PRUDENTIAL SERIES FUND INC, 485BPOS, 1995-04-28

PRUDENTIAL SERIES FUND INC
485BPOS, 1995-04-28

Previous: METROPOLITAN SERIES FUND INC, 485BPOS, 1995-04-28

Next: PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT, 485BPOS, 1995-04-28

As filed with the SEC on __________. Registration No. 2-80896

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 29 [X]
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 32 [X]
(Check appropriate box or boxes)

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

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

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Name of Depositor)

Prudential Plaza
Newark, New Jersey 07102-3777
(800) 445-4571
(Address and telephone number of principal executive offices)

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

Thomas C. Castano
Assistant Secretary
The Prudential Insurance Company of America
Prudential Plaza
Newark, New Jersey 07102-3777
(Name and address of agent for service)

Copy to:
Jeffrey C. Martin
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036

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

The Registrant has registered an indefinite amount of securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940. The Rule 24f-2 notice for
fiscal year 1994 was filed on February 28, 1995.

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

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485

[X] on May 1, 1995 pursuant to paragraph (b) of Rule 485
-----------------
(date)

[ ] 60 days after filing pursuant to paragraph (a) of Rule 485

[ ] on pursuant to paragraph (a) of Rule 485
---------------------
(date)

<PAGE>

CROSS REFERENCE SHEET
(as required by 495(a) under the 1933 Act)

<TABLE>
<CAPTION>
N1-A Item Number and Caption Location
- ---------------------------- --------
<S> <C>
Part A
1. Cover Page ................................ Cover Page

2. Synopsis .................................. Not Applicable

3. Condensed Financial Information ........... Financial Highlights; Investment Objectives and
Policies of the Portfolios

4. General Description of Registrant ......... The Series Fund; Investment Objectives and
Policies of the Portfolios; Investment Restrictions
Applicable to the Portfolios

5. Management of the Fund .................... Investment Manager; Investment Management Arrangements
and Expenses; Portfolio Brokerage and Related Practices;
Portfolio Transactions and Brokerage; Custodian, Transfer Agent
and Dividend Disbursing Agent; Monitoring for Possible Conflict

6. Capital Stock and Other Securities ........ Investment Objectives and Policies of the Portfolios;
Dividends, Distributions and Taxes; Voting Rights;
Additional Information

7. Purchase of Securities Being Offered ...... Purchase and Redemption of Shares; Determination of Net Asset Value

8. Redemption or Repurchase .................. Purchase and Redemption of Shares; Other Information
Concerning the Series Fund

9. Pending Legal Proceedings ................. Not Applicable

Part B
10. Cover Page ................................ Cover Page

11. Table of Contents ......................... Contents

12. General Information and History ........... Not Applicable

13. Investment Objectives and Policies ........ Investment Objectives and Policies of the Portfolios;
Investment Restrictions

14. Management of the Fund .................... Management of the Series Fund

15. Control Persons and Principal Holders
of Securities ............................. Not Applicable

16. Investment Advisory and other Services .... Investment Management Arrangements and Expenses; Custodian,
Transfer Agent, and Dividend Disbursing Agent; Experts

17. Brokerage Allocation ...................... Portfolio Transactions and Brokerage
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
N1-A Item Number and Caption Location
- ---------------------------- --------
<S> <C>
18. Capital Stock and Other Securities ......... Not Applicable

19. Purchase, Redemption and Pricing
of Securities Being Offered ............... Determination of Net Asset Value

20. Tax Status ................................. Not Applicable

21. Underwriters ............................... Determination of Net Asset Value

22. Calculations of Performance Data ........... Not Applicable

23. Financial Statements ....................... Financial Statements of The Prudential Series Fund, Inc.

</TABLE>

Part C

Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to this Registration Statement.

<PAGE>

PART A

INFORMATION REQUIRED IN A PROSPECTUS

<PAGE>

PROSPECTUS

May 1, 1995

THE PRUDENTIAL
SERIES FUND, INC.

The Prudential Series Fund, Inc. (the "Series Fund") is a diversified, open-end
management investment company (commonly known as a "mutual fund") that is
intended to provide a range of investment alternatives through its sixteen
separate portfolios, each of which is, for investment purposes, in effect a
separate fund. The portfolios are: the Money Market Portfolio, the Bond
Portfolio, the Government Securities Portfolio, three Zero Coupon Bond
Portfolios with different liquidation dates--1995 (not available for investment
after November 14, 1995), 2000, and 2005, the Conservatively Managed Flexible
Portfolio, the Aggressively Managed Flexible Portfolio, the High Yield Bond
Portfolio, the Stock Index Portfolio, the High Dividend Stock Portfolio, the
Common Stock Portfolio, the Growth Stock Portfolio, the Small Capitalization
Stock Portfolio, the Global Equity Portfolio, and the Natural Resources
Portfolio. A separate class of capital stock is issued for each portfolio.
Shares of the Series Fund are currently sold only to separate accounts (the
"Accounts") of The Prudential Insurance Company of America ("The Prudential")
and certain other insurers to fund the benefits under variable life insurance
and variable annuity contracts (the "Contracts") issued by those Companies. The
Accounts invest in shares of the Series Fund through subaccounts that correspond
to the portfolios. The Accounts will redeem shares of the Series Fund to the
extent necessary to provide benefits under the Contracts or for such other
purposes as may be consistent with the Contracts.

Not every portfolio is available under all of the variable contracts. The
prospectus for each Contract lists the portfolios currently available under that
particular Contract.

Shares of the Money Market Portfolio and the Government Securities Portfolio are
neither insured nor guaranteed by the U.S. Government. While the Money Market
Portfolio seeks to maintain a stable price per share, there is no assurance that
the portfolio will be able to do so.

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

THE INVESTMENT OBJECTIVES OF THE PORTFOLIOS CAN BE FOUND ON THE NEXT PAGE

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

Information contained in this prospectus should be read carefully by a
prospective investor before an investment is made. Additional information about
the Series Fund has been filed with the Securities and Exchange Commission in a
statement of additional information, dated May 1, 1995, which information is
incorporated herein by reference and is available without charge upon written
request to The Prudential Series Fund, Inc., Prudential Plaza, Newark, New
Jersey 07102-3777, or by telephoning (800) 445-4571.

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

PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.

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

The Prudential Series Fund, Inc.
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 445-4571

PSF-1 Ed 5-95

<PAGE>

INVESTMENT OBJECTIVES OF THE PORTFOLIOS ARE AS FOLLOWS:

FIXED INCOME PORTFOLIOS

Money Market Portfolio. The maximum current income that is consistent with
stability of capital and maintenance of liquidity through investment in
high-quality short-term debt obligations.

To obtain the predicted investment return an investor must plan to retain his or
her investment in the selected portfolio until the designated year in which the
portfolio will be liquidated. Redemption prior to that time may result in a
loss. Moreover, since the portfolios will be actively managed with the objective
of obtaining a yield higher than the predicted yield, there is a risk that the
actual yield may be lower.

BALANCED PORTFOLIOS

Conservatively Managed Flexible Portfolio. Achievement of a favorable total
investment return consistent with a portfolio having a conservatively managed
mix of money market instruments, fixed income securities, and common stocks, in
proportions believed by the investment manager to be appropriate for an investor
desiring diversification of investment who prefers a relatively lower risk of
loss than that associated with the Aggressively Managed Flexible Portfolio while
recognizing that this reduces the chances of greater appreciation.

Aggressively Managed Flexible Portfolio. Achievement of a high total return
consistent with a portfolio having an aggressively managed mix of money market
instruments, fixed income securities, and common stocks, in proportions believed
by the investment manager to be appropriate for an investor desiring
diversification of investment who is willing to accept a relatively high level
of loss in an effort to achieve greater appreciation.

HIGH YIELD BOND PORTFOLIOS

High Yield Bond Portfolio. Achievement of a high total return through investment
in high yield/high risk fixed income securities in the medium to lower quality
ranges. Such securities may have speculative characteristics and generally
involve greater risks of loss of income and principal than higher rated
securities.

DIVERSIFIED STOCK PORTFOLIOS

Stock Index Portfolio. Achievement of investment results that correspond to the
price and yield performance of publicly traded common stocks in the aggregate by
following a policy of attempting to duplicate the price and yield performance of
the Standard & Poor's 500 Composite Stock Price Index.

High Dividend Stock Portfolio. Both current income and capital appreciation
through investment primarily in common stocks and convertible securities that
provide favorable prospects for investment income returns above those of the
Standard & Poor's 500 Stock Index or the NYSE Composite Index.

Growth Stock Portfolio. Long-term growth of capital through investment primarily
in equity securities of established companies with above-average growth
prospects. Current income, if any, is incidental.

Small Capitalization Stock Portfolio. Long-term growth of capital through
investment primarily in equity securities of publicly-traded companies with
small market capitalization. Current income, if any, is incidental.

Global Equity Portfolio. Long-term growth of capital through investment
primarily in common stock and common stock equivalents of foreign and domestic
issuers. Current income, if any, is incidental.

<PAGE>

SPECIALIZED PORTFOLIOS

Natural Resources Portfolio. Long-term growth of capital through investment
primarily in common stocks and convertible securities of "natural resource
companies" (as defined in this prospectus) and in securities (typically debt
securities and preferred stock) the terms of which are related to the market
value of a natural resource.

There can be no assurance that the objectives of any portfolio will be realized.
See INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS, page 8. The Series
Fund may in the future establish other portfolios with different investment
objectives.

<PAGE>

CONTENTS

Page

FINANCIAL HIGHLIGHTS........................................................ 1

THE SERIES FUND............................................................. 8

THE ACCOUNTS AND THE CONTRACTS.............................................. 8

INVESTMENT MANAGER.......................................................... 8

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS........................ 8
Fixed Income Portfolios................................................. 9
Money Market Portfolio.................................................. 9
Bond Portfolio.......................................................... 9
Government Securities Portfolio......................................... 10
Zero Coupon Bond Portfolios 1995, 2000, and 2005........................ 11
Balanced Portfolios..................................................... 13
Conservatively Managed Flexible Portfolio............................... 13
Aggressively Managed Flexible Portfolio................................. 13
High Yield Bond Portfolios.............................................. 14
High Yield Bond Portfolio............................................... 14
Diversified Stock Portfolios............................................ 16
Stock Index Portfolio................................................... 16
High Dividend Stock Portfolio........................................... 18
Common Stock Portfolio.................................................. 19
Growth Stock Portfolio.................................................. 19
Small Capitalization Stock Portfolio.................................... 20
Global Equity Portfolio................................................. 21
Specialized Portfolios.................................................. 22
Natural Resources Portfolio............................................. 22
Convertible Securities.................................................. 23
Foreign Securities...................................................... 23
Options on Equity Securities............................................ 24
Options on Debt Securities.............................................. 25
Options on Stock Indices................................................ 26
Options on Foreign Currencies........................................... 26
Futures Contracts....................................................... 27
Options on Futures Contracts............................................ 27
Reverse Repurchase Agreements and Dollar Rolls.......................... 28
When-Issued and Delayed Delivery Securities............................. 28
Short Sales............................................................. 28
Short Sales Against the Box............................................. 29
Interest Rate Swaps..................................................... 29
Loans of Portfolio Securities........................................... 29

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS........................ 29

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES............................. 30

PURCHASE AND REDEMPTION OF SHARES........................................... 30

DETERMINATION OF NET ASSET VALUE............................................ 31

DIVIDENDS, DISTRIBUTIONS, AND TAXES......................................... 32

OTHER INFORMATION CONCERNING THE SERIES FUND................................ 33
Incorporation and Authorized Stock...................................... 33
Voting Rights........................................................... 34
Monitoring for Possible Conflict........................................ 34
Periodic Reports ....................................................... 34
Portfolio Brokerage and Related Practices............................... 34
Custodian, Transfer Agent, and Dividend Disbursing Agent................ 35
Additional Information.................................................. 35

APPENDIX: SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO
MAY CURRENTLY INVEST ..................................................... A1

<PAGE>

<TABLE>
<CAPTION>
MONEY MARKET
-------------------------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87 01/01/86 01/01/85
TO TO TO TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86* 12/31/85*
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.402 0.290 0.372 0.596 0.778 0.877 0.717 0.630 0.062 0.079
Net realized and
unrealized gains
(losses) on
investments............ 0 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.402 0.290 0.372 0.596 0.778 0.877 0.717 0.630 0.062 0.079
Distributions to
Shareholders:
Distributions from net
investment income...... (0.402) (0.290) (0.372) (0.596) (0.778) (0.877) (0.717) (0.630) (0.062) (0.079)
Distributions from net
realized gains......... 0 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.402) (0.290) (0.372) (0.596) (0.778) (0.877) (0.717) (0.630) (0.062) (0.079)
Reverse stock split (10
to 1).................. -- -- -- -- -- -- -- -- 9.000 --
Net increase (decrease)
in Net Asset Value..... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 9.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $ 10.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 4.05 % 2.95 % 3.79 % 6.16 % 8.16 % 9.25 % 7.35 % 6.52 % 6.54 % 7.91 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $583.3 $474.7 $528.7 $529.6 $434.2 $236.1 $155.9 $107.2 $52.5 $50.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.47 % 0.45 % 0.47 % 0.46 % 0.50 % 0.55 % 0.57 % 0.53 % 0.55 % 0.68 %
Ratio of net investment
income to average net
assets................. 4.02 % 2.90 % 3.72 % 5.96 % 7.80 % 8.77 % 7.17 % 6.30 % 6.16 % 7.60 %
Portfolio turnover
rate................... -- -- -- -- -- -- -- -- -- --
Number of shares
outstanding at end of
period (in millions)... 58.3 47.5 52.9 53.0 43.4 23.6 15.6 10.7 5.2 20.3
</TABLE>

<TABLE>
<CAPTION>
BOND
-------------------------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87 01/01/86 01/01/85
TO TO TO TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86* 12/31/85*
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $10.038 $11.048 $ 10.967 $ 9.998
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.682 0.686 0.761 0.797 0.825 0.886 0.875 0.859 0.904 1.073
Net realized and
unrealized gains
(losses) on
investments............ (1.040) 0.398 0.013 0.842 (0.004) 0.424 (0.069) (0.821) 0.607 0.739
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... (0.358) 1.084 0.774 1.639 0.821 1.310 0.806 0.038 1.511 1.812
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.683) (0.657) (0.728) (0.779) (0.810) (0.854) (0.902) (0.990) (0.909) (0.843)
Distributions from net
realized gains......... (0.024) (0.153) (0.219) (0.190) 0 (0.077) 0 (0.058) (0.521) 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.707) (0.810) (0.947) (0.969) (0.810) (0.931) (0.902) (1.048) (1.430) (0.843)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... (1.065) 0.274 (0.173) 0.670 0.011 0.379 (0.096) (1.010) 0.081 0.969
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $10.038 $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $10.038 $ 11.048 $ 10.967
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. (3.23 %) 10.13 % 7.19 % 16.44 % 8.32 % 13.49 % 8.19 % 0.29 % 14.45 % 18.65 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $541.6 $576.2 $428.8 $318.7 $227.7 $191.1 $148.8 $139.5 $110.1 $40.9
Ratio of expenses net of
reimbursement to
average net assets..... 0.45 % 0.46 % 0.47 % 0.49 % 0.47 % 0.53 % 0.53 % 0.53 % 0.51 % 0.68 %
Ratio of net investment
income to average net
assets................. 6.41 % 6.05 % 6.89 % 7.43 % 8.06 % 8.56 % 8.52 % 8.15 % 8.11 % 9.85 %
Portfolio turnover
rate................... 31.57 % 41.12 % 60.53 % 131.01 % 42.10 % 272.85 % 222.20 % 238.41 % 246.82 % 92.56 %
Number of shares
outstanding at end of
period (in millions)... 54.0 51.9 39.6 29.0 22.0 18.5 15.0 13.9 10.0 2.5
</TABLE>

All calculations are based on average month-end shares outstanding, where
applicable.
*The per share information of the Portfolios of The Prudential Series Fund,
Inc. has not been restated to reflect the operations of the Pruco Life Series
Fund, Inc. prior to the November 1, 1986 merger.
**Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns.
This information should be read in conjunction with the financial statements
of The Prudential Series Fund, Inc. and notes thereto, which appear in the
Statement of Additional Information.
Further information about the performance of the portfolios is contained in
the Annual Report to Contract Owners which may be obtained without charge.

1 - SERIES FUND

<PAGE>

<TABLE>
<CAPTION>
GOVERNMENT SECURITIES
-------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $11.784 $11.094 $11.133 $10.146 $10.324 $10.017
-------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.703 0.700 0.731 0.736 0.791 0.545
Net realized and
unrealized gains
(losses) on
investments............ (1.311) 0.678 (0.092) 0.847 (0.177) 0.613
-------- -------- -------- -------- -------- --------
Total from investment
operations........... (0.608) 1.378 0.639 1.583 0.614 1.158
-------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.723) (0.642) (0.593) (0.596) (0.769) (0.489)
Distributions from net
realized gains......... 0.008 (0.046) (0.085) 0 (0.023) (0.362)
-------- -------- -------- -------- -------- --------
Total
distributions........ (0.715) (0.688) (0.678) (0.596) (0.792) (0.851)
-------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... (1.323) 0.690 (0.039) 0.987 (0.178) 0.307
-------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $10.461 $11.784 $11.094 $11.133 $10.146 $10.324
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. (5.16 %) 12.56 % 5.85 % 16.11 % 6.34 % 11.60 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $487.6 $540.1 $315.5 $95.0 $23.7 $17.0
Ratio of expenses net of
reimbursement to
average net assets..... 0.45 % 0.46 % 0.53 % 0.58 % 0.74 % 0.50 %
Ratio of net investment
income to average net
assets................. 6.30 % 5.91 % 6.58 % 6.97 % 7.86 % 5.06 %
Portfolio turnover
rate................... 34.19 % 18.59 % 80.71 % 127.18 % 379.45 % 208.86 %
Number of shares
outstanding at end of
period (in millions)... 46.6 45.8 28.3 8.5 2.3 1.6
</TABLE>

<TABLE>
<CAPTION>
ZERO COUPON BOND 1995
-------------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87 02/12/86
TO TO TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86
-------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $11.282 $11.174 $11.250 $10.380 $11.094 $10.331 $10.270 $11.724 $ 10.156
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Income From Investment
Operations:
Net investment income.... 0.800 0.761 0.802 0.844 1.447 0.889 0.888 0.893 0.791
Net realized and
unrealized gains
(losses) on
investments............ (0.808) 0.107 (0.010) 0.874 (0.670) 0.766 0.027 (1.263) 1.437
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations........... (0.008) 0.868 0.792 1.718 0.777 1.655 0.915 (0.370) 2.228
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.679) (0.760) (0.798) (0.845) (1.491) (0.892) (0.854) (1.084) (0.660)
Distributions from net
realized gains......... (0.002) 0 (0.070) (0.003) 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total
distributions........ (0.681) (0.760) (0.868) (0.848) (1.491) (0.892) (0.854) (1.084) (0.660)
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net increase (decrease)
in Net Asset Value..... (0.689) 0.108 (0.076) 0.870 (0.714) 0.763 0.061 (1.454) 1.568
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net Asset Value at end of
period................. $10.593 $11.282 $11.174 $11.250 $10.380 $11.094 $10.331 $10.270 $ 11.724
-------- -------- -------- -------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total Investment Rate of
Return:**.............. (0.03 %) 7.87 % 7.19 % 17.20 % 7.95 % 16.41 % 9.01 % (3.25 %) 21.96 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $17.7 $15.2 $13.6 $13.0 $11.0 $10.0 $9.0 $7.5 $7.2
Ratio of expenses net of
reimbursement to
average net assets..... 0.60 % 0.63 % 0.69 % 0.71 % 0.75 % 0.75 % 0.75 % 0.69 % 0.42 %
Ratio of net investment
income to average net
assets................. 6.72 % 6.61 % 7.12 % 7.86 % 13.80 % 8.13 % 8.34 % 8.17 % 6.89 %
Portfolio turnover
rate................... 4.38 % 5.84 % 34.80 % 0.77 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
Number of shares
outstanding at end of
period (in millions)... 1.7 1.3 1.2 1.2 1.1 0.9 0.9 0.7 0.6
</TABLE>

All calculations are based on average month-end shares outstanding, where
applicable.
**Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns.
This information should be read in conjunction with the financial statements
of The Prudential Series Fund, Inc. and notes thereto, which appear in the
Statement of Additional Information.
Further information about the performance of the portfolios is contained in
the Annual Report to Contract Owners which may be obtained without charge.

2 - SERIES FUND

<PAGE>

<TABLE>
<CAPTION>
ZERO COUPON BOND 2000
-------------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87 02/12/86
TO TO TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86
-------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $13.715 $12.550 $12.402 $11.279 $11.883 $11.004 $10.685 $12.476 $ 10.267
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Income From Investment
Operations:
Net investment income.... 0.927 0.850 0.892 0.908 1.114 0.919 0.919 0.934 0.807
Net realized and
unrealized gains
(losses) on
investments............ (1.907) 1.157 0.140 1.308 (0.593) 1.277 0.292 (1.623) 2.087
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations........... (0.980) 2.007 1.032 2.216 0.521 2.196 1.211 (0.689) 2.894
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.850) (0.837) (0.884) (0.944) (1.125) (0.915) (0.892) (1.102) (0.685)
Distributions from net
realized gains......... (0.023) (0.005) 0 (0.149) 0 (0.402) 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total
distributions........ (0.873) (0.842) (0.884) (1.093) (1.125) (1.317) (0.892) (1.102) (0.685)
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net increase (decrease)
in Net Asset Value..... (1.853) 1.165 0.148 1.123 (0.604) 0.879 0.319 (1.791) 2.209
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net Asset Value at end of
period................. $11.862 $13.715 $12.550 $12.402 $11.279 $11.883 $11.004 $10.685 $ 12.476
-------- -------- -------- -------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total Investment Rate of
Return:**.............. (7.18 %) 16.15 % 8.59 % 20.71 % 5.11 % 20.38 % 11.56 % (5.51 %) 28.62 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $20.6 $22.2 $16.7 $14.6 $13.9 $13.1 $10.9 $9.0 $8.1
Ratio of expenses net of
reimbursement to
average net assets..... 0.51 % 0.62 % 0.66 % 0.68 % 0.75 % 0.75 % 0.75 % 0.64 % 0.40 %
Ratio of net investment
income to average net
assets................. 6.69 % 6.21 % 7.24 % 7.77 % 9.99 % 7.73 % 8.24 % 8.19 % 6.61 %
Portfolio turnover
rate................... 9.41 % 0.53 % 0.00 % 0.00 % 0.00 % 38.62 % 0.00 % 0.00 % 0.00 %
Number of shares
outstanding at end of
period (in millions)... 1.7 1.6 1.3 1.2 1.2 1.1 1.0 0.8 0.7
</TABLE>

<TABLE>
<CAPTION>
ZERO COUPON BOND 2005
-------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $12.677 $11.029 $10.874 $ 9.798 $10.457 $10.017
-------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.752 0.768 0.804 0.820 0.850 0.561
Net realized and
unrealized gains
(losses) on
investments............ (1.967) 1.623 0.207 1.143 (0.649) 0.598
-------- -------- -------- -------- -------- --------
Total from investment
operations........... (1.215) 2.391 1.011 1.963 0.201 1.159
-------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.715) (0.741) (0.792) (0.827) (0.860) (0.531)
Distributions from net
realized gains......... (0.003) (0.002) (0.064) (0.060) 0 (0.188)
-------- -------- -------- -------- -------- --------
Total
distributions........ (0.718) (0.743) (0.856) (0.887) (0.860) (0.719)
-------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... (1.933) 1.648 0.155 1.076 (0.659) 0.440
-------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $10.744 $12.677 $11.029 $10.874 $ 9.798 $10.457
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. (9.61 %) 21.94 % 9.66 % 21.16 % 2.56 % 11.67 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $16.5 $14.5 $9.8 $8.7 $7.3 $7.2
Ratio of expenses net of
reimbursement to
average net assets..... 0.60 % 0.66 % 0.75 % 0.75 % 0.75 % 0.49 %
Ratio of net investment
income to average net
assets................. 6.53 % 6.17 % 7.46 % 8.08 % 8.83 % 5.25 %
Portfolio turnover
rate................... 5.94 % 3.62 % 11.48 % 5.76 % 4.36 % 59.90 %
Number of shares
outstanding at end of
period (in millions)... 1.5 1.1 0.9 0.8 0.7 0.7
</TABLE>

3 - SERIES FUND

<PAGE>

<TABLE>
<CAPTION>
CONSERVATIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87 01/01/86 01/01/85
TO TO TO TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86* 12/31/85*
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $11.889 $12.571 $ 12.173 $ 10.469
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.528 0.486 0.558 0.687 0.821 0.891 0.773 0.656 0.652 0.725
Net realized and
unrealized gains
(losses) on
investments............ (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424 (0.399) 1.046 1.443
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... (0.151) 1.715 0.968 2.425 0.678 2.046 1.197 0.257 1.698 2.168
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791) (0.709) (0.517) (0.464)
Distributions from net
realized gains......... (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0 (0.230) (0.783) 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791) (0.939) (1.300) (0.464)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406 (0.682) 0.398 1.704
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $11.889 $ 12.571 $ 12.173
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. (0.97 %) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19 % 1.54 % 14.17 % 21.11 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6 $803.9 $375.4 $75.9
Ratio of expenses net of
reimbursement to
average net assets..... 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65 % 0.66 % 0.64 % 0.86 %
Ratio of net investment
income to average net
assets................. 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22 % 5.05 % 5.10 % 5.99 %
Portfolio turnover
rate................... 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67 % 140.69 % 207.78 % 54.89 %
Number of shares
outstanding at end of
period (in millions)... 248.4 208.2 148.4 104.8 84.2 73.0 66.3 67.6 29.9 4.2
</TABLE>

<TABLE>
<CAPTION>
AGGRESSIVELY MANAGED FLEXIBLE
-------------------------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87 01/01/86 01/01/85
TO TO TO TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86* 12/31/85*
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $13.555 $ 12.810 $ 10.469
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.473 0.566 0.583 0.650 0.715 0.813 0.724 0.577 0.611 0.584
Net realized and
unrealized gains
(losses) on
investments............ (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840 (0.753) 1.342 2.095
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... (0.548) 2.448 1.190 3.459 0.249 2.802 1.564 (0.176) 1.953 2.679
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767) (0.673) (0.456) (0.338)
Distributions from net
realized gains......... (0.462) (0.929) (0.914) (0.513) 0 (0.666) 0 (0.380) (0.752) 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767) (1.053) (1.208) (0.338)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797 (1.229) 0.745 2.341
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $ 13.555 $ 12.810
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. (3.16 %) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83 % (1.83 %) 15.48 % 25.87 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $3,481.5 $3,292.2 $2,435.6 $1,990.7 $1,507.8 $1,386.5 $1,103.9 $1,062.4 $593.6 $138.7
Ratio of expenses net of
reimbursement to
average net assets..... 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70 % 0.71 % 0.67 % 0.93 %
Ratio of net investment
income to average net
assets................. 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52 % 4.09 % 4.43 % 4.65 %
Portfolio turnover
rate................... 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45 % 123.83 % 133.76 % 56.46 %
Number of shares
outstanding at end of
period (in millions)... 224.7 194.1 152.2 122.2 107.7 96.0 84.1 86.2 43.8 6.1
</TABLE>

4 - SERIES FUND

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED)
The following financial highlights information has been audited by Deloitte &
Touche LLP, Independent Auditors. Their report is included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
HIGH YIELD BOND
---------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 02/23/87
TO TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(AS RESTATED)
Net Asset Value at
beginning of period.... $ 8.406 $ 7.719 $ 7.212 $ 5.838 $ 7.673 $ 8.904 $ 8.742 $10.000
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.869 0.822 0.824 0.836 0.936 1.071 1.066 0.968
Net realized and
unrealized gains
(losses) on
investments............ (1.102) 0.632 0.415 1.397 (1.792) (1.223) 0.065 (1.428)
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... (0.233) 1.454 1.239 2.233 (0.856) (0.152) 1.131 (0.460)
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.807) (0.767) (0.732) (0.859) (0.979) (1.079) (0.969) (0.798)
Distributions from net
realized gains......... 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.807) (0.767) (0.732) (0.859) (0.979) (1.079) (0.969) (0.798)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... (1.040) 0.687 0.507 1.374 (1.835) (1.231) 0.162 (1.258)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $ 7.366 $ 8.406 $ 7.719 $ 7.212 $ 5.838 $ 7.673 $ 8.904 $ 8.742
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. (2.72 %) 19.27 % 17.54 % 39.71 % (11.84 %) (2.05 %) 13.17 % (4.91 %)
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $306.2 $282.9 $153.7 $78.7 $49.8 $60.0 $65.8 $40.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.65 % 0.65 % 0.70 % 0.75 % 0.75 % 0.71 % 0.75 % 0.73 %
Ratio of net investment
income to average net
assets................. 9.82 % 9.91 % 10.67 % 12.05 % 13.42 % 12.29 % 11.60 % 10.13 %
Portfolio turnover
rate................... 68.67 % 95.52 % 75.04 % 57.21 % 34.66 % 60.59 % 70.73 % 16.58 %
Number of shares
outstanding at end of
period (in millions)... 41.6 33.6 19.9 10.9 8.5 7.8 7.4 4.6

<CAPTION>
STOCK INDEX
---------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 10/19/87
TO TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $15.202 $14.218 $13.605 $10.760 $11.732 $ 9.454 $ 8.531 $ 8.071
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.377 0.361 0.350 0.351 0.357 0.326 0.357 0.047
Net realized and
unrealized gains
(losses) on
investments............ (0.231) 1.002 0.600 2.814 (0.792) 2.570 0.951 0.548
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 0.146 1.363 0.950 3.165 (0.435) 2.896 1.308 0.595
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.368) (0.346) (0.329) (0.307) (0.309) (0.354) (0.385) (0.135)
Distributions from net
realized gains......... (0.023) (0.033) (0.008) (0.013) (0.228) (0.264) 0 0
-------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.391) (0.379) (0.337) (0.320) (0.537) (0.618) (0.385) (0.135)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... (0.245) 0.984 0.613 2.845 (0.972) 2.278 0.923 0.460
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $14.957 $15.202 $14.218 $13.605 $10.760 $11.732 $ 9.454 $ 8.531
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. 1.01 % 9.66 % 7.13 % 29.72 % (3.63 %) 30.93 % 15.44 % 7.35 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $664.5 $615.1 $433.5 $236.9 $104.5 $53.8 $36.0 $24.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.42 % 0.42 % 0.46 % 0.47 % 0.60 % 0.69 % 0.78 % 0.45 %
Ratio of net investment
income to average net
assets................. 2.50 % 2.43 % 2.56 % 2.82 % 3.23 % 2.95 % 3.87 % 0.53 %
Portfolio turnover
rate................... 1.74 % 0.60 % 0.43 % 1.10 % 17.80 % 14.54 % 15.62 % 0.47 %
Number of shares
outstanding at end of
period (in millions)... 44.4 40.5 30.5 17.4 9.7 4.6 3.8 2.9
</TABLE>

5 - SERIES FUND

<PAGE>

<TABLE>
<CAPTION>
HIGH DIVIDEND STOCK
-----------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 02/19/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period $15.655 $13.673 $13.209 $11.241 $12.254 $10.621 $10.132
-------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.664 0.551 0.582 0.578 0.509 0.539 0.452
Net realized and
unrealized gains
(losses) on
investments............ (0.453) 2.459 0.723 2.430 (0.980) 1.841 0.684
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations 0.211 3.010 1.305 3.008 (0.471) 2.380 1.136
-------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.562) (0.501) (0.515) (0.542) (0.461) (0.462) (0.420)
Distributions from net
realized gains......... (0.820) (0.527) (0.326) (0.498) (0.081) (0.285) (0.227)
-------- -------- -------- -------- -------- -------- --------
Total
distributions........ (1.382) (1.028) (0.841) (1.040) (0.542) (0.747) (0.647)
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... (1.171) 1.982 0.464 1.968 (1.013) 1.633 0.489
-------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $14.484 $15.655 $13.673 $13.209 $11.241 $12.254 $10.621
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. 1.44 % 22.28 % 10.14 % 27.50 % (3.73 %) 22.67 % 11.31 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $859.7 $602.8 $234.4 $106.9 $55.5 $34.9 $11.3
Ratio of expenses net of
reimbursement to
average net assets..... 0.52 % 0.54 % 0.57 % 0.57 % 0.60 % 0.74 % 0.64 %
Ratio of net investment
income to average net
assets................. 3.92 % 3.56 % 4.32 % 4.53 % 4.53 % 4.48 % 4.08 %
Portfolio turnover
rate................... 62.66 % 41.43 % 39.98 % 60.12 % 54.79 % 56.65 % 61.31 %
Number of shares
outstanding at end of
period (in millions)... 59.4 38.5 17.1 8.1 4.9 2.9 1.1
</TABLE>

<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87 01/01/86 01/01/85
TO TO TO TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86* 12/31/85*
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $21.487 $18.903 $17.905 $15.449 $18.539 $15.463 $13.620 $14.815 $ 14.634 $ 11.160
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.512 0.417 0.444 0.482 0.577 0.474 0.402 0.393 0.448 0.340
Net realized and
unrealized gains
(losses) on
investments............ 0.054 3.666 2.050 3.414 (1.573) 4.064 1.909 (0.065) 1.765 3.306
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.566 4.083 2.494 3.896 (0.996) 4.538 2.311 0.328 2.213 3.646
Distributions to
Shareholders:
Distributions from net
investment income...... (0.487) (0.404) (0.439) (0.478) (0.563) (0.503) (0.468) (0.496) (0.275) (0.172)
Distributions from net
realized gains......... (0.904) (1.095) (1.057) (0.962) (1.531) (0.959) 0 (1.027) (1.757) 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.391) (1.499) (1.496) (1.440) (2.094) (1.462) (0.468) (1.523) (2.032) (0.172)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... (0.825) 2.584 0.998 2.456 (3.090) 3.076 1.843 (1.195) 0.181 3.474
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
period................. $20.662 $21.487 $18.903 $17.905 $15.449 $18.539 $15.463 $13.620 $ 14.815 $ 14.634
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 2.78 % 21.87 % 14.17 % 26.01 % (5.21 %) 29.73 % 17.05 % 1.67 % 15.10 % 32.84 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $2,617.8 $2,186.5 $1,416.6 $1,032.8 $700.5 $675.5 $500.1 $451.0 $247.9 $68.8
Ratio of expenses net of
reimbursement to
average net assets..... 0.55 % 0.53 % 0.53 % 0.51 % 0.56 % 0.56 % 0.57 % 0.51 % 0.52 % 0.88 %
Ratio of net investment
income to average net
assets................. 2.39 % 1.99 % 2.33 % 2.66 % 3.37 % 2.66 % 2.67 % 2.34 % 2.90 % 2.44 %
Portfolio turnover
rate................... 6.90 % 12.95 % 15.70 % 20.85 % 84.84 % 73.54 % 62.35 % 79.91 % 117.15 % 91.70 %
Number of shares
outstanding at end of
period (in millions)... 126.7 101.8 74.9 57.7 45.3 36.4 32.3 33.1 16.7 2.0
</TABLE>

6 - SERIES FUND

<PAGE>

<TABLE>
<CAPTION>
GLOBAL EQUITY
-----------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 09/19/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508 $ 9.818
-------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.028 0.023 0.051 0.096 0.203 0.079 0.052
Net realized and
unrealized gains
(losses) on
investments............ (0.744) 4.433 (0.419) 1.020 (1.802) 1.806 0.787
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... (0.716) 4.456 (0.368) 1.116 (1.599) 1.885 0.839
-------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.019) (0.079) (0.056) (0.100) (0.067) (0.073) (0.149)
Distributions from net
realized gains......... (0.025) (0.106) 0 (0.090) (0.015) (0.773) 0
-------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.044) (0.185) (0.056) (0.190) (0.082) (0.846) (0.149)
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... (0.760) 4.271 (0.424) 0.926 (1.681) 1.039 0.690
-------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $13.879 $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. (4.89 %) 43.14 % (3.42 %) 11.39 % (12.91 %) 18.82 % 8.57 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $345.7 $129.1 $34.0 $34.3 $26.2 $29.4 $26.9
Ratio of expenses net of
reimbursement to
average net assets..... 1.23 % 1.44 % 1.87 % 1.62 % 1.67 % 1.47 % 0.42 %
Ratio of net investment
income to average net
assets................. 0.20 % 0.18 % 0.49 % 0.92 % 1.92 % 0.70 % 0.51 %
Portfolio turnover
rate................... 37.46 % 54.54 % 78.16 % 136.21 % 43.12 % 47.95 % 6.40 %
Number of shares
outstanding at end of
period (in millions)... 24.9 8.8 3.3 3.2 2.7 2.5 2.6
</TABLE>

<TABLE>
<CAPTION>
NATURAL RESOURCES
-----------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 05/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at
beginning of period.... $15.562 $12.949 $12.450 $11.622 $12.705 $10.141 $ 9.910
-------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.183 0.227 0.319 0.368 0.417 0.364 0.254
Net realized and
unrealized gains
(losses) on
investments............ (0.850) 3.004 0.588 0.821 (1.143) 3.216 0.274
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... (0.667) 3.231 0.907 1.189 (0.726) 3.580 0.528
-------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.150) (0.207) (0.309) (0.361) (0.336) (0.358) (0.252)
Distributions from net
realized gains......... (0.302) (0.411) (0.099) 0 (0.021) (0.658) (0.045)
-------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.452) (0.618) (0.408) (0.361) (0.357) (1.016) (0.297)
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... (1.119) 2.613 0.499 0.828 (1.083) 2.564 0.231
-------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
period................. $14.443 $15.562 $12.949 $12.450 $11.622 $12.705 $10.141
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. (4.30 %) 25.15 % 7.30 % 10.30 % (5.76 %) 35.64 % 5.42 %
Ratios/Supplemental Data:
Net assets at end of
period (in millions)... $227.3 $158.8 $77.5 $62.6 $50.6 $17.9 $9.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.61 % 0.60 % 0.72 % 0.68 % 0.75 % 0.86 % 0.58 %
Ratio of net investment
income to average net
assets................. 1.09 % 1.50 % 2.44 % 2.97 % 3.45 % 3.04 % 2.46 %
Portfolio turnover
rate................... 18.10 % 19.64 % 29.20 % 21.33 % 42.18 % 49.17 % 59.33 %
Number of shares
outstanding at end of
period (in millions)... 15.7 10.2 6.0 5.0 4.4 1.4 0.9
</TABLE>

7 - SERIES FUND

<PAGE>
THE SERIES FUND

The Prudential Series Fund, Inc. (the "Series Fund"), a diversified open-end
management investment company, is a Maryland corporation organized on November
15, 1982. On October 31, 1986, the Pruco Life Series Fund, Inc., a diversified
open-end management investment company that sold its shares to separate accounts
of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey,
was merged into the Series Fund. The Series Fund is currently made up of sixteen
separate portfolios: the Money Market Portfolio, the Bond Portfolio, the
Government Securities Portfolio, the Zero Coupon Bond Portfolios 1995 (not
available for investment after November 14, 1995), 2000, and 2005, the
Conservatively Managed Flexible Portfolio, the Aggressively Managed Flexible
Portfolio, the High Yield Bond Portfolio, the Stock Index Portfolio, the High
Dividend Stock Portfolio, the Common Stock Portfolio, the Growth Stock
Portfolio, the Small Capitalization Stock Portfolio, the Global Equity
Portfolio, and the Natural Resources Portfolio. Each portfolio is, for
investment purposes, in effect a separate investment fund, and a separate class
of capital stock is issued for each portfolio. In other respects the Series Fund
is treated as one entity. Each share of capital stock issued with respect to a
portfolio has a pro-rata interest in the assets of that portfolio and has no
interest in the assets of any other portfolio. Each portfolio bears its own
liabilities and also its proportionate share of the general liabilities of the
Series Fund. The Series Fund is registered under the Investment Company Act of
1940 (the "1940 Act") as an open-end, diversified, management investment
company. This registration does not imply any supervision by the Securities and
Exchange Commission over the Series Fund's management or its investment policies
or practices.

THE ACCOUNTS AND THE CONTRACTS

Shares in the Series Fund are currently sold only to separate accounts of The
Prudential Insurance Company of America ("The Prudential") and certain other
insurers to fund benefits under variable life insurance and variable annuity
contracts issued by those Companies. All the separate accounts are referred to
as the "Accounts", and all the contracts are referred to as the "Contracts".
Each Contract owner allocates the net premiums and the assets relating to the
Contract, within the limitations described in the Contracts, among the
subaccounts of the Accounts which in turn invest in the corresponding portfolios
of the Series Fund. Not all portfolios of the Series Fund are currently
available to all Contracts. The attached prospectus for the Contracts lists the
portfolios that are currently available and describes the particular type of
Contract selected and the relationship between changes in the value of shares of
each portfolio and changes in the benefits payable under the Contracts. The
rights of the Accounts as shareholders should be distinguished from the rights
of a Contract owner which are described in the Contracts. The terms
"shareholder" or "shareholders" in this prospectus refer to the Accounts.

INVESTMENT MANAGER

The Prudential is the investment advisor of the Series Fund. The Prudential's
principal business address is Prudential Plaza, Newark, New Jersey 07102-3777.

The Prudential has entered into a Service Agreement with its wholly-owned
subsidiary The Prudential Investment Corporation ("PIC"), which provides that
PIC will furnish to The Prudential such services as The Prudential may require
in connection with the performance of its obligations under an Investment
Advisory Agreement with the Series Fund. In addition, The Prudential has entered
into a Subadvisory Agreement with its wholly-owned subsidiary Jennison
Associates Capital Corp. ("Jennison"), under which Jennison furnishes investment
advisory services in connection with the management of the Growth Stock
Portfolio. See INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES, page 30.

The Prudential will continue to have responsibility for all investment advisory
services under its Investment Advisory Agreement with respect to the Series
Fund.

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

Each portfolio of the Series Fund has a different investment objective which it
pursues through separate investment policies as described below. Since each
portfolio has a different investment objective, each can be expected to have
different investment results and incur different market and financial risks. The
Series Fund may in the future establish other portfolios with different
investment objectives.

8 - Series Fund
<PAGE>

portfolio seeks to achieve its investment objectives, however, are not
fundamental. They may be changed by the Board of Directors of the Series Fund
without the approval of the shareholders.

The portfolio turnover rate of the portfolios that were available for investment
as of December 31, 1994 can be found in the FINANCIAL HIGHLIGHTS table on pages
1 through 7. The portfolio turnover rate is, generally, the percentage computed
by dividing the lesser of portfolio purchases or sales by the average value of
the portfolio, in each case excluding securities with maturities of 1 year or
less. Generally, the higher the portfolio turnover rate, the greater the
brokerage costs incurred by a portfolio.

The following paragraphs describe the investment objectives and policies of each
portfolio. There is no guarantee that any of these objectives will be met.

Fixed Income Portfolios.

Money Market Portfolio. The objective of this portfolio is to achieve, through
investment in high-quality short-term debt obligations, the maximum current
income that is consistent with stability of capital and maintenance of
liquidity.

The portfolio seeks to achieve this objective by following the policy of
investing primarily in money market instruments denominated in U.S. dollars that
mature in 13 months or less from the date the portfolio acquires them.
Money-market instruments include short-term obligations of the United States and
foreign governments, their agencies, instrumentalities, and political
subdivisions, and of domestic and foreign banks and corporations. They also
include commercial paper, other corporate obligations, obligations of savings
and loan associations and savings banks, and variable amount demand master
notes. The portfolio may also enter into repurchase and reverse repurchase
agreements and may purchase and sell securities on a when-issued and delayed
delivery basis. These investment techniques may involve additional risks. A
detailed description of the money market instruments in which the portfolio may
invest, of the repurchase and reverse repurchase agreements it may enter into,
and of the risks associated with those instruments and agreements may be found
in the Appendix to this prospectus.

Because of the high quality, short-term nature of the portfolio's holdings,
increases in the value of an investment in the portfolio will be derived almost
entirely from interest on the securities held by it. Accordingly, the results
for the portfolio are subject to the risk of fluctuation in short-term interest
rates.

Bond Portfolio. The objective of this portfolio is to achieve a high level of
income over the longer term while providing reasonable safety of capital through
investment primarily in readily marketable intermediate and long-term fixed
income securities that provide attractive yields but do not involve substantial
risk of loss of capital through default.

The portfolio seeks to achieve this objective by following the policies of
purchasing only debt securities of investment grade or, if not rated, of
comparable quality in the opinion of the portfolio manager and of investing from
time to time a portion of its assets in short-term debt obligations of the kind
held in the Money Market Portfolio as described in the Appendix to this
prospectus. Since the value of fixed income securities generally fluctuates
inversely with changes in interest rates, the proportions of intermediate or
longer-term securities and short-term debt obligations held in the portfolio
will vary to reflect The Prudential's assessment of prospective changes in
interest rates, so that the portfolio may benefit from relative price
appreciation when interest rates decline and suffer lesser declines in value
when interest rates rise. The success of this strategy will depend on The
Prudential's ability to forecast changes in interest rates, and there is a
corresponding risk that the value of the securities held in the portfolio will
decline.

At least 80% of the portfolio's holdings (including short-term debt obligations)
will generally consist of debt securities that at the time of purchase have a
rating within the four highest grades determined by Moody's Investor Services,
Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"), or a similar
nationally-recognized rating service. The portfolio may retain a security whose
rating has dropped below the four highest grades as determined by a commercial
rating service. Without limitation, the portfolio may invest in obligations of
the U.S. Government and its agencies and instrumentalities. The Appendix to the
statement of additional information defines the ratings that are given to debt
securities by Moody's and S&P and describes the standards applied by them in
assigning these ratings.

The remaining assets of the portfolio may be invested in, among other things,
debt securities that are not rated within the four highest grades or in
convertible debt securities and preferred or convertible preferred stocks that
are rated within the four highest grades applicable to such securities. On
occasion, however, the portfolio may acquire common stock, not through direct
investment but by the conversion of convertible debt securities or the exercise
of warrants. For additional information regarding warrants, see INVESTMENT
OBJECTIVES AND POLICIES OF THE PORTFOLIOS in the statement of additional
information. No more than 10% of the value of the total assets of the portfolio
will be held in common stocks, and those will usually be sold as soon as a
favorable opportunity is available.

9 - Series Fund
<PAGE>

The portfolio may invest up to 20% of its total assets in United States currency
denominated debt securities issued outside the United States by foreign or
domestic issuers. For additional information regarding such securities, see
Foreign Securities on page 23.

In addition, the portfolio may: (i) purchase and sell options on debt
securities; (ii) purchase and sell interest rate futures contracts and options
thereon; (iii) purchase securities on a when-issued or delayed delivery basis;
(iv) use interest rate swaps; and (v) make short sales. These techniques are
described on pages 25 through 29, and further information about some of them is
included in the statement of additional information.

Barbara Kenworthy, Managing Director, PIC, has been portfolio manager of the
Bond Portfolio since 1995. Ms. Kenworthy is also portfolio manager of the
Prudential Diversified Bond Fund, Inc. and the Prudential Government Income
Fund. Prior to 1994, Ms. Kenworthy was a portfolio manager and president of
several taxable fixed-income funds for The Dreyfus Corp.

Government Securities Portfolio. The objective of this portfolio is to achieve a
high level of income over the longer term consistent with the preservation of
capital through investment primarily in intermediate and long-term U.S. Treasury
securities and debt obligations issued by agencies of or instrumentalities
established, sponsored or guaranteed by the U.S. Government. At least 65% of the
total assets of the portfolio will be invested in U.S. Government securities.

The portfolio seeks to achieve this objective by investing at least 65% of its
assets in U.S. Treasury securities, obligations issued or guaranteed by U.S.
Government agencies and instrumentalities, mortgage-related securities issued by
U.S. Government instrumentalities or non-governmental corporations, or related
collateralized mortgage obligations. These instruments are described below. The
portfolio may invest up to a total of 35% of its assets in the following three
categories: (1) short-term debt obligations of the kind held in the Money Market
Portfolio; (2) securities of issuers other than the U.S. government and related
entities, usually foreign governments, where the principal and interest are
substantially guaranteed (generally to the extent of 90% thereof) by U.S.
Government agencies whose guarantee is backed by the full faith and credit of
the United States and where an assurance of payment on the unguaranteed portion
is provided for in a comparable way; and (3) asset-backed securities rated in
either of the top two ratings by Moody's or Standard & Poor's, or if not rated,
determined by the investment manager to be of comparable quality. A description
of corporate bond ratings is contained in the Appendix to the statement of
additional information.

U.S. Treasury Securities. U.S. Treasury securities include bills, notes, and
bonds issued by the U.S. Treasury. These instruments are direct obligations of
the U.S. Government and, as such, are backed by the full faith and credit of the
United States. They differ primarily in their coupons, the lengths of their
maturities, and the dates of their issuances.

Obligations Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. Obligations issued by agencies of the U.S. Government or
instrumentalities established or sponsored by the U.S. Government include
securities that are guaranteed by federal agencies or instrumentalities, and may
or may not be backed by the full faith and credit of the United States.
Obligations of the Government National Mortgage Association ("GNMA"), the
Farmers Home Administration, and the Export-Import Bank are backed by the full
faith and credit of the United States. Securities in which the portfolio may
invest that are not backed by the full faith and credit of the United States
include obligations issued by the Tennessee Valley Authority, The Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC"), the United States Postal Service, each of which has the
right to borrow from the United States Treasury to meet its obligations, and
obligations of the Federal Farm Credit Bank and the Federal Home Loan Bank, the
obligations of which may be satisfied only by the individual credit of the
issuing agency. In the case of securities not backed by the full faith and
credit of the U.S. Government, the portfolio must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the U.S.Government if the agency or
instrumentality does not meet its commitments.

U.S. Government Securities are considered among the most creditworthy of fixed
income investments. The yields available from U.S. Government Securities are
generally lower than the yields available from corporate debt securities. The
values of U.S. Government Securities (like those of fixed income securities,
generally) will change as interest rates fluctuate. During periods of falling
U.S. interest rates, the values of outstanding long-term U.S. Government
Securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. The magnitude of these
fluctuations will generally be greater for securities with longer maturities.
Although changes in the value of U.S. Government Securities will not affect
investment income from those securities, they will affect the portfolio's net
asset value. The proportions of intermediate and long-term securities held in
the portfolio will vary to reflect The Prudential's assessment of prospective
changes in interest rates, so that the portfolio may benefit from relative price
appreciation when interest rates decline and suffer lesser declines in value
when interest rates rise. The success of this strategy will depend on The
Prudential's ability to forecast changes in interest rates, and there is a
corresponding risk that the value of the securities held in the portfolio will
decline.

10 - Series Fund
<PAGE>

Mortgage-Related Securities Issued by U.S. Government Instrumentalities
or by Non-Governmental Corporations. The portfolio may invest in mortgage-backed
securities issued by GNMA, FNMA or FHLMC and representing undivided ownership
interests in pools of mortgages. The mortgages backing these securities include
conventional 30 year fixed rate mortgages, 15 year fixed rate mortgages,
graduated payment mortgages, and adjustable rate mortgages. The U.S. Government
or the issuing agency guarantees the payment of interest and principal of these
securities. However, the guarantees do not extend to the securities' yield or
value, which are likely to vary inversely with fluctuations in interest rates,
nor do the guarantees extend to the yield or value of the portfolio's shares.
These securities are in most cases pass-through instruments, through which the
holders receive a share of all interest and principal payments from the
mortgages underlying the securities, net of certain fees. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through securities.
Mortgage-backed securities are often subject to more rapid repayment then their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying mortgage obligations. For example,
securities backed by mortgages with 30 year maturities are customarily treated
as prepaying fully in the 12th year and securities backed by mortgages with 15
year maturities are customarily treated as prepaying fully in the seventh year.
While the timing of prepayments of graduated payment mortgages differs somewhat
from that of conventional mortgages, the prepayment experience of graduated
payment mortgages is basically the same as that of the conventional mortgages of
the same maturity dates over the life of the pool. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-backed securities
can be expected to accelerate. When the mortgage obligations are prepaid, the
portfolio reinvests the prepaid amounts in securities, the yields of which
reflect interest rates prevailing at the time. Therefore, the portfolio's
ability to maintain a portfolio of high yielding mortgage-backed securities will
be adversely affected to the extent that prepayments of mortgages must be
reinvested in securities which have lower yields than the prepaid mortgages.
Moreover, prepayments of mortgages which underlie securities purchased at a
premium could result in capital losses.

CMOs. The portfolio may also purchase collateralized mortgage obligations
("CMOs"). A CMO is a security issued by a corporation or a U.S. Government
instrumentality that is backed by a portfolio of mortgages or mortgage-backed
securities. The issuer's obligation to make interest and principal payments is
secured by the underlying portfolio of mortgages or mortgage-backed securities.
CMOs are partitioned into several classes with a ranked priority by which the
classes of obligations are redeemed. The portfolio may invest in only those
privately issued CMOs that are collateralized by mortgage-backed securities
issued by GNMA, FHLMC or FNMA, and in CMOs issued by FHLMC, GNMA or FNMA, and
which are considered to be U.S. Government Securities for this portfolio.
Neither the United States Government nor any U.S. Government agency guarantees
the payment of principal or interest on these securities.

Asset-Backed Securities. Asset-backed securities represent a participation in,
or are secured by and payable from, a stream of payments generated by particular
assets, such as automobile or credit card receivables. Asset-backed securities
present certain risks, including the risk that the underlying obligor on the
asset, such as the automobile purchaser or the credit card holder, may default
on his or her obligation. In addition, asset-backed securities often do not
provide a security interest in the related collateral. For example, credit card
receivables are generally unsecured, and for automobile receivables the security
interests in the underlying automobiles are often not transferred when the pool
is created, with the resulting possibility that the collateral could be resold.
In general, however, these types of loans are of shorter average life than
mortgage loans and are less likely to have substantial prepayments.

Under normal circumstances, this portfolio's turnover rate is not expected to
exceed 200%. Purchases of U.S. Government Securities are generally made from
dealers at prices which usually include a profit to the dealer. See Portfolio
Brokerage and Related Practices, page 34.

David Graham, Vice President, PIC, has been portfolio manager of the Government
Securities Portfolio since 1995. Mr. Graham also manages the Prudential GNMA
Fund, the Prudential Adjustable Rate Securities Fund, and the Prudential U.S.
Government Fund. He has been employed by PIC as a portfolio manager since 1993.
Prior to 1993, Mr. Graham was a portfolio manager for Alliance Capital
Management, L.P.

Zero Coupon Bond Portfolios 1995, 2000, and 2005. The objective of each of these
portfolios is to achieve the highest predictable compounded investment return
for a specific period of time, consistent with the safety of invested capital,
by investing primarily in debt obligations of the United States Treasury and
investment-grade corporations that have been issued without interest coupons or
stripped of their unmatured interest coupons, interest coupons that have been
stripped from such debt obligations, and receipts and certificates for such
stripped

11 - Series Fund
<PAGE>

debt obligations and stripped coupons (collectively "stripped
securities"). The three portfolios differ only in their liquidation dates, which
for each portfolio is November 15 of the specified year.

In pursuing this objective, each Zero Coupon Bond Portfolio invests only in
readily marketable debt securities that do not involve substantial risk of loss
of capital through default, although their value may vary because of changes in
the general level of interest rates. It is the policy of each Zero Coupon Bond
Portfolio to invest at least 70% of its assets in stripped securities that are
obligations of the United States Government maturing within 2 years of the
portfolio liquidation date. Up to 30% of the assets may be invested and held
either in stripped securities issued by investment-grade corporations or in
high-grade interest bearing corporate debt securities, in each case with a
quality rating of Baa or better, provided that no more than 20% of the assets of
the portfolio may be invested in interest bearing securities. The Prudential
will evaluate the creditworthiness of potential investments in corporate
securities in order to determine whether such securities are suitable for
purchase by the portfolios. A small portion of the portfolios may be invested in
short-term debt obligations of the kind held in the Money Market Portfolio in
order to make effective use of cash reserves pending investments in the
securities described above.

At the beginning of each week, The Prudential will calculate the anticipated
compounded growth rate that investors purchasing shares of each portfolio that
day are predicted to achieve if their investment is maintained until the
portfolio liquidation date. That rate will change from day to day depending on
various factors, including particularly the general level of interest rates, but
daily changes will generally not be significant. If there is a significant
change in interest rates (greater than a 0.30% change in the yield of a zero
coupon Treasury bond maturing in the specified year), The Prudential will
recalculate the predicted yield. The Prudential will furnish the anticipated
compounded growth rate on request.

In order to achieve a predictable compounded investment return to each
portfolio's liquidation date that will be as little affected as possible by
variations in the general level of interest rates, the composition of the
securities held in each portfolio is such that the weighted average period of
time until receipt of scheduled cash payments (whether of principal or
interest)--sometimes referred to as the portfolio's "duration"--will be kept
within 1 year of the period remaining until the portfolio liquidation date. When
the portfolio's duration is thus maintained, differences between the market
value and the face amount of unmatured bonds on the portfolio's liquidation date
resulting from changes in the general level of interest rates will be
approximately equal in magnitude to, but opposite in direction from, the
difference between the amount of interest accumulated through the reinvestment
of earlier coupon or principal payments and the amount that would have been
accumulated at the originally predicted rate. Each portfolio is thus able to
hold interest bearing securities and stripped securities with maturity dates
before, during, and after the portfolio's liquidation date. The concept of
"duration" is explained more fully in the statement of additional information.

On the liquidation date of a Zero Coupon Bond Portfolio, all of the securities
held by the portfolio will be sold and all outstanding shares of the portfolio
will be redeemed. The redemption proceeds will, except as otherwise directed by
Contract owners, be used to purchase shares of the Money Market Portfolio.

Each portfolio seeks to realize a higher yield than would be obtained simply by
maintaining the portfolio's initial investments. The portfolios are actively
managed by The Prudential to take advantage of trading opportunities that may
exist from time to time due to price and yield distortions resulting from
changes in the supply and demand characteristics or perceived differences in
quality or liquidity characteristics of the securities available for purchase by
the portfolio. There is a corresponding risk that, to the extent that this
strategy is unsuccessful, the initial yield objective will not be met.

The stripping of interest coupons will cause the stripped securities to be
purchased at a substantial (or "deep") discount from their principal amounts
payable at maturity. If held to maturity, these obligations provide a
predictable yield. But because interest on stripped securities is not paid in
cash on a current basis but rather is in effect compounded until maturity (or
the payment date in the case of a coupon), the market values of securities of
this type are subject to greater fluctuations, as a result of changes in
interest rates, than are the values of debt securities that provide for the
periodic payment of interest; and the longer the term to maturity of a
portfolio, the greater the risk of such fluctuations. In light of these factors,
investors who desire to attain the anticipated growth rate on their investment
expected at the time of purchase must plan to hold the portfolio's shares and to
reinvest all dividends and distributions until the portfolio matures. Any
investor who redeems his or her interest in the portfolio prior to the portfolio
liquidation date or who fails to reinvest dividends is likely to achieve quite a
different investment return than the return that was predicted on the date the
investment was made, and may even suffer a loss.

May Ngai, Senior Associate, PIC, has been portfolio manager of the Zero Coupon
Bond Portfolios 1995, 2000, and 2005 since 1995. From 1991 to the present, Ms.
Ngai has held the position of mortgage strategist, Taxable Mutual Funds,
Prudential Investment Advisors. Prior to 1991, Ms. Ngai was an Applications
Specialist for Gifford Fong Associates.

12 - Series Fund

<PAGE>

Balanced Portfolios.

Conservatively Managed Flexible Portfolio. The objective of this portfolio is to
achieve a favorable total investment return consistent with a portfolio having a
conservatively managed mix of money market instruments, fixed income securities,
and common stocks in proportions believed by the investment manager to be
appropriate for an investor desiring diversification of investment who prefers a
relatively lower risk of loss than that associated with the Aggressively Managed
Flexible Portfolio while recognizing that this reduces the chances of greater
appreciation.

To achieve this objective, the Conservatively Managed Flexible Portfolio will
follow a policy of maintaining a more conservative asset mix among stocks, bonds
and money market instruments than the Aggressively Managed Flexible Portfolio.
In general, the portfolio manager will observe the following range of target
asset allocation mixes:

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 15% 35% 50%
Bonds 15% 35% 50%
Money Market 0% 30% 70%

The portfolio manager will make variations in the proportions of each investment
category in accordance with its judgment about the expected returns and risks of
the various investment categories.

The bond portion of this portfolio will be invested primarily in securities with
maturities of 2 to 10 years and ratings at the time of purchase within the four
highest grades determined by Moody's, S&P, or a similar nationally-recognized
rating service. A description of corporate bond ratings is contained in the
Appendix to the statement of additional information. Because of their shorter
maturities, the value of the notes and bonds in this portfolio will be less
sensitive to changes in interest rates than the longer-term bonds likely to be
held in the Aggressively Managed Flexible Portfolio. Thus, there will be less of
a risk of loss of principal, but not as much of a likelihood for greater
appreciation in value. Up to 20% of the bond portion of this portfolio may be
invested in United States currency denominated debt securities issued outside
the United States by foreign or domestic issuers. The common stock portion of
this portfolio will be invested primarily in the equity securities of major,
established corporations in sound financial condition that appear to offer
attractive prospects of a total return from dividends and capital appreciation
that is superior to broadly based stock indices. The money market portion of the
portfolio will hold high-quality short-term debt obligations with a maturity of
12 months or less (as described in the Appendix to this prospectus) and will
maintain a dollar-weighted average maturity of 120 days or less.

To the extent permitted by applicable insurance law, this portfolio may invest
up to 30% of its total assets in non-United States currency denominated debt and
equity securities of foreign and U.S. issuers. The particular risks of
investments in foreign securities are described under Foreign Securities on page
23.

In addition, the portfolio may: (i) purchase and sell options on equity
securities, debt securities, stock indices and foreign currencies; (ii) purchase
and sell stock index, interest rate and foreign currency futures contracts and
options thereon; (iii) enter into forward foreign currency exchange contracts;
(iv) purchase securities on a when-issued or delayed delivery basis; (v) use
interest rate swaps; and (vi) make short sales. These techniques are described
on pages 24 through 29, and further information about some of them is included
in the statement of additional information.

The Conservatively Managed Flexible Portfolio is managed by Prudential
Investment Advisors ("PIA") and Prudential Diversified Investment Strategies
("PDI"), units of PIC, using a team of portfolio managers under the supervision
of Mark Stumpp, Managing Director, PIC. Mr. Stumpp has been providing overall
asset allocation for the portfolio since 1994. Mr. Stumpp also supervises the
team of portfolio managers for the Aggressively Managed Flexible Portfolio of
the Series Fund and is portfolio manager for several employee benefit trusts
including The Prudential Retirement System for U.S. Employees and Special
Agents. Prior to 1994, he was responsible for corporate pension asset management
for Prudential Diversified Investment Strategies' corporate clients.

Aggressively Managed Flexible Portfolio. The objective of this portfolio is
achievement of a high total return consistent with a portfolio having an
aggressively managed mix of money market instruments, fixed income securities,
and common stocks, in proportions believed by the investment manager to be
appropriate for an investor desiring diversification of investment who is
willing to accept a relatively high level of loss in an effort to achieve
greater appreciation.

To achieve this objective, the Aggressively Managed Flexible Portfolio will
follow a policy of maintaining a more aggressive asset mix among stocks, bonds
and money market investments than the Conservatively Managed Flexible Portfolio.
In general, the portfolio manager will observe the following range of target
asset allocation mixes:

13 - Series Fund
<PAGE>

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 25% 60% 100%
Bonds 0% 40% 75%
Money Market 0% 0% 75%

The portfolio manager may make short-run, and sometimes substantial, variations
in the asset mix based upon its judgment about the expected returns and risks of
the various investment categories. In varying the asset mix in accordance with
these judgments, The Prudential will also seek to take advantage of imbalances
in fundamental values among the different markets.

The bond component of this portfolio is expected under normal circumstances to
have a weighted average maturity of greater than 10 years. The values of bonds
with long maturities are generally more sensitive to changes in interest rates
than those of shorter maturities. The bond portion of this portfolio will
primarily be invested in securities that have a rating at the time of purchase
within the four highest grades determined by Moody's, S&P, or a similar
nationally-recognized rating service. A description of corporate bond ratings is
contained in the Appendix to the statement of additional information. However,
up to 25% of the bond component of this portfolio may be invested in securities
having ratings at the time of purchase of "BB", "Ba" or lower, or if not rated,
of comparable quality in the opinion of the portfolio manager, also known as
high risk securities. Up to 20% of the bond portion of this portfolio may be
invested in United States currency denominated debt securities issued outside
the United States by foreign or domestic issuers. The established company common
stock component of this portfolio will consist of the equity securities of major
corporations that are believed to be in sound financial condition. In selecting
stocks of smaller capitalization companies, the portfolio manager will
concentrate on companies with a capitalization range of $75 million to $600
million that show above average profitability (measured by return-on-equity,
earnings, and dividend growth rates) with modest price/earnings ratios. The
individual equity selections for this portfolio may tend to have more volatile
market values than the equity securities selected for the Common Stock Portfolio
or the Conservatively Managed Flexible Portfolio. The money market portion of
the portfolio will hold high-quality short-term debt obligations with a maturity
of 12 months or less (as described in the Appendix to this prospectus) and will
maintain a dollar-weighted average maturity of 120 days or less.

The facts that this portfolio will invest in common stocks regarded as having
higher risks than those that will be purchased by the Conservatively Managed
Flexible Portfolio; that it will invest in bonds with longer maturities; and
that the "normal" mix for this portfolio will include a higher percentage of
stocks all combine to mean that the risk of investing in this portfolio is
relatively higher--to the extent that each of these factors results in greater
risks--than the risk of investing in the Conservatively Managed Flexible
Portfolio.

The Aggressively Managed Flexible Portfolio is managed by Prudential Investment
Advisors ("PIA") and Prudential Diversified Investment Strategies ("PDI"), units
of PIC, using a team of portfolio managers under the supervision of Mark Stumpp,
Managing Director, PIC. Mr. Stumpp has been providing overall asset allocation
for the portfolio since 1994. Mr. Stumpp also supervises the team of portfolio
managers for the Conservatively Managed Flexible Portfolio of the Series Fund
and is portfolio manager for several employee benefit trusts including The
Prudential Retirement System for U.S. Employees and Special Agents. Prior to
1994, he was responsible for corporate pension asset management for Prudential
Diversified Investment Strategies' corporate clients.

High Yield Bond Portfolios.

High Yield Bond Portfolio. The objective of this portfolio is to achieve a high
total return through investment in a diversified portfolio of high yield/high
risk fixed income securities.

The portfolio seeks to achieve its objective by following a policy of generally
investing in fixed income securities rated in the medium to lower categories by
recognized rating services or in unrated fixed income securities of comparable
quality. The portfolio expects to invest principally in fixed income securities
rated Baa or lower by Moody's, or BBB or lower by S&P. These securities are
sometimes known as "junk bonds." Corporate bonds which are rated Baa by Moody's
are described by Moody's as being investment grade, but are also characterized
as having speculative characteristics. Corporate bonds rated below Baa by
Moody's and BBB by S&P are

14 - Series Fund
<PAGE>

considered speculative. A description of corporate bond ratings is contained in
the Appendix to the statement of additional information.

Medium to lower rated and comparable non-rated securities tend to offer higher
yields than higher rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not have
been as strong as that of other issuers. Since medium to lower rated securities
generally involve greater risks of loss of income and principal than higher
rated securities, investors should consider carefully the relative risks
associated with investments in high yield/high risk securities which carry
medium to lower ratings and in comparable non-rated securities. Investors should
understand that such securities are not generally meant for short-term
investing.

The achievement of the portfolio's investment objectives will depend on The
Prudential's analytical and portfolio management skills. These skills are more
important in connection with the investment in medium to lower rated and
comparable unrated securities and to the portfolio's performance than would be
the case if the portfolio invested in higher quality fixed income securities. In
selecting securities for the portfolio, The Prudential will evaluate, among
other things, an issuer's financial history, condition, prospects and
management. A credit rating assigned by a commercial rating service will not
measure the market risk of high yield/high risk bonds and may not be a timely
reflection of the condition and economic viability of an individual issuer. In
its credit analysis, The Prudential therefore will not rely principally on the
ratings assigned by the ratings services (e.g., Moody's and S&P), although such
ratings will be considered. Through careful selection and by investment in a
diversified mix of securities, The Prudential will seek to reduce the risks that
are associated with investing in medium to lower rated and comparable unrated
debt securities.

Fixed income securities are subject to the risk of an issuer's inability to meet
principal and interest payments on the obligations (credit risk) and may also be
subject to price volatility due to such factors as interest rate sensitivity,
market perception of the creditworthiness of the issuer and general market
liquidity (market risk). The value of the fixed income securities in the
portfolio will be directly impacted by the market perception of the
creditworthiness of the securities' issuers and will fluctuate inversely with
changes in interest rates. Lower rated or unrated securities are more likely to
react to developments affecting market and credit risk than are more highly
rated securities, which react primarily to movements in the general level of
interest rates. For example, because investors generally perceive that there are
greater risks associated with investing in medium or lower rated securities, the
yields and prices of such securities may tend to fluctuate more than those of
higher rated securities. Moreover, in the lower quality segments of the fixed
income securities market, changes in perception of the creditworthiness of
individual issuers tend to occur more frequently and in a more pronounced manner
than do changes in higher quality segments of the fixed income securities
market. The yield and price of medium to lower rated securities therefore may
experience greater volatility than is the case with higher rated securities. The
Prudential considers both credit risk and market risk in selecting securities
for the portfolio. By holding a diversified selection of such securities, the
portfolio seeks to reduce this volatility.

The secondary market for high yield/high risk securities, which is concentrated
in relatively few market makers, may not be as liquid as the secondary market
for more highly rated securities. Under adverse market or economic conditions,
the secondary market for high yield/high risk securities could contract further,
independent of any specific adverse changes in the condition of a particular
issuer. As a result, The Prudential could find it more difficult to sell such
securities or may be able to sell the securities only at prices lower than if
such securities were widely traded. Prices realized upon the sale of such lower
rated or unrated securities therefore may be less than the prices used in
calculating the portfolio's net asset value. In the absence of readily available
market quotations, high yield/high risk securities will be valued by the Series
Fund's Board of Directors using a method that, in the good faith belief of the
Board, accurately reflects fair value. Valuing such securities in an illiquid
market is a difficult task. The Board's judgment plays a more significant role
in valuing such securities than those securities for which more objective market
data are available.

During the fiscal year ended December 31, 1994, the monthly dollar weighted
average ratings of the debt obligations held by the High Yield Bond Portfolio,
expressed as a percentage of the portfolio's total investments, were as follows:

15 - Series Fund
<PAGE>

Percentage of Total
Ratings Investments
------- -------------------
AAA/Aaa 3.0%*
AA/Aa 0%
A/A 0%
BBB/Baa 0%
BB/Ba 6.7%
B/B 69.7%
CCC/Caa or lower 9.3%
Unrated 11.3%

----------
* Short-term investments and cash.

Consistent with its investment objective, the portfolio anticipates that under
normal conditions at least 80% of the value of its total assets will be invested
in high yield/high risk, medium to lower rated fixed income securities. Fixed
income securities appropriate for the portfolio may include both convertible and
nonconvertible debt securities and preferred stock. The portfolio will not
acquire common stocks, except when attached to or included in a unit with fixed
income securities which otherwise would be attractive to the portfolio.

The portfolio may invest up to 20% of its total assets in United States currency
denominated debt issues issued outside the United States by foreign and domestic
issuers. For additional information regarding such securities, see Foreign
Securities on page 23.

The portfolio may, when it has temporary cash available, enter into repurchase
agreements and invest in other short-term obligations of the type invested in by
the Money Market Portfolio. The portfolio may also invest in commercial paper of
domestic corporations that does not meet the quality restrictions applicable to
the investments of the Money Market Portfolio. Moreover, when market conditions
dictate a more defensive investment strategy, the portfolio may invest more
substantially in such short-term obligations. The portfolio may also (i)
purchase and sell options on debt securities; (ii) purchase and sell interest
rate futures contracts and options thereon; (iii) purchase securities on a
when-issued or delayed delivery basis; (iv) use interest rate swaps; and (v)
make short sales. These techniques are described on pages 25 through 29, and
further information about some of them is included in the statement of
additional information.

Although the portfolio is not expected to engage in substantial short-term
trading, it may sell securities it owns without regard to the length of time
they have been held. The portfolio's turnover rate is not expected to exceed
150%.

Lars Berkman, Managing Director, PIC, and Michael Snyder, Vice President, PIC,
have been co-managers of the High Yield Bond Portfolio since 1995. Mr. Berkman
is also portfolio manager of The Prudential High Yield Fund and has been
employed by PIC as a portfolio manager since 1990. Mr. Snyder is also the
portfolio manager of the U.S. High Yield Income Fund for The Prudential and has
been employed by PIC since 1987.

Diversified Stock Portfolios.

Stock Index Portfolio. The objective of this portfolio is to achieve investment
results that correspond to the price and yield performance of publicly-traded
common stocks in the aggregate.

The portfolio seeks to achieve this objective by following the policy of
attempting to duplicate the price and yield performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index"), an index which represents
more than 70% of the total market value of all publicly-traded common stocks and
is widely viewed among investors as representative of the performance of
publicly-traded common stocks as a whole. The S&P 500 Index is composed of 500
selected common stocks, over 95% of which are listed on the New York Stock
Exchange ("NYSE"). Standard & Poor's Corporation chooses the stocks to be
included in the index on a statistical basis taking into account market values
and industry diversification. Inclusion in the index in no way implies an
opinion by Standard & Poor's Corporation as to a stock's attractiveness as an
investment. "Standard & Poor's", "Standard & Poor's 500" and "500" are
trademarks of McGraw Hill, Inc. and have been licensed for use by The Prudential
Insurance Company of America and its affiliates and subsidiaries. The Series
Fund is not sponsored, endorsed, sold or promoted by S&P and S&P makes no
representation regarding the advisability of investing in the Series Fund.
Reference is made to the statement of additional information which sets forth
certain additional disclaimers and limitations of liabilities on behalf of S&P.

The S&P 500 Index is a "weighted" index in which the weighting of each stock
depends on its relative total market value: its market price per share times the
number of shares outstanding. Because of this weighting, approximately 10% of
the S&P 500 Index's value is accounted for by the stocks of the five largest
companies by relative market value. As of December 31, 1994 those companies
were: General Electric Co., American Telephone & Telegraph Co., Exxon Corp.,
Coca-Cola Co., and Royal Dutch.

16 - Series Fund
<PAGE>

This portfolio will not be "managed" in the traditional sense of using economic,
financial or market analysis to determine the stocks to be purchased by the
portfolio. Rather, the portfolio manager will purchase stocks for the portfolio
in proportion to their weighting in the S&P 500 Index. Thus, adverse financial
performance by a company will not result in reduction or elimination of the
portfolio's holdings of its stock and, conversely, superior financial
performance by a company will not lead the portfolio to increase its holdings of
the company's stock. If a stock held by this portfolio is eliminated from the
S&P 500 Index, the portfolio will sell its holdings of the stock regardless of
the prospects of the company. Because the portfolio will not be "managed" in the
traditional sense, portfolio turnover is expected to be low and is generally not
expected to exceed 10%. A 10% portfolio turnover rate would occur if one-tenth
of the portfolio's securities were sold and either repurchased or replaced
within 1 year. Because of the expected low turnover, transaction costs, such as
brokerage commissions, are also expected to be relatively low.

The following table shows the performance of the S&P 500 Index for the 25 years
ending in 1994. The period covered by this table is one of generally rising
stock prices, and the performance of the S&P 500 Index in this period should not
be viewed as a representation of any future performance by that index. In
addition, the fees and costs involved in the operation of the Stock Index
Portfolio mean that the performance of a share of stock in the portfolio may not
equal the performance of the S&P 500 Stock Index even if the assets held by the
portfolio do equal that performance.

*S&P 500 WITH DIVIDENDS REINVESTED
Annual Percentage Change
- --------------------------------------------------------------------------------
1970 +3.93 1983 +22.38
1971 +14.56 1984 +6.10
1972 +18.90 1985 +31.57
1973 -14.77 1986 +18.56
1974 -26.39 1987 +5.10
1975 +37.16 1988 +16.61
1976 +23.57 1989 +31.69
1977 -7.42 1990 -3.10
1978 +6.38 1991 +30.47
1979 +18.20 1992 +7.61
1980 +32.27 1993 +10.08
1981 -5.01 1994 +1.32
1982 +21.44

- ---------
Source: Standard & Poor's Corporation. Percentage change calculated in
accordance with specifications of SEC release number IA-327.

In the seven full years since this portfolio was established its total return,
compared to that of the S&P 500 Index, was as follows:

Annual Percentage Change Total Return
S&P 500 with Stock Index Portfolio
Dividends Reinvested (after deduction of expenses)
------------------------ -----------------------------
1988 +16.61 +15.44
1989 +31.69 +30.93
1990 -3.10 -3.63
1991 +30.47 +29.72
1992 +7.61 +7.13
1993 +10.08 +9.66
1994 +1.32 +1.01

17 - Series Fund
<PAGE>

costs, to be more efficient than selling only the amount of stocks needed to
meet the cash requirements. The portfolio will not, however, increase its
holdings of cash in anticipation of any decline in the value of the S&P 500
Index or of the stock markets generally. The portfolio will instead remain as
fully invested in the S&P 500 Index stocks as feasible in light of its cash flow
patterns during periods of market declines as well as advances, and investors in
the portfolio thus run the risk of remaining fully invested in common stocks
during a period of general decline in the stock markets.

Tracking accuracy is measured by the difference between total return for the S&P
Index with dividends reinvested and total return for the portfolio with
dividends reinvested before deductions of portfolio fees and expenses. Tracking
accuracy is monitored by the portfolio manager on a daily basis. All tracking
accuracy deviations are reviewed to determine the effectiveness of investment
policies and techniques.

If the portfolio does hold short-term investments as a result of the patterns of
cash flows to and from the portfolio, such holdings may cause its performance to
differ from that of the S&P 500 Index. The portfolio will attempt to minimize
any such difference in performance through transactions involving stock index
futures contracts, options on stock indices, and/or options on stock index
future contracts. These derivative investment instruments are described under
Options on Stock Indices, Stock Index Futures Contracts, and Options on Futures
Contracts on pages 26 through 27. The portfolio will not use such instruments
for speculative purposes or to hedge against any decline in the value of the
stocks held in the portfolio, but instead will employ them only as a temporary
substitute for investment of cash holdings directly in the 500 stocks when the
portfolio's cash holdings are too small to make such an investment in an
efficient manner.

For example, if the portfolio's cash reserves are insufficient to invest
efficiently in another unit of the basket of stocks comprising the S&P 500
Index, the portfolio may purchase S&P 500 futures contracts to hedge against a
rise in the value of the stocks the portfolio intends to acquire. In its attempt
to minimize any difference in performance between the portfolio and the S&P 500
Index, the portfolio currently intends to engage in transactions involving the
S&P 500 Index futures contracts, the NYSE Composite Index futures contracts,
options on the S&P 500 Index, the S&P 100 Index, and the NYSE Composite Index,
and options on the S&P 500 Index futures contracts and the NYSE Composite Index
futures contracts. There can be no assurance that the portfolio's attempt to
minimize such performance difference through the use of any of these instruments
will succeed. See the statement of additional information for a more detailed
discussion of the manner in which the portfolio will employ these instruments
and for a description of other risks involved in the use of such instruments.

The above described investment policies and techniques of the Stock Index
Portfolio are non-fundamental and may be changed without shareholder approval if
it is determined that alternative investment techniques would be more effective
in achieving the portfolio's objective.

High Dividend Stock Portfolio. The objective of this portfolio is both current
income and capital appreciation through investment primarily in common stocks
and convertible securities that provide favorable prospects for investment
income returns above those of the Standard & Poor's 500 Stock Index or the NYSE
Composite Index. In selecting these securities, the portfolio will put emphasis
on earnings, balance sheet and cash flow analysis, and the relationships that
these factors have to the price and return of a given security. Under normal
circumstances, the portfolio intends to invest at least 65% of its total assets
in such securities.

The portfolio may invest the balance of its assets in other stocks, other
securities convertible into common stocks, debt securities (including money
market instruments), options on stocks and stock indices, and stock index
futures. The portfolio may under normal circumstances invest up to 35% of its
total assets in money market instruments of the type invested in by the Money
Market Portfolio and without limit when the portfolio's manager believes market
conditions warrant a temporary defensive posture or pending the investment of
proceeds from sales of the portfolio shares. These investments include entering
into repurchase agreements of the kind that the Money Market Portfolio may
utilize. In addition, up to 35% of the portfolio's total assets may be invested
in other fixed-income obligations. The portfolio anticipates that these will
primarily be rated A or better by Moody's or S&P. However, the portfolio may
also invest in lower-rated fixed-income securities, although it will not invest
in securities rated lower than CC or Ca by Moody's or S&P, respectively. The
risks of medium to lower rated securities, also known as high risk securities,
are described above in connection with the High Yield Bond Portfolio. A
description of debt ratings is contained in the Appendix to the statement of
additional information. The portfolio may also invest in non-rated fixed-income
securities which, in the opinion of the manager, are of a quality comparable to
rated securities in which the portfolio may invest.

To the extent permitted by applicable insurance law, the portfolio may invest up
to 30% of its total assets in non-United States currency denominated debt and
equity securities of foreign and U.S. issuers. The particular risks of
investments in foreign securities are described under Foreign Securities on page
23.

18 - Series Fund
<PAGE>

These techniques are described on pages 24 through 28, and further information
about some of them is included in the statement of additional information.

As a result of its investment policies, the portfolio's turnover rate may exceed
100%, although it is not expected to exceed 200%.

Warren Spitz, Managing Director, PIC, has been portfolio manager of the High
Dividend Stock Portfolio since 1988.

Common Stock Portfolio. The objective of this portfolio is to achieve capital
appreciation through investment primarily in common stocks of companies,
including major established corporations as well as smaller capitalization
companies, that appear to offer attractive prospects of price appreciation that
is superior to broadly-based stock indices. Current income, if any, is
incidental.

Although the portfolio will be invested primarily in common stocks, it may also
invest to a limited extent in short, intermediate or long term debt, either
convertible or nonconvertible into common stock, as well as in nonconvertible
preferred stock. The portfolio will attempt to maintain a flexible approach to
the selection of common stocks of various types of companies whose valuations
appear to offer opportunities for above-average appreciation. Thus, the
portfolio may invest in securities of companies whose estimated growth in
earnings exceeds that projected for the market as a whole because of factors
such as expanding market share, new products or changes in market environment.
Or it may invest in "undervalued" securities which are often characterized by a
lack of investor recognition of the basic value of a company's assets.
Securities of companies with sales and earnings trends which are currently
unfavorable but which are expected to reverse may also be in the portfolio. The
effort to achieve price appreciation that is superior to broadly based stock
indices necessarily involves accepting a greater risk of declining values.
During periods when stock prices decline generally, it can be expected that the
value of the portfolio will also decline.

To the extent permitted by applicable insurance law, this portfolio may invest
up to 30% of its total assets in non-United States currency denominated common
stock and fixed-income securities convertible into common stock of foreign and
U.S. issuers. The particular risks of investments in foreign securities are
described under Foreign Securities on page 23.

In addition, the portfolio may: (i) purchase and sell options on equity
securities, stock indices and foreign currencies; (ii) purchase and sell stock
index and foreign currency futures contracts and options thereon; (iii) enter
into forward foreign currency exchange contracts; and (iv) purchase securities
on a when-issued or delayed delivery basis. These techniques are described on
pages 24 through 28, and further information about some of them is included in
the statement of additional information.

A portion of the portfolio may be invested in short-term debt obligations of the
kind held in the Money Market Portfolio as described in the Appendix to this
prospectus in order to make effective use of cash reserves pending investment in
common stocks.

Thomas Jackson, Managing Director, PIC, has been portfolio manager of the Common
Stock Portfolio since 1990. Prior to 1990, Mr. Jackson was Principal for Red Oak
Advisors.

Growth Stock Portfolio. The objective of the Growth Stock Portfolio is to
achieve long-term growth of capital through investment primarily in equity
securities of established companies with above-average growth prospects. Current
income, if any, is incidental.

In order to achieve this objective, the Growth Stock Portfolio will follow a
policy of selecting stocks on a company-by-company basis primarily through the
use of fundamental analysis. The portfolio manager will look for companies that
have demonstrated growth in earnings and sales, high returns on equity and
assets, or other strong financial characteristics, and in the opinion of the
portfolio manager, are attractively valued. These companies tend to have a
unique market niche, a strong new product profile or superior management. Under
normal market conditions, at least 65% of the value of the total assets of the
portfolio will be invested in common stocks and preferred stocks of companies
which exceed $1 billion in market capitalization.

The portfolio may invest up to 35% of its total assets in: (i) common stocks,
preferred stocks, and other equity-related securities of companies that are
undergoing changes in management or product and marketing dynamics which have
not yet been reflected in reported earnings but which are expected to impact
earnings in the intermediate term--these securities often lack investor
recognition and are often favorably valued; (ii) other equity-related
securities; (iii) with respect to a maximum of 20% of its total assets, common
stocks, preferred stocks and other equity-related securities of Canadian issuers
or American Depository Receipts ("ADRs"); (iv) investment grade fixed income
securities and mortgage-backed securities, including lower rated securities
[rated in the fourth highest rating category by a rating service (i.e. Baa by
Moody's Investor Services or BBB by Standard & Poor's)] or, if not rated,
determined by the portfolio manager to be of comparable quality to securities so
rated. A description of debt ratings is contained in the Appendix to the
statement of additional information; and (v) obligations issued or guaranteed by
the U.S. Government, its agencies and instrumentalities.

19 - Series Fund
<PAGE>

In addition, the portfolio may: (i) purchase and sell options on equity
securities, stock indices, and foreign currencies; (ii) lend its portfolio
securities; (iii) purchase and sell stock index and foreign currency futures
contracts and options thereon; (iv) enter into forward foreign currency exchange
contracts; and (v) enter into repurchase agreements and purchase securities on a
when-issued or delayed delivery basis. These techniques are described on pages
24 through 28, and further information about some of them is included in the
statement of additional information.

The effort to achieve superior investment returns necessarily involves a risk of
exposure to declining values. Securities in which the portfolio may primarily
invest have historically been more volatile than the Standard & Poor's 500
Composite Stock Price Index. Accordingly, during periods when stock prices
decline generally, it can be expected that the value of the portfolio will
decline more than the market indices.

David Poiesz, Director and Vice President of Jennison Associates Capital Corp.,
has been portfolio manager of the Growth Portfolio since its inception in 1995.
Mr. Poiesz joined Jennison Associates in 1983 as an equity research analyst and
has been an equity portfolio manager since 1991.

Small Capitalization Stock Portfolio. The objective of this portfolio is to
achieve long-term growth of capital through investment primarily in equity
securities of publicly-traded companies with small market capitalization.
Current income, if any, is incidental.

The portfolio seeks to achieve this objective by following the policy of
attempting to duplicate the price and yield performance of the Standard & Poor's
Small Capitalization Stock Index (the "S&P SmallCap 600 Index"), an index which
consists of six-hundred smaller capitalization domestic stocks chosen for market
size, liquidity, and industry group representation. Stocks in the index have
market capitalizations between $35 million and $1.215 billion. However, to be
included in the index, stock selections are also screened for trading volume,
share turnover, ownership concentration, share price and bid/ask spreads. The
initial sector weightings were selected to reflect the industry distribution of
all small capitalization stocks followed by S&P. The S&P SmallCap 600 Index has
above average risk and may fluctuate more than the S&P 500 Index which invests
in stocks of larger, more established firms.

The S&P SmallCap 600 Index is a market weighted index (stock price times shares
outstanding), with each stock affecting the index in proportion to its market
value. Standard & Poor's Corporation is responsible for selecting and
maintaining the list of stocks to be included in the index. Inclusion in the
index in no way implies an opinion by Standard & Poor's Corporation as to a
stock's attractiveness as an investment. "Standard & Poor's", "Standard & Poor's
Small Capitalization Stock Index" and "Standard & Poor's SmallCap 600" are
trademarks of McGraw Hill, Inc. The Series Fund is not sponsored, endorsed, sold
or promoted by S&P and S&P makes no representation regarding the advisability of
investing in the Series Fund. Reference is made to the statement of additional
information which sets forth certain additional disclaimers and limitations of
liabilities on behalf of S&P.

The following table shows the performance of the S&P SmallCap 600 Index for the
10 years ending in 1994. Although the index was first published in 1994, S&P
reconstructed its performance for earlier years. The performance of the S&P
SmallCap 600 Index in this period should not be viewed as a representation of
any future performance by that index. In addition, the fees and costs involved
in the operation of the Small Capitalization Stock Portfolio mean that the
performance of a share of stock in the portfolio may not equal the performance
of the S&P Small Cap 600 Stock Index even if the assets held by the portfolio do
equal that performance.

S&P SmallCap 600 With Dividends Reinvested
Annual Percentage Change
- --------------------------------------------------------------------------------
1985 +32.23
1986 +3.23
1987 -13.50
1988 +19.49
1989 +13.89
1990 -9.90
1991 +48.49
1992 +21.04
1993 +18.79
1994 -4.77
- ------
Source: Standard & Poor's Corporation. Percentage change calculated in
accordance with specifications of SEC release number IA-327.

20 - Series Fund
<PAGE>

Under normal circumstances, this portfolio intends to be invested in all or a
representative sample of the stocks in the S&P SmallCap 600 Index. The portfolio
may hold cash or its equivalent, these holdings may cause its performance to
differ from that of the S&P SmallCap 600 Index. The portfolio will attempt to
minimize any such differences in performance through transactions involving
stock index futures contracts, options on stock indices, and/or options on stock
index future contracts. These investment instruments are described under Options
on Stock Indices, Stock Index Futures Contracts, and Options on Futures
Contracts on pages 26 through 27.

In addition, the portfolio may: (i) purchase and sell options on equity
securities; (ii) lend its portfolio securities; and (iii) purchase securities on
a when-issued or delayed delivery basis. These techniques are described on pages
24 through 28, and further information about some of them is included in the
statement of additional information.

The investment policies and techniques of the Small Capitalization Stock
Portfolio are not fundamental and may be changed without shareholder approval if
it is determined that alternative investment techniques would be more effective
in achieving the portfolio's objective.

Wai Chiang, Director of Portfolio Management, Prudential Diversified Investment
Strategies, has been portfolio manager for the Small Capitalization Stock
Portfolio since its inception in 1995. Mr. Chiang also manages the unregistered
commingled domestic equity index separate accounts, Pridex and Pridex 500 for
The Prudential. Mr. Chiang has been employed by The Prudential as a portfolio
manager since 1986.

Global Equity Portfolio. The objective of this portfolio is long-term growth of
capital through investment primarily in common stocks and common stock
equivalents (such as convertible debt securities) of foreign and domestic
issuers. Current income, if any, is incidental.

The portfolio is intended to provide investors with the opportunity to invest in
a portfolio of securities of companies located throughout the world. In making
the allocation of assets among the various countries and geographic regions, the
portfolio manager ordinarily considers such factors as prospects for relative
economic growth between foreign countries; expected levels of inflation and
interest rates; government policies influencing business conditions; the range
of individual investment opportunities available to international investors; and
other pertinent financial, tax, social, political and national factors--all in
relation to the prevailing prices of the securities in each country or region.

There are, generally, no geographic limitations on companies in which the
portfolio may invest. Depending upon market conditions, the portfolio may be
invested primarily in foreign securities. Investments may be made in companies
based in the Pacific Basin (for example, Japan, Australia, New Zealand,
Singapore, Malaysia, and Hong Kong) and Western Europe (for example, the United
Kingdom, Spain, Germany, Switzerland, the Netherlands, France, and Scandinavia),
as well as the United States, Canada, and such other areas and countries as the
portfolio manager may determine from time to time. The portfolio may seek to
hedge its position in foreign currencies as more fully described herein.

The portfolio is not required to maintain any particular geographic or currency
mix of its investments. The portfolio intends to maintain investments in at
least three countries (including the United States), but may, when market
conditions warrant, invest up to 35% of its assets in companies located in any
one country (other than the United States).

In analyzing companies for investment, the portfolio manager ordinarily looks
for one or more of the following characteristics: prospects for above-average
earnings growth per share; high return on invested capital; healthy balance
sheet; sound financial and accounting policies and overall financial strength;
strong competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management; and
general operating characteristics which will enable the companies to compete
successfully in their marketplace--all in relation to the prevailing prices of
the securities of such companies.

Investing in securities of foreign companies and countries involves special
risks. The particular risks of investments in foreign securities are described
under Foreign Securities on page 23.

When the portfolio manager believes market conditions dictate a temporary
defensive strategy, or during periods of structuring and restructuring the
portfolio, the portfolio may invest without limit in money market investments of
the kind in which the Money Market Portfolio invests, including repurchase
agreements.

In addition, the portfolio may: (i) purchase and sell options on equity
securities, stock indices and foreign currencies; (ii) purchase and sell stock
index, interest rate and foreign currency futures contracts and options thereon;
(iii) enter into forward foreign currency exchange contracts; and (iv) purchase
securities on a when-issued or delayed delivery basis. These techniques are
described on pages 23 through 28, and further information about some of them is
included in the statement of additional information.

daily net assets), though similar to such expenses of other global funds, are
higher than those generally incurred by funds investing solely in the securities
of U.S. issuers.

As a result of its investment policies, the portfolio's turnover rate may exceed
100% although it is not expected to exceed 200%.

Daniel Duane, Managing Director, PIC, has been the portfolio manager of the
Global Equity Portfolio since 1990. Prior to 1990, Mr. Duane was the Senior
Portfolio Manager of the Global Equity Investments at First Investors Asset
Management.

Specialized Portfolios.

Natural Resources Portfolio. The objective of this portfolio is long-term growth
of capital through investment primarily in common stocks and convertible
securities of "natural resource companies" (as defined below) and in securities
(typically debt securities and preferred stocks) the terms of which are related
to the market value of some natural resource ("asset-indexed securities"). Under
normal circumstances, the portfolio will invest at least 65% of its total assets
in such securities.

Companies that primarily own, explore, mine, process or otherwise develop
natural resources, or supply goods and services primarily to such companies,
will be considered "natural resource companies." Natural resources generally
include precious metals (e.g., gold, silver and platinum), ferrous and
nonferrous metals (e.g., iron, aluminum and copper), strategic metals (e.g.,
uranium and titanium), hydrocarbons (e.g., coal, oil and natural gases), timber
land, undeveloped real property and agricultural commodities.

The value of equity securities of natural resource companies (including those
companies that are primarily involved in providing goods and services to natural
resource companies) will fluctuate pursuant to market conditions generally, as
well as to the market for the particular natural resource in which the issuer is
involved. In addition, the values of natural resources are affected by numerous
factors including events occurring in nature, inflationary pressures and
international politics. For instance, events in nature (such as earthquakes or
fires in prime natural resource areas) and political events (such as coups or
military confrontations) can affect the overall supply of a natural resource and
thereby the value of companies involved in such natural resources. In addition,
rising interest rates (i.e., inflationary pressures) may affect the demand for
natural resources such as timber. The portfolio manager will seek securities
that are attractively priced relative to the intrinsic values of the relevant
natural resource or that are of companies which are positioned to benefit under
existing or anticipated economic conditions. Accordingly, the portfolio may
shift its emphasis from one natural resource industry to another depending upon
prevailing trends or developments, provided that the portfolio will not invest
25% or more of its total assets in the securities of companies in any one
natural resource industry. See INVESTMENT RESTRICTIONS in the statement of
additional information for information concerning the industry classifications.
The portfolio is not required to maintain any particular mix of investments
among the natural resource industries.

In addition to common stocks and common stock equivalents, the portfolio may
invest in securities, the principal amount, redemption terms or conversion terms
of which are related to the market price of a natural resource asset, referred
to herein as "asset-indexed securities." The portfolio expects to purchase
asset-indexed securities which are rated, or are issued by issuers that have
outstanding obligations which are rated, at least BBB or Baa by S&P or Moody's,
respectively, or commercial paper rated at least A-2 or P-2 by S&P or Moody's,
respectively, or in unrated securities that the portfolio manager has determined
to be of comparable quality. The portfolio reserves the right, however, to
invest in asset-indexed securities rated as low as CC or Ca by Moody's or S&P,
respectively, or in unrated securities of comparable quality, also known as high
risk securities. A description of security ratings is set forth in the Appendix
to the statement of additional information. If the asset-indexed security is
backed by a letter of credit or other similar instrument, the manager may take
such backing into account in determining the quality of the security.

Although it is expected that the market prices of the asset-indexed securities
will fluctuate on the basis of the natural resources on which such securities
are based, there may not be a perfect correlation between the price movements of
the asset-indexed securities and the underlying natural resources. Asset-indexed
securities are not always secured with a security interest in the underlying
natural resource asset. Further, asset-indexed securities typically bear
interest or pay dividends at below market rates (and in certain cases at nominal
rates). Although the value of asset-indexed securities that bear interest may
fluctuate inversely with market interest rates, such fluctuations are
anticipated generally to be minimal since the value of such securities is
typically based on the natural resources on which the securities are based.

Certain asset-indexed securities may be payable at maturity in cash, or, at the
option of the holder, directly in a stated amount of the asset to which the
securities are related. The portfolio does not intend to invest directly in
natural resources and, therefore, would elect to be paid in cash or would
attempt to sell the asset-indexed security prior to maturity to realize the
appreciation in the underlying asset.

22 - Series Fund
<PAGE>

As indicated above, the portfolio intends to invest primarily in common stocks
and convertible securities of natural resource companies and asset-indexed
securities. The portfolio may invest the balance of its assets in other stocks,
other securities convertible into common stocks, debt securities (including
money market instruments), and options on stocks and on natural resource-related
stock indices. The portfolio may under normal circumstances invest up to 35% of
its total assets in money market instruments of the type invested in by the
Money Market Portfolio and without limit when the portfolio manager believes
market conditions warrant a temporary defensive posture or during periods of
structuring and restructuring the portfolio. These investments include entering
into repurchase agreements of the kind that the Money Market Portfolio may
utilize. In addition, up to 35% of the portfolio's total assets may be invested
in other fixed-income obligations. The portfolio anticipates that these will
primarily be rated A or better by Moody's or S&P. However, the portfolio may
also invest in lower-rated fixed-income securities, also known as high risk
securities, although it will not invest in securities rated lower than CC or Ca
by Moody's or S&P, respectively. The portfolio may also invest in non-rated
fixed-income securities which, in the opinion of the manager, are of a quality
comparable to rated securities in which the portfolio may invest.

In addition, the portfolio may: (i) purchase and sell options on equity
securities, stock indices and foreign currencies (ii) purchase and sell stock
index and foreign currency futures contracts and options thereon; (iii) enter
into forward foreign currency exchange contracts; and (iv) purchase securities
on a when-issued or delayed delivery basis. These techniques are described on
pages 24 through 29, and further information about some of them is included in
the statement of additional information.

As a result of its investment policies, the portfolio's turnover rate may exceed
100%, although it is not expected to exceed 200%.

Leigh Goehring, Vice President, PIC, has been portfolio manager of the Natural
Resources Portfolio since 1992. Prior to 1992, Mr. Goehring was portfolio
manager of The Prudential-Bache Option Growth Fund.

Convertible Securities. The Conservatively Managed Flexible, Aggressively
Managed Flexible, High Dividend Stock, Common Stock, Growth Stock, Small
Capitalization Stock, Global Equity, and Natural Resources Portfolios may invest
in convertible securities and such securities may constitute a major part of the
holdings of the High Dividend Stock, Global Equity and Natural Resources
Portfolios. A convertible security is a fixed-income security (a bond or
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stocks in a
corporation's capital structure, but are usually subordinated to similar
nonconvertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforded by a similar nonconvertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation attendant upon a market price advance in
the convertible security's underlying common stock. The price of a convertible
security tends to increase as the market value of the underlying stock rises,
whereas it tends to decrease as the market value of the underlying stock
declines. While no securities investment is without risk, investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.

Foreign Securities. The Global Equity Portfolio may invest up to 100% of its
total assets in common stock and convertible securities denominated in a foreign
currency and issued by foreign or domestic issuers. The Bond and High Yield Bond
Portfolios may each invest up to 20% of their assets in United States currency
denominated debt securities issued outside the United States by foreign or
domestic issuers. In addition, the bond components of the Conservatively Managed
Flexible and Aggressively Managed Flexible Portfolios may each invest up to 20%
of their assets in such securities. To the extent permitted by applicable law,
the Conservatively Managed Flexible, Aggressively Managed Flexible, and High
Dividend Stock Portfolios may invest up to 30% of their total assets in debt and
equity securities denominated in a foreign currency and issued by foreign or
domestic issuers. Further, to the extent permitted by applicable insurance law,
the Common Stock, Growth Stock, and Natural Resources Portfolios may invest up
to 30% of their total assets in non-United States currency denominated common
stock and fixed-income securities convertible into common stock of foreign and
U.S. issuers. Securities issued outside the United States and not publicly
traded in the United States, as well as American Depository Receipts ("ADRs"),
and securities denominated in a foreign currency are referred to collectively in
this prospectus as "foreign securities."

ADRs are U.S. dollar-denominated certificates issued by a United States bank or
trust company and represent the right to receive securities of a foreign issuer
deposited in a domestic bank or foreign branch of a United States bank and
traded on a United States exchange or in an over-the-counter market. Investment
in ADRs has certain advantages over direct investment in the underlying foreign
securities because they are easily transferable, have

23 - Series Fund
<PAGE>

readily available market quotations, and the foreign issuers are usually subject
to comparable auditing, accounting, and financial reporting standards as
domestic issuers.

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

If the security is denominated in foreign currency, it may be affected by
changes in currency rates and in exchange control regulations, and costs may be
incurred in connection with conversions between currencies. The portfolios that
may invest in foreign securities may, but need not, enter into forward foreign
currency exchange contracts for the purchase or sale of foreign currency for
hedging purposes, including: locking-in the U.S. dollar price equivalent of
interest or dividends to be paid on such securities which are held by the
portfolio; and protecting the U.S. dollar value of such securities which are
held by the portfolio. The portfolios will not enter into such forward contracts
or maintain a net exposure to such contracts where the consummation of the
contracts would obligate the portfolio to deliver an amount of foreign currency
in excess of the value of the portfolio's portfolio securities or other assets
denominated in that currency. See Forward Foreign Currency Exchange Contracts in
the statement of additional information. In addition, the portfolios may, for
hedging purposes, enter into certain transactions involving options on foreign
currencies, foreign currency futures contracts and options on foreign currency
futures contracts. See Options on Foreign Currencies, Futures Contracts, and
Options on Futures Contracts on pages 26 through 27.

Options on Equity Securities. The Conservatively Managed Flexible, Aggressively
Managed Flexible, High Dividend Stock, Common Stock, Growth Stock, Small
Capitalization Stock, Global Equity, and Natural Resources Portfolios may
purchase and write (i.e., sell) put and call options on equity securities that
are traded on securities exchanges, are listed on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or that result from
privately negotiated transactions with broker-dealers ("OTC options"). A call
option is a short-term contract pursuant to which the purchaser or holder, in
return for a premium paid, has the right to buy the equity security underlying
the option at a specified exercise price at any time during the term of the
option. The writer of the call option, who receives the premium, has the
obligation, upon exercise of the option, to deliver the underlying equity
security against payment of the exercise price. A put option is a similar
contract which gives the purchaser or holder, in return for a premium, the right
to sell the underlying equity security at a specified price during the term of
the option. The writer of the put, who receives the premium, has the obligation
to buy the underlying equity security at the exercise price upon exercise by the
holder of the put.

A portfolio will write only "covered" options on stocks. A call option is
covered if: (1) the portfolio owns the security underlying the option; or (2)
the portfolio has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of other
securities it holds; or (3) the portfolio holds on a share-for-share basis a
call on the same security as the call written where the exercise price of the
call held is equal to or less than the exercise price of the call written or
greater than the exercise price of the call written if the difference is
maintained by the portfolio in cash, Treasury bills or other high grade
short-term debt obligations in a segregated account with its custodian. A put
option is covered if: (1) the portfolio deposits and maintains with its
custodian in a segregated account cash, U.S. Government securities or other
liquid high-grade debt obligations having a value equal to or greater than the
exercise price of the option; or (2) the portfolio holds on a share-for-share
basis a put on the same security as the put written where the exercise price of
the put held is equal to or greater than the exercise price of the put written
or less than the exercise price if the difference is maintained by the portfolio
in cash, Treasury bills or other high grade short-term debt obligations in a
segregated account with its custodian.

24 - Series Fund
<PAGE>
However, if the market price of the security underlying the put rises,
the profit the portfolio realizes on the sale of the security will be reduced by
the premium paid for the put option less any amount (net of transaction costs)
for which the put may be sold. Similar principles apply to the purchase of puts
on debt securities and stock indices, as described under Options on Debt
Securities, page 25 and Options on Stock Indices, page 26.

These portfolios may purchase call options for hedging and investment purposes.
No portfolio intends to invest more than 5% of its net assets at any one time in
the purchase of call options on stocks. These portfolios may also purchase
putable and callable equity securities, which are securities coupled with a put
or a call option provided by the issuer.

If the writer of an exchange-traded option wishes to terminate the obligation,
he or she may effect a "closing purchase transaction" by buying an option of the
same series as the option previously written. Similarly, the holder of an
exchange-traded option may liquidate his or her position by exercise of the
option or by effecting a "closing sale transaction" by selling an option of the
same series as the option previously purchased. A portfolio will realize a
profit from a closing transaction if the price of the transaction is less than
the premium received from writing the option or is more than the premium paid to
purchase the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from a closing purchase transaction with respect to a call option
is likely to be offset in whole or in part by appreciation of the underlying
equity security owned by the portfolio. Unlike exchange-traded options, OTC
options generally do not have a continuous liquid market. Consequently, the
portfolio will generally be able to realize the value of an OTC option it has
purchased only by exercising it or reselling it to the dealer who issued it.
Similarly, when the portfolio writes an OTC option, it generally will be able to
close out the OTC option prior to its expiration only by entering into a closing
purchase transaction with the dealer to which the portfolio originally wrote the
OTC option. There is, in general, no guarantee that closing purchase or closing
sale transactions can be effected.

There are certain special risks associated with the portfolios' transactions in
stock options, in addition to a risk that the market value of the security will
move adversely to the portfolio's option position. These risks, which relate
primarily to liquidity, are discussed in the statement of additional
information.

Options on Debt Securities. The Bond, Government Securities, Conservatively
Managed Flexible, Aggressively Managed Flexible, and High Yield Bond Portfolios
may purchase and write (i.e. sell) put and call options on debt securities
(including U.S. Government debt securities) that are traded on U.S. securities
exchanges or that result from privately negotiated transactions with primary
U.S. Government securities dealers recognized by the Federal Reserve Bank of New
York ("OTC options"). Options on debt are similar to options on stock, except
that the option holder has the right to take or make delivery of a debt
security, rather than stock.

A portfolio will write only "covered" options. Options on debt securities are
covered in the same manner as options on stocks, discussed above, except that,
in the case of call options on U.S. Treasury Bills, the portfolio might own U.S.
Treasury Bills of a different series from those underlying the call option, but
with a principal amount and value corresponding to the option contract amount
and a maturity date no later than that of the securities deliverable under the
call option. The principal reason for a portfolio to write an option on one or
more of its securities is to realize through the receipt of the premiums paid by
the purchaser of the option a greater current return than would be realized on
the underlying security alone. Calls on debt securities will not be written
when, in the opinion of The Prudential, interest rates are likely to decline
significantly, because under those circumstances the premium received by writing
the call likely would not fully offset the foregone appreciation in the value of
the underlying security.

These portfolios may also write straddles (i.e., a combination of a call and a
put written on the same security at the same strike price where the same issue
of the security is considered "cover" for both the put and the call). In such
cases, the portfolio will also segregate or deposit for the benefit of the
portfolio's broker cash or liquid high-grade debt obligations equivalent to the
amount, if any, by which the put is "in the money." It is contemplated that each
portfolio's use of straddles will be limited to 5% of the portfolio's net assets
(meaning that the securities used for cover or segregated as described above
will not exceed 5% of the portfolio's net assets at the time the straddle is
written). The writing of a call and a put on the same security at the same
strike price where the call and the put are covered by different securities is
not considered a straddle for purposes of this limit.

These portfolios may purchase "protective puts" in an effort to protect the
value of a security that it owns against a substantial decline in market value.
Protective puts are described in Options on Equity Securities, page 24. A
portfolio may wish to protect certain portfolio securities against a decline in
market value at a time when put options on those particular securities are not
available for purchase. A portfolio may therefore purchase a put option on
securities other than those it wishes to protect even though it does not hold
such other securities in its portfolio. While changes in the value of the put
option should generally offset changes in the value of the securities being
hedged, the correlation between the two values may not be as close in these
transactions as in transactions in which the portfolio purchases a put option on
an underlying security it owns.

25 - Series Fund
<PAGE>

These portfolios may also purchase call options on debt securities for hedging
or investment purposes. No portfolio currently intends to invest more than 5% of
its net assets at any one time in the purchase of call options on debt
securities. A portfolio may also purchase putable and callable debt securities,
which are securities coupled with a put or call option provided by the issuer.

If the writer of an exchange-traded option wishes to terminate the obligation,
he or she may effect a "closing purchase transaction" or a "closing sale
transaction" in a manner similar to that discussed above in connection with
options on equity securities.

The staff of the Securities and Exchange Commission has taken the position that
purchased OTC options and the assets used as "cover" for written OTC options are
illiquid for purposes of a portfolio's 15% limitation on investment in illiquid
securities. However, pursuant to the terms of certain no-action letters issued
by the staff, the securities used as cover for written OTC options may be
considered liquid provided that the portfolio sells OTC options only to
qualified dealers who agree that the portfolio may repurchase any OTC option it
writes for a maximum price to be calculated by a predetermined formula. In such
cases, the OTC option would be considered illiquid only to the extent that the
maximum repurchase price under the formula exceeds the intrinsic value of the
option.

There are certain risks associated with the portfolios' transactions in debt
options, in addition to a risk that the market value of the security will move
adversely to the portfolio's option position. These risks, which relate
primarily to liquidity, are discussed in the statement of additional
information.

Options on Stock Indices. The Conservatively Managed Flexible, Aggressively
Managed Flexible, High Dividend Stock, Common Stock, Growth Stock, Global
Equity, and Natural Resources Portfolios may purchase and sell put and call
options on stock indices traded on securities exchanges, listed on NASDAQ or
that result from privately negotiated transactions with broker-dealers ("OTC
options"). The Stock Index and Small Capitalization Stock Portfolios may utilize
options on stock indices by constructing "put/call" combinations that are
economically comparable to a long stock index futures position, as described in
the statement of additional information. Options on stock indices are similar to
options on stock except that, rather than the right to take or make delivery of
stock at a specified price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of the stock index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
option. This amount of cash is equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple (the "multiplier"). The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Unlike stock options, all settlements are in cash, and gain or loss depends on
price movements in the stock market generally (or in a particular industry or
segment of the market) rather than price movements in individual stocks.

The multiplier for an index option performs a function similar to the unit of
trading for a stock option. It determines the total dollar value per Contract of
each point in the difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.

A portfolio will write only "covered" options on stock indices. The manner in
which these options are covered is discussed in the statement of additional
information.

These portfolios may purchase put and call options for hedging and investment
purposes. No portfolio intends to invest more than 5% of its net assets at any
time in the purchase of puts and calls on stock indices. A portfolio may effect
closing sale and purchase transactions involving options on stock indices, as
described above in connection with stock options.

Options on Foreign Currencies. The Conservatively Managed Flexible, Aggressively
Managed Flexible, High Dividend Stock, Common Stock, Growth Stock, Global
Equity, and Natural Resources Portfolios may purchase and write put and call
options on foreign currencies traded on U.S. or foreign securities exchanges or
boards of trade for hedging purposes in a manner similar to that in which
forward foreign currency exchange contracts (discussed under Foreign Securities,
page 23 and futures contracts on foreign currencies (discussed under Futures
Contracts, page 27) will be employed. Options on foreign currencies are similar
to options on stock, except that the option holder has the right to take or make
delivery of a specified amount of foreign currency, rather than stock.

A portfolio may purchase and write options to hedge the portfolio's securities
denominated in foreign currencies. If there is a decline in the dollar value of
a foreign currency in which the portfolio's securities are denominated, the
dollar value of such securities will decline even though the foreign currency
value remains the same. To hedge against the decline of the foreign currency, a
portfolio may purchase put options on such foreign currency. If the value of the
foreign currency declines, the gain realized on the put option would offset, in
whole or in part, the adverse effect such decline would have on the value of the
portfolio's securities. Alternatively, a portfolio may write a call option on
the foreign currency. If the foreign currency declines, the option would not be
exercised and

26 - Series Fund
<PAGE>

the decline in the value of the portfolio securities denominated
in such foreign currency would be offset in part by the premium the portfolio
received for the option.

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

A portfolio's successful use of currency exchange options on foreign currencies
depends upon the manager's ability to predict the direction of the currency
exchange markets and political conditions, which requires different skills and
techniques than predicting changes in the securities markets generally. For
instance, if the currency being hedged has moved in a favorable direction, the
corresponding appreciation of the portfolio's securities denominated in such
currency would be partially offset by the premiums paid on the options. Further,
if the currency exchange rate does not change, the portfolio net income would be
less than if the portfolio had not hedged since there are costs associated with
options.

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

Futures Contracts. The Conservatively Managed Flexible, Aggressively Managed
Flexible, Stock Index, High Dividend Stock, Common Stock, Growth Stock, Small
Capitalization Stock, Global Equity, and Natural Resources Portfolios may, to
the extent permitted by applicable regulations, attempt to reduce the risk of
investment in equity securities by hedging a portion of their equity portfolios
through the use of stock index futures contracts. A stock index futures contract
is an agreement in which the seller of the contract agrees to deliver to the
buyer an amount of cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of the last trading day
of the contract and the price at which the agreement is made. No physical
delivery of the underlying stocks in the index is made.

The Bond, Government Securities, Conservatively Managed Flexible, Aggressively
Managed Flexible, High Yield Bond, and Global Equity Portfolios may, to the
extent permitted by applicable regulations, purchase and sell for hedging
purpose futures contracts on interest-bearing securities (such as U.S. Treasury
bonds and notes) or interest rate indices (referred to collectively as "interest
rate futures contracts").

The Conservatively Managed Flexible, Aggressively Managed Flexible, High
Dividend Stock, Common Stock, Growth Stock, Global Equity, and Natural Resources
Portfolios may, to the extent permitted by applicable regulations, purchase and
sell futures contracts on foreign currencies or groups of foreign currencies for
hedging purposes.

When the futures contract is entered into, each party deposits with a broker or
in a segregated custodial account approximately 5% of the contract amount,
called the "initial margin." Subsequent payments to and from the broker, called
the "variation margin," will be made on a daily basis as the underlying
security, index or rate fluctuates making the long and short positions in the
futures contracts more or less valuable, a process known as "marking to the
market." The Board of Directors currently intends to limit futures trading so
that a portfolio will not enter into futures contracts or related options if the
aggregate initial margins and premiums exceed 5% of the fair market value of its
assets, after taking into account unrealized profits and unrealized losses on
any such contracts and options.

A portfolio's successful use of futures contracts depends upon the investment
manager's ability to predict the direction of the relevant market. The
correlation between movement in the price of the futures contract and the price
of the securities or currencies being hedged is imperfect. The ability of a
portfolio to close out a futures position depends on a liquid secondary market.
There is no assurance that liquid secondary markets will exist for any
particular futures contract at any particular time.

Options on Futures Contracts. To the extent permitted by applicable insurance
law and federal regulations, the Conservatively Managed Flexible, Aggressively
Managed Flexible, Stock Index, High Dividend Stock, Common Stock, Growth Stock,
Small Capitalization Stock, Global Equity and Natural Resources, Portfolios may
enter into certain transactions involving options on stock index futures
contracts; the Bond, Government Securities, Conservatively Managed Flexible,
Aggressively Managed Flexible High Yield Bond and Global Equity Portfolios may
enter into certain transactions involving options on interest rate futures
contracts; and the Conservatively Managed Flexible, Aggressively Managed
Flexible, High Dividend Stock, Common Stock, Growth Stock, Global Equity and
Natural Resources Portfolios may enter into certain transactions involving
options on foreign currency futures

27 - Series Fund
<PAGE>

contracts. An option on a futures contract gives the purchaser or holder the
right, but not the obligation, to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified price at any time during the option exercise period. The
writer of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by the writer and holder of the option will be accomplished by
delivery of the accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. As an alternative to
exercise, the holder or writer of an option may terminate a position by selling
or purchasing an option of the same series. There is no guarantee that such
closing transactions can be effected. The Stock Index and Small Capitalization
Stock Portfolios intend to utilize options on stock index futures contracts by
constructing "put/call" combinations that are economically comparable to a long
stock index futures position, as described in the statement of additional
information. The other portfolios intend to utilize options on futures contracts
for the same purposes that they use the underlying futures contracts.

Reverse Repurchase Agreements and Dollar Rolls. The Bond, Government Securities
and High Yield Bond Portfolios, as well as the fixed income portions of the
Conservatively Managed Flexible and Aggressively Managed Flexible Portfolios,
may use reverse repurchase agreements and dollar rolls. The Money Market
Portfolio and the money market portion of any portfolio may use reverse
repurchase agreements. Reverse repurchase agreements involve the sale of
securities held by a portfolio with an agreement by the portfolio to repurchase
the same securities at an agreed upon price and date. During the reverse
repurchase period, the portfolio often continues to receive principal and
interest payments on the sold securities. The terms of each agreement reflect a
rate of interest for use of the funds for the period, and thus these agreements
have the characteristics of borrowing by the portfolio. Dollar rolls involve
sales by a portfolio of securities for delivery in the current month with a
simultaneous contract to repurchase substantially similar securities (same type
and coupon) from the same party at an agreed upon price and date. During the
roll period, the portfolio forgoes principal and interest paid on the
securities. A portfolio is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or a cash equivalent security position which
matures on or before the forward settlement date of the dollar roll transaction.
A portfolio will establish a segregated account with its custodian in which it
will maintain cash, U.S. Government securities or other liquid high-grade debt
obligations equal in value to its obligations in respect of reverse repurchase
agreements and dollar rolls. Reverse repurchase agreements and dollar rolls
involve the risk that the market value of the securities retained by the
portfolio may decline below the price of the securities the portfolio has sold
but is obligated to repurchase under the agreement. In the event the buyer of
securities under a reverse repurchase agreement or dollar roll files for
bankruptcy or becomes insolvent, the portfolio's use of the proceeds of the
agreement may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the portfolio's obligation to repurchase
the securities. The Bond, Government Securities and High Yield Bond Portfolios,
as well as the fixed income portions of the Conservatively Managed Flexible and
Aggressively Managed Flexible Portfolios, will not obligate more than 30% of
their net assets in connection with reverse repurchase agreements and dollar
rolls. No other portfolio will obligate more than 10% of its net assets in
connection with reverse repurchase agreements.

When-Issued and Delayed Delivery Securities. From time to time, in the ordinary
course of business, the Bond, Government Securities, Conservatively Managed
Flexible, Aggressively Managed Flexible, High Yield Bond, High Dividend Stock,
Common Stock, Growth Stock, Small Capitalization Stock, Global Equity and
Natural Resources Portfolios may purchase equity securities on a when-issued or
delayed delivery basis, that is, delivery and payment can take place a month or
more after the date of the transaction. Each of these portfolios will limit such
purchases to those in which the date for delivery and payment falls within 120
days of the date of the commitment. A portfolio will make commitments for such
when-issued transactions only with the intention of actually acquiring the
securities. A portfolio's custodian will maintain, in a separate account, cash,
U.S. Government securities or other high grade debt obligations having a value
equal to or greater than such commitments. If a portfolio chooses to dispose of
the right to acquire a when-issued security prior to its acquisition, it could,
as with the disposition of any other portfolio security, incur a gain or loss
due to market fluctuations.

In addition, the Money Market Portfolio and short-term portions of the other
portfolios may purchase money market securities on when-issued or delayed
delivery basis on the terms set forth in the Appendix to this prospectus.

28 - Series Fund
<PAGE>

interest which accrues during the period of the loan. To borrow the security the
portfolio may be required to pay a premium which would increase the cost of the
security sold. The proceeds of the short sale will be retained by the broker to
the extent necessary to meet margin requirements until the short position is
closed out. Until the portfolio replaces the borrowed security, it will (a)
maintain in a segregated account cash or U.S. Government securities at such a
level that the amount deposited in the account plus the amount deposited with
the broker as collateral will equal the current market value of the security
sold short and will not be less than the market value of the security at the
time it was sold short or (b) otherwise cover its short position.

The portfolio will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date on which
the portfolio replaces the borrowed security. The portfolio will realize a gain
if the security declines in price between those dates. This result is the
opposite of what one would expect from a cash purchase of a long position in a
security. The amount of any gain will be decreased, and the amount of any loss
will be increased, by the amount of any premium or interest paid in connection
with the short sale. No more than 25% of any portfolio's net assets will be,
when added together: (i) deposited as collateral for the obligation to replace
securities borrowed to effect short sales and (ii) allocated to segregated
accounts in connection with short sales.

Short Sales Against the Box. All portfolios (other than the Money Market and
Zero Coupon Bond Portfolios) may make short sales of securities or maintain a
short position, provided that at all times when a short position is open the
portfolio owns an equal amount of such securities or securities convertible into
or exchangeable, with or without payment of any further consideration, for an
equal amount of the securities of the same issuer as the securities sold short
(a "short sale against the box"); provided, that if further consideration is
required in connection with the conversion or exchange, cash or U.S. Government
securities in an amount equal to such consideration must be put in a segregated
account.

Interest Rate Swaps. The Bond, Government Securities and High Yield Bond
Portfolios and the fixed income portions of the Conservatively Managed Flexible
and Aggressively Managed Flexible Portfolios may use interest rate swaps to
increase or decrease a portfolio's exposure to long- or short-term interest
rates. No portfolio currently intends to invest more than 5% of its net assets
at any one time in interest rate swaps. For more information, see the statement
of additional information.

Loans of Portfolio Securities. All of the portfolios except the Money Market
Portfolio may from time to time lend the securities they hold to broker-dealers,
provided that such loans are made pursuant to written agreements and are
continuously secured by collateral in the form of cash, U.S. Government
securities or irrevocable standby letters of credit in an amount equal to at
least the market value at all times of the loaned securities plus the accrued
interest and dividends. During the time securities are on loan, the portfolio
will continue to receive the interest and dividends or amounts equivalent
thereto, on the loaned securities while receiving a fee from the borrower or
earning interest on the investment of the cash collateral. The right to
terminate the loan will be given to either party subject to appropriate notice.
Upon termination of the loan, the borrower will return to the lender securities
identical to the loaned securities. The portfolio will not have the right to
vote securities on loan, but would terminate the loan and retain the right to
vote if that were considered important with respect to the investment.

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

No portfolio will lend securities to broker-dealers affiliated with The
Prudential, including Prudential Securities Incorporated. This will not affect a
portfolio's ability to maximize its securities lending opportunities.

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS

The Series Fund is subject to certain investment restrictions which are
fundamental to the operations of the Series Fund and may not be changed except
with the approval of a majority vote (as defined under INVESTMENT OBJECTIVES AND
POLICIES OF THE PORTFOLIOS on page 8) of the persons participating in the
affected portfolio.

The investments of the various portfolios are generally subject to certain
additional restrictions under state laws. In the event of future amendments to
the applicable statutes, each portfolio will comply, without the approval of the
shareholders, with the statutory requirements as so modified.

For a detailed discussion of investment restrictions applicable to the Series
Fund, see INVESTMENT RESTRICTIONS in the statement of additional information.

29 - Series Fund
<PAGE>

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES

The Series Fund has entered into an Investment Advisory Agreement with The
Prudential under which The Prudential will, subject to the direction of the
Board of Directors of the Series Fund, be responsible for the management of the
Series Fund, and provide investment advice and related services to each
portfolio. The directors, in addition to reviewing the actions of the Series
Fund's investment advisor, decide upon matters of general policy. The Series
Fund's officers conduct and supervise the daily business operations of the
Series Fund.

The Prudential, founded in 1875 under the laws of New Jersey, is subject to
regulation by the Department of Insurance of the State of New Jersey as well as
by the insurance departments of all the other states and jurisdictions in which
it does business. The Prudential is registered both as a broker-dealer under the
Securities Exchange Act of 1934 and as an investment advisor under the
Investment Advisers Act of 1940. The Prudential's principal business address is
Prudential Plaza, Newark, New Jersey 07102-3777.

The Prudential manages the assets that it owns as well as those of various
separate accounts established by The Prudential and those held by other
investment companies for which it acts as investment advisor. Total assets under
management as of December 31, 1994 were approximately $297 billion which
includes approximately $212 billion owned by The Prudential and approximately
$85 billion of external assets under The Prudential's management.

Subject to The Prudential's supervision, substantially all of the investment
advisory services provided to the Series Fund by The Prudential are furnished,
with respect to 15 of the Series Fund's 16 portfolios, by its wholly-owned
subsidiary PIC, pursuant to the Service Agreement between The Prudential and
PIC. The Agreement provides that The Prudential will reimburse PIC for its costs
and expenses. The Conservatively Managed Flexible and Aggressively Managed
Flexible Portfolios are managed by Prudential Investment Advisors ("PIA") and
Prudential Diversified Investment Strategies ("PDI"), units of PIC, using a team
of portfolio managers under the supervision of Mark Stumpp, Managing Director,
PIC. Investment advisory services with respect to the Growth Stock Portfolio
provided by The Prudential are furnished by another wholly-owned subsidiary,
Jennison Associates Capital Corp. ("Jennison"), pursuant to an Investment
Subadvisory Agreement between The Prudential and Jennison. That Agreement
provides that a portion of the fee received by The Prudential for providing
investment advisory services to the Growth Stock Portfolio will be paid to
Jennison. PIC and Jennison are both registered as investment advisors under the
Investment Advisers Act of 1940.

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

The investment management fee for the Stock Index Portfolio is equal to an
annual rate of 0.35% of the average daily net assets of the portfolio. For the
Money Market, Bond, Government Securities, High Dividend Stock, Zero Coupon
Bond, and Small Capitalization Stock Portfolios that fee is equal to an annual
rate of 0.4% of the average daily net assets of each of the portfolios. For the
Common Stock and Natural Resources Portfolios, the fee is equal to an annual
rate of 0.45% of the average daily net assets of each of the portfolios. The fee
for the Conservatively Managed Flexible and the High Yield Bond Portfolios is
equal to an annual rate of 0.55% of the average daily net assets of each of the
portfolios. For the Aggressively Managed Flexible and Growth Stock Portfolios,
the fee is equal to an annual rate of 0.6% of the average daily net assets of
the portfolio. The fee for the Global Equity Portfolio is equal to an annual
rate of 0.75% of the average daily net assets of the portfolio.

For the year ended December 31, 1994, the Series Fund's total expenses were
0.59% of the average net assets of the Series Fund's portfolios. The investment
management fee for that period constituted 0.51% of the average net assets. For
further information about the expenses of the Series Fund, see INVESTMENT
MANAGEMENT ARRANGEMENTS AND EXPENSES in the statement of additional information.

PURCHASE AND REDEMPTION OF SHARES

Shares in the Series Fund are currently offered continuously, without sales
charge, at prices equal to the respective net asset values of the portfolios,
only to the Accounts to fund benefits payable under the Contracts. The Series
Fund may at some later date also offer its shares to other separate accounts of
The Prudential or other insurers. Pruco Securities Corporation ("Prusec"), an
indirect wholly-owned subsidiary of The Prudential, acts as the principal
underwriter of the Series Fund. Prusec's principal business address is 1111
Durham Avenue, South Plainfield, New Jersey 07080.

The Series Fund is required to redeem all full and fractional shares of the
Series Fund for cash within 7 days of receipt of proper notice of redemption.
The redemption price is the net asset value per share next determined after the
initial receipt of proper notice of redemption.

30 - Series Fund
<PAGE>

The right to redeem shares or to receive payment with respect to any redemption
may be suspended only for any period during which trading on the NYSE is
restricted as determined by the Securities and Exchange Commission or when such
exchange is closed (other than customary weekend and holiday closings), for any
period during which an emergency exists as defined by the Securities and
Exchange Commission as a result of which disposal of a portfolio's securities or
determination of the net asset value of each portfolio is not reasonably
practicable, and for such other periods as the Securities and Exchange
Commission may by order permit for the protection of shareholders of each
portfolio.

DETERMINATION OF NET ASSET VALUE

The net asset value of the shares of each portfolio is determined once daily, as
of 4:15 p.m. New York City time (12:00 noon New York City time in the case of
the Money Market Portfolio) on each day during which the NYSE is open for
business. The NYSE is open for business Monday through Friday except for the
days on which the following holidays are observed: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. The net asset value per share of each portfolio except the
Money Market Portfolio is computed by adding the sum of the value of the
securities held by that portfolio plus any cash or other assets it holds,
subtracting all its liabilities, and dividing the result by the total number of
shares outstanding of that portfolio at such time. Expenses, including the
investment management fee payable to The Prudential, are accrued daily.

In determining the net asset value of the Bond, Government Securities and High
Yield Bond Portfolios, securities (other than debt obligations with remaining
maturities of less than 60 days, which are valued at amortized cost) will be
valued utilizing an independent pricing service to determine valuations for
normal institutional size trading units of securities. The pricing service
considers such factors as security prices, yields, maturities, call features,
ratings, and developments relating to specific securities in arriving at
securities valuations.

The net asset value of shares of the Money Market Portfolio will normally remain
at $10 per share, because the net investment income of this portfolio (including
realized and unrealized gains and losses on portfolio holdings) will be declared
as a dividend each time the portfolio's net income is determined, see DIVIDENDS,
DISTRIBUTIONS, AND TAXES, page 32. If in the view of the Board of Directors of
the Series Fund it is inadvisable to continue to maintain the net asset value of
the Money Market Portfolio at $10 per share, the Board reserves the right to
alter the procedure. The Series Fund will notify shareholders of any such
alteration.

All short-term debt obligations in the Money Market Portfolio of 13 months'
maturity or less are valued on an amortized cost basis. This means that each
obligation will be valued initially at its purchase price and thereafter by
amortizing any discount or premium uniformly to maturity, regardless of the
impact of fluctuating interest rates on the market value of the obligation. This
highly practical method of valuation is in widespread use and almost always
results in a value that is extremely close to the actual market value. In order
to continue to utilize the amortized cost method of valuation, the Money Market
Portfolio may not purchase any security with a remaining maturity of more than
13 months and must maintain a dollar-weighted average of portfolio maturity of
90 days or less. In the event of sizeable changes in interest rates, however,
the value determined by this method may be higher or lower than the price that
would be received if the obligation were sold. The Board of Directors has
established procedures to determine whether, on these occasions, if any should
occur, the deviation might be enough to affect the value of shares in the
portfolio by more than 1/2 of one percent, and, if it does, an appropriate
adjustment will be made in the value of the obligations. The portfolio may only
be invested in securities of high quality as described in detail in the Appendix
to this prospectus.

The net asset value of the Stock Index, High Dividend Stock, Common Stock,
Growth Stock, Small Capitalization Stock, Global Equity and Natural Resources
Portfolios will be determined in the following manner. Any security for which
the primary market is on an exchange is generally valued at the last sale price
on such exchange as of the close of the NYSE (which is currently 4:00 p.m. New
York City time) or, in the absence of recorded sales, at the mean between the
most recently quoted bid and asked prices. NASDAQ National Market System equity
securities are valued at the last sale price or, if there was no sale on such
day, at the mean between the most recently quoted bid and asked prices. Other
over-the-counter equity securities are valued at the mean between the most
recently quoted bid and asked prices. Convertible debt securities that are
actively traded in the over-the-counter market, including listed securities for
which the primary market is believed to be over-the-counter, are valued at the
mean between the most recently quoted bid and asked prices. Corporate bonds
(other than convertible debt securities) and Government bonds held by the High
Dividend Stock and Natural Resources Portfolios are valued on the same basis as
securities in the Bond and High Yield Bond Portfolios, as described above.
Short-term debt instruments which mature in less than 60 days are valued at
amortized cost. For valuation purposes, quotations of foreign securities in a
foreign currency are converted to U.S.dollar equivalents.

31 - Series Fund
<PAGE>

such securities is determined as of such times for purposes of computing a
portfolio's net asset value. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. If an extraordinary event occurs
after the close of an exchange on which that security is traded, the security
will be valued at fair value as determined in good faith by the applicable
portfolio manager under procedures established by and under the general
supervision of the Series Fund's Board of Directors.

In determining the net asset value of each of the Balanced Portfolios, the
method of valuation of a security depends on the type of investment involved.
Intermediate or long-term fixed income securities are valued in the same way as
such securities in the Bond Portfolio, and common stocks and convertible debt
securities are valued in the same way as such securities are valued in the
Common Stock Portfolio. Short-term debt obligations with a maturity of 12 months
or less are valued on an amortized cost basis in accordance with an order
obtained from the Securities and Exchange Commission. Each Balanced Portfolio
must maintain a dollar-weighted average maturity for its short-term debt
obligations of 120 days or less. As discussed above in connection with the Money
Market Portfolio, the values determined by the amortized cost method may deviate
from market value under certain circumstances. The Board of Directors has
established procedures to monitor whether any material deviation occurs and, if
so, will promptly consider what action, if any, should be initiated to prevent
unfair results to Contract owners. The short-term portion of these portfolios
may be invested only in high quality instruments, as described in the Appendix
to this prospectus.

In determining the net asset value of shares of Zero Coupon Bond Portfolios
1995, 2000, and 2005, securities (other than debt obligations with maturities of
less than 60 days, which are valued at amortized cost) will be valued utilizing
an independent pricing service to determine valuations for normal institutional
size trading units of securities. The pricing service considers such factors as
security prices, yields, maturities, call features, ratings, and developments
relating to specific securities in arriving at securities valuations.

With respect to all the portfolios which utilize such investments, options on
stock and stock indices traded on national securities exchanges are valued at
the average of the bid and asked prices as of the close of the respective
exchange (which is currently 4:10 p.m. New York City time). Futures contracts
are marked to market daily, and options thereon are valued at the mean between
their most recently quoted bid and asked prices, as of the close of the
applicable commodities exchanges (which is currently 4:15 p.m. New York City
time).

Securities or assets for which market quotations are not readily available will
be valued at fair value as determined by The Prudential under the direction of
the Board of Directors of the Series Fund.

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

DIVIDENDS, DISTRIBUTIONS, AND TAXES

The Series Fund intends to continue to qualify as a regulated investment company
under certain provisions of the Internal Revenue Code (the "Code"). Under such
provisions, the Series Fund will not be subject to federal income tax on the
part of its net ordinary income and net realized capital gains that it
distributes to the Accounts. The Series Fund intends to meet the requirements
for treatment as a regulated investment company both on a portfolio-by-portfolio
basis and for the Series Fund as a whole. The Series Fund's compliance with
those requirements may prevent a portfolio from utilizing options and futures
contracts as much as the portfolio manager might otherwise believe to be
desirable.

The Series Fund intends to distribute as dividends substantially all the net
investment income, if any, of each portfolio. For dividend purposes, net
investment income of each portfolio, other than the Money Market Portfolio and
the Zero Coupon Bond Portfolios, will consist of all payments of dividends
(other than stock dividends) or interest received by such portfolio less the
estimated expenses of such portfolio (including fees payable to the Investment
Manager). Net investment income of the Money Market Portfolio consists of: (i)
interest accrued and/or discount earned (including both original issue and
market discount); (ii) plus or minus all realized and unrealized gains and
losses; (iii) less the expenses of the portfolio (including the fees payable to
the Investment Manager). The Internal Revenue Service has ruled that the owner
of a zero coupon bond, for federal income tax purposes, realizes taxable
interest each year equal to a portion of the difference between the face value
of the zero coupon bond and its purchase price. For dividend purposes, the net
investment income of each Zero Coupon Bond Portfolio will be equal to the sum of
such taxable interest realized by such portfolio and the interest upon the
interest-bearing securities less the estimated expenses of the portfolio.
Therefore, each portfolio may be required

32 - Series Fund
<PAGE>

to distribute more cash than it actually has received. Each portfolio will raise
the cash necessary to make such distributions by selling securities or from
interest income. This may require the portfolio to sell securities when it would
not do so for investment reasons, and may cause the portfolio to realize
additional gains. The Contract owner is not subject to federal or state income
taxes on distributions from the Series Fund portfolios to the corresponding
subaccounts.

Dividends on the Money Market Portfolio will be declared and reinvested daily in
additional full and fractional shares of the portfolio. Shares will begin
accruing dividends on the day following the date on which they are issued.
Dividends from investment income of the other portfolios will normally be
declared and reinvested in additional full and fractional shares
quarter-annually.

The Series Fund will also declare and distribute annually all net realized
capital gains of the Series Fund--other than short-term gains of the Money
Market Portfolio, which are declared as dividends daily.

The Code generally imposes a 4% excise tax on a portion of the undistributed
income of a regulated investment company if that company fails to distribute
required percentages of its ordinary income and capital gain net income. The
Series Fund intends to employ practices that will eliminate or minimize the
imposition of this excise tax.

In addition, Section 817(h) of the Code requires that assets underlying variable
life insurance and variable annuity contracts must meet certain diversification
requirements if the contracts are to qualify as life insurance and annuity
contracts. The diversification requirements ordinarily must be met within 1 year
after Contract owner funds are first allocated to the particular portfolio, and
within 30 days after the end of each calendar quarter thereafter. In order to
meet the diversification requirements set forth in Treasury Regulations issued
pursuant to Section 817(h), each portfolio must meet one of two alternative
tests. Under the first test, no more than 55% of the portfolio's assets can be
invested in any one investment; no more than 70% of the assets can be invested
in any two investments; no more than 80% of the assets can be invested in any
three investments; and no more than 90% can be invested in any four investments.
Under the second test, the portfolio must meet the tax law diversification
requirements for a regulated investment company and no more than 55% of the
value of the portfolio's assets can be invested in cash, cash items, Government
securities, and securities of other regulated investment companies. A third test
is available for portfolios that underlie only variable life insurance
contracts, such as the Zero Coupon Bond Portfolios. Under this test, such
portfolios can be invested without limit in Treasury securities and, where the
portfolio is invested in part in Treasury securities, the percentages of the
first test are revised and applied to the portion of the portfolio not invested
in Treasury securities.

For purposes of determining whether a variable account is adequately
diversified, each United States Government agency or instrumentality is treated
as a separate issuer for purposes of determining whether a variable account is
adequately diversified. The Series Fund's compliance with the diversification
requirements will generally limit the amount of assets that may be invested in
federally insured certificates of deposit and all types of securities issued or
guaranteed by each United States Government agency or instrumentality.

The Global Equity Portfolio may be required to pay withholding or other taxes to
foreign governments. If so, the taxes will reduce the portfolio's dividends.
Foreign tax withholding from dividends and interest (if any) is typically set at
a rate between 10% and 15%. While Contract owners will thus bear the cost of
foreign tax withholding, they will not be able to claim a foreign tax credit or
deduction for foreign taxes paid by the portfolio.

The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and Treasury Regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and the
Treasury Regulations promulgated thereunder. The Code and these Regulations are
subject to change by legislative or administrative actions.

OTHER INFORMATION CONCERNING THE SERIES FUND

Incorporation and Authorized Stock. The Series Fund was incorporated under
Maryland law on November 15, 1982. The authorized Capital Stock of the Series
Fund consists of 2 billion shares, par value $0.01 per share. The shares of
Capital Stock are divided into sixteen classes: Money Market Portfolio Capital
Stock (200 million shares), Bond Portfolio Capital Stock (200 million shares),
Government Securities Portfolio Capital Stock (100 million shares), Zero Coupon
Bond Portfolio 1995 Capital Stock (25 million shares), Zero Coupon Bond
Portfolio 2000 Capital Stock (25 million shares), Zero Coupon Bond Portfolio
2005 Capital Stock (50 million shares), Conservatively Managed Flexible
Portfolio Capital Stock (300 million shares), Aggressively Managed Flexible
Portfolio Capital Stock (300 million shares), High Yield Bond Portfolio Capital
Stock (100 million shares), Stock Index Portfolio Capital Stock (100 million
shares), High Dividend Stock Portfolio Capital Stock (100 million shares),
Common Stock Portfolio Capital Stock (200 million shares), Growth Stock
Portfolio Capital Stock (50 million shares), Small Capitalization Stock
Portfolio Capital Stock (50 million shares), Global Equity Portfolio Capital
Stock (100 million shares), Natural Resources Portfolio Capital Stock (100
million shares). The shares of each portfolio,

33 - Series Fund
<PAGE>

when issued, will be fully paid and non-assessable, will have no conversion,
exchange or similar rights, and will be freely transferable.

Each share of stock will have a pro rata interest in the assets of the portfolio
to which the stock of that class relates and will have no interest in the assets
of any other portfolio. Holders of shares of any portfolio are entitled to
redeem their shares as set forth under PURCHASE AND REDEMPTION OF SHARES, page
30.

The Prudential provided the initial capital for the Series Fund by purchasing
$5,000,000 worth of shares of each of the Money Market and Bond Portfolios,
$300,000 worth of shares of the Common Stock Portfolio, $2,500,000 worth of
shares of the Conservatively Managed Flexible Portfolio, and $3,000,000 worth of
shares of the Aggressively Managed Flexible Portfolio. In addition, The
Prudential has since purchased $20,000,000 worth of shares of the High Yield
Bond Portfolio; $25,000,000 worth of shares of the Stock Index and Global Equity
Portfolios; $5,000,000 worth of shares of each of the Zero Coupon Bond, High
Dividend Stock, and Natural Resources Portfolios; $10,000,000 worth of shares of
the Government Securities Portfolio; $10,000,000 worth of shares of the Growth
Stock Portfolio; and $10,000,000 worth of shares of the Small Capitalization
Stock Portfolio. Such shares were acquired to enable the portfolios to avoid an
unrealistically poor investment performance that might otherwise result because
the amounts available for investment were too small. These shares were acquired
for investment and can be disposed of only by redemption. They will not be
redeemed by The Prudential until the other assets of the portfolios are large
enough so that redemption will not have an adverse effect upon investment
performance. From the inception of the respective portfolios through December
31, 1994, The Prudential has redeemed a total of $5,062,001 worth of shares from
the Money Market Portfolio, $7,752,850 worth of shares from the Bond Portfolio,
$11,056,195 worth of shares from the Government Securities Portfolio, $8,805,910
worth of shares from the Zero Coupon Bond 1990 Portfolio, $7,050,071 worth of
shares from the Zero Coupon Bond Portfolio 2005, $3,825,023 worth of shares from
the Conservatively Managed Flexible Portfolio, $4,645,305 worth of shares from
the Aggressively Managed Flexible Portfolio, $21,444,384 worth of shares from
the High Yield Bond Portfolio, $31,019,279 worth of shares from the Stock Index
Portfolio, $6,346,935 worth of shares from the High Dividend Stock Portfolio,
$304,065 worth of shares from the Common Stock Portfolio, and $6,341,486 worth
of shares from the Natural Resources Portfolio (these amounts reflect total
redemption of the shares purchased by The Prudential). In addition, The
Prudential has redeemed $3,162,000 worth of shares from the Zero Coupon Bond
Portfolio 1995, $9,142,000 worth of shares from the Zero Coupon Bond Portfolio
2000, and $33,089,000 worth of shares from the Global Equity Portfolio (these
amounts reflect partial redemption of the shares purchased by The Prudential).
The Prudential will vote its shares in the same manner and in the same
proportion as the shares held in the Accounts, which generally are voted in
accordance with instructions of Contract owners.

Voting Rights. The voting rights of Contract owners, and limitations on those
rights, are explained in the accompanying prospectus for the Contracts. The
Prudential and certain other insurers with separate accounts which invest in the
Series Fund, as the owners of the assets in the Accounts, vote all of the shares
of the Series Fund, but they will generally do so in accordance with the
instructions of Contract owners pursuant to the current SEC requirements and
staff interpretations regarding pass-through voting. Under certain
circumstances, however, the Companies may disregard voting instructions received
from Contract owners. The Series Fund does not hold annual meetings of
shareholders in any year in which it is not required to do so either under
Maryland law or the Investment Company Act of 1940. For additional information
describing how the Companies will vote the shares of the Series Fund, see Voting
Rights in the accompanying prospectus for the Contracts.

Monitoring for Possible Conflict. As stated above, Series Fund shares will be
sold to separate accounts of The Prudential and certain other insurers to fund
both variable life insurance and variable annuity contracts. The Board of
Directors of the Series Fund intends to monitor events for the existence of any
material conflict between the interests of variable life insurance and variable
annuity contract owners. The Companies have agreed to be responsible for
reporting any potential or existing conflicts to the Board of Directors.
Moreover, the Companies have agreed to be responsible, at their cost, to remedy
any material irreconcilable conflict up to and including establishing a new
registered management investment company and segregating the assets underlying
the variable life insurance and variable annuity contracts.

Periodic Reports. The Series Fund will send each shareholder, at least annually,
statements showing as of a specified date the number of shares in each portfolio
credited to the shareholder. The Series Fund will also send Contract owners
annual and semi-annual reports showing the financial condition of the portfolios
and the investments held in each. The annual report may take the form of an
updated copy of this prospectus and its accompanying statement of additional
information.

34 - Series Fund
<PAGE>

commissions. Fixed income securities, as well as equity securities traded in the
over-the-counter market, are generally traded on a "net" basis with dealers
acting as principals for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price that includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. Certain of these securities may also be
purchased directly from an issuer, in which case neither commissions nor
discounts are paid.

An affiliated broker may be employed to execute brokerage transactions on behalf
of the portfolios, as long as the commissions are reasonable and fair compared
to the commissions received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. The Series Fund may not
engage in any transactions in which The Prudential or its affiliates, including
Prudential Securities Incorporated, acts as principal, including
over-the-counter purchases and negotiated trades in which such a party acts as a
principal. Additional information about portfolio brokerage and related
transactions is included in the statement of additional information.

Custodian, Transfer Agent, and Dividend Disbursing Agent. Chemical Bank, 4 New
York Plaza, New York, NY 10004 is the custodian of the assets held by all the
portfolios, except the Global Equity Portfolio, and is authorized to use the
facilities of the Depository Trust Company and the facilities of the book-entry
system of the Federal Reserve Bank with respect to securities held by these
portfolios. Brown Brothers Harriman & Co. ("Brown Brothers"), 40 Water Street,
Boston, MA 02109, is the custodian of the assets of the Global Equity Portfolio.
Brown Brothers employs subcustodians, who were approved by the directors of the
Series Fund in accordance with regulations of the Securities and Exchange
Commission, for the purpose of providing custodial service for the Global Equity
Portfolio's foreign assets held outside the United States. Morgan Guaranty Trust
Company, 60 Wall Street, New York, NY 10260 is the custodian of the assets held
in connection with repurchase agreements entered into by the portfolios and is
authorized to use the facilities of the book-entry system of the Federal Reserve
Bank. The directors of the Series Fund monitor the activities of the custodians
and the subcustodians.

The Prudential is the transfer agent and dividend disbursing agent for the
Series Fund. The Prudential's principal business address is Prudential Plaza,
Newark, New Jersey 07102-3777.

Additional Information. This prospectus and the statement of additional
Information referred to on the cover page do not contain all the information set
forth in the registration statement, certain portions of which have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
The omitted information may be obtained from the Commission's principal office
in Washington, D.C., upon payment of the fees prescribed by the Commission.

For further information, shareholders may also contact the Series Fund's office,
the address and phone number of which are set forth on the cover of this
prospectus.

35 - Series Fund
<PAGE>
APPENDIX

SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO
MAY CURRENTLY INVEST

The Money Market Portfolio, and the other portfolios to the extent their
investment policies so provide, may invest in the following liquid, short-term,
debt securities regularly bought and sold by financial institutions:

1. U.S. Treasury Bills and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These are debt securities
(including bills, certificates of indebtedness, notes, and bonds) issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the U.S.
Government that is established under the authority of an act of Congress.
Although all obligations of agencies and instrumentalities are not direct
obligations of the U.S. Treasury, payment of the interest and principal on them
is generally backed directly or indirectly by the U.S. Government. This support
can range from the backing of the full faith and credit of the United States, to
U.S. Treasury guarantees or to the backing solely of the issuing instrumentality
itself. Securities which are not backed by the full faith and credit of the
United States include but are not limited to obligations of the Tennessee Valley
Authority, the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, and the United States Postal Service, each of which has
the right to borrow from the U.S. Treasury to meet its obligations, and
obligations of the Federal Farm Credit System and the Federal Home Loan Banks,
the obligations of which may only be satisfied by the individual credit of the
issuing agency. Obligations of the Government National Mortgage Association, the
Farmers Home Administration, and the Export-Import Bank are examples of
securities that are backed by the full faith and credit of the United States.

2. Obligations (including certificates of deposit, bankers' acceptances, and
time deposits) of domestic banks, foreign branches of U.S. banks, U.S. branches
of foreign banks, and foreign offices of foreign banks provided that such bank
has, at the time of the portfolio's investment, total assets of at least $1
billion or the equivalent. Obligations of any savings and loan association or
savings bank organized under the laws of the United States or any state thereof,
provided that such association or savings bank has, at the time of the
portfolio's investment, total assets of at least $1 billion. The term
"certificates of deposit" includes both Eurodollar certificates of deposit,
which are traded in the over-the-counter market, and Eurodollar time deposits,
for which there is generally not a market. "Eurodollars" are dollars deposited
in banks outside the United States. An investment in Eurodollar instruments
involves risks that are different in some respects from an investment in debt
obligations of domestic issuers, including future political and economic
developments such as possible expropriation or confiscatory taxation that might
adversely affect the payment of principal and interest on the Eurodollar
instruments.

"Certificates of deposit" are certificates evidencing the indebtedness of a
commercial bank to repay funds deposited with it for a definite period of time
(usually from 14 days to 1 year). "Bankers' acceptances" are credit instruments
evidencing the obligation of a bank to pay a draft which has been drawn on it by
a customer. These instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. "Time deposits"
are non-negotiable deposits in a bank for a fixed period of time.

3. Commercial paper, variable amount demand master notes, bills, notes, and
other obligations issued by a U.S. company, a foreign company or a foreign
government, its agencies, instrumentalities or political subdivisions,
denominated in U.S. dollars, and, at the date of investment, rated at least A or
A-2 by Standard & Poor's Corporation ("S&P"), A or Prime-2 by Moody's Investors
Service ("Moody's") or, if not rated, issued by an entity having an outstanding
unsecured debt issue rated at least A or A-2 by S&P or A or Prime-2 by Moody's.
A description of corporate bond ratings is contained in the Appendix to the
statement of additional information. If such obligations are guaranteed or
supported by a letter of credit issued by a bank, such bank (including a foreign
bank) must meet the requirements set forth in paragraph 2 above. If such
obligations are guaranteed or insured by an insurance company or other non-bank
entity, such insurance company or other non-bank entity must represent a credit
of high quality, as determined by the Series Fund's investment adviser under the
supervision of the Series Fund's Board of Directors.

As stated above in paragraphs 2 and 3, the Money Market Portfolio and short-term
portions of the other portfolios may contain obligations of foreign branches of
domestic banks and domestic branches of foreign banks, as well as commercial
paper, bills, notes, and other obligations issued in the United States by
foreign issuers, including foreign governments, their agencies, and
instrumentalities. This involves certain additional risks. These risks include
future political and economic developments in the country of the issuer, the
possible imposition of withholding taxes on interest income payable on such
obligations held by the Series Fund, the possible seizure or nationalization of
foreign deposits, and the possible establishment of exchange controls or other
foreign governmental laws or restrictions which might affect adversely the
payment of principal and interest on such obligations held by the Series Fund.
In addition, there may be less publicly available information about a foreign
issuer than about a domestic one, and foreign issuers may not be subject to the
same accounting, auditing and financial recordkeeping standards, and
requirements as domestic issuers. Securities issued by foreign issuers may

A1 - Series Fund
<PAGE>

be subject to greater fluctuations in price than securities issued by U.S.
entities. Finally, in the event of a default with respect to any such foreign
debt obligations, it may be more difficult for the Series Fund to obtain or to
enforce a judgment against the issuers of such securities.

4. Repurchase Agreements. When the Money Market Portfolio purchases money market
securities of the types described above, it may on occasion enter into a
repurchase agreement with the seller wherein the seller and the buyer agree at
the time of sale to a repurchase of the security at a mutually agreed upon time
and price. The period of maturity is usually quite short, possibly overnight or
a few days, although it may extend over a number of months. The resale price is
in excess of the purchase price, reflecting an agreed-upon market rate effective
for the period of time the portfolio's money is invested in the security, and is
not related to the coupon rate of the purchased security. Repurchase agreements
may be considered loans of money to the seller of the underlying security, which
are collateralized by the securities underlying the repurchase agreement. The
Series Fund will not enter into repurchase agreements unless the agreement is
"fully collateralized" (i.e., the value of the securities is, and during the
entire term of the agreement remains, at least equal to the amount of the 'loan'
including accrued interest). The Series Fund will take possession of the
securities underlying the agreement and will value them daily to assure that
this condition is met. The Series Fund has adopted standards for the parties
with whom it will enter into repurchase agreements which it believes are
reasonably designed to assure that such a party presents no serious risk of
becoming involved in bankruptcy proceedings within the time frame contemplated
by the repurchase agreement. In the event that a seller defaults on a repurchase
agreement, the Series Fund may incur a loss in the market value of the
collateral, as well as disposition costs; and, if a party with whom the Series
Fund had entered into a repurchase agreement becomes involved in bankruptcy
proceedings, the Series Fund's ability to realize on the collateral may be
limited or delayed and a loss may be incurred if the collateral securing the
repurchase agreement declines in value during the bankruptcy proceedings.

The Series Fund will not enter into repurchase agreements with The Prudential or
its affiliates, including Prudential Securities Incorporated. This will not
affect the Series Fund's ability to maximize its opportunities to engage in
repurchase agreements.

5. Reverse Repurchase Agreements. The Money Market Portfolio may use reverse
repurchase agreements, which are described on page 28 of the prospectus. No
portfolio may obligate more than 10% of its net assets in connection with
reverse repurchase agreements, except that the Bond, High Yield Bond, and
Government Securities Portfolios, as well as the fixed income portions of the
Conservatively Managed Flexible and Aggressively Managed Flexible Portfolios,
may obligate up to 30% of their net assets in connection with reverse repurchase
agreements and dollar rolls.

6. When-Issued and Delayed Delivery Securities. From time to time, in the
ordinary course of business, the Money Market Portfolio may purchase securities
on a when-issued or delayed delivery basis (i.e., delivery and payment can take
place a month or more after the date of the transaction). The purchase price and
the interest rate payable on the securities are fixed on the transaction date.
The securities so purchased are subject to market fluctuation, and no interest
accrues to the portfolio until delivery and payment take place. At the time the
portfolio makes the commitment to purchase securities on a when-issued or
delayed delivery basis, it will record the transaction and thereafter reflect
the value, each day, of such securities in determining its net asset value. The
portfolio will make commitments for when-issued transactions only with the
intention of actually acquiring the securities and, to facilitate such
acquisitions, the Series Fund's custodian bank will maintain in a separate
account securities of the portfolio having a value equal to or greater than such
commitments. On delivery dates for such transactions, the portfolio will meet
its obligations from maturities or sales of the securities held in the separate
account and/or from then available cash flow. If the portfolio chooses to
dispose of the right to acquire a when issued security prior to its acquisition,
it could, as with the disposition of any other obligation, incur a gain or loss
due to market fluctuation. No when-issued commitments will be made if, as a
result, more than 15% of the portfolio's net assets would be so committed.

A2 - Series Fund
<PAGE>

Second tier securities are eligible securities that are not first tier
securities; (3) The portfolio will not invest more than 5% of its total assets
in second tier securities; (4) The portfolio may not invest more than 1% of its
assets in second tier securities of any one issuer; (5) In the event a first
tier security held by the portfolio is downgraded and becomes a second tier
security, or in the case of an unrated security the Series Fund's Board
determines it is no longer of comparable quality to a first tier security, or in
the event The Prudential becomes aware that a NRSRO has rated a second tier
security or an unrated portfolio security below its second highest rating, the
Board will reassess promptly whether the security presents minimal credit risks
and shall cause the portfolio to take such action as the Board determines is in
the best interests of the portfolio and its shareholders; (6) In the event of a
default or because of a rating downgrade a security held in the portfolio is no
longer an eligible investment, the portfolio will sell the security as soon as
practicable unless the Series Fund's Board makes a specific finding that such
action would not be in the best interest of the portfolio; and (7) The
portfolio's dollar-weighted average maturity will be no more than 90 days. The
Series Fund's Board of Directors has adopted written procedures delegating to
the investment advisor under certain guidelines the responsibility to make
several of the above-described determinations, including certain credit quality
determinations.

A3 - Series Fund
<PAGE>
PROSPECTUS

May 1, 1995

THE PRUDENTIAL
SERIES FUND, INC.

THIS PROSPECTUS IS FOR USE ONLY WITH THE PRUDENTIAL VARIABLE CONTRACT
ACCOUNT-24, AS IT DESCRIBES ONLY THE PORTFOLIOS AVAILABLE FOR INVESTMENT THROUGH
THAT ACCOUNT. THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE CURRENT
PROSPECTUS FOR THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT-24.

The Prudential Series Fund, Inc. (the "Series Fund") is a diversified, open-end
management investment company (commonly known as a "mutual fund") that is
intended to provide a range of investment alternatives through its sixteen
separate portfolios, each of which is, for investment purposes, in effect a
separate fund. Seven of the Series Fund's Portfolios are currently available for
investment by Participants in Prudential's MEDLEY(SM) Program through
corresponding subaccounts of The Prudential Variable Contract Account-24. The
Portfolios are: the Bond Portfolio, the Government Securities Portfolio, the
Conservatively Managed Flexible Portfolio, the Aggressively Managed Flexible
Portfolio, the Stock Index Portfolio, the Common Stock Portfolio, and the Global
Equity Portfolio. A separate class of capital stock is issued for each
portfolio. Shares of the Series Fund are currently sold only to separate
accounts (the "Accounts") of The Prudential Insurance Company of America ("The
Prudential") and certain other insurers to fund the benefits under variable life
insurance and variable annuity contracts (the "Contracts") issued by those
Companies. The Accounts invest in shares of the Series Fund through subaccounts
that correspond to the portfolios. The Accounts will redeem shares of the Series
Fund to the extent necessary to provide benefits under the Contracts or for such
other purposes as may be consistent with the Contracts.

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

THE INVESTMENT OBJECTIVES OF THE SEVEN PORTFOLIOS CAN BE FOUND ON THE NEXT PAGE.

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

Information contained in this prospectus should be read carefully by a
prospective investor before an investment is made. Additional information about
the Series Fund has been filed with the Securities and Exchange Commission in a
statement of additional information, dated May 1, 1995, which information is
incorporated herein by reference and is available without charge upon written
request to The Prudential Insurance Company of America, c/o Prudential Defined
Contribution Services, 30 Scranton Office Park, Moosic, Pennsylvania 18507-1789,
or by telephoning 1-(800) 458-6333.

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

PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.

The Prudential Series Fund, Inc.
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 445-4571

PSF-1A Ed 5-95

<PAGE>

INVESTMENT OBJECTIVES OF THE PORTFOLIOS ARE AS FOLLOWS:

FIXED INCOME PORTFOLIOS

BALANCED PORTFOLIOS

DIVERSIFIED STOCK PORTFOLIOS

Global Equity Portfolio. Long-term growth of capital through investment
primarily in common stock and common stock equivalents of foreign and domestic
issuers. Current income, if any, is incidental.

There can be no assurance that the objectives of any portfolio will be realized.
See INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS, page 5. The Series
Fund may in the future establish other portfolios with different investment
objectives.

<PAGE>

CONTENTS

Page

FINANCIAL HIGHLIGHTS ..................................................... 1

THE SERIES FUND .......................................................... 5

THE ACCOUNTS AND THE CONTRACTS ........................................... 5

INVESTMENT MANAGER ....................................................... 5

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS ..................... 5
Fixed Income Portfolios ................................................ 6
Bond Portfolio ......................................................... 6
Government Securities Portfolio ........................................ 6
Balanced Portfolios .................................................... 8
Conservatively Managed Flexible Portfolio .............................. 8
Aggressively Managed Flexible Portfolio ................................ 9
Diversified Stock Portfolios. .......................................... 10
Stock Index Portfolio .................................................. 10
Common Stock Portfolio ................................................. 12
Global Equity Portfolio ................................................ 12
Convertible Securities ................................................. 13
Foreign Securities ..................................................... 14
Options on Equity Securities ........................................... 14
Options on Debt Securities ............................................. 15
Options on Stock Indices ............................................... 16
Options on Foreign Currencies .......................................... 17
Futures Contracts ...................................................... 17
Options on Futures Contracts ........................................... 18
Reverse Repurchase Agreements and Dollar Rolls ......................... 18
When-Issued and Delayed Delivery Securities ............................ 18
Short Sales ............................................................ 19
Short Sales Against the Box ............................................ 19
Interest Rate Swaps .................................................... 19
Loans of Portfolio Securities .......................................... 19

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS ..................... 20

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES .......................... 20

PURCHASE AND REDEMPTION OF SHARES ........................................ 21

DETERMINATION OF NET ASSET VALUE ......................................... 21

DIVIDENDS, DISTRIBUTIONS, AND TAXES ...................................... 22

OTHER INFORMATION CONCERNING THE SERIES FUND ............................. 23
Incorporation and Authorized Stock ..................................... 23
Voting Rights .......................................................... 23
Monitoring for Possible Conflict ....................................... 23
Periodic Reports ....................................................... 24
Portfolio Brokerage and Related Practices .............................. 24
Custodian, Transfer Agent, and Dividend Disbursing Agent ............... 24
Additional Information ................................................. 24

APPENDIX: SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO
MAY CURRENTLY INVEST ................................................... A1

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED)
The following financial highlights information has been audited by Deloitte &
Touche LLP, Independent Auditors. Their report is included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
BOND
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 11.103 $ 10.829 $ 11.002 $ 10.332 $ 10.321 $ 9.942 $ 10.038
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.682 0.686 0.761 0.797 0.825 0.886 0.875
Net realized and unrealized
gains (losses) on
investments................... (1.040) 0.398 0.013 0.842 (0.004) 0.424 (0.069)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.358) 1.084 0.774 1.639 0.821 1.310 0.806
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.683) (0.657) (0.728) (0.779) (0.810) (0.854) (0.902)
Distributions from net realized
gains......................... (0.024) (0.153) (0.219) (0.190) 0 (0.077) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.707) (0.810) (0.947) (0.969) (0.810) (0.931) (0.902)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.065) 0.274 (0.173) 0.670 0.011 0.379 (0.096)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 10.038 $ 11.103 $ 10.829 $ 11.002 $ 10.332 $ 10.321 $ 9.942
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (3.23%) 10.13 % 7.19 % 16.44 % 8.32 % 13.49 % 8.19%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $541.6 $576.2 $428.8 $318.7 $227.7 $191.1 $148.8
Ratio of expenses net of
reimbursement to average net
assets........................ 0.45 % 0.46 % 0.47 % 0.49 % 0.47 % 0.53 % 0.53%
Ratio of net investment income
to average net assets......... 6.41 % 6.05 % 6.89 % 7.43 % 8.06 % 8.56 % 8.52%
Portfolio turnover rate......... 31.57 % 41.12 % 60.53 % 131.01 % 42.10 % 272.85 % 222.20%
Number of shares outstanding at
end of period (in millions)... 54.0 51.9 39.6 29.0 22.0 18.5 15.0

<TABLE>
<CAPTION>
GOVERNMENT SECURITIES
----------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 11.784 $ 11.094 $ 11.133 $ 10.146 $ 10.324 $ 10.017
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.703 0.700 0.731 0.736 0.791 0.545
Net realized and unrealized
gains (losses) on
investments................... (1.311) 0.678 (0.092) 0.847 (0.177) 0.613
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.608) 1.378 0.639 1.583 0.614 1.158
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.723) (0.642) (0.593) (0.596) (0.769) (0.489)
Distributions from net realized
gains......................... 0.008 (0.046) (0.085) 0 (0.023) (0.362)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.715) (0.688) (0.678) (0.596) (0.792) (0.851)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.323) 0.690 (0.039) 0.987 (0.178) 0.307
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 10.461 $ 11.784 $ 11.094 $ 11.133 $ 10.146 $ 10.324
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (5.16%) 12.56 % 5.85 % 16.11 % 6.34 % 11.60 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $487.6 $540.1 $315.5 $95.0 $23.7 $17.0
Ratio of expenses net of
reimbursement to average net
assets........................ 0.45 % 0.46 % 0.53 % 0.58 % 0.74 % 0.50 %
Ratio of net investment income
to average net assets......... 6.30 % 5.91 % 6.58 % 6.97 % 7.86 % 5.06 %
Portfolio turnover rate......... 34.19 % 18.59 % 80.71 % 127.18 % 379.45 % 208.86 %
Number of shares outstanding at
end of period (in millions)... 46.6 45.8 28.3 8.5 2.3 1.6
</TABLE>

1 - SERIES FUND

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED)
The following financial highlights information has been audited by Deloitte &
Touche LLP, Independent Auditors. Their report is included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
CONSERVATIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 14.905 $ 14.243 $ 14.318 $ 13.060 $ 13.361 $ 12.295 $ 11.889
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.528 0.486 0.558 0.687 0.821 0.891 0.773
Net realized and unrealized
gains (losses) on
investments................... (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.151) 1.715 0.968 2.425 0.678 2.046 1.197
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791)
Distributions from net realized
gains......................... (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 14.095 $ 14.905 $ 14.243 $ 14.318 $ 13.060 $ 13.361 $ 12.295
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (0.97%) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6
Ratio of expenses net of
reimbursement to average net
assets........................ 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65%
Ratio of net investment income
to average net assets......... 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22%
Portfolio turnover rate......... 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67%
Number of shares outstanding at
end of period (in millions)... 248.4 208.2 148.4 104.8 84.2 73.0 66.3

01/01/87 01/01/86 01/01/85
TO TO TO
12/31/87 12/31/86* 12/31/85*
----------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 12.571 $ 12.173 $ 10.469
----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.656 0.652 0.725
Net realized and unrealized
gains (losses) on
investments................... (0.399) 1.046 1.443
----------- ----------- -----------
Total from investment
operations.................. 0.257 1.698 2.168
----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.709) (0.517) (0.464)
Distributions from net realized
gains......................... (0.230) (0.783) 0
----------- ----------- -----------
Total distributions......... (0.939) (1.300) (0.464)
----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.682) 0.398 1.704
----------- ----------- -----------
Net Asset Value at end of
period........................ $ 11.889 $ 12.571 $ 12.173
----------- ----------- -----------
----------- ----------- -----------
Total Investment Rate of
Return:**..................... 1.54 % 14.17 % 21.11 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $803.9 $375.4 $75.9
Ratio of expenses net of
reimbursement to average net
assets........................ 0.66 % 0.64 % 0.86 %
Ratio of net investment income
to average net assets......... 5.05 % 5.10 % 5.99 %
Portfolio turnover rate......... 140.69 % 207.78 % 54.89 %
Number of shares outstanding at
end of period (in millions)... 67.6 29.9 4.2
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 16.957 $ 16.005 $ 16.288 $ 13.996 $ 14.446 $ 13.123 $ 12.326
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.473 0.566 0.583 0.650 0.715 0.813 0.724
Net realized and unrealized
gains (losses) on
investments................... (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.548) 2.448 1.190 3.459 0.249 2.802 1.564
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767)
Distributions from net realized
gains......................... (0.462) (0.929) (0.914) (0.513) 0 (0.666) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 15.496 $ 16.957 $ 16.005 $ 16.288 $ 13.996 $ 14.446 $ 13.123
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (3.16%) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $3,481.5 $3,292.2 $2,435.6 $1,990.7 $1,507.8 $1,386.5 $1,103.9
Ratio of expenses net of
reimbursement to average net
assets........................ 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70%
Ratio of net investment income
to average net assets......... 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52%
Portfolio turnover rate......... 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45%
Number of shares outstanding at
end of period (in millions)... 224.7 194.1 152.2 122.2 107.7 96.0 84.1

2 - SERIES FUND

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED)
The following financial highlights information has been audited by Deloitte &
Touche LLP, Independent Auditors. Their report is included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
STOCK INDEX
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 15.202 $ 14.218 $ 13.605 $ 10.760 $ 11.732 $ 9.454 $ 8.531
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.377 0.361 0.350 0.351 0.357 0.326 0.357
Net realized and unrealized
gains (losses) on
investments................... (0.231) 1.002 0.600 2.814 (0.792) 2.570 0.951
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. 0.146 1.363 0.950 3.165 (0.435) 2.896 1.308
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.368) (0.346) (0.329) (0.307) (0.309) (0.354) (0.385)
Distributions from net realized
gains......................... (0.023) (0.033) (0.008) (0.013) (0.228) (0.264) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.391) (0.379) (0.337) (0.320) (0.537) (0.618) (0.385)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.245) 0.984 0.613 2.845 (0.972) 2.278 0.923
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 14.957 $ 15.202 $ 14.218 $ 13.605 $ 10.760 $ 11.732 $ 9.454
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... 1.01% 9.66% 7.13% 29.72% (3.63%) 30.93 % 15.44%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $664.5 $615.1 $433.5 $236.9 $104.5 $53.8 $36.0
Ratio of expenses net of
reimbursement to average net
assets........................ 0.42 % 0.42 % 0.46 % 0.47 % 0.60 % 0.69 % 0.78%
Ratio of net investment income
to average net assets......... 2.50 % 2.43 % 2.56 % 2.82 % 3.23 % 2.95 % 3.87%
Portfolio turnover rate......... 1.74 % 0.60 % 0.43 % 1.10 % 17.80 % 14.54 % 15.62%
Number of shares outstanding at
end of period (in millions)... 44.4 40.5 30.5 17.4 9.7 4.6 3.8

10/19/87
TO
12/31/87
-----------
<S> <C>
Net Asset Value at beginning of
period........................ $ 8.071
-----------
Income From Investment
Operations:
Net investment income........... 0.047
Net realized and unrealized
gains (losses) on
investments................... 0.548
-----------
Total from investment
operations.................. 0.595
-----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.135)
Distributions from net realized
gains......................... 0
-----------
Total distributions......... (0.135)
-----------
Net increase (decrease) in Net
Asset Value................... 0.460
-----------
Net Asset Value at end of
period........................ $ 8.531
-----------
-----------
Total Investment Rate of
Return:**..................... 7.35 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $24.5
Ratio of expenses net of
reimbursement to average net
assets........................ 0.45 %
Ratio of net investment income
to average net assets......... 0.53 %
Portfolio turnover rate......... 0.47 %
Number of shares outstanding at
end of period (in millions)... 2.9
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 21.487 $ 18.903 $ 17.905 $ 15.449 $ 18.539 $ 15.463 $ 13.620
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.512 0.417 0.444 0.482 0.577 0.474 0.402
Net realized and unrealized
gains (losses) on
investments................... 0.054 3.666 2.050 3.414 (1.573) 4.064 1.909
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. 0.566 4.083 2.494 3.896 (0.996) 4.538 2.311
Distributions to Shareholders:
Distributions from net
investment income............. (0.487) (0.404) (0.439) (0.478) (0.563) (0.503) (0.468)
Distributions from net realized
gains......................... (0.904) (1.095) (1.057) (0.962) (1.531) (0.959) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (1.391) (1.499) (1.496) (1.440) (2.094) (1.462) (0.468)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.825) 2.584 0.998 2.456 (3.090) 3.076 1.843
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 20.662 $ 21.487 $ 18.903 $ 17.905 $ 15.449 $ 18.539 $ 15.463
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... 2.78% 21.87% 14.17% 26.01% (5.21%) 29.73 % 17.05%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $2,617.8 $2,186.5 $1,416.6 $1,032.8 $700.5 $675.5 $500.1
Ratio of expenses net of
reimbursement to average net
assets........................ 0.55 % 0.53 % 0.53 % 0.51 % 0.56 % 0.56 % 0.57%
Ratio of net investment income
to average net assets......... 2.39 % 1.99 % 2.33 % 2.66 % 3.37 % 2.66 % 2.67%
Portfolio turnover rate......... 6.90 % 12.95 % 15.70 % 20.85 % 84.84 % 73.54 % 62.35%
Number of shares outstanding at
end of period (in millions)... 126.7 101.8 74.9 57.7 45.3 36.4 32.3

3 - SERIES FUND

<PAGE>

<TABLE>
<CAPTION>
GLOBAL EQUITY
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 09/19/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period $ 14.639 $ 10.368 $ 10.792 $ 9.866 $ 11.547 $ 10.508 $ 9.818
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.028 0.023 0.051 0.096 0.203 0.079 0.052
Net realized and unrealized
gains (losses) on
investments................... (0.744) 4.433 (0.419) 1.020 (1.802) 1.806 0.787
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.716) 4.456 (0.368) 1.116 (1.599) 1.885 0.839
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.019) (0.079) (0.056) (0.100) (0.067) (0.073) (0.149)
Distributions from net realized
gains......................... (0.025) (0.106) 0 (0.090) (0.015) (0.773) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.044) (0.185) (0.056) (0.190) (0.082) (0.846) (0.149)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.760) 4.271 (0.424) 0.926 (1.681) 1.039 0.690
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 13.879 $ 14.639 $ 10.368 $ 10.792 $ 9.866 $ 11.547 $ 10.508
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (4.89%) 43.14 % (3.42 %) 11.39 % (12.91 %) 18.82 % 8.57 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $345.7 $129.1 $34.0 $34.3 $26.2 $29.4 $26.9
Ratio of expenses net of
reimbursement to average net
assets........................ 1.23 % 1.44 % 1.87 % 1.62 % 1.67 % 1.47 % 0.42 %
Ratio of net investment income
to average net assets......... 0.20 % 0.18 % 0.49 % 0.92 % 1.92 % 0.70 % 0.51 %
Portfolio turnover rate......... 37.46 % 54.54 % 78.16 % 136.21 % 43.12 % 47.95 % 6.40 %
Number of shares outstanding at
end of period (in millions)... 24.9 8.8 3.3 3.2 2.7 2.5 2.6
</TABLE>

4 - SERIES FUND

<PAGE>
THE SERIES FUND

The Prudential Series Fund, Inc. (the "Series Fund"), a diversified open-end
management investment company, is a Maryland corporation organized on November
15, 1982. On October 31, 1986, the Pruco Life Series Fund, Inc., a diversified
open-end management investment company that sold its shares to separate accounts
of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey,
was merged into the Series Fund. The Prudential Variable Contract Account-24 may
currently invest in seven of the Series Fund's Portfolios: the Bond Portfolio,
the Government Securities Portfolio, the Conservatively Managed Flexible
Portfolio, the Aggressively Managed Flexible Portfolio, the Stock Index
Portfolio, the Common Stock Portfolio, and the Global Equity Portfolio. Each
portfolio is, for investment purposes, in effect a separate investment fund, and
a separate class of capital stock is issued for each portfolio. In other
respects the Series Fund is treated as one entity. Each share of capital stock
issued with respect to a portfolio has a pro-rata interest in the assets of that
portfolio and has no interest in the assets of any other portfolio. Each
portfolio bears its own liabilities and also its proportionate share of the
general liabilities of the Series Fund. The Series Fund is registered under the
Investment Company Act of 1940 (the "1940 Act") as an open-end, diversified,
management investment company. This registration does not imply any supervision
by the Securities and Exchange Commission over the Series Fund's management or
its investment policies or practices.

THE ACCOUNTS AND THE CONTRACTS

Shares in the Series Fund are currently sold only to separate accounts of The
Prudential Insurance Company of America ("The Prudential") and certain other
insurers to fund benefits under variable life insurance and variable annuity
contracts issued by those Companies. All the separate accounts are referred to
as the "Accounts", and all the contracts are referred to as the "Contracts".
Each Contract owner or Participant allocates the net premiums and the assets
relating to the Contract, within the limitations described in the Contracts,
among the subaccounts of the Accounts which in turn invest in the corresponding
portfolios of the Series Fund. The attached prospectus for the Contracts
describes the particular type of Contract selected and the relationship between
changes in the value of shares of each portfolio and changes in the benefits
payable under the Contracts. The rights of the Accounts as shareholders should
be distinguished from the rights of a Contract owner or Participant which are
described in the Contracts. The terms "shareholder" or "shareholders" in this
prospectus refer to the Accounts.

INVESTMENT MANAGER

The Prudential is the investment advisor of the Series Fund. The Prudential's
principal business address is Prudential Plaza, Newark, New Jersey 07102-3777.

The Prudential will continue to have responsibility for all investment advisory
services under its Investment Advisory Agreement with respect to the Series
Fund.

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

The investment objectives of each portfolio are fundamental and may not be
changed without the approval of the holders of a majority of the outstanding
shares of the portfolio affected (which for this purpose and under the 1940 Act
means the lesser of: (i) 67% of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented; or (ii) more than 50%
of the outstanding shares). The policies by which a portfolio seeks to achieve
its investment objectives, however, are not fundamental. They may be changed by
the Board of Directors of the Series Fund without the approval of the
shareholders.

The portfolio turnover rate of the portfolios that were available for investment
as of December 31, 1994 can be found in the FINANCIAL HIGHLIGHTS table on pages
1 through 4. The portfolio turnover rate is, generally, the percentage computed
by dividing the lesser of portfolio purchases or sales by the average value of
the portfolio,
5 - Series Fund
<PAGE>

in each case excluding securities with maturities of 1 year or
less. Generally, the higher the portfolio turnover rate, the greater the
brokerage costs incurred by a portfolio.

The following paragraphs describe the investment objectives and policies of each
portfolio available for investment by Participants in Prudential's MEDLEY
Program through corresponding subaccounts of The Prudential Variable Contract
Account-24. There is no guarantee that any of these objectives will be met.

Fixed Income Portfolios.

In addition, the portfolio may: (i) purchase and sell options on debt
securities; (ii) purchase and sell interest rate futures contracts and options
thereon; (iii) purchase securities on a when-issued or delayed delivery basis;
(iv) use interest rate swaps; and (v) make short sales. These techniques are
described on pages 15 through 19, and further information about some of them is
included in the statement of additional information.

6 - Series Fund
<PAGE>

in the following three categories: (1) short-term debt obligations of the kind
held in the types of money market instruments described in the Appendix to this
prospectus; (2) securities of issuers other than the U.S. government and related
entities, usually foreign governments, where the principal and interest are
substantially guaranteed (generally to the extent of 90% thereof) by U.S.
Government agencies whose guarantee is backed by the full faith and credit of
the United States and where an assurance of payment on the unguaranteed portion
is provided for in a comparable way; and (3) asset-backed securities rated in
either of the top two ratings by Moody's or Standard & Poor's, or if not rated,
determined by the investment manager to be of comparable quality. A description
of corporate bond ratings is contained in the Appendix to the statement of
additional information.

Obligations Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. Obligations issued by agencies of the U.S. Government or
instrumentalities established or sponsored by the U.S. Government include
securities that are guaranteed by federal agencies or instrumentalities, and may
or may not be backed by the full faith and credit of the United States.
Obligations of the Government National Mortgage Association ("GNMA"), the
Farmers Home Administration, and the Export-Import Bank are backed by the full
faith and credit of the United States. Securities in which the portfolio may
invest that are not backed by the full faith and credit of the United States
include obligations issued by the Tennessee Valley Authority, The Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC"), the United States Postal Service, each of which has the
right to borrow from the United States Treasury to meet its obligations, and
obligations of the Federal Farm Credit Bank and the Federal Home Loan Bank, the
obligations of which may be satisfied only by the individual credit of the
issuing agency. In the case of securities not backed by the full faith and
credit of the U.S. Government, the portfolio must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the U.S. Government if the agency or
instrumentality does not meet its commitments.

Mortgage-Related Securities Issued by U.S. Government Instrumentalities or by
Non-Governmental Corporations. The portfolio may invest in mortgage-backed
securities issued by GNMA, FNMA or FHLMC and representing undivided ownership
interests in pools of mortgages. The mortgages backing these securities include
conventional 30 year fixed rate mortgages, 15 year fixed rate mortgages,
graduated payment mortgages, and adjustable rate mortgages. The U.S. Government
or the issuing agency guarantees the payment of interest and principal of these
securities. However, the guarantees do not extend to the securities' yield or
value, which are likely to vary inversely with fluctuations in interest rates,
nor do the guarantees extend to the yield or value of the portfolio's shares.
These securities are in most cases pass-through instruments, through which the
holders receive a share of all interest and principal payments from the
mortgages underlying the securities, net of certain fees. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through securities.
Mortgage-backed securities are often subject to more rapid repayment then their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying mortgage obligations. For example,
securities backed by mortgages with 30 year maturities are customarily treated
as prepaying fully in the 12th year and securities backed by mortgages with 15
year maturities are customarily treated as prepaying fully in the seventh year.
While the timing of prepayments of graduated payment mortgages differs somewhat
from that of conventional mortgages, the prepayment experience of graduated
payment mortgages is basically the same as that of the conventional mortgages of
the same maturity dates over the life of the pool. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-backed securities
can be expected to accelerate. When the mortgage obligations are prepaid, the
portfolio reinvests the prepaid amounts in securities, the yields of which
reflect interest rates prevailing at the

7 - Series Fund
<PAGE>

time. Therefore, the portfolio's ability to maintain a portfolio of high
yielding mortgage-backed securities will be adversely affected to the extent
that prepayments of mortgages must be reinvested in securities which have lower
yields than the prepaid mortgages. Moreover, prepayments of mortgages which
underlie securities purchased at a premium could result in capital losses.

In addition, the portfolio may: (i) purchase and sell options on debt
securities; (ii) purchase and sell interest rate futures contracts and options
thereon; (iii) purchase securities on a when-issued or delayed delivery basis;
(iv) use interest rate swaps; and (v) make short sales. These techniques are
described on pages 15 through 19, and further information about some of them is
included in the statement of additional information.

Balanced Portfolios.

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 15% 35% 50%
Bonds 15% 35% 50%
Money Market 0% 30% 70%

The portfolio manager will make variations in the proportions of each investment
category in accordance with its judgment about the expected returns and risks of
the various investment categories.

8 - Series Fund
<PAGE>

of a likelihood for greater appreciation in value. Up to 20% of the bond portion
of this portfolio may be invested in United States currency denominated debt
securities issued outside the United States by foreign or domestic issuers. The
common stock portion of this portfolio will be invested primarily in the equity
securities of major, established corporations in sound financial condition that
appear to offer attractive prospects of a total return from dividends and
capital appreciation that is superior to broadly based stock indices. The money
market portion of the portfolio will hold high-quality short-term debt
obligations with a maturity of 12 months or less (as described in the Appendix
to this prospectus) and will maintain a dollar-weighted average maturity of 120
days or less.

In addition, the portfolio may: (i) purchase and sell options on equity
securities, debt securities, stock indices and foreign currencies (ii) purchase
and sell stock index, interest rate and foreign currency futures contracts and
options thereon; (iii) enter into forward foreign currency exchange contracts;
(iv) purchase securities on a when-issued or delayed delivery basis; (v) use
interest rate swaps; and (vi) make short sales. These techniques are described
on pages 14 through 19, and further information about some of them is included
in the statement of additional information.

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 25% 60% 100%
Bonds 0% 40% 75%
Money Market 0% 0% 75%

The bond component of this portfolio is expected under normal circumstances to
have a weighted average maturity of greater than 10 years. The values of bonds
with long maturities are generally more sensitive to changes in interest rates
than those of shorter maturities. The bond portion of this portfolio will
primarily be invested in securities that have a rating at the time of purchase
within the four highest grades determined by Moody's, S&P, or a similar
nationally-recognized rating service. A description of corporate bond ratings is
included in the Appendix to the statement of additional information. However, up
to 25% of the bond component of this portfolio may be invested in securities
having ratings at the time of purchase of "BB", "Ba" or lower, or if not rated,
of comparable quality in the opinion of the portfolio manager, these securities
are also known as high risk securities. Up to 20% of the bond portion of this
portfolio may be invested in United States currency denominated debt securities
issued outside the United States by foreign or domestic issuers. The established
company common stock component of this portfolio will consist of the equity
securities of major corporations that are believed to be in sound financial
condition. In selecting stocks of smaller capitalization companies, the
portfolio manager will concentrate on companies with a capitalization range of
$75 million to $600 million that show above average profitability (measured by
return-on-equity, earnings, and dividend growth rates) with modest
price/earnings ratios. The individual equity selections for this portfolio may
tend to have more volatile market values than the equity securities selected for
the Common Stock Portfolio or the Conservatively Managed Flexible Portfolio. The
money market portion of the portfolio will hold high-quality short-term debt
obligations with a maturity of 12 months or less (as

9 - Series Fund
<PAGE>

described in the Appendix to this prospectus) and will maintain a
dollar-weighted average maturity of 120 days or less.

Diversified Stock Portfolios.

Stock Index Portfolio. The objective of this portfolio is to achieve investment
results that correspond to the price and yield performance of publicly-traded
common stocks in the aggregate.

10 - Series Fund
<PAGE>

- --------
Source: Standard & Poor's Corporation. Percentage change calculated in
accordance with specifications of SEC release number IA-327.

In the seven full years since this portfolio was established its total return,
compared to that of the S&P 500 Index, was as follows:

Under normal circumstances, the portfolio generally intends to purchase all 500
stocks represented in the S&P 500 Index and to invest its assets as fully in
those stocks (in proportion to their weighting in the index) as is feasible in
light of cash flows into and out of the portfolio. In order to reduce
transaction costs, a weighted investment in the 500 stocks comprising the S&P
500 Index is most efficiently made in relatively large amounts. As additional
cash is received from the purchase of shares in the portfolio, it may be held
temporarily in the types of money market instruments described in the Appendix
to this prospectus until the portfolio has a sufficient amount of assets in such
investments to make an efficient weighted investment in the 500 stocks
comprising the S&P 500 Index. If net cash outflows from the portfolio are
anticipated, the portfolio may sell stocks (in proportion to their weighting in
the S&P 500 Index) in amounts in excess of those needed to satisfy the cash
outflows and hold the balance of the proceeds in short-term investments if such
a transaction appears, taking into account transaction costs, to be more
efficient than selling only the amount of stocks needed to meet the cash
requirements. The portfolio will not, however, increase its holdings of cash in
anticipation of any decline in the value of the S&P 500 Index or of the stock
markets generally. The portfolio will instead remain as fully invested in the
S&P 500 Index stocks as feasible in light of its cash flow patterns during
periods of market declines as well as advances, and investors in the portfolio
thus run the risk of remaining fully invested in common stocks during a period
of general decline in the stock markets.

11 - Series Fund
<PAGE>

If the portfolio does hold short-term investments as a
result of the patterns of cash flows to and from the portfolio, such holdings
may cause its performance to differ from that of the S&P 500 Index. The
portfolio will attempt to minimize any such difference in performance through
transactions involving stock index futures contracts, options on stock indices,
and/or options on stock index future contracts. These derivative investment
instruments are described under Options on Stock Indices, Stock Index Futures
Contracts, and Options on Futures Contracts on pages 16 through 18. The
portfolio will not use such instruments for speculative purposes or to hedge
against any decline in the value of the stocks held in the portfolio, but
instead will employ them only as a temporary substitute for investment of cash
holdings directly in the 500 stocks when the portfolio's cash holdings are too
small to make such an investment in an efficient manner.

Although the portfolio will be invested primarily in common stocks, it may also
invest to a limited extent in short, intermediate or long-term debt, either
convertible or nonconvertible into common stock, as well as in nonconvertible
preferred stock. The portfolio will attempt to maintain a flexible approach to
the selection of common stocks of various types of companies whose valuations
appear to offer opportunities for above-average appreciation. Thus, the
portfolio may invest in securities of companies whose estimated growth in
earnings exceeds that projected for the market as a whole because of factors
such as expanding market share, new products or changes in market environment.
Or it may invest in "undervalued" securities which are often characterized by a
lack of investor recognition of the basic value of a company's assets.
Securities of companies with sales and earnings trends which are currently
unfavorable but which are expected to reverse may also be in the portfolio. The
effort to achieve price appreciation that is superior to broadly based stock
indices necessarily involves accepting a greater risk of declining values.
During periods when stock prices decline generally, it can be expected that the
value of the portfolio will also decline.

In addition, the portfolio may: (i) purchase and sell options on equity
securities, stock indices and foreign currencies; (ii) purchase and sell stock
index and foreign currency futures contracts and options thereon; (iii) enter
into forward foreign currency exchange contracts; and (iv) purchase securities
on a when-issued or delayed delivery basis. These techniques are described on
pages 14 through 19, and further information about some of them is included in
the statement of additional information.

Thomas Jackson, Managing Director, PIC, has been portfolio manager of the Common
Stock Portfolio since 1990. Prior to 1990, Mr. Jackson was Principal for Red Oak
Advisors.

12 - Series Fund
<PAGE>

regions, the portfolio manager ordinarily considers such factors as prospects
for relative economic growth between foreign countries; expected levels of
inflation and interest rates; government policies influencing business
conditions; the range of individual investment opportunities available to
international investors; and other pertinent financial, tax, social, political
and national factors--all in relation to the prevailing prices of the securities
in each country or region.

Investing in securities of foreign companies and countries involves special
risks. The particular risks of investments in foreign securities are described
under Foreign Securities on page 14.

When the portfolio manager believes market conditions dictate a temporary
defensive strategy, or during periods of structuring and restructuring the
portfolio, the portfolio may invest without limit in money market investments of
the kind described in the Appendix to the prospectus, including repurchase
agreements.

In addition, the portfolio may: (i) purchase and sell options on equity
securities, stock indices and foreign currencies (ii) purchase and sell stock
index, interest rate and foreign currency futures contracts and options thereon;
(iii) enter into forward foreign currency exchange contracts; and (iv) purchase
securities on a when-issued or delayed delivery basis. These techniques are
described on pages 14 through 19, and further information about some of them is
included in the statement of additional information.

The operating expense ratio of the portfolio can be expected to be significantly
higher than that of a fund investing exclusively in domestic securities since
the expenses of the portfolio, such as custodial, valuation and communication
costs, as well as the rate of the investment management fee (0.75% of the
portfolio's average daily net assets), though similar to such expenses of other
global funds, are higher than those generally incurred by funds investing solely
in the securities of U.S. issuers.

As a result of its investment policies, the portfolio's turnover rate may exceed
100% although it is not expected to exceed 200%.

Convertible Securities. The Conservatively Managed Flexible, Aggressively
Managed Flexible, Common Stock, and Global Equity Portfolios may invest in
convertible securities and such securities may constitute a major part of the
holdings of the Global Equity Portfolio. A convertible security is a
fixed-income security (a bond or preferred stock) which may be converted at a
stated price within a specified period of time into a certain quantity of the
common stock of the same or a different issuer. Convertible securities are
senior to common stocks in a corporation's capital structure, but are usually
subordinated to similar nonconvertible securities. While providing a fixed
income stream (generally higher in yield than the income derivable from a common
stock but lower than that afforded by a similar nonconvertible security), a
convertible security also affords an investor the opportunity, through its
conversion feature, to participate in the capital appreciation attendant upon a
market price advance in the convertible security's underlying common stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines. While no securities investment is without risk,
investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

13 - Series Fund
<PAGE>

Foreign Securities. The Global Equity Portfolio may invest up to 100% of its
total assets in common stock and convertible securities denominated in a foreign
currency and issued by foreign or domestic issuers. The Bond Portfolio may
invest up to 20% of its assets in United States currency denominated debt
securities issued outside the United States by foreign or domestic issuers. In
addition, the bond components of the Conservatively Managed Flexible and
Aggressively Managed Flexible Portfolios may each invest up to 20% of their
assets in such securities. To the extent permitted by applicable law, the
Conservatively Managed Flexible, and Aggressively Managed Flexible Portfolios
may invest up to 30% of their total assets in debt and equity securities
denominated in a foreign currency and issued by foreign or domestic issuers.
Further, to the extent permitted by applicable insurance law, the Common Stock
Portfolio may invest up to 30% of its total assets in non-United States currency
denominated common stock and fixed-income securities convertible into common
stock of foreign and U.S. issuers. Securities issued outside the United States
and not publicly traded in the United States, as well as American Depository
Receipts ("ADRs"), and securities denominated in a foreign currency are referred
to collectively in this prospectus as "foreign securities."

Options on Equity Securities. The Conservatively Managed Flexible, Aggressively
Managed Flexible, Common Stock, and Global Equity Portfolios may purchase and
write (i.e., sell) put and call options on equity securities that are traded on
securities exchanges, are listed on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), or that result from privately
negotiated transactions with broker-dealers ("OTC options"). A call option is a
short-term contract pursuant to which the purchaser or holder, in return for a
premium paid, has the right to buy the equity security underlying the option at
a specified exercise price at any time during the term of the option. The writer
of the call option, who receives the premium, has the obligation, upon exercise
of the option, to deliver the underlying equity security against payment of the
exercise price. A put option is a similar contract which gives the purchaser or
holder, in return for a premium, the right to sell the underlying equity
security at a specified price during the term of the option. The writer of the
put, who receives the premium, has the obligation to buy the underlying equity
security at the exercise price upon exercise by the holder of the put.

14 - Series Fund
<PAGE>

basis a call on the same security as the call written where the exercise price
of the call held is equal to or less than the exercise price of the call written
or greater than the exercise price of the call written if the difference is
maintained by the portfolio in cash, Treasury bills or other high grade
short-term debt obligations in a segregated account with its custodian. A put
option is covered if: (1) the portfolio deposits and maintains with its
custodian in a segregated account cash, U.S. Government securities or other
liquid high-grade debt obligations having a value equal to or greater than the
exercise price of the option; or (2) the portfolio holds on a share-for-share
basis a put on the same security as the put written where the exercise price of
the put held is equal to or greater than the exercise price of the put written
or less than the exercise price if the difference is maintained by the portfolio
in cash, Treasury bills or other high grade short-term debt obligations in a
segregated account with its custodian.

The Conservatively Managed Flexible, Aggressively Managed Flexible, Common
Stock, and Global Equity Portfolios may also purchase "protective puts" (i.e.,
put options acquired for the purpose of protecting a portfolio security from a
decline in market value). In exchange for the premium paid for the put option,
the portfolio acquires the right to sell the underlying security at the exercise
price of the put regardless of the extent to which the underlying security
declines in value. The loss to the portfolio is limited to the premium paid for,
and transaction costs in connection with, the put plus the initial excess, if
any, of the market price of the underlying security over the exercise price.
However, if the market price of the security underlying the put rises, the
profit the portfolio realizes on the sale of the security will be reduced by the
premium paid for the put option less any amount (net of transaction costs) for
which the put may be sold. Similar principles apply to the purchase of puts on
debt securities and stock indices, as described under Options on Debt
Securities, below and Options on Stock Indices, page 16.

Options on Debt Securities. The Bond, Government Securities, Conservatively
Managed Flexible, and Aggressively Managed Flexible Portfolios may purchase and
write (i.e. sell) put and call options on debt securities (including U.S.
Government debt securities) that are traded on U.S. securities exchanges or that
result from privately negotiated transactions with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York ("OTC
options"). Options on debt are similar to options on stock, except that the
option holder has the right to take or make delivery of a debt security, rather
than stock.

15 - Series Fund
<PAGE>
These portfolios may also write straddles (i.e., a combination of a call and a
put written on the same security at the same strike price where the same issue
of the security is considered "cover" for both the put and the call). In such
cases, the portfolio will also segregate or deposit for the benefit of the
portfolio's broker cash or liquid high-grade debt obligations equivalent to the
amount, if any, by which the put is "in the money." It is contemplated that each
portfolio's use of straddles will be limited to 5% of the portfolio's net assets
(meaning that the securities used for cover or segregated as described above
will not exceed 5% of the portfolio's net assets at the time the straddle is
written). The writing of a call and a put on the same security at the same
strike price where the call and the put are covered by different securities is
not considered a straddle for purposes of this limit.

These portfolios may purchase "protective puts" in an effort to protect the
value of a security that it owns against a substantial decline in market value.
Protective puts are described in Options on Equity Securities, page 14. A
portfolio may wish to protect certain portfolio securities against a decline in
market value at a time when put options on those particular securities are not
available for purchase. A portfolio may therefore purchase a put option on
securities other than those it wishes to protect even though it does not hold
such other securities in its portfolio. While changes in the value of the put
option should generally offset changes in the value of the securities being
hedged, the correlation between the two values may not be as close in these
transactions as in transactions in which the portfolio purchases a put option on
an underlying security it owns.

Options on Stock Indices. The Conservatively Managed Flexible, Aggressively
Managed Flexible, Common Stock, and Global Equity Portfolios may purchase and
sell put and call options on stock indices traded on securities exchanges,
listed on NASDAQ or that result from privately negotiated transactions with
broker-dealers ("OTC options"). The Stock Index Portfolio may utilize options on
stock indices by constructing "put/call" combinations that are economically
comparable to a long stock index futures position, as described in the statement
of additional information. Options on stock indices are similar to options on
stock except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the stock index upon which the option is based is greater than, in the case of a
call, or less than, in the case of a put, the exercise price of the option. This
amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the "multiplier"). The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike stock
options, all settlements are in cash, and gain or loss depends on price
movements in the stock market generally (or in a particular industry or segment
of the market) rather than price movements in individual stocks.

A portfolio will write only "covered" options on stock indices. The manner in
which these options are covered is discussed in the statement of additional
information.

16 - Series Fund
<PAGE>

may effect closing sale and purchase transactions involving options on stock
indices, as described above in connection with stock options.

Options on Foreign Currencies. The Conservatively Managed Flexible, Aggressively
Managed Flexible, Common Stock, and Global Equity Portfolios may purchase and
write put and call options on foreign currencies traded on U.S. or foreign
securities exchanges or boards of trade for hedging purposes in a manner similar
to that in which forward foreign currency exchange contracts (discussed under
Foreign Securities, page 14 and futures contracts on foreign currencies
(discussed under Futures Contracts, below) will be employed. Options on foreign
currencies are similar to options on stock, except that the option holder has
the right to take or make delivery of a specified amount of foreign currency,
rather than stock.

Futures Contracts. The Conservatively Managed Flexible, Aggressively Managed
Flexible, Stock Index, Common Stock, and Global Equity Portfolios may, to the
extent permitted by applicable regulations, attempt to reduce the risk of
investment in equity securities by hedging a portion of their equity portfolios
through the use of stock index futures contracts. A stock index futures contract
is an agreement in which the seller of the contract agrees to deliver to the
buyer an amount of cash equal to a specific dollar amount times the difference
between the value of a specific stock index at the close of the last trading day
of the contract and the price at which the agreement is made. No physical
delivery of the underlying stocks in the index is made.

The Bond, Government Securities, Conservatively Managed Flexible, Aggressively
Managed Flexible, and Global Equity Portfolios may, to the extent permitted by
applicable regulations, purchase and sell for hedging purpose futures contracts
on interest-bearing securities (such as U.S. Treasury bonds and notes) or
interest rate indices (referred to collectively as "interest rate futures
contracts").

The Conservatively Managed Flexible, Aggressively Managed Flexible, Common
Stock, and Global Equity Portfolios may, to the extent permitted by applicable
regulations, purchase and sell futures contracts on foreign currencies or groups
of foreign currencies for hedging purposes.

17 - Series Fund
<PAGE>

fair market value of its assets, after taking into account unrealized profits
and unrealized losses on any such contracts and options.

Options on Futures Contracts. To the extent permitted by applicable insurance
law and federal regulations, the Conservatively Managed Flexible, Aggressively
Managed Flexible, Stock Index, Common Stock, and Global Equity Portfolios may
enter into certain transactions involving options on stock index futures
contracts; the Bond, Government Securities, Conservatively Managed Flexible,
Aggressively Managed Flexible, and Global Equity Portfolios may enter into
certain transactions involving options on interest rate futures contracts; and
the Conservatively Managed Flexible, Aggressively Managed Flexible, Common
Stock, and Global Equity Portfolios may enter into certain transactions
involving options on foreign currency futures contracts. An option on a futures
contract gives the purchaser or holder the right, but not the obligation, to
assume a position in a futures contract (a long position if the option is a call
and a short position if the option is a put) at a specified price at any time
during the option exercise period. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and long position if the option is a put). Upon exercise of the
option, the assumption of offsetting futures positions by the writer and holder
of the option will be accomplished by delivery of the accumulated balance in the
writer's futures margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract. As an alternative to exercise, the holder or writer of an
option may terminate a position by selling or purchasing an option of the same
series. There is no guarantee that such closing transactions can be effected.
The Stock Index Portfolio intends to utilize options on stock index futures
contracts by constructing "put/call" combinations that are economically
comparable to a long stock index futures position, as described in the statement
of additional information. The other portfolios intend to utilize options on
futures contracts for the same purposes that they use the underlying futures
contracts.

Reverse Repurchase Agreements and Dollar Rolls. The Bond and Government
Securities Portfolios, as well as the fixed income portions of the
Conservatively Managed Flexible and Aggressively Managed Flexible Portfolios,
may use reverse repurchase agreements and dollar rolls. The money market portion
of any portfolio may use reverse repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by a portfolio with an agreement
by the portfolio to repurchase the same securities at an agreed upon price and
date. During the reverse repurchase period, the portfolio often continues to
receive principal and interest payments on the sold securities. The terms of
each agreement reflect a rate of interest for use of the funds for the period,
and thus these agreements have the characteristics of borrowing by the
portfolio. Dollar rolls involve sales by a portfolio of securities for delivery
in the current month with a simultaneous contract to repurchase substantially
similar securities (same type and coupon) from the same party at an agreed upon
price and date. During the roll period, the portfolio forgoes principal and
interest paid on the securities. A portfolio is compensated by the difference
between the current sales price and the forward price for the future purchase
(often referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. A "covered roll" is a specific type of dollar roll
for which there is an offsetting cash position or a cash equivalent security
position which matures on or before the forward settlement date of the dollar
roll transaction. A portfolio will establish a segregated account with its
custodian in which it will maintain cash, U.S. Government securities or other
liquid high-grade debt obligations equal in value to its obligations in respect
of reverse repurchase agreements and dollar rolls. Reverse repurchase agreements
and dollar rolls involve the risk that the market value of the securities
retained by the portfolio may decline below the price of the securities the
portfolio has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities under a reverse repurchase agreement or dollar
roll files for bankruptcy or becomes insolvent, the portfolio's use of the
proceeds of the agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the portfolio's obligation
to repurchase the securities. The Bond and Government Securities Portfolios, as
well as the fixed income portions of the Conservatively Managed Flexible and
Aggressively Managed Flexible Portfolios, will not obligate more than 30% of
their net assets in connection with reverse repurchase agreements and dollar
rolls. No other portfolio will obligate more than 10% of its net assets in
connection with reverse repurchase agreements.

When-Issued and Delayed Delivery Securities. From time to time, in the ordinary
course of business, the Bond, Government Securities, Conservatively Managed
Flexible, Aggressively Managed Flexible, Common Stock and Global Equity
Portfolios may purchase equity securities on a when-issued or delayed delivery
basis, that is, delivery and payment can take place a month or more after the
date of the transaction. Each of these portfolios will limit such purchases to
those in which the date for delivery and payment falls within 120 days of the
date of the commitment. A portfolio will make commitments for such when-issued
transactions only with the intention of

18 - Series Fund
<PAGE>

actually acquiring the securities. A portfolio's custodian will maintain, in a
separate account, cash, U.S. Government securities or other high grade debt
obligations having a value equal to or greater than such commitments. If a
portfolio chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
portfolio security, incur a gain or loss due to market fluctuations.

In addition, the short-term portions of any of the portfolios may purchase money
market securities on when-issued or delayed delivery basis on the terms set
forth in the Appendix to this prospectus.

Short Sales. The Bond, Government Securities, Conservatively Managed Flexible
and Aggressively Managed Flexible Portfolios may sell securities they do not own
in anticipation of a decline in the market value of those securities ("short
sales"). To complete such a transaction, the portfolio will borrow the security
to make delivery to the buyer. The portfolio is then obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by the portfolio. Until the security is replaced, the
portfolio is required to pay to the lender any interest which accrues during the
period of the loan. To borrow the security the portfolio may be required to pay
a premium which would increase the cost of the security sold. The proceeds of
the short sale will be retained by the broker to the extent necessary to meet
margin requirements until the short position is closed out. Until the portfolio
replaces the borrowed security, it will (a) maintain in a segregated account
cash or U.S. Government securities at such a level that the amount deposited in
the account plus the amount deposited with the broker as collateral will equal
the current market value of the security sold short and will not be less than
the market value of the security at the time it was sold short or (b) otherwise
cover its short position.

Short Sales Against the Box. All portfolios available to The Prudential Variable
Contract Account-24 may make short sales of securities or maintain a short
position, provided that at all times when a short position is open the portfolio
owns an equal amount of such securities or securities convertible into or
exchangeable, with or without payment of any further consideration, for an equal
amount of the securities of the same issuer as the securities sold short (a
"short sale against the box"); provided, that if further consideration is
required in connection with the conversion or exchange, cash or U.S. Government
securities in an amount equal to such consideration must be put in a segregated
account.

Interest Rate Swaps. The Bond and Government Securities Portfolios and the fixed
income portions of the Conservatively Managed Flexible and Aggressively Managed
Flexible Portfolios may use interest rate swaps to increase or decrease a
portfolio's exposure to long- or short-term interest rates. No portfolio
currently intends to invest more than 5% of its net assets at any one time in
interest rate swaps. For more information, see the statement of additional
information.

Loans of Portfolio Securities. All of the portfolios available to The Prudential
Variable Contract Account-24 may from time to time lend the securities they hold
to broker-dealers, provided that such loans are made pursuant to written
agreements and are continuously secured by collateral in the form of cash, U.S.
Government securities or irrevocable standby letters of credit in an amount
equal to at least the market value at all times of the loaned securities plus
the accrued interest and dividends. During the time securities are on loan, the
portfolio will continue to receive the interest and dividends or amounts
equivalent thereto, on the loaned securities while receiving a fee from the
borrower or earning interest on the investment of the cash collateral. The right
to terminate the loan will be given to either party subject to appropriate
notice. Upon termination of the loan, the borrower will return to the lender
securities identical to the loaned securities. The portfolio will not have the
right to vote securities on loan, but would terminate the loan and retain the
right to vote if that were considered important with respect to the investment.

19 - Series Fund
<PAGE>

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS

The Series Fund is subject to certain investment restrictions which are
fundamental to the operations of the Series Fund and may not be changed except
with the approval of a majority vote (as defined under INVESTMENT OBJECTIVES AND
POLICIES OF THE PORTFOLIOS on page 5) of the persons participating in the
affected portfolio.

The investments of the various portfolios currently available to The Prudential
Variable Contract Account-24 are generally subject to certain additional
restrictions under state laws. In the event of future amendments to the
applicable statutes, each of these portfolios will comply, without the approval
of the shareholders, with the statutory requirements as so modified.

For a detailed discussion of investment restrictions applicable to the Series
Fund, see INVESTMENT RESTRICTIONS in the statement of additional information.

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES

Subject to The Prudential's supervision, substantially all of the investment
advisory services provided to the Series Fund by The Prudential, with respect to
the portfolios currently available to The Prudential Variable Contract
Account-24, are furnished by its wholly-owned subsidiary, PIC, pursuant to the
Service Agreement between The Prudential and PIC which provides that The
Prudential will reimburse PIC for its costs and expenses. The Conservatively
Managed Flexible and Aggressively Managed Flexible Portfolios are managed by
Prudential Investment Advisors ("PIA") and Prudential Diversified Investment
Strategies ("PDI"), units of PIC, using a team of portfolio managers under the
supervision of Mark Stumpp, Managing Director, PIC. PIC is registered as an
investment advisor under the Investment Advisers Act of 1940.

The investment management fee for the Stock Index Portfolio is equal to an
annual rate of 0.35% of the average daily net assets of the portfolio. The
investment management fee for the Bond and Government Securities Portfolios is
equal to an annual rate of 0.4% of the average daily net assets of each of the
portfolios. For the Common Stock Portfolio, the fee is equal to an annual rate
of 0.45% of the average daily net assets of the portfolio. The fee for the
Conservatively Managed Flexible is equal to an annual rate of 0.55% of the
average daily net assets of the portfolio. For the Aggressively Managed Flexible
Portfolio, the fee is equal to an annual rate of 0.6% of the average daily net
assets of the portfolio. The fee for the Global Equity Portfolio is equal to an
annual rate of 0.75% of the average daily net assets of the portfolio.

For the year ended December 31, 1994, the Series Fund's total expenses were
0.59% of the average net assets of all of the Series Fund's portfolios. The
investment management fee for that period constituted 0.51% of the average net
assets. For further information about the expenses of the Series Fund, see
INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES in the statement of additional
information.

20 - Series Fund
<PAGE>

PURCHASE AND REDEMPTION OF SHARES

DETERMINATION OF NET ASSET VALUE

The net asset value of the shares of each portfolio available to The Prudential
Variable Contract Account-24 is determined once daily, as of 4:15 p.m. New York
City time on each day during which the NYSE is open for business. The NYSE is
open for business Monday through Friday except for the days on which the
following holidays are observed: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
The net asset value per share of each such portfolio is computed by adding the
sum of the value of the securities held by that portfolio plus any cash or other
assets it holds, subtracting all its liabilities, and dividing the result by the
total number of shares outstanding of that portfolio at such time. Expenses,
including the investment management fee payable to The Prudential, are accrued
daily.

In determining the net asset value of the Bond and Government Securities
Portfolios, securities (other than debt obligations with remaining maturities of
less than 60 days, which are valued at amortized cost) will be valued utilizing
an independent pricing service to determine valuations for normal institutional
size trading units of securities. The pricing service considers such factors as
security prices, yields, maturities, call features, ratings, and developments
relating to specific securities in arriving at securities valuations.

The net asset value of the Stock Index, Common Stock, and Global Equity
Portfolios will be determined in the following manner. Any security for which
the primary market is on an exchange is generally valued at the last sale price
on such exchange as of the close of the NYSE (which is currently 4:00 p.m. New
York City time) or, in the absence of recorded sales, at the mean between the
most recently quoted bid and asked prices. NASDAQ National Market System equity
securities are valued at the last sale price or, if there was no sale on such
day, at the mean between the most recently quoted bid and asked prices. Other
over-the-counter equity securities are valued at the mean between the most
recently quoted bid and asked prices. Convertible debt securities that are
actively traded in the over-the-counter market, including listed securities for
which the primary market is believed to be over-the-counter, are valued at the
mean between the most recently quoted bid and asked prices. Short-term debt
instruments which mature in less than 60 days are valued at amortized cost. For
valuation purposes, quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents.

Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities, and money market instruments, is substantially completed
each day at various times prior to the close of the NYSE. The value of any such
securities is determined as of such times for purposes of computing a
portfolio's net asset value. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. If an extraordinary event occurs
after the close of an exchange on which that security is traded, the security
will be valued at fair value as determined in good faith by the applicable
portfolio manager under procedures established by and under the general
supervision of the Series Fund's Board of Directors.

21 - Series Fund
<PAGE>

from the Securities and Exchange Commission. Each Balanced Portfolio must
maintain a dollar-weighted average maturity for its short-term debt obligations
of 120 days or less. The values determined by the amortized cost method may
deviate from market value under certain circumstances. The Board of Directors
has established procedures to monitor whether any material deviation occurs and,
if so, will promptly consider what action, if any, should be initiated to
prevent unfair results to Contract owners. The short-term portion of these
portfolios may be invested only in high quality instruments, as described in the
Appendix to this prospectus.

DIVIDENDS, DISTRIBUTIONS, AND TAXES

The Series Fund will also declare and distribute annually all net realized
capital gains of the portfolios available to The Prudential Variable Contract
Account-24.

22 - Series Fund
<PAGE>

OTHER INFORMATION CONCERNING THE SERIES FUND

The Prudential provided the initial capital for the Series Fund. With respect to
the seven portfolios currently available to The Prudential Variable Contract
Account-24, The Prudential initially purchased $5,000,000 worth of shares of the
Bond Portfolio, $300,000 worth of shares of the Common Stock Portfolio,
$2,500,000 worth of shares of the Conservatively Managed Flexible Portfolio, and
$3,000,000 worth of shares of the Aggressively Managed Flexible Portfolio. The
Prudential has since purchased $25,000,000 worth of shares of the Stock Index
and Global Equity Portfolios; and $10,000,000 worth of shares of the Government
Securities Portfolio. These shares were acquired for investment and can be
disposed of only by redemption. They will not be redeemed by The Prudential
until the other assets of the portfolios are large enough so that redemption
will not have an adverse effect upon investment performance. From the inception
of the respective portfolios through December 31, 1994, The Prudential has
redeemed a total of $7,752,850 worth of shares from the Bond Portfolio, $304,065
worth of shares from the Common Stock Portfolio, $31,019,279 worth of shares
from the Stock Index Portfolio, $3,825,023 worth of shares from the
Conservatively Managed Flexible Portfolio, and $4,645,305 worth of shares from
the Aggressively Managed Flexible Portfolio, and $11,056,195 worth of shares
from the Government Securities Portfolio (these amounts reflect total redemption
of the shares purchased by The Prudential). In addition, The Prudential has
redeemed $33,089,000 worth of shares from the Global Equity Portfolio (this
amount reflects partial redemption of the shares purchased by The Prudential).
The Prudential will vote its shares in the same manner and in the same
proportion as the shares held in the Accounts, which generally are voted in
accordance with instructions of Contract owners.

Voting Rights. The voting rights of Contract owners or Participants, and
limitations on those rights, are explained in the accompanying prospectus for
the Contracts. The Prudential and certain other insurers with separate accounts
which invest in the Series Fund, as the owners of the assets in the Accounts,
vote all of the shares of the Series Fund, but they will generally do so in
accordance with the instructions of Contract owners or Participants pursuant to
the current SEC requirements and staff interpretations regarding pass-through
voting. Under certain circumstances, however, the Companies may disregard voting
instructions received from Contract owners or Participants. The Series Fund does
not hold annual shareholders meetings in any year in which it is not required to
do so either under Maryland law or the Investment Company Act of 1940. For
additional information describing how the Companies will vote the shares of the
Series Fund, see Voting Rights in the accompanying prospectus for the Contracts.

23 - Series Fund
<PAGE>

establishing a new registered management investment company and segregating the
assets underlying the variable life insurance and variable annuity contracts.

Periodic Reports. The Series Fund will send each shareholder, at least annually,
statements showing as of a specified date the number of shares in each portfolio
credited to the shareholder. The Series Fund will also send Contract owners and
Participants semi-annual reports showing the financial condition of the
portfolios in which they may invest and the investments held in each. The annual
report may take the form of an updated copy of this prospectus and its
accompanying statement of additional information.

Portfolio Brokerage and Related Practices. The Prudential is responsible for
decisions to buy and sell securities for the portfolios, the selection of
brokers and dealers to effect the transactions and the negotiation of brokerage
commissions, if any. Transactions on a stock exchange in equity securities will
be executed primarily through brokers that will receive a commission paid by the
portfolio. The Bond and Government Securities Portfolios, on the other hand,
will not normally incur any brokerage commissions. Fixed income securities, as
well as equity securities traded in the over-the-counter market, are generally
traded on a "net" basis with dealers acting as principals for their own accounts
without a stated commission, although the price of the security usually includes
a profit to the dealer. In underwritten offerings, securities are purchased at a
fixed price that includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. Certain of
these securities may also be purchased directly from an issuer, in which case
neither commissions nor discounts are paid.

Custodian, Transfer Agent, and Dividend Disbursing Agent. Chemical Bank, 4 New
York Plaza, New York, NY 10004 is the custodian of the assets held by all the
portfolios in which The Prudential Variable Contract Account-24 may currently
invest, except the Global Equity Portfolio, and is authorized to use the
facilities of the Depository Trust Company and the facilities of the book-entry
system of the Federal Reserve Bank with respect to securities held by these
portfolios. Brown Brothers Harriman & Co. ("Brown Brothers"), 40 Water Street,
Boston MA 02109, is the custodian of the assets of the Global Equity Portfolio.
Brown Brothers employs subcustodians, who were approved by the directors of the
Series Fund in accordance with regulations of the Securities and Exchange
Commission, for the purpose of providing custodial service for the Global Equity
Portfolio's foreign assets held outside the United States. Morgan Guaranty Trust
Company, 60 Wall Street, New York, NY 10260 is the custodian of the assets held
in connection with repurchase agreements entered into by the portfolios and is
authorized to use the facilities of the book-entry system of the Federal Reserve
Bank. The directors of the Series Fund monitor the activities of the custodians
and the subcustodians.

The Prudential is the transfer agent and dividend disbursing agent for the
Series Fund. The Prudential's principal business address is Prudential Plaza,
Newark, New Jersey 07102-3777.

Additional Information. This prospectus and the statement of additional
information referred to on the cover page do not contain all the information set
forth in the registration statement, certain portions of which have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
The omitted information may be obtained from the Commission's principal office
in Washington, D.C., upon payment of the fees prescribed by the Commission.

For further information, shareholders may also contact the Series Fund's office,
the address and phone number of which are set forth on the cover of this
prospectus.

24 - Series Fund
<PAGE>

APPENDIX

SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO
MAY CURRENTLY INVEST*

*Although the Money Market Portfolio is not available to The Prudential Variable
Contract Account-24, any short-term portion of the various portfolios available
through subaccounts of that Account may be invested in the types of securities
described in this Appendix.

A1 - Series Fund
<PAGE>
governmental laws or restrictions which might affect adversely the payment of
principal and interest on such obligations held by the Series Fund. In addition,
there may be less publicly available information about a foreign issuer than
about a domestic one, and foreign issuers may not be subject to the same
accounting, auditing and financial recordkeeping standards, and requirements as
domestic issuers. Securities issued by foreign issuers may be subject to greater
fluctuations in price than securities issued by U.S. entities. Finally, in the
event of a default with respect to any such foreign debt obligations, it may be
more difficult for the Series Fund to obtain or to enforce a judgment against
the issuers of such securities.

5. Reverse Repurchase Agreements. The Money Market Portfolio may use reverse
repurchase agreements, which are described on page 18 of the prospectus. No
portfolio may obligate more than 10% of its net assets in connection with
reverse repurchase agreements, except that the Bond and Government Securities
Portfolios, as well as the fixed income portions of the Conservatively Managed
Flexible and Aggressively Managed Flexible Portfolios, may obligate up to 30% of
their net assets in connection with reverse repurchase agreements and dollar
rolls.

A2 - Series Fund
<PAGE>

Prudential's
Variable
Appreciable Life(R)
Insurance

May 1, 1995
PROSPECTUS
The Prudential Series Fund, Inc.
and
The Prudential Variable Appreciable Account

PVAL-1 Ed 5-95 The Prudential Insurance Company of America
Catalog No. 646960S

<PAGE>

PROSPECTUS
May 1, 1995

THE PRUDENTIAL
VARIABLE APPRECIABLE ACCOUNT

Variable
APPRECIABLE
LIFE(R)___________________
INSURANCE CONTRACTS

PROVIDING FOR THE INVESTMENT
OF ASSETS IN THE
INVESTMENT PORTFOLIOS OF

THE PRUDENTIAL SERIES
FUND, INC.

This prospectus describes two forms of a variable life insurance contract
offered by The Prudential Insurance Company of America under the name Variable
Appreciable Life(R) Insurance. The first form provides a death benefit that
generally remains fixed in an amount chosen by the purchaser and cash surrender
values that vary daily. The second form also provides cash surrender values that
vary daily but the death benefit will also vary daily. Under both forms of
contract, the death benefit will never be less than the "face amount" of
insurance chosen by the purchaser. There is no guaranteed minimum cash surrender
value.

The assets held for the purpose of paying benefits under these and other similar
contracts are segregated from the other assets of The Prudential and are
invested in one or more of sixteen investment portfolios of The Prudential
Series Fund, Inc. chosen by the contract owner. This prospectus also describes
the securities issued by the Series Fund. The contract owner may also choose to
have the assets invested in a fixed-rate option or in The Prudential Variable
Contract Real Property Account, described in a prospectus attached to this one.

Although it is advantageous to the purchaser to pay a Scheduled Premium amount
on the dates due, which are at least once a year but may be more often,
purchasers have considerable flexibility as to when and in what amounts they pay
premiums.

Before you sign an application to purchase this life insurance contract, you
should read this prospectus with care and have any questions you may have
answered by your Prudential representative. If you do purchase the contract, you
should retain this prospectus for future reference, together with the contract
itself that you will receive.

Additional information about the contract and the Series Fund is set forth in a
separate Statement of Additional Information which is incorporated by reference
into this prospectus. It is available without charge upon request to The
Prudential Insurance Company of America at the address shown below.

REPLACING EXISTING INSURANCE WITH A CONTRACT DESCRIBED IN THIS PROSPECTUS MAY
NOT BE TO YOUR ADVANTAGE. IF YOU CURRENTLY OWN A LIFE INSURANCE CONTRACT, THE
BENEFITS AND COSTS OF PURCHASING ADDITIONAL INSURANCE UNDER THE EXISTING POLICY
SHOULD BE COMPARED WITH THE BENEFITS AND COSTS OF PURCHASING THE CONTRACT
DESCRIBED IN THIS PROSPECTUS. IN MAKING THIS COMPARISON, YOU SHOULD CONSULT WITH
A QUALIFIED TAX ADVISOR.

The Prudential Insurance Company of America
The Prudential Series Fund, Inc.
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 437-4016 Ext. 46

*Appreciable Life is a registered mark of The Prudential.
PVAL-1 Ed 5-95

<PAGE>
TABLE OF CONTENTS
Page

INTRODUCTION AND SUMMARY .................................................. 1
Brief Description of the Contract ....................................... 1
Fixed Income Portfolios ................................................. 3
Money Market Portfolio ......................................... 3
Bond Portfolio ................................................. 3
Government Securities Portfolio ................................ 3
Zero Coupon Bond Portfolios 1995, 2000, and 2005 .............. 3
Balanced Portfolios ..................................................... 3
Conservatively Managed Flexible Portfolio ...................... 3
Aggressively Managed Flexible Portfolio ........................ 3
High Yield Bond Portfolios .............................................. 3
High Yield Bond Portfolio ...................................... 3
Diversified Stock Portfolios ............................................ 3
Stock Index Portfolio .......................................... 3
High Dividend Stock Portfolio .................................. 3
Common Stock Portfolio ......................................... 3
Growth Stock Portfolio ......................................... 3
Small Capitalization Stock Portfolio ........................... 4
Global Equity Portfolio ....................................... 4
Specialized Portfolios .................................................. 4
Natural Resources Portfolio .................................... 4
Real Property Account ................................................... 4
Fixed-Rate Option ....................................................... 4
Transfers Between Investment Options .................................... 4
Which Investment Option Should Be Selected? ............................. 4
The Scheduled Premium ................................................... 4
Payment of Substantially Higher Premiums ................................ 5
Contract Loans .......................................................... 5
Differences Between the Contract and Variable Universal Life
Insurance Contracts ................................................... 5

FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS OF THE SERIES FUND ................. 5

PORTFOLIO RATES OF RETURN ................................................. 13

HYPOTHETICAL ILLUSTRATION OF DEATH BENEFITS AND CASH SURRENDER VALUES ..... 14

INFORMATION ABOUT THE ACCOUNT, THE REAL PROPERTY ACCOUNT AND THE FIXED RATE
OPTION .................................................................. 15
The Prudential Variable Appreciable Account ........................... 15
The Prudential Variable Contract Real Property Account ................ 15
The Fixed-Rate Option ................................................. 15

DETAILED INFORMATION ABOUT THE CONTRACT ................................... 16
Requirements for Issuance of a Contract .............................. 16
Contract Forms ........................................................ 16
Short-Term Cancellation Right or "Free Look" .......................... 16
Contract Fees and Charges ............................................. 17
Deductions from Premiums ....................................... 17
Deductions from Portfolios ..................................... 17
Monthly Deductions from Contract Fund .......................... 18
Daily Deduction from the Contract Fund ......................... 19
Surrender or Withdrawal Charges ................................ 19
Transaction Charges ............................................ 20
Contract Date ......................................................... 20
Premiums .............................................................. 20
Allocation of Premiums ................................................ 21
Transfers ............................................................. 21
How the Contract Fund Changes with Investment Experience .............. 22
How a Contract's Death Benefit Will Vary .............................. 22
Contract Loans ........................................................ 23
Surrender of a Contract ............................................... 24
Lapse and Reinstatement ............................................... 24
Fixed Extended Term Insurance ................................... 24

<PAGE>
Page
Fixed Reduced Paid-Up Insurance ................................ 25
Variable Reduced Paid-Up Insurance ............................. 25
What Happens If No Request Is Made? ............................ 25
When Proceeds Are Paid .................................................. 25
Living Needs Benefit .................................................... 25
Terminal Illness Option ........................................ 25
Nursing Home Option ............................................ 25
Voting Rights ........................................................... 26
Reports to Contract Owners .............................................. 26
Tax Treatment of Contract Benefits ...................................... 27
Riders .................................................................. 27
Participation in Divisible Surplus ...................................... 28
Other Contract Provisions ............................................... 28

FURTHER INFORMATION ABOUT THE SERIES FUND ................................. 28

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS ...................... 28
Fixed Income Portfolios ................................................. 29
Money Market Portfolio ......................................... 29
Bond Portfolio ................................................. 29
Government Securities Portfolio ................................ 30
Zero Coupon Bond Portfolios 1995, 2000, and 2005 ............... 31

Balanced Portfolios ..................................................... 32

Conservatively Managed Flexible Portfolio ...................... 32
Aggressively Managed Flexible Portfolio ........................ 32
High Yield Bond Portfolios .............................................. 33
High Yield Bond Portfolio ...................................... 33
Diversified Stock Portfolios ............................................ 34
Stock Index Portfolio .......................................... 34
High Dividend Stock Portfolio .................................. 35
Common Stock Portfolio ......................................... 36
Growth Stock Portfolio ......................................... 36
Small Capitalization Stock Portfolio ........................... 37
Global Equity Portfolio ........................................ 38
Specialized Portfolios .................................................. 38
Natural Resources Portfolio .................................... 38
Foreign Securities ...................................................... 39
Options, Futures Contracts and Swaps .................................... 40
Short Sales ............................................................. 40
Reverse Repurchase Agreements and Dollar Rolls .......................... 40
Loans of Portfolio Securities ........................................... 41

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS ...................... 41

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES ........................... 41
Portfolio Brokerage and Related Practices ............................... 42

STATE REGULATION .......................................................... 42

EXPERTS ................................................................... 42

LITIGATION ................................................................ 42

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION ......... 42

ADDITIONAL INFORMATION .................................................... 44

FINANCIAL STATEMENTS ...................................................... 44

FINANCIAL STATEMENTS OF THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT ....... A1

CONSOLIDATED FINANCIAL STATEMENTS OF THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA AND SUBSIDIARIES ....................................... B1

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, ITS STATEMENT OF ADDITIONAL INFORMATION, AND THE PROSPECTUS FOR
THE REAL PROPERTY ACCOUNT.

<PAGE>
INTRODUCTION AND SUMMARY

This section provides only an overview of the more significant provisions of the
Contract. It omits details which are provided in the rest of this prospectus, as
well as in a Statement of Additional Information which is available to you upon
request without charge. A description of the contents of that Statement of
Additional Information is on page 42.

As you read this prospectus you should keep in mind that you are considering the
purchase of a life insurance contract. Because it is variable life insurance --
and variable life insurance has significant investment aspects and requires you
to make investment decisions -- it is also a "security." That is why you have
been given this prospectus. Securities which are offered to the public must be
registered with the Securities and Exchange Commission, and the prospectus that
is a part of the registration statement must be given to all prospective buyers.
But because a substantial part of your premium pays for life insurance that will
pay to your beneficiary, in the event of your death, an amount far exceeding
your total premium payments, you should not buy this contract unless a major
reason for the purchase is to provide life insurance protection. Because the
contract provides whole-life or permanent insurance, it also serves a second
important objective. It can be expected to provide an increasing cash surrender
value that can be used during your lifetime.

Brief Description of the Contract

The Variable Appreciable Life Insurance Contract (referred to from now on as the
"Contract") is issued and sold by The Prudential Insurance Company of America
("The Prudential"), a mutual insurance company founded in 1875 under the laws of
the State of New Jersey. It is licensed to sell life insurance and annuities in
all 50 states, the District of Columbia and Guam. It is also registered as a
broker and dealer under The Securities and Exchange Act of 1934 and as an
investment adviser under The Investment Advisers Act of 1940. The Prudential's
consolidated financial statements begin on page B1.

The Contract is a form of flexible premium variable life insurance. It is built
around a Contract Fund, the amount of which changes every business day. That
amount represents the value of your Contract on that day although you will have
to pay a surrender charge if you decide to surrender the Contract during the
first ten Contract years.

A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. The Prudential has
established a separate account, like a separate division within the Company,
called The Prudential Variable Appreciable Account (from now on, the "Account").
Whenever you pay a premium, The Prudential first deducts certain charges
(described below) and, unless you decide otherwise (as explained below) puts the
remainder -- often called the "net premium" -- into the Account, where it is
combined with the net premiums from all other contracts like this one. The money
in the Account, including your Contract Fund, is then invested in the following
way. The Account is divided into sixteen subaccounts and you must decide which
subaccount or subaccounts will hold the assets of your Contract Fund. The money
allocated to each subaccount is immediately invested in a corresponding
portfolio of The Prudential Series Fund, Inc. (from now on the "Series Fund").
Those sixteen portfolios are described in more detail below. Each has a
different investment objective (for example, common stocks, bonds, money market
securities, government securities) so that you have a wide range of investment
options to choose from.

You also have two additional options which are regulated differently from the
other sixteen because neither one is an investment company registered under the
Investment Company Act of 1940. The first of these is a fixed-rate option that
increases the portion of your Contract Fund allocated to this option at a
guaranteed rate of interest. The remaining option is a real property option
which invests in income-producing real property. It is described in a separate
prospectus that is attached to this one. Thus your Contract Fund value changes
every day depending upon the change in the value of the particular portfolios
(or the other two investment options) that you have selected for the investment
of your Contract Fund.

Although the selection of any of the investment portfolios or of the real
property option offers the possibility that your Contract Fund value will
increase if there is favorable investment performance, you are subject to the
risk that investment performance will be unfavorable and that the value of your
Contract Fund will decrease. The risk will be different, depending upon which
investment options you choose. See Which Investment Option Should Be Selected,
page 4. If you select the fixed-rate option, you are credited with a stated rate
of interest but you assume the risk that this rate may change in later years.

The Prudential deducts certain charges from each premium payment and from the
amounts held in the designated investment options. In addition, The Prudential
makes certain additional charges if a Contract lapses or is surrendered during
the first 10 Contract years. All these charges, which are largely designed to
cover insurance costs and risks as well as sales and administrative expenses,
are fully described under Contract Fees and Charges, on page 17. In brief, and
subject to that fuller description, the following diagram outlines the charges
which may be made:

1
<PAGE>

- --------------------------------------------------------------------------------
Premium Payment
- --------------------------------------------------------------------------------
|
- --------------------------------------------------------------------------------
o less charge for taxes
attributable to premiums
o less $2 processing fee
- --------------------------------------------------------------------------------
|
- --------------------------------------------------------------------------------
Invested Premium Amount
o To be invested in one or a combination of:
o The Investment Portfolios of the Series Fund described below
o The Fixed-Rate Option
o The Real Property Account
- --------------------------------------------------------------------------------
|
- --------------------------------------------------------------------------------
Daily Charges
o Management fees and expenses are deducted from the assets of the Series
Fund.
o A daily charge equivalent to an annual rate of up to 0.9% is deducted from
the assets of the variable investment options for mortality and expense
risks.
- --------------------------------------------------------------------------------
|
- --------------------------------------------------------------------------------
Monthly Charges
o A sales charge is currently deducted from the Contract Fund in the amount
of 1/2 of 1% of the primary annual premium.
o The Contract Fund is reduced by a guaranteed minimum death benefit risk
charge of not more than $0.01 per $1,000 of the face amount of insurance.
o The Contract Fund is reduced by an administrative charge of up to $3 per
Contract and $0.03 per $1,000 of face amount of insurance; if the face
amount of the Contract is greater than $100,000, the charge is reduced.
o A charge for anticipated mortality is deducted, with the maximum charge
based on the Non-Smoker/Smoker 1980 CSO Tables.
o If the Contract includes riders, a deduction from the Contract Fund will be
made for charges applicable to those riders; a deduction will also be made
if the rating class of the insured results in an extra charge.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Possible Additional Charges
o If the Contract lapses or is surrendered during the first 10 years, a
contingent deferred sales charge is assessed; the maximum contingent
deferred sales charge during the first 5 years is 50% of the first year's
primary annual premium but this charge is both subject to other important
limitations and reduced for Contracts that have been in force for more than
5 years.
o If the Contract lapses or is surrendered during the first 10 years, a
contingent deferred administrative charge is assessed; during the first 5
years, this charge equals $5 per $1,000 of face amount and it begins to
decline uniformly after the fifth Contract year so that it disappears on
the tenth Contract anniversary.
o An administrative processing charge of up to $15 will be made in connection
with each withdrawal of excess cash surrender value or a decrease in face
amount.
- --------------------------------------------------------------------------------
An important feature of the Contract is its death benefit. You have a choice of
two different forms of the Contract which differ in the amount of the death
benefit. Under Contract Form A the death benefit will generally be equal to the
face amount of insurance. It can never be less than this amount, but it is
possible, after the Contract has been held for many years, that the Contract
Fund will become so large that The Prudential -- to meet certain requirements of
the Internal Revenue Code -- will increase the death benefit. Under Contract
Form B, the death benefit will increase and decrease as the amount of the
Contract Fund varies with the investment performance of the selected options.
However, the death benefit under Form B, as is true under Form A, will never be
less than the initial face amount and it may also increase to satisfy Internal
Revenue Code requirements. Throughout this prospectus the word "Contract" refers
to both Form A and B unless specifically stated otherwise. Under both Form A and
B Contracts there is no guaranteed minimum cash surrender value.

When you first buy the Contract you give instructions to The Prudential as to
which subaccounts (and, therefore, which corresponding portfolios of the Series
Fund) you wish your Contract Fund invested. Thereafter you may make changes in
these allocations either in writing or by telephone. The investment objectives
of each portfolio, described more fully at pages 28 to 38 of this prospectus,
and of the other two investment options are as follows:

2
<PAGE>

Fixed Income Portfolios

Money Market Portfolio. The maximum current income that is consistent with
stability of capital and maintenance of liquidity through investment in
high-quality short-term debt obligations. The rate of return will generally
follow the fluctuations in short term interest rates.

Bond Portfolio. A high level of income over the longer term while providing
reasonable safety of capital through investment primarily in readily marketable
intermediate and long-term fixed income securities that provide attractive
yields but do not involve substantial risk of loss of capital through default.
The securities will be of investment grade and should result in higher returns,
but market value will fluctuate inversely with changes in interest rates of
longer maturities.

Government Securities Portfolio. Achievement of a high level of income over the
longer term consistent with the preservation of capital through investment
primarily in U.S. Government securities, including intermediate and long-term
U.S. Treasury securities and debt obligations issued by agencies of or
instrumentalities established, sponsored or guaranteed by the U.S. Government.
At least 65% of the total assets of the portfolio will be invested in U.S.
Government securities. The rate of return is likely to be somewhat lower than
that of the Bond Portfolio, but the risk of loss through default is
significantly lower. Market value will also vary inversely with changes in
interest rates.

Zero Coupon Bond Portfolios 1995, 2000, and 2005. Achievement of the highest
predictable compounded investment return for a specific period of time,
consistent with the safety of invested capital, by investing primarily in debt
obligations of the United States Treasury and investment-grade corporations that
have been issued without interest coupons or stripped of their unmatured
interest coupons, in interest coupons that have been stripped from such debt
obligations, and receipts and in certificates for such stripped debt obligations
and stripped coupons (collectively "stripped securities"). The three portfolios
differ only in their liquidation dates, which for each portfolio is November 15
of the specified year. Market values are subject to greater fluctuations in
interest rates than they are for the other fixed-income portfolios so that
redemption, by transfer or otherwise prior to the maturity date could result in
a loss.

Balanced Portfolios

Conservatively Managed Flexible Portfolio. Achievement of a favorable total
investment return consistent with a portfolio having a conservatively managed
mix of money market instruments, fixed income securities, and common stocks, in
proportions believed by the investment manager to be appropriate for an investor
desiring diversification of investment who prefers a relatively lower risk of
loss than that associated with the Aggressively Managed Flexible Portfolio
while recognizing that this reduces the chances of greater appreciation.

High Yield Bond Portfolios

High Yield Bond Portfolio. Achievement of a high total return through investment
in high yield/high risk fixed income securities in the medium to low quality
ranges. These securities are sometimes known as "junk bonds." Even higher
returns are likely to be achieved but with greater risk of loss because of
investment in lower grade speculative debt securities.

Diversified Stock Portfolios

Common Stock Portfolio. Capital appreciation through investment primarily in
common stocks of companies, including major established corporations as well as
smaller capitalization companies, that appear to offer attractive prospects of
price appreciation that is superior to broadly-based stock indices. Current
income, if any, is incidental. Higher total return, through assumption of
greater risk, can be expected from this portfolio. As with all the equity
portfolios, significant fluctuations in market value can be expected, with
losses in some years.

3
<PAGE>

Global Equity Portfolio. Long-term growth of capital through investment
primarily in common stock and common stock equivalents of foreign and domestic
issuers. Current income, if any, is incidental. While the characteristics of
this portfolio are similar to other equity portfolios, there will be an
additional risk because the portfolio invests a significant portion of its
assets in foreign securities.

Specialized Portfolios

Natural Resources Portfolio. Long-term growth of capital through investment
primarily in common stocks and convertible securities of "natural resource
companies" and in securities (typically debt securities and preferred stock) the
terms of which are related to the market value of a natural resource. While the
characteristics of this portfolio are similar to the other equity portfolios,
there will be additional risk because the portfolio is concentrated in a limited
number of sectors.

Real Property Account. High current income plus capital appreciation through
investment in a partnership whose assets are primarily 100%-owned unmortgaged
commercial real property and mortgages on real properties. Investment in real
property is also subject to fluctuations in market values.

Fixed-Rate Option. Guarantee against loss of principal plus income at a rate
which may change at yearly intervals, but will never be lower than an effective
annual rate of 4%.

Transfers Between Investment Options

You may at any time change the instructions for the allocation of your premiums
to the various investment options. You may also transfer amounts held in one
option to another. There are restrictions upon transfers out of the Real
Property Account and the fixed-rate option which The Prudential may waive.

Which Investment Option Should Be Selected?

Historically, for investments held over relatively long periods, the investment
performance of common stocks has generally been superior to that of short or
long-term debt securities, even though common stocks have been subject to much
more dramatic changes in value over short periods of time. Accordingly, the
Stock Index, High Dividend Stock, Common Stock, Growth Stock, Small
Capitalization Stock, Global Equity, or Natural Resources Portfolios may be
desirable options if you are willing to accept such volatility in your Contract
values. Each of these equity portfolios involves somewhat different policies and
investment risks.

You may prefer the somewhat greater protection against loss of principal (and
reduced chance of high total return) provided by the Government Securities or
Bond Portfolios. There may be times when you desire even greater safety of
principal and may then prefer the Money Market Portfolio or the fixed-rate
option, recognizing that the level of short-term rates may change rather
rapidly. Money invested in a Zero Coupon Bond Portfolio and held to its
liquidation date will realize a predictable return, although the portfolio's
value may fluctuate significantly with changes in interest rates prior to its
liquidation date. If you are willing to take risks and possibly achieve a higher
total return, you may prefer the High Yield Bond Portfolio, recognizing that
with higher yielding, lower quality bonds the risks are greater. You may wish to
divide your invested premium among two or more of the portfolios. You may wish
to obtain diversification by relying on The Prudential's judgment for an
appropriate asset mix by choosing one of the Balanced Portfolios. The Real
Property Account permits you to diversify your investment under the Contract to
include an interest in a pool of income-producing real property, and real estate
is often considered to be a hedge against inflation.

You should make a choice that takes into account how willing you are to accept
investment risks, the manner in which your other assets are invested, and your
own predictions about what investment results are likely to be in the future.
The Prudential does recommend against frequent transfers among the several
options as experience generally indicates that "market timing" investing,
particularly by non-professional investors, is likely to prove unsuccessful.

The Scheduled Premium

Your Contract sets forth an annual Scheduled Premium, or one that is payable
more frequently, such as monthly. The Prudential guarantees that, if the
Scheduled Premiums are paid when due (or if missed premiums are paid later, with
interest), the death benefit will be paid upon the death of the insured. The
Contract will not lapse even if investment experience is unexpectedly so
unfavorable that the Contract Fund value drops to below zero.

Your Scheduled Premium consists of two amounts. The first or initial amount is
payable from the time you purchase your Contract until the Contract anniversary
immediately following your 65th birthday or the Contract's seventh anniversary,
whichever is later (the "Premium Change Date"). The second amount is the
guaranteed maximum amount payable after the Premium Change Date. See Premiums,
page 20.

4
<PAGE>

Payment of Substantially Higher Premiums

The payment of premiums in excess of scheduled premiums may cause the Contract
to become a Modified Endowment Contract for federal income tax purposes. If you
make premium payments in amounts high enough to turn the Contract into a
Modified Endowment Contract, The Prudential will notify you, ask whether it is
your intention to do so, and return the premium, if you wish, with interest. See
Premiums, page 20 and Tax Treatment of Contract Benefits, page 27.

Contract Loans

The Contract permits the owner to borrow up to 90% of the amount of the cash
surrender value (100% of the portion allocated to the fixed-rate option) on
favorable terms. See Contract Loans, page 23. When a loan is made, the amount
held under the investment options described above is reduced, proportionately,
by the amount of the loan.

Differences Between the Contract and Variable Universal Life Insurance Contracts

The Prudential believes that the most common form of universal life insurance,
offered by many other life insurance companies, is suitable for many people and,
although it does not now offer such a contract to the general public, it may do
so in the future. It believes, however, that there are features in that form of
universal life insurance, particularly in universal variable life insurance,
that enable it too easily to be used in an unsuitable way. Most universal life
insurance contracts also provide for premiums to be paid at irregular intervals
but with a recommended "target premium" to be paid at specified intervals.
Regular payment of the recommended target premiums, however, does not guarantee
- -- as is the case with this Contract -- that a death benefit will always be
paid. If the target premium is set too low and investment experience for some
period is unfavorable, the Contract Fund can drop to zero and then those
contracts will lapse. Similarly, if a contract owner skips several premium
payments during a period of financial strain, the same thing could happen, even
after a contract has been in force for many years. If that should happen, there
will be little incentive to reinstate the contract and the contract owner will
have bought, unintentionally and unnecessarily, very expensive term insurance.
Two purposes for which permanent insurance is bought -- protection against death
and savings for later use -- will not have been met.

The Prudential's Variable Appreciable Life Insurance Contract is a form of life
insurance that seeks to eliminate these defects. Although it provides much of
the flexibility of variable universal life, it differs in two important ways.
First, The Prudential guarantees that if the Scheduled Premiums are paid when
due (or missed premiums are paid later with interest), the Contract will not
lapse and the face amount of insurance will be paid upon the death of the
insured even if, because of unfavorable investment experience, the Contract Fund
value should drop to below zero. Second, if all premiums are not paid when due
(or made up), the Contract will not lapse as long as the Contract Fund is higher
than a stated amount set forth in a table in the Contract -- an amount that
increases each year and in later years becomes quite high; it is called the
"Tabular Contract Fund." The Contract lapses when the Contract Fund falls to
below this stated amount, rather than when it drops to zero. Thus, when a
Variable Appreciable Life Contract lapses, it may still have considerable value
and you will, therefore, have a substantial incentive to reinstate it, as well
as an opportunity to make a considered decision whether to do so or to take, in
one form or another, the cash surrender value. In effect, The Prudential
provides an early and timely warning against the imprudent use of the
flexibility provided by the Contract.

In the following pages of this prospectus we describe in much greater detail all
of the provisions of the Contract. That description is preceded by two sets of
tables. The first set provides, in condensed form, financial information about
the portfolios of the Series Fund, beginning on the date each of them was first
established. The second set shows what the cash surrender values and death
benefits would be under a Contract issued on a hypothetical person, making
certain assumptions. These tables show generally how the values under the
Contract would vary, with different investment performances.

FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS OF THE SERIES FUND

The tables that follow provide information about the annual investment income,
capital appreciation and expenses of the 14 portfolios of the Series Fund that
were available as of December 31, 1994 for each year, beginning with the year
after the Series Fund was established. They are prepared on a per share basis
and therefore provide useful information about the investment performance of
each portfolio.

Note, however, that these tables do not tell you how your Contract Fund would
have changed during this period because they do not reflect the deductions from
the Contract Fund other than the deductions for the investment management fees
and expenses.

5
<PAGE>

<PAGE>

PORTFOLIO RATES OF RETURN

The following table, based upon the immediately preceding condensed financial
information for the Series Fund, shows first the average annual compounded net
rates of return for each Portfolio for the year ended 12/31/94 for the 5 year
period ending on that date, and from the inception date of each Portfolio to
December 31, 1994. Then, the annual net rates of return for each Portfolio for
each year are shown. These rates of return should not be regarded as an estimate
or prediction of future performance. They may be useful in assessing the
competence and performance of the Series Fund's investment advisor and in
helping you to decide which portfolios to choose. AS STATED ABOVE, THIS
INFORMATION RELATES ONLY TO THE SERIES FUND AND DOES NOT REFLECT THE VARIOUS
OTHER CHARGES MADE UNDER THE CONTRACTS SUCH AS SALES AND ADMINISTRATIVE CHARGES
AND COST OF INSURANCE CHARGES. SEE CONTRACT FEES AND CHARGES, PAGE 17.
<TABLE>
<CAPTION>
5 YEAR 10 YEAR
PERIOD PERIOD INCEPTION
INCEPTION YEAR ENDED ENDED ENDED DATE TO YEAR ENDED YEAR ENDED YEAR ENDED
DATE 12/31/94 12/31/94 12/31/94 12/31/94 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------- ----------- ----------- ----------- ------------- ----------- ----------- -----------

MONEY MARKET 5/83 4.1% 5.0% 6.3% 6.7% 4.1% 3.0% 3.8%

BOND 5/83 -3.2% 7.6% 9.2% 9.0% -3.2% 10.1% 7.2%

GOVERNMENT
SECURITIES 5/89 -5.2% 6.9% N/A 8.1% -5.2% 12.6% 5.9%

ZERO COUPON BOND
1995 2/86 0.0% 7.9% N/A 9.2% 0.0% 7.9% 7.2%

ZERO COUPON BOND
2000 2/86 -7.2% 8.2% N/A 10.5% -7.2% 16.2% 8.6%

ZERO COUPON BOND
2005 5/89 -9.6% 8.5% N/A 9.6% -9.6% 21.9% 9.7%

CONSERVATIVELY
MANAGED FLEXIBLE 5/83 -1.0% 8.3% 10.4% 9.9% -1.0% 12.2% 6.9%

AGGRESSIVELY
MANAGED FLEXIBLE 5/83 -3.2% 9.0% 11.7% 10.6% -3.2% 15.6% 7.6%

HIGH YIELD BOND 2/87 -2.7% 10.8% N/A 7.5% -2.7% 20.0% 17.5%

STOCK INDEX 10/87 1.0% 8.2% N/A 13.0% 1.0% 9.7% 7.1%

HIGH DIVIDEND
STOCK 2/88 1.4% 10.9% N/A 12.8% 1.4% 22.3% 10.1%

COMMON STOCK 5/83 2.8% 11.3% 15.0% 13.3% 2.8% 21.9% 14.2%

GLOBAL EQUITY 9/88 -4.9% 5.0% N/A 8.3% -4.9% 43.1% -3.4%

NATURAL RESOURCES 5/88 -4.3% 6.0% N/A 10.2% -4.3% 25.2% 7.3%

YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/91 12/31/90 12/31/89 12/31/88 12/31/87 12/31/86 12/31/85
<S> <C> <C> <C> <C> <C> <C> <C>
----------- ----------- ----------- ----------- ----------- ----------- -----------
MONEY MARKET 6.2% 8.2% 9.3% 7.4% 6.5% 6.5% 7.9%
BOND 16.4% 8.3% 13.5% 8.2% 0.3% 14.4% 18.7%
GOVERNMENT
SECURITIES 16.1% 6.3% N/A N/A N/A N/A N/A
ZERO COUPON BOND
1995 17.2% 8.0% 16.4% 9.0% -3.3% N/A N/A
ZERO COUPON BOND
2000 20.7% 5.1% 20.4% 11.6% -5.5% N/A N/A
ZERO COUPON BOND
2005 21.2% 2.6% N/A N/A N/A N/A N/A
CONSERVATIVELY
MANAGED FLEXIBLE 19.1% 5.3% 17.0% 10.2% 1.5% 14.2% 21.1%
AGGRESSIVELY
MANAGED FLEXIBLE 25.4% 1.9% 21.8% 12.8% -1.8% 15.5% 25.9%
HIGH YIELD BOND 39.2% -11.8% -2.1% 13.2% N/A N/A N/A
STOCK INDEX 29.7% -3.6% 30.9% 15.4% N/A N/A N/A
HIGH DIVIDEND
STOCK 27.5% -3.7% 22.7% N/A N/A N/A N/A
COMMON STOCK 26.0% -5.1% 29.7% 17.1% 1.7% 15.1% 32.8%
GLOBAL EQUITY 11.4% -12.9% 18.8% N/A N/A N/A N/A
NATURAL RESOURCES 10.3% -5.8% 35.6% N/A N/A N/A N/A
</TABLE>

<PAGE>
HYPOTHETICAL ILLUSTRATION OF
DEATH BENEFITS AND CASH SURRENDER VALUES

The four tables that follow show how the death benefit and cash surrender values
change with the investment experience of the Account. They are "hypothetical"
because they are based, in part, upon several assumptions, each of which is
described below. All four tables assume, first, that a Contract with a face
amount of $100,000 has been bought by a 35 year old man in a preferred rating
class. It is assumed that the Scheduled Premium of $894.06 is paid on each
anniversary date, and that the deduction for taxes attributable to premiums is
3.25%. The first table assumes that a Form A Contract has been purchased and the
second table assumes that a Form B Contract has been purchased. Both assume that
the current charges will continue for the indefinite future. They assume also
that a termination dividend will be paid, since that is The Prudential's current
intention, upon death or surrender after the 16th year. The third and fourth
tables are based upon the same assumptions except that it is assumed that the
maximum charges permitted by the Contract have been made from the beginning and
that no termination dividends are paid. In effect, the third and fourth tables
represent a kind of "worst case" scenario.

Another assumption is that the Contract Fund has been invested in equal amounts
in each of the 16 available portfolios of the Series Fund. Finally, there are
four assumptions, shown separately, about the average investment performance of
the portfolios. The first is that there will be a uniform 0% gross rate of
return, that is, that the average value of the Contract Fund will uniformly be
adversely affected by very unfavorable investment performance. The other three
assumptions are that investment performance will be at a uniform gross annual
rate of 4%, 8% and 12%. These, of course, are unrealistic assumptions since
actual returns will fluctuate from year to year. Nevertheless, these assumptions
help show how the Contract values will change with investment experience.

The first column in the following tables shows the Contract year. The second
column, to provide context, shows what the aggregate amount would be if the
Scheduled Premiums had been invested in a savings account paying 4% compounded
interest. Of course, if that were done, there would be no life insurance
protection. The next four columns show the death benefit payable in each of the
years shown for the four different assumed investment returns. Note that a gross
return (as well as the net return) is shown at the top of each column. The gross
return represents the combined effect of income and capital appreciation of the
portfolios before any reduction is made for investment advisory fees or other
Series Fund expenses. The net return reflects an average total annual expenses
of the 16 portfolios of 0.58%, and the daily deduction from the Contract Fund of
0.6% per year for the first two tables, which are based on current charges, and
0.9% per year for the two tables that are based upon maximum charges. For
Contracts with face amounts of less than $100,000, the current charge is 0.9%
per year. Thus, assuming maximum charges, gross returns of 0%, 4%, 8% and 12%
are the equivalent of net returns of -1.48%, 2.52%, 6.52% and 10.52%
respectively. The death benefits and cash surrender values shown reflect the
deduction of all expenses and charges both from the Series Fund and under the
Contract.

The amounts shown assume that there is no loan. The cash surrender values shown
for the first 10 years reflect the surrender charges that would be deducted if
the Contract were surrendered in those years. For years after the tenth, the
cash surrender values are equal to the Contract Fund value, plus any termination
dividend.

Note that under the Form B Contract the death benefit changes to reflect
investment returns, while under the Form A Contract the death benefit increases
only when the cash surrender value becomes quite large (the small increase in
death benefit in years 20 to 35 reflects a termination dividend, not investment
results). Correspondingly, the cash surrender values under the Form A Contract
are slightly larger than those under the Form B Contract.

If you are considering the purchase of a variable life insurance contract from
another insurance company, you should not rely upon these tables for comparison
purposes. A comparison between two tables, each showing values for a 35 year old
man, may be useful for a 35 year old man but would be inaccurate if made for a
35 year old woman or a 50 year old man. To take a second example, the death
benefit and cash surrender values under a $50,000 Contract cannot be determined
by dividing by two the amount shown in a table for a $100,000 Contract. Your
Prudential representative can provide you with a comparable hypothetical
illustration for a person of your own age, sex, and rating class. You can obtain
an illustration using premium amounts and payment patterns that you wish to
follow. You may use assumed gross returns different than those shown in the
tables, although they may not be higher than 12%.

14
<PAGE>

<TABLE>
<CAPTION>
ILLUSTRATIONS
-------------

VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM A -- FIXED DEATH BENEFIT
MALE PREFERRED ISSUE AGE 35
$100,000 GUARANTEED DEATH BENEFIT
$894.06 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING CURRENT CONTRACTUAL CHARGES

Death Benefit (2) (4) Cash Surrender Value (2) (4)
---------------------------------------------------- ----------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- ----------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (3) (-1.18% Net) (2.82% Net) (6.82% Net) (10.82% Net) (-1.18% Net) (2.82% Net) (6.82% Net) (10.82% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,000 $100,000 $100,000 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,000 $100,000 $100,000 $ 272 $ 351 $ 432 $ 516
3 $ 2,903 $100,000 $100,000 $100,000 $100,000 $ 760 $ 912 $ 1,074 $ 1,244
4 $ 3,948 $100,000 $100,000 $100,000 $100,000 $ 1,231 $ 1,479 $ 1,749 $ 2,043
5 $ 5,036 $100,000 $100,000 $100,000 $100,000 $ 1,683 $ 2,050 $ 2,460 $ 2,919
6 $ 6,167 $100,000 $100,000 $100,000 $100,000 $ 2,369 $ 2,879 $ 3,465 $ 4,137
7 $ 7,344 $100,000 $100,000 $100,000 $100,000 $ 3,041 $ 3,719 $ 4,518 $ 5,460
8 $ 8,568 $100,000 $100,000 $100,000 $100,000 $ 3,690 $ 4,559 $ 5,614 $ 6,891
9 $ 9,840 $100,000 $100,000 $100,000 $100,000 $ 4,315 $ 5,401 $ 6,755 $ 8,441
10 $ 11,164 $100,000 $100,000 $100,000 $100,000 $ 4,915 $ 6,241 $ 7,942 $ 10,121
15 $ 18,618 $100,000 $100,000 $100,000 $100,000 $ 6,548 $ 9,435 $ 13,719 $ 20,082
20 $ 27,688 $101,115 $101,115 $101,115 $101,115 $ 8,448 $13,532 $ 22,372 $ 37,772
25 $ 38,723 $102,229 $102,229 $102,229 $126,155 $ 9,483 $17,345 $ 33,595 $ 66,881
30 (Age 65) $ 52,149 $102,225 $102,225 $102,225 $186,777 $ 7,432 $18,690 $ 46,879 $111,974
35 $ 88,449 $102,455 $102,455 $102,455 $273,324 $21,015 $37,083 $ 64,883 $183,298
40 $132,613 $102,672 $102,672 $120,713 $398,981 $30,906 $57,183 $ 89,657 $294,716
45 $186,345 $102,863 $102,863 $151,192 $584,216 $35,051 $80,902 $121,151 $466,475
</TABLE>

(1) If premiums are paid more frequently than annually, the initial payments
would be $456.85 semi-annually, $231.52 quarterly or $78.55 monthly. The
ultimate payments would be $2,411.37 semi-annually, $1,218.60 quarterly or
$410.34 monthly. The death benefits and cash surrender values would be
slightly different for a Contract with more frequent premium payments.

(2) Assumes no Contract loan has been made.

(3) For a hypothetical gross investment return of 0%, the second Scheduled
Premium will be $4,726.61. For a gross return of 4%, the second Scheduled
Premium will be $4,582.92; on a current basis, a lesser premium of $4,438.41
will guarantee that your contract will not lapse for one year. For a gross
return of 8%, the second Scheduled Premium will be $1,818.18; on a current
basis, a lesser premium of $894.06 will guarantee that your contract will
not lapse for one year. For a gross return of 12%, the second Scheduled
Premium will be $894.06. The premiums accumulated at 4% interest in column 2
are those payable if the gross investment return is 4%. For an explanation
of why the scheduled premium may increase on the premium change date, see
Premiums.

(4) Assumes after age 65 payment of the lesser premium amount, if applicable.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%, 8%,
AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY THE PRUDENTIAL
OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.

<PAGE>

<TABLE>
<CAPTION>
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM B -- VARIABLE DEATH BENEFIT
MALE PREFERRED ISSUE AGE 35
$100,000 GUARANTEED DEATH BENEFIT
$894.06 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING CURRENT CONTRACTUAL CHARGES

Death Benefit (2) (4) Cash Surrender Value (2) (4)
---------------------------------------------------- ----------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- ----------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (3) (-1.18% Net) (2.82% Net) (6.82% Net) (10.82% Net) (-1.18% Net) (2.82% Net) (6.82% Net) (10.82% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,000 $100,021 $100,049 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,000 $100,061 $100,144 $ 217 $ 296 $ 376 $ 460
3 $ 2,903 $100,000 $100,000 $100,119 $100,289 $ 704 $ 856 $ 1,016 $ 1,186
4 $ 3,948 $100,000 $100,000 $100,199 $100,491 $ 1,190 $ 1,437 $ 1,706 $ 1,998
5 $ 5,036 $100,000 $100,000 $100,302 $100,758 $ 1,672 $ 2,038 $ 2,446 $ 2,902
6 $ 6,167 $100,000 $100,000 $100,481 $101,148 $ 2,366 $ 2,874 $ 3,456 $ 4,123
7 $ 7,344 $100,000 $100,000 $100,689 $101,624 $ 3,038 $ 3,712 $ 4,505 $ 5,440
8 $ 8,568 $100,000 $100,000 $100,931 $102,196 $ 3,687 $ 4,551 $ 5,596 $ 6,861
9 $ 9,840 $100,000 $100,000 $101,209 $102,876 $ 4,312 $ 5,391 $ 6,732 $ 8,399
10 $ 11,164 $100,000 $100,000 $101,523 $103,674 $ 4,912 $ 6,230 $ 7,911 $ 10,062
15 $ 18,618 $100,000 $100,000 $103,764 $109,962 $ 6,545 $ 9,417 $13,603 $ 19,801
20 $ 27,688 $101,115 $101,115 $109,097 $123,892 $ 8,509 $13,614 $22,161 $ 36,956
25 $ 38,723 $102,229 $102,300 $117,723 $149,255 $ 9,610 $17,570 $32,993 $ 64,525
30 (Age 65) $ 52,149 $102,225 $104,036 $129,777 $192,532 $ 7,621 $19,036 $44,777 $107,532
35 $ 88,295 $102,455 $106,733 $128,447 $264,335 $21,343 $37,034 $58,748 $177,296
40 $132,272 $102,672 $111,007 $131,145 $389,313 $31,513 $55,834 $75,972 $287,592
45 $185,778 $102,863 $117,554 $139,749 $575,007 $36,124 $75,081 $97,276 $459,131
</TABLE>

(2) Assumes no Contract loan has been made.

(3) For a hypothetical gross investment return of 0%, the second Scheduled
Premium will be $4,726.61. For a gross return of 4%, the second Scheduled
Premium will be $4,630.16; on a current basis, a lesser premium of $4,411.15
will guarantee that your contract will not lapse for one year. For a gross
return of 8%, the second Scheduled Premium will be $3,259.52; on a current
basis, a lesser premium of $894.06 will guarantee that your contract will
not lapse for one year. For a gross return of 12%, the second Scheduled
Premium will be $894.06. The premiums accumulated at 4% interest in column 2
are those payable if the gross investment return is 4%. For an explanation
of why the scheduled premium may increase on the premium change date, see
Premiums.

(4) Assumes after age 65 payment of the lesser premium amount, if applicable.

<PAGE>

<TABLE>
<CAPTION>
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM A -- FIXED DEATH BENEFIT
MALE PREFERRED ISSUE AGE 35
$100,000 GUARANTEED DEATH BENEFIT
$894.06 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING MAXIMUM CONTRACTUAL CHARGES

Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- ----------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- ----------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (3) (-1.48% Net) (2.52% Net) (6.52% Net) (10.52% Net) (-1.48% Net) (2.52% Net) (6.52% Net) (10.52% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,000 $100,000 $100,000 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,000 $100,000 $100,000 $ 267 $ 345 $ 426 $ 509
3 $ 2,903 $100,000 $100,000 $100,000 $100,000 $ 749 $ 901 $ 1,061 $ 1,231
4 $ 3,948 $100,000 $100,000 $100,000 $100,000 $1,213 $ 1,460 $ 1,728 $ 2,020
5 $ 5,036 $100,000 $100,000 $100,000 $100,000 $1,657 $ 2,021 $ 2,428 $ 2,883
6 $ 6,167 $100,000 $100,000 $100,000 $100,000 $2,284 $ 2,788 $ 3,367 $ 4,031
7 $ 7,344 $100,000 $100,000 $100,000 $100,000 $2,897 $ 3,562 $ 4,347 $ 5,274
8 $ 8,568 $100,000 $100,000 $100,000 $100,000 $3,485 $ 4,333 $ 5,363 $ 6,612
9 $ 9,840 $100,000 $100,000 $100,000 $100,000 $4,050 $ 5,101 $ 6,415 $ 8,055
10 $ 11,164 $100,000 $100,000 $100,000 $100,000 $4,588 $ 5,864 $ 7,505 $ 9,613
15 $ 18,618 $100,000 $100,000 $100,000 $100,000 $5,905 $ 8,602 $ 12,628 $ 18,639
20 $ 27,688 $100,000 $100,000 $100,000 $100,000 $6,170 $10,731 $ 18,738 $ 32,796
25 $ 38,723 $100,000 $100,000 $100,000 $106,241 $4,657 $11,395 $ 25,623 $ 55,426
30 (Age 65) $ 52,149 $100,000 $100,000 $100,000 $152,071 $ 75 $ 9,056 $ 32,836 $ 90,434
35 $ 90,072 $100,000 $100,000 $100,000 $212,544 $8,135 $21,296 $ 51,591 $141,903
40 $136,211 $100,000 $100,000 $105,063 $295,301 $8,471 $29,886 $ 77,422 $217,610
45 $192,347 $100,000 $100,000 $137,661 $407,903 $ 0 $30,208 $109,780 $325,291
</TABLE>

(1) If premiums are paid more frequently than annually, the payments would be
$456.85 semi-annually, $231.52 quarterly or $78.55 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.

(2) Assumes no Contract loan has been made.

(3) For a hypothetical gross investment return of 0%, the premium after age 65
will be $4,726.61; for a gross return of 4% the premium after age 65 will be
$4,726.61; for a gross return of 8% the premium after age 65 will be
$2,977.27; for a gross return of 12% the premium after age 65 will be
$894.06. The premiums accumulated at 4% interest in column 2 are those
payable if the gross investment return is 4%. For an explanation of why the
scheduled premium may increase on the premium change date, see Premiums.

<PAGE>

Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- ----------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- ----------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (3) (-1.48% Net) (2.52% Net) (6.52% Net) (10.52% Net) (-1.48% Net) (2.52% Net) (6.52% Net) (10.52% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,000 $100,019 $100,047 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,000 $100,055 $100,138 $ 211 $ 290 $ 370 $ 453
3 $ 2,903 $100,000 $100,000 $100,107 $100,276 $ 693 $ 844 $ 1,004 $ 1,173
4 $ 3,948 $100,000 $100,000 $100,178 $100,468 $1,172 $ 1,418 $ 1,685 $ 1,975
5 $ 5,036 $100,000 $100,000 $100,270 $100,722 $1,646 $ 2,009 $ 2,414 $ 2,866
6 $ 6,167 $100,000 $100,000 $100,383 $101,042 $2,281 $ 2,783 $ 3,358 $ 4,017
7 $ 7,344 $100,000 $100,000 $100,519 $101,438 $2,894 $ 3,556 $ 4,335 $ 5,254
8 $ 8,568 $100,000 $100,000 $100,682 $101,919 $3,482 $ 4,326 $ 5,347 $ 6,584
9 $ 9,840 $100,000 $100,000 $100,871 $102,493 $4,047 $ 5,093 $ 6,394 $ 8,016
10 $ 11,164 $100,000 $100,000 $101,090 $103,171 $4,585 $ 5,856 $ 7,478 $ 9,559
15 $ 18,618 $100,000 $100,000 $102,697 $108,553 $5,902 $ 8,592 $ 12,536 $ 18,392
20 $ 27,688 $100,000 $100,000 $105,381 $118,768 $6,167 $10,720 $ 18,445 $ 31,832
25 $ 38,723 $100,000 $100,000 $109,466 $136,734 $4,654 $11,381 $ 24,736 $ 52,004
30 (Age 65) $ 52,149 $100,000 $100,000 $115,248 $166,857 $ 73 $ 9,039 $ 30,248 $ 81,857
35 $ 90,072 $100,000 $100,000 $119,939 $197,109 $8,132 $21,274 $ 50,240 $127,410
40 $136,211 $100,000 $100,000 $128,713 $267,674 $8,468 $29,854 $ 73,540 $197,252
45 $192,347 $100,000 $100,000 $143,033 $372,271 $ 0 $30,156 $100,560 $296,875
</TABLE>

(2) Assumes no Contract loan has been made.

(3) For a hypothetical gross investment return of 0%, the premium after age 65
will be $4,726.61; for a gross return of 4% the premium after age 65 will be
$4,726.61; for a gross return of 8% the premium after age 65 will be
$3,914.71; for a gross return of 12% the premium after age 65 will be
$1,166.65. The premiums accumulated at 4% interest in column 2 are those
payable if the gross investment return is 4%. For an explanation of why the
scheduled premium may increase on the premium change date, see Premiums.

<PAGE>
INFORMATION ABOUT THE ACCOUNT,
THE REAL PROPERTY ACCOUNT AND THE
FIXED RATE OPTION

The Prudential Variable Appreciable Account. The Account was established on
August 11, 1987 under New Jersey law as a separate investment account. The
Account meets the definition of a "separate account" under the federal
securities laws. The Account holds assets that are segregated from all of The
Prudential's other assets.

The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of The Prudential. The Prudential is also the
legal owner of the assets in the Account. But The Prudential will at all times
maintain assets in the Account with a total market value at least equal to the
liabilities relating to the variable benefits attributable to the Account. These
assets may not be charged with liabilities which arise from any other business
The Prudential conducts. Accordingly, Contract owners, under New Jersey law,
have a prior claim to these assets. In addition to these assets, the Account's
assets may include funds contributed by The Prudential to commence operation of
the Account and may include accumulations of the charges The Prudential makes
against the Account. From time to time these additional assets will be withdrawn
by The Prudential but before making any such withdrawal, The Prudential will
consider any possible adverse impact the withdrawal might have on the Account.

The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any
supervision by the SEC of the management or investment policies or practices of
the Account. For state law purposes, the Account is treated as a part or
division of The Prudential. There are currently sixteen subaccounts within the
Account that are available investments under the Contract. Additional
subaccounts may be added in the future. The Account's financial statements begin
on page A1.

The Prudential Variable Contract Real Property Account. The Prudential Variable
Contract Real Property Account (the "Real Property Account") is a separate
account of The Prudential that, through a general partnership formed by The
Prudential and two of its subsidiaries, invests primarily in income-producing
real property such as office buildings, shopping centers, agricultural land,
hotels, apartments or industrial properties. It also invests in mortgage loans
and other real estate-related investments, including sale-leaseback
transactions. It is not registered as an investment company under the Investment
Company Act of 1940 and is therefore not subject to the same regulation as the
Series Fund. The objectives of the Real Property Account and the Partnership are
to preserve and protect capital, provide for compounding of income as a result
of reinvestment of cash flow from investments, and provide for increases over
time in the amount of such income through appreciation in the value of assets.

The Partnership has entered into an investment management agreement with The
Prudential, under which The Prudential selects the properties and other
investments held by the Partnership. The Prudential charges the Partnership a
daily fee for investment management which amounts to 1.25% per year of the
average daily gross assets of the Partnership.

A full description of the Real Property Account, its management, policies, and
restrictions, its charges and expenses, the risks associated with investment
therein, the Partnership's investment objectives, and all other aspects of the
Real Property Account's and the Partnership's operations is contained in the
attached prospectus for the Real Property Account, which should be read together
with this prospectus by any Contract owner considering the real estate
investment option. There is no assurance that the investment objectives will be
met.

The Fixed-Rate Option. Because of exemptive and exclusionary provisions,
interests in the fixed-rate option under the Contract have not been registered
under the Securities Act of 1933 and The Prudential has not been registered as
an investment company under the Investment Company Act of 1940. Accordingly,
interests in the fixed-rate option are not subject to the provisions of these
Acts, and The Prudential has been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosure in this Prospectus relating
to the fixed-rate option. Any inaccurate or misleading disclosure regarding the
fixed-rate option may, however, subject The Prudential and its directors to
civil liability if that results in any damage.

15
<PAGE>

Contract Date, page 20. Thereafter, a new crediting rate will be declared each
year and will remain in effect for the calendar year. The Prudential reserves
the right to change this practice. The Prudential is not obligated to credit
interest at a higher rate than 4%, although in its sole discretion it may do so.
Different crediting rates may be declared for different portions of the Contract
Fund allocated to the fixed-rate option. At least annually and on request, a
Contract owner will be advised of the interest rates that currently apply to his
or her Contract.

Transfers from the fixed-rate option are subject to strict limits. (See
Transfers, page 21). The payment of any cash surrender value attributable to the
fixed-rate option may be delayed up to 6 months (see When Proceeds Are Paid,
page 25).

DETAILED INFORMATION ABOUT THE CONTRACT

Requirements for Issuance of a Contract. Generally, the minimum initial
guaranteed death benefit that can be applied for is $60,000; however, higher
minimums apply to insureds over the age of 75. Insureds 14 years of age or less
may apply for a minimum initial guaranteed death benefit of $40,000, which will
increase by 50% at age 21. The Contract may generally be issued on insureds
below the age of 81. Before issuing any Contract, The Prudential requires
evidence of insurability, which may include a medical examination. Non-Smokers
who meet preferred underwriting requirements are offered the most favorable
premium rate. A higher premium is charged if an extra mortality risk is
involved. Certain classes of Contracts, for example a Contract issued in
connection with a tax-qualified pension plan, may be issued on a "guaranteed
issue" basis and may have a lower minimum initial death benefit than a Contract
which is individually underwritten. These are the current underwriting
requirements. The Prudential reserves the right to change them on a
non-discriminatory basis.

Contract Forms. A purchaser may select either of two forms of the Contract. The
Scheduled Premiums shown in the Contract will be the same for a given insured,
regardless of which Contract Form is chosen. Contract Form A has a death benefit
equal to the initial face amount of insurance. The death benefit of a Form A
Contract does not vary with the investment performance of the investment options
selected by the owner, unless the death benefit is increased to ensure that the
Contract meets the Internal Revenue Code's definition of life insurance. See How
a Contract's Death Benefit Will Vary, page 22. Favorable investment results of
the investment options to which the assets related to the Contract are allocated
and payment of greater than Scheduled Premiums will generally result in
increases in the cash surrender value. See How the Contract Fund Changes With
Investment Experience, page 22.

Contract Form B also has an initial face amount of insurance but favorable
investment performance and payment of greater than Scheduled Premiums generally
result in an increase in the death benefit and, over time, in a lesser increase
in the cash surrender value than under the Form A Contract. See How the Contract
Fund Changes With Investment Experience, page 22 and How a Contract's Death
Benefit Will Vary, page 22. Unfavorable investment performance will result in
decreases in the death benefit (but never below the face amount stated in the
Contract) and in the cash surrender value.

Purchasers should select the form that best meets their needs and objectives.
All permanent insurance provides both protection for beneficiaries in the event
of death and the opportunity to accumulate savings for possible use in later
years. The Prudential's Variable Appreciable Life Contract provides more
flexible investment opportunities than do more conventional life insurance
policies because it permits the owner to decide how the assets held under the
Contract will be invested, because it permits considerable flexibility in
determining the amount and timing of premium payments, because it permits
adjustment of the face amount of insurance (subject, in the case of an increase,
to evidence of insurability), and because favorable investment returns result in
an increase in Contract values. Purchasers who prefer to have favorable
investment results and greater than Scheduled Premiums reflected in part in the
form of an increased death benefit should choose Contract Form B. Purchasers who
are satisfied with the amount of their insurance coverage and wish to have
favorable investment results and additional premiums reflected to the maximum
extent in increasing cash surrender values should choose Contract Form A.

In choosing a Contract form, purchasers should also consider whether they intend
to use the withdrawal feature. Purchasers of Form A Contracts should note that
an early withdrawal may result in a portion of the surrender charge being
deducted from the Contract Fund. Furthermore, a purchaser of a minimum face
amount Form A Contract cannot make withdrawals unless the Contract's death
benefit has been increased to comply with the Internal Revenue Code's definition
of life insurance. Purchasers of Form B Contracts will not incur a surrender
charge for a withdrawal and are not precluded from making withdrawals if they
purchase a minimum size Contract. See Withdrawal of Excess Cash Surrender Value
in the Statement of Additional Information. Withdrawal of part of the cash
surrender value may have tax consequences, see Tax Treatment of Contract
Benefits, page 27.

16
<PAGE>

The Prudential mails or delivers a Notice of Withdrawal Right, whichever is
latest. Some states allow a longer period of time during which a Contract may be
returned for a refund. A refund can be requested by mailing or delivering the
Contract to the representative who sold it or to The Prudential Home Office
specified in the Contract. A Contract returned according to this provision shall
be deemed void from the beginning. You will then receive a refund of all premium
payments made, plus or minus any change due to investment experience in the
value of the invested portion of the premiums, calculated as if no charges had
been made against the Account or the Series Fund. However, if applicable law so
requires, if you exercise your short-term cancellation right, you will receive a
refund of all premium payments made, with no adjustment for investment
experience.

Contract Fees and Charges. This section provides a detailed description of each
charge that is described briefly in the chart on page 2, and an explanation of
the purpose of the charge.

In several instances we will use the terms "maximum charge" and "current
charge." The "maximum charge," in each instance, will be the highest charge that
The Prudential is entitled to make under the Contract. The "current charge" is
the lower amount that The Prudential is now charging and which it intends to
charge for the indefinite future. However, if circumstances change, The
Prudential reserves the right to increase each current charge, up to but to no
more than the maximum charge, without giving any advance notice.

A Contract owner may add several "riders" to the Contract which provide
additional benefits, which are charged for separately. The statement and
description of charges that follows assumes there are no riders to the Contract.

Deductions from Premiums

(a) A charge for taxes attributable to premiums is deducted from each premium
payment. That charge is currently made up of two parts. The first part is in an
amount equal to the state or local premium tax. It varies from state to state
and generally ranges from 0.5% to 5% of the premium received by The Prudential.
The second part is for federal income taxes measured by premiums and it is equal
to 1.25% of the premium. The Prudential believes that this charge is a
reasonable estimate of an increase in its federal income taxes resulting from a
1990 change in the Internal Revenue Code. It is intended to recover this
increased tax. During 1994 and 1993, The Prudential deducted a total of
approximately $22,131,000 and $23,248,000, respectively, in taxes attributable
to premiums.

(b) A charge of $2 is deducted from each premium payment to cover the cost of
collecting and processing premiums. Thus, if you pay premiums annually, this
charge will be $2 per year. If you pay premiums monthly, the charge will be $24
per year. During 1994 and 1993, The Prudential received a total of approximately
$28,372,000 and $23,826,000, respectively, in processing charges.

Deductions from Portfolios

(a) An investment advisory fee is deducted daily from each portfolio at a rate,
on an annualized basis, from 0.35% for the Stock Index Portfolio to 0.75% for
the Global Equity Portfolio.

(b) The expenses incurred in conducting the investment operations of the
portfolios (such as investment advisory fees, custodian fees and preparation and
distribution of annual reports) are paid out of the portfolio's income. These
expenses also vary from portfolio to portfolio. The total expenses of each
portfolio for the year 1994 expressed as a percentage of the average assets
during the year are shown below:

Investment Other Total
Portfolio Advisory Fee Expenses * Expenses *
- --------- ------------ ---------- ----------
Money Market ...................... 0.40% 0.07% 0.47%
Bond .............................. 0.40% 0.05% 0.45%
High Yield Bond ................... 0.55% 0.10% 0.65%
Government Securities ............. 0.40% 0.05% 0.45%
Common Stock ...................... 0.45% 0.10% 0.55%
Stock Index ....................... 0.35% 0.07% 0.42%
High Dividend Stock ............... 0.40% 0.10% 0.50%
Natural Resources ................. 0.45% 0.10% 0.55%
Global Equity ..................... 0.75% 0.48% 1.23%
Conservatively Managed Flexible.... 0.55% 0.06% 0.61%
Aggressively Managed Flexible ..... 0.60% 0.06% 0.66%
Zero Coupon Bond 1995 ............. 0.40% 0.00% 0.40%
Zero Coupon Bond 2000 ............. 0.40% 0.00% 0.40%
Zero Coupon Bond 2005 ............. 0.40% 0.00% 0.40%

* For some of the portfolios, the actual expenses were higher than those
shown in the second and third columns. The Prudential currently makes
payments to the following seven subaccounts so that the portfolio expenses
indirectly borne by a Contract owner investing in: (1) the Zero Coupon Bond
Portfolios will not exceed the investment management fee; and (2) the High
Yield Bond, Stock Index,

<PAGE>

High Dividend Stock, and Natural Resources Portfolios will not exceed the
investment advisory fee plus 0.1% of the average daily net assets of the
Portfolio. Without such adjustments the portfolio expenses indirectly borne
by a Contract owner, expressed as a percentage of the average daily net
assets by portfolio, would have been 0.60% for the Zero Coupon Bond
Portfolio 2005, 0.60% for the Zero Coupon Bond Portfolio 1995, 0.51% for
the Zero Coupon Bond Portfolio 2000, 0.61% for the Natural Resources
Portfolio and 0.52% for the High Dividend Stock Portfolio. No such
adjustments were necessary for the High Yield Bond or Stock Index
Portfolios during 1994. The Prudential intends to continue making these
adjustments in the future, although it retains the right to stop doing so.
For the years 1994, 1993 and 1992, The Prudential received a total of
$66,413,260, $51,197,499, and $35,661,075, respectively in investment
advisory fees.

The advisory fee for the Small Capitalization Stock Portfolio is 0.40% and for
the Growth Stock Portfolio is 0.60%. These portfolios were not available for
investment in 1994.

Monthly Deductions from Contract Fund

The following monthly charges are deducted proportionately from the dollar
amounts held in each of the chosen investment option[s].

(a) An administrative charge of $3 plus $0.03 per $1,000 per month of face
amount of insurance is deducted each month. Thus, for a Contract with $60,000
face amount, the charge is $3 plus $1.80 for a total of $4.80. The charge is
intended to pay for processing claims, keeping records, and communicating with
Contract owners. The current charge for Contracts with face amounts greater than
$100,000 is lower. The $0.03 per $1,000 portion of the charge is reduced to
$0.01 per $1,000 for that part of the face amount that exceeds $100,000 and will
not exceed $12. If premiums are paid by automatic transfer under The
Prudential's Pru-Matic Plan, as described on page 20, the $0.03 per $1,000
charge is reduced to $0.01 for all Contract face amounts and will not exceed $1.
During 1994 and 1993, The Prudential received a total of approximately
$56,055,000, and $49,562,000, respectively, in monthly administrative charges.

(b) A mortality charge is deducted that is intended to be used to pay death
benefits. When an insured dies, the amount payable to the beneficiary is larger
than the Contract Fund and significantly larger if the insured dies in the early
years of a Contract. The mortality charges collected from all Contract owners
enables The Prudential to pay the death benefit for the few insureds who die.
The maximum mortality charge is determined by multiplying the "net amount at
risk" under a Contract (the amount by which the Contract's death benefit exceeds
the Contract Fund) by a rate based upon the insured's current attained age and
sex (except where unisex rates apply) and the anticipated mortality for that
class of persons. The anticipated mortality is based upon mortality tables
published by The National Association of Insurance Commissioners called the
Non-Smoker/Smoker 1980 CSO Tables. The Prudential's current mortality charge is
lower than the maximum for insureds of 50 years of age and older. In addition,
for insureds of all ages, if a Contract has a face amount of at least $100,000
and the insured under the Contract has met strict underwriting requirements and
qualifies for a "select rating" basis for the particular risk classification,
the current mortality charges may be lower still.

Certain Contracts, for example Contracts issued in connection with tax-qualified
pension plans, may be issued on a "guaranteed issue" basis and may have current
mortality charges which are different from those mortality charges for Contracts
which are individually underwritten. These Contracts with different current
mortality charges may be offered to categories of individuals meeting
eligibility guidelines determined by The Prudential.

(c) A sales charge, often called a sales load, is deducted to pay part of the
costs The Prudential incurs in selling the Contracts, including commissions,
advertising and the printing and distribution of prospectuses and sales
literature. The charge is equal to 0.5% of the "primary annual premium" which is
equal to the Scheduled Premium that would be payable if premiums were being paid
annually, less the two deductions from premiums (taxes attributable to premiums
and the $2 processing charge), and less the $3 part of the monthly deduction
described in (a) above. The deduction is made whether the Contract owner is
paying premiums annually or more frequently. It is lower on Contracts issued on
insureds over 60 years of age. At present this sales charge is made only during
the first five Contract years. For Contracts with face amounts of at least $7.5
million, this sales charge is made only during the first two Contract years.
However, The Prudential reserves the right to make this charge in all Contract
years. To summarize, for most Contracts, this charge is somewhat less than 6% of
the annual Scheduled Premium for each of the first five Contract years and it
may but probably will not continue to be charged after that.

There is a second sales load, which will be charged only if a Contract lapses or
is surrendered before the end of the 10th Contract year. It is often described
as a contingent deferred sales load ("CDSL") and is described below under
Surrender or Withdrawal Charges. During 1994 and 1993, The Prudential received a
total of approximately $96,357,000 and $74,858,000, in sales charges.

(d) A charge of $0.01 per $1000 of face amount of insurance is made to
compensate The Prudential for the risk it assumes by guaranteeing that, no
matter how unfavorable investment experience may be, the death benefit will
never be less than the guaranteed minimum death benefit so long as Scheduled
Premiums are paid on or before

<PAGE>

the due date or during the grace period. During 1994 and 1993, The Prudential
received a total of approximately $9,487,000 and $7,817,000, respectively, for
this risk charge.

(e) If a rider is added to the basic Contract, or if an insured is in a
substandard risk classification (for example, a person in a hazardous
occupation), the annual Scheduled Premium will be increased and the additional
charges will be deducted monthly.

(f) A charge may be deducted to cover federal, state or local taxes (other than
"taxes attributable to premiums" described above) that are imposed upon the
operations of the Account. At present no such taxes are imposed and no charge is
made.

Daily Deduction from the Contract Fund

Each day a charge is deducted from the assets of each of the subaccounts and/or
the Real Property Account (the "variable investment options") in an amount
equivalent to an effective annual rate of 0.9%. For Contracts with face amounts
of $100,000 or more, the current charge is 0.6%. This charge is intended to
compensate The Prudential for assuming mortality and expense risks under the
Contract. The mortality risk assumed is that insureds may live for shorter
periods of time than The Prudential estimated when it determined what mortality
charge to make. The expense risk assumed is that expenses incurred in issuing
and administering the Contract will be greater than The Prudential estimated in
fixing its administrative charges. The Prudential will realize a profit from
this risk charge to the extent it is not needed to provide benefits and pay
expenses under the Contracts. During 1994 and 1993, The Prudential received a
total of approximately $16,959,000 and $12,154,000, respectively, in mortality
and expense risk charges. This charge is not assessed against amounts allocated
to the fixed-rate option.

Surrender or Withdrawal Charges

(a) An additional sales load (the CDSL) is charged if a Contract is surrendered
for its cash surrender value or lapses during the first 10 Contract years. It is
not deducted from the death benefit if the insured should die during this
period. This contingent deferred charge is generally at its highest in dollar
amount during the Contract's fourth and fifth years and then is reduced daily at
a constant rate until it reaches zero at the end of the 10th year. The exact
amount is determined by a complex formula that is described in the Statement of
Additional Information. The amount of this charge can be more easily understood
by reference to the following table which shows the sales loads that would be
paid by a 35 year old man under a Form B Contract with $100,000 face amount of
insurance, both through the monthly deductions from the Contract Fund described
above and upon the surrender of the Contract.
<TABLE>
<CAPTION>

Cumulative Cumulative
Cumulative Sales Load Total Sales Load
Surrender, Scheduled Deducted from Contingent as Percentage
Last Day of Premiums Contract Deferred Total Sales of Scheduled
Year No. Paid Fund Sales Load Load Premiums Paid
- ----------- --------- ------------- ---------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
1 $ 894.06 $ 49.56 $218.66 $268.22 30.00%
2 1,788.12 99.12 367.64 466.76 26.10%
3 2,682.18 148.68 398.55 547.23 20.40%
4 3,576.24 198.24 414.00 612.24 17.12%
5 4,470.30 247.80 414.00 661.80 14.80%
6 5,364.36 247.80 331.00 578.80 10.79%
7 6,258.42 247.80 248.00 495.80 7.92%
8 7,152.48 247.80 166.00 413.80 5.79%
9 8,046.54 247.80 83.00 330.80 4.11%
10 8,940.60 247.80 0.00 247.80 2.77%

</TABLE>

The percentages shown in the last column will not be appreciably different for
insureds of different ages.

(b) An administrative charge of $5 per $1,000 of face amount of insurance is
deducted upon lapse or surrender to cover the cost of processing applications,
conducting medical examinations, determining insurability and the insured's
rating class, and establishing records. However, this charge is reduced
beginning on the Contract's fifth anniversary and declines daily at a constant
rate until it disappears entirely on the tenth Contract anniversary. During 1994
and 1993, The Prudential received a total of approximately $7,971,000 and
$5,612,000, respectively, from surrendered or lapsed Contracts. The Prudential
does not expect to make a profit on this charge.

19
<PAGE>

Transaction Charges

There may be transaction charges if certain events take place. Examples are: the
face amount of insurance is decreased or part of the cash surrender value is
withdrawn. The Prudential is entitled under the Contract to charge a fee in
these situations, which will generally be $15 or less. Currently, it waives the
fee in some instances. These fees are described at the appropriate place in this
prospectus or in the Statement of Additional Information.

Contract Date. When the first premium payment is paid with the application for a
Contract, the Contract Date will ordinarily be the later of the date of the
application or the date of any medical examination. In most cases no medical
examination will be necessary. If the first premium is not paid with the
application, the Contract Date will ordinarily be the date the first premium is
paid and the Contract is delivered. It may be advantageous for a Contract owner
to have an earlier Contract Date when that will result in the use by The
Prudential of a lower issue age in determining the amount of the Scheduled
Premium. The Prudential will permit a Contract to be back-dated but only to a
date not earlier than 6 months prior to the date of the application. The
Prudential will require the payment of all premiums that would have been due had
the application date coincided with the back-dated Contract Date. No Contract
may be back-dated to a date prior to that which is in accordance with The
Prudential's regulations. The death benefit and cash surrender value under the
Contract will be equal to what they would have been had the Contract been issued
on the Contract Date, all Scheduled Premiums been received on their due dates,
and all Contract charges been made. The term Monthly Date means the day of each
month that is the same as the Contract Date.

Premiums. As already explained, the Contract provides for a Scheduled Premium
which, if paid when due or within a 61 day grace period, ensures that the
Contract will not lapse. If you pay premiums other than on a monthly basis, you
will receive a notice that a premium is due about 3 weeks before each due date.
If you pay premiums monthly, you will receive each year a book with 12 coupons
that will serve as a reminder. With The Prudential's consent, you may change the
frequency of premium payments.

You may elect to have monthly premiums paid automatically under the "Pru-Matic
Premium Plan" by pre-authorized transfers from a bank checking account. If you
select the Pru-Matic Premium Plan, one of the current monthly charges will be
reduced. See Monthly Deductions From Contract Fund, page 18. Some Contract
owners may also be eligible to have monthly premiums paid by pre-authorized
deductions from an employer's payroll.

As stated above, your Contract sets forth two Scheduled Premium amounts. Your
first or initial amount is payable from the time you purchase your Contract
until the Contract anniversary immediately following your 65th birthday or the
Contract's 7th anniversary, whichever is later (the "Premium Change Date"). If
your Contract Fund on the Premium Change Date is higher than it would have been
had all Scheduled Premiums been paid when due, maximum contractual charges been
deducted, and only an average net rate of return of 4% been earned, then the
second Scheduled Premium Amount will be lower than the maximum amount stated in
your Contract. You will be told what the amount of your second Scheduled Premium
will be. You will also be told what lesser amount, if any, The Prudential will
accept that will guarantee against lapse for one year. For examples of what the
second Scheduled Premium might be, see Footnote 3 to the tables on pages T1
through T4.

A significant feature of this Contract is that it permits you to pay greater
than Scheduled Premiums. This may be done by making occasional unscheduled
premium payments or on a periodic basis. If you wish, you may select a higher
contemplated premium than the Scheduled Premium. The Prudential will then bill
you for the chosen premium. In general, the regular payment of higher premiums
will result in higher cash surrender values and, at least under Form B, in
higher death benefits. Conversely, payment of a Scheduled Premium need not be
made if the Contract Fund is sufficiently large to enable the charges due under
the Contract to be made without causing the Contract to lapse. See Lapse and
Reinstatement, page 24. The payment of premiums substantially in excess of
Scheduled Premiums may cause the Contract to become a Modified Endowment
Contract. If this happens, loans and other distributions which would otherwise
not be taxable events will be subject to federal income taxation. See Tax
Treatment of Contract Benefits, page 27.

If you elect to add a "rider" to your Contract that provides additional
benefits, see Riders, page 27, the Scheduled Premium may be increased. Some
riders provide additional term insurance in a stated amount that does not vary
with investment experience. One of these "term riders" also allows you to choose
different insurance amounts in different years. For these riders, you may choose
to pay a billed premium higher than your initial Scheduled Premium. Under some
circumstances this could result in a higher cash surrender value and death
benefit than if the same premium had been paid under a Contract with the same
death benefit but without the rider. After several years, however, even if the
billed premiums are paid on time, the Contract could lose its guarantee against
lapse and, after many more years, could have lower cash surrender values.

In states where the necessary approvals have been obtained, you may choose a
level premium option. In that case, the Scheduled Premium, the amount (which can
be obtained from your Prudential representative), will be higher and the
Scheduled Premium will not increase at age 65 (or 7 years after issue, if
later), even if investment

20
<PAGE>

experience has been unfavorable. If that level Scheduled Premium is paid when
due, or within the grace period, the Contract will not lapse.

The Prudential will generally accept any premium payment if the payment is at
least $25. The Prudential does reserve the right, however, to limit unscheduled
premiums to a total of $10,000 in any Contract year, and to refuse to accept
premiums that would immediately result in more than a dollar-for-dollar increase
in the death benefit. See How a Contract's Death Benefit Will Vary, page 22. The
flexibility of premium payments provides Contract owners with different
opportunities under the two Forms of the Contract. Greater than scheduled
payments under a Form A Contract increase the Contract Fund. Greater than
scheduled payments under a Form B Contract increase both the Contract Fund and
the death benefit, but any future increases in the Contract Fund will be less
than under a Form A Contract. This is because the monthly mortality charges
under the Form B Contract will be higher to compensate for the higher amount of
insurance. For all Contracts, the privilege of making large or additional
premium payments offers a way of investing amounts which accumulate without
current income taxation.

Unless you elect otherwise, your Contract will include a "waiver of premium"
provision under which The Prudential will pay your Scheduled Premiums if you
incur a disability before age 60 that lasts over six months. If the disability
begins after you become 60 and before you are 65, premiums will be paid only
until the first Contract anniversary following your 65th birthday. The waiver of
premium provision does not apply if you become disabled after your 65th
birthday.

Allocation of Premiums. On the Contract Date, the $2 processing charge and the
charge for taxes attributable to premiums are deducted from the initial premium,
and the first monthly deductions are made. See Contract Fees and Charges, page
17. The remainder of the initial premium will be allocated on the Contract Date
among the subaccounts, the fixed-rate option or the Real Property Account
according to the desired allocation specified in the application form. The
invested portion of any part of the initial premium in excess of the Scheduled
Premium is placed in the selected investment options on the date of receipt, but
not earlier than the Contract Date. Thus, to the extent that The Prudential
receives the initial premium prior to the Contract Date, there will be a period
during which it will not be invested. All subsequent premium payments, after the
deductions from premiums, when received by The Prudential will be placed in the
subaccounts, the fixed-rate option or the Real Property Account in accordance
with the allocation previously designated. Provided the Contract is not in
default, you may change the way in which subsequent premiums are allocated by
giving written notice to the Prudential Home Office stated in the Contract. You
may also change the way in which subsequent premiums are allocated by
telephoning your Prudential Home Office, provided you are enrolled to use the
Telephone Transfer System. There is no charge for reallocating future premiums.
If any part of the invested portion of a premium is allocated to a particular
investment option, that portion must be at least 10% on the date the allocation
takes effect. All percentage allocations must be in whole numbers. For example,
33% can be selected but 33 1/3% cannot. Of course, the total allocation of all
selected investment options must equal 100%.

Additionally, a feature called Dollar Cost Averaging is available to Contract
owners. If you wish, designated dollar amounts will be transferred monthly from
the Money Market Subaccount into other investment options available under the
Contract, excluding the fixed-rate option, but including the Real Property
Account. At issue, the minimum amount initially designated for transfer under
this feature must be the greater of $2,000 and 10% of the initial premium
payment. After issue, The Prudential will accept an amount less than $2,000
provided it brings the balance in any current Dollar Cost Averaging account up
to $2,000. Monthly transfers must be at least 3% of the amount allocated to the
Dollar Cost Averaging account (that is, if you designate $5,000, the minimum
monthly transfer is $150), with a minimum of $20 transferred into any one
investment option. These amounts are subject to change at The Prudential's
discretion. The minimum transfer amount will only be recalculated if the amount
designated for transfer is increased.

Each automatic monthly transfer will take effect as of the end of the valuation
period on the Monthly Date, provided the New York Stock Exchange is open on that
date. A valuation period is the period of time from one determination of the
value of the amount invested in a subaccount to the next. Such determinations
are made when the net asset values of the portfolios of the Series Fund are
calculated, which is generally 4:15 p.m. New York City time on each day during
which the New York Stock Exchange is open. If the New York Stock Exchange is not
open on that date, or if the Monthly Date does not occur in that particular
month, the transfer will take effect as of the end of the last valuation period
which immediately follows that Monthly Date. Automatic monthly transfers will
continue until the amount designated for Dollar Cost Averaging has been
transferred, or until the Contract owner gives notification of a change in
allocation or cancellation of the feature. Currently there is no charge for
using the Dollar Cost Averaging feature.

Transfers. If the Contract is not in default, or if the Contract is in force as
variable reduced paid-up insurance (see Lapse and Reinstatement, page 24), you
may, up to four times in each Contract year, transfer amounts from one
subaccount to another subaccount, to the fixed-rate option or to the Real
Property Account. There is no charge. All or a portion of the amount credited to
a subaccount may be transferred.

21
<PAGE>

In addition, the total amount credited to a Contract held in the subaccounts or
the Real Property Account may be transferred to the fixed-rate option at any
time during the first two Contract years. If you wish to convert your variable
Contract to a fixed-benefit Contract in this manner, you must request a complete
transfer of funds to the fixed-rate option and also change your allocation
instructions regarding future premiums.

Transfers among subaccounts will take effect as of the end of the valuation
period (usually the business day) in which a proper transfer request is received
at your Prudential Home Office. The request may be in terms of dollars, such as
a request to transfer $10,000 from one subaccount to another, or may be in terms
of a percentage reallocation among subaccounts. In the latter case, as with
premium reallocations, the percentages must be in whole numbers. You may
transfer amounts by proper written notice to your Prudential Home Office, or by
telephone, unless you ask that transfers by telephone not be made. The
Prudential has adopted procedures designed to ensure that requests by telephone
are genuine and will require appropriate identification for that purpose. The
Prudential cannot guarantee that you will be able to get through to complete a
telephone transfer during peak periods such as periods of drastic economic or
market change.

On the liquidation date of a Zero Coupon Bond Subaccount, all the shares held by
it in the corresponding portfolio of the Series Fund will be redeemed and the
proceeds of the redemption applicable to each Contract will be transferred to
the Money Market Subaccount unless the owner directs that it be transferred to
another subaccount. Affected owners will be notified in writing prior to the
liquidation date and given the opportunity to transfer their proceeds to another
subaccount. A transfer that occurs upon the liquidation date of a Zero Coupon
Bond Subaccount will not be counted as one of the four permissible transfers in
a Contract year.

Transfers from the fixed-rate option to the subaccounts or the Real Property
Account are currently permitted once each Contract year and only during the
30-day period beginning on the Contract anniversary. The maximum amount which
may be transferred out of the fixed-rate option each year is currently the
greater of: (a) 25% of the amount in the fixed-rate option, or (b) $2,000. Such
transfer requests received prior to the Contract anniversary will be effected on
the Contract anniversary. Transfer requests received within the 30-day period
beginning on the Contract anniversary will be effected as of the end of the
valuation period in which a proper transfer request is received at your
Prudential Home Office. These limits are subject to change in the future.
Transfers from the Real Property Account are also subject to restrictions, and
these restrictions are described in the attached prospectus for that investment
option.

How the Contract Fund Changes with Investment Experience. As explained above,
after the tenth Contract year, there will no longer be a surrender charge and,
if there is no Contract loan, the cash surrender value will be equal to the
Contract Fund, plus any termination dividend. This section, therefore, also
describes how the cash surrender value of the Contract will change with
investment experience.

On the Contract Date, the Contract Fund value is the initial premium less the
deductions from premiums and the first monthly deductions. See Contract Fees and
Charges, page 17. This amount is placed in the investment options designated by
the owner. Thereafter the Contract Fund value changes daily, reflecting
increases or decreases in the value of the securities in which the assets of the
subaccount have been invested, the performance of the Real Property Account if
that option has been selected, and interest credited on any amounts allocated to
the fixed-rate option. It is also reduced by the daily asset charge for
mortality and expense risks assessed against the variable investment options.
The Contract Fund value also increases to reflect the receipt of additional
premium payments and is decreased by the monthly deductions.

A Contract's cash surrender value on any date will be the Contract Fund value
plus any termination dividend, reduced by the withdrawal charges, if any, and by
any Contract debt. Upon request, The Prudential will tell a Contract owner the
cash surrender value of his or her Contract. It is possible, although highly
unlikely, that the cash surrender value of a Contract could decline to zero
because of unfavorable investment performance, even if a Contract owner
continues to pay Scheduled Premiums when due.

The tables on pages T1 through T4 of this prospectus illustrate what the death
benefit and cash surrender values would be for a representative Contract,
assuming uniform hypothetical investment results in the selected portfolio[s],
and also provide information about the aggregate premiums payable under the
Contract. The tables also show, if the level premium option has not been chosen,
the maximum Scheduled Premium that may be payable for the period after the
insured reaches the age of 65 for the illustrated Contract under each of the
assumed investment returns.

How a Contract's Death Benefit Will Vary. The death benefit under a Form A
Contract will generally be equal to the face amount of insurance chosen by the
purchaser when the Contract was bought. Generally the investment experience
affects only the value of the Contract Fund. This means that as the Contract
Fund value grows, the deduction for the cost of mortality may decrease because
the "amount at risk" becomes smaller. The death benefit cannot ever fall below
the face amount of insurance. It could happen, however, that it will become
higher. If the Contract is kept in force for several years and if investment
performance is relatively favorable, the Contract Fund value may grow to the
point where, to meet certain provisions of the Internal Revenue Code which
require that

22
<PAGE>

the death benefit always be greater than the Contract Fund value, the death
benefit must be increased. The required difference between the death benefit and
Contract Fund value is higher at younger ages than at older ages. A precise
description is in the Statement of Additional Information.

If the Contract Fund value reaches this level, each premium payment increases
the death benefit by an amount greater than the premium. Accordingly, The
Prudential, when that occurs, reserves the right to refuse further premium
payments, although in practice it will accept a payment equal to two years'
Scheduled Premiums.

Under a Form B Contract, the death benefit will change from the outset with
investment experience. Here again the precise way in which that will occur is
complicated and is described in the Statement of Additional Information. In
general, if the net investment performance is 4% per year or higher, the death
benefit will increase; if it is below 4%, it will decrease. The Prudential
guarantees, however, that it will not decrease below the face amount of
insurance. If unfavorable experience of that kind should occur, it must be
offset by favorable experience before the death benefit begins to increase
again.

The death benefit could also increase to satisfy Internal Revenue Code
requirements, for the same reasons described above respecting Form A Contracts.

Contract Loans. The owner may borrow from The Prudential up to the "loan value"
of the Contract, using the Contract as the only security for the loan. The loan
value is equal to (1) 90% of an amount equal to the portion of the Contract Fund
value attributable to the variable investment options and to any prior loan[s]
supported by the variable investment options, minus the portion of any charges
attributable to variable investment options that would be payable upon an
immediate surrender; plus (2) 100% of an amount equal to the portion of the
Contract Fund value attributable to the fixed-rate option and to any prior
loan[s] supported by the fixed-rate option, minus the portion of any charges
attributable to the fixed-rate option that would be payable upon an immediate
surrender. The minimum amount that may be borrowed at any one time is $200
unless the proceeds are used to pay premiums on the Contract.

If you request a loan you may choose one of two interest rates. You may elect to
have interest charges accrued daily at a fixed effective annual rate of 5.5%.
Alternatively, you may elect a variable interest rate that changes from time to
time. You may switch from the fixed to variable interest loan provision, or
vice-versa, with The Prudential's consent.

If you elect the variable loan interest rate provision, interest charged on any
loan will accrue daily at an annual rate The Prudential determines at the start
of each Contract year (instead of at the fixed 5.5% rate). This interest rate
will not exceed the greatest of (1) the "Published Monthly Average" for the
calendar month ending two months before the calendar month of the Contract
anniversary; (2) 5%; or (3) the rate permitted by law in the state of issue of
the Contract. The "Published Monthly Average" means Moody's Corporate Bond Yield
Average -- Monthly Average Corporates, as published by Moody's Investors
Service, Inc. or any successor to that service, or if that average is no longer
published, a substantially similar average established by the insurance
regulator where the Contract is issued. For example, the Published Monthly
Average in 1994 ranged from 7.25% to 8.94%.

Interest payments on any loan are due at the end of each Contract year. If
interest is not paid when due, it is added to the principal amount of the loan.
The term "Contract debt" means the amount of all outstanding loans plus any
interest accrued but not yet due. If at any time the Contract debt exceeds what
the cash surrender value would be if there were no Contract debt, The Prudential
will notify the Contract owner of its intent to terminate the Contract in 61
days, within which time the owner may repay all or enough of the loan to reduce
it to below the cash surrender value and thus keep the Contract in force.

When a loan is made, an amount equal to the loan proceeds will be transferred
out of the Account, the fixed-rate option and/or the Real Property Account, as
applicable. The reduction will normally be made in the same proportions as the
value in each subaccount, the fixed-rate option, and the Real Property Account
bears to the total value of the Contract Fund. While a fixed-rate (5.5%) loan is
outstanding, the amount that was so transferred will continue to be treated as
part of the Contract Fund and it will be credited with the daily equivalent of
an annual return of 4% rather than with the actual rate of return of the
subaccount[s], fixed-rate option or Real Property Account. While a loan made
pursuant to the variable loan interest rate provision is outstanding, the amount
that was so transferred will be credited with the daily equivalent of a rate
that is 1% less than the loan interest rate for the Contract year. If a loan
remains outstanding at a time when The Prudential fixes a new rate, the new
interest rate will apply.

Choosing the variable rate option will usually mean a higher outlay of cash when
the loan is repaid but it will also result in a greater increase in the Contract
Fund value.

A loan will not affect the amount of the premiums due. Should the death benefit
become payable while a loan is outstanding, or should the Contract be
surrendered, any Contract debt will be deducted from the death benefit or the
cash surrender value.

<PAGE>

A loan will have an effect on a Contract's cash surrender value and may have an
effect on the death benefit, even if the loan is fully repaid, because the
investment results of the selected investment options will apply only to the
amount remaining invested under those options. The longer the loan is
outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If investment results are greater than the rate being
credited on the loan balance while the loan is outstanding, values under the
Contract will not increase as rapidly as they would have if no loan had been
made. If investment results are below that rate, Contract values will be higher
than they would have been had no loan been made. A loan that is repaid will not
have any effect upon the guaranteed minimum death benefit.

Consider, for example, a Contract issued on a 35 year old male, as illustrated
in the table on page T1, with an 8% gross investment return. Assume a $2,500
fixed-rate (5.5%) loan was made under this Contract at the end of Contract year
8 and repaid at the end of Contract year 10 and loan interest was paid when due.
Upon repayment, the cash surrender value would be $7,798.65. This amount is
lower than the cash surrender value shown on that page for the end of Contract
year 10 because the loan amount was credited with the 4% assumed rate of return
rather than the 6.82% net return for the designated subaccount[s] resulting from
the 8% gross return in the underlying Series Fund. Loans from Modified Endowment
Contracts may be treated for tax purposes as distributions of income. See Tax
Treatment of Contract Benefits, page 27.

Surrender of a Contract. You may surrender a Contract in whole or in part for
its cash surrender value while the insured is living. Partial surrender involves
splitting the Contract into two Contracts. One Contract is surrendered for its
cash surrender value; the other is continued in force on the same terms as the
original Contract except that premiums will be based on the new face amount. You
will be given a new Contract document. The cash surrender value and the
guaranteed minimum death benefit of the new Contract will be proportionately
reduced based upon the reduction in the face amount of insurance. The new
Contract must have a face amount of insurance at least equal to the minimum face
amount applicable to the insured. Otherwise a partial surrender is not
permitted. See Requirements for Issuance of a Contract, page 16.

To surrender a Contract in whole or in part, you must deliver or mail it,
together with a written request, to your Prudential Home Office. The cash
surrender value of a surrendered or partially surrendered Contract (taking into
account the deferred sales and administrative charges, if any) will be
determined as of the end of the valuation period in which such a request is
received in the Home Office. Surrender of all or part of a Contract may have tax
consequences. See Tax Treatment of Contract Benefits, page 27.

Lapse and Reinstatement. As has already been explained, if Scheduled Premiums
are paid on or before each due date, or within the grace period after each due
date, and there are no withdrawals, a Contract will remain in force even if the
investment results of that Contract's variable investment option[s] have been so
unfavorable that the Contract Fund has decreased to zero or less.

In addition, even if a Scheduled Premium is not paid, the Contract will remain
in force as long as the Contract Fund on any Monthly Date is equal to or greater
than the Tabular Contract Fund value on the following Monthly Date. (A Table of
Tabular Contract Fund Values is included in the Contract; the values increase
with each year the Contract remains in force.) This could occur because of such
factors as favorable investment experience, deduction of current rather than
maximum charges, or the previous payment of greater than Scheduled Premiums.

However, if a Scheduled Premium is not paid, and the Contract Fund is
insufficient to keep the Contract in force, the Contract will go into default.
Should this happen, The Prudential will send the Contract owner a notice of
default setting forth the payment necessary to keep the Contract in force on a
premium paying basis. This payment must be received at the Prudential Home
Office within the 61 day grace period after the notice of default is mailed or
the Contract will lapse. A Contract that lapses with an outstanding Contract
loan may have tax consequences. See Tax Treatment of Contract Benefits, page 27.

Neither transfers nor reallocations of premium payments may be made if a
Contract is in default.

A Contract that has lapsed may be reinstated within 5 years after the date of
default unless the Contract has been surrendered for its cash surrender value.
To reinstate a lapsed Contract, The Prudential requires renewed evidence of
insurability, and submission of certain payments due under the Contract.

If your Contract does lapse, it will still provide some benefits. You can
receive the cash surrender value by making a request of The Prudential prior to
the end of the 61 day grace period. You may also choose one of the three forms
of insurance described below for which no further premiums are payable.

Fixed Extended Term Insurance. The amount of insurance that would have been paid
on the date of default will continue for a stated period of time. You will be
told in writing how long that will be. The insurance amount will not change.
There will be a diminishing cash surrender value but no loan value. Extended
term insurance is not available to insureds in high risk classifications or
under Contracts issued in connection with tax-qualified pension plans.

<PAGE>

Fixed Reduced Paid-Up Insurance. This insurance continues for the lifetime of
the insured but at an insurance amount that is lower than that provided by fixed
extended term insurance. It will increase in amount only if dividends are paid
and it will decrease only if a Contract loan is taken. You will be told, if you
ask, what the amount of the insurance will be. Fixed paid-up insurance has a
cash surrender value and a loan value both of which will gradually increase in
value. It is possible for this Contract to be classified as a Modified Endowment
Contract if this option is exercised during the first 7 Contract years. See Tax
Treatment of Contract Benefits, page 27.

Variable Reduced Paid-Up Insurance. This is similar to fixed paid-up insurance
and will initially be in the same amount. The Contract Fund will continue to
vary to reflect the experience of the selected investment options. There will be
a new guaranteed minimum death benefit. Loans will be available subject to the
same rules that apply to premium-paying Contracts.

Variable paid-up insurance is not available to insureds in high risk rating
classes or if the new guaranteed amount is less than $5,000. It is possible for
this Contract to be classified as a Modified Endowment Contract if this option
is exercised during the first 7 Contract years. See Tax Treatment of Contract
Benefits, page 27.

What Happens If No Request Is Made? Except in the two situations described
below, if no request is made the "automatic option" will be fixed extended term
insurance. If that is not available to the insured, then fixed reduced paid-up
insurance will be provided. However, if variable reduced paid-up insurance is
available and the amount is at least as great as the amount of fixed extended
term insurance, then the automatic option will be variable reduced paid-up
insurance. This could occur when there is a Contract debt outstanding when the
Contract lapses.

When Proceeds Are Paid. The Prudential will generally pay any death benefit,
cash surrender value, loan proceeds or withdrawal within 7 days after receipt at
a Prudential Home Office of all the documents required for such a payment. Other
than the death benefit, which is determined as of the date of death, the amount
will be determined as of the end of the valuation period in which the necessary
documents are received. However, The Prudential may delay payment of proceeds
from the subaccount[s] and the variable portion of the death benefit due under
the Contract if the sale or valuation of the Account's assets is not reasonably
practicable because the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by the SEC or the SEC declares
that an emergency exists.

With respect to the amount of any cash surrender value allocated to the
fixed-rate option, and with respect to a Contract in force as fixed reduced
paid-up insurance, The Prudential expects to pay the cash surrender value
promptly upon request. However, The Prudential has the right to delay payment of
such cash surrender value for up to 6 months (or a shorter period if required by
applicable law). The Prudential will pay interest of at least 3% a year if it
delays such a payment for 30 days or more (or a shorter period if required by
applicable law).

Living Needs Benefit. Contract applicants may elect to add the Living Needs
Benefit(SM) to their Contracts at issue, subject to The Prudential's receipt of
satisfactory evidence of insurability. The benefit may vary state-by-state. It
can generally be added only to Contracts of $50,000 or more. There is no charge
for adding the benefit to the Contract. However, an administrative charge (not
to exceed $150) will be made at the time the Living Needs Benefit is paid.

The Living Needs Benefit allows the Contract owner to elect to receive an
accelerated payment of all or part of the Contract's death benefit, adjusted to
reflect current value, at a time when certain special needs exist. The adjusted
death benefit will always be less than the death benefit, but will generally be
greater than the Contract's cash surrender value. Depending upon state
regulatory approval, one or both of the following options may be available. A
Prudential representative should be consulted as to whether additional options
may be available.

Terminal Illness Option. This option is available if the insured is diagnosed as
terminally ill with a life expectancy of 6 months or less. When satisfactory
evidence is provided, The Prudential will provide an accelerated payment of the
portion of the death benefit selected by the Contract owner as a Living Needs
Benefit. You may (1) elect to receive the benefit in a single sum or (2) receive
equal monthly payments for 6 months. If the insured dies before all the payments
have been made, the present value of the remaining payments will be paid to the
beneficiary designated in the Living Needs Benefit claim form in a single sum.

Nursing Home Option. This option is available after the insured has been
confined to an eligible nursing home for 6 months or more. When satisfactory
evidence is provided, including certification by a licensed physician, that the
insured is expected to remain in the nursing home until death, The Prudential
will provide an accelerated payment of the portion of the death benefit selected
by the Contract owner as a Living Needs Benefit. You may (1) elect to receive
the benefit in a single sum or (2) receive equal monthly payments for a
specified number of years (not more than 10 nor less than 2), depending upon the
age of the insured. If the insured dies before all of the payments have been
made, the present value of the remaining payments will be paid to the
beneficiary designated in the Living Needs Benefit claim form in a single sum.

25
<PAGE>

All or part of the Contract's death benefit may be accelerated under the Living
Needs Benefit. If the benefit is only partially accelerated, a death benefit of
at least $25,000 must remain under the Contract. The Prudential reserves the
right to determine the minimum amount that may be accelerated.

No benefit will be payable if the Contract owner is required to elect it in
order to meet the claims of creditors or to obtain a government benefit. The
Prudential can furnish details about the amount of Living Needs Benefit that is
available to an eligible Contract owner under a particular Contract, and the
adjusted premium payments that would be in effect if less than the entire death
benefit is accelerated.

The Contract owner should consider whether adding this settlement option is
appropriate in his or her given situation. Adding the Living Needs Benefit to
the Contract has no adverse consequences; however, electing to use it could.
Contract owners should consult a qualified tax advisor before electing to
receive this benefit. Unlike a death benefit received by a beneficiary after the
death of an insured, receipt of a Living Needs Benefit payment may give rise to
a federal or state income tax. Receipt of a Living Needs Benefit payment may
also affect a Contract owner's eligibility for certain government benefits or
entitlements.

Voting Rights. As stated above, all of the assets held in the subaccounts of the
Account will be invested in shares of the corresponding portfolios of the Series
Fund. The Prudential is the legal owner of those shares and as such has the
right to vote on any matter voted on at Series Fund shareholders meetings.
However, The Prudential will vote the shares of the Series Fund at any regular
and special shareholders meetings it is required to hold in accordance with
voting instructions received from Contract owners. The Series Fund will not hold
annual shareholders meetings when not required to do so under Maryland law or
the Investment Company Act of 1940. Series Fund shares for which no timely
instructions from Contract owners are received, and any shares indirectly owned
by The Prudential, will be voted in the same proportion as shares in the
respective portfolios for which instructions are received.

Matters on which Contract owners may give voting instructions include the
following: (1) election of the Board of Directors of the Series Fund; (2)
ratification of the independent accountant of the Series Fund; (3) approval of
the investment advisory agreement for a portfolio of the Series Fund
corresponding to the Contract owner's selected subaccount[s]; (4) any change in
the fundamental investment policy of a portfolio corresponding to the Contract
owner's selected subaccount[s]; and (5) any other matter requiring a vote of the
shareholders of the Series Fund. With respect to approval of the investment
advisory agreement or any change in a portfolio's fundamental investment policy,
Contract owners participating in such portfolios will vote separately on the
matter.

The number of shares in a portfolio for which you may give instructions is
determined by dividing the portion of your Contract Fund attributable to the
portfolio, by the value of one share of the portfolio. The number of votes for
which each Contract owner may give The Prudential instructions will be
determined as of the record date chosen by the Board of Directors of the Series
Fund. The Prudential will furnish Contract owners with proper forms and proxies
to enable them to give these instructions. The Prudential reserves the right to
modify the manner in which the weight to be given voting instructions is
calculated where such a change is necessary to comply with current federal
regulations.

The Prudential may, if required by state insurance regulations, disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the sub-classification or investment objectives of one or more
of the Series Fund's portfolios, or to approve or disapprove an investment
advisory contract for the Series Fund. In addition, The Prudential itself may
disregard voting instructions that would require changes in the investment
policy or investment advisor of one or more of the Series Fund's portfolios,
provided that The Prudential reasonably disapproves such changes in accordance
with applicable federal regulations. If The Prudential does disregard voting
instructions, it will advise Contract owners of that action and its reasons for
such action in the next annual or semi-annual report to Contract owners.

Contract owners also share with the owners of all Prudential Contracts and
policies the right to vote in elections for members of the Board of Directors of
The Prudential.

Reports to Contract Owners. Once each Contract year (except where the Contract
is in force as fixed extended term insurance or fixed reduced paid-up
insurance), you will be sent a statement that provides certain information
pertinent to your own Contract. These statements show all transactions during
the year that affected the value of your Contract Fund, including monthly
changes attributable to investment experience. That statement will also show the
current death benefit, cash surrender value, and loan values of your Contract.
On request, you will be sent a current statement in a form similar to that of
the annual statement described above, but The Prudential may limit the number of
such requests or impose a reasonable charge if such requests are made too
frequently.

You will also receive, usually at the end of February, an annual report of the
operations of the Account and of the Series Fund. That report will list the
investments held in each portfolio and include audited financial statements for
the Account and the Series Fund. A semi-annual report, with similar unaudited
information for the Series Fund, will be sent to you, usually at the end of
August.

26
<PAGE>

Tax Treatment of Contract Benefits. The tax treatment of life insurance is
complex and may change, therefore you should consult with a qualified tax
advisor. A more technical discussion of what follows is contained in the
Statement of Additional Information. Here The Prudential provides, not tax
advice but, a general statement of how it believes the tax laws currently apply
in the most commonly occurring circumstances.

Treatment as Life Insurance. The Prudential believes that the Contract should
qualify as "life insurance" under the Internal Revenue Code. This means that,
except as noted below, any annual increases in your Contract Fund, whether
attributable to income or capital appreciation, should not be included in your
income. In addition, the receipt of a death benefit by a beneficiary should not
result in taxable income.

Although The Prudential believes the Contract should qualify as "life insurance"
for federal tax purposes, there are uncertainties, particularly because the
Secretary of the Treasury has not yet issued final regulations that bear on this
question. Accordingly, we have reserved the right to make changes -- which will
be applied uniformly to all Contract owners after advance written notice -- that
we deem necessary to insure that the Contract will continue to qualify as life
insurance.

Pre-Death Distributions. The tax treatment of any distribution received by an
owner prior to an insured's death will depend upon whether the Contract is
classified as a Modified Endowment Contract.

If the Contract is not classified as a Modified Endowment Contract, proceeds
received in the event of a lapse, total or partial surrender of the Contract, or
withdrawal of part of the cash surrender value will generally not be taxable
unless the total amount received exceeds the gross premiums paid less the
untaxed portion of any prior withdrawals. In certain limited circumstances, all
or a portion of a withdrawal or partial surrender during the first 15 contract
years may be taxable even if total withdrawals do not exceed total premiums paid
to date. The proceeds of any loan will be treated as indebtedness of the owner
and will not be treated as taxable income.

If the Contract is classified as a Modified Endowment Contract, pre-death
distributions, including loans, withdrawals and partial surrenders (even those
made during the 2 year period before the Contract became a Modified Endowment
Contract), will be taxed first as investment income to the extent of gain in the
Contract, and then as a return of the Contract owner's investment in the
Contract. In addition, pre-death distributions (including full surrenders) will
be subject to a penalty of 10% of the amount includible in income unless the
amount is distributed on or after the owner reaches age 59 1/2, on account of
the owner's disability, or as a life annuity.

A policy may be classified as a Modified Endowment Contract if premiums
substantially (or sometimes slightly) in excess of Scheduled Premiums are paid
or the face amount of insurance is decreased during the first seven Contract
years, or if the face amount of insurance is increased or if a rider is added to
(or a rider is removed from) the Contract. You should consult with your tax
advisor or a Prudential representative before making any of these policy
changes.

Other Tax Consequences. There may be federal estate taxes and state and local
estate and inheritance taxes payable if either the owner or the insured dies.
The transfer or assignment of the Contract to a new owner may also have tax
consequences. The individual situation of each Contract owner or beneficiary
will be significant.

Riders. When the Contract is first issued, the owner may be able to obtain
additional fixed benefits which may increase the Scheduled Premium. If they do
cause an increase in the Scheduled Premium, they will be charged for by making
monthly deductions from the Contract Fund. These optional insurance benefits
will be described in what is known as a "rider" to the Contract. One rider pays
an additional amount if the insured dies in an accident. Another waives certain
premiums if the insured is disabled within the meaning of the provision (or, in
the case of a Contract issued on an insured under the age of 15, if the
applicant dies or becomes disabled within the meaning of the provision). Others
pay an additional amount if the insured dies within a stated number of years
after issue; similar benefits may be available if the insured's spouse or child
should die. The amounts of these benefits are fully guaranteed at issue; they do
not depend on the performance of the Account, although they will no longer be
available if the Contract should lapse. Certain restrictions may apply; they are
clearly described in the applicable rider.

Under other riders, which provide a fixed amount of term insurance in exchange
for increasing total scheduled annual premiums, the amount payable upon death of
the insured may be substantially increased for a given total initial annual
premium. The rider may be appropriate for Contract owners who reasonably expect
their incomes to increase regularly so that they will be able to afford the
increasing scheduled annual premiums or who may be willing to rely upon their
future Contract Fund values to prevent the Contract from lapsing in later years.

Certain term riders issued by The Prudential may provide for a conversion
premium credit if the rider or policy is converted to a Prudential whole life
policy, including the Contracts described in this prospectus. If a Contract is
purchased through exercise of such a conversion privilege, the first year's
scheduled premium will be reduced by the amount of the premium credit. The
Prudential will add to first year scheduled premiums paid by the Contract owner
the pro rata portion of the premium credit.

27
<PAGE>

Any Prudential representative authorized to sell the Contract can explain these
extra benefits further. Samples of the provisions are available from The
Prudential upon written request.

Participation in Divisible Surplus. Because the Contract is issued by The
Prudential, a mutual life insurance company, it is a participating policy. This
means that the Contract is eligible to be credited part of The Prudential's
divisible surplus attributable to the Contracts, as determined by The
Prudential's Board of Directors. That determination is made, with respect to the
insurance contracts issued by The Prudential, every year. However, The
Prudential does not expect to credit any dividends upon these Contracts while
they remain in force because favorable investment performance will be reflected
in Contract values and because The Prudential intends, if experience indicates
that current charges are greater than needed to cover expenses, to reduce those
charges further so that there will be no source of distributable surplus
attributable to these Contracts. If a Contract is kept in force for a number of
years, The Prudential currently intends to add a termination dividend to the
proceeds payable upon death or surrender.

Other Contract Provisions. There are several other Contract provisions that are
of less significance to you than those already described in detail either
because they relate to options that you may choose under the Contract but are
not likely to exercise for several years after you first purchase it or because
they are of a routine nature not likely to influence your decision to buy the
Contract. These provisions are summarized in the Expanded Table of Contents of
the Statement of Additional Information, page 42 and described in greater detail
in the Statement of Additional Information.

FURTHER INFORMATION ABOUT THE SERIES FUND

The Prudential Series Fund, Inc. (the "Series Fund") is a Maryland corporation
organized on November 15, 1982. It is registered under the Investment Company
Act of 1940 (the "1940 Act") as an open-end, diversified, management investment
company. This registration does not imply any supervision by the Securities and
Exchange Commission over the Series Fund's management or its investment policies
or practices.

The Series Fund is currently made up of sixteen separate portfolios. Each
portfolio is, for many purposes, in effect a separate investment fund, and a
separate class of capital stock is issued for each portfolio. Each share of
capital stock issued with respect to a portfolio has a pro-rata interest in the
assets of that portfolio and has no interest in the assets of any other
portfolio. Each portfolio bears its own liabilities and also its proportionate
share of the general liabilities of the Series Fund. In other respects the
Series Fund is treated as one entity. For example, the Series Fund has only one
Board of Directors and owners of the shares of each portfolio are entitled to
vote for members of the Board.

Shares in the Series Fund are currently sold and redeemed at the close of each
business day, at their net asset value, determined in the manner described in
the Statement of Additional Information, only to separate accounts of The
Prudential and its subsidiaries. They may, in the future, be sold to other
insurers to fund benefits under variable life insurance and variable annuity
contracts issued by those companies.

The Prudential is the investment advisor of the Series Fund. The Prudential has
entered into a Service Agreement with its wholly-owned subsidiary The Prudential
Investment Corporation ("PIC"), which provides that PIC will furnish to The
Prudential such services as The Prudential may require in connection with the
performance of its obligations under an Investment Advisory Agreement with the
Series Fund. In addition, The Prudential has entered into a Subadvisory
Agreement with its wholly-owned subsidiary Jennison Associates Capital Corp.
("Jennison"), under which Jennison furnishes investment advisory services in
connection with the management of the Growth Stock Portfolio. See Investment
Management Arrangements and Expenses, page 41.

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

Each portfolio of the Series Fund has a different objective which it pursues
through separate investment policies as described below. Since each portfolio
has a different investment objective, each can be expected to have different
investment results and incur different market and financial risks. Those risks,
as explained above, are borne by the Contract owner. The Series Fund may in the
future establish other portfolios with different investment objectives.

28
<PAGE>

The investment objectives of each portfolio are set forth on pages 3 through 4.
For the sake of convenience, they are repeated here, followed in each case by a
brief description of the policies of each portfolio. In some cases a fuller
description of those policies is in the Statement of Additional Information.
There is no guarantee that any of these objectives will be met.

Fixed Income Portfolios

Because of the high quality, short-term nature of the portfolio's holdings,
increases in the value of an investment in the portfolio will be derived almost
entirely from interest on the securities held by it. Accordingly, the results
for the portfolio will follow generally the fluctuation in short-term interest
rates.

The portfolio seeks to achieve this objective by following the policies of
purchasing only debt securities of investment grade or, if not rated, of
comparable quality in the opinion of the portfolio manager and of investing from
time to time a portion of its assets in short-term debt obligations of the kind
held in the Money Market Portfolio as described in the Statement of Additional
Information. Since the value of fixed income securities generally fluctuates
inversely with changes in interest rates, the proportions of intermediate or
longer-term securities and short-term debt obligations held in the portfolio
will vary to reflect The Prudential's assessment of prospective changes in
interest rates, so that the portfolio may benefit from relative price
appreciation when interest rates decline and suffer lesser declines in value
when interest rates rise. The success of this strategy will depend on The
Prudential's ability to forecast changes in interest rates, and there is a
corresponding risk that the value of the securities held in the portfolio will
decline.

At least 80% of the portfolio's holdings (including short-term debt obligations)
will generally consist of debt securities that at the time of purchase have a
rating within the four highest grades determined by Moody's Investor Services,
Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"), or a similar
nationally-recognized rating service. The portfolio may retain a security whose
rating has dropped below the four highest grades as determined by a commercial
rating service. Without limitation, the portfolio may invest in obligations of
the U.S. Government and its agencies and instrumentalities. The Statement of
Additional Information defines the ratings that are given to debt securities by
Moody's and S&P and describes the standards applied by them in assigning these
ratings.

The remaining assets of the portfolio may be invested in, among other things,
debt securities that are not rated within the four highest grades or in
convertible debt securities and preferred or convertible preferred stocks that
are rated within the four highest grades applicable to such securities. On
occasion, however, the portfolio may acquire common stock, not through direct
investment but by the conversion of convertible debt securities or the exercise
of warrants. No more than 10% of the value of the total assets of the portfolio
will be held in common stocks, and those will usually be sold as soon as a
favorable opportunity is available.

The portfolio may invest up to 20% of its total assets in United States currency
denominated debt securities issued outside the United States by foreign or
domestic issuers. The particular risks of investments in foreign securities are
described under Foreign Securities on page 39.

In addition, the portfolio may (i) purchase and sell options on debt securities;
(ii) purchase and sell interest rate futures contracts and options thereon;
(iii) purchase securities on a when-issued or delayed delivery basis; (iv) use
interest rate swaps; and (v) make short sales. These techniques are described
briefly under Options, Futures Contracts and Swaps and Short Sales on page 40,
and in detail in the Statement of Additional Information.

29
<PAGE>

Income Fund. Prior to 1994, Ms. Kenworthy was a portfolio manager and president
of several taxable fixed-income funds for The Dreyfus Corp.

Government Securities Portfolio. The objective of this portfolio is to achieve a
high level of income over the longer term consistent with the preservation of
capital through investment primarily in U.S. Government securities, including
intermediate and long-term U.S. Treasury securities and debt obligations issued
by agencies of or instrumentalities established, sponsored or guaranteed by the
U.S. Government. At least 65% of the total assets of the portfolio will be
invested in U.S. Government securities.

The portfolio seeks to achieve this objective by investing at least 65% of its
assets in U.S. Treasury securities, obligations issued or guaranteed by U.S.
Government agencies and instrumentalities, mortgage-related securities issued by
U.S. Government instrumentalities or non-governmental corporations, or related
collateralized mortgage obligations. These instruments are described below. The
portfolio may invest up to a total of 35% of its assets in the following three
categories: (1) short-term debt obligations of the kind held in the Money Market
Portfolio; (2) securities of issuers other than the U.S. government and related
entities, usually foreign governments, where the principal and interest are
substantially guaranteed (generally to the extent of 90% thereof) by U.S.
Government agencies whose guarantee is backed by the full faith and credit of
the United States and where an assurance of payment on the unguaranteed portion
is provided for in a comparable way; and (3) asset-backed securities rated in
either of the top two ratings by Moody's or Standard & Poor's, or if not rated,
determined by the investment manager to be of comparable quality. A description
of debt ratings is in the Statement of Additional Information.

U.S. Government Securities are considered among the most creditworthy of fixed
income investments. Their values (like those of fixed-income securities,
generally) will vary inversely with changes in interest rates. The magnitude of
these fluctuations will generally be greater for securities with longer
maturities.

U.S. Treasury securities are direct obligations of the U.S. Government and, as
such, are backed by the full faith and credit of the United States. Obligations
issued by agencies of the U.S. Government or instrumentalities established or
sponsored by the U.S. Government include securities that are guaranteed by
federal agencies or instrumentalities, and may or may not be backed by the full
faith and credit of the United States. Obligations of the Government National
Mortgage Association ("GNMA"), the Farmers Home Administration, and the Export-
Import Bank, for example, are backed by the full faith and credit of the United
States. Obligations issued by the Tennessee Valley Authority, The Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC"), the United States Postal Service, the Federal Farm Credit
Bank and the Federal Home Loan Bank are not, and the portfolio must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment.

The portfolio may invest in mortgage-backed securities issued by GNMA, FNMA or
FHLMC and representing undivided ownership interests in pools of mortgages. The
mortgages backing these securities include conventional 30 year fixed rate
mortgages, 15 year fixed rate mortgages, graduated payment mortgages, and
adjustable rate mortgages. The U.S. Government or the issuing agency guarantees
the payment of interest and principal of these securities. However, the
guarantees do not extend to the securities' yield or value of the portfolio's
shares. The portfolio may also purchase collateralized mortgage obligations
("CMOs"). A CMO is a debt security issued by a corporation or a U.S. Government
instrumentality. The payment of principal and interest is secured by an
underlying portfolio of mortgages or mortgage-backed securities. The portfolio
will invest in only those privately issued CMOs that are collateralized by
mortgage-backed securities issued by GNMA, FHLMC or FNMA, and in CMOs issued by
FHLMC, GNMA or FNMA. Neither the United States Government nor any U.S.
Government agency guarantees the payment of principal or interest on these
securities.

The portfolio may also invest in asset-backed securities. Asset-backed
securities represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, such as automobile or credit
card receivables. Asset-backed securities present certain risks, including the
risk that the underlying obligor on the asset, such as the automobile purchaser
or the credit card holder, may default on his or her obligation. In addition,
asset-backed securities often do not provide a security interest in the related
collateral. For example, credit card receivables are generally unsecured, and
for automobile receivables the security interests in the underlying automobiles
are often not transferred when the pool is created, with the resulting
possibility that the collateral could be resold. In general, however, these
types of loans are of shorter average life than mortgage loans and are less
likely to have substantial prepayments.

<PAGE>

In pursuing this objective, each Zero Coupon Bond portfolio invests only in
readily marketable debt securities that do not involve substantial risk of loss
of capital through default, although their value may vary because of changes in
the general level of interest rates. It is the policy of each Zero Coupon Bond
portfolio to invest at least 70% of its assets in stripped securities that are
obligations of the United States Government maturing within 2 years of the
portfolio liquidation date. Up to 30% of the assets may be invested and held
either in stripped securities issued by investment-grade corporations or in
high-grade interest bearing corporate debt securities, in each case with a
quality rating of Baa or better, provided that no more than 20% of the assets of
the portfolio may be invested in interest bearing securities. The Prudential
will evaluate the creditworthiness of the potential investments in corporate
securities in order to determine whether such securities are suitable for
purchase by the portfolios. A small portion of the portfolios may be invested in
short-term debt obligations of the kind held in the Money Market Portfolio in
order to make effective use of cash reserves pending investments in the
securities described above.

In order to achieve a predictable compounded investment return to each
portfolio's liquidation date that will be as little affected as possible by
variations in the general level of interest rates during the intervening period,
the composition of the securities held in each portfolio is such that the
weighted average period of time until receipt of scheduled cash payments
(whether of principal or interest) -- sometimes referred to as the portfolio's
"duration" -- will be kept within 1 year of the period remaining until the
portfolio liquidation date. When the portfolio's duration is thus maintained,
differences between the market value and the face amount of unmatured bonds on
the portfolio's liquidation date resulting from changes in the general level of
interest rates will be approximately equal in magnitude to, but opposite in
direction from, the difference between the amount of interest accumulated
through the reinvestment of earlier coupon or principal payments and the amount
that would have been accumulated at the originally predicted rate. Each
portfolio is thus able to hold interest bearing securities and stripped
securities with maturity dates before, during, and after the portfolio's
liquidation date. The concept of "duration" is explained more fully in the
Statement of Additional Information.

Each portfolio seeks to realize a higher yield than would be obtained simply by
maintaining the portfolio's initial investments. The portfolios are actively
managed by The Prudential to take advantage of trading opportunities that may
exist from time to time when, for various reasons, some of the securities
available for purchase by the portfolio appear underpriced. There is a
corresponding risk that, to the extent that this strategy is unsuccessful, the
initial yield objective will not be met.

Stripped securities are purchased at a substantial (or "deep") discount from
their principal amounts payable at maturity. If held to maturity, these
obligations provide a predictable yield. But because interest on stripped
securities is not paid in cash on a current basis but rather is in effect
compounded until maturity (or the payment date in the case of a coupon), the
market values of securities of this type are subject to greater fluctuations, as
a result of changes in interest rates, than are the values of debt securities
that provide for the periodic payment of interest; and the longer the term to
maturity of a portfolio, the greater the risk of such fluctuations. Accordingly,
if you redeem an interest in the portfolio (for example, by a transfer to
another portfolio) prior to the portfolio liquidation date, you are likely to
achieve quite a different investment return than the return that was predicted
on the date your investment was made. You may suffer a loss.

On the liquidation date of a Zero Coupon Bond Portfolio, all of the securities
held by the portfolio will be sold, all outstanding shares of the portfolio will
be redeemed, and the proceeds will, unless otherwise directed by Contract
owners, be allocated to the Money Market Subaccount and invested in the Money
Market Portfolio.

<PAGE>

Balanced Portfolios

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 15% 35% 50%
Bonds 15% 35% 50%
Money Marke 0% 30% 70%

The bond portion of the portfolio will be invested primarily in securities with
maturities of 2 to 10 years and ratings at the time of purchase within the four
highest grades determined by Moody's, S&P, or a similar nationally- recognized
rating service. A description of debt ratings is in the Statement of Additional
Information. Because of their shorter maturities, the value of the notes and
bonds in this portfolio will be less sensitive to changes in interest rates than
the longer-term bonds likely to be held in the Aggressively Managed Flexible
Portfolio. Thus, there will be less of a risk of loss of principal, but not as
much of a likelihood for greater appreciation in value. Up to 20% of the bond
portion of this portfolio may be invested in United States currency denominated
debt securities issued outside the United States by foreign or domestic issuers.
The common stock portion of this portfolio will be invested primarily in the
equity securities of major, established corporations in sound financial
condition that appear to offer attractive prospects of a total return from
dividends and capital appreciation that is superior to broadly based stock
indices. The money market portion of the portfolio will hold high-quality
short-term debt obligations with a maturity of 12 months or less (as described
in the Statement of Additional Information) and will maintain a dollar-weighted
average maturity of 120 days or less.

In addition, the portfolio may (i) purchase and sell options on equity
securities, debt securities, stock indices and foreign currencies (ii) purchase
and sell stock index, interest rate and foreign currency futures contracts and
options thereon; (iii) enter into forward foreign currency exchange contracts;
(iv) purchase securities on a when-issued or delayed delivery basis; (v) use
interest rate swaps; and (vi) make short sales. These techniques are described
briefly under Options, Futures Contracts and Swaps and Short Sales on page 40,
and in detail in the Statement of Additional Information.

Aggressively Managed Flexible Portfolio. The objective of this portfolio is
achievement of a high total return consistent with a portfolio having an
aggressively managed mix of money market instruments, fixed income securities,
and common stocks, in proportions believed by The Prudential to be appropriate
for an investor desiring diversification of investment who is willing to accept
a relatively high level of loss in an effort to achieve greater appreciation.

<PAGE>

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 25% 60% 100%
Bonds 0% 40% 75%
Money Market 0% 0% 75%

The bond component of this portfolio is expected under normal circumstances to
have a weighted average maturity of greater than 10 years. The values of bonds
with longer maturities are generally more sensitive to changes in interest rates
than those of shorter maturities. The bond portion of this portfolio will
primarily be invested in securities that have a rating at the time of purchase
within the four highest grades determined by Moody's, S&P, or a similar
nationally-recognized rating service. A description of debt ratings is in the
Statement of Additional Information. However, up to 25% of the bond component of
this portfolio may be invested in securities having ratings at the time of
purchase of "BB," "Ba" or lower, or if not rated, of comparable quality in the
opinion of the portfolio manager, these securities are also known as high risk
securities. Up to 20% of the bond portion of this portfolio may be invested in
United States currency denominated debt securities issued outside the United
States by foreign or domestic issuers. The established company common stock
component of this portfolio will consist of the equity securities of major
corporations that are believed to be in sound financial condition. In selecting
stocks of smaller capitalization companies, the portfolio manager will
concentrate on companies with a capitalization range of $75 million to $600
million that show above-average profitability (measured by return-on-equity,
earnings, and dividend growth rates) with modest price/earnings ratios. The
individual equity selections for this portfolio may tend to have more volatile
market values than the equity securities selected for the Common Stock Portfolio
or the Conservatively Managed Flexible Portfolio. The money market portion of
the portfolio will hold high-quality short-term debt obligations with a maturity
of 12 months or less (as described in the Statement of Additional Information)
and will maintain a dollar-weighted average maturity of 120 days or less.

To the extent permitted by applicable insurance law, this portfolio may invest
up to 30% of its total assets in non-United States currency denominated debt and
equity securities of foreign and U.S. issuers. The particular risks of
investment in foreign securities are described under Foreign Securities,
page 39.

High Yield Bond Portfolios

High Yield Bond Portfolio. The objective of this portfolio is to achieve a high
total return through investment in a diversified portfolio of high yield/high
risk fixed income securities.

The portfolio seeks to achieve its objective by following a policy of generally
investing in fixed income securities rated in the medium to lower categories by
recognized rating services or in unrated fixed income securities of comparable
quality. The portfolio expects to invest principally in fixed income securities
rated Baa or lower by Moody's, or BBB or lower by S&P. Corporate bonds which are
rated Baa by Moody's are described by Moody's as being investment grade, but are
also characterized as having speculative characteristics. Corporate bonds rated
below Baa by Moody's and BBB by S&P are considered speculative. A description of
corporate bond ratings is in the Statement of Additional Information.

Medium to lower rated fixed income securities tend to offer higher yields than
higher rated securities because they are subject to the higher risk of an
issuer's inability to meet principal and interest payments on the obligations
(credit risk) and also to higher price volatility due to such factors as
interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity (market risk). In the lower quality segments
of the fixed income securities market, changes in perception of the
creditworthiness of individual issuers tend to occur more frequently and in a
more pronounced manner than do changes in higher quality segments of the fixed
income securities market. The Prudential considers both credit risk and market
risk in selecting securities for the portfolio. It will evaluate, among other
things, an issuer's financial history, condition, prospects and management. It
will make its own independent credit analysis and will not rely principally on
the ratings assigned by the ratings services

33
<PAGE>

(e.g., Moody's and S&P), although such ratings will be considered. By holding a
diversified selection of such securities, the portfolio seeks to reduce both
credit risk and volatility.

The portfolio may invest up to 20% of its total assets in United States currency
denominated debt issues issued outside the United States by foreign and domestic
issuers. The particular risks of investments in foreign securities are described
under Foreign Securities on page 39.

The portfolio may also (i) purchase and sell options on debt securities; (ii)
purchase and sell interest rate futures contracts and options thereon; (iii)
purchase securities on a when-issued or delayed delivery basis; (iv) use
interest rate swaps; and (v) make short sales. These techniques are described
briefly under Options, Futures Contracts and Swaps and Short Sales on page 40,
and in detail in the Statement of Additional Information.

Diversified Stock Portfolios

Stock Index Portfolio. The objective of this portfolio is to achieve investment
results that correspond to the price and yield performance of publicly-traded
common stocks in the aggregate.

The portfolio seeks to achieve this objective by following the policy of
attempting to duplicate the price and yield performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index"), an index which represents
more than 70% of the total market value of all publicly-traded common stocks and
is widely viewed among investors as representative of the performance of
publicly-traded common stocks as a whole. The S&P 500 Index is composed of 500
selected common stocks, over 95% of which are listed on the New York Stock
Exchange ("NYSE"). Standard & Poor's Corporation chooses the stocks to be
included in the index on a statistical basis taking into account market values
and industry diversification. Inclusion in the index in no way implies an
opinion by Standard & Poor's Corporation as to a stock's attractiveness as an
investment, and Standard & Poor's Corporation is not in any way affiliated with
this portfolio. "Standard & Poor's," "Standard & Poor's 500" and "500" are
trademarks of McGraw Hill, Inc. and have been licensed for use by The Prudential
Insurance Company of America and its affiliates and subsidiaries. The Series
Fund is not sponsored, endorsed, sold or promoted by S&P and S&P makes no
representation regarding the advisability of investing in the Series Fund.
Reference is made to the Statement of Additional Information which sets forth
certain additional disclaimers and limitations of liabilities on behalf of S&P.

The S&P 500 Index is a "weighted" index in which the weighting of each stock
depends on its relative total market value: its market price per share times the
number of shares outstanding. Because of this weighting, approximately 10% of
the S&P 500 Index's value is accounted for by the stocks of the five largest
companies by relative market value. As of December 31, 1994 those companies
were: General Electric Co., American Telephone and Telegraph Co., Exxon Corp.,
Coca-Cola Co., and Royal Dutch.

This portfolio will not be "managed" in the traditional sense of using economic,
financial or market analysis to determine the stocks to be purchased by the
portfolio. Rather, the portfolio manager will purchase stocks for the portfolio
in proportion to their weighting in the S&P 500 Index. Thus, adverse financial
performance by a company will not result in reduction or elimination of the
portfolio's holdings of its stock and, conversely, superior financial
performance by a company will not lead the portfolio to increase its holdings of
the company's stock. If a stock held by this portfolio is eliminated from the
S&P 500 Index, the portfolio will sell its holdings of the stock regardless of
the prospects of the company. Because the portfolio will not be "managed" in the
traditional sense, portfolio turnover is expected to be low and is generally not
expected to exceed 10% and brokerage commissions are also expected to be
correspondingly low.

<PAGE>
<TABLE>
*S&P 500 WITH DIVIDENDS REINVESTED
Annual Percentage Change
<CAPTION>
<S> <C> <C> <C>
1970 +3.93 1983 +22.38
1971 +14.56 1984 +6.10
1972 +18.90 1985 +31.57
1973 -14.77 1986 +18.56
1974 -26.39 1987 +5.10
1975 +37.16 1988 +16.61
1976 +23.57 1989 +31.69
1977 -7.42 1990 -3.10
1978 +6.38 1991 +30.47
1979 +18.20 1992 +7.61
1980 +32.27 1993 +10.08
1981 -5.01 1994 +1.32
1982 +21.44
</TABLE>

Source: Standard & Poor's Corporation. Percentage change calculated in
accordance with specifications of SEC release number IA-327.

In the seven full years since this portfolio was established its total return,
compared to that of the S&P 500 Index, was as follows:

Annual Percentage Change S&P 500 Total Return
with Stock Index Portfolio
Dividends Reinvested (after deduction of expenses)
--------------------------------- -----------------------------
1988 +16.61 +15.44
1989 +31.69 +30.93
1990 -3.10 -3.63
1991 +30.47 +29.72
1992 +7.61 +7.13
1993 +10.08 +9.66
1994 +1.32 +1.01

A fuller description of the policies followed by the Stock Index Portfolio is in
the Statement of Additional Information.

The portfolio seeks to achieve this objective by following the policy of
investing in such securities, giving emphasis to earnings, balance sheet and
cash flow analysis, and the relationships that these factors have to the price
and return of a given security. Under normal circumstances, the portfolio
intends to invest at least 65% of its total assets in such securities.

The portfolio may invest the balance of its assets in other stocks, other
securities convertible into common stocks and in debt securities (including
money market instruments). The portfolio may under normal circumstances invest
up to 35% of its total assets in money market instruments of the type invested
in by the Money Market Portfolio and without limit when the portfolio's manager
believes market conditions warrant a temporary defensive posture or pending the
investment of proceeds from sales of the portfolio shares. In addition, up to
35% of the portfolio's total assets may be invested in other fixed-income
obligations. The portfolio anticipates that these will primarily be rated A or
better by Moody's or S&P. However, the portfolio may also invest in lower-rated
fixed-income securities, although it will not invest in securities rated lower
than CC or Ca by Moody's or S&P, respectively. The risks of medium to lower
rated securities, also known as high risk securities, are described above in
connection with the High Yield Bond Portfolio. A description of debt ratings is
in the Statement of Additional Information. The portfolio may also invest in
non-rated fixed-income securities which, in the opinion of the manager, are of a
quality comparable to rated securities in which the portfolio will invest.

<PAGE>

These techniques are described briefly under Options, Futures Contracts and
Swaps on page 40, and in detail in the Statement of Additional Information.

As a result of its investment policies, the portfolio's turnover rate may exceed
100%, although it is not expected to exceed 200%.

Warren Spitz, Managing Director, PIC, has been portfolio manager for the High
Dividend Stock Portfolio since 1988.

The portfolio seeks to achieve this objective by following the policy of
investing primarily in common stocks. It may also invest to a limited extent in
short, intermediate or long term debt, either convertible or nonconvertible into
common stock, as well as in nonconvertible preferred stock. The portfolio will
attempt to maintain a flexible approach to the selection of common stocks of
various types of companies whose valuations appear to offer opportunities for
above-average appreciation. Thus, the portfolio may invest in securities of
companies whose estimated growth in earnings exceeds that projected for the
market as a whole because of factors such as expanding market share, new
products or changes in market environment. Or it may invest in "undervalued"
securities which are often characterized by a lack of investor recognition of
the basic value of a company's assets. Securities of companies with sales and
earnings trends which are currently unfavorable but which are expected to
reverse may also be in the portfolio. The effort to achieve price appreciation
that is superior to broadly based stock indices necessarily involves accepting a
greater risk of declining values. During periods when stock prices decline
generally, it can be expected that the value of the portfolio will also decline.

In addition, the portfolio may (i) purchase and sell options on equity
securities, stock indices and foreign currencies (ii) purchase and sell stock
index and foreign currency futures contracts and options thereon; (iii) enter
into forward foreign currency exchange contracts; and (iv) purchase securities
on a when-issued or delayed delivery basis. These techniques are described
briefly under Options, Futures Contracts and Swaps on page 40, and in detail in
the Statement of Additional Information.

A portion of the portfolio may be invested in short-term debt obligations of the
kind held in the Money Market portfolio as described in the Statement of
Additional Information in order to make effective use of cash reserves pending
investment in common stocks.

Thomas Jackson, Managing Director, PIC, has been portfolio manager of the Common
Stock Portfolio since 1990. Prior to 1990, Mr. Jackson was Principal for Red Oak
Advisors.

The portfolio may invest up to 35% of its total assets in: (i) common stocks,
preferred stocks, and other equity-related securities of companies that are
undergoing changes in management or product and marketing dynamics which have
not yet been reflected in reported earnings but which are expected to impact
earnings in the intermediate term -- these securities often lack investor
recognition and are often favorably valued; (ii) other equity-related
securities; (iii) with respect to a maximum of 20% of its total assets, common
stocks, preferred stocks and other equity-related securities of Canadian issuers
or American Depository Receipts ("ADRs"); (iv) investment grade fixed income
securities and mortgage-backed securities, including lower rated securities
[rated in the fourth highest rating category by a rating service (i.e. Baa by
Moody's Investor Services or BBB by Standard & Poor's)] or, if not rated,
determined by the portfolio manager to be of comparable quality to securities so
rated. A description of debt ratings is contained in the Appendix to the
statement of additional information; and (v) obligations issued or guaranteed by
the U.S. Government, its agencies and instrumentalities.

<PAGE>

In addition, the portfolio may: (i) purchase and sell options on equity
securities, stock indices, and foreign currencies; (ii) lend its portfolio
securities; (iii) purchase and sell stock index and foreign currency futures
contracts and options thereon; (iv) enter into forward foreign currency exchange
contracts; and (v) enter into repurchase agreements and purchase securities on a
when-issued or delayed delivery basis. These techniques are described on pages
39 through 41, and further information about some of them is included in the
Statement of Additional Information.

The S&P SmallCap 600 Index is a market weighted index (stock price times shares
outstanding), with each stock affecting the index in proportion to its market
value. Standard & Poor's Corporation is responsible for selecting and
maintaining the list of stocks to be included in the index. Inclusion in the
index in no way implies an opinion by Standard & Poor's Corporation as to a
stock's attractiveness as an investment. "Standard & Poor's", "Standard & Poor's
Small Capitalization Stock Index" and "Standard & Poor's SmallCap 600" are
trademarks of McGraw Hill. Inc. The Series Fund is not sponsored, endorsed, sold
or promoted by S&P and S&P makes no representation regarding the advisability of
investing in the Series Fund. Reference is made to the statement of additional
information which sets forth certain additional disclaimers and limitations of
liabilities on behalf of S&P.

S&P SmallCap 600 With Dividends Reinvested
Annual Percentage Change
------------------------------------------
1985 +32.23
1986 +3.23
1987 -13.50
1988 +19.49
1989 +13.89
1990 -9.90
1991 +48.49
1992 +21.04
1993 +18.79
1994 -4.77

Source: Standard & Poor's Corporation. Percentage change calculated in
accordance with specifications of SEC release number IA-327.

37
<PAGE>

In addition, the portfolio may: (i) purchase and sell options on equity
securities; (ii) lend its portfolio securities; and (iii) purchase securities on
a when-issued or delayed delivery basis. These techniques are described briefly
under Options, Futures Contracts and Swaps on page 40, and in detail in the
Statement of Additional Information.

Wai Chiang, Director of Portfolio Management, Prudential Diversified Investment
Strategies, has been portfolio manager for the Small Capitalization Stock
Portfolio since its inception in 1995. Mr. Chiang also manages the unregistered
separate accounts, Pridex and Pridex 500 for The Prudential. Mr. Chiang has been
employed by The Prudential as a portfolio manager since 1986.

Investing in securities of foreign companies and countries involves special
risks. See Foreign Securities on page 39.

In addition, the portfolio may (i) purchase and sell options on equity
securities, stock indices and foreign currencies; (ii) purchase and sell stock
index, interest rate and foreign currency futures contracts and options thereon;
(iii) enter into forward foreign currency exchange contracts; and (iv) purchase
securities on a when-issued or delayed delivery basis. These techniques are
described briefly under Options, Futures Contracts and Swaps on page 40, and in
detail in the Statement of Additional Information.

Specialized Portfolios

<PAGE>

Companies that primarily own, explore, mine, process or otherwise develop
natural resources, or supply goods and services primarily to such companies,
will be considered "natural resource companies." Natural resources generally
include precious metals (e.g., gold, silver and platinum), hydrocarbons (e.g.,
coal, oil and natural gases), timber land, undeveloped real property and
agricultural commodities.

"Asset-indexed securities," in which the portfolio may also invest, are
securities whose principal amount, redemption terms or conversion terms are
related to the market price of a natural resource asset. The portfolio expects
to purchase asset-indexed securities which are rated, or are issued by issuers
that have outstanding obligations which are rated, at least BBB or Baa by S&P or
Moody's, respectively, or commercial paper rated at least A-2, or P-2 by S&P or
Moody's, respectively, or in unrated securities that The Prudential determines
to be of comparable quality. The portfolio reserves the right, however, to
invest in asset-indexed securities rated as low as CC or Ca by Moody's or S&P,
respectively, or in unrated securities of comparable quality, also known as high
risk securities. The portfolio may invest a small portion of its assets in other
stocks, other securities convertible into common stocks, fixed-income securities
that are primarily rated A or better by Moody's or S&P (including money market
instruments), and options on stocks and on natural resource-related stock
indices. A description of debt ratings is in the Statement of Additional
Information. The portfolio may under normal circumstances invest up to 35% of
its total assets in money market instruments of the type invested in by the
Money Market Portfolio and without limit when the portfolio manager believes
market conditions warrant a temporary defensive posture or during periods of
structuring and restructuring the portfolio.

The portfolio's turnover rate may exceed 100%, although it is not expected to
exceed 200%.

Foreign Securities. The Global Equity Portfolio may invest up to 100% of its
total assets in common stock and convertible securities denominated in a foreign
currency and issued by foreign or domestic issuers. The Bond and High Yield Bond
Portfolios may each invest up to 20% of their assets in United States currency
denominated debt securities issued outside the United States by foreign or
domestic issuers. In addition, the bond components of the Conservatively Managed
Flexible and Aggressively Managed Flexible Portfolios may each invest up to 20%
of their assets in such securities. To the extent permitted by applicable
insurance law, the High Dividend Stock, Conservatively Managed Flexible and
Aggressively Managed Flexible Portfolios may invest up to 30% of their total
assets in debt and equity securities denominated in a foreign currency and
issued by foreign or domestic issuers. Further, to the extent permitted by
applicable insurance law, the Common Stock, Growth Stock, and Natural Resources
Portfolios may invest up to 30% of their assets in non-United States currency
denominated common stock and fixed income securities convertible into common
stock of foreign and domestic issuers. Securities issued outside the United
States and not publicly traded in the United States, as well as American
Depository Receipts ("ADRs") and securities denominated in a foreign currency
are referred to collectively in this prospectus as "foreign securities."

<PAGE>

Foreign securities involve risks of political and economic instability in the
country of the issuer, the difficulty of predicting international trade
patterns, the possibility of imposition of exchange controls and, in the case of
securities not denominated in United States currency, the risk of currency
fluctuations. Such securities may be subject to greater fluctuations in price
than domestic securities. Under certain market conditions, foreign securities
may be less liquid than domestic securities. In addition, there may be less
publicly available information about a foreign company than about a domestic
company. Foreign companies generally are subject to uniform accounting,
auditing, and financial reporting standards comparable to those applicable to
domestic companies. There is generally less government regulation of securities
exchanges, brokers, and listed companies abroad than in the United States, and,
with respect to certain foreign countries, there is a possibility of
expropriation, confiscatory taxation or diplomatic developments which could
affect investment in those countries. If the security is denominated in foreign
currency, it may be affected by changes in currency rates and in exchange
control regulations, and costs may be incurred in connection with conversions
between currencies. Finally, in the event of a default of any foreign debt
obligations, it may be more difficult for a portfolio to obtain or to enforce a
judgment against the issuers of such securities. See Forward Foreign Currency
Exchange Contracts in the Statement of Additional Information.

Options, Futures Contracts and Swaps. The description of each portfolio's
investment policies also state whether they will invest in what are sometimes
called derivative securities. These include options (which may be to buy or sell
equity securities, debt securities, stock indices, foreign currencies and stock
index futures contracts); futures contracts on interest bearing securities,
stock and interest rate indices, and foreign currencies; and interest rate
swaps. These investments have not in the past represented more than a very minor
part of the investments of any portfolio but may increase in the future.

A call option gives the owner the right to buy and a put option the right to
sell a designated security or index at a predetermined price for a given period
of time. They will be used primarily to hedge or minimize fluctuations in the
principal value of a portfolio or to generate additional income. They involve
risks which differ, depending upon the particular option. But they often offer
an attractive alternative to the purchase or sale of the related security.

Futures contracts represent a contractual obligation to buy or sell a designated
security or index within a stated period. They can be used as a hedge against or
to minimize fluctuations of a portfolio or as an efficient way of establishing
certain positions more quickly than direct purchase of the securities. They can
also be used to speculate, but this will not be done by any of the portfolios.
They involve risks of various kinds, all of which could result in losses rather
than in achieving the intended objective of any particular purchase.

Because options, futures and swaps are now used to such a limited extent, a full
description of these investments and the risks associated with them is in the
Statement of Additional Information.

Short Sales. The Bond, High Yield, Bond, Government Securities, Conservatively
Managed Flexible and Aggressively Managed Flexible Portfolios may sell
securities they do not own in anticipation of a decline in the market value of
those securities ("short sales"). The portfolio will incur a loss as a result of
the short sale if the price of the security increases between the date of the
short sale and the date on which the portfolio replaces the borrowed security.
The portfolio will realize a gain if the security declines in price between
those dates. This result is the opposite of what one would expect from a cash
purchase of a long position in a security. The amount of any gain will be
decreased, and the amount of any loss will be increased, by the amount of any
premium or interest paid in connection with the short sale.

Reverse Repurchase Agreements and Dollar Rolls. The Bond, High Yield Bond, and
Government Securities Portfolios, as well as the fixed income portions of the
Conservatively Managed Flexible and Aggressively Managed Flexible Portfolios,
may use reverse repurchase agreements and dollar rolls. The Money Market
Portfolio and the money market portion of any portfolio may use reverse
repurchase agreements. Reverse repurchase agreements involve the sale of
securities held by a portfolio with an agreement by the portfolio to repurchase
the same securities at an agreed upon price and date. During the reverse
repurchase period, the portfolio often continues to receive principal and
interest payments on the sold securities. The terms of each agreement reflect a
rate of interest for use of the funds for the period, and thus these agreements
have the characteristics of borrowing by the portfolio. Dollar rolls involve
sales by a portfolio of securities for delivery in the current month with a
simultaneous contract to repurchase substantially similar securities (same type
and coupon) from the same party at an agreed upon price and date. During the
roll period, the portfolio forgoes principal and interest paid on the
securities. A portfolio is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or a cash equivalent security position which
matures on or before the forward settlement date of the dollar roll transaction.
A portfolio will establish a segregated account with its custodian in which it
will maintain cash, U.S. Government securities or other liquid high-grade debt
obligations equal in value to its obligations in respect of reverse repurchase
agreements and dollar rolls. Reverse repurchase agreements and dollar rolls
involve the risk that the market value of the securities retained by the
portfolio may decline below the price of the securities the portfolio has sold
but

<PAGE>

is obligated to repurchase under the agreement. In the event the buyer of
securities under a reverse repurchase agreement or dollar roll files for
bankruptcy or becomes insolvent, the portfolio's use of the proceeds of the
agreement may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the portfolio's obligation to repurchase
the securities. The Bond, High Yield Bond, and Government Securities Portfolios,
as well as the fixed income portions of the Conservatively Managed Flexible and
Aggressively Managed Flexible Portfolios, will not obligate more than 30% of
their net assets in connection with reverse repurchase agreements and dollar
rolls. No other portfolio will obligate more than 10% of its net assets in
connection with reverse repurchase agreements.

There is a slight risk that the borrower may become insolvent, which might delay
carrying out a decision to sell the loaned security. This risk can be minimized
by careful selection of borrowers and requiring and monitoring the adequacy of
capital. No loans will be made to any broker affiliated with The Prudential.

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS

The Series Fund is subject to certain investment restrictions which are
fundamental to the operations of the Series Fund and may not be changed except
with the approval of a majority vote of the persons participating in the
affected portfolio.

The investments of the various portfolios are generally subject to certain
additional restrictions under state laws. In the event of future amendments to
the applicable New Jersey statutes, each portfolio will comply, without the
approval of the shareholders, with the statutory requirements as so modified.

A detailed discussion of investment restrictions applicable to the Series Fund
is in the Statement of Additional Information.

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES

The Series Fund has entered into an Investment Advisory Agreement with The
Prudential under which The Prudential will, subject to the direction of the
Board of Directors of the Series Fund, be responsible for the management of the
Series Fund, and provide investment advice and related services to each
portfolio. The Prudential manages the assets that it owns as well as those of
various separate accounts established by The Prudential and those held by other
investment companies for which it acts as investment advisor. Total assets under
management as of December 31, 1994 was approximately $297 billion, which
includes approximately $212 billion owned by The Prudential and approximately
$85 billion of external assets under The Prudential's management.

For the year ended December 31, 1994, the Series Fund's total expenses were
0.59% of the average net assets of all of the Series Fund's portfolios. The
investment management fee for that period constituted 0.51% of the average net
assets. Further information about the investment management arrangements and the
expenses of the Series Fund is in the Statement of Additional Information.

41
<PAGE>

An affiliated broker may be employed to execute brokerage transactions on behalf
of the portfolios, as long as the commissions are reasonable and fair compared
to the commissions received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. The Series Fund may not
engage in any transactions in which The Prudential or its affiliates, including
The Prudential Securities Incorporated, acts as principal, including
over-the-counter purchases and negotiated trades in which such a party acts as a
principal. Additional information about portfolio brokerage and related
transactions is in the Statement of Additional Information.

STATE REGULATION

The Prudential is subject to regulation and supervision by the Department of
Insurance of the State of New Jersey, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business.

The Prudential is required to submit annual statements of its operations,
including financial statements, to the insurance departments of the various
jurisdictions in which it does business to determine solvency and compliance
with local insurance laws and regulations.

In addition to the annual statements referred to above, The Prudential is
required to file with New Jersey and other jurisdictions a separate statement
with respect to the operations of all its variable contract accounts, in a form
promulgated by the National Association of Insurance Commissioners.

EXPERTS

The financial statements included in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein, and are included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing. Deloitte &
Touche LLP's principal business address is Two Hilton Court, Parsippany, New
Jersey 07054-0319. Actuarial matters included in this prospectus have been
examined by Nancy D. Davis, FSA, MAAA, whose opinion is filed as an exhibit to
the registration statement.

LITIGATION

No litigation is pending that would have a material effect upon the Account or
the Series Fund.

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

Included in the registration statements for the Contracts and the Series Fund is
a Statement of Additional Information which is available without charge by
writing to The Prudential at Prudential Plaza, Newark, New Jersey 07102-3777.
The following table of contents of that Statement provides a brief summary of
what is included in each section.

I. MORE DETAILED INFORMATION ABOUT THE CONTRACT.

Sales Load Upon Surrender. A description is given of exactly how The
Prudential determines the amount of the part of the sales load that is
imposed only upon surrenders or withdrawals during the first 10 Contract
years.

Reduction of Charges for Concurrent Sales to Several Individuals. Where the
Contract is sold at the same time to several individuals who are members of
an associated class and The Prudential's expenses will be reduced, some of
the charges under those Contracts may be reduced.

Sales to Persons 14 Years of Age or Younger. The face amount will increase,
on the insured's 21st birthday, to 150% of the initial face amount. The
application of some of the other Contract provisions may be affected.

Paying Premiums by Payroll Deduction. Your employer may pay monthly
premiums for you with deductions from your salary.

Unisex Premiums and Benefits. In some states and under certain
circumstances, premiums and benefits will not vary with the sex of the
insured.

42
<PAGE>

How the Death Benefit Will Vary. A description is given of exactly how the
death benefit may increase to satisfy Internal Revenue Code requirements.

Withdrawal of Excess Cash Surrender Value. If the Contract Fund value is
high enough you may be able to withdraw part of the cash surrender value
while keeping the Contract in effect. There will be a transaction charge.
For Form A Contracts there will be a surrender charge. The death benefit
will change. There may be tax consequences. You should consult your
Prudential representative to discuss whether a withdrawal or a loan is
preferable.

Increases in Face Amount. If you wish to increase the amount of your
insurance, it may be preferable to increase the amount of this Contract
rather than to buy another Contract. Conditions will apply, and there will
be changes in the premiums and charges. Other provisions of your Contract
will be affected.

Decreases in Face Amount. In addition to effecting a partial surrender of
the Contract, you may, within limits, reduce the Contract's face amount
without withdrawing any cash. This reduces the amount at risk and the
monthly mortality charge. There could be tax consequences. Your Prudential
representative should first be consulted.

Tax Treatment of Contract Benefits. A fuller account is provided of how
Contract owners may be affected by federal income taxes.

Sale of the Contract and Sales Commissions. The Contract is sold primarily
by agents of The Prudential who are also registered representatives of one
of its subsidiaries, Pruco Securities Corporation, a broker and dealer
registered under the Securities and Exchange Act of 1934. Generally,
selling agents receive a commission of 50% of the Scheduled Premium in the
first year, 10% for the next three years and smaller commissions
thereafter.

Tax-Qualified Pension Plans. Certain restrictions apply if the Contract is
purchased to fund, in part, a tax-advantaged pension plan.

Other Standard Contract Provisions. The Contract contains several
provisions commonly included in all life insurance policies. They include
provisions relating to beneficiaries, misstatement of age or sex, suicide,
assignment, incontestability, and settlement options.

Exchange of Fixed-Dollar Contract to Variable Contract. Owners of an
existing Prudential fixed-dollar life insurance contract may be able to
exchange it for a Contract upon favorable terms.

II. INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS.

General
Convertible Securities
Warrants
Options and Futures
When-Issued and Delayed Delivery Securities
Short Sales
Short Sales Against the Box
Interest Rate Swaps
Loans of Portfolio Securities
Illiquid Securities
Forward Foreign Currency Exchange Contracts
Further Information About the Policies of the
Stock Index Portfolio
Further Information About the Zero Coupon
Bond Portfolios

A more detailed description is given of these investments and the policies
of these portfolios.

III. INVESTMENT RESTRICTIONS.

There are many restrictions upon the investments the portfolios may make
and the practices in which they may engage; these are fundamental, meaning
they may not be changed without Contract owner approval.

IV. INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES.

A fuller description than that in the prospectus is given.

V. PORTFOLIO TRANSACTIONS AND BROKERAGE.

A description is given of how securities transactions are effected and how
The Prudential selects the brokers.

43
<PAGE>

VI. DETERMINATION OF NET ASSET VALUE.

A full description is given of how the daily net asset value of each
portfolio is determined.

VII. SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY CURRENTLY INVEST.

A full description is given.

VIII. DEBT RATINGS.

A description is given of how Moody's Investors Services, Inc. and
Standard & Poor's Corporation describe the creditworthiness of debt
securities.

IX. POSSIBLE REPLACEMENT OF THE SERIES FUND.

Although it is most unlikely, it is conceivable that The Prudential might
wish to replace the Series Fund portfolios with other investment options.
SEC approval will be needed.

X. OTHER INFORMATION CONCERNING THE SERIES FUND.

Incorporation and Authorized Stock
Dividends, Distributions and Taxes
Custodian and Transfer Agent
Experts
Licenses

More detail is provided about these matters.

XI. DIRECTORS AND OFFICERS OF THE PRUDENTIAL AND MANAGEMENT OF THE SERIES
FUND.

The names and recent affiliations of The Prudential's directors and
executive officers are given. The same information is given for the Series
Fund.

XII. FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC.

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

ADDITIONAL INFORMATION

A registration statement has been filed with the SEC under the Securities Act of
1933, relating to the offering described in this prospectus. This prospectus and
the Statement of Additional Information do not include all of the information
set forth in the registration statement. Certain portions have been omitted
pursuant to the rules and regulations of the SEC. The omitted information may,
however, be obtained from the SEC's principal office in Washington, D.C., upon
payment of a prescribed fee.

Further information may also be obtained from The Prudential. Its address and
telephone number are on the cover of this prospectus.

FINANCIAL STATEMENTS

The financial statements of the Account should be distinguished from the
consolidated financial statements of The Prudential, which should be considered
only as bearing upon the ability of The Prudential to meet its obligations under
the Contracts. The financial statements of the Series Fund are in the Statement
of Additional Information.

44
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF NET ASSETS

December 31, 1994

<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------

AGGRESSIVELY
MONEY COMMON MANAGED
TOTAL MARKET BOND STOCK FLEXIBLE
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2].......... $2,587,138,095 $ 78,169,861 $ 76,194,412 $ 500,113,200 $ 699,836,622
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $2,568,337,051 $ 77,928,559 $ 76,018,846 $ 495,997,636 $ 695,664,623
Equity of The Prudential Insurance Company of
America....................................... 18,801,044 241,302 175,566 4,115,564 4,171,999
-------------- -------------- -------------- -------------- --------------
$2,587,138,095 $ 78,169,861 $ 76,194,412 $ 500,113,200 $ 699,836,622
============== ============== ============== ============== ==============
</TABLE>

STATEMENTS OF OPERATIONS

For the year ended December 31, 1994

<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------

AGGRESSIVELY
MONEY COMMON MANAGED
TOTAL MARKET BOND STOCK FLEXIBLE
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 79,801,099 $ 2,906,404 $ 4,745,723 $ 10,458,080 $ 18,588,518

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 16,768,066 504,103 518,852 3,134,155 4,527,520
Reimbursement for excess expenses [Note 3D]..... (53,999) 0 0 0 0
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 16,714,067 504,103 518,852 3,134,155 4,527,520
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 63,087,032 2,402,301 4,226,871 7,323,925 14,060,998
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 54,709,623 0 158,594 19,666,506 18,931,168
Realized gain (loss) on shares redeemed
[average cost basis].......................... 167,179 0 4,403 86,672 0
Net unrealized loss on investments.............. (155,373,175) 0 (7,162,380) (18,362,891) (56,779,739)
-------------- -------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... (100,496,373) 0 (6,999,383) 1,390,287 (37,848,571)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ (37,409,341) $ 2,402,301 $ (2,772,512) $ 8,714,212 $ (23,787,573)
============== ============== ============== ============== ==============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 AND A11.
A1

<PAGE>

STATEMENTS OF NET ASSETS (CONTINUED)
December 31, 1994
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
ZERO ZERO
CONSERVATIVELY COUPON COUPON HIGH
MANAGED BOND BOND YIELD STOCK
FLEXIBLE 1995 2000 BOND INDEX
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2].......... $ 637,504,119 $ 4,804,597 $ 16,786,627 $ 54,538,773 $ 190,760,024
============== ============== ============== ============== ==============
NET ASSETS, representing:
Equity of Contract owners....................... $ 633,504,352 $ 4,788,369 $ 16,177,407 $ 54,364,432 $ 190,028,325
Equity of The Prudential Insurance Company of
America....................................... 3,999,767 16,228 609,220 174,341 731,699
-------------- -------------- -------------- -------------- --------------
$ 637,504,119 $ 4,804,597 $ 16,786,627 $ 54,538,773 $ 190,760,024
============== ============== ============== ============== ==============

HIGH
DIVIDEND NATURAL GLOBAL
STOCK RESOURCES EQUITY
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2].......... $ 150,687,304 $ 72,147,168 $ 29,938,696
============== ============== ==============
NET ASSETS, representing:
Equity of Contract owners....................... $ 149,277,865 $ 71,565,256 $ 27,782,691
Equity of The Prudential Insurance Company of
America....................................... 1,409,439 581,912 2,156,005
-------------- -------------- --------------
$ 150,687,304 $ 72,147,168 $ 29,938,696
============== ============== ==============
</TABLE>

STATEMENTS OF OPERATIONS (CONTINUED)
For the year ended December 31, 1994
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
ZERO ZERO
CONSERVATIVELY COUPON COUPON HIGH
MANAGED BOND BOND YIELD STOCK
FLEXIBLE 1995 2000 BOND INDEX
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 21,289,808 $ 286,151 $ 1,133,170 $ 5,329,778 $ 4,465,133

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 4,323,507 32,534 118,731 370,924 1,283,145
Reimbursement for excess expenses [Note 3D]..... 0 (9,637) (17,971) 0 0
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 4,323,507 22,897 100,760 370,924 1,283,145
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 16,966,301 263,254 1,032,410 4,958,854 3,181,988
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 6,635,310 1,011 31,655 38 267,733
Realized gain (loss) on shares redeemed
[average cost basis].......................... 31,649 586 1,031 5,625 58,302
Net unrealized loss on investments.............. (33,092,575) (288,227) (2,416,751) (6,827,471) (2,856,319)
-------------- -------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... (26,425,616) (286,630) (2,384,065) (6,821,808) (2,530,284)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ (9,459,315) $ (23,376) $ (1,351,655) $ (1,862,954) $ 651,704
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------

HIGH
DIVIDEND NATURAL GLOBAL
STOCK RESOURCES EQUITY*
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 5,001,100 $ 674,356 $ 44,201
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 893,008 470,895 55,679
Reimbursement for excess expenses [Note 3D]..... 0 (2) 0
-------------- -------------- --------------
NET EXPENSES...................................... 893,008 470,893 55,679
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 4,108,092 203,463 (11,478)
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 7,633,088 1,375,424 5,622
Realized gain (loss) on shares redeemed
[average cost basis].......................... 34,607 22,045 0
Net unrealized loss on investments.............. (11,478,198) (5,314,192) (1,421,127)
-------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... (3,810,503) (3,916,723) (1,415,505)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 297,589 $ (3,713,260) $ (1,426,983)
-------------- -------------- --------------
-------------- -------------- --------------
*Commenced
Business
on 5/1/94
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 AND A11.
A2

<PAGE>

STATEMENTS OF NET ASSETS (CONTINUED)

December 31, 1994

<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
ZERO
COUPON
GOVERNMENT BOND
SECURITIES 2005
-------------- --------------
<S> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2].......... $ 61,563,342 $ 14,093,350
============== ==============
NET ASSETS, representing:
Equity of Contract owners....................... $ 61,256,996 $ 13,981,694
Equity of The Prudential Insurance Company of
America....................................... 306,346 111,656
-------------- --------------
$ 61,563,342 $ 14,093,350
============== ==============
</TABLE>

STATEMENTS OF OPERATIONS (CONTINUED)

For the year ended December 31, 1994

<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
ZERO
COUPON
GOVERNMENT BOND
SECURITIES 2005
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 4,032,941 $ 845,736

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 445,508 89,505
Reimbursement for excess expenses [Note 3D]..... 0 (26,389)
-------------- --------------
NET EXPENSES...................................... 445,508 63,116
-------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 3,587,433 782,620
-------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 0 3,474
Realized gain (loss) on shares redeemed
[average cost basis].......................... (74,828) (2,913)
Net unrealized loss on investments.............. (7,299,824) (2,073,481)
-------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... (7,374,652) (2,072,920)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ (3,787,219) $ (1,290,300)
============== ==============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 AND A11.
A3

<PAGE>

(This page intentionally left blank.)

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the years ended December 31, 1994 and 1993

<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------

MONEY
TOTAL MARKET BOND
------------------------------ ------------------------------ ------------------------------
1993
1994 (AS RESTATED) 1994 1993 1994 1993
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 63,087,032 $ 44,057,142 $ 2,402,301 $ 1,562,897 $ 4,226,871 $ 3,075,764
Capital gains distributions
received....................... 54,709,623 70,916,387 0 0 158,594 892,376
Realized gain (loss) on shares
redeemed
[average cost basis]........... 167,179 626,607 0 0 4,403 15,239
Net unrealized gain (loss) on
investments.................... (155,373,175) 89,884,218 0 0 (7,162,380) 662,894
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ (37,409,341) 205,484,354 2,402,301 1,562,897 (2,772,512) 4,646,273
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 560,003,324 595,883,814 6,444,757 5,467,177 11,829,119 18,271,190
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (942,487) 1,089,951 (213,654) (175,801) (532,267) (36,073)
-------------- -------------- -------------- -------------- -------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 521,651,496 802,458,119 8,633,404 6,854,273 8,524,340 22,881,390

NET ASSETS:
Beginning of year................ 2,065,486,599 1,263,028,480 69,536,457 62,682,184 67,670,072 44,788,682
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $2,587,138,095 $2,065,486,599 $ 78,169,861 $ 69,536,457 $ 76,194,412 $ 67,670,072
============== ============== ============== ============== ============== ==============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 AND A11.
A5

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

For the years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------

AGGRESSIVELY
COMMON MANAGED
STOCK FLEXIBLE
------------------------------ ------------------------------
1994 1993 1994 1993
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 7,323,925 $ 3,787,584 $ 14,060,998 $ 12,932,914
Capital gains distributions
received....................... 19,666,506 16,988,695 18,931,168 29,168,105
Realized gain (loss) on shares
redeemed
[average cost basis]........... 86,672 167,532 0 122,764
Net unrealized gain (loss) on
investments.................... (18,362,891) 30,362,343 (56,779,739) 18,927,854
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 8,714,212 51,306,154 (23,787,573) 61,151,637
-------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 123,951,671 108,534,011 142,298,237 150,101,012
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ 452,486 1,171,594 (55,717) (111,711)
-------------- -------------- -------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 133,118,369 161,011,759 118,454,947 211,140,938

NET ASSETS:
Beginning of year................ 366,994,831 205,983,072 581,381,675 370,240,737
-------------- -------------- -------------- --------------
End of year...................... $ 500,113,200 $ 366,994,831 $ 699,836,622 $ 581,381,675
============== ============== ============== ==============

ZERO
CONSERVATIVELY COUPON
MANAGED BOND
FLEXIBLE 1995
------------------------------ ------------------------------

1994 1993 1994 1993
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 16,966,301 $ 10,601,459 $ 263,254 $ 257,300
Capital gains distributions
received....................... 6,635,310 18,959,118 1,011 0
Realized gain (loss) on shares
redeemed
[average cost basis]........... 31,649 120,806 586 0
Net unrealized gain (loss) on
investments.................... (33,092,575) 12,220,568 (288,227) (1,749)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ (9,459,315) 41,901,951 (23,376) 255,551
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 127,164,401 163,207,517 338,277 1,203,358
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (1,173,893) 816,842 (106,380) 8,524
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 116,531,193 205,926,310 208,521 1,467,433
NET ASSETS:
Beginning of year................ 520,972,926 315,046,616 4,596,076 3,128,643
-------------- -------------- -------------- --------------
End of year...................... $ 637,504,119 $ 520,972,926 $ 4,804,597 $ 4,596,076
============== ============== ============== ==============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 AND A11.
A6

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

For the years ended December 31, 1994 and 1993

<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------

ZERO
COUPON HIGH
BOND YIELD STOCK
2000 BOND INDEX
------------------------------ ------------------------------ ------------------------------
1993
1994 1993 1994 (AS RESTATED) 1994 1993
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 1,032,410 $ 834,516 $ 4,958,854 $ 3,323,954 $ 3,181,988 $ 2,402,805
Capital gains distributions
received....................... 31,655 5,978 38 23 267,733 339,359
Realized gain (loss) on shares
redeemed
[average cost basis]........... 1,031 1,154 5,625 48,986 58,302 63,772
Net unrealized gain (loss) on
investments.................... (2,416,751) 919,475 (6,827,471) 2,255,362 (2,856,319) 8,649,699
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ (1,351,655) 1,761,123 (1,862,954) 5,628,325 651,704 11,455,635
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 900,334 5,163,860 9,774,435 17,361,907 26,983,569 43,311,756
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ 409,426 10,638 (576,511) (16,603) (298,727) (951,071)
-------------- -------------- -------------- -------------- -------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... (41,895) 6,935,621 7,334,970 22,973,629 27,336,546 53,816,320

NET ASSETS:
Beginning of year................ 16,828,522 9,892,901 47,203,803 24,230,174 163,423,478 109,607,158
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 16,786,627 $ 16,828,522 $ 54,538,773 $ 47,203,803 $ 190,760,024 $ 163,423,478
============== ============== ============== ============== ============== ==============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 AND A11.
A7

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

For the years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------------------------

HIGH
DIVIDEND NATURAL GLOBAL GOVERNMENT
STOCK RESOURCES EQUITY* SECURITIES
------------------------------ ------------------------------ -------------- --------------
1994 1993 1994 1993 1994 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 4,108,092 $ 1,948,922 $ 203,463 $ 300,114 $ (11,478) $ 3,587,433
Capital gains distributions
received....................... 7,633,088 3,057,447 1,375,424 1,290,124 5,622 0
Realized gain (loss) on shares
redeemed
[average cost basis]........... 34,607 68,504 22,045 8,953 0 (74,828)
Net unrealized gain (loss) on
investments.................... (11,478,198) 6,361,835 (5,314,192) 6,638,189 (1,421,127) (7,299,824)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 297,589 11,436,708 (3,713,260) 8,237,380 (1,426,983) (3,787,219)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 51,018,498 44,298,031 22,317,372 13,476,759 29,174,840 4,183,444
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (376,490) 886,003 (47,480) 173,903 2,190,839 (467,937)
-------------- -------------- -------------- -------------- -------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 50,939,597 56,620,742 18,556,632 21,888,042 29,938,696 (71,712)

NET ASSETS:
Beginning of year................ 99,747,707 43,126,965 53,590,536 31,702,494 0 61,635,054
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 150,687,304 $ 99,747,707 $ 72,147,168 $ 53,590,536 $ 29,938,696 $ 61,563,342
============== ============== ============== ============== ============== ==============
*Commenced
Business
on 5/1/94

<CAPTION>
1993
--------------
<S> <C>
OPERATIONS:
Net investment income (loss)..... $ 2,505,506
Capital gains distributions
received....................... 213,250
Realized gain (loss) on shares
redeemed
[average cost basis]........... 6,004
Net unrealized gain (loss) on
investments.................... 2,070,124
--------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 4,794,884
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 20,135,848
--------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (628,148)
--------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 24,302,584
NET ASSETS:
Beginning of year................ 37,332,470
--------------
End of year...................... $ 61,635,054
==============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 AND A11.
A8

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

For the years ended December 31, 1994 and 1993

<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------

ZERO
COUPON
BOND
2005
------------------------------
1994 1993
-------------- --------------
<S> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 782,620 $ 523,407
Capital gains distributions
received....................... 3,474 1,912
Realized gain (loss) on shares
redeemed
[average cost basis]........... (2,913) 2,893
Net unrealized gain (loss) on
investments.................... (2,073,481) 817,624
-------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ (1,290,300) 1,345,836
-------------- --------------

NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 3,624,370 5,351,388
-------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (146,182) (58,146)
-------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 2,187,888 6,639,078

NET ASSETS:
Beginning of year................ 11,905,462 5,266,384
-------------- --------------
End of year...................... $ 14,093,350 $ 11,905,462
============== ==============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 AND A11.
A9

<PAGE>

NOTES TO FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
FOR THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993

NOTE 1: GENERAL

The Prudential Variable Appreciable Account (the "Account") of The Prudential
Insurance Company of America ("The Prudential") was established on August 11,
1987 by a resolution of The Prudential's Board of Directors in conformity with
insurance laws of the State of New Jersey. The assets of the Account are
segregated from The Prudential's other assets.

The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. There are fourteen subaccounts within the Account,
each of which invests only in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"). The Series Fund is a diversified open-end
management investment company, and is managed by The Prudential.

NOTE 2: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS

The net asset value per share for each portfolio of the Series Fund, the number
of shares of each portfolio held by the subaccounts of the Account and the
aggregate cost of investments in such shares at December 31, 1994 were as
follows:

<TABLE>
<CAPTION>
PORTFOLIOS
-------------------------------------------------------------------------------
AGGRESSIVELY CONSERVATIVELY
PORTFOLIO MONEY COMMON MANAGED MANAGED
INFORMATION MARKET BOND STOCK FLEXIBLE FLEXIBLE
- ---------------------------- -------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Number of shares: 7,816,986 7,590,332 24,204,046 45,162,376 45,229,225
Net asset value per share: $ 10.0000 $ 10.0384 $ 20.6624 $ 15.4960 $ 14.0950
Cost: $ 78,169,861 $ 82,298,314 $ 479,554,451 $ 718,908,716 $ 652,751,738
</TABLE>

<TABLE>
<CAPTION>
PORTFOLIOS (CONTINUED)
-------------------------------------------------------------------------------
ZERO ZERO
COUPON COUPON HIGH HIGH
PORTFOLIO BOND BOND YIELD STOCK DIVIDEND
INFORMATION 1995 2000 BOND INDEX STOCK
- ---------------------------- -------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Number of shares: 453,570 1,415,159 7,400,245 12,753,836 10,403,600
Net asset value per share: $ 10.5929 $ 11.8620 $ 7.3655 $ 14.9571 $ 14.4842
Cost: $ 5,036,020 $ 17,707,975 $ 58,897,134 $ 172,505,026 $ 152,868,694
</TABLE>

<TABLE>
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------------
ZERO
COUPON
PORTFOLIO NATURAL GLOBAL GOVERNMENT BOND
INFORMATION RESOURCES EQUITY SECURITIES 2005
- ---------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Number of shares: 4,995,241 2,157,138 5,884,837 1,311,729
Net asset value per share: $ 14.4432 $ 13.8789 $ 10.4614 $ 10.7441
Cost: $ 69,492,489 $ 31,359,823 $ 66,221,339 $ 15,136,391
</TABLE>

NOTE 3: CHARGES AND EXPENSES

A. Mortality Risk and Expense Risk Charges

The mortality risk and expense risk charges at an effective annual rate of
up to 0.90% may be applied daily against the net assets representing equity
of the Contract owners held in each subaccount. For contracts with face
amounts of $100,000 or more, the annual rate is 0.60%.

B. Deferred Sales Charge

A deferred sales charge is imposed upon the surrender of certain variable
life insurance contracts to compensate The Prudential for sales and other
marketing expenses. The amount of any sales charge will depend on the number
of years that have elapsed since the Contract was issued. No sales charge
will be imposed after the tenth year of the Contract. No sales charge will
be imposed on death benefits.

A10

<PAGE>

C. Partial Withdrawal Charge

The partial withdrawal of the cash surrender value from certain variable
life insurance contracts invokes a charge equal to the lesser of $15 or 2%
of the amount withdrawn.

D. Expense Reimbursement

The Account is reimbursed by The Prudential, on a non-guaranteed basis, for
expenses incurred by the Series Fund in excess of the effective rate of
0.40% for all Zero Coupon Bond Portfolios, 0.45% for the Stock Index
Portfolio, 0.50% for the High Dividend Stock Portfolio, 0.55% for the
Natural Resources Portfolio, and 0.65% for the High Yield Bond Portfolio of
the average daily net assets of these portfolios.

NOTE 4: TAXES

The operations of the subaccounts form a part of, and are taxed with, the
operations of The Prudential. Under the Internal Revenue Code, all ordinary
income and capital gains allocated to the Contract owners are not taxed to The
Prudential. As a result, the net asset values of the subaccounts are not
affected by federal income taxes on distributions received by the subaccounts.

NOTE 5: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS

The increase (decrease) in net assets resulting from surplus transfers
represents the net contributions of The Prudential to the Account.

NOTE 6: RELATED PARTY TRANSACTIONS

The Prudential has purchased multiple individual contracts of the Account
insuring the lives of certain employees. The Prudential is the owner and
beneficiary of the contracts. Net premium payments of approximately $23.0
million for each of the years ended December 31, 1994 and December 31, 1993,
respectively, were directed to the Aggressively Managed Flexible subaccount.
Equity of Contract owners in that subaccount at December 31, 1994 and December
31, 1993 includes approximately $136.7 million and $122.8 million, respectively,
owned by The Prudential.

NOTE 7: RESTATEMENT

Subsequent to the issuance of the Account's previously issued December 31, 1993
financial statements, The Prudential determined that in the High Yield Bond
subaccount, net assets and net increase in net assets resulting from operations
were overstated by approximately $284,192 due to the overvaluation of a security
held in the High Yield Bond Portfolio of the Series Fund at December 31, 1993.
Accordingly, the comparative 1993 financial information included in the
statements of changes in net assets of the Account has been restated.

A11

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Contract Owners of
The Prudential Variable Appreciable
Account and the Board of Directors
of The Prudential Insurance Company of America
Newark, New Jersey

We have audited the accompanying statements of net assets of The Prudential
Variable Appreciable Account of The Prudential Insurance Company of America
(comprising, respectively, the Money Market, Bond, Common Stock, Aggressively
Managed Flexible, Conservatively Managed Flexible, Zero Coupon Bond 1995, Zero
Coupon Bond 2000, High Yield Bond, Stock Index, High Dividend Stock, Natural
Resources, Global Equity, Government Securities and Zero Coupon Bond 2005
subaccounts) as of December 31, 1994, the related statements of operations for
the periods presented in the year then ended, and the statements of changes in
net assets for each of the periods presented in the two years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the respective subaccounts
constituting The Prudential Variable Appreciable Account as of December 31,
1994, the results of their operations, and the changes in their net assets for
the respective stated periods in conformity with generally accepted accounting
principles.

As discussed in Note 7, the 1993 financial statements of The Prudential Variable
Appreciable Account have been restated.

Deloitte & Touche LLP
Parsippany, New Jersey
February 10, 1995

A12

<PAGE> 1
CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
<TABLE>
<CAPTION>

DECEMBER 31,
1994 1993
------ ------
(IN MILLIONS)

<S> <C> <C>
ASSETS

Fixed maturities....................... $ 78,743 $ 79,061
Equity securities...................... 2,327 2,216
Mortgage loans......................... 26,199 27,509
Investment real estate................. 1,600 1,903
Policy loans........................... 6,631 6,456
Other long-term investments............ 5,147 4,739
Short-term investments................. 10,630 6,304
Securities purchased under
agreements to resell................. 5,591 9,656
Trading account securities............. 6,218 8,586
Cash................................... 1,109 1,666
Accrued investment income.............. 1,932 1,826
Premiums due and deferred.............. 2,712 2,549
Broker-dealer receivables.............. 7,311 9,133
Other assets........................... 7,119 9,997
Assets held in Separate Accounts....... 48,633 48,110
-------- --------
TOTAL ASSETS............................... $211,902 $219,711
======== ========
LIABILITIES, AVR AND SURPLUS
Liabilities:
Policy liabilities and insurance
reserves:
Future policy benefits and claims...... $101,589 $100,030
Unearned premiums...................... 1,144 1,146
Other policy claims and benefits
payable.............................. 1,848 1,935
Policy dividends....................... 1,686 2,018
Other policyholders' funds............. 9,097 9,874
Securities sold under agreements
to repurchase........................ 8,919 14,703
Notes payable and other borrowings..... 12,009 13,354
Broker-dealer payables................. 5,144 5,410
Other liabilities...................... 13,036 13,075
Liabilities related to
Separate Accounts...................... 47,946 47,475
-------- --------
TOTAL LIABILITIES.......................... 202,418 209,020
-------- --------
Asset valuation reserve (AVR).............. 2,035 2,687
-------- --------
Surplus:
Capital notes.......................... 298 298
Special surplus fund................... 1,097 1,091
Unassigned surplus..................... 6,054 6,615
-------- --------
TOTAL SURPLUS.............................. 7,449 8,004
-------- --------
TOTAL LIABILITIES, AVR
AND SURPLUS............................ $211,902 $219,711
======== ========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF
OPERATIONS AND CHANGES IN SURPLUS AND ASSET
VALUATION RESERVE (AVR)

YEARS ENDED DECEMBER 31,
1994 1993 1992
----- ----- -----
(IN MILLIONS)

<S> <C> <C> <C>
REVENUE

Premiums and annuity
considerations............. $29,698 $29,982 $29,858
Net investment income........ 9,595 10,090 10,318
Broker-dealer revenue........ 3,677 4,025 3,592
Realized investment
(losses)/gains............. (450) 953 720
Other income................. 1,037 924 833
------- ------- -------
TOTAL REVENUE.................... 43,557 45,974 45,321
------- ------- -------
BENEFITS AND EXPENSES
Current and future benefits
and claims................. 30,788 30,573 32,031
Insurance and underwriting
expenses................... 4,830 4,982 4,563
Limited partnership
matters.................... 1,422 390 129
General, administrative
and other expenses......... 5,794 5,575 5,394
------- ------- -------
TOTAL BENEFITS AND
EXPENSES..................... 42,834 41,520 42,117
------- ------- -------
Income from operations
before dividends
and income taxes............. 723 4,454 3,204
Dividends to
policyholders................ 2,290 2,339 2,389
------- ------- -------
Income/(loss) before
income taxes................. (1,567) 2,115 815
Income tax
(benefit)/provision.......... (392) 1,236 468
------- ------- -------
NET INCOME/(LOSS)................ (1,175) 879 347
SURPLUS, BEGINNING
OF YEAR...................... 8,004 7,365 6,527
Issuance of capital notes
(after net charge-off
of non-admitted prepaid
postretirement benefit
cost of $113 in 1993)........ 0 185 0
Net unrealized
investment (losses)
and change in AVR............ 620 (425) 491
------- ------- -------
SURPLUS, END OF
YEAR......................... 7,449 8,004 7,365
------- ------- -------
AVR, BEGINNING OF YEAR........... 2,687 2,457 3,216
(Decrease)/increase in AVR (652) 230 (759)
------- ------- -------
AVR, END OF YEAR................. 2,035 2,687 2,457
------- ------- -------
TOTAL SURPLUS AND
AVR.......................... $ 9,484 $10,691 $ 9,822
======= ======= =======

</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-1
<PAGE> 2

CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,
1994 1993 1992
----- ----- -----
(IN MILLIONS)

<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES

Net income/(loss)................ $(1,175) $ 879 $ 347
Adjustments to reconcile
net income/(loss) to cash flows
from operating activities:
Increase in policy liabilities
and insurance reserves..... 1,289 2,747 3,428
Net increase in
Separate Accounts.......... (52) (59) (69)
Realized investment
losses/(gains)............. 450 (953) (720)
Depreciation, amortization
and other non-cash
items...................... 379 261 380
Decrease/(increase)
in operating assets:
Mortgage loans........... (226) (226) (1,952)
Policy loans............. (175) (174) (216)
Securities purchased
under agreements
to resell.............. 2,979 (2,049) (1,420)
Trading account
securities............. 2,447 (2,087) 351
Broker-dealer
receivables............ 1,822 (1,803) (161)
Other assets............. 1,873 (2,277) (1,041)
(Decrease)/increase in
operating liabilities:
Securities sold under
agreements to
repurchase........... (3,247) 1,134 1,967
Broker-dealer
payables............. (266) 1,067 (653)
Other liabilities...... (2,116) 2,007 841
------ ------ ------
CASH FLOWS FROM
OPERATING ACTIVITIES............ 3,982 (1,533) 1,082
------ ------ ------
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds from the
sale/maturity of:
Fixed maturities.............. 82,834 87,840 73,326
Equity securities............. 1,426 1,725 957
Mortgage loans................ 4,154 4,789 3,230
Investment real estate........ 935 441 243
Other long-term
investments................. 1,022 1,352 2,046
Property and equipment........ 637 6 5
Payments for the purchase of:
Fixed maturities.............. (83,075) (89,034) (72,397)
Equity securities............. (1,535) (1,085) (977)
Mortgage loans................ (3,446) (3,530) (3,087)
Investment real estate........ (161) (196) (240)
Other long-term
investments................. (1,687) (531) (2,039)
Property and equipment........ (392) (640) (733)
Short-term investments (net)...... (4,281) (2,150) (1,160)
Net change in cash placed as
collateral for securities
loaned........................ 2,011 (589) (1,032)
------ ------ ------
CASH FLOWS FROM
INVESTING ACTIVITIES.......... (1,558) (1,602) (1,858)
------ ------ ------
</TABLE>

<TABLE>

<S> <C> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES
Net (payments)/proceeds
of short-term borrowings.... $ (1,115) $ 1,106 $ 70
Proceeds from the issuance of
long-term debt.............. 345 1,228 217
Payments for the settlement
of long-term debt........... (760) (721) (204)
Proceeds/(payments) of
unmatched securities
purchased under
agreements to resell........ 1,086 (47) (170)
(Payments)/proceeds of
unmatched securities sold
under agreements to
repurchase.................. (2,537) 1,707 1,201
Proceeds from the issuance of
capital notes............... 0 298 0
------- ------- -------
CASH FLOWS FROM
FINANCING ACTIVITIES.......... (2,981) 3,571 1,114
------- ------- -------
Net (decrease)/increase
in cash..................... (557) 436 338
Cash, beginning of year........ 1,666 1,230 892
------- ------- -------
CASH, END OF YEAR.............. $ 1,109 $ 1,666 $ 1,230
======== ======= =======

</TABLE>

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Income tax payments made, net of refunds, during 1994, 1993 and 1992 were $64
million, $933 million and $555 million, respectively. Interest payments made
during 1994, 1993 and 1992 were $1,429 million, $1,171 million and $1,272
million, respectively.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-2

<PAGE> 3

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

1. ACCOUNTING POLICIES AND PRINCIPLES

A. PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
The Prudential Insurance Company of America ("The Prudential"), a mutual
life insurance company, and its subsidiaries (collectively, "the
Company"). The activities of the Company cover a broad range of financial
services, including life and health insurance, property and casualty
insurance, reinsurance, group health care, securities brokerage, asset
management, investment advisory services, mortgage banking and servicing,
and real estate development and brokerage. All significant intercompany
balances and transactions have been eliminated in consolidation.

B. BASIS OF PRESENTATION

The consolidated financial statements are presented in conformity with
generally accepted accounting principles ("GAAP"), which for mutual life
insurance companies and their insurance subsidiaries are statutory
accounting practices prescribed or permitted by regulatory authorities in
the domiciliary states. Certain reclassifications have been made to the
1993 and 1992 financial statements to conform to the 1994 presentation.

In 1994, The American Institute of Certified Public Accountants issued
Statement of Position 94-5, "Disclosures of Certain Matters in the
Financial Statements of Insurance Enterprises" ("SOP 94-5"), which
requires insurance enterprises to disclose in their financial statements
the accounting methods used in their statutory financial statements that
are permitted by the state insurance departments rather than prescribed
statutory accounting practices.

The Prudential, domiciled in the State of New Jersey, prepares its
statutory financial statements in accordance with accounting practices
prescribed or permitted by the New Jersey Department of Insurance ("the
Department"). Its insurance subsidiaries prepare statutory financial
statements in accordance with accounting practices prescribed or permitted
by their respective domiciliary home state insurance departments.
Prescribed statutory accounting practices include publications of the
National Association of Insurance Commissioners ("NAIC"), state laws,
regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so prescribed.

In 1993, The Prudential issued Fixed Rate Capital Notes ("the notes").
Interest payments on the notes are pre-approved by the Department, and
principal repayment is subject to a Risk-Based Capital test. This
permitted accounting practice differs from that prescribed by the NAIC.
The NAIC practices provide for Insurance Commissioner approval of every
interest and principal payment before the payment is made. The Prudential
has included the notes as part of surplus (see Note 7).

The Prudential has established guaranty fund liabilities for the
insolvencies of certain life insurance companies. The liabilities were
established net of estimated premium tax credits and federal income tax.
Prescribed statutory accounting practices do not address the establishment
of liabilities for guaranty fund assessments.

The Company, with permission from the Department, prepares an Annual
Report that differs from the Annual Statement filed with the Department in
that subsidiaries are consolidated and certain financial statement
captions are presented differently.

C. FUTURE APPLICATION OF ACCOUNTING STANDARDS

The Financial Accounting Standards Board (the "FASB") issued Financial
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises," which, as
amended, is effective for fiscal years beginning after December 15, 1995.
Interpretation No. 40 changes the current practice of mutual life
insurance companies with respect to utilizing statutory basis financial
statements for general purposes in that it would not allow such financial
statements to be referred to as having been prepared in accordance with
GAAP. Interpretation No. 40 requires GAAP financial statements of mutual
life insurance companies to apply all GAAP pronouncements, unless
specifically exempted. Implementation of Interpretation No. 40 will
require significant effort and judgment as to determining GAAP for mutual
insurance companies' insurance operations. The Company is currently
assessing the impact of Interpretation No. 40 on its consolidated
financial statements.

D. INVESTED ASSETS

Fixed maturities, which include long-term bonds and redeemable preferred
stock, are stated primarily at amortized cost. Equity securities, which
consist primarily of common stocks, are carried at market value, which is
based on quoted market prices, where available, or prices provided by
state regulatory authorities.

F-3

<PAGE> 4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

As of January 1, 1994, the non-insurance subsidiaries of The Prudential
adopted Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS No. 115").
Under SFAS No. 115, debt and marketable equity securities are classified
in three categories: held-to-maturity, available-for-sale and trading. The
effect of adopting SFAS No. 115 for the non-insurance subsidiaries was not
material.

Mortgage loans are stated primarily at unpaid principal balances. In
establishing reserves for losses on mortgage loans, management considers
expected losses on loans which they believe may not be collectible in full
and expected losses on foreclosures and the sale of mortgage loans.
Reserves established for potential or estimated mortgage loan losses are
included in the "Asset valuation reserve."

Policy loans are stated primarily at unpaid principal balances.

Investment real estate, except for real estate acquired in satisfaction of
debt, is carried at cost less accumulated straight-line depreciation ($748
million in 1994 and $859 million in 1993), encumbrances and permanent
impairments in value. Real estate acquired in satisfaction of debt,
included in "Other assets," is carried at the lower of cost or fair value
less disposition costs. Fair value is considered to be the amount that
could reasonably be expected in a current transaction between willing
parties, other than in forced or liquidation sale.

Included in "Other long-term investments" is the Company's net equity in
joint ventures and other forms of partnerships, which amounted to $3,357
million and $3,745 million as of December 31, 1994 and 1993, respectively.
The Company's share of net income from such entities was $354 million,
$375 million and $185 million for 1994, 1993 and 1992, respectively.

Short-term investments are stated at amortized cost, which approximates
fair value.

Securities purchased under agreements to resell and securities sold under
agreements to repurchase are collateralized financing transactions and are
carried at their contract amounts plus accrued interest. These agreements
are generally collateralized by cash or securities with market values in
excess of the obligations under the contract. It is the Company's policy
to take possession of securities purchased under resale agreements and to
value the securities daily. The Company monitors the value of the
underlying collateral and collateral is adjusted when necessary.

Trading account securities from broker-dealer operations are reported
based upon quoted market prices with unrealized gains and losses reported
in "Broker-dealer revenue."

The Company has a securities lending program whereby large blocks of
securities are loaned to third parties, primarily major brokerage firms.
As of December 31, 1994 and 1993, the estimated fair values of loaned
securities were $6,765 million and $6,520 million, respectively. Company
and NAIC policies require a minimum of 102% and 105% of the fair value of
the domestic and foreign loaned securities, respectively, to be separately
maintained as collateral for the loans. Cash collateral received is
invested in "Short-term investments," which are reflected as assets in the
Consolidated Statements of Financial Position. The offsetting collateral
liability is included in the Consolidated Statements of Financial Position
in "Other liabilities" in the amounts of $2,385 million and $374 million
at December 31, 1994 and 1993, respectively. Non-cash collateral is
recorded in memorandum records and not reflected in the consolidated
financial statements.

Net unrealized investment gains and losses result principally from changes
in the carrying values of invested assets. Net unrealized investment
losses were $(32) million, $(195) million and $(268) million for the years
ended December 31, 1994, 1993 and 1992, respectively.

The asset valuation reserve (AVR) and the interest maintenance reserve
(IMR) are required reserves for life insurance companies. The AVR is
calculated based on a statutory formula and is designed to mitigate the
effect of valuation and credit-related losses on unassigned surplus.

F-4

<PAGE> 5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

The components of AVR at December 31, 1994 and 1993 are as follows:

1994 1993
----- -----
(IN MILLIONS)

<S> <C> <C>
Fixed maturities, equity securities
and short-term investments............. $ 930 $1,591
Mortgage loans.......................... 674 722
Real estate and other invested assets... 431 374
------ ------
Total AVR............................... $2,035 $2,687
====== ======
</TABLE>

In 1993, the Company made a voluntary contribution to the mortgage loan
component of the AVR in the amount of $305 million.

The IMR is designed to reduce the fluctuations of surplus resulting from
market interest rate movements. Interest rate-related realized capital
gains and losses are generally deferred and amortized into investment
income over the remaining life of the investment sold. The IMR balance,
included in "Other policyholders' funds," was $502 million and $1,539
million at December 31, 1994 and 1993, respectively. Net realized
investment (losses)/gains of $(929) million, $1,082 million and $626
million were deferred during the years ended December 31, 1994, 1993 and
1992, respectively. IMR amounts amortized into investment income were $107
million, $118 million and $51 million for the years ended December 31,
1994, 1993 and 1992, respectively.

E. FUTURE POLICY BENEFITS, LOSSES AND CLAIMS

Reserves for individual life insurance are calculated using various
methods, interest rates and mortality tables, which produce reserves that
meet the aggregate requirements of state laws and regulations.
Approximately 39% of individual life insurance reserves are determined
using the net level premium method, or by using the greater of a net level
premium reserve or the policy cash value. About 56% of individual life
insurance reserves are calculated according to the Commissioner's Reserve
Valuation Method ("CRVM") or methods which compare CRVM reserves to policy
cash values.

For group life insurance, 24% of reserves are determined using net level
premium methods and various mortality tables and interest rates. About 53%
of group life reserves are associated with extended death benefits. For
the most part, these are calculated using modified group tables at various
interest rates. The remainder of group life reserves are unearned premium
reserves (calculated using the 1960 Commissioner's Standard Group Table),
reserves for group life fund accumulations and other miscellaneous
reserves. Reserves for group and individual annuity contracts are
determined using the Commissioner's Annuity Reserve Valuation Method.

For life insurance and annuities, unpaid claims include estimates of both
the death benefits on reported claims and those which are incurred but not
reported. Unpaid claims and claim adjustment expenses for other than life
insurance and annuities include estimates of benefits and associated
settlement expenses for reported losses and a provision for losses
incurred but not reported.

F-5

<PAGE> 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

Activity in the liability for unpaid claims and claim adjustment
expenses is:

1994 1993
----------------------- ------------------------
ACCIDENT PROPERTY ACCIDENT PROPERTY
AND AND AND AND
HEALTH CASUALTY HEALTH CASUALTY
--------- ---------- ---------- ----------
(IN MILLIONS)

<S> <C> <C> <C> <C>
Balance at January 1 ......... $ 2,654 $ 4,869 $ 2,623 $ 4,712
Less reinsurance recoverables 15 1,070 22 1,107
-------- -------- -------- --------

Net balance at January 1 ..... 2,639 3,799 2,601 3,605
-------- -------- -------- --------

Incurred related to:
Current year ................ 7,398 2,541 7,146 2,364
Prior years ................. (105) 158 (167) 109
-------- -------- -------- --------

Total incurred ............... 7,293 2,699 6,979 2,473
-------- -------- -------- --------

Paid related to:
Current year ................ 5,568 1,237 5,336 1,119
Prior years ................. 1,649 1,163 1,605 1,160
-------- -------- -------- --------

Total paid ................... 7,217 2,400 6,941 2,279
-------- -------- -------- --------

Net balance at December 31 ... 2,715 4,098 2,639 3,799
Plus reinsurance recoverables 23 1,018 15 1,070
-------- -------- -------- --------

Balance at December 31 ....... $ 2,738 $ 5,116 $ 2,654 $ 4,869
======== ======== ======== ========

</TABLE>

As a result of changes in estimates of insured events in prior years, the
declines of $105 million and $167 million in the provision for claims and
claim adjustment expenses for accident and health business in 1994 and
1993, respectively, were due to lower-than-expected trends in claim costs
and an accelerated decline in indemnity health business.

As a result of changes in estimates of insured events in prior years, the
provision for claims and claim adjustment expenses for property and
casualty business (net of reinsurance recoveries of $47 million and $120
million in 1994 and 1993, respectively) increased by $158 million and $109
million in 1994 and 1993, respectively, due to increased loss development
and reserve strengthening for asbestos and environmental claims.

F. REVENUE RECOGNITION AND RELATED EXPENSES

Life premiums are recognized as income over the premium paying period of
the related policies. Annuity considerations are recognized as revenue
when received.

Health and property and casualty premiums are earned ratably over the
terms of the related insurance and reinsurance contracts or policies.
Unearned premium reserves are established to cover the unexpired portion
of premiums written. Such reserves are computed by pro rata methods for
direct business and are computed either by pro rata methods or using
reports received from ceding companies for reinsurance. Premiums which
have not yet been reported are estimated and accrued.

Expenses incurred in connection with acquiring new insurance business,
including such acquisition costs as sales commissions, are charged to
operations as incurred in "Insurance and underwriting expenses."

Commission revenues in "Broker-dealer revenue" and related broker-dealer
expenses in "General, administrative and other expenses" are accrued when
transactions are executed.

F-6

<PAGE> 7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

G. INCOME TAXES

Under the Internal Revenue Code ("the Code"), The Prudential and its life
insurance subsidiaries are taxed on their gain from operations after
dividends to policyholders. In calculating this tax, the Code requires the
capitalization and amortization of policy acquisition expenses.

The Code also imposes an "equity tax" on mutual life insurance companies
based on an imputed surplus which, in effect, reduces the deduction for
policyholder dividends. The amount of the equity tax is estimated in the
current year based on the anticipated equity tax rate, and is adjusted in
subsequent years as the rate is finalized.

The Prudential files a consolidated federal income tax return with all of
its domestic subsidiaries. The provision for taxes reported in these
financial statements also includes tax liabilities for the foreign
subsidiaries. Net operating losses of the non-life subsidiaries may be
used in this consolidated return, but are limited each year to the lesser
of 35% of cumulative eligible non-life subsidiary losses or 35% of life
company taxable income.

As of January 1, 1993, the non-insurance subsidiaries of The Prudential
adopted Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, such subsidiaries
recognize deferred tax liabilities or assets for the expected future tax
consequences of events that have been recognized in their financial
statements. Included in "Income tax (benefit)/provision" are deferred
taxes of $(477) million, $21 million and $(8) million for the years ended
December 31, 1994, 1993 and 1992, respectively. The cumulative effect of
adopting SFAS No. 109 was not material.

At December 31, 1994, the Company had consolidated non-life tax loss
carryforwards of $598 million which will expire between 1998 and 2009, if
not utilized.

H. SEPARATE ACCOUNTS

Separate Account assets and liabilities, reported in the Consolidated
Statements of Financial Position at estimated market value, represent
segregated funds which are administered for pension and other clients. The
assets consist of common stocks, long-term bonds, real estate, mortgages
and short-term investments. The liabilities consist of reserves
established to meet withdrawal and future benefit payment contractual
provisions. Investment risks associated with market value changes are
generally borne by the clients, except to the extent of minimum guarantees
made by the Company with respect to certain accounts. Separate Account net
investment income, realized and unrealized capital gains and losses,
benefit payments and change in reserves are included in "Current and
future benefits and claims."

I. DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives used for trading purposes are recorded in the Consolidated
Statements of Financial Position at fair value at the reporting date.
Realized and unrealized changes in fair values are recognized in
"Broker-dealer revenue" and "Other income" in the Consolidated Statements
of Operations in the period in which the changes occur. Gains and losses
on hedges of existing assets or liabilities are included in the carrying
amount of those assets or liabilities and are deferred and recognized in
earnings in the same period as the underlying hedged item. For interest
rate swaps that qualify for settlement accounting, the interest
differential to be paid or received under the swap agreements is accrued
over the life of the agreements as a yield adjustment. Gains and losses on
early termination of derivatives that modify the characteristics of
designated assets and liabilities are deferred and are amortized as an
adjustment to the yield of the related assets or liabilities over their
remaining lives.

Derivatives used in activities that support life and health insurance and
annuity contracts are recorded at fair value with unrealized gains and
losses recorded in "Net unrealized investment (losses) and change in AVR."
Upon termination of derivatives supporting life and health insurance and
annuity contracts, the interest-related gains and losses are amortized
through the IMR.

2. RESTRICTED ASSETS AND SPECIAL DEPOSITS

Assets in the amounts of $5,901 million and $5,164 million at December 31,
1994 and 1993, respectively, were on deposit with governmental authorities or
trustees as required by law.

Assets valued at $5,855 million and $4,430 million at December 31, 1994 and
1993, respectively, were maintained as compensating balances or pledged as
collateral for bank loans and other financing agreements.

F-7

<PAGE> 8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

Restricted cash of $455 million and $444 million at December 31, 1994 and
1993, respectively, was included in "Cash" in the Consolidated Statements of
Financial Position and Cash Flows.

3. FIXED MATURITIES

The carrying value and estimated fair value of fixed maturities at December
31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
1994 1993
------------------------------------------- -----------------------------------------------
GROSS GROSS ESTIMATED GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES VALUE
-------- -------- -------- -------- -------- -------- -------- --------
(IN MILLIONS)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies .......... $13,624 $ 123 $ 647 $13,100 $14,979 $ 754 $ 94 $15,639
Obligations of U.S. .....
states and their
political subdivisions 2,776 32 165 2,643 3,212 187 3 3,396
Fixed maturities issued
by foreign governments
and their agencies and
political subdivisions 3,101 37 153 2,985 2,716 188 3 2,901
Corporate securities .... 54,144 1,191 1,772 53,563 51,548 4,390 300 55,638
Mortgage-backed
securities ............ 4,889 82 148 4,823 6,478 257 220 6,515
Other fixed maturities .. 209 0 0 209 128 0 0 128
------- ------- ------- ------- ------- ------- ------- -------
Total ................... $78,743 $ 1,465 $ 2,885 $77,323 $79,061 $ 5,776 $ 620 $84,217
======= ======= ======= ======= ======= ======= ======= =======

</TABLE>

The carrying value and estimated fair value of fixed maturities at December
31, 1994 categorized by contractual maturity, are shown below. Actual
maturities will differ from contractual maturities because borrowers may
prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
VALUE VALUE
----------- -----------
(IN MILLIONS)

<S> <C> <C>
Due in one year or less .............. $ 2,746 $ 2,760
Due after one year through five years 24,405 24,000
Due after five years through ten years 18,972 18,536
Due after ten years .................. 27,731 27,204
------- -------
73,854 72,500
Mortgage-backed securities ........... 4,889 4,823
------- -------
Totals ............................... $78,743 $77,323
======= =======

</TABLE>

Proceeds from the sale and maturity of fixed maturities during 1994, 1993 and
1992 were $82,834 million, $87,840 million and $73,326 million, respectively.
Gross gains of $693 million, $2,473 million and $2,034 million, and gross
losses of $2,009 million, $698 million and $530 million were realized on such
sales during 1994, 1993 and 1992, respectively (see Note 1D).

The Company invests in both investment grade and non-investment grade
securities. The Securities Valuation Office of the NAIC rates the fixed
maturities held by insurers (which account for approximately 98% of the
Company's total fixed maturities balance at December 31, 1994 and 1993) for
regulatory purposes and groups investments into six categories ranging from
highest quality bonds to those in or near default. The lowest three NAIC
categories represent, for the most part, high-yield securities and are
defined by the NAIC as including any security with a public agency rating of
B+ or B1 or less.

F-8

<PAGE> 9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

Included in "Fixed maturities" are securities that are classified by the NAIC
as being in the lowest three rating categories. These approximate 1.6% and
2.0% of the Company's assets at December 31, 1994 and 1993, respectively. At
December 31, 1994 and 1993, their estimated fair value varied from the
carrying value by $(78) million and $42 million, respectively.

4. MORTGAGE LOANS

Mortgage loans at December 31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
1994 1993
----------------------- -------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
(IN MILLIONS)

<S> <C> <C> <C> <C>
Commercial and agricultural loans:
In good standing ......... $ 19,752 75.4% $ 20,916 76.0%
In good standing
with restructured terms 1,412 5.4% 1,177 4.3%
Past due 90 days or more . 339 1.3% 590 2.2%
In process of foreclosure 387 1.5% 415 1.5%
Residential loans .......... 4,309 16.4% 4,411 16.0%
-------- ------ -------- ------
Total mortgage loans ....... $ 26,199 100.0% $ 27,509 100.0%
======== ====== ======== ======

</TABLE>

At December 31, 1994, the Company's mortgage loans were collateralized by the
following property types: office buildings (30%), retail stores (20%),
residential properties (17%), apartment complexes (12%), industrial buildings
(11%), agricultural properties (7%) and other commercial properties (3%). The
mortgage loans are geographically dispersed throughout the United States and
Canada with the largest concentrations in California (25%) and New York (8%).
Included in these balances are mortgage loans with affiliated joint ventures
of $684 million and $689 million at December 31, 1994 and 1993, respectively.

5. EMPLOYEE BENEFIT PLANS

A. PENSION PLANS

The Company has several defined benefit pension plans which cover
substantially all of its employees. The benefits are generally based on
career average earnings and credited length of service.

The Company's funding policy is to contribute annually the amount necessary
to satisfy the Internal Revenue Service contribution guidelines. The
pension plans are accounted for in accordance with Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions" ("SFAS
No. 87").

Employee pension benefit plan status at September 30, 1994 and 1993 is as
follows:

1994 1993
-------- --------
(IN MILLIONS)

<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits of
$2,956 in 1994 and $3,053 in 1993 ........................ $(3,255) $(3,401)
======= =======
Projected benefit obligation ............................... (4,247) (4,409)
Plan assets at fair value .................................... 5,704 5,950
------- -------
Plan assets in excess of projected benefit obligation ........ 1,457 1,541
Unrecognized net asset existing at the date of the initial
application of SFAS No. 87 ................................. (980) (1,086)
Unrecognized prior service cost since initial application of
SFAS No. 87 ................................................ 228 253
Unrecognized net loss from actuarial experience since initial
application of SFAS No. 87 ................................. 9 25
Additional minimum liability ................................. (8) 0
------- -------
Prepaid pension cost ......................................... $ 706 $ 733
======= =======

</TABLE>

F-9

<PAGE> 10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

Plan assets consist primarily of equity securities, bonds, real estate and
short-term investments, of which $4,155 million are included in the
Consolidated Statement of Financial Position at December 31, 1994.

In compliance with statutory accounting principles, The Prudential's
prepaid pension costs of $765 million and $784 million at December 31,
1994 and 1993, respectively, were considered non-admitted assets. These
assets are excluded from the consolidated assets and the changes in these
non-admitted assets of ($19) million and $142 million in 1994 and 1993,
respectively, are reported in "General, administrative and other expenses"
in the Consolidated Statements of Operations.

The components of the net periodic pension expense/(benefit) for 1994 and
1993 are as follows:

<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(IN MILLIONS)

<S> <C> <C> <C>
Service cost - benefits earned during the year $ 163 $ 133 $ 133
Interest cost on projected benefit obligation 311 301 296
Actual return on assets ...................... 56 (854) (367)
Net amortization and deferral ................ (639) 301 (150)
Net charge for special termination benefits .. 156 0 0
----- ----- -----
Net periodic pension expense/(benefit) ...... $ 47 $(119) $ (88)
===== ===== =====

</TABLE>

The net expense relating to the Company's pension plans is $28 million, $23
million and $29 million in 1994, 1993 and 1992, respectively, which considers
the changes in The Prudential's non-admitted prepaid pension asset of $(19)
million, $142 million and $117 million, respectively.

As a result of a special early retirement program, net curtailment gains and
special termination benefits of approximately $156 million are included in
the net periodic pension expense for the year ended December 31, 1994.

The assumptions used in 1994 and 1993 to develop the accumulated pension
benefit obligation were:

1994 1993
-------- --------

<S> <C> <C>
Discount rate ................................ 8.25-8.5% 7.0%
Expected long-term rate of return on assets... 8.5-9.0% 8.5-9.0%
Rate of increase in compensation levels ...... 5.0-5.5% 4.5-5.0%

</TABLE>

B. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

The Company provides certain life insurance and health care benefits for
its retired employees. Substantially all of the Company's employees may
become eligible to receive a benefit if they retire after age 55 with at
least 10 years of service.

Effective in 1993, the costs of postretirement benefits, with respect to
The Prudential, are recognized in accordance with the accounting policy
issued by the NAIC. The NAIC's policy is similar to Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," except that the NAIC policy excludes
non-vested employees. The Prudential has elected to amortize its
transition obligation over 20 years.

Prior to 1993, the Company's policy was to fund the cost of providing
these benefits in the years that the employees were providing services to
the Company. The Company defined this service period as originating at an
assumed entry age and terminating at an average retirement age. Annual
deposits to the fund were determined using the entry age normal actuarial
cost method, including amortization of prior service costs for employees'
services rendered prior to the initial funding of the plan. The provision
for the year ended December 31, 1992 was $143 million.

The Prudential's net periodic postretirement benefit cost required to be
recognized for 1994 and 1993, under the NAIC policy is $110 million and
$125 million, respectively. In 1994 and 1993, The Prudential voluntarily
accrued an additional $10 million and $62 million, respectively, which
represents a portion of the obligation for active non-vested employees
(the total of this obligation is $520 million and $594 million as of
December 31, 1994 and 1993, respectively).

Company funding of its postretirement benefit obligations totaled $31
million and $404 million in 1994 and 1993, respectively. The Company
contributes amounts to the plan in excess of covered expenses being paid.

F-10

<PAGE> 11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

The postretirement benefit plan status as of September 30, 1994 and 1993 is
as follows:

<TABLE>
<CAPTION>
1994 1993
-------- --------
(IN MILLIONS)

<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees ........................................... $(1,337) $(1,211)
Fully eligible active plan participants ............ (188) (445)
------- -------
Total APBO ...................................... (1,525) (1,656)
Plan assets at fair value ............................ 1,304 1,335
------- -------
Accumulated postretirement benefit obligation in
excess of plan assets .............................. (221) (321)
Unrecognized transition obligation ................... 448 525
Unrecognized net (gain)/loss from actuarial experience (41) 69
------- -------
Prepaid postretirement benefit cost in accordance
with the NAIC accounting policy .................... 186 273
Additional amount accrued ............................ (72) (62)
------- -------
Prepaid postretirement benefit cost .................. $ 114 $ 211
======= =======

</TABLE>

Plan assets consist of group and individual variable life insurance policies,
group life and health contracts and short-term investments, of which $996
million are included in the Consolidated Statement of Financial Position at
December 31, 1994.

In compliance with statutory accounting principles, The Prudential's prepaid
postretirement benefit costs of $127 million and $217 million at December 31,
1994 and 1993, respectively, are considered non-admitted assets. These assets
are excluded from the consolidated assets and the changes in these
non-admitted assets of $(90) million and $217 million in 1994 and 1993,
respectively, are reported in "General, administrative and other expenses" in
1994 and in "Issuance of capital notes" in 1993.

Net periodic postretirement benefit cost for 1994 and 1993 includes the
following components:

1994 1993
-------- --------
(IN MILLIONS)

<S> <C> <C>
Cost of newly eligible or vested employees... $ 38 $ 41
Interest cost ................................ 112 124
Actual return on plan assets ................. (98) (86)
Net amortization and deferral ................ (13) 15
Amortization of transition obligation ........ 23 39
Net charge for special termination benefits... 58 0
Additional contribution expense .............. 10 62
----- -----
Net periodic postretirement benefit cost ..... $ 130 $ 195
===== =====
</TABLE>

The net reduction to surplus relating to the Company's postretirement benefit
plans is $40 million and $412 million in 1994 and 1993, respectively, which
considers the changes in the non-admitted prepaid postretirement benefit cost
of $(90) million and $217 million in 1994 and 1993, respectively.

As a result of a special early retirement program, curtailment expenses and
special termination benefits of approximately $58 million are included in the
net periodic postretirement benefit cost for the year ended December 31,
1994.

The assumptions used in 1994 and 1993 to measure the accumulated
postretirement benefits obligation were:

<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Discount rate ...................................... 8.25-8.5% 7.0-7.5%
Expected long-term rate of return on plan assets.... 9.0% 9.0%
Salary scale ....................................... 5.5% 5.0%

</TABLE>

F-11

<PAGE> 12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

The health care cost trend rates used varied from 9.1% to 13.9%, depending
on the plan, with one plan being graded to 6.5% by the year 2012 and all
others being graded to 6.0% by 2006. Increasing the health care cost trend
rate by one percentage point in each year would increase the
postretirement benefit obligation as of September 30, 1994, by $243
million and the total of the cost of newly eligible or vested employees
and interest cost for 1994 by $21 million.

In 1994, the Company changed its method of accounting for the recognition
of costs and obligations relating to severance, disability and related
benefits to former or inactive employees after employment, but before
retirement, to an accrual method. Previously, these benefits were expensed
when paid. The effect of this change was to decrease surplus by
approximately $160 million in 1994.

6. NOTES PAYABLE AND OTHER BORROWINGS

Notes payable and other borrowings consisted of the following at December 31,
1994 and 1993:

<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------------------ ------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
BALANCE COST OF FUNDS BALANCE COST OF FUNDS
-------- ---------------- -------- --------------
(IN MILLIONS)

<S> <C> <C> <C> <C>
Short-term debt..... $ 9,188 5.7% $ 9,435 3.7%
Long-term debt...... 2,821 6.5% 3,919 5.3%
------- -------
$12,009 $13,354
======= =======

</TABLE>

Scheduled repayments of long-term debt as of December 31, 1994, are as
follows: $594 million in 1995, $269 million in 1996, $362 million in 1997,
$268 million in 1998, $666 million in 1999, and $662 million thereafter. As
of December 31, 1994, the Company had $8,120 million in lines of credit from
numerous financial institutions of which $3,925 million were unused.

7. CAPITAL NOTES

In 1993, The Prudential issued 6.875% Fixed Rate Capital Notes ("the notes")
in the aggregate principal amount of $300 million. The notes mature on April
15, 2003, and may not be redeemed prior to maturity and will not be entitled
to any sinking fund. The notes are subordinated in right of payment to all
claims of policyholders and to senior indebtedness. Payment of the principal
amount of the notes at maturity is subject to the following conditions: (i)
The Prudential shall not be in payment default with respect to any senior
indebtedness or class of policyholders, (ii) no state or federal agency shall
have instituted proceedings seeking reorganization, rehabilitation or
liquidation of The Prudential, and (iii) immediately after making such
payment, Total Adjusted Capital would exceed 200% of its Authorized Control
Level Risk-Based Capital. The terms "Total Adjusted Capital" and "Authorized
Control Level" are defined by the Risk-Based Capital for Life and/or Health
Insurers Model Act. The payment of interest on the notes is subject to
satisfaction of conditions (i) and (ii) above. Unpaid accrued interest
amounted to $25 million at December 31, 1994 and 1993. The net proceeds from
the notes, approximately $298 million, were contributed to a voluntary
employee benefit association trust to prefund certain obligations of The
Prudential to provide postretirement medical and other benefits. This
resulted in a prepaid asset, which is non-admitted for statutory purposes.
The net increase to surplus from the issuance of the notes, including a tax
benefit of $104 million less the charge-off of the non-admitted asset of $217
million, was $185 million (see Note 5B).

8. SPECIAL SURPLUS FUND

The special surplus fund includes required contingency reserves of $1,097
million and $1,091 million as of December 31, 1994 and 1993, respectively.

9. FAIR VALUE INFORMATION

The fair value amounts have been determined by the Company using available
information and reasonable valuation methodologies for those accounts for
which fair value disclosures are required. Considerable judgment is
necessarily applied in interpreting data to develop the estimates of fair
value. Accordingly, the estimates presented may not be realized in a current
market exchange. The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair values. The
following methods and assumptions were used in calculating the fair values.
(For all other financial instruments presented in the table, the carrying
value is a reasonable estimate of fair value.)

F-12
<PAGE> 13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

FIXED MATURITIES. Fair values for fixed maturities, other than private
placement securities, are based on quoted market prices or estimates from
independent pricing services. Fair values for private placement securities
are estimated using a discounted cash flow model which considers the current
market spreads between the U.S. Treasury yield curve and corporate bond yield
curve, adjusted for the type of issue, its current quality and its remaining
average life. The fair value of certain non-performing private placement
securities is based on amounts provided by state regulatory authorities.

MORTGAGE LOANS. The fair value of residential mortgages is based on recent
market trades or quotes, adjusted where necessary for differences in risk
characteristics. The fair value of the commercial mortgage and agricultural
loan portfolio is primarily based upon the present value of the scheduled
cash flows discounted at the appropriate U.S. Treasury rate, adjusted for the
current market spread for a similar quality mortgage. For certain
non-performing and other loans, fair value is based upon the value of the
underlying collateral.

POLICY LOANS. The estimated fair value of policy loans is calculated using a
discounted cash flow model based upon current U.S. Treasury rates and
historical loan repayments.

DERIVATIVE FINANCIAL INSTRUMENTS. The fair value of swap agreements is
estimated based on the present value of future cash flows under the
agreements discounted at the applicable zero coupon U.S. Treasury rate and
swap spread. The fair value of forwards and futures is estimated based on
market quotes for a transaction with similar terms, while the fair value of
options is based principally on market quotes. The fair value of loan
commitments is estimated based on fees actually charged or those currently
charged for similar arrangements, adjusted for changes in interest rates and
credit quality subsequent to origination.

INVESTMENT-TYPE INSURANCE CONTRACT LIABILITIES. Fair values for the Company's
investment-type insurance contract liabilities are estimated using a
discounted cash flow model, based on interest rates currently being offered
for similar contracts.

NOTES PAYABLE AND OTHER BORROWINGS. The estimated fair value of notes payable
and other borrowings is based on the borrowing rates currently available to
the Company for debt with similar terms and maturities.

The following table discloses the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1994 and 1993:

<TABLE>
<CAPTION>
1994 1993
------------------------------- ----------------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- -------- ---------
(IN MILLIONS)

<S> <C> <C> <C> <C>
Financial assets:
Fixed maturities ..................... $78,743 $77,323 $79,061 $84,217
Equity securities .................... 2,327 2,327 2,216 2,216
Mortgage loans ....................... 26,199 24,955 27,509 28,004
Policy loans ......................... 6,631 6,018 6,456 6,568
Short-term investments ............... 10,630 10,630 6,304 6,304
Securities purchased under
agreements to resell ............... 5,591 5,591 9,656 9,656
Trading account securities ........... 6,218 6,218 8,586 8,586
Cash ................................. 1,109 1,109 1,666 1,666
Broker-dealer receivables ............ 7,311 7,311 9,133 9,133
Assets held in Separate Accounts ..... 48,633 48,633 48,110 48,110

Financial liabilities:

Investment-type insurance contracts .. 39,747 38,934 41,149 42,668
Securities sold under agreements
to repurchase ...................... 8,919 8,919 14,703 14,703
Notes payable and other borrowings ... 12,009 11,828 13,354 13,625
Broker-dealer payables ............... 5,144 5,144 5,410 5,410
Liabilities related to Separate
Accounts ............................. 47,946 47,946 47,475 47,475
Derivative financial instruments - net
(see Note 10) ...................... 392 397 253 303

</TABLE>

F-13

<PAGE> 14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

10. DERIVATIVE AND OFF-BALANCE-SHEET CREDIT-RELATED INSTRUMENTS

A. DERIVATIVE FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 119, "Disclosures about
Derivative Financial Instruments and Fair Value of Financial
Instruments," effective for 1994, requires certain disclosures about
derivative financial instruments and other financial instruments with
similar characteristics ("derivatives"). Derivatives include swaps,
forwards, futures, options and loan commitments subject to market risk,
all of which are used by the Company in the normal course of business in
both trading and other than trading activities.

The Company uses derivatives in trading activities primarily to meet the
financing and hedging needs of its customers and to trade for its own
account. The Company also uses derivatives for purposes other than
trading to reduce exposure to interest rate, currency and other forms of
market risk.

The table below summarizes the Company's outstanding positions by
derivative instrument as of December 31,1994. The amounts presented are
classified as either trading or other than trading, based on
management's intent at the time of contract inception and throughout the
life of the contract. The table includes the estimated fair values of
outstanding derivative positions only and does not include the fair
values of associated financial and non-financial assets and liabilities,
which generally offset derivative fair values. The fair value amounts
presented do not reflect the netting of amounts pursuant to rights of
setoff, qualifying master netting agreements with counterparties or
collateral arrangements. The table shows that less than 5% of derivative
fair values were not reflected in the Company's Consolidated Statement
of Financial Position.

DERIVATIVE FINANCIAL INSTRUMENTS
AS OF DECEMBER 31, 1994
(IN MILLIONS)

TRADING OTHER THAN TRADING
-------------------- ----------------------
ESTIMATED ESTIMATED
NOTIONAL FAIR VALUE NOTIONAL FAIR VALUE
-------- ---------- -------- ----------

<S> <C> <C> <C> <C> <C>
Swaps Assets $13,852 $ 837 $ 184 $ 9
Liabilities 14,825 1,216 4,993 48
Forwards Assets 21,988 300 2,720 24
Liabilities 19,898 289 3,112 19
Futures Assets 1,520 40 4,296 17
Liabilities 1,878 35 505 3
Options Assets 2,924 31 2,407 8
Liabilities 3,028 38 2,217 2
Loan commitments Assets 0 0 212 2
Liabilities 0 0 1,543 15
------- ------- ------- -------
Total Assets $40,284 $ 1,208 $ 9,819 $ 60
======= ======= ======= =======
Liabilities $39,629 $ 1,578 $12,370 $ 87
======= ======= ======= =======

</TABLE>

TOTAL
----------------------------------------------
CARRYING ESTIMATED
NOTIONAL AMOUNT FAIR VALUE
-------- -------- ----------

<S> <C> <C> <C> <C>
Swaps Assets $14,036 $ 845 $ 846
Liabilities 19,818 1,236 1,264
Forwards Assets 24,708 312 324
Liabilities 23,010 299 308
Futures Assets 5,816 30 57
Liabilities 2,383 35 38
Options Assets 5,331 34 39
Liabilities 5,245 40 40
Loan commitments Assets 212 (2) 2
Liabilities 1,543 1 15
------- ------- -------
Total Assets $50,103 $ 1,219 $ 1,268*
======= ======= =======
Liabilities $51,999 $ 1,611 $ 1,665*
======= ======= =======

</TABLE>

* $1,233 of Assets and $1,596 of Liabilities are reflected in the Consolidated
Statement of Financial Position

F-14

<PAGE> 15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

DERIVATIVES HELD FOR TRADING PURPOSES. The Company uses derivatives for
trading purposes in securities broker-dealer activities and in a
limited-purpose swap subsidiary. Net trading revenues for the year ended
December 31, 1994, relating to forwards, futures and swaps were $107 million,
$33 million and $8 million, respectively. Net trading revenues for options
were not material. Average fair value for trading derivatives in an asset
position during the year ended December 31, 1994, was $1,526 million and for
derivatives in a liability position was $1,671 million. Of those derivatives
held for trading purposes at December 31, 1994, 60.0% of notional consisted
of interest rate derivatives, 33.7% consisted of foreign exchange
derivatives, and 6.3% consisted of equity and commodity derivatives.

DERIVATIVES HELD FOR PURPOSES OTHER THAN TRADING. Of the total notional of
derivatives held for purposes other than trading at December 31, 1994, 23.0%
were used by the Company to hedge its investment portfolio to reduce interest
rate, currency and other market risks, 75.8% were used to hedge interest rate
risk related to the Company's mortgage banking subsidiary activities, and
1.2% were used to hedge interest and currency risks associated with the
Company's debt issuances. Of those derivatives held for purposes other than
trading at December 31, 1994, 85.0% of notional consisted of interest rate
derivatives, 13.9% consisted of foreign exchange derivatives, and 1.1%
consisted of equity and commodity derivatives.

Derivatives used to hedge the Company's investment portfolio, including
futures, options and forwards, are typically short-term in nature and are
intended to minimize exposure to market fluctuations or to change the
characteristics of the Company's asset/liability mix, consistent with the
Company's risk management activities. At December 31, 1994, net gains of $0.7
million relating to futures used as hedges of anticipated bond investments
were deferred and included in "Other liabilities." The investments being
hedged are expected to be made in the first quarter of 1995. The Company's
mortgage banking subsidiary hedges the interest rate risk associated with
mortgage loans and mortgage-backed securities held for sale and with unfunded
loans for which a rate of interest has been guaranteed. At December 31, 1994,
net gains of $0.8 million relating to forwards, futures and options used as
hedges of unfunded loan commitments were deferred as "Other liabilities." The
deferred gains were included in the carrying amounts of the loans when
funded, which is generally within sixty days from the commitment date. The
Company's mortgage banking subsidiary also hedges its exposure to future
changes in interest rates on interest-sensitive liabilities and hedges the
prepayment risk associated with its mortgage servicing portfolio. At December
31, 1994, net gains of $6.5 million relating to futures used as hedges of
anticipated borrowings were deferred and included in "Other liabilities." The
borrowings being hedged are expected to be issued by early 1996. The Company
also uses derivatives, particularly swaps and forwards, to manage the
interest rate and foreign exchange risks associated with its notes payable
and other borrowings.

B. OFF-BALANCE-SHEET CREDIT-RELATED INSTRUMENTS

During the normal course of its business, the Company is party to financial
instruments with off-balance-sheet credit risk such as commitments, financial
guarantees, loans sold with recourse and letters of credit. Commitments
include commitments to purchase and sell mortgage loans, the unfunded portion
of commitments to fund investments in private placement securities, and
unused credit card and home equity lines. The Company also provides financial
guarantees incidental to other transactions and letters of credit that
guarantee the performance of customers to third parties. These credit-related
financial instruments have off-balance-sheet credit risk because only their
origination fees, if any, and accruals for probable losses, if any, are
recognized in the Consolidated Statements of Financial Position until the
obligation under the instrument is fulfilled or expires. These instruments
can extend for several years and expirations are not concentrated in any
period. The Company seeks to control credit risk associated with these
instruments by limiting credit, maintaining collateral where customary and
appropriate, and performing other monitoring procedures.

The notional amount of these instruments, which represents the Company's
maximum exposure to credit loss from other parties' non-performance, was
$17,389 million and $18,666 million at December 31, 1994 and 1993,
respectively. Because many of these amounts expire without being advanced in
whole or in part, the amounts do not represent future cash flows. The above
notional amounts include $4,150 million and $3,066 million of unused
available lines of credit under credit card and home equity commitments as of
December 31, 1994 and 1993, respectively. The Company has not experienced,
and does not anticipate experiencing, all of its customers exercising their
entire available lines of credit at any given point in time.

The estimated fair value of off-balance-sheet credit related instruments was
$(91.3) million and $13.0 million at December 31, 1994 and 1993,
respectively. The total fair value at December 31, 1994, includes $(13.3)
million for fixed-rate loan commitments, which are subject to market risk.
The estimated fair value was determined based on fees currently charged for
similar arrangements, adjusted for changes in interest rate and credit
quality that occurred subsequent to origination.

F-15

<PAGE> 16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

11. CONTINGENCIES

A. ENVIRONMENTAL-RELATED CLAIMS

The Company receives claims under expired contracts which assert alleged
injuries and/or damages relating to or resulting from toxic torts, toxic
waste and other hazardous substances. The liabilities for such claims
cannot be estimated by traditional reserving techniques. As a result of
judicial decisions and legislative actions, the coverage afforded under
these contracts may be expanded beyond their original terms. Extensive
litigation between insurers and insureds over these issues continues and
the outcome is not predictable, nor is there any clear emerging trend.
In establishing the unpaid claim reserves for these losses, management
considered the available information. However, given the expansion of
coverage and liability by the courts and legislatures in the past, and
potential for other unfavorable trends in the future, the ultimate cost
of these claims could increase from the levels currently established.

B. LAWSUITS

Various lawsuits against the Company have arisen in the course of the
Company's business. In certain of these matters, large and/or
indeterminate amounts are sought.

In 1993, Prudential Securities Incorporated (PSI), a subsidiary of The
Prudential, entered into an agreement with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc., and
state securities commissions whereby PSI agreed to pay $330 million into
a settlement fund to pay eligible claims on certain limited partnership
matters. Under this agreement, if partnership matter claims exceed the
established settlement fund, PSI is obligated to pay such additional
claims.

In October 1994, the United States Attorney for the Southern District of
New York (the "U.S. Attorney") filed a complaint against PSI in
connection with its sale of certain limited partnerships.
Simultaneously, PSI entered into an agreement to comply with certain
conditions for a period of three years, and to pay an additional $330
million into the settlement fund. At the end of the three-year period,
assuming PSI has fully complied with the terms of the agreement, the
U.S. Attorney will institute no further action.

In the opinion of management, PSI is in compliance with all provisions
of the aforementioned agreements and, after consideration of applicable
accruals, the ultimate liability of such litigation, including
partnership settlement matters, will not have a material adverse effect
on the Company's financial position.

F-16

<PAGE> 17

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of The Prudential Insurance Company of America
Newark, New Jersey

We have audited the accompanying consolidated statements of financial
position of The Prudential Insurance Company of America and subsidiaries as
of December 31, 1994 and 1993, and the related consolidated statements of
operations and changes in surplus and asset valuation reserve and of cash
flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The Prudential Insurance Company
of America and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted
accounting principles.

Deloitte & Touche LLP
Parsippany, New Jersey
March 1, 1995

F-17

<PAGE>

PRUvider
Variable
Appreciable Life(R)
Insurance

May 1, 1995
PROSPECTUS

The Prudential Series Fund, Inc.
and
The Pruco Life PRUvider Variable Appreciable Account

SVAL-1 Ed 5-95 Pruco Life Insurance Company
Catalog No. 6469898

<PAGE>

PROSPECTUS
May 1, 1995

PRUCO LIFE INSURANCE COMPANY
PRUVIDER VARIABLE APPRECIABLE ACCOUNT

PRUvider(SM)
Variable Appreciable Life(R)
Insurance Contract

This prospectus describes a variable life insurance contract issued by Pruco
Life Insurance Company ("Pruco Life"), a stock life insurance company that is a
wholly-owned subsidiary of The Prudential Insurance Company of America ("The
Prudential"). Pruco Life calls this contract its PRUvider(SM) Variable
Appreciable Life(R) Insurance Contract* (the "Contract"). The Contract provides
whole-life insurance protection. The death benefit varies daily with investment
experience but will never be less than a guaranteed minimum amount (the face
amount specified in the Contract). The Contract also generally provides a cash
surrender value which does not have a guaranteed minimum amount.

The assets held for the purpose of paying benefits under these and other similar
contracts are segregated from the other assets of Pruco Life and are invested in
one or both of the current subaccounts of the Pruco Life PRUvider Variable
Appreciable Account (from now on, the "Account"). In this case, the assets will
be invested in the corresponding portfolio of The Prudential Series Fund, Inc.
(from now on, the "Series Fund"). The two portfolios of the Series Fund
currently available to Contract owners are the Conservatively Managed Flexible
Portfolio and the Aggressively Managed Flexible Portfolio. The contract owner
may also choose to have the assets invested in a fixed-rate option. This
prospectus describes the Contract generally, the Pruco Life PRUvider Variable
Appreciable Account and the securities issued by the Series Fund.

Although it is advantageous to the purchaser to pay a Scheduled Premium amount
on the dates due, which are at least once a year but may be more often,
purchasers have flexibility as to when and in what amounts they pay premiums.

Before you sign an application to purchase this life insurance contract, you
should read this prospectus with care and have any questions you may have
answered by your Pruco Life representative. If you do purchase the contract, you
should retain this prospectus for future reference, together with the contract
itself that you will receive.

Additional information about the contract and the Series Fund is set forth in a
separate Statement of Additional Information which is incorporated by reference
into this prospectus. It is available without charge upon request to the Pruco
Life Insurance Company at the address shown below.

REPLACING EXISTING LIFE INSURANCE WITH A CONTRACT DESCRIBED IN THIS PROSPECTUS
MAY NOT BE TO YOUR ADVANTAGE. IF YOU CURRENTLY OWN A LIFE INSURANCE CONTRACT,
THE BENEFITS AND COSTS OF PURCHASING ADDITIONAL INSURANCE UNDER THE EXISTING
POLICY SHOULD BE COMPARED WITH THE BENEFITS AND COSTS OF PURCHASING THE CONTRACT
DESCRIBED IN THIS PROSPECTUS. IN MAKING THIS COMPARISON, YOU SHOULD CONSULT WITH
A QUALIFIED TAX ADVISOR.

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

Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 437-4016, Ext. 46

*PRUvider is a service mark of The Prudential.
Appreciable Life is a registered mark of The Prudential.
SVAL-1 Ed. 5-95

<PAGE>

TABLE OF CONTENTS
Page

INTRODUCTION AND SUMMARY .................................................. 1
Brief Description of the Contract ................................ 1
Balanced Portfolios .............................................. 2
Conservatively Managed Flexible Portfolio ............... 2
Aggressively Managed Flexible Portfolio ................. 3
Fixed-Rate Option ................................................ 3
Transfers Between Investment Options ............................. 3
The Scheduled Premium ............................................ 3
Payment of Higher Premiums ....................................... 3
Contract Loans ................................................... 3
Differences Between the Contract and Variable Universal Life
Insurance Contracts ..................................... 3
FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS OF THE SERIES FUND ................. 4
Illustrations of Cash Surrender Values, Death Benefits
and Accumulated Premiums ......................................... 7
GENERAL INFORMATION ABOUT
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT AND THE
FIXED RATE OPTION ................................................ 8
Pruco Life PRUvider Variable Appreciable Account ................. 8
The Fixed-Rate Option ............................................ 8
DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS ...................... 8
Requirements for Issuance of a Contract .......................... 8
Short-Term Cancellation Right or "Free Look" ..................... 9
Contract Fees and Charges ........................................ 9
Deductions from Premiums ................................ 9
Deductions from Portfolios .............................. 9
Monthly Deductions from Contract Fund ................... 9
Daily Deduction from the Contract Fund .................. 10
Surrender or Withdrawal Charges ......................... 11
Transaction Charges ..................................... 11
Contract Date .................................................... 11
Premiums ......................................................... 11
Allocation of Premiums ........................................... 12
Transfers ........................................................ 13
How the Contract Fund Changes with Investment Experience ......... 13
How a Contract's Death Benefit Will Vary ......................... 13
Contract Loans ................................................... 14
Surrender of a Contract .......................................... 14
Lapse and Reinstatement .......................................... 14
Fixed Extended Term Insurance ........................... 15
Fixed Reduced Paid-Up Insurance ......................... 15
Variable Reduced Paid-Up Insurance ...................... 15
What Happens If No Request Is Made? ..................... 15
Paid-Up Insurance Option ......................................... 15
When Proceeds Are Paid ........................................... 16
Living Needs Benefit ............................................. 16
Terminal Illness Option ................................. 16
Nursing Home Option ..................................... 16
Voting Rights .................................................... 17
Reports to Contract Owners ....................................... 17
Tax Treatment of Contract Benefits ............................... 17
Treatment as Life Insurance ............................. 17
Pre-Death Distributions ................................. 18
Other Tax Consequences .................................. 18
Other Contract Provisions ........................................ 18
FURTHER INFORMATION ABOUT THE SERIES FUND ................................. 18

<PAGE>

Page
INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS ................................................ 19
Balanced Portfolios .............................................. 19
Conservatively Managed Flexible Portfolio ............... 19
Aggressively Managed Flexible Portfolio ................. 20
Foreign Securities ............................................... 20
Options, Futures Contracts and Swaps ............................. 21
Short Sales ...................................................... 21
Reverse Repurchase Agreements and Dollar Rolls ................... 21
Loans of Portfolio Securities .................................... 22
INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS ...................... 22
INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES ........................... 22
Portfolio Brokerage and Related Practices ........................ 23
STATE REGULATION .......................................................... 23
EXPERTS ................................................................... 23
LITIGATION ................................................................ 23
EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION ......... 23
ADDITIONAL INFORMATION .................................................... 25
FINANCIAL STATEMENTS ...................................................... 25
FINANCIAL STATEMENTS OF THE PRUCO LIFE PRUvider VARIABLE APPRECIABLE
ACCOUNT ................................................................... A1
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES ............................. B1

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR
THE SERIES FUND.

<PAGE>

INTRODUCTION AND SUMMARY

As you read this prospectus you should keep in mind that you are considering the
purchase of a life insurance contract. Because it is variable life insurance -
and variable life insurance has significant investment aspects and requires you
to make investment decisions - it is also a "security." That is why you have
been given this prospectus. Securities which are offered to the public must be
registered with the Securities and Exchange Commission, and the prospectus that
is a part of the registration statement must be given to all prospective buyers.
But because a substantial part of your premium pays for life insurance that will
pay to your beneficiary, in the event of your death, an amount far exceeding
your total premium payments, you should not buy this contract unless a major
reason for the purchase is to provide life insurance protection. Because the
contract provides whole-life or permanent insurance, it also serves a second
important objective. It can be expected to provide an increasing cash surrender
value that can be used during your lifetime.

Brief Description of the Contract

The PRUvider Variable Appreciable Life Contract (referred to from now on as the
"Contract") is issued and sold by the Pruco Life Insurance Company ("Pruco
Life"), a stock life insurance company, organized in 1971 under the laws of the
State of Arizona. It is licensed to sell life insurance and annuities in the
District of Columbia, Guam, and in all states except New York. These Contracts
are not offered in any state in which the necessary approvals have not yet been
obtained.

Pruco Life is a wholly-owned subsidiary of The Prudential, a mutual insurance
company founded in 1875 under the laws of the State of New Jersey. As of
December 31, 1994, The Prudential has invested over $442 million in Pruco Life
in connection with Pruco Life's organization and operation. The Prudential
intends from time to time to make additional capital contributions to Pruco Life
as needed to enable it to meet its reserve requirements and expenses in
connection with its business. The Prudential is under no obligation to make such
contributions and its assets do not back the benefits payable under the
Contract. Pruco Life's consolidated financial statements begin on page B1 and
should be considered only as bearing upon Pruco Life's ability to meet its
obligations under the Contracts.

A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. Pruco Life has established a
separate account, like a separate division within the Company, called the Pruco
Life PRUvider Variable Appreciable Account. Whenever you pay a premium, Pruco
Life first deducts certain charges (described below) and, unless you decide
otherwise puts the remainder - often called the "net premium" - into the
Account, where it is combined with the net premiums from all other contracts
like this one. The money in the Account, including your Contract Fund, is then
invested in the following way. The Account is divided into 2 subaccounts and you
must decide which one[s] will hold the assets of your Contract Fund. The money
allocated to each subaccount is immediately invested in a corresponding
portfolio of The Prudential Series Fund, Inc. Those two portfolios -- called the
Conservatively Managed Flexible Portfolio and the Aggressively Managed Flexible
Portfolio -- differ in the amount of risk associated with them and are described
in more detail below.

Because the assets that relate to the Contract may be invested in these variable
investment options, the Contract offers an opportunity for your cash surrender
value to appreciate more rapidly than it would under comparable fixed-benefit
whole-life insurance. You, however, must accept the risk that if investment
performance is unfavorable the cash surrender value may not appreciate as
rapidly and, indeed, may decrease in value. If you prefer to avoid this risk you
may elect to allocate part or all of the net premiums in a fixed-rate option
under which a stated interest rate is credited to the amount of your Contract
Fund allocated to that option. See The Fixed-Rate Option, page 8.

Pruco Life deducts certain charges from each premium payment and from the
amounts held in the designated investment options. In addition, Pruco Life makes
certain additional charges if a Contract lapses or is surrendered during the
first 10 Contract years. All these charges, which are largely designed to cover
insurance costs and risks as well as sales and administrative expenses, are
fully described under Contract Fees and Charges on page 9. In brief, and subject
to that fuller description, the following diagram outlines the charges which may
be made:

<PAGE>

-------------------------------------------------------
Premium Payment
-------------------------------------------------------

---------------------------------------------
o less charge for taxes
attributable to premiums
o less $2 processing fee
---------------------------------------------

- --------------------------------------------------------------------------------
Invested Premium Amount
o To be invested in one or a combination of:
o The Conservatively Managed Flexible Portfolio
o The Aggressively Managed Flexible Portfolio
o The Fixed Rate Option
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Daily Charges
o A daily charge equivalent to an annual rate of up to 0.9% is deducted from
the assets of the subaccounts for mortality and expense risks.
o Management fees and expenses are deducted from the assets of the Series
Fund. See Deductions from Portfolios, page 9.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Monthly Charges
o A sales charge is deducted from the Contract fund in the amount of 1/2 of
1% of the primary annual premium.
o The Contract fund is reduced by a guaranteed minimum death benefit risk
charge of not more than $0.01 per $1,000 of the face amount of insurance.
o The Contract fund is reduced by an administrative charge of up to $6 per
Contract and up to $0.19 per $1,000 of face amount of insurance (currently,
on a non-guaranteed basis, the $0.19 charge is decreased to $0.09 per
$1,000); if the face amount of the Contract is less than $10,000, there is
an additional charge of $0.30 per $1,000 of face amount.
o A charge for anticipated mortality is deducted, with the maximum charge
based on the non-smoker/smoker 1980 CSO Tables.
o If the Contract includes riders, a deduction from the
Contract fund will be made for charges applicable to those
riders; a deduction will also be made if the rating class of the insured
results in an extra charge.
- --------------------------------------------------------------------------------

Because of the charges listed above, and in particular because of the
significant charges deducted upon early surrender or lapse, you should purchase
a Contract only if you intend and have the financial capability to keep it in
force for a substantial period.

When you first buy the Contract you give instructions to Pruco Life as to which
of the two subaccounts (and, therefore, which corresponding portfolios of the
Series Fund) you wish your Contract Fund invested. Thereafter you may make
changes in these allocations either in writing or by telephone. The investment
objectives of the portfolios, described more fully starting on page 19 of this
prospectus, and of the fixed rate option are as follows:

Balanced Portfolios

<PAGE>

tion of investment who prefers a relatively lower risk of loss and a
correspondingly reduced chance of high appreciation.

Aggressively Managed Flexible Portfolio. Achievement of a high total investment
return consistent with a portfolio having an aggressively managed mix of money
market instruments, fixed income securities, and common stocks, in proportions
believed by the investment manager to be appropriate for an investor desiring
diversification of investment who is willing to accept a relatively high level
of loss in an effort to achieve greater appreciation.

Fixed-Rate Option. Guarantee against loss of principal plus income at a rate
which may change at yearly intervals, but will never be lower than an effective
annual rate of 4%.

Transfers Between Investment Options

The Scheduled Premium

Your Contract sets forth an annual Scheduled Premium, or one that is payable
more frequently, such as monthly. Pruco Life guarantees that, if the Scheduled
Premiums are paid when due (or if missed premiums are paid later, with
interest), the death benefit will be paid upon the death of the insured. The
Contract will not lapse even if investment experience is unexpectedly so
unfavorable that the Contract Fund value drops to below zero.

The amount of the scheduled premium depends on the Contract's face amount, the
insured's sex (except where unisex rates apply) and age at issue, the insured's
risk classification, the rate for taxes attributable to premiums, and the
frequency of premium payments selected. Under certain low face amount Contracts
issued on younger insureds, the payment of the Scheduled Premium may cause the
Contract to be classified as a Modified Endowment Contract. See Tax Treatment of
Contract Benefits, page 17. The scheduled premium will not be increased (except
to reflect changes in the rate for taxes attributable to premiums). See
Premiums, page 11.

Payment of Higher Premiums

The payment of premiums in excess of Scheduled Premiums may cause the Contract
to be classified as a Modified Endowment Contract. If you make premium payments
in amounts high enough to turn the Contract into a Modified Endowment Contract,
Pruco Life will notify you, ask whether it is your intention to do so, and
return the premium, if you wish, with interest. See Premiums, page 11 and Tax
Treatment of Contract Benefits, page 17.

Contract Loans

The Contract permits the owner to borrow up to 90% of the amount of the cash
surrender value (100% of the portion allocated to the fixed-rate option) on
favorable terms. See Contract Loans, page 14. When a loan is made, the amount
held under the investment options described above is reduced, proportionately,
by the amount of the loan.

Differences Between the Contract and Variable Universal Life Insurance Contracts

Pruco Life believes that the most common form of universal life insurance,
offered by many other life insurance companies, is suitable for many people and,
although it does not now offer such a contract to the general public, it may do
so in the future. It believes, however, that there are features in that form of
universal life insurance, particularly in variable universal life insurance,
that enable it too easily to be used in an unsuitable way. Most universal life
insurance contracts also provide for premiums to be paid at irregular intervals
but with a recommended "target premium" to be paid at specified intervals.
Regular payment of the recommended target premiums, however, does not guarantee
- - as is the case with this Contract - that a death benefit will always be paid.
If the target premium is set too low and investment experience for some period
is unfavorable, the Contract Fund can drop to zero and then those contracts will
lapse. Similarly, if a contract owner skips several premium payments during a
period of financial strain, the same thing could happen, even after a contract
has been in force for many years. If that should happen, there will be little
incentive to reinstate the contract and the contract owner will have bought,
unintentionally and unnecessarily, very expensive term insurance. Two purposes
for which permanent insurance is bought - protection against death and savings
for later use - will not have been met.

Pruco Life's PRUvider Variable Appreciable Life Insurance Contract is a form of
life insurance that seeks to eliminate these defects. Although it provides much
of the flexibility of variable universal life, it differs in two important ways.
First, Pruco Life guarantees that if the Scheduled Premiums are paid when due
(or missed premiums are paid later with interest), the Contract will not lapse
and the face amount of insurance will be paid upon the death of the insured even
if, because of unfavorable investment experience, the Contract Fund value should
drop to below zero. Second, if all premiums are not paid when due (or made up),
the Contract will not lapse as long as the Contract Fund is higher than a stated
amount set forth in a table in the Contract - an amount that increases

3
<PAGE>

each year and in later years becomes quite high; it is called the "Tabular
Contract Fund." The Contract lapses when the Contract Fund falls to below this
stated amount, rather than when it drops to zero. Thus, when a PRUvider Variable
Appreciable Life Contract lapses, it may still have considerable value and you
will, therefore, have a substantial incentive to reinstate it, as well as an
opportunity to make a considered decision whether to do so or to take, in one
form or another, the cash surrender value. In effect, Pruco Life provides an
early and timely warning against the imprudent use of the flexibility provided
by the Contract.

FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS OF THE SERIES FUND

The tables that follow provide information about the annual investment income,
capital appreciation and expenses of the 2 available portfolios of the Series
Fund for each year, beginning with the year after the Series Fund was
established. They are prepared on a per share basis and therefore provide useful
information about the investment performance of each portfolio.

NOTE, HOWEVER, THAT THESE TABLES DO NOT TELL YOU HOW YOUR CONTRACT FUND WOULD
HAVE CHANGED DURING THIS PERIOD BECAUSE THEY DO NOT REFLECT THE DEDUCTIONS FROM
THE CONTRACT FUND OTHER THAN THE PORTFOLIO DEDUCTIONS.

4
<PAGE>

THE PRUDENTIAL SERIES FUND, INC. FINANCIAL HIGHLIGHTS

THE PRUDENTIAL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED)
The following financial highlights information has been audited by Deloitte &
Touche LLP, Independent Auditors. Their report is included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
AGGRESSIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 16.957 $ 16.005 $ 16.288 $ 13.996 $ 14.446 $ 13.123 $ 12.326
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.473 0.566 0.583 0.650 0.715 0.813 0.724
Net realized and unrealized
gains (losses) on
investments................... (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.548) 2.448 1.190 3.459 0.249 2.802 1.564
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767)
Distributions from net realized
gains......................... (0.462) (0.929) (0.914) (0.513) 0 (0.666) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 15.496 $ 16.957 $ 16.005 $ 16.288 $ 13.996 $ 14.446 $ 13.123
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (3.16%) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $3,481.5 $3,292.2 $2,435.6 $1,990.7 $1,507.8 $1,386.5 $1,103.9
Ratio of expenses net of
reimbursement to average net
assets........................ 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70%
Ratio of net investment income
to average net assets......... 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52%
Portfolio turnover rate......... 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45%
Number of shares outstanding at
end of period (in millions)... 224.7 194.1 152.2 122.2 107.7 96.0 84.1

01/01/87 01/01/86 01/01/85
TO TO TO
12/31/87 12/31/86* 12/31/85*
----------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 13.555 $ 12.810 $ 10.469
----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.577 0.611 0.584
Net realized and unrealized
gains (losses) on
investments................... (0.753) 1.342 2.095
----------- ----------- -----------
Total from investment
operations.................. (0.176) 1.953 2.679
----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.673) (0.456) (0.338)
Distributions from net realized
gains......................... (0.380) (0.752) 0
----------- ----------- -----------
Total distributions......... (1.053) (1.208) (0.338)
----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.229) 0.745 2.341
----------- ----------- -----------
Net Asset Value at end of
period........................ $ 12.326 $ 13.555 $ 12.810
----------- ----------- -----------
----------- ----------- -----------
Total Investment Rate of
Return:**..................... (1.83 %) 15.48 % 25.87 %
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $1,062.4 $593.6 $138.7
Ratio of expenses net of
reimbursement to average net
assets........................ 0.71 % 0.67 % 0.93 %
Ratio of net investment income
to average net assets......... 4.09 % 4.43 % 4.65 %
Portfolio turnover rate......... 123.83 % 133.76 % 56.46 %
Number of shares outstanding at
end of period (in millions)... 86.2 43.8 6.1
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 14.905 $ 14.243 $ 14.318 $ 13.060 $ 13.361 $ 12.295 $ 11.889
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.528 0.486 0.558 0.687 0.821 0.891 0.773
Net realized and unrealized
gains (losses) on
investments................... (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.151) 1.715 0.968 2.425 0.678 2.046 1.197
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791)
Distributions from net realized
gains......................... (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 14.095 $ 14.905 $ 14.243 $ 14.318 $ 13.060 $ 13.361 $ 12.295
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (0.97%) 12.20% 6.95% 19.07% 5.27% 16.99% 10.19%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6
Ratio of expenses net of
reimbursement to average net
assets........................ 0.61% 0.60% 0.62% 0.63% 0.65% 0.64% 0.65%
Ratio of net investment income
to average net assets......... 3.61% 3.22% 3.88% 4.89% 6.21% 6.81% 6.22%
Portfolio turnover rate......... 125.18% 79.46% 62.07% 115.35% 44.04% 153.92% 110.67%
Number of shares outstanding at
end of period (in millions)... 248.4 208.2 148.4 104.8 84.2 73.0 66.3

All calculations are based on average month-end shares outstanding, where
applicable.

*The per share information of the Portfolios of The Prudential Series Fund,
Inc. has not been restated to reflect the operations of the Pruco Life Series
Fund, Inc. prior to the November 1, 1986 merger.

**Total investment returns are at the portfolio level and exclude contract
specific charges which would reduce returns.
This information should be read in conjunction with the financial statements
of The Prudential Series Fund, Inc. and notes thereto, which appear in the
Statement of Additional Information.
Further information about the performance of the portfolios is contained in
the Annual Report to Contract Owners which may be obtained without charge.

<PAGE>

PORTFOLIO RATES OF RETURN

The following table, based upon the immediately preceding condensed financial
information for the Series Fund, shows first the average annual compounded net
rates of return for each Portfolio for the year ended 12/31/94 for the 5 year
period ending on that date, and from the inception date of each Portfolio to
December 31, 1994. Then, the annual net rates of return for each Portfolio for
each year are shown. These rates of return should not be regarded as an estimate
or prediction of future performance. They may be useful in assessing the
competence and performance of the Series Fund's investment advisor and in
helping you to decide which portfolios to choose. AS STATED ABOVE, THIS
INFORMATION RELATES ONLY TO THE SERIES FUND AND DOES NOT REFLECT THE VARIOUS
OTHER CHARGES MADE UNDER THE CONTRACTS SUCH AS SALES AND ADMINISTRATIVE CHARGES
AND COST OF INSURANCE CHARGES. SEE CONTRACT FEES AND CHARGES, PAGE 9.
<TABLE>
<CAPTION>
5 YEAR 10 YEAR
PERIOD PERIOD INCEPTION
INCEPTION YEAR ENDED ENDED ENDED DATE TO YEAR ENDED YEAR ENDED YEAR ENDED
DATE 12/31/94 12/31/94 12/31/94 12/31/94 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------- ----------- ----------- ----------- ------------- ----------- ----------- -----------

AGGRESSIVELY
MANAGED FLEXIBLE 5/83 -3.2% 9.0% 11.7% 10.6% -3.2% 15.6% 7.6%

CONSERVATIVELY
MANAGED FLEXIBLE 5/83 -1.0% 8.3% 10.4% 9.9% -1.0% 12.2% 6.9%

<PAGE>

Illustrations of Cash Surrender Values, Death Benefits
and Accumulated Premiums

The following tables have been prepared to help show how values under the
Contract change with investment performance of the Account. The tables assume
that no portion of the Contract fund is allocated to the fixed-rate option. The
tables illustrate how cash surrender values (reflecting the deduction of
deferred sales load and administrative charges, if any) and death benefits of
Contracts issued on an insured of a given age would vary over time if the gross
investment return on the assets held in the selected Series Fund portfolios were
a uniform, after tax, annual rate of 0%, 4%, 8%, and 12% and minimum scheduled
premiums were paid. The death benefits and cash surrender values would be
different from those shown if the returns averaged 0%, 4%, 8%, and 12% but
fluctuated over and under those averages throughout the years.

The death benefits and cash surrender values shown in the first two tables on
pages T1 and T2 reflect Pruco Life's current charges. The values shown in these
tables are calculated upon the assumption that Pruco Life will continue to use
the administrative charges and mortality rates that it is currently using, even
though it is permitted under the Contract to use higher administrative charges
and the higher mortality charges specified in the 1980 CSO Table. While Pruco
Life does not currently intend to withdraw or modify these reductions in
charges, it reserves the right to do so.

The death benefits and cash surrender values shown in the next two tables on
pages T3 and T4 are calculated upon the assumption that the maximum
administrative charges allowable under the Contract and the maximum mortality
charges specified by the 1980 CSO Table are made throughout the life of the
Contract; they do not reflect Pruco Life's current practice of reducing the
administrative and mortality charges.

The amounts shown for the death benefit and cash surrender value as of each
Contract year reflect the fact that the net investment return on the assets held
in the subaccounts is lower than the gross, after-tax return of the Series
Fund's portfolios. This is because these tables assume an investment management
fee and other estimated Series Fund expenses totaling 0.64%. The 0.64% figure is
based on an average of the current management fees of the two available
portfolios and an analysis of historical operating expenses other than
management fees, taking into account any applicable expense offsets. Actual fees
and expenses of the portfolios associated with a Contract may be more or less
than 0.64%, will vary from year to year, and will depend on how the Contract
fund is allocated. Based on the above assumptions, gross annual rates of return
of 0%, 4%, 8%, and 12% correspond in the tables to approximate net annual rates
of return of - 1.54%, 2.46%, 6.46%, and 10.46%, respectively. The tables reflect
the fact that no charges for federal or state income taxes are currently made
against the Account (other than "taxes attributable to premiums"). If such a
charge is made in the future, it will take higher gross rates of return to
produce the same net after-tax returns. The tables assume that the insured is in
the preferred rating class, and the charge for federal, state and local taxes
attributable to premiums is 3.25%.

Upon request, Pruco Life will furnish a comparable hypothetical illustration
based on the proposed insured's age and sex (except where unisex rates apply)
and on the face amount or premium amount requested. The illustrations can be
prepared upon the assumptions that the insured is in the preferred or standard
rating class or in a different risk classification, and can assume that annual,
semi-annual, quarterly or monthly premiums are paid.

7
<PAGE>

ILLUSTRATIONS
-------------

THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$5,000 GUARANTEED DEATH BENEFIT
$173.70 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES

Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- ---------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- ---------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net) (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net)
------ ------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 181 $ 5,003 $ 5,007 $ 5,011 $ 5,016 $ 0 $ 0 $ 1 $ 6
2 $ 369 $ 5,002 $ 5,013 $ 5,024 $ 5,036 $ 48 $ 58 $ 70 $ 82
3 $ 564 $ 5,000 $ 5,019 $ 5,040 $ 5,063 $ 101 $ 121 $ 142 $ 165
4 $ 767 $ 5,000 $ 5,024 $ 5,058 $ 5,095 $ 153 $ 184 $ 219 $ 256
5 $ 978 $ 5,000 $ 5,028 $ 5,078 $ 5,135 $ 204 $ 249 $ 300 $ 356
6 $ 1,198 $ 5,000 $ 5,033 $ 5,104 $ 5,186 $ 268 $ 329 $ 400 $ 482
7 $ 1,427 $ 5,000 $ 5,037 $ 5,133 $ 5,246 $ 330 $ 410 $ 505 $ 619
8 $ 1,665 $ 5,000 $ 5,042 $ 5,166 $ 5,318 $ 391 $ 492 $ 617 $ 768
9 $ 1,912 $ 5,000 $ 5,045 $ 5,203 $ 5,402 $ 451 $ 576 $ 734 $ 932
10 $ 2,169 $ 5,000 $ 5,048 $ 5,245 $ 5,499 $ 510 $ 661 $ 858 $ 1,112
15 $ 3,617 $ 5,000 $ 5,053 $ 5,536 $ 6,260 $ 717 $ 1,042 $ 1,525 $ 2,248
20 $ 5,379 $ 5,000 $ 5,039 $ 6,011 $ 9,057 $ 877 $ 1,448 $ 2,421 $ 4,095
25 $ 7,523 $ 5,000 $ 5,001 $ 6,926 $13,437 $ 962 $ 1,867 $ 3,613 $ 7,010
30 (Age 65) $10,132 $ 5,000 $ 5,000 $ 8,661 $19,408 $ 929 $ 2,280 $ 5,151 $11,541
35 $13,305 $ 5,000 $ 5,000 $10,596 $27,634 $ 686 $ 2,660 $ 7,075 $18,449
40 $17,166 $ 5,000 $ 5,000 $12,799 $39,087 $ 34 $ 2,960 $ 9,431 $28,804
45 $21,864 $ 5,000 $ 5,000 $15,368 $55,245 $ 0 $ 3,082 $12,256 $44,057

</TABLE>

(1) If premiums are paid more frequently than annually, the payments would
be $89.46 semi-annually, $46.15 quarterly or $16.90 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.

(2) Assumes no Contract loan has been made.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING INTEREST RATES, AND RATES OF INFLATION. THE DEATH
BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%, 8%,
AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN
BE MADE BY PRUCO LIFE OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.

<PAGE>

THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES

Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- ---------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- ---------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net) (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net)
------ ------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,012 $20,024 $20,036 $ 20,048 $ 38 $ 50 $ 62 $ 74
2 $ 829 $20,013 $20,046 $20,080 $ 20,115 $ 242 $ 275 $ 309 $ 345
3 $ 1,269 $20,001 $20,065 $20,132 $ 20,203 $ 441 $ 505 $ 572 $ 643
4 $ 1,726 $20,000 $20,081 $20,193 $ 20,315 $ 635 $ 738 $ 851 $ 973
5 $ 2,202 $20,000 $20,093 $20,264 $ 20,454 $ 831 $ 984 $ 1,154 $ 1,345
6 $ 2,697 $20,000 $20,110 $20,353 $ 20,633 $ 1,081 $ 1,293 $ 1,537 $ 1,816
7 $ 3,211 $20,000 $20,124 $20,456 $ 20,847 $ 1,332 $ 1,613 $ 1,946 $ 2,337
8 $ 3,746 $20,000 $20,136 $20,573 $ 21,103 $ 1,578 $ 1,939 $ 2,376 $ 2,907
9 $ 4,302 $20,000 $20,145 $20,707 $ 21,406 $ 1,819 $ 2,269 $ 2,831 $ 3,530
10 $ 4,881 $20,000 $20,152 $20,857 $ 21,760 $ 2,054 $ 2,604 $ 3,309 $ 4,212
15 $ 8,140 $20,000 $20,146 $21,922 $ 24,549 $ 2,888 $ 4,100 $ 5,876 $ 8,504
20 $12,106 $20,000 $20,057 $23,679 $ 34,279 $ 3,528 $ 5,695 $ 9,317 $ 15,497
25 $16,931 $20,000 $20,000 $26,641 $ 50,898 $ 3,870 $ 7,333 $13,899 $ 26,553
30 (Age 65) $22,801 $20,000 $20,000 $33,351 $ 73,548 $ 3,734 $ 8,939 $19,833 $ 43,738
35 $29,942 $20,000 $20,000 $40,833 $104,757 $ 2,747 $10,366 $27,261 $ 69,940
40 $38,631 $20,000 $20,000 $49,349 $148,208 $ 113 $11,386 $36,366 $109,216
45 $49,203 $20,000 $20,000 $59,285 $209,506 $ 0 $11,501 $47,278 $167,075

</TABLE>

(1) If premiums are paid more frequently than annually, the payments would
be $202.79 semi-annually, $103.98 quarterly or $36.59 monthly. The
death benefits and cash surrender values would be slightly different
for a Contract with more frequent premium payments.

(2) Assumes no Contract loan has been made.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING INTEREST RATES, AND RATES OF INFLATION. THE DEATH
BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%, 8%,
AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN
BE MADE BY PRUCO LIFE OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.

<PAGE>

THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$5,000 GUARANTEED DEATH BENEFIT
$173.70 ANNUAL PREMIUM (1)
USING MAXIMUM CONTRACTUAL CHARGES

Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- ---------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- ---------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net) (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net)
------ ------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 181 $ 5,000 $ 5,000 $ 5,004 $ 5,009 $ 0 $ 0 $ 0 $ 0
2 $ 369 $ 5,000 $ 5,000 $ 5,010 $ 5,021 $ 35 $ 45 $ 56 $ 67
3 $ 564 $ 5,000 $ 5,000 $ 5,018 $ 5,039 $ 82 $ 100 $ 120 $ 141
4 $ 767 $ 5,000 $ 5,000 $ 5,028 $ 5,063 $ 127 $ 157 $ 188 $ 223
5 $ 978 $ 5,000 $ 5,000 $ 5,039 $ 5,092 $ 172 $ 213 $ 260 $ 313
6 $ 1,198 $ 5,000 $ 5,000 $ 5,053 $ 5,129 $ 228 $ 284 $ 349 $ 424
7 $ 1,427 $ 5,000 $ 5,000 $ 5,069 $ 5,173 $ 282 $ 355 $ 442 $ 545
8 $ 1,665 $ 5,000 $ 5,000 $ 5,088 $ 5,226 $ 335 $ 427 $ 539 $ 677
9 $ 1,912 $ 5,000 $ 5,000 $ 5,110 $ 5,289 $ 387 $ 499 $ 641 $ 820
10 $ 2,169 $ 5,000 $ 5,000 $ 5,135 $ 5,362 $ 437 $ 572 $ 748 $ 975
15 $ 3,617 $ 5,000 $ 5,000 $ 5,314 $ 5,944 $ 600 $ 883 $ 1,302 $ 1,932
20 $ 5,379 $ 5,000 $ 5,000 $ 5,614 $ 7,650 $ 709 $ 1,197 $ 2,023 $ 3,459
25 $ 7,523 $ 5,000 $ 5,000 $ 6,084 $11,146 $ 735 $ 1,490 $ 2,950 $ 5,815
30 (Age 65) $10,132 $ 5,000 $ 5,000 $ 6,949 $15,771 $ 627 $ 1,724 $ 4,132 $ 9,379
35 $13,305 $ 5,000 $ 5,000 $ 8,350 $21,951 $ 274 $ 1,821 $ 5,575 $14,656
40 $17,166 $ 5,000 $ 5,000 $ 9,876 $30,276 $ 0 $ 1,621 $ 7,278 $22,311
45 $21,864 $ 5,000 $ 5,000 $11,567 $41,579 $ 0 $ 678 $ 9,224 $33,158

</TABLE>

(2) Assumes no Contract loan has been made.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING INTEREST RATES, AND RATES OF INFLATION. THE DEATH
BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%, 8%,
AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN
BE MADE BY PRUCO LIFE OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.

<PAGE>

THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING MAXIMUM CONTRACTUAL CHARGES

Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- ---------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- ---------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net) (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net)
------ ------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,000 $20,000 $20,009 $ 20,020 $ 12 $ 23 $ 35 $ 46
2 $ 829 $20,000 $20,000 $20,023 $ 20,056 $ 190 $ 221 $ 253 $ 286
3 $ 1,269 $20,000 $20,000 $20,044 $ 20,110 $ 363 $ 422 $ 484 $ 550
4 $ 1,726 $20,000 $20,000 $20,072 $ 20,185 $ 532 $ 626 $ 730 $ 842
5 $ 2,202 $20,000 $20,000 $20,108 $ 20,282 $ 703 $ 842 $ 998 $ 1,172
6 $ 2,697 $20,000 $20,000 $20,151 $ 20,404 $ 923 $ 1,114 $ 1,335 $ 1,588
7 $ 3,211 $20,000 $20,000 $20,204 $ 20,556 $ 1,142 $ 1,395 $ 1,693 $ 2,045
8 $ 3,746 $20,000 $20,000 $20,266 $ 20,740 $ 1,356 $ 1,678 $ 2,069 $ 2,543
9 $ 4,302 $20,000 $20,000 $20,339 $ 20,960 $ 1,564 $ 1,964 $ 2,462 $ 3,084
10 $ 4,881 $20,000 $20,000 $20,423 $ 21,220 $ 1,766 $ 2,253 $ 2,875 $ 3,672
15 $ 8,140 $20,000 $20,000 $21,047 $ 23,311 $ 2,422 $ 3,471 $ 5,001 $ 7,266
20 $12,106 $20,000 $20,000 $22,120 $ 28,759 $ 2,863 $ 4,695 $ 7,758 $ 13,001
25 $16,931 $20,000 $20,000 $23,831 $ 41,954 $ 2,969 $ 5,824 $11,293 $ 21,888
30 (Age 65) $22,801 $20,000 $20,000 $26,578 $ 59,408 $ 2,533 $ 6,695 $15,806 $ 35,329
35 $29,942 $20,000 $20,000 $31,980 $ 82,730 $ 1,113 $ 6,983 $21,351 $ 55,234
40 $38,631 $20,000 $20,000 $37,865 $114,143 $ 0 $ 5,993 $27,903 $ 84,113
45 $49,203 $20,000 $20,000 $44,385 $156,794 $ 0 $ 1,813 $35,395 $125,039

</TABLE>

(2) Assumes no Contract loan has been made.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING INTEREST RATES, AND RATES OF INFLATION. THE DEATH
BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%, 8%,
AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN
BE MADE BY PRUCO LIFE OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY
PERIOD OF TIME.

<PAGE>

GENERAL INFORMATION ABOUT
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT AND THE
FIXED RATE OPTION

Pruco Life PRUvider Variable Appreciable Account. Pruco Life PRUvider Variable
Appreciable Account was established on July 10, 1992 under Arizona law as a
separate investment account. The Account meets the definition of a "separate
account" under the federal securities laws. The Account holds assets that are
segregated from all of Pruco Life's other assets.

The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Pruco Life. Pruco Life is also the legal
owner of the assets in the Account. Pruco Life will at all times maintain assets
in the Account with a total market value at least equal to the reserve and other
liabilities relating to the variable benefits attributable to the Account. These
assets may not be charged with liabilities which arise from any other business
Pruco Life conducts. In addition to these assets, the Account's assets may
include funds contributed by Pruco Life to commence operation of the Account and
may include accumulations of the charges Pruco Life makes against the Account.
From time to time these additional assets will be transferred to Pruco Life's
general account. Before making any such transfer, Pruco Life will consider any
possible adverse impact the transfer might have on the Account.

The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any
supervision by the SEC of the management or investment policies or practices of
the Account. For state law purposes, the Account is treated as a part or
division of Pruco Life. There are currently two subaccounts within the Account,
one of which invests in the Conservatively Managed Flexible Portfolio and the
other of which invests in the Aggressively Managed Flexible Portfolio of the
Series Fund. Additional subaccounts may be added in the future. The Account's
financial statements begin on page A1.

The Fixed-Rate Option. Because of exemptive and exclusionary provisions,
interests in the fixed-rate option under the Contract have not been registered
under the Securities Act of 1933 and the general account has not been registered
as an investment company under the Investment Company Act of 1940. Accordingly,
interests in the fixed-rate option are not subject to the provisions of these
Acts, and Pruco Life has been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosure in this Prospectus relating
to the fixed-rate option. Any inaccurate or misleading disclosure regarding the
fixed-rate option may, however, subject Pruco Life and its directors to civil
liability if that results in any damage.

As explained earlier, you may elect to allocate, either initially or by
transfer, all or part of the amount credited under the Contract to the
fixed-rate option, and the amount so allocated or transferred becomes part of
The Pruco Life's general assets. Sometimes this is referred to as Pruco Life's
general account, which consists of all assets owned by Pruco Life other than
those in the Account and in other separate accounts that have been or may be
established by Pruco Life. Subject to applicable law, Pruco Life has sole
discretion over the investment of the assets of the general account, and
Contract owners do not share in the investment experience of those assets.
Instead, Pruco Life guarantees that the part of the Contract Fund allocated to
the fixed-rate option will accrue interest daily at an effective annual rate
that Pruco Life declares periodically. This rate may not be less than an
effective annual rate of 4%. Currently, declared interest rates remain in effect
from the date money is allocated to the fixed-rate option until the Monthly date
in the same month in the following year. See Contract Date, page 11. Thereafter,
a new crediting rate will be declared each year and will remain in effect for
the calendar year. Pruco Life reserves the right to change this practice. Pruco
Life is not obligated to credit interest at a higher rate than 4%, although in
its sole discretion it may do so. Different crediting rates may be declared for
different portions of the Contract Fund allocated to the fixed-rate option. At
least annually and on request, a Contract owner will be advised of the interest
rates that currently apply to his or her Contract.

Transfers from the fixed-rate option are subject to strict limits. (See
Transfers, page 13). The payment of any cash surrender value attributable to the
fixed-rate option may be delayed up to 6 months (see When Proceeds Are Paid,
page 16).

DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS

Requirements for Issuance of a Contract. Generally, the minimum initial
guaranteed death benefit that can be applied for is $5,000 and the maximum that
can be applied for is $25,000. The Contract may generally be issued on insureds
below the age of 76. Before issuing any Contract, Pruco Life requires evidence
of insurability which may include a medical examination. Non-smokers who meet
preferred underwriting requirements are offered the most favorable premium rate.
A higher premium is charged if an extra mortality risk is involved. These are
the

<PAGE>

current underwriting requirements. The Company reserves the right to change
these requirements on a non-discriminatory basis.

Short-Term Cancellation Right or "Free Look". Generally, you may return the
Contract for a refund within 10 days after you receive it, within 45 days after
Part I of the application for insurance is signed, or within 10 days after Pruco
Life mails or delivers a Notice of Withdrawal Right, whichever is latest. Some
states allow a longer period of time during which a Contract may be returned for
a refund. A refund can be requested by mailing or delivering the Contract to the
representative who sold it or to the Home Office specified in the Contract. A
Contract returned according to this provision shall be deemed void from the
beginning. You will then receive a refund of all premium payments made, plus or
minus any change due to investment experience in the value of the invested
portion of the premiums, calculated as if no charges had been made against the
Account or the Series Fund. However, if applicable law so requires, if you
exercise your short-term cancellation right, you will receive a refund of all
premium payments made, with no adjustment for investment experience.

Contract Fees and Charges. This section provides a detailed description of each
charge that is described briefly in the chart on page 1, and an explanation of
the purpose of the charge.

In several instances we will use the terms "maximum charge" and "current
charge." The "maximum charge," in each instance, will be the highest charge that
Pruco Life is entitled to make under the Contract. The "current charge" is the
lower amount that Pruco Life is now charging and which it intends to charge for
the indefinite future. However, if circumstances change, Pruco Life reserves the
right to increase each current charge, up to but to no more than the maximum
charge, without giving any advance notice.

Deductions from Premiums

(a) A charge for taxes attributable to premiums is deducted from each premium.
That charge is currently made up of two parts. The first part is in an amount
equal to the state or local premium tax. It varies from jurisdiction to
jurisdiction and generally ranges from 0.75% to 5% of the premium received by
Pruco Life. The second part is for federal income taxes measured by premiums and
it is equal to 1.25% of the premium. Pruco Life believes that this charge is a
reasonable estimate of an increase in its federal income taxes resulting from a
1990 change in the Internal Revenue Code. It is intended to recover this
increased tax. During 1994 and 1993, Pruco Life received a total of
approximately $2,412,598 and $1,477,242, respectively, in taxes attributable to
premiums.

(b) A charge of $2 is deducted from each premium payment to cover the cost of
collecting and processing premiums. Thus, if you pay premiums annually, this
charge will be $2 per year. If you pay premiums monthly, the charge will be $24
per year. During 1994 and 1993, Pruco Life received a total of approximately
$753,128 and $294,890, respectively, in processing charges.

Deductions from Portfolios

(a) An investment advisory fee is deducted daily from each portfolio at an
annual rate of 0.55% for the Conservatively Managed Flexible Portfolio and 0.6%
for the Aggressively Managed Flexible Portfolio.

---------------------------------------------------------------------
Other Total
Portfolio Advisory Fee Expenses Expenses
---------------------------------------------------------------------
Conservatively Managed Flexible 0.55% 0.06% 0.61%
Aggressively Managed Flexible 0.60% 0.06% 0.66%
---------------------------------------------------------------------

For the years 1994, 1993, and 1992, The Prudential received a total of
$66,413,206, $51,197,499, and $35,661,075, respectively, in investment
management fees for all of the Series Fund's portfolios.

Monthly Deductions from Contract Fund

The following monthly charges are deducted proportionately from the dollar
amounts held in each of the chosen investment option[s].

(a) A sales charge, often called a sales load, is deducted to pay part of the
costs Pruco Life incurs in selling the Contracts, including commissions,
advertising and the printing and distribution of prospectuses and sales
literature.

9
<PAGE>

The charge is equal to 0.5% of the "primary annual premium" which is equal to
the Scheduled Premium that would be payable if premiums were being paid
annually, less the two deductions from premiums (taxes attributable to premiums
and the $2 processing charge), and less the $6 part of the monthly deduction
described in (c) below, the $0.30 per $1,000 of face amount for Contracts with a
face amount of less than $10,000, and any extra premiums for riders or
substandard risks. The deduction is made whether the Contract owner is paying
premiums annually or more frequently. It is lower on Contracts issued on
insureds over 60 years of age. To summarize, this charge is somewhat less than
(significantly less for Contracts with small face amounts) 6% of the annual
Scheduled Premium.

There is a second sales load, which will be charged only if a Contract lapses or
is surrendered before the end of the 10th Contract year. It is often described
as a contingent deferred sales load ("CDSL") and is described later under
Surrender or Withdrawal Charges. During 1994 and 1993, Pruco Life received a
total of approximately $1,785,222 and $514,394, respectively, in sales load
charges.

(b) A charge of not more than $0.01 per $1000 of face amount of insurance is
made to compensate Pruco Life for the risk it assumes by guaranteeing that, no
matter how unfavorable investment experience may be, the death benefit will
never be less than the guaranteed minimum death benefit so long as Scheduled
Premiums are paid on or before the due date or during the grace period. This
charge will not be made if the Contract has been continued in force pursuant to
an option on lapse. During 1994 and 1993, Pruco Life received a total of
approximately $92,140 and $33,545, respectively, for this risk charge.

(c) An administrative charge of $6 plus up to $0.19 per $1,000 per month of face
amount of insurance is deducted each month. Currently, on a non- guaranteed
basis, this charge is reduced from $0.19 to $0.09 per $1,000. The charge is
intended to pay for processing claims, keeping records, and communicating with
Contract owners. If premiums are paid by automatic transfer under the Pru-Matic
Plan, as described on page 11, the current charge is further reduced to $0.07
per $1,000 of face amount. There is an additional charge of $0.30 per $1,000 of
face amount if the face amount of the Contract is less than $10,000. This
monthly administrative charge will not be made if the Contract has been
continued in force pursuant to an option on lapse. During 1994 and 1993, Pruco
Life received a total of approximately $5,161,744 and $1,853,895, respectively,
in monthly administrative charges.

(d) A mortality charge is deducted that is intended to be used to pay death
benefits. When an insured dies, the amount payable to the beneficiary is larger
than the Contract Fund and significantly larger if the insured dies in the early
years of a Contract. The mortality charges collected from all Contract owners
enables Pruco Life to pay the death benefit for the few insureds who die. The
maximum mortality charge is determined by multiplying the "net amount at risk"
under a Contract (the amount by which the Contract's death benefit, computed as
if there were neither riders nor Contract debt, exceeds the Contract Fund) by a
rate based upon the insured's current attained age and sex (except where unisex
rates apply) and the anticipated mortality for that class of persons. The
anticipated mortality is based upon mortality tables published by The National
Association of Insurance Commissioners called the Non-Smoker/Smoker 1980 CSO
Tables. Pruco Life may determine that a lesser amount than that called for by
these mortality tables will be adequate for insureds of particular ages and may
thus make a lower mortality charge for such persons. Any lower current mortality
charges are not applicable to Contracts in force pursuant to an option on lapse.
See Lapse and Reinstatement, page 14.

(e) If the Contract includes riders, Pruco Life deducts any charges applicable
to those riders from the Contract fund on each Monthly date. In addition, Pruco
Life will deduct on each Monthly date any extra charge incurred because of the
rating class of the insured.

Daily Deduction from the Contract Fund

Each day a charge is deducted from the assets of each of the subaccounts in an
amount equivalent to an effective annual rate of up to 0.9%. This charge is
intended to compensate Pruco Life for assuming mortality and expense risks under
the Contract. The mortality risk assumed is that insureds may live for shorter
periods of time than Pruco Life estimated when it determined what mortality
charge to make. The expense risk assumed is that expenses incurred in issuing
and administering the Contract will be greater than Pruco Life estimated in
fixing its administrative charges. Pruco Life will realize a profit from this
risk charge to the extent it is not needed to provide benefits and pay expenses
under the Contracts. This charge is not assessed against amounts allocated to
the fixed-rate option. During 1994 and 1993, Pruco Life received a total of
approximately $576,113 and $133,775, respectively, in mortality and expense risk
charges.

10
<PAGE>

Surrender or Withdrawal Charges

(a) An additional sales load (the CDSL) is charged if a Contract is surrendered
for its cash surrender value or lapses during the first 10 Contract years. It is
not deducted from the death benefit if the insured should die during this
period. This maximum contingent deferred charge is equal to 50% of the first
year's primary annual premium upon Contracts that lapse during the first 5
Contract years. That percentage is reduced uniformly on a daily basis starting
from the Contract's fifth anniversary until it disappears on the tenth
anniversary. Other important limitations apply. They are described more fully in
the Statement of Additional Information. The amount of this charge can be more
easily understood by reference to the following table which shows the sales
loads that would be paid by a 35 year old man with $20,000 face amount of
insurance, both through the monthly deductions from the Contract Fund described
above and upon the surrender of the Contract.

- --------------------------------------------------------------------------------
Cumulative Cumulative
Sales Load Total Sales
Cumulative Deducted Load as Per-
Surrender Scheduled from Contingent centage of
Last Day of Premiums Contract Deferred Total Sales Scheduled
Year No. Paid Fund Sales Load Load Premiums Paid
- --------------------------------------------------------------------------------
1 $ 390.90 $ 18.24 $ 87.22 $105.46 26.98%
2 781.80 36.48 104.16 140.64 17.99%
3 1,172.70 54.72 121.10 175.82 14.99%
4 1,563.60 72.96 138.04 211.00 13.49%
5 1,954.50 91.20 146.55 237.75 12.16%
6 2,345.40 109.44 121.80 231.24 9.86%
7 2,736.30 127.68 91.40 219.08 8.01%
8 3,127.20 145.92 60.80 206.72 6.61%
9 3,518.10 164.16 30.40 194.56 5.53%
10 3,909.00 182.40 0.00 182.40 4.67%
- --------------------------------------------------------------------------------

The percentages shown, in the last column will not be appreciably different
or insureds of different ages.

(b) An administrative charge of $5 per $1,000 of face amount of insurance
is deducted upon lapse or surrender to cover the cost of processing
applications, conducting medical examinations, determining insurability and
the insured's rating class, and establishing records. However, this charge
is reduced beginning on the Contract's fifth anniversary and declines daily
at a constant rate until it disappears entirely on the tenth Contract
anniversary. During 1994 and 1993, Pruco Life received a total of
approximately $94,251 and $15,552, respectively, for surrendered or lapsed
Contracts.

Transaction Charges

An administrative processing charge of $15 will be made in connection with each
withdrawal of excess cash surrender value of a Contract. This charge is
described in more detail in the Statement of Additional Information.

Contract Date. When the first premium payment is paid with the application for a
Contract, the Contract date will ordinarily be the later of the date of the
application or the date of any medical examination. In most cases no medical
examination will be necessary. If the first premium is not paid with the
application, the Contract date will ordinarily be the date the first premium was
paid and the Contract was delivered. Under certain circumstances, Pruco Life
will permit a Contract to be back-dated but only to a date not earlier than 6
months prior to the date of the application. It may be advantageous for a
Contract owner to have an earlier Contract date since that will result in the
use by Pruco Life of a lower issue age in determining the amount of the
scheduled premium. Pruco Life will require the payment of all premiums that
would have been due had the application date coincided with the back-dated
Contract date. The death benefit and cash surrender value under the Contract
will be equal to what they would have been had the Contract been issued on the
Contract date, all scheduled premiums been received on their due dates, and all
Contract charges been made.

Premiums. As already explained, the Contract provides for a Scheduled Premium
which, if paid when due or within a 61 day grace period, ensures that the
Contract will not lapse. If you pay premiums other than on a monthly basis, you
will receive a notice that a premium is due about 3 weeks before each due date.
If you pay premiums monthly, you will receive a book each year with 12 coupons
that will serve as a reminder. With Pruco Life's consent, you may change the
frequency of premium payments.

You may elect to have monthly premiums paid automatically under the "PruMatic
Premium Plan" by pre-authorized transfers from a bank checking account. If you
select the Pru-Matic Premium Plan, one of the current monthly charges will be
reduced. See Monthly Deductions From Contract Fund, page 9. Some Contract owners
may also be eligible to have monthly premiums paid by pre-authorized deductions
from an employer's payroll.

11
<PAGE>

The following table shows, for two face amounts, representative preferred and
standard annual premium amounts under Contracts issued on insureds who are not
substandard risks. These premiums do not reflect any additional riders or
supplementary benefits.

- --------------------------------------------------------------------------------
$10,000 Face Amount $20,000 Face Amount
---------------------------------------------------
Preferred Standard Preferred Standard
- --------------------------------------------------------------------------------
Male, age 35 $ 233.70 $ 274.01 $ 390.90 $ 471.52
at issue
- --------------------------------------------------------------------------------
Female, age 45 $ 278.04 $ 308.53 $ 479.59 $ 540.57
at issue
- --------------------------------------------------------------------------------
Male, age 55 $ 450.96 $ 562.17 $ 825.43 $1047.86
at issue
- --------------------------------------------------------------------------------

The following table compares annual and monthly premiums for insureds who are in
the preferred rating class. Note that in these examples the sum of 12 monthly
premiums for a particular Contract is approximately 110% to 116% of the annual
scheduled premium for that Contract.

- --------------------------------------------------------------------------------
$10,000 Face Amount $20,000 Face Amount
---------------------------------------------------
Monthly Annual Monthly Annual
- --------------------------------------------------------------------------------
Male, age 35 $ 22.43 $ 233.70 $ 36.59 $ 390.90
at issue
- --------------------------------------------------------------------------------
Female, age 45 $ 26.46 $ 278.04 $ 44.65 $ 479.59
at issue
- --------------------------------------------------------------------------------
Male, age 55 $ 41.96 $ 450.96 $ 75.66 $ 825.43
at issue
- --------------------------------------------------------------------------------

A significant feature of this Contract is that it permits you to pay greater
than Scheduled Premiums. This may be done by making occasional unscheduled
premium payments or on a periodic basis. If you wish, you may select a higher
contemplated premium than the Scheduled Premium. Pruco Life will then bill you
for the chosen premium. In general, the regular payment of higher premiums will
result in higher cash surrender values and higher death benefits. Conversely,
payment of a Scheduled Premium need not be made if the Contract Fund is
sufficiently large to enable the charges due under the Contract to be made
without causing the Contract to lapse. See Lapse and Reinstatement, page 14. The
payment of premiums in excess of Scheduled Premiums may cause the Contract to
become a Modified Endowment Contract. If this happens, loans and other
distributions which would otherwise not be taxable events will be subject to
federal income taxation. See Tax Treatment of Contract Benefits, page 17.

Pruco Life will generally accept any premium payment if the payment is at least
$25. Pruco Life does reserve the right, however, to limit unscheduled premiums
to a total of $5,000 in any Contract year, and to refuse to accept premiums that
would immediately result in more than a dollar-for-dollar increase in the death
benefit. See How a Contract's Death Benefit Will Vary, page 13. The privilege of
making large or additional premium payments offers a way of investing amounts
which accumulate without current income taxation, but again, there are tax
consequences if the Contract becomes a Modified Endowment Contract. See Tax
Treatment of Contract Benefits, page 17.

Allocation of Premiums. On the Contract date, a $2 processing charge and the
charge for taxes attributable to premiums are deducted from the initial premium.
The remainder is allocated on the Contract date among the subaccount[s] or the
fixed-rate option according to the desired allocation specified in the
application form. From this invested portion of the initial premium, the first
monthly deductions are made. See Contract Fees and Charges, page 9. The invested
portion of any part of the initial premium in excess of the Scheduled Premium is
placed in the selected investment option[s] on the date of receipt, but not
earlier than the Contract date. Thus, to the extent that the receipt of the
first premium precedes the Contract date, there will be a period during which
the Contract owner's initial premium will not be invested. All subsequent
premium payments, after the deduction from premiums, when received by Pruco Life
will be placed in the subaccount[s] or the fixed-rate option in accordance with
the allocation previously designated. Provided the Contract is not in default,
you may change the way in which subsequent premiums are allocated by giving
written notice to a Home Office. You may also change the way in which subsequent
premiums are allocated by telephoning the Home Office, provided you are enrolled
to

12
<PAGE>

use the Telephone Transfer system. There is no charge for reallocating future
premiums. If any part of the invested portion of a premium is allocated to a
particular investment option, that portion must be at least 10% on the date the
allocation takes effect. All percentage allocations must be in whole numbers.
For example, 33% can be selected but 331/3% cannot. Of course, the total
allocation of all selected investment options must equal 100%.

Transfers. If the Contract is not in default, or if the Contract is in force as
variable reduced paid-up insurance (see Lapse and Reinstatement, page 14), you
may, up to four times in each Contract year, transfer amounts from one
subaccount to the other subaccount or to the fixed-rate option. There is no
charge. All or a portion of the amount credited to a subaccount may be
transferred.

In addition, the total amount credited to a Contract held in the subaccounts may
be transferred to the fixed-rate option at any time during the first two
Contract years. If you wish to convert your variable Contract to a fixed-benefit
Contract in this manner, you must request a complete transfer of funds to the
fixed-rate option and should also change your allocation instructions regarding
any future premiums.

Transfers between subaccounts will take effect as of the end of the valuation
period in which a proper transfer request is received at a Home Office. The
request may be in terms of dollars, such as a request to transfer $1,000 from
one subaccount to the other, or may be in terms of a percentage reallocation
between subaccounts. In the latter case, as with premium reallocations, the
percentages must be in whole numbers. You may transfer amounts by proper written
notice to a Home Office, or by telephone, unless you ask that transfers by
telephone not be made. Pruco Life has adopted procedures designed to ensure that
requests by telephone are genuine and will require appropriate identification
for that purpose. Pruco Life cannot guarantee that you will be able to get
through to complete a telephone transfer during peak periods such as periods of
drastic economic or market change.

Transfers from the fixed-rate option are subject to restrictions and may only be
made with Pruco Life's consent. Transfers from the fixed-rate option to the
subaccounts are currently permitted once each Contract year and only during the
30-day period beginning on the Contract anniversary. The maximum amount which
may be transferred out of the fixed-rate option each year is currently the
greater of: (a) 25% of the amount in the fixed-rate option, or (b) $2,000. Such
transfer requests received prior to the Contract anniversary will be effected on
the Contract anniversary. Transfer requests received within the 30-day period
beginning on the Contract anniversary will be effected as of the end of the
valuation period in which a proper transfer request is received at a Home
Office. These limits are subject to change in the future.

How the Contract Fund Changes with Investment Experience. As explained above,
after the tenth Contract year, there will no longer be a surrender charge and,
if there is no Contract loan, the cash surrender value will be equal to the
Contract Fund. This section, therefore, also describes how the cash surrender
value of the Contract will change with investment experience.

On the Contract Date, the Contract Fund value is the initial premium less the
deductions from premiums and the first monthly deductions. See Contract Fees and
Charges, page 9. This amount is placed in the investment options designated by
the owner. Thereafter the Contract Fund value changes daily, reflecting
increases or decreases in the value of the securities in which the assets of the
subaccount have been invested, and interest credited on any amounts allocated to
the fixed-rate option. It is also reduced by the daily asset charge for
mortality and expense risks assessed against the variable investment options.
The Contract Fund value also increases to reflect the receipt of additional
premium payments and is decreased by the monthly deductions.

A Contract's cash surrender value on any date will be the Contract Fund value
reduced by the withdrawal charges, if any, and by any Contract debt. Upon
request, Pruco Life will tell a Contract owner the cash surrender value of his
or her Contract. It is possible, although highly unlikely, that the cash
surrender value of a Contract could decline to zero because of unfavorable
investment performance, even if a Contract owner continues to pay Scheduled
Premiums when due.

How a Contract's Death Benefit Will Vary. The death benefit will change from the
outset with investment experience. The precise way in which that will occur is
complicated and is described in the Statement of Additional Information. In
general, and assuming the optional paid-up benefit is not in effect, see Paid-Up
Insurance Option, on page 15, if the net investment performance is 4% per year
or higher, the death benefit will increase; if it is below 4%, it will decrease.
Pruco Life guarantees, however, that it will not decrease below the face amount
of insurance. If unfavorable experience of that kind should occur, it must be
offset by favorable experience before the death benefit begins to increase
again.

13
<PAGE>

that the death benefit always be greater than the Contract Fund value, the death
benefit must be increased. The required difference between the death benefit and
Contract Fund value is higher at younger ages than at older ages. A precise
description is in the Statement of Additional Information.

Contract Loans. The owner may borrow from Pruco Life up to the "loan value" of
the Contract, using the Contract as the only security for the loan. The loan
value is equal to (1) 90% of an amount equal to the portion of the Contract fund
value attributable to the variable investment options and to any prior loan[s]
supported by the variable investment options, minus the portion of any charges
attributable to variable investment options that would be payable upon an
immediate surrender; plus (2) 100% of an amount equal to the portion of the
Contract fund value attributable to the fixed-rate option and to any prior
loan[s] supported by the fixed-rate option, minus the portion of any charges
attributable to the fixed-rate option that would be payable upon an immediate
surrender. The minimum amount that may be borrowed at any one time is $200
unless the proceeds are used to pay premiums on the Contract.

Interest charged on a loan accrues daily at a fixed effective annual rate of
5.5%. Interest payments on any loan are due at the end of each Contract year. If
interest is not paid when due, it is added to the principal amount of the loan.
The term "Contract debt" means the amount of all outstanding loans plus any
interest accrued but not yet due. If at any time the Contract debt exceeds what
the cash surrender value would be if there were no Contract debt, Pruco Life
will notify you of its intent to terminate the Contract in 61 days, within which
time you may repay all or enough of the loan to obtain a positive cash surrender
value and thus keep the Contract in force for a limited time.

When a loan is made, an amount equal to the loan proceeds will be transferred
out of the variable investment options and/or the fixed-rate option, as
applicable. The reduction will normally be made in the same proportions as the
value in each subaccount and the fixed-rate option bears to the total value of
the Contract. While a loan is outstanding, the amount that was so transferred
will continue to be treated as part of the Contract fund but it will be credited
with the assumed rate of return of 4% rather than with the actual rate of return
of the subaccount[s] or fixed-rate option.

A loan will have an effect on a Contract's cash surrender value and may have an
effect on the death benefit, even if the loan is fully repaid, because the
investment results of the selected investment options will apply only to the
amount remaining invested under those options. The longer the loan is
outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If investment results are greater than the rate being
credited upon the amount of the loan while the loan is outstanding, values under
the Contract will not increase as rapidly as they would have if no loan had been
made. If investment results are below that rate, Contract values will be higher
than they would have been had no loan been made. A loan that is repaid will not
have any effect upon the guaranteed minimum death benefit.

Consider the Contract issued on a 35 year old male insured illustrated in the
table on page T2 with an 8% gross investment return. Assume a $1,500 loan was
made under this Contract at the end of Contract year 8 and repaid at the end of
Contract year 10 and loan interest was paid when due. Upon repayment, the cash
surrender value would be $3,234.10. This amount is lower than the cash surrender
value shown on that page for the end of Contract year 10 because the loan amount
was credited with the 4% assumed rate of return rather than the 6.46% net return
for the designated subaccount[s] resulting from the 8% gross return in the
underlying Series Fund. Loans from Modified Endowment Contracts may be treated
for tax purposes as distributions of income. See Tax Treatment of Contract
Benefits, page 17.

Surrender of a Contract. You may surrender a Contract for its cash surrender
value while the insured is living. To surrender a Contract, you must deliver or
mail it, together with a written request, to a Home Office. The cash surrender
value of a surrendered Contract (taking into account the deferred sales and
administrative charges, if any) will be determined as of the end of the
valuation period in which such a request is received in the Home Office.
Surrender of a Contract may have tax consequences. See Tax Treatment of Contract
Benefits, page 17.

14
<PAGE>

Contract remains in force.) This could occur because of such factors as
favorable investment experience, deduction of current rather than maximum
charges, or the previous payment of greater than Scheduled Premiums.

However, if a Scheduled Premium is not paid, and the Contract Fund is
insufficient to keep the Contract in force, the Contract will go into default.
Should this happen, Pruco Life will send you a notice of default setting forth
the payment necessary to keep the Contract in force on a premium paying basis.
This payment must be received at a Home Office within the 61 day grace period
after the notice of default is mailed or the Contract will lapse. A Contract
that lapses with an outstanding Contract loan may have tax consequences. See Tax
Treatment of Contract Benefits, page 17.

A Contract that has lapsed may be reinstated within 5 years after the date of
default unless the Contract has been surrendered for its cash surrender value.
To reinstate a lapsed Contract, Pruco Life requires renewed evidence of
insurability, and submission of certain payments due under the Contract.

If your Contract does lapse, it will still provide some benefits. You can
receive the cash surrender value by making a request of Pruco Life prior to the
end of the 61 day grace period. You may also choose one of the three forms of
insurance described below for which no further premiums are payable.

Fixed Reduced Paid-Up Insurance. This insurance continues for the lifetime of
the insured but at an insurance amount that is generally lower than that
provided by fixed extended term insurance. It will decrease only if a Contract
loan is taken. You will be told, if you ask, what the amount of the insurance
will be. Fixed paid-up insurance has a cash surrender value and a loan value. It
is possible for this Contract to be classified as a Modified Endowment Contract
if this option is exercised during the first 7 Contract years. See Tax Treatment
of Contract Benefits, page 17.

Variable Reduced Paid-Up Insurance. This is similar to fixed paid-up insurance
and will initially be in the same amount. The Contract Fund will continue to
vary to reflect the experience of the selected investment options. There will be
a new guaranteed minimum death benefit. Variable reduced paid-up insurance has
cash surrender and loan values.

Variable reduced paid-up insurance is the automatic option provided upon lapse,
if the amount of variable reduced paid-up insurance is at least as great as the
amount of fixed extended term insurance which would have been provided upon
lapse. Variable reduced paid-up insurance will be available only if the insured
is not in one of the high risk rating classes for which Pruco Life does not
offer fixed extended term insurance. It is possible for this Contract to be
classified as a Modified Endowment Contract if this option is exercised during
the first 7 Contract years. See Tax Treatment of Contract Benefits, page 17.

Paid-Up Insurance Option. In certain circumstances you may elect to stop paying
premiums and to have guaranteed insurance coverage for the lifetime of the
insured. This benefit is available only if the following conditions are met: (1)
the Contract is not in default; (2) Pruco Life is not paying premiums in
accordance with any payment of premium benefit that may be included in the
Contract; and (3) the Contract fund is sufficiently large so that the calculated
guaranteed paid-up insurance amount is at least equal to the face amount of
insurance plus the excess, if any, of the Contract fund over the tabular
Contract fund. The amount of guaranteed paid-up insurance coverage may be
greater. It will be equal to the difference between the Contract fund and the
present value of future monthly charges from the Contract fund (other than
charges for anticipated mortality costs and for payment of premium riders)
multiplied by the attained age factor. This option will generally be available
only when the Contract has been in force for many years and the Contract fund
has grown because of favorable investment experience or the payment of
unscheduled premiums or both. Once the paid-up insurance option is exercised,
the actual death benefit is equal to the greater of the guaranteed paid-up
insurance amount and the Contract fund multiplied by the attained age factor.
Upon request, Pruco Life will quote the amount needed to pay up the Contract and
to guarantee the paid-up insurance amount as long as a payment equal to or
greater than the quoted amount is received within two weeks of the quote. There
is no guarantee if the remittance is received within the two week period and is
less than the quoted amount or if the remittance is received outside the two
week period. In this case, Pruco Life will add the remittance to the contract
fund and recalculate the guaranteed paid-up

15
<PAGE>

insurance amount. If the guaranteed paid-up insurance amount is equal to or
greater than the face amount, the paid-up request will be processed. If the
guaranteed paid-up insurance amount is calculated below the face amount, the
insured will be notified that the amount is insufficient to process the request.
In some cases, the quoted amount, if paid, would increase the death benefit by
more than it increases the contract fund. In these situations, underwriting
might be required to accept the premium payment and to process the paid-up
request. Pruco Life reserves the right to change this procedure in the future.
After the first Contract year, you must make a proper written request for the
Contract to become fully paid-up and send the Contract to a Pruco Life Home
Office to be endorsed. If this option is exercised during the first 7 Contract
years, the Contract may be classified as a "Modified Endowment Contract," see
Tax Treatment of Contract Benefits, page 17. A Contract in effect under a
paid-up insurance option will have cash surrender and loan values.

When Proceeds Are Paid. Pruco Life will generally pay any death benefit, cash
surrender value, loan proceeds or withdrawal within 7 days after receipt at a
Home Office of all the documents required for such a payment. Other than the
death benefit, which is determined as of the date of death, the amount will be
determined as of the end of the valuation period in which the necessary
documents are received. However, Pruco Life may delay payment of proceeds from
the subaccount[s] and the variable portion of the death benefit due under the
Contract if the sale or valuation of the Account's assets is not reasonably
practicable because the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by the SEC or the SEC declares
that an emergency exists.

With respect to the amount of any cash surrender value allocated to the
fixed-rate option, and with respect to a Contract in force as fixed reduced
paid-up insurance or as extended term insurance, Pruco Life expects to pay the
cash surrender value promptly upon request. However, Pruco Life has the right to
delay payment of such cash surrender value for up to 6 months (or a shorter
period if required by applicable law). Pruco Life will pay interest of at least
3% a year if it delays such a payment for more than 30 days (or a shorter period
if required by applicable law).

Living Needs Benefit. Contract applicants may elect to add the Living Needs
Benefit(SM) to their Contracts at issue, subject to Pruco Life's receipt of
satisfactory evidence of insurability. The benefit may vary state-by-state. It
can generally be added only when the aggregate face amounts of the insured's
eligible contracts equal $50,000 or more. There is no charge for adding the
benefit to the Contract. However, an administrative charge (not to exceed $150)
will be made at the time the Living Needs Benefit is paid.

The Living Needs Benefit allows the Contract owner to elect to receive an
accelerated payment of all or part of the Contract's death benefit, adjusted to
reflect current value, at a time when certain special needs exist. The adjusted
death benefit will always be less than the death benefit, but will generally be
greater than the Contract's cash surrender value. Depending upon state
regulatory approval, one or both of the following options may be available. A
Pruco Life representative should be consulted as to whether additional options
may be available.

Terminal Illness Option. This option is available if the insured is diagnosed as
terminally ill with a life expectancy of 6 months or less. When satisfactory
evidence is provided, Pruco Life will provide an accelerated payment of the
portion of the death benefit selected by the Contract owner as a Living Needs
Benefit. You may (1) elect to receive the benefit in a single sum or (2) receive
equal monthly payments for 6 months. If the insured dies before all the payments
have been made, the present value of the remaining payments will be paid to the
beneficiary designated in the Living Needs Benefit claim form in a single sum.

Nursing Home Option. This option is available after the insured has been
confined to an eligible nursing home for 6 months or more. When satisfactory
evidence is provided, including certification by a licensed physician, that the
insured is expected to remain in the nursing home until death, Pruco Life will
provide an accelerated payment of the portion of the death benefit selected by
the Contract owner as a Living Needs Benefit. You may (1) elect to receive the
benefit in a single sum or (2) receive equal monthly payments for a specified
number of years (not more than 10 nor less than 2), depending upon the age of
the insured. If the insured dies before all of the payments have been made, the
present value of the remaining payments will be paid to the beneficiary
designated in the Living Needs Benefit claim form in a single sum.

All or part of the Contract's death benefit may be accelerated under the Living
Needs Benefit. If the benefit is only partially accelerated, a death benefit of
at least $25,000 must remain under the Contract. Pruco Life reserves the right
to determine the minimum amount that may be accelerated.

No benefit will be payable if the Contract owner is required to elect it in
order to meet the claims of creditors or to obtain a government benefit. Pruco
Life can furnish details about the amount of Living Needs Benefit that is
available to an eligible Contract owner under a particular Contract, and the
adjusted premium payments that would be in effect if less than the entire death
benefit is accelerated.

16
<PAGE>

use it could. Contract owners should consult a qualified tax advisor before
electing to receive this benefit. Unlike a death benefit received by a
beneficiary after the death of an insured, receipt of a Living Needs Benefit
payment may give rise to a federal or state income tax. Receipt of a Living
Needs Benefit payment may also affect a Contract owner's eligibility for certain
government benefits or entitlements.

Voting Rights. As stated above, all of the assets held in the subaccounts of the
Account will be invested in shares of the corresponding portfolios of the Series
Fund. Pruco Life is the legal owner of those shares and as such has the right to
vote on any matter voted on at Series Fund shareholders meetings. However, Pruco
Life will, as required by law, vote the shares of the Series Fund at any regular
and special shareholders meetings it is required to hold in accordance with
voting instructions received from Contract owners. The Series Fund will not hold
annual shareholders meetings when not required to do so under Maryland law or
the Investment Company Act of 1940. Series Fund shares for which no timely
instructions from Contract owners are received, and any shares attributable to
general account investments of Pruco Life will be voted in the same proportion
as shares in the respective portfolios for which instructions are received.

Matters on which Contract owners may give voting instructions including the
following: (1) election of the Board of Directors of the Series Fund; (2)
ratification of the independent accountant of the Series Fund; (3) approval of
the investment advisory agreement for a portfolio of the Series Fund
corresponding to the Contract owner's selected subaccount[s]; (4) any change in
the fundamental investment policy of a portfolio corresponding to the Contract
owner's selected subaccount[s]; and (5) any other matter requiring a vote of the
shareholders of the Series Fund. With respect to approval of the investment
advisory agreement or any change in a portfolio's fundamental investment policy,
Contract owners participating in such portfolios will vote separately on the
matter.

The number of shares in a portfolio for which you may give instructions is
determined by dividing the portion of your Contract Fund attributable to the
portfolio, by the value of one share of the portfolio. The number of votes for
which each Contract owner may give Pruco Life instructions will be determined as
of the record date chosen by the Board of Directors of the Series Fund. Pruco
Life will furnish Contract owners with proper forms and proxies to enable them
to give these instructions. Pruco Life reserves the right to modify the manner
in which the weight to be given voting instructions is calculated where such a
change is necessary to comply with current federal regulations or
interpretations of those regulations.

Pruco Life may, if required by state insurance regulations, disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the sub-classification or investment objectives of one or more
of the Series Fund's portfolios, or to approve or disapprove an investment
advisory contract for the Series Fund. In addition, Pruco Life itself may
disregard voting instructions that would require changes in the investment
policy or investment advisor of one or more of the Series Fund's portfolios,
provided that Pruco Life reasonably disapproves such changes in accordance with
applicable federal regulations. If Pruco Life does disregard voting
instructions, it will advise Contract owners of that action and its reasons for
such action in the next annual or semi-annual report to Contract owners.

Reports to Contract Owners. Once each Contract year (except where the Contract
is in force as fixed extended term insurance or fixed reduced paid-up
insurance), you will be sent a statement that provides certain information
pertinent to your own Contract. These statements show all transactions during
the year that affected the value of your Contract Fund, including monthly
changes attributable to investment experience. That statement will also show the
current death benefit, cash surrender value, and loan values of your Contract.
On request, you will be sent a current statement in a form similar to that of
the annual statement described above, but Pruco Life may limit the number of
such requests or impose a reasonable charge if such requests are made too
frequently.

You will be sent an annual report of the Account. You will also be sent annual
and semi-annual reports of the Series Fund showing the financial condition of
the portfolios and the investments held in both.

Tax Treatment of Contract Benefits. The tax treatment of life insurance is
complex and may change, therefore if you need assistance, you should consult
with a qualified tax advisor. A more technical discussion of what follows is
contained in the Statement of Additional Information. Here Pruco Life provides,
not tax advice, but a general statement of how it believes the tax laws
currently apply in the most commonly occurring circumstances.

Treatment as Life Insurance. Pruco Life believes that the Contract should
qualify as "life insurance" under the Internal Revenue Code. This means that,
except as noted below, any annual increases in your Contract Fund, whether
attributable to income or capital appreciation, should not be included in your
income. In addition, the receipt of a death benefit by a beneficiary should not
result in taxable income.

Although Pruco Life believes the Contract should qualify as "life insurance" for
federal tax purposes, there are uncertainties, particularly because the
Secretary of the Treasury has not yet issued permanent regulations that bear on
this question. Accordingly, we have reserved the right to make changes -- which
will be applied uniformly to all Contract owners after advance written notice --
that we deem necessary to insure that the Contract will continue to qualify as
life insurance.

17
<PAGE>

Pre-Death Distributions. The tax treatment of any distribution received by an
owner prior to an insured's death will depend upon whether the Contract is
classified as a Modified Endowment Contract.

If the Contract is not classified as a Modified Endowment Contract, proceeds
received in the event of a lapse, surrender of the Contract, or withdrawal of
part of the cash surrender value will generally not be taxable unless the total
amount received exceeds the gross premiums paid less the untaxed portion of any
prior withdrawals. In certain limited circumstances, all or a portion of a
withdrawal during the first 15 contract years may be taxable even if total
withdrawals do not exceed total premiums paid to date. The proceeds of any loan
will be treated as indebtedness of the owner and will not be treated as taxable
income.

If the Contract is classified as a Modified Endowment Contract, pre- death
distributions, including loans and withdrawals (even those made during the 2
year period before the Contract became a Modified Endowment Contract), will be
taxed first as investment income to the extent of gain in the Contract, and then
as a return of the Contract owner's investment in the Contract. In addition,
pre-death distributions (including full surrenders) will be subject to a penalty
of 10% of the amount includible in income unless the amount is distributed on or
after the owner reaches age 59 1/2, on account of the owner's disability, or as
a life annuity.

A Contract may be classified as a Modified Endowment Contract under various
circumstances. For example, low face amount Contracts issued on younger insureds
may be classified as a Modified Endowment Contract even though the Contract
owner pays only the Scheduled Premiums or even less than the Scheduled Premiums.
Before purchasing such a Contract, you should understand the tax treatment of
pre-death distributions and consider the purpose for which the Contract is being
purchased. More generally, a Contract may be classified as a Modified Endowment
Contract if premiums in excess of Scheduled Premiums are paid or the face amount
of insurance is decreased during the first seven Contract years, or if the face
amount of insurance is increased or if a rider is added or removed from the
Contract. You should consult with your tax advisor before making any of these
policy changes.

Other Contract Provisions. There are several other Contract provisions that are
of less significance to you than those already described in detail either
because they relate to options that you may choose under the Contract but are
not likely to exercise for several years after you first purchase it or because
they are of a routine nature not likely to influence your decision to buy the
Contract. These provisions are summarized in the Expanded Table of Contents of
the Statement of Additional Information, page 23 and described in greater detail
in the Statement of Additional Information.

FURTHER INFORMATION ABOUT THE SERIES FUND

The Series Fund is currently made up of sixteen separate portfolios, two of
which, the Conservatively Managed Flexible and Aggressively Managed Flexible
Portfolios are available to Contract owners. Each portfolio is, for many
purposes, in effect a separate investment fund, and a separate class of capital
stock is issued for each portfolio. Each share of capital stock issued with
respect to a portfolio has a pro-rata interest in the assets of that portfolio
and has no interest in the assets of any other portfolio. Each portfolio bears
its own liabilities and also its proportionate share of the general liabilities
of the Series Fund. In other respects the Series Fund is treated as one entity.
For example, the Series Fund has only one Board of Directors and owners of the
shares of each portfolio are entitled to vote for members of the Board.

18
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS

The investment objectives of both portfolios available to PRUvider Contract
owners are set forth on page 2. For the sake of convenience, they are repeated
here, followed in each case by a brief description of the policies of both
portfolios. In some cases a fuller description of those policies is in the
Statement of Additional Information. There is no guarantee that any of these
objectives will be met.

Balanced Portfolios

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 15% 35% 50%
Bonds 15% 35% 50%
Money Market 0% 30% 70%

The bond portion of the portfolio will be invested primarily in securities with
maturities of 2 to 10 years and ratings at the time of purchase within the four
highest grades determined by Moody's, S&P, or a similar nationally-recognized
rating service. A description of debt ratings is in the Statement of Additional
Information. Because of their shorter maturities, the value of the notes and
bonds in this portfolio will be less sensitive to changes in interest rates than
the longer-term bonds likely to be held in the Aggressively Managed Flexible
Portfolio. Thus, there will be less of a risk of loss of principal, but not as
much of a likelihood for greater appreciation in value. Up to 20% of the bond
portion of this portfolio may be invested in United States currency denominated
debt securities issued outside the United States by foreign or domestic issuers.
The common stock portion of this portfolio will be invested primarily in the
equity securities of major, established corporations in sound financial
condition that appear to offer attractive prospects of a total return from
dividends and capital appreciation that is superior to broadly based stock
indices. The money market portion of the portfolio will hold high-quality
short-term debt obligations with a maturity of 12 months or less (as described
in the Statement of Additional Information) and will maintain a dollar-weighted
average maturity of 120 days or less.

In addition, the portfolio may (i) purchase and sell options on equity
securities, debt securities, stock indices and foreign currencies (ii) purchase
and sell stock index, interest rate and foreign currency futures contracts and
options thereon; (iii) enter into forward foreign currency exchange contracts;
(iv) purchase securities on a when-issued or delayed delivery basis; (v) use
interest rate swaps; and (vi) make short sales. These techniques are described
briefly under Options, Futures Contracts and Swaps and Short Sales on page 21,
and in detail in the Statement of Additional Information.

19
<PAGE>

The Conservatively Managed Flexible Portfolio is managed by Prudential
Investment Advisors ("PIA") and Prudential Diversified Investment Strategies
("PDI"), units of PIC, using a team of portfolio managers under the supervision
of Mark Stumpp, Managing Director, PIC. Mark Stumpp has been providing overall
asset allocation for the portfolio since 1994. Mr. Stumpp also supervises the
team of portfolio managers for the Aggressively Managed Flexible Portfolio of
the Series Fund and is portfolio manager for several employee benefit trusts
including the Prudential Retirement System for U.S. Employees and Special
Agents. Prior to 1994, he was responsible for corporate pension asset management
for Prudential Diversified Investment Strategies' corporate clients.

Aggressively Managed Flexible Portfolio. The objective of this portfolio is
achievement of a high total return consistent with a portfolio having an
aggressively managed mix of money market instruments, fixed income securities,
and common stocks, in proportions believed by The Prudential to be appropriate
for an investor desiring diversification of investment who is willing to accept
a relatively high level of loss in an effort to achieve greater appreciation.

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 25% 60% 100%
Bonds 0% 40% 75%
Money Market 0% 0% 75%

The bond component of this portfolio is expected under normal circumstances to
have a weighted average maturity of greater than 10 years. The values of bonds
with longer maturities are generally more sensitive to changes in interest rates
than those of shorter maturities. The bond portion of this portfolio will
primarily be invested in securities that have a rating at the time of purchase
within the four highest grades determined by Moody's, S&P, or a similar
nationally-recognized rating service. A description of debt ratings is in the
Statement of Additional Information. However, up to 25% of the bond component of
this portfolio may be invested in securities having ratings at the time of
purchase of "BB," "Ba" or lower, or if not rated, of comparable quality in the
opinion of the portfolio manager, these securities are also known as high risk
securities. Up to 20% of the bond portion of this portfolio may be invested in
United States currency denominated debt securities issued outside the United
States by foreign or domestic issuers. The established company common stock
component of this portfolio will consist of the equity securities of major
corporations that are believed to be in sound financial condition. In selecting
stocks of smaller capitalization companies, the portfolio manager will
concentrate on companies with a capitalization range of $75 million to $600
million that show above-average profitability (measured by return- on-equity,
earnings, and dividend growth rates) with modest price/earnings ratios. The
individual equity selections for this portfolio may tend to have more volatile
market values than the equity securities selected for the Common Stock Portfolio
or the Conservatively Managed Flexible Portfolio. The money market portion of
the portfolio will hold high-quality short-term debt obligations with a maturity
of 12 months or less (as described in the Statement of Additional Information)
and will maintain a dollar-weighted average maturity of 120 days or less.

To the extent permitted by applicable insurance law, this portfolio may invest
up to 30% of its total assets in non-United States currency denominated debt and
equity securities of foreign and U.S. issuers. The particular risks of
investment in foreign securities are described under Foreign Securities, below.

In addition, the portfolio may (i) purchase and sell options on equity
securities, debt securities, stock indices and foreign currencies (ii) purchase
and sell stock index, interest rate and foreign currency futures contracts and
options thereon; (iii) enter into forward foreign currency exchange contracts;
(iv) purchase securities on a when-issued or delayed delivery basis; (v) use
interest rate swaps; and (vi) make short sales. These techniques are described
briefly under Options, Futures Contracts and Swaps and Short Sales, below, and
in detail in the Statement of Additional Information.

The Aggressively Managed Flexible Portfolio is managed by Prudential Investment
Advisors ("PIA") and Prudential Diversified Investment Strategies ("PDI"), units
of PIC, using a team of portfolio managers under the supervision of Mark Stumpp,
Managing Director, PIC. Mark Stumpp has been providing overall asset allocation
for the portfolio since 1994. Mr. Stumpp also supervises the team of portfolio
managers for the Conservatively Managed Flexible Portfolio of the Series Fund
and is portfolio manager for several employee benefit trusts including the
Prudential Retirement System for U.S. Employees and Special Agents. Prior to
1994, he was responsible for corporate pension asset management for Prudential
Diversified Investment Strategies' corporate clients.

20
<PAGE>

law, the Conservatively Managed Flexible and Aggressively Managed Flexible
Portfolios may invest up to 30% of their total assets in debt and equity
securities denominated in a foreign currency and issued by foreign or domestic
issuers. Securities issued outside the United States and not publicly traded in
the United States, as well as American Depository Receipts ("ADRs") and
securities denominated in a foreign currency are referred to collectively in
this prospectus as "foreign securities."

Options, Futures Contracts and Swaps. The description of the portfolios'
investment policies also state whether they will invest in what are sometimes
called derivative securities. These include options (which may be to buy or sell
equity securities, debt securities, stock indices, foreign currencies and stock
index futures contracts); futures contracts on interest bearing securities,
stock and interest rate indices, and foreign currencies; and interest rate
swaps. These investments have not in the past represented more than a very minor
part of the investments of any portfolio but may increase in the future.

Because options, futures and swaps are now used to such a limited extent, a full
description of these investments and the risks associated with them is in the
Statement of Additional Information.

Short Sales. The Conservatively Managed Flexible and Aggressively Managed
Flexible Portfolios may sell securities they do not own in anticipation of a
decline in the market value of those securities ("short sales"). The portfolio
will incur a loss as a result of the short sale if the price of the security
increases between the date of the short sale and the date on which the portfolio
replaces the borrowed security. The portfolio will realize a gain if the
security declines in price between those dates. This result is the opposite of
what one would expect from a cash purchase of a long position in a security. The
amount of any gain will be decreased, and the amount of any loss will be
increased, by the amount of any premium or interest paid in connection with the
short sale.

21
<PAGE>

the portfolio. Dollar rolls involve sales by a portfolio of securities for
delivery in the current month with a simultaneous contract to repurchase
substantially similar securities (same type and coupon) from the same party at
an agreed upon price and date. During the roll period, the portfolio forgoes
principal and interest paid on the securities. A portfolio is compensated by the
difference between the current sales price and the forward price for the future
purchase (often referred to as the "drop") as well as by the interest earned on
the cash proceeds of the initial sale. A "covered roll" is a specific type of
dollar roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of the
dollar roll transaction. A portfolio will establish a segregated account with
its custodian in which it will maintain cash, U.S. Government securities or
other liquid high-grade debt obligations equal in value to its obligations in
respect of reverse repurchase agreements and dollar rolls. Reverse repurchase
agreements and dollar rolls involve the risk that the market value of the
securities retained by the portfolio may decline below the price of the
securities the portfolio has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities under a reverse repurchase
agreement or dollar roll files for bankruptcy or becomes insolvent, the
portfolio's use of the proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the portfolio's obligation to repurchase the securities. No portfolio will
obligate more than 30% of its net assets in connection with reverse repurchase
agreements and dollar rolls.

Loans of Portfolio Securities. Both of the portfolios may from time to time lend
the securities they hold to broker-dealers, provided that such loans are made
pursuant to written agreements and are continuously secured by collateral in the
form of cash, U.S. Government Securities or irrevocable standby letters of
credit in an amount equal to at least the market value at all times of the
loaned securities plus the accrued interest and dividends. During the time
securities are on loan, the portfolio will continue to receive the interest and
dividends, or amounts equivalent thereto, on the loaned securities, while
receiving a fee from the borrower or earning interest on the investment of the
cash collateral.

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS

The Series Fund is subject to certain investment restrictions which are
fundamental to the operations of the Series Fund and may not be changed except
with the approval of a majority vote of the persons participating in the
affected portfolio.

A detailed discussion of investment restrictions applicable to the Series Fund
is in the Statement of Additional Information.

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES

The Series Fund has entered into an Investment Advisory Agreement with The
Prudential under which The Prudential will, subject to the direction of the
Board of Directors of the Series Fund, be responsible for the management of the
Series Fund, and provide investment advice and related services to each
portfolio. The Prudential manages the assets that it owns as well as those of
various separate accounts established by The Prudential and those held by other
investment companies for which it acts as investment advisor. Total assets under
management as of December 31, 1994 was approximately $297 billion, which
includes approximately $212 billion owned by The Prudential and approximately
$85 billion of external assets under The Prudential's management.

Subject to The Prudential's supervision, substantially all of the investment
advisory services provided to the Series Fund by The Prudential with respect to
the Conservatively Managed Flexible and Aggressively Managed Flexible
Portfolios, are furnished by its wholly-owned subsidiary, PIC, pursuant to the
Service Agreement between The Prudential and PIC which provides that The
Prudential will reimburse PIC for its costs and expenses. The Conservatively
Managed Flexible and Aggressively Managed Flexible Portfolios are managed by
Prudential Investment Advisors ("PIA") and Prudential Diversified Investment
Strategies ("PDI"), units of PIC, using a team of portfolio managers under the
supervision of Mark Stumpp, Managing Director, PIC. PIC is registered as an
investment advisor under the Investment Advisers Act of 1940.

22
<PAGE>

For the year ended December 31, 1994, the Series Fund's total expenses were
0.59% of the average net assets of all of the Series Fund's portfolios. The
investment management fee for that period constituted 0.51% of the average net
assets. Further information about the investment management arrangements and the
expenses of the Series Fund is in the Statement of Additional Information.

An affiliated broker may be employed to execute brokerage transactions on behalf
of the portfolios, as long as the commissions are reasonable and fair compared
to the commissions received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. The Series Fund may not
engage in any transactions in which The Prudential or its affiliates, including
The Prudential Securities Incorporated, acts as principal, including
over-the-counter purchases and negotiated trades in which such a party acts as a
principal. Additional information about portfolio brokerage and related
transactions is in the Statement of Additional Information.

STATE REGULATION

Pruco Life is subject to regulation and supervision by the Department of
Insurance of the State of Arizona, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business.

Pruco Life is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business to determine solvency and compliance with local
insurance laws and regulations.

In addition to the annual statements referred to above, Pruco Life is required
to file with Arizona and other jurisdictions a separate statement with respect
to the operations of all its variable contract accounts, in a form promulgated
by the National Association of Insurance Commissioners.

EXPERTS

LITIGATION

No litigation is pending that would have a material effect upon the Account or
the Series Fund.

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

Included in the registration statements for the Contracts and the Series Fund is
a Statement of Additional Information which is available without charge by
writing to Pruco Life at 213 Washington Street, Newark, New Jersey 07102-2992.
The following table of contents of that Statement provides a brief summary of
what is included in each section.

I. MORE DETAILED INFORMATION ABOUT THE CONTRACT.

Sales Load Upon Surrender. A description is given of exactly how Pruco
Life determines the amount of the part of the sales load that is imposed
only upon surrenders or withdrawals during the first 10 Contract years.

Reduction of Charges for Concurrent Sales to Several Individuals. Where
the Contract is sold at the same time to several individuals who are
members of an associated class and Pruco Life's expenses will be
reduced, some of the charges under those Contracts may be reduced.

Paying Premiums by Payroll Deduction. Your employer may pay monthly
premiums for you with deductions from your salary.

23
<PAGE>

Unisex Premiums and Benefits. In some states and under certain
circumstances, premiums and benefits will not vary with the sex of the
insured.

How the Death Benefit Will Vary. A description is given of exactly how
the death benefit may increase to satisfy Internal Revenue Code
requirements.

Withdrawal of Excess Cash Surrender Value. If the Contract Fund value is
high enough you may be able to withdraw part of the cash surrender value
while keeping the Contract in effect. There will be a transaction
charge. The death benefit will change. There may be tax consequences.
You should consult your Pruco Life representative to discuss whether a
withdrawal or a loan is preferable.

Tax Treatment of Contract Benefits. A fuller account is provided of
how Contract owners may be affected by federal income taxes.

Sale of the Contract and Sales Commissions. The Contract is sold
primarily by agents of The Prudential who are also registered
representatives of one of its subsidiaries, Pruco Securities
Corporation, a broker and dealer registered under the Securities and
Exchange Act of 1934. Generally, selling agents receive a commission of
50% of the Scheduled Premium in the first year, 10% for the next three
years and smaller commissions thereafter.

Riders. Various extra fixed-benefits may be obtained for an extra
premium. They are described in what are known as "riders" to the
Contract.

Other Standard Contract Provisions. The Contract contains several
provisions commonly included in all life insurance policies. They
include provisions relating to beneficiaries, misstatement of age or
sex, suicide, assignment, incontestability, and settlement options.

II. INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS.

A more detailed description is given of these investments and the
policies of these portfolios.

III. INVESTMENT RESTRICTIONS.

There are many restrictions upon the investments the portfolios may make
and the practices in which they may engage; these are fundamental,
meaning they may not be changed without Contract owner approval.

IV. INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES.

A fuller description than that in the prospectus is given.

V. PORTFOLIO TRANSACTIONS AND BROKERAGE.

A description is given of how securities transactions are effected and
how The Prudential selects the brokers.

VI. DETERMINATION OF NET ASSET VALUE.

A full description is given of how the daily net asset value of each
portfolio is determined.

VII. SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY CURRENTLY INVEST.

A full description is given.

VIII. DEBT RATINGS.

A description is given of how Moody's Investors Services, Inc. and
Standard & Poor's Corporation describe the creditworthiness of debt
securities.

24
<PAGE>

IX. POSSIBLE REPLACEMENT OF THE SERIES FUND.

Although it is most unlikely, it is conceivable that Pruco Life might
wish to replace the Series Fund portfolios with other investment
options. SEC approval will be needed.

X. OTHER INFORMATION CONCERNING THE SERIES FUND.

Incorporation and Authorized Stock
Dividends, Distributions and Taxes
Custodian and Transfer Agent
Experts
License

More detail is provided about these matters.

XI. DIRECTORS AND OFFICERS OF PRUCO LIFE AND MANAGEMENT OF
THE SERIES FUND.

The names and recent affiliations of Pruco Life's directors and
executive officers are given. The same information is given for the
Series Fund.

XII. FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC.

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

ADDITIONAL INFORMATION

Further information may also be obtained from Pruco Life. Its address and
telephone number are on the cover of this prospectus.

FINANCIAL STATEMENTS

The financial statements of the Account should be distinguished from the
consolidated financial statements of Pruco Life which should be considered only
as bearing upon the ability of Pruco Life to meet its obligations under the
Contracts. The financial statements of the Series Fund are in the Statement of
Additional Information.

25
<PAGE>

FINANCIAL STATEMENTS OF
PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF NET ASSETS

December 31, 1994

<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------

AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
TOTAL FLEXIBLE FLEXIBLE
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 87,858,560 $ 38,633,529 $ 49,225,031
-------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 337,089 0 337,089
-------------- -------------- --------------
NET ASSETS........................................ $ 87,521,471 $ 38,633,529 $ 48,887,942
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 85,745,930 $ 37,774,804 $ 47,971,126
Equity of Pruco Life Insurance Company.......... 1,775,541 858,725 916,816
-------------- -------------- --------------
$ 87,521,471 $ 38,633,529 $ 48,887,942
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

STATEMENTS OF OPERATIONS

For the year ended December 31, 1994

<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------

AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
TOTAL FLEXIBLE FLEXIBLE
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 2,445,440 $ 942,724 $ 1,502,716

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 576,113 251,732 324,381
-------------- -------------- --------------
NET INVESTMENT INCOME............................. 1,869,327 690,992 1,178,335
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 1,439,356 951,248 488,108
Realized loss on shares redeemed
[average cost basis].......................... (2,077) (1,569) (508)
Net unrealized loss on investments.............. (4,745,569) (2,528,354) (2,217,215)
-------------- -------------- --------------
NET LOSS ON INVESTMENTS........................... (3,308,290) (1,578,675) (1,729,615)
-------------- -------------- --------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ (1,438,963) $ (887,683) $ (551,280)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGE A3.
A1

<PAGE>

FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the years ended December 31, 1994 and 1993

<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------

AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
TOTAL FLEXIBLE FLEXIBLE
------------------------------ ------------------------------ ------------------------------
1994 1993 1994 1993 1994 1993
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>

OPERATIONS:
Net investment income............ $ 1,869,327 $ 564,708 $ 690,992 $ 255,767 $ 1,178,335 $ 308,941
Capital gains distributions
received....................... 1,439,356 1,502,084 951,248 776,668 488,108 725,416
Realized gain (loss) on shares
redeemed
[average cost basis]........... (2,077) 1,490 (1,569) 55 (508) 1,435
Net unrealized loss on
investments.................... (4,745,569) (776,739) (2,528,354) (355,699) (2,217,215) (421,040)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ (1,438,963) 1,291,543 (887,683) 676,791 (551,280) 614,752
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 48,924,502 36,912,827 21,856,622 16,111,519 27,067,880 20,801,308
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ 638,522 1,139,174 327,110 536,120 311,412 603,054
-------------- -------------- -------------- -------------- -------------- --------------

TOTAL INCREASE IN NET ASSETS....... 48,124,061 39,343,544 21,296,049 17,324,430 26,828,012 22,019,114

NET ASSETS:
Beginning of year................ 39,397,410 53,866 17,337,480 13,050 22,059,930 40,816
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 87,521,471 $ 39,397,410 $ 38,633,529 $ 17,337,480 $ 48,887,942 $ 22,059,930
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGE A3.
A2

<PAGE>

NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
FOR THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993

NOTE 1: GENERAL

Pruco Life PRUvider Variable Appreciable Account (the "Account") was established
on July 10, 1992 under Arizona law as a separate investment account of Pruco
Life Insurance Company ("Pruco Life") which is a wholly-owned subsidiary of The
Prudential Insurance Company of America ("The Prudential"). The assets of the
Account are segregated from Pruco Life's other assets.

The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. There are two subaccounts within the Account, each
of which invests only in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"). The Series Fund is a diversified open-end
management investment company, and is managed by The Prudential.

NOTE 2: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS

<TABLE>
<CAPTION>
PORTFOLIOS
-------------------------------
AGGRESSIVELY CONSERVATIVELY
PORTFOLIO MANAGED MANAGED
INFORMATION FLEXIBLE FLEXIBLE
- ------------------------------- -------------- ---------------
<S> <C> <C>
Number of shares: 2,493,128 3,492,385
Net asset value per share: $ 15.4960 $ 14.0950
Cost: $ 41,517,592 $ 51,863,286
</TABLE>

NOTE 3: CHARGES AND EXPENSES

A. Mortality Risk and Expense Risk Charges

The mortality risk and expense risk charges at an effective annual rate of
0.90% are applied daily against the net assets representing equity of
Contract owners held in each subaccount.

B. Deferred Sales Charge

A deferred sales charge is imposed upon the surrender of certain variable
life insurance contracts to compensate Pruco Life for sales and other
marketing expenses. The amount of any sales charge will depend on the number
of years that have elapsed since the Contract was issued. No sales charge
will be imposed after the tenth year of the Contract. No sales charge will
be imposed on death benefits.

C. Partial Withdrawal Charge

The partial withdrawal of the cash surrender value from certain variable
life insurance contracts invokes a charge of $15.

NOTE 4: TAXES

The operations of the subaccounts form a part of, and are taxed with, the
operations of Pruco Life. Under the Internal Revenue Code, all ordinary income
and capital gains allocated to the Contract owners are not taxed to Pruco Life.
As a result, the net asset values of the subaccounts are not affected by federal
income taxes on distributions received by the subaccounts.

NOTE 5: NET INCREASE IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS

The increase in net assets resulting from surplus transfers represents the net
contributions of Pruco Life to the Account.

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Contract Owners of
Pruco Life PRUvider Variable Appreciable
Account and the Board of Directors
of Pruco Life Insurance Company
Newark, New Jersey

We have audited the accompanying statements of net assets of Pruco Life PRUvider
Variable Appreciable Account of Pruco Life Insurance Company (comprising,
respectively, the Aggressively Managed Flexible and Conservatively Managed
Flexible subaccounts) as of December 31, 1994, and the related statements of
operations for the periods presented in the year then ended, and the statement
of changes in net assets for each of the periods presented in the two years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the respective subaccounts
constituting the Pruco Life PRUvider Variable Appreciable Account as of December
31, 1994, and the results of their operations, and the changes in their net
assets for the respective stated periods in conformity with generally accepted
accounting principles.

Deloitte & Touche LLP
Parsippany, New Jersey
February 10, 1995

<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

DECEMBER 31,
----------------------
1994 1993
---------- ----------
($000's)
ASSETS
Fixed maturities (market value
$2,596,172 and $2,951,602)........ $2,647,315 $2,835,251
Equity securities (cost $5,434 and
$4,405)........................... 3,326 2,788
Mortgage loans...................... 71,919 56,184
Investment in real estate........... 7,189 9,994
Policy loans........................ 493,862 420,271
Other long-term investments......... 4,044 2,753
Short-term investments.............. 191,455 201,079
---------- ----------
Total Investments................. 3,419,110 3,528,320
Cash................................ 27,780 671
Notes receivable from affiliates.... - 50,000
Interest receivable from
affiliates........................ - 23
Accrued investment income........... 59,382 56,785
Premiums due and deferred........... 16,821 16,569
Receivable from affiliates.......... 7,517 6,880
Federal income taxes--from
affiliate......................... 23,306 4,151
Other assets........................ 25,102 15,829
Assets held in Separate Accounts.... 3,511,784 3,492,876
---------- ----------
TOTAL ASSETS.......................... $7,090,802 $7,172,104
========== ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy liabilities and insurance
reserves:
Future policy benefits and
claims.......................... $2,767,552 $2,912,283
Other policy claims and benefits
payable......................... 15,184 13,606
Interest Maintenance Reserve (IMR) 21,802 46,506
Payable to affiliates............... 30,257 54,286
Other liabilities................... 131,695 103,985
Asset Valuation Reserve (AVR)....... 23,690 22,692
Liabilities related to Separate
Accounts.......................... 3,424,535 3,399,953
---------- ----------
Total Liabilities..................... 6,414,715 6,553,311
---------- ----------
STOCKHOLDER'S EQUITY:
Common Stock, $10 par value;
authorized, 1,000,000 shares;
issued and outstanding, 250,000
shares............................ 2,500 2,500
Paid-in capital..................... 439,582 439,582
Unassigned surplus.................. 234,005 176,711
---------- ----------
Total Stockholder's Equity............ 676,087 618,793
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY................ $7,090,802 $7,172,104
========== ==========

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,
----------------------------------
1994 1993 1992
---------- ---------- ----------
($000's)
REVENUE
Premiums and annuity
considerations......... $ 611,820 $ 563,900 $ 497,088
Net investment income.... 245,977 260,939 274,037
Net realized investment
gains/(losses) (21,215) 8,878 28,117
Other income............. 13,259 18,882 16,043
---------- ---------- ----------
Total Revenue.............. 849,841 852,599 815,285
---------- ---------- ----------
BENEFITS AND EXPENSES
Current and future
benefits and claims.... 559,658 534,354 478,148
Commission expenses...... 30,169 28,386 17,956
General, administrative
and other expenses..... 119,309 129,171 111,745
---------- ---------- ----------
Total Benefits and
Expenses................. 709,136 691,911 607,849
---------- ---------- ----------
Income before provision
in lieu of federal
income tax............. 140,705 160,688 207,436
Provision in lieu of
federal income tax..... (87,750) (83,640) (96,578)
---------- ---------- ----------
NET INCOME................. $ 52,955 $ 77,048 $ 110,858
========== ========== ==========

SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

Years Ended December 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
($000's)
COMMON STOCK
Balance, beginning of
year................... $ 2,500 $ 2,500 $ 2,500
Issued during year....... - - -
--------- --------- ---------
Balance, end of year..... 2,500 2,500 2,500
--------- --------- ---------
Paid-in Capital
Balance, beginning of
year................... 439,582 439,582 439,582
Paid-in during year...... - - -
--------- --------- ---------
Balance, end of year..... 439,582 439,582 439,582
--------- --------- ---------
Unassigned Surplus
Balance, beginning of
year................... 176,711 162,530 98,966
Net income............... 52,955 77,048 110,858
Net unrealized investment
gains/(losses)......... 5,814 (9,351) 2,750
(Increase) decrease in
non-admitted assets.... (477) 575 130
(Increase) decrease in
AVR.................... (998) 5,909 3,681
Dividends to
stockholder............ - (60,000) (53,855)
--------- --------- ---------
Balance, end of year..... 234,005 176,711 162,530
--------- --------- ---------

TOTAL STOCKHOLDER'S
EQUITY..................... $ 676,087 $ 618,793 $ 604,612
========= ========= =========

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,
-------------------------------------
1994 1993 1992
----------- ----------- -----------
($000's)
CASH FLOW FROM OPERATING ACTIVITIES
Net income................ $ 52,955 $ 77,048 $ 110,858
Adjustments to reconcile
net income to net cash
from operations:
Increase (decrease) in
policy liabilities and
insurance reserves.... (143,153) (124,602) 95,927
Net decrease in Separate
Accounts.............. 5,674 12,173 4,531
Net realized
investment(gains)/
losses................ 21,215 (8,878) (28,117)
Depreciation,
amortization and other
non-cash items........ 314 1,907 (1,810)
(Increase) decrease in
operating assets:
Policy loans.......... (73,591) (71,472) (86,306)
Notes receivable from
affiliates.......... 50,000 9,000 4,000
Interest receivable
from affiliates..... 23 420 361
Accrued investment
income.............. (2,597) 880 (45)
Premiums due and
deferred............ (252) (880) 47,374
Receivable from
affiliates.......... (637) 1,970 10,818
Federal income
taxes--from
affiliate........... (19,155) 6,879 (11,030)
Other assets.......... (9,273) (9,481) (3,476)
Increase (decrease) in
operating liabilities:
Payable to
affiliates............ (24,029) 13,260 (53,063)
Federal income
taxes--to
affiliate........... - - (497)
Other liabilities..... 27,710 34,632 (50,303)
----------- ----------- -----------

Cash Flow From (Used For)
Operating Activities...... (114,796) (57,144) 39,222
----------- ----------- -----------

CASH FLOW FROM INVESTING
ACTIVITIES
Proceeds from the sale/
maturity of:
Fixed maturities........ 2,710,424 1,687,992 3,898,399
Equity securities....... 1,909 4,032 1,791
Mortgage loans.......... 10,821 21,691 954
Other long-term
investments........... 607 520 -
Investment in real
estate................ 8,676 - -
Payments for the purchase
of:
Fixed maturities........ (2,561,081) (1,483,234) (3,986,331)
Equity securities....... (2,436) (3,068) (1,170)
Mortgage loans.......... (35,276) (918) -
Other long-term
investments........... (1,584) (84) (860)
Investment in real
estate................ - (20) (71)
Net proceeds (payments)
of short-term
investments........... 9,845 (116,735) 108,858
----------- ----------- -----------
Cash Flow From Investing
Activities................ 141,905 110,176 21,570
----------- ----------- -----------

CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid............ - (60,000) (53,855)
----------- ----------- -----------
Net increase (decrease) in
Cash.................... 27,109 (6,968) 6,937
Cash, beginning of year... 671 7,639 702
----------- ----------- -----------
CASH, END OF YEAR........... $ 27,780 $ 671 $ 7,639
=========== =========== ===========

SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Non-cash financing:
Investment in real
estate from foreclosed
mortgage loans.......... $ 4,139 $ 7,300 $ 6,338
=========== =========== ===========
Cash paid in lieu of
income taxes............ $ 73,903 $ 76,760 $ 108,105
=========== =========== ===========

SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

1. Summary of Significant Accounting Policies and Principles

A. Principles of Consolidation

The accompanying financial statements include the consolidated accounts of
Pruco Life Insurance Company (Pruco Life), a stock life insurance company,
and its subsidiaries (collectively, the Company). Pruco Life is a
wholly-owned subsidiary of The Prudential Insurance Company of America
(The Prudential), a mutual life insurance company. The Company markets
individual life insurance and single pay deferred annuities primarily
through The Prudential's sales force. All significant intercompany
balances and transactions have been eliminated in consolidation.

B. Basis of Presentation

The financial statements are presented in conformity with Generally
Accepted Accounting Principles (GAAP), which for mutual life insurance
companies and their life insurance subsidiaries are statutory accounting
practices prescribed or permitted by state regulatory authorities in the
domiciliary states. Certain reclassifications have been made to the 1992
and 1993 financial statements and footnotes to conform to the 1994
presentation. Included in the Statement of Operations are certain items
which, under statutory accounting practices, are charged or credited
directly to surplus.

In 1994, The American Institute of Certified Public Accountants issued
Statement of Position 94-5 "Disclosures of Certain Matters in the
Financial Statements of Insurance Enterprises" ("SOP 94-5") which requires
insurance enterprises to disclose in their financial statements the
accounting methods used in their statutory financial statements that are
permitted by the state insurance departments rather than prescribed
statutory accounting practices.

Pruco Life Insurance Company, domiciled in the State of Arizona, prepares
its statutory financial statements in accordance with accounting practices
prescribed or permitted by the Arizona Department of Insurance ("the
Department"), and its insurance subsidiaries prepare statutory financial
statements in accordance with accounting practices prescribed or permitted
by their domiciliary home state insurance department. Prescribed statutory
accounting practices include publications of the National Association of
Insurance Commissioners (NAIC), state laws, regulations, and general
administrative rules. Permitted statutory accounting practices encompass
all accounting practices not so prescribed.

The Company has established guaranty fund liabilities for the insolvencies
of certain life insurance companies. The liabilities were established net
of premium tax credits and federal income tax. Prescribed statutory
accounting practices do not address the establishment of liabilities for
guaranty fund assessments.

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

The following is a reconciliation of Pruco Life's statutory net income
with net income per the consolidated financial statements.

<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
($000's)
<S> <C> <C> <C>
Pruco Life Statutory Net Income including net gains
and losses on sales of investments................ $ 49,374 $ 79,405 $ 126,507
Adjustments to reconcile to net income as follows:
Dividends from subsidiary......................... - (26,000) (27,162)
Change in determination of deferred premiums...... - - (12,495)
Provision for future assessments.................. 349 577 (3,493)
Net gain from operations in Separate Accounts..... 7,508 5,572 2,563
Income tax applicable to other than current
year............................................ (25,467) - -
Other............................................. 7,684 (2,429) 1,459
Subsidiaries' Net Income.......................... 13,507 19,923 23,479
--------- --------- ---------
Net Income.......................................... $ 52,955 $ 77,048 $ 110,858
========= ========= =========
</TABLE>

C. Future Application of Accounting Standards

The Financial Accounting Standards Board (the "FASB") issued Financial
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises", which, as
amended is effective for fiscal years beginning after December 15, 1995.
Interpretation No. 40 changes the current practice of the Company with
respect to utilizing statutory basis financial statements for general
purposes in that it would not allow such financial statements to be
referred to as having been prepared in accordance with GAAP.
Interpretation No. 40 requires GAAP financial statements to apply all GAAP
pronouncements, unless specifically exempted. Implementation of the
Interpretation will require significant effort and judgment as to
determining GAAP for insurance operations.

The Company is currently unable to determine the impact of Interpretation
No. 40 on its financial statements.

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

D. Selected Financial Data of Pruco Life

Pruco Life markets the Future Value Annuity Contract, an individual
deferred annuity contract. Only assets of Pruco Life, shown below, are
available to meet the guarantees under this annuity contract. The
following is the selected financial data of Pruco Life:

<TABLE>
<CAPTION>
December 31,
----------------------
1994 1993
---------- ----------
($000')
<S> <C> <C>
Assets:
Investments................................................. $2,758,088 $2,835,163
Investment in subsidiaries.................................. 169,816 156,515
Other assets................................................ 135,778 133,020
Assets held in Separate Accounts.............................. 2,869,734 2,846,792
---------- ----------
Total Assets.................................................. $5,933,416 $5,971,490
========== ==========
Liabilities:
Policy liabilities and insurance reserves................... $2,296,987 $2,417,098
Other liabilities........................................... 163,322 165,974
Liabilities related to Separate Accounts 2,797,020 2,769,625
---------- ----------
Total Liabilities........................................... $5,257,329 $5,352,697
========== ==========
</TABLE>

Years Ended December 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
($000')

Revenues...................................... $ 698,685 $ 716,402 $ 675,863
--------- --------- ---------
Benefits, expenses and taxes.................. 659,237 633,277 561,322
--------- --------- ---------
Net Income.................................... $ 39,448 $ 83,125 $ 114,541
========= ========= =========

E. Investments

Fixed maturities, which include long-term bonds and redeemable preferred
stock, are stated primarily at amortized cost. Certain investments in this
category were non-income producing at December 31, 1994 and 1993. These
investments amounted to $13.2 million and $2 million, respectively. Equity
securities, which consist primarily of common stock, are carried at market
value which is based on quoted market prices, where available, or prices
provided by the National Association of Insurance Commissioners' (NAIC)
Securities Valuation Office (SVO).

Mortgage loans are carried at the lower of the fair value of the
underlying property or unpaid principal balance. At December 31, 1994, one
loan was in foreclosure in the amount of $6 million. At December 31, 1993,
aside from one loan in foreclosure, one mortgage, in the amount of $3
million, was in default.

Policy loans are stated primarily at unpaid principal balances.

All the Company's real estate investments were acquired through
foreclosure during 1994 and 1993. These properties are carried at the
lower of cost or fair value less disposition costs. Fair value is
considered to be the amount that could reasonably be expected in a current
transaction between willing parties, other than in forced or liquidation
sale. Depreciation on these properties for the years ended December 31,
1994 and 1993 was $456 thousand and $289 thousand, respectively.

Other long-term investments, which consist solely of limited partnerships,
are valued at the aggregate net equity in the partnerships. There were no
non-income producing investments in this category at December 31, 1994.
Certain investments in this category were non-income producing at December
31, 1993. These investments amounted to $118 thousand.

Short-term investments are stated at amortized cost, which approximates
fair value.

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

Realized investment gains and losses are reported based on specific
identification of the investments sold.

F. Future Policy Benefits, Losses and Claims

Reserves for individual life insurance are calculated using various
methods, interest rates and mortality tables which produce reserves that
meet the aggregate requirements of state laws and regulations.
Approximately 7% of individual life insurance reserves are determined
using the net level premium method, or by using the greater of a net level
premium reserve or the policy cash value. About 93% of individual life
insurance reserves are calculated according to the Commissioner's Reserve
Valuation Method ("CRVM"), or methods which compare CRVM reserves to
policy cash values.

Reserves for individual annuity contracts are determined using the
Commissioner's Annuity Reserve Valuation Method.

For life insurance, unpaid claims include estimates of both the death
benefits on reported claims and those which are incurred but not reported.

G. Revenue Recognition and Related Expenses

Premium revenues are recognized as income over the premium paying period
of the related policies. Annuity considerations are recognized as revenue
when received. Expenses, including new business acquisition costs such as
commissions, are charged to operations as incurred.

H. Asset Valuation Reserve and Interest Maintenance Reserve

The Asset Valuation Reserve (AVR) and the Interest Maintenance Reserve
(IMR) are required reserves for assets of life insurance companies. AVR is
calculated based on a statutory formula and designed to mitigate the
effect of valuation and credit related losses on unassigned surplus.

The components of AVR at December 31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
Fixed Equity Real Estate
Maturities Mortgages Securities & Other Inv. Total
----------- ----------- ----------- ------------ ---------
($000's)
<S> <C> <C> <C> <C> <C>
Transfer from December 31, 1992 --
AVR ............................... $23,152 $5,139 $310 $ 0 $28,601
Additions ........................... 7,197 0 650 2,353 10,200
Deductions .......................... (12,055) (1,440) (261) (2,353) (16,109)
------- ------ ---- ------ -------
End of Year 1993 -- AVR ............. 18,294 3,699 699 0 22,692
======= ====== ==== ====== =======
Beginning of Year 1994 -- AVR ....... 18,294 3,699 699 0 22,692
Additions ........................... 12,062 2,166 348 2,047 16,623
Deductions .......................... (10,454) (4,355) (314) (502) (15,625)
------- ------ ---- ------ -------
End of Year 1994 -- AVR ............. $19,902 $1,510 $733 $1,545 $23,690
======= ====== ==== ====== =======
</TABLE>

The IMR is designed to reduce the fluctuations of surplus resulting from
market interest rate movements. Predominantly all interest rate related
realized capital gains and losses are deferred and amortized into
investment income over the remaining life of the investment sold. The IMR
balance was $21.8 million and $46.5 million at December 31, 1994 and 1993,
respectively. "Net realized investment gains/(losses)" of $(19.9) million
and $19.2 million were deferred in 1994 and 1993, respectively. Amortized
into "Net investment income" were $4.8 million and $6.7 million of IMR for
the year ended December 31, 1994 and 1993, respectively.

I. Federal Income Taxes

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

between estimated liabilities and actual payments are included in the
current year's operations as an adjustment to the provision in lieu of
income taxes. For the years 1993 and 1992, the Company was allocated a
portion of the consolidated income tax liability attributable to Section
809 of the Internal Revenue Code (commonly referred to as "Equity Tax").
Beginning in 1994, the Company will no longer be allocated this Equity
Tax.

Taxes on the Company are calculated under the Internal Revenue Code of
1986 which provides that life insurance companies be taxed on their gain
from operations after dividends to policyholders. In calculating this tax,
the Code requires the capitalization and amortization of policy
acquisition expenses.

J. Separate Accounts

Separate accounts represent funds for which investment income and
investment gains and losses accrue directly to, and investment risk is
borne by, the policyholders. Each account has specific investment
objectives. Assets are carried at market value. Deposits to such accounts
are included in revenues with a corresponding liability increase included
in benefits and expenses. The assets of each account are legally
segregated and are not subject to claims that arise out of any other
business of the Company. Consequently, management believes that it is
appropriate to combine Separate Account policyholder net investment income
and net realized and unrealized capital gains/(losses) along with benefit
payments and change in reserves in "Current and future benefits and
claims". Policyholder net investment income and net realized and
unrealized gains/(losses) for the years ended December 31, 1994, 1993 and
1992 were ($28) million, $443 million and $223 million, respectively.

2. Federal Income Taxes

The following is a reconciliation of the Company's federal tax provision as
computed at the federal tax rate with that computed at the Company's
effective tax rate. The below amounts include federal income tax applicable
to prior years, where appropriate.

<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
($000's)
<S> <C> <C> <C>

Operating income before federal income taxes.......... $ 140,705 $ 160,688 $ 207,436
Statutory tax rate.................................... 35% 35% 34%
--------- --------- ---------
Expected federal income taxes......................... 49,247 56,241 70,528
Tax effect of:
Statutory/tax policy reserve difference............. 19,949 14,577 (16,381)
Timing differences in tax/book income recognition on
investments....................................... 11,608 4,055 14,404
Timing differences in tax/book income recogni-
tion--other....................................... (6,816) (415) 921
Change in determination of deferred premiums........ - - 6,128
Decrease/(Increase) in life insurance premiums
deferred and uncollected.......................... (88) (308) 2,650
Capitalization of policy acquisition expenses....... 13,850 7,374 8,158
Allocated equity tax................................ - 2,116 10,170
--------- --------- ---------
Federal income taxes.................................. $ 87,750 $ 83,640 $ 96,578
========= ========= =========
Effective tax rate.................................... 62% 52% 47%
========= ========= =========
</TABLE>

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

3. Net Investment Income

Net investment income consisted of:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
($000's)
<S> <C> <C> <C>
Gross investment income
Fixed maturities.................................... $ 196,909 $ 216,660 $ 237,884
Equity securities................................... 14 22 14
Mortgage loans...................................... 4,041 6,359 7,529
Investment in real estate........................... 2,146 2,066 1,258
Policy loans........................................ 25,692 21,741 17,437
Short-term investments.............................. 12,676 9,031 11,638
Other............................................... 5,075 3,945 2,681
--------- --------- ---------
246,553 259,824 278,441

Investment expenses................................... (5,421) (5,570) (7,687)
--------- --------- ---------
Net investment income before IMR...................... 241,132 254,254 270,754

Amortization of Interest Maintenance Reserve.......... 4,845 6,685 3,283
--------- --------- ---------
Net investment income................................. $ 245,977 $ 260,939 $ 274,037
========= ========= =========
</TABLE>

4. Investments and Investment Gains (Losses)

<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
($000's)
<S> <C> <C> <C>
Realized Gains (Losses)
Fixed maturities..................................... $ (38,180) $ 32,471 $ 69,559
Equity securities.................................... 503 607 967
Mortgage loans....................................... (4,581) (2,592) (3,889)
Investment in real estate............................ 1,184 (2,004) (1,757)
Other................................................ (1) (411) 517
Tax effected amounts transferred to Interest
Maintenance Reserve.................................. 19,860 (19,193) (37,280)
--------- --------- ---------
Net realized investment gains.......................... $ (21,215) $ 8,878 $ 28,117
========= ========= =========
Unrealized Gains (Losses)
Fixed maturities..................................... 5,430 (9,380) 3,637
Equity securities.................................... (490) 260 (1,305)
Other................................................ 874 (231) 418
--------- --------- ---------
Net unrealized investment gains (losses)............... 5,814 (9,351) 2,750
Balance beginning of year.............................. (18,166) (8,815) (11,565)
--------- --------- ---------
Balance end of year.................................... $ (12,352) $ (18,166) $ (8,815)
========= ========= =========
</TABLE>

B8
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

Equity Securities at December 31,
($000's)
Unrealized
--------------------------------
Cost Gains Losses
--------- --------- ----------
1994........................................ $5,434 $ 386 $2,494
1993........................................ 4,405 742 2,359
1992........................................ 4,762 1,093 2,969

Fixed Maturities
($000's)

At December 31,
Increase (Decrease)
in Difference
Between Market Value
Amortized Market and Amortized
Cost Value Cost During the Year
---------- ---------- ----------------------
1994........................... $2,647,315 $2,596,172 $(167,494)
1993........................... 2,835,251 2,951,602 10,453
1992........................... 3,025,030 3,130,928 (74,958)

The amortized cost and estimated market value of fixed maturities at December
31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
1994
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
($000's) ($000's) ($000's) ($000's)
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies... $ 409,678 $ 224 $20,259 $ 389,643
Obligations of U.S. and political
subdivisions................................ - - - -
Debt securities issued by foreign governments
and their agencies.......................... 86,026 2,075 2,310 85,791
Corporate securities.......................... 1,960,296 17,005 43,521 1,933,780
Mortgage-backed securities.................... 191,315 1,429 5,786 186,958
---------- ------- ------- ----------
Total......................................... $2,647,315 $20,733 $71,876 $2,596,172
========== ======= ======= ==========

<CAPTION>
1993
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
($000's) ($000's) ($000's) ($000's)
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies... $ 374,797 $ 3,819 $ 638 $ 377,978
Obligations of U.S. and political
subdivisions................................ 3,705 1,106 - 4,811
Debt securities issued by foreign governments
and their agencies.......................... 99,524 6,632 3 106,153
Corporate securities.......................... 2,070,066 107,643 4,514 2,173,195
Mortgage-backed securities.................... 287,159 6,223 3,917 289,465
---------- -------- ------ ----------
Total......................................... $2,835,251 $125,423 $9,072 $2,951,602
========== ======== ====== ==========
</TABLE>

B9
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

The amortized cost and estimated market value of debt securities at December 31,
1994 by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
($000's) ($000's)
---------- ----------
<S> <C> <C>
Due in one year or less................................. $ 127,296 $ 130,795
Due after one year through five years.................. 1,823,406 1,794,674
Due after five years through ten years................. 402,232 384,814
Due after ten years.................................... 103,066 98,931
---------- ----------
2,456,000 2,409,214
Mortgage-backed securities............................. 191,315 186,958
---------- ----------
Total.................................................. $2,647,315 $2,596,172
========== ==========
</TABLE>

Proceeds from the sale/maturity of debt securities during 1994, 1993 and
1992 were $2.7 billion, $1.7 billion and $3.9 billion, respectively. Gross
gains of $16.8 million, $44.5 million and $90.4 million and gross losses
of $49.8 million, $12.0 million and $20.8 million were realized on those
sales during 1994, 1993, and 1992, respectively.

The Company invests in both investment grade and non-investment grade
securities. The SVO of the NAIC rates fixed maturities held by insurers
(SVO rated securities accounted for approximately 93.6% and 93.0% of the
Company's total fixed maturities balances at both December 31, 1994 and
1993) for regulatory purposes and groups investments into six categories
ranging from highest quality bonds to those in or near default. The lowest
three NAIC categories represent, for the most part, high-yield securities
and are defined by the NAIC as including any security with a public agency
rating of B+ or B1 or less.

Included in "fixed maturities" are securities that are classified by the
NAIC as being in the lowest three rating categories. These approximated
1.5% and 1.6% of the Company's assets at December 31, 1994 and 1993,
respectively. The amount by which the market value of these securities
exceeded the carrying value was approximately $(.9) million and 1.0
million at December 31, 1994 and 1993, respectively.

5. Related Party Transactions

A. Service Agreements

The Company, The Prudential, Pruco Life of New Jersey and Pruco Securities
Corporation, an indirect wholly-owned subsidiary of The Prudential,
operate under service and lease agreements whereby services of officers
and employees, supplies, use of equipment and office space are provided.
The net cost of these services allocated to the Company were $78 million,
$98 million, and $71 million for the years ended December 31, 1994, 1993,
and 1992, respectively.

In a reorganization of the parent's Individual Insurance Department,
effective January 1, 1993, the corporate staff of the Company was absorbed
by the parent. The costs associated with these employees, which were
previously borne by the Company, are now charged to the Company under the
service and lease agreements with the parent.

B. Employee Benefit Plans

Pension Plans

The Company is a wholly-owned subsidiary of The Prudential which sponsors
a defined benefit pension plan. The defined benefit pension plan is
generally based on career average earnings and credit length of service.
The Prudential's funding policy is to contribute annually the amount
necessary to satisfy the Internal Revenue Service contribution guidelines.

No pension expense for contributions to the plan was allocated to the
Company in 1994, 1993 or 1992 because the plan was subject to the full
funding limitation under the Internal Revenue Code.

B10
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

Postretirement Life and Health Benefits

The Prudential also sponsors postretirement defined benefit plans which
provide certain life insurance and health care benefits. Substantially all
employees may become eligible to receive a benefit if they retire after
age 55 with at least 10 years of service. Prior to 1993, The Prudential's
policy was to fund the cost of providing these benefits in the years that
the employees were providing services to the Company. Effective for 1993,
The Prudential has recognized the cost of these benefits in accordance
with the accounting policy issued by the National Association of Insurance
Commissioners (NAIC). The NAIC's policy is similar to SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
except that the NAIC policy excludes non-vested employees and only allows
the transition obligation to be recognized immediately or amortized over
twenty years. The Prudential has elected to amortize its transition
obligation over twenty years. A provision for contributions to the
postretirement fund is included in the net cost of services allocated to
the Company discussed above for the years ended December 31, 1994, 1993
and 1992.

C. Reinsurance

The Company currently has two reinsurance agreements in place with The
Prudential (the reinsurer). Specifically: reinsurance of a Group Annuity
Contract, whereby the reinsurer, in consideration for a single premium
payment by the Company, provides Reinsurance equal to 100% of all payments
due under the Contract; and, a Yearly Renewable Term agreement in which
the Company may offer and the reinsurer may accept reinsurance on any life
in excess of the Company's maximum limit of retention ($2.5 million).
These agreements had no material effect on net income for the years ended
December 1994, 1993, and 1992.

D. Other Transactions

A certificate of deposit issued by The Prudential Bank and Trust Company
of $50 million as of December 31, 1993 was not renewed in 1994. The
Company also received a $9 million payment settlement of a promissory note
from Pruco Inc. during 1993.

The Company has issued approximately 375 variable universal life contracts
to The Prudential for the purpose of funding non-qualified pension
benefits for certain employees. Included in insurance premiums and annuity
considerations for the years ended December 31, 1994, 1993 and 1992 are
respectively, $12 million, $12 million and $13 million, which are
attributable to these contracts.

6. Dividends

The Company is subject to Arizona law which limits the amount of dividends
that insurance companies can pay to stockholders. The maximum dividend which
may be paid in any 12 month period without notification or approval is
limited to the lesser of 10% of surplus as of December 31 of the preceding
year or the net gain from operations of the preceding calendar year. Cash
dividends may only be paid out of surplus derived from realized net profits.
Based on these limitations and the Company's surplus position at December 31,
1994, the Company would be permitted a maximum of $60 million in dividend
distributions in 1995, all of which could be paid in cash, without approval
from The State of Arizona Department of Insurance.

7. Fair Value Information

The fair value amounts have been determined by the Company using available
information and reasonable valuation methodologies for only those accounts
for which fair value disclosures are required. Considerable judgment is
necessarily applied in interpreting data to develop the estimates of fair
value. Accordingly, the estimates presented may not be realized in a current
market exchange. The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair values.

The following methods and assumptions were used in calculating the fair
values. For all other financial instruments presented in the table, the
carrying value is a reasonable estimate of fair value.

Fixed Maturities. Fair values for fixed maturities, other than private
placement securities, are based on quoted market prices or estimates from
independent pricing services. Fair values for private placement securities
are estimated using a discounted cash flow model which considers the current
market spreads between the U.S.

B11
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1994, 1993, and 1992

Treasury yield curve and corporate bond yield curve adjusted for the type of
issue, its current quality and its remaining average life. The fair value of
certain non-performing private placement securities is based on amounts
provided by state regulatory authorities.

Mortgage Loans. The fair value of the commercial mortgage and agricultural
loan portfolio is primarily based upon the present value of the scheduled
cash flows discounted at the appropriate U.S. Treasury rate, adjusted for the
current market spread for a similar quality mortgage. For certain
non-performing and other loans, fair value is based upon the value of the
underlying collateral.

Policy Loans. The estimated fair value is calculated using a discounted cash
flow model based upon current U.S. Treasury rates and historical loan
repayments.

Investment-Type Insurance Contract Liabilities. Fair values for the Company's
investment-type insurance contract liabilities are estimated using a
discounted cash flow model, based on interest rates currently being offered
for similar contracts.

The following table discloses the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1994 and 1993.

<TABLE>
<CAPTION>
1994 1993
---------------------- ----------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
($000's) ($000's)
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities ........................ $2,647,315 $2,596,172 $2,835,251 $2,951,602
Equity securities ....................... 3,326 3,326 2,788 2,788
Mortgage loans .......................... 71,919 71,805 56,184 58,738
Policy loans ............................ 493,862 448,617 420,271 416,243
Other long-term investments ............. 4,044 4,044 2,753 2,753
Short-term investments .................. 191,455 191,455 201,079 201,079

Financial Liabilities:
Investment-type insurance contracts ..... $ 794,691 $ 761,324 $1,053,025 $1,033,692
</TABLE>

8. Contingencies

Various lawsuits against the Company have arisen in the course of the
Company's business. In certain of these matters, large and/or indeterminate
amounts are sought. In the opinion of the Company, any ultimate liability
which would result from such litigation would not have a material adverse
effect on the Company's financial position.

B12
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Pruco Life Insurance Company
Newark, New Jersey

We have audited the accompanying consolidated statements of financial position
of Pruco Life Insurance Company and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of operations, stockholder's
equity, and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Pruco Life Insurance Company and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Parsippany, New Jersey
March 6, 1995

B13

<PAGE>

PRUvider(SM)
Variable Appreciable Life(R)
Insurance Contract

PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 437-4016, Ext. 46

<PAGE>

PRUvider
Variable
Appreciable Life(R)
Insurance

May 1, 1995
PROSPECTUS

The Prudential Series Fund, Inc.
and
The Pruco Life of New Jersey Variable Appreciable Account

SVAL-2 Ed 5-95 Pruco Life Insurance Company of New Jersey
Catalog No. 640189U

<PAGE>

PROSPECTUS

May 1, 1995

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT

PRUvider(sm)
Variable Appreciable Life(R)
Insurance Contract

This prospectus describes a variable life insurance contract issued by Pruco
Life Insurance Company of New Jersey ("Pruco Life of New Jersey"), a stock life
insurance company that is an indirect wholly-owned subsidiary of The Prudential
Insurance Company of America ("The Prudential"). Pruco Life of New Jersey calls
this contract its PRUvider(sm) Variable Appreciable Life(R) Insurance Contract*
(the "Contract"). The Contract provides whole-life insurance protection. The
death benefit varies daily with investment experience but will never be less
than a guaranteed minimum amount (the face amount specified in the Contract).
The Contract also generally provides a cash surrender value which does not have
a guaranteed minimum amount.

The assets held for the purpose of paying benefits under these and other similar
contracts are segregated from the other assets of Pruco Life of New Jersey and
are invested in one or both of the current subaccounts of the Pruco Life of New
Jersey Variable Appreciable Account (from now on, the "Account"). In this case,
the assets will be invested in the corresponding portfolio of The Prudential
Series Fund, Inc. (from now on, the "Series Fund"). The two portfolios of the
Series Fund currently available to Contract owners are the Conservatively
Managed Flexible Portfolio and the Aggressively Managed Flexible Portfolio. The
contract owner may also choose to have the assets invested in a fixed-rate
option. This prospectus describes the Contract generally, the Pruco Life of New
Jersey Variable Appreciable Account and the securities issued by the Series
Fund.

Before you sign an application to purchase this life insurance contract, you
should read this prospectus with care and have any questions you may have
answered by your Pruco Life of New Jersey representative. If you do purchase the
contract, you should retain this prospectus for future reference, together with
the contract itself that you will receive.

Additional information about the contract and the Series Fund is set forth in a
separate Statement of Additional Information which is incorporated by reference
into this prospectus. It is available without charge upon request to the Pruco
Life Insurance Company of New Jersey at the address shown below.

Pruco Life Insurance Company of New Jersey
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 437-4016, Ext. 46

*PRUvider is a service mark of The Prudential.
Appreciable Life is a registered mark of The Prudential.
SVAL-2 Ed. 5-95

<PAGE>

TABLE OF CONTENTS

Page
----
INTRODUCTION AND SUMMARY .............................................. 1
Brief Description of the Contract ................................ 1
Balanced Portfolios .............................................. 3
Conservatively Managed Flexible Portfolio ................... 3
Aggressively Managed Flexible Portfolio ..................... 3
Fixed-Rate Option ................................................ 3
Transfers Between Investment Options ............................. 3
The Scheduled Premium ............................................ 3
Payment of Higher Premiums ....................................... 3
Contract Loans ................................................... 3
Differences Between the Contract and Variable Universal Life
Insurance Contracts ......................................... 3

FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS OF THE SERIES FUND ............. 4

Illustrations of Cash Surrender Values, Death Benefits
and Accumulated Premiums ......................................... 7

GENERAL INFORMATION ABOUT
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT AND THE
FIXED RATE OPTION ................................................ 8
Pruco Life of New Jersey Variable Appreciable Account ............ 8
The Fixed-Rate Option ............................................ 8

DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS .................. 8
Requirements for Issuance of a Contract .......................... 8
Short-Term Cancellation Right or "Free Look" ..................... 9
Contract Fees and Charges ........................................ 9
Deductions from Premiums .................................... 9
Deductions from Portfolios .................................. 9
Monthly Deductions from Contract Fund ....................... 10
Daily Deduction from the Contract Fund ...................... 10
Surrender or Withdrawal Charges ............................. 11
Transaction Charges ......................................... 11
Contract Date .................................................... 11
Premiums ......................................................... 11
Allocation of Premiums ........................................... 12
Transfers ........................................................ 13
How the Contract Fund Changes with Investment Experience ......... 13
How a Contract's Death Benefit Will Vary ......................... 14
Contract Loans ................................................... 14
Surrender of a Contract .......................................... 14
Lapse and Reinstatement .......................................... 15
Fixed Extended Term Insurance ............................... 15
Fixed Reduced Paid-Up Insurance ............................. 15
Variable Reduced Paid-Up Insurance .......................... 15
What Happens If No Request Is Made? ......................... 15
Paid-Up Insurance Option ......................................... 15
Reduced Paid-Up Insurance Option ................................. 16
When Proceeds Are Paid ........................................... 16
Living Needs Benefit ............................................. 16
Terminal Illness Option ..................................... 16
Voting Rights .................................................... 17
Reports to Contract Owners ....................................... 17
Tax Treatment of Contract Benefits ............................... 17
Treatment as Life Insurance ................................. 18
Pre-Death Distributions ..................................... 18
Other Tax Consequences ...................................... 18
Other Contract Provisions ........................................ 18

FURTHER INFORMATION ABOUT THE SERIES FUND ............................. 18

<PAGE>

Page
----
INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS ................................................ 19
Balanced Portfolios .............................................. 19
Conservatively Managed Flexible Portfolio ................... 19
Aggressively Managed Flexible Portfolio ..................... 20
Foreign Securities ............................................... 21
Options, Futures Contracts and Swaps ............................. 21
Short Sales ...................................................... 21
Reverse Repurchase Agreements and Dollar Rolls ................... 22
Loans of Portfolio Securities .................................... 22

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS .................. 22

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES ....................... 22
Portfolio Brokerage and Related Practices ........................ 23

STATE REGULATION ...................................................... 23

EXPERTS ............................................................... 23

LITIGATION ............................................................ 23

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION ..... 24

ADDITIONAL INFORMATION ................................................ 25

FINANCIAL STATEMENTS .................................................. 25

FINANCIAL STATEMENTS OF THE PRUCO LIFE PRUvider VARIABLE APPRECIABLE
ACCOUNT ............................................................... A1

CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY AND SUBSIDIARIES ........... B1

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
FOR THE SERIES FUND.

<PAGE>

INTRODUCTION AND SUMMARY

Brief Description of the Contract

The PRUvider Variable Appreciable Life Contract (referred to from now on as the
"Contract") is issued and sold by the Pruco Life Insurance Company of New Jersey
("Pruco Life of New Jersey"), a stock life insurance company, organized in 1982
under the laws of the State of New Jersey. It is licensed to sell life insurance
and annuities only in the States of New Jersey and New York. These Contracts are
not offered in any state in which the necessary approvals have not yet been
obtained.

Pruco Life of New Jersey is a wholly-owned subsidiary of Pruco Life Insurance
Company, which in turn is a wholly-owned subsidiary of The Prudential, a mutual
insurance company founded in 1875 under the laws of the State of New Jersey. As
of December 31, 1994, The Prudential has invested $127 million in Pruco Life of
New Jersey through its subsidiary Pruco Life Insurance Company in connection
with Pruco Life of New Jersey's organization and operation. The Prudential
intends from time to time to make additional capital contributions to Pruco Life
of New Jersey as needed to enable it to meet its reserve requirements and
expenses in connection with its business. The Prudential is under no obligation
to make such contributions and its assets do not back the benefits payable under
the Contract. Pruco Life of New Jersey's consolidated financial statements begin
on page B1 and should be considered only as bearing upon Pruco Life of New
Jersey's ability to meet its obligations under the Contracts.

A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. Pruco Life of New Jersey has
established a separate account, like a separate division within the Company,
called the Pruco Life of New Jersey Variable Appreciable Account. Whenever you
pay a premium, Pruco Life of New Jersey first deducts certain charges (described
below) and, unless you decide otherwise puts the remainder - often called the
"net premium" - into the Account, where it is combined with the net premiums
from all other contracts like this one. The money in the Account, including your
Contract Fund, is then invested in the following way. The Account is divided
into 2 subaccounts and you must decide which one[s] will hold the assets of your
Contract Fund. The money allocated to each subaccount is immediately invested in
a corresponding portfolio of The Prudential Series Fund, Inc. Those two
portfolios -- called the Conservatively Managed Flexible Portfolio and the
Aggressively Managed Flexible Portfolio -- differ in the amount of risk
associated with them and are described in more detail below.

Pruco Life of New Jersey deducts certain charges from each premium payment and
from the amounts held in the designated investment options. In addition, Pruco
Life of New Jersey makes certain additional charges if a Contract lapses or is
surrendered during the first 10 Contract years. All these charges, which are
largely designed to cover insurance costs and risks as well as sales and
administrative expenses, are fully described under Contract

<PAGE>

Fees and Charges on page 9. In brief, and subject to that fuller description,
the following diagram outlines the charges which may be made:

-------------------------------------
Premium Payment
-------------------------------------

------------------------------
o less charge for taxes
attributable to premiums
o less $2 processing fee
------------------------------

- --------------------------------------------------------------------------------
Daily Charges
o A daily charge equivalent to an annual rate of up to 0.9% is deducted from
the assets of the subaccounts for mortality and expense risks.
o Management fees and expenses are deducted from the assets of the Series Fund.
See Deductions from Portfolios, page 9.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Monthly Charges
o A sales charge is deducted from the Contract fund in the amount of 1/2 of 1%
of the primary annual premium.
o The Contract fund is reduced by a guaranteed minimum death benefit risk
charge of not more than $0.01 per $1,000 of the face amount of insurance.
o The Contract fund is reduced by an administrative charge of up to $6 per
Contract and up to $0.19 per $1,000 of face amount of insurance (currently,
on a non-guaranteed basis, the $0.19 charge is decreased to $0.09 per
$1,000); if the face amount of the Contract is less than $10,000, there is an
additional charge of $0.30 per $1,000 of face amount.
o A charge for anticipated mortality is deducted, with the maximum charge based
on the non-smoker/smoker 1980 CSO Tables.
o If the Contract includes riders, a deduction from the Contract fund will be
made for charges applicable to those riders; a deduction will also be made if
the rating class of the insured results in an extra charge.
- --------------------------------------------------------------------------------

When you first buy the Contract you give instructions to Pruco Life of New
Jersey as to which of the two subaccounts (and, therefore, which corresponding
portfolios of the Series Fund) you wish your Contract Fund invested. Thereafter
you may make changes in these allocations either in writing or by telephone. The
investment objectives of the portfolios, described more fully starting on page
19 of this prospectus, and of the fixed rate option are as follows:

<PAGE>

Balanced Portfolios

Conservatively Managed Flexible Portfolio. Achievement of a favorable total
investment return consistent with a portfolio having a conservatively managed
mix of money market instruments, fixed income securities, and common stocks, in
proportions believed by the investment manager to be appropriate for an investor
who desires diversification of investment who prefers a relatively lower risk of
loss and a correspondingly reduced chance of high appreciation.

Fixed-Rate Option. Guarantee against loss of principal plus income at a rate
which may change at yearly intervals, but will never be lower than an effective
annual rate of 4%.

Transfers Between Investment Options

You may at any time change the instructions for the allocation of your premiums
to the various investment options. You may also transfer amounts held in one
option to another. There are restrictions upon transfers out of the fixed-rate
option which Pruco Life of New Jersey may waive.

The Scheduled Premium

Your Contract sets forth an annual Scheduled Premium, or one that is payable
more frequently, such as monthly. Pruco Life of New Jersey guarantees that, if
the Scheduled Premiums are paid when due (or if missed premiums are paid later,
with interest), the death benefit will be paid upon the death of the insured.
The Contract will not lapse even if investment experience is unexpectedly so
unfavorable that the Contract Fund value drops to below zero.

Payment of Higher Premiums

The payment of premiums in excess of Scheduled Premiums may cause the Contract
to be classified as a Modified Endowment Contract. If you make premium payments
in amounts high enough to turn the Contract into a Modified Endowment Contract,
Pruco Life of New Jersey will notify you, ask whether it is your intention to do
so, and return the premium, if you wish, with interest. See Premiums, page 11
and Tax Treatment of Contract Benefits, page 17.

Contract Loans

The Contract permits the owner to borrow up to 90% of the amount of the cash
surrender value (100% of the portion allocated to the fixed-rate option) on
favorable terms. See Contract Loans, page 14. When a loan is made, the amount
held under the investment options described above is reduced, proportionately,
by the amount of the loan.

Differences Between the Contract and Variable Universal Life Insurance
Contracts

Pruco Life of New Jersey believes that the most common form of universal life
insurance, offered by many other life insurance companies, is suitable for many
people and, although it does not now offer such a contract to the general
public, it may do so in the future. It believes, however, that there are
features in that form of universal life insurance, particularly in variable
universal life insurance, that enable it too easily to be used in an unsuitable
way. Most universal life insurance contracts also provide for premiums to be
paid at irregular intervals but with a recommended "target premium" to be paid
at specified intervals. Regular payment of the recommended target premiums,
however, does not guarantee - as is the case with this Contract - that a death
benefit will always be paid. If the target premium is set too low and investment
experience for some period is unfavorable, the Contract Fund can drop to zero
and then those contracts will lapse. Similarly, if a contract owner skips
several premium payments during a period of financial strain, the same thing
could happen, even after a contract has been in force for many years. If that
should happen, there will be little incentive to reinstate the contract and the
contract owner will have bought, unintentionally and unnecessarily, very
expensive term insurance. Two purposes for which permanent insurance is bought
- -- protection against death and savings for later use -- will not have been met.

Pruco Life of New Jersey's PRUvider Variable Appreciable Life Insurance Contract
is a form of life insurance that seeks to eliminate these defects. Although it
provides much of the flexibility of variable universal life, it differs in

<PAGE>

two important ways. First, Pruco Life of New Jersey guarantees that if the
Scheduled Premiums are paid when due (or missed premiums are paid later with
interest), the Contract will not lapse and the face amount of insurance will be
paid upon the death of the insured even if, because of unfavorable investment
experience, the Contract Fund value should drop to below zero. Second, if all
premiums are not paid when due (or made up), the Contract will not lapse as long
as the Contract Fund is higher than a stated amount set forth in a table in the
Contract - an amount that increases each year and in later years becomes quite
high; it is called the "Tabular Contract Fund." The Contract lapses when the
Contract Fund falls to below this stated amount, rather than when it drops to
zero. Thus, when a PRUvider Variable Appreciable Life Contract lapses, it may
still have considerable value and you will, therefore, have a substantial
incentive to reinstate it, as well as an opportunity to make a considered
decision whether to do so or to take, in one form or another, the cash surrender
value. In effect, Pruco Life of New Jersey provides an early and timely warning
against the imprudent use of the flexibility provided by the Contract.

FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS OF THE SERIES FUND

<PAGE>

<TABLE>
<CAPTION>
AGGRESSIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 16.957 $ 16.005 $ 16.288 $ 13.996 $ 14.446 $ 13.123 $ 12.326
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.473 0.566 0.583 0.650 0.715 0.813 0.724
Net realized and unrealized
gains (losses) on
investments................... (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.548) 2.448 1.190 3.459 0.249 2.802 1.564
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767)
Distributions from net realized
gains......................... (0.462) (0.929) (0.914) (0.513) 0 (0.666) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 15.496 $ 16.957 $ 16.005 $ 16.288 $ 13.996 $ 14.446 $ 13.123
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (3.16%) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $3,481.5 $3,292.2 $2,435.6 $1,990.7 $1,507.8 $1,386.5 $1,103.9
Ratio of expenses net of
reimbursement to average net
assets........................ 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70%
Ratio of net investment income
to average net assets......... 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52%
Portfolio turnover rate......... 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45%
Number of shares outstanding at
end of period (in millions)... 224.7 194.1 152.2 122.2 107.7 96.0 84.1

</TABLE>

<TABLE>
<CAPTION>
CONSERVATIVELY MANAGED FLEXIBLE
-----------------------------------------------------------------------------------------
01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO TO TO TO
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 14.905 $ 14.243 $ 14.318 $ 13.060 $ 13.361 $ 12.295 $ 11.889
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.528 0.486 0.558 0.687 0.821 0.891 0.773
Net realized and unrealized
gains (losses) on
investments................... (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. (0.151) 1.715 0.968 2.425 0.678 2.046 1.197
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791)
Distributions from net realized
gains......................... (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total distributions......... (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value at end of
period........................ $ 14.095 $ 14.905 $ 14.243 $ 14.318 $ 13.060 $ 13.361 $ 12.295
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Investment Rate of
Return:**..................... (0.97%) 12.20% 6.95% 19.07% 5.27% 16.99% 10.19%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6
Ratio of expenses net of
reimbursement to average net
assets........................ 0.61% 0.60% 0.62% 0.63% 0.65% 0.64% 0.65%
Ratio of net investment income
to average net assets......... 3.61% 3.22% 3.88% 4.89% 6.21% 6.81% 6.22%
Portfolio turnover rate......... 125.18% 79.46% 62.07% 115.35% 44.04% 153.92% 110.67%
Number of shares outstanding at
end of period (in millions)... 248.4 208.2 148.4 104.8 84.2 73.0 66.3

<CAPTION>
01/01/87 01/01/86 01/01/85
TO TO TO
12/31/87 12/31/86* 12/31/85*
----------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value at beginning of
period........................ $ 12.571 $ 12.173 $ 10.469
----------- ----------- -----------
Income From Investment
Operations:
Net investment income........... 0.656 0.652 0.725
Net realized and unrealized
gains (losses) on
investments................... (0.399) 1.046 1.443
----------- ----------- -----------
Total from investment
operations.................. 0.257 1.698 2.168
----------- ----------- -----------
Distributions to Shareholders:
Distributions from net
investment income............. (0.709) (0.517) (0.464)
Distributions from net realized
gains......................... (0.230) (0.783) 0
----------- ----------- -----------
Total distributions......... (0.939) (1.300) (0.464)
----------- ----------- -----------
Net increase (decrease) in Net
Asset Value................... (0.682) 0.398 1.704
----------- ----------- -----------
Net Asset Value at end of
period........................ $ 11.889 $ 12.571 $ 12.173
----------- ----------- -----------
----------- ----------- -----------
Total Investment Rate of
Return:**..................... 1.54% 14.17% 21.11%
Ratios/Supplemental Data:
Net assets at end of period (in
millions)..................... $803.9 $375.4 $75.9
Ratio of expenses net of
reimbursement to average net
assets........................ 0.66% 0.64% 0.86%
Ratio of net investment income
to average net assets......... 5.05% 5.10% 5.99%
Portfolio turnover rate......... 140.69% 207.78% 54.89%
Number of shares outstanding at
end of period (in millions)... 67.6 29.9 4.2
</TABLE>

All calculations are based on average month-end shares outstanding, where
applicable.

<PAGE>

PORTFOLIO RATES OF RETURN

<TABLE>
<CAPTION>
5 YEAR 10 YEAR
PERIOD PERIOD INCEPTION
INCEPTION YEAR ENDED ENDED ENDED DATE TO YEAR ENDED YEAR ENDED YEAR ENDED
DATE 12/31/94 12/31/94 12/31/94 12/31/94 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------- ----------- ----------- ----------- ------------- ----------- ----------- -----------

AGGRESSIVELY
MANAGED FLEXIBLE 5/83 -3.2% 9.0% 11.7% 10.6% -3.2% 15.6% 7.6%

CONSERVATIVELY
MANAGED FLEXIBLE 5/83 -1.0% 8.3% 10.4% 9.9% -1.0% 12.2% 6.9%

</TABLE>

<PAGE>

Illustrations of Cash Surrender Values, Death Benefits
and Accumulated Premiums

The death benefits and cash surrender values shown in the first two tables on
pages T1 and T2 reflect Pruco Life of New Jersey's current charges. The values
shown in these tables are calculated upon the assumption that Pruco Life of New
Jersey will continue to use the administrative charges and mortality rates that
it is currently using, even though it is permitted under the Contract to use
higher administrative charges and the higher mortality charges specified in the
1980 CSO Table. While Pruco Life of New Jersey does not currently intend to
withdraw or modify these reductions in charges, it reserves the right to do so.

The death benefits and cash surrender values shown in the next two tables on
pages T3 and T4 are calculated upon the assumption that the maximum
administrative charges allowable under the Contract and the maximum mortality
charges specified by the 1980 CSO Table are made throughout the life of the
Contract; they do not reflect Pruco Life of New Jersey's current practice of
reducing the administrative and mortality charges.

Upon request, Pruco Life of New Jersey will furnish a comparable hypothetical
illustration based on the proposed insured's age and sex (except where unisex
rates apply) and on the face amount or premium amount requested. The
illustrations can be prepared upon the assumptions that the insured is in the
preferred or standard rating class or in a different risk classification, and
can assume that annual, semi-annual, quarterly or monthly premiums are paid.

<PAGE>

ILLUSTRATIONS
-------------

<TABLE>
<CAPTION>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$5,000 GUARANTEED DEATH BENEFIT
$173.70 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES

Death Benefit (2) Cash Surrender Value (2)
------------------------------------------------ ----------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ------------------------------------------------ ----------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net) (-1.54% Net) (2.46% Net) (6.46% Net) (10.46% Net)
---- -------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 181 $ 5,003 $ 5,007 $ 5,011 $ 5,016 $ 0 $ 0 $ 1 $ 6
2 $ 369 $ 5,002 $ 5,013 $ 5,024 $ 5,036 $ 48 $ 58 $ 70 $ 82
3 $ 564 $ 5,000 $ 5,019 $ 5,040 $ 5,063 $ 101 $ 121 $ 142 $ 165
4 $ 767 $ 5,000 $ 5,024 $ 5,058 $ 5,095 $ 153 $ 184 $ 219 $ 256
5 $ 978 $ 5,000 $ 5,028 $ 5,078 $ 5,135 $ 204 $ 249 $ 300 $ 356
6 $ 1,198 $ 5,000 $ 5,033 $ 5,104 $ 5,186 $ 268 $ 329 $ 400 $ 482
7 $ 1,427 $ 5,000 $ 5,037 $ 5,133 $ 5,246 $ 330 $ 410 $ 505 $ 619
8 $ 1,665 $ 5,000 $ 5,042 $ 5,166 $ 5,318 $ 391 $ 492 $ 617 $ 768
9 $ 1,912 $ 5,000 $ 5,045 $ 5,203 $ 5,402 $ 451 $ 576 $ 734 $ 932
10 $ 2,169 $ 5,000 $ 5,048 $ 5,245 $ 5,499 $ 510 $ 661 $ 858 $ 1,112
15 $ 3,617 $ 5,000 $ 5,053 $ 5,536 $ 6,260 $ 717 $ 1,042 $ 1,525 $ 2,248
20 $ 5,379 $ 5,000 $ 5,039 $ 6,011 $ 9,057 $ 877 $ 1,448 $ 2,421 $ 4,095
25 $ 7,523 $ 5,000 $ 5,001 $ 6,926 $13,437 $ 962 $ 1,867 $ 3,613 $ 7,010
30 (Age 65) $10,132 $ 5,000 $ 5,000 $ 8,661 $19,408 $ 929 $ 2,280 $ 5,151 $11,541
35 $13,305 $ 5,000 $ 5,000 $10,596 $27,634 $ 686 $ 2,660 $ 7,075 $18,449
40 $17,166 $ 5,000 $ 5,000 $12,799 $39,087 $ 34 $ 2,960 $ 9,431 $28,804
45 $21,864 $ 5,000 $ 5,000 $15,368 $55,245 $ 0 $ 3,082 $12,256 $44,057

</TABLE>

(1) If premiums are paid more frequently than annually, the payments would be
$89.46 semi-annually, $46.15 quarterly or $16.90 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.

(2) Assumes no Contract loan has been made.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%, 8%,
AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUCO LIFE OF
NEW JERSEY OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.

<PAGE>

<TABLE>
<CAPTION>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES

1 $ 407 $20,012 $20,024 $20,036 $ 20,048 $ 38 $ 50 $ 62 $ 74
2 $ 829 $20,013 $20,046 $20,080 $ 20,115 $ 242 $ 275 $ 309 $ 345
3 $ 1,269 $20,001 $20,065 $20,132 $ 20,203 $ 441 $ 505 $ 572 $ 643
4 $ 1,726 $20,000 $20,081 $20,193 $ 20,315 $ 635 $ 738 $ 851 $ 973
5 $ 2,202 $20,000 $20,093 $20,264 $ 20,454 $ 831 $ 984 $ 1,154 $ 1,345
6 $ 2,697 $20,000 $20,110 $20,353 $ 20,633 $ 1,081 $ 1,293 $ 1,537 $ 1,816
7 $ 3,211 $20,000 $20,124 $20,456 $ 20,847 $ 1,332 $ 1,613 $ 1,946 $ 2,337
8 $ 3,746 $20,000 $20,136 $20,573 $ 21,103 $ 1,578 $ 1,939 $ 2,376 $ 2,907
9 $ 4,302 $20,000 $20,145 $20,707 $ 21,406 $ 1,819 $ 2,269 $ 2,831 $ 3,530
10 $ 4,881 $20,000 $20,152 $20,857 $ 21,760 $ 2,054 $ 2,604 $ 3,309 $ 4,212
15 $ 8,140 $20,000 $20,146 $21,922 $ 24,549 $ 2,888 $ 4,100 $ 5,876 $ 8,504
20 $12,106 $20,000 $20,057 $23,679 $ 34,279 $ 3,528 $ 5,695 $ 9,317 $ 15,497
25 $16,931 $20,000 $20,000 $26,641 $ 50,898 $ 3,870 $ 7,333 $13,899 $ 26,553
30 (Age 65) $22,801 $20,000 $20,000 $33,351 $ 73,548 $ 3,734 $ 8,939 $19,833 $ 43,738
35 $29,942 $20,000 $20,000 $40,833 $104,757 $ 2,747 $10,366 $27,261 $ 69,940
40 $38,631 $20,000 $20,000 $49,349 $148,208 $ 113 $11,386 $36,366 $109,216
45 $49,203 $20,000 $20,000 $59,285 $209,506 $ 0 $11,501 $47,278 $167,075

</TABLE>

(1) If premiums are paid more frequently than annually, the payments would be
$202.79 semi-annually, $103.98 quarterly or $36.59 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.

(2) Assumes no Contract loan has been made.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%, 8%,
AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUCO LIFE OF
NEW JERSEY OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.

<PAGE>

<TABLE>
<CAPTION>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$5,000 GUARANTEED DEATH BENEFIT
$173.70 ANNUAL PREMIUM (1)
USING MAXIMUM CONTRACTUAL CHARGES

1 $ 181 $5,000 $5,000 $ 5,004 $ 5,009 $ 0 $ 0 $ 0 $ 0
2 $ 369 $5,000 $5,000 $ 5,010 $ 5,021 $ 35 $ 45 $ 56 $ 67
3 $ 564 $5,000 $5,000 $ 5,018 $ 5,039 $ 82 $ 100 $ 120 $ 141
4 $ 767 $5,000 $5,000 $ 5,028 $ 5,063 $127 $ 157 $ 188 $ 223
5 $ 978 $5,000 $5,000 $ 5,039 $ 5,092 $172 $ 213 $ 260 $ 313
6 $ 1,198 $5,000 $5,000 $ 5,053 $ 5,129 $228 $ 284 $ 349 $ 424
7 $ 1,427 $5,000 $5,000 $ 5,069 $ 5,173 $282 $ 355 $ 442 $ 545
8 $ 1,665 $5,000 $5,000 $ 5,088 $ 5,226 $335 $ 427 $ 539 $ 677
9 $ 1,912 $5,000 $5,000 $ 5,110 $ 5,289 $387 $ 499 $ 641 $ 820
10 $ 2,169 $5,000 $5,000 $ 5,135 $ 5,362 $437 $ 572 $ 748 $ 975
15 $ 3,617 $5,000 $5,000 $ 5,314 $ 5,944 $600 $ 883 $1,302 $ 1,932
20 $ 5,379 $5,000 $5,000 $ 5,614 $ 7,650 $709 $ 1,197 $2,023 $ 3,459
25 $ 7,523 $5,000 $5,000 $ 6,084 $11,146 $735 $ 1,490 $2,950 $ 5,815
30 (Age 65) $10,132 $5,000 $5,000 $ 6,949 $15,771 $627 $ 1,724 $4,132 $ 9,379
35 $13,305 $5,000 $5,000 $ 8,350 $21,951 $274 $ 1,821 $5,575 $14,656
40 $17,166 $5,000 $5,000 $ 9,876 $30,276 $ 0 $ 1,621 $7,278 $22,311
45 $21,864 $5,000 $5,000 $11,567 $41,579 $ 0 $ 678 $9,224 $33,158

</TABLE>

(1) If premiums are paid more frequently than annually, the payments would be
$89.46 semi-annually, $46.15 quarterly or $16.90 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.

(2) Assumes no Contract loan has been made.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%, 8%,
AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUCO LIFE OF
NEW JERSEY OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.

<PAGE>

<TABLE>
<CAPTION>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING MAXIMUM CONTRACTUAL CHARGES

1 $ 407 $20,000 $20,000 $20,009 $ 20,020 $ 12 $ 23 $ 35 $ 46
2 $ 829 $20,000 $20,000 $20,023 $ 20,056 $ 190 $ 221 $ 253 $ 286
3 $ 1,269 $20,000 $20,000 $20,044 $ 20,110 $ 363 $ 422 $ 484 $ 550
4 $ 1,726 $20,000 $20,000 $20,072 $ 20,185 $ 532 $ 626 $ 730 $ 842
5 $ 2,202 $20,000 $20,000 $20,108 $ 20,282 $ 703 $ 842 $ 998 $ 1,172
6 $ 2,697 $20,000 $20,000 $20,151 $ 20,404 $ 923 $ 1,114 $ 1,335 $ 1,588
7 $ 3,211 $20,000 $20,000 $20,204 $ 20,556 $1,142 $ 1,395 $ 1,693 $ 2,045
8 $ 3,746 $20,000 $20,000 $20,266 $ 20,740 $1,356 $ 1,678 $ 2,069 $ 2,543
9 $ 4,302 $20,000 $20,000 $20,339 $ 20,960 $1,564 $ 1,964 $ 2,462 $ 3,084
10 $ 4,881 $20,000 $20,000 $20,423 $ 21,220 $1,766 $ 2,253 $ 2,875 $ 3,672
15 $ 8,140 $20,000 $20,000 $21,047 $ 23,311 $2,422 $ 3,471 $ 5,001 $ 7,266
20 $12,106 $20,000 $20,000 $22,120 $ 28,759 $2,863 $ 4,695 $ 7,758 $ 13,001
25 $16,931 $20,000 $20,000 $23,831 $ 41,954 $2,969 $ 5,824 $11,293 $ 21,888
30 (Age 65) $22,801 $20,000 $20,000 $26,578 $ 59,408 $2,533 $ 6,695 $15,806 $ 35,329
35 $29,942 $20,000 $20,000 $31,980 $ 82,730 $1,113 $ 6,983 $21,351 $ 55,234
40 $38,631 $20,000 $20,000 $37,865 $114,143 $ 0 $ 5,993 $27,903 $ 84,113
45 $49,203 $20,000 $20,000 $44,385 $156,794 $ 0 $ 1,813 $35,395 $125,039

</TABLE>

(1) If premiums are paid more frequently than annually, the payments would be
$202.79 semi-annually, $103.98 quarterly or $36.59 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.

(2) Assumes no Contract loan has been made.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%, 8%,
AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUCO LIFE OF
NEW JERSEY OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.

<PAGE>

GENERAL INFORMATION ABOUT
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT AND THE
FIXED RATE OPTION

Pruco Life of New Jersey Variable Appreciable Account. The Pruco Life of New
Jersey Variable Appreciable Account was established on January 13, 1984 under
New Jersey law as a separate investment account. The Account meets the
definition of a "separate account" under the federal securities laws. The
Account holds assets that are segregated from all of Pruco Life of New Jersey's
other assets.

The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Pruco Life of New Jersey. Pruco Life of New
Jersey is also the legal owner of the assets in the Account. Pruco Life of New
Jersey will at all times maintain assets in the Account with a total market
value at least equal to the reserve and other liabilities relating to the
variable benefits attributable to the Account. These assets may not be charged
with liabilities which arise from any other business Pruco Life of New Jersey
conducts. In addition to these assets, the Account's assets may include funds
contributed by Pruco Life of New Jersey to commence operation of the Account and
may include accumulations of the charges Pruco Life of New Jersey makes against
the Account. From time to time these additional assets will be transferred to
Pruco Life of New Jersey's general account. Before making any such transfer,
Pruco Life of New Jersey will consider any possible adverse impact the transfer
might have on the Account.

The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any
supervision by the SEC of the management or investment policies or practices of
the Account. For state law purposes, the Account is treated as a part or
division of Pruco Life of New Jersey. There are currently two subaccounts within
the Account, one of which invests in the Conservatively Managed Flexible
Portfolio and the other of which invests in the Aggressively Managed Flexible
Portfolio of the Series Fund. Additional subaccounts may be added in the future.
The Account's financial statements begin on page A1.

The Fixed-Rate Option. Because of exemptive and exclusionary provisions,
interests in the fixed-rate option under the Contract have not been registered
under the Securities Act of 1933 and the general account has not been registered
as an investment company under the Investment Company Act of 1940. Accordingly,
interests in the fixed-rate option are not subject to the provisions of these
Acts, and Pruco Life of New Jersey has been advised that the staff of the
Securities and Exchange Commission has not reviewed the disclosure in this
Prospectus relating to the fixed-rate option. Any inaccurate or misleading
disclosure regarding the fixed-rate option may, however, subject Pruco Life of
New Jersey and its directors to civil liability if that results in any damage.

As explained earlier, you may elect to allocate, either initially or by
transfer, all or part of the amount credited under the Contract to the
fixed-rate option, and the amount so allocated or transferred becomes part of
The Pruco Life of New Jersey's general assets. Sometimes this is referred to as
Pruco Life of New Jersey's general account, which consists of all assets owned
by Pruco Life of New Jersey other than those in the Account and in other
separate accounts that have been or may be established by Pruco Life of New
Jersey. Subject to applicable law, Pruco Life of New Jersey has sole discretion
over the investment of the assets of the general account, and Contract owners do
not share in the investment experience of those assets. Instead, Pruco Life of
New Jersey guarantees that the part of the Contract Fund allocated to the
fixed-rate option will accrue interest daily at an effective annual rate that
Pruco Life of New Jersey declares periodically. This rate may not be less than
an effective annual rate of 4%. Currently, declared interest rates remain in
effect from the date money is allocated to the fixed-rate option until the
Monthly date in the same month in the following year. See Contract Date, page
11. Thereafter, a new crediting rate will be declared each year and will remain
in effect for the calendar year. Pruco Life of New Jersey reserves the right to
change this practice. Pruco Life of New Jersey is not obligated to credit
interest at a higher rate than 4%, although in its sole discretion it may do so.
Different crediting rates may be declared for different portions of the Contract
Fund allocated to the fixed-rate option. At least annually and on request, a
Contract owner will be advised of the interest rates that currently apply to his
or her Contract.

DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS

Requirements for Issuance of a Contract. Generally, the minimum initial
guaranteed death benefit that can be applied for is $5,000 and the maximum that
can be applied for is $25,000. The Contract may generally be issued on insureds
below the age of 76. Before issuing any Contract, Pruco Life of New Jersey
requires evidence of insurability which may include a medical examination.
Non-smokers who meet preferred underwriting requirements

<PAGE>

are offered the most favorable premium rate. A higher premium is charged if an
extra mortality risk is involved. These are the current underwriting
requirements. The Company reserves the right to change these requirements on a
non-discriminatory basis.

Short-Term Cancellation Right or "Free Look". Generally, you may return the
Contract for a refund within 10 days after you receive it, within 45 days after
Part I of the application for insurance is signed, or within 10 days after Pruco
Life of New Jersey mails or delivers a Notice of Withdrawal Right, whichever is
latest. Some states allow a longer period of time during which a Contract may be
returned for a refund. A refund can be requested by mailing or delivering the
Contract to the representative who sold it or to the Home Office specified in
the Contract. A Contract returned according to this provision shall be deemed
void from the beginning. You will then receive a refund of all premium payments
made, plus or minus any change due to investment experience in the value of the
invested portion of the premiums, calculated as if no charges had been made
against the Account or the Series Fund. However, if applicable law so requires,
if you exercise your short-term cancellation right, you will receive a refund of
all premium payments made, with no adjustment for investment experience.

Contract Fees and Charges. This section provides a detailed description of each
charge that is described briefly in the chart on page 2, and an explanation of
the purpose of the charge.

In several instances we will use the terms "maximum charge" and "current
charge." The "maximum charge," in each instance, will be the highest charge that
Pruco Life of New Jersey is entitled to make under the Contract. The "current
charge" is the lower amount that Pruco Life of New Jersey is now charging and
which it intends to charge for the indefinite future. However, if circumstances
change, Pruco Life of New Jersey reserves the right to increase each current
charge, up to but to no more than the maximum charge, without giving any advance
notice.

Deductions from Premiums

(a) A charge for taxes attributable to premiums is deducted from each premium.
That charge is currently made up of two parts. The first part is in an amount
equal to the state or local premium tax. It varies from jurisdiction to
jurisdiction and generally ranges from 0.75% to 5% of the premium received by
Pruco Life of New Jersey. The second part is for federal income taxes measured
by premiums and it is equal to 1.25% of the premium. Pruco Life of New Jersey
believes that this charge is a reasonable estimate of an increase in its federal
income taxes resulting from a 1990 change in the Internal Revenue Code. It is
intended to recover this increased tax. For the year ended December 31, 1994 and
for the period May 1 through December 31, 1993, Pruco Life of New Jersey
received a total of approximately $149,988 and $41,942, respectively, in charges
for payment of taxes attributable to premiums.

(b) A charge of $2 is deducted from each premium payment to cover the cost of
collecting and processing premiums. Thus, if you pay premiums annually, this
charge will be $2 per year. If you pay premiums monthly, the charge will be $24
per year. For the year ended December 31, 1994 and for the period May 1 through
December 31, 1993, Pruco Life of New Jersey received a total of approximately
$116,312 and $24,448, respectively, in processing charges.

Deductions from Portfolios

- --------------------------------------------------------------------------------
Other Total
Portfolio Advisory Fee Expenses Expenses
- --------------------------------------------------------------------------------
Conservatively Managed Flexible 0.55% 0.06% 0.61%
Aggressively Managed Flexible 0.60% 0.06% 0.66%
- --------------------------------------------------------------------------------

For the years 1994, 1993, and 1992, The Prudential received a total of
$66,413,206, $51,197,499, and $35,661,075, respectively, in investment
management fees for all of the Series Fund's portfolios.

<PAGE>

Monthly Deductions from Contract Fund

The following monthly charges are deducted proportionately from the dollar
amounts held in each of the chosen investment option[s].

(a) A sales charge, often called a sales load, is deducted to pay part of the
costs Pruco Life of New Jersey incurs in selling the Contracts, including
commissions, advertising and the printing and distribution of prospectuses and
sales literature. The charge is equal to 0.5% of the "primary annual premium"
which is equal to the Scheduled Premium that would be payable if premiums were
being paid annually, less the two deductions from premiums (taxes attributable
to premiums and the $2 processing charge), and less the $6 part of the monthly
deduction described in (c) below, the $0.30 per $1,000 of face amount for
Contracts with a face amount of less than $10,000, and any extra premiums for
riders or substandard risks. The deduction is made whether the Contract owner is
paying premiums annually or more frequently. It is lower on Contracts issued on
insureds over 60 years of age. To summarize, this charge is somewhat less than
(significantly less for Contracts with small face amounts) 6% of the annual
Scheduled Premium.

There is a second sales load, which will be charged only if a Contract lapses or
is surrendered before the end of the 10th Contract year. It is often described
as a contingent deferred sales load ("CDSL") and is described later under
Surrender or Withdrawal Charges. For the year ended December 31, 1994 and for
the period May 1 through December 31, 1993, Pruco Life of New Jersey received a
total of approximately $203,885 and $27,920, respectively, in sales load
charges.

(b) A charge of not more than $0.01 per $1000 of face amount of insurance is
made to compensate Pruco Life of New Jersey for the risk it assumes by
guaranteeing that, no matter how unfavorable investment experience may be, the
death benefit will never be less than the guaranteed minimum death benefit so
long as Scheduled Premiums are paid on or before the due date or during the
grace period. This charge will not be made if the Contract has been continued in
force pursuant to an option on lapse. For the year ended December 31, 1994 and
for the period May 1 through December 31, 1993, Pruco Life of New Jersey
received a total of approximately $12,917 and $2,533, respectively, for this
risk charge.

(c) An administrative charge of $6 plus up to $0.19 per $1,000 per month of face
amount of insurance is deducted each month. Currently, on a non-guaranteed
basis, this charge is reduced from $0.19 to $0.09 per $1,000. The charge is
intended to pay for processing claims, keeping records, and communicating with
Contract owners. If premiums are paid by automatic transfer under the Pru-Matic
Plan, as described on page 11, the current charge is further reduced to $0.07
per $1,000 of face amount. There is an additional charge of $0.30 per $1,000 of
face amount if the face amount of the Contract is less than $10,000. This
monthly administrative charge will not be made if the Contract has been
continued in force pursuant to an option on lapse. For the year ended December
31, 1994 and for the period May 1 through December 31, 1993, Pruco Life of New
Jersey received a total of approximately $680,579 and $129,032, respectively, in
monthly administrative charges.

(d) A mortality charge is deducted that is intended to be used to pay death
benefits. When an insured dies, the amount payable to the beneficiary is larger
than the Contract Fund and significantly larger if the insured dies in the early
years of a Contract. The mortality charges collected from all Contract owners
enables Pruco Life of New Jersey to pay the death benefit for the few insureds
who die. The maximum mortality charge is determined by multiplying the "net
amount at risk" under a Contract (the amount by which the Contract's death
benefit, computed as if there were neither riders nor Contract debt, exceeds the
Contract Fund) by a rate based upon the insured's current attained age and sex
(except where unisex rates apply) and the anticipated mortality for that class
of persons. The anticipated mortality is based upon mortality tables published
by The National Association of Insurance Commissioners called the
Non-Smoker/Smoker 1980 CSO Tables. Pruco Life of New Jersey may determine that a
lesser amount than that called for by these mortality tables will be adequate
for insureds of particular ages and may thus make a lower mortality charge for
such persons. Any lower current mortality charges are not applicable to
Contracts in force pursuant to an option on lapse. See Lapse and Reinstatement,
page 15.

(e) If the Contract includes riders, Pruco Life of New Jersey deducts any
charges applicable to those riders from the Contract fund on each Monthly date.
In addition, Pruco Life of New Jersey will deduct on each Monthly date any extra
charge incurred because of the rating class of the insured.

Daily Deduction from the Contract Fund

<PAGE>

risk assumed is that expenses incurred in issuing and administering the Contract
will be greater than Pruco Life of New Jersey estimated in fixing its
administrative charges. Pruco Life of New Jersey will realize a profit from this
risk charge to the extent it is not needed to provide benefits and pay expenses
under the Contracts. This charge is not assessed against amounts allocated to
the fixed-rate option. For the year ended December 31, 1994 and for the period
May 1 through December 31, 1993, Pruco Life of New Jersey received a total of
approximately $31,792 and $2,635, respectively, in mortality and expense risk
charges.

Surrender or Withdrawal Charges

(a) An additional sales load (the CDSL) is charged if a Contract is surrendered
for its cash surrender value or lapses during the first 10 Contract years. It is
not deducted from the death benefit if the insured should die during this
period. This maximum contingent deferred charge is equal to 50% of the first
year's primary annual premium upon Contracts that lapse during the first 5
Contract years. That percentage is reduced uniformly on a daily basis starting
from the Contract's fifth anniversary until it disappears on the tenth
anniversary. Other important limitations apply. They are described more fully in
the Statement of Additional Information. The amount of this charge can be more
easily understood by reference to the following table which shows the sales
loads that would be paid by a 35 year old man with $20,000 face amount of
insurance, both through the monthly deductions from the Contract Fund described
above and upon the surrender of the Contract.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Cumulative
Cumulative Total Sales
Cumulative Sales Load Load as Per-
Surrender, Scheduled Deducted Contingent centage of
Last Day of Premiums from Contract Deferred Total Sales Scheduled
Year No. Paid Fund Sales Load Load Premiums Paid
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $ 390.90 $ 18.24 $ 87.22 $ 105.46 26.98%
2 781.80 36.48 104.16 140.64 17.99%
3 1,172.70 54.72 121.10 175.82 14.99%
4 1,563.60 72.96 138.04 211.00 13.49%
5 1,954.50 91.20 146.55 237.75 12.16%
6 2,345,40 109.44 121.80 231.24 9.86%
7 2,736.30 127.68 91.40 219.08 8.01%
8 3,127,20 145.92 60.80 206.72 6.61%
9 3,518.10 164.16 30.40 194.56 5.53%
10 3,909.00 182.40 0.00 182.40 4.67%
- --------------------------------------------------------------------------------------------------------

</TABLE>

The percentages shown in the last column will not be appreciably different for
insureds of different ages.

(b) An administrative charge of $5 per $1,000 of face amount of insurance is
deducted upon lapse or surrender to cover the cost of processing 0.00 182.40
applications, conducting medical examinations, determining insurability and the
insured's rating class, and establishing records. However, this charge is
reduced beginning on the Contract's fifth anniversary and declines daily at a
constant rate until it disappears entirely on the tenth Contract anniversary.
For the year ended December 31, 1994 and for the period May 1 through December
31, 1993, Pruco Life of New Jersey received a total of approximately $10,806 and
$506, respectively, for surrendered or lapsed Contracts.

Transaction Charges

Contract Date. When the first premium payment is paid with the application for a
Contract, the Contract date will ordinarily be the later of the date of the
application or the date of any medical examination. In most cases no medical
examination will be necessary. If the first premium is not paid with the
application, the Contract date will ordinarily be the date the first premium was
paid and the Contract was delivered. Under certain circumstances, Pruco Life of
New Jersey will permit a Contract to be back-dated but only to a date not
earlier than 6 months prior to the date of the application. It may be
advantageous for a Contract owner to have an earlier Contract date since that
will result in the use by Pruco Life of New Jersey of a lower issue age in
determining the amount of the scheduled premium. Pruco Life of New Jersey will
require the payment of all premiums that would have been due had the application
date coincided with the back-dated Contract date. The death benefit and cash
surrender value under the Contract will be equal to what they would have been
had the Contract been issued on the Contract date, all scheduled premiums been
received on their due dates, and all Contract charges been made.

<PAGE>

monthly, you will receive a book each year with 12 coupons that will serve as a
reminder. With Pruco Life of New Jersey's consent, you may change the frequency
of premium payments.

You may elect to have monthly premiums paid automatically under the "Pru-Matic
Premium Plan" by pre-authorized transfers from a bank checking account. If you
select the Pru-Matic Premium Plan, one of the current monthly charges will be
reduced. See Monthly Deductions From Contract Fund, page 10. Some Contract
owners may also be eligible to have monthly premiums paid by pre-authorized
deductions from an employer's payroll.

- --------------------------------------------------------------------------------
$10,000 Face Amount $20,000 Face Amount
----------------------------------------------------
Preferred Standard Preferred Standard
- --------------------------------------------------------------------------------
Male, age 35 $ 233.70 $ 274.01 $ 390.90 $ 471.52
at issue
- --------------------------------------------------------------------------------
Female, age 45 $ 278.04 $ 308.53 $ 479.59 $ 540.57
at issue
- --------------------------------------------------------------------------------
Male, age 55 $ 450.96 $ 562.17 $ 825.43 $1047.86
at issue
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
$10,000 Face Amount $20,000 Face Amount
----------------------------------------------------
Monthly Annual Monthly Annual
- --------------------------------------------------------------------------------
Male, age 35 $ 22.43 $ 233.70 $ 36.59 $ 390.90
at issue
- --------------------------------------------------------------------------------
Female, age 45 $ 26.46 $ 278.04 $ 44.65 $ 479.59
at issue
- --------------------------------------------------------------------------------
Male, age 55 $ 41.96 $ 450.96 $ 75.66 $ 825.43
at issue
- --------------------------------------------------------------------------------

A significant feature of this Contract is that it permits you to pay greater
than Scheduled Premiums. This may be done by making occasional unscheduled
premium payments or on a periodic basis. If you wish, you may select a higher
contemplated premium than the Scheduled Premium. Pruco Life of New Jersey will
then bill you for the chosen premium. In general, the regular payment of higher
premiums will result in higher cash surrender values and higher death benefits.
Conversely, payment of a Scheduled Premium need not be made if the Contract Fund
is sufficiently large to enable the charges due under the Contract to be made
without causing the Contract to lapse. See Lapse and Reinstatement, page 15. The
payment of premiums in excess of Scheduled Premiums may cause the Contract to
become a Modified Endowment Contract. If this happens, loans and other
distributions which would otherwise not be taxable events will be subject to
federal income taxation. See Tax Treatment of Contract Benefits, page 17.

Pruco Life of New Jersey will generally accept any premium payment if the
payment is at least $25. Pruco Life of New Jersey does reserve the right,
however, to limit unscheduled premiums to a total of $5,000 in any Contract
year, and to refuse to accept premiums that would immediately result in more
than a dollar-for-dollar increase in the death benefit. See How a Contract's
Death Benefit Will Vary, page 14. The privilege of making large or additional
premium payments offers a way of investing amounts which accumulate without
current income taxation, but again, there are tax consequences if the Contract
becomes a Modified Endowment Contract. See Tax Treatment of Contract Benefits,
page 17.

<PAGE>

page 9. The invested portion of any part of the initial premium in excess of the
Scheduled Premium is placed in the selected investment option[s] on the date of
receipt, but not earlier than the Contract date. Thus, to the extent that the
receipt of the first premium precedes the Contract date, there will be a period
during which the Contract owner's initial premium will not be invested. All
subsequent premium payments, after the deduction from premiums, when received by
Pruco Life of New Jersey will be placed in the subaccount[s] or the fixed-rate
option in accordance with the allocation previously designated. Provided the
Contract is not in default, you may change the way in which subsequent premiums
are allocated by giving written notice to a Home Office. You may also change the
way in which subsequent premiums are allocated by telephoning the Home Office,
provided you are enrolled to use the Telephone Transfer system. There is no
charge for reallocating future premiums. If any part of the invested portion of
a premium is allocated to a particular investment option, that portion must be
at least 10% on the date the allocation takes effect. All percentage allocations
must be in whole numbers. For example, 33% can be selected but 331/3% cannot. Of
course, the total allocation of all selected investment options must equal 100%.

Transfers. If the Contract is not in default, or if the Contract is in force as
variable reduced paid-up insurance (see Lapse and Reinstatement, page 15), you
may, up to four times in each Contract year, transfer amounts from one
subaccount to the other subaccount or to the fixed-rate option. There is no
charge. All or a portion of the amount credited to a subaccount may be
transferred.

Transfers between subaccounts will take effect as of the end of the valuation
period in which a proper transfer request is received at a Home Office. The
request may be in terms of dollars, such as a request to transfer $1,000 from
one subaccount to the other, or may be in terms of a percentage reallocation
between subaccounts. In the latter case, as with premium reallocations, the
percentages must be in whole numbers. You may transfer amounts by proper written
notice to a Home Office, or by telephone, unless you ask that transfers by
telephone not be made. Pruco Life of New Jersey has adopted procedures designed
to ensure that requests by telephone are genuine and will require appropriate
identification for that purpose. Pruco Life of New Jersey cannot guarantee that
you will be able to get through to complete a telephone transfer during peak
periods such as periods of drastic economic or market change.

Transfers from the fixed-rate option are subject to restrictions and may only be
made with Pruco Life of New Jersey's consent. Transfers from the fixed-rate
option to the subaccounts are currently permitted once each Contract year and
only during the 30-day period beginning on the Contract anniversary. The maximum
amount which may be transferred out of the fixed-rate option each year is
currently the greater of: (a) 25% of the amount in the fixed-rate option, or (b)
$2,000. Such transfer requests received prior to the Contract anniversary will
be effected on the Contract anniversary. Transfer requests received within the
30-day period beginning on the Contract anniversary will be effected as of the
end of the valuation period in which a proper transfer request is received at a
Home Office. These limits are subject to change in the future.

How the Contract Fund Changes with Investment Experience. As explained above,
after the tenth Contract year, there will no longer be a surrender charge and,
if there is no Contract loan, the cash surrender value will be equal to the
Contract Fund. This section, therefore, also describes how the cash surrender
value of the Contract will change with investment experience.

A Contract's cash surrender value on any date will be the Contract Fund value
reduced by the withdrawal charges, if any, and by any Contract debt. Upon
request, Pruco Life of New Jersey will tell a Contract owner the cash surrender
value of his or her Contract. It is possible, although highly unlikely, that the
cash surrender value of a Contract could decline to zero because of unfavorable
investment performance, even if a Contract owner continues to pay Scheduled
Premiums when due.

<PAGE>

How a Contract's Death Benefit Will Vary. The death benefit will change from the
outset with investment experience. The precise way in which that will occur is
complicated and is described in the Statement of Additional Information. In
general, and assuming the optional paid-up benefit is not in effect, see Paid-Up
Insurance Option, on page 15, if the net investment performance is 4% per year
or higher, the death benefit will increase; if it is below 4%, it will decrease.
Pruco Life of New Jersey guarantees, however, that it will not decrease below
the face amount of insurance. If unfavorable experience of that kind should
occur, it must be offset by favorable experience before the death benefit begins
to increase again.

If the Contract is kept in force for several years and if investment performance
is relatively favorable, the Contract Fund value may grow to the point where, to
meet certain provisions of the Internal Revenue Code which require that the
death benefit always be greater than the Contract Fund value, the death benefit
must be increased. The required difference between the death benefit and
Contract Fund value is higher at younger ages than at older ages. A precise
description is in the Statement of Additional Information.

Contract Loans. The owner may borrow from Pruco Life of New Jersey up to the
"loan value" of the Contract, using the Contract as the only security for the
loan. The loan value is equal to (1) 90% of an amount equal to the portion of
the Contract fund value attributable to the variable investment options and to
any prior loan[s] supported by the variable investment options, minus the
portion of any charges attributable to variable investment options that would be
payable upon an immediate surrender; plus (2) 100% of an amount equal to the
portion of the Contract fund value attributable to the fixed-rate option and to
any prior loan[s] supported by the fixed-rate option, minus the portion of any
charges attributable to the fixed-rate option that would be payable upon an
immediate surrender. The minimum amount that may be borrowed at any one time is
$200 unless the proceeds are used to pay premiums on the Contract.

Interest charged on a loan accrues daily at a fixed effective annual rate of
5.5%. Interest payments on any loan are due at the end of each Contract year. If
interest is not paid when due, it is added to the principal amount of the loan.
The term "Contract debt" means the amount of all outstanding loans plus any
interest accrued but not yet due. If at any time the Contract debt exceeds what
the cash surrender value would be if there were no Contract debt, Pruco Life of
New Jersey will notify you of its intent to terminate the Contract in 61 days,
within which time you may repay all or enough of the loan to obtain a positive
cash surrender value and thus keep the Contract in force for a limited time.

A loan will have an effect on a Contract's cash surrender value and may have an
effect on the death benefit, even if the loan is fully repaid, because the
investment results of the selected investment options will apply only to the
amount remaining invested under those options. The longer the loan is
outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If investment results are greater than the rate being
credited upon the amount of the loan while the loan is outstanding, values under
the Contract will not increase as rapidly as they would have if no loan had been
made. If investment results are below that rate, Contract values will be higher
than they would have been had no loan been made. A loan that is repaid will not
have any effect upon the guaranteed minimum death benefit.

<PAGE>

However, if a Scheduled Premium is not paid, and the Contract Fund is
insufficient to keep the Contract in force, the Contract will go into default.
Should this happen, Pruco Life of New Jersey will send you a notice of default
setting forth the payment necessary to keep the Contract in force on a premium
paying basis. This payment must be received at a Home Office within the 61 day
grace period after the notice of default is mailed or the Contract will lapse. A
Contract that lapses with an outstanding Contract loan may have tax
consequences. See Tax Treatment of Contract Benefits, page 17.

A Contract that has lapsed may be reinstated within 5 years after the date of
default unless the Contract has been surrendered for its cash surrender value.
To reinstate a lapsed Contract, Pruco Life of New Jersey requires renewed
evidence of insurability, and submission of certain payments due under the
Contract.

If your Contract does lapse, it will still provide some benefits. You can
receive the cash surrender value by making a request of Pruco Life of New Jersey
prior to the end of the 61 day grace period. You may also choose one of the
three forms of insurance described below for which no further premiums are
payable.

Variable Reduced Paid-Up Insurance. This is similar to fixed paid-up insurance
and will initially be in the same amount. The Contract Fund will continue to
vary to reflect the experience of the selected investment options. There will be
a new guaranteed minimum death benefit. Variable reduced paid-up insurance has
cash surrender and loan values.

Variable reduced paid-up insurance is the automatic option provided upon lapse,
if the amount of variable reduced paid-up insurance is at least as great as the
amount of fixed extended term insurance which would have been provided upon
lapse. Variable reduced paid-up insurance will be available only if the insured
is not in one of the high risk rating classes for which Pruco Life of New Jersey
does not offer fixed extended term insurance. It is possible for this Contract
to be classified as a Modified Endowment Contract if this option is exercised
during the first 7 Contract years. See Tax Treatment of Contract Benefits, page
17.

<PAGE>

of favorable investment experience or the payment of unscheduled premiums or
both. Once the paid-up insurance option is exercised, the actual death benefit
is equal to the greater of the guaranteed paid-up insurance amount and the
Contract fund multiplied by the attained age factor. Upon request, Pruco Life of
New Jersey will quote the amount needed to pay up the Contract and to guarantee
the paid-up insurance amount as long as a payment equal to or greater than the
quoted amount is received within two weeks of the quote. There is no guarantee
if the remittance is received within the two week period and is less than the
quoted amount or if the remittance is received outside the two week period. In
this case, Pruco Life of New Jersey will add the remittance to the contract fund
and recalculate the guaranteed paid-up insurance amount. If the guaranteed
paid-up insurance amount is equal to or greater than the face amount, the
paid-up request will be processed. If the guaranteed paid-up insurance amount is
calculated below the face amount, the insured will be notified that the amount
is insufficient to process the request. In some cases, the quoted amount, if
paid, would increase the death benefit by more than it increases the contract
fund. In these situations, underwriting might be required to accept the premium
payment and to process the paid-up request. Pruco Life of New Jersey reserves
the right to change this procedure in the future. After the first Contract year,
you must make a proper written request for the Contract to become fully paid-up
and send the Contract to a Pruco Life of New Jersey Home Office to be endorsed.
If this option is exercised during the first 7 Contract years, the Contract may
be classified as a "Modified Endowment Contract," see Tax Treatment of Contract
Benefits, page 17. A Contract in effect under a paid-up insurance option will
have cash surrender and loan values.

Reduced Paid-Up Insurance Option. Like the paid-up insurance option, reduced
paid-up insurance provides the insured with lifetime insurance coverage without
the payment of additional premiums. However, reduced paid-up insurance provides
insurance coverage which is generally lower than the death benefit of the
Contract. Reduced paid-up insurance is based upon a Contract's current net cash
value and can be requested at any time. This option is available only when the
Contract is not in default and Pruco Life of New Jersey is not paying any
premiums in accordance with any payment of premium benefit that may be included
in the Contract. In order to receive reduced paid-up insurance, a Contract owner
must make a proper written request, and Pruco Life of New Jersey may request
that the owner send the Contract to a Home Office to be endorsed. Acquisition of
reduced paid-up insurance within the first 7 Contract years may result in the
Contract becoming a Modified Endowment Contract. See Tax Treatment of Contract
Benefits, page 17.

When Proceeds Are Paid. Pruco Life of New Jersey will generally pay any death
benefit, cash surrender value, loan proceeds or withdrawal within 7 days after
receipt at a Home Office of all the documents required for such a payment. Other
than the death benefit, which is determined as of the date of death, the amount
will be determined as of the end of the valuation period in which the necessary
documents are received. However, Pruco Life of New Jersey may delay payment of
proceeds from the subaccount[s] and the variable portion of the death benefit
due under the Contract if the sale or valuation of the Account's assets is not
reasonably practicable because the New York Stock Exchange is closed for other
than a regular holiday or weekend, trading is restricted by the SEC or the SEC
declares that an emergency exists.

With respect to the amount of any cash surrender value allocated to the
fixed-rate option, and with respect to a Contract in force as fixed reduced
paid-up insurance or as extended term insurance, Pruco Life of New Jersey
expects to pay the cash surrender value promptly upon request. However, Pruco
Life of New Jersey has the right to delay payment of such cash surrender value
for up to 6 months (or a shorter period if required by applicable law). Pruco
Life of New Jersey will pay interest of at least 3% a year if it delays such a
payment for more than 30 days (or a shorter period if required by applicable
law).

Living Needs Benefit. Contract applicants may elect to add the Living Needs
Benefit(sm) to their Contracts at issue, subject to Pruco Life's receipt of
satisfactory evidence of insurability. The benefit may vary state-by-state. It
can generally be added only when the aggregate face amounts of the insured's
eligible contracts equal $50,000 or more. There is no charge for adding the
benefit to the Contract. However, an administrative charge (not to exceed $150)
will be made at the time the Living Needs Benefit is paid.

The Living Needs Benefit allows the Contract owner to elect to receive an
accelerated payment of all or part of the Contract's death benefit, adjusted to
reflect current value, at a time when certain special needs exist. The adjusted
death benefit will always be less than the death benefit, but will generally be
greater than the Contract's cash surrender value. Depending upon state
regulatory approval, the following option may be available. A Pruco Life of New
Jersey representative should be consulted as to whether additional options may
be available.

Terminal Illness Option. This option is available if the insured is diagnosed as
terminally ill with a life expectancy of 6 months or less. When satisfactory
evidence is provided, Pruco Life of New Jersey will provide an accelerated
payment of the portion of the death benefit selected by the Contract owner as a
Living Needs Benefit. You may (1) elect to receive the benefit in a single sum
or (2) receive equal monthly payments for 6 months. If the insured dies before
all the payments have been made, the present value of the remaining payments
will be paid to the beneficiary designated in the Living Needs Benefit claim
form in a single sum.

<PAGE>

All or part of the Contract's death benefit may be accelerated under the Living
Needs Benefit. If the benefit is only partially accelerated, a death benefit of
at least $25,000 must remain under the Contract. Pruco Life of New Jersey
reserves the right to determine the minimum amount that may be accelerated.

No benefit will be payable if the Contract owner is required to elect it in
order to meet the claims of creditors or to obtain a government benefit. Pruco
Life of New Jersey can furnish details about the amount of Living Needs Benefit
that is available to an eligible Contract owner under a particular Contract, and
the adjusted premium payments that would be in effect if less than the entire
death benefit is accelerated.

Voting Rights. As stated above, all of the assets held in the subaccounts of the
Account will be invested in shares of the corresponding portfolios of the Series
Fund. Pruco Life of New Jersey is the legal owner of those shares and as such
has the right to vote on any matter voted on at Series Fund shareholders
meetings. However, Pruco Life of New Jersey will, as required by law, vote the
shares of the Series Fund at any regular and special shareholders meetings it is
required to hold in accordance with voting instructions received from Contract
owners. The Series Fund will not hold annual shareholders meetings when not
required to do so under Maryland law or the Investment Company Act of 1940.
Series Fund shares for which no timely instructions from Contract owners are
received, and any shares attributable to general account investments of Pruco
Life of New Jersey will be voted in the same proportion as shares in the
respective portfolios for which instructions are received.

The number of shares in a portfolio for which you may give instructions is
determined by dividing the portion of your Contract Fund attributable to the
portfolio, by the value of one share of the portfolio. The number of votes for
which each Contract owner may give Pruco Life of New Jersey instructions will be
determined as of the record date chosen by the Board of Directors of the Series
Fund. Pruco Life of New Jersey will furnish Contract owners with proper forms
and proxies to enable them to give these instructions. Pruco Life of New Jersey
reserves the right to modify the manner in which the weight to be given voting
instructions is calculated where such a change is necessary to comply with
current federal regulations or interpretations of those regulations.

Pruco Life of New Jersey may, if required by state insurance regulations,
disregard voting instructions if such instructions would require shares to be
voted so as to cause a change in the sub-classification or investment objectives
of one or more of the Series Fund's portfolios, or to approve or disapprove an
investment advisory contract for the Series Fund. In addition, Pruco Life of New
Jersey itself may disregard voting instructions that would require changes in
the investment policy or investment advisor of one or more of the Series Fund's
portfolios, provided that Pruco Life of New Jersey reasonably disapproves such
changes in accordance with applicable federal regulations. If Pruco Life of New
Jersey does disregard voting instructions, it will advise Contract owners of
that action and its reasons for such action in the next annual or semi-annual
report to Contract owners.

Reports to Contract Owners. Once each Contract year (except where the Contract
is in force as fixed extended term insurance or fixed reduced paid-up
insurance), you will be sent a statement that provides certain information
pertinent to your own Contract. These statements show all transactions during
the year that affected the value of your Contract Fund, including monthly
changes attributable to investment experience. That statement will also show the
current death benefit, cash surrender value, and loan values of your Contract.
On request, you will be sent a current statement in a form similar to that of
the annual statement described above, but Pruco Life of New Jersey may limit the
number of such requests or impose a reasonable charge if such requests are made
too frequently.

<PAGE>

advice, but a general statement of how it believes the tax laws currently apply
in the most commonly occurring circumstances.

Treatment as Life Insurance. Pruco Life of New Jersey believes that the Contract
should qualify as "life insurance" under the Internal Revenue Code. This means
that, except as noted below, any annual increases in your Contract Fund, whether
attributable to income or capital appreciation, should not be included in your
income. In addition, the receipt of a death benefit by a beneficiary should not
result in taxable income.

Although Pruco Life of New Jersey believes the Contract should qualify as "life
insurance" for federal tax purposes, there are uncertainties, particularly
because the Secretary of the Treasury has not yet issued permanent regulations
that bear on this question. Accordingly, we have reserved the right to make
changes -- which will be applied uniformly to all Contract owners after advance
written notice -- that we deem necessary to insure that the Contract will
continue to qualify as life insurance.

Pre-Death Distributions. The tax treatment of any distribution received by an
owner prior to an insured's death will depend upon whether the Contract is
classified as a Modified Endowment Contract.

If the Contract is classified as a Modified Endowment Contract, pre-death
distributions, including loans and withdrawals (even those made during the 2
year period before the Contract became a Modified Endowment Contract), will be
taxed first as investment income to the extent of gain in the Contract, and then
as a return of the Contract owner's investment in the Contract. In addition,
pre-death distributions (including full surrenders) will be subject to a penalty
of 10% of the amount includible in income unless the amount is distributed on or
after the owner reaches age 59 1/2, on account of the owner's disability, or as
a life annuity.

Other Contract Provisions. There are several other Contract provisions that are
of less significance to you than those already described in detail either
because they relate to options that you may choose under the Contract but are
not likely to exercise for several years after you first purchase it or because
they are of a routine nature not likely to influence your decision to buy the
Contract. These provisions are summarized in the Expanded Table of Contents of
the Statement of Additional Information, page 23 and described in greater detail
in the Statement of Additional Information.

FURTHER INFORMATION ABOUT THE SERIES FUND

<PAGE>

entity. For example, the Series Fund has only one Board of Directors and owners
of the shares of each portfolio are entitled to vote for members of the Board.

INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS

The investment objectives of both portfolios available to PRUvider Contract
owners are set forth on page 3. For the sake of convenience, they are repeated
here, followed in each case by a brief description of the policies of both
portfolios. In some cases a fuller description of those policies is in the
Statement of Additional Information. There is no guarantee that any of these
objectives will be met.

Balanced Portfolios

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 15% 35% 50%
Bonds 15% 35% 50%
Money Market 0% 30% 70%

The bond portion of the portfolio will be invested primarily in securities with
maturities of 2 to 10 years and ratings at the time of purchase within the four
highest grades determined by Moody's, S&P, or a similar nationally-recognized
rating service. A description of debt ratings is in the Statement of Additional
Information. Because of their shorter maturities, the value of the notes and
bonds in this portfolio will be less sensitive to changes in interest rates than
the longer-term bonds likely to be held in the Aggressively Managed Flexible
Portfolio. Thus, there will be less of a risk of loss of principal, but not as
much of a likelihood for greater appreciation in value. Up to 20% of the bond
portion of this portfolio may be invested in United States currency denominated
debt securities issued outside the United States by foreign or domestic issuers.
The common stock portion of this portfolio will be invested primarily in the
equity securities of major, established corporations in sound financial
condition that appear to offer attractive prospects of a total return from
dividends and capital appreciation that is superior to broadly based stock
indices. The money market portion of the portfolio will hold high-quality
short-term

<PAGE>

debt obligations with a maturity of 12 months or less (as described in the
Statement of Additional Information) and will maintain a dollar-weighted average
maturity of 120 days or less.

In addition, the portfolio may (i) purchase and sell options on equity
securities, debt securities, stock indices and foreign currencies (ii) purchase
and sell stock index, interest rate and foreign currency futures contracts and
options thereon; (iii) enter into forward foreign currency exchange contracts;
(iv) purchase securities on a when-issued or delayed delivery basis; (v) use
interest rate swaps; and (vi) make short sales. These techniques are described
briefly under Options, Futures Contracts and Swaps and Short Sales on page 21,
and in detail in the Statement of Additional Information.

The Conservatively Managed Flexible Portfolio is managed by Prudential
Investment Advisors ("PIA") and Prudential Diversified Investment Strategies
("PDI"), units of PIC, using a team of portfolio managers under the supervision
of Mark Stumpp, Managing Director, PIC. Mark Stumpp has been providing overall
asset allocation for the portfolio since 1994. Mr. Stumpp also supervises the
team of portfolio managers for the Aggressively Managed Flexible Portfolio of
the Series Fund and is portfolio manager for several employee benefit trusts
including the Prudential Retirement System for U.S. Employees and Special
Agents. Prior to 1994, he was responsible for corporate pension asset management
for Prudential Diversified Investment Strategies' corporate clients.

Aggressively Managed Flexible Portfolio. The objective of this portfolio is
achievement of a high total return consistent with a portfolio having an
aggressively managed mix of money market instruments, fixed income securities,
and common stocks, in proportions believed by The Prudential to be appropriate
for an investor desiring diversification of investment who is willing to accept
a relatively high level of loss in an effort to achieve greater appreciation.

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 25% 60% 100%
Bonds 0% 40% 75%
Money Market 0% 0% 75%

To the extent permitted by applicable insurance law, this portfolio may invest
up to 30% of its total assets in non-United States currency denominated debt and
equity securities of foreign and U.S. issuers. The particular risks of
investment in foreign securities are described under Foreign Securities, below.

<PAGE>

briefly under Options, Futures Contracts and Swaps and Short Sales, below, and
in detail in the Statement of Additional Information.

The Aggressively Managed Flexible Portfolio is managed by Prudential Investment
Advisors ("PIA") and Prudential Diversified Investment Strategies ("PDI"), units
of PIC, using a team of portfolio managers under the supervision of Mark Stumpp,
Managing Director, PIC. Mark Stumpp has been providing overall asset allocation
for the portfolio since 1994. Mr. Stumpp also supervises the team of portfolio
managers for the Conservatively Managed Flexible Portfolio of the Series Fund
and is portfolio manager for several employee benefit trusts including the
Prudential Retirement System for U.S. Employees and Special Agents. Prior to
1994, he was responsible for corporate pension asset management for Prudential
Diversified Investment Strategies' corporate clients.

Foreign Securities. The bond components of the Conservatively Managed Flexible
and Aggressively Managed Flexible Portfolios may each invest up to 20% of their
assets in United States currency denominated debt securities issued outside the
United States by foreign or domestic issuers. To the extent permitted by
applicable insurance law, the Conservatively Managed Flexible and Aggressively
Managed Flexible Portfolios may invest up to 30% of their total assets in debt
and equity securities denominated in a foreign currency and issued by foreign or
domestic issuers. Securities issued outside the United States and not publicly
traded in the United States, as well as American Depository Receipts ("ADRs")
and securities denominated in a foreign currency are referred to collectively in
this prospectus as "foreign securities."

Because options, futures and swaps are now used to such a limited extent, a full
description of these investments and the risks associated with them is in the
Statement of Additional Information.

<PAGE>

will incur a loss as a result of the short sale if the price of the security
increases between the date of the short sale and the date on which the portfolio
replaces the borrowed security. The portfolio will realize a gain if the
security declines in price between those dates. This result is the opposite of
what one would expect from a cash purchase of a long position in a security. The
amount of any gain will be decreased, and the amount of any loss will be
increased, by the amount of any premium or interest paid in connection with the
short sale.

Reverse Repurchase Agreements and Dollar Rolls. The fixed income portions of the
Conservatively Managed Flexible and Aggressively Managed Flexible Portfolios may
use reverse repurchase agreements and dollar rolls. The money market portion of
these portfolios may use reverse repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by a portfolio with an agreement
by the portfolio to repurchase the same securities at an agreed upon price and
date. During the reverse repurchase period, the portfolio often continues to
receive principal and interest payments on the sold securities. The terms of
each agreement reflect a rate of interest for use of the funds for the period,
and thus these agreements have the characteristics of borrowing by the
portfolio. Dollar rolls involve sales by a portfolio of securities for delivery
in the current month with a simultaneous contract to repurchase substantially
similar securities (same type and coupon) from the same party at an agreed upon
price and date. During the roll period, the portfolio forgoes principal and
interest paid on the securities. A portfolio is compensated by the difference
between the current sales price and the forward price for the future purchase
(often referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. A "covered roll" is a specific type of dollar roll
for which there is an offsetting cash position or a cash equivalent security
position which matures on or before the forward settlement date of the dollar
roll transaction. A portfolio will establish a segregated account with its
custodian in which it will maintain cash, U.S. Government securities or other
liquid high-grade debt obligations equal in value to its obligations in respect
of reverse repurchase agreements and dollar rolls. Reverse repurchase agreements
and dollar rolls involve the risk that the market value of the securities
retained by the portfolio may decline below the price of the securities the
portfolio has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities under a reverse repurchase agreement or dollar
roll files for bankruptcy or becomes insolvent, the portfolio's use of the
proceeds of the agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the portfolio's obligation
to repurchase the securities. No portfolio will obligate more than 30% of its
net assets in connection with reverse repurchase agreements and dollar rolls.

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS

The Series Fund is subject to certain investment restrictions which are
fundamental to the operations of the Series Fund and may not be changed except
with the approval of a majority vote of the persons participating in the
affected portfolio.

A detailed discussion of investment restrictions applicable to the Series Fund
is in the Statement of Additional Information.

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES

The Series Fund has entered into an Investment Advisory Agreement with The
Prudential under which The Prudential will, subject to the direction of the
Board of Directors of the Series Fund, be responsible for the management of the
Series Fund, and provide investment advice and related services to each
portfolio. The Prudential manages the assets that it owns as well as those of
various separate accounts established by The Prudential and those held by other
investment companies for which it acts as investment advisor. Total assets

<PAGE>

under management as of December 31, 1994 was approximately $297 billion, which
includes approximately $212 billion owned by The Prudential and approximately
$85 billion of external assets under The Prudential's management.

Subject to The Prudential's supervision, substantially all of the investment
advisory services provided to the Series Fund by The Prudential, with respect to
the Conservatively Managed Flexible and Aggressively Managed Flexible
Portfolios, are furnished by its wholly-owned subsidiary, PIC, pursuant to the
Service Agreement between The Prudential and PIC which provides that The
Prudential will reimburse PIC for its costs and expenses. The Conservatively
Managed Flexible and Aggressively Managed Flexible Portfolios are managed by
Prudential Investment Advisors ("PIA") and Prudential Diversified Investment
Strategies ("PDI"), units of PIC, using a team of portfolio managers under the
supervision of Mark Stumpp, Managing Director, PIC. PIC is registered as an
investment advisor under the Investment Advisers Act of 1940.

For the year ended December 31, 1994, the Series Fund's total expenses were
0.59% of the average net assets of all of the Series Fund's portfolios. The
investment management fee for that period constituted 0.51% of the average net
assets. Further information about the investment management arrangements and the
expenses of the Series Fund is in the Statement of Additional Information.

An affiliated broker may be employed to execute brokerage transactions on behalf
of the portfolios, as long as the commissions are reasonable and fair compared
to the commissions received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. The Series Fund may not
engage in any transactions in which The Prudential or its affiliates, including
The Prudential Securities Incorporated, acts as principal, including
over-the-counter purchases and negotiated trades in which such a party acts as a
principal. Additional information about portfolio brokerage and related
transactions is in the Statement of Additional Information.

STATE REGULATION

Pruco Life of New Jersey is subject to regulation and supervision by the
Department of Insurance of the State of New Jersey, which periodically examines
its operations and financial condition. It is also subject to the insurance laws
and regulations of all jurisdictions in which it is authorized to do business.

Pruco Life of New Jersey is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business to determine solvency and
compliance with local insurance laws and regulations.

In addition to the annual statements referred to above, Pruco Life of New Jersey
is required to file with New Jersey and other jurisdictions a separate statement
with respect to the operations of all its variable contract accounts, in a form
promulgated by the National Association of Insurance Commissioners.

EXPERTS

LITIGATION

No litigation is pending that would have a material effect upon the Account or
the Series Fund.

<PAGE>

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

Included in the registration statements for the Contracts and the Series Fund is
a Statement of Additional Information which is available without charge by
writing to Pruco Life of New Jersey at 213 Washington Street, Newark, New Jersey
07102-2992. The following table of contents of that Statement provides a brief
summary of what is included in each section.

I. MORE DETAILED INFORMATION ABOUT THE CONTRACT.

Sales Load Upon Surrender. A description is given of exactly how Pruco Life
of New Jersey determines the amount of the part of the sales load that is
imposed only upon surrenders or withdrawals during the first 10 Contract
years.

Reduction of Charges for Concurrent Sales to Several Individuals. Where the
Contract is sold at the same time to several individuals who are members of
an associated class and Pruco Life of New Jersey's expenses will be
reduced, some of the charges under those Contracts may be reduced.

Paying Premiums by Payroll Deduction. Your employer may pay monthly
premiums for you with deductions from your salary.

Unisex Premiums and Benefits. In some states and under certain
circumstances, premiums and benefits will not vary with the sex of the
insured.

How the Death Benefit Will Vary. A description is given of exactly how the
death benefit may increase to satisfy Internal Revenue Code requirements.

Withdrawal of Excess Cash Surrender Value. If the Contract Fund value is
high enough you may be able to withdraw part of the cash surrender value
while keeping the Contract in effect. There will be a transaction charge.
The death benefit will change. There may be tax consequences. You should
consult your Pruco Life of New Jersey representative to discuss whether a
withdrawal or a loan is preferable.

Tax Treatment of Contract Benefits. A fuller account is provided of how
Contract owners may be affected by federal income taxes.

Riders. Various extra fixed-benefits may be obtained for an extra premium.
They are described in what are known as "riders" to the Contract.

II. INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS.

A more detailed description is given of these investments and the policies
of these portfolios.

III. INVESTMENT RESTRICTIONS.

<PAGE>

IV. INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES.

A fuller description than that in the prospectus is given.

V. PORTFOLIO TRANSACTIONS AND BROKERAGE.

A description is given of how securities transactions are effected and how
The Prudential selects the brokers.

VI. DETERMINATION OF NET ASSET VALUE.

A full description is given of how the daily net asset value of each
portfolio is determined.

VII. SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY CURRENTLY INVEST.

A full description is given.

VIII. DEBT RATINGS.

A description is given of how Moody's Investors Services, Inc. and Standard
& Poor's Corporation describe the creditworthiness of debt securities.

IX. POSSIBLE REPLACEMENT OF THE SERIES FUND.

Although it is most unlikely, it is conceivable that Pruco Life of New
Jersey might wish to replace the Series Fund portfolios with other
investment options. SEC approval will be needed.

X. OTHER INFORMATION CONCERNING THE SERIES FUND.

Incorporation and Authorized Stock
Dividends, Distributions and Taxes
Custodian and Transfer Agent
Experts
License

More detail is provided about these matters.

XI. DIRECTORS AND OFFICERS OF PRUCO LIFE NEW JERSEY AND MANAGEMENT OF THE
SERIES FUND.

The names and recent affiliations of Pruco Life of New Jersey's directors
and executive officers are given. The same information is given for the
Series Fund.

XII. FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC.

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

ADDITIONAL INFORMATION

Further information may also be obtained from Pruco Life of New Jersey. Its
address and telephone number are on the cover of this prospectus.

FINANCIAL STATEMENTS

The financial statements of the Account should be distinguished from the
consolidated financial statements of Pruco Life of New Jersey which should be
considered only as bearing upon the ability of Pruco Life of New Jersey to meet
its obligations under the Contracts. The financial statements of the Series Fund
are in the Statement of Additional Information.

<PAGE>

FINANCIAL STATEMENTS OF THE
AGGRESSIVELY MANAGED FLEXIBLE AND CONSERVATIVELY MANAGED FLEXIBLE
SUBACCOUNTS OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF NET ASSETS

December 31, 1994

<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------

AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
FLEXIBLE FLEXIBLE
-------------- --------------
<S> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 233,718,269 $ 81,590,657
-------------- --------------
-------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 233,517,300 $ 81,326,963
Equity of Pruco Life Insurance Company of New
Jersey........................................ 200,969 263,694
-------------- --------------
$ 233,718,269 $ 81,590,657
-------------- --------------
-------------- --------------
</TABLE>

STATEMENTS OF OPERATIONS

For the year ended December 31, 1994

<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------

AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
FLEXIBLE FLEXIBLE
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 6,399,269 $ 2,807,857

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 1,375,417 489,251
Reimbursement for excess expenses [Note 3D]..... (595,211) (167,623)
-------------- --------------
NET EXPENSES...................................... 780,206 321,628
-------------- --------------
NET INVESTMENT INCOME............................. 5,619,063 2,486,229
-------------- --------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Capital gains distributions received............ 6,536,164 863,296
Realized gain on shares redeemed
[average cost basis].......................... 469,942 84,451
Net unrealized loss on investments.............. (20,633,412) (4,531,190)
-------------- --------------
NET LOSS ON INVESTMENTS........................... (13,627,306) (3,583,443)
-------------- --------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ (8,008,243) $ (1,097,214)
-------------- --------------
-------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A3 AND A4.
A1

<PAGE>

FINANCIAL STATEMENTS OF THE
AGGRESSIVELY MANAGED FLEXIBLE AND CONSERVATIVELY MANAGED FLEXIBLE
SUBACCOUNTS OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the years ended December 31, 1994 and 1993

<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------

AGGRESSIVELY CONSERVATIVELY
MANAGED MANAGED
FLEXIBLE FLEXIBLE
------------------------------ ------------------------------
1994 1993 1994 1993
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>

OPERATIONS:
Net investment income............ $ 5,619,063 $ 6,280,495 $ 2,486,229 $ 2,062,592
Capital gains distributions
received....................... 6,536,164 11,902,634 863,296 3,025,676
Realized gain on shares redeemed
[average cost basis]........... 469,942 418,824 84,451 129,112
Net unrealized gain (loss) on
investments.................... (20,633,412) 10,810,912 (4,531,190) 3,136,483
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ (8,008,243) 29,412,865 (1,097,214) 8,353,863
-------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 10,588,266 11,993,656 1,744,736 1,914,942
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ 28,940 (43,261) 139,892 (180,905)
-------------- -------------- -------------- --------------

TOTAL INCREASE IN NET ASSETS....... 2,608,963 41,363,260 787,414 10,087,900

NET ASSETS:
Beginning of year................ 231,109,306 189,746,046 80,803,243 70,715,343
-------------- -------------- -------------- --------------
End of year...................... $ 233,718,269 $ 231,109,306 $ 81,590,657 $ 80,803,243
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A3 AND A4.
A2

<PAGE>

NOTES TO FINANCIAL STATEMENTS OF THE
AGGRESSIVELY MANAGED FLEXIBLE AND CONSERVATIVELY MANAGED FLEXIBLE
SUBACCOUNTS OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
FOR THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993

NOTE 1: GENERAL

Pruco Life of New Jersey Variable Appreciable Account (the "Account") was
established on January 13, 1984 under New Jersey law as a separate investment
account of Pruco Life Insurance Company of New Jersey ("Pruco Life of New
Jersey") which is a wholly-owned subsidiary of Pruco Life Insurance Company (an
Arizona domiciled company) and is indirectly wholly-owned by The Prudential
Insurance Company of America ("The Prudential"). The assets of the Account are
segregated from Pruco Life of New Jersey's other assets. The two products that
invest in the Account are Pruco Life of New Jersey Variable Appreciable Life
("VAL") and Pruco Life of New Jersey PRUvider Variable Appreciable Life
("PRUvider").

The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. There are eleven subaccounts within the Account,
each of which invests only in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"). The Series Fund is a diversified open-end
management investment company, and is managed by The Prudential. The PRUvider
product invests only in the Aggressively Managed Flexible and Conservatively
Managed Flexible portfolios of the Series Fund.

New sales of the VAL product were discontinued as of May 1, 1992. However,
premium payments made by current Contract owners will continue to be received by
the Account.

NOTE 2: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS

<TABLE>
<CAPTION>
PORTFOLIOS
-------------------------------
AGGRESSIVELY CONSERVATIVELY
PORTFOLIO MANAGED MANAGED
INFORMATION FLEXIBLE FLEXIBLE
- ---------------------------- -------------- ---------------
<S> <C> <C>
Number of shares: 15,082,481 5,788,641
Net asset value per share: $ 15.4960 $ 14.0950
Cost: $ 224,631,831 $ 77,606,684
</TABLE>

NOTE 3: CHARGES AND EXPENSES

A. Mortality Risk and Expense Risk Charges

The mortality risk and expense risk charges at an effective annual rate of
0.60% are applied daily against the net assets representing equity of VAL
Contract owners held in each subaccount.

The mortality risk and expense risk charges at an effective annual rate of
0.90% are applied daily against the net assets representing equity of
PRUvider Contract owners held in each subaccount.

B. Deferred Sales Charge

A deferred sales charge is imposed upon the surrender of certain variable
life insurance contracts to compensate Pruco Life of New Jersey for sales
and other marketing expenses. The amount of any sales charge will depend on
the number of years that have elapsed since the Contract was issued. No
sales charge will be imposed after the tenth year of the Contract. No sales
charge will be imposed on death benefits.

C. Partial Withdrawal Charge

A $15 charge is imposed in connection with partial withdrawals of the cash
surrender value from certain variable life insurance contracts.

<PAGE>

D. Expense Reimbursement

Pursuant to a prior merger agreement, the Account is reimbursed by Pruco
Life of New Jersey for expenses in excess of 0.40% of the VAL product's
average daily net assets incurred by the Money Market, Bond, Common Stock,
Aggressively Managed Flexible and the Conservatively Managed Flexible
Portfolios of the Series Fund.

NOTE 4: TAXES

The operations of the subaccounts form a part of, and are taxed with, the
operations of Pruco Life of New Jersey. Under the Internal Revenue Code, all
ordinary income and capital gains allocated to the Contract owners are not taxed
to Pruco Life of New Jersey. As a result, the net asset values of the
subaccounts are not affected by federal income taxes on distributions received
by the subaccounts.

NOTE 5: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS

The increase (decrease) in net assets resulting from surplus transfers
represents the net contributions of Pruco Life of New Jersey to the Account.

NOTE 6: RELATED PARTY TRANSACTIONS

The Prudential has purchased multiple individual VAL contracts of the Account
insuring the lives of certain employees. The Prudential is the owner and
beneficiary of the contracts. Net premium payments of approximately $12.0
million for each of the years ended December 31, 1994 and December 31, 1993,
respectively, were directed to the Aggressively Managed Flexible subaccount.
Equity of Contract owners in that subaccount at December 31, 1994 and December
31, 1993 includes approximately $73.6 million and $65.5 million, respectively,
owned by The Prudential.

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Contract Owners of
Pruco Life of New Jersey Variable Appreciable
Account and the Board of Directors
of Pruco Life Insurance Company of New Jersey
Newark, New Jersey

We have audited the accompanying statements of net assets of the Aggressively
Managed Flexible and Conservatively Managed Flexible subaccounts of the Pruco
Life of New Jersey Variable Appreciable Account of Pruco Life Insurance Company
of New Jersey as of December 31, 1994, the related statements of operations for
the periods presented in the year then ended, and the statements of changes in
net assets for each of the periods presented in the two years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the Aggressively Managed Flexible
and Conservatively Managed Flexible subaccounts of the Pruco Life of New Jersey
Variable Appreciable Account as of December 31, 1994, the results of their
operations, and the changes in their net assets for the respective stated
periods in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Parsippany, New Jersey
February 10, 1995

<PAGE>

FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
<S> <C> <C>
1994 1993
---------- ----------

<CAPTION>
($000'S)
<S> <C> <C>
ASSETS
Fixed maturities (market value
$509,821 and $606,543)............ $ 527,304 $ 587,213
Policy loans........................ 85,277 69,766
Short-term investments.............. 41,695 29,599
---------- ----------
Total Investments................. 654,276 686,578
Cash................................ 17 37
Accrued investment income........... 11,262 10,583
Premiums due and deferred........... 2,753 3,021
Receivable from affiliates.......... 1,827 1,695
Federal income taxes--from
affiliate......................... 8,597 149
Other assets........................ 1,549 4,309
Assets held in Separate Accounts.... 642,049 646,083
---------- ----------
TOTAL ASSETS.......................... $1,322,330 $1,352,455
---------- ----------
---------- ----------
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
LIABILITIES:
Policy liabilities and insurance
reserves:
Future policy benefits and
claims.......................... $ 497,353 $ 537,725
Other policy claims and benefits
payable......................... 3,268 3,132
Interest Maintenance Reserve
(IMR)........................... 6,931 14,440
Payable to affiliates............... 4,568 7,987
Other liabilities................... 14,117 3,595
Asset Valuation Reserve (AVR)....... 5,512 5,306
Liabilities related to Separate
Accounts.......................... 627,515 630,328
---------- ----------
TOTAL LIABILITIES..................... 1,159,264 1,202,513
---------- ----------
STOCKHOLDER'S EQUITY:
Common Stock, $5 par value; 400,000
shares authorized, issued and
outstanding....................... 2,000 2,000
Paid-in capital..................... 125,000 125,000
Unassigned surplus.................. 36,066 22,942
---------- ----------
TOTAL STOCKHOLDER'S EQUITY............ 163,066 149,942
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY................ $1,322,330 $1,352,455
---------- ----------
---------- ----------
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------
<CAPTION>
($000'S)
<S> <C> <C> <C>
REVENUE
Premiums and annuity
considerations............. $ 106,117 $ 105,390 $ 100,371
Net investment income........ 44,381 47,700 53,063
Net realized investment
gains/ (losses)............ (2,825) 6,066 10,296
Other income................. 3,201 2,831 2,570
--------- --------- ---------
TOTAL REVENUE.................. 150,874 161,987 166,300
--------- --------- ---------
BENEFITS AND EXPENSES
Current and future benefits
and claims................. 100,555 100,514 98,016
Commission expenses.......... 3,075 3,038 2,766
General, administrative and
other expenses............. 17,149 19,182 19,371
--------- --------- ---------
TOTAL BENEFITS AND
EXPENSES..................... 120,779 122,734 120,153
--------- --------- ---------
Income before provision in
lieu of federal income
tax........................ 30,095 39,253 46,147
Provision in lieu of federal
income tax................. (16,765) (19,460) (22,701)
--------- --------- ---------
NET INCOME..................... $ 13,330 $ 19,793 $ 23,446
--------- --------- ---------
--------- --------- ---------
</TABLE>

SEE NOTES TO THE FINANCIAL STATEMENTS

<PAGE>

FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------

<CAPTION>
($000'S)
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of year... $ 2,000 $ 2,000 $ 2,000
Issued during year........... - - -
--------- --------- ---------
Balance, end of year......... 2,000 2,000 2,000
--------- --------- ---------
PAID-IN CAPITAL
Balance, beginning of year... 125,000 125,000 125,000
Paid-in during year.......... - - -
--------- --------- ---------
Balance, end of year......... 125,000 125,000 125,000
--------- --------- ---------
UNASSIGNED SURPLUS
Balance, beginning of year... 22,942 29,333 33,255
Net income................... 13,330 19,793 23,446
Net unrealized investment
gains...................... - - 810
Increase in AVR.............. (206) (184) (1,016)
Dividends to stockholder..... - (26,000) (27,162)
--------- --------- ---------
Balance, end of year......... 36,066 22,942 29,333
--------- --------- ---------
TOTAL STOCKHOLDER'S EQUITY..... $ 163,066 $ 149,942 $ 156,333
--------- --------- ---------
--------- --------- ---------
</TABLE>

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------

<CAPTION>
($000'S)
CASH FLOW FROM OPERATING
ACTIVITIES
<S> <C> <C> <C>
Net income................. $ 13,330 $ 19,793 $ 23,446
Adjustments to reconcile
net income to net cash
from operations:
Increase (decrease) in
policy liabilities and
insurance reserves..... (40,237) (13,998) 22,323
Net decrease in Separate
Accounts............... 1,220 3,426 1,336
Net realized
investment(gains)/
losses................. 2,825 (6,066) (10,296)
Amortization and other
non-cash items......... 1,696 1,791 108
<CAPTION>

STATEMENTS OF CASH FLOWS (CONT'D)

YEARS ENDED
DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C>
--------- --------- ---------
<CAPTION>
($000'S)
<S> <C> <C> <C>
(Increase) decrease in
operating assets:
Policy loans........... (15,511) (13,921) (15,177)
Accrued investment
income............... (679) 500 534
Premiums due and
deferred............. 268 115 11,596
Receivable from
affiliates........... (132) (953) (5)
Federal income
taxes--from
affiliate............ (8,448) 4,065 (3,876)
Other assets........... 2,760 (3,808) (501)
Increase (decrease) in
operating liabilities:
Payable to
affiliates............. (3,419) 732 (1,012)
Other liabilities...... 10,522 (1,271) 985
--------- --------- ---------
CASH FLOW FROM (USED FOR)
OPERATING ACTIVITIES......... (35,805) (9,595) 29,461
--------- --------- ---------

CASH FLOW FROM INVESTING
ACTIVITIES
Proceeds from the sale/
maturity of:
Fixed maturities......... 705,889 443,879 578,236
Payments for the purchase
of:
Fixed maturities......... (658,008) (391,561) (642,511)
Net proceeds (payments)
of short-term
investments............ (12,096) (17,838) 35,792
--------- --------- ---------
CASH FLOW FROM (USED FOR)
INVESTING ACTIVITIES....... 35,785 34,480 (28,483)
--------- --------- ---------

CASH FLOW FROM FINANCING
ACTIVITIES
Dividends paid............. - (26,000) -
--------- --------- ---------
Net increase (decrease) in
Cash..................... (20) (1,115) 978
Cash, beginning of year.... 37 1,152 174
--------- --------- ---------
CASH, END OF YEAR............ $ 17 $ 37 $ 1,152
--------- --------- ---------
--------- --------- ---------
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<S> <C> <C> <C>
Cash paid in lieu of income
taxes.................... $ 17,679 $ 15,396 $ 26,576
--------- --------- ---------
--------- --------- ---------
<CAPTION>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
<S> <C> <C> <C>
Dividends paid in the form
of fixed maturities...... $ - $ - $ 27,162
--------- --------- ---------
--------- --------- ---------
</TABLE>

SEE NOTES TO THE FINANCIAL STATEMENTS

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992

1. GENERAL

Pruco Life Insurance Company of New Jersey (the Company), a stock life
insurance company domiciled in the State of New Jersey, is an indirect
subsidiary of The Prudential Insurance Company of America (The Prudential), a
mutual life insurance company, and a direct subsidiary of Pruco Life
Insurance Company (Pruco Life), a stock life insurance company domiciled in
the State of Arizona. The Company markets individual life insurance and
single-pay deferred annuities through The Prudential's sales force.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES

A. BASIS OF PRESENTATION

In 1994, The American Institute of Certified Public Accountants issued
Statement of Position 94-5 "Disclosures of Certain Matters in the
Financial Statements of Insurance Enterprises",("SOP 94-5"), which
requires insurance enterprises to disclose in their financial statements
the accounting methods used in their statutory financial statements that
are permitted by the state insurance departments rather than prescribed
statutory accounting practices.

Pruco Life Insurance Company of New Jersey, domiciled in the State of New
Jersey, prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the New Jersey Department
of Insurance ("The Department"). Prescribed statutory accounting practices
include publications of the National Association of Insurance
Commissioners (NAIC), state laws, regulations, and general administrative
rules. Permitted statutory accounting practices encompass all accounting
practices not so prescribed.

The Company, with permission from the Department, prepares an Annual
Report that differs from the Annual Statement filed with the Department in
that certain financial statement captions are presented differently.

The following is a reconciliation of statutory net income with net income
per the financial statements.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------

<CAPTION>
($000'S)
<S> <C> <C> <C>
Statutory net income including net gains and losses
on sales of investments............................ $ 16,309 $ 20,075 $ 29,432
Adjustments to reconcile to net income as follows:
Change in determination of deferred premiums....... - - (5,529)
Income tax applicable to other than current year... (7,534) - -
Net gain/(loss) from operations in Separate
Accounts......................................... 1,372 (458) 433
Other.............................................. 3,183 176 (890)
--------- --------- ---------
Net Income........................................... $ 13,330 $ 19,793 $ 23,446
--------- --------- ---------
--------- --------- ---------
</TABLE>

B. FUTURE APPLICATION OF ACCOUNTING STANDARDS

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
purposes in that it would not allow such financial statements to be
referred to as having been prepared in accordance with GAAP.
Interpretation No. 40 requires GAAP financial statements to apply all GAAP
pronouncements, unless specifically exempted. Implementation of the
Interpretation will require significant effort and judgement as to
determining GAAP for insurance operations. The Company is currently unable
to determine the impact of Interpretation No. 40 on its financial
statements.

C. INVESTMENTS

Fixed maturities are stated at amortized cost. Short-term investments are
stated at amortized cost, which approximates fair value.

Policy loans are stated primarily at unpaid principal balances.

Realized investment gains and losses are reported based on specific
identification of the investments sold.

D. FUTURE POLICY BENEFITS, LOSSES, AND CLAIMS

Reserves for individual annuity contracts are determined using the
Commissioner's Annuity Reserve Valuation Method.

For life insurance, unpaid claims include estimates of both death benefits
on reported claims and those which are incurred but not reported.

E. REVENUE RECOGNITION AND RELATED EXPENSES

F. FEDERAL INCOME TAXES

The Company is a member of a group of affiliated companies which join in
filing a consolidated federal tax return. Pursuant to a tax allocation
agreement, current tax liabilities are determined for individual companies
based upon their separate return basis taxable income. Members with
taxable income incur an amount in lieu of the separate return basis
federal tax. Members with a loss for tax purposes recognize a current
benefit in proportion to the amount of their losses utilized in computing
consolidated taxable income. Differences between estimated liabilities and
actual payments are included in the current year's operations as an
adjustment to the provision in lieu of income taxes. For the years 1993
and 1992, the Company was allocated a portion of the consolidated income
tax liability attributable to Section 809 in the Internal Revenue Code
(commonly referred to as the "Equity Tax"). Beginning in 1994, the Company
will no longer be allocated this Equity Tax.

G. ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE

The Asset Valuation Reserve (AVR) and the Interest Maintenance Reserve
(IMR) are required reserves for assets of life insurance companies. The
AVR is calculated based on a statutory formula and designed to mitigate
the effect of valuation and credit related losses on unassigned surplus.

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
million at December 31, 1994 and 1993 respectively. "Net realized
investment gains/(losses) of $(5.5)million and $7.2 million were deferred
in 1994 and 1993, respectively. Amortized into "Net investment income"
were $2.0 million and $2.4 million of IMR for the year ended December 31,
1994 and 1993, respectively.

H. SEPARATE ACCOUNTS

Separate accounts represent funds for which investment income and
investment gains and losses accrue directly to, and investment risk is
borne by, the policyholders. Each account has specific investment
objectives. Assets are carried at market value. Deposits to such accounts
are included in revenues with a corresponding liability increase included
in benefits and expenses. The assets of each account are legally
segregated and are not subject to claims that arise out of any other
business of the Company. Consequently, management believes that it is
appropriate to combine Separate Account policyholder net investment income
and net realized and unrealized capital gains/(losses) along with benefit
payments and change in reserves in "Current and future benefits and
claims". Policyholder net investment income and net realized and
unrealized gains/(losses) for the years ended December 31, 1994, 1993 and
1992 were ($7) million, $86 million and $45 million, respectively.

3. FEDERAL INCOME TAXES

Operating income before federal income taxes............. $ 30,095 $ 39,253 $ 46,147
Statutory tax rate....................................... 35% 35% 34%
--------- --------- ---------
Expected federal income taxes............................ 10,533 13,739 15,690
Tax effect of:
Statutory/tax policy reserve difference................ 4,279 1,367 (4,059)
Timing differences in tax/book income recognition on
investments.......................................... (2,743) 2,151 3,758
Timing differences in tax/book income
recognition--other................................... (78) (25) (87)
Change in determination of deferred premiums........... - - 1,880
Decrease in life insurance premium deferred and
uncollected.......................................... 94 40 726
Capitalization of policy acquisition expenses.......... 4,680 1,541 2,047
Allocated equity tax................................... - 647 2,746
--------- --------- ---------
Federal income taxes..................................... $ 16,765 $ 19,460 $ 22,701
--------- --------- ---------
--------- --------- ---------
Effective tax rate....................................... 56% 50% 49%
--------- --------- ---------
--------- --------- ---------
</TABLE>

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992

4. NET INVESTMENT INCOME

Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------

<CAPTION>
($000'S)
<S> <C> <C> <C>
Gross investment income
Fixed maturities.................................... $ 36,565 $ 40,546 $ 47,722
Policy loans........................................ 4,290 3,506 2,644
Short-term investments.............................. 2,364 1,817 2,834
Other............................................... 44 25 30
--------- --------- ---------
43,263 45,894 53,230

Investment expenses................................... (906) (581) (996)
--------- --------- ---------
42,357 45,313 52,234

Amortization of Interest Maintenance Reserve.......... 2,024 2,387 829
--------- --------- ---------
Net investment income................................. $ 44,381 $ 47,700 $ 53,063
--------- --------- ---------
--------- --------- ---------
</TABLE>

5. INVESTMENTS AND INVESTMENT GAINS/(LOSSES)

Net realized and unrealized gains/(losses) were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------

Realized Gains
Fixed maturities.................................... $ (8,311) $ 13,225 $ 20,767
Short-term investments.............................. 1 26 -
Tax effected amounts transferred to Interest
Maintenance Reserve................................. 5,485 (7,185) (10,471)
--------- --------- ---------
Net realized investment gains......................... $ (2,825) $ 6,066 $ 10,296
--------- --------- ---------
--------- --------- ---------
Unrealized Gains
Fixed maturities.................................... $ - $ - $ 810
--------- --------- ---------
Net unrealized investment gains....................... - - 810
Balance beginning of year............................. - - (810)
--------- --------- ---------
Balance end of year................................... $ - $ - $ -
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
FIXED MATURITIES
<S> <C> <C> <C>
($000'S)

AT DECEMBER 31,
INCREASE (DECREASE) IN
AMORTIZED MARKET DIFFERENCE BETWEEN MARKET VALUE
COST VALUE AND AMORTIZED COST DURING THE YEAR
----------- --------- ----------------------------------
<S> <C> <C> <C>

1994............................... $ 527,304 $ 509,821 $ (36,813)
1993............................... 587,213 606,543 (1,472)
1992............................... 630,484 651,286 (21,101)
</TABLE>

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992

The amortized cost and estimated market values of investments in debt securities
at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994
<S> <C> <C> <C> <C>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
($000'S) ($000'S) ($000'S) ($000'S)
----------- ----------- ----------- -----------
U.S. Treasury securities and obligations of
U.S. government corporations and agencies.... $ 116,502 $ 10 $ 11,641 $ 104,871
Debt securities issued by foreign governments
and their agencies........................... 34,554 1,631 723 35,462
Corporate securities........................... 336,641 1,261 7,524 330,378
Mortgage-backed securities..................... 39,607 180 677 39,110
----------- ----------- ----------- -----------
Total.......................................... $ 527,304 $ 3,082 $ 20,565 $ 509,821
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

1993
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
($000'S) ($000'S) ($000'S) ($000'S)
<S> <C> <C> <C> <C>
----------- ----------- ----------- -----------
U.S. Treasury securities and obligations of
U.S. government corporations and agencies.... $ 153,304 $ 62 $ 616 $ 152,750
Debt securities issued by foreign governments
and their agencies........................... 35,034 2,017 - 37,051
Corporate securities........................... 364,158 17,792 533 381,417
Mortgage-backed securities..................... 34,717 793 185 35,325
----------- ----------- ----------- -----------
Total.......................................... $ 587,213 $ 20,664 $ 1,334 $ 606,543
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
($000'S) ($000'S)
<S> <C> <C>
----------- -----------
Due in one year or less............................................ $ 30,132 $ 30,029
Due after one year through five years.............................. 404,859 395,195
Due after five years through ten years............................. 42,489 35,368
Due after ten years................................................ 10,217 10,120
----------- -----------
487,697 470,712
Mortgage-backed securities......................................... 39,607 39,109
----------- -----------
Total.............................................................. $ 527,304 $ 509,821
----------- -----------
----------- -----------
</TABLE>

Proceeds from the sale/maturity of debt securities during 1994, 1993 and
1992 were $705.9 million, $443.9 million and $578.2 million, respectively.
Gross gains of $3.3 million, $13.4 million and $23.5 million and gross
losses of $11.6 million, $.2 million and $2.7 million were realized on
those sales during 1994, 1993 and 1992, respectively.

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
lowest three NAIC categories represent, for the most part, high yield
securities and are defined by the NAIC as including any security with a
public agency rating of B+, B1 or less. At December 31, 1994 and 1993, the
Company held no securities in the three lowest NAIC categories.

6. RELATED PARTY TRANSACTIONS

A. SERVICE AGREEMENTS

The Company, The Prudential, Pruco Life, and Pruco Securities Corporation,
an indirect wholly-owned subsidiary of The Prudential, operate under
service and lease agreements whereby services of officers and employees,
supplies, use of equipment and office space are provided. The net cost of
these services allocated to the Company were $15 million, $17.1 million,
and $17.2 million for the years ended December 31, 1994, 1993 and 1992,
respectively.

B. EMPLOYEES BENEFIT PLANS

PENSION PLANS

No pension expense for contributions to the plan was allocated to the
Company in 1994, 1993 or 1992 because the plan was subject to the full
funding limitation under the Internal Revenue Code.

POSTRETIREMENT LIFE AND HEALTH BENEFITS

C. OTHER TRANSACTIONS

The Company has issued approximately 375 variable appreciable life
contracts to The Prudential for the purpose of funding non-qualified
pension benefits for certain employees. Included in insurance premiums and
annuity considerations for the years ended December 31, 1994, 1993 and
1992 are respectively, $12 million, $12 million, and $13 million, which
are attributable to these contracts.

7. DIVIDENDS

The Company is subject to New Jersey law which limits the amount of dividends
that insurance companies can pay to stockholders. The maximum dividend that
may be paid in any 12 month period without prior approval of the New Jersey
Commissioner of Insurance is limited to the greater of 10% of surplus as of
December 31 of the preceding year or the net gain from operations of the
preceding calendar year. Based on these limitations, the Company would be
permitted a maximum of $16 million in dividend distributions in 1995, all of
which could be paid in cash, without the approval from The Department of
Insurance of the State of New Jersey.

8. FAIR VALUE INFORMATION

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
judgment is necessarily applied in interpreting data to develop the estimates
of fair value. Accordingly, the estimates presented may not be realized in a
current market exchange. The use of different market assumptions and/or
estimation methodologies could have a material effect on the estimated fair
values.

The following methods and assumptions were used in calculating the fair
values. For all other financial instruments presented in the table, the
carrying value is a reasonable estimate of fair value.

FIXED MATURITIES. Fair values for fixed maturities, other than private
placement securities, are based on quoted market prices or estimates from
independent pricing services. Fair values for private placement securities
are estimated using a discounted cash flow model which considers the current
market spreads between the U.S. Treasury yield curve and corporate bond yield
curve adjusted for the type of issue, its current quality and its remaining
average life. The fair value of certain non-performing private placement
securities is based on amounts provided by state regulatory authorities.

POLICY LOANS. The estimated fair value is calculated using a discounted cash
flow model based upon current U.S. Treasury rates and historical loan
repayments.

The following table discloses the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1994 and 1993.
<TABLE>
<CAPTION>
($000'S) ($000'S)

<S> <C> <C> <C> <C>
1994 1993
-------------------- --------------------

<CAPTION>
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
--------- --------- --------- ---------
Financial Assets:
Fixed maturities $ 527,304 $ 509,821 $ 587,213 $ 606,543
Policy loans 85,277 76,734 69,766 71,821
Short-term investments 41,695 41,695 29,599 29,599

Financial Liabilities:
Investment-type insurance contracts $ 166,183 $ 159,463 $ 231,203 $ 226,982
</TABLE>

9. CONTINGENCIES

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Pruco Life Insurance Company of New Jersey
Newark, New Jersey

We have audited the accompanying statements of financial position of Pruco Life
Insurance Company of New Jersey as of December 31, 1994 and 1993, and the
related statements of operations, stockholder's equity, and cash flows for each
of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pruco Life Insurance Company of New Jersey
as of December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Parsippany, New Jersey
March 6, 1995

B10

<PAGE>

PRUvider(sm)
Variable Appreciable Life (R)
Insurance Contract

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 437-4016, Ext. 46

<PAGE>

PART B

INFORMATION REQUIRED IN STATEMENT
OF ADDITIONAL INFORMATION

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

May 1, 1995

THE PRUDENTIAL
SERIES FUND, INC.

Shares of the Series Fund are currently sold only to separate accounts (the
"Accounts") of The Prudential Insurance Company of America ("The Prudential")
and certain other insurers to fund the benefits under variable life insurance
and variable annuity contracts (the "Contracts") issued by those Companies. The
Accounts invest in shares of the Series Fund through subaccounts that correspond
to the portfolios. The Accounts will redeem shares of the Series Fund to the
extent necessary to provide benefits under the Contracts or for such other
purposes as may be consistent with the Contracts.

Not every portfolio is available under all of the variable contracts. The
prospectus for each Contract lists the portfolios currently available under that
particular Contract.

This statement of additional information is not a prospectus and should be read
in conjunction with the Series Fund's prospectus dated May 1, 1995, which is
available without charge upon written request to The Prudential Series Fund,
Inc., Prudential Plaza, Newark, New Jersey 07102-3777 or by telephoning (800)
445-4571.
<TABLE>

CONTENTS
<CAPTION>
Cross-Reference to
Page Page in Prospectus
---- ------------------
<S> <C> <C>
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS
General .................................................................... 1 8
Warrants ................................................................... 1
Options on Stock, Options on Debt Securities, Options on Stock Indices,
Options on Foreign Currencies, Futures Contracts, and Options on
Futures Contracts .......................................................... 1 27
Forward Foreign Currency Exchange Contracts ................................ 4 23
Interest Rate Swaps ........................................................ 5
Illiquid Securities ........................................................ 6

INVESTMENT RESTRICTIONS ...................................................... 6 29

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES .............................. 9 30

DETERMINATION OF NET ASSET VALUE ............................................. 11 31

FURTHER INFORMATION ABOUT THE ZERO COUPON BOND PORTFOLIOS .................... 12 11

OTHER INFORMATION CONCERNING THE SERIES FUND
Portfolio Transactions and Brokerage ....................................... 13 34
Custodian, Transfer Agent, and Dividend Disbursing Agent ................... 15 35
Experts .................................................................... 15
Licenses ................................................................... 15

MANAGEMENT OF THE SERIES FUND ................................................ 16 8

FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC. ..................... A1

THE PRUDENTIAL SERIES FUND, INC. SCHEDULE OF INVESTMENTS ..................... B1

STATEMENT OF ASSETS AND LIABILITIES OF THE GROWTH STOCK AND
SMALL CAPITALIZATION STOCK PORTFOLIOS OF THE PRUDENTIAL SERIES
FUND, INC. ................................................................... C1

APPENDIX: DEBT RATINGS ....................................................... D1
</TABLE>

The Prudential Series Fund, Inc.
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 445-4571

PSF-2 Ed 5-95 Catalog No. 646674P

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

General. The Prudential Series Fund, Inc. (the "Series Fund") is made up of
sixteen separate portfolios: the Money Market Portfolio, the Bond Portfolio, the
Government Securities Portfolio, the Zero Coupon Bond Portfolios 1995 (not
available for investment after November 14, 1995), 2000, and 2005, the
Conservatively Managed Flexible Portfolio, the Aggressively Managed Flexible
Portfolio, the High Yield Bond Portfolio, the Stock Index Portfolio, the High
Dividend Stock Portfolio, the Common Stock Portfolio, the Growth Stock
Portfolio, the Small Capitalization Stock Portfolio, the Global Equity
Portfolio, and the Natural Resources Portfolio. Not every portfolio is available
under all of the variable contracts. The prospectus for each Contract lists the
portfolios currently available under that particular Contract. The portfolios
are managed by The Prudential Insurance Company of America ("The Prudential") as
discussed in INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES, page 9.

Each of the sixteen portfolios seeks to achieve a different investment
objective. Accordingly, each portfolio can be expected to have different
investment results and to be subject to different financial and market risks.
Financial risk refers to the ability of an issuer of a debt security to pay
principal and interest and to the earnings stability and overall financial
soundness of an issuer of an equity security. Market risk refers to the degree
to which the price of a security will react to changes in conditions in
securities markets in general, and with particular reference to debt securities,
to changes in the overall level of interest rates.

The investment objectives of the Series Fund's portfolios can be found in
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS in the prospectus. The
policies employed to manage the Zero Coupon Bond Portfolios are discussed in
greater detail in a separate section below.

Warrants. The Conservatively Managed Flexible, Aggressively Managed Flexible,
High Dividend Stock, Common Stock, Growth Stock, Small Capitalization Stock,
Global Equity, and Natural Resources Portfolios may invest in warrants on common
stocks. Warrants are options to buy a number of shares of stock at a
predetermined price during a specified period. The risk associated with the
purchase of a warrant is that the purchase price will be lost if the market
price of the stock does not reach a level that justifies the exercise or sale of
the warrant before it expires. From time to time, the Bond and the High Yield
Bond Portfolios may invest in debt securities that are offered together with
warrants but only when the debt security meets the portfolio's investment
criteria and the value of the warrant is relatively very small. If the warrant
later becomes valuable, it will ordinarily be sold rather than be exercised.

Options on Stock, Options on Debt Securities, Options on Stock Indices, Options
on Foreign Currencies, Futures Contracts, and Options on Futures Contracts.

A. Additional Information Regarding the Use of Futures and Options by the Bond,
Government Securities, Conservatively Managed Flexible, Aggressively Managed
Flexible, High Yield Bond, High Dividend Stock, Common Stock, Growth Stock,
Small Capitalization Stock, Global Equity, and Natural Resources Portfolios.

A portfolio will write only "covered" options on stock indices. A call option is
covered if the portfolio holds a portfolio of stocks at least equal to the value
of the index times the multiplier times the number of contracts. When a
portfolio writes a call option on a broadly based stock market index, the
portfolio will segregate or put into escrow with its custodian or pledge to a
broker as collateral for the option, cash, cash equivalents or "qualified
securities" (defined below) with a market value at the time the option is
written of not less than 100% of the current index value times the multiplier
times the number of contracts. If a portfolio has written an option on an
industry or market segment index, it will segregate or put into escrow with its
custodian or pledge to a broker as collateral for the option, at least five
"qualified securities", all of which are stocks of issuers in such industry or
market segment, with a market value at the time the option is written of not
less than 100% of the current index value times the multiplier times the number
of contracts. Such stocks will include stocks which represent at least 50% of
the weighting of the industry or market segment index and will represent at
least 50% of the portfolio's holdings in that industry or market segment. No
individual security will represent more than 15% of the amount so segregated,
pledged or escrowed in the case of broadly based stock market index options or
25% of such amount in the case of industry or market segment index options. If
at the close of business on any day the market value of such qualified
securities so segregated, escrowed or pledged falls below 100% of the current
index value times the multiplier times the number of contracts, the portfolio
will so segregate, escrow or pledge an amount in cash, Treasury bills or other
high-grade short-term obligations equal in value to the difference. In addition,
when a portfolio writes a call on an index which is in-the-money at the time the
call is written, the portfolio will segregate with its custodian or pledge to
the broker as collateral, cash or U.S. Government or other high-grade short-term
debt obligations equal in value to the amount by which the call is in-the-money
times the multiplier times the number of contracts. Any amount segregated
pursuant to the foregoing sentence may be applied to the portfolio's obligation
to segregate additional amounts in the event that the market value of the
qualified securities falls below 100% of the current index value times the
multiplier times the number of contracts. A "qualified security" is an equity
security which is listed on a securities exchange or listed on the National
Association of Securities Dealers

<PAGE>

Automated Quotation System ("NASDAQ") against which the portfolio has not
written a stock call option and which has not been hedged by the portfolio by
the sale of stock index futures. However, if the portfolio holds a call on the
same index as the call written where the exercise price of the call held is
equal to or less than the exercise price of the call written or greater than the
exercise price of the call written if the difference is maintained by the
portfolio in cash, Treasury bills or other high-grade short-term obligations in
a segregated account with its custodian, it will not be subject to the
requirement described in this paragraph.

A put option is covered if: (1) the portfolio holds in a segregated account
cash, Treasury bills or other high-grade short-term debt obligations of a value
equal to the strike price times the multiplier times the number of contracts; or
(2) the portfolio holds a put on the same index as the put written where the
strike price of the put held is equal to or greater than the strike price of the
put written or less than the strike price of the put written if the difference
is maintained by the portfolio in cash, Treasury bills or other high-grade
short-term debt obligations in a segregated account with its custodian. In
instances involving the purchase of futures contracts by a portfolio, an amount
of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the portfolio's
custodian and/or in a margin account with a broker to collateralize the position
and thereby ensure that the use of such futures is unleveraged.

B. Additional Information Regarding the Use of Futures and Options by the Stock
Index and Small Capitalization Stock Portfolios. As explained in the prospectus,
the Stock Index Portfolio seeks to duplicate the performance of the S&P 500
Index and the Small Capitalization Stock Portfolio seeks to duplicate the
performance of the S&P SmallCap 600 Index. The portfolios will be as fully
invested in the S&P Indices stocks as is feasible in light of cash flow patterns
and the cash requirements for efficiently investing in a unit of the basket of
stocks comprising the S&P 500 and S&P SmallCap 600 Indices, respectively. When
the portfolios do have short-term investments, they may purchase stock index
futures contracts in an effort to have the portfolio better mimic the
performance of a fully invested portfolio. When a portfolio purchases stock
index futures contracts, an amount of cash and cash equivalents, equal to the
market value of the futures contracts, will be deposited in a segregated account
with the portfolio's custodian and/or in a margin account with a broker to
collateralize the position and thereby ensure that the use of futures is
unleveraged. As with the other portfolios, the Board of Directors currently
intends to limit futures trading so that the Stock Index and Small
Capitalization Stock Portfolios will not enter into futures contracts or related
options if the aggregate initial margins and premiums exceed 5% of the fair
market value of its assets, after taking into account unrealized profits and
unrealized losses on any such contracts and options.

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

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

<PAGE>

would cease to exist, although outstanding options on that exchange that had
been issued by a clearing corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms. There is no
assurance that higher than anticipated trading activity or other unforeseen
events might not, at times, render certain of the facilities of any of the
clearing corporations inadequate, and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders.

The purchase and sale of options that result from privately negotiated
transactions with broker-dealers ("OTC options") will also be subject to certain
risks. Unlike exchange-traded options, OTC options generally do not have a
continuous liquid market. Consequently, a portfolio will generally be able to
realize the value of an OTC option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when a portfolio writes an
OTC option, it generally will be able to close out the OTC option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which the portfolio originally wrote the OTC option. While the portfolios
will seek to enter into OTC options only with dealers who agree to and which are
expected to be able to be capable of entering into closing transactions with the
portfolio, there can be no assurance that the portfolio will be able to
liquidate an OTC option at a favorable price at any time prior to expiration. In
the event of insolvency of the other party, the portfolio may be unable to
liquidate an OTC option. The Prudential monitors the creditworthiness of dealers
with whom the Series Fund enters into OTC option transactions under the Board of
Directors' general supervision.

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

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

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

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

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

3
<PAGE>

sells the call which in either case would occur no earlier than the day
following the day the exercise notice was filed.

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

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

F. Risks of Transactions in Futures Contracts. There are several risks
associated with a portfolio's use of futures contracts for hedging purposes. One
such risk arises because of imperfect correlation between movements in the price
of the futures contract and the price of the securities or currency that are the
subject of the hedge. In the case of futures contracts on stock or interest rate
indices, the correlation between the price of the futures contract and movements
in the index might not be perfect. To compensate for differences in historical
volatility, a portfolio could purchase or sell futures contracts with a greater
or lesser value than the securities or currency it wished to hedge or purchase.
In addition, temporary price distortions in the futures market could be caused
by a variety of factors. Further, the ability of a portfolio to close out a
futures position depends on a liquid secondary market. There is no assurance
that a liquid secondary market on an exchange will exist for any particular
futures contract at any particular time. Further, each portfolio's successful
use of futures contracts is to some extent dependent on the ability of the
portfolio manager to predict correctly movements in the direction of the market,
interest rates and/or currency exchange rates.

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

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

Forward Foreign Currency Exchange Contracts. As explained in the prospectus, the
Conservatively Managed Flexible, Aggressively Managed Flexible, High Dividend
Stock, Common Stock, Growth Stock, Global Equity, and Natural Resources
Portfolios may purchase debt and equity securities denominated in foreign
currencies. To address the currency fluctuation risk that such investments
entail, these portfolios may enter into forward foreign currency exchange
contracts in several circumstances. When a portfolio enters into a contract for
the purchase or sale of a security denominated in a foreign currency, or when a
portfolio anticipates the receipt in a foreign currency of dividends or interest
payments on a security which it holds, the portfolio may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such dividend
or interest payment, as the case may be. By entering into a forward contract for
a fixed amount of dollars, for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, the portfolio will be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date on which the security is purchased or sold, or on which
the dividend or interest payment is declared, and the date on which such
payments are made or received.

<PAGE>

Additionally, when a portfolio's manager believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, the portfolio may enter into a forward contract for a fixed amount of
dollars, to sell the amount of foreign currency approximating the value of some
or all of the portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The portfolios will not enter into such
forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate a portfolio to deliver an amount of
foreign currency in excess of the value of the securities or other assets
denominated in that currency held by the portfolio. Under normal circumstances,
consideration of the prospect for currency parities will be incorporated into
the long-term investment decisions made with regard to overall diversification
strategies. However, the portfolios believe that it is important to have the
flexibility to enter into such forward contracts when it is determined that the
best interests of the portfolios will thereby be served. A portfolio's custodian
will place cash or liquid, high-grade equity or debt securities into a
segregated account of the portfolio in an amount equal to the value of the
portfolio's total assets committed to the consummation of forward foreign
currency exchange contracts. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of the portfolio's commitments with respect to such contracts.

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

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

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

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

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

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

5
<PAGE>

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

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

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

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

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

INVESTMENT RESTRICTIONS

Set forth below are certain investment restrictions applicable to the
portfolios. Restrictions 1, 3, 5, and 8-11 are fundamental and may not be
changed without shareholder approval as required by the 1940 Act. Restrictions
2, 4, 6, 7, and 12 are not fundamental and may be changed by the Board of
Directors without shareholder approval.

None of the portfolios will:

<PAGE>

Portfolio, and the Balanced Portfolios may purchase and sell interest rate
futures contracts and related options; and all portfolios (other than the
Money Market, Government Securities, Zero Coupon Bond, and Small
Capitalization Stock Portfolios) may purchase and sell foreign currency
futures contracts and related options and forward foreign currency exchange
contracts.

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

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

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

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

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

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

7
<PAGE>

customarily acquired by institutional investors that may or may not be
convertible into stock or accompanied by warrants or rights to acquire
stock. Repurchase agreements and the purchase of publicly traded debt
obligations are not considered to be "loans" for this purpose and may be
entered into or purchased by a portfolio in accordance with its investment
objectives and policies.

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

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

11. Purchase securities of a company in any industry if, as a result of the
purchase, a portfolio's holdings of securities issued by companies in that
industry would exceed 25% of the value of the portfolio, except that this
restriction does not apply to purchases of obligations issued or guaranteed
by the U.S. Government, its agencies and instrumentalities or issued by
domestic banks. For purposes of this restriction, neither finance companies
as a group nor utility companies as a group are considered to be a single
industry and will be grouped instead according to their services; for
example, gas, electric, and telephone utilities will each be considered a
separate industry. For purposes of this exception, domestic banks shall
include all banks which are organized under the laws of the United States
or a state (as defined in the 1940 Act), U.S. branches of foreign banks
that are subject to the same regulations as U.S. banks and foreign branches
of domestic banks (as permitted by the SEC).

12. Invest more than 15% of its net assets in illiquid securities or invest
more than 10% of its net assets in the securities of unseasoned issuers.
(The Money Market Portfolio will not invest more than 10% of its net assets
in illiquid securities.) For purposes of this restriction, (a) illiquid
securities are those deemed illiquid pursuant to SEC regulations and
guidelines, as they may be revised from time to time; and (b) unseasoned
issuers are issuers (other than U.S. Government agencies or
instrumentalities) having a record, together with predecessors, of less
than 3 years' continuous operation.

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

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

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

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

3. Invest in any security with a remaining maturity in excess of 13 months,
except that securities held pursuant to repurchase agreements may have a
remaining maturity of more than 13 months.

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

8
<PAGE>

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

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

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

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

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

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

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

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

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

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

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES

The Prudential is the investment advisor of the Series Fund. It is the largest
insurance company in the United States. The Series Fund has entered into an
Investment Advisory Agreement with The Prudential under which The Prudential
will, subject to the direction of the Board of Directors of the Series Fund, be
responsible for the management of the Series Fund, and provide investment advice
and related services to each portfolio. The Prudential has entered into a
Service Agreement with its wholly-owned subsidiary The Prudential Investment
Corporation ("PIC"), which provides that PIC will furnish to The Prudential such
services as The Prudential may require in connection with The Prudential's
performance of its obligations under advisory agreements with clients

9
<PAGE>

which are registered investment companies. In addition, The Prudential has
entered into a Subadvisory Agreement with its wholly-owned subsidiary Jennison
Associates Capital Corp. ("Jennison") under which Jennison furnishes investment
advisory services in connection with the management of the Growth Stock
Portfolio. More detailed information about The Prudential and its role as
investment advisor can be found in INVESTMENT MANAGEMENT ARRANGEMENTS AND
EXPENSES in the prospectus.

The investment management fee for the Stock Index Portfolio is equal to an
annual rate of 0.35% of the average daily net assets of the portfolio. For the
Money Market, Bond, Government Securities, Zero Coupon Bond, High Dividend
Stock, and Small Capitalization Stock Portfolios that fee is equal to an annual
rate of 0.4% of the average daily net assets of each of the portfolios. For the
Common Stock and Natural Resources Portfolios, the fee is equal to an annual
rate of 0.45% of the average daily net assets of each of the portfolios. The fee
for the Conservatively Managed Flexible and High Yield Bond Portfolios is equal
to an annual rate of 0.55% of the average daily net assets of each of the
portfolios. For the Aggressively Managed Flexible and Growth Stock Portfolios,
the fee is equal to an annual rate of 0.6% of the average daily net assets of
the portfolio. The fee for the Global Equity Portfolio is equal to an annual
rate of 0.75% of the average daily net assets of the portfolio. The Prudential
reimburses PIC for the costs and expenses it incurs under the Service Agreement.
The Prudential pays Jennison a portion of the fee it receives for providing
investment advisory services to the Growth Stock Portfolio.

For the years 1994, 1993, and 1992, The Prudential received a total of
$66,413,206, $51,197,499, and $35,661,075, respectively, in investment
management fees for all of the Series Fund's portfolios.

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

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

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

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

<PAGE>

that they may be terminated upon 60 days' notice by the Series Fund's Board of
Directors or by a majority vote of its shareholders. The Prudential may
terminate the Agreements upon 90 days' notice.

The Service Agreement between The Prudential and PIC was most recently ratified
by shareholders of the Series Fund at their 1989 annual meeting with respect to
all portfolios except for the Growth Stock and Small Capitalization Stock
Portfolios, which had not yet been established. The Service Agreement with
respect to those portfolios and the Investment Subadvisory Agreement with
Jennison were ratified by the sole shareholder of those portfolios, April 5,
1995. The Service Agreement between The Prudential and PIC will continue in
effect as to the Series Fund for a period of more than 2 years from its
execution, only so long as such continuance is specifically approved at least
annually in the same manner as the Investment Advisory Agreement between The
Prudential and the Series Fund. The Service Agreement may be terminated by
either party upon not less than 30 days prior written notice to the other party,
will terminate automatically in the event of its assignment, and will terminate
automatically as to the Series Fund in the event of the assignment or
termination of the Investment Advisory Agreement between The Prudential and the
Series Fund. The Prudential is not relieved of its responsibility for all
investment advisory services under the Investment Advisory Agreement.

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

DETERMINATION OF NET ASSET VALUE

Shares in the Series Fund are currently offered continuously, without sales
charge, at prices equal to the respective net asset values of the portfolios,
only to the Accounts to fund benefits payable under the Contracts described in
the variable life insurance and variable annuity prospectuses. The Series Fund
may at some later date also offer its shares to other separate accounts of The
Prudential or other insurers. The Prudential acts as principal underwriter of
the Series Fund. As such, The Prudential receives no underwriting compensation
from the Series Fund. The Prudential's principal business address is Prudential
Plaza, Newark, New Jersey 07102-3777.

The net asset value of the shares of each portfolio is determined once daily, as
of 4:15 p.m. New York City time (12:00 noon New York City time in the case of
the Money Market Portfolio) on each day during which the New York Stock Exchange
("NYSE") is open for business. The NYSE is open for business Monday through
Friday except for the days on which the following holidays are observed: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. The net asset value per share of each
portfolio except the Money Market Portfolio is computed by adding the sum of the
value of the securities held by that portfolio plus any cash or other assets it
holds, subtracting all its liabilities, and dividing the result by the total
number of shares outstanding of that portfolio at such time. Expenses, including
the investment management fee payable to The Prudential, are accrued daily.

In determining the net asset value of the Bond, Government Securities, and High
Yield Bond Portfolios, securities (other than debt obligations with remaining
maturities of less than 60 days, which are valued at amortized cost) will be
valued utilizing an independent pricing service to determine valuations for
normal institutional size trading units of securities. The pricing service
considers such factors as security prices, yields, maturities, call features,
ratings, and developments relating to specific securities in arriving at
securities valuations.

The net asset value of shares of the Money Market Portfolio will normally remain
at $10 per share, because the net investment income of this portfolio (including
realized and unrealized gains and losses on portfolio holdings) will be declared
as a dividend each time the portfolio's net income is determined, see DIVIDENDS,
DISTRIBUTIONS, AND TAXES, in the prospectus. If in the view of the Board of
Directors of the Series Fund it is inadvisable to continue to maintain the net
asset value of the Money Market Portfolio at $10 per share, the Board reserves
the right to alter the procedure. The Series Fund will notify shareholders of
any such alteration.

11
<PAGE>

less. In the event of sizeable changes in interest rates, however, the value
determined by this method may be higher or lower than the price that would be
received if the obligation were sold. The Board of Directors has established
procedures to determine whether, on these occasions, if any should occur, the
deviation might be enough to affect the value of shares in the Money Market
Portfolio by more than 1/2 of one percent, and, if it does, an appropriate
adjustment will be made in the value of the obligations. The portfolio may only
be invested in securities of high quality as described in detail in the Appendix
to the prospectus.

The net asset value of the Stock Index, High Dividend Stock, Common Stock,
Growth Stock, Small Capitalization Stock, Global Equity, and Natural Resources
Portfolios will be determined in the following manner. Any security for which
the primary market is on an exchange is generally valued at the last sale price
on such exchange as of the close of the NYSE (which is currently 4:00 p.m. New
York City time) or, in the absence of recorded sales, at the mean between the
most recently quoted bid and asked prices. NASDAQ National Market System equity
securities are valued at the last sale price or, if there was no sale on such
day, at the mean between the most recently quoted bid and asked prices. Other
over-the-counter equity securities are valued at the mean between the most
recently quoted bid and asked prices. Convertible debt securities that are
actively traded in the over-the-counter market, including listed securities for
which the primary market is believed to be over-the-counter, are valued at the
mean between the most recently quoted bid and asked prices. Corporate bonds
(other than convertible debt securities) and Government bonds held by the High
Dividend Stock and Natural Resources Portfolios are valued on the same basis as
securities in the Bond and High Yield Bond Portfolios, as described above.
Short-term debt instruments which mature in less than 60 days are valued at
amortized cost. For valuation purposes, quotations of foreign securities in a
foreign currency are converted to U.S. dollar equivalents.

Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities, and money market instruments, is substantially completed
each day at various times prior to the close of the NYSE. The value of any such
securities are determined as of such times for purposes of computing a
portfolio's net asset value. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. If an extraordinary event occurs
after the close of an exchange on which that security is traded, the security
will be valued at fair value as determined in good faith by the applicable
portfolio manager under procedures established by and under the general
supervision of the Series Fund's Board of Directors.

In determining the net asset value of the shares of the Zero Coupon Bond
Portfolios 1995, 2000, and 2005, securities (other than debt obligations with
maturities of less than 60 days, which are valued at amortized cost) will be
valued utilizing an independent pricing service to determine valuations for
normal institutional size trading units of securities. The pricing service
considers such factors as security prices, yields, maturities, call features,
ratings, and developments relating to specific securities in arriving at
securities valuations.

FURTHER INFORMATION ABOUT THE ZERO COUPON BOND PORTFOLIOS

As stated in the prospectus, the objective of Zero Coupon Bond Portfolios 1995,
2000, and 2005 is to achieve the highest predictable compounded investment
return for a specified period of time, consistent with the safety of invested
capital. This discussion provides a more detailed explanation of the investment
policies that will be employed to manage these portfolios.

<PAGE>

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

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

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

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

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

OTHER INFORMATION CONCERNING THE SERIES FUND

Portfolio Transactions and Brokerage. The Prudential is responsible for
decisions to buy and sell securities, options on securities and indices, and
futures and related options for the Series Fund. The Prudential is also
responsible for the selection of brokers, dealers, and futures commission
merchants to effect the transactions and the negotiation of brokerage
commissions, if any. Broker-dealers may receive brokerage commissions on Series
Fund portfolio transactions, including options and the purchase and sale of
underlying securities upon the exercise of options. Orders may be directed to
any broker or futures commission merchant including, to the extent and in the

13
<PAGE>

manner permitted by applicable law, Prudential Securities Incorporated, an
indirect wholly-owned subsidiary of The Prudential.

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

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

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

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

<PAGE>

1993, and 1992, respectively, was paid out to Prudential Securities
Incorporated. For 1994, the commissions paid to this affiliated broker
constituted 4.8% of the total commissions paid by the Series Fund for that year.
Transactions through this affiliated broker accounted for 6.4% of the aggregate
dollar amount of transactions for the Series Fund involving the payment of
commissions.

Custodian, Transfer Agent, and Dividend Disbursing Agent. Chemical Bank, 4 New
York Plaza, New York, NY 10004 is the custodian of the assets held by all the
portfolios, except the Global Equity Portfolio, and is authorized to use the
facilities of the Depository Trust Company and the facilities of the book-entry
system of the Federal Reserve Bank with respect to securities held by these
portfolios. Chemical Bank is also authorized to use the facilities of the
Mortgage Backed Security Clearing Corporation (a subsidiary of the Midwest Stock
Exchange) with respect to mortgage-backed securities held by any of these
portfolios. Chemical Bank maintains certain financial and accounting books and
records pursuant to an agreement with the Series Fund. Brown Brothers Harriman &
Co. ("Brown Brothers"), 40 Water Street, Boston, MA 02109 is the custodian of
the assets of the Global Equity Portfolio and in that capacity maintains certain
financial and accounting books and records pursuant to an agreement with the
Series Fund. Brown Brothers employs subcustodians, who were approved by the
directors of the Series Fund in accordance with regulations of the Securities
and Exchange Commission, for the purpose of providing custodial service for the
Global Equity Portfolio's foreign assets held outside the United States. Morgan
Guaranty Trust Company, 60 Wall Street, New York, NY 10260 is the custodian of
the assets held in connection with repurchase agreements entered into by the
portfolios and is authorized to use the facilities of the book-entry system of
the Federal Reserve Bank. The directors of the Series Fund monitor the
activities of the custodians and the subcustodians.

The Prudential is the transfer agent and dividend-disbursing agent for the
Series Fund. The Prudential as transfer agent issues and redeems shares of the
Series Fund and maintains records of ownership for the shareholders.

Experts. The financial statements included in this statement of additional
information and the FINANCIAL HIGHLIGHTS included in the Series Fund's
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing. Deloitte & Touche LLP's principal business address is Two Hilton
Court, Parsippany, NJ 07054-0319.

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

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

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES
NO WARRANTY, EXPRESS OR IMPLIED AS TO RESULTS TO BE OBTAINED BY THE SERIES FUND,
CONTRACT OWNERS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500
INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 500 INDEX, THE S&P SMALLCAP 600 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

15
<PAGE>
MANAGEMENT OF THE SERIES FUND

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

ROBERT P. HILL*, Chairman of the Board--Executive Vice President of The
Prudential.

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

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

W. SCOTT McDONALD, JR., Director--Executive Vice President of Fairleigh
Dickinson University since 1991: Prior to 1991: Executive Vice President of Drew
University. Address: 23 Forest Road, Madison, New Jersey 07940.

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

MENDEL A. MELZER, Vice President--Senior Vice President and Chief Financial
Officer of Prudential Preferred Financial Services since 1993; 1991 to 1993:
Managing Director, The Prudential Investment Corporation; Prior to 1991: Senior
Vice President, Prudential Capital Corporation.

STEPHEN P. TOOLEY, Comptroller--Vice President and Comptroller of Prudential
Insurance and Financial Services since 1993; Prior to 1993: Director, Financial
Analysis of The Prudential.

THOMAS C. CASTANO, Secretary and Treasurer--Assistant General Counsel of The
Prudential since 1993; Prior to 1993: Assistant General Counsel of Pruco Life
Insurance Company.

No director or officer of the Series Fund who is also an officer, director or
employee of The Prudential or its affiliates is entitled to any remuneration
from the Series Fund for services as one of its directors or officers. Each
director of the Series Fund who is not an interested person of the Series Fund
will receive a fee of $2,000 per year plus $200 per portfolio for each meeting
of the Board attended and will be reimbursed for all expenses incurred in
connection with attendance at meetings.

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

16
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments................................ $ 581,582,129
Cash....................................... 892
Interest receivable........................ 2,410,515
--------------
Total Assets............................. 583,993,536
--------------
LIABILITIES
Accrued expenses........................... 130,371
Payable to investment adviser.............. 581,688
--------------
Total Liabilities........................ 712,059
--------------
NET ASSETS................................... $ 583,281,477
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 583,281
Paid-in capital, in excess of par........ 582,698,196
--------------
Net assets, December 31, 1994.............. $ 583,281,477
--------------
--------------
Net asset value per share of 58,328,148
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 10.0000
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Interest................................... $ 24,040,312
---------------
EXPENSES
Investment management fee.................. 2,145,819
Shareholders' reports...................... 160,709
Accounting fees............................ 72,868
Custodian expense -- net................... 39,561
S.E.C. fees................................ 36,474
Professional fees.......................... 33,486
Directors' expense......................... 2,034
Miscellaneous expenses..................... 28
---------------
2,490,979
---------------
NET INVESTMENT INCOME........................ 21,549,333
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 21,549,333
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 21,549,333 $ 14,815,991
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (21,549,333) (14,815,991)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [18,862,200 and 9,104,900 shares, respectively]..................... 188,622,000 91,049,000
Reinvestment of dividend distributions [2,154,934 and 1,481,599 shares,
respectively]......................................................................... 21,549,333 14,815,991
Capital stock repurchased [(10,162,500) and (15,984,800) shares, respectively]......... (101,625,000) (159,848,000)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.............. 108,546,333 (53,983,009)
------------------ -------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............................................................................ 108,546,333 (53,983,009)
NET ASSETS:
Beginning of year...................................................................... 474,735,144 528,718,153
------------------ -------------------
End of year............................................................................ $ 583,281,477 $ 474,735,144
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
BOND PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$563,227,825)............................ $ 531,295,677
Cash....................................... 702
Interest receivable........................ 11,014,524
--------------
Total Assets............................. 542,310,903
--------------
LIABILITIES
Accrued expenses........................... 39,255
Payable to investment adviser.............. 579,489
Payable for portfolio shares redeemed...... 43,560
--------------
Total Liabilities........................ 662,304
--------------
NET ASSETS................................... $ 541,648,599
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 539,579
Paid-in capital, in excess of par........ 583,467,451
--------------
584,007,030
Undistributed net investment income........ 381,010
Accumulated net realized losses............ (10,807,293)
Net unrealized depreciation................ (31,932,148)
--------------
Net assets, December 31, 1994.............. $ 541,648,599
--------------
--------------
Net asset value per share of 53,957,906
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 10.0384
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Interest................................... $ 38,674,225
---------------
EXPENSES
Investment management fee.................. 2,251,096
Shareholders' reports...................... 180,661
Accounting fees............................ 77,978
Custodian expense -- net................... 28,771
Professional fees.......................... 21,380
Directors' expense......................... 2,086
Miscellaneous expenses..................... 98
---------------
2,562,070
---------------
NET INVESTMENT INCOME........................ 36,112,155
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (4,246,256)
Net unrealized loss on investments......... (50,839,016)
---------------
NET LOSS ON INVESTMENTS...................... (55,085,272)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 18,973,117)
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 36,112,155 $ 31,295,792
Net realized gain (loss) on investments................................................ (4,246,256) 8,958,204
Net unrealized gain(loss) on investments............................................... (50,839,016) 7,179,211
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (18,973,117) 47,433,207
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (35,627,999) (31,001,007)
Net realized gain from investment transactions......................................... (1,267,553) (7,690,651)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (36,895,552) (38,691,658)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,414,897 and 9,888,368 shares, respectively]...................... 36,662,212 111,911,952
Reinvestment of dividend distributions [3,610,015 and 3,457,814 shares,
respectively]......................................................................... 36,895,552 38,691,658
Capital stock repurchased [(4,963,909) and (1,044,056) shares, respectively]........... (52,266,357) (11,890,355)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 21,291,407 138,713,255
------------------ -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................................................. (34,577,262) 147,454,804
NET ASSETS:
Beginning of year...................................................................... 576,225,861 428,771,057
------------------ -------------------
End of year............................................................................ $ 541,648,599 $ 576,225,861
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$507,031,047)............................ $ 478,087,478
Cash....................................... 329
Interest receivable........................ 8,947,544
Receivable for portfolio shares sold....... 1,059,634
--------------
Total Assets............................. 488,094,985
--------------
LIABILITIES
Accrued expenses........................... 5,192
Payable to investment adviser.............. 515,488
--------------
Total Liabilities........................ 520,680
--------------
NET ASSETS................................... $ 487,574,305
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 466,072
Paid-in capital, in excess of par........ 526,044,120
--------------
526,510,192
Undistributed net investment income........ 931,495
Accumulated net realized losses............ (10,923,813)
Net unrealized depreciation................ (28,943,569)
--------------
Net assets, December 31, 1994.............. $ 487,574,305
--------------
--------------
Net asset value per share of 46,607,219
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 10.4614
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Interest................................... $ 35,819,887
---------------
EXPENSES
Investment management fee.................. 2,125,130
Shareholders' reports...................... 168,609
Accounting fees............................ 73,159
Custodian expense -- net................... 13,387
Professional fees.......................... 9,127
Directors' expense......................... 2,077
Miscellaneous expenses..................... 31
S.E.C. fees................................ (3,561)
---------------
2,387,959
---------------
NET INVESTMENT INCOME........................ 33,431,928
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (10,380,614)
Net unrealized loss on investments......... (52,690,952)
---------------
NET LOSS ON INVESTMENTS...................... (63,071,566)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 29,639,638)
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 33,431,928 $ 25,803,560
Net realized gain (loss) on investments................................................ (10,380,614) 884,434
Net unrealized gain(loss) on investments............................................... (52,690,952) 19,594,824
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (29,639,638) 46,282,818
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (32,955,665) (25,487,269)
Net realized gain from investment transactions......................................... 0 (1,904,203)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (32,955,665) (27,391,472)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,591,224 and 15,693,270 shares, respectively]..................... 41,656,912 185,551,898
Reinvestment of dividend distributions [3,094,061 and 2,328,874 shares,
respectively]......................................................................... 32,955,665 27,391,472
Capital stock repurchased [(5,912,961) and (449,498) shares, respectively]............. (64,569,681) (5,251,752)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 10,042,896 207,691,618
------------------ -------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............................................................................ (52,552,407) 226,582,964
NET ASSETS:
Beginning of year...................................................................... 540,126,712 313,543,748
------------------ -------------------
End of year............................................................................ $ 487,574,305 $ 540,126,712
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 1995 PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$17,721,753)............................. $ 17,758,646
Cash....................................... 5,351
--------------
Total Assets............................. 17,763,997
--------------
LIABILITIES
Accrued expenses........................... 5,142
Payable to investment adviser.............. 25,223
--------------
Total Liabilities........................ 30,365
--------------
NET ASSETS................................... $ 17,733,632
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 16,741
Paid-in capital, in excess of par........ 17,695,936
--------------
17,712,677
Distributions in excess of net investment
income................................... (15,516)
Distributions in excess of net realized
gains.................................... (422)
Net unrealized appreciation................ 36,893
--------------
Net assets, December 31, 1994.............. $ 17,733,632
--------------
--------------
Net asset value per share of 1,674,113
outstanding shares of common stock
(authorized 25,000,000 shares)........... $ 10.5929
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Interest................................... $ 1,119,611
---------------
EXPENSES
Investment management fee.................. 60,662
Accounting fees............................ 18,250
Custodian expense -- net................... 5,694
Shareholders' reports...................... 4,264
Directors' expense......................... 1,816
S.E.C. fees................................ 1,006
Professional fees.......................... 493
---------------
92,185
---------------
NET INVESTMENT INCOME........................ 1,027,426
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 1,948
Net unrealized loss on investments......... (1,029,896)
---------------
NET LOSS ON INVESTMENTS...................... (1,027,948)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 522)
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 1,027,426 $ 965,547
Net realized gain on investments....................................................... 1,948 7,307
Net unrealized gain(loss) on investments............................................... (1,029,896) 111,542
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (522) 1,084,396
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (1,001,231) (972,442)
Net realized gain from investment transactions......................................... (3,573) 0
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (1,004,804) (972,442)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [301,289 and 111,174 shares, respectively].......................... 3,295,000 1,287,000
Reinvestment of dividend distributions [94,042 and 85,653 shares, respectively]........ 1,004,804 972,442
Capital stock repurchased [(52,950) and (31,181) shares, respectively]................. (592,000) (360,000)
Initial capitalization repurchased [(18,027) and (35,953) shares, respectively]........ (197,000) (416,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 3,510,804 1,483,442
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 2,505,478 1,595,396
NET ASSETS:
Beginning of year...................................................................... 15,228,154 13,632,758
------------------ -------------------
End of year............................................................................ $ 17,733,632 $ 15,228,154
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 2000 PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$20,000,846)............................. $ 20,665,896
Cash....................................... 2,106
--------------
Total Assets............................. 20,668,002
--------------
LIABILITIES
Accrued expenses........................... 3,844
Payable to investment adviser.............. 29,162
--------------
Total Liabilities........................ 33,006
--------------
NET ASSETS................................... $ 20,634,996
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 17,396
Paid-in capital, in excess of par........ 19,986,241
--------------
20,003,637
Distributions in excess of net investment
income................................... (34,092)
Accumulated net realized gains............. 401
Net unrealized appreciation................ 665,050
--------------
Net assets, December 31, 1994.............. $ 20,634,996
--------------
--------------
Net asset value per share of 1,739,587
outstanding shares of common stock
(authorized 25,000,000 shares)........... $ 11.8620
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Interest................................... $ 1,521,379
---------------
EXPENSES
Investment management fee.................. 84,265
Accounting fees............................ 18,250
Shareholders' reports...................... 5,206
Directors' expense......................... 1,819
Miscellaneous expenses..................... 535
Custodian expense -- net................... (3,054)
---------------
107,021
---------------
NET INVESTMENT INCOME........................ 1,414,358
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 38,776
Net unrealized loss on investments......... (3,049,221)
---------------
NET LOSS ON INVESTMENTS...................... (3,010,445)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 1,596,087)
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 1,414,358 $ 1,247,229
Net realized gain on investments....................................................... 38,776 8,483
Net unrealized gain(loss) on investments............................................... (3,049,221) 1,576,324
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (1,596,087) 2,832,036
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (1,398,377) (1,258,808)
Net realized gain from investment transactions......................................... (38,912) (7,940)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (1,437,289) (1,266,748)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [102,167 and 397,878 shares, respectively].......................... 1,340,000 5,460,000
Reinvestment of dividend distributions [118,462 and 92,723 shares, respectively]....... 1,437,289 1,266,748
Capital stock repurchased [(60,345) and (121,421) shares, respectively]................ (787,000) (1,675,000)
Initial capitalization repurchased [(38,338) and (80,105) shares, respectively]........ (507,000) (1,105,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 1,483,289 3,946,748
------------------ -------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............................................................................ (1,550,087) 5,512,036
NET ASSETS:
Beginning of year...................................................................... 22,185,083 16,673,047
------------------ -------------------
End of year............................................................................ $ 20,634,996 $ 22,185,083
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 2005 PORTFOLIO
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$16,718,218)............................. $ 16,531,317
Cash....................................... 971
Interest receivable........................ 404
--------------
Total Assets............................. 16,532,692
--------------
LIABILITIES
Accrued expenses........................... 3,464
Payable to investment adviser.............. 23,530
--------------
Total Liabilities........................ 26,994
--------------
NET ASSETS................................... $ 16,505,698
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 15,363
Paid-in capital, in excess of par........ 16,654,038
--------------
16,669,401
Undistributed net investment income........ 23,198
Net unrealized depreciation................ (186,901)
--------------
Net assets, December 31, 1994.............. $ 16,505,698
--------------
--------------
Net asset value per share of 1,536,257
outstanding shares of common stock
(authorized 50,000,000 shares)........... $ 10.7441
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Interest................................... $ 1,042,827
---------------
EXPENSES
Investment management fee.................. 57,716
Accounting fees............................ 18,250
Custodian expense -- net................... 4,522
Shareholders' reports...................... 3,767
Directors' expense......................... 1,816
S.E.C. fees................................ 1,318
Miscellaneous expenses..................... 262
---------------
87,651
---------------
NET INVESTMENT INCOME........................ 955,176
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net unrealized loss on investments......... (2,370,041)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 1,414,865)
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 955,176 $ 751,943
Net realized gain on investments....................................................... 0 6,214
Net unrealized gain(loss) on investments............................................... (2,370,041) 1,440,496
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (1,414,865) 2,198,653
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (938,283) (751,577)
Net realized gain from investment transactions......................................... (3,855) (2,358)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (942,138) (753,935)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [461,883 and 442,819 shares, respectively].......................... 5,262,071 5,590,000
Reinvestment of dividend distributions [86,081 and 60,299 shares, respectively]........ 942,138 753,935
Capital stock repurchased [(31,239) and (169,578) shares, respectively]................ (366,000) (2,099,000)
Initial capitalization repurchased [(122,127) and (82,494) shares, respectively]....... (1,448,071) (1,040,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 4,390,138 3,204,935
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 2,033,135 4,649,653
NET ASSETS:
Beginning of year...................................................................... 14,472,563 9,822,910
------------------ -------------------
End of year............................................................................ $ 16,505,698 $ 14,472,563
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$3,443,877,594).......................... $3,468,953,719
Cash....................................... 2,043
Interest and dividends receivable.......... 24,063,629
Receivable for securities sold............. 20,886,513
--------------
Total Assets............................. 3,513,905,904
--------------
LIABILITIES
Accrued expenses........................... 304,995
Payable for securities purchased........... 7,467,333
Payable to investment adviser.............. 4,963,479
Payable for portfolio shares redeemed...... 65,811
--------------
Total Liabilities........................ 12,801,618
--------------
NET ASSETS................................... $3,501,104,286
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,483,940
Paid-in capital, in excess of par........ 3,488,749,211
--------------
3,491,233,151
Distributions in excess of net investment
income................................... (2,593,413)
Accumulated distributions in excess of net
realized gains........................... (12,611,577)
Net unrealized appreciation................ 25,076,125
--------------
Net assets, December 31, 1994.............. $3,501,104,286
--------------
--------------
Net asset value per share of 248,394,018
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 14.0950
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 21,577,417
Interest................................... 121,932,781
---------------
143,510,198
---------------
EXPENSES
Investment management fee.................. 18,730,421
Shareholders' reports...................... 982,095
Foreign withholding tax.................... 524,162
Accounting fees............................ 216,958
S.E.C. fees................................ 165,214
Custodian expense -- net................... 114,541
Professional fees.......................... 102,549
Directors' expense......................... 3,365
Miscellaneous expenses..................... 182
---------------
20,839,487
---------------
NET INVESTMENT INCOME........................ 122,670,711
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments --
Securities transactions.................. 30,566,616
Futures contracts........................ 184,405
---------------
Net realized gain on investments........... 30,751,021
Net unrealized loss on investments......... (184,854,002)
---------------
NET LOSS ON INVESTMENTS...................... (154,102,981)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 31,432,270)
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 122,670,711 $ 83,594,970
Net realized gain on investments....................................................... 30,751,021 116,251,058
Net unrealized gain(loss) on investments............................................... (184,854,002) 86,497,365
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (31,432,270) 286,343,393
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (120,740,360) (84,057,597)
Net realized gain from investment transactions......................................... (37,214,012) (113,728,724)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (157,954,372) (197,786,321)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [34,889,459 and 48,698,296 shares, respectively].................... 514,344,688 736,447,769
Reinvestment of dividend distributions [11,198,868 and 13,291,624 shares,
respectively]......................................................................... 157,954,372 197,786,321
Capital stock repurchased [(5,887,371) and (2,225,762) shares, respectively]........... (84,977,146) (33,653,303)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 587,321,914 900,580,787
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 397,935,272 989,137,859
NET ASSETS:
Beginning of year...................................................................... 3,103,169,014 2,114,031,155
------------------ -------------------
End of year............................................................................ $ 3,501,104,286 $ 3,103,169,014
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$3,347,362,272).......................... $3,478,056,152
Cash....................................... 1,392
Interest and dividends receivable.......... 23,489,135
Receivable for securities sold............. 35,026,977
--------------
Total Assets............................. 3,536,573,656
--------------
LIABILITIES
Accrued expenses........................... 323,207
Payable for securities purchased........... 49,250,851
Payable to investment adviser.............. 5,363,453
Payable for portfolio shares redeemed...... 95,846
--------------
Total Liabilities........................ 55,033,357
--------------
NET ASSETS................................... $3,481,540,299
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,246,733
Paid-in capital, in excess of par........ 3,405,640,023
--------------
3,407,886,756
Accumulated distributions in excess of net
investment income........................ (7,770,622)
Accumulated distributions in excess of net
realized gains........................... (49,268,078)
Net unrealized appreciation (depreciation)
Securities............................... 130,693,880
Foreign currency translations............ (1,637)
--------------
Net assets, December 31, 1994.............. $3,481,540,299
--------------
--------------
Net asset value per share of 224,673,289
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 15.4960
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 40,972,935
Interest................................... 80,410,745
---------------
121,383,680
---------------
EXPENSES
Investment management fee.................. 20,399,604
Shareholders' reports...................... 895,362
Foreign withholding tax.................... 571,581
Accounting fees............................ 231,918
Custodian expense -- net................... 153,924
S.E.C. fees................................ 129,279
Professional fees.......................... 120,289
Directors' expense......................... 3,420
Miscellaneous expenses..................... 189
---------------
22,505,566
---------------
NET INVESTMENT INCOME........................ 98,878,114
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on investments --
Securities transactions.................. 23,860,613
Futures contracts........................ (22,340)
---------------
Net realized gain on investments........... 23,838,273
---------------
Net unrealized loss on investments and
foreign currencies--
Securities............................... (230,569,722)
Foreign currency translations............ (1,637)
---------------
Net unrealized loss on investments and
foreign currencies....................... (230,571,359)
---------------
NET LOSS ON INVESTMENTS AND FOREIGN
CURRENCIES................................... (206,733,086)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 107,854,972)
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 98,878,114 $ 94,441,961
Net realized gain on investments....................................................... 23,838,273 202,429,143
Net unrealized gain(loss) on investments and foreign currency translations............. (230,571,359) 106,972,046
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (107,854,972) 403,843,150
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (96,126,295) (96,961,144)
Net realized gain from investment transactions......................................... (98,311,584) (167,511,713)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (194,437,879) (264,472,857)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [22,611,559 and 28,416,647 shares, respectively].................... 370,947,414 490,167,019
Reinvestment of dividend distributions [12,531,550 and 15,710,066 shares,
respectively]......................................................................... 194,437,879 264,472,857
Capital stock repurchased [(4,617,224) and (2,154,837) shares, respectively]........... (73,719,278) (37,398,394)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 491,666,015 717,241,482
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 189,373,164 856,611,775
NET ASSETS:
Beginning of year...................................................................... 3,292,167,135 2,435,555,360
------------------ -------------------
End of year............................................................................ $ 3,481,540,299 $ 3,292,167,135
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
HIGH YIELD BOND PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$326,056,650)............................ $ 299,082,997
Cash....................................... 219
Interest and dividends receivable.......... 7,505,266
Receivable for securities sold............. 1,590,651
--------------
Total Assets............................. 308,179,133
--------------
LIABILITIES
Accrued expenses........................... 38,417
Payable for securities purchased........... 1,457,852
Payable to investment adviser.............. 458,151
--------------
Total Liabilities........................ 1,954,420
--------------
NET ASSETS................................... $ 306,224,713
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 415,757
Paid-in capital, in excess of par........ 340,891,135
--------------
341,306,892
Accumulated distributions in excess of net
investment income........................ (1,410,346)
Accumulated net realized losses............ (6,698,180)
Net unrealized depreciation................ (26,973,653)
--------------
Net assets, December 31, 1994.............. $ 306,224,713
--------------
--------------
Net asset value per share of 41,575,673
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 7.3655
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 1,451,223
Interest................................... 30,539,834
---------------
31,991,057
---------------
EXPENSES
Investment management fee.................. 1,683,950
Accounting fees............................ 140,525
Shareholders' reports...................... 108,517
Custodian expense -- net................... 25,191
S.E.C. fees................................ 14,855
Professional fees.......................... 6,374
Directors' expense......................... 1,962
Miscellaneous expenses..................... 17
---------------
1,981,391
---------------
NET INVESTMENT INCOME........................ 30,009,666
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (4,761,509)
Net unrealized loss on investments......... (34,417,342)
---------------
NET LOSS ON INVESTMENTS...................... (39,178,851)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 9,169,185)
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
(AS RESTATED)
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 30,009,666 $ 21,969,043
Net realized gain (loss) on investments................................................ (4,761,509) 9,902,123
Net unrealized gain (loss) on investments.............................................. (34,417,342) 6,056,112
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (9,169,185) 37,927,278
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (30,650,298) (22,294,669)
Net realized gain from investment transactions......................................... (228) (156)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (30,650,526) (22,294,825)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [7,836,280 and 12,700,848 shares, respectively]..................... 64,526,000 105,011,000
Reinvestment of dividend distributions [4,067,658 and 2,686,600 shares,
respectively]......................................................................... 30,650,526 22,294,825
Capital stock repurchased [(3,976,156) and (1,650,203) shares, respectively]........... (31,985,000) (13,774,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 63,191,526 113,531,825
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 23,371,815 129,164,278
NET ASSETS:
Beginning of year...................................................................... 282,852,898 153,688,620
------------------ -------------------
End of year............................................................................ $ 306,224,713 $ 282,852,898
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$584,600,736)............................ $ 665,573,026
Cash....................................... 125
Interest and dividends receivable.......... 1,826,860
--------------
Total Assets............................. 667,400,011
--------------
LIABILITIES
Accrued expenses........................... 43,939
Payable for securities purchased........... 1,961,738
Payable to investment adviser.............. 594,419
Payable for daily variation margin on open
futures contracts (see Note 2)........... 178,025
Payable for portfolio shares redeemed...... 87,683
--------------
Total Liabilities........................ 2,865,804
--------------
NET ASSETS................................... $ 664,534,207
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 444,295
Paid-in capital, in excess of par........ 584,354,669
--------------
584,798,964
Accumulated distributions in excess of net
investment income........................ (448,482)
Distributions in excess of net realized
gains.................................... (1,303,715)
Net unrealized appreciation
Securities............................... 80,972,290
Futures contracts........................ 515,150
--------------
Net assets, December 31, 1994.............. $ 664,534,207
--------------
--------------
Net asset value per share of 44,429,452
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 14.9571
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 17,703,412
Interest................................... 848,482
---------------
18,551,894
---------------
EXPENSES
Investment management fee.................. 2,223,022
Shareholders' reports...................... 169,859
Foreign withholding tax.................... 104,365
Accounting fees............................ 92,457
Custodian expense -- net................... 25,969
Professional fees.......................... 17,287
S.E.C. fees................................ 17,213
Directors' expense......................... 2,108
Miscellaneous expenses..................... 35
---------------
2,652,315
---------------
NET INVESTMENT INCOME........................ 15,899,579
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments --
Securities transactions.................. 225,124
Futures contracts........................ (1,036,890)
---------------
Net realized loss on investments........... (811,766)
---------------
Net unrealized gain (loss) on investments
--
Securities............................... (8,921,232)
Futures contracts........................ 486,200
---------------
Net unrealized loss on investments......... (8,435,032)
---------------
NET LOSS ON INVESTMENTS...................... (9,246,798)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 6,652,781
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 15,899,579 $ 12,982,334
Net realized gain (loss) on investments................................................ (811,766) 2,033,345
Net unrealized gain (loss) on investments.............................................. (8,435,032) 33,892,763
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 6,652,781 48,908,442
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (15,754,398) (13,030,262)
Net realized gain from investment transactions......................................... (958,203) (1,280,819)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (16,712,601) (14,311,081)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,553,644 and 10,331,253 shares, respectively]..................... 68,598,345 152,405,579
Reinvestment of dividend distributions [1,130,115 and 959,900 shares, respectively].... 16,712,601 14,311,081
Capital stock repurchased [(1,718,830) and (1,313,029) shares, respectively]........... (25,854,984) (19,639,158)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 59,455,962 147,077,502
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 49,396,142 181,674,863
NET ASSETS:
Beginning of year...................................................................... 615,138,065 433,463,202
------------------ -------------------
End of year............................................................................ $ 664,534,207 $ 615,138,065
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

A10

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
HIGH DIVIDEND STOCK PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$873,043,522)............................ $ 859,427,250
Cash....................................... 763
Interest and dividends receivable.......... 4,068,061
--------------
Total Assets............................. 863,496,074
--------------
LIABILITIES
Accrued expenses........................... 94,060
Payable for securities purchased........... 2,875,386
Payable to investment adviser.............. 855,376
--------------
Total Liabilities........................ 3,824,822
--------------
NET ASSETS................................... $ 859,671,252
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 593,526
Paid-in capital, in excess of par........ 873,328,334
--------------
873,921,860
Undistributed net investment income........ 145,759
Distributions in excess of net realized
gains.................................... (780,095)
Net unrealized depreciation................ (13,616,272)
--------------
Net assets, December 31, 1994.............. $ 859,671,252
--------------
--------------
Net asset value per share of 59,352,571
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 14.4842
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 28,264,031
Interest................................... 5,609,616
---------------
33,873,647
---------------
EXPENSES
Investment management fee.................. 3,061,395
Foreign withholding tax.................... 442,666
Shareholders' reports...................... 222,968
S.E.C. fees................................ 90,342
Accounting fees............................ 75,849
Custodian expense -- net................... 39,777
Professional fees.......................... 8,495
Directors' expense......................... 2,142
Miscellaneous expenses..................... 37
---------------
3,943,671
---------------
NET INVESTMENT INCOME........................ 29,929,976
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 41,343,251
Net unrealized loss on investments......... (64,632,006)
---------------
NET LOSS ON INVESTMENTS...................... (23,288,755)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 6,641,221
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 29,929,976 $ 14,507,277
Net realized gain on investments....................................................... 41,343,251 21,045,993
Net unrealized gain(loss) on investments............................................... (64,632,006) 35,871,500
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 6,641,221 71,424,770
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (29,421,933) (14,844,865)
Net realized gain from investment transactions......................................... (44,325,396) (18,679,382)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (73,747,329) (33,524,247)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [16,514,586 and 19,384,187 shares, respectively].................... 261,909,000 300,016,000
Reinvestment of dividend distributions [5,080,100 and 2,176,775 shares,
respectively]......................................................................... 73,747,329 33,524,247
Capital stock repurchased [(746,813) and (196,958) shares, respectively]............... (11,659,000) (3,017,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 323,997,329 330,523,247
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 256,891,221 368,423,770
NET ASSETS:
Beginning of year...................................................................... 602,780,031 234,356,261
------------------ -------------------
End of year............................................................................ $ 859,671,252 $ 602,780,031
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

A11

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
COMMON STOCK PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$2,419,493,392).......................... $2,665,964,937
Cash....................................... 155
Interest and dividends receivable.......... 5,114,347
Receivable for securities sold............. 391,399
--------------
Total Assets............................. 2,671,470,838
--------------
LIABILITIES
Accrued expenses........................... 239,413
Payable for securities purchased........... 50,317,741
Payable to investment adviser.............. 2,947,775
Payable for portfolio shares redeemed...... 193,892
--------------
Total Liabilities........................ 53,698,821
--------------
NET ASSETS................................... $2,617,772,017
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 1,266,927
Paid-in capital, in excess of par........ 2,372,417,930
--------------
2,373,684,857
Accumulated distributions in excess of net
investment income........................ (5,718,849)
Accumulated net realized gains............. 3,334,464
Net unrealized appreciation................ 246,471,545
--------------
Net assets, December 31, 1994.............. $2,617,772,017
--------------
--------------
Net asset value per share of 126,692,657
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 20.6624
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 50,216,245
Interest................................... 20,648,244
---------------
70,864,489
---------------
EXPENSES
Investment management fee.................. 10,874,059
Foreign withholding tax.................... 1,200,006
Shareholders' reports...................... 651,725
S.E.C. fees................................ 144,182
Accounting fees............................ 143,460
Custodian expense -- net................... 77,177
Professional fees.......................... 71,071
Directors' expense......................... 2,913
Miscellaneous expenses..................... 127
---------------
13,164,720
---------------
NET INVESTMENT INCOME........................ 57,699,769
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 84,713,465
Net unrealized loss on investments......... (76,779,978)
---------------
NET GAIN ON INVESTMENTS...................... 7,933,487
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 65,633,256
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 57,699,769 $ 36,054,825
Net realized gain on investments....................................................... 84,713,465 124,861,589
Net unrealized gain (loss) on investments.............................................. (76,779,978) 185,462,685
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 65,633,256 346,379,099
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (56,757,732) (36,692,128)
Net realized gain from investment transactions......................................... (106,046,594) (103,435,491)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (162,804,326) (140,127,619)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [19,167,446 and 21,331,255 shares, respectively].................... 412,393,503 447,667,281
Reinvestment of dividend distributions [7,934,974 and 6,632,819 shares,
respectively]......................................................................... 162,804,326 140,127,619
Capital stock repurchased [(2,170,186) and (1,143,204) shares, respectively]........... (46,752,467) (24,126,373)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 528,445,362 563,668,527
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 431,274,292 769,920,007
NET ASSETS:
Beginning of year...................................................................... 2,186,497,725 1,416,577,718
------------------ -------------------
End of year............................................................................ $ 2,617,772,017 $ 2,186,497,725
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

A12

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GLOBAL EQUITY PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$333,259,423)............................ $ 340,065,997
Foreign currency, at value (cost:
$7,107,458).............................. 7,169,111
Dividends and interest receivable.......... 240,756
Receivable for securities sold............. 2,036,391
Receivable for portfolio shares sold....... 5,435
Other assets............................... 163,813
--------------
Total Assets............................. 349,681,503
--------------
LIABILITIES
Bank overdraft............................. 151,478
Accrued expenses........................... 507,759
Payable for securities purchased........... 2,689,594
Payable to investment adviser.............. 598,694
--------------
Total Liabilities........................ 3,947,525
--------------
NET ASSETS................................... $ 345,733,978
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 249,106
Paid-in capital, in excess of par........ 339,734,079
--------------
339,983,185
Distributions in excess of net investment
income................................... (306,676)
Accumulated net realized losses............ (830,366)
Net unrealized appreciation on securities
and foreign currency translations........ 6,887,835
--------------
Net assets, December 31, 1994.............. $ 345,733,978
--------------
--------------
Net asset value per share of 24,910,615
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 13.8790
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 2,857,120
Interest................................... 602,579
---------------
3,459,699
---------------
EXPENSES
Investment management fee.................. 1,798,467
Custodian expense -- net................... 695,706
Income taxes -- foreign.................... 284,990
Accounting fees............................ 101,774
S.E.C. fees................................ 82,504
Shareholders' reports...................... 17,205
Professional fees.......................... 2,375
Directors' expense......................... 1,886
Miscellaneous expenses..................... 70
---------------
2,984,977
---------------
NET INVESTMENT INCOME........................ 474,722
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
SECURITIES AND FOREIGN CURRENCIES
Net realized loss on securities and foreign
currency transactions.................... (578,250)
Net unrealized loss on securities and
foreign currency translations............ (16,334,560)
---------------
NET LOSS ON SECURITIES AND FOREIGN
CURRENCIES................................... (16,912,810)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ (16,438,088)
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 474,722 $ 113,317
Net realized gain (loss) on securities and foreign currency transactions............... (578,250) 2,342,360
Net unrealized gain (loss) on securities and foreign currency translations............. (16,334,560) 21,161,913
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (16,438,088) 23,617,590
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (499,141) (403,351)
Net realized gain from investment transactions......................................... (394,438) (839,910)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (893,579) (1,243,261)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [17,513,960 and 5,977,164 shares, respectively]..................... 254,421,899 78,356,145
Reinvestment of dividend distributions [64,991 and 90,677 shares, respectively]........ 893,579 1,243,261
Capital stock repurchased [(751,122) and (141,366) shares, respectively]............... (10,781,034) (1,761,681)
Initial capitalization repurchased [(735,674) and (391,272) shares, respectively]...... (10,558,000) (5,164,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 233,976,444 72,673,725
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 216,644,777 95,048,054
NET ASSETS:
Beginning of year...................................................................... 129,089,201 34,041,147
------------------ -------------------
End of year............................................................................ $ 345,733,978 $ 129,089,201
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

A13

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
NATURAL RESOURCES PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<S> <C>
ASSETS
Investments, at value (cost:
$227,082,786)............................ $ 230,156,734
Cash....................................... 204
Interest and dividends receivable.......... 455,179
--------------
Total Assets............................. 230,612,117
--------------
LIABILITIES
Accrued expenses........................... 37,673
Payable for securities purchased........... 3,040,439
Payable to investment adviser.............. 260,076
--------------
Total Liabilities........................ 3,338,188
--------------
NET ASSETS................................... $ 227,273,929
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 157,357
Paid-in capital, in excess of par........ 222,958,907
--------------
223,116,264
Undistributed net investment income........ 36,877
Accumulated net realized gains............. 1,046,840
Net unrealized appreciation................ 3,073,948
--------------
Net assets, December 31, 1994.............. $ 227,273,929
--------------
--------------
Net asset value per share of 15,735,726
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 14.4432
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<S> <C>
INVESTMENT INCOME
Dividends.................................. $ 2,919,308
Interest................................... 547,273
---------------
3,466,581
---------------
EXPENSES
Investment management fee.................. 917,600
Foreign withholding tax.................... 155,276
Shareholders' reports...................... 56,649
Accounting fees............................ 45,569
Custodian expense -- net................... 28,357
S.E.C. fees................................ 27,962
Professional fees.......................... 4,165
Directors' expense......................... 1,894
Miscellaneous expenses..................... 10
---------------
1,237,482
---------------
NET INVESTMENT INCOME........................ 2,229,099
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments --
Securities transactions.................. 4,039,297
Options written.......................... 32,757
---------------
Net realized gain on investments........... 4,072,054
Net unrealized loss on investments......... (16,859,455)
---------------
NET LOSS ON INVESTMENTS...................... (12,787,401)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... ($ 10,558,302)
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 2,229,099 $ 1,708,004
Net realized gain on investments....................................................... 4,072,054 4,531,550
Net unrealized gain (loss) on investments.............................................. (16,859,455) 15,555,589
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (10,558,302) 21,795,143
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (2,145,214) (1,727,285)
Net realized gain from investment transactions......................................... (4,370,759) (3,710,814)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (6,515,973) (5,438,099)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [5,475,055 and 4,020,200 shares, respectively]...................... 85,097,000 61,876,000
Reinvestment of dividend distributions [446,624 and 360,819 shares, respectively]...... 6,515,973 5,438,099
Capital stock repurchased [(393,177) and (161,277) shares, respectively]............... (6,107,000) (2,363,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 85,505,973 64,951,099
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 68,431,698 81,308,143
NET ASSETS:
Beginning of year...................................................................... 158,842,231 77,534,088
------------------ -------------------
End of year............................................................................ $ 227,273,929 $ 158,842,231
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

A14

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 99.7% AMOUNT VALUE
------------- --------------
<S> <C> <C>
BANK-RELATED INSTRUMENTS -- 17.0%
Bank of Montreal, C.D.,
5.800%, 01/30/95.............................. $ 25,000,000 $ 25,000,000
Bank of Tokyo, Ltd., C.D.,
6.460%, 03/30/95.............................. 10,000,000 10,000,000
Fuji Bank, Ltd, C.D.,
5.906%, 01/20/95.............................. 10,000,000 10,000,000
Industrial Bank of Japan, Ltd., T.D.,
6.375%, 03/28/95.............................. 10,000,000 10,000,000
Mitsubishi Bank, Ltd, T.D.,
7.000%, 01/03/95.............................. 4,047,000 4,047,000
Republic National Bank of New York, C.D.,
4.300%, 03/08/95.............................. 10,000,000 9,994,761
Sanwa Bank, Ltd., C.D.,
5.950%, 01/30/95.............................. 11,000,000 11,000,000
6.040%, 02/02/95.............................. 6,000,000 6,000,000
Societe Generale, C.D.,
5.650%, 02/07/95.............................. 5,000,000 5,000,000
Sumitomo Bank, Ltd., C.D.,
5.960%, 01/30/95.............................. 5,000,000 5,000,000
Sumitomo Bank, Ltd., T.D.,
6.060%, 02/01/95.............................. 3,000,000 3,000,000
--------------
99,041,761
--------------
COMMERCIAL PAPER -- 68.9%
American Express Centurion Bank,
%4.500%, 08/04/95, Tranche #TR00037........... 2,000,000 1,999,883
%4.813%, 08/18/95, Tranche #TR00039........... 3,000,000 2,999,813
American Home Products Corp.,
5.900%, 01/31/95.............................. 28,000,000 27,871,511
American Honda Finance Corp.,
5.980%, 01/31/95.............................. 4,000,000 3,981,396
6.150%, 01/30/95.............................. 2,000,000 1,990,775
Aristar, Inc.,
5.540%, 01/23/95.............................. 1,000,000 996,922
5.940%, 02/01/95.............................. 1,700,000 1,691,866
6.040%, 02/01/95.............................. 1,000,000 995,134
Asset Securitization Cooperative Corp.,
5.500%, 01/17/95-01/23/95..................... 14,000,000 13,965,472
5.520%, 01/23/95.............................. 6,000,000 5,981,600
5.970%, 02/01/95.............................. 6,000,000 5,971,145
Associates Corp. of North America,
5.770%, 01/31/95.............................. 8,000,000 7,964,098
%Avco Financial Services, Inc.,
4.677%, 09/13/95.............................. 4,000,000 4,000,000
Bankers Trust New York Corp.,
5.440%, 01/24/95.............................. 20,000,000 19,936,533
Chrysler Financial Corp.,
5.750%, 01/18/95.............................. 11,000,000 10,973,646
CIT Group Holdings, Inc.,
6.270%, 03/13/95.............................. 9,000,000 8,891,843
Coca-Cola Enterprises, Inc.,
6.015%, 02/01/95.............................. 10,000,000 9,951,546
6.170%, 03/07/95.............................. 5,000,000 4,946,013
Commercial Credit Co.,
5.750%, 01/31/95.............................. 2,000,000 1,991,056
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Corporate Asset Funding Co., Inc.,
5.500%, 01/11/95.............................. $ 1,000,000 $ 998,778
Dean Witter, Discover & Co.,
5.780%, 01/23/95.............................. 373,000 371,802
5.970%, 02/01/95.............................. 1,397,000 1,390,282
Duracell, Inc.,
6.300%, 02/10/95.............................. 1,000,000 993,350
Falcon Asset Securitization Corp.,
6.170%, 02/06/95-03/07/95..................... 15,725,000 15,608,336
First National Bank of Chicago,
5.688%, 02/22/95, Tranche #TR00087............ 2,000,000 2,000,000
Ford Motor Credit Co.,
5.780%, 02/01/95.............................. 8,000,000 7,962,751
6.000%, 01/23/95.............................. 1,423,000 1,418,257
6.050%, 01/17/95.............................. 1,000,000 997,647
Fuji Bank, Ltd.,
6.200%, 02/10/95.............................. 3,000,000 2,980,367
General Electric Capital Corp.,
5.430%, 01/11/95.............................. 2,000,000 1,997,587
5.850%, 01/30/95.............................. 5,000,000 4,978,063
6.450%, 04/13/95.............................. 9,650,000 9,477,104
General Mills, Inc.,
5.600%, 02/03/95.............................. 2,870,000 2,856,160
General Motors Acceptance Corp.,
5.740%, 01/17/95.............................. 27,400,000 27,338,837
Golden Peanut Co.,
5.600%, 02/01/95.............................. 3,000,000 2,986,467
Greyhound Financial Corp.,
6.200%, 01/13/95.............................. 1,000,000 998,278
6.290%, 02/08/95.............................. 3,000,000 2,981,130
6.300%, 01/27/95.............................. 5,000,000 4,979,000
Hanson Finance, PLC,
5.470%, 01/17/95.............................. 1,000,000 997,873
6.260%, 03/03/95.............................. 2,000,000 1,979,481
6.280%, 03/01/95.............................. 2,000,000 1,980,113
Heller Financial, Inc.,
6.300%, 03/13/95-03/14/95..................... 5,000,000 4,939,275
Household Finance Corp.,
5.500%, 01/12/95.............................. 4,000,000 3,994,500
International Lease Finance Corp.,
5.750%, 01/18/95.............................. 2,000,000 1,995,208
ITT Financial Corp.,
6.200%, 01/20/95.............................. 14,000,000 13,959,011
Maguire/Thomas Partners,
6.125%, 01/13/95.............................. 1,715,000 1,712,082
6.360%, 03/21/95.............................. 5,000,000 5,000,000
MCA Funding Corp.,
5.100%, 01/09/95.............................. 7,800,000 7,793,370
McKenna Triangle National Corp.,
6.250%, 03/08/95.............................. 4,000,000 3,955,556
Merrill Lynch & Co., Inc.,
5.750%, 01/17/95.............................. 15,000,000 14,966,458
5.870%, 01/31/95.............................. 3,000,000 2,986,303
Money Market Auto Loan Trust
1990-1,
%3.325%, 11/30/95............................. 2,300,000 2,300,000
%3.375%, 11/30/95............................. 5,000,000 5,000,000
</TABLE>

<PAGE>

MONEY MARKET PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Money Market Credit Card Trust 1989-1,
%3.720%, 06/10/96............................. $ 2,368,182 $ 2,368,070
%3.830%, 06/10/96............................. 1,090,909 1,090,909
%4.420%, 06/10/96............................. 986,364 986,364
Morgan Stanley Group, Inc.,
%3.530%, 12/15/95, Tranche #TR00102........... 5,000,000 5,000,000
%3.593%, 12/15/95, Tranche #TR00102........... 2,000,000 2,000,000
6.270%, 03/01/95.............................. 2,500,000 2,475,181
National Australia Funding, Inc.,
5.600%, 02/01/95.............................. 3,330,000 3,314,978
NationsBank Corp. of North Carolina,
5.400%, 01/23/95.............................. 1,560,000 1,555,320
PNC Bank N.A.,
5.520%, 01/06/95, Tranche #TR00010............ 19,000,000 18,999,874
PNC Bank of Ohio,
3.500%, 01/31/95, Tranche #TR00002............ 2,000,000 1,999,805
Preferred Receivables Funding Corp.,
5.650%, 01/11/95.............................. 4,000,000 3,994,978
Republic National Bank of New York,
5.750%, 02/01/95.............................. 2,000,000 1,999,994
Sears, Roebuck Acceptance Corp.,
5.870%, 01/27/95.............................. 3,000,000 2,988,260
6.050%, 02/06/95.............................. 14,000,000 13,920,006
Sumitomo Corp. of America,
5.125%, 01/09/95.............................. 4,000,000 3,996,583
WCP Funding, Inc.,
6.280%, 03/06/95.............................. 2,000,000 1,978,369
Westpac Capital Corp.,
5.500%, 01/17/95.............................. 2,000,000 1,995,721
6.280%, 03/14/95.............................. 3,000,000 2,963,367
Whirlpool Corp.,
5.570%, 01/09/95.............................. 3,500,000 3,496,750
5.660%, 02/02/95.............................. 1,000,000 995,283
Whirlpool Financial Corp.,
5.500%, 01/12/95.............................. 13,000,000 12,982,125
5.600%, 02/06/95-02/09/95..................... 2,000,000 1,988,956
5.610%, 02/10/95.............................. 2,000,000 1,988,156
WMX Technologies,
5.225%, 02/07/95.............................. 3,000,000 2,984,760
--------------
402,037,487
--------------
MEDIUM TERM NOTES -- 10.7%
%American Express Centurion Bank, M.T.N.,
4.813%, 09/19/95, Tranche #TR00080............ 2,000,000 1,999,861
%Beneficial Corp., M.T.N.,
4.487%, 07/19/95, Tranche #TR00768............ 7,000,000 6,997,412
Fifth Third Bank, M.T.N.,
6.200%, 02/07/95, Tranche #TR00075............ 4,000,000 4,000,188
Ford Motor Credit Co.,
9.300%, 03/15/95.............................. 2,000,000 2,017,850
General Motors Acceptance Corp., M.T.N.,
6.900%, 05/08/95, Tranche #TR00347............ 500,000 501,829
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
**Goldman Sachs Group L.P., M.T.N.,
5.375%, 01/11/96, Series A.................... $ 28,000,000 $ 28,000,000
Merrill Lynch & Co., Inc., M.T.N.,
%4.823%, 09/22/95, Tranche #TR00106........... 3,000,000 2,999,580
4.885%, 10/02/95, Tranche #TR00110............ 6,500,000 6,499,055
%Morgan Stanley Group, Inc., M.T.N.,
3.405%, 01/16/96, Tranche #TR00010............ 4,000,000 4,000,000
Society Bank of North America, M.T.N.,
3.550%, 01/20/95, Tranche #TR00005............ 2,500,000 2,499,810
Toyota Motor Credit Corp., M.T.N.,
5.700%, 01/23/95, Tranche #TR00029............ 3,000,000 2,998,996
--------------
62,514,581
--------------
PROMISSORY NOTES -- 3.1%
Lehman Brothers Holdings, Inc.,
5.028%, 05/23/95.............................. 15,000,000 15,000,000
Orix America, Inc.,
5.850%, 01/27/95.............................. 3,000,000 2,988,300
--------------
17,988,300
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 581,582,129
--------------
OTHER ASSETS -- 0.3%
(net of liabilities)........................................... 1,699,348
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 583,281,477
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

C.D. Certificates of Deposit
L.P. Limited Partnership
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
T.D. Time Deposit

**Indicates a restricted security; the aggregate cost of the restricted
securities is $28,000,000. The aggregate value, $28,000,000 is
approximately 4.8% of net assets. (See Note 2)

%Indicates a variable rate security.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

BOND PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 95.3% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 14.4%
Abbey National First Capital,
8.200%, 10/15/04.............................. $ 3,000,000 $ 2,928,630
Aristar, Inc.,
5.750%, 07/15/98.............................. 2,000,000 1,837,600
7.500%, 07/01/99.............................. 2,000,000 1,919,440
Associates Corp. of North America,
8.375%, 01/15/98.............................. 500,000 499,995
8.800%, 01/14/95.............................. 1,000,000 1,000,380
Chase Manhattan Corp.,
8.000%, 06/15/99.............................. 2,000,000 1,964,800
Chemical Bank,
6.625%, 08/15/05.............................. 2,000,000 1,713,160
Chrysler Finance Corp., M.T.N.,
5.260%, 07/06/95, Tranche #TR00029............ 900,000 890,334
5.340%, 07/05/95, Tranche #TR00028............ 2,300,000 2,276,356
Chrysler Financial Corp.,
9.500%, 12/15/99.............................. 5,000,000 5,187,800
Citicorp, M.T.N.,
8.500%, 02/24/97, Tranche #TR00128............ 3,000,000 3,018,390
Coles Myer Finance USA, Ltd., M.T.N.,
5.560%, 02/15/99, Tranche #TR00018............ 6,000,000 5,413,140
Countrywide Funding Corp., M.T.N.,
6.880%, 08/03/98, Tranche #TR00025............ 4,000,000 3,811,040
Equicredit Home Equity Loan Trust, CMO,
7.850%, 08/15/07, Series 1994-3, Class A-3.... 5,000,000 4,823,438
First Fidelity Bancorp,
9.750%, 05/25/95.............................. 5,000,000 5,049,300
Ford Motor Credit Co.,
6.250%, 02/26/98.............................. 3,000,000 2,826,090
General Motors Acceptance Corp.,
8.400%, 10/15/99.............................. 3,700,000 3,698,483
General Motors Acceptance Corp., M.T.N.,
7.500%, 11/04/97, Tranche #TR00598............ 2,000,000 1,946,940
Goldman Sachs Group, L.P.,
6.100%, 04/15/98.............................. 2,000,000 1,856,980
**John Hancock Mutual Life Insurance Co.,
7.375%, 02/15/24.............................. 3,000,000 2,414,670
Mellon Financial Co.,
6.500%, 12/01/97.............................. 2,000,000 1,912,200
NationsBank Corp. of North Carolina,
6.625%, 01/15/98.............................. 3,000,000 2,859,210
%Nomura Asset Securities Corp., CMO,
8.026%, 12/15/06, 1994 MDA, Class A-3......... 3,000,000 2,821,875
**Potomac Capital Investment Corp., M.T.N.,
6.190%, 04/28/97, Series B.................... 3,500,000 3,466,627
Republic New York Corp.,
9.125%, 05/15/21.............................. 2,850,000 2,978,591
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Sovereign Bancorp, Inc.
6.750%, 09/01/00.............................. $ 5,000,000 $ 4,475,000
Union Bank Finland, Ltd.,
5.250%, 06/15/96.............................. 3,000,000 2,872,530
Zurich Reinsurance Centre Holdings, Inc.,
7.125%, 10/15/23.............................. 2,000,000 1,587,680
--------------
78,050,679
--------------
FOREIGN -- 15.7%
Australia & New Zealand Banking Group, Ltd.,
6.250%, 02/01/04.............................. 3,000,000 2,566,560
**Banco Del Estado-Chile,
8.390%, 08/01/01.............................. 2,100,000 1,979,250
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 4,100,000 3,977,000
Canadian Pacific Forest Products Ltd.,
10.250%, 01/15/03............................. 4,000,000 3,963,390
Carter Holt Harvey, Ltd.,
8.875%, 12/01/04.............................. 2,500,000 2,524,150
**Cemex, SA,
8.875%, 06/10/98.............................. 6,000,000 5,265,000
Central Puerto and Cent Negue, SA,
10.750%, 11/02/97............................. 3,000,000 2,872,500
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 4,000,000 3,275,000
%Hydro-Quebec,
3.438%, 09/30/49, Series G-1E4................ 3,000,000 2,507,813
**Kansallis-Osake Pankki, N.Y.,
8.650%, 12/29/49.............................. 5,000,000 4,837,500
Korea Development Bank,
8.090%, 10/06/04.............................. 5,400,000 5,284,940
National Australia Bank, Ltd.,
9.700%, 10/15/98.............................. 1,700,000 1,774,970
Nippon Telegraph & Telephone Corp.,
9.500%, 07/27/98.............................. 1,800,000 1,869,588
Noranda, Inc.,
8.125%, 06/15/04.............................. 2,000,000 1,912,380
Nova Scotia, Province of Canada,
8.875%, 07/01/19.............................. 3,000,000 2,900,460
Ontario, Province of Canada,
15.750%, 03/15/12............................. 3,475,000 4,139,280
**%Petroleos Mexicanos,
5.563%, 03/08/99.............................. 2,500,000 2,375,000
Republic of Argentina,
8.375%, 12/20/03.............................. 4,000,000 2,850,000
Republic of Columbia,
7.250%, 02/23/04.............................. 2,500,000 2,059,375
8.750%, 10/06/99.............................. 3,500,000 3,338,125
Republic of Italy,
6.875%, 09/27/23.............................. 4,000,000 3,150,880
Republic of South Africa,
9.625%, 12/15/99.............................. 4,000,000 3,961,250
**Republic of Trinidad and Tobago,
11.750%, 10/03/04............................. 4,000,000 4,050,000
Saskatchewan, Province of Canada,
8.000%, 07/15/04.............................. 4,000,000 3,872,560
Svenska Handelsbanken,
8.125%, 08/15/07.............................. 2,500,000 2,350,225
</TABLE>

<PAGE>

BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
**Tenaga Nasional Berhad,
7.875%, 06/15/04.............................. $ 3,000,000 $ 2,856,570
United States of Mexico with Rights,
6.250%, 12/31/19, Class B..................... 4,000,000 2,175,000
--------------
84,688,766
--------------
INDUSTRIAL -- 17.2%
Arkla, Inc., M.T.N.,
9.320%, 12/18/00, Tranche #TR00043............ 2,000,000 1,962,460
9.380%, 03/15/96, Tranche #TR00018............ 1,300,000 1,308,567
Boise Cascade Corp.,
9.875%, 02/15/01.............................. 1,000,000 1,002,040
Borden, Inc.,
7.875%, 02/15/23.............................. 2,000,000 1,463,680
Carnival Cruise Lines, Inc.,
5.750%, 03/15/98.............................. 3,000,000 2,766,810
Comsat Corp.,
8.125%, 04/01/04.............................. 4,000,000 3,898,480
Crane Co.,
7.250%, 06/15/99.............................. 3,000,000 2,842,020
Delta Air Lines, Inc., M.T.N.,
7.790%, 12/01/98.............................. 1,000,000 928,400
8.380%, 06/12/98, Tranche #TR00017............ 2,000,000 1,897,680
Enterprise Rent A Car, M.T.N.,
8.750%, 12/15/99 Tranche #TR00001............. 3,000,000 2,989,650
Federal Express Corp.,
9.650%, 06/15/12.............................. 3,000,000 3,164,610
Fleming Companies, Inc., C.D.,
10.625%, 12/15/01............................. 4,000,000 4,000,000
Georgia-Pacific Corp.,
9.625%, 03/15/22.............................. 1,500,000 1,515,075
J.C. Penney Co., Inc.,
9.750%, 06/15/21.............................. 6,400,000 6,902,144
Laidlaw, Inc.,
8.250%, 05/15/23.............................. 2,500,000 2,177,225
News America Holdings, Inc.,
7.450%, 06/01/00.............................. 3,000,000 2,796,330
7.750%, 02/01/24.............................. 3,300,000 2,684,352
Noble Affiliates, Inc.,
7.250%, 10/15/23.............................. 2,000,000 1,596,200
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013............ 3,000,000 2,887,500
Philip Morris Companies, Inc.,
7.500%, 01/15/02.............................. 2,500,000 2,343,100
9.000%, 01/01/01.............................. 4,800,000 4,858,032
Procter & Gamble Co., ESOP,
9.360%, 01/01/21, Series A.................... 4,900,000 5,286,120
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 5,750,000 5,606,250
Royal Caribbean Cruises Ltd.,
11.375%, 05/15/02............................. 4,000,000 4,250,000
Sears, Roebuck & Co.,
9.375%, 11/01/11.............................. 2,000,000 2,090,040
**Shurgard Securities Trust, CMO,
8.240%, 06/15/04.............................. 3,000,000 2,882,813
Tele-Communications, Inc.,
10.125%, 04/15/22............................. 5,000,000 5,015,400
Time Warner, Inc.,
**6.050%, 07/01/95............................ 2,500,000 2,479,075
7.450%, 02/01/98.............................. 2,200,000 2,096,885
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Transco Energy Co.,
11.250%, 07/01/99............................. $ 2,500,000 $ 2,659,375
Westinghouse Electric Corp.,
8.375%, 06/15/02.............................. 2,000,000 1,858,260
Whitman Corp.,
7.500%, 08/15/01.............................. 3,000,000 2,852,100
--------------
93,060,673
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 45.5%
Federal Farm Credit Bank,
8.650%, 10/01/99, Series A.................... 150,000 153,375
Federal Farm Credit Bank, M.T.N.,
7.900%, 03/01/96.............................. 2,800,000 2,816,744
Federal Home Loan Mortgage Corporation,
9.800%, 03/25/96.............................. 4,000,000 4,095,000
Federal Home Loan Mortgage Corporation, CMO,
6.800%, 08/15/05, Series 1224, Class 1224-F... 5,000,000 4,757,800
Federal Home Loan Mortgage Corporation, REMIC,
6.500%, 10/15/06, Series 1194, Class 1194-G... 5,000,000 4,428,100
7.500%, 09/15/05, Series 1295, Class 1295-G... 8,300,000 7,934,219
Federal National Mortgage Association,
7.000%, 10/01/13-01/01/24..................... 33,044,696 30,002,267
9.000%, 10/01/16-09/01/21..................... 792,613 797,724
11.000%, 11/01/20............................. 6,159,127 6,647,977
Federal National Mortgage Association, REMIC,
Zero Coupon, 09/25/15, Tranche #TR1989-102,
Class 102A.................................. 1,387,991 1,027,113
6.500%, 07/25/20, Tranche #TR1992-138, Class
D........................................... 5,000,000 4,492,150
8.600%, 04/25/03, Series 1989-92, Class
92-D........................................ 1,086,155 1,087,849
9.000%, 03/25/20, Series 1990-24, Class
24-E........................................ 2,000,000 2,028,120
Government National Mortgage Association,
7.500%, 05/20/02.............................. 690,383 649,823
International Bank for Reconstruction and
Development,
12.375%, 10/15/02............................. 750,000 923,213
Resolution Funding Corp.,
Zero Coupon, 10/15/15......................... 17,100,000 3,219,075
8.125%, 10/15/19, Class A..................... 700,000 703,283
8.625%, 01/15/21.............................. 200,000 211,562
United States Treasury Bonds,
6.250%, 08/15/23.............................. 4,800,000 3,902,256
8.125%, 08/15/19.............................. 8,250,000 8,359,560
10.750%, 08/15/05............................. 10,800,000 12,973,500
11.250%, 02/15/15............................. 6,400,000 8,456,000
11.625%, 11/15/04............................. 15,130,000 18,950,325
12.000%, 08/15/13............................. 6,000,000 7,978,140
United States Treasury Notes,
3.875%, 09/30/95.............................. 7,000,000 6,837,040
6.250%, 02/15/03.............................. 6,000,000 5,426,220
6.375%, 08/15/02, Series 2002................. 4,200,000 3,845,604
6.875%, 03/31/97, Series 1997................. 1,500,000 1,472,805
7.250%, 08/15/04.............................. 1,100,000 1,055,824
7.500%, 02/29/96, Series 1996................. 9,300,000 9,310,137
</TABLE>

<PAGE>

BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
7.875%, 02/15/96-07/31/96, Series 1996........ $ 36,000,000 $ 36,151,740
8.875%, 11/15/97, Series 1997................. 20,370,000 20,907,972
9.000%, 05/15/98, Series B-1998............... 3,000,000 3,100,770
9.250%, 01/15/96, Series 1996................. 12,000,000 12,228,720
9.250%, 08/15/98, Series D-1998............... 9,300,000 9,703,992
--------------
246,635,999
--------------
UTILITIES -- 2.5%
%Central Maine Power Co., M.T.N.,
5.978%, 08/03/95, Tranche #TR00036............ 4,000,000 4,000,000
Consolidated Edison of New York, Inc.,
9.700%, 12/01/25.............................. 2,100,000 2,273,922
Pennsylvania Power & Light Co.,
9.375%, 07/01/21.............................. 1,150,000 1,179,268
Southern Union Co.,
7.600%, 02/01/24.............................. 3,000,000 2,511,450
Texas Utilities Electric Co.,
5.875%, 04/01/98.............................. 4,000,000 3,702,920
--------------
13,667,560
--------------
TOTAL LONG-TERM BONDS
(Cost $548,035,825)............................................ 516,103,677
--------------
<CAPTION>

PRINCIPAL
SHORT-TERM INVESTMENTS -- 2.8% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95, (see Note 4)................ 15,192,000 15,192,000
--------------
OTHER ASSETS -- 1.9%
(net of liabilities)........................................... 10,352,922
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 541,648,599
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

C.D. Certificates of Deposit
CMO Collateralized Mortgage Obligations
ESOP Employee Stock Ownership Plan
L.P. Limited Partnership
M.T.N. Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

**Indicates a restricted security; the aggregate cost of the restricted
securities is $42,727,259. The aggregate value, $39,858,505 is
approximately 7.4% of net assets. (See Note 2)

%Indicates a variable rate security.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

GOVERNMENT SECURITIES PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 90.5% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 8.0%
Collateralized Mortgage Obligation, Trust 63
(Class E),
9.000%, 09/20/99.............................. $ 1,000,000 $ 995,310
ContiMortgage Home Equity Loan Trust, CMO,
7.960%, 09/15/09, Series 1994-4, Class A2..... 5,000,000 4,900,000
Equicon Home Equity Loan Trust, CMO,
7.850%, 03/18/14, Series 1994-2, Class A2..... 3,000,000 2,949,375
Equicredit Home Equity Loan Trust, CMO,
7.440%, 10/15/05, Series 1994-3, Class A2..... 5,000,000 4,871,875
European Investment Bank,
9.125%, 06/01/02.............................. 3,500,000 3,672,515
Green Tree Financial Corp., CMO,
7.250%, 11/15/19, Series 1994-6, Class A2..... 5,000,000 4,880,469
Olympic Automobile Receivables Trust, CMO,
6.850%, 06/15/01, Series 1994-B, Class A2..... 3,000,000 2,914,687
%People's Bank Credit Card Master Trust, CMO,
5.525%, 03/15/01, Series 1994-2, Class A...... 4,000,000 3,730,562
Vanderbilt Mortgage Finance, CMO,
7.600%, 07/10/19, Series 1994-A, Class A2..... 4,000,000 3,856,250
Western Financial Grantor Trust, CMO,
6.650%, 12/01/99, Series 1994-3, Class A...... 3,570,339 3,489,449
World Omni Automobile Lease Securitization
Trust, CMO,
6.450%, 09/25/00, Series 1994-A, Class A...... 3,000,000 2,907,188
--------------
39,167,680
--------------
INDUSTRIAL -- 0.6%
%Aircraft Lease Portfolio Securitization, Ltd.,
CMO,
7.800%, 09/15/04, Series 1994-1, Class A4..... 3,000,000 2,918,906
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 81.9%
Federal Farm Credit Bank, M.T.N.,
5.930%, 08/18/03.............................. 3,859,000 3,330,819
7.900%, 03/01/96.............................. 7,000,000 7,041,860
8.600%, 05/30/06.............................. 1,250,000 1,286,913
Federal Home Loan Bank,
5.000%, 10/25/95.............................. 5,000,000 4,903,100
Federal Home Loan Mortgage Corporation, Gold
Fixed Participation,
6.095%, 02/23/01.............................. 12,000,000 11,032,440
6.130%, 08/19/99.............................. 7,000,000 6,492,500
6.270%, 01/27/04.............................. 5,000,000 4,326,550
6.485%, 02/18/04.............................. 10,000,000 8,734,400
6.550%, 04/02/03.............................. 4,000,000 3,558,760
6.600%, 11/12/99.............................. 4,000,000 3,820,000
7.500%, 01/01/00-07/23/07..................... 28,463,802 26,902,313
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Federal Home Loan Mortgage Corporation, REMIC,
7.500%, 09/15/05, Series 1295, Class 1295-G... $ 2,100,000 $ 2,007,453
Federal National Mortgage Association,
Zero Coupon, 10/09/19......................... 22,500,000 3,009,375
7.600%, 04/14/04.............................. 7,000,000 6,573,420
7.850%, 09/10/98.............................. 3,000,000 3,010,320
8.200%, 12/23/96, Series K.................... 5,000,000 5,026,550
8.200%, 08/10/98, Series F.................... 2,000,000 1,996,240
8.500%, 06/10/96, Series G.................... 5,500,000 5,549,830
11.000%, 11/01/20............................. 7,527,510 8,124,968
Federal National Mortgage Association, M.T.N.,
5.930%, 09/26/03.............................. 5,000,000 4,309,000
5.990%, 10/01/03.............................. 5,000,000 4,327,100
7.800%, 02/21/07.............................. 5,000,000 4,701,563
8.625%, 06/30/04.............................. 3,000,000 3,087,330
Federal National Mortgage Association, REMIC,
6.500%, 07/25/20, Trust 1992-138, Class D..... 4,000,000 3,593,720
8.950%, 12/25/18, Trust 1990-45, Class 45-G... 2,000,000 1,993,750
Financing Corp.,
9.400%, 02/08/18.............................. 9,850,000 10,955,072
Government National Mortgage Association,
7.000%, 09/15/22-01/15/24..................... 33,750,027 30,290,650
8.500%, 07/15/08-08/15/24..................... 7,292,192 7,165,689
International Bank for Reconstruction and
Development,
7.625%, 01/19/23.............................. 5,000,000 4,662,300
8.375%, 10/01/99.............................. 7,900,000 8,102,398
Private Export Funding Corp.,
8.750%, 06/30/03, Series KK................... 9,950,000 10,294,867
Resolution Funding Corp.,
8.125%, 10/15/19, Principle Only Class A...... 4,200,000 4,219,698
Student Loan Marketing Association,
7.300%, 08/01/12.............................. 19,850,000 18,255,648
Tennessee Valley Authority Power,
8.375%, 10/01/99, Power 1989, Series D........ 6,300,000 6,402,375
8.625%, 11/15/29, Power 1989, Series G........ 3,100,000 3,076,037
United States Treasury Bonds,
6.250%, 08/15/23.............................. 1,600,000 1,300,752
7.625%, 11/15/22.............................. 3,200,000 3,088,512
7.875%, 02/15/21.............................. 500,000 493,750
8.000%, 11/15/21.............................. 11,400,000 11,444,574
8.125%, 08/15/19-08/15/21..................... 18,605,000 18,887,658
8.750%, 08/15/20.............................. 11,300,000 12,219,933
8.875%, 08/15/17-02/15/19..................... 11,850,000 12,917,785
9.250%, 02/15/16.............................. 800,000 900,128
10.375%, 11/15/12............................. 4,000,000 4,760,000
10.750%, 08/15/05............................. 7,300,000 8,769,125
11.250%, 02/15/15............................. 3,400,000 4,492,250
11.625%, 11/15/04............................. 3,750,000 4,696,875
United States Treasury Bonds, Stripped,
Zero Coupon, 02/15/05-02/15/12................ 4,750,000 1,756,783
</TABLE>

<PAGE>

GOVERNMENT SECURITIES PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
United States Treasury Notes,
4.625%, 08/15/95.............................. $ 4,700,000 $ 4,633,918
5.875%, 05/15/95.............................. 2,300,000 2,294,963
6.875%, 08/31/99.............................. 2,400,000 2,310,000
7.000%, 04/15/99.............................. 13,000,000 12,597,780
7.125%, 09/30/99.............................. 11,700,000 11,363,625
7.750%, 03/31/96-11/30/99..................... 7,000,000 6,995,320
8.000%, 08/15/99.............................. 10,100,000 10,158,378
8.500%, 11/15/00.............................. 2,000,000 2,061,560
8.625%, 08/15/97.............................. 7,600,000 7,743,715
8.875%, 02/15/99.............................. 10,700,000 11,074,500
--------------
399,126,892
--------------
TOTAL LONG-TERM BONDS
(Cost $470,157,047)............................................ 441,213,478
--------------
<CAPTION>

PRINCIPAL
SHORT-TERM INVESTMENTS -- 7.6% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. 36,874,000 $ 36,874,000
--------------
OTHER ASSETS -- 1.9%
(net of liabilities)........................................... 9,486,827
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 487,574,305
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

CMO Collateralized Mortgage Obligations
M.T.N. Medium Term Note
REMIC Real Estate Mortgage Investment Conduit

%Indicates a variable rate security.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

ZERO COUPON BOND 1995 PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 100.1% VALUE VALUE
------------- --------------
<S> <C> <C>
INDUSTRIAL -- 4.1%
Schering-Plough Corp.,
Zero Coupon, 12/02/96......................... $ 850,000 $ 731,400
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 96.0%
Certificate of Accrual on Treasury Securities,
Zero Coupon, 02/15/97......................... 1,003,000 855,027
Coupon Treasury Receipts,
Zero Coupon, 05/15/95-02/15/97................ 13,002,145 11,928,682
Treasury Investment Growth Receipts,
Zero Coupon, 11/15/95......................... 236,000 222,494
United States Treasury Bills,
Zero Coupon, 11/16/95......................... 3,000,000 2,822,490
United States Treasury Bonds, Stripped,
Zero Coupon, 02/15/97......................... 1,407,000 1,198,553
--------------
17,027,246
--------------
TOTAL LONG-TERM BONDS
(Cost $17,721,753)............................................. 17,758,646
--------------
LIABILITIES -- (0.1%)
(net of other assets).......................................... (25,014)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 17,733,632
--------------
--------------
</TABLE>

ZERO COUPON BOND 2000 PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 100.1% VALUE VALUE
------------- --------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS
Certificate of Accrual on Treasury Securities,
Zero Coupon, 05/15/01......................... $ 1,088,000 $ 666,117
Coupon Treasury Receipts,
Zero Coupon, 11/15/00-08/15/01................ 3,622,026 2,208,859
Treasury Investment Growth Receipts,
Zero Coupon, 02/15/02......................... 9,831,000 5,669,144
United States Treasury Bonds, Stripped,
Zero Coupon, 02/15/00-05/15/02................ 19,368,000 12,121,776
--------------
TOTAL LONG-TERM BONDS
(Cost $20,000,846)............................................. 20,665,896
--------------
LIABILITIES -- (0.1%)
(net of other assets).......................................... (30,900)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 20,634,996
--------------
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

ZERO COUPON BOND 2005 PORTFOLIO

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 96.3% VALUE VALUE
------------- --------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS
Certificate of Accrual on Treasury Securities,
Zero Coupon, 08/15/04-05/15/11................ $ 4,605,000 $ 1,873,840
Principal Treasury Receipts,
Zero Coupon, 05/15/03......................... 1,590,000 829,360
Treasury Investment Growth Receipts,
Zero Coupon, 05/15/04-11/15/11................ 13,113,500 4,451,632
United States Treasury Bonds, Stripped,
Zero Coupon, 05/15/04-11/15/07................ 21,221,000 8,740,485
--------------
TOTAL LONG-TERM BONDS
(Cost $16,082,218)............................................. 15,895,317
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 3.9% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. 636,000 636,000
--------------
LIABILITIES -- (0.2%)
(net of other assets).......................................... (25,619)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 16,505,698
--------------
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

<PAGE>

CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 34.8% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 1.1%
+Coltec Industries, Inc......................... 311,000 $ 5,325,875
GenCorp, Inc.................................... 676,800 8,037,000
Loral Corp...................................... 338,100 12,805,538
Rockwell International Corp..................... 253,100 9,048,325
+UNC, Inc....................................... 289,100 1,734,600
--------------
36,951,338
--------------
AUTOS - CARS & TRUCKS -- 1.9%
A.O. Smith Corp................................. 466,800 11,436,600
Ford Motor Co................................... 318,300 8,912,400
General Motors Corp............................. 192,800 8,145,800
General Motors Corp. (Class 'E' Stock).......... 325,600 12,535,600
General Motors Corp. (Class 'H' Stock).......... 465,900 16,248,263
Titan Wheel International, Inc.................. 332,600 9,229,650
--------------
66,508,313
--------------
BANKS AND SAVINGS & LOANS -- 2.4%
First Bank System, Inc.......................... 490,900 16,322,425
First Interstate Bancorp........................ 300,000 20,287,500
KeyCorp......................................... 937,400 23,435,000
Norwest Corp.................................... 1,060,200 24,782,175
--------------
84,827,100
--------------
CHEMICALS -- 1.1%
Imperial Chemical Industries, PLC, ADR.......... 371,300 17,265,450
OM Group, Inc................................... 308,400 7,401,600
W.R. Grace & Co................................. 318,800 12,313,650
--------------
36,980,700
--------------
CHEMICALS - SPECIALTY -- 0.8%
Ferro Corp...................................... 655,200 15,642,900
M.A. Hanna Co................................... 464,000 11,020,000
--------------
26,662,900
--------------
COMMERCIAL SERVICES -- 0.2%
+Welbilt Corp................................... 168,600 5,627,025
--------------
COMPUTER SERVICES -- 0.5%
National Data Corp.............................. 413,400 10,645,050
+Paxar Corp..................................... 818,343 8,183,430
--------------
18,828,480
--------------
CONSTRUCTION -- 0.2%
Ply-Gem Industries.............................. 400,000 7,650,000
--------------
CONTAINERS -- 0.5%
Ball Corp....................................... 363,600 11,453,400
+Sealed Air Corp................................ 167,800 6,082,750
--------------
17,536,150
--------------
DIVERSIFIED GAS -- 0.1%
+Basin Exploration, Inc......................... 148,000 1,628,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 1.1%
Schering-Plough Corp............................ 289,000 21,386,000
Warner-Lambert Co............................... 210,600 16,216,200
--------------
37,602,200
--------------
ELECTRICAL EQUIPMENT -- 0.3%
Belden Corp..................................... 524,300 11,665,675
--------------
ELECTRONICS -- 0.4%
+ADT Ltd........................................ 620,000 6,665,000
+IMO Industries, Inc............................ 477,900 5,973,750
--------------
12,638,750
--------------
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES -- 1.3%
American Express Co............................. 319,000 $ 9,410,500
Dean Witter, Discover & Co...................... 736,500 24,948,938
Reinsurance Group of America, Inc............... 487,800 12,012,075
--------------
46,371,513
--------------
FOODS -- 0.4%
Universal Foods Corp............................ 542,000 14,905,000
--------------
FOREST PRODUCTS -- 0.6%
Mead Corp....................................... 455,900 22,168,137
--------------
FURNITURE -- 0.1%
Leggett & Platt, Inc............................ 128,700 4,504,500
--------------
GAS PIPELINES -- 0.4%
Enron Oil & Gas Co.............................. 332,700 6,238,125
+Seagull Energy Corp............................ 387,200 7,405,200
--------------
13,643,325
--------------
HOSPITAL MANAGEMENT -- 1.3%
+Healthtrust, Inc.-The Hospital Co.............. 735,700 23,358,475
National Medical Enterprises, Inc............... 1,650,000 23,306,250
--------------
46,664,725
--------------
HOUSING RELATED -- 0.8%
+Giant Cement Holdings, Inc..................... 415,200 4,930,500
+Owens-Corning Fiberglas Corp................... 662,800 21,209,600
--------------
26,140,100
--------------
INSURANCE -- 2.4%
Emphesys Financial Group, Inc................... 314,600 9,988,550
Equitable of Iowa Companies..................... 372,700 10,528,775
Financial Security Assurance Holdings, Ltd...... 226,200 4,750,200
National Re Corp................................ 207,600 5,449,500
PennCorp Financial Group, Inc................... 638,400 8,379,000
Provident Life & Accident Insurance Co. (Class
'B' Stock).................................... 177,200 3,854,100
TIG Holdings, Inc............................... 588,300 11,030,625
Trenwick Group, Inc............................. 276,200 11,703,975
W.R. Berkley Corp............................... 192,800 7,230,000
Western National Corp........................... 900,000 11,587,500
--------------
84,502,225
--------------
LEISURE -- 0.4%
+Caesars World, Inc............................. 213,100 14,224,424
--------------
MACHINERY -- 0.6%
DT Industries, Inc.............................. 234,500 2,520,875
+INDRESCO, Inc.................................. 390,700 5,567,475
Kaydon Corp..................................... 229,700 5,512,800
Parker-Hannifin Corp............................ 136,500 6,210,750
--------------
19,811,900
--------------
MEDIA -- 2.2%
Central Newspapers (Class 'A' Stock)............ 331,700 9,329,063
Comcast Corp. (Class 'A' Stock)................. 362,500 5,573,438
Comcast Corp. (Special Class 'A' Stock)......... 9,600 150,600
Lee Enterprises, Inc............................ 168,700 5,820,150
Media General, Inc. (Class 'A' Stock)........... 123,600 3,507,150
+Tele-Communications, Inc. (Class 'A' Stock).... 848,200 18,448,350
Time Warner, Inc................................ 599,500 21,057,437
Times Mirror Co. (Class 'A' Stock).............. 400,000 12,550,000
--------------
76,436,188
--------------
</TABLE>

B10

<PAGE>

CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY -- 4.8%
American Publishing Co. (Class 'A' Stock)....... 161,400 $ 1,775,400
BW/IP, Inc. (Class 'A' Stock)................... 379,200 6,493,800
Danaher Corp.................................... 227,800 11,902,550
Diebold, Inc.................................... 421,400 17,330,075
Donaldson Company, Inc.......................... 400,400 9,609,600
+Enterra Corp................................... 280,300 5,325,700
+FMC Corp....................................... 110,800 6,398,700
+IDEX Corp...................................... 190,400 8,044,400
+Itel Corp...................................... 168,700 5,841,238
ITT Corp........................................ 144,000 12,762,000
+Litton Industries, Inc......................... 259,700 9,608,900
Mark IV Industries, Inc......................... 545,300 10,769,675
Mascotech, Inc.................................. 607,300 7,818,988
Pentair, Inc.................................... 472,950 19,982,137
+SPS Transaction Services, Inc.................. 192,800 5,061,000
Textron, Inc.................................... 96,400 4,856,150
Trinity Industries, Inc......................... 385,500 12,143,250
+Wolverine Tube, Inc............................ 279,500 6,638,125
York International Corp......................... 199,000 7,338,125
--------------
169,699,813
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.0%
Eastman Kodak Co................................ 372,300 17,777,325
Whitman Corp.................................... 913,400 15,756,150
--------------
33,533,475
--------------
PETROLEUM -- 0.9%
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 594,400 8,618,800
Elf Aquitaine, ADR.............................. 530,100 18,686,025
Parker & Parsley Petroleum Co................... 257,800 5,284,900
--------------
32,589,725
--------------
PETROLEUM SERVICES -- 0.7%
+Mesa, Inc...................................... 1,008,400 4,915,950
Murphy Oil Corp................................. 190,800 8,109,000
Oryx Energy Co.................................. 849,400 10,086,625
--------------
23,111,575
--------------
RAILROADS -- 1.1%
Burlington Northern, Inc........................ 259,000 12,464,375
+Chicago & North Western Transportation Co...... 671,600 12,928,300
Illinois Central Corp........................... 440,000 13,530,000
--------------
38,922,675
--------------
REAL ESTATE DEVELOPMENT -- 0.7%
Zeneca Group, PLC, ADR.......................... 607,200 24,971,100
--------------
RESTAURANTS -- 0.4%
Morrison Restaurants, Inc....................... 350,300 8,582,350
+Shoney's, Inc.................................. 530,100 6,758,775
--------------
15,341,125
--------------
RETAIL -- 1.3%
+Best Products Corp., Inc....................... 1,081,600 7,030,400
+Caldor Corp.................................... 382,100 8,501,725
Harcourt General, Inc........................... 277,500 9,781,875
K mart Corp..................................... 621,400 8,078,200
Rite Aid Corp................................... 258,200 6,035,425
Sears, Roebuck & Co............................. 139,800 6,430,800
--------------
45,858,425
--------------
RUBBER -- 0.3%
Goodyear Tire & Rubber Co....................... 269,800 9,072,024
--------------
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
STEEL -- 0.3%
+Material Sciences Corp......................... 675,000 $ 10,715,624
--------------
TELECOMMUNICATIONS -- 1.6%
+Airtouch Communications, Inc................... 385,500 11,227,688
Century Telephone Enterprises, Inc.............. 337,300 9,950,350
MCI Communications Corp......................... 661,100 12,147,713
+Nextel Communications, Inc. (Class 'A'
Stock)........................................ 495,400 7,121,375
Rochester Telephone Corp........................ 797,700 16,851,412
--------------
57,298,538
--------------
TEXTILES -- 0.4%
+Owens-Illinois, Inc............................ 552,700 6,079,700
V.F. Corp....................................... 181,900 8,844,888
--------------
14,924,588
--------------
TRUCKING/SHIPPING -- 0.2%
Ryder System, Inc............................... 385,500 8,481,000
--------------
TOTAL COMMON STOCKS
(Cost $1,152,952,120).......................................... 1,218,998,355
--------------
<CAPTION>

PAR MARKET
LONG-TERM BONDS -- 27.3% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 5.2%
Associates Corp. of North America,
6.875%, 01/15/97.............................. $ 5,250,000 $ 5,117,018
8.250%, 12/01/99.............................. 34,100,000 33,900,515
8.375%, 01/15/98.............................. 1,100,000 1,099,989
Banc One Credit Card Master Trust, CMO,
7.750%, 12/15/99, Series 1994-B, Class B...... 5,100,000 5,036,250
%Chrysler Financial Corp.,
3.813%, 11/15/96.............................. 13,200,000 13,264,415
Chrysler Financial Corp., M.T.N.,
5.390%, 08/27/96, Tranche #TR00041............ 7,300,000 7,005,810
CIGNA Mortgage Securities, Inc.,
9.400%, 01/15/02, Series 1988-1, Class A2..... 3,362,186 3,329,614
Citicorp, M.T.N.,
8.500%, 02/24/97, Tranche #TR00128............ 5,100,000 5,131,263
Dean Witter, Discover & Co.,
6.000%, 03/01/98.............................. 2,500,000 2,334,275
Discover Card Trust,
7.875%, 04/16/98, Series #1991-C, Class B..... 10,000,000 9,959,300
Federal Express Corp., M.T.N.,
10.010%, 06/01/98, Tranche #SR00067........... 3,000,000 3,101,790
10.050%, 06/15/99, Tranche #SR00068........... 500,000 521,055
First Union Corp.,
9.450%, 06/15/99.............................. 4,000,000 4,112,080
Ford Credit Grantor Trust, CMO,
7.300%, 10/15/99, Series 1994-8, Class A...... 11,669,941 11,527,714
Ford Motor Credit Co.,
7.750%, 11/15/02.............................. 3,300,000 3,146,979
General Motors Acceptance Corp.,
8.250%, 08/01/96.............................. 5,000,000 4,985,950
</TABLE>

B11

<PAGE>

CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
General Motors Acceptance Corp., M.T.N.,
6.300%, 09/10/97, Tranche #TR00532............ $ 5,000,000 $ 4,735,700
6.500%, 06/10/96.............................. 13,000,000 12,725,960
7.375%, 07/20/98, Tranche #TR00667............ 4,650,000 4,474,184
7.500%, 11/04/97, Tranche #TR00598............ 15,000,000 14,602,050
7.850%, 03/05/97, Tranche #TR00187............ 3,300,000 3,259,938
Mellon Financial Co.,
6.500%, 12/01/97.............................. 1,650,000 1,577,565
Standard Credit Card Master Trust,
7.250%, 04/07/08, Series 1994-2A, Class A..... 4,650,000 4,237,313
Standard Credit Card Trust,
9.375%, 03/10/96, Series 1990-1............... 7,000,000 7,028,420
Union Bank Finland, Ltd.,
5.250%, 06/15/96.............................. 16,650,000 15,942,542
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #00248.............. 2,600,000 2,606,968
--------------
184,764,657
--------------
FOREIGN -- 4.5%
**Banco Del Estado-Chile,
8.390%, 08/01/01.............................. 3,700,000 3,487,250
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 7,300,000 7,081,000
**%Cemex, SA,
6.250%, 10/25/95, Series B.................... 4,250,000 4,165,000
**Cemex, SA, M.T.N.,
9.500%, 09/20/01, Tranche #TR00010............ 12,500,000 10,625,000
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 10,000,000 8,187,500
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 5,190,000 4,411,500
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 7,342,500
Financiera Energetic Nacional,
6.625%, 12/13/96.............................. 5,000,000 4,800,000
**Financiera Energetic Nacional, M.T.N.,
9.000%, 11/08/99.............................. 9,900,000 9,420,432
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 5,150,000 5,107,352
**Grupo Condumex, SA, M.T.N.,
6.250%, 07/27/96.............................. 4,300,000 3,827,000
**Grupo Embotellador Mexicana,
10.750%, 11/19/97............................. 8,015,000 7,133,350
Grupo Televisa, SA,
10.000%, 11/09/97............................. 7,250,000 6,561,250
%Hydro-Quebec,
3.438%, 09/30/49.............................. 3,500,000 2,925,780
**Kansallis-Osake Pankki, N.Y.,
8.650%, 12/29/49.............................. 10,000,000 9,675,000
Kansallis-Osake Pankki, N.Y., C.D.,
6.125%, 05/15/98.............................. 6,160,000 5,715,494
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Korea Development Bank,
5.875%, 12/01/98.............................. $ 1,900,000 $ 1,727,290
6.750%, 12/01/05.............................. 10,400,000 8,811,504
9.250%, 06/15/98.............................. 10,000,000 10,159,300
Korea Electric Power Corp.,
7.750%, 04/01/13.............................. 2,350,000 2,038,343
Republic of Columbia,
7.125%, 05/11/98.............................. 2,775,000 2,548,664
7.250%, 02/23/04.............................. 5,400,000 4,448,250
8.750%, 10/06/99.............................. 925,000 882,219
Republic of South Africa,
9.625%, 12/15/99.............................. 8,200,000 8,120,563
**Republic of Trinidad and Tobago,
11.750%, 10/03/04............................. 9,300,000 9,416,250
United Mexican States,
5.820%, 06/28/01.............................. 1,375,000 976,250
6.970%, 08/12/00.............................. 2,300,000 1,771,000
8.500%, 09/15/02.............................. 6,850,000 5,514,250
--------------
156,879,291
--------------
INDUSTRIAL -- 4.3%
Arkla, Inc., M.T.N.,
9.250%, 12/18/97, Tranche #TR00027............ 3,000,000 2,988,840
Avenor, Inc.,
9.375%, 02/15/04.............................. 11,225,000 10,590,086
Coca-Cola Enterprises, Inc.,
6.500%, 11/15/97.............................. 3,750,000 3,582,975
Columbia/HCA Healthcare Corp., M.T.N.,
8.850%, 01/01/07, Tranche #TR00009............ 12,700,000 12,674,600
Comdisco, Inc.,
8.950%, 05/15/95.............................. 19,420,000 19,533,800
Delta Air Lines, Inc.,
9.750%, 05/15/21.............................. 10,800,000 9,927,575
10.375%, 02/01/11............................. 6,850,000 6,697,040
**Enterprise Rent A Car, M.T.N.,
8.750%, 12/15/99.............................. 13,750,000 13,702,563
Ford Motor Co.,
9.000%, 09/15/01.............................. 3,900,000 3,979,482
Hanson Overseas Corp.,
5.500%, 01/15/96.............................. 2,000,000 1,953,980
News America Holdings, Inc.,
7.750%, 01/20/24.............................. 4,550,000 3,716,304
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013............ 12,000,000 11,550,000
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 8,950,000 8,726,250
RJR Nabisco, Inc.,
8.625%, 12/01/02.............................. 14,350,000 13,310,056
8.750%, 08/15/05.............................. 2,550,000 2,324,886
Sears, Roebuck & Co., M.T.N.,
9.420%, 04/01/96, Series IV................... 1,000,000 1,018,625
Sears, Roebuck Acceptance Corp.,
9.000%, 09/15/96.............................. 2,000,000 2,024,140
Tele-Communications, Inc.,
7.875%, 08/01/13.............................. 6,800,000 5,664,060
9.875%, 06/15/22.............................. 4,700,000 4,606,658
**Time Warner, Inc.,
6.050%, 07/01/95.............................. 8,000,000 7,933,040
</TABLE>

B12

<PAGE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Asset Securitization Cooperative Corp.,
5.500%, 01/23/95.............................. $ 9,000,000 $ 8,972,500
5.970%, 02/02/95.............................. 6,000,000 5,970,150
6.050%, 02/01/95.............................. 12,800,000 12,737,618
Bankers Trust New York Corp.,
5.150%, 04/03/95.............................. 25,637,000 25,306,924
5.440%, 01/24/95.............................. 17,200,000 17,145,419
Barclays Bank, PLC,
6.100%, 02/17/95.............................. 500,000 496,188
Chrysler Financial Corp.,
5.750%, 01/17/95.............................. 23,000,000 22,948,569
CIESCO,
5.500%, 01/11/95.............................. 5,000,000 4,993,889
CIT Group Holdings, Inc.,
5.500%, 01/17/95.............................. 13,000,000 12,972,194
5.970%, 02/01/95.............................. 14,000,000 13,932,672
Coca-Cola Enterprises, Inc.,
6.015%, 02/01/95.............................. 23,000,000 22,888,555
6.120%, 01/31/95.............................. 31,970,000 31,817,823
6.170%, 03/07/95.............................. 4,900,000 4,847,092
Corporate Receivables Corp.,
6.170%, 03/07/95.............................. 47,000,000 46,492,518
6.570%, 05/23/95.............................. 11,100,000 10,816,395
Dean Witter, Discover & Co.,
5.970%, 02/01/95.............................. 7,344,000 7,308,680
Deerfield Capital,
6.090%, 01/17/95.............................. 19,900,000 19,852,870
Duracell, Inc.,
6.300%, 02/10/95.............................. 2,000,000 1,986,700
Falcon Asset Securitization Corp.,
6.100%, 01/13/95.............................. 11,000,000 10,981,360
6.170%, 03/07/95.............................. 8,975,000 8,878,092
General Electric Capital Corp.,
6.430%, 04/13/95.............................. 6,150,000 6,040,154
6.450%, 04/13/95-04/18/95..................... 36,350,000 35,684,396
General Motors Acceptance Corp.,
5.740%, 01/17/95.............................. 60,500,000 60,364,951
Golden Peanut Co.,
5.600%, 02/01/95-02/03/95..................... 9,500,000 9,455,589
Greyhound Financial Corp.,
6.180%, 02/16/95.............................. 7,649,000 7,591,225
6.290%, 02/08/95.............................. 5,000,000 4,968,550
6.300%, 01/27/95.............................. 7,000,000 6,970,600
6.330%, 02/07/95.............................. 2,000,000 1,987,692
Hanson Finance, PLC,
5.470%, 01/17/95.............................. 2,000,000 1,995,746
6.260%, 03/03/95.............................. 5,000,000 4,948,703
6.270%, 03/09/95.............................. 13,000,000 12,852,829
6.280%, 03/01/95.............................. 4,000,000 3,960,227
Heller Financial, Inc.,
6.300%, 03/14/95.............................. 6,000,000 5,926,500
International Lease Finance Corp.,
6.200%, 03/20/95.............................. 10,000,000 9,869,111
ITT Corp.,
5.820%, 01/17/95.............................. 7,000,000 6,984,157
ITT Financial Corp.,
6.200%, 01/20/95.............................. 28,000,000 27,918,022
Maguire/Thomas Partners,
6.100%, 01/18/95.............................. 5,000,000 4,987,292
MCA Funding Corp.,
5.100%, 01/09/95.............................. 5,000,000 4,995,750
5.120%, 01/17/95.............................. 22,000,000 21,956,196
</TABLE>

B13

<PAGE>

CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
McKenna Triangle National Corp.,
6.100%, 01/23/95.............................. $ 1,000,000 $ 996,611
Merrill Lynch & Co., Inc.,
5.750%, 01/17/95.............................. 15,000,000 14,966,458
Morgan Stanley Group, Inc.,
6.270%, 03/01/95.............................. 8,500,000 8,415,616
National Australia Funding, Inc.,
5.600%, 02/01/95.............................. 2,000,000 1,990,978
NationsBank Corp. of North Carolina,
5.400%, 01/23/95.............................. 19,000,000 18,943,000
Newell Co.,
6.000%, 01/05/95.............................. 21,054,000 21,046,982
Preferred Receivables Funding Corp.,
5.650%, 01/11/95.............................. 13,000,000 12,983,678
Public Service Electric & Gas Co.,
6.020%, 01/17/95.............................. 11,000,000 10,974,248
Republic National Bank of New York,
5.750%, 02/01/95.............................. 5,000,000 4,999,985
Sears Roebuck Acceptance Corp.,
6.050%, 02/07/95.............................. 37,000,000 36,782,368
State Street Bank & Trust,
5.950%, 01/17/95.............................. 33,377,000 33,299,769
WCP Funding, Inc.,
6.280%, 03/06/95.............................. 4,000,000 3,956,738
Westpac Capital Corp.,
6.280%, 03/14/95.............................. 6,000,000 5,926,733
Whirlpool Corp.,
5.660%, 02/02/95.............................. 2,000,000 1,990,567
Whirlpool Financial Corp.,
5.600%, 02/06/95-02/09/95..................... 3,000,000 2,983,667
5.610%, 02/10/95.............................. 5,000,000 4,970,392
WMX Technologies,
5.200%, 05/12/95.............................. 4,000,000 3,925,467
5.225%, 02/07/95.............................. 3,000,000 2,984,760
Xerox Credit Corp.,
5.970%, 02/01/95.............................. 32,000,000 31,846,107
--------------
835,855,703
--------------
MEDIUM TERM NOTES -- 2.4%
PNC Bank N.A., M.T.N.,
5.150%, 02/22/95, Tranche #TR00005............ 10,000,000 10,000,066
%Corestates Capital Corp., M.T.N.,
6.020%, 07/19/95, Tranche #TR00076............ 10,000,000 10,002,084
**%Goldman Sachs Group, L.P., M.T.N.,
3.875%, 04/13/95.............................. 48,000,000 48,000,000
%Xerox Credit Corp., M.T.N.,
6.800%, 06/02/95, Tranche #TR00016............ 15,000,000 15,003,075
--------------
83,005,225
--------------
PROMISSORY NOTES -- 1.3%
Diamond Lease USA, Inc.,
6.100%, 01/18/95.............................. 1,000,000 997,458
Lehman Brothers Holdings, Inc.,
5.028%, 05/23/95.............................. 32,000,000 32,000,000
Seiko Corporation of America,
6.100%, 01/20/95.............................. 3,000,000 2,991,358
SRD Finance, Inc.,
6.100%, 01/12/95.............................. 3,000,000 2,995,425
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
Sumitomo Electric Finance U.S.A., Inc.,
6.050%, 01/26/95.............................. $ 8,000,000 $ 7,969,078
--------------
46,953,319
--------------
REPURCHASE AGREEMENTS -- 3.5%
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. 121,345,000 121,345,000
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 1,293,541,023
--------------
OTHER ASSETS -- 1.0%
(net of liabilities)........................................... 32,150,567
--------------
TOTAL NET ASSETS -- 100.0%....................................... $3,501,104,286
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
C.D. Certificates of Deposit
CMO Collateralized Mortgage Obligations
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)
T.D. Time Deposit

**Indicates a restricted security; the aggregate cost of the restricted
securities is $148,547,029. The aggregate value, $142,653,385 is
approximately 4.1% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1994.

%Indicates a variable rate security.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

B14

<PAGE>

AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO

DECEMBER 31, 1994

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Pfizer, Inc..................................... 285,300 $ 22,039,425
Schering-Plough Corp............................ 350,100 25,907,400
+Thermotrex Corp................................ 354,100 4,780,350
--------------
92,153,763
--------------
ELECTRICAL EQUIPMENT -- 1.2%
Baldor Electric Co.............................. 489,440 13,214,880
Belden, Inc..................................... 409,700 9,115,825
W.W. Grainger, Inc.............................. 177,600 10,256,400
Westinghouse Electric Corp...................... 674,200 8,258,950
--------------
40,846,055
--------------
ELECTRONICS -- 2.0%
+ADT Ltd........................................ 1,314,400 14,129,800
Emerson Electric Co............................. 883,800 55,237,500
--------------
69,367,300
--------------
FINANCIAL SERVICES -- 2.2%
Dean Witter, Discover & Co...................... 903,400 30,602,675
Federal Home Loan Mortgage Corp................. 403,700 20,386,850
GFC Financial Corp.............................. 232,400 7,378,700
Manufactured Home Communities, Inc.............. 717,900 14,268,262
T. Rowe Price & Associates...................... 170,200 5,106,000
--------------
77,742,487
--------------
FOODS -- 2.4%
Archer-Daniels-Midland Co....................... 3,512,040 72,435,825
Pioneer Hi-Bred International, Inc.............. 301,500 10,401,750
--------------
82,837,575
--------------
FOREST PRODUCTS -- 1.8%
Caraustar Industries, Inc....................... 419,500 9,333,875
International Paper Co.......................... 134,800 10,160,550
Willamette Industries, Inc...................... 881,200 41,857,000
--------------
61,351,425
--------------
GAS PIPELINES -- 0.3%
+Seagull Energy Corp............................ 535,400 10,239,525
--------------
HEALTHCARE -- 0.2%
+Sybron International Corp...................... 205,100 7,075,950
--------------
HOSPITAL MANAGEMENT -- 2.1%
Columbia / HCA Healthcare Corp.................. 840,442 30,676,132
+Health Care and Retirement Corp................ 576,400 17,364,050
+Healthtrust, Inc.-The Hospital Co.............. 374,700 11,896,725
+Homedco Group, Inc............................. 111,500 4,195,188
National Medical Enterprises, Inc............... 583,600 8,243,350
--------------
72,375,445
--------------
INSURANCE -- 3.4%
American International Group, Inc............... 411,800 40,356,400
CCP Insurance, Inc.............................. 74,800 1,524,050
Chubb Corp...................................... 302,000 23,367,250
General Re Corp................................. 323,900 40,082,625
NAC Re Corp..................................... 277,400 9,292,900
PennCorp Financial Group, Inc................... 256,100 3,361,313
--------------
117,984,538
--------------
LEISURE -- 1.3%
Carnival Corp. (Class 'A' Stock)................ 1,755,500 37,304,375
Royal Caribbean Cruise, Ltd..................... 233,600 6,657,600
--------------
43,961,975
--------------
MACHINERY -- 0.1%
+Thermo Fibertek, Inc........................... 219,800 3,489,325
--------------
</TABLE>

B15

<PAGE>

AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
MEDIA -- 3.4%
American Media, Inc. (Class 'A' Stock).......... 408,600 $ 6,639,750
Capital Cities/ABC, Inc......................... 347,400 29,615,850
Comcast Corp. (Class 'A' Stock)................. 276,000 4,243,500
Gannett Co., Inc................................ 400,000 21,300,000
+Rogers Communications, Inc. (Class 'B'
Stock)........................................ 350,100 4,679,441
Shaw Communications, Inc. (Class 'B' Stock)..... 703,700 5,016,572
+Tele-Communications, Inc. (Class 'A' Stock).... 1,107,200 24,081,600
Tribune Co...................................... 420,400 23,016,900
--------------
118,593,613
--------------
MINERAL RESOURCES -- 1.8%
Placer Dome, Inc................................ 912,000 19,836,000
Potash Corp. of Saskatchewan, Inc............... 876,500 29,801,000
+Sante Fe Pacific Gold Corp..................... 950,300 12,235,112
--------------
61,872,112
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 6.1%
+American Business Information, Inc............. 624,500 11,553,250
Danaher Corp.................................... 110,300 5,763,175
Expeditors International of Washington, Inc..... 359,000 7,808,250
General Electric Co............................. 660,800 33,700,800
Illinois Tool Works, Inc........................ 936,600 40,976,250
Libbey, Inc..................................... 323,600 5,663,000
Martin Marietta Materials, Inc.................. 631,800 11,214,450
Modine Manufacturing Co......................... 308,900 8,880,875
Pentair, Inc.................................... 258,200 10,908,950
+Scholastic Corp................................ 139,800 7,129,800
The Rival Co.................................... 181,700 3,179,750
+Thermo Electron Corp........................... 563,100 25,269,113
Tyco International Ltd.......................... 881,600 41,876,000
--------------
213,923,663
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.7%
+DeVRY, Inc..................................... 380,100 11,783,100
Kellwood Co..................................... 533,900 11,211,900
--------------
22,995,000
--------------
PETROLEUM -- 2.5%
Amoco Corp...................................... 401,000 23,709,125
Royal Dutch Petroleum Co., ADR.................. 586,300 63,027,250
--------------
86,736,375
--------------
PETROLEUM SERVICES -- 0.8%
+Mesa, Inc...................................... 1,037,800 5,059,275
Total SA, ADR................................... 739,100 21,803,450
--------------
26,862,725
--------------
RAILROADS -- 0.3%
Illinois Central Corp........................... 372,700 11,460,525
--------------
REAL ESTATE DEVELOPMENT -- 1.6%
Crescent Real Estate Equities, Inc.............. 480,600 13,036,275
Duke Realty Investments, Inc.................... 434,000 12,260,500
Equity Residential Properties Trust............. 451,100 13,533,000
Federal Realty Investment Trust................. 285,200 5,882,250
Weingarten Realty Investors..................... 306,800 11,620,050
--------------
56,332,075
--------------
RESTAURANTS -- 0.2%
Sbarro, Inc..................................... 342,900 8,915,400
--------------
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
RETAIL -- 2.0%
Dayton-Hudson Corp.............................. 307,400 $ 21,748,550
Edison Brothers Stores.......................... 143,400 2,652,900
Harcourt General, Inc........................... 468,800 16,525,200
Tiffany & Co.................................... 203,300 7,928,700
+Toys 'R' Us, Inc............................... 707,400 21,575,700
--------------
70,431,050
--------------
STEEL -- 2.1%
Broken Hill Proprietary Co., Ltd., ADR.......... 539,050 33,218,955
+LTV Corp....................................... 933,000 15,161,250
Worthington Industries, Inc..................... 1,206,100 24,122,000
--------------
72,502,205
--------------
TELECOMMUNICATIONS -- 2.4%
+Airtouch Communications, Inc................... 527,900 15,375,088
AT&T Corp....................................... 846,200 42,521,550
TCA Cable TV, Inc............................... 482,300 10,490,025
Telecomunicacoes Brasileiras, SA, ADR........... 39,700 1,776,455
Telefonos de Mexico (Class 'L' Stock), ADR...... 290,000 11,890,000
--------------
82,053,118
--------------
TEXTILES -- 0.4%
Russell Corp.................................... 168,900 5,299,237
Unifi, Inc...................................... 272,500 6,948,750
--------------
12,247,987
--------------
TOBACCO -- 1.1%
Philip Morris Companies, Inc.................... 438,900 25,236,750
UST, Inc........................................ 463,400 12,859,350
--------------
38,096,100
--------------
TOTAL COMMON STOCKS
(Cost $1,884,990,437).......................................... 2,046,142,938
--------------
<CAPTION>

PAR MARKET
LONG-TERM BONDS -- 24.6% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 3.1%
Associates Corp. of North America,
8.250%, 12/01/99.............................. $ 33,900,000 $ 33,701,685
Banc One Credit Card Master Trust, CMO,
7.750%, 12/15/99, Series 1994-B, Class B...... 5,000,000 4,937,500
Chase Manhattan Credit Card Trust,
7.400%, 05/15/00, Series 1992-1............... 5,000,000 4,921,850
Ford Credit Grantor Trust, CMO,
7.300%, 10/15/99, TR 1994-8, Class A.......... 13,614,932 13,449,000
Ford Motor Credit Co.,
7.750%, 11/15/02.............................. 2,815,000 2,684,468
General Motors Acceptance Corp., M.T.N.,
6.500%, 06/10/96.............................. 10,000,000 9,789,200
7.000%, 05/19/97, Tranche #TR00401............ 10,000,000 9,683,700
7.000%, 06/02/97, Tranche #TR00476............ 6,000,000 5,806,980
7.375%, 07/20/98, Tranche #TR00667............ 4,500,000 4,329,855
7.850%, 03/05/97, Tranche #TR00187............ 3,200,000 3,161,153
</TABLE>

B16

<PAGE>

AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
%MBNA Master Credit Card Trust, CMO,
5.495%, 01/15/02, Series 1994-1, Class A...... $ 7,500,000 $ 7,480,313
Standard Credit Card Master Trust, CMO,
7.250%, 04/07/08, Series 1994-2A, Class A..... 4,500,000 4,100,625
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #TR00248............ 3,330,000 3,338,924
--------------
107,385,253
--------------
FOREIGN -- 4.4%
**Banco Del Estado-Chile,
8.390%, 08/01/01.............................. 3,500,000 3,298,750
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 7,300,000 7,081,000
**Cemex, SA,
8.875%, 06/10/98.............................. 5,000,000 4,387,500
**Cemex, SA, M.T.N.,
9.500%, 09/20/01, Tranche #TR00010............ 12,500,000 10,625,000
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 7,250,000 5,935,938
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 15,100,000 12,835,000
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 7,342,500
Empresas La Moderna, SA,
10.250%, 11/12/97............................. 2,000,000 1,750,000
Financiera Energetic Nacional,
6.625%, 12/13/96.............................. 5,100,000 4,896,000
**Financiera Energetic Nacional, M.T.N.,
9.000%, 11/08/99.............................. 9,900,000 9,420,432
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 3,700,000 3,669,359
**Grupo Embotellador Mexicana,
10.750%, 11/19/97............................. 8,020,000 7,137,800
Grupo Televisa, SA,
10.000%, 11/09/97............................. 4,000,000 3,620,000
**Kansallis-Osake Pankki, N.Y.,
8.650%, 12/29/49.............................. 9,000,000 8,707,500
Korea Development Bank,
5.875%, 12/01/98.............................. 1,900,000 1,727,290
6.750%, 12/01/05.............................. 8,000,000 6,778,080
9.250%, 06/15/98.............................. 10,400,000 10,565,672
Korea Electric Power Corp.,
7.750%, 04/01/13.............................. 2,225,000 1,929,921
New Zealand Government,
9.875%, 01/15/11.............................. 7,300,000 8,225,713
Republic of Columbia,
7.125%, 05/11/98.............................. 2,700,000 2,479,782
7.250%, 02/23/04.............................. 4,100,000 3,377,375
8.750%, 10/06/99.............................. 900,000 858,375
Republic of South Africa,
9.625%, 12/15/99.............................. 8,300,000 8,219,593
**Republic of Trinidad and Tobago,
11.750%, 10/03/04............................. 9,000,000 9,112,500
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
United Mexican States,
5.820%, 06/28/01.............................. $ 1,375,000 $ 976,250
6.970%, 08/12/00.............................. 2,300,000 1,771,000
8.500%, 09/15/02.............................. 6,925,000 5,574,625
--------------
152,302,955
--------------
INDUSTRIAL -- 5.3%
Avenor, Inc.,
9.375%, 02/15/04.............................. 11,100,000 10,472,156
Columbia/HCA Healthcare Corp., M.T.N.,
8.850%, 01/01/07, Tranche #TR00009............ 15,400,000 15,369,200
Delta Air Lines, Inc.,
7.710%, 05/14/97.............................. 1,300,000 1,238,328
9.750%, 05/15/21.............................. 10,790,000 9,918,384
9.875%, 01/01/98.............................. 27,650,000 27,964,381
10.375%, 02/01/11............................. 6,950,000 6,794,807
Enterprise Rent A Car, M.T.N.,
8.750%, 12/15/99, Tranche #TR00001............ 13,750,000 13,702,563
Fleming Companies, Inc., C.D.,
10.625%, 12/15/01............................. 28,000,000 28,000,000
Ford Motor Co.,
9.000%, 09/15/01.............................. 3,000,000 3,061,140
News America Holdings, Inc.,
7.750%, 01/20/24.............................. 4,650,000 3,797,981
%Occidental Petroleum Corp., M.T.N.,
6.312%, 11/04/99.............................. 5,000,000 4,960,460
Oryx Energy Co.,
9.300%, 05/01/96.............................. 2,350,000 2,330,355
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013............ 10,500,000 10,106,250
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 7,600,000 7,410,000
RJR Nabisco, Inc.,
8.625%, 12/01/02.............................. 14,080,000 13,059,621
8.750%, 08/15/05.............................. 2,500,000 2,279,300
Tele-Communications, Inc.,
7.875%, 08/01/13.............................. 7,000,000 5,830,650
9.875%, 06/15/22.............................. 4,700,000 4,606,657
Transco Energy,
9.125%, 05/01/98.............................. 14,000,000 14,017,500
--------------
184,919,733
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 11.8%
Federal National Mortgage Association,
Zero Coupon, 07/05/14......................... 10,000,000 2,035,200
Government National Mortgage Association,
8.950%, 10/15/28, Pool #222286................ 4,024,004 4,000,514
United States Treasury Bonds,
6.250%, 08/15/23.............................. 21,510,000 17,486,985
8.875%, 08/15/17.............................. 53,900,000 58,717,043
8.875%, 02/15/19, Series 2019................. 29,800,000 32,537,726
9.250%, 02/15/16, Series 2016................. 16,200,000 18,227,592
11.250%, 02/15/15............................. 119,750,000 158,219,688
12.000%, 08/15/13............................. 17,250,000 22,937,153
United States Treasury Notes,
6.500%, 08/15/97.............................. 15,000,000 14,545,350
7.500%, 10/31/99, Series 1999................. 42,250,000 41,642,445
</TABLE>

B17

<PAGE>

AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
7.750%, 11/30/99.............................. $ 16,125,000 $ 16,064,530
7.875%, 11/15/04.............................. 24,750,000 24,819,547
--------------
411,233,773
--------------
TOTAL LONG-TERM BONDS
(Cost $886,300,335)............................................ 855,841,714
--------------
<CAPTION>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
General Motors Acceptance Corp.,
5.740%, 01/17/95.............................. $ 16,100,000 $ 16,064,061
Greyhound Financial Corp.,
6.300%, 01/27/95.............................. 2,000,000 1,991,600
Hanson Finance, PLC,
6.280%, 03/01/95.............................. 1,000,000 990,057
Household Finance Corp.,
5.500%, 01/12/95.............................. 5,000,000 4,993,125
International Lease Finance Corp.,
6.200%, 03/20/95.............................. 5,000,000 4,934,556
ITT Corp.,
5.820%, 01/17/95.............................. 2,000,000 1,995,473
ITT Financial Corp.,
6.200%, 01/23/95.............................. 6,000,000 5,979,333
Konica Finance USA Corp.,
6.200%, 01/10/95.............................. 1,000,000 998,794
McKenna Triangle National Corp.,
6.150%, 01/17/95.............................. 100,000 99,761
Merrill Lynch & Co., Inc.,
5.750%, 01/17/95.............................. 5,000,000 4,988,819
Morgan Guaranty Trust Co.,
6.500%, 05/18/95.............................. 259,200 252,882
NationsBank Corp. of North Carolina,
5.400%, 01/23/95.............................. 11,000,000 10,967,000
Newell Co.,
6.000%, 01/05/95.............................. 8,946,000 8,943,018
Public Service Electric & Gas Co.,
6.020%, 01/10/95.............................. 8,700,000 8,689,816
Sears, Roebuck Acceptance Corp.,
6.050%, 02/06/95.............................. 10,000,000 9,942,861
Transamerica Corp.,
6.150%, 01/20/95.............................. 350,000 348,984
--------------
182,381,760
--------------
MEDIUM TERM NOTES -- 0.6%
NationsBank Corp. of Texas, M.T.N.,
6.030%, 01/31/95, Tranche #TR00023............ 5,000,000 5,000,000
PNC Bank N.A., M.T.N.,
5.150%, 02/22/95, Tranche #TR00005............ 5,000,000 5,000,033
%Xerox Credit Corp., M.T.N.,
6.800%, 06/02/95, Tranche #TR00016............ 10,000,000 10,002,050
--------------
20,002,083
--------------
PROMISSORY NOTES -- 0.1%
SRD Finance, Inc.,
6.150%, 01/12/95.............................. 3,000,000 2,995,388
Sumitomo Electric Finance U.S.A., Inc.,
6.050%, 01/26/95.............................. 2,000,000 1,992,269
--------------
4,987,657
--------------
</TABLE>

B18

<PAGE>

AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 9.5%
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. $ 330,700,000 $ 330,700,000
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 576,071,500
--------------
OTHER ASSETS -- 0.1%
(net of liabilities)........................................... 3,484,147
--------------
TOTAL NET ASSETS -- 100.0%....................................... $3,481,540,299
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
C.D. Certificates of Deposit
CMO Collateralized Mortgage Obligations
L.P. Limited Partnership
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

**Indicates a restricted security; the aggregate cost of the restricted
securities is $63,175,092. The aggregate value, $58,625,420 is
approximately 1.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1994.

%Indicates a variable rate security.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

B19

<PAGE>

HIGH YIELD BOND PORTFOLIO

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 0.7% SHARES VALUE
------------- --------------
<S> <C> <C>
BEVERAGES -- 0.0%
**+Dr. Pepper Bottling Holdings, Inc. (Class 'B'
Stock)........................................ 5,807 $ 20,325
--------------
CHEMICALS - SPECIALTY -- 0.1%
**+Thermadyne Holdings Corp. (Class 'B'
Stock)........................................ 3,787 45,444
--------------
CONTAINERS -- 0.0%
+Gaylord Container Corp. (Class 'A' Stock)...... 1,738 15,859
--------------
ELECTRONICS -- 0.2%
**+Berg Electronics Holding Corp................ 154,080 693,360
--------------
FINANCIAL SERVICES -- 0.0%
**+PM Holdings Corp............................. 1,103 0
--------------
FOODS -- 0.0%
**+Specialty Foods Acquisition Corp............. 30,000 22,500
--------------
HOUSING RELATED -- 0.0%
+U.S. Home Corp................................. 1,290 20,800
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.0%
+Total Renal Care, Inc. (Class 'B' Stock)....... 4,500 0
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.0%
**+Acme Boot, Inc............................... 1,250 0
--------------
PETROLEUM SERVICES -- 0.0%
+Mesa, Inc...................................... 6,417 31,283
--------------
RETAIL -- 0.0%
**+Loehmann's Holdings, Inc..................... 19,708 19,708
--------------
TOBACCO -- 0.4%
+RJR Nabisco Holdings Corp...................... 204,501 1,124,756
--------------
TOTAL COMMON STOCKS
(Cost $2,424,049).............................................. 1,994,035
--------------

MARKET
PREFERRED STOCKS -- 4.2% SHARES VALUE
------------- --------------
<S> <C> <C>
AIRLINES -- 0.0%
USAir Group, Inc. (Conv. Pfd.; Class 'B'
Stock)........................................ 5,000 75,625
--------------
BANKS AND SAVINGS & LOANS -- 0.4%
**Riggs National Corp., Series B................ 47,500 1,163,750
--------------
ELECTRONICS -- 0.6%
[Berg Electronics Holding Corp. (Class 'E'
Stock)........................................ 73,345 1,870,298
--------------
FINANCIAL SERVICES -- 0.2%
[SD Warren Co................................... 20,000 520,000
--------------
FOODS -- 0.1%
Pantry Pride, Inc. (Ex. Pfd.; Class 'B'
Stock)........................................ 2,950 281,725
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 1.3%
[FoxMeyer Health Corp. (Ex. Pfd.; Class 'A'
Stock)........................................ 7,533 241,056
[Harvard Industries, Inc. (Ex. Pfd.)............ 98,161 2,564,456
[Supermarkets General Holdings Corp. (Ex.
Pfd.)......................................... 56,670 1,246,740
--------------
4,052,252
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.0%
[+Pay 'n Pak Stores (Cum. Ex. Pfd.)............. 82,384 0
--------------
PETROLEUM-CANADIAN -- 0.1%
%+Gulf Canada Resources Ltd.,
Series 1...................................... 122,000 305,000
--------------
REAL ESTATE DEVELOPMENT -- 0.1%
[UDC Homes, Inc. (Ex. Pfd.)..................... 107,789 296,420
--------------
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
PREFERRED STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
RETAIL -- 0.9%
Color Tile, Inc................................. 10,000 $ 1,680,000
**Color Tile, Inc. (Class 'A' Stock)............ 47,500 1,187,500
Grand Union Holdings Corp. (Cum. Conv. Pfd.;
Class 'C' Stock).............................. 9,000 1,125
--------------
2,868,625
--------------
STEEL -- 0.3%
**Republic Engineered Steels, Inc............... 76,167 856,883
--------------
TELECOMMUNICATIONS -- 0.2%
Tele Communications, Inc. (Ex. Pfd.; Class 'B'
Stock)........................................ 9,900 559,350
--------------
TOTAL PREFERRED STOCKS
(Cost $16,088,791)............................................. 12,849,928
--------------
<CAPTION>

MARKET
RIGHTS AND WARRANTS -- 0.1% SHARES VALUE
------------- --------------
<S> <C> <C>
COMMUNICATIONS -- 0.0%
++Dial Call Communications, Inc. (Warrant)...... 3,793 4,741
--------------
CONTAINERS -- 0.1%
++Gaylord Container Corp. (Warrant)............. 21,259 154,128
--------------
ENVIRONMENTAL SERVICES -- 0.0%
++ICF Kaiser International, Inc. (Warrant)...... 7,200 7,200
--------------
FINANCIAL SERVICES -- 0.0%
++SD Warren Co. (Warrant)....................... 20,000 0
--------------
HEALTHCARE -- 0.0%
++Eye Care Centers of America, Inc. (Warrant)... 1,250 0
--------------
HOUSING RELATED -- 0.0%
**++J.M. Peters Co., Inc. (Warrant)............. 9,875 0
++Miles Homes, Inc. (Warrant)................... 15,000 0
++U.S. Home Corp. (Class 'B' Warrant)........... 1,056 6,072
--------------
6,072
--------------
INDUSTRIAL -- 0.0%
++United International Holdings, Inc.
(Warrant)..................................... 6,000 0
--------------
LEISURE -- 0.0%
++Casino America, Inc. (Warrant)................ 6,526 1,000
++Casino Magic Finance Corp. (Warrant).......... 10,500 525
**++Louisiana Casino Cruise, Inc. (Warrant)..... 4,200 0
**++President Riverboat Casinos, Inc.
(Warrant)..................................... 15,000 7,500
++President Riverboat Casinos, Inc. (Warrant)... 22,075 11,038
--------------
20,063
--------------
LODGING -- 0.0%
++Santa Fe Hotel, Inc. (Warrant)................ 50 0
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.0%
++Berry Plastics Corp. (Warrant)................ 1,000 15,000
**++Fitzgerald's Gaming Corp. (Warrant)......... 500 0
++Foamex - JPS Automotive, L.P. (Warrant)....... 2,000 0
++Health O Meter, Inc. (Warrant)................ 1,000 0
**++Purity Supreme (Warrant).................... 5,198 104
**++Sam Houston Race Park (Warrant)............. 4,000 100
**++Southdown, Inc. (Warrant)................... 5,000 20,000
++Uniroyal Technology Corp.(Warrant)............ 12,500 6,250
--------------
41,454
--------------
</TABLE>

B20

<PAGE>

HIGH YIELD BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
RIGHTS AND WARRANTS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
RETAIL -- 0.0%
**++Apparel Ventures (Warrant).................. 500 $ 0
--------------
TELECOMMUNICATIONS -- 0.0%
**++Pagemart, Inc. (Warrant).................... 9,200 0
--------------
TOTAL RIGHTS AND WARRANTS
(Cost $130,633)................................................ 233,658
--------------
<CAPTION>

PAR MARKET
LONG-TERM BONDS -- 87.9% VALUE VALUE
------------- --------------
<S> <C> <C>
FINANCIAL -- 5.6%
American Financial Corp.,
12.000%, 09/03/99............................. $ 1,000,000 $ 1,002,500
12.000%, 09/03/99, Series A................... 500,000 501,250
GB Property Funding Corp.,
10.875%, 01/15/04............................. 1,000,000 810,000
Indah Kiat International Finance Co.,
12.500%, 06/15/06............................. 3,000,000 2,917,500
Lomas Mortgage USA, Inc.,
10.250%, 10/01/02............................. 1,250,000 1,037,500
*Mesa Capital Corp.,
Zero Coupon, 06/30/96-06/30/98................ 3,017,000 2,602,970
*PM Holdings Corp.,
Zero Coupon, 09/01/05, Series B............... 3,281,000 1,464,146
**PSF Finance, L.P.,
12.250%, 06/15/04............................. 1,000,000 1,005,000
Reliance Group Holdings, Inc.,
9.750%, 11/15/03.............................. 1,500,000 1,312,500
SD Warren Co.,
12.000%, 12/15/04............................. 1,750,000 1,789,375
Tiphook Finance Corp.,
7.125%, 05/01/98.............................. 593,000 432,890
8.000%, 03/15/00.............................. 1,940,000 1,358,000
*Transtar Holdings, L.P.,
Zero Coupon, 12/15/03, Series B............... 2,000,000 1,035,000
--------------
17,268,631
--------------
FOREIGN -- 1.1%
*Bell Cablemedia, PLC,
Zero Coupon, 07/15/04......................... 1,500,000 802,500
*Diamond Cable Communication, PLC,
Zero Coupon, 09/30/04......................... 2,000,000 980,000
**Tubos De Acero De Mexico, SA, M.T.N.,
13.750%, 12/08/99, Tranche #TR00001........... 1,000,000 955,000
*Videotron Holdings, PLC,
Zero Coupon, 07/01/04......................... 1,000,000 525,000
--------------
3,262,500
--------------
INDUSTRIAL -- 81.2%
Acme Boot, Inc.,
11.500%, 12/15/00, Series B................... 1,250,000 500,000
ACME Holdings, Inc.,
11.750%, 06/01/00............................. 2,500,000 1,050,000
Adelphia Communications Corp.,
&9.500%, 02/15/04, Series B................... 2,092,220 1,506,398
12.500%, 05/15/02............................. 1,500,000 1,402,500
Affinity Group, Inc.,
11.500%, 10/15/03............................. 1,500,000 1,432,500
American Media Operations, Inc.,
11.625%, 11/15/04............................. 1,000,000 1,025,000
*American Standard, Inc.,
Zero Coupon, 06/01/05......................... 1,250,000 803,125
Americold Corp.,
11.500%, 03/01/05, Series B................... 750,000 675,000
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
*Apparel Retailers, Inc.,
Zero Coupon, 08/15/05, Series B............... $ 5,500,000 $ 3,080,000
Apparel Ventures, Inc.,
12.250%, 12/31/00, Series B................... 500,000 447,500
Applied Extrusion Technologies, Inc.,
11.500%, 04/01/02, Series B................... 1,000,000 990,000
Arcadian Partners, L.P.,
10.750%, 05/01/05, Series B................... 2,500,000 2,350,000
Astrum International Corp.,
11.500%, 06/08/03............................. 389,000 390,945
Aztar Corp.,
11.000%, 10/01/02............................. 1,000,000 910,000
13.750%, 10/01/04............................. 1,500,000 1,522,500
Baldwin Co.,
10.375%, 08/01/03, Series B................... 1,750,000 945,000
Bally's Park Place Funding, Inc.,
9.250%, 03/15/04.............................. 2,000,000 1,720,000
*Bell & Howell Holdings Co.,
Zero Coupon, 03/01/05......................... 3,250,000 1,584,375
Berg Electronics, Inc.,
11.375%, 05/01/03............................. 1,000,000 992,500
Berry Plastics Corp.,
12.250%, 04/15/04............................. 1,000,000 965,000
Big Flower Press, Inc.,
10.750%, 08/01/03............................. 2,000,000 1,860,000
*Building Materials Corp. of America,
Zero Coupon, 07/01/04, Series B............... 3,000,000 1,530,000
Cablevision Industries Corp.,
9.250%, 04/01/08, Series B.................... 750,000 671,250
10.750%, 01/30/02............................. 1,000,000 995,000
Cablevision Systems Corp.,
9.875%, 02/15/13.............................. 1,000,000 900,000
*Call-Net Enterprises, Inc.,
Zero Coupon, 12/01/04......................... 2,000,000 1,045,000
Carrols Corp.,
11.500%, 08/15/03............................. 2,250,000 2,070,000
Casino America, Inc.,
11.500%, 11/15/01............................. 2,000,000 1,690,000
Casino Magic Finance Corp.,
11.500%, 10/15/01, Series B................... 1,750,000 1,120,000
*Cencall Communications Corp.,
Zero Coupon, 01/15/04......................... 500,000 175,000
Chancellor Broadcasting Co.,
12.500%, 10/01/04............................. 2,000,000 2,000,000
Charter Medical Corp.,
11.250%, 04/15/04, Series A................... 1,000,000 1,030,000
Chiquita Brands International, Inc.,
10.500%, 08/01/04............................. 327,000 320,460
11.500%, 06/01/01............................. 250,000 243,750
Clark R&M Holdings, Inc.,
Zero Coupon, 02/15/00, Series A............... 1,500,000 855,000
Clean Harbors, Inc.,
12.500%, 05/15/01............................. 1,000,000 957,500
CMI Industries, Inc.,
9.500%, 10/01/03.............................. 750,000 622,500
Cole National Group, Inc.,
11.250%, 10/01/01............................. 875,000 822,500
Color Tile, Inc.,
10.750%, 12/15/01............................. 2,000,000 1,760,000
Computervision Corp.,
10.875%, 08/15/97............................. 1,500,000 1,380,000
Container Corp. of America,
11.250%, 05/01/04, Series A................... 1,000,000 1,025,000
Continental Cablevision, Inc.,
9.500%, 08/01/13.............................. 1,000,000 915,000
Continental Homes Holding Corp.,
12.000%, 08/01/99............................. 1,000,000 940,000
</TABLE>

B21

<PAGE>

HIGH YIELD BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Dairy Mart Convenience Stores, Inc.,
10.250%, 03/15/04............................. $ 750,000 $ 555,000
Dan River, Inc.,
10.125%, 12/15/03............................. 1,000,000 900,000
**&Del Monte Corp.,
12.250%, 09/01/02............................. 2,388,000 2,220,840
Di Giorgio Corp.,
12.000%, 02/15/03............................. 1,500,000 1,440,000
*Dial Call Communications, Inc.,
Zero Coupon, 04/15/04-12/15/05................ 3,250,000 1,077,500
Doehler-Jarvis, Inc.,
11.875%, 06/01/02............................. 3,000,000 2,940,000
Domtar, Inc.,
11.750%, 03/15/99............................. 1,000,000 1,027,500
12.000%, 04/15/01............................. 1,000,000 1,040,000
Engle Homes, Inc,
11.750%, 12/15/00............................. 1,000,000 920,000
Eye Care Centers of America, Inc.,
12.000%, 10/01/03............................. 1,250,000 975,000
Fairchild Corp.,
13.125%, 03/15/06............................. 655,000 563,300
Fairchild Industries, Inc.,
12.250%, 02/01/99............................. 2,480,000 2,380,800
Family Restaurants, Inc.,
*Zero Coupon, 02/01/04........................ 1,800,000 954,000
9.750%, 02/01/02.............................. 1,250,000 981,250
Farm Fresh, Inc.,
12.250%, 10/01/00............................. 1,500,000 1,300,000
Federated Department Stores,
11.290%, 06/30/02, Series B................... 250,000 252,188
***Fitzgerald's Gaming Corp.,
Zero Coupon, 03/15/96......................... 500,000 270,000
Flagstar Corp.,
10.750%, 09/15/01............................. 1,250,000 1,171,875
11.250%, 11/01/04............................. 2,567,000 2,117,775
Florida Steel Corp.,
11.500%, 12/15/00............................. 500,000 490,000
Florsheim Shoe Co.,
12.750%, 09/01/02............................. 1,000,000 970,000
Foamex, L.P.,
11.250%, 10/01/02............................. 1,500,000 1,425,000
*Foamex - JPS Automotive, L.P.,
Zero Coupon, 07/01/04, Series B............... 2,000,000 1,050,000
Food 4 Less Supermarkets, Inc.,
*Zero Coupon, 12/15/04, Series B.............. 2,500,000 1,850,000
13.750%, 06/15/01............................. 1,000,000 1,085,000
Forecast Group, L.P.,
11.375%, 12/15/00............................. 1,000,000 670,000
Forest Oil Corp.,
11.250%, 09/01/03............................. 1,500,000 1,327,500
Forstmann & Co., Inc.,
**14.750%, 04/15/99........................... 500,000 515,000
14.750%, 04/15/99............................. 1,330,000 1,383,200
Fort Howard Corp.,
14.125%, 11/01/04............................. 3,500,000 3,526,250
12.625%, 11/01/00............................. 500,000 515,000
Fresh Del Monte Produce,
10.000%, 05/01/03, Series B................... 500,000 340,000
G-I Holdings, Inc.,
Zero Coupon, 10/01/98......................... 500,000 305,000
G.U. Acquisition Corp.,
13.000%, 03/02/98............................. 1,000,000 300,000
Garden State Newspapers, Inc.,
12.000%, 07/01/04............................. 2,250,000 2,250,000
Gaylord Container Corp.,
11.500%, 05/15/01............................. 500,000 515,000
Geneva Steel, Inc.,
11.125%, 03/15/01............................. 1,000,000 940,000
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Georgia Gulf Corp.,
15.000%, 04/15/00............................. $ 500,000 $ 510,000
Gillett Holdings, Inc.,
12.250%, 06/30/02, Series A................... 1,000,000 1,057,500
Grand Casinos Resorts, Inc.,
12.500%, 02/01/00, Series B................... 1,000,000 940,000
Great Dane Holdings, Inc.,
12.750%, 08/01/01............................. 1,925,000 1,905,750
GS Technologies Operating Co.,
12.000%, 09/01/04............................. 1,750,000 1,728,125
Gulf Canada Resources Ltd.,
9.250%, 01/15/04.............................. 500,000 458,750
Harvard Industries, Inc.,
12.000%, 07/15/04............................. 1,250,000 1,259,375
Health O Meter, Inc.,
13.000%, 08/15/02............................. 1,000,000 900,000
Hills Stores Co.,
10.250%, 09/30/03............................. 500,000 465,000
Hollywood Casino Corp.,
14.000%, 04/01/98............................. 1,750,000 1,732,500
Horsehead Industries, Inc.,
14.000%, 06/01/99............................. 2,000,000 1,980,000
15.750%, 06/01/97............................. 296,000 304,880
Host Marriott Hospitality, Inc.,
9.875%, 05/01/01, Series D.................... 938,000 938,000
10.500%, 05/01/06, Series M................... 253,000 251,735
10.875%, 11/01/01, Series E................... 220,000 223,300
ICF Kaiser International, Inc.,
12.000%, 12/31/03............................. 1,500,000 1,305,000
*Imax Corp.,
7.000%, 03/01/01.............................. 1,500,000 1,252,500
Imo Industries, Inc.,
12.000%, 11/01/01............................. 1,500,000 1,513,125
12.250%, 08/15/97............................. 750,000 750,000
*Indspec Chemical Corp.,
Zero Coupon, 12/01/03, Class B................ 1,249,000 711,930
Inter-City Products Corp.,
9.750%, 03/01/00.............................. 1,750,000 1,631,875
Interlake Corp.,
12.125%, 03/01/02............................. 2,500,000 2,325,000
*Ivex Holdings Corp.,
Zero Coupon, 03/15/05, Series B............... 2,000,000 800,000
Ivex Packaging Corp.,
12.500%, 12/15/02............................. 1,250,000 1,243,750
**J B Williams Holdings, Inc.,
12.000%, 03/01/04............................. 1,000,000 935,000
J.B. Poindexter & Co.,
12.500%, 05/15/04............................. 3,250,000 3,055,000
J.M. Peters Co.,
12.750%, 05/01/02............................. 1,250,000 1,037,500
Jones Intercable, Inc.,
10.500%, 03/01/08............................. 1,250,000 1,225,000
Jordan Industries, Inc.,
*Zero Coupon, 08/01/05........................ 500,000 250,000
10.375%, 08/01/03............................. 500,000 445,000
JPS Automotive Products Corp.,
11.125%, 06/15/01............................. 500,000 480,000
JPS Textile Group, Inc.,
7.000%, 05/15/00.............................. 1,000,000 410,000
9.850%, 06/01/99.............................. 1,049,000 645,135
K & F Industries, Inc.,
11.875%, 12/01/03............................. 1,500,000 1,458,750
13.750%, 08/01/01............................. 500,000 450,000
K. Hovnanian Enterprises, Inc.,
11.250%, 04/15/02............................. 1,000,000 835,000
Kaiser Aluminum & Chemical Corp.,
12.750%, 02/01/03............................. 1,375,000 1,385,313
</TABLE>

B22

<PAGE>

HIGH YIELD BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Kloster Cruise Ltd.,
13.000%, 05/01/03............................. $ 1,500,000 $ 1,350,000
Lady Luck Gaming Corp.,
10.500%, 03/01/01, Series B................... 1,000,000 390,000
Lamson & Sessions Co.,
14.000%, 06/01/97............................. 500,000 505,000
Laroche Industries, Inc.,
13.000%, 08/15/04............................. 1,000,000 920,000
Loehmann's Holdings, Inc.,
10.250%, 10/01/97............................. 300,000 289,500
13.750%, 02/15/99............................. 1,600,000 1,584,000
Louisiana Casino Cruises, Inc.,
11.500%, 12/01/98............................. 1,400,000 1,190,000
MacAndrews & Forbes Group, Inc.,
12.250%, 07/01/96............................. 750,000 742,500
13.000%, 03/01/99............................. 1,250,000 1,225,000
Mail-Well Corp.,
10.500%, 02/15/04............................. 2,500,000 2,175,000
Malette, Inc.,
12.250%, 07/15/04............................. 2,500,000 2,525,000
*Marcus Cable Operating Co., L.P.,
Zero Coupon, 08/01/04......................... 3,000,000 1,590,000
Marvel Holdings, Inc.,
Zero Coupon, 04/15/98, Series B............... 2,000,000 1,230,000
Maxxam Group, Inc.,
*Zero Coupon, 08/01/03........................ 2,500,000 1,425,000
11.250%, 08/01/03............................. 1,000,000 937,500
Miles Homes, Inc.,
12.000%, 04/01/01............................. 1,250,000 862,500
Moran Transportation Co.,
11.750%, 07/15/04, Series B................... 1,000,000 945,000
Motor Wheel Corp.,
11.500%, 03/01/00, Series B................... 2,500,000 2,312,500
*Neodata Services, Inc.,
Zero Coupon, 05/01/03, Series B............... 2,000,000 1,560,000
NewCity Communications, Inc.,
11.375%, 11/01/03............................. 1,500,000 1,380,000
Newflo Corp.,
13.250%, 11/15/02............................. 1,000,000 985,000
*Nextel Communications, Inc.,
Zero Coupon, 09/01/03-08/15/04................ 2,000,000 760,000
NL Industries, Inc.,
*Zero Coupon, 10/15/05........................ 2,250,000 1,395,000
11.750%, 10/15/03............................. 1,250,000 1,250,000
Nortek, Inc.,
9.875%, 03/01/04.............................. 1,750,000 1,557,500
**%Northwest Airlines, Inc,
12.092%, 12/31/00............................. 1,976,884 1,907,693
NVR, Inc.,
11.000%, 04/15/03............................. 2,000,000 1,670,000
NWCG Holdings Corp.,
Zero Coupon, 06/15/99, Series B............... 3,000,000 1,530,000
OrNda Healthcorp,
11.375%, 08/15/04............................. 1,000,000 1,025,000
12.250%, 05/15/02............................. 1,500,000 1,605,000
Outdoor Systems, Inc.,
10.750%, 08/15/03............................. 1,250,000 1,125,000
Overhead Door Co.,
12.250%, 02/01/00............................. 1,000,000 1,012,500
PA Holdings Corp.,
13.750%, 07/15/99............................. 224,000 235,200
Pagemart, Inc.,
12.250%, 11/01/03............................. 2,000,000 1,200,000
Pamida, Inc.,
11.750%, 03/15/03............................. 1,500,000 1,402,500
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Pathmark Stores, Inc.,
*Zero Coupon, 11/01/03........................ $ 2,500,000 $ 1,275,000
9.625%, 05/01/03.............................. 500,000 445,000
11.625%, 06/15/02............................. 1,000,000 960,000
Petroleum Heat & Power Company, Inc.,
9.375%, 02/01/06.............................. 500,000 425,000
10.125%, 04/01/03............................. 1,240,000 1,128,400
**PF Acquisition Corp.,
12.250%, 02/01/05............................. 1,500,000 1,500,000
Pier 1 Imports, Inc.,
11.500%, 07/15/03............................. 347,000 357,410
Pilgrim's Pride Corp.,
10.875%, 08/01/03............................. 1,750,000 1,649,375
**Polymer Group, Inc.,
12.250%, 07/15/02............................. 1,250,000 1,193,750
**President Riverboat Casinos, Inc.,
13.000%, 09/15/01............................. 2,500,000 2,200,000
Presidio Oil Co.,
11.500%, 09/15/00, Series B................... 800,000 580,000
%14.050%, 07/15/02, Series B.................. 400,000 248,000
Presley Cos.,
12.500%, 07/01/01............................. 1,750,000 1,505,000
***Pricellular Wireless Corp.,
Zero Coupon, 11/15/01......................... 1,000,000 660,000
Pueblo Xtra International, Inc.,
9.500%, 08/01/03.............................. 500,000 420,000
Purity Supreme, Inc.,
11.750%, 08/01/99, Series B................... 1,250,000 1,037,500
Ralphs Grocery Co.,
9.000%, 04/01/03, Series B.................... 1,250,000 1,212,500
***Remington Arms Co.,
9.500%, 12/01/03.............................. 1,000,000 840,000
Republic Engineered Steel, Inc.,
9.875%, 12/15/01.............................. 1,000,000 905,000
Rexene Corp.,
11.750%, 12/01/04............................. 1,000,000 1,025,000
Robin Media Group, Inc.,
11.125%, 04/01/97............................. 1,250,000 1,187,500
Rohr, Inc.,
11.625%, 05/15/03............................. 1,000,000 995,000
Ryland Group, Inc.,
9.625%, 06/01/04.............................. 1,000,000 840,000
**Sam Houston Race Park, Ltd.,
11.750%, 07/15/99............................. 1,000,000 350,000
Santa Fe Hotel, Inc.,
11.000%, 12/15/00............................. 500,000 440,000
Scott Cable Communications, Inc.,
12.250%, 04/15/01............................. 250,000 200,000
Seminole Kraft Corp.,
13.500%, 10/15/96............................. 287,000 287,000
Seven-Up/RC Bottling Co.,
11.500%, 08/01/99............................. 1,250,000 1,050,000
Showboat, Inc.,
13.000%, 08/01/09............................. 1,500,000 1,425,000
Silgan Corp.,
11.750%, 06/15/02............................. 1,000,000 1,035,000
*Silgan Holdings, Inc.,
Zero Coupon, 12/15/02......................... 2,000,000 1,680,000
Southdown, Inc.,
14.000%, 10/15/01, Series B................... 500,000 556,250
Southland Corp.,
12.000%, 06/15/09, Series C................... 500,000 490,000
Specialty Foods Acquisition Corp.,
*Zero Coupon, 08/15/05, Series B.............. 2,000,000 805,000
10.250%, 08/15/01, Series B................... 1,000,000 890,000
11.250%, 08/15/03, Series B................... 1,250,000 1,087,500
</TABLE>

B23

<PAGE>

HIGH YIELD BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
SPX Corp.,
11.750%, 06/01/02............................. $ 2,500,000 $ 2,487,500
**Star Markets, Inc.,
13.000%, 11/01/04............................. 1,000,000 1,017,500
Station Casinos, Inc.,
9.625%, 06/01/03.............................. 2,000,000 1,680,000
Stone Consolidated Corp.,
10.250%, 12/15/00............................. 650,000 640,250
Stone Container Corp.,
9.875%, 02/01/01.............................. 1,500,000 1,410,000
12.625%, 07/15/98............................. 1,500,000 1,571,250
Surgical Health Corp.,
11.500%, 07/15/04............................. 600,000 600,000
*Talley Industries, Inc.,
Zero Coupon, 10/15/05......................... 2,750,000 1,375,000
Talley Manufacturing & Technology, Inc.,
10.750%, 10/15/03............................. 500,000 450,000
Thrifty Payless, Inc.,
11.750%, 04/15/03............................. 3,000,000 2,940,000
*Total Renal Care, Inc.,
Zero Coupon, 08/15/04......................... 500,000 375,000
Triangle Pacific Corp.,
10.500%, 08/01/03............................. 2,000,000 1,915,000
Trism, Inc.,
10.750%, 12/15/00............................. 500,000 475,000
*Triton Energy Corp.,
Zero Coupon, 12/15/00......................... 2,000,000 1,492,500
Trump Plaza Funding,
10.875%, 06/15/01............................. 800,000 608,000
Trump Taj Mahal Funding, Inc.,
11.350%, 11/15/99, Series A................... 2,000,000 1,330,000
Uniroyal Technology Corp.,
11.750%, 06/01/03............................. 2,000,000 1,620,000
%Unisys Corp.,
13.500%, 07/01/97............................. 750,000 802,500
United Artists Theatre Circuit, Inc.,
11.500%, 05/01/02, Series B................... 1,000,000 1,032,500
United International Holdings, Inc.,
Zero Coupon, 11/15/99......................... 6,000,000 3,030,000
US Air, Inc.,
9.625%, 02/01/01.............................. 2,000,000 1,100,000
10.375%, 03/01/13, Series 93-A3............... 1,000,000 815,000
12.875%, 04/01/00............................. 950,000 762,375
Valcor, Inc.,
9.625%, 11/01/03.............................. 750,000 690,000
Wainoco Oil Corp.,
12.000%, 08/01/02............................. 1,500,000 1,530,000
Waters Corp.,
12.750%, 09/30/04, Series B................... 1,250,000 1,256,250
Webb Corp.,
9.000%, 02/15/06.............................. 375,000 285,000
Webcraft Technologies, Inc.,
9.375%, 02/15/02.............................. 1,500,000 1,297,500
Wheeling-Pittsburgh Corp.,
9.375%, 11/15/03.............................. 1,400,000 1,190,000
Wherehouse Entertainment, Inc.,
13.000%, 08/01/02, Series B................... 150,000 75,000
White Rose Foods, Inc.,
Zero Coupon, 11/01/98......................... 1,750,000 945,000
Wickes Lumber Co.,
11.625%, 12/15/03............................. 2,500,000 2,425,000
Williamhouse Regency, Inc.,
11.500%, 06/15/05............................. 2,000,000 1,840,000
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Young Broadcasting Corp.,
11.750%, 11/15/04............................. $ 500,000 $ 505,000
--------------
248,816,277
--------------
TOTAL LONG-TERM BONDS
(Cost $293,001,887)............................................ 269,347,408
--------------
<CAPTION>

MARKET
OTHER LONG-TERM INVESTMENTS -- 0.1% SHARES VALUE
------------- --------------
<S> <C> <C>
**+PG Partners L.P.............................. 7,541 361,968
(Cost $115,290)
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.7% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. 14,296,000 14,296,000
--------------
OTHER ASSETS -- 2.3%
(net of liabilities)........................................... 7,141,716
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 306,224,713
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

L.P. Limited Partnership
M.T.N. Medium Term Note
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

*Denotes deferred interest security that accrues no interest until a
predetermined date at which time a specified coupon rate becomes effective.

**Indicates a restricted security; the aggregate cost of the restricted
securities is $21,440,552. The aggregate value, $19,903,619 is
approximately 6.5% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1994.

++Non-income producing.

%Indicates a variable rate security.

[Payment-in-kind preferred stock--dividend is paid in additional preferred
shares in lieu of cash.

&Payment-in-kind bonds--interest is paid in additional bonds in lieu of
cash.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

B24

<PAGE>

STOCK INDEX PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 96.1% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 2.1%
AlliedSignal, Inc............................... 54,100 $ 1,839,400
Boeing Co....................................... 64,850 3,031,737
E-Systems, Inc.................................. 6,200 258,075
General Dynamics Corp........................... 12,100 526,350
Lockheed Corp................................... 11,900 864,237
Loral Corp...................................... 16,300 617,362
Martin Marietta Corp............................ 18,400 816,500
McDonnell Douglas Corp.......................... 7,500 1,065,000
Northrop Grumman Corp........................... 9,300 390,600
Raytheon Co..................................... 25,800 1,647,975
Rockwell International Corp..................... 41,800 1,494,350
United Technologies Corp........................ 24,200 1,521,575
--------------
14,073,161
--------------
AIRLINES -- 0.3%
+AMR Corp....................................... 14,600 777,450
Delta Air Lines, Inc............................ 9,900 499,950
Southwest Airlines Co........................... 27,100 453,925
+USAir Group, Inc............................... 10,500 45,938
--------------
1,777,263
--------------
ALUMINUM -- 0.5%
Alcan Aluminum, Ltd............................. 42,450 1,077,169
Aluminum Co. of America......................... 16,900 1,463,962
Reynolds Metals Co.............................. 12,100 592,900
--------------
3,134,031
--------------
AUTOS - CARS & TRUCKS -- 2.6%
Chrysler Corp................................... 67,800 3,322,200
Cummins Engine Co., Inc......................... 8,300 375,575
Dana Corp....................................... 18,800 439,450
Echlin, Inc..................................... 10,900 327,000
Ford Motor Co................................... 191,800 5,370,400
General Motors Corp............................. 142,700 6,029,075
Genuine Parts Co................................ 23,650 851,400
Johnson Controls, Inc........................... 7,500 367,500
+Navistar International Corp.................... 14,500 219,312
Safety Kleen Corp............................... 11,050 162,987
--------------
17,464,899
--------------
BANKS AND SAVINGS & LOANS -- 5.1%
Banc One Corp................................... 77,622 1,969,658
Bank of Boston Corp............................. 20,300 525,262
BankAmerica Corp................................ 70,548 2,786,646
Bankers Trust NY Corp........................... 15,300 847,237
Barnett Banks, Inc.............................. 18,700 717,612
Boatmen's Bancshares, Inc....................... 19,500 528,937
Chase Manhattan Corp............................ 36,501 1,254,722
Chemical Banking Corp........................... 48,382 1,735,704
Citicorp........................................ 74,100 3,065,887
CoreStates Financial Corp....................... 28,000 728,000
First Chicago Corp.............................. 17,800 849,950
First Fidelity Bancorp.......................... 15,600 700,050
First Interstate Bancorp........................ 15,500 1,048,187
First Union Corp................................ 32,500 1,344,688
Fleet Financial Group, Inc...................... 26,700 867,750
Golden West Financial Corp...................... 12,200 430,050
Great Western Financial Corp.................... 24,500 392,000
H.F. Ahmanson & Co.............................. 22,200 357,975
J.P. Morgan & Co., Inc.......................... 36,650 2,052,400
KeyCorp......................................... 47,100 1,177,500
Mellon Bank Corp................................ 27,850 852,906
NationsBank Corp................................ 52,239 2,357,285
NBD Bancorp, Inc................................ 30,425 832,884
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Norwest Corp.................................... 60,800 $ 1,421,200
PNC Bank Corp................................... 44,300 935,838
Shawmut National Corp........................... 22,300 365,163
Suntrust Banks, Inc............................. 23,100 1,103,025
U.S. Bancorp.................................... 18,900 427,613
Wachovia Corp................................... 32,400 1,044,900
Wells Fargo & Co................................ 10,400 1,508,000
--------------
34,229,029
--------------
BEVERAGES -- 3.5%
Adolph Coors Co. (Class 'B' Stock).............. 7,100 118,925
Anheuser-Busch Companies, Inc................... 49,900 2,538,663
Brown-Forman Corp. (Class 'B' Stock)............ 15,300 466,650
Coca-Cola Co.................................... 246,100 12,674,150
PepsiCo, Inc.................................... 150,800 5,466,500
Seagram Co., Ltd................................ 70,300 2,073,850
--------------
23,338,738
--------------
CHEMICALS -- 2.8%
Air Products & Chemicals, Inc................... 21,700 968,362
Dow Chemical Co................................. 52,500 3,530,625
E.I. du Pont de Nemours & Co.................... 129,700 7,295,625
Eastman Chemical Co............................. 15,900 802,950
Hercules, Inc................................... 7,800 899,925
Mallinckrodt Group, Inc......................... 14,800 442,150
Monsanto Co..................................... 22,500 1,586,250
Nalco Chemical Co............................... 12,900 432,150
Rohm & Haas Co.................................. 13,100 748,337
Sigma-Aldrich Corp.............................. 9,000 297,000
Union Carbide Corp.............................. 28,600 840,125
W.R. Grace & Co................................. 17,900 691,388
--------------
18,534,887
--------------
CHEMICALS - SPECIALTY -- 0.4%
Engelhard Corp.................................. 18,850 419,413
First Mississippi Corp.......................... 3,700 92,500
Great Lakes Chemical Corp....................... 13,700 780,900
Morton International, Inc....................... 28,100 800,850
Praxair, Inc.................................... 25,100 514,550
Raychem Corp.................................... 7,800 277,875
--------------
2,886,088
--------------
COMMERCIAL SERVICES -- 0.2%
Deluxe Corp..................................... 15,300 405,450
John H. Harland Co.............................. 5,900 118,000
Moore Corp., Ltd................................ 18,300 345,413
Ogden Corp...................................... 7,600 142,500
--------------
1,011,363
--------------
COMPUTER SERVICES -- 2.8%
Autodesk, Inc................................... 8,800 348,700
Automatic Data Processing, Inc.................. 26,700 1,561,950
+Ceridian Corp.................................. 8,200 220,375
+Cisco Systems.................................. 50,000 1,756,250
Computer Associates International, Inc.......... 31,350 1,520,475
+Computer Sciences Corp......................... 9,900 504,900
First Data Corp................................. 20,600 975,925
+Harris Computer Systems Corp................... 370 4,532
+Intergraph Corp................................ 7,600 61,750
+Lotus Development Corp......................... 9,000 369,000
+Microsoft Corp................................. 109,900 6,717,638
+Novell, Inc.................................... 70,000 1,198,750
+Oracle Systems Corp............................ 54,400 2,400,400
</TABLE>

B25

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Sun Microsystems, Inc.......................... 19,300 $ 685,150
+Tandem Computers, Inc.......................... 21,100 361,338
--------------
18,687,133
--------------
CONSTRUCTION -- 0.2%
Fluor Corp...................................... 15,600 672,750
Foster Wheeler Corp............................. 6,800 202,300
Kaufman & Broad Home Corp....................... 6,366 81,962
Pulte Corp...................................... 5,100 117,300
--------------
1,074,312
--------------
CONTAINERS -- 0.2%
Ball Corp....................................... 5,400 170,100
Bemis Co., Inc.................................. 10,000 240,000
+Crown Cork & Seal, Inc......................... 17,300 653,075
--------------
1,063,175
--------------
COSMETICS & SOAPS -- 2.3%
Alberto Culver Co. (Class 'B' Stock)............ 5,000 136,250
Avon Products, Inc.............................. 13,400 800,650
Clorox Co....................................... 9,900 582,862
Colgate Palmolive Co............................ 28,500 1,806,188
Gillette Co..................................... 41,900 3,132,025
International Flavors & Fragrances, Inc......... 21,000 971,250
Procter & Gamble Co............................. 130,552 8,094,224
--------------
15,523,449
--------------
DIVERSIFIED GAS -- 0.2%
Coastal Corp.................................... 19,900 512,425
Eastern Enterprises............................. 4,100 107,625
ENSERCH Corp.................................... 12,200 160,125
NICOR, Inc...................................... 10,300 234,325
ONEOK, Inc...................................... 4,600 82,800
--------------
1,097,300
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 2.3%
Alco Standard Corp.............................. 10,388 651,847
Avery Dennison Corp............................. 10,500 372,750
+COMPAQ Computer Corp........................... 49,400 1,951,300
Honeywell, Inc.................................. 24,900 784,350
International Business Machines Corp............ 111,100 8,165,850
Pitney-Bowes, Inc............................... 29,600 939,800
+Unisys Corp.................................... 31,100 268,238
Xerox Corp...................................... 20,182 1,998,018
--------------
15,132,153
--------------
DRUGS AND HOSPITAL SUPPLIES -- 7.7%
Abbott Laboratories............................. 155,000 5,056,875
Allergan, Inc................................... 12,100 341,825
+ALZA Corp...................................... 15,200 273,600
American Home Products Corp..................... 58,200 3,652,050
+Amgen, Inc..................................... 25,600 1,510,400
Bausch & Lomb, Inc.............................. 11,300 382,787
Baxter International, Inc....................... 53,600 1,514,200
Becton, Dickinson & Co.......................... 14,000 672,000
+Biomet, Inc.................................... 21,600 302,400
Bristol-Myers Squibb Co......................... 97,140 5,621,978
C.R. Bard, Inc.................................. 9,900 267,300
Eli Lilly & Co.................................. 55,800 3,661,875
Johnson & Johnson............................... 122,600 6,712,350
Medtronic, Inc.................................. 22,000 1,223,750
Merck & Co., Inc................................ 240,050 9,151,906
Pfizer, Inc..................................... 58,300 4,503,675
Schering-Plough Corp............................ 36,700 2,715,800
St. Jude Medical, Inc........................... 8,500 337,875
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
United States Surgical Corp..................... 10,500 $ 199,500
Upjohn Co....................................... 32,700 1,005,525
Warner-Lambert Co............................... 25,500 1,963,500
--------------
51,071,171
--------------
ELECTRICAL EQUIPMENT -- 0.1%
Westinghouse Electric Corp...................... 66,800 818,300
--------------
ELECTRONICS -- 4.1%
+Advanced Micro Devices, Inc.................... 17,700 440,288
Amdahl Corp..................................... 23,300 256,300
AMP, Inc........................................ 20,200 1,469,550
Apple Computer, Inc............................. 22,400 873,600
+Cray Research, Inc............................. 4,700 74,025
+Data General Corp.............................. 5,400 54,000
+Digital Equipment Corp......................... 26,400 877,800
EG&G, Inc....................................... 9,700 137,012
Emerson Electric Co............................. 42,700 2,668,750
Harris Corp..................................... 7,400 314,500
Hewlett-Packard Co.............................. 48,500 4,843,937
Intel Corp...................................... 79,800 5,097,225
Micron Technology, Inc.......................... 19,800 873,675
Motorola, Inc................................... 107,800 6,238,925
+National Semiconductor Corp.................... 23,900 466,050
Perkin-Elmer Corp............................... 8,100 207,562
Tandy Corp...................................... 12,265 614,783
Tektronix, Inc.................................. 5,600 191,800
Texas Instruments, Inc.......................... 17,500 1,310,312
Thomas & Betts Corp............................. 3,500 234,938
+Zenith Electronics Corp........................ 8,300 96,488
--------------
27,341,520
--------------
FINANCIAL SERVICES -- 2.6%
American Express Co............................. 94,200 2,778,900
Beneficial Corp................................. 9,700 378,300
Dean Witter, Discover & Co...................... 32,245 1,092,299
Federal Home Loan Mortgage Corporation.......... 34,150 1,724,575
Federal National Mortgage Association........... 51,700 3,767,637
H & R Block, Inc................................ 19,800 735,075
Household International , Inc................... 17,500 649,688
MBNA Corp....................................... 27,800 649,825
Merrill Lynch & Co., Inc........................ 39,200 1,401,400
National City Corp.............................. 28,200 729,675
Salomon, Inc.................................... 20,600 772,500
Transamerica Corp............................... 14,200 706,450
Travelers, Inc.................................. 62,031 2,016,008
--------------
17,402,332
--------------
FOODS -- 3.2%
Archer-Daniels-Midland Co....................... 98,764 2,037,007
Campbell Soup Co................................ 47,900 2,113,587
ConAgra, Inc.................................... 47,600 1,487,500
CPC International, Inc.......................... 28,200 1,501,650
Fleming Companies, Inc.......................... 6,700 155,775
General Mills, Inc.............................. 30,000 1,710,000
Giant Food, Inc. (Class 'A' Stock).............. 10,900 237,075
H.J. Heinz & Co................................. 47,100 1,730,925
Hershey Foods Corp.............................. 16,300 788,513
Kellogg Co...................................... 42,500 2,470,313
Pet, Inc........................................ 19,900 393,025
Pioneer Hi-Bred International, Inc.............. 16,600 572,700
Quaker Oats Co.................................. 26,000 799,500
Ralston-Ralston Purina Group.................... 19,240 858,585
Sara Lee Corp................................... 91,000 2,297,750
</TABLE>

B26

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Sysco Corp...................................... 34,800 $ 896,100
W. M. Wrigley, Jr. Co........................... 22,300 1,101,063
--------------
21,151,068
--------------
FOREST PRODUCTS -- 1.8%
Boise Cascade Corp.............................. 7,686 205,600
Champion International Corp..................... 17,900 653,350
Federal Paper Board Co., Inc.................... 8,500 246,500
Georgia-Pacific Corp............................ 17,200 1,229,800
International Paper Co.......................... 23,600 1,778,850
James River Corp. of Virginia................... 15,900 321,975
Kimberly-Clark Corp............................. 31,000 1,565,500
Louisiana Pacific Corp.......................... 21,000 572,250
Mead Corp....................................... 11,100 539,737
Potlatch Corp................................... 5,800 216,050
Scott Paper Co.................................. 14,100 974,663
Stone Container Corp............................ 17,066 294,388
Temple Inland, Inc.............................. 10,500 473,813
Union Camp Corp................................. 13,100 617,338
Westvaco Corp................................... 12,400 486,700
Weyerhaeuser Co................................. 39,300 1,473,750
--------------
11,650,264
--------------
GAS PIPELINES -- 0.6%
+Columbia Gas System, Inc....................... 9,500 223,250
Consolidated Natural Gas Co..................... 17,900 635,450
Enron Corp...................................... 47,400 1,445,700
NorAm Energy Corp............................... 21,100 113,413
Panhandle Eastern Corp.......................... 22,990 454,053
Peoples Energy Corp............................. 6,400 167,200
Transco Energy Co............................... 7,600 126,350
Williams Companies, Inc......................... 19,900 499,987
--------------
3,665,403
--------------
HOSPITAL MANAGEMENT -- 0.6%
+Beverly Enterprises, Inc....................... 17,000 244,375
Columbia / HCA Healthcare Corp.................. 68,132 2,486,818
Community Psychiatric Centers................... 6,900 75,900
Manor Care, Inc................................. 11,850 324,394
National Medical Enterprises, Inc............... 30,600 432,225
Service Corp. International..................... 17,800 493,950
Shared Medical Systems Corp..................... 4,700 153,925
--------------
4,211,587
--------------
HOUSING RELATED -- 0.6%
Armstrong World Industries, Inc................. 7,100 273,350
Centex Corp..................................... 6,000 136,500
Fleetwood Enterprises, Inc...................... 8,700 163,125
Lowe's Companies, Inc........................... 30,000 1,042,500
Masco Corp...................................... 29,300 662,913
Maytag Corp..................................... 19,500 292,500
+Owens-Corning Fiberglas Corp................... 8,600 275,200
Skyline Corp.................................... 1,000 19,250
Stanley Works................................... 9,000 321,750
Whirlpool Corp.................................. 14,200 713,550
--------------
3,900,638
--------------
INSURANCE -- 3.1%
Aetna Life & Casualty Co........................ 21,500 1,013,187
Alexander & Alexander Services, Inc............. 8,500 157,250
American General Corp........................... 40,400 1,141,300
American International Group, Inc............... 60,225 5,902,050
Chubb Corp...................................... 16,800 1,299,900
CIGNA Corp...................................... 13,700 871,662
Continental Corp................................ 10,600 201,400
General Re Corp................................. 15,750 1,949,062
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Jefferson-Pilot Corp............................ 9,650 $ 500,594
Lincoln National Corp........................... 17,800 623,000
Marsh & McLennan Companies, Inc................. 13,800 1,093,650
Providian Corp.................................. 18,500 571,188
SAFECO Corp..................................... 11,700 608,400
St. Paul Companies, Inc......................... 16,000 716,000
Torchmark Corp.................................. 13,900 484,763
U.S. Healthcare, Inc............................ 30,500 1,258,125
United Healthcare Corp.......................... 32,700 1,475,587
UNUM Corp....................................... 14,500 547,375
USF&G Corp...................................... 14,900 203,013
USLIFE Corp..................................... 4,100 142,987
--------------
20,760,493
--------------
LEISURE -- 1.0%
+Bally Entertainment Corp....................... 7,200 44,100
Brunswick Corp.................................. 18,300 345,412
Handleman Co.................................... 5,850 66,544
Hasbro, Inc..................................... 16,500 482,625
+King World Productions, Inc.................... 6,650 229,425
Mattel, Inc..................................... 34,356 863,195
Outboard Marine Corp............................ 3,900 76,537
Walt Disney Co.................................. 102,200 4,713,975
--------------
6,821,813
--------------
LODGING -- 0.3%
Hilton Hotels Corp.............................. 9,400 633,325
Marriott International, Inc..................... 23,700 666,563
+Promus Companies, Inc.......................... 19,950 618,450
--------------
1,918,338
--------------
MACHINERY -- 1.2%
Briggs & Stratton Corp.......................... 5,200 170,300
Caterpillar, Inc................................ 38,500 2,122,312
Cincinnati Milacron, Inc........................ 6,900 163,013
+Clark Equipment Co............................. 3,200 173,600
Cooper Industries, Inc.......................... 22,100 754,162
Deere & Co...................................... 16,500 1,093,125
Dover Corp...................................... 10,700 552,387
Eaton Corp...................................... 14,900 737,550
Giddings & Lewis, Inc........................... 6,900 101,775
+Giddings & Lewis, Inc. (Contingent Payment
Right)........................................ 1,000 0
Harnischfeger Industries, Inc................... 8,400 236,250
Ingersoll-Rand Co............................... 19,700 620,550
PACCAR, Inc..................................... 7,130 315,503
Parker-Hannifin Corp............................ 9,300 423,150
Snap-On Inc..................................... 8,000 266,000
SPX Corp........................................ 1,500 24,938
Timken Co....................................... 6,400 225,600
+Varity Corp.................................... 8,810 319,363
--------------
8,299,578
--------------
MEDIA -- 3.0%
Capital Cities/ABC, Inc......................... 29,800 2,540,450
CBS, Inc........................................ 12,150 672,806
Comcast Corp. (Special Class 'A' Stock)......... 44,400 696,525
Dow Jones & Co., Inc............................ 18,300 567,300
Dun & Bradstreet Corp........................... 32,760 1,801,800
Gannett Co., Inc................................ 27,800 1,480,350
Interpublic Group of Companies, Inc............. 14,400 462,600
Knight-Ridder, Inc.............................. 9,900 499,950
McGraw-Hill, Inc................................ 9,400 628,625
Meredith Corp................................... 2,900 135,213
</TABLE>

B27

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
New York Times Co. (Class 'A' Stock)............ 19,800 $ 438,075
R. R. Donnelley & Sons Co....................... 29,500 870,250
+Tele-Communications, Inc. (Class 'A' Stock).... 109,900 2,390,325
Time Warner, Inc................................ 71,940 2,526,893
Times Mirror Co. (Class 'A' Stock).............. 24,000 753,000
Tribune Co...................................... 12,500 684,375
+Viacom, Inc. (Class 'B' Stock)................. 66,367 2,696,159
--------------
19,844,696
--------------
MINERAL RESOURCES -- 1.1%
American Barrick Resources Corp................. 67,100 1,492,975
ASARCO, Inc..................................... 8,700 247,950
Burlington Resources, Inc....................... 24,600 861,000
Cyprus Amax Minerals Co......................... 17,600 459,800
Echo Bay Mines, Ltd............................. 21,800 231,625
Homestake Mining Co............................. 26,300 450,388
Inco, Ltd....................................... 22,200 635,475
Newmont Mining Corp............................. 16,100 579,600
Phelps Dodge Corp............................... 13,300 822,937
Pittston Services Group......................... 7,300 193,450
Placer Dome, Inc................................ 45,800 996,150
+Sante Fe Pacific Gold Corp..................... 46,916 604,044
--------------
7,575,394
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 4.5%
Bassett Furniture Industries, Inc............... 2,612 74,442
Browning-Ferris Industries, Inc................. 37,400 1,061,225
Crane Co........................................ 5,500 147,813
Ecolab, Inc..................................... 12,000 252,000
+FMC Corp....................................... 6,900 398,475
General Electric Co............................. 326,400 16,646,400
General Signal Corp............................. 9,262 295,226
Illinois Tool Works, Inc........................ 21,400 936,250
ITT Corp........................................ 22,400 1,985,200
+JWP, Inc....................................... 4,200 0
Millipore Corp.................................. 5,500 266,062
Morrison Knudsen Corp........................... 5,800 73,950
NACCO Industries, Inc. (Class 'A' Stock)........ 1,600 77,400
Pall Corp....................................... 21,900 410,625
PPG Industries, Inc............................. 40,400 1,499,850
Rollins Environmental Services, Inc............. 9,400 45,825
Teledyne, Inc................................... 10,300 207,287
Textron, Inc.................................... 17,100 861,412
Trinova Corp.................................... 5,600 164,500
TRW, Inc........................................ 12,300 811,800
Tyco International, Ltd......................... 14,300 679,250
W.W. Grainger, Inc.............................. 9,500 548,625
WMX Technologies, Inc........................... 91,700 2,407,125
Zurn Industries, Inc............................ 2,000 36,000
--------------
29,886,742
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 2.3%
American Greetings Corp. (Class 'A' Stock)...... 13,800 372,600
Black & Decker Corp............................. 16,500 391,875
Corning, Inc.................................... 42,400 1,266,700
Dial Corp....................................... 17,600 374,000
Eastman Kodak Co................................ 63,300 3,022,575
Jostens, Inc.................................... 8,100 150,863
Minnesota Mining & Manufacturing Co............. 80,500 4,296,687
+National Education Corp........................ 2,700 11,138
Polaroid Corp................................... 9,500 308,750
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Premark International, Inc...................... 12,300 $ 538,125
Rubbermaid, Inc................................. 30,800 885,500
Unilever N.V., ADR.............................. 30,400 3,541,600
Whitman Corp.................................... 19,700 339,825
--------------
15,500,238
--------------
PETROLEUM -- 8.8%
Amerada Hess Corp............................... 17,500 798,438
Amoco Corp...................................... 94,730 5,600,911
Ashland Oil, Inc................................ 11,600 400,200
Atlantic Richfield Co........................... 30,485 3,101,848
Chevron Corp.................................... 123,900 5,529,037
Exxon Corp...................................... 236,800 14,385,600
Kerr-McGee Corp................................. 9,900 455,400
Louisiana Land & Exploration Co................. 6,500 236,438
+Maxus Energy Corp.............................. 23,000 77,625
Mobil Corp...................................... 75,800 6,386,150
Occidental Petroleum Corp....................... 59,700 1,149,225
Pennzoil Co..................................... 9,100 401,538
Phillips Petroleum Co........................... 49,700 1,627,675
Royal Dutch Petroleum Co........................ 102,000 10,965,000
Santa Fe Energy Resources, Inc.................. 15,970 127,760
Sun Co., Inc.................................... 21,000 603,750
Tenneco, Inc.................................... 32,700 1,389,750
Texaco, Inc..................................... 49,600 2,969,800
Unocal Corp..................................... 46,300 1,261,675
USX-Marathon Group.............................. 54,800 897,350
--------------
58,365,170
--------------
PETROLEUM SERVICES -- 0.9%
Baker Hughes, Inc............................... 26,700 487,275
Dresser Industries, Inc......................... 35,000 660,625
Halliburton Co.................................. 21,800 722,125
Helmerich & Payne, Inc.......................... 5,100 130,687
McDermott International, Inc.................... 9,700 240,075
Oryx Energy Co.................................. 18,600 220,875
+Rowan Companies, Inc........................... 15,200 93,100
Schlumberger, Ltd............................... 46,600 2,347,475
Sonat, Inc...................................... 16,000 448,000
+Western Atlas, Inc............................. 9,700 364,963
--------------
5,715,200
--------------
RAILROADS -- 1.0%
Burlington Northern, Inc........................ 17,300 832,562
Conrail Inc..................................... 15,100 762,550
CSX Corp........................................ 19,856 1,382,474
Norfolk Southern Corp........................... 25,800 1,564,125
Santa Fe Pacific Corp........................... 36,260 634,550
Union Pacific Corp.............................. 39,300 1,793,063
--------------
6,969,324
--------------
RESTAURANTS -- 0.7%
Luby's Cafeterias, Inc.......................... 4,550 101,806
McDonald's Corp................................. 133,800 3,913,650
+Ryan's Family Steak Houses, Inc................ 8,500 63,750
+Shoney's, Inc.................................. 7,900 100,725
Wendy's International, Inc...................... 19,700 283,188
--------------
4,463,119
--------------
RETAIL -- 5.9%
Albertson's, Inc................................ 48,300 1,400,700
American Stores Co.............................. 27,600 741,750
Brown Group, Inc................................ 3,000 96,000
Bruno's, Inc.................................... 13,700 114,737
Charming Shoppes, Inc........................... 18,300 121,237
Circuit City Stores, Inc........................ 18,700 416,075
</TABLE>

B28

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Dayton Hudson Corp.............................. 13,614 $ 963,190
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 21,950 587,163
Great Atlantic & Pacific Tea Co., Inc........... 7,000 126,875
Hartcourt General, Inc.......................... 15,406 543,062
+Hartmarx Corp.................................. 2,600 15,275
Home Depot, Inc................................. 85,749 3,944,454
J.C. Penney Co., Inc............................ 44,700 1,994,737
K mart Corp..................................... 85,700 1,114,100
+Kroger Co...................................... 22,100 533,163
Liz Claiborne, Inc.............................. 15,600 263,250
Longs Drug Stores, Inc.......................... 3,600 114,300
May Department Stores Co........................ 47,300 1,596,375
Melville Corp................................... 20,200 623,675
Mercantile Stores Co., Inc...................... 7,100 280,450
Newell Co....................................... 30,000 630,000
Nike, Inc. (Class 'B' Stock).................... 14,100 1,052,212
Nordstrom, Inc.................................. 15,400 646,800
Oshkosh B' Gosh, Inc. (Class 'A' Stock)......... 1,900 26,600
Pep Boys-Manny, Moe & Jack...................... 11,700 362,700
+Price/Costco, Inc.............................. 42,566 548,037
Reebok International, Ltd....................... 15,600 616,200
Rite Aid Corp................................... 17,100 399,713
Sears, Roebuck & Co............................. 66,900 3,077,400
Sherwin-Williams Co............................. 16,200 536,625
Stride Rite Corp................................ 9,400 104,575
Supervalu, Inc.................................. 13,700 335,650
The Gap, Inc.................................... 27,300 832,650
The Limited, Inc................................ 68,700 1,245,187
TJX Companies, Inc.............................. 14,300 223,438
+Toys 'R' Us, Inc............................... 54,850 1,672,925
Wal-Mart Stores, Inc............................ 438,600 9,320,250
Walgreen Co..................................... 23,700 1,036,875
Winn Dixie Stores, Inc.......................... 14,300 734,663
Woolworth Corp.................................. 24,400 366,000
--------------
39,359,068
--------------
RUBBER -- 0.2%
B.F. Goodrich Co................................ 4,700 203,863
Cooper Tire & Rubber Co......................... 16,200 382,725
Goodyear Tire & Rubber Co....................... 28,900 971,762
--------------
1,558,350
--------------
STEEL -- 0.4%
+Armco, Inc..................................... 19,500 129,188
+Bethlehem Steel Corp........................... 21,000 378,000
+Inland Steel Industries, Inc................... 8,900 312,612
Nucor Corp...................................... 16,600 921,300
USX-U.S. Steel Group............................ 14,140 501,970
Worthington Industries, Inc..................... 17,300 346,000
--------------
2,589,070
--------------
TELECOMMUNICATIONS -- 4.5%
+Airtouch Communications........................ 94,200 2,743,575
Alltel Corp..................................... 30,000 903,750
Ameritech Corp.................................. 104,600 4,223,225
+Andrew Corp.................................... 4,900 256,025
AT&T Corporation................................ 299,173 15,033,443
+DSC Communications Corp........................ 21,200 760,550
+M/A-Com, Inc................................... 2,300 16,675
MCI Communications Corp......................... 123,300 2,265,638
Northern Telecom, Ltd........................... 48,000 1,602,000
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Scientific-Atlanta, Inc......................... 14,500 $ 304,500
Sprint Corp..................................... 65,400 1,806,675
--------------
29,916,056
--------------
TEXTILES -- 0.2%
National Service Industries, Inc................ 9,500 243,438
Russell Corp.................................... 7,200 225,900
Springs Industries, Inc......................... 3,700 136,900
V.F. Corp....................................... 12,018 584,375
--------------
1,190,613
--------------
TOBACCO -- 1.9%
American Brands, Inc............................ 39,000 1,462,500
Philip Morris Companies, Inc.................... 166,100 9,550,750
+RJR Nabisco Holdings Corp...................... 62,557 344,063
UST, Inc........................................ 38,600 1,071,150
--------------
12,428,463
--------------
TRUCKING/SHIPPING -- 0.3%
Consolidated Freightways, Inc................... 6,500 145,438
+Federal Express Corp........................... 10,400 626,600
Roadway Services, Inc........................... 7,600 431,300
Ryder System, Inc............................... 14,600 321,200
Yellow Corp..................................... 6,000 143,250
--------------
1,667,788
--------------
UTILITY - COMMUNICATIONS -- 4.2%
Bell Atlantic Corp.............................. 83,100 4,134,225
BellSouth Corp.................................. 94,400 5,109,400
GTE Corp........................................ 182,620 5,547,083
NYNEX Corp...................................... 79,800 2,932,650
Pacific Telesis Group........................... 80,500 2,294,250
Southwestern Bell Corp.......................... 115,000 4,643,125
U S West, Inc................................... 86,800 3,092,250
--------------
27,752,983
--------------
UTILITY - ELECTRIC -- 3.8%
American Electric Power Co., Inc................ 35,300 1,160,487
Baltimore Gas & Electric Co..................... 27,650 611,756
Carolina Power & Light Co....................... 30,500 812,062
Central & South West Corp....................... 36,400 823,550
CINergy Corp.................................... 27,739 648,399
Consolidated Edison Co. of NY, Inc.............. 44,900 1,156,175
Detroit Edison Co............................... 28,300 739,337
Dominion Resources, Inc......................... 32,050 1,145,788
Duke Power Co................................... 39,200 1,494,500
Entergy Corp.................................... 42,900 938,438
FPL Group, Inc.................................. 35,900 1,260,987
Houston Industries, Inc......................... 24,700 879,938
Niagara Mohawk Power Corp....................... 26,200 373,350
Northern States Power Co........................ 12,900 567,600
Ohio Edison Co.................................. 28,200 521,700
Pacific Enterprises............................. 15,700 333,625
Pacific Gas & Electric Co....................... 82,600 2,013,375
PacifiCorp...................................... 54,200 982,375
PECO Energy Co.................................. 42,500 1,041,250
Public Service Enterprise Group, Inc............ 47,100 1,248,150
SCEcorp......................................... 84,800 1,240,200
Southern Co..................................... 124,300 2,486,000
Texas Utilities Co.............................. 42,829 1,370,528
Unicom Corp..................................... 41,000 984,000
Union Electric Company.......................... 19,600 693,350
--------------
25,526,920
--------------
TOTAL COMMON STOCKS
(Cost $557,376,390)............................................ 638,348,680
--------------
</TABLE>

B29

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.1% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 3.9%
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. $ 25,939,000 $ 25,939,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.2%
United States Treasury Bills,
/5.590%, 03/16/95............................ 100,000 98,882
/5.640%, 03/16/95............................ 1,200,000 1,186,464
--------------
1,285,346
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 27,224,346
--------------
##VARIATION MARGIN ON OPEN FUTURES CONTRACTS -- 0.0%............... (178,025)
--------------
LIABILITIES -- (0.2%)
(net of other assets).......................................... (860,794)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 664,534,207
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt

+No dividend was paid on this security during the 12 months ending December
31, 1994.

/Entire amount pledged as collateral for futures transactions (See Note 2).

##Open futures contracts as of December 31, 1994 are as follows:

PAR VALUE
COVERED BY CONTRACT TYPE EXPIRATION DATE VALUE OF CONTRACTS
$24,628,425 S&P 500 Index Futures Mar 95 $25,143,575
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

B30

<PAGE>

HIGH DIVIDEND STOCK PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 67.8% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 5.1%
E-Systems, Inc.................................. 78,900 $ 3,284,212
Northrop Grumman Corp........................... 379,200 15,926,400
Rockwell International Corp..................... 127,400 4,554,550
Thiokol Corp.................................... 706,600 19,696,475
--------------
43,461,637
--------------
AUTOS - CARS & TRUCKS -- 1.1%
Chrysler Corp................................... 106,100 5,198,900
General Motors Corp............................. 106,100 4,482,725
--------------
9,681,625
--------------
BANKS AND SAVINGS & LOANS -- 0.1%
First Fidelity Bancorp.......................... 12,300 551,963
--------------
COMPUTER SERVICES -- 0.7%
+Intergraph Corp................................ 760,900 6,182,313
--------------
DIVERSIFIED GAS -- 2.3%
British Gas, PLC, ADR........................... 225,600 10,998,000
Equitable Resources, Inc........................ 83,550 2,266,293
Sonat Offshore Drilling, Inc.................... 311,200 5,523,800
Yankee Energy Systems, Inc...................... 30,400 661,200
--------------
19,449,293
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 3.1%
International Business Machines Corp............ 279,600 20,550,600
United Stationers, Inc.......................... 429,800 5,694,850
--------------
26,245,450
--------------
DRUGS AND HOSPITAL SUPPLIES -- 0.8%
Baxter International, Inc....................... 254,000 7,175,500
--------------
ELECTRICAL EQUIPMENT -- 1.6%
Westinghouse Electric Corp...................... 1,105,600 13,543,600
--------------
ELECTRONICS -- 1.6%
+Digital Equipment Corp......................... 62,600 2,081,450
+IMO Industries, Inc............................ 411,200 5,140,000
Kollmorgen Corp................................. 4,600 26,450
Newport Corp.................................... 316,400 2,452,100
Pacific Scientific Co........................... 101,500 4,110,750
--------------
13,810,750
--------------
FINANCIAL SERVICES -- 5.5%
A.G. Edwards, Inc............................... 425,100 7,651,800
Alex Brown, Inc................................. 118,700 3,605,513
Bear Stearns Companies, Inc..................... 560,000 8,610,000
Carr Realty Corp................................ 22,100 397,800
Legg Mason, Inc................................. 89,300 1,897,625
Lehman Brothers Holdings, Inc................... 1,124,100 16,580,475
Manufactured Home Communities, Inc.............. 137,100 2,724,863
Property Trust of America....................... 347,771 6,259,877
--------------
47,727,953
--------------
GAS PIPELINES -- 2.1%
Panhandle Eastern Corp.......................... 421,700 8,328,575
TransCanada Pipelines, Ltd...................... 442,700 5,367,738
Transco Energy Co............................... 183,500 3,050,687
Williams Companies, Inc......................... 42,000 1,055,250
--------------
17,802,250
--------------
HOUSING RELATED -- 0.8%
Irvine Apartment Communities, Inc............... 400,000 6,550,000
--------------
INSURANCE -- 7.3%
Aetna Life & Casualty Co........................ 161,600 7,615,400
Alexander & Alexander Services, Inc............. 812,000 15,022,000
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Continental Corp................................ 822,300 $ 15,623,700
Jefferson-Pilot Corp............................ 51,600 2,676,750
Lincoln National Corp........................... 168,800 5,908,000
Ohio Casualty Corp.............................. 97,600 2,757,200
SAFECO Corp..................................... 159,200 8,278,400
Selective Insurance Group, Inc.................. 208,400 5,262,100
--------------
63,143,550
--------------
MACHINERY -- 0.7%
+Esterline Technologies Corp.................... 298,800 4,108,500
+Terex Corp..................................... 278,600 1,950,200
--------------
6,058,700
--------------
MINERAL RESOURCES -- 0.4%
Potash Corp. of Saskatchewan, Inc............... 113,300 3,852,200
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.9%
+Moog, Inc. (Class 'A' Stock)................... 7,700 71,225
Morrison Knudsen Corp........................... 546,000 6,961,500
+Tubos De Acero De Mexico, ADR.................. 59,500 278,906
--------------
7,311,631
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.6%
Pulitzer Publishing Co.......................... 132,800 5,328,600
--------------
PETROLEUM -- 7.8%
Elf Aquitaine, ADR.............................. 385,979 13,605,760
KN Energy, Inc.................................. 261,900 6,220,125
Mobil Corp...................................... 36,700 3,091,975
Occidental Petroleum Corp....................... 445,100 8,568,175
Petroleum Heat and Power Co., Inc. (Class 'A'
Stock)........................................ 49,800 460,650
Quaker State Corp............................... 652,800 9,139,200
Sun Co., Inc.................................... 150,100 4,315,375
Tenneco, Inc.................................... 258,700 10,994,750
Texaco, Inc..................................... 47,200 2,826,100
USX-Marathon Group.............................. 498,600 8,164,575
--------------
67,386,685
--------------
PETROLEUM SERVICES -- 8.3%
Baker Hughes, Inc............................... 601,300 10,973,725
**+Crestar Energy, Inc.......................... 200,000 2,067,367
Dresser Industries, Inc......................... 576,400 10,879,550
Halliburton Co.................................. 480,000 15,900,000
McDermott International, Inc.................... 782,400 19,364,400
+Smith International Inc........................ 102,300 1,278,750
Sonat, Inc...................................... 144,400 4,043,200
+Varco International, Inc....................... 1,056,300 6,601,875
--------------
71,108,867
--------------
REAL ESTATE DEVELOPMENT -- 8.7%
Amli Residential Properties Trust............... 208,300 3,905,625
Avalon Properties, Inc.......................... 265,000 6,095,000
Beacon Properties Corp.......................... 184,800 3,511,200
Crescent Real Estate Equities, Inc.............. 251,000 6,808,375
Equity Residential Properties Trust............. 686,000 20,580,000
First Union Real Estate Investments............. 130,500 864,563
Gables Residential Trust........................ 345,800 7,434,700
Glimcher Realty Trust........................... 300,000 6,562,500
JP Realty, Inc.................................. 84,000 1,764,000
Kimco Realty Corp............................... 37,500 1,420,312
Malan Realty Investors, Inc..................... 140,000 1,872,500
Simon Property Group, Inc....................... 214,300 5,196,775
Vornado Realty Trust............................ 175,400 6,292,475
Weingarten Realty Investors..................... 62,500 2,367,187
--------------
74,675,212
--------------
</TABLE>

B31

<PAGE>

HIGH DIVIDEND STOCK PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
RETAIL -- 0.8%
Bradlees, Inc................................... 900 $ 10,463
K mart Corp..................................... 160,000 2,080,000
May Department Stores Co........................ 150,000 5,062,500
--------------
7,152,963
--------------
STEEL -- 0.8%
USX-U.S. Steel Group............................ 187,600 6,659,800
--------------
TELECOMMUNICATIONS -- 3.3%
Ameritech Corp.................................. 12,800 516,800
Telefonos de Mexico (Class 'L' Stock), ADR...... 682,200 27,970,200
--------------
28,487,000
--------------
UTILITY - COMMUNICATIONS -- 0.9%
BellSouth Corp.................................. 80,000 4,330,000
NYNEX Corp...................................... 73,300 2,693,775
U S West, Inc................................... 14,800 527,250
--------------
7,551,025
--------------
UTILITY - ELECTRIC -- 2.5%
Central & South West Corp....................... 63,000 1,425,375
Central Hudson Gas & Electric Corp., Inc........ 34,400 911,600
Central Louisiana Electric Co................... 54,500 1,287,563
CINergy Corp.................................... 343,728 8,034,642
Entergy Corp.................................... 217,200 4,751,250
NIPSCO Industries, Inc.......................... 91,000 2,707,250
SCEcorp......................................... 182,000 2,661,750
--------------
21,779,430
--------------
TOTAL COMMON STOCKS
(Cost $583,122,780)............................................ 582,677,997
--------------
<CAPTION>

MARKET
PREFERRED STOCKS -- 16.4% SHARES VALUE
------------- --------------
<S> <C> <C>
ALUMINUM -- 1.3%
Kaiser Aluminum Corp. (Conv. Pfd.).............. 363,500 3,862,187
Reynolds Metals Co. (Conv. Pfd.)................ 147,700 7,144,988
--------------
11,007,175
--------------
AUTOS - CARS & TRUCKS -- 1.4%
Ford Motor Co. (Cum. Conv. Pfd.), Series A...... 127,000 11,684,000
--------------
DRUGS & HOSPITAL SUPPLIES -- 0.6%
U.S. Surgical Corp. (Conv. Pfd.)................ 224,400 5,161,200
--------------
ELECTRICAL EQUIPMENT -- 2.3%
**Westinghouse Electric Corp. (Conv. Pfd.)...... 1,457,000 19,487,375
--------------
ELECTRONICS -- 2.0%
Advanced Micro Devices, Inc. (Conv. Ex. Pfd.)... 160,000 8,400,000
National Semiconductor Corp. (Conv. Pfd.)....... 125,000 9,062,500
--------------
17,462,500
--------------
FINANCIAL SERVICES -- 0.8%
**Parker & Parsley Capital, LLC (Conv. Pfd.).... 135,000 6,210,000
Property Trust of America (Conv. Pfd.), Series
A............................................. 54,500 1,199,000
--------------
7,409,000
--------------
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
PREFERRED STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
FOREST PRODUCTS -- 1.1%
Bowater, Inc. (Conv. Pfd.), Series B............ 161,100 $ 3,967,088
James River Corp. of Virginia (Cum. Conv. Ex.
Pfd.), Series P............................... 268,300 5,433,075
--------------
9,400,163
--------------
INSURANCE -- 0.7%
**Alexander & Alexander Services, Inc. (Conv
Pfd.), Series A............................... 100,000 4,000,000
**Unocal Corp. (Conv. Pfd.)..................... 35,000 1,754,375
USF&G Corp. (Conv. Ex. Pfd.), Series A.......... 10,900 493,225
--------------
6,247,600
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.7%
Echo Bay Finance Corp. (Conv. Pfd.), Series A... 100,000 3,287,500
Hecla Mining Co. (Conv. Pfd.), Series B......... 60,000 2,805,000
--------------
6,092,500
--------------
PETROLEUM SERVICES -- 1.0%
McDermott International, Inc. (Conv. Pfd.),
Series C...................................... 100,000 4,137,500
Noble Drilling Corp. (Conv. Pfd.)............... 90,000 1,822,500
Reading & Bates Corp. (Conv. Pfd.).............. 134,800 2,780,250
--------------
8,740,250
--------------
STEEL -- 2.3%
**Bethlehem Steel Corp. (Cum. Conv. Pfd.)....... 300,000 14,700,000
USX Corp. (Cum. Conv. Pfd.)..................... 114,600 5,128,350
--------------
19,828,350
--------------
TOBACCO -- 2.1%
RJR Nabisco Holdings Corp. (Conv. Pfd.), Series
C............................................. 2,955,000 17,730,000
--------------
UTILITY - ELECTRIC -- 0.1%
Gulf States Utilities Co........................ 900 51,075
Gulf States Utilities Co. (Preferred Series
A)............................................ 4,392 432,612
--------------
483,687
--------------
TOTAL PREFERRED STOCKS
(Cost $151,254,542)............................................ 140,733,800
--------------
<CAPTION>

MARKET
RIGHTS AND WARRANTS -- 0.0% SHARES VALUE
------------- --------------
<S> <C> <C>
MACHINERY
**++Terex Corp. (Rights)........................ 16,950 0
--------------
(Cost $0)
<CAPTION>

PAR MARKET
CONVERTIBLE BONDS -- 4.5% VALUE VALUE
------------- --------------
<S> <C> <C>
INDUSTRIAL
Coeur D'Alene Mines, Corp.,
7.000%, 11/30/02.............................. $ 3,000,000 $ 3,375,000
Conner Peripherals, Inc.,
6.750%, 03/01/01.............................. 1,980,000 1,366,200
Cross Timbers Oil Co.,
5.250%, 11/01/03.............................. 2,583,000 2,095,459
**Cypress Semiconductor Corp.,
3.150%, 03/15/01.............................. 1,335,000 1,229,869
</TABLE>

B32

<PAGE>

HIGH DIVIDEND STOCK PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
IMC Global, Inc.,
6.250%, 12/01/01.............................. $ 4,500,000 $ 4,162,500
Malan Realty Investors, Inc.,
9.500%, 07/15/04.............................. 3,000,000 2,576,250
Noble Affiliates, Inc.,
4.250%, 11/01/03.............................. 11,701,000 9,945,850
Oryx Energy Co.,
7.500%, 05/15/14.............................. 2,000,000 1,385,000
Quantum Corp.,
6.375%, 04/01/02.............................. 5,250,000 5,118,750
Seagate Technology,
**5.000%, 11/01/03............................ 4,200,000 4,326,000
6.750%, 05/01/12.............................. 3,070,000 2,548,100
VLSI Technology, Inc.,
7.000%, 05/01/12.............................. 1,054,000 901,170
--------------
TOTAL CONVERTIBLE BONDS
(Cost $41,994,290)............................................. 39,030,148
--------------
<CAPTION>
PAR MARKET
LONG-TERM BONDS -- 2.5% VALUE VALUE
------------- --------------
<S> <C> <C>
INDUSTRIAL -- 0.5%
**Terex Corp.,
13.000%, 08/01/96............................. 4,583,000 4,376,765
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 2.0%
United States Treasury Notes,
7.500%, 10/31/99, Series 1999................. 17,000,000 16,755,540
--------------
TOTAL LONG-TERM BONDS
(Cost $20,818,910)............................................. 21,132,305
--------------
<CAPTION>

PRINCIPAL
SHORT-TERM INVESTMENTS -- 8.8% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. 75,853,000 75,853,000
--------------
OTHER ASSETS -- 0.0%
(net of liabilities)........................................... 244,002
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 859,671,252
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
PLC Public Limited Company (British Corporation)

**Indicates a restricted security; the aggregate cost of the restricted
securities is $63,176,231. The aggregate value, $58,151,751 is
approximately 6.8% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1994.

++Non-income producing.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

B33

<PAGE>

COMMON STOCK PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 87.3% SHARES VALUE
------------- --------------
<S> <C> <C>
AEROSPACE -- 3.4%
AAR Corp........................................ 650,000 $ 8,693,750
Lockheed Corp................................... 207,900 15,098,738
Loral Corp...................................... 900,000 34,087,500
United Technologies Corp........................ 500,000 31,437,500
--------------
89,317,488
--------------
ALUMINUM -- 1.3%
+Alumax, Inc.................................... 267,500 7,590,313
Aluminum Co. of America......................... 300,000 25,987,500
--------------
33,577,813
--------------
AUTOS - CARS & TRUCKS -- 4.0%
Chrysler Corp................................... 975,000 47,775,000
Ford Motor Co................................... 800,000 22,400,000
General Motors Corp............................. 700,000 29,575,000
+Navistar International Corp.................... 395,200 5,977,400
--------------
105,727,400
--------------
BANKS AND SAVINGS & LOANS -- 5.9%
Bank of New York Company, Inc................... 900,000 26,100,000
BankAmerica Corp................................ 550,000 21,725,000
Chase Manhattan Corp............................ 600,000 20,625,000
Comerica, Inc................................... 700,000 17,062,500
First of America Bank Corp...................... 187,000 5,610,000
Great Western Financial Corp.................... 1,000,000 16,000,000
J.P. Morgan & Co., Inc.......................... 300,000 16,800,000
Mellon Bank Corp................................ 276,398 8,464,689
Mercantile Bankshares Corp...................... 279,600 5,487,150
NationsBank Corp................................ 350,000 15,793,750
--------------
153,668,089
--------------
CHEMICALS -- 0.9%
Eastman Chemical Co............................. 466,550 23,560,774
--------------
CHEMICALS - SPECIALTY -- 1.5%
+ESSEF Corp..................................... 110,000 1,677,500
IMC Global, Inc................................. 705,500 30,512,875
Witco Corp...................................... 268,800 6,619,200
--------------
38,809,575
--------------
COMMERCIAL SERVICES -- 0.6%
Wellman, Inc.................................... 550,000 15,537,500
--------------
COMPUTER SERVICES -- 1.0%
Comdisco, Inc................................... 900,000 20,812,500
Gerber Scientific, Inc.......................... 419,800 5,457,400
+Harris Computer Systems Corp................... 15,000 183,750
--------------
26,453,650
--------------
CONSTRUCTION -- 0.0%
+Willcox & Gibbs, Inc........................... 107,199 629,793
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.8%
International Business Machines Corp............ 300,000 22,050,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 2.8%
Baxter International, Inc....................... 2,100,000 59,325,000
Upjohn Co....................................... 450,000 13,837,500
--------------
73,162,500
--------------
ELECTRONICS -- 7.7%
Amdahl Corp..................................... 850,000 9,350,000
+Digital Equipment Corp......................... 2,500,000 83,125,000
Harris Corp..................................... 300,000 12,750,000
Hewlett-Packard Co.............................. 175,000 17,478,125
Tandy Corp...................................... 1,418,000 71,077,250
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Varian Associates, Inc.......................... 145,000 $ 5,075,000
Zero Corp....................................... 120,500 1,687,000
--------------
200,542,375
--------------
FINANCIAL SERVICES -- 6.8%
American Express Co............................. 2,100,000 61,950,000
Dean Witter, Discover & Co...................... 1,200,000 40,650,000
Lehman Brothers Holdings, Inc................... 900,000 13,275,000
Republic New York Corp.......................... 225,000 10,181,250
Salomon, Inc.................................... 700,000 26,250,000
Travelers, Inc.................................. 800,000 26,000,000
--------------
178,306,250
--------------
FOREST PRODUCTS -- 6.1%
International Paper Co.......................... 415,000 31,280,625
James River Corp. of Virginia................... 560,000 11,340,000
Rayonier, Inc................................... 125,000 3,812,500
Scott Paper Co.................................. 1,650,000 114,056,250
--------------
160,489,375
--------------
GAS PIPELINES -- 0.3%
NorAm Energy Corp............................... 1,300,000 6,987,500
--------------
HEALTHCARE -- 1.1%
+Foundation Health Corp......................... 950,000 29,450,000
--------------
HOSPITAL MANAGEMENT -- 3.2%
+American Medical Holdings, Inc................. 649,600 15,671,600
+Beverly Enterprises, Inc....................... 39,300 564,938
Columbia / HCA Healthcare Corp.................. 400,000 14,600,000
+Hillhaven Corp................................. 459,400 9,762,250
National Medical Enterprises, Inc............... 2,965,000 41,880,625
--------------
82,479,413
--------------
HOUSING RELATED -- 0.5%
Centex Corp..................................... 600,000 13,650,000
--------------
INSURANCE -- 13.0%
Alexander & Alexander Services, Inc............. 1,050,000 19,425,000
American General Corp........................... 1,000,000 28,250,000
Chubb Corp...................................... 700,000 54,162,500
Citizens Corp................................... 500,000 8,500,000
Continental Corp................................ 2,300,000 43,700,000
Emphesys Financial Group, Inc................... 441,400 14,014,450
Equitable Companies, Inc........................ 1,518,700 27,526,438
First Colony Corp............................... 1,253,600 28,049,300
John Alden Financial Corp....................... 141,000 4,053,750
Old Republic International Corp................. 1,000,590 21,262,538
Providian Corp.................................. 340,500 10,512,937
SAFECO Corp..................................... 800,000 41,600,000
SCOR U.S. Corp.................................. 195,600 1,638,150
St. Paul Companies, Inc......................... 400,000 17,900,000
Western National Corp........................... 1,528,200 19,675,575
--------------
340,270,638
--------------
LODGING -- 2.0%
Loews Corp...................................... 600,000 52,125,000
--------------
MINERAL RESOURCES -- 1.6%
Amax Gold, Inc.................................. 131,342 788,052
Cyprus Amax Minerals Co......................... 1,533,200 40,054,850
+Nord Resources Corp............................ 130,500 831,938
--------------
41,674,840
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 1.8%
American Water Works Co., Inc................... 135,000 3,645,000
ITT Corp........................................ 500,000 44,312,500
+Worldtex, Inc.................................. 107,199 388,596
--------------
48,346,096
--------------
</TABLE>

B34

<PAGE>

COMMON STOCK PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.8%
Avnet, Inc...................................... 310,000 $ 11,470,000
Eastman Kodak Co................................ 500,000 23,875,000
Gibson Greetings, Inc........................... 750,000 11,062,500
--------------
46,407,500
--------------
PETROLEUM -- 4.8%
Amerada Hess Corp............................... 325,000 14,828,125
Atlantic Richfield Co........................... 250,000 25,437,500
Elf Aquitaine, ADR.............................. 1,836,033 64,720,163
Occidental Petroleum Corp....................... 1,100,000 21,175,000
--------------
126,160,788
--------------
PETROLEUM SERVICES -- 2.3%
+B.J. Services Co............................... 500,000 8,437,500
Oryx Energy Co.................................. 1,600,000 19,000,000
Total SA, ADR................................... 717,640 21,170,380
Union Texas Petroleum Holdings, Inc............. 504,500 10,468,375
--------------
59,076,255
--------------
RAILROADS -- 0.9%
+Southern Pacific Rail Corp..................... 1,300,000 23,562,500
--------------
RETAIL -- 5.7%
Dayton-Hudson Corp.............................. 119,600 8,461,700
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 1,300,000 34,775,000
+Federated Department Stores, Inc............... 700,000 13,475,000
K mart Corp..................................... 2,300,000 29,900,000
Petrie Stores Corp.............................. 540,000 12,082,500
U.S. Shoe Corp.................................. 1,491,600 27,967,500
+Waban, Inc..................................... 1,300,000 23,075,000
--------------
149,736,700
--------------
STEEL -- 0.5%
+Bethlehem Steel................................ 500,000 9,000,000
Carpenter Technology Corp....................... 50,000 2,800,000
--------------
11,800,000
--------------
TELECOMMUNICATIONS -- 3.5%
Sprint Corp..................................... 1,700,000 46,962,500
Telefonica de Espana, SA, ADR................... 1,300,000 45,662,500
--------------
92,625,000
--------------
TRUCKING/SHIPPING -- 0.8%
OMI Corp........................................ 1,000,000 6,625,000
Overseas Shipholding Group, Inc................. 600,000 13,800,000
--------------
20,425,000
--------------
UTILITY - ELECTRIC -- 0.7%
American Electric Power Co., Inc................ 180,000 5,917,500
General Public Utilities Corp................... 500,000 13,125,000
--------------
19,042,500
--------------
TOTAL COMMON STOCKS
(Cost $2,039,308,682).......................................... 2,285,652,312
--------------
<CAPTION>

MARKET
PREFERRED STOCKS -- 1.4% SHARES VALUE
------------- --------------
<S> <C> <C>
AUTOS - CARS & TRUCKS -- 0.5%
**Chrysler Corp. (Conv. Pfd.)................... 95,000 13,050,625
--------------
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
PREFERRED STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
TOBACCO -- 0.9%
RJR Nabisco Holdings Corp. (Conv. Pfd.)......... 4,000,000 $ 24,000,000
--------------
TOTAL PREFERRED STOCKS
(Cost $36,922,710)............................................. 37,050,625
--------------
<CAPTION>

PRINCIPAL
SHORT-TERM INVESTMENTS -- 13.1% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. $ 343,262,000 $ 343,262,000
--------------
LIABILITIES -- (1.8%)
(net of other assets).......................................... (48,192,920)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $2,617,772,017
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

**Indicates a restricted security; the aggregate cost of the restricted
securities is $10,923,100. The aggregate value, $13,050,625 is
approximately 0.5% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1994.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

B35

<PAGE>

GLOBAL EQUITY PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 87.0% SHARES VALUE
------------- --------------
<S> <C> <C>
AUSTRALIA -- 6.7%
Brambles Industries, Ltd.
(Miscellaneous - Basic Industry).............. 314,800 $ 3,006,681
Broken Hill Proprietary Co., Ltd.
(Metals - Diversified)........................ 303,900 4,617,732
BTR Nylex, Ltd.
(Miscellaneous - Basic Industry).............. 1,391,344 2,588,736
Coca-Cola Amatil, Ltd.
(Foods)....................................... 817,705 5,198,194
Publishing and Broadcasting, Ltd.
(Media)....................................... 50,000 139,933
Western Mining Corp. Holdings, Ltd.
(Metals - Diversified)........................ 1,336,312 7,728,382
--------------
23,279,658
--------------
BELGIUM -- 0.9%
Bekaert, NPV
(Miscellaneous - Basic Industry).............. 4,500 3,194,107
--------------
FEDERAL REPUBLIC OF GERMANY -- 2.5%
BASF, AG
(Chemicals)................................... 18,900 3,896,719
Bilfinger & Berger Bau, AG
(Construction)................................ 3,744 1,908,663
Preussag, AG
(Miscellaneous - Basic Industry).............. 9,270 2,691,898
--------------
8,497,280
--------------
FINLAND -- 0.7%
Kymmene Corp.
(Forest Products)............................. 85,200 2,320,066
--------------
FRANCE -- 4.6%
Guyenne et Gascogne
(Retail)...................................... 3,100 783,561
Imetal
(Mineral Resources)........................... 32,880 3,176,574
Lafarge Coppee
(Construction)................................ 47,510 3,380,228
**Lafarge Coppee
(Construction)................................ 1,100 78,263
Legrand
(Electrical Equipment)........................ 2,700 3,275,791
Plastic Omnium
(Autos - Cars & Trucks)....................... 6,765 729,571
Valeo, SA
(Autos - Cars & Trucks)....................... 88,885 4,425,112
--------------
15,849,100
--------------
HONG KONG -- 4.4%
Cdl Hotels International, Ltd.
(Real Estate Development)..................... 3,908,174 1,540,540
Citic Pacific, Ltd.
(Miscellaneous - Basic Industry).............. 1,387,000 3,343,141
Guoco Group, Ltd.
(Financial Services).......................... 1,243,000 5,317,389
Hung Hing Printing Group, Ltd.
(Miscellaneous - Basic Industry).............. 3,452,000 709,361
Hutchison Whampoa, Ltd.
(Miscellaneous - Basic Industry).............. 1,097,000 4,480,155
--------------
15,390,586
--------------
INDONESIA -- 0.4%
PT Kabelmetal Indonesia (Foreign)
(Telecommunications).......................... 1,047,400 1,429,572
--------------
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
JAPAN -- 17.0%
Aiwa
(Electronics)................................. 122,000 $ 2,999,498
Autobacs Seven
(Retail)...................................... 41,700 4,979,729
DDI Corp.
(Telecommunications).......................... 370 3,193,176
Japan Associated Finance
(Financial Services).......................... 26,000 4,044,155
Kamigumi Co.
(Trucking/Shipping)........................... 302,000 3,212,444
Keyence Corp.
(Electrical Equipment)........................ 37,000 4,195,685
Kyocera Corp.
(Electrical Equipment)........................ 59,000 4,375,414
Minebea Co., Ltd.
(Miscellaneous - Basic Industry).............. 434,000 3,658,404
Murata Manufacturing Co., Ltd.
(Electronics)................................. 55,500 2,144,255
Nichiei Co., Ltd.
(Financial Services).......................... 77,300 4,964,576
Nissen Co., Ltd.
(Retail)...................................... 68,520 2,117,828
Nisshin Steel Co., Ltd.
(Steel)....................................... 578,000 2,911,751
Rohm Co.
(Electronics)................................. 102,000 4,319,518
Shin-Etsu Chemical Co.
(Chemicals)................................... 176,000 3,497,040
Sony Music Entertainment
(Leisure)..................................... 65,600 3,686,503
Tokyo Electron, Ltd.
(Electrical Equipment)........................ 141,000 4,386,352
--------------
58,686,328
--------------
MALAYSIA -- 3.9%
Hong Leong Industries Berhad
(Construction)................................ 3,000 15,508
I.J.M. Corp. Berhad (Loan Stock)
(Construction)................................ 810,000 1,887,409
Malaysian Airline Systems Berhad
(Airlines).................................... 421,000 1,261,269
Renong Berhad
(Miscellaneous - Basic Industry).............. 2,181,000 2,699,025
Resorts World Berhad
(Leisure)..................................... 804,000 4,722,929
Technology Resources Industries Berhad
(Miscellaneous - Basic Industry).............. 904,000 2,885,295
United Merchant Group Berhad
(Financial Services).......................... 666 1,226
--------------
13,472,661
--------------
MEXICO -- 2.2%
Cementos Apasco, SA (Class 'A' Stock)
(Housing Related)............................. 426,400 2,125,573
Cifra, SA (Class 'B' Stock)
(Retail)...................................... 1,259,800 2,562,648
Femsa (Class 'B' Stock)
(Miscellaneous - Basic Industry).............. 604,900 1,549,030
Grupo Financiero Banamex (Class 'L' Stock)
(Banks and Savings & Loans)................... 5,720 16,556
</TABLE>

B36

<PAGE>

GLOBAL EQUITY PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Grupo Financiero Banamex Accival, SA (Class 'C'
Stock)
(Banks and Savings & Loans)................... 414,100 $ 1,223,572
--------------
7,477,379
--------------
NETHERLANDS -- 0.5%
Boskalis Westminster, CVA
(Construction)................................ 91,050 1,857,002
--------------
NEW ZEALAND -- 1.1%
Fletcher Challenge, Ltd.
(Forest Products)............................. 1,574,000 3,697,877
--------------
REPUBLIC OF KOREA -- 1.4%
Pohang Iron & Steel Co., Ltd.
(Steel)....................................... 3,800 306,988
Samsung Electronics Co.
(Electronics)................................. 27,390 3,786,316
Samsung Electronics Co. (New)
(Electronics)................................. 1,309 178,462
Shinsegae Department Store
(Retail)...................................... 4,200 434,115
--------------
4,705,881
--------------
SINGAPORE -- 6.5%
Fraser & Neave, Ltd.
(Beverages)................................... 303,000 3,139,142
Overseas Union Bank, Ltd. (Foreign)
(Banks and Savings & Loans)................... 740,000 4,315,609
Sembawang Maritime, Ltd.
(Trucking/Shipping)........................... 706,500 3,417,376
Singapore Airlines, Ltd. (Foreign)
(Airlines).................................... 508,000 4,670,463
United Overseas Bank, Ltd. (Foreign)
(Banks and Savings & Loans)................... 527,000 5,568,302
Wing Tai Holdings, Ltd.
(Miscellaneous - Basic Industry).............. 856,250 1,515,695
--------------
22,626,587
--------------
SPAIN -- 2.7%
Acerinox, SA
(Steel)....................................... 30,760 3,212,862
Centros Commerciales Pryca, SA
(Retail)...................................... 93,362 1,407,776
Dragados Y Construcciones, SA
(Construction)................................ 118,900 1,670,924
Vallehermoso, SA
(Real Estate Development)..................... 167,233 2,902,760
--------------
9,194,322
--------------
SWEDEN -- 4.2%
Astra, AB (Series 'B' Free)
(Drugs and Hospital Supplies)................. 145,150 3,701,724
Hennes & Mauritz (Series 'B' Free)
(Retail)...................................... 90,200 4,624,974
Mo Och Domsjo, AB (Series 'B' Free)
(Forest Products)............................. 57,000 2,654,170
Volvo, AB (Series 'B' Free)
(Autos - Cars & Trucks)....................... 190,200 3,583,573
--------------
14,564,441
--------------
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
THAILAND -- 0.9%
Land & House Public Co., Ltd. (Foreign)
(Construction)................................ 25,700 $ 458,618
Sahaviriya Steel Industry
(Metals - Diversified)........................ 764,800 1,949,699
Sahaviriya Steel Industry (Foreign)
(Metals - Diversified)........................ 322,000 820,872
--------------
3,229,189
--------------
UNITED KINGDOM -- 8.9%
Barclays, PLC
(Banks and Savings & Loans)................... 246,900 2,360,517
British Sky Broadcasting Group, PLC
(Media)....................................... 620,600 2,490,829
Carlton Communications
(Communications).............................. 192,600 2,703,295
Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)....................... 446,570 4,105,274
**Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)....................... 22,870 210,242
J. Sainsbury, PLC
(Retail)...................................... 299,500 1,928,464
Powergen, PLC
(Utility - Electric).......................... 294,000 2,465,795
S.G. Warburg Group, PLC
(Financial Services).......................... 171,900 1,861,344
Siebe, PLC
(Machinery)................................... 500,840 4,369,066
TeleWest Communications, PLC
(Media)....................................... 1,200,000 3,192,089
Vodafone Group, PLC
(Telecommunications).......................... 1,503,900 4,988,840
--------------
30,675,755
--------------
UNITED STATES -- 17.5%
+Adaptec, Inc.
(Computer Services)........................... 206,600 4,880,925
+Applied Materials, Inc.
(Electrical Equipment)........................ 81,000 3,422,250
+Cirrus Logic, Inc.
(Electronics)................................. 106,500 2,396,250
+Electronic Arts, Inc.
(Computer Services)........................... 139,700 2,689,225
Exide Corp.
(Autos - Cars & Trucks)....................... 61,000 3,431,250
Mattel, Inc.
(Leisure)..................................... 171,050 4,297,631
MCI Communications Corp.
(Telecommunications).......................... 162,300 2,982,263
+Microsoft Corp.
(Computer Services)........................... 72,800 4,449,900
Mobil Corp.
(Petroleum)................................... 48,500 4,086,125
Motorola, Inc.
(Electronics)................................. 105,900 6,128,962
+Nextel Communications, Inc. (Class 'A' Stock)
(Telecommunications).......................... 186,600 2,682,375
Norwest Corp.
(Banks and Savings & Loans)................... 155,000 3,623,125
+Oracle Systems Corp.
(Computer Services)........................... 115,900 5,114,087
Pohang Iron & Steel Co., Ltd., ADR
(Steel)....................................... 60,800 1,778,400
</TABLE>

B37

<PAGE>

GLOBAL EQUITY PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
+Silicon Graphics, Inc.
(Computer Services)........................... 157,800 $ 4,891,800
Time Warner, Inc.
(Media)....................................... 103,300 3,628,413
--------------
60,482,981
--------------
TOTAL COMMON STOCKS
(Cost $296,456,732)............................................ 300,630,772
--------------
<CAPTION>

MARKET
PREFERRED STOCKS -- 3.2% SHARES VALUE
------------- --------------
<S> <C> <C>
FEDERAL REPUBLIC OF GERMANY -- 0.7%
Krones, AG
(Machinery)................................... 4,368 2,452,270
--------------
FINLAND -- 2.4%
Nokia, AB
(Miscellaneous - Basic Industry).............. 55,900 8,236,414
--------------
REPUBLIC OF KOREA -- 0.1%
Samsung Electronics Co.
(Electronics)................................. 5,213 394,033
--------------
TOTAL PREFERRED STOCKS
(Cost $7,891,492).............................................. 11,082,717
--------------
<CAPTION>
MARKET
RIGHTS AND WARRANTS -- 0.4% SHARES VALUE
------------- --------------
<S> <C> <C>
FEDERAL REPUBLIC OF GERMANY -- 0.2%
)Kamigumi Co. (Warrants),
(Trucking/Shipping)........................... 1,000 164,553
)Nissen Co., Ltd. (Warrants),
(Retail)...................................... 316 397,638
--------------
562,191
--------------
FRANCE -- 0.0%
**Lafarge Coppee (Warrants),
(Construction)................................ 1,000 5,074
--------------
SWITZERLAND -- 0.1%
\Nitori Co., Ltd. (Warrants),
(Furniture)................................... 2,950 507,066
--------------
UNITED STATES -- 0.1%
#Autobacs Seven Warrants 95 #1,
(Retail)...................................... 35 130,813
#Autobacs Seven Warrants 96 #2,
(Retail)...................................... 35 127,313
--------------
258,126
--------------
TOTAL RIGHTS AND WARRANTS
(Cost $1,517,852).............................................. 1,332,457
--------------
<CAPTION>

PAR MARKET
CONVERTIBLE BONDS -- 0.3% VALUE VALUE
------------- --------------
<S> <C> <C>
SINGAPORE -- 0.1%
Sembawang Maritime, Ltd.,
(1.500%, 10/25/98
(Trucking/Shipping)........................... $ 154,000 $ 240,906
--------------
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
UNITED STATES -- 0.2%
MDX Public Co., Ltd.,
(4.750%, 9/17/03
(Real Estate Development)..................... $ 1,227,000 $ 779,145
--------------
TOTAL CONVERTIBLE BONDS
(Cost $1,393,348).............................................. 1,020,051
--------------
<CAPTION>

PRINCIPAL
SHORT-TERM INVESTMENTS -- 7.5% AMOUNT VALUE
------------- --------------
<S> <C> <C>
UNITED STATES
REPURCHASE AGREEMENTS
(Sanawa, 5.750%, entered 12/30/94; maturing
01/03/95 in the amount of $26,000,000
(collateralized by $25,575,000 United States
Treasury Notes, 7.875%, 01/15/98)........... $ 26,000,000 $ 26,000,000
--------------
- -C-UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS
- 0.0%......................................................... 17,247
--------------
OTHER ASSETS -- 1.6%
(net of liabilities)........................................... 5,650,734
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 345,733,978
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

AB Aktiebolag (Swedish Stock Company)
ADR American Depository Receipt
AG Aktiengesellschaft (West German Stock Company)
CVA Certificaten Van Affecton (Guaranteed)
NPV Net Present Value
PLC Public Limited Company (British Corporation)
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

#These are American warrants with an underlying Japanese security.

)These are German warrants with an underlying Japanese security.

\These are Swiss warrants with an underlying Japanese security.

**Indicates a restricted security; the aggregate cost of the restricted
securities is $216,115. The aggregate value, $293,578 is approximately .1%
of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1994.

- -C- Forward Foreign Exchange Contracts as of December 31, 1994:

FOREIGN CURRENCY SOLD EXPIRATION DATE UNREALIZED APPRECIATION
Australian Dollar
171,259 January 1995 $17,247
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

B38

<PAGE>

NATURAL RESOURCES PORTFOLIO

DECEMBER 31, 1994

<TABLE>
<CAPTION>
MARKET
COMMON STOCKS -- 88.3% SHARES VALUE
------------- --------------
<S> <C> <C>
ALUMINUM -- 6.0%
+Alumax, Inc.................................... 100,000 $ 2,837,500
Aluminum Co. of America......................... 40,000 3,465,000
Comalco, Ltd., ADR.............................. 142,000 2,753,579
+Kaiser Aluminum Corp........................... 91,000 989,625
Reynolds Metals Co.............................. 75,050 3,677,450
--------------
13,723,154
--------------
CHEMICALS -- 0.8%
Calgon Carbon Corp.............................. 180,000 1,867,499
--------------
CHEMICALS - SPECIALTY -- 3.0%
IMC Global, Inc................................. 154,800 6,695,099
--------------
DIVERSIFIED GAS -- 7.1%
+Basin Exploration, Inc......................... 130,000 1,413,750
Cross Timbers Oil Co............................ 224,900 3,373,500
+Rigel Energy Corp.............................. 294,500 2,945,000
Sonat Offshore Drilling, Inc.................... 127,000 2,254,250
USX-Delhi Group................................. 106,500 1,065,000
Western Gas Resources, Inc...................... 257,600 4,958,800
--------------
16,010,300
--------------
FOREST PRODUCTS -- 4.7%
Champion International Corp..................... 99,500 3,631,750
Fletcher Challenge, Ltd., ADR................... 312,900 3,559,238
Rayonier, Inc................................... 116,100 3,541,050
--------------
10,732,038
--------------
GAS PIPELINES -- 4.3%
Aquila Gas Pipeline Corp........................ 113,700 895,388
+Global Marine, Inc............................. 206,500 748,563
+Reading & Bates Offshore Drilling Co........... 232,600 1,395,600
+Seagull Energy Corp............................ 170,400 3,258,900
+Tejas Gas Corp................................. 70,450 3,355,180
--------------
9,653,631
--------------
METALS - DIVERSIFIED -- 1.4%
+Stillwater Mining Co........................... 242,900 3,263,969
--------------
MINERAL RESOURCES -- 30.9%
Agnico-Eagle Mines, Ltd......................... 425,000 4,515,625
American Barrick Resources Corp................. 254,653 5,666,029
Battle Mountain Gold Co......................... 162,300 1,785,300
+Cominco, Ltd................................... 144,000 2,556,000
CRA, Ltd., ADR.................................. 69,200 3,821,688
Freeport-McMoRan Copper & Gold, Inc. (Class 'A'
Stock)........................................ 162,300 3,448,875
Inco, Ltd....................................... 168,600 4,826,175
M.I.M. Holdings, Ltd., ADR...................... 840,000 2,801,652
Newmont Mining Corp............................. 126,307 4,547,052
Pegasus Gold, Inc............................... 172,000 1,956,500
Placer Dome, Inc................................ 199,700 4,343,475
Potash Corp. of Saskatchewan, Inc............... 320,400 10,893,600
+Sante Fe Pacific Gold Corp..................... 437,700 5,635,388
+TVX Gold, Inc.................................. 600,000 4,050,000
Vigoro Corp..................................... 169,000 5,070,000
Western Mining Corp. Holdings, Ltd., ADR........ 187,500 4,382,812
--------------
70,300,171
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.8%
+Enterra Corp................................... 98,500 1,871,500
--------------
PETROLEUM -- 6.9%
Amerada Hess Corp............................... 47,900 2,185,438
Cabot Oil & Gas Corp. (Class 'A' Stock)......... 129,900 1,883,550
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
<S> <C> <C>
Elf Aquitaine, ADR.............................. 189,783 $ 6,689,850
Parker & Parsley Petroleum Co................... 145,000 2,972,500
USX-Marathon Group.............................. 117,100 1,917,513
--------------
15,648,851
--------------
PETROLEUM CANADIAN -- 2.7%
Beau Canada Exploration, Ltd. (Class 'A'
Stock)........................................ 831,900 1,186,099
+Talisman Energy, Inc........................... 290,000 4,858,314
--------------
6,044,413
--------------
PETROLEUM SERVICES -- 19.7%
+American Oilfield Divers, Inc.................. 59,900 374,375
Baker Hughes, Inc............................... 126,700 2,312,275
+Cairn Energy USA, Inc.......................... 250,000 1,968,750
Camco International, Inc........................ 100,000 1,887,500
+Coflexip, ADR.................................. 172,000 3,999,000
**+Crestar Energy, Inc.......................... 240,000 2,480,841
+Dreco Energy Services, Ltd. (Class 'A'
Stock)........................................ 88,100 644,231
+Hornbeck Offshore Services, Inc................ 127,200 1,605,900
+ICO, Inc....................................... 192,300 769,200
+Marine Drilling Co., Inc....................... 820,400 2,307,375
+Mesa, Inc...................................... 440,900 2,149,388
+Newfield Exploration Co........................ 204,000 4,029,000
Noble Affiliates, Inc........................... 156,700 3,878,325
+Noble Drilling Corp............................ 140,600 826,025
+Offshore Pipelines, Inc........................ 150,000 3,393,750
Oryx Energy Co.................................. 117,100 1,390,563
+PetroCorp, Inc................................. 217,500 2,324,531
+Pride Petroleum Services, Inc.................. 260,000 1,348,750
+Stolt Comex Seaway, SA......................... 220,000 1,567,500
Trident NGL Holding, Inc........................ 200,000 2,100,000
+Varco International, Inc....................... 115,800 723,750
+Western Co. of North America................... 162,200 2,737,125
--------------
44,818,154
--------------
TOTAL COMMON STOCKS
(Cost $195,869,708)............................................ 200,628,779
--------------
<CAPTION>

MARKET
PREFERRED STOCKS -- 5.5% SHARES VALUE
------------- --------------
<S> <C> <C>
ALUMINUM -- 0.7%
Kaiser Aluminum Corp. (Conv. Pfd.).............. 150,000 1,593,750
--------------
MINERAL RESOURCES -- 1.3%
Amax Gold, Inc. (Conv. Pfd), Series B........... 22,400 1,086,400
Battle Mountain Gold Co. (Conv. Pfd.)........... 12,000 732,000
Freeport - McMoRan Copper & Gold, Inc........... 60,000 1,177,500
--------------
2,995,900
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 1.8%
Hecla Mining Co. (Conv. Pfd.), Series B......... 87,000 4,067,250
--------------
PETROLEUM SERVICES -- 1.7%
Noble Drilling Corp. (Conv. Pfd.)............... 150,000 3,037,500
Reading & Bates Corp. (Cum. Conv. Pfd.)......... 39,900 822,938
--------------
3,860,438
--------------
TOTAL PREFERRED STOCKS
(Cost $13,791,225)............................................. 12,517,338
--------------
</TABLE>

B39

<PAGE>

NATURAL RESOURCES PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
CONVERTIBLE BONDS -- 3.0% VALUE VALUE
------------- --------------
<S> <C> <C>
INDUSTRIAL
Coeur d'Alene Mines Corp.,
6.375%, 01/31/04.............................. $ 4,319,000 $ 3,584,770
7.000%, 11/30/02.............................. 1,465,000 1,648,125
**Homestake Mining Co.,
5.500%, 06/23/00.............................. 1,519,000 1,486,722
--------------
TOTAL CONVERTIBLE BONDS
(Cost $7,130,853).............................................. 6,719,617
--------------
<CAPTION>

PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.5% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. 10,291,000 10,291,000
--------------
LIABILITIES -- (1.3%)
(net of other assets).......................................... (2,882,805)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 227,273,929
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

**Indicates a restricted security; the aggregate cost of the restricted
securities is $4,570,797. The aggregate value, $3,967,563 is approximately
1.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1994.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B41 THROUGH B46.

B40

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FOR THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993 (AS RESTATED)

NOTE 1: GENERAL

The Prudential Series Fund, Inc. ("Series Fund"), a Maryland corporation,
organized on November 15, 1982, is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Series Fund is composed of sixteen Portfolios, each with a separate series of
capital stock. Shares in the Series Fund are currently sold only to certain
separate accounts of The Prudential Insurance Company of America ("The
Prudential"), Pruco Life Insurance Company and Pruco Life Insurance Company of
New Jersey (together referred to as the "Companies") to fund benefits under
certain variable life insurance and variable annuity contracts issued by the
Companies.

The shareholders of Pruco Life Series Fund, Inc. ("Pruco Fund") and the Series
Fund approved the merger of the Pruco Fund into the Series Fund as of November
1, 1986. The merger combined five portfolios with identical investment
strategies (Money Market, Bond, Common Stock, Aggressively Managed Flexible and
Conservatively Managed Flexible) of the Pruco Fund with their counterpart in the
Series Fund. The merger was effected by converting the net assets of the Pruco
Fund at the merger date into shares of the Series Fund at the share price of
that day and was accounted for as a pooling of interest.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SECURITIES VALUATION: Equity securities are valued at market. Securities traded
on a national securities exchange are valued at the last sales price on such
exchange as of the close of the New York Stock Exchange or, in the absence of
recorded sales, at the mean between the most recently quoted bid and asked
prices. For any securities not traded on a national securities exchange but
traded in the over-the-counter market, the securities are valued at the mean
between the most recently quoted bid and asked prices, except that securities
for which quotations are furnished through a nationwide automated quotation
system approved by the National Association of Securities Dealers, Inc.
("NASDAQ") are valued at the last sales price or if there was no sale on such
day, at the mean between the most recently quoted bid and asked prices.
Convertible debt securities are valued at the mean between the most recently
quoted bid and asked prices provided by principal market makers. High yield
bonds are valued either by quotes received from principal market makers or by an
independent pricing service which determines prices by analysis of quality,
coupon, maturity and other adjustment factors. Long-term bonds are valued at
market, based on valuation prices by an independent pricing service which
determines prices by analysis of quality, coupon, maturity and other adjustment
factors. Short-term investments are valued at amortized cost, which with accrued
interest approximates market value. Amortized cost is computed using the cost on
the date of purchase adjusted for constant amortization of discount or premium
to maturity. The interest rates shown for Commercial Paper, Promissory Notes,
and certain U.S. Government Agency Obligations on the Schedules of Investments
are the discount rates paid at the time of purchase. Any security for which a
quotation is unavailable is valued at fair value as determined in good faith by
or under the direction of the Series Fund's Board of Directors.

The ability of issuers of debt securities held by specific Portfolios of the
Series Fund to meet their obligations may be affected by economic developments
in a specific country or industry.

Each portfolio, other than the Money Market Portfolio, may invest up to 15% of
its net assets in securities which are subject to legal or contractual
restrictions on resale or for which no readily available market exists
("restricted securities"). The Money Market Portfolio may invest up to 10% of
its net assets in restricted securities. Restricted securities are valued
pursuant to the valuation procedures noted above.

DERIVATIVE FINANCIAL INSTRUMENTS: The Series Fund may engage in various
portfolio strategies to seek increased returns by hedging the portfolios against
adverse movements in the equity, debt, and currency markets. Losses may arise
due to changes in the value of the contract or if the counterparty does not
perform under the contract.

OPTION WRITING: When the Series Fund sells an option, an amount equal to the
premium received is recorded as a liability and is subsequently adjusted to the
current market value of the option written. Premiums received from writing
options which expire unexercised are treated on the expiration date as gains
from the sale of securities. As to options which are closed, the difference
between the premium and the amount paid on effecting a closing purchase
transaction, including brokerage commissions, is also treated as a gain, or if
the

B41

<PAGE>

premium received is less than the amount paid for the closing purchase
transaction, as a loss. If a call option is exercised, the premium is added to
the proceeds from the sale in determining whether a gain or loss has been
realized.

The Series Fund's use of written options involves, to varying degrees, elements
of market risk in excess of the amount recognized in the statement of assets and
liabilities. The contract or notional amounts reflect the extent of the Series
Fund's involvement in these financial instruments. Risks arise from the possible
movements in foreign exchange rates and securities values underlying these
instruments.

STOCK INDEX FUTURES: Portfolios of the Fund may attempt to reduce the risk of
investment in equity securities by hedging a portion of their equity portfolios
through the use of stock index futures traded on a commodities exchange or board
of trade. A stock index futures contract is an agreement in which the seller of
the contract agrees to deliver to the buyer an amount of cash equal to a
specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the agreement was made. Upon entering into a futures contract, a
Portfolio is required to pledge to the broker liquid assets equal to the minimum
"initial margin," approximately 5% of the contract amount. The Portfolio further
agrees to receive or pay to the broker an amount of cash equal to the futures
contract's daily fluctuation in value. These receipts or payments are known as
the "variation margin" and are recorded as unrealized gains or losses. When a
futures contract is closed, the Portfolio records a realized gain or loss equal
to the difference between the value of the contract at the time it was opened
and the value at the time it was closed.

FOREIGN CURRENCY TRANSACTIONS: The books and records of the Series Fund 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
mid daily rate of exchange as reported by a major New York City bank;

(ii) purchases and sales of investment securities, income and expenses at the
rate of exchange prevailing on the respective dates of such transactions.

Since the net assets of the Series Fund are presented at the foreign exchange
rates and market values at the close of the fiscal period, it is not practical
to isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from change
in the market prices of securities held at the end of the fiscal period.
Similarly, it is not practical to isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market prices
of equities sold during the fiscal year.

Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of government supervision and regulation of foreign security markets.

The Global Equity Portfolio may invest up to 100% of its total assets in common
stock and convertible securities denominated in a foreign currency and issued by
foreign or domestic issuers. The Bond and High Yield Bond Portfolios may each
invest up to 20% of their assets in United States currency denominated debt
securities issued outside the United States by foreign or domestic issuers. In
addition, the bond components of the Conservatively Managed Flexible and
Aggressively Managed Flexible Portfolios may each invest up to 20% of their
assets in such securities. Further, the High Dividend Stock and Aggressively
Managed Flexible Portfolios may invest up to 30% of their total assets in debt
and equity securities denominated in a foreign currency and issued by foreign or
domestic issuers. In addition, Common Stock and Natural Resources Portfolios may
invest up to 30% of their total assets in non-United States currency denominated
common stock and fixed-income securities convertible into common stock of
foreign and U.S. issuers.

Net realized gains and losses on foreign currency transactions represent net
foreign exchange gains and losses from holding of foreign currencies; currency
gains or losses realized between the trade and settlement dates on security
transactions; and the difference between the amounts of the dividends and
foreign taxes recorded on the Series Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net currency gains and losses from valuing
foreign currency denominated assets and liabilities at fiscal period end
exchange rates are reflected as a component of unrealized loss on foreign
currencies.

FORWARD FOREIGN EXCHANGE CONTRACTS: The Series Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Series Fund's records. However, the effect on operations is recorded from the
date the Series Fund enters into such contracts. Premium or discount is
amortized over the life of the contracts.

B42

<PAGE>

SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Dividend income is recorded on
the ex-dividend date. Interest income is accrued daily on both long-term bonds
and short-term investments. Interest income also includes net amortization from
the purchase of fixed-income securities. Long-term security and option
transactions are recorded on the first business day following the trade date,
except that transactions on the last business day of the reporting cycle are
recorded on that date. Short-term security and futures transactions are recorded
on trade date. Realized gains and losses from security transactions are
determined and accounted for on the basis of identified cost.

DISTRIBUTIONS AND TAXES: The Portfolios of the Series Fund intend to continue
to qualify for and elect the special tax treatment afforded regulated investment
companies under Subchapter M of the Internal Revenue Code, thereby relieving the
Series Fund of Federal income taxes. To so qualify, the Series Fund intends to
distribute substantially all of its net investment income and net realized
capital gains, if any, less any available capital loss carry forward. As of
December 31, 1994, (based on an October 31 measurement period) the Bond
Portfolio had a net capital loss carry forward of $643,550 (expiring in 2002).
The High Yield Bond Portfolio had a net capital loss carry forward of $5,141,222
($3,756,791 expiring in 1999 and $1,384,431 expiring in 2002). The Global Equity
Portfolio had a net capital loss carry forward of $6,265,350 (expiring in 2002).
Finally, the Zero Coupon Bond 2005 Portfolio had a net capital loss carry
forward of $123,179 (expiring in 2002). These amounts will be available to
offset any future taxable gains.

The Money Market Portfolio declares dividends of net investment income
(including realized and unrealized gains and losses on Portfolio securities) on
each business day. These dividends are reinvested in additional full and
fractional shares of the Portfolio. This policy enables the Money Market
Portfolio to maintain a net asset value of $10.00 per share. Dividends from
investment income of the other Portfolios will normally be declared and
reinvested in additional full and fractional shares four times annually.
Dividends from net realized capital gains are declared and reinvested in
additional full and fractional shares twice a year.

EXPENSES: Each Portfolio pays for certain expenses incurred in its individual
operation, and also pays a portion of the Series Fund's general administrative
expenses allocated on the basis of the asset size of the respective Portfolios.

The Series Fund has an arrangement with Chemical Banking Corporation, a
custodian bank. On a daily basis, cash funds which are not invested earn a
credit which is used to offset custody charges on a Portfolio basis, exclusive
of the Global Equity Portfolio, for which Brown Brothers Harriman & Co. is the
custodian bank. For the year ended December 31, 1994, the total of the credits
used was:

<TABLE>
<S> <C>
Conservatively Managed Flexible Portfolio..................... $ 91,232
Aggressively Managed Flexible Portfolio....................... 41,492
Government Securities Portfolio............................... 15,374
Money Market Portfolio........................................ 14,851
High Yield Bond Portfolio..................................... 7,469
Bond Portfolio................................................ 4,838
Zero Coupon Bond 2005 Portfolio............................... 2,531
Zero Coupon Bond 2000 Portfolio............................... 1,447
Zero Coupon Bond 1995 Portfolio............................... 517
</TABLE>

NOTE 3: INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT MANAGEMENT AND ACCOUNTING FEES: Pursuant to an investment advisory
agreement (the "Agreement"), The Prudential receives an investment management
fee, calculated daily, at an effective annual rate of 0.35% of the average daily
net assets of the Stock Index Portfolio: 0.40% of the average daily net assets
of the Money Market, Bond, Zero Coupon Bond 1995, Zero Coupon Bond 2000, Zero
Coupon Bond 2005, High Dividend Stock and Government Securities Portfolios;
0.45% of average daily net assets of the Common Stock and Natural Resources
Portfolios; 0.55% of the average daily net assets of the Conservatively Managed
Flexible and the High Yield Bond Portfolios; 0.60% of the average daily net
assets of the Aggressively Managed Flexible Portfolio; and 0.75% of the average
daily net assets of the Global Equity Portfolio. Under the Agreement, The
Prudential has agreed to refund to a portfolio (other than the Global Equity
Portfolio), the portion of the management fee for that Portfolio equal to the
amount that the aggregate annual ordinary operating expenses (excluding
interest, taxes and brokerage commissions) exceeds 0.75% of the Portfolio's

B43

<PAGE>

average daily net assets. The Agreement also requires the Series Fund to
reimburse The Prudential for the cost of maintaining staff and personnel who
provide daily accounting services for the operation of the Series Fund with the
exception of the Global Equity Portfolio.

DIRECTORS' EXPENSES: The Series Fund pays for the fees and expenses of those
members of the Series Fund's Board of Directors who are not officers or
employees of The Prudential or its affiliates.

BROKERAGE COMMISSIONS: For the year ended December 31, 1994, Prudential
Securities Inc., an indirect, wholly-owned subsidiary of The Prudential, earned
$560,155 in brokerage commissions from Portfolio transactions executed on behalf
of the Series Fund.

OTHER TRANSACTIONS WITH AFFILIATES: As of December 31, 1994, The Prudential had
investments of $7,208,297 in the Zero Coupon Bond 1995 Portfolio; $105,934 in
the Zero Coupon Bond 2000 Portfolio; and $1,158,347 in the Global Equity
Portfolio.

NOTE 4: JOINT REPURCHASE AGREEMENT ACCOUNT

The Portfolios of the Series Fund transfer uninvested cash balances into a
single joint account, the daily aggregate balance of which is invested in one or
more repurchase agreements collateralized by U.S. Government obligations. The
Series Fund's undivided investment in the joint repurchase agreement account
represented, in principal, $974,388,000 as of December 31, 1994. The Portfolios
of the Series Fund with cash invested in the joint account had the following
percentage participation in the account:

<TABLE>
<S> <C>
Common Stock Portfolio........................................ 35.23%
Aggressively Managed Flexible Portfolio....................... 33.94%
Conservatively Managed Flexible Portfolio..................... 12.45%
High Dividend Stock Portfolio................................. 7.78%
Government Securities Portfolio............................... 3.78%
Stock Index Portfolio......................................... 2.66%
Bond Portfolio................................................ 1.56%
High Yield Bond Portfolio..................................... 1.47%
Natural Resources Portfolio................................... 1.06%
Zero Coupon Bond 2005 Portfolio............................... .07%
----------
100.00%
</TABLE>

Banker's Trust Securities Repurchase Agreement, dated 12/30/94, in the principal
amount of $225,000,000, repurchase price $225,143,746, due 1/3/95;
collateralized by $225,555,000 U.S. Treasury Notes, 8%, due 5/15/01.

Goldman Sachs Repurchase Agreement, dated 12/30/94, in the principal amount of
$67,388,000, repurchase price $67,427,309, due 1/3/95; collateralized by
$61,265,000 U.S. Treasury Bonds, 8.875%, due 2/15/19.

Morgan Stanley Repurchase Agreement, dated 12/30/94, in the principal amount of
$278,000,000, repurchase price $278,171,508, due 1/3/95; collateralized by
$143,865,000 U.S. Treasury Notes, 5.125%, due 3/31/98; $142,980,000 U.S.
Treasury Notes, 8.75%, due 10/15/97.

Nomura Securities Repurchase Agreement, dated 12/30/94, in the principal amount
of $179,000,000, repurchase price $179,119,333, due 1/3/95; collateralized by
$26,435,000 U.S. Treasury Bonds, 7.125%, due 2/15/23; $33,240,000 U.S. Treasury
Bonds, 7.875%, due 2/15/21; $118,360,000 U.S. Treasury Bonds, 8.125%, due
8/15/19.

Smith Barney Repurchase Agreement, dated 12/30/94, in the principal amount of
$100,000,000, repurchase price $100,065,552, due 1/3/95; collateralized by
$4,805,000 U.S. Treasury Bonds, 12.0%, due 8/15/13; $17,000,000 U.S. Treasury
Bonds, 7.125%, due 2/15/23; $15,000,000 U.S. Treasury Bonds, 8.875%, due
2/15/19; $17,000,000 U.S. Treasury Bonds, 11.875%, due 11/15/03; $33,000,000
U.S. Treasury Bonds, 11.125%, due 8/15/03.

UBS Securities Repurchase Agreement, dated 12/30/94, in the principal amount of
$125,000,000, repurchase price $125,079,860, due 1/3/95; collateralized by
$45,000,000 U.S. Treasury Bonds, 14.0%, due 11/15/11; $62,000,000 U.S. Treasury
Notes, 5.125%, due 3/31/96.

B44

<PAGE>

NOTE 5: PURCHASE AND SALE OF SECURITIES

The aggregate cost of purchase and the proceeds from the sales of securities
(excluding short-term issues) for the year ended December 31, 1994 were as
follows:

Cost of Purchases:

<TABLE>
<CAPTION>
ZERO ZERO ZERO CONSERVATIVELY AGGRESSIVELY
GOVERNMENT COUPON COUPON COUPON MANAGED MANAGED
BOND SECURITIES 1995 2000 2005 FLEXIBLE FLEXIBLE
------------ ------------ ------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities.......... $230,427,085 $170,067,390 $ 3,088,318 $ 2,167,569 $ 3,833,265 $2,264,216,698 $2,110,107,294
Equity Securities........ $ 0 $ 0 $ 0 $ 0 $ 0 $ 587,491,444 $1,463,207,489
</TABLE>

<TABLE>
<CAPTION>
HIGH HIGH
YIELD STOCK DIVIDEND COMMON GLOBAL NATURAL
BOND INDEX STOCK STOCK EQUITY RESOURCES
------------ ------------ -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Debt Securities.......... $245,231,365 $ 0 $ 59,651,560 $ 0 $ 2,014,070 $ 4,138,265
Equity Securities........ $ 15,834,213 $ 59,347,016 $ 672,161,860 $ 798,167,933 $298,502,390 $115,627,163
</TABLE>

Proceeds From Sales:

<TABLE>
<CAPTION>
ZERO ZERO ZERO CONSERVATIVELY AGGRESSIVELY
GOVERNMENT COUPON COUPON COUPON MANAGED MANAGED
BOND SECURITIES 1995 2000 2005 FLEXIBLE FLEXIBLE
------------ ------------ ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities.......... $161,141,232 $192,629,378 $ 670,613 $ 1,988,360 $ 854,514 $2,265,817,380 $1,985,428,664
Equity Securities........ $ 0 $ 0 $ 0 $ 0 $ 0 $ 430,107,759 $1,492,407,199
</TABLE>

<TABLE>
<CAPTION>
HIGH HIGH
YIELD STOCK DIVIDEND COMMON GLOBAL NATURAL
BOND INDEX STOCK STOCK EQUITY RESOURCES
------------ ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Debt Securities.......... $184,820,098 $ 0 $ 14,057,405 $ 0 $ 3,180,314 $ 2,019,170
Equity Securities........ $ 13,401,205 $ 10,703,691 $440,060,612 $133,822,827 $ 80,485,320 $ 34,073,194
</TABLE>

Transactions in call options written during the year ended December 31, 1994
were as follows:

<TABLE>
<CAPTION>
NATURAL
RESOURCES
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Options outstanding at
December 31, 1993....... 0 $ 0
Options written........... 300 66,832
Options terminated in
closing purchase
transactions............ (300) (66,832)
Options expired........... 0 0
Options exercised......... 0 0
--------- -----------
Options outstanding at
December 31, 1994....... 0 $ 0
--------- -----------
--------- -----------
</TABLE>

The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of December 31, 1994 were as follows:
<TABLE>
<CAPTION>
ZERO ZERO ZERO CONSERVATIVELY
MONEY GOVERNMENT COUPON COUPON COUPON MANAGED
MARKET BOND SECURITIES 1995 2000 2005 FLEXIBLE
------------ ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation... $ 0 1,403,760 947,221 147,086 839,286 381,531 147,865,296
Gross Unrealized Depreciation... 0 33,335,908 29,890,790 110,193 174,236 568,432 122,789,171
Total Net Unrealized............ 0 (31,932,148) (28,943,569) 36,893 665,050 (186,901) 25,076,125
Tax Basis....................... 581,582,129 563,227,825 507,031,047 17,721,753 20,000,846 16,718,218 3,443,877,594

AGGRESSIVELY HIGH HIGH
MANAGED YIELD STOCK DIVIDEND COMMON GLOBAL NATURAL
FLEXIBLE BOND INDEX STOCK STOCK EQUITY RESOURCES
------------ ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation... 224,521,828 3,272,256 $105,889,895 41,940,476 376,581,396 29,685,605 23,326,212
Gross Unrealized Depreciation... 93,827,948 32,262,000 24,917,605 55,556,748 130,109,851 22,797,770 20,252,264
Total Net Unrealized............ 130,693,880 (28,989,744) 80,972,290 (13,616,272) 246,471,545 6,887,835 3,073,948
Tax Basis....................... 3,347,362,272 328,072,741 584,600,736 873,043,522 2,419,493,392 340,366,881 227,082,786
</TABLE>

B45

<PAGE>

NOTE 6: RESTATEMENT

Subsequent to the issuance of the 1993 financial statements of the High Yield
Bond Portfolio ("the Portfolio"), Prudential management learned that
distributions of $1,366,447 received by the Portfolio had been erroneously
reported to the Series Fund and reflected in the Portfolio's 1993 financial
statements as interest income. These distributions, in fact, represented
payments for partial redemptions of the underlying security.

This error resulted in the following overstatements in the originally issued
1993 financial statements:

<TABLE>
<S> <C>
Investments $1,708,058
----------
----------

Interest Income $1,366,447

Net Unrealized Gain
on Investments 341,611
----------

Net Assets $1,708,058
----------
----------
Net Asset Value Per Share $.051
----------
----------
</TABLE>

The comparative 1993 financial information included in the statements of changes
in net assets of the Portfolio has been restated to correct for this error.

B46

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors of The Prudential Series Fund, Inc.:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Money Market, Bond, Common Stock,
Aggressively Managed Flexible, Conservatively Managed Flexible, Zero Coupon Bond
1995, Zero Coupon Bond 2000, Zero Coupon Bond 2005, High Yield Bond, Stock
Index, High Dividend Stock, Natural Resources, Government Securities and Global
Equity Portfolios of The Prudential Series Fund, Inc. as of December 31, 1994,
the related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
financial highlights contained in the prospectus for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodians and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective portfolios of The Prudential Series Fund, Inc. as of December 31,
1994, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and
financial highlights for each of the periods presented in conformity with
generally accepted accounting principles.

As discussed in Note 6, the 1993 financial statements of the High Yield Bond
Portfolio have been restated.

Deloitte & Touche LLP
Parsippany, New Jersey
February 10, 1995

B47

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO

<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 3, 1995

ASSETS
Cash.................................................. $ 100,000
---------

NET ASSETS
Net assets were comprised of:
Common stock, at $0.01 par value.................... $ 100
Paid-in capital, in excess of par................... 99,900
---------
Net assets............................................ $ 100,000
---------
---------
Net asset value per share of 10,000 outstanding shares
of common stock (authorized 50,000,000 shares)....... $ 10.0000
---------
---------

SMALL CAPITALIZATION STOCK PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
April 3, 1995
<S> <C>

ASSETS
Cash.................................................. $ 100,000
---------

SEE NOTES TO THE STATEMENTS OF ASSETS AND LIABILITIES ON PAGE C2.
C1

<PAGE>

NOTES TO THE STATEMENTS OF ASSETS AND LIABILITIES OF THE
GROWTH STOCK AND SMALL CAPITALIZATION STOCK
PORTFOLIOS OF THE PRUDENTIAL SERIES FUND, INC.
AS OF APRIL 3, 1995

NOTE 1: GENERAL

The Growth Stock and Small Capitalization Stock Portfolios had no operations
other than the sale to The Prudential of 10,000 shares of common stock on April
3, 1995.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 3: INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT MANAGEMENT AND ACCOUNTING FEES: Pursuant to an investment advisory
agreement (the "Agreement"), The Prudential will receive an investment
management fee, calculated daily, at an effective annual rate of 0.60% of the
average daily net assets of the Growth Stock Portfolio and 0.40% of the average
daily net assets of the Small Capitalization Stock Portfolio.

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors of The Prudential Series Fund, Inc.:

We have audited the accompanying statements of assets and liabilities of the
Growth Stock and Small Capitalization Stock Portfolios (two of the portfolios
comprising The Prudential Series Fund, Inc.) as of April 3, 1995. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such statements of assets and liabilities present fairly, in all
material respects, the financial position of each of the respective portfolios
of The Prudential Series Fund, Inc. as of April 3, 1995 in conformity with
generally accepted accounting principles.

Deloitte & Touche LLP
Parsippany, New Jersey
April 3, 1995

C3
<PAGE>

APPENDIX

DEBT RATINGS

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

Bonds:

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

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

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

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

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

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

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

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

Commercial paper:

o Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:

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

- --High rates of return of funds employed.

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

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

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

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

D-1

<PAGE>

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

Bonds:

AAA Bonds rated AAA are highest grade obligations. They possess the ultimate
degree of protection as to principal and interest. Marketwise they move with
interest rates, and hence provide the maximum safety on all counts.

AA Bonds rated AA also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in small degree. Here, too, prices
move with the long term money market.

A Bonds rated A are regarded as upper medium grade. They have considerable
investment strength but are not entirely free from adverse effects of
changes in economic and trade conditions. Interest and principal are
regarded as safe. They predominantly reflect money rates in their market
behavior, but to some extent, also economic conditions.

BBB The BBB, or medium grade category, is borderline between definitely sound
obligations and those where the speculative element begins to predominate.
These bonds have adequate asset coverage and normally are protected by
satisfactory earnings. Their susceptibility to changing conditions,
particularly to depressions, necessitates constant watching. Marketwise, the
bonds are more responsive to business and trade conditions than to interest
rates. This group is the lowest which qualifies for commercial bank
investment.

BB-B-CCC-CC-Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

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

D-2

<PAGE>

THE PRUDENTIAL
SERIES FUND, INC.

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 445-4571
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

May 1, 1995

THE PRUDENTIAL
SERIES FUND, INC.

THIS STATEMENT OF ADDITIONAL INFORMATION IS FOR USE ONLY WITH THE PRUDENTIAL
VARIABLE CONTRACT ACCOUNT-24.

Unless otherwise indicated, this statement of additional information provides
information only with respect to the seven portfolios of the Series Fund
currently available to The Prudential Variable Contract Account-24.

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

This statement of additional information is not a prospectus and should be read
in conjunction with the Series Fund's prospectus dated May 1, 1995 that is for
use with The Prudential Variable Contract Account-24, which is available without
charge upon written request to The Prudential Insurance Company of America, c/o
Prudential Defined Contribution Services, 30 Scranton Office Park, Moosic,
Pennsylvania 18507-1789, or by telephoning 1-(800) 458-6333.

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

CONTENTS

<TABLE>
<CAPTION>
Cross-Reference to
Page Page in Prospectus
---- --------------------
<S> <C> <C>
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

General ............................................................................. 1 5
Warrants ............................................................................ 1
Options on Stock, Options on Debt Securities, Options on Stock Indices,
Options on Foreign Currencies, Futures Contracts, and Options on
Futures Contracts ................................................................. 1 17
Forward Foreign Currency Exchange Contracts ......................................... 4 14
Interest Rate Swaps ................................................................. 5
Illiquid Securities ................................................................. 6

INVESTMENT RESTRICTIONS ............................................................... 6 20

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES ....................................... 9 20

DETERMINATION OF NET ASSET VALUE ...................................................... 10 21

OTHER INFORMATION CONCERNING THE SERIES FUND
Portfolio Transactions and Brokerage ................................................ 11 24
Custodian, Transfer Agent, and Dividend Disbursing Agent ............................ 12 24
Experts ............................................................................. 13
Licenses ............................................................................ 13

MANAGEMENT OF THE SERIES FUND ......................................................... 14 5

FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC. .............................. A1

THE PRUDENTIAL SERIES FUND, INC. SCHEDULE OF INVESTMENTS .............................. B1

APPENDIX: DEBT RATINGS ................................................................ C1

</TABLE>

The Prudential Series Fund, Inc.
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 445-4571

PSF-2A Ed 5-95
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

General. The Prudential Variable Contract Account-24 may currently invest in
seven portfolios of The Prudential Series Fund, Inc. (the "Series Fund"): the
Bond Portfolio, the Government Securities Portfolio, the Conservatively Managed
Flexible Portfolio, the Aggressively Managed Flexible Portfolio, the Stock Index
Portfolio, the Common Stock Portfolio, and the Global Equity Portfolio. The
portfolios are managed by The Prudential Insurance Company of America ("The
Prudential") as discussed in INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES,
page 9.

Each of the portfolios seeks to achieve a different investment objective.
Accordingly, each portfolio can be expected to have different investment results
and to be subject to different financial and market risks. Financial risk refers
to the ability of an issuer of a debt security to pay principal and interest and
to the earnings stability and overall financial soundness of an issuer of an
equity security. Market risk refers to the degree to which the price of a
security will react to changes in conditions in securities markets in general,
and with particular reference to debt securities, to changes in the overall
level of interest rates.

The investment objective of each of the Series Fund's seven portfolios currently
available to The Prudential Variable Contract Account-24 can be found in
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS in the prospectus.

Warrants. The Conservatively Managed Flexible, Aggressively Managed Flexible,
Common Stock, and Global Equity Portfolios may invest in warrants on common
stocks. Warrants are options to buy a number of shares of stock at a
predetermined price during a specified period. The risk associated with the
purchase of a warrant is that the purchase price will be lost if the market
price of the stock does not reach a level that justifies the exercise or sale of
the warrant before it expires. From time to time, the Bond Portfolio may invest
in debt securities that are offered together with warrants but only when the
debt security meets the portfolio's investment criteria and the value of the
warrant is relatively very small. If the warrant later becomes valuable, it will
ordinarily be sold rather than be exercised.

Options on Stock, Options on Debt Securities, Options on Stock Indices, Options
on Foreign Currencies, Futures Contracts, and Options on Futures Contracts.

A. Additional Information Regarding the Use of Futures and Options by the Bond,
Government Securities, Conservatively Managed Flexible, Aggressively Managed
Flexible, Common Stock, and Global Equity Portfolios.

<PAGE>

by the portfolio in cash, Treasury bills or other high-grade short-term
obligations in a segregated account with its custodian, it will not be subject
to the requirement described in this paragraph.

B. Additional Information Regarding the Use of Futures and Options by the Stock
Index Portfolio. As explained in the prospectus, the Stock Index Portfolio seeks
to duplicate the performance of the S&P 500 Index. The portfolio will be as
fully invested in the S&P 500 Index stocks as is feasible in light of cash flow
patterns and the cash requirements for efficiently investing in a unit of the
basket of stocks comprising the S&P 500 Index. When the portfolio does have
short-term investments, it may purchase stock index futures contracts in an
effort to have the portfolio better mimic the performance of a fully invested
portfolio. When the portfolio purchases stock index futures contracts, an amount
of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the portfolio's
custodian and/or in a margin account with a broker to collateralize the position
and thereby ensure that the use of futures is unleveraged. As with the other
portfolios, the Board of Directors currently intends to limit futures trading so
that the Stock Index Portfolio will not enter into futures contracts or related
options if the aggregate initial margins and premiums exceed 5% of the fair
market value of its assets, after taking into account unrealized profits and
unrealized losses on any such contracts and options.

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

<PAGE>

be able to minimize the risk by withholding exercise instructions until just
before the daily cutoff time or by selling rather than exercising an option when
the index level is close to the exercise price, it may not be possible to
eliminate this risk entirely because the cutoff times for index options may be
earlier than those fixed for other types of options and may occur before
definitive closing index values are announced.

Forward Foreign Currency Exchange Contracts. As explained in the prospectus, the
Conservatively Managed Flexible, Aggressively Managed Flexible, Common Stock,
and Global Equity Portfolios may purchase debt and equity securities denominated
in foreign currencies. To address the currency fluctuation risk that such
investments entail, these portfolios may enter into forward foreign currency
exchange contracts in several circumstances. When a portfolio enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, or when a portfolio anticipates the receipt in a foreign currency of
dividends or interest payments on a security which it holds, the portfolio may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such dividend or interest payment, as the case may be. By entering
into a forward contract for a fixed amount of dollars, for the purchase or sale
of the amount of foreign currency involved in the underlying transactions, the
portfolio will be able to protect itself against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and the subject
foreign currency during the period between the date on which the security is
purchased or sold, or on which the dividend or interest payment is declared, and
the date on which such payments are made or received.

4
<PAGE>

portfolios will not enter into such forward contracts or maintain a net exposure
to such contracts where the consummation of the contracts would obligate a
portfolio to deliver an amount of foreign currency in excess of the value of the
securities or other assets denominated in that currency held by the portfolio.
Under normal circumstances, consideration of the prospect for currency parities
will be incorporated into the long-term investment decisions made with regard to
overall diversification strategies. However, the portfolios believe that it is
important to have the flexibility to enter into such forward contracts when it
is determined that the best interests of the portfolios will thereby be served.
A portfolio's custodian will place cash or liquid, high-grade equity or debt
securities into a segregated account of the portfolio in an amount equal to the
value of the portfolio's total assets committed to the consummation of forward
foreign currency exchange contracts. If the value of the securities placed in
the segregated account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will equal the
amount of the portfolio's commitments with respect to such contracts.

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

<PAGE>

decline. Moreover, there is no guarantee that a portfolio could eliminate its
exposure under an outstanding swap agreement by entering into an offsetting swap
agreement with the same or another party.

Illiquid Securities. Each portfolio available to The Prudential Variable
Contract Account-24 may invest up to 15% of its net assets in illiquid
securities. Illiquid securities are those which may not be sold in the ordinary
course of business within seven days at approximately the value at which the
portfolio has valued them. Repurchase agreements with a maturity of greater than
seven days are considered illiquid.

INVESTMENT RESTRICTIONS

None of the portfolios available to The Prudential Variable Contract Account-24
will:

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

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

4. Make short sales of securities or maintain a short position, except that
the Bond, Government Securities, Conservatively Managed Flexible and
Aggressively Managed Flexible Portfolios may sell securities short up to
25% of their net assets and except that the portfolios make short sales
against the box. Collateral

<PAGE>

arrangements entered into with respect to options, futures contracts and
forward contracts are not deemed to be short sales. Collateral
arrangements entered into with respect to interest rate swap agreements
are not deemed to be short sales.

5. Purchase securities on margin or otherwise borrow money or issue senior
securities except that the Bond and Government Securities Portfolios, as
well as the fixed income portions of the Balanced Portfolios, may enter
into reverse repurchase agreements, dollar rolls and may purchase
securities on a when-issued and delayed delivery basis; except that the
money market portion of any portfolio may enter into reverse repurchase
agreements and may purchase securities on a when-issued and delayed
delivery basis; and except that the Common Stock, Global Equity,
Aggressively Managed Flexible and Conservatively Managed Flexible
Portfolios may purchase securities on a when-issued or a delayed delivery
basis. The Series Fund may also obtain such short-term credit as it needs
for the clearance of securities transactions and may borrow from a bank
for the account of any portfolio as a temporary measure to facilitate
redemptions (but not for leveraging or investment) or to exercise an
option, an amount that does not exceed 5% of the value of the portfolio's
total assets (including the amount owed as a result of the borrowing) at
the time the borrowing is made. Interest paid on borrowings will not be
available for investment. Collateral arrangements with respect to futures
contracts and options thereon and forward foreign currency exchange
contracts (as permitted by restriction no. 1) are not deemed to be the
issuance of a senior security or the purchase of a security on margin.
Collateral arrangements with respect to the writing of the following
options by the following portfolios are not deemed to be the issuance of a
senior security or the purchase of a security on margin: Diversified Stock
Portfolios other than the Stock Index Portfolio (options on equity
securities, stock indices, foreign currencies); Stock Index Portfolio
(options on stock indices); Balanced Portfolios (options on debt
securities, equity securities, stock indices, foreign currencies); Bond
Portfolio (options on debt securities, foreign currencies); Government
Securities Portfolio (options on debt securities). Collateral arrangements
entered into by the Fixed Income Portfolios and the Balanced Portfolios
with respect to interest rate swap agreements are not deemed to be the
issuance of a senior security or the purchase of a security on margin.

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

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

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

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

7
<PAGE>

assets. If there is an authoritative decision that any of these
obligations are not "securities" for purposes of this diversification
test, this limitation would not apply to the purchase of such obligations.

11. Purchase securities of a company in any industry if, as a result of the
purchase, a portfolio's holdings of securities issued by companies in that
industry would exceed 25% of the value of the portfolio, except that this
restriction does not apply to purchases of obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities or
issued by domestic banks. For purposes of this restriction, neither
finance companies as a group nor utility companies as a group are
considered to be a single industry and will be grouped instead according
to their services; for example, gas, electric, and telephone utilities
will each be considered a separate industry. For purposes of this
exception, domestic banks shall include all banks which are organized
under the laws of the United States or a state (as defined in the 1940
Act), U.S. branches of foreign banks that are subject to the same
regulations as U.S. banks and foreign branches of domestic banks (as
permitted by the SEC).

12. Invest more than 15% of its net assets in illiquid securities or invest
more than 10% of its net assets in the securities of unseasoned issuers.
For purposes of this restriction, (a) illiquid securities are those deemed
illiquid pursuant to SEC regulations and guidelines, as they may be
revised from time to time: and (b) unseasoned issuers are issuers (other
than U.S. Government agencies or instrumentalities) having a record,
together with predecessors, of less than 3 years' continuous operation.

The investments of the various portfolios currently available to The Prudential
Variable Contract Account-24 are generally subject to certain additional
restrictions under the laws of the State of New Jersey. In the event of future
amendments to the applicable New Jersey statutes, each of these portfolios will
comply, without the approval of the shareholders, with the statutory
requirements as so modified. The pertinent provisions of New Jersey law as they
stand are, in summary form, as follows:

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

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

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

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

<PAGE>

DIVIDENDS, DISTRIBUTIONS, AND TAXES in the prospectus. The Prudential intends to
maintain the assets of each portfolio pursuant to those diversification
requirements.

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES

The investment management fee for the Stock Index Portfolio is equal to an
annual rate of 0.35% of the average daily net assets of the portfolio. For the
Bond and Government Securities Portfolios that fee is equal to an annual rate of
0.4% of the average daily net assets of each of the portfolios. For the Common
Stock Portfolio, the fee is equal to an annual rate of 0.45% of the average
daily net assets of the portfolio. The fee for the Conservatively Managed
Flexible Portfolio is equal to an annual rate of 0.55% of the average daily net
assets of the portfolio. For the Aggressively Managed Flexible Portfolio, the
fee is equal to an annual rate of 0.6% of the average daily net assets of the
portfolio. The fee for the Global Equity Portfolio is equal to an annual rate of
0.75% of the average daily net assets of the portfolio. The Prudential
reimburses PIC for the costs and expenses it incurs under the Service Agreement.

For the years 1994, 1993, and 1992, The Prudential received a total of
$66,413,206, $51,197,499, and $35,661,075, respectively, in investment
management fees for all of the Series Fund's portfolios.

9
<PAGE>

Prudential Variable Contract Account-24. The Agreement will continue in effect
if approved annually by: (1) a majority of the non-interested persons of the
Series Fund's Board of Directors; and (2) by a majority of the entire Board of
Directors or by a majority vote of the shareholders of each portfolio. The
required shareholder approval of the Agreement shall be effective with respect
to any portfolio if a majority of the voting shares of that portfolio vote to
approve the Agreement, even if the Agreement is not approved by a majority of
the voting shares of any other portfolio or by a majority of the voting shares
of the entire Series Fund. The Agreement provides that it may not be assigned by
The Prudential and that it may be terminated upon 60 days' notice by the Series
Fund's Board of Directors or by a majority vote of its shareholders. The
Prudential may terminate the Agreement upon 90 days' notice.

The Service Agreement between The Prudential and PIC was most recently ratified
by shareholders of the Series Fund at their 1989 annual meeting with respect to
all portfolios available to The Prudential Variable Contract Account-24. The
Service Agreement between The Prudential and PIC will continue in effect as to
the Series Fund for a period of more than 2 years from its execution, only so
long as such continuance is specifically approved at least annually in the same
manner as the Investment Advisory Agreement between The Prudential and the
Series Fund. The Service Agreement may be terminated by either party upon not
less than 30 days prior written notice to the other party, will terminate
automatically in the event of its assignment, and will terminate automatically
as to the Series Fund in the event of the assignment or termination of the
Investment Advisory Agreement between The Prudential and the Series Fund. The
Prudential is not relieved of its responsibility for all investment advisory
services under the Investment Advisory Agreement.

DETERMINATION OF NET ASSET VALUE

Shares in the Series Fund are currently offered continuously, without sales
charge, at prices equal to the respective net asset values of the portfolios,
only to the Accounts to fund benefits payable under the Contracts described in
the variable life insurance and variable annuity prospectuses. The Series Fund
may at some later date also offer its shares to other separate accounts of The
Prudential or other insurers. The Prudential acts as principal underwriter of
the Series Fund. As such, The Prudential receives no underwriting compensation
from the Series Fund. The Prudential's principal business address is Prudential
Plaza, Newark, New Jersey 07102-3777.

The net asset value of the shares of each portfolio is determined once daily, as
of 4:15 p.m. New York City time on each day during which the New York Stock
Exchange ("NYSE") is open for business. The NYSE is open for business Monday
through Friday except for the days on which the following holidays are observed:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. The net asset value per share of
each portfolio available to The Prudential Variable Contract Account-24 is
computed by adding the sum of the value of the securities held by that portfolio
plus any cash or other assets it holds, subtracting all its liabilities, and
dividing the result by the total number of shares outstanding of that portfolio
at such time. Expenses, including the investment management fee payable to The
Prudential, are accrued daily.

10
<PAGE>

instruments which mature in less than 60 days are valued at amortized cost. For
valuation purposes, quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents.

Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities, and money market instruments, is substantially completed
each day at various times prior to the close of the NYSE. The value of any such
securities are determined as of such times for purposes of computing a
portfolio's net asset value. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. If an extraordinary event occurs
after the close of an exchange on which that security is traded, the security
will be valued at fair value as determined in good faith by the applicable
portfolio manager under procedures established by and under the general
supervision of the Series Fund's Board of Directors.

In determining the net asset value of each of the Balanced Portfolios, the
method of valuation of a security depends on the type of investment involved.
Intermediate or long-term fixed income securities are valued in the same way as
such securities in the Bond Portfolio, and common stocks and convertible debt
securities are valued in the same way as such securities are valued in the
Common Stock Portfolio. Short-term debt obligations with a maturity of 12 months
or less are valued on an amortized cost basis in accordance with an order
obtained from the Securities and Exchange Commission. Each Balanced Portfolio
must maintain a dollar-weighted average maturity for its short-term debt
obligations of 120 days or less. The values determined by the amortized cost
method may deviate from market value under certain circumstances. The Board of
Directors has established procedures to monitor whether any material deviation
occurs and, if so, will promptly consider what action, if any, should be
initiated to prevent unfair results to Contract owners. The short-term portion
of these portfolios may be invested only in high quality instruments, as
described in the Appendix to the prospectus.

OTHER INFORMATION CONCERNING THE SERIES FUND

<PAGE>

clients. Such research and investment services are those which brokerage houses
customarily provide to institutional investors and include statistical and
economic data and research reports on particular companies and industries. Such
services are used by The Prudential in connection with all of its investment
activities, and some of such services obtained in connection with the execution
of transactions for the Series Fund may be used in managing other investment
accounts. Conversely, brokers, dealers or futures commission merchants
furnishing such services may be selected for the execution of transactions for
such other accounts, and the services furnished by such brokers, dealers or
futures commission merchants may be used by The Prudential in providing
investment management for the Series Fund. Commission rates are established
pursuant to negotiations with the broker, dealer or futures commission merchant
based on the quality and quantity of execution services provided by the broker
in the light of generally prevailing rates. The Prudential's policy is to pay
higher commissions to brokers, other than Prudential Securities Incorporated,
for particular transactions than might be charged if a different broker had been
selected on occasions when, in The Prudential's opinion, this policy furthers
the objective of obtaining best price and execution. The Prudential's present
policy is not to permit higher commissions to be paid on Series Fund
transactions in order to secure research, statistical, and investment services
from brokers. The Prudential might in the future authorize the payment of such
higher commissions but only with the prior concurrence of the Board of Directors
of the Series Fund, if it is determined that the higher commissions are
necessary in order to secure desired research and are reasonable in relation to
all the services that the broker provides.

For the years 1994, 1993, and 1992, the Series Fund paid a total of $11,579,886,
$9,492,283, and $5,802,658, respectively, in brokerage commissions. Of those
amounts, $560,155, $977,695, and $873,920, for 1994, 1993, and 1992,
respectively, was paid out to Prudential Securities Incorporated. For 1994, the
commissions paid to this affiliated broker constituted 4.8% of the total
commissions paid by the Series Fund for that year. Transactions through this
affiliated broker accounted for 6.4% of the aggregate dollar amount of
transactions for the Series Fund involving the payment of commissions. These
figures do include all of the Series Fund's portfolios, including portfolios not
available to The Prudential Variable Contract Account-24.

Custodian, Transfer Agent, and Dividend Disbursing Agent. Chemical Bank, 4 New
York Plaza, New York, NY 10004 is the custodian of the assets held by all the
portfolios, except the Global Equity Portfolio, and is authorized to use the
facilities of the Depository Trust Company and the facilities of the book-entry
system of the Federal Reserve Bank with respect to securities held by these
portfolios. Chemical Bank is also authorized to use the facilities of the
Mortgage Backed Security Clearing Corporation (a subsidiary of the Midwest Stock
Exchange) with respect to mortgage-backed securities held by any of these
portfolios. Chemical Bank maintains certain financial and accounting books and
records pursuant to an agreement with the Series Fund. Brown Brothers Harriman &
Co. ("Brown Brothers"), 40 Water Street, Boston, MA 02109 is the custodian of
the assets of the Global Equity Portfolio and in that capacity maintains certain
financial and accounting books and records pursuant to an agreement with the
Series Fund. Brown Brothers employs subcustodians, who were approved by the
directors of the Series Fund in accordance with regulations of the Securities
and Exchange Commission, for the purpose of providing custodial service for the
Global Equity Portfolio's foreign assets held outside the United States. Morgan
Guaranty Trust Company, 60 Wall Street, New York, NY 10260 is the custodian of
the assets held in connection with repurchase agreements entered into by the
portfolios and is authorized to use the facilities of the book-entry system of
the Federal Reserve Bank. The directors of the Series Fund monitor the
activities of the custodians and the subcustodians.

<PAGE>

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

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED
AS TO RESULTS TO BE OBTAINED BY THE SERIES FUND, CONTRACT OWNERS, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

<PAGE>

MANAGEMENT OF THE SERIES FUND

ROBERT P. HILL*, Chairman of the Board--Executive Vice President of The
Prudential.

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

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

STEPHEN P. TOOLEY, Comptroller--Vice President and Comptroller of Prudential
Insurance and Financial Services since 1993; Prior to 1993: Director, Financial
Analysis of The Prudential.

THOMAS C. CASTANO, Secretary and Treasurer--Assistant General Counsel of The
Prudential since 1993; Prior to 1993: Assistant General Counsel of Pruco Life
Insurance Company.

14
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
BOND PORTFOLIO

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 36,112,155 $ 31,295,792
Net realized gain (loss) on investments................................................ (4,246,256) 8,958,204
Net unrealized gain(loss) on investments............................................... (50,839,016) 7,179,211
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (18,973,117) 47,433,207
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (35,627,999) (31,001,007)
Net realized gain from investment transactions......................................... (1,267,553) (7,690,651)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (36,895,552) (38,691,658)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,414,897 and 9,888,368 shares, respectively]...................... 36,662,212 111,911,952
Reinvestment of dividend distributions [3,610,015 and 3,457,814 shares,
respectively]......................................................................... 36,895,552 38,691,658
Capital stock repurchased [(4,963,909) and (1,044,056) shares, respectively]........... (52,266,357) (11,890,355)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 21,291,407 138,713,255
------------------ -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................................................. (34,577,262) 147,454,804
NET ASSETS:
Beginning of year...................................................................... 576,225,861 428,771,057
------------------ -------------------
End of year............................................................................ $ 541,648,599 $ 576,225,861
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 33,431,928 $ 25,803,560
Net realized gain (loss) on investments................................................ (10,380,614) 884,434
Net unrealized gain(loss) on investments............................................... (52,690,952) 19,594,824
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (29,639,638) 46,282,818
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (32,955,665) (25,487,269)
Net realized gain from investment transactions......................................... 0 (1,904,203)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (32,955,665) (27,391,472)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,591,224 and 15,693,270 shares, respectively]..................... 41,656,912 185,551,898
Reinvestment of dividend distributions [3,094,061 and 2,328,874 shares,
respectively]......................................................................... 32,955,665 27,391,472
Capital stock repurchased [(5,912,961) and (449,498) shares, respectively]............. (64,569,681) (5,251,752)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 10,042,896 207,691,618
------------------ -------------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............................................................................ (52,552,407) 226,582,964
NET ASSETS:
Beginning of year...................................................................... 540,126,712 313,543,748
------------------ -------------------
End of year............................................................................ $ 487,574,305 $ 540,126,712
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 122,670,711 $ 83,594,970
Net realized gain on investments....................................................... 30,751,021 116,251,058
Net unrealized gain(loss) on investments............................................... (184,854,002) 86,497,365
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (31,432,270) 286,343,393
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (120,740,360) (84,057,597)
Net realized gain from investment transactions......................................... (37,214,012) (113,728,724)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (157,954,372) (197,786,321)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [34,889,459 and 48,698,296 shares, respectively].................... 514,344,688 736,447,769
Reinvestment of dividend distributions [11,198,868 and 13,291,624 shares,
respectively]......................................................................... 157,954,372 197,786,321
Capital stock repurchased [(5,887,371) and (2,225,762) shares, respectively]........... (84,977,146) (33,653,303)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 587,321,914 900,580,787
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 397,935,272 989,137,859
NET ASSETS:
Beginning of year...................................................................... 3,103,169,014 2,114,031,155
------------------ -------------------
End of year............................................................................ $ 3,501,104,286 $ 3,103,169,014
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 98,878,114 $ 94,441,961
Net realized gain on investments....................................................... 23,838,273 202,429,143
Net unrealized gain(loss) on investments and foreign currency translations............. (230,571,359) 106,972,046
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (107,854,972) 403,843,150
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (96,126,295) (96,961,144)
Net realized gain from investment transactions......................................... (98,311,584) (167,511,713)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (194,437,879) (264,472,857)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [22,611,559 and 28,416,647 shares, respectively].................... 370,947,414 490,167,019
Reinvestment of dividend distributions [12,531,550 and 15,710,066 shares,
respectively]......................................................................... 194,437,879 264,472,857
Capital stock repurchased [(4,617,224) and (2,154,837) shares, respectively]........... (73,719,278) (37,398,394)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 491,666,015 717,241,482
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 189,373,164 856,611,775
NET ASSETS:
Beginning of year...................................................................... 3,292,167,135 2,435,555,360
------------------ -------------------
End of year............................................................................ $ 3,481,540,299 $ 3,292,167,135
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 15,899,579 $ 12,982,334
Net realized gain (loss) on investments................................................ (811,766) 2,033,345
Net unrealized gain (loss) on investments.............................................. (8,435,032) 33,892,763
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 6,652,781 48,908,442
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (15,754,398) (13,030,262)
Net realized gain from investment transactions......................................... (958,203) (1,280,819)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (16,712,601) (14,311,081)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,553,644 and 10,331,253 shares, respectively]..................... 68,598,345 152,405,579
Reinvestment of dividend distributions [1,130,115 and 959,900 shares, respectively].... 16,712,601 14,311,081
Capital stock repurchased [(1,718,830) and (1,313,029) shares, respectively]........... (25,854,984) (19,639,158)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 59,455,962 147,077,502
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 49,396,142 181,674,863
NET ASSETS:
Beginning of year...................................................................... 615,138,065 433,463,202
------------------ -------------------
End of year............................................................................ $ 664,534,207 $ 615,138,065
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
COMMON STOCK PORTFOLIO

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 57,699,769 $ 36,054,825
Net realized gain on investments....................................................... 84,713,465 124,861,589
Net unrealized gain (loss) on investments.............................................. (76,779,978) 185,462,685
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 65,633,256 346,379,099
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (56,757,732) (36,692,128)
Net realized gain from investment transactions......................................... (106,046,594) (103,435,491)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (162,804,326) (140,127,619)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [19,167,446 and 21,331,255 shares, respectively].................... 412,393,503 447,667,281
Reinvestment of dividend distributions [7,934,974 and 6,632,819 shares,
respectively]......................................................................... 162,804,326 140,127,619
Capital stock repurchased [(2,170,186) and (1,143,204) shares, respectively]........... (46,752,467) (24,126,373)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 528,445,362 563,668,527
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 431,274,292 769,920,007
NET ASSETS:
Beginning of year...................................................................... 2,186,497,725 1,416,577,718
------------------ -------------------
End of year............................................................................ $ 2,617,772,017 $ 2,186,497,725
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GLOBAL EQUITY PORTFOLIO

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31
---------------------------------------
1994 1993
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 474,722 $ 113,317
Net realized gain (loss) on securities and foreign currency transactions............... (578,250) 2,342,360
Net unrealized gain (loss) on securities and foreign currency translations............. (16,334,560) 21,161,913
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ (16,438,088) 23,617,590
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (499,141) (403,351)
Net realized gain from investment transactions......................................... (394,438) (839,910)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (893,579) (1,243,261)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [17,513,960 and 5,977,164 shares, respectively]..................... 254,421,899 78,356,145
Reinvestment of dividend distributions [64,991 and 90,677 shares, respectively]........ 893,579 1,243,261
Capital stock repurchased [(751,122) and (141,366) shares, respectively]............... (10,781,034) (1,761,681)
Initial capitalization repurchased [(735,674) and (391,272) shares, respectively]...... (10,558,000) (5,164,000)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 233,976,444 72,673,725
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 216,644,777 95,048,054
NET ASSETS:
Beginning of year...................................................................... 129,089,201 34,041,147
------------------ -------------------
End of year............................................................................ $ 345,733,978 $ 129,089,201
------------------ -------------------
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

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

DECEMBER 31, 1994

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
**Potomac Capital Investment Corp., M.T.N.,
6.190%, 04/28/97, Series B.................... $ 3,500,000 $ 3,466,627
Republic New York Corp.,
9.125%, 05/15/21.............................. 2,850,000 2,978,591
Sovereign Bancorp, Inc.
6.750%, 09/01/00.............................. 5,000,000 4,475,000
Union Bank Finland, Ltd.,
5.250%, 06/15/96.............................. 3,000,000 2,872,530
Zurich Reinsurance Centre Holdings, Inc.,
7.125%, 10/15/23.............................. 2,000,000 1,587,680
--------------
78,050,679
--------------
FOREIGN -- 15.7%
Australia & New Zealand Banking Group, Ltd.,
6.250%, 02/01/04.............................. 3,000,000 2,566,560
**Banco Del Estado-Chile,
8.390%, 08/01/01.............................. 2,100,000 1,979,250
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 4,100,000 3,977,000
Canadian Pacific Forest Products Ltd.,
10.250%, 01/15/03............................. 4,000,000 3,963,390
Carter Holt Harvey, Ltd.,
8.875%, 12/01/04.............................. 2,500,000 2,524,150
**Cemex, SA,
8.875%, 06/10/98.............................. 6,000,000 5,265,000
Central Puerto and Cent Negue, SA,
10.750%, 11/02/97............................. 3,000,000 2,872,500
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 4,000,000 3,275,000
%Hydro-Quebec,
3.438%, 09/30/49, Series G-1E4................ 3,000,000 2,507,813
**Kansallis-Osake Pankki, N.Y.,
8.650%, 12/29/49.............................. 5,000,000 4,837,500
Korea Development Bank,
8.090%, 10/06/04.............................. 5,400,000 5,284,940
National Australia Bank, Ltd.,
9.700%, 10/15/98.............................. 1,700,000 1,774,970
Nippon Telegraph & Telephone Corp.,
9.500%, 07/27/98.............................. 1,800,000 1,869,588
Noranda, Inc.,
8.125%, 06/15/04.............................. 2,000,000 1,912,380
Nova Scotia, Province of Canada,
8.875%, 07/01/19.............................. 3,000,000 2,900,460
Ontario, Province of Canada,
15.750%, 03/15/12............................. 3,475,000 4,139,280
**%Petroleos Mexicanos,
5.563%, 03/08/99.............................. 2,500,000 2,375,000
Republic of Argentina,
8.375%, 12/20/03.............................. 4,000,000 2,850,000
Republic of Columbia,
7.250%, 02/23/04.............................. 2,500,000 2,059,375
8.750%, 10/06/99.............................. 3,500,000 3,338,125
</TABLE>

<PAGE>

BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Republic of Italy,
6.875%, 09/27/23.............................. $ 4,000,000 $ 3,150,880
Republic of South Africa,
9.625%, 12/15/99.............................. 4,000,000 3,961,250
**Republic of Trinidad and Tobago,
11.750%, 10/03/04............................. 4,000,000 4,050,000
Saskatchewan, Province of Canada,
8.000%, 07/15/04.............................. 4,000,000 3,872,560
Svenska Handelsbanken,
8.125%, 08/15/07.............................. 2,500,000 2,350,225
**Tenaga Nasional Berhad,
7.875%, 06/15/04.............................. 3,000,000 2,856,570
United States of Mexico with Rights,
6.250%, 12/31/19, Class B..................... 4,000,000 2,175,000
--------------
84,688,766
--------------
INDUSTRIAL -- 17.2%
Arkla, Inc., M.T.N.,
9.320%, 12/18/00, Tranche #TR00043............ 2,000,000 1,962,460
9.380%, 03/15/96, Tranche #TR00018............ 1,300,000 1,308,567
Boise Cascade Corp.,
9.875%, 02/15/01.............................. 1,000,000 1,002,040
Borden, Inc.,
7.875%, 02/15/23.............................. 2,000,000 1,463,680
Carnival Cruise Lines, Inc.,
5.750%, 03/15/98.............................. 3,000,000 2,766,810
Comsat Corp.,
8.125%, 04/01/04.............................. 4,000,000 3,898,480
Crane Co.,
7.250%, 06/15/99.............................. 3,000,000 2,842,020
Delta Air Lines, Inc., M.T.N.,
7.790%, 12/01/98.............................. 1,000,000 928,400
8.380%, 06/12/98, Tranche #TR00017............ 2,000,000 1,897,680
Enterprise Rent A Car, M.T.N.,
8.750%, 12/15/99 Tranche #TR00001............. 3,000,000 2,989,650
Federal Express Corp.,
9.650%, 06/15/12.............................. 3,000,000 3,164,610
Fleming Companies, Inc., C.D.,
10.625%, 12/15/01............................. 4,000,000 4,000,000
Georgia-Pacific Corp.,
9.625%, 03/15/22.............................. 1,500,000 1,515,075
J.C. Penney Co., Inc.,
9.750%, 06/15/21.............................. 6,400,000 6,902,144
Laidlaw, Inc.,
8.250%, 05/15/23.............................. 2,500,000 2,177,225
News America Holdings, Inc.,
7.450%, 06/01/00.............................. 3,000,000 2,796,330
7.750%, 02/01/24.............................. 3,300,000 2,684,352
Noble Affiliates, Inc.,
7.250%, 10/15/23.............................. 2,000,000 1,596,200
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013............ 3,000,000 2,887,500
Philip Morris Companies, Inc.,
7.500%, 01/15/02.............................. 2,500,000 2,343,100
9.000%, 01/01/01.............................. 4,800,000 4,858,032
Procter & Gamble Co., ESOP,
9.360%, 01/01/21, Series A.................... 4,900,000 5,286,120
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01.............................. 5,750,000 5,606,250
</TABLE>

DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
Royal Caribbean Cruises Ltd.,
11.375%, 05/15/02............................. $ 4,000,000 $ 4,250,000
Sears, Roebuck & Co.,
9.375%, 11/01/11.............................. 2,000,000 2,090,040
**Shurgard Securities Trust, CMO,
8.240%, 06/15/04.............................. 3,000,000 2,882,813
Tele-Communications, Inc.,
10.125%, 04/15/22............................. 5,000,000 5,015,400
Time Warner, Inc.,
**6.050%, 07/01/95............................ 2,500,000 2,479,075
7.450%, 02/01/98.............................. 2,200,000 2,096,885
Transco Energy Co.,
11.250%, 07/01/99............................. 2,500,000 2,659,375
Westinghouse Electric Corp.,
8.375%, 06/15/02.............................. 2,000,000 1,858,260
Whitman Corp.,
7.500%, 08/15/01.............................. 3,000,000 2,852,100
--------------
93,060,673
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 45.5%
Federal Farm Credit Bank,
8.650%, 10/01/99, Series A.................... 150,000 153,375
Federal Farm Credit Bank, M.T.N.,
7.900%, 03/01/96.............................. 2,800,000 2,816,744
Federal Home Loan Mortgage Corporation,
9.800%, 03/25/96.............................. 4,000,000 4,095,000
Federal Home Loan Mortgage Corporation, CMO,
6.800%, 08/15/05, Series 1224, Class 1224-F... 5,000,000 4,757,800
Federal Home Loan Mortgage Corporation, REMIC,
6.500%, 10/15/06, Series 1194, Class 1194-G... 5,000,000 4,428,100
7.500%, 09/15/05, Series 1295, Class 1295-G... 8,300,000 7,934,219
Federal National Mortgage Association,
7.000%, 10/01/13-01/01/24..................... 33,044,696 30,002,267
9.000%, 10/01/16-09/01/21..................... 792,613 797,724
11.000%, 11/01/20............................. 6,159,127 6,647,977
Federal National Mortgage Association, REMIC,
Zero Coupon, 09/25/15, Tranche #TR1989-102,
Class 102A.................................. 1,387,991 1,027,113
6.500%, 07/25/20, Tranche #TR1992-138, Class
D........................................... 5,000,000 4,492,150
8.600%, 04/25/03, Series 1989-92, Class
92-D........................................ 1,086,155 1,087,849
9.000%, 03/25/20, Series 1990-24, Class
24-E........................................ 2,000,000 2,028,120
Government National Mortgage Association,
7.500%, 05/20/02.............................. 690,383 649,823
International Bank for Reconstruction and
Development,
12.375%, 10/15/02............................. 750,000 923,213
Resolution Funding Corp.,
Zero Coupon, 10/15/15......................... 17,100,000 3,219,075
8.125%, 10/15/19, Class A..................... 700,000 703,283
8.625%, 01/15/21.............................. 200,000 211,562
United States Treasury Bonds,
6.250%, 08/15/23.............................. 4,800,000 3,902,256
8.125%, 08/15/19.............................. 8,250,000 8,359,560
</TABLE>

<PAGE>

BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
10.750%, 08/15/05............................. $ 10,800,000 $ 12,973,500
11.250%, 02/15/15............................. 6,400,000 8,456,000
11.625%, 11/15/04............................. 15,130,000 18,950,325
12.000%, 08/15/13............................. 6,000,000 7,978,140
United States Treasury Notes,
3.875%, 09/30/95.............................. 7,000,000 6,837,040
6.250%, 02/15/03.............................. 6,000,000 5,426,220
6.375%, 08/15/02, Series 2002................. 4,200,000 3,845,604
6.875%, 03/31/97, Series 1997................. 1,500,000 1,472,805
7.250%, 08/15/04.............................. 1,100,000 1,055,824
7.500%, 02/29/96, Series 1996................. 9,300,000 9,310,137
7.875%, 02/15/96-07/31/96, Series 1996........ 36,000,000 36,151,740
8.875%, 11/15/97, Series 1997................. 20,370,000 20,907,972
9.000%, 05/15/98, Series B-1998............... 3,000,000 3,100,770
9.250%, 01/15/96, Series 1996................. 12,000,000 12,228,720
9.250%, 08/15/98, Series D-1998............... 9,300,000 9,703,992
--------------
246,635,999
--------------
UTILITIES -- 2.5%
%Central Maine Power Co., M.T.N.,
5.978%, 08/03/95, Tranche #TR00036............ 4,000,000 4,000,000
Consolidated Edison of New York, Inc.,
9.700%, 12/01/25.............................. 2,100,000 2,273,922
Pennsylvania Power & Light Co.,
9.375%, 07/01/21.............................. 1,150,000 1,179,268
Southern Union Co.,
7.600%, 02/01/24.............................. 3,000,000 2,511,450
Texas Utilities Electric Co.,
5.875%, 04/01/98.............................. 4,000,000 3,702,920
--------------
13,667,560
--------------
TOTAL LONG-TERM BONDS
(Cost $548,035,825)............................................ 516,103,677
--------------
</TABLE>

DECEMBER 31, 1994

<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 2.8% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.720%, 01/03/95, (see Note 4)................ $ 15,192,000 $ 15,192,000
--------------
OTHER ASSETS -- 1.9%
(net of liabilities)........................................... 10,352,922
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 541,648,599
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $42,727,259. The aggregate value, $39,858,505 is
approximately 7.4% of net assets. (See Note 2)

%Indicates a variable rate security.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 27 THROUGH 31.

<PAGE>

GOVERNMENT SECURITIES PORTFOLIO

DECEMBER 31, 1994

<PAGE>

The following abbreviations are used in portfolio descriptions:

CMO Collateralized Mortgage Obligations
M.T.N. Medium Term Note
REMIC Real Estate Mortgage Investment Conduit

%Indicates a variable rate security.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 27 THROUGH 31.

<PAGE>

CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO

DECEMBER 31, 1994

<PAGE>

CONSERVATIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
General Motors Acceptance Corp., M.T.N.,
6.300%, 09/10/97, Tranche #TR00532............ $ 5,000,000 $ 4,735,700
6.500%, 06/10/96.............................. 13,000,000 12,725,960
7.375%, 07/20/98, Tranche #TR00667............ 4,650,000 4,474,184
7.500%, 11/04/97, Tranche #TR00598............ 15,000,000 14,602,050
7.850%, 03/05/97, Tranche #TR00187............ 3,300,000 3,259,938
Mellon Financial Co.,
6.500%, 12/01/97.............................. 1,650,000 1,577,565
Standard Credit Card Master Trust,
7.250%, 04/07/08, Series 1994-2A, Class A..... 4,650,000 4,237,313
Standard Credit Card Trust,
9.375%, 03/10/96, Series 1990-1............... 7,000,000 7,028,420
Union Bank Finland, Ltd.,
5.250%, 06/15/96.............................. 16,650,000 15,942,542
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #00248.............. 2,600,000 2,606,968
--------------
184,764,657
--------------
FOREIGN -- 4.5%
**Banco Del Estado-Chile,
8.390%, 08/01/01.............................. 3,700,000 3,487,250
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 7,300,000 7,081,000
**%Cemex, SA,
6.250%, 10/25/95, Series B.................... 4,250,000 4,165,000
**Cemex, SA, M.T.N.,
9.500%, 09/20/01, Tranche #TR00010............ 12,500,000 10,625,000
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 10,000,000 8,187,500
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 5,190,000 4,411,500
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 7,342,500
Financiera Energetic Nacional,
6.625%, 12/13/96.............................. 5,000,000 4,800,000
**Financiera Energetic Nacional, M.T.N.,
9.000%, 11/08/99.............................. 9,900,000 9,420,432
Fomento Economico Mexicano, SA,
9.500%, 07/22/97.............................. 5,150,000 5,107,352
**Grupo Condumex, SA, M.T.N.,
6.250%, 07/27/96.............................. 4,300,000 3,827,000
**Grupo Embotellador Mexicana,
10.750%, 11/19/97............................. 8,015,000 7,133,350
Grupo Televisa, SA,
10.000%, 11/09/97............................. 7,250,000 6,561,250
%Hydro-Quebec,
3.438%, 09/30/49.............................. 3,500,000 2,925,780
**Kansallis-Osake Pankki, N.Y.,
8.650%, 12/29/49.............................. 10,000,000 9,675,000
Kansallis-Osake Pankki, N.Y., C.D.,
6.125%, 05/15/98.............................. 6,160,000 5,715,494
</TABLE>

<PAGE>

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $148,547,029. The aggregate value, $142,653,385 is
approximately 4.1% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1994.

%Indicates a variable rate security.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 27 THROUGH 31.

B10

<PAGE>

AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO

DECEMBER 31, 1994

B11

<PAGE>

B12

<PAGE>

B13

<PAGE>

AGGRESSIVELY MANAGED FLEXIBLE PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
<S> <C> <C>
7.750%, 11/30/99.............................. $ 16,125,000 $ 16,064,530
7.875%, 11/15/04.............................. 24,750,000 24,819,547
--------------
411,233,773
--------------
TOTAL LONG-TERM BONDS
(Cost $886,300,335)............................................ 855,841,714
--------------
<CAPTION>

B14

<PAGE>

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $63,175,092. The aggregate value, $58,625,420 is
approximately 1.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1994.

%Indicates a variable rate security.
</FN>
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES 27 THROUGH 31.

B15

<PAGE>

STOCK INDEX PORTFOLIO

DECEMBER 31, 1994

B16

<PAGE>

B17

<PAGE>

B18

<PAGE>

B19

<PAGE>

B20

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.1% AMOUNT VALUE
------------- --------------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 3.9%
Joint Repurchase Agreement Account,
5.720%, 01/03/95 (see Note 4)................. $ 25,939,000 $ 25,939,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.2%
United States Treasury Bills,
++5.590%, 03/16/95............................ 100,000 98,882
++5.640%, 03/16/95............................ 1,200,000 1,186,464
--------------
1,285,346
--------------
TOTAL SHORT-TERM INVESTMENTS..................................... 27,224,346
--------------
##
VARIATION MARGIN ON OPEN FUTURES CONTRACTS -- 0.0%...............
(178,025)
--------------
LIABILITIES -- (0.2%)
(net of other assets).......................................... (860,794)
--------------
TOTAL NET ASSETS -- 100.0%....................................... $ 664,534,207
--------------
--------------
<FN>

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt

+No dividend was paid on this security during the 12 months ending December
31, 1994.

++Entire amount pledged as collateral for futures transactions (See Note 2).