PRUDENTIAL SERIES FUND INC, 485BPOS, 1996-04-26

PRUDENTIAL SERIES FUND INC
485BPOS, 1996-04-26

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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. 31 [X]

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

AMENDMENT NO. 34 [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 1995 was filed on February 29, 1996.

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, 1996 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>

<TABLE>

CROSS REFERENCE SHEET
(AS REQUIRED BY 495(A) UNDER THE 1933 ACT)
<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>

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, 1996

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 fifteen
separate portfolios, each of which is, for investment purposes, in effect a
separate fund. The portfolios are: the Money Market Portfolio, the Diversified
Bond Portfolio, the Government Income Portfolio, two Zero Coupon Bond Portfolios
with different liquidation dates--2000 and 2005, the Conservative Balanced
Portfolio, the Flexible Managed Portfolio, the High Yield Bond Portfolio, the
Stock Index Portfolio, the Equity Income Portfolio, the Equity Portfolio, the
Prudential Jennison Portfolio, the Small Capitalization Stock Portfolio, the
Global 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 INCOME 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, 1996 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 5-96

<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.

ZERO COUPON BOND PORTFOLIOS 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, interest coupons that have been stripped from such debt
obligations, and receipts and certificates for such stripped debt obligations
and stripped coupons.

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

CONSERVATIVE BALANCED PORTFOLIO (formerly the 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
Flexible Managed Portfolio while recognizing that this reduces the chances of
greater appreciation.

FLEXIBLE MANAGED PORTFOLIO (formerly the 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.

EQUITY INCOME PORTFOLIO (formerly the 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.

EQUITY PORTFOLIO (formerly the 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.

PRUDENTIAL JENNISON PORTFOLIO (formerly the 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.

<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 10. The Series
Fund may in the future establish other portfolios with different investment
objectives.

<PAGE>

CONTENTS
Page
----
FINANCIAL HIGHLIGHTS........................................................ 1

PORTFOLIO RATES OF RETURN................................................... 9

THE SERIES FUND............................................................ 10

THE ACCOUNTS AND THE CONTRACTS............................................. 10

INVESTMENT MANAGER......................................................... 10

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS....................... 10
FIXED INCOME PORTFOLIOS........................................... 11
Money Market Portfolio............................................ 11
Diversified Bond Portfolio........................................ 11
Government Income Portfolio....................................... 12
Zero Coupon Bond Portfolios 2000 and 2005 ........................ 14
BALANCED PORTFOLIOS............................................... 15
Conservative Balanced Portfolio................................... 15
Flexible Managed Portfolio........................................ 16
HIGH YIELD BOND PORTFOLIOS........................................ 17
High Yield Bond Portfolio......................................... 17
DIVERSIFIED STOCK PORTFOLIOS...................................... 19
Stock Index Portfolio............................................. 19
Equity Income Portfolio........................................... 21
Equity Portfolio.................................................. 21
Prudential Jennison Portfolio..................................... 22
Small Capitalization Stock Portfolio.............................. 22
Global Portfolio.................................................. 23
SPECIALIZED PORTFOLIOS............................................ 24
Natural Resources Portfolio....................................... 24
CONVERTIBLE SECURITIES............................................ 26
FOREIGN SECURITIES................................................ 26
OPTIONS ON EQUITY SECURITIES...................................... 27
OPTIONS ON DEBT SECURITIES........................................ 28
OPTIONS ON STOCK INDICES.......................................... 28
OPTIONS ON FOREIGN CURRENCIES..................................... 29
FUTURES CONTRACTS................................................. 30
OPTIONS ON FUTURES CONTRACTS...................................... 30
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS.................... 30
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES....................... 31
SHORT SALES....................................................... 31
SHORT SALES AGAINST THE BOX....................................... 31
INTEREST RATE SWAPS............................................... 32
LOANS OF PORTFOLIO SECURITIES..................................... 32

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS....................... 32

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES............................ 32

PURCHASE AND REDEMPTION OF SHARES.......................................... 33

DETERMINATION OF NET ASSET VALUE........................................... 33

DIVIDENDS, DISTRIBUTIONS, AND TAXES........................................ 35

OTHER INFORMATION CONCERNING THE SERIES FUND............................... 36
Incorporation and Authorized Stock................................ 36
Voting Rights..................................................... 37
Monitoring for Possible Conflict.................................. 37
Periodic Reports.................................................. 37
Portfolio Brokerage and Related Practices......................... 37
Custodian, Transfer Agent, and Dividend Disbursing Agent.......... 38
Additional Information............................................ 38

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>

MONEY MARKET
-------------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $ 1.000
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.564 0.402 0.290 0.372 0.596 0.778 0.877 0.717 0.630 0.062
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 0.564 0.402 0.290 0.372 0.596 0.778 0.877 0.717 0.630 0.062
Distributions to
Shareholders:
Distributions from net
investment income...... (0.564) (0.402) (0.290) (0.372) (0.596) (0.778) (0.877) (0.717) (0.630) (0.062)
Distributions from
realized gains......... 0 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (0.564) (0.402) (0.290) (0.372) (0.596) (0.778) (0.877) (0.717) (0.630) (0.062)
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 0.000 9.000
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 5.80 % 4.05 % 2.95 % 3.79 % 6.16 % 8.16 % 9.25 % 7.35% 6.52 % 6.54 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $613.3 $583.3 $474.7 $528.7 $529.6 $434.2 $236.1 $155.9 $107.2 $52.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.44 % 0.47 % 0.45 % 0.47 % 0.46 % 0.50 % 0.55 % 0.57 % 0.53 % 0.55 %
Ratio of net investment
income to average net
assets................. 5.64 % 4.02 % 2.90 % 3.72 % 5.96 % 7.80 % 8.77 % 7.17 % 6.30 % 6.16 %
Portfolio turnover
rate................... -- -- -- -- -- -- -- -- -- --
Number of shares
outstanding at end of
period (in millions)... 61.3 58.3 47.5 52.9 53.0 43.4 23.6 15.6 10.7 5.2

DIVERSIFIED BOND
-------------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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*
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at
beginning of year...... $10.038 $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $10.038 $ 11.048 $10.967
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Income From Investment
Operations:
Net investment income.... 0.763 0.682 0.686 0.761 0.797 0.825 0.886 0.875 0.859 0.904
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.293 (1.040) 0.398 0.013 0.842 (0.004) 0.424 (0.069) (0.821) 0.607
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Total from investment
operations........... 2.056 (0.358) 1.084 0.774 1.639 0.821 1.310 0.806 0.038 1.511
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.755) (0.683) (0.657) (0.728) (0.779) (0.810) (0.854) (0.902) (0.990) (0.909)
Distributions from net
realized gains......... (0.026) (0.024) (0.153) (0.219) (0.190) 0 (0.077) 0 (0.058) (0.521)
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Total
distributions........ (0.781) (0.707) (0.810) (0.947) (0.969) (0.810) (0.931) (0.902) (1.048) (1.430)
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Net increase (decrease)
in Net Asset Value..... 1.275 (1.065) 0.274 (0.173) 0.670 0.011 0.379 (0.096) (1.010) 0.081
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Net Asset Value at end of
year................... $11.313 $10.038 $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $ 10.038 $11.048
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Total Investment Rate of
Return:**.............. 20.73 % (3.23 %) 10.13 % 7.19 % 16.44 % 8.32 % 13.49 % 8.19 % 0.29 % 14.45 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $655.8 $541.6 $576.2 $428.8 $318.7 $227.7 $191.1 $148.8 $139.5 $110.1
Ratio of expenses net of
reimbursement to
average net assets..... 0.44 % 0.45 % 0.46 % 0.47 % 0.49 % 0.47 % 0.53 % 0.53 % 0.53 % 0.51 %
Ratio of net investment
income to average net
assets................. 7.00 % 6.41 % 6.05 % 6.89 % 7.43 % 8.06 % 8.56 % 8.52 % 8.15 % 8.11 %

Portfolio turnover
rate................... 199.09 % 31.57 % 41.12 % 60.53 % 131.01 % 42.10 % 272.85 % 222.20 % 238.41 % 246.82 %
Number of shares
outstanding at end of
period (in millions)... 58.0 54.0 51.9 39.6 29.0 22.0 18.5 15.0 13.9 10.0
</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.

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>

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>

GOVERNMENT INCOME
-----------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $10.461 $11.784 $11.094 $11.133 $10.146 $10.324 $10.017
------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.741 0.703 0.700 0.731 0.736 0.791 0.545
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.275 (1.311) 0.678 (0.092) 0.847 (0.177) 0.613
------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 2.016 (0.608) 1.378 0.639 1.583 0.614 1.158
------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.758) (0.723) (0.642) (0.593) (0.596) (0.769) (0.489)
Distributions from net
realized gains......... 0.000 0.008 (0.046) (0.085) 0.000 (0.023) (0.362)
------- ------- ------- ------- ------- ------- -------
Total
distributions........ (0.758) (0.715) (0.688) (0.678) (0.596) (0.792) (0.851)
------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 1.258 (1.323) 0.690 (0.039) 0.987 (0.178) 0.307
------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $11.719 $10.461 $11.784 $11.094 $11.133 $10.146 $10.324
======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 19.48 % (5.16 %) 12.56 % 5.85 % 16.11 % 6.34 % 11.60 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $501.8 $487.6 $540.1 $315.5 $95.0 $23.7 $17.0
Ratio of expenses net of
reimbursement to
average net assets..... 0.45 % 0.45 % 0.46 % 0.53 % 0.58 % 0.74 % 0.50 %
Ratio of net investment
income to average net
assets................. 6.55 % 6.30 % 5.91 % 6.58 % 6.97 % 7.86 % 5.06 %
Portfolio turnover
rate................... 195.49 % 34.19 % 18.59 % 80.71 % 127.18 % 379.45 % 208.86 %
Number of shares
outstanding at end of
period (in millions)... 42.8 46.6 45.8 28.3 8.5 2.3 1.6
</TABLE>
<TABLE>
<CAPTION>

ZERO COUPON BOND 1995
-------------------------------------------------------------------------------------------------------
01/01/95 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 TO
11/15/95 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> <C>
Net Asset Value at
beginning of period.... $10.593 $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.... 0.538 0.800 0.761 0.802 0.844 1.447 0.889 0.888 0.893 0.791
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.109 (0.808) 0.107 (0.010) 0.874 (0.670) 0.766 0.027 (1.263) 1.437
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 0.647 (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...... (0.676) (0.679) (0.760) (0.798) (0.845) (1.491) (0.892) (0.854) (1.084) (0.660)
Distributions from net
realized gains......... (0.165) (0.002) 0.000 (0.070) (0.003) 0.000 0.000 0.000 0.000 0.000
Distributions of net
assets at liquidation
date................... (10.399) 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (11.240) (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..... (10.593) (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................. $ 0.000 $10.593 $11.282 $11.174 $11.250 $10.380 $11.094 $10.331 $10.270 $11.724
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 6.20 % (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)... $0.0 $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..... 0.49 % 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................. 5.39 % 6.72 % 6.61 % 7.12 % 7.86 % 13.80 % 8.13 % 8.34 % 8.17 % 6.89 %
Portfolio turnover
rate................... 0.00 % 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)... 0.0 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.

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>

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.

ZERO COUPON BOND 2000
-------------------------------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $11.862 $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.... 0.592 0.927 0.850 0.892 0.908 1.114 0.919 0.919 0.934 0.807
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.944 (1.907) 1.157 0.140 1.308 (0.593) 1.277 0.292 (1.623) 2.087
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 2.536 (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...... (0.593) (0.850) (0.837) (0.884) (0.944) (1.125) (0.915) (0.892) (1.102) (0.685)
Distributions from net
realized gains......... (0.532) (0.023) (0.005) 0.000 (0.149) 0.000 (0.402) 0.000 0.000 0.000
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.125) (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..... 1.411 (1.853) 1.165 0.148 1.123 (0.604) 0.879 0.319 (1.791) 2.209
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $13.273 $11.862 $13.715 $12.550 $12.402 $11.279 $11.883 $11.004 $10.685 $12.476
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 21.56 % (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 year
(in millions).......... $25.3 $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..... 0.48 % 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................. 4.53 % 6.69 % 6.21 % 7.24 % 7.77 % 9.99 % 7.73 % 8.24 % 8.19 % 6.61 %
Portfolio turnover
rate................... 70.68 % 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)... 1.9 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
-----------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $10.744 $12.677 $11.029 $10.874 $ 9.798 $10.457 $10.017
------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.655 0.752 0.768 0.804 0.820 0.850 0.561
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 2.733 (1.967) 1.623 0.207 1.143 (0.649) 0.598
------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 3.388 (1.215) 2.391 1.011 1.963 0.201 1.159
------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.656) (0.715) (0.741) (0.792) (0.827) (0.860) (0.531)
------- ------- ------- ------- ------- ------- -------
Distributions from net
realized gains......... (0.286) (0.003) (0.002) (0.064) (0.060) 0.000 (0.188)
------- ------- ------- ------- ------- ------- -------
Total
distributions........ (0.942) (0.718) (0.743) (0.856) (0.887) (0.860) (0.719)
------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 2.446 (1.933) 1.648 0.155 1.076 (0.659) 0.440
------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $13.190 $10.744 $12.677 $11.029 $10.874 $ 9.798 $10.457
======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 31.85 % (9.61 %) 21.94 % 9.66 % 21.16 % 2.56 % 11.67 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $23.6 $16.5 $14.5 $9.8 $8.7 $7.3 $7.2
Ratio of expenses net of
reimbursement to
average net assets..... 0.49 % 0.60 % 0.66 % 0.75 % 0.75 % 0.75 % 0.49 %
Ratio of net investment
income to average net
assets................. 5.32 % 6.53 % 6.17 % 7.46 % 8.08 % 8.83 % 5.25 %
Portfolio turnover
rate................... 69.15 % 5.94 % 3.62 % 11.48 % 5.76 % 4.36 % 59.90 %
Number of shares
outstanding at end of
period (in millions)... 1.8 1.5 1.1 0.9 0.8 0.7 0.7
</TABLE>

All calculations are based on average month-end shares outstanding, where
applicable.

Further information about the performance of the portfolios is
contained in the Annual Report to Contract Owners which may be obtained
without charge.

3 - 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>

CONSERVATIVE BALANCED
----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $11.889 $12.571 $12.173
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.635 0.528 0.486 0.558 0.687 0.821 0.891 0.773 0.656 0.652
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investmentss........... 1.775 (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424 (0.399) 1.046
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 2.410 (0.151) 1.715 0.968 2.425 0.678 2.046 1.197 0.257 1.698
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.643) (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791) (0.709) (0.517)
Distributions from net
realized gains......... (0.553) (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0.000 (0.230) (0.783)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.196) (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791) (0.939) (1.300)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 1.214 (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406 (0.682) 0.398
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $11.889 $12.571
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 17.27 % (0.97 %) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19 % 1.54 % 14.17 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $3,940.8 $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6 $803.9 $375.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.58 % 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65% 0.66 % 0.64 %
Ratio of net investment
income to average net
assets................. 4.19 % 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22 % 5.05 % 5.10 %
Portfolio turnover
rate................... 200.68 % 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67 % 140.69 % 207.78 %
Number of shares
outstanding at end of
period (in millions)... 257.4 248.4 208.2 148.4 104.8 84.2 73.0 66.3 67.6 29.9

Net Asset Value at
beginning of year...... $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $13.555 $12.810
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.564 0.473 0.566 0.583 0.650 0.715 0.813 0.724 0.577 0.611
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 3.149 (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840 (0.753) 1.342
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 3.713 (0.548) 2.448 1.190 3.459 0.249 2.802 1.564 (0.176) 1.953
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.560) (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767) (0.673) (0.456)
Distributions from net
realized gains......... (0.790) (0.462) (0.929) (0.914) (0.513) 0.000 (0.666) 0.000 (0.380) (0.752)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.350) (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767) (1.053) (1.208)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 2.363 (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797 (1.229) 0.745
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $13.555
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 24.13 % (3.16 %) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83 % (1.83 %) 15.48 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $4,261.2 $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
Ratio of expenses net of
reimbursement to
average net assets..... 0.63 % 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70% 0.71 % 0.67 %
Ratio of net investment
income to average net
assets................. 3.30 % 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52 % 4.09 % 4.43 %
Portfolio turnover
rate................... 173.30 % 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45 % 123.83 % 133.76 %
Number of shares
outstanding at end of
period (in millions)... 238.6 224.7 194.1 152.2 122.2 107.7 96.0 84.1 86.2 43.8
</TABLE>

All calculations are based on average month-end shares outstanding, where
applicable.

Further information about the performance of the portfolios is
contained in the Annual Report to Contract Owners which may be obtained
without charge.

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
-----------------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $ 7.366 $ 8.406 $ 7.719 $ 7.212 $ 5.838 $ 7.673 $ 8.904 $8.742 $10.000
------- ------- ------- ------- ------- ------- ------- ------ -------
Income From Investment
Operations:
Net investment income.... 0.812 0.869 0.822 0.824 0.836 0.936 1.071 1.066 0.968
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.460 (1.102) 0.632 0.415 1.397 (1.792) (1.223) 0.065 (1.428)
------- ------- ------- ------- ------- ------- ------- ------ -------
Total from investment
operations........... 1.272 (0.233) 1.454 1.239 2.233 (0.856) (0.152) 1.131 (0.460)
------- ------- ------- ------- ------- ------- ------- ------ -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.838) (0.807) (0.767) (0.732) (0.859) (0.979) (1.079) (0.969) (0.798)
Distributions from net
realized gains......... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- ------- ------- ------ -------
Total
distributions........ (0.838) (0.807) (0.767) (0.732) (0.859) (0.979) (1.079) (0.969) (0.798)
------- ------- ------- ------- ------- ------- ------- ------ -------
Net increase (decrease)
in Net Asset Value..... 0.434 (1.040) 0.687 0.507 1.374 (1.835) (1.231) 0.162 (1.258)
------- ------- ------- ------- ------- ------- ------- ------ -------
Net Asset Value at end of
year................... $ 7.800 $ 7.366 $ 8.406 $ 7.719 $ 7.212 $ 5.838 $ 7.673 $8.904 $ 8.742
======= ======= ======= ======= ======= ======= ======= ====== =======
Total Investment Rate of
Return:**.............. 17.56 % (2.72 %) 19.27 % 17.54 % 39.71 % (11.84 %) (2.05 %) 13.17 % (4.91 %)
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $367.9 $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..... 0.61 % 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................. 10.34 % 9.88 % 9.91 % 10.67 % 12.05 % 13.42 % 12.29 % 11.60% 10.13 %
Portfolio turnover
rate................... 139.34 % 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)... 47.2 41.6 33.6 19.9 10.9 8.5 7.8 7.4 4.6

STOCK INDEX
-----------------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $14.957 $15.202 $14.218 $13.605 $10.760 $11.732 $ 9.454 $8.531 $ 8.071
------- ------- ------- ------- ------- ------- ------- ------ -------
Income From Investment
Operations:
Net investment income.... 0.403 0.377 0.361 0.350 0.351 0.357 0.326 0.357 0.047
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 5.126 (0.231) 1.002 0.600 2.814 (0.792) 2.570 0.951 0.548
------- ------- ------- ------- ------- ------- ------- ------ -------
Total from investment
operations........... 5.529 0.146 1.363 0.950 3.165 (0.435) 2.896 1.308 0.595
------- ------- ------- ------- ------- ------- ------- ------ -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.384) (0.368) (0.346) (0.329) (0.307) (0.309) (0.354) (0.385) (0.135)
Distributions from net
realized gains......... (0.146) (0.023) (0.033) (0.008) (0.013) (0.228) (0.264) 0.000 0.000
------- ------- ------- ------- ------- ------- ------- ------ -------
Total
distributions........ (0.530) (0.391) (0.379) (0.337) (0.320) (0.537) (0.618) (0.385) (0.135)
------- ------- ------- ------- ------- ------- ------- ------ -------
Net increase (decrease)
in Net Asset Value..... 4.999 (0.245) 0.984 0.613 2.845 (0.972) 2.278 0.923 0.460
------- ------- ------- ------- ------- ------- ------- ------ -------
Net Asset Value at end of
year................... $19.956 $14.957 $15.202 $14.218 $13.605 $10.760 $11.732 $9.454 $ 8.531
======= ======= ======= ======= ======= ======= ======= ====== =======
Total Investment Rate of
Return:**.............. 37.06 % 1.01 % 9.66 % 7.13 % 29.72 % (3.63 %) 30.93 % 15.44 % 7.35 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $1,031.3 $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..... 0.38 % 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................. 2.27 % 2.50 % 2.43 % 2.56 % 2.82 % 3.23 % 2.95 % 3.87 % 0.53 %
Portfolio turnover
rate................... 1.16 % 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)... 51.7 44.4 40.5 30.5 17.4 9.7 4.6 3.8 2.9
</TABLE>

All calculations are based on average month-end shares outstanding, where
applicable.

Further information about the performance of the portfolios is
contained in the Annual Report to Contract Owners which may be obtained
without charge.

5 - 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>

EQUITY INCOME
---------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year ..... $14.484 $15.655 $13.673 $13.209 $11.241 $12.254 $10.621 $10.132
------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.644 0.664 0.551 0.582 0.578 0.509 0.539 0.452
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 2.495 (0.453) 2.459 0.723 2.430 (0.980) 1.841 0.684
------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations 3.139 0.211 3.010 1.305 3.008 (0.471) 2.380 1.136
------- ------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.618) (0.562) (0.501) (0.515) (0.542) (0.461) (0.462) (0.420)
Distributions from net
realized gains......... (0.734) (0.820) (0.527) (0.326) (0.498) (0.081) (0.285) (0.227)
------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.352) (1.382) (1.028) (0.841) (1.040) (0.542) (0.747) (0.647)
------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 1.787 (1.171) 1.982 0.464 1.968 (1.013) 1.633 0.489
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $16.271 $14.484 $15.655 $13.673 $13.209 $11.241 $12.254 $10.621
======= ======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 21.70 % 1.44 % 22.28 % 10.14 % 27.50 % (3.73 %) 22.67 % 11.31 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $1,110.0 $859.7 $602.8 $234.4 $106.9 $55.5 $34.9 $11.3
Ratio of expenses net of
reimbursement to
average net assets..... 0.43 % 0.52 % 0.54 % 0.57 % 0.57 % 0.60 % 0.74 % 0.64 %
Ratio of net investment
income to average net
assets................. 4.00 % 3.92 % 3.56 % 4.32 % 4.53 % 4.53 % 4.48 % 4.08 %
Portfolio turnover
rate................... 63.55 % 62.66 % 41.43 % 39.98 % 60.12 % 54.79 % 56.65 % 61.31 %
Number of shares
outstanding at end of
period (in millions)... 68.2 59.4 38.5 17.1 8.1 4.9 2.9 1.1
<CAPTION>

EQUITY
---------------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $20.662 $21.487 $18.903 $17.905 $15.449 $18.539 $15.463 $13.620 $14.815 $14.634
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.546 0.512 0.417 0.444 0.482 0.577 0.474 0.402 0.393 0.448
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 5.891 0.054 3.666 2.050 3.414 (1.573) 4.064 1.909 (0.065) 1.765
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 6.437 0.566 4.083 2.494 3.896 (0.996) 4.538 2.311 0.328 2.213
Distributions to
Shareholders:
Distributions from net
investment income...... (0.515) (0.487) (0.404) (0.439) (0.478) (0.563) (0.503) (0.468) (0.496) (0.275)
Distributions from net
realized gains......... (0.944) (0.904) (1.095) (1.057) (0.962) (1.531) (0.959) 0.000 (1.027) (1.757)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.459) (1.391) (1.499) (1.496) (1.440) (2.094) (1.462) (0.468) (1.523) (2.032)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 4.978 (0.825) 2.584 0.998 2.456 (3.090) 3.076 1.843 (1.195) 0.181
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $25.640 $20.662 $21.487 $18.903 $17.905 $15.449 $18.539 $15.463 $13.620 $14.815
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 31.29 % 2.78 % 21.87 % 14.17 % 26.01 % (5.21 %) 29.73 % 17.05 % 1.67 % 15.10 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $3,813.8 $2,617.8 $2,186.5 $1,416.6 $1,032.8 $700.5 $675.5 $500.1 $451.0 $247.9
Ratio of expenses net of
reimbursement to
average net assets..... 0.48 % 0.55 % 0.53 % 0.53 % 0.51 % 0.56 % 0.56 % 0.57 % 0.51 % 0.52 %
Ratio of net investment
income to average net
assets................. 2.28 % 2.39 % 1.99 % 2.33 % 2.66 % 3.37 % 2.66 % 2.67 % 2.34 % 2.90 %
Portfolio turnover
rate................... 17.65 % 6.90 % 12.95 % 15.70 % 20.85 % 84.84 % 73.54 % 62.35 % 79.91 % 117.15 %
Number of shares
outstanding at end of
period (in millions)... 148.7 126.7 101.8 74.9 57.7 45.3 36.4 32.3 33.1 16.7
</TABLE>

All calculations are based on average month-end shares outstanding, where
applicable.

Further information about the performance of the portfolios is
contained in the Annual Report to Contract Owners which may be obtained
without charge.

6 - 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.

PRUDENTIAL
JENNISON
--------
04/25/95*
TO
12/31/95
--------
Net Asset Value at
beginning of period $10.000
-------
Income From Investment
Operations:
Net investment income.... 0.018
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 2.535
-------
Total from investment
operations........... 2.553
-------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.006)
Distributions from net
realized gains......... 0.000
-------
Total
distributions........ (0.006)
-------
Net increase (decrease)
in Net Asset Value..... 2.547
-------
Net Asset Value at end of
year................... $12.547
=======
Total Investment Rate of
Return:**.............. 24.42%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $63.1
Ratio of expenses net of
reimbursement to
average net assets..... 0.79%
Ratio of net investment
income to average net
assets................. 0.15%
Portfolio turnover
rate................... 37.45%
Number of shares
outstanding at end of
period (in millions)... 5.0

SMALL
CAPITALIZATION
STOCK
--------
04/25/95*
TO
12/31/95
--------
Net Asset Value at
beginning of period.... $10.000

Income From Investment
Operations:
Net investment income.... 0.077
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.916
-------
Total from investment
operations........... 1.993
-------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.044)
Distributions from net
realized gains......... (0.116)
-------
Total
distributions........ (0.160)
-------
Net increase (decrease)
in Net Asset Value..... 1.833
-------
Net Asset Value at end of
year................... $11.833
=======
Total Investment Rate of
Return:**.............. 19.74%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $47.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.60%
Ratio of net investment
income to average net
assets................. 0.68%
Portfolio turnover
rate................... 31.79%
Number of shares
outstanding at end of
period (in millions)... 4.0

All calculations are based on average month-end shares outstanding, where
applicable.

*Commencement of business.

Further information about the performance of the portfolios is
contained in the Annual Report to Contract Owners which may be obtained
without charge.

7 - 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>

GLOBAL
---------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year ..... $13.879 $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508 $ 9.818
------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.065 0.028 0.023 0.051 0.096 0.203 0.079 0.052
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 2.138 (0.744) 4.433 (0.419) 1.020 (1.802) 1.806 0.787
------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 2.203 (0.716) 4.456 (0.368) 1.116 (1.599) 1.885 0.839
------- ------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.242) (0.019) (0.079) (0.056) (0.100) (0.067) (0.073) (0.149)
Distributions from net
realized gains......... (0.307) (0.025) (0.106) 0.000 (0.090) (0.015) (0.773) 0.000
------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (0.549) (0.044) (0.185) (0.056) (0.190) (0.082) (0.846) (0.149)
------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 1.654 (0.760) 4.271 (0.424) 0.926 (1.681) 1.039 0.690
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $15.533 $13.879 $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508
======= ======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 15.88 % (4.89 %) 43.14 % (3.42 %) 11.39 % (12.91 %) 18.82 % 8.57 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $400.1 $345.7 $129.1 $34.0 $34.3 $26.2 $29.4 $26.9
Ratio of expenses net of
reimbursement to
average net assets..... 1.06 % 1.23 % 1.44 % 1.87 % 1.62 % 1.67 % 1.47 % 0.42 %
Ratio of net investment
income to average net
assets................. 0.44 % 0.20 % 0.18 % 0.49 % 0.92 % 1.92 % 0.70 % 0.51 %
Portfolio turnover
rate................... 58.52 % 37.46 % 54.54 % 78.16 % 136.21 % 43.12 % 47.95 % 6.40 %
Number of shares
outstanding at end of
period (in millions)... 25.7 24.9 8.8 3.3 3.2 2.7 2.5 2.6

NATURAL RESOURCES
---------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $14.443 $15.562 $12.949 $12.450 $11.622 $12.705 $10.141 $ 9.910
------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.204 0.183 0.227 0.319 0.368 0.417 0.364 0.254
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 3.662 (0.850) 3.004 0.588 0.821 (1.143) 3.216 0.274
------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 3.866 (0.667) 3.231 0.907 1.189 (0.726) 3.580 0.528
------- ------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.209) (0.150) (0.207) (0.309) (0.361) (0.336) (0.358) (0.252)
Distributions from net
realized gains......... (0.828) (0.302) (0.411) (0.099) 0.000 (0.021) (0.658) (0.045)
------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.037) (0.452) (0.618) (0.408) (0.361) (0.357) (1.016) (0.297)
------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 2.829 (1.119) 2.613 0.499 0.828 (1.083) 2.564 0.231
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $17.272 $14.443 $15.562 $12.949 $12.450 $11.622 $12.705 $10.141
======= ======= ======= ======= ======= ======= ======= =======
Total Investment Rate of
Return:**.............. 26.92 % (4.30 %) 25.15 % 7.30 % 10.30 % (5.76 %) 35.64 % 5.42 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $293.2 $227.3 $158.8 $77.5 $62.6 $50.6 $17.9 $9.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.50 % 0.61 % 0.60 % 0.72 % 0.68 % 0.75 % 0.86 % 0.58 %
Ratio of net investment
income to average net
assets................. 1.25 % 1.09 % 1.50 % 2.44 % 2.97 % 3.45 % 3.04 % 2.46 %
Portfolio turnover
rate................... 46.11 % 18.10 % 19.64 % 29.20 % 21.33 % 42.18 % 49.17 % 59.33 %
Number of shares
outstanding at end of
period (in millions)... 17.0 15.7 10.2 6.0 5.0 4.4 1.4 0.9
</TABLE>

All calculations are based on average month-end shares outstanding, where
applicable.

Further information about the performance of the portfolios is
contained in the Annual Report to Contract Owners which may be obtained
without charge.

8 - SERIES FUND
<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 12/31/95 for the 5 year
and 10 year periods ending on that date, and from the inception date of each
Portfolio to December 31, 1995. 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. THIS INFORMATION
RELATES ONLY TO THE SERIES FUND AND DOES NOT REFLECT THE VARIOUS OTHER CHARGES
MADE UNDER THE CONTRACTS.
<TABLE>
<CAPTION>

5 YEAR 10 YEAR
PERIOD PERIOD INCEPTION YEAR YEAR YEAR
INCEPTION YEAR ENDED ENDED ENDED DATE TO ENDED ENDED ENDED
DATE 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET 5/83 5.8% 4.5% 6.0% 6.6% 5.8% 4.1% 3.0%
DIVERSIFIED BOND 5/83 20.7% 9.9% 9.4% 9.9% 20.7% -3.2% 10.1%
GOVERNMENT INCOME 5/89 19.5% 9.4% N/A 9.8% 19.5% -5.2% 12.6%
ZERO COUPON BOND
1995 2/86 6.2% 7.8% N/A 9.0% 9.2% 0.0% 7.9%
ZERO COUPON BOND
2000 2/86 21.6% 11.4% N/A 11.6% 21.6% -7.2% 16.2%
ZERO COUPON BOND
2005 5/89 31.9% 14.1% N/A 12.6% 31.9% -9.6% 21.9%
CONSERVATIVE
BALANCED 5/83 17.3% 10.7% 10.1% 10.4% 17.3% -1.0% 12.2%
FLEXIBLE MANAGED 5/83 24.1% 13.4% 11.9% 11.6% 24.1% -3.2% 15.6%
HIGH YIELD BOND 2/87 17.6% 17.4% N/A 8.6% 17.6% -2.7% 20.0%
STOCK INDEX 10/87 37.1% 16.1% N/A 15.7% 37.1% 1.0% 9.7%
EQUITY INCOME 2/88 21.7% 16.2% N/A 13.9% 21.7% 1.4% 22.3%
EQUITY 5/83 31.3% 18.8% 15.0% 14.6% 31.3% 2.8% 21.9%
PRUDENTIAL
JENNISON 5/95 N/A N/A N/A 24.4% N/A N/A N/A
SMALL
CAPITALIZATION
STOCK 5/95 N/A N/A N/A 19.7% N/A N/A N/A
GLOBAL 9/88 15.9% 11.2% N/A 9.3% 15.9% -4.9% 43.1%
NATURAL RESOURCES 5/88 26.9% 12.1% N/A 11.7% 26.9% -4.3% 25.2%

YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
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>
MONEY MARKET 3.8% 6.2% 8.2% 9.3% 7.4% 6.5% 6.5%
DIVERSIFIED BOND 7.2% 16.4% 8.3% 13.5% 8.2% 0.3% 14.4%
GOVERNMENT INCOME 5.9% 16.1% 6.3% N/A N/A N/A N/A
ZERO COUPON BOND
1995 7.2% 17.2% 8.0% 16.4% 9.0% -3.3% N/A
ZERO COUPON BOND
2000 8.6% 20.7% 5.1% 20.4% 11.6% -5.5% N/A
ZERO COUPON BOND
2005 9.7% 21.2% 2.6% N/A N/A N/A N/A
CONSERVATIVE
BALANCED 6.9% 19.1% 5.3% 17.0% 10.2% 1.5% 14.2%
FLEXIBLE MANAGED 7.6% 25.4% 1.9% 21.8% 12.8% -1.8% 15.5%
HIGH YIELD BOND 17.5% 39.2% -11.8% -2.1% 13.2% N/A N/A
STOCK INDEX 7.1% 29.7% -3.6% 30.9% 15.4% N/A N/A
EQUITY INCOME 10.1% 27.5% -3.7% 22.7% N/A N/A N/A
EQUITY 14.2% 26.0% -5.1% 29.7% 17.1% 1.7% 15.1%
PRUDENTIAL
JENNISON N/A N/A N/A N/A N/A N/A N/A
SMALL
CAPITALIZATION
STOCK N/A N/A N/A N/A N/A N/A N/A
GLOBAL -3.4% 11.4% -12.9% 18.8% N/A N/A N/A
NATURAL RESOURCES 7.3% 10.3% -5.8% 35.6% N/A N/A N/A
</TABLE>

9 - 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 fifteen
separate portfolios: the Money Market Portfolio, the Diversified Bond Portfolio,
the Government Income Portfolio, the Zero Coupon Bond Portfolios 2000 and 2005,
the Conservative Balanced Portfolio, the Flexible Managed Portfolio, the High
Yield Bond Portfolio, the Stock Index Portfolio, the Equity Income Portfolio,
the Equity Portfolio, the Prudential Jennison Portfolio, the Small
Capitalization Stock Portfolio, the Global 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 Prudential Jennison
Portfolio. See INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES, page 32.

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.

10 - 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, 1995 can be found in the FINANCIAL HIGHLIGHTS table on pages
1 through 8. 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 397 days 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.

DIVERSIFIED 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 primarily 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.

11 - 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 26.

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 28 through 32, and further information about some of them is
included in the statement of additional information.

Barbara Kenworthy, Managing Director, Prudential Mutual Fund Investment
Management ("PMFIM"), a division of PIC, has been portfolio manager of the
Diversified Bond Portfolio since 1995. Ms. Kenworthy is also portfolio manager
of the Prudential Diversified Bond Fund, Inc., the Prudential Government Income
Fund, Inc., and the Government Income and Zero Coupon Bond Portfolios 2000 and
2005 of the Series Fund. Prior to 1994, Ms. Kenworthy was a portfolio manager
and president of several taxable fixed-income funds for The Dreyfus Corp.

GOVERNMENT INCOME 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; (3) Foreign Government Securities including
debt securities issued or guaranteed, as to payment of principal and interest,
by governments, governmental agencies, supranational entities and other
governmental entities denominated in U.S. dollars. A supranational entity is an
entity constituted by the national governments of several countries to promote
economic development. Examples of such supranational entities include, among
others, the World Bank (International Bank for Reconstruction and Development),
the European Investment Bank and the Asian Development Bank; and (4)
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 portfolio 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.

12 - Series Fund

<PAGE>

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.

Mortgage-Related Securities Issued by U.S. Government Instrumentalities or by
Non-Governmental Corporations. The portfolio may invest in the following three
types of mortgage-backed securities: (i) those issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, such as Government
National Mortgage Association (GNMA), Federal National Mortgage Association
(FNMA) and Federal Home Loan Mortgage Corporation (FHLMC): (ii) those issued by
private issuers that represent an interest in or are collateralized by
mortgage-backed securities issued or guaranteed by the U.S. Government or one of
its agencies or instrumentalities; and (iii) those issued by private issuers
that represent an interest in or are collateralized by whole mortgage loans or
mortgage-backed securities without government guarantee but usually having some
form of private credit enhancement. The portfolio may invest in adjustable rate
and fixed rate mortgage securities. With respect to private mortgage-backed
securities not collateralized by securities of the U.S. Government or its
agencies, the portfolio will only purchase such securities rated not lower than
Aa by Moody's or AA by Standard & Poor's or similarly rated by another
nationally recognized rating service or, if unrated, of comparable quality in
the opinion of the portfolio manager. The mortgages backing these securities
include conventional 30 year fixed rate mortgages, 15 year fixed rate mortgages,
graduated payment mortgages, and adjustable rate mortgages (ARMs). The
mortgage-backed securities may include those representing an undivided ownership
interest in a pool of mortgages, e.g. GNMA, FNMA and FHLMC certificates. The
U.S. Government or the issuing agency guarantees the payment of interest and
principal of mortgaged-backed securities issued by the U.S. Government or its
agencies/instrumentalities. However, these guarantees do not extend to the
securities' yield or value, which are likely to vary inversely with fluctuations
in interest rates, nor do the guarantees extend to the yield or value of the
portfolio's shares. Mortgage-backed 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.
Mortgage-backed securities of the types described under (i) and (ii) above are
considered to be U.S. Government Securities for purposes of meeting the
requirement that at least 65% of the portfolio's assets be invested in U.S.
Government Securities.

Adjustable rate mortgage securities are pass-through mortgage securities
collateralized by mortgages with adjustable rather than fixed rates. Generally
ARMs have a specified maturity date and amortize principal over their life. In
periods of declining interest rates, there is a reasonable likelihood that ARMs
will experience increased rates of pre-payment of principal, However, the major
difference between ARMs and fixed rate mortgage securities is that the interest
rate and the rate of amortization of principal of ARMs can and do change in
accordance with movements in a particular pre-specified, published interest rate
index.

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 CMOs issued by
agencies or instrumentalities of the U.S. Government or by private originators
of, or investors in mortgage loans, including depository institutions, mortgage
banks, investment banks and special purpose subsidiaries of the foregoing. With
respect to privately issued CMOs, the portfolio will only purchase such
securities rated not lower than Aa by Moody's or AA by Standard & Poor's or
similarly rated by another nationally recognized rating service, or if unrated,
of comparable quality in the opinion of the portfolio manager. Privately issued
CMOs that are

13 - Series Fund

<PAGE>

collateralized by mortgage-backed securities issued by GNMA, FHLMC or FNMA, and
CMOs issued by agencies or instrumentalities of the U.S. Government are
considered to be U.S. Government Securities for purposes of meeting the
requirement that at least 65% of the portfolio's assets be invested in U.S.
Government Securities. 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.

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 37.

Barbara Kenworthy, Managing Director, PMFIM, has been portfolio manager of the
Government Income Portfolio since 1995. Ms. Kenworthy is also portfolio manager
of the Prudential Diversified Bond Fund, Inc., the Prudential Government Income
Fund, Inc., and the Diversified Bond and Zero Coupon Bond Portfolios 2000 and
2005 of the Series Fund. Prior to 1994, Ms. Kenworthy was a portfolio manager
and president of several taxable fixed-income funds for The Dreyfus Corp.

ZERO COUPON BOND PORTFOLIOS 2000 AND 2005. The objective of both 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 debt obligations and stripped coupons (collectively "stripped
securities"). The two 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. However, as a
defensive position, as the liquidation date of each portfolio draws near, more
than 20% of assets may be invested in interest bearing securities when deemed
appropriate in the view of the portfolio manager given prevailing market
conditions and investment opportunities available at the time. 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.

14 - Series Fund

<PAGE>

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.

Barbara Kenworthy, Managing Director, PMFIM, has been portfolio manager of the
Zero Coupon Bond Portfolios 2000 and 2005 since 1995. Ms. Kenworthy is also
portfolio manager of the Prudential Diversified Bond Fund, Inc., the Prudential
Government Income Fund, Inc., and the Diversified Bond and Government Income
Portfolios of the Series Fund. Prior to 1994, Ms. Kenworthy was a portfolio
manager and president of several taxable fixed-income funds for The Dreyfus
Corp.

BALANCED PORTFOLIOS

CONSERVATIVE BALANCED 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 Flexible Managed
Portfolio while recognizing that this reduces the chances of greater
appreciation.

To achieve this objective, the Conservative Balanced Portfolio will follow a
policy of maintaining a more conservative asset mix among stocks, bonds and
money market instruments than the Flexible Managed 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 and Money Market 25% 65% 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, but will maintain at least 25% of the value
of the portfolio's assets in fixed-income senior securities.

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 or if unrated, of comparable quality in the opinion of the
portfolio manager. 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 Flexible Managed 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

15 - Series Fund

<PAGE>

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
26.

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 27 through 32, and further information about some of them is included
in the statement of additional information.

The Conservative Balanced Portfolio is managed by a team of portfolio managers.
Mark Stumpp, Managing Director, PIC, has been lead portfolio manager of the
Conservative Balanced Portfolio since 1994 and is responsible for the overall
asset allocation decisions. Mr. Stumpp shares supervisory responsibility of the
portfolio management team with Theresa Hamacher, Managing Director, PIC. Ms.
Hamacher and Mr. Stumpp also supervise the team of portfolio managers for the
Flexible Managed Portfolio. Mr. Stumpp is also 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. Ms. Hamacher supervises a team of portfolio managers that
manage over $65 billion in assets for PIC.

FLEXIBLE MANAGED 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 Flexible Managed Portfolio will follow a policy
of maintaining a more aggressive asset mix among stocks, bonds and money market
investments than the Conservative Balanced Portfolio. In general, the portfolio
manager will observe the following range of target asset allocation mixes:

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 below $5 billion 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 Equity Portfolio or the Conservative
Balanced 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.

16 - Series Fund

<PAGE>

The facts that this portfolio will invest in common stocks regarded as having
higher risks than those that will be purchased by the Conservative Balanced
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 Conservative Balanced Portfolio.

The Flexible Managed Portfolio is managed by a team of portfolio managers. Mark
Stumpp, Managing Director, PIC, has been lead portfolio manager of the Flexible
Managed Portfolio since 1994 and is responsible for the overall asset allocation
decisions. Mr. Stumpp shares supervisory responsibility of the portfolio
management team with Theresa Hamacher, Managing Director, PIC. Ms. Hamacher and
Mr. Stumpp also supervise the team of portfolio managers for the Conservative
Balanced Portfolio. Mr. Stumpp is also 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.
Ms. Hamacher supervises a team of portfolio managers that manage over $65
billion in assets for PIC.

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 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.

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<PAGE>

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, 1995, 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:

Percentage of Total
Ratings Investments
------- --------------------
AAA/Aaa 3.3%*
AA/Aa 0%
A/A 0%
BBB/Baa 0%
BB/Ba 15.9%
B/B 59.2%
CCC/Caa or lower 7.5%
Unrated 14.1%
- ----------------
*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 fixed-income securities issued outside the United States by foreign
and domestic issuers. For additional information regarding such securities, see
FOREIGN SECURITIES on page 26.

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 28 through 32, 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, PMFIM, and Michael Snyder, Vice President,
PMFIM, 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 as a portfolio manager in the mutual fund unit since 1990. Mr. Snyder
is also the portfolio manager of the High Yield Income Fund, Inc. for The
Prudential and has been employed as a portfolio manager in the mutual fund unit
since 1987.

18 - Series Fund

<PAGE>

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, 1995 those companies
were: General Electric Co., American Telephone & Telegraph Co., Exxon Corp.,
Coca-Cola Co., and Merck & Co., Inc.

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 1995. 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
----------------------------------
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 1995 +37.58
1983 +22.38
- --------------------

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

19 - Series Fund

<PAGE>

In the eight 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
1995 +37.58 +37.06

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 short-term, high quality investments of the sort in which the
Money Market Portfolio invests, 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.

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, FUTURES CONTRACTS, and OPTIONS ON FUTURES CONTRACTS on
pages 28 through 30. 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.

20 - Series Fund

<PAGE>

EQUITY INCOME 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
26.

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 27 through 31, 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, PMFIM, has been portfolio manager of the Equity
Income Portfolio since 1988. Mr. Spitz is also the portfolio manager of the
Prudential Equity Income Fund.

EQUITY 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 26.

21 - Series Fund

<PAGE>

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, PMFIM, has been portfolio manager of the
Equity Portfolio since 1990. Mr. Jackson is also portfolio manager of the
Prudential Equity Fund, Inc.

PRUDENTIAL JENNISON PORTFOLIO. The objective of the Prudential Jennison
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 Prudential Jennison 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 30% of its total assets, common
stocks, preferred stocks and other equity-related securities of non-United
States currency denominated 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 nationally recognized rating service (e.g. 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.

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
27 through 31, 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 Senior Vice President of Jennison Associates Capital
Corp., has been portfolio manager of the Prudential Jennison Portfolio since its
inception in 1995. Mr. Poiesz also manages the Prudential Institutional Growth
Fund and the Prudential Jennison Fund. 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.

22 - Series Fund

<PAGE>

& 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 1995. 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 SmallCap 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
-------------------------------------------
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
1995 +29.96
- --------------
Source: Standard & Poor's Corporation. Percentage change calculated in
accordance with specifications of SEC release number IA-327.

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, FUTURES CONTRACTS, and OPTIONS ON FUTURES CONTRACTS on pages
28 through 30.

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
27 through 31, 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 of 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 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.

23 - Series Fund

<PAGE>

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 26.

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 26 through 31, 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%.

Daniel Duane, Managing Director, PMFIM, has been the portfolio manager of the
Global Portfolio since 1990. Mr. Duane also manages several mutual funds
including the Prudential Global Fund, Inc.

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

24 - Series Fund

<PAGE>

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.

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.

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, PMFIM, has been portfolio manager of the Natural
Resources Portfolio since 1992. Mr. Goehring also manages the Prudential Global
Natural Resources Fund, Inc. Prior to 1992, Mr. Goehring was portfolio manager
of The Prudential-Bache Option Growth Fund.

25 - Series Fund

<PAGE>

CONVERTIBLE SECURITIES

The Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global, and Natural Resources Portfolios
may invest in convertible securities and such securities may constitute a major
part of the holdings of the Equity Income, Global 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 Portfolio may invest up to 100% of its total assets in common stock
and convertible securities denominated in a foreign currency and issued by
foreign or domestic issuers. The Diversified Bond and High Yield Bond Portfolios
may each invest up to 20% of their assets in United States currency denominated
debt securities issued outside the United States by foreign or domestic issuers.
In addition, the bond components of the Conservative Balanced and Flexible
Managed Portfolios may each invest up to 20% of their assets in such securities.
To the extent permitted by applicable law, the Conservative Balanced, Flexible
Managed, and Equity Income 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 Equity, Prudential Jennison, 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 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

26 - Series Fund

<PAGE>

contracts. See OPTIONS ON FOREIGN CURRENCIES, FUTURES CONTRACTS, and OPTIONS ON
FUTURES CONTRACTS on pages 29 through 30.

OPTIONS ON EQUITY SECURITIES

The Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global, 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.

The Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global, and Natural Resources 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, page 28 and OPTIONS ON STOCK
INDICES, page 28.

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.

27 - Series Fund

<PAGE>

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 Diversified Bond, Government Income, Conservative Balanced, Flexible
Managed, 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 27. 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.

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 Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Global, and Natural Resources Portfolios may purchase and sell put and
call options on stock indices traded on securities exchanges,

28 - Series Fund

<PAGE>

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 Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Global, 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 26 and futures contracts on foreign currencies (discussed under
FUTURES CONTRACTS, page 30) 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 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.

29 - Series Fund

<PAGE>

FUTURES CONTRACTS

The Conservative Balanced, Flexible Managed, Stock Index, Equity Income, Equity,
Prudential Jennison, Small Capitalization Stock, Global, 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 Diversified Bond, Government Income, Conservative Balanced, Flexible
Managed, High Yield Bond, and Global 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 Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Global, 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
Conservative Balanced, Flexible Managed, Stock Index, Equity Income, Equity,
Prudential Jennison, Small Capitalization Stock, Global and Natural Resources,
Portfolios may enter into certain transactions involving options on stock index
futures contracts; the Diversified Bond, Government Income, Conservative
Balanced, Flexible Managed High Yield Bond and Global Portfolios may enter into
certain transactions involving options on interest rate futures contracts; and
the Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Global and Natural Resources 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 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 Diversified Bond, Government Income and High Yield Bond Portfolios, as well
as the fixed income portions of the Conservative Balanced and Flexible Managed
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

30 - Series Fund

<PAGE>

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 Diversified Bond,
Government Income and High Yield Bond Portfolios, as well as the fixed income
portions of the Conservative Balanced and Flexible Managed 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 Diversified Bond,
Government Income, Conservative Balanced, Flexible Managed, High Yield Bond,
Equity Income, Equity, Prudential Jennison, Small Capitalization Stock, Global
and Natural Resources Portfolios may purchase or sell 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.

SHORT SALES

The Diversified Bond, Government Income, Conservative Balanced, Flexible Managed
and High Yield Bond 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.

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

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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 Diversified Bond, Government Income and High Yield Bond Portfolios and the
fixed income portions of the Conservative Balanced and Flexible Managed
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 10) 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.

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.

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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, 1995 were over $314 billion which includes over
$219 billion owned by The Prudential and approximately $95 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 fourteen of the Series Fund's fifteen portfolios, by its
wholly-owned subsidiary PIC, pursuant to the Service Agreement between The
Prudential and PIC. The Agreement provides that a portion of the fee received by
The Prudential for providing investment advisory services will be paid to PIC.
The Conservative Balanced and Flexible Managed Portfolios are managed by PIC,
using a team of portfolio managers under the supervision of Theresa Hamacher and
Mark Stumpp, Managing Directors, PIC. Investment advisory services with respect
to the Prudential Jennison 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 Prudential Jennison
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, Diversified Bond, Government Income, Equity Income, 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
Equity and Natural Resources Portfolios, the fee is equal to an annual rate of
0.45% of the average daily net assets of each of the portfolios. The fee for the
Conservative Balanced and 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
Flexible Managed and Prudential Jennison 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 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, 1995, the Series Fund's total expenses were
0.55% 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.

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. In the event the New York Stock Exchange closes early on any

33 - Series Fund

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business day, the net asset value of each portfolio shall be determined at a
time between such closing and 4:15 p.m. New York City time. 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 Diversified Bond, Government Income
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 35. 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 397 days'
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
397 days 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, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global 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 Equity
Income and Natural Resources Portfolios are valued on the same basis as
securities in the Diversified 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 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 Diversified Bond Portfolio, and common stocks and
convertible debt securities are valued in the same way as such securities are
valued in the Equity 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

34 - Series Fund

<PAGE>

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 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
and options thereon are valued at the last sale price at the close of the
applicable commodities exchanges or board of trade (which is currently 4:15 p.m.
New York City time) or, if there was no sale on the applicable commodities
exchange or board of trade on such day, at the mean between the most recently
quoted bid and asked prices on such exchange or board of trade.

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 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.

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<PAGE>

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 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 fifteen
classes: Money Market Portfolio Capital Stock (225 million shares), Diversified
Bond Portfolio Capital Stock (200 million shares), Government Income Portfolio
Capital Stock (100 million shares), Zero Coupon Bond Portfolio 2000 Capital
Stock (25 million shares), Zero Coupon Bond Portfolio 2005 Capital Stock (50
million shares), Conservative Balanced Portfolio Capital Stock (300 million
shares), Flexible Managed Portfolio Capital Stock (300 million shares), High
Yield Bond Portfolio Capital Stock (100 million shares), Stock Index Portfolio
Capital Stock (100 million shares), Equity Income Portfolio Capital Stock (100
million shares), Common Stock Portfolio Capital Stock (200 million shares),
Prudential Jennison Portfolio Capital Stock (50 million shares), Small
Capitalization Stock Portfolio Capital Stock (50 million shares), Global
Portfolio Capital Stock (100 million shares), Natural Resources Portfolio
Capital Stock (100 million shares). The shares of each portfolio, 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 33.

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 Diversified Bond
Portfolios, $300,000 worth of shares of the Equity Portfolio, $2,500,000 worth
of shares of the Conservative Balanced Portfolio, and $3,000,000 worth of shares
of the Flexible Managed 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 Portfolios; $5,000,000
worth of shares of each of the Zero Coupon Bond, Equity Income, and Natural
Resources Portfolios; $10,000,000 worth of shares of the Government Income
Portfolio; $10,000,000 worth of shares of the Prudential Jennison 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

36 - Series Fund

<PAGE>

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, 1995, 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 Diversified Bond
Portfolio, $11,056,195 worth of shares from the Government Income Portfolio,
$9,253,423 worth of shares from the Zero Coupon Bond Portfolio 2000, $7,050,071
worth of shares from the Zero Coupon Bond Portfolio 2005, $3,825,023 worth of
shares from the Conservative Balanced Portfolio, $4,645,305 worth of shares from
the Flexible Managed 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 Equity Income Portfolio, $304,065 worth of
shares from the Equity 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
$33,878,000 worth of shares from the Global 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, 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.

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 Money Market, Diversified
Bond, High Yield Bond, Government Income, and Zero Coupon Bond 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.

37 - Series Fund

<PAGE>

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 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 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 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.

38 - 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 30 of the prospectus. No
portfolio may obligate more than 10% of its net assets in connection with
reverse repurchase agreements, except that the Diversified Bond, High Yield
Bond, and Government Income Portfolios, as well as the fixed income portions of
the Conservative Balanced and Flexible Managed 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, 1996

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 fifteen
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 Diversified Bond Portfolio, the Government Income Portfolio,
the Conservative Balanced Portfolio, the Flexible Managed Portfolio, the Stock
Index Portfolio, the Equity Portfolio, and the Global 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, 1996, 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 5-96

<PAGE>

INVESTMENT OBJECTIVES OF THE PORTFOLIOS ARE AS FOLLOWS:

FIXED INCOME PORTFOLIOS

BALANCED PORTFOLIOS

DIVERSIFIED STOCK PORTFOLIOS

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
Diversified Bond Portfolio........................................ 6
Government Income Portfolio....................................... 6
BALANCED PORTFOLIOS............................................... 9
Conservative Balanced Portfolio................................... 9
Flexible Managed Portfolio........................................ 10
DIVERSIFIED STOCK PORTFOLIOS...................................... 11
Stock Index Portfolio............................................. 11
Equity Portfolio.................................................. 12
Global Portfolio.................................................. 13
CONVERTIBLE SECURITIES............................................ 14
FOREIGN SECURITIES................................................ 14
OPTIONS ON EQUITY SECURITIES...................................... 15
OPTIONS ON DEBT SECURITIES........................................ 16
OPTIONS ON STOCK INDICES.......................................... 17
OPTIONS ON FOREIGN CURRENCIES..................................... 17
FUTURES CONTRACTS................................................. 18
OPTIONS ON FUTURES CONTRACTS...................................... 18
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS.................... 19
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES....................... 19
SHORT SALES....................................................... 19
SHORT SALES AGAINST THE BOX....................................... 20
INTEREST RATE SWAPS............................................... 20
LOANS OF PORTFOLIO SECURITIES..................................... 20

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

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES............................ 21

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

DETERMINATION OF NET ASSET VALUE........................................... 22

DIVIDENDS, DISTRIBUTIONS, AND TAXES........................................ 23

OTHER INFORMATION CONCERNING THE SERIES FUND............................... 23
INCORPORATION AND AUTHORIZED STOCK................................ 23
VOTING RIGHTS..................................................... 24
MONITORING FOR POSSIBLE CONFLICT.................................. 24
PERIODIC REPORTS.................................................. 24
PORTFOLIO BROKERAGE AND RELATED PRACTICES......................... 25
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT.......... 25
ADDITIONAL INFORMATION............................................ 25

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.

DIVERSIFIED BOND
-------------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $10.038 $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $10.038 $ 11.048 $ 10.967
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.763 0.682 0.686 0.761 0.797 0.825 0.886 0.875 0.859 0.904
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.293 (1.040) 0.398 0.013 0.842 (0.004) 0.424 (0.069) (0.821) 0.607
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 2.056 (0.358) 1.084 0.774 1.639 0.821 1.310 0.806 0.038 1.511
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.755) (0.683) (0.657) (0.728) (0.779) (0.810) (0.854) (0.902) (0.990) (0.909)
Distributions from net
realized gains......... (0.026) (0.024) (0.153) (0.219) (0.190) 0 (0.077) 0 (0.058) (0.521)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.781) (0.707) (0.810) (0.947) (0.969) (0.810) (0.931) (0.902) (1.048) (1.430)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 1.275 (1.065) 0.274 (0.173) 0.670 0.011 0.379 (0.096) (1.010) 0.081
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $11.313 $10.038 $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $ 10.038 $ 11.048
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 20.73 % (3.23 %) 10.13 % 7.19 % 16.44 % 8.32 % 13.49 % 8.19 % 0.29 % 14.45 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $655.8 $541.6 $576.2 $428.8 $318.7 $227.7 $191.1 $148.8 $139.5 $110.1
Ratio of expenses net of
reimbursement to
average net assets..... 0.44 % 0.45 % 0.46 % 0.47 % 0.49 % 0.47 % 0.53 % 0.53 % 0.53 % 0.51 %
Ratio of net investment
income to average net
assets................. 7.00 % 6.41 % 6.05 % 6.89 % 7.43 % 8.06 % 8.56 % 8.52 % 8.15 % 8.11 %
Portfolio turnover
rate................... 199.09 % 31.57 % 41.12 % 60.53 % 131.01 % 42.10 % 272.85 % 222.20 % 238.41 % 246.82 %
Number of shares
outstanding at end of
period (in millions)... 58.0 54.0 51.9 39.6 29.0 22.0 18.5 15.0 13.9 10.0
</TABLE>

GOVERNMENT INCOME
-----------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $10.461 $11.784 $11.094 $11.133 $10.146 $10.324 $10.017
-------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.741 0.703 0.700 0.731 0.736 0.791 0.545
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.275 (1.311) 0.678 (0.092) 0.847 (0.177) 0.613
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 2.016 (0.608) 1.378 0.639 1.583 0.614 1.158
-------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.758) (0.723) (0.642) (0.593) (0.596) (0.769) (0.489)
Distributions from net
realized gains......... 0.000 0.008 (0.046) (0.085) 0.000 (0.023) (0.362)
-------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.758) (0.715) (0.688) (0.678) (0.596) (0.792) (0.851)
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 1.258 (1.323) 0.690 (0.039) 0.987 (0.178) 0.307
-------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
year................... $11.719 $10.461 $11.784 $11.094 $11.133 $10.146 $10.324
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. 19.48 % (5.16 %) 12.56 % 5.85 % 16.11 % 6.34 % 11.60 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $501.8 $487.6 $540.1 $315.5 $95.0 $23.7 $17.0
Ratio of expenses net of
reimbursement to
average net assets..... 0.45 % 0.45 % 0.46 % 0.53 % 0.58 % 0.74 % 0.50 %
Ratio of net investment
income to average net
assets................. 6.55 % 6.30 % 5.91 % 6.58 % 6.97 % 7.86 % 5.06 %
Portfolio turnover
rate................... 195.49 % 34.19 % 18.59 % 80.71 % 127.18 % 379.45 % 208.86 %
Number of shares
outstanding at end of
period (in millions)... 42.8 46.6 45.8 28.3 8.5 2.3 1.6
</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>

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.

CONSERVATIVE BALANCED
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $11.889 $ 12.571 $ 12.173
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.635 0.528 0.486 0.558 0.687 0.821 0.891 0.773 0.656 0.652
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.775 (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424 (0.399) 1.046
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 2.410 (0.151) 1.715 0.968 2.425 0.678 2.046 1.197 0.257 1.698
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.643) (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791) (0.709) (0.517)
Distributions from net
realized gains......... (0.553) (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0.000 (0.230) (0.783)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.196) (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791) (0.939) (1.300)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 1.214 (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406 (0.682) 0.398
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $ 11.889 $ 12.571
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 17.27 % (0.97 %) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19 % 1.54 % 14.17 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $3,940.8 $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6 $803.9 $375.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.58 % 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65% 0.66 % 0.64 %
Ratio of net investment
income to average net
assets................. 4.19 % 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22 % 5.05 % 5.10 %
Portfolio turnover
rate................... 200.68 % 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67 % 140.69 % 207.78 %
Number of shares
outstanding at end of
period (in millions)... 257.4 248.4 208.2 148.4 104.8 84.2 73.0 66.3 67.6 29.9

FLEXIBLE MANAGED
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $ 13.555 $ 12.810
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.564 0.473 0.566 0.583 0.650 0.715 0.813 0.724 0.577 0.611
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 3.149 (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840 (0.753) 1.342
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 3.713 (0.548) 2.448 1.190 3.459 0.249 2.802 1.564 (0.176) 1.953
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.560) (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767) (0.673) (0.456)
Distributions from net
realized gains......... (0.790) (0.462) (0.929) (0.914) (0.513) 0.000 (0.666) 0.000 (0.380) (0.752)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.350) (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767) (1.053) (1.208)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 2.363 (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797 (1.229) 0.745
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $ 12.326 $ 13.555
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 24.13 % (3.16 %) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83 % (1.83 %) 15.48 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $4,261.2 $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
Ratio of expenses net of
reimbursement to
average net assets..... 0.63 % 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70% 0.71 % 0.67 %
Ratio of net investment
income to average net
assets................. 3.30 % 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52 % 4.09 % 4.43 %
Portfolio turnover
rate................... 173.30 % 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45 % 123.83 % 133.76 %
Number of shares
outstanding at end of
period (in millions)... 238.6 224.7 194.1 152.2 122.2 107.7 96.0 84.1 86.2 43.8
</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.

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.

STOCK INDEX
-------------------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $14.957 $15.202 $14.218 $13.605 $10.760 $11.732 $ 9.454 $8.531 $ 8.071
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Income From Investment
Operations:
Net investment income.... 0.403 0.377 0.361 0.350 0.351 0.357 0.326 0.357 0.047
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 5.126 (0.231) 1.002 0.600 2.814 (0.792) 2.570 0.951 0.548
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations........... 5.529 0.146 1.363 0.950 3.165 (0.435) 2.896 1.308 0.595
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.384) (0.368) (0.346) (0.329) (0.307) (0.309) (0.354) (0.385) (0.135)
Distributions from net
realized gains......... (0.146) (0.023) (0.033) (0.008) (0.013) (0.228) (0.264) 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total
distributions........ (0.530) (0.391) (0.379) (0.337) (0.320) (0.537) (0.618) (0.385) (0.135)
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net increase (decrease)
in Net Asset Value..... 4.999 (0.245) 0.984 0.613 2.845 (0.972) 2.278 0.923 0.460
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net Asset Value at end of
year................... $19.956 $14.957 $15.202 $14.218 $13.605 $10.760 $11.732 $ 9.454 $ 8.531
-------- -------- -------- -------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total Investment Rate of
Return:**.............. 37.06 % 1.01 % 9.66 % 7.13 % 29.72 % (3.63 %) 30.93 % 15.44 % 7.35 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $1,031.3 $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..... 0.38 % 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................. 2.27 % 2.50 % 2.43 % 2.56 % 2.82 % 3.23 % 2.95 % 3.87 % 0.53 %
Portfolio turnover
rate................... 1.16 % 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)... 51.7 44.4 40.5 30.5 17.4 9.7 4.6 3.8 2.9

EQUITY
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $20.662 $21.487 $18.903 $17.905 $15.449 $18.539 $15.463 $13.620 $ 14.815 $ 14.634
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.546 0.512 0.417 0.444 0.482 0.577 0.474 0.402 0.393 0.448
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 5.891 0.054 3.666 2.050 3.414 (1.573) 4.064 1.909 (0.065) 1.765
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 6.437 0.566 4.083 2.494 3.896 (0.996) 4.538 2.311 0.328 2.213
Distributions to
Shareholders:
Distributions from net
investment income...... (0.515) (0.487) (0.404) (0.439) (0.478) (0.563) (0.503) (0.468) (0.496) (0.275)
Distributions from net
realized gains......... (0.944) (0.904) (1.095) (1.057) (0.962) (1.531) (0.959) 0.000 (1.027) (1.757)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.459) (1.391) (1.499) (1.496) (1.440) (2.094) (1.462) (0.468) (1.523) (2.032)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 4.978 (0.825) 2.584 0.998 2.456 (3.090) 3.076 1.843 (1.195) 0.181
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $25.640 $20.662 $21.487 $18.903 $17.905 $15.449 $18.539 $15.463 $ 13.620 $ 14.815
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 31.29 % 2.78 % 21.87 % 14.17 % 26.01 % (5.21 %) 29.73 % 17.05 % 1.67 % 15.10 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $3,813.8 $2,617.8 $2,186.5 $1,416.6 $1,032.8 $700.5 $675.5 $500.1 $451.0 $247.9
Ratio of expenses net of
reimbursement to
average net assets..... 0.48 % 0.55 % 0.53 % 0.53 % 0.51 % 0.56 % 0.56 % 0.57 % 0.51 % 0.52 %
Ratio of net investment
income to average net
assets................. 2.28 % 2.39 % 1.99 % 2.33 % 2.66 % 3.37 % 2.66 % 2.67 % 2.34 % 2.90 %
Portfolio turnover
rate................... 17.65 % 6.90 % 12.95 % 15.70 % 20.85 % 84.84 % 73.54 % 62.35 % 79.91 % 117.15 %
Number of shares
outstanding at end of
period (in millions)... 148.7 126.7 101.8 74.9 57.7 45.3 36.4 32.3 33.1 16.7

</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.

3 - SERIES FUND

<PAGE>

GLOBAL
---------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year $13.879 $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508 $9.818
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.065 0.028 0.023 0.051 0.096 0.203 0.079 0.052
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 2.138 (0.744) 4.433 (0.419) 1.020 (1.802) 1.806 0.787
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 2.203 (0.716) 4.456 (0.368) 1.116 (1.599) 1.885 0.839
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.242) (0.019) (0.079) (0.056) (0.100) (0.067) (0.073) (0.149)
Distributions from net
realized gains......... (0.307) (0.025) (0.106) 0.000 (0.090) (0.015) (0.773) 0.000
-------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.549) (0.044) (0.185) (0.056) (0.190) (0.082) (0.846) (0.149)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 1.654 (0.760) 4.271 (0.424) 0.926 (1.681) 1.039 0.690
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
year................... $15.533 $13.879 $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. 15.88 % (4.89 %) 43.14 % (3.42 %) 11.39 % (12.91 %) 18.82 % 8.57 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $400.1 $345.7 $129.1 $34.0 $34.3 $26.2 $29.4 $26.9
Ratio of expenses net of
reimbursement to
average net assets..... 1.06 % 1.23 % 1.44 % 1.87 % 1.62 % 1.67 % 1.47 % 0.42 %
Ratio of net investment
income to average net
assets................. 0.44 % 0.20 % 0.18 % 0.49 % 0.92 % 1.92 % 0.70 % 0.51 %
Portfolio turnover
rate................... 58.52 % 37.46 % 54.54 % 78.16 % 136.21 % 43.12 % 47.95 % 6.40 %
Number of shares
outstanding at end of
period (in millions)... 25.7 24.9 8.8 3.3 3.2 2.7 2.5 2.6
</TABLE>

All calculations are based on average month-end shares outstanding, where
applicable.

Further information about the performance of the portfolios is contained in
the Annual Report to Contract Owners which may be obtained without charge.

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 Diversified Bond
Portfolio, the Government Income Portfolio, the Conservative Balanced Portfolio,
the Flexible Managed Portfolio, the Stock Index Portfolio, the Equity Portfolio,
and the Global 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, 1995 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 16 through 20, and further information about some of them is
included in the statement of additional information.

6 - Series Fund

<PAGE>

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 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; (3) Foreign Government Securities including debt securities
issued or guaranteed, as to payment of principal and interest, by governments,
governmental agencies, supranational entities and other governmental entities
denominated in U.S. dollars. A supranational entity is an entity constituted by
the national governments of several countries to promote economic development.
Examples of such supranational entities include, among others, the World Bank
(International Bank for Reconstruction and Development), the European Investment
Bank and the Asian Development Bank; and (4) 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 portfolio 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. 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.

7 - Series Fund

<PAGE>

mortgages, graduated payment mortgages, and adjustable rate mortgages (ARMs).
The mortgage-backed securities may include those representing an undivided
ownership interest in a pool of mortgages, e.g. GNMA, FNMA and FHLMC
certificates. The U.S. Government or the issuing agency guarantees the payment
of interest and principal of mortgaged-backed securities issued by the U.S.
Government or its agencies/instrumentalities. However, these guarantees do not
extend to the securities' yield or value, which are likely to vary inversely
with fluctuations in interest rates, nor do the guarantees extend to the yield
or value of the portfolio's shares. Mortgage-backed 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.
Mortgage-backed securities of the types described under (i) and (ii) above are
considered to be U.S. Government Securities for purposes of meeting the
requirement that at least 65% of the portfolio's assets be invested in U.S.
Government Securities.

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 16 through 20, and further information about some of them is
included in the statement of additional information.

8 - Series Fund

<PAGE>

BALANCED PORTFOLIOS

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 15% 35% 50%
Bonds and Money Market 25% 65% 70%

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 15 through 20, and further information about some of them is included
in the statement of additional information.

9 - Series Fund

<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 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 below $5
billion 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 Equity Portfolio or
the Conservative Balanced 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.

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 15 through 20, and further information about some of them is included
in the statement of additional information.

10 - Series Fund

<PAGE>

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.

- --------------------------------------------------------------------------------
*S&P 500 WITH DIVIDENDS REINVESTED
Annual Percentage Change
- --------------------------------------------------------------------------------
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 1995 +37.58
1983 +22.38
- --------------------------------------------------------------------------------
Source: Standard & Poor's Corporation. Percentage change calculated in
accordance with specifications of SEC release number IA-327.
- --------------------------------------------------------------------------------

11 - Series Fund

<PAGE>

In the eight 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
1995 +37.58 +37.06
- --------------------------------------------------------------------------------

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.

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, FUTURES CONTRACTS, and OPTIONS ON FUTURES CONTRACTS on
pages 17 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.

12 - Series Fund

<PAGE>

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.

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 15 through 20, and further information about some of them is included in
the statement of additional information.

Thomas Jackson, Managing Director, PMFIM, has been portfolio manager of the
Equity Portfolio since 1990. Mr. Jackson is also portfolio manager of the
Prudential Equity Fund, Inc.

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.

13 - Series Fund

<PAGE>

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 20, 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%.

Daniel Duane, Managing Director, PMFIM, has been the portfolio manager of the
Global Portfolio since 1990. Mr. Duane also manages several mutual funds
including the Prudential Global Fund, Inc.

CONVERTIBLE SECURITIES

The Conservative Balanced, Flexible Managed, Equity, and Global Portfolios may
invest in convertible securities and such securities may constitute a major part
of the holdings of the Global 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.

FOREIGN SECURITIES

The Global Portfolio may invest up to 100% of its total assets in common stock
and convertible securities denominated in a foreign currency and issued by
foreign or domestic issuers. The Diversified Bond 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 Conservative Balanced and Flexible Managed Portfolios may each
invest up to 20% of their assets in such securities. To the extent permitted by
applicable law, the Conservative Balanced, and Flexible Managed Portfolios may
invest up to 30% of their total assets in debt and equity securities denominated
in a foreign currency and issued by foreign or domestic issuers. Further, to the
extent permitted by applicable insurance law, the Equity 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."

14 - Series Fund

<PAGE>

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.

OPTIONS ON EQUITY SECURITIES

The Conservative Balanced, Flexible Managed, Equity, and Global 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.

The Conservative Balanced, Flexible Managed, Equity, and Global 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 17.

15 - Series Fund

<PAGE>

also purchase putable and callable equity securities, which are securities
coupled with a put or a call option provided by the issuer.

OPTIONS ON DEBT SECURITIES

The Diversified Bond, Government Income, Conservative Balanced, and Flexible
Managed 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.

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 15. 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.

16 - Series Fund

<PAGE>

OPTIONS ON STOCK INDICES

The Conservative Balanced, Flexible Managed, Equity, and Global 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.

OPTIONS ON FOREIGN CURRENCIES

The Conservative Balanced, Flexible Managed, Equity, and Global 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.

17 - Series Fund

<PAGE>

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.

FUTURES CONTRACTS

The Conservative Balanced, Flexible Managed, Stock Index, Equity, and Global
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 Diversified Bond, Government Income, Conservative Balanced, Flexible
Managed, and Global 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 Conservative Balanced, Flexible Managed, Equity, and Global 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.

OPTIONS ON FUTURES CONTRACTS

To the extent permitted by applicable insurance law and federal regulations, the
Conservative Balanced, Flexible Managed, Stock Index, Equity, and Global
Portfolios may enter into certain transactions involving options on stock index
futures contracts; the Diversified Bond, Government Income, Conservative
Balanced, Flexible Managed, and Global Portfolios may enter into certain
transactions involving options on interest rate futures contracts; and the
Conservative Balanced, Flexible Managed, Equity, and Global 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

18 - Series Fund

<PAGE>

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 Diversified Bond and Government Income Portfolios, as well as the fixed
income portions of the Conservative Balanced and Flexible Managed 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 Diversified Bond and Government Income
Portfolios, as well as the fixed income portions of the Conservative Balanced
and Flexible Managed 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 Diversified Bond,
Government Income, Conservative Balanced, Flexible Managed, Equity and Global
Portfolios may purchase or sell 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 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 Diversified Bond, Government Income, Conservative Balanced and Flexible
Managed 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

19 - Series Fund

<PAGE>

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 Diversified Bond and Government Income Portfolios and the fixed income
portions of the Conservative Balanced and Flexible Managed 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.

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.

20 - Series Fund

<PAGE>

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 a portion
of the fee received by The Prudential for providing investment advisory services
will be paid to PIC. The Conservative Balanced and Flexible Managed Portfolios
are managed by PIC, using a team of portfolio managers under the supervision of
Theresa Hamacher and Mark Stumpp, Managing Directors, 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 Diversified Bond and Government Income
Portfolios is equal to an annual rate of 0.4% of the average daily net assets of
each of the portfolios. For the Equity 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
Conservative Balanced is equal to an annual rate of 0.55% of the average daily
net assets of the portfolio. For the Flexible Managed 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 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, 1995, the Series Fund's total expenses were
0.55% 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.

PURCHASE AND REDEMPTION OF SHARES

21 - Series Fund

<PAGE>

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 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.
In the event the New York Stock Exchange closes early on any business day, the
net asset value of each portfolio shall be determined at a time between such
closing and 4:15 p.m. New York City time. 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 Diversified Bond and Government Income
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, Equity, and Global 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.

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 Diversified Bond Portfolio, and common stocks and
convertible debt securities are valued in the same way as such securities are
valued in the Equity Portfolio. With respect to the money market portion of the
Conservative Balanced and Flexible Managed Portfolios, all 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 this prospectus.

22 - Series Fund

<PAGE>

on such day, at the mean between the most recently quoted bid and asked prices
on such exchange or board of trade.

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.

OTHER INFORMATION CONCERNING THE SERIES FUND

INCORPORATION AND AUTHORIZED STOCK

23 - Series Fund

<PAGE>

Stock (200 million shares), Government Income Portfolio Capital Stock (100
million shares), Zero Coupon Bond Portfolio 2000 Capital Stock (25 million
shares), Zero Coupon Bond Portfolio 2005 Capital Stock (50 million shares),
Conservative Balanced Portfolio Capital Stock (300 million shares), Flexible
Managed Portfolio Capital Stock (300 million shares), High Yield Bond Portfolio
Capital Stock (100 million shares), Stock Index Portfolio Capital Stock (100
million shares), Equity Income Portfolio Capital Stock (100 million shares),
Equity Portfolio Capital Stock (200 million shares), Prudential Jennison
Portfolio Capital Stock (50 million shares), Small Capitalization Stock
Portfolio Capital Stock (50 million shares), Global Portfolio Capital Stock (100
million shares), Natural Resources Portfolio Capital Stock (100 million shares).
The shares of each portfolio, when issued, will be fully paid and
non-assessable, will have no conversion, exchange or similar rights, and will be
freely transferable.

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
Diversified Bond Portfolio, $300,000 worth of shares of the Equity Portfolio,
$2,500,000 worth of shares of the Conservative Balanced Portfolio, and
$3,000,000 worth of shares of the Flexible Managed Portfolio. The Prudential has
since purchased $25,000,000 worth of shares of the Stock Index and Global
Portfolios; and $10,000,000 worth of shares of the Government Income 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, 1995, The Prudential has redeemed a total of
$7,752,850 worth of shares from the Diversified Bond Portfolio, $304,065 worth
of shares from the Equity Portfolio, $31,019,279 worth of shares from the Stock
Index Portfolio, $3,825,023 worth of shares from the Conservative Balanced
Portfolio, and $4,645,305 worth of shares from the Flexible Managed Portfolio,
and $11,056,195 worth of shares from the Government Income Portfolio (these
amounts reflect total redemption of the shares purchased by The Prudential). In
addition, The Prudential has redeemed $33,878,000 worth of shares from the
Global 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.

MONITORING FOR POSSIBLE CONFLICT

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.

24 - Series Fund

<PAGE>

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 Diversified Bond and
Government Income 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.

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 in which The Prudential Variable Contract
Account-24 may currently invest, except the Global 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 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
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.

25 - 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 19 of the prospectus. No
portfolio may obligate more than 10% of its net assets in connection with
reverse repurchase agreements, except that the Diversified Bond and Government
Income Portfolios, as well as the fixed income portions of the Conservative
Balanced and Flexible Managed 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, 1996

PROSPECTUS

THE PRUDENTIAL SERIES FUND, INC.
AND
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

PVAL-1 ED 5-96

CATALOG NO. 646960S

<PAGE>

PROSPECTUS

MAY 1, 1996

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 fifteen 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 5-96

<PAGE>

TABLE OF CONTENTS

PAGE

INTRODUCTION AND SUMMARY.................................................... 1
BRIEF DESCRIPTION OF THE CONTRACT.................................. 1
FIXED INCOME PORTFOLIOS ........................................... 3
Money Market Portfolio.................................... 3
Diversified Bond Portfolio................................ 3
Government Income Portfolio............................... 3
Zero Coupon Bond Portfolios 2000 and 2005................. 3
BALANCED PORTFOLIOS................................................ 3
Conservative Balanced Portfolio........................... 3
Flexible Managed Portfolio................................ 3
HIGH YIELD BOND PORTFOLIOS......................................... 3
High Yield Bond Portfolio................................. 3
DIVERSIFIED STOCK PORTFOLIOS....................................... 3
Stock Index Portfolio..................................... 3
Equity Income Portfolio................................... 3
Equity Portfolio.......................................... 3
Prudential Jennison Portfolio............................. 4
Small Capitalization Stock Portfolio...................... 4
Global 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.............................................. 5
PAYMENT OF SUBSTANTIALLY HIGHER PREMIUMS........................... 5
CONTRACT LOANS..................................................... 5
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACTS...................... 5

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

PORTFOLIO RATES OF RETURN................................................... 14

HYPOTHETICAL ILLUSTRATION OF DEATH BENEFITS AND CASH SURRENDER VALUES....... 15

INFORMATION ABOUT THE ACCOUNT, THE REAL PROPERTY ACCOUNT AND THE
FIXED RATE OPTION.................................................. 16
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT........................ 16
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT............. 16
THE FIXED-RATE OPTION.............................................. 16

DETAILED INFORMATION ABOUT THE CONTRACT..................................... 17
REQUIREMENTS FOR ISSUANCE OF A CONTRACT............................ 17
CONTRACT FORMS..................................................... 17
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"....................... 18
CONTRACT FEES AND CHARGES.......................................... 18
Deductions from Premiums.................................. 18
Deductions from Portfolios................................ 18
Monthly Deductions from Contract Fund..................... 19
Daily Deduction from the Contract Fund.................... 20
Surrender or Withdrawal Charges........................... 20
Transaction Charges....................................... 21
CONTRACT DATE...................................................... 21
PREMIUMS .......................................................... 21
ALLOCATION OF PREMIUMS............................................. 22
TRANSFERS.......................................................... 23
HOW THE CONTRACT FUND CHANGES WITH INVESTMENT EXPERIENCE........... 24
HOW A CONTRACT'S DEATH BENEFIT WILL VARY........................... 24
CONTRACT LOANS..................................................... 25
SURRENDER OF A CONTRACT............................................ 26
LAPSE AND REINSTATEMENT............................................ 26
Fixed Extended Term Insurance............................. 26
Fixed Reduced Paid-Up Insurance........................... 26
Variable Reduced Paid-Up Insurance........................ 27

<PAGE>

PAGE

What Happens If No Request Is Made?....................... 27
WHEN PROCEEDS ARE PAID............................................. 27
LIVING NEEDS BENEFIT............................................... 27
Terminal Illness Option................................... 27
Nursing Home Option....................................... 27
VOTING RIGHTS...................................................... 28
REPORTS TO CONTRACT OWNERS......................................... 28
TAX TREATMENT OF CONTRACT BENEFITS................................. 29
RIDERS .......................................................... 30
PARTICIPATION IN DIVISIBLE SURPLUS................................. 30
OTHER CONTRACT PROVISIONS.......................................... 30

FURTHER INFORMATION ABOUT THE SERIES FUND................................... 30

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS........................ 31
FIXED INCOME PORTFOLIOS............................................ 31
MONEY MARKET PORTFOLIO.................................... 31
DIVERSIFIED BOND PORTFOLIO................................ 31
GOVERNMENT INCOME PORTFOLIO............................... 32
ZERO COUPON BOND PORTFOLIOS 2000 AND 2005................. 34
BALANCED PORTFOLIOS................................................ 35
CONSERVATIVE BALANCED PORTFOLIO........................... 35
FLEXIBLE MANAGED PORTFOLIO................................ 36
HIGH YIELD BOND PORTFOLIOS......................................... 37
HIGH YIELD BOND PORTFOLIO................................. 37
DIVERSIFIED STOCK PORTFOLIOS....................................... 38
STOCK INDEX PORTFOLIO..................................... 38
EQUITY INCOME PORTFOLIO................................... 39
EQUITY PORTFOLIO.......................................... 40
PRUDENTIAL JENNISON PORTFOLIO............................. 40
SMALL CAPITALIZATION STOCK PORTFOLIO...................... 41
GLOBAL PORTFOLIO.......................................... 42
SPECIALIZED PORTFOLIOS............................................. 43
NATURAL RESOURCES PORTFOLIO............................... 43
FOREIGN SECURITIES................................................. 44
OPTIONS, FUTURES CONTRACTS AND SWAPS............................... 44
SHORT SALES........................................................ 44
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS..................... 45
LOANS OF PORTFOLIO SECURITIES...................................... 45

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS........................ 45

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES............................. 46
PORTFOLIO BROKERAGE AND RELATED PRACTICES.......................... 46

STATE REGULATION............................................................ 46

EXPERTS..................................................................... 46

LITIGATION.................................................................. 47

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION........... 47

ADDITIONAL INFORMATION...................................................... 49

FINANCIAL STATEMENTS........................................................ 49

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 47.

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 fifteen 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 fifteen 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 fifteen 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 18. 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 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 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

2
<PAGE>

make changes in these allocations either in writing or by telephone. The
investment objectives of each portfolio, described more fully at pages 31 to 43
of this prospectus, and of the other two investment options 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. The rate of return will generally
follow the fluctuations in short term interest rates.

DIVERSIFIED BOND PORTFOLIO (formerly the 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 INCOME PORTFOLIO (formerly the 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 Diversified 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 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 two 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

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

<PAGE>

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.

GLOBAL PORTFOLIO (formerly the 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, Equity Income, Equity, Prudential Jennison, Small Capitalization
Stock, Global, 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 Income or
Diversified 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.

<PAGE>

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 21.

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. See
PREMIUMS, page 21 and TAX TREATMENT OF CONTRACT BENEFITS, page 29.

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 25. When a loan is made, the amount
held under the investment options described above is reduced, proportionately,
by the amount of the loan.

VARIABLE APPRECIABLE LIFE INSURANCE CONTRACTS

The Prudential Variable APPRECIABLE LIFE Insurance Contract is a form of life
insurance that provides much of the flexibility of variable universal life,
however, it differs in two important ways. First, The Prudential guarantees that
if the Scheduled Premiums are paid when due, or within the grace period (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 15 portfolios of the Series Fund that
were available as of December 31, 1995 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.

<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>
MONEY MARKET
------------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $ 10.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.564 0.402 0.290 0.372 0.596 0.778 0.877 0.717 0.630 0.062
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.564 0.402 0.290 0.372 0.596 0.778 0.877 0.717 0.630 0.062
Distributions to
Shareholders:
Distributions from net
investment income...... (0.564) (0.402) (0.290) (0.372) (0.596) (0.778) (0.877) (0.717) (0.630) (0.062)
Distributions from
realized gains......... 0 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.564) (0.402) (0.290) (0.372) (0.596) (0.778) (0.877) (0.717) (0.630) (0.062)
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 0.000 9.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $10.000 $ 10.000 $ 10.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 5.80 % 4.05 % 2.95 % 3.79 % 6.16 % 8.16 % 9.25 % 7.35 % 6.52 % 6.54 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $613.3 $583.3 $474.7 $528.7 $529.6 $434.2 $236.1 $155.9 $107.2 $52.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.44 % 0.47 % 0.45 % 0.47 % 0.46 % 0.50 % 0.55 % 0.57 % 0.53 % 0.55 %
Ratio of net investment
income to average net
assets................. 5.64 % 4.02 % 2.90 % 3.72 % 5.96 % 7.80 % 8.77 % 7.17 % 6.30 % 6.16 %
Portfolio turnover
rate................... -- -- -- -- -- -- -- -- -- --
Number of shares
outstanding at end of
period (in millions)... 61.3 58.3 47.5 52.9 53.0 43.4 23.6 15.6 10.7 5.2

Net Asset Value at
beginning of year...... $10.038 $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $10.038 $ 11.048 $ 10.967
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.763 0.682 0.686 0.761 0.797 0.825 0.886 0.875 0.859 0.904
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.293 (1.040) 0.398 0.013 0.842 (0.004) 0.424 (0.069) (0.821) 0.607
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 2.056 (0.358) 1.084 0.774 1.639 0.821 1.310 0.806 0.038 1.511
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.755) (0.683) (0.657) (0.728) (0.779) (0.810) (0.854) (0.902) (0.990) (0.909)
Distributions from net
realized gains......... (0.026) (0.024) (0.153) (0.219) (0.190) 0 (0.077) 0 (0.058) (0.521)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (0.781) (0.707) (0.810) (0.947) (0.969) (0.810) (0.931) (0.902) (1.048) (1.430)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 1.275 (1.065) 0.274 (0.173) 0.670 0.011 0.379 (0.096) (1.010) 0.081
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $11.313 $10.038 $11.103 $10.829 $11.002 $10.332 $10.321 $ 9.942 $ 10.038 $ 11.048
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 20.73 % (3.23 %) 10.13 % 7.19 % 16.44 % 8.32 % 13.49 % 8.19 % 0.29 % 14.45 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $655.8 $541.6 $576.2 $428.8 $318.7 $227.7 $191.1 $148.8 $139.5 $110.1
Ratio of expenses net of
reimbursement to
average net assets..... 0.44 % 0.45 % 0.46 % 0.47 % 0.49 % 0.47 % 0.53 % 0.53 % 0.53 % 0.51 %
Ratio of net investment
income to average net
assets................. 7.00 % 6.41 % 6.05 % 6.89 % 7.43 % 8.06 % 8.56 % 8.52 % 8.15 % 8.11 %
Portfolio turnover
rate................... 199.09 % 31.57 % 41.12 % 60.53 % 131.01 % 42.10 % 272.85 % 222.20 % 238.41 % 246.82 %
Number of shares
outstanding at end of
period (in millions)... 58.0 54.0 51.9 39.6 29.0 22.0 18.5 15.0 13.9 10.0
</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.

<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>
GOVERNMENT INCOME
-----------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $10.461 $11.784 $11.094 $11.133 $10.146 $10.324 $10.017
-------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.741 0.703 0.700 0.731 0.736 0.791 0.545
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.275 (1.311) 0.678 (0.092) 0.847 (0.177) 0.613
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 2.016 (0.608) 1.378 0.639 1.583 0.614 1.158
-------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.758) (0.723) (0.642) (0.593) (0.596) (0.769) (0.489)
Distributions from net
realized gains......... 0.000 0.008 (0.046) (0.085) 0.000 (0.023) (0.362)
-------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.758) (0.715) (0.688) (0.678) (0.596) (0.792) (0.851)
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 1.258 (1.323) 0.690 (0.039) 0.987 (0.178) 0.307
-------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
year................... $11.719 $10.461 $11.784 $11.094 $11.133 $10.146 $10.324
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. 19.48 % (5.16 %) 12.56 % 5.85 % 16.11 % 6.34 % 11.60 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $501.8 $487.6 $540.1 $315.5 $95.0 $23.7 $17.0
Ratio of expenses net of
reimbursement to
average net assets..... 0.45 % 0.45 % 0.46 % 0.53 % 0.58 % 0.74 % 0.50 %
Ratio of net investment
income to average net
assets................. 6.55 % 6.30 % 5.91 % 6.58 % 6.97 % 7.86 % 5.06 %
Portfolio turnover
rate................... 195.49 % 34.19 % 18.59 % 80.71 % 127.18 % 379.45 % 208.86 %
Number of shares
outstanding at end of
period (in millions)... 42.8 46.6 45.8 28.3 8.5 2.3 1.6
</TABLE>

<TABLE>
<CAPTION>
ZERO COUPON BOND 1995
-------------------------------------------------------------------------------------------------------
01/01/95 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 TO
11/15/95 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> <C>
Net Asset Value at
beginning of period.... $10.593 $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.... 0.538 0.800 0.761 0.802 0.844 1.447 0.889 0.888 0.893 0.791
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.109 (0.808) 0.107 (0.010) 0.874 (0.670) 0.766 0.027 (1.263) 1.437
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 0.647 (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...... (0.676) (0.679) (0.760) (0.798) (0.845) (1.491) (0.892) (0.854) (1.084) (0.660)
Distributions from net
realized gains......... (0.165) (0.002) 0.000 (0.070) (0.003) 0.000 0.000 0.000 0.000 0.000
Distributions of net
assets at liquidation
date................... (10.399) 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (11.240) (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..... (10.593) (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................. $ 0.000 $10.593 $11.282 $11.174 $11.250 $10.380 $11.094 $10.331 $ 10.270 $ 11.724
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 6.20 % (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)... $0.0 $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..... 0.49 % 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................. 5.39 % 6.72 % 6.61 % 7.12 % 7.86 % 13.80 % 8.13 % 8.34 % 8.17 % 6.89 %
Portfolio turnover
rate................... 0.00 % 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)... 0.0 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.

7
<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>
ZERO COUPON BOND 2000
-------------------------------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $11.862 $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.... 0.592 0.927 0.850 0.892 0.908 1.114 0.919 0.919 0.934 0.807
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.944 (1.907) 1.157 0.140 1.308 (0.593) 1.277 0.292 (1.623) 2.087
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 2.536 (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...... (0.593) (0.850) (0.837) (0.884) (0.944) (1.125) (0.915) (0.892) (1.102) (0.685)
Distributions from net
realized gains......... (0.532) (0.023) (0.005) 0.000 (0.149) 0.000 (0.402) 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.125) (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..... 1.411 (1.853) 1.165 0.148 1.123 (0.604) 0.879 0.319 (1.791) 2.209
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $13.273 $11.862 $13.715 $12.550 $12.402 $11.279 $11.883 $11.004 $ 10.685 $ 12.476
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 21.56 % (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 year
(in millions).......... $25.3 $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..... 0.48 % 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................. 4.53 % 6.69 % 6.21 % 7.24 % 7.77 % 9.99 % 7.73 % 8.24 % 8.19 % 6.61 %
Portfolio turnover
rate................... 70.68 % 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)... 1.9 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
-----------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89
TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $10.744 $12.677 $11.029 $10.874 $ 9.798 $10.457 $10.017
-------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.655 0.752 0.768 0.804 0.820 0.850 0.561
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 2.733 (1.967) 1.623 0.207 1.143 (0.649) 0.598
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 3.388 (1.215) 2.391 1.011 1.963 0.201 1.159
-------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.656) (0.715) (0.741) (0.792) (0.827) (0.860) (0.531)
Distributions from net
realized gains......... (0.286) (0.003) (0.002) (0.064) (0.060) 0.000 (0.188)
-------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.942) (0.718) (0.743) (0.856) (0.887) (0.860) (0.719)
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 2.446 (1.933) 1.648 0.155 1.076 (0.659) 0.440
-------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
year................... $13.190 $10.744 $12.677 $11.029 $10.874 $ 9.798 $10.457
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. 31.85 % (9.61 %) 21.94 % 9.66 % 21.16 % 2.56 % 11.67 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $23.6 $16.5 $14.5 $9.8 $8.7 $7.3 $7.2
Ratio of expenses net of
reimbursement to
average net assets..... 0.49 % 0.60 % 0.66 % 0.75 % 0.75 % 0.75 % 0.49 %
Ratio of net investment
income to average net
assets................. 5.32 % 6.53 % 6.17 % 7.46 % 8.08 % 8.83 % 5.25 %
Portfolio turnover
rate................... 69.15 % 5.94 % 3.62 % 11.48 % 5.76 % 4.36 % 59.90 %
Number of shares
outstanding at end of
period (in millions)... 1.8 1.5 1.1 0.9 0.8 0.7 0.7
</TABLE>

8
<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>
CONSERVATIVE BALANCED
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $11.889 $ 12.571 $ 12.173
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.635 0.528 0.486 0.558 0.687 0.821 0.891 0.773 0.656 0.652
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments........... 1.775 (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424 (0.399) 1.046
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 2.410 (0.151) 1.715 0.968 2.425 0.678 2.046 1.197 0.257 1.698
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.643) (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791) (0.709) (0.517)
Distributions from net
realized gains......... (0.553) (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0.000 (0.230) (0.783)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.196) (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791) (0.939) (1.300)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 1.214 (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406 (0.682) 0.398
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $ 11.889 $ 12.571
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------

Total Investment Rate of
Return:**.............. 17.27% (0.97%) 12.20% 6.95% 19.07% 5.27% 16.99% 10.19% 1.54% 14.17%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $3,940.8 $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6 $803.9 $375.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.58% 0.61% 0.60% 0.62% 0.63% 0.65% 0.64% 0.65% 0.66% 0.64%
Ratio of net investment
income to average net
assets................. 4.19% 3.61% 3.22% 3.88% 4.89% 6.21% 6.81% 6.22% 5.05% 5.10%
Portfolio turnover
rate................... 200.68% 125.18% 79.46% 62.07% 115.35% 44.04% 153.92% 110.67% 140.69% 207.78%
Number of shares
outstanding at end of
period (in millions)... 257.4 248.4 208.2 148.4 104.8 84.2 73.0 66.3 67.6 29.9

FLEXIBLE MANAGED
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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*
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at
beginning of year...... $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $ 13.555 $ 12.810
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.564 0.473 0.566 0.583 0.650 0.715 0.813 0.724 0.577 0.611
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 3.149 (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840 (0.753) 1.342
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 3.713 (0.548) 2.448 1.190 3.459 0.249 2.802 1.564 (0.176) 1.953
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.560) (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767) (0.673) (0.456)
Distributions from net
realized gains......... (0.790) (0.462) (0.929) (0.914) (0.513) 0.000 (0.666) 0.000 (0.380) (0.752)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.350) (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767) (1.053) (1.208)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 2.363 (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797 (1.229) 0.745
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $ 12.326 $ 13.555
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 24.13% (3.16%) 15.58% 7.61% 25.43% 1.91% 21.77% 12.83% (1.83%) 15.48%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $4,261.2 $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
Ratio of expenses net of
reimbursement to
average net assets..... 0.63% 0.66% 0.66% 0.67% 0.67% 0.69% 0.69% 0.70% 0.71% 0.67%
Ratio of net investment
income to average net
assets................. 3.30% 2.90% 3.30% 3.63% 4.23% 5.13% 5.66% 5.52% 4.09% 4.43%
Portfolio turnover
rate................... 173.30% 123.63% 62.99% 59.03% 93.13% 51.87% 141.04% 128.45% 123.83% 133.76%
Number of shares
outstanding at end of
period (in millions)... 238.6 224.7 194.1 152.2 122.2 107.7 96.0 84.1 86.2 43.8
</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.

9
<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
-------------------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $ 7.366 $ 8.406 $ 7.719 $ 7.212 $ 5.838 $ 7.673 $ 8.904 $8.742 $ 10.000
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Income From Investment
Operations:
Net investment income.... 0.812 0.869 0.822 0.824 0.836 0.936 1.071 1.066 0.968
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 0.460 (1.102) 0.632 0.415 1.397 (1.792) (1.223) 0.065 (1.428)
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations........... 1.272 (0.233) 1.454 1.239 2.233 (0.856) (0.152) 1.131 (0.460)
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.838) (0.807) (0.767) (0.732) (0.859) (0.979) (1.079) (0.969) (0.798)
Distributions from net
realized gains......... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total
distributions........ (0.838) (0.807) (0.767) (0.732) (0.859) (0.979) (1.079) (0.969) (0.798)
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net increase (decrease)
in Net Asset Value..... 0.434 (1.040) 0.687 0.507 1.374 (1.835) (1.231) 0.162 (1.258)
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net Asset Value at end of
year................... $ 7.800 $ 7.366 $ 8.406 $ 7.719 $ 7.212 $ 5.838 $ 7.673 $ 8.904 $ 8.742
-------- -------- -------- -------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total Investment Rate of
Return:**.............. 17.56% (2.72%) 19.27% 17.54% 39.71% (11.84%) (2.05%) 13.17% (4.91%)
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $367.9 $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..... 0.61% 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................. 10.34% 9.88% 9.91% 10.67% 12.05% 13.42% 12.29% 11.60% 10.13%
Portfolio turnover
rate................... 139.34% 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)... 47.2 41.6 33.6 19.9 10.9 8.5 7.8 7.4 4.6

STOCK INDEX
-------------------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net Asset Value at
beginning of year...... $14.957 $15.202 $14.218 $13.605 $10.760 $11.732 $ 9.454 $8.531 $ 8.071
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Income From Investment
Operations:
Net investment income.... 0.403 0.377 0.361 0.350 0.351 0.357 0.326 0.357 0.047
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 5.126 (0.231) 1.002 0.600 2.814 (0.792) 2.570 0.951 0.548
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations........... 5.529 0.146 1.363 0.950 3.165 (0.435) 2.896 1.308 0.595
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.384) (0.368) (0.346) (0.329) (0.307) (0.309) (0.354) (0.385) (0.135)
Distributions from net
realized gains......... (0.146) (0.023) (0.033) (0.008) (0.013) (0.228) (0.264) 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total
distributions........ (0.530) (0.391) (0.379) (0.337) (0.320) (0.537) (0.618) (0.385) (0.135)
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net increase (decrease)
in Net Asset Value..... 4.999 (0.245) 0.984 0.613 2.845 (0.972) 2.278 0.923 0.460
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Net Asset Value at end of
year................... $19.956 $14.957 $15.202 $14.218 $13.605 $10.760 $11.732 $ 9.454 $ 8.531
-------- -------- -------- -------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- ---------
Total Investment Rate of
Return:**.............. 37.06% 1.01% 9.66% 7.13% 29.72% (3.63%) 30.93% 15.44% 7.35%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $1,031.3 $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..... 0.38% 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................. 2.27% 2.50% 2.43% 2.56% 2.82% 3.23% 2.95% 3.87% 0.53%
Portfolio turnover
rate................... 1.16% 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)... 51.7 44.4 40.5 30.5 17.4 9.7 4.6 3.8 2.9
</TABLE>

<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>
EQUITY INCOME
---------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year $14.484 $15.655 $13.673 $13.209 $11.241 $12.254 $10.621 $10.132
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.644 0.664 0.551 0.582 0.578 0.509 0.539 0.452
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 2.495 (0.453) 2.459 0.723 2.430 (0.980) 1.841 0.684
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations 3.139 0.211 3.010 1.305 3.008 (0.471) 2.380 1.136
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.618) (0.562) (0.501) (0.515) (0.542) (0.461) (0.462) (0.420)
(0.420)
Distributions from net
realized gains......... (0.734) (0.820) (0.527) (0.326) (0.498) (0.081) (0.285) (0.227)
-------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (1.352) (1.382) (1.028) (0.841) (1.040) (0.542) (0.747) (0.647)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 1.787 (1.171) 1.982 0.464 1.968 (1.013) 1.633 0.489
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
year................... $16.271 $14.484 $15.655 $13.673 $13.209 $11.241 $12.254 $10.621
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. 21.70% 1.44% 22.28% 10.14% 27.50% (3.73%) 22.67% 11.31%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $1,110.0 $859.7 $602.8 $234.4 $106.9 $55.5 $34.9 $11.3
Ratio of expenses net of
reimbursement to
average net assets..... 0.43% 0.52% 0.54% 0.57% 0.57% 0.60% 0.74% 0.64%
Ratio of net investment
income to average net
assets................. 4.00% 3.92% 3.56% 4.32% 4.53% 4.53% 4.48% 4.08%
Portfolio turnover
rate................... 63.55% 62.66% 41.43% 39.98% 60.12% 54.79% 56.65% 61.31%
Number of shares
outstanding at end of
period (in millions)... 68.2 59.4 38.5 17.1 8.1 4.9 2.9 1.1
</TABLE>

<TABLE>
<CAPTION>
EQUITY
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $20.662 $21.487 $18.903 $17.905 $15.449 $18.539 $15.463 $13.620 $14.815 $14.634
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income From Investment
Operations:
Net investment income.... 0.546 0.512 0.417 0.444 0.482 0.577 0.474 0.402 0.393 0.448
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 5.891 0.054 3.666 2.050 3.414 (1.573) 4.064 1.909 (0.065) 1.765
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from investment
operations........... 6.437 0.566 4.083 2.494 3.896 (0.996) 4.538 2.311 0.328 2.213
Distributions to
Shareholders:
Distributions from net
investment income...... (0.515) (0.487) (0.404) (0.439) (0.478) (0.563) (0.503) (0.468) (0.496) (0.275)
Distributions from net
realized gains......... (0.944) (0.904) (1.095) (1.057) (0.962) (1.531) (0.959) 0.000 (1.027) (1.757)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total
distributions........ (1.459) (1.391) (1.499) (1.496) (1.440) (2.094) (1.462) (0.468) (1.523) (2.032)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net increase (decrease)
in Net Asset Value..... 4.978 (0.825) 2.584 0.998 2.456 (3.090) 3.076 1.843 (1.195) 0.181
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net Asset Value at end of
year................... $25.640 $20.662 $21.487 $18.903 $17.905 $15.449 $18.539 $15.463 $ 13.620 $ 14.815
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Investment Rate of
Return:**.............. 31.29% 2.78% 21.87% 14.17% 26.01% (5.21%) 29.73% 17.05% 1.67% 15.10%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $3,813.8 $2,617.8 $2,186.5 $1,416.6 $1,032.8 $700.5 $675.5 $500.1 $451.0 $247.9
Ratio of expenses net of
reimbursement to
average net assets..... 0.48% 0.55% 0.53% 0.53% 0.51% 0.56% 0.56% 0.57% 0.51% 0.52%
Ratio of net investment
income to average net
assets................. 2.28% 2.39% 1.99% 2.33% 2.66% 3.37% 2.66% 2.67% 2.34% 2.90%
Portfolio turnover
rate................... 17.65% 6.90% 12.95% 15.70% 20.85% 84.84% 73.54% 62.35% 79.91% 117.15%
Number of shares
outstanding at end of
period (in millions)... 148.7 126.7 101.8 74.9 57.7 45.3 36.4 32.3 33.1 16.7
</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.

11
<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.

PRUDENTIAL
JENNISON
--------
04/25/95*
TO
12/31/95
--------
Net Asset Value at
beginning of period $10.000
--------
Income From Investment
Operations:
Net investment income.... 0.018
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 2.535
--------
Total from investment
operations........... 2.553
--------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.006)
Distributions from net
realized gains......... 0.000
--------
Total
distributions........ (0.006)
--------
Net increase (decrease)
in Net Asset Value..... 2.547
--------
Net Asset Value at end of
year................... $12.547
--------
--------
Total Investment Rate of
Return:**.............. 24.42%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $63.1
Ratio of expenses net of
reimbursement to
average net assets..... 0.79%
Ratio of net investment
income to average net
assets................. 0.15%
Portfolio turnover
rate................... 37.45%
Number of shares
outstanding at end of
period (in millions)... 5.0

SMALL
CAPITALIZATION
STOCK
--------
04/25/95*
TO
12/31/95
--------
Net Asset Value at
beginning of period.... $10.000
--------
Income From Investment
Operations:
Net investment income.... 0.077
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 1.916
--------
Total from investment
operations........... 1.993
--------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.044)
Distributions from net
realized gains......... (0.116)
--------
Total
distributions........ (0.160)
--------
Net increase (decrease)
in Net Asset Value..... 1.833
--------
Net Asset Value at end of
year................... $11.833
--------
--------
Total Investment Rate of
Return:**.............. 19.74%
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $47.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.60%
Ratio of net investment
income to average net
assets................. 0.68%
Portfolio turnover
rate................... 31.79%
Number of shares
outstanding at end of
period (in millions)... 4.0

All calculations are based on average month-end shares outstanding, where
applicable.

*Commencement of business.

**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>

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>
GLOBAL
---------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 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> <C>
Net Asset Value at
beginning of year $13.879 $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508 $9.818
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.065 0.028 0.023 0.051 0.096 0.203 0.079 0.052
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 2.138 (0.744) 4.433 (0.419) 1.020 (1.802) 1.806 0.787
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 2.203 (0.716) 4.456 (0.368) 1.116 (1.599) 1.885 0.839
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.242) (0.019) (0.079) (0.056) (0.100) (0.067) (0.073) (0.149)
Distributions from net
realized gains......... (0.307) (0.025) (0.106) 0.000 (0.090) (0.015) (0.773) 0.000
-------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (0.549) (0.044) (0.185) (0.056) (0.190) (0.082) (0.846) (0.149)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 1.654 (0.760) 4.271 (0.424) 0.926 (1.681) 1.039 0.690
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
year................... $15.533 $13.879 $14.639 $10.368 $10.792 $ 9.866 $11.547 $10.508
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. 15.88 % (4.89 %) 43.14% (3.42 %) 11.39 % (12.91 %) 18.82 % 8.57 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $400.1 $345.7 $129.1 $34.0 $34.3 $26.2 $29.4 $26.9
Ratio of expenses net of
reimbursement to
average net assets..... 1.06 % 1.23 % 1.44 % 1.87 % 1.62 % 1.67 % 1.47 % 0.42 %
Ratio of net investment
income to average net
assets................. 0.44 % 0.20 % 0.18 % 0.49 % 0.92 % 1.92 % 0.70 % 0.51 %
Portfolio turnover
rate................... 58.52 % 37.46 % 54.54 % 78.16 % 136.21 % 43.12 % 47.95 % 6.40 %
Number of shares
outstanding at end of
period (in millions)... 25.7 24.9 8.8 3.3 3.2 2.7 2.5 2.6

NATURAL RESOURCES
---------------------------------------------------------------------------------
01/01/95 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 TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at
beginning of year...... $14.443 $15.562 $12.949 $12.450 $11.622 $12.705 $10.141 $9.910
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net investment income.... 0.204 0.183 0.227 0.319 0.368 0.417 0.364 0.254
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 3.662 (0.850) 3.004 0.588 0.821 (1.143) 3.216 0.274
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations........... 3.866 (0.667) 3.231 0.907 1.189 (0.726) 3.580 0.528
-------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.209) (0.150) (0.207) (0.309) (0.361) (0.336) (0.358) (0.252)
Distributions from net
realized gains......... (0.828) (0.302) (0.411) (0.099) 0.000 (0.021) (0.658) (0.045)
-------- -------- -------- -------- -------- -------- -------- --------
Total
distributions........ (1.037) (0.452) (0.618) (0.408) (0.361) (0.357) (1.016) (0.297)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in Net Asset Value..... 2.829 (1.119) 2.613 0.499 0.828 (1.083) 2.564 0.231
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value at end of
year................... $17.272 $14.443 $15.562 $12.949 $12.450 $11.622 $12.705 $10.141
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total Investment Rate of
Return:**.............. 26.92 % (4.30 %) 25.15 % 7.30 % 10.30 % (5.76 %) 35.64 % 5.42 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $293.2 $227.3 $158.8 $77.5 $62.6 $50.6 $17.9 $9.5
Ratio of expenses net of
reimbursement to
average net assets..... 0.50 % 0.61 % 0.60 % 0.72 % 0.68 % 0.75 % 0.86 % 0.58 %
Ratio of net investment
income to average net
assets................. 1.25 % 1.09 % 1.50 % 2.44 % 2.97 % 3.45 % 3.04 % 2.46 %
Portfolio turnover
rate................... 46.11 % 18.10 % 19.64 % 29.20 % 21.33 % 42.18 % 49.17 % 59.33 %
Number of shares
outstanding at end of
period (in millions)... 17.0 15.7 10.2 6.0 5.0 4.4 1.4 0.9
</TABLE>

<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 12/31/95 for the 5 year
and 10 year periods ending on that date, and from the inception date of each
Portfolio to December 31, 1995. 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 18.

<TABLE>
<CAPTION>
5 YEAR 10 YEAR
PERIOD PERIOD INCEPTION
INCEPTION YEAR ENDED ENDED ENDED DATE TO YEAR ENDED YEAR ENDED YEAR ENDED
DATE 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET 5/83 5.8% 4.5% 6.0% 6.6% 5.8% 4.1% 3.0%
DIVERSIFIED BOND 5/83 20.7% 9.9% 9.4% 9.9% 20.7% -3.2% 10.1%
GOVERNMENT INCOME 5/89 19.5% 9.4% N/A 9.8% 19.5% -5.2% 12.6%
ZERO COUPON BOND
1995 2/86 6.2% 7.8% N/A 9.0% 9.2% 0.0% 7.9%
ZERO COUPON BOND
2000 2/86 21.6% 11.4% N/A 11.6% 21.6% -7.2% 16.2%
ZERO COUPON BOND
2005 5/89 31.9% 14.1% N/A 12.6% 31.9% -9.6% 21.9%
CONSERVATIVE
BALANCED 5/83 17.3% 10.7% 10.1% 10.4% 17.3% -1.0% 12.2%
FLEXIBLE MANAGED 5/83 24.1% 13.4% 11.9% 11.6% 24.1% -3.2% 15.6%
HIGH YIELD BOND 2/87 17.6% 17.4% N/A 8.6% 17.6% -2.7% 20.0%
STOCK INDEX 10/87 37.1% 16.1% N/A 15.7% 37.1% 1.0% 9.7%
EQUITY INCOME 2/88 21.7% 16.2% N/A 13.9% 21.7% 1.4% 22.3%
EQUITY 5/83 31.3% 18.8% 15.0% 14.6% 31.3% 2.8% 21.9%
PRUDENTIAL
JENNISON 5/95 N/A N/A N/A 24.4% N/A N/A N/A
SMALL
CAPITALIZATION
STOCK 5/95 N/A N/A N/A 19.7% N/A N/A N/A
GLOBAL 9/88 15.9% 11.2% N/A 9.3% 15.9% -4.9% 43.1%
NATURAL RESOURCES 5/88 26.9% 12.1% N/A 11.7% 26.9% -4.3% 25.2%
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
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>
MONEY MARKET 3.8% 6.2% 8.2% 9.3% 7.4% 6.5% 6.5%
DIVERSIFIED BOND 7.2% 16.4% 8.3% 13.5% 8.2% 0.3% 14.4%
GOVERNMENT INCOME 5.9% 16.1% 6.3% N/A N/A N/A N/A
ZERO COUPON BOND
1995 7.2% 17.2% 8.0% 16.4% 9.0% -3.3% N/A
ZERO COUPON BOND
2000 8.6% 20.7% 5.1% 20.4% 11.6% -5.5% N/A
ZERO COUPON BOND
2005 9.7% 21.2% 2.6% N/A N/A N/A N/A
CONSERVATIVE
BALANCED 6.9% 19.1% 5.3% 17.0% 10.2% 1.5% 14.2%
FLEXIBLE MANAGED 7.6% 25.4% 1.9% 21.8% 12.8% -1.8% 15.5%
HIGH YIELD BOND 17.5% 39.2% -11.8% -2.1% 13.2% N/A N/A
STOCK INDEX 7.1% 29.7% -3.6% 30.9% 15.4% N/A N/A
EQUITY INCOME 10.1% 27.5% -3.7% 22.7% N/A N/A N/A
EQUITY 14.2% 26.0% -5.1% 29.7% 17.1% 1.7% 15.1%
PRUDENTIAL
JENNISON N/A N/A N/A N/A N/A N/A N/A
SMALL
CAPITALIZATION
STOCK N/A N/A N/A N/A N/A N/A N/A
GLOBAL -3.4% 11.4% -12.9% 18.8% N/A N/A N/A
NATURAL RESOURCES 7.3% 10.3% -5.8% 35.6% 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 fifteen 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 15 portfolios of 0.55%, 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 -1.45%, 2.55%, 6.55% and 10.55%
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%.

<PAGE>

<TABLE>

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
<CAPTION>
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) (-1.15% Net) (2.85% Net) (6.85% Net) (10.85% Net) (-1.15% Net) (2.85% Net) (6.85% Net) (10.85% 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 $ 273 $ 352 $ 433 $ 516
3 $ 2,903 $100,000 $100,000 $100,000 $100,000 $ 761 $ 914 $ 1,075 $ 1,245
4 $ 3,948 $100,000 $100,000 $100,000 $100,000 $ 1,232 $ 1,481 $ 1,751 $ 2,045
5 $ 5,036 $100,000 $100,000 $100,000 $100,000 $ 1,685 $ 2,053 $ 2,464 $ 2,922
6 $ 6,167 $100,000 $100,000 $100,000 $100,000 $ 2,373 $ 2,883 $ 3,470 $ 4,142
7 $ 7,344 $100,000 $100,000 $100,000 $100,000 $ 3,046 $ 3,724 $ 4,525 $ 5,468
8 $ 8,568 $100,000 $100,000 $100,000 $100,000 $ 3,696 $ 4,566 $ 5,622 $ 6,901
9 $ 9,840 $100,000 $100,000 $100,000 $100,000 $ 4,323 $ 5,410 $ 6,766 $ 8,455
10 $ 11,164 $100,000 $100,000 $100,000 $100,000 $ 4,924 $ 6,252 $ 7,957 $ 10,140
15 $ 18,618 $100,000 $100,000 $100,000 $100,000 $ 6,566 $ 9,461 $ 13,758 $ 20,140
20 $ 27,688 $101,115 $101,115 $101,115 $101,115 $ 8,477 $13,582 $ 22,459 $ 37,922
25 $ 38,723 $102,229 $102,229 $102,229 $126,807 $ 9,524 $17,428 $ 33,767 $ 67,221
30 (Age 65) $ 52,149 $102,225 $102,225 $102,225 $187,948 $ 7,483 $18,819 $ 47,202 $112,671
35 $ 88,305 $102,455 $102,455 $102,455 $275,357 $21,092 $37,151 $ 65,482 $184,655
40 $132,295 $102,672 $102,672 $121,997 $402,438 $31,034 $57,205 $ 90,604 $297,264
45 $185,816 $102,863 $102,863 $152,950 $590,020 $35,265 $80,898 $122,553 $471,103
</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 $4,412.98. For a gross return of 8%, the second Scheduled
Premium will be $894.06. 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.

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>
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
<CAPTION>
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) (-1.15% Net) (2.85% Net) (6.85% Net) (10.85% Net) (-1.15% Net) (2.85% Net) (6.85% Net) (10.85% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,000 $100,022 $100,050 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,000 $100,062 $100,145 $ 218 $ 296 $ 377 $ 460
3 $ 2,903 $100,000 $100,000 $100,120 $100,290 $ 705 $ 857 $ 1,018 $ 1,187
4 $ 3,948 $100,000 $100,000 $100,201 $100,493 $ 1,191 $ 1,439 $ 1,708 $ 2,000
5 $ 5,036 $100,000 $100,000 $100,305 $100,761 $ 1,675 $ 2,041 $ 2,449 $ 2,905
6 $ 6,167 $100,000 $100,000 $100,485 $101,153 $ 2,369 $ 2,878 $ 3,460 $ 4,128
7 $ 7,344 $100,000 $100,000 $100,696 $101,632 $ 3,043 $ 3,717 $ 4,512 $ 5,448
8 $ 8,568 $100,000 $100,000 $100,940 $102,207 $ 3,692 $ 4,558 $ 5,605 $ 6,872
9 $ 9,840 $100,000 $100,000 $101,220 $102,890 $ 4,319 $ 5,401 $ 6,743 $ 8,413
10 $ 11,164 $100,000 $100,000 $101,538 $103,692 $ 4,921 $ 6,242 $ 7,926 $ 10,080
15 $ 18,618 $100,000 $100,000 $103,802 $110,018 $ 6,563 $ 9,443 $13,641 $ 19,857
20 $ 27,688 $101,115 $101,115 $109,180 $124,036 $ 8,537 $13,663 $22,244 $ 37,100
25 $ 38,723 $102,229 $102,381 $117,885 $149,586 $ 9,651 $17,651 $33,155 $ 64,856
30 (Age 65) $ 52,149 $102,225 $104,159 $130,070 $193,244 $ 7,674 $19,159 $45,070 $108,244
35 $ 88,175 $102,455 $106,807 $128,946 $266,449 $21,423 $37,108 $59,247 $178,708
40 $132,007 $102,672 $111,053 $131,964 $392,900 $31,646 $55,880 $76,791 $290,235
45 $185,334 $102,863 $117,595 $141,056 $581,032 $36,346 $75,122 $98,583 $463,935
</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 $4,389.87. For a gross return of 8%, the second Scheduled
Premium will be $894.06. 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.

<PAGE>

<TABLE>
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
<CAPTION>
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) (-1.45% Net) (2.55% Net) (6.55% Net) (10.55% Net) (-1.45% Net) (2.55% Net) (6.55% Net) (10.55% 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 $ 346 $ 427 $ 510
3 $ 2,903 $100,000 $100,000 $100,000 $100,000 $ 750 $ 902 $ 1,062 $ 1,232
4 $ 3,948 $100,000 $100,000 $100,000 $100,000 $1,215 $ 1,461 $ 1,730 $ 2,022
5 $ 5,036 $100,000 $100,000 $100,000 $100,000 $1,659 $ 2,024 $ 2,431 $ 2,886
6 $ 6,167 $100,000 $100,000 $100,000 $100,000 $2,288 $ 2,792 $ 3,372 $ 4,036
7 $ 7,344 $100,000 $100,000 $100,000 $100,000 $2,902 $ 3,567 $ 4,354 $ 5,281
8 $ 8,568 $100,000 $100,000 $100,000 $100,000 $3,491 $ 4,340 $ 5,371 $ 6,622
9 $ 9,840 $100,000 $100,000 $100,000 $100,000 $4,057 $ 5,110 $ 6,426 $ 8,069
10 $ 11,164 $100,000 $100,000 $100,000 $100,000 $4,597 $ 5,875 $ 7,519 $ 9,631
15 $ 18,618 $100,000 $100,000 $100,000 $100,000 $5,922 $ 8,626 $ 12,665 $ 18,694
20 $ 27,688 $100,000 $100,000 $100,000 $100,000 $6,196 $10,776 $ 18,817 $ 32,934
25 $ 38,723 $100,000 $100,000 $100,000 $106,835 $4,691 $11,467 $ 25,775 $ 55,736
30 (Age 65) $ 52,149 $100,000 $100,000 $100,000 $153,081 $ 114 $ 9,162 $ 33,113 $ 91,034
35 $ 90,072 $100,000 $100,000 $100,000 $214,200 $8,187 $21,463 $ 51,929 $143,009
40 $136,211 $100,000 $100,000 $105,742 $297,951 $8,551 $30,173 $ 77,922 $219,563
45 $192,347 $100,000 $100,000 $138,439 $412,067 $ 0 $30,745 $110,401 $328,611
</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 second Scheduled
Premium will be $4,726.61; for a gross return of 4% the second Scheduled
Premium will be $4,726.61; for a gross return of 8% the second Scheduled
Premium will be $2,950.08; 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.

<PAGE>

<TABLE>
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 MAXIMUM CONTRACTUAL CHARGES
<CAPTION>
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) (-1.45% Net) (2.55% Net) (6.55% Net) (10.55% Net) (-1.45% Net) (2.55% Net) (6.55% Net) (10.55% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,000 $100,020 $100,048 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,000 $100,056 $100,139 $ 212 $ 290 $ 371 $ 454
3 $ 2,903 $100,000 $100,000 $100,108 $100,277 $ 694 $ 845 $ 1,005 $ 1,174
4 $ 3,948 $100,000 $100,000 $100,180 $100,471 $1,174 $ 1,420 $ 1,687 $ 1,978
5 $ 5,036 $100,000 $100,000 $100,273 $100,725 $1,649 $ 2,012 $ 2,417 $ 2,869
6 $ 6,167 $100,000 $100,000 $100,388 $101,048 $2,285 $ 2,787 $ 3,363 $ 4,023
7 $ 7,344 $100,000 $100,000 $100,526 $101,446 $2,899 $ 3,561 $ 4,342 $ 5,262
8 $ 8,568 $100,000 $100,000 $100,690 $101,929 $3,488 $ 4,333 $ 5,355 $ 6,594
9 $ 9,840 $100,000 $100,000 $100,882 $102,507 $4,054 $ 5,102 $ 6,405 $ 8,030
10 $ 11,164 $100,000 $100,000 $101,104 $103,189 $4,594 $ 5,866 $ 7,492 $ 9,577
15 $ 18,618 $100,000 $100,000 $102,733 $108,606 $5,919 $ 8,616 $ 12,572 $ 18,445
20 $ 27,688 $100,000 $100,000 $105,456 $118,899 $6,193 $10,765 $ 18,520 $ 31,963
25 $ 38,723 $100,000 $100,000 $109,605 $137,023 $4,688 $11,453 $ 24,875 $ 52,293
30 (Age 65) $ 52,149 $100,000 $100,000 $115,485 $167,449 $ 112 $ 9,145 $ 30,485 $ 82,449
35 $ 90,072 $100,000 $100,000 $120,259 $198,068 $8,184 $21,441 $ 50,560 $128,369
40 $136,211 $100,000 $100,000 $129,182 $269,782 $8,547 $30,141 $ 74,009 $198,805
45 $192,347 $100,000 $100,000 $143,749 $375,417 $ 0 $30,693 $101,276 $299,384
</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 $4,726.61; for a gross return of 8% the second Scheduled
Premium will be $3,902.07; for a gross return of 12% the second Scheduled
Premium will be $1,135.16. 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.

T4
<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 fifteen 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.

<PAGE>

be established by The Prudential. Subject to applicable law, The Prudential 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, The Prudential guarantees that the part of the Contract Fund allocated
to the fixed-rate option will accrue interest daily at an effective annual rate
that The Prudential 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 21. 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 23). 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 27).

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 24. 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 24.

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 24 and HOW A CONTRACT'S DEATH
BENEFIT WILL VARY, page 24. 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

<PAGE>

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 29.

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 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. 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 0.75% to 5% (but in some instances can exceed 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 1995 and 1994, The
Prudential deducted a total of approximately $23,620,000 and $22,131,000,
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. If you pay premiums more frequently, for example under a payroll
deduction plan with your employer, the charge may be more than $24 per year.
During 1995 and 1994, The Prudential received a total of approximately
$29,170,000 and $28,372,000, 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 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 1995 expressed as a percentage of the average assets
during the year are shown below:

<PAGE>

INVESTMENT OTHER TOTAL
PORTFOLIO ADVISORY EXPENSES * EXPENSES *
FEE
- -------------------------------------------------------------------------------
MONEY MARKET 0.40% 0.04% 0.44%
DIVERSIFIED BOND 0.40% 0.04% 0.44%
GOVERNMENT INCOME 0.40% 0.05% 0.45%
ZERO COUPON BOND 2000 0.40% 0.00% 0.40%
ZERO COUPON BOND 2005 0.40% 0.00% 0.40%
CONSERVATIVE BALANCED 0.55% 0.03% 0.58%
FLEXIBLE MANAGED 0.60% 0.03% 0.63%
HIGH YIELD BOND 0.55% 0.06% 0.61%
STOCK INDEX 0.35% 0.03% 0.38%
EQUITY INCOME 0.40% 0.03% 0.43%
EQUITY 0.45% 0.03% 0.48%
PRUDENTIAL JENNISON 0.60% 0.19% 0.79%
SMALL CAPITALIZATION STOCK 0.40% 0.20% 0.60%
GLOBAL 0.75% 0.31% 1.06%
NATURAL RESOURCES 0.45% 0.05% 0.50%
- -------------------------------------------------------------------------------

* 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, Equity Income, 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 0.48% for the Zero Coupon Bond Portfolio 2000,
0.49% for the Zero Coupon Bond Portfolio 2005. No such adjustments were
necessary for the High Yield Bond, Stock Index, Equity Income and Natural
Resources Portfolios during 1995. The Prudential intends to continue making
these adjustments in the future, although it retains the right to stop doing
so. For the years 1995, 1994 and 1993, The Prudential received a total of
$77,610,207, $66,413,206, and $51,197,499, respectively in investment advisory
fees.

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 21, the $0.03 per $1,000
charge is reduced to $0.01 for all Contract face amounts and will not exceed $1.
During 1995 and 1994, The Prudential received a total of approximately
$60,000,000, and $56,055,000, 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.

<PAGE>

(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 1995 and 1994, The Prudential received a
total of approximately $102,068,000 and $96,357,000, 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 the due date or during the grace period. During
1995 and 1994, The Prudential received a total of approximately $10,377,000 and
$9,487,000, 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.

The earnings of the Account are taxed as part of the operations of The
Prudential. No charge is being made currently to the Account for Company federal
income taxes. The Prudential will review the question of a charge to the Account
for Company federal income taxes periodically. Such a charge may be made in
future years for any federal income taxes that would be attributable to the
Contracts.

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 1995 and 1994, The Prudential received a
total of approximately $22,308,000 and $16,959,000, 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
in total or in part 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. If the
Contract is partially surrendered or the face amount is decreased during the
first 10 years, a proportionate amount of the contingent deferred sales charge
will be deducted from the Contract Fund.

<PAGE>

CUMULATIVE
TOTAL SALES
CUMULATIVE LOAD AS
SURRENDER, CUMULATIVE SALES LOAD CONTINGENT TOTAL PER-
LAST DAY OF SCHEDULED DEDUCTED DEFERRED SALES CENTAGE OF
YEAR NO. PREMIUMS FROM SALES LOAD SCHEDULED
PAID CONTRACT LOAD PREMIUMS
FUND 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. If the
Contract is partially surrendered or the face amount is decreased during the
first 10 years, a proportionate amount of the charge will be deducted from the
Contract Fund. During 1995 and 1994, The Prudential received a total of
approximately $9,266,000 and $7,971,000, respectively, from surrendered or
lapsed Contracts. The Prudential does not expect to make a profit on this
charge.

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 19. Some Contract
owners may also be eligible to have monthly premiums paid by pre-authorized
deductions from an employer's payroll.

<PAGE>

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, net of any excess premiums, 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 a 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. 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 26. 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 29.

If you elect to add a "rider" to your Contract that provides additional
benefits, see RIDERS, page 30, 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.

The Contract allows you to choose a level premium option. In that case, the
Scheduled Premium, (the amount of which can be quoted by 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 experience has
been unfavorable. If that level Scheduled Premium is paid when due, or within
the grace period (or missed premiums are paid later with interest), 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 24. 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 18. 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
generally 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.

<PAGE>

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 ("DCA") is available to
Contract owners. If you wish, premiums may be allocated to the portion of the
Money Market Subaccount used for this feature (the "DCA account"), and
designated dollar amounts will be transferred monthly from the DCA account to
other investment options available under the Contract, excluding the Money
Market Subaccount and the fixed-rate option, but including the Real Property
Account. Automatic monthly transfers must be at least 3% of the amount allocated
to the DCA 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.

When you establish DCA at issue, you must allocate to the DCA account the
greater of $2,000 or 10% of the initial premium payment. When you establish DCA
after issue, you must allocate to the DCA account at least $2,000. These
minimums are subject to change at The Prudential's discretion. After DCA has
been established and as long as the DCA account has a positive balance, you may
allocate or transfer amounts to the DCA account, subject to the limitations on
premium payments and transfers generally. In addition, if you pay premiums on an
annual or semi-annual basis, and you have already established DCA, your premium
allocation instructions may include an allocation of all or a portion of all
your premium payments to the DCA account.

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 ("NYSE") 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 NYSE is not
open on the Monthly Date, the transfer will take effect as of the end of the
valuation period on the next day that the NYSE is open. If the Monthly Date does
not occur in a particular month (e.g., February 30), the transfer will take
effect as of the end of the valuation period on the last day of the month that
the NYSE is open. Automatic monthly transfers will continue until the balance in
the DCA account reaches zero, or until the Contract owner gives notification of
a change in allocation or cancellation of the feature. If you have an
outstanding premium allocation to the DCA account, but your DCA option has
previously been canceled, premiums allocated to the DCA account will be
allocated to the Money Market Subaccount. Currently there is no charge for using
the DCA 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 26), 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.

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, provided you are enrolled to use the Telephone Transfer System. You
will automatically be enrolled to use the Telephone Transfer System unless you
elect not to have this privilege. The Prudential has adopted procedures designed
to ensure that requests by telephone are genuine. The Prudential will not be
held liable for following telephone instructions that we reasonably believe to
be genuine. 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

<PAGE>

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 18. 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 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.

<PAGE>

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 1995 ranged from 7.11% to 8.71%.

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. If the
Contract owner fails to keep the Contract in force, the amount of unpaid
Contract debt will be treated as a distribution which may be taxable. See LAPSE
AND REINSTATEMENT, page 26, and TAX TREATMENT OF CONTRACT BENEFITS - PRE-DEATH
DISTRIBUTIONS, page 29.

When a loan is made, an amount equal to the loan proceeds (the "loan amount")
will be transferred out of the subaccounts and the Real Property Account
(collectively, the "variable options"), and/or the fixed-rate option to
Prudential's general account. The investment options will normally be reduced
proportionally based on their balances at the time the loan is made. The loan
amount is treated as part of the Contract Fund. While a fixed-rate (5.5%) loan
is outstanding, the loan amount will be credited with the daily equivalent of an
annual return of 4% rather than with the actual rate of return of the variable
options or the fixed-rate option. While a loan made pursuant to the variable
loan interest rate provision is outstanding, the loan amount 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 The Prudential
fixes a new rate, the new interest rate will apply. When the loan is repaid, the
repayment is made to the investment options. The loan repayment is first divided
between the variable options as a group and the fixed-rate option in the same
proportions used for the transfer at the time the loan was made. The portion of
the loan repayment allocated to the variable options as a group is divided among
those options proportionately based on their balances at the time of loan
repayment.

Choosing the variable rate option may mean a higher outlay of cash when interest
payments are made or when the loan is repaid, but it may 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.

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.

<PAGE>

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 $7,811.48. 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 6.85% 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 29.

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 17.

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 29.

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 29.

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.

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

<PAGE>

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 29.

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 29.

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.

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.

<PAGE>

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.

<PAGE>

TAX TREATMENT OF CONTRACT BENEFITS

Each prospective purchaser is urged to consult a qualified tax advisor. The
following discussion is not intended as tax advice, and it is not a complete
statement of what the effect of federal income taxes will be under all
circumstances. Rather, it provides information about how The Prudential believes
the current laws apply in the most commonly occurring circumstances. There is no
guarantee, however, that the current federal income tax laws, regulations or
interpretations will not change.

TREATMENT AS LIFE INSURANCE. The Contract will be treated as "life insurance" as
long as it satisfies certain definitional tests set forth in section 7702 of the
Internal Revenue Code ("the Code") and as long as the underlying investment for
the Contract satisfies diversification requirements under section 817(h) of the
Code. (For further details on diversification requirements, see TAX TREATMENT OF
CONTRACT BENEFITS in the Statement of Additional Information.)

The Prudential believes that the Contract meets these definitional and
diversification requirements and accordingly will be treated as life insurance
for tax purposes. This means that (1) the death benefit should be excludible
from the gross income of the beneficiary under section 101(a) of the Code; and
(2) except as noted below, the Contract owner should not be taxed on any part of
the Contract fund, including additions attributable to interest, dividends or
appreciation.

However, Section 7702 of the Code which defines life insurance for tax purposes
gives the Secretary of the Treasury authority to prescribe regulations to carry
out the purposes of the section. In this regard, proposed regulations governing
mortality charges were issued in 1991 and proposed regulations under sections
101, 7702, and 7702A governing the treatment of life insurance policies that
provide accelerated death benefits were issued in 1992. None of these proposed
regulations has yet been finalized. Additional regulations under section 7702
may also be promulgated in the future. Moreover, in connection with the issuance
of temporary regulations under section 817(h), the Treasury Department announced
that such regulations do not provide guidance concerning the extent to which
Contract owners may direct their investments to particular divisions of a
separate account. Such guidance will be included in regulations or rulings under
section 817(d) relating to the definition of a variable contract.

The Prudential intends to comply with final regulations under section 7702 and
817. Therefore, it reserves the right to make such changes as it deems necessary
to assure that the Contract continues to qualify as life insurance for tax
purposes. Any such changes will apply uniformly to affected Contract owners and
will be made only after advance written notice to affected Contract owners.

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. The amount of any unpaid Contract debt
will, upon surrender or lapse, be added to the cash surrender value and treated,
for this purpose, as if it had been received. 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.

It is possible for this Contract to be classified as a Modified Endowment
Contract under at least two circumstances: premiums in excess of Scheduled
Premiums are paid; or a decrease in the face amount of insurance is made (or a
rider removed) during the first 7 Contract years. Moreover, the addition of a
rider or the increase in the face amount of insurance after the Contract date
may have an impact on the Contract's status as a Modified Endowment Contract.
Contract owners contemplating any of these steps should first consult a
qualified tax advisor and their Prudential representative.

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.

<PAGE>

RIDERS

Contract owners 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.

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

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 47 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 fifteen 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.

<PAGE>

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 Prudential Jennison Portfolio. See
INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES, page 46.

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.

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 primarily 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.

<PAGE>

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 44.

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 44,
and in detail in the Statement of Additional Information.

GOVERNMENT INCOME 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) Foreign Government Securities
including debt securities issued or guaranteed, as to payment of principal and
interest, by governments, governmental agencies, supranational entities and
other governmental entities denominated in U.S. dollars. A supranational entity
is an entity constituted by the national governments of several countries to
promote economic development. Examples of such supranational entities include,
among others, the World Bank (International Bank for Reconstruction and
Development), the European Investment Bank and the Asian Development Bank; and
(4) 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 portfolio manager to be of
comparable quality. A description of debt ratings is in the Statement of
Additional Information.

<PAGE>

("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 the following three
types of mortgage-backed securities: (i) those issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, such as Government
National Mortgage Association (GNMA), Federal National Mortgage Association
(FNMA) and Federal Home Loan Mortgage Corporation (FHLMC); (ii) those issued by
private issuers that represent an interest in or are collateralized by
mortgage-backed securities issued or guaranteed by the U.S. Government or one of
its agencies or instrumentalities; and (iii) those issued by private issuers
that represent an interest in or are collateralized by whole mortgage loans or
mortgage-backed securities without government guarantee but usually having some
form of private credit enhancement. The portfolio may invest in adjustable rate
and fixed rate mortgage securities. With respect to private mortgage-backed
securities not collateralized by securities of the U.S. Government or its
agencies, the portfolio will only purchase such securities rated not lower than
As by Moody's or AA by Standard & Poor's or similarly rated by another
nationally recognized rating service or, if unrated, of comparable quality in
the opinion of the portfolio manager. The mortgages backing these securities
include conventional 30 year fixed rate mortgages, 15 year fixed rate mortgages,
graduated payment mortgages, and adjustable rate mortgages (ARMs). The
mortgage-backed securities may include those representing an undivided ownership
interest in a pool of mortgages, e.g. GNMA, FNMA and FHLMC certificates. The
U.S. Government or the issuing agency guarantees the payment of interest and
principal of mortgaged-backed securities issued by the U.S. Government or its
agencies/instrumentalities. However, these guarantees do not extend to the
securities' yield or value, which are likely to vary inversely with fluctuations
in interest rates, nor do the guarantees extend to the yield or value of the
portfolio's shares. Mortgage-backed 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.
Mortgage-backed securities of the types described under (i) and (ii) above are
considered to be U.S. Government Securities for purposes of meeting the
requirement that at least 65% of the portfolio's assets be invested in U.S.
Government Securities.

<PAGE>

life. In periods of declining interest rates, there is a reasonable likelihood
that ARMs will experience increased rates of pre-payment of principal, However,
the major difference between ARMs and fixed rate mortgage securities is that the
interest rate and the rate of amortization of principal of ARMs can and do
change in accordance with movements in a particular pre-specified, published
interest rate index.

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. However, as a
defensive position, as the liquidation date of each portfolio draws near, more
than 20% of assets may be invested in interest bearing securities when deemed
appropriate in the view of the portfolio manager given prevailing market
conditions and investment opportunities available at the time. 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.

<PAGE>

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.

BALANCED PORTFOLIOS

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 15% 35% 50%
Bonds and Money Market 25% 65% 70%

<PAGE>

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 or if unrated, of comparable quality in the opinion of the
portfolio manager. 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 Flexible Managed
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 44,
and in detail in the Statement of Additional Information.

FLEXIBLE MANAGED 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%

<PAGE>

stocks of smaller capitalization companies, the portfolio manager will
concentrate on companies with a capitalization below $5 billion 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 Equity Portfolio or the Conservative
Balanced 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
44.

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 (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 fixed-income securities 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 44.

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 44,
and in detail in the Statement of Additional Information.

<PAGE>

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, 1995 those companies
were: General Electric Co., American Telephone and Telegraph Co., Exxon Corp.,
Coca-Cola Co., and Merck & Co.,Inc.

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>

- -------------------------------------------------------------------------------
*S&P 500 WITH DIVIDENDS REINVESTED
ANNUAL PERCENTAGE CHANGE
- -------------------------------------------------------------------------------
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 1995 +37.58
1983 +22.38
- -------------------------------------------------------------------------------
Source: Standard & Poor's Corporation. Percentage change calculated in
accordance with specifications of SEC release number IA-327.
- -------------------------------------------------------------------------------

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

-------------------------------------------------------------
ANNUAL PERCENTAGE TOTAL RETURN
CHANGE S&P 500 STOCK INDEX
WITH PORTFOLIO
DIVIDENDS (AFTER DEDUCTION OF
REINVESTED 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
1995 +37.58 +37.06
-------------------------------------------------------------

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>

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 44, 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, PMFIM, has been portfolio manager of the Equity
Income Portfolio since 1988. Mr. Spitz is also the portfolio manager of the
Prudential Equity Income Fund, Inc.

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.

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, PMFIM, has been portfolio manager of the
Equity Portfolio since 1990. Mr. Jackson is also portfolio manager of the
Prudential Equity Fund, Inc.

<PAGE>

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 Statement of Additional
Information; and (v) obligations issued or guaranteed by the U.S. Government,
its agencies and instrumentalities.

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
44 through 45, 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.

The following table shows the performance of the S&P SmallCap 600 Index for the
10 years ending in 1995. 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.

<PAGE>

S&P SMALLCAP 600 WITH DIVIDENDS
REINVESTED
ANNUAL PERCENTAGE CHANGE
----------------------------------------------------------

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
1995 +29.96

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

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 44, and in detail in the
Statement of Additional Information.

Wai Chiang, Director of Portfolio Management, Prudential Diversified Investment
Strategies, has been portfolio manager of 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 44.

<PAGE>

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 44, and in
detail in the Statement of Additional Information.

Daniel Duane, Managing Director, PMFIM, has been the portfolio manager of the
Global Portfolio since 1990. Mr. Duane also manages several mutual funds
including the Prudential Global Fund, Inc.

SPECIALIZED PORTFOLIOS

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. The Prudential 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.
However, the portfolio will not invest 25% or more of its total assets in the
securities of companies in any one natural resource industry.

"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%.

<PAGE>

FOREIGN SECURITIES

The Global Portfolio may invest up to 100% of its total assets in common stock
and convertible securities denominated in a foreign currency and issued by
foreign or domestic issuers. The Diversified Bond and High Yield Bond Portfolios
may each invest up to 20% of their assets in United States currency denominated
debt securities issued outside the United States by foreign or domestic issuers.
In addition, the bond components of the Conservative Balanced and Flexible
Managed Portfolios may each invest up to 20% of their assets in such securities.
To the extent permitted by applicable insurance law, the Equity Income,
Conservative Balanced and Flexible Managed Portfolios may invest up to 30% of
their total assets in debt and equity securities denominated in a foreign
currency and issued by foreign or domestic issuers. Further, to the extent
permitted by applicable insurance law, the Equity, Prudential Jennison, 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."

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 Diversified Bond, High Yield Bond, Government Income, Conservative Balanced
and Flexible Managed Portfolios may sell securities they do not own in
anticipation of a decline in the market value of those securities ("short

<PAGE>

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 Diversified Bond, High Yield Bond, and Government Income Portfolios, as well
as the fixed income portions of the Conservative Balanced and Flexible Managed
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 Diversified Bond, High Yield Bond, and Government Income
Portfolios, as well as the fixed income portions of the Conservative Balanced
and Flexible Managed 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.

LOANS OF PORTFOLIO SECURITIES

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.

<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 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, 1995 was over $314 billion, which includes over
$219 billion owned by The Prudential and approximately $95 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 14 of the Series Fund's 15 portfolios, by its wholly-owned
subsidiary PIC, pursuant to the Service Agreement between The Prudential and
PIC. The Agreement provides that a portion of the fee received by The Prudential
for providing investment advisory services will be paid to PIC. The Conservative
Balanced and Flexible Managed Portfolios are managed by PIC, using a team of
portfolio managers under the supervision of Theresa Hamacher and Mark Stumpp,
Managing Directors, PIC. Investment advisory services with respect to the
Prudential Jennison 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 Prudential Jennison
Portfolio will be paid to Jennison. PIC and Jennison are both registered as
investment advisors under the Investment Advisers Act of 1940.

For the year ended December 31, 1995, the Series Fund's total expenses were
0.55% 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.

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. 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.

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

<PAGE>

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.

On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of The Prudential. There have been no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of the accountant, would have caused them to make a reference
to the matter in their reports.

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.

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. For new Contracts issued on or
about July 1, 1996 the commission rates for the

<PAGE>

second through tenth years will change to no more than 6% of the
Scheduled Premiums 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.

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

<PAGE>

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.

<PAGE>

(This page intentionally left blank.)

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF NET ASSETS
December 31, 1995

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

MONEY DIVERSIFIED FLEXIBLE
TOTAL MARKET BOND EQUITY MANAGED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2].......... $3,599,591,117 $ 91,504,205 $ 102,110,437 $ 796,560,693 $ 955,172,457
-------------- -------------- -------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 112,981 0 112,981 0 0
-------------- -------------- -------------- -------------- --------------
NET ASSETS........................................ $3,599,478,136 $ 91,504,205 $ 101,997,456 $ 796,560,693 $ 955,172,457
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $3,588,840,453 $ 91,078,689 $ 101,673,097 $ 792,519,007 $ 953,458,614
Equity of The Prudential Insurance Company of
America....................................... 10,637,683 425,516 324,359 4,041,686 1,713,843
-------------- -------------- -------------- -------------- --------------
$3,599,478,136 $ 91,504,205 $ 101,997,456 $ 796,560,693 $ 955,172,457
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>

STATEMENTS OF OPERATIONS
For the year ended December 31, 1995

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

MONEY DIVERSIFIED FLEXIBLE
TOTAL MARKET BOND EQUITY MANAGED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 111,690,657 $ 4,806,197 $ 6,288,926 $ 14,649,870 $ 27,370,012

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 22,111,170 588,554 636,478 4,664,094 5,819,777
Reimbursement for excess expenses [Note 3D]..... (38,198) 0 0 0 0
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 22,072,972 588,554 636,478 4,664,094 5,819,777
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 89,617,685 4,217,643 5,652,448 9,985,776 21,550,235
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 111,700,229 0 222,002 27,318,049 39,426,921
Realized gain (loss) on shares redeemed
[average cost basis].......................... 235,828 0 30,407 11,957 56,509
Net unrealized gain on investments.............. 427,073,308 0 10,042,691 129,700,617 110,261,394
-------------- -------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 539,009,365 0 10,295,100 157,030,623 149,744,824
-------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 628,627,050 $ 4,217,643 $ 15,947,548 $ 167,016,399 $ 171,295,059
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>

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

<PAGE>

STATEMENTS OF NET ASSETS (CONTINUED)
December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
ZERO ZERO
COUPON COUPON HIGH
CONSERVATIVE BOND BOND YIELD STOCK
BALANCED 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].......... $ 786,605,541 $ 0 $ 20,466,375 $ 68,050,361 $ 297,367,890
-------------- -------------- -------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
NET ASSETS........................................ $ 786,605,541 $ 0 $ 20,466,375 $ 68,050,361 $ 297,367,890
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 785,777,721 $ 0 $ 20,452,359 $ 67,967,542 $ 296,625,930
Equity of The Prudential Insurance Company of
America....................................... 827,820 0 14,016 82,819 741,960
-------------- -------------- -------------- -------------- --------------
$ 786,605,541 $ 0 $ 20,466,375 $ 68,050,361 $ 297,367,890
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------

EQUITY NATURAL
INCOME RESOURCES GLOBAL
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2].......... $ 223,168,163 $ 101,098,037 $ 49,702,460
-------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 0 0 0
-------------- -------------- --------------
NET ASSETS........................................ $ 223,168,163 $ 101,098,037 $ 49,702,460
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 222,179,341 $ 100,775,478 $ 49,235,307
Equity of The Prudential Insurance Company of
America....................................... 988,822 322,559 467,153
-------------- -------------- --------------
$ 223,168,163 $ 101,098,037 $ 49,702,460
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

STATEMENTS OF OPERATIONS (CONTINUED)
For the year ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
ZERO ZERO
COUPON COUPON HIGH
CONSERVATIVE BOND BOND YIELD STOCK
BALANCED 1995 2000 BOND INDEX
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 30,522,743 $ 313,598 $ 837,457 $ 6,585,427 $ 5,408,994

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 5,231,266 30,367 131,947 434,315 1,743,600
Reimbursement for excess expenses [Note 3D]..... 0 (6,868) (14,886) 0 0
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 5,231,266 23,499 117,061 434,315 1,743,600
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 25,291,477 290,099 720,396 6,151,112 3,665,394
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 26,552,510 77,686 759,176 0 2,097,393
Realized gain (loss) on shares redeemed
[average cost basis].......................... 97,662 (324,158) 16,969 (58,578) 293,916
Net unrealized gain on investments.............. 55,648,508 231,423 1,982,145 3,163,738 66,716,563
-------------- -------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 82,298,680 (15,049) 2,758,290 3,105,160 69,107,872
-------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 107,590,157 $ 275,050 $ 3,478,686 $ 9,256,272 $ 72,773,266
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------

EQUITY NATURAL
INCOME RESOURCES GLOBAL
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 7,622,371 $ 1,146,237 $ 714,936
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 1,320,659 630,840 260,887
Reimbursement for excess expenses [Note 3D]..... 0 (14) 0
-------------- -------------- --------------
NET EXPENSES...................................... 1,320,659 630,826 260,887
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 6,301,712 515,411 454,049
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 9,279,251 4,578,307 915,804
Realized gain (loss) on shares redeemed
[average cost basis].......................... 46,601 68,144 4,998
Net unrealized gain on investments.............. 18,945,636 14,973,181 4,212,026
-------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 28,271,488 19,619,632 5,132,828
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 34,573,200 $ 20,135,043 $ 5,586,877
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 AND A11.
A2

<PAGE>

STATEMENTS OF NET ASSETS (CONTINUED)
December 31, 1995

<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
INCOME 2005 JENNISON STOCK
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2].......... $ 73,135,507 $ 21,163,904 $ 7,658,781 $ 5,826,306

LIABILITIES
Payable to Related Separate Account............. 0 0 0 0
-------------- -------------- -------------- --------------
NET ASSETS........................................ $ 73,135,507 $ 21,163,904 $ 7,658,781 $ 5,826,306
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 73,073,051 $ 21,001,313 $ 7,426,649 $ 5,596,355
Equity of The Prudential Insurance Company of
America....................................... 62,456 162,591 232,132 229,951
-------------- -------------- -------------- --------------
$ 73,135,507 $ 21,163,904 $ 7,658,781 $ 5,826,306
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

STATEMENTS OF OPERATIONS (CONTINUED)
For the year ended December 31, 1995

<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
INCOME 2005 JENNISON* STOCK*
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 4,467,531 $ 939,899 $ 376 $ 16,083

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 478,032 118,323 12,370 9,661
Reimbursement for excess expenses [Note 3D]..... 0 (16,430) 0 0
-------------- -------------- -------------- --------------
NET EXPENSES...................................... 478,032 101,893 12,370 9,661
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 3,989,499 838,006 (11,994) 6,422
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 0 425,717 0 47,413
Realized gain (loss) on shares redeemed
[average cost basis].......................... (8,599) 0 0 0
Net unrealized gain on investments.............. 7,403,233 3,328,939 281,405 181,809
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 7,394,634 3,754,656 281,405 229,222
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 11,384,133 $ 4,592,662 $ 269,411 $ 235,644
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
*Commenced
Business
on 5/1/95
</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, 1995 and 1994

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

MONEY DIVERSIFIED
TOTAL MARKET BOND
------------------------------ ------------------------------ ------------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 89,617,685 $ 63,087,032 $ 4,217,643 $ 2,402,301 $ 5,652,448 $ 4,226,871
Capital gains distributions
received....................... 111,700,229 54,709,623 0 0 222,002 158,594
Realized gain (loss) on shares
redeemed [average cost basis].. 235,828 167,179 0 0 30,407 4,403
Net unrealized gain (loss) on
investments.................... 427,073,308 (155,373,175) 0 0 10,042,691 (7,162,380)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS. 628,627,050 (37,409,341) 4,217,643 2,402,301 15,947,548 (2,772,512)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS........................ 394,015,275 560,003,324 8,955,240 6,444,757 9,712,345 11,829,119
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM SURPLUS
TRANSFERS........................ (10,302,284) (942,487) 161,461 (213,654) 143,151 (532,267)
-------------- -------------- -------------- -------------- -------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 1,012,340,041 521,651,496 13,334,344 8,633,404 25,803,044 8,524,340

NET ASSETS:
Beginning of year................ 2,587,138,095 2,065,486,599 78,169,861 69,536,457 76,194,412 67,670,072
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $3,599,478,136 $2,587,138,095 $ 91,504,205 $ 78,169,861 $ 101,997,456 $ 76,194,412
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</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, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------

FLEXIBLE
EQUITY MANAGED
------------------------------ ------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 9,985,776 $ 7,323,925 $ 21,550,235 $ 14,060,998
Capital gains distributions
received....................... 27,318,049 19,666,506 39,426,921 18,931,168
Realized gain (loss) on shares
redeemed [average cost basis].. 11,957 86,672 56,509 0
Net unrealized gain (loss) on
investments.................... 129,700,617 (18,362,891) 110,261,394 (56,779,739)
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS. 167,016,399 8,714,212 171,295,059 (23,787,573)
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS........................ 130,026,767 123,951,671 86,936,282 142,298,237
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM SURPLUS
TRANSFERS........................ (595,673) 452,486 (2,895,506) (55,717)
-------------- -------------- -------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 296,447,493 133,118,369 255,335,835 118,454,947

NET ASSETS:
Beginning of year................ 500,113,200 366,994,831 699,836,622 581,381,675
-------------- -------------- -------------- --------------
End of year...................... $ 796,560,693 $ 500,113,200 $ 955,172,457 $ 699,836,622
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------

<CAPTION>
--------------------------------------------------------------
ZERO
COUPON
CONSERVATIVE BOND
BALANCED 1995
------------------------------ ------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 25,291,477 $ 16,966,301 $ 290,099 $ 263,254
Capital gains distributions
received....................... 26,552,510 6,635,310 77,686 1,011
Realized gain (loss) on shares
redeemed [average cost basis].. 97,662 31,649 (324,158) 586
Net unrealized gain (loss) on
investments.................... 55,648,508 (33,092,575) 231,423 (288,227)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS. 107,590,157 (9,459,315) 275,050 (23,376)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS........................ 44,932,925 127,164,401 (5,059,111) 338,277
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM SURPLUS
TRANSFERS........................ (3,421,660) (1,173,893) (20,536) (106,380)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 149,101,422 116,531,193 (4,804,597) 208,521
NET ASSETS:
Beginning of year................ 637,504,119 520,972,926 4,804,597 4,596,076
-------------- -------------- -------------- --------------
End of year...................... $ 786,605,541 $ 637,504,119 $ 0 $ 4,804,597
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</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, 1995 and 1994

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

ZERO
COUPON HIGH
BOND YIELD STOCK
2000 BOND INDEX
------------------------------ ------------------------------ ------------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 720,396 $ 1,032,410 $ 6,151,112 $ 4,958,854 $ 3,665,394 $ 3,181,988
Capital gains distributions
received....................... 759,176 31,655 0 38 2,097,393 267,733
Realized gain (loss) on shares
redeemed [average cost basis].. 16,969 1,031 (58,578) 5,625 293,916 58,302
Net unrealized gain (loss) on
investments.................... 1,982,145 (2,416,751) 3,163,738 (6,827,471) 66,716,563 (2,856,319)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS. 3,478,686 (1,351,655) 9,256,272 (1,862,954) 72,773,266 651,704
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS....................... 846,650 900,334 4,374,480 9,774,435 33,935,158 26,983,569
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM SURPLUS
TRANSFERS....................... (645,588) 409,426 (119,164) (576,511) (100,558) (298,727)
-------------- -------------- -------------- -------------- -------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................. . 3,679,748 (41,895) 13,511,588 7,334,970 106,607,866 27,336,546

NET ASSETS:
Beginning of yea................ 16,786,627 16,828,522 54,538,773 47,203,803 190,760,024 163,423,478
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 20,466,375 $ 16,786,627 $ 68,050,361 $ 54,538,773 $ 297,367,890 $ 190,760,024
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</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, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------------------------

EQUITY NATURAL
INCOME RESOURCES GLOBAL**
------------------------------ ------------------------------ ------------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 6,301,712 $ 4,108,092 $ 515,411 $ 203,463 $ 454,049 $ (11,478)
Capital gains distributions
received....................... 9,279,251 7,633,088 4,578,307 1,375,424 915,804 5,622
Realized gain (loss) on shares
redeemed [average cost basis].. 46,601 34,607 68,144 22,045 4,998 0
Net unrealized gain (loss) on
investments.................... 18,945,636 (11,478,198) 14,973,181 (5,314,192) 4,212,026 (1,421,127)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS. 34,573,200 297,589 20,135,043 (3,713,260) 5,586,877 (1,426,983)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS........................ 38,554,244 51,018,498 9,214,757 22,317,372 16,098,541 29,174,840
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM SURPLUS
TRANSFERS........................ (646,585) (376,490) (398,931) (47,480) (1,921,654) 2,190,839
-------------- -------------- -------------- -------------- -------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 72,480,859 50,939,597 28,950,869 18,556,632 19,763,764 29,938,696

NET ASSETS:
Beginning of year................ 150,687,304 99,747,707 72,147,168 53,590,536 29,938,696 0
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 223,168,163 $ 150,687,304 $ 101,098,037 $ 72,147,168 $ 49,702,460 $ 29,938,696
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
**Commenced
Business
on 5/1/94

<CAPTION>
GOVERNMENT
INCOME
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 3,989,499 $ 3,587,433
Capital gains distributions
received....................... 0 0
Realized gain (loss) on shares
redeemed [average cost basis].. (8,599) (74,828)
Net unrealized gain (loss) on
investments.................... 7,403,233 (7,299,824)
-------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS. 11,384,133 (3,787,219)
-------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS........................ 481,705 4,183,444
-------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM SURPLUS
TRANSFERS........................ (293,673) (467,937)
-------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 11,572,165 (71,712)
NET ASSETS:
Beginning of year................ 61,563,342 61,635,054
-------------- --------------
End of year...................... $ 73,135,507 $ 61,563,342
-------------- --------------
-------------- --------------
</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, 1995 and 1994

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

ZERO
COUPON SMALL
BOND PRUDENTIAL CAPITALIZATION
2005 JENNISON* STOCK*
------------------------------ -------------- --------------
1995 1994 1995 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>

OPERATIONS:
Net investment income (loss)..... $ 838,006 $ 782,620 $ (11,994) $ 6,422
Capital gains distributions
received....................... 425,717 3,474 0 47,413
Realized gain (loss) on shares
redeemed [average cost basis].. 0 (2,913) 0 0
Net unrealized gain (loss) on
investments.................... 3,328,939 (2,073,481) 281,405 181,809
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS. 4,592,662 (1,290,300) 269,411 235,644
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS........................ 2,469,936 3,624,370 7,175,027 5,360,329
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM SURPLUS
TRANSFERS........................ 7,956 (146,182) 214,343 230,333
-------------- -------------- -------------- --------------

TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 7,070,554 2,187,888 7,658,781 5,826,306

NET ASSETS:
Beginning of year................ 14,093,350 11,905,462 0 0
-------------- -------------- -------------- --------------
End of year...................... $ 21,163,904 $ 14,093,350 $ 7,658,781 $ 5,826,306
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
*Commenced
Business
on 5/1/95
</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, 1995 AND DECEMBER 31, 1994

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 sixteen 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 Zero Coupon Bond 1995 subaccount was liquidated on November 15, 1995. On
that date, all shares held in the corresponding portfolio of the Series Fund
were redeemed and the redemption proceeds were transferred to the Money Market
subaccount, unless otherwise directed, in accordance with the prospectus.

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, 1995 were as
follows:
<TABLE>
<CAPTION>
PORTFOLIOS
-----------------------------------------------------------------------------
PORTFOLIO MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
INFORMATION MARKET BOND EQUITY MANAGED BALANCED
- ------------------------- ------------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Number of shares: 9,150,420 9,025,842 31,067,291 53,483,137 51,382,708
Net asset value per
share: $ 10.0000 $ 11.3131 $ 25.6399 $ 17.8593 $ 15.3088
Cost: $ 91,504,205 $ 98,171,648 $ 646,301,327 $ 863,983,157 $ 746,204,653

PORTFOLIOS (CONTINUED)
-----------------------------------------------------------------------------
ZERO ZERO
COUPON COUPON HIGH
PORTFOLIO BOND BOND YIELD STOCK EQUITY
INFORMATION 1995 2000 BOND INDEX INCOME
- ------------------------- ------------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Number of shares: 0 1,541,954 8,723,958 14,901,125 13,715,785
Net asset value per
share: $ 0.0000 $ 13.2730 $ 7.8004 $ 19.9561 $ 16.2709
Cost: $ 0 $ 19,405,578 $ 69,244,984 $ 212,396,329 $ 206,403,917
</TABLE>

<TABLE>
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------------------------------------------
ZERO SMALL
PORTFOLIO NATURAL GOVERNMENT COUPON PRUDENTIAL CAPITALIZATION
INFORMATION RESOURCES GLOBAL INCOME BOND 2005 JENNISON STOCK
- ------------------------- ------------- ------------- -------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Number of shares: 5,853,358 3,199,757 6,240,811 1,604,549 610,418 492,362
Net asset value per
share: $ 17.2718 $ 15.5332 $ 11.7189 $ 13.1899 $ 12.5468 $ 11.8334
Cost: $ 83,470,176 $ 46,911,561 $ 70,390,270 $ 18,878,006 $ 7,377,376 $ 5,644,497
</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%.

A10

<PAGE>

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.

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 Equity Income 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 (withdrawals) 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 $22.9
million and $23.0 million for the years ended December 31, 1995 and December 31,
1994, respectively, were directed to the Flexible Managed subaccount. Equity of
Contract owners in that subaccount at December 31, 1995 and December 31, 1994
includes approximately $190.4 million and $136.7 million, respectively, owned by
The Prudential.

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, Diversified Bond, Equity, Flexible
Managed, Conservative Balanced, Zero Coupon Bond 1995, Zero Coupon Bond 2000,
High Yield Bond, Stock Index, Equity Income, Natural Resources, Global,
Government Income, Zero Coupon Bond 2005, Prudential Jennison, and Small
Capitalization Stock subaccounts) as of December 31, 1995, 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, 1995. 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,
1995, 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 15, 1996

A12

<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION

December 31,
1995 1994
-------- --------
(In Millions)

ASSETS
Fixed maturities .............................. $ 85,585 $ 78,620
Equity securities ............................. 1,937 2,327
Mortgage loans ................................ 23,680 26,199
Investment real estate ........................ 1,568 1,600
Policy loans .................................. 6,800 6,631
Other invested assets ......................... 4,019 5,147
Short-term investments ........................ 7,874 10,630
Securities purchased under
agreements to resell ......................... 5,130 5,591
Trading account securities .................... 3,658 6,341
Cash .......................................... 1,633 1,109
Accrued investment income ..................... 1,915 1,932
Premiums due and deferred ..................... 2,402 2,712
Broker-dealer receivables ..................... 8,136 8,164
Other assets .................................. 6,608 6,266
Assets held in Separate Accounts .............. 58,435 48,633
-------- --------
TOTAL ASSETS ................................... $219,380 $211,902
======== ========
LIABILITIES, AVR AND SURPLUS
Liabilities:
Policy liabilities and insurance reserves:
Future policy benefits and claims ............ $ 94,973 $ 98,354
Unearned premiums ............................ 836 1,144
Other policy claims and
benefits payable ............................ 1,932 1,848
Policy dividends ............................. 1,894 1,822
Policyholder account balances ................ 12,540 12,195
Securities sold under agreements
to repurchase ................................ 7,993 8,919
Notes payable and other borrowings ............ 9,157 12,009
Broker-dealer payables ........................ 6,083 6,198
Other liabilities ............................. 14,976 11,983
Liabilities related to Separate Accounts ...... 57,586 47,946
-------- --------
Total Liabilities .............................. 207,970 202,418
-------- --------
Asset Valuation Reserve (AVR) .................. 2,742 2,035
-------- --------
Surplus:
Capital Notes ................................. 984 298
Special surplus fund .......................... 1,274 1,097
Unassigned surplus ............................ 6,410 6,054
-------- --------
Total Surplus .................................. 8,668 7,449
-------- --------
TOTAL LIABILITIES, AVR
AND SURPLUS ................................... $219,380 $211,902
======== ========

CONSOLIDATED STATEMENTS OF
OPERATIONS AND CHANGES IN SURPLUS AND ASSET VALUATION RESERVE (AVR)

Years Ended December 31,
1995 1994 1993
------- ------- -------
(In Millions)

REVENUE
Premiums and annuity
considerations ........................... $27,413 $29,698 $29,982
Net investment income ..................... 9,844 9,595 10,090
Broker-dealer revenue ..................... 3,800 3,677 4,025
Realized investment
gains/(losses) ........................... 882 (450) 953
Other income .............................. 972 1,037 924
------- ------- -------
Total Revenue .............................. 42,911 43,557 45,974
------- ------- -------
BENEFITS AND EXPENSES
Current and future benefits
and claims ............................... 27,854 30,788 30,573
Insurance and underwriting
expenses ................................. 4,577 4,830 4,982
Limited partnership matters ............... 0 1,422 390
General, administrative and
other expenses ........................... 6,034 5,794 5,575
------- ------- -------
Total Benefits and Expenses ................ 38,465 42,834 41,520
------- ------- -------
Income from operations
before dividends
and income taxes .......................... 4,446 723 4,454
Dividends to policyholders ................. 2,519 2,290 2,339
------- ------- -------
Income/(loss) before
income taxes .............................. 1,927 (1,567) 2,115
Income tax provision/(benefit) ............. 1,348 (392) 1,236
------- ------- -------
NET INCOME/(LOSS) .......................... 579 (1,175) 879
Surplus, beginning of year ................. 7,449 8,004 7,365
Issuance of Capital Notes
(after net charge-off of
non-admitted prepaid
postretirement benefit
cost of $113 in 1993) ..................... 686 0 185
Net unrealized investment
gains/(losses) and change
in AVR .................................... (46) 620 (425)
------- ------- -------
SURPLUS, END OF YEAR ....................... 8,668 7,449 8,004
------- ------- -------
AVR, beginning of year ..................... 2,035 2,687 2,457
Increase/(decrease) in AVR ................. 707 (652) 230
------- ------- -------
AVR, END OF YEAR ........................... 2,742 2,035 2,687
------- ------- -------
TOTAL SURPLUS AND AVR ...................... $11,410 $ 9,484 $10,691
======= ======= =======

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,
1995 1994 1993
-------- -------- --------
(In Millions)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income/(loss) ..................... $ 579 $(1,175) $ 879
Adjustments to reconcile net
income/(loss) to cash flows from
operating activities:
(Decrease)/increase in policy
liabilities and insurance
reserves ........................... (1,691) 1,289 2,747
Net increase in Separate
Accounts ........................... (162) (52) (59)
Realized investment
(gains)/losses ..................... (882) 450 (953)
Depreciation, amortization and
other non-cash items ............... 217 379 261
Gain on sale and results of
operations from reinsurance
segment ............................ (72) 0 0
Decrease/(increase) in
operating assets:
Mortgage loans ...................... (305) (226) (226)
Policy loans ........................ (169) (175) (174)
Securities purchased
under agreements to
resell ............................. 139 2,979 (2,049)
Trading account
securities ......................... 2,707 2,324 (2,087)
Broker-dealer
receivables ....................... 28 969 (1,803)
Other assets ........................ 205 3,254 (2,172)
(Decrease)/increase in
operating liabilities:
Securities sold under
agreements to repurchase ........... (475) (3,247) 1,134
Broker-dealer payables .............. (115) 788 1,280
Other liabilities ................... 501 (3,170) 1,794
-------- -------- --------
Cash Flows from Operating
Activities ........................... 505 4,387 (1,428)
-------- -------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities ..................... 100,317 90,914 100,023
Equity securities .................... 2,302 1,426 1,725
Mortgage loans ....................... 5,567 4,154 4,789
Investment real estate ............... 291 407 336
Other invested assets ................ 1,943 1,022 1,352
Property and equipment ............... 3 637 6
Sale of reinsurance segment .......... 790 0 0
Payments for the purchase of:
Fixed maturities ..................... (107,192) (91,032) (101,217)
Equity securities .................... (1,450) (1,535) (1,085)
Mortgage loans ....................... (3,002) (3,446) (3,530)
Investment real estate ............... (387) (161) (196)
Other invested assets ................ (515) (1,687) (531)
Property and equipment ............... (238) (392) (640)
Short-term investments (net) .......... 2,756 (4,281) (2,150)
Net change in cash placed as
collateral for securities loaned ..... 1,379 2,011 (589)
-------- -------- --------
Cash Flows from Investing
Activities ........................... $ 2,564 $ (1,963) $ (1,707)
-------- -------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net (payments)/proceeds of
short-term debt ...................... $ (2,489) $ (1,115) $ 1,106
Proceeds from the issuance of
long-term debt ....................... 763 345 1,228
Payments for the settlement of
long-term debt ....................... (1,376) (760) (721)
Proceeds/(payments) from
unmatched securities purchased
under agreements to resell ........... 322 1,086 (47)
(Payments)/proceeds for
unmatched securities sold under
agreements to repurchase ............. (451) (2,537) 1,707
Proceeds from the issuance of
Capital Notes ........................ 686 0 298
-------- -------- --------
Cash Flows from
Financing Activities ................. (2,545) (2,981) 3,571
-------- -------- --------
Net increase/(decrease)
in cash .............................. 524 (557) 436
Cash, beginning of year ............... 1,109 1,666 1,230
-------- -------- --------
CASH, END OF YEAR ..................... $ 1,633 $ 1,109 $ 1,666
======== ======== ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Income tax payments, net of refunds, made during 1995, 1994 and 1993 were $430
million, $64 million and $933 million, respectively. Interest payments made
during 1995, 1994 and 1993 were $1,413 million, $1,429 million and $1,171
million, respectively.

The 1995 amounts are presented net of the cash flow activities of the
reinsurance segment.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-2
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

For The Years Ended December 31, 1995, 1994 and 1993

1. ACCOUNTING POLICIES AND PRINCIPLES

A. PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
The Prudential Insurance Company of America ("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 care insurance, property and casualty insurance,
securities brokerage, asset management, investment advisory services, 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 the National Association of
Insurance Commissioners ("NAIC") and their respective domiciliary state
insurance departments. Prescribed statutory accounting practices include
publications of the NAIC, state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass
all accounting practices not so prescribed.

The Company, with permission from the New Jersey Department of Insurance
("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.

Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the 1995 presentation.

Management has used estimates and assumptions in the preparation of the
financial statements that affect the reported amounts of assets,
liabilities, revenue and expenses. Actual results could differ from those
estimates.

Life and General Insurance Operations--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. Expenses incurred in
connection with acquiring new insurance business, including such
acquisition costs as sales commissions, are charged to operations as
incurred.

Broker-Dealer Operations--The Company is engaged in the securities industry
in the United States, with operations in various foreign countries. Client
transactions are recorded on a settlement date basis. Securities and
commodities commission revenues and related expenses are accrued for client
transactions on a trade date basis. Investment banking revenue includes
advisory fees, selling concessions, management and underwriting fees, and
is recorded, net of related expenses, when the services are substantially
completed. Asset management and portfolio service fees are fees earned on
total assets under management and mutual funds sponsored by the Company and
third parties. Certain costs that are directly related to the sales of
mutual funds are deferred.

C. 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
fair value.

Mortgage loans are stated primarily at unpaid principal balances. Mortgage
loans for non-life subsidiaries are recorded net of valuation reserves.

Investment real estate, except for real estate acquired in satisfaction of
debt, is carried at cost less accumulated straight-line depreciation,
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.

Policy loans are stated at unpaid principal balances.

Other invested assets primarily represent the Company's investment in joint
ventures and other forms of partnerships. These investments are carried
primarily on the equity method where the Company has the ability to
exercise significant influence over the operating and financial policies of
the entity.

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

F-3

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

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, to value the
securities daily, and to require adjustment of the underlying collateral
when deemed necessary.

Trading account securities from broker-dealer operations are reported based
upon quoted market prices.

Securities lending is a program whereby securities are loaned to third
parties, primarily major brokerage firms. As of December 31, 1995 and 1994,
the estimated fair values of loaned securities were $7,982 million and
$8,506 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. The
offsetting collateral liability as of December 31, 1995 and 1994 is $5,690
million and $4,252 million, respectively. Non-cash collateral is recorded
in memorandum records and is not reflected in the consolidated financial
statements.

Derivative financial instruments--For the Company's non-insurance
subsidiaries, derivatives used for trading purposes are recorded at fair
value as of the reporting date. Realized and unrealized changes in fair
values are recognized in "Broker-dealer revenue" and "Other income" 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 asset/liability risk management activities, which
support life and health insurance and annuity contracts, are recorded at
fair value with unrealized gains and losses recorded in "Net unrealized
investment gains/(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 Interest
Maintenance Reserve (IMR).

D. SEPARATE ACCOUNTS

These assets and liabilities, reported at estimated market value, represent
segregated funds invested for pension and other clients. 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.

E. CAPITAL NOTES

Interest payments on the 1993 Capital Notes are preapproved by the
Department. This practice differs from that prescribed by the NAIC. The
NAIC practices provide for Insurance Commissioner approval of every
interest payment before the payment is made. The interest payments on the
Capital Notes issued in 1995 comply with prescribed NAIC practices.
Prudential has included all notes as a component of surplus (Note 7).

F. FUTURE APPLICATION OF ACCOUNTING STANDARDS

The Financial Accounting Standards Board (the "FASB") issued 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 not allowing 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. The Company is assessing the impact of Interpretation No. 40 on
its consolidated financial statements. Such effort has not been completed
and management currently believes surplus will increase significantly.

F-4

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

2. FUTURE POLICY BENEFITS, RESERVE FOR LOSSES AND LOSS EXPENSES

A. For life insurance, general insurance and annuities, unpaid claims and
claim adjustment expenses include estimates of benefits and associated
settlement expenses on reported claims and those which are incurred but not
reported.

Activity in the liability for unpaid claims and claim adjustment expenses
is:

1995 1994 1993
--------------------- --------------------- -----------------------
Accident Property Accident Property Accident Property
and and and and and and
Health Casualty Health Casualty Health Casualty
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
(In Millions)

Balance at January 1 ........................ $2,738 $5,116 $2,654 $4,869 $2,623 $4,712
Less reinsurance recoverables .............. 23 1,018 15 1,070 22 1,107
------ ------ ------ ------ ------ ------
Net balance at January 1 .................... 2,715 4,098 2,639 3,799 2,601 3,605
------ ------ ------ ------ ------ ------
Incurred related to:
Current year ............................... 8,062 2,387 7,398 2,541 7,146 2,364
Prior years ................................ (48) 95 (105) 158 (167) 109
------ ------ ------ ------ ------ ------
Total incurred .............................. 8,014 2,482 7,293 2,699 6,979 2,473
------ ------ ------ ------ ------ ------
Paid related to:
Current year ............................... 5,972 1,010 5,568 1,237 5,336 1,119
Prior years ................................ 1,807 959 1,649 1,163 1,605 1,160
------ ------ ------ ------ ------ ------
Total paid .................................. 7,779 1,969 7,217 2,400 6,941 2,279
------ ------ ------ ------ ------ ------
Less reinsurance
segment (Note 10) .......................... 0 2,326 0 0 0 0
------ ------ ------ ------ ------ ------
Net balance at December 31 .................. 2,950 2,285 2,715 4,098 2,639 3,799
Plus reinsurance recoverables .............. 15 819 23 1,018 15 1,070
------ ------ ------ ------ ------ ------
Balance at December 31 ...................... $2,965 $3,104 $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 $48 million, $105 million and $167 million in the provision for
claims and claim adjustment expenses for accident and health business in
1995, 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 $88 million, $47
million and $120 million in 1995, 1994 and 1993, respectively) increased by
$95 million, $158 million and $109 million in 1995, 1994 and 1993,
respectively, due to increased loss development and reserve strengthening
for asbestos and environmental claims.

B. 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 the net
level premium reserve or the policy cash value. About 54% of individual
life insurance reserves are calculated according to the Commissioner's
Reserve Valuation Method ("CRVM"), or methods which compare CRVM to policy
cash values. The remaining reserves include universal life reserves which
are equal to the greater of the policyholder account value less the
unamortized expense allowance and the policy cash value, or are for
supplementary benefits whose reserves are calculated using methods,
interest rates and tables appropriate for the benefit provided.

For group life insurance, about 56% of the reserves are associated with
extended death benefits. These reserves are primarily calculated using
modified group tables at various interest rates. The remainder 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 deferred individual annuity contracts are determined using the
Commissioner's Annuity Reserve Valuation Method. These account for 72% of
the individual annuity reserves. The remaining reserves are equal to the
present value of future payments with the annuity mortality table and
interest rates based on the date of issue or maturity as appropriate.

Reserves for other deposit funds or other liabilities with life
contingencies reflect the contract deposit account or experience
accumulation for the contract and any purchased annuity reserves. For money
purchase annuities issued in Canada, the reserve equals the present value
of each deposit accumulated to the end of its guarantee period at its
guaranteed interest rate, discounted at the valuation interest rate.

F-5

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

Accident and health reserves represent the present value of the future
potential payments, discounted for contingencies and interest. The
remaining material reserves for active life reserves and unearned premiums
are valued using the preliminary term method, gross premium valuation
method, or a pro-rata portion of gross premiums. Reserves are also held for
amounts not yet due on hospital benefits and other coverages.

The reserve for guaranteed interest contracts, deposit funds and other
liabilities without life contingencies equal either the present value of
future payments discounted at the guaranteed rate or the fund value.

3. INCOME TAXES

Under the Internal Revenue Code ("the Code"), 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.

Prudential files a consolidated federal income tax return with all of its
domestic 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. The provision reported in the consolidated financial
statements also includes tax liabilities for foreign subsidiaries.

The non-insurance subsidiaries of the Company recognize deferred tax assets
and liabilities for the expected future tax consequences of events that have
been recognized in their financial statements. Included in "Income tax
provision/(benefit)" are deferred taxes of $109 million, $(477) million and
$21 million for the years ended December 31, 1995, 1994 and 1993,
respectively.

At December 31, 1995, the Company had consolidated non-life tax loss
carryforwards of $595 million which will expire between 1998 and 2010, if not
utilized.

4. INVESTED ASSETS

A. FIXED MATURITIES

The Company invests in both investment grade and non-investment grade
public and private fixed maturities. The Securities Valuation Office of the
NAIC rates the fixed maturities held by insurers 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 primarily high-yield securities and are defined by the NAIC as
including any security with a public agency rating equivalent to B+ or B1
or less. These securities approximate 0.9% and 1.6% of the Company's
consolidated assets at December 31, 1995 and 1994, respectively.

The carrying value and estimated fair value of fixed maturities at December
31, 1995 and 1994, are as follows:

1995
-------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
(In Millions)
U.S. Treasury securities and obligations of
U.S. government corporations and
agencies ..................................................... $16,494 $1,409 $ 1 $17,902
Obligations of U.S. states and their
political subdivisions ....................................... 1,365 70 2 1,433
Fixed maturities issued by foreign governments
and their agencies and political subdivisions ................ 3,641 275 4 3,912
Corporate securities .......................................... 58,998 4,792 108 63,682
Mortgage-backed securities .................................... 5,048 276 10 5,314
Other fixed maturities ........................................ 39 0 0 39
------- ------ ---- -------
Total ......................................................... $85,585 $6,822 $125 $92,282
======= ====== ==== =======
</TABLE>

F-6

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1994
------------------------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
(In Millions)

U.S. Treasury securities and obligations of
U.S. government corporations and agencies .................. $13,576 $ 122 $ 646 $13,052
Obligations of U.S. states and their
political subdivisions ..................................... 2,776 32 165 2,643
Fixed maturities issued by foreign governments
and their agencies and political subdivisions .............. 3,093 37 153 2,977
Corporate securities ........................................ 54,076 1,191 1,772 53,495
Mortgage-backed securities .................................. 4,889 82 148 4,823
Other fixed maturities ...................................... 210 0 0 210
------- ------ ------ -------
Total ....................................................... $78,620 $1,464 $2,884 $77,200
======= ====== ====== ========
</TABLE>

The carrying value and estimated fair value of fixed maturities at December
31, 1995, categorized by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers may
prepay obligations with or without call or prepayment penalties.

Estimated
Carrying Fair
Value Value
-------- ---------
(In Millions)

Due in one year or less .................... $ 398 $ 402
Due after one year through five years ...... 26,936 27,748
Due after five years through ten years ..... 23,124 24,637
Due after ten years ........................ 30,079 34,181
------- -------
80,537 86,968
Mortgage-backed securities ................. 5,048 5,314
------- -------
Total ...................................... $85,585 $92,282
======= =======

Proceeds from the sale and maturity of fixed maturities during 1995, 1994
and 1993 were $100,317 million, $90,914 million and $100,023 million,
respectively. Gross gains of $2,083 million, $693 million and $2,473
million and gross losses of $943 million, $2,009 million and $698 million
were realized on such sales during 1995, 1994 and 1993, respectively.

B. MORTGAGE LOANS

Mortgage loans at December 31, 1995 and 1994, are as follows:

1995 1994
-------------------- --------------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
(In Millions)
Commercial and agricultural loans:
In good standing ...................................... $17,792 75.1% $19,752 75.4%
In good standing
with restructured terms .............................. 976 4.1% 1,412 5.4%
Past due 90 days or more .............................. 145 0.6% 339 1.3%
In process of foreclosure ............................. 158 0.7% 387 1.5%
Residential loans ...................................... 4,609 19.5% 4,309 16.4%
------- ----- ------- -----
Total mortgage loans ................................... $23,680 100.0% $26,199 100.0%
======= ===== ======= =====

</TABLE>

At December 31, 1995, the Company's mortgage loans were collateralized by
the following property types: office buildings (29%), retail stores (20%),
residential properties (19%), apartment complexes (13%), industrial
buildings (10%), agricultural properties (7%) and other commercial
properties (2%). The mortgage loans are geographically dispersed throughout
the United States and Canada with the largest concentrations in California
(23%) and New York (9%). Included in these balances

F-7

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

are mortgage loans with affiliated joint ventures of $653 million and $684
million at December 31, 1995 and 1994, respectively.

C. INVESTMENT REAL ESTATE

Accumulated depreciation on investment real estate was $643 million and
$748 million at December 31, 1995 and 1994, respectively.

D. OTHER INVESTED ASSETS

The Company's net equity in joint ventures and other forms of partnerships
amounted to $2,612 million and $3,357 million as of December 31, 1995 and
1994, respectively. The Company's share of net income from such entities
was $326 million, $354 million and $375 million for 1995, 1994 and 1993,
respectively.

E. NET UNREALIZED INVESTMENT GAINS/(LOSSES)

Net unrealized investment gains/(losses), which result principally from
changes in the carrying values of invested assets, were $661 million, $(32)
million and $(195) million for the years ended December 31, 1995, 1994 and
1993, respectively.

F. ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE

These reserves are required for life insurance companies under NAIC
regulations. 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. The IMR captures net realized capital gains and losses
resulting from changes in the general level of interest rates. These gains
and losses are amortized into investment income over the expected remaining
life of the investments sold. At December 31, 1995, the components of AVR
are 67% for fixed maturities, equity securities and short-term investments;
21% for mortgage loans; and 12% for investment real estate and other
invested assets. The IMR balance at December 31, 1995 and 1994 was $1,191
million and $502 million, respectively. During 1995, 1994 and 1993, $775
million, $(929) million and $1,082 million of net realized investment
gains/(losses) were deferred, respectively.

G. RESTRICTED ASSETS AND SPECIAL DEPOSITS

Assets in the amounts of $6,271 million and $5,901 million at December 31,
1995 and 1994, respectively, were on deposit with governmental authorities
or trustees as required by law. Assets valued at $3,558 million and $5,855
million at December 31, 1995 and 1994, respectively, were maintained as
compensating balances or pledged as collateral for bank loans and other
financing agreements. Restricted cash and securities of $1,137 million and
$897 million at December 31, 1995 and 1994, respectively, were included in
the consolidated financial statements. The restricted cash represents funds
deposited by clients and funds accruing to clients as a result of trades or
contracts.

5. EMPLOYEE BENEFIT PLANS

A. PENSION PLANS

The Company has several defined benefit pension plans, which cover
substantially all of its employees. Benefits are generally based on career
average earnings and credited length of service. The Company's funding
policy for U.S. plans is to contribute annually the amount necessary to
satisfy the Internal Revenue Service contribution guidelines.

Employee pension benefit plan status is as follows:

September 30, 1995 September 30, 1994
------------------------ ------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(In Millions)
Actuarial present value of benefit obligation:
Vested benefit obligation ..................................... $(3,270) $(236) $(2,749) $(207)
======= ===== ====== =====
Accumulated benefit obligation ................................ (3,572) (261) (3,025) (230)
======= ===== ====== =====
Projected benefit obligation ................................... (4,330) (297) (3,975) (272)
Plan assets at fair value ...................................... 6,688 206 5,524 180
------- ----- ------ -----
Plan assets in excess of projected benefit obligation .......... 2,358 (91) 1,549 (92)
Unrecognized transition amount ................................. (904) (4) (976) (4)
Unrecognized prior service cost ................................ 199 16 211 17
Unrecognized net (gain)/loss ................................... (753) 15 (18) 27
Additional minimum liability ................................... 0 (8) 0 (8)
------- ----- ------ -----
Prepaid/(accrued) pension cost ................................. $ 900 $ (72) $ 766 $ (60)
======= ===== ====== =====
</TABLE>

F-8

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

Plan assets consist primarily of equity securities, bonds, real estate and
short-term investments, of which $4,974 million and $4,325 million are
included in Separate Account assets and liabilities at December 31, 1995
and 1994, respectively.

In compliance with statutory accounting principles, Prudential's prepaid
pension costs of $900 million and $766 million at December 31, 1995 and
1994, respectively, are considered non-admitted assets. These assets are
excluded from the consolidated assets and the changes in these non-admitted
assets were $134 million, $(19) million, and $142 million in 1995, 1994 and
1993, respectively.

The components of the net periodic pension (benefit)/expense for 1995, 1994
and 1993 are as follows:

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
(In Millions)

Service cost--benefits earned during the year ............................. $ 133 $ 163 $ 133
Interest cost on projected benefit obligation ............................. 392 311 301
Actual return on assets ................................................... (1,288) 56 (854)
Net amortization and deferral ............................................. 629 (639) 301
Net curtailment gains and special termination benefits .................... 0 156 0
------- ----- -----
Net periodic pension (benefit)/expense .................................... $ (134) $ 47 $(119)
======= ===== =====

</TABLE>

The net reduction to surplus relating to the Company's pension plans is $0,
$28 million and $23 million in 1995, 1994 and 1993, respectively, which
considers the changes in Prudential's non-admitted prepaid pension asset of
$134 million, $(19) million and $142 million, respectively. The accounting
assumptions used by Prudential were:

As of September 30,
--------------------
1995 1994 1993
---- ---- ----
Discount rate ................................. 7.5% 8.5% 7.0%
Rate of increase in compensation levels ....... 4.5% 5.5% 5.0%
Expected long-term rate of return on assest ... 9.0% 9.0% 9.0%

The 1995 pension benefit for the Company's non-U.S. plans is $8 million.

B. POSTRETIREMENT 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.

Postretirement benefits, with respect to Prudential, are recognized in
accordance with prescribed NAIC policy. Prudential has elected to amortize
its transition obligation over 20 years. The Company's funding of its
postretirement benefit obligations totaled $48 million, $31 million and
$404 million in 1995, 1994 and 1993, respectively.

F-9

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

For The Years Ended December 31, 1995, 1994 and 1993

The postretirement benefit plan status is as follows:

September 30,
------------------
1995 1994
-------- -------
(In Millions)
Accumulated postretirement benefit obligation (APBO):
Retirees ............................................... $(1,526) $(1,337)
Fully eligible active plan participants ................ (152) (188)
------- -------
Total APBO ............................................... (1,678) (1,525)
------- -------
Plan assets at fair value ................................ 1,309 1,232
------- -------
Funded status ............................................ (369) (293)
Unrecognized transition amount ........................... 423 448
Unrecognized net loss/(gain) ............................. 1 (41)
------- -------
Prepaid postretirement benefit cost ...................... $ 55 $ 114
======= =======

Plan assets consist of group and individual variable life insurance
policies, group life and health contracts and short-term investments, of
which $990 million and $996 million are included in the Consolidated
Statement of Financial Position at December 31, 1995 and 1994,
respectively. In compliance with statutory accounting principles,
Prudential's prepaid postretirement benefit costs of $99 million and $127
million at December 31, 1995 and 1994, respectively, are considered
non-admitted assets. These assets are excluded from the consolidated assets
and the changes in these non-admitted assets of $(28) million, $(90)
million and $217 million in 1995, 1994 and 1993, respectively, are reported
in "General, administrative and other expenses" in 1995 and 1994, and in
"Issuance of Capital Notes" in 1993.

Net periodic postretirement benefit cost for 1995, 1994 and 1993 includes
the following components:

1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
(In Millions)

Service cost .................................................. $ 56 $ 38 $ 41
Interest cost ................................................. 123 112 124
Actual return on plan assets .................................. (144) (98) (86)
Amortization of transition obligation ......................... 25 23 39
Other ......................................................... 47 (3) 77
Net curtailment and special termination benefits .............. 0 58 0
----- ---- ----
Net periodic postretirement benefit cost ...................... $ 107 $130 $195
===== ==== ====

</TABLE>

The net reduction to surplus relating to the Company's postretirement
benefit plans is $79 million, $40 million, and $412 million in 1995, 1994
and 1993, respectively, which considers the changes in the non-admitted
prepaid postretirement benefit cost of $(28) million, $(90) million and
$217 million in 1995, 1994 and 1993, respectively.

The accounting assumptions used by Prudential were:

As of September 30,
------------------------------------------
1995 1994 1993
--------- -------- -------
<S> <C> <C> <C>
Discount rate ............................................... 7.5% 8.5% 7.0%
Expected long-term rate of return on plan assets ............ 8.0% 9.0% 9.0%
Rate of increase in compensation levels ..................... 4.5% 5.5% 5.0%
Health care cost trend rates ................................ 8.9-13.3% 9.1-13.9% 9.5-14.7%
Ultimate health care cost trend rate at 2006 ................ 5.0% 6.0% 5.0%

</TABLE>

The effect of a 1% increase in health care cost trend rates on the
September 30, 1995, accumulated postretirement benefit obligation and
service and interest costs would be $138 million and $16 million,
respectively.

C. POSTEMPLOYMENT BENEFITS

The Company accrues for postemployment benefits primarily for life and
health benefits provided to former or inactive employees who are not
retirees. The net accumulated liability for these benefits at December 31,
1995 and 1994 was $102 million and $151 million, respectively. The Company
funded $45 million of postemployment benefits during 1995.

F-10

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

For The Years Ended December 31, 1995, 1994 and 1993

6. NOTES PAYABLE AND OTHER BORROWINGS

Notes payable and other borrowings consisted of the following:

December 31, 1995 December 31, 1994
------------------------- -------------------------
Weighted Weighted
Average Average
Balance Cost of Funds Balance Cost of Funds
-------- ------------- ------- -------------
<S> <C> <C> <C> <C>
(In Millions)
Short-term debt:
Commercial paper ........................... $3,711 5.8% $ 4,108 5.6%
Medium-term notes payable .................. 9 7.4% 204 4.8%
Other ...................................... 2,007 6.4% 4,876 5.8%
------ -------
Total Short Term ............................ 5,727 6.0% 9,188 5.7%
------ -------
Long-term debt:
Notes payable .............................. 1,309 7.2% 1,684 7.3%
Medium-term notes payable .................. 377 5.6% 535 5.9%
Euro medium-term notes payable ............. 537 6.0% 584 4.7%
Other ...................................... 1,207 6.2% 18 10.3%
------ -------
Total Long Term ............................. 3,430 6.5% 2,821 6.5%
------ -------
Total ....................................... $9,157 6.2% $12,009 5.9%
====== =======
</TABLE>

Scheduled repayments of long-term debt as of December 31, 1995, are as
follows: $321 million in 1996, $448 million in 1997, $868 million in 1998,
$667 million in 1999, $620 million in 2000, and $593 million thereafter.

As of December 31, 1995, the Company had $6,770 million in lines of credit
from numerous financial institutions of which $4,263 million were unused.

7. SURPLUS

A. Capital Notes

A summary of the outstanding Capital Notes as of December 31, 1995 is as
follows:

Principal Interest Maturity
Issue Date (Par) Rate Date
---------- --------- -------- --------
(In Millions)

April 1993 ................ $ 300 6.875% April 2003
June 1995 ................. 250 7.650% July 2007
July 1995 ................. 100 8.100% July 2015
June 1995 ................. 350 8.300% July 2025
------
Total ..................... $1,000
======

The notes are subordinate in right of payment to policyholder claims and to
senior indebtedness, and principal repayments are subject to a risk-based
capital test.

The net proceeds from the April 1993 notes, approximately $298 million,
were contributed to a voluntary employee benefit association trust to
prefund certain obligations of 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 (Note 5B).

B. SPECIAL SURPLUS FUND

In accordance with the requirements of various states, a special surplus
fund has been established for contingency reserves of $1,274 million and
$1,097 million as of December 31, 1995 and 1994, respectively.

8. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values presented on the next page have been determined using
available information and reasonable valuation methodologies. Considerable
judgment is applied in interpreting data to develop the estimates of fair
value. Accordingly, such estimates

F-11

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

For The Years Ended December 31, 1995, 1994 and 1993

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 credit
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.

Equity Securities--Fair value is based on quoted market prices, where
available, or prices 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, 1995 and
1994.

1995 1994
------------------------ -----------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
(In Millions)
FINANCIAL ASSETS:
Fixed maturities ........................... $ 85,585 $ 92,282 $ 78,620 $77,200
Equity securities .......................... 1,937 1,937 2,327 2,327
Mortgage loans ............................. 23,680 24,268 26,199 24,955
Policy loans ............................... 6,800 7,052 6,631 6,018
Short-term investments ..................... 7,874 7,874 10,630 10,630
Securities purchased under
agreements to resell ...................... 5,130 5,130 5,591 5,591
Trading account securities ................. 3,658 3,658 6,341 6,341
Cash ....................................... 1,633 1,633 1,109 1,109
Broker-dealer receivables .................. 8,136 8,136 8,164 8,164
Assets held in Separate Accounts ........... 58,435 58,435 48,633 48,633
Derivative financial instruments ........... 1,473 1,640 1,219 1,268

FINANCIAL LIABILITIES:
Investment-type insurance contracts ........ 35,336 36,258 39,747 38,934
Securities sold under agreements to
repurchase ................................ 7,993 7,993 8,919 8,919
Notes payable and other borrowings ......... 9,157 9,231 12,009 11,828
Broker-dealer payables ..................... 6,083 6,083 6,198 6,198
Liabilities related to Separate
Accounts .................................. 57,586 57,586 47,946 47,946
Derivative financial instruments ........... 1,704 1,781 1,611 1,665

</TABLE>

F-12

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

For The Years Ended December 31, 1995, 1994 and 1993

9. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS

A. Derivative Financial Instruments

Derivatives, including swaps, forwards, futures, options, and loan
commitments subject to market risk, are used for trading and other
than trading activities (Note 1C). The following two tables summarize
the Company's outstanding positions on a gross basis before netting
pursuant to rights of offset, qualifying master netting agreements
with counterparties or collateral arrangements as of December 31, 1995
and 1994, respectively:

DERIVATIVE FINANCIAL INSTRUMENTS
As of December 31, 1995
(In Millions)
<TABLE>
<CAPTION>

Trading Other Than Trading Total
-------------------- -------------------- -------------------------------
Estimated Estimated Carrying Estimated
Notional Fair Value Notional Fair Value Notional Amount Fair Value
-------- ---------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Assets ................. $12,720 $1,131 $ 114 $ 10 $12,834 $1,132 $1,141
Liabilities ............ 11,488 1,317 4,476 62 15,964 1,371 1,379
Forwards:
Assets ................. 20,351 291 2,281 33 22,632 305 324
Liabilities ............ 22,068 278 6,675 48 28,743 291 326
Futures:
Assets ................. 1,387 14 2,590 34 3,977 20 48
Liabilities ............ 3,065 18 1,821 11 4,886 24 29
Options:
Assets ................. 1,961 20 4,345 97 6,306 20 117
Liabilities ............ 1,700 17 2,724 20 4,424 18 37
Loan Commitments:
Assets ................. 0 0 123 10 123 (4) 10
Liabilities ............ 0 0 1,412 10 1,412 0 10
------- ------ ------- ---- ------- ------ ------
Total:
Assets ................. $36,419 $1,456 $ 9,453 $184 $45,872 $1,473 $1,640
======= ====== ======= ==== ======= ====== ======
Liabilities ............ $38,321 $1,630 $17,108 $151 $55,429 $1,704 $1,781
======= ====== ======= ==== ======= ====== ======
</TABLE>

F-13

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

For The Years Ended December 31, 1995, 1994 and 1993

DERIVATIVE FINANCIAL INSTRUMENTS
As of December 31, 1994
(In Millions)

Trading Other Than Trading Total
-------------------- -------------------- -------------------------------
Estimated Estimated Carrying Estimated
Notional Fair Value Notional Fair Value Notional Amount Fair Value
-------- ---------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Assets ................. $13,852 $ 837 $ 184 $ 9 $14,036 $ 845 $ 846
Liabilities ............ 14,825 1,216 4,993 48 19,818 1,236 1,264
Forwards:
Assets ................. 21,988 300 2,720 24 24,708 312 324
Liabilities ............ 19,898 289 3,112 19 23,010 299 308
Futures:
Assets ................. 1,520 40 4,296 17 5,816 30 57
Liabilities ............ 1,878 35 505 3 2,383 35 38
Options:
Assets ................. 2,924 31 2,407 8 5,331 34 39
Liabilities ............ 3,028 38 2,217 2 5,245 40 40
Loan Commitments:
Assets ................. 0 0 212 2 212 (2) 2
Liabilities ............ 0 0 1,543 15 1,543 1 15
------- ------ ------- --- ------- ------ ------
Total:
Assets ................. $40,284 $1,208 $ 9,819 $60 $50,103 $1,219 $1,268
======= ====== ======= === ======= ====== ======
Liabilities ............ $39,629 $1,578 $12,370 $87 $51,999 $1,611 $1,665
======= ====== ======= === ======= ====== ======
</TABLE>

Derivatives Held for Trading Purposes--The Company uses derivatives
for trading purposes in securities broker-dealer activities and in a
limited-purpose swap subsidiary to meet the financial and hedging
needs of its customers. Net trading revenues for the years ended
December 31, 1995 and 1994, relating to forwards and futures and swaps
were $110 million, $42 million and $3 million, and $42 million, $33
million and $8 million, respectively. Net trading revenues for options
were not material. Average fair values for trading derivatives in an
asset position during the years ended December 31, 1995 and 1994 were
$1,394 million and $1,526 million, respectively, and for derivatives
in a liability position were $1,582 million and $1,671 million,
respectively. Of those derivatives held for trading purposes at
December 31, 1995, 55% of the notional amount consisted of interest
rate derivatives, 40% consisted of foreign currency derivatives, and
5% consisted of equity and commodity derivatives.

Derivatives Held for Purposes Other Than Trading--The Company uses
derivatives primarily for asset/liability risk management and to
reduce exposure to interest rate, currency and other market risks. Of
the total notional amount of derivatives held for purposes other than
trading at December 31, 1995, 16% were used by the Company to hedge
its investment portfolio to reduce interest rate, currency and other
market risks, and 84% were used to hedge interest rate risk related to
the Company's mortgage banking segment activities. Of those
derivatives held for purposes other than trading at December 31, 1995,
92% of notional consisted of interest rate derivatives and 8%
consisted of foreign currency derivatives.

B. Off-Balance Sheet Credit-Related Instruments

During the normal course of its business, the Company utilizes
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 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 $15,498 million and $17,389 million at December
31, 1995 and 1994, respectively. Because many of these amounts expire
without being advanced in whole or in part, the notional amounts do
not represent future cash

F-14

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

For The Years Ended December 31, 1995, 1994 and 1993

flows. The above notional amounts include $6,001 million and $4,150
million of unused available lines of credit under credit card and home
equity commitments as of December 31, 1995 and 1994, 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 $(67) million and $(91) million at
December 31, 1995 and 1994, respectively.

10. DIVESTITURES

In October 1995, the Company completed the sale of its reinsurance segment,
Prudential Reinsurance Holdings, Inc. ("Holdings"), through an initial
public offering of common stock. As a result of the sale, an after-tax gain
of $72 million was recorded in 1995.

In March 1995, the Company announced its intention to sell its mortgage
banking segment. On January 26, 1996, the Company entered into a definitive
agreement to sell substantially all the assets of Prudential Home Mortgage
Company, Inc. and it has also liquidated certain mortgage-backed securities
and extended warehouse loans. The Company recorded an after-tax loss of $98
million, which includes operating gains and losses, asset write downs, and
other costs directly related to the planned sale. The Company continues to
have discussions with prospective buyers for the sale of the remaining
assets.

A summary of the assets and liabilities of the mortgage banking segment at
December 31 follows:

ASSETS AND LIABILITIES OF MORTGAGE BANKING SEGMENT

1995 1994
------ ------
(In Millions)

Total assets ............................ $4,293 $4,357
Total liabilities ....................... 4,215 4,199
------ ------
Net assets .............................. $ 78 $ 158
====== ======

11. CONTINGENCIES

A. Aggregate Stop Loss Retrocession Agreement

As a result of the sale of Holdings, in 1995, Prudential Reinsurance
(a Holdings subsidiary) and Gibraltar Casualty Co. (a Prudential
subsidiary) entered into an Aggregate Stop Loss Agreement. The Stop
Loss Agreement is intended to mitigate the impact on Prudential
Reinsurance of adverse development of loss reserves as of June 30,
1995, of up to $375 million of the first $400 million of adverse
development. The Company has recorded a loss reserve of $230 million
as of December 31, 1995.

B. Environmental and Asbestos-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. 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.

C. 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.

Several purported class actions and individual actions have been
brought against the Company on behalf of those persons who purchased
life insurance policies allegedly because of deceptive sales practices
engaged in by the Company and its insurance agents in violation of
state and federal laws. The sales practices alleged to have occurred
are contrary to Company policy. Some of these cases seek very
substantial damages while others seek unspecified compensatory,
punitive and treble damages. The Company intends to defend these cases
vigorously.

F-15

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

For The Years Ended December 31, 1995, 1994 and 1993

In response to this litigation, several state insurance departments
have initiated market conduct examinations relating to Prudential's
sales practices. The Attorney General of one state has conducted an
investigation and made its report to the state insurance commissioner.
Another Attorney General has also made inquiries. The New Jersey
Insurance Commissioner is leading a multi-state task force of
insurance commissioners to examine life insurance industry sales and
marketing practices. There are now approximately thirty insurance
departments participating in this effort. The Company is cooperating
fully in this examination.

Litigation is subject to many uncertainties, and given the complexity
and scope of these suits, their outcome cannot be predicted. It is
also not possible to predict the likely results of any regulatory
inquiries or their effect on litigation which might be initiated in
response to widespread media coverage of these matters.

Accordingly, management is unable to make a meaningful estimate of the
amount or range of loss that could result from an unfavorable outcome
of all pending litigation and the regulatory inquiries. It is possible
that the results of operations or the cash flows of the Company in
particular quarterly or annual periods could be materially affected by
an ultimate unfavorable outcome of certain pending litigation and
regulatory matters.

Management believes, however, that the ultimate outcome of all pending
litigation and regulatory matters referred to above should not have a
material adverse effect on the Company's financial position.

In 1993, Prudential Securities Incorporated (PSI), a subsidiary of
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. The agreement also required PSI to take
measures to enhance the adequacy of its sales practices compliance
controls.

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 for litigation, including
partnership settlement matters, will not have a material adverse
effect on the Company's financial position.

F-16

<PAGE>

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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP
Parsippany, New Jersey
March 1, 1996

F-17

<PAGE>

PRUDENTIAL'S
VARIABLE
APPRECIABLE LIFE(R)
INSURANCE

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 437-4016, Ext. 46
<PAGE>

PRUVIDER
VARIABLE
APPRECIABLE LIFE(R)
INSURANCE

MAY 1, 1996
PROSPECTUS

THE PRUDENTIAL SERIES FUND, INC.
AND
THE PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT

SVAL-1 ED 5-96 PRUCO LIFE INSURANCE COMPANY
CATALOG NO. 6469898

<PAGE>

PROSPECTUS

MAY 1, 1996

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 CONSERVATIVE BALANCED PORTFOLIO
and the FLEXIBLE MANAGED 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. 5-96

<PAGE>

TABLE OF CONTENTS
PAGE

INTRODUCTION AND SUMMARY .................................................. 1
BRIEF DESCRIPTION OF THE CONTRACT ................................... 1
BALANCED PORTFOLIOS ................................................. 3
CONSERVATIVE BALANCED PORTFOLIO ............................... 3
FLEXIBLE MANAGED PORTFOLIO .................................... 3
FIXED-RATE OPTION ................................................... 3
TRANSFERS BETWEEN INVESTMENT OPTIONS ................................ 3
THE SCHEDULED PREMIUM ............................................... 3
PAYMENT OF HIGHER PREMIUMS .......................................... 3
CONTRACT LOANS ...................................................... 3
PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACTS .............. 3

FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS OF THE SERIES FUND ................. 4

THE PRUDENTIAL SERIES FUND, INC. FINANCIAL HIGHLIGHTS ..................... 5

PORTFOLIO RATES OF RETURN ................................................. 6

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 ...................... 9
REQUIREMENTS FOR ISSUANCE OF A CONTRACT ............................. 9
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 ........................ 11
Surrender or Withdrawal Charges ............................... 11
Transaction Charges ........................................... 11
CONTRACT DATE ....................................................... 12
PREMIUMS ............................................................ 12
ALLOCATION OF PREMIUMS .............................................. 13
TRANSFERS ........................................................... 13
HOW THE CONTRACT FUND CHANGES WITH INVESTMENT EXPERIENCE ............ 14
HOW A CONTRACT'S DEATH BENEFIT WILL VARY ............................ 14
CONTRACT LOANS ...................................................... 14
SURRENDER OF A CONTRACT ............................................. 15
LAPSE AND REINSTATEMENT ............................................. 15
Fixed Extended Term Insurance ................................. 15
Fixed Reduced Paid-Up Insurance ............................... 16
Variable Reduced Paid-Up Insurance ............................ 16
What Happens If No Request Is Made? ........................... 16
PAID-UP INSURANCE OPTION ............................................ 16
WHEN PROCEEDS ARE PAID .............................................. 16
LIVING NEEDS BENEFIT ................................................ 17
Terminal Illness Option ....................................... 17
Nursing Home Option ........................................... 17
VOTING RIGHTS ....................................................... 17
REPORTS TO CONTRACT OWNERS .......................................... 18

<PAGE>

PAGE

TAX TREATMENT OF CONTRACT BENEFITS ................................... 18
Treatment as Life Insurance .................................... 18
Pre-Death Distributions ........................................ 18
Other Tax Consequences ......................................... 19
OTHER CONTRACT PROVISIONS ............................................ 19

FURTHER INFORMATION ABOUT THE SERIES FUND .................................. 19

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS ....................... 20
BALANCED PORTFOLIOS .................................................. 20
CONSERVATIVE BALANCED PORTFOLIO ................................ 20
FLEXIBLE MANAGED PORTFOLIO ..................................... 21
FOREIGN SECURITIES ................................................... 22
OPTIONS, FUTURES CONTRACTS AND SWAPS ................................. 22
SHORT SALES .......................................................... 23
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS ....................... 23
LOANS OF PORTFOLIO SECURITIES ........................................ 23

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS ....................... 23

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES ............................ 24
PORTFOLIO BROKERAGE AND RELATED PRACTICES ............................ 24

STATE REGULATION ........................................................... 24

EXPERTS .................................................................... 24

LITIGATION ................................................................. 25

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION .......... 25

ADDITIONAL INFORMATION ..................................................... 26

FINANCIAL STATEMENTS ....................................................... 27

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, 1995, 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
CONSERVATIVE BALANCED PORTFOLIO and the FLEXIBLE MANAGED 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 Conservative Balanced Portfolio
o The Flexible Managed 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.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
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 $15 will be made in connection with
each withdrawal of excess cash surrender value.
- --------------------------------------------------------------------------------

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 20 of this
prospectus, and of the fixed rate option are as follows:

<PAGE>

BALANCED PORTFOLIOS

CONSERVATIVE BALANCED PORTFOLIO (formerly the 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 than that associated with
the Flexible Managed Portfolio while recognizing that this reduces the chances
of greater appreciation.

FLEXIBLE MANAGED PORTFOLIO (formerly the 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 18. The scheduled premium will not be increased (except
to reflect changes in the rate for taxes attributable to premiums). See
PREMIUMS, page 12.

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. See PREMIUMS, page 12 and TAX
TREATMENT OF CONTRACT BENEFITS, page 18.

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.

PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACTS

Pruco Life's PRUVIDER Variable APPRECIABLE LIFE Insurance Contract is a form of
life insurance that provides much of the flexibility of variable universal life.
However, it differs in two important ways. First, Pruco Life guarantees that if
the Scheduled Premiums are paid when due or within the grace period (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

<PAGE>

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.

<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.

CONSERVATIVE BALANCED
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $11.889 $12.571 $12.173
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.635 0.528 0.486 0.558 0.687 0.821 0.891 0.773 0.656 0.652
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investmentss........... 1.775 (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424 (0.399) 1.046
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 2.410 (0.151) 1.715 0.968 2.425 0.678 2.046 1.197 0.257 1.698
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.643) (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791) (0.709) (0.517)
Distributions from net
realized gains......... (0.553) (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0.000 (0.230) (0.783)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.196) (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791) (0.939) (1.300)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 1.214 (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406 (0.682) 0.398
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $ 11.889 $12.571
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Investment Rate of
Return:**.............. 17.27 % (0.97 %) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19 % 1.54 % 14.17 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $3,940.8 $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6 $803.9 $375.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.58 % 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65% 0.66 % 0.64 %
Ratio of net investment
income to average net
assets................. 4.19 % 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22 % 5.05 % 5.10 %
Portfolio turnover
rate................... 200.68 % 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67 % 140.69 % 207.78 %
Number of shares
outstanding at end of
period (in millions)... 257.4 248.4 208.2 148.4 104.8 84.2 73.0 66.3 67.6 29.9

FLEXIBLE MANAGED
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $13.555 $12.810
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.564 0.473 0.566 0.583 0.650 0.715 0.813 0.724 0.577 0.611
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 3.149 (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840 (0.753) 1.342
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 3.713 (0.548) 2.448 1.190 3.459 0.249 2.802 1.564 (0.176) 1.953
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.560) (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767) (0.673) (0.456)
Distributions from net
realized gains......... (0.790) (0.462) (0.929) (0.914) (0.513) 0.000 (0.666) 0.000 (0.380) (0.752)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.350) (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767) (1.053) (1.208)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 2.363 (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797 (1.229) 0.745
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $ 13.555
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Investment Rate of
Return:**.............. 24.13 % (3.16 %) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83 % (1.83 %) 15.48 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $4,261.2 $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
Ratio of expenses net of
reimbursement to
average net assets..... 0.63 % 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70 % 0.71 % 0.67 %
Ratio of net investment
income to average net
assets................. 3.30 % 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52 % 4.09 % 4.43 %
Portfolio turnover
rate................... 173.30 % 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45 % 123.83 % 133.76 %
Number of shares
outstanding at end of
period (in millions)... 238.6 224.7 194.1 152.2 122.2 107.7 96.0 84.1 86.2 43.8
</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.

<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 12/31/95 for the 5 year
and 10 year periods ending on that date, and from the inception date of each
Portfolio to December 31, 1995. 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.

5 YEAR 10 YEAR
PERIOD PERIOD INCEPTION
INCEPTION YEAR ENDED ENDED ENDED DATE TO YEAR ENDED YEAR ENDED YEAR ENDED
DATE 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FLEXIBLE MANAGED 5/83 24.1% 13.4% 11.9% 11.6% 24.1% -3.2% 15.6%

CONSERVATIVE
BALANCED 5/83 17.3% 10.7% 10.1% 10.4% 17.3% -1.0% 12.2%

YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
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>
FLEXIBLE MANAGED 7.6% 25.4% 1.9% 21.8% 12.8% -1.8% 15.5%

CONSERVATIVE
BALANCED 6.9% 19.1% 5.3% 17.0% 10.2% 1.5% 14.2%
</TABLE>

<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 0.61% and also reflect the
daily charge to the Account for assuming mortality and expense risks, which is
equivalent to an effective annual rate of 0.9%. The 0.61% 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 0.61%, 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 -1.51%,
2.49%, 6.49%, and 10.49%, 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.

<PAGE>

<TABLE>
<CAPTION>
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 (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET) (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 181 $5,003 $5,007 $ 5,011 $ 5,016 $ 0 $ 0 $ 2 $ 6
2 $ 369 $5,002 $5,013 $ 5,024 $ 5,036 $ 48 $ 59 $ 70 $ 82
3 $ 564 $5,000 $5,019 $ 5,040 $ 5,063 $101 $ 121 $ 142 $ 165
4 $ 767 $5,000 $5,024 $ 5,058 $ 5,096 $153 $ 185 $ 219 $ 256
5 $ 978 $5,000 $5,028 $ 5,079 $ 5,136 $204 $ 249 $ 300 $ 357
6 $ 1,198 $5,000 $5,033 $ 5,104 $ 5,187 $268 $ 329 $ 400 $ 482
7 $ 1,427 $5,000 $5,038 $ 5,134 $ 5,247 $330 $ 411 $ 506 $ 620
8 $ 1,665 $5,000 $5,042 $ 5,167 $ 5,319 $392 $ 493 $ 618 $ 770
9 $ 1,912 $5,000 $5,046 $ 5,204 $ 5,403 $452 $ 577 $ 735 $ 934
10 $ 2,169 $5,000 $5,050 $ 5,246 $ 5,501 $511 $ 663 $ 859 $ 1,114
15 $ 3,617 $5,000 $5,056 $ 5,541 $ 6,266 $719 $1,045 $1,529 $ 2,255
20 $ 5,379 $5,000 $5,044 $ 6,020 $ 9,093 $880 $1,454 $2,430 $ 4,111
25 $ 7,523 $5,000 $5,010 $ 6,960 $13,506 $967 $1,876 $3,631 $ 7,046
30 (AGE 65) $10,132 $5,000 $5,000 $ 8,713 $19,529 $936 $2,294 $5,181 $11,613
35 $13,305 $5,000 $5,000 $10,670 $27,840 $694 $2,681 $ 7,124 $18,587
40 $17,166 $5,000 $5,000 $12,902 $39,427 $ 44 $2,995 $ 9,507 $29,054
45 $21,864 $5,000 $5,000 $15,510 $55,797 $ 0 $3,146 $12,369 $44,496
</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>

<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

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 (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET) (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% 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 $ 243 $ 276 $ 310 $ 345
3 $ 1,269 $20,002 $20,065 $20,132 $ 20,204 $ 442 $ 505 $ 573 $ 644
4 $ 1,726 $20,000 $20,081 $20,194 $ 20,316 $ 635 $ 739 $ 851 $ 974
5 $ 2,202 $20,000 $20,095 $20,265 $ 20,456 $ 832 $ 985 $ 1,156 $ 1,346
6 $ 2,697 $20,000 $20,111 $20,355 $ 20,635 $1,083 $1,295 $ 1,539 $ 1,818
7 $ 3,211 $20,000 $20,126 $20,459 $ 20,851 $1,334 $1,616 $ 1,948 $ 2,340
8 $ 3,746 $20,000 $20,139 $20,577 $ 21,108 $1,581 $1,942 $ 2,380 $ 2,911
9 $ 4,302 $20,000 $20,149 $20,712 $ 21,412 $1,822 $2,273 $ 2,835 $ 3,535
10 $ 4,881 $20,000 $20,157 $20,863 $ 21,768 $2,058 $2,609 $ 3,315 $ 4,220
15 $ 8,140 $20,000 $20,157 $21,938 $ 24,573 $2,896 $4,111 $ 5,892 $ 8,528
20 $12,106 $20,000 $20,078 $23,714 $ 34,411 $3,541 $5,716 $ 9,352 $ 15,557
25 $16,931 $20,000 $20,000 $26,772 $ 51,149 $3,888 $7,368 $13,967 $ 26,684
30 (Age 65) $22,801 $20,000 $20,000 $33,547 $ 73,995 $3,759 $8,994 $19,950 $ 44,003
35 $29,942 $20,000 $20,000 $41,116 $105,519 $2,780 $10,454 $27,451 $ 70,449
40 $38,631 $20,000 $20,000 $49,746 $149,472 $ 153 $11,532 $36,658 $110,146
45 $49,203 $20,000 $20,000 $59,831 $211,561 $ 0 $11,760 $47,713 $168,712
</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>

<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

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 (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET) (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% 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 $ 5,022 $ 35 $ 45 $ 56 $ 67
3 $ 564 $5,000 $5,000 $ 5,018 $ 5,039 $ 82 $ 100 $ 120 $ 142
4 $ 767 $5,000 $5,000 $ 5,028 $ 5,063 $128 $ 157 $ 189 $ 224
5 $ 978 $5,000 $5,000 $ 5,040 $ 5,093 $172 $ 214 $ 261 $ 314
6 $ 1,198 $5,000 $5,000 $ 5,054 $ 5,129 $228 $ 284 $ 350 $ 425
7 $ 1,427 $5,000 $5,000 $ 5,070 $ 5,174 $283 $ 356 $ 442 $ 546
8 $ 1,665 $5,000 $5,000 $ 5,089 $ 5,227 $336 $ 428 $ 540 $ 678
9 $ 1,912 $5,000 $5,000 $ 5,111 $ 5,290 $388 $ 500 $ 642 $ 821
10 $ 2,169 $5,000 $5,000 $ 5,136 $ 5,364 $438 $ 574 $ 749 $ 977
15 $ 3,617 $5,000 $5,000 $ 5,318 $ 5,950 $601 $ 885 $1,306 $ 1,938
20 $ 5,379 $5,000 $5,000 $ 5,622 $ 7,682 $712 $1,202 $2,031 $ 3,473
25 $ 7,523 $5,000 $5,000 $ 6,099 $11,204 $739 $1,498 $2,965 $ 5,845
30 (AGE 65) $10,132 $5,000 $5,000 $ 6,993 $15,870 $632 $1,736 $4,159 $ 9,438
35 $13,305 $5,000 $5,000 $ 8,411 $22,115 $280 $1,840 $5,616 $14,765
40 $17,166 $5,000 $5,000 $ 9,959 $30,539 $ 0 $1,651 $7,339 $22,504
45 $21,864 $5,000 $5,000 $11,677 $41,993 $ 0 $ 731 $9,312 $33,488
</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>

<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

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 (-1.51% Net) (2.49% Net) (6.49% Net) (10.49% Net) (-1.51% Net) (2.49% Net) (6.49% Net) (10.49% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,000 $20,000 $20,009 $ 20,028 $ 12 $ 24 $ 35 $ 46
2 $ 829 $20,000 $20,000 $20,024 $ 20,056 $ 191 $ 221 $ 253 $ 286
3 $ 1,269 $20,000 $20,000 $20,045 $ 20,111 $ 364 $ 423 $ 485 $ 551
4 $ 1,726 $20,000 $20,000 $20,073 $ 20,185 $ 532 $ 627 $ 730 $ 843
5 $ 2,202 $20,000 $20,000 $20,109 $ 20,283 $ 704 $ 843 $ 999 $ 1,173
6 $ 2,697 $20,000 $20,000 $20,153 $ 20,406 $ 924 $1,116 $ 1,337 $ 1,590
7 $ 3,211 $20,000 $20,000 $20,206 $ 20,559 $1,144 $1,397 $ 1,696 $ 2,048
8 $ 3,746 $20,000 $20,000 $20,269 $ 20,744 $1,358 $1,681 $ 2,072 $ 2,547
9 $ 4,302 $20,000 $20,000 $20,343 $ 20,965 $1,567 $1,968 $ 2,466 $ 3,089
10 $ 4,881 $20,000 $20,000 $20,428 $ 21,227 $1,769 $2,257 $ 2,880 $ 3,679
15 $ 8,140 $20,000 $20,000 $21,061 $ 23,332 $2,429 $3,480 $ 5,015 $ 7,287
20 $12,106 $20,000 $20,000 $22,149 $ 28,871 $2,874 $4,713 $ 7,787 $ 13,052
25 $16,931 $20,000 $20,000 $23,887 $ 42,162 $2,984 $5,854 $11,349 $ 21,996
30 (Age 65) $22,801 $20,000 $20,000 $26,744 $ 59,769 $2,553 $6,742 $15,904 $ 35,543
35 $29,942 $20,000 $20,000 $32,210 $ 83,331 $1,136 $7,056 $21,505 $ 55,635
40 $38,631 $20,000 $20,000 $38,177 $115,111 $ 0 $6,109 $28,133 $ 84,826
45 $49,203 $20,000 $20,000 $44,799 $158,323 $ 0 $2,012 $35,726 $126,256
</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 Conservative Balanced Portfolio and the other of
which invests in the Flexible Managed 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 12. 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).

<PAGE>

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. For proposed
insureds 21 years of age or younger, the minimum initial guaranteed death
benefit that can be applied for is $10,000. 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 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. 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% (but in some instances it may
exceed 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 1995 and 1994, Pruco Life
received a total of approximately $2,003,387 and $2,412,598, 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. If you pay premiums more frequently, for example under a payroll
deduction plan with your employer, the charge may be more than $24 per year.
During 1995 and 1994, Pruco Life received a total of approximately $965,634 and
$753,128, 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 Conservative Balanced Portfolio and 0.6% for the
Flexible Managed Portfolio.

<PAGE>

-------------------------------------------------------------------
OTHER TOTAL
PORTFOLIO ADVISORY EXPENSES EXPENSES
FEE
-------------------------------------------------------------------
Conservative Balanced 0.55% 0.03% 0.58%
Flexible Managed 0.60% 0.03% 0.63%
-------------------------------------------------------------------

For the years 1995, 1994, and 1993, The Prudential received a total of
$77,610,207, $66,413,206, and $51,197,499, 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. 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 1995 and 1994, Pruco Life received a
total of approximately $3,035,533 and $1,785,222, 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 1995 and 1994, Pruco Life received a total of
approximately $120,813 and $92,140, 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 12, 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 1995 and 1994, Pruco
Life received a total of approximately $6,876,677 and $5,161,744, 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 15.

(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.

<PAGE>

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 1995 and 1994, Pruco Life received a total of
approximately $976,867 and $576,113, 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.

- --------------------------------------------------------------------------------
CUMULATIVE
CUMULATIVE TOTAL SALES
SURRENDER, CUMULATIVE SALES LOAD CONTINGENT LOAD AS
LAST DAY SCHEDULED DEDUCTED DEFERRED TOTAL PER-
OF PREMIUMS FROM SALES SALES CENTAGE OF
YEAR NO. PAID CONTRACT LOAD LOAD SCHEDULED
FUND 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 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 1995
and 1994, Pruco Life received a total of approximately $219,895 and $94,251,
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.

<PAGE>

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

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 "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.

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

<PAGE>

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 18.

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 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 18.

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 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%.

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.

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 (usually the business day) in which a proper transfer request is received
at a Home Office. The valuation period is defined as 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 are
calculated, which is generally at 4:15 p.m. New York City time on each day
during which the New York Stock Exchange is open. 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 using the Telephone Transfer System unless you elect not to have
this privilege. Pruco Life has adopted procedures designed to ensure that
requests by telephone are genuine and will require appropriate identification
for that purpose. Pruco Life will not be held liable for following telephone
instructions that we reasonably believe to be genuine. 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

<PAGE>

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 previously stated, 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 16, 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.

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 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. If you fail to
keep the Contract in force, the amount of unpaid Contract debt will be treated
as a distribution which may be taxable. See TAX TREATMENT OF CONTRACT BENEFITS,
page 18, and LAPSE AND REINSTATEMENT, page 15.

<PAGE>

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 $3,239.13. 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 6.49% 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 18.

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 18.

LAPSE AND REINSTATEMENT

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.

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 18.

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 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

<PAGE>

available to insureds in high risk classifications or under Contracts issued in
connection with tax-qualified pension plans.

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 18.

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 18.

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.

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 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 18. 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

<PAGE>

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.

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

<PAGE>

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. Each prospective
purchaser is urged to consult a qualified tax advisor. The following discussion
is not intended as tax advice, and it is not a complete statement of what the
effect of federal income taxes will be under all circumstances. Rather, it
provides information about how Pruco Life believes the tax laws apply in the
most commonly occurring circumstances. A more technical discussion of what
follows is contained in the Statement of Additional Information.

Treatment as Life Insurance. Pruco Life believes that the Contract should
qualify as "life insurance" under the Internal Revenue Code. This means that:
(1) except as noted below, the Contract owner should not be taxed on any part of
the Contract Fund, including additions attributable to interest or appreciation;
and (2) the death benefit should be excludable from the gross income of the
beneficiary under section 101(a) of the Code.

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.

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.

<PAGE>

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 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.

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 25 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 fifteen separate portfolios, two of
which, the Conservative Balanced and Flexible Managed 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.

<PAGE>

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 and Money Market 25% 65% 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 or, if unrated, of comparable quality in the opinion of the
portfolio manager. 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 Flexible Managed
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.

To the extent permitted by applicable insurance law, this portfolio may invest
up to 30% of its total assets in nonUnited 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
22.

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

<PAGE>

briefly under OPTIONS, FUTURES CONTRACTS AND SWAPS and SHORT SALES beginning on
page 22, and in detail in the Statement of Additional Information.

FLEXIBLE MANAGED 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 below $5 billion 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 Equity Portfolio or the Conservative
Balanced 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 nonUnited 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>

Theresa Hamacher, Managing Director, PIC. Ms. Hamacher and Mr. Stumpp also
supervise the team of portfolio managers for the Conservative Balanced
Portfolio. Mr. Stumpp is also 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. Ms.
Hamacher supervises a team of portfolio managers that manage over $65 billion in
assets for PIC.

FOREIGN SECURITIES

The bond components of the Conservative Balanced and Flexible Managed 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 Conservative Balanced
and Flexible Managed Portfolios may invest up to 30% of their total assets in
debt and equity securities denominated in a foreign currency and issued by
foreign or 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.

<PAGE>

SHORT SALES

The Conservative Balanced and Flexible Managed 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 fixed income portions of the Conservative Balanced and Flexible Managed
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.

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.

<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 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, 1995 was over $314 billion, which includes over
$219 billion owned by The Prudential and approximately $95 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 Conservative Balanced and Flexible Managed Portfolios, are furnished by its
wholly-owned subsidiary, PIC, pursuant to the Service Agreement between The
Prudential and PIC which provides that a portion of the fee received by The
Prudential for providing investment advisory services will be paid to PIC. The
Conservative Balanced and Flexible Managed Portfolios are managed by PIC, using
a team of portfolio managers under the supervision of Theresa Hamacher and Mark
Stumpp, Managing Directors, PIC. PIC is registered as an investment advisor
under the Investment Advisers Act of 1940.

For the year ended December 31, 1995, the Series Fund's total expenses were
0.55% 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.

PORTFOLIO BROKERAGE AND RELATED PRACTICES

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

<PAGE>

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.

On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Pruco Life. There have been no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statements disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of the accountant, would have caused them to make a reference
to the matter in their reports.

LITIGATION

Several actions have been brought against Pruco Life on behalf of those persons
who purchased life insurance policies based on complaints about sales practices
engaged in by The Prudential, Pruco Life and agents appointed by The Prudential
and Pruco Life. The Prudential has agreed to indemnify Pruco Life for any and
all losses resulting from such litigation.

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.

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. For new Contracts issued on or about July 1, 1996, the
commission rates for the second through tenth years will change to no more
than 6% of the Scheduled Premiums 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.

<PAGE>

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.

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

<PAGE>

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.

<PAGE>

FINANCIAL STATEMENTS OF
PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF NET ASSETS

December 31, 1995

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

FLEXIBLE CONSERVATIVE
TOTAL MANAGED BALANCED
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 133,332,152 $ 62,315,462 $ 71,016,690
-------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 1,252,693 610,140 642,553
-------------- -------------- --------------
NET ASSETS........................................ $ 132,079,459 $ 61,705,322 $ 70,374,137
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 132,070,650 $ 61,705,322 $ 70,365,328
Equity of Pruco Life Insurance Company.......... 8,809 0 8,809
-------------- -------------- --------------
$ 132,079,459 $ 61,705,322 $ 70,374,137
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

STATEMENTS OF OPERATIONS

For the year ended December 31, 1995

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

FLEXIBLE CONSERVATIVE
TOTAL MANAGED BALANCED
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 4,403,550 $ 1,728,237 $ 2,675,313

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 976,867 441,801 535,066
-------------- -------------- --------------
NET INVESTMENT INCOME............................. 3,426,683 1,286,436 2,140,247
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Capital gains distributions received............ 4,905,965 2,529,393 2,376,572
Net unrealized gain on investments.............. 10,873,078 6,464,304 4,408,774
-------------- -------------- --------------
NET GAIN ON INVESTMENTS........................... 15,779,043 8,993,697 6,785,346
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 19,205,726 $ 10,280,133 $ 8,925,593
-------------- -------------- --------------
-------------- -------------- --------------
</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, 1995 and 1994

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

FLEXIBLE CONSERVATIVE
TOTAL MANAGED BALANCED
------------------------------ ------------------------------ ------------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>

OPERATIONS:
Net investment income............ $ 3,426,683 $ 1,869,327 $ 1,286,436 $ 690,992 $ 2,140,247 $ 1,178,335
Capital gains distributions
received....................... 4,905,965 1,439,356 2,529,393 951,248 2,376,572 488,108
Realized loss on shares redeemed
[average cost basis]........... 0 (2,077) 0 (1,569) 0 (508)
Net unrealized gain (loss) on
investments.................... 10,873,078 (4,745,569) 6,464,304 (2,528,354) 4,408,774 (2,217,215)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 19,205,726 (1,438,963) 10,280,133 (887,683) 8,925,593 (551,280)
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 27,226,200 48,924,502 13,702,273 21,856,622 13,523,927 27,067,880
-------------- -------------- -------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (1,873,938) 638,522 (910,613) 327,110 (963,325) 311,412
-------------- -------------- -------------- -------------- -------------- --------------

TOTAL INCREASE IN NET ASSETS....... 44,557,988 48,124,061 23,071,793 21,296,049 21,486,195 26,828,012

NET ASSETS:
Beginning of year................ 87,521,471 39,397,410 38,633,529 17,337,480 48,887,942 22,059,930
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 132,079,459 $ 87,521,471 $ 61,705,322 $ 38,633,529 $ 70,374,137 $ 48,887,942
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</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, 1995 AND DECEMBER 31, 1994

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
------------------------------
PORTFOLIO FLEXIBLE CONSERVATIVE
INFORMATION MANAGED BALANCED
- ------------------------------- -------------- --------------
<S> <C> <C>
Number of shares: 3,489,240 4,638,958
Net asset value per share: $ 17.8593 $ 15.3088
Cost: $ 58,735,222 $ 69,246,171
</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 (withdrawals) 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 Flexible Managed and Conservative Balanced subaccounts) as of
December 31, 1995, and the related statements of operations for the year then
ended, and the statement of changes in net assets for each of the two years in
the period 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, 1995, and the results of their operations for the year then ended, and the
changes in their net assets for each of the two years in the period then ended
in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996

<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

DECEMBER 31,
-----------------------------
1995 1994
-------- -------
($000'S)
ASSETS
Fixed maturities (market value $2,598,439
and $2,596,172)....................... $2,510,783 $2,647,315
Equity securities (cost $5,317 and $5,434) 4,009 3,326
Mortgage loans........................... 64,464 71,919
Investment in real estate................ 4,059 7,189
Policy loans............................. 569,273 493,862
Other long-term investments.............. 4,159 4,044
Short-term investments................... 228,016 191,455
---------- ----------
Total Investments..................... 3,384,763 3,419,110
Cash..................................... 41,435 27,780
Accrued investment income................ 59,862 59,382
Premiums due and deferred................ 19,521 16,821
Receivable from affiliates............... 8,275 7,517
Federal income taxes--from affiliate..... 8,875 23,306
Other assets............................. 9,436 25,102
Assets held in Separate Accounts......... 4,285,269 3,511,784
---------- ----------
TOTAL ASSETS............................. $7,817,436 $7,090,802
========== ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy liabilities and insurance reserves:
Future policy benefits and claims...... $2,606,856 $2,767,552
Other policy claims and benefits payable 13,822 15,184
Interest Maintenance Reserve (IMR)..... 27,282 21,802
Payable to affiliates.................... 41,584 30,257
Other liabilities........................ 52,865 131,695
Asset Valuation Reserve (AVR)............ 37,268 23,690
Liabilities related to Separate Accounts 4,208,737 3,424,535
---------- ----------
TOTAL LIABILITIES ........................ 6,988,414 6,414,715
---------- ----------

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....................... 386,940 234,005
---------- ----------
TOTAL STOCKHOLDER'S EQUITY................ 829,022 676,087
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY. $7,817,436 $7,090,802
========== ==========

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
($000'S)

REVENUE
Premiums and annuity considerations....... $570,440 $611,820 $563,900
Net investment income..................... 250,386 245,977 260,939
Net realized investment gains/(losses).... 3,952 (21,215) 8,878
Other income.............................. 40,987 13,259 18,882
-------- -------- --------
TOTAL REVENUE.............................. 865,765 849,841 852,599
-------- -------- --------
BENEFITS AND EXPENSES
Current and future benefits and claims.... 512,988 559,658 534,354
Commission expenses....................... 25,755 30,169 28,386
General, administrative and other expenses 118,808 119,309 129,171
-------- -------- --------
TOTAL BENEFITS AND EXPENSES................ 657,551 709,136 691,911
-------- -------- --------
Income before provision in lieu of federal
income tax............................... 208,214 140,705 160,688
Provision in lieu of federal
income tax............................... (50,013) (87,750) (83,640)
-------- -------- --------
NET INCOME................................. $158,201 $ 52,955 $ 77,048
======== ======== ========

SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

B-1

<PAGE>

CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- -------- -------
($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................. 234,005 176,711 162,530
Net income................................. 158,201 52,955 77,048
Net unrealized investment gains/(losses)... 8,761 5,814 (9,351)
(Increase) decrease in non-admitted assets. (449) (477) 575
(Increase) decrease in AVR................. (13,578) (998) 5,909
Dividends to stockholder................... - - (60,000)
-------- -------- --------
Balance, end of year....................... 386,940 234,005 176,711
-------- -------- --------
TOTAL STOCKHOLDER'S EQUITY.................. $829,022 $676,087 $618,793
======== ======== ========

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- -------- ------
($000'S)

CASH FLOW FROM OPERATING ACTIVITIES
Net income............................... $ 158,201 $ 52,955 $ 77,048
Adjustments to reconcile net income
to net cash from operations:
Increase/(decrease) in policy
liabilities and insurance reserves..... (162,058) (143,153) (124,602)
Net decrease in Separate Accounts....... 10,717 5,674 12,173
Net realized investment (gains)/losses.. (3,952) 21,215 (8,878)
Depreciation, amortization and
other non-cash items................... (2,854) 314 1,907
(Increase)/decrease in operating assets:
Policy loans........................... (75,411) (73,591) (71,472)
Notes receivable from affiliates....... - 50,000 9,000
Interest receivable from affiliates.... - 23 420
Accrued investment income.............. (480) (2,597) 880
Premiums due and deferred.............. (2,700) (252) (880)
Receivable from affiliates............. (758) (637) 1,970
Federal income taxes--from affiliate... 14,467 (19,155) 6,879
Other assets........................... 15,666 (9,273) (9,481)
Increase/(decrease) in operating
liabilities:
Payable to affiliates.................. 11,327 (24,029) 13,260
Federal income taxes--to affiliate..... (36) - -
Other liabilities...................... (78,830) 27,710 34,632
--------- --------- ---------

CASH FLOW FROM (USED FOR) OPERATING
ACTIVITIES ............................ (116,701) (114,796) (57,144)
--------- --------- ---------

CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity of:
Fixed maturities....................... 2,031,587 2,710,424 1,687,992
Equity securities...................... 5,557 1,909 4,032
Mortgage loans......................... 7,395 10,821 21,691
Other long-term investments............ 1,559 607 520
Investment in real estate.............. 2,925 8,676 -
Payments for the purchase of:
Fixed maturities....................... (1,876,232) (2,561,081) (1,483,234)
Equity securities...................... (4,279) (2,436) (3,068)
Mortgage loans......................... - (35,276) (918)
Other long-term investments............ (1,674) (1,584) (84)
Investment in real estate.............. - - (20)
Net proceeds/(payments) of short-term
investments............................ (36,482) 9,845 (116,735)
--------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES...... 130,356 141,905 110,176
--------- ---------- ----------

CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid......................... - - (60,000)
--------- ---------- -----------
Net increase/(decrease) in Cash........ 13,655 27,109 (6,968)
Cash, beginning of year................ 27,780 671 7,639
--------- ---------- ----------
CASH, END OF YEAR....................... $ 41,435 $ 27,780 $ 671
========= ========== ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Non-cash financing:
Investment in real estate from
foreclosed mortgage loans.......... $ - $ 4,139 $ 7,300
========= ========== ==========
Cash paid in lieu of income taxes.... $ 53,107 $ 73,903 $ 76,760
========= ========== ==========

SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

B-2

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES

A. PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the 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 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 the National Association
of Insurance Commissioners ("NAIC") and their respective domiciliary home
state insurance departments. Prescribed statutory accounting practices
include publications of the NAIC, state laws, regulations and general
administrative rules. Permitted statutory accounting practices encompass
all accounting practices not so prescribed.

The Company, with permission from the Arizona Department of Insurance
("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.

Certain reclassifications have been made to the 1994 and 1993 financial
statements and footnotes to conform to the 1995 presentation. Included in
the Statement of Operations are certain items which, under statutory
accounting practices, are charged or credited directly to surplus.

The following is a reconciliation of Pruco Life's Statutory Net Income
with net income per the consolidated financial statements.

YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
-------- -------- -------
($000'S)

Pruco Life Statutory Net Income including net
gains and losses on sales of investments....... $113,565 $ 49,374 $ 79,405
Adjustments to reconcile to net income
as follows:
Dividends from subsidiary...................... - - (26,000)
Change in General Account Reserve due to
changes in valuation basis................... 8,990 10,853 (2,331)
Provision for future assessments............... 367 377 588
Net gain from operations in Separate Accounts.. (9,775) 8,880 5,114
Gain/(Loss) due to income tax applicable to
other than current year...................... 19,752 (33,001) -
Other.......................................... (510) (13) 67
Subsidiaries' Statutory Net Income............. 25,812 16,485 20,205
-------- -------- --------
Consolidated Net Income.......................... $158,201 $ 52,955 $ 77,048
======== ======== ========

C. FUTURE APPLICATION OF ACCOUNT STANDARDS

B-3
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

mutual life insurance companies, with respect to utilizing statutory basis
financial statements for general purposes, in not allowing 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 judgement. The company is assessing the
impact of Interpretation No. 40 on its consolidated financial statements,
such effort has not been completed and management currently believes
surplus will increase significantly.

D. SELECTED FINANCIAL DATA OF PRUCO LIFE

Pruco Life markets the Future Value Annuity Contract, and 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:

DECEMBER 31,
------------------------------
1995 1994
---------- ----------
($000'S)
Assets:
Investments other than subsidiaries........ $2,736,259 $2,758,088
Investment in subsidiaries................. 198,601 169,816
Other assets............................... 132,185 135,778
Assets held in Separate Accounts........... 3,495,841 2,869,734
---------- ----------
Total Assets............................... $6,562,886 $5,933,416
========== ==========
Liabilities:
Policy liabilities and insurance reserves.. $2,187,632 $2,296,987
Other liabilities.......................... 115,115 163,322
Liabilities related to Separate Accounts... 3,431,117 2,797,020
---------- ----------
Total Liabilities.......................... $5,733,864 $5,257,329
========== ==========

YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
--------- --------- ---------
($000'S)

Revenues........................... $717,990 $698,685 $716,402
Benefits, expenses and taxes....... 588,812 659,237 633,277
-------- -------- --------
Net Income......................... $129,178 $ 39,448 $ 83,125
======== ======== ========
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, 1995 and 1994. These
investments amounted to $29 million and $13 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, 1995, two
loans were in foreclosure in the amount of $8 million. At December 31,
1994, one loan was in foreclosure in the amount of $6 million.

Policy loans are stated primarily at unpaid principal balances.

B-4

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

All the Company's real estate investments were acquired through
foreclosure during 1995 and 1994. These properties are carried at the
lower of cost of 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,
1995 and 1994 was $106 thousand and $456 thousand, respectively.

Other long-term investments, which consist solely of limited partnerships,
are valued at the aggregate net equity in the partnerships. Certain
investments in this category were non-income producing at December 31,
1995. These investments amounted to $300 thousand. There were no
non-income producing investments at December 31, 1994.

Short-term investments are stated at amortized cost, which approximates
fair value.

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 deferred 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.

Reserves for other deposit funds or other liabilities with life
contingencies reflect the contract deposit account or experience
accumulation for the contract and any purchased annuity reserves.

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 for life insurance companies under NAIC regulations.
The 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, 1995 and 1994 are as follows:

($000'S)
FIXED EQUITY REAL ESTATE
MATURITIES MORTGAGES SECURITIES & OTHER INV. TOTAL
---------- --------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
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
======== ======= ======= ====== ========
Beginning of Year 1995 -- AVR ................ $ 19,902 $ 1,510 $ 733 $1,545 $ 23,690
Additions .................................... 14,540 1,007 2,764 272 18,583
Deductions ................................... (1,832) (39) (2,627) (507) (5,005)
-------- ------- ------- ------ --------
End of Year 1995-- AVR ....................... $ 32,610 $ 2,478 $ 870 $1,310 $ 37,268
========= ======= ======= ====== ========

</TABLE>

B-5

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

The IMR captures net realized capital gains and losses resulting from
changes in the general level of interest rates. These gains and losses are
amortized into investment income over the expected remaining life of the
investment sold. The IMR balance was $27.3 million and $21.8 million at
December 31, 1995 and 1994, respectively. "Net realized investment
gains/(losses)" of $9.2 million and $(19.9) million were deferred in 1995
and 1994, respectively. Amortized into "Net investment income" were $3.8
million and $4.8 million of IMR for the year ended December 31, 1995 and
1994, respectively.

I. 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 year 1993,
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"). Since 1994, the Company has no
longer been 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, with the exception of the Pruco Life Modified
Guaranteed Annuity Account. The Pruco Life Modified Guaranteed Annuity
Account is a non-unitized separate account, which funds the Modified
Guaranteed Annuity Contract and the Market Value Adjustment Annuity
Contract. Owners of the Pruco Life Modified Annuity and the Market Value
Adjustment Annuity Contracts do not participate in the investment gain or
loss from assets relating to such accounts. Such gain, or loss is borne,
in total, by Pruco Life. 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, 1995, 1994 and
1993 were $805 million, ($28) million and $443 million, respectively.

B-6
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

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.

YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
-------- -------- -------
($000'S)
<S> <C> <C> <C>
Income before provision in lieu of
federal income taxes.................... $208,214 $140,705 $160,688
Statutory tax rate........................ 35% 35% 35%
--------- -------- --------
Expected federal income taxes............. $ 72,875 $ 49,247 $ 56,241
Tax effect of:
Statutory/tax policy reserve
difference............................ (14,524) 19,949 14,577
Timing differences in tax/book income
recognition on investments............ (6,980) 11,608 4,055
Timing differences in tax/book income
Recognition--other.................... (7,173) (6,816) (415)
Decrease/(Increase) in life insurance
premiums deferred and uncollected..... (953) (88) (308)
Capitalization of policy acquisition
expenses.............................. 6,768 13,850 7,374
Allocated equity tax.................... - - 2,116
-------- -------- --------
Federal income taxes...................... $ 50,013 $ 87,750 $ 83,640
======== ======== ========
Effective tax rate........................ 24% 62% 52%
======== ======== ========
</TABLE>

3. NET INVESTMENT INCOME

Net investment income consisted of:

YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
---------- ---------- --------
($000'S)
<S> <C> <C> <C>
Gross investment income
Fixed maturities......................... $194,198 $196,909 $216,660
Equity securities......................... 104 14 22
Mortgage loans............................ 7,757 4,041 6,359
Investment in real estate................. 647 2,146 2,066
Policy loans.............................. 29,775 25,692 21,741
Short-term investments.................... 15,092 12,676 9,031
Other..................................... 3,949 5,075 3,945
-------- -------- --------
251,522 246,553 259,824

Investment expenses......................... (4,904) (5,421) (5,570)
-------- -------- --------
Net investment income before IMR............ 246,618 241,132 254,254

Amortization of Interest Maintenance Reserve 3,768 4,845 6,685
-------- -------- --------
Net investment income....................... $250,386 $245,977 $260,939
======== ======== ========

</TABLE>

B-7
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

4. INVESTMENT AND INVESTMENT GAINS (LOSSES)

YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
---------- ---------- --------
($000'S)
<S> <C> <C> <C>
Realized Gains (Losses)
Fixed maturities.......................... $ 11,359 $(38,180) $ 32,471
Equity securities......................... 2,020 503 607
Mortgage loans............................ (90) (4,581) (2,592)
Investment in real estate................. (99) 1,184 (2,004)
Other..................................... 10 (1) (411)
Tax effected amounts transferred to Interest
Maintenance Reserve....................... (9,248) 19,860 (19,193)
-------- -------- --------
Net realized investment gains............... $ 3,952 $(21,215) $ 8,878
======== ======== ========
Unrealized Gains (Losses)
Fixed maturities.......................... 9,192 5,430 (9,380)
Equity securities......................... 799 (490) 260
Other..................................... (1,229) 874 (231)
-------- -------- --------
Net unrealized investment gains (losses) 8,762 5,814 (9,351)
Balance beginning of year................... (12,352) (18,166) (8,815)
-------- -------- --------
Balance end of year......................... $ (3,590) $(12,352) $(18,166)
======== ======== ========
</TABLE>

EQUITY SECURITIES AT DECEMBER 31,
($000'S)

GROSS UNREALIZED
-----------------------------------------------------
FAIR
MARKET
COST GAINS LOSSES VALUE
------- ------- -------- -------
1995 ........... $5,317 $581 $1,889 $4,009
1994 ........... 5,434 386 2,493 3,327
1993 ........... 4,405 742 2,359 2,788

FIXED MATURIES
--------------------------------
($000'S)
INCREASE (DECREASE)
AT DECEMBER 31, IN DIFFERENCE BETWEEN
-------------------------------- MARKET VALUE AND
AMORTIZED MARKET AND AMORTIZED COST
COST VALUE DURING THE YEAR
---------- ---------- ------------------
1995 .... $2,510,782 $2,598,439 $ 138,800
1994 .... 2,647,315 2,596,172 (167,494)
1993 .... 2,835,251 2,951,602 10,453

B-8

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

The amortized cost and estimated market value of fixed maturities at December
31, 1995 and 1994 are as follows:

1995
--------------------------------------------------------
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 ........................ $ 324,854 $ 6,829 $ 61 $ 331,622
Obligations of U.S. and
political subdivisions .............. - - - -
Debt securities issued by foreign
governments and
their agencies ...................... 73,042 3,055 - 76,097
Corporate securities .................. 1,943,696 73,489 3,974 2,013,211
Mortgage backed securities ............ 169,190 8,717 398 177,509
---------- -------- ------- ----------
Total ................................. $2,510,782 $ 92,090 $ 4,433 $2,598,439
========== ======== ======= ==========
</TABLE>

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
========== ======== ======== ==========
</TABLE>

The amortized cost and estimated market value of fixed maturities at December
31, 1995 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.

ESTIMATED
AMORTIZED MARKET
COST VALUE
($000's) ($000's)
---------- ----------
Due in one year or less ................... $ 161,693 $ 163,629
Due after one year through five years ..... 1,500,204 1,549,264
Due after five years through ten years .... 529,845 556,294
Due after ten years ....................... 149,850 151,743
---------- ----------
2,341,592 2,420,930
Mortgage-backed securities ................ 169,190 177,509
---------- ----------
Total ..................................... $2,510,782 $2,598,439
========== ==========

Proceeds from the sale/maturity of fixed maturities during 1995, 1994, and
1993 were $2.0 billion, $2.7 billion and $1.7 billion, respectively. Gross
gains of $28.8 million, $16.8 million and $44.5 million and gross losses
of $17.5 million, $49.8 million and $12.0 million were realized on those
sales during 1995, 1994, and 1993, 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 87.2% and 93.6% of the
Company's total fixed maturities balances at both December 31, 1995 and
1994) for regulatory purposes and

B-9

<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

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
1.0% and 1.5% of the Company's assets at December 31, 1995 and 1994,
respectively. The amount by which the market value of these securities
exceeded the carrying value was approximately $1.8 million and $(0.9)
million at December 31, 1995 and 1994, 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 $98 million,
$78 million, and $98 million for the years ended December 31, 1995, 1994,
and 1993, 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
several defined benefit pension plans that cover substanially all of its
employees. Benefits are generally based on career average earnings and
credited 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 1995, 1994 or 1993 because the plan was subject to the full
funding limitation under the Internal Revenue Code.

POSTRETIREMENT LIFE AND HEALTH BENEFITS

The Prudential also sponsors certain life insurance and health care
benefits for its retired employees. Substantially all employees may become
eligible to receive a benefit if they retire after age 55 with at least 10
years of service. Postretirement benefits, with respect to The Prudential,
are recognized in accordance with the prescribed NAIC policy. The
Prudential elected to amortize its 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, 1995, 1994, and 1993.

C. REINSURANCE

The Company currently has three 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 contact; and, two 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 1995, 1994, and 1993.

D. OTHER TRANSACTIONS

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, 1995, 1994 and 1993 are
respectively, $12 million, $12 million and $12 million, which are
attributable to these contracts.

B-10
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

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, 1995, the Company would be permitted a maximum of $83
million in dividend distributions in 1996, 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 judgement 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.

EQUITY SECURITIES. Fair value is based on quoted market prices, where
available, or prices 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.

B-11
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

The following table discloses the carrying amounts and estimated fair
values of the Company's financial instruments at December 31, 1995 and
1994.

(000's) (000's)
1995 1994
----------------------- --------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities ............. $2,510,782 $2,598,438 $ 2,647,315 $ 2,596,172
Equity securities ............ 4,009 4,036 3,326 3,326
Mortgage Loans ............... 64,464 63,635 71,919 71,805
Policy Loans ................. 569,273 577,975 493,862 448,617
Other Long term investments .. 4,159 4,159 4,044 4,044
Short term investments ....... 228,016 228,016 191,455 191,455

Financial Liabilities:
Investment type
insurance contracts ........ $ 536,963 $ 537,241 $ 794,691 $ 761,324

</TABLE>

8. CONTINGENCIES

Several actions have been brought against the Company on behalf of
those persons who purchased life insurance policies based on complaints
about sales practices engaged in by The Prudential, the Company and agents
appointed by The Prudential and the Company. The Prudential has agreed to
indemnify the Company for any and all losses resulting from such
litigation.

B-12

<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, 1995 and
1994, 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, 1995. 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, 1995 and 1994 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Parsippany, New Jersey
March 15, 1996

B-13

<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, 1996
PROSPECTUS

THE PRUDENTIAL SERIES FUND, INC.
AND
THE PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT

SVAL-2 ED 5-96 PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
CATALOG NO. 640189U

<PAGE>

PROSPECTUS

MAY 1, 1996

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 CONSERVATIVE BALANCED
PORTFOLIO and the FLEXIBLE MANAGED 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. 5-96

<PAGE>

TABLE OF CONTENTS
Page

FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS OF THE SERIES FUND ................. 4

THE PRUDENTIAL SERIES FUND, INC. FINANCIAL HIGHLIGHTS ..................... 5

PORTFOLIO RATES OF RETURN ................................................. 6

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 ...................... 9

REQUIREMENTS FOR ISSUANCE OF A CONTRACT ............................. 9
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 ........................ 11
Surrender or Withdrawal Charges ............................... 11
Transaction Charges ........................................... 11
CONTRACT DATE ....................................................... 12
PREMIUMS ............................................................ 12
ALLOCATION OF PREMIUMS .............................................. 13
TRANSFERS ........................................................... 13
HOW THE CONTRACT FUND CHANGES WITH INVESTMENT EXPERIENCE ............ 14
HOW A CONTRACT'S DEATH BENEFIT WILL VARY ............................ 14
CONTRACT LOANS ...................................................... 14
SURRENDER OF A CONTRACT ............................................. 15
LAPSE AND REINSTATEMENT ............................................. 15
Fixed Extended Term Insurance ................................. 16
Fixed Reduced Paid-Up Insurance ............................... 16
Variable Reduced Paid-Up Insurance ............................ 16
What Happens If No Request Is Made? ........................... 16
PAID-UP INSURANCE OPTION ............................................ 16
REDUCED PAID-UP INSURANCE OPTION .................................... 17
WHEN PROCEEDS ARE PAID .............................................. 17
LIVING NEEDS BENEFIT ................................................ 17
Terminal Illness Option ....................................... 17
VOTING RIGHTS ....................................................... 18
REPORTS TO CONTRACT OWNERS .......................................... 18

<PAGE>

PAGE

TAX TREATMENT OF CONTRACT BENEFITS ................................... 18
Treatment as Life Insurance .................................... 18
Pre-Death Distributions ........................................ 19
Other Tax Consequences ......................................... 19
OTHER CONTRACT PROVISIONS ............................................ 19

FURTHER INFORMATION ABOUT THE SERIES FUND .................................. 19

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS ....................... 20

BALANCED PORTFOLIOS .................................................. 20
CONSERVATIVE BALANCED PORTFOLIO ................................ 20
FLEXIBLE MANAGED PORTFOLIO ..................................... 21
FOREIGN SECURITIES ................................................... 22
OPTIONS, FUTURES CONTRACTS AND SWAPS ................................. 22
SHORT SALES .......................................................... 23
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS ....................... 23
LOANS OF PORTFOLIO SECURITIES ........................................ 23

INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS ....................... 23

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES ............................ 24
PORTFOLIO BROKERAGE AND RELATED PRACTICES ............................ 24

STATE REGULATION ........................................................... 24

EXPERTS .................................................................... 25

LITIGATION ................................................................. 25

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION .......... 25

ADDITIONAL INFORMATION ..................................................... 27

FINANCIAL STATEMENTS ....................................................... 27

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, 1995, 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 CONSERVATIVE BALANCED PORTFOLIO and the FLEXIBLE
MANAGED 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

1
<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:

o To be invested in one or a combination of:
o The Conservative Balanced Portfolio
o The Flexible Managed Portfolio
o The Fixed Rate Option

- --------------------------------------------------------------------------------
|
|
- --------------------------------------------------------------------------------
DAILY CHARGES

- --------------------------------------------------------------------------------
POSSIBLE ADDITIONAL CHARGES

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

2
<PAGE>

objectives of the portfolios, described more fully starting on page 20 of this
prospectus, and of the fixed rate option are as follows:

BALANCED PORTFOLIOS

CONSERVATIVE BALANCED PORTFOLIO (formerly the 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 than that associated with
the Flexible Managed Portfolio while recognizing that this reduces the chances
of 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

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

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.

PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACTS

Pruco Life of New Jersey's PRUVIDER Variable APPRECIABLE LIFE Insurance Contract
is a form of life insurance that provides much of the flexibility of variable
universal life. However, it differs in two important ways. First, Pruco Life of
New Jersey guarantees that if the Scheduled Premiums are paid when due or within
the grace period (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."

3
<PAGE>

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

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

(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.

CONSERVATIVE BALANCED
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $11.889 $12.571 $12.173
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.635 0.528 0.486 0.558 0.687 0.821 0.891 0.773 0.656 0.652
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investmentss........... 1.775 (0.679) 1.229 0.410 1.738 (0.143) 1.155 0.424 (0.399) 1.046
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 2.410 (0.151) 1.715 0.968 2.425 0.678 2.046 1.197 0.257 1.698
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.643) (0.505) (0.468) (0.533) (0.668) (0.812) (0.887) (0.791) (0.709) (0.517)
Distributions from net
realized gains......... (0.553) (0.154) (0.585) (0.510) (0.499) (0.167) (0.093) 0.000 (0.230) (0.783)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.196) (0.659) (1.053) (1.043) (1.167) (0.979) (0.980) (0.791) (0.939) (1.300)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 1.214 (0.810) 0.662 (0.075) 1.258 (0.301) 1.066 0.406 (0.682) 0.398
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $15.309 $14.095 $14.905 $14.243 $14.318 $13.060 $13.361 $12.295 $ 11.889 $12.571
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Investment Rate of
Return:**.............. 17.27 % (0.97 %) 12.20 % 6.95 % 19.07 % 5.27 % 16.99 % 10.19 % 1.54 % 14.17 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $3,940.8 $3,501.1 $3,103.2 $2,114.0 $1,500.0 $1,100.2 $976.0 $815.6 $803.9 $375.4
Ratio of expenses net of
reimbursement to
average net assets..... 0.58 % 0.61 % 0.60 % 0.62 % 0.63 % 0.65 % 0.64 % 0.65% 0.66 % 0.64 %
Ratio of net investment
income to average net
assets................. 4.19 % 3.61 % 3.22 % 3.88 % 4.89 % 6.21 % 6.81 % 6.22 % 5.05 % 5.10 %
Portfolio turnover
rate................... 200.68 % 125.18 % 79.46 % 62.07 % 115.35 % 44.04 % 153.92 % 110.67 % 140.69 % 207.78 %
Number of shares
outstanding at end of
period (in millions)... 257.4 248.4 208.2 148.4 104.8 84.2 73.0 66.3 67.6 29.9

FLEXIBLE MANAGED
-----------------------------------------------------------------------------------------------------
01/01/95 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
TO TO TO TO TO TO TO TO TO TO
12/31/95 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> <C>
Net Asset Value at
beginning of year...... $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $13.555 $12.810
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net investment income.... 0.564 0.473 0.566 0.583 0.650 0.715 0.813 0.724 0.577 0.611
Net realized gains
(losses) and unrealized
appreciation
(depreciation) on
investments............ 3.149 (1.021) 1.882 0.607 2.809 (0.466) 1.989 0.840 (0.753) 1.342
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 3.713 (0.548) 2.448 1.190 3.459 0.249 2.802 1.564 (0.176) 1.953
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to
Shareholders:
Distributions from net
investment income...... (0.560) (0.451) (0.567) (0.559) (0.654) (0.699) (0.813) (0.767) (0.673) (0.456)
Distributions from net
realized gains......... (0.790) (0.462) (0.929) (0.914) (0.513) 0.000 (0.666) 0.000 (0.380) (0.752)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions........ (1.350) (0.913) (1.496) (1.473) (1.167) (0.699) (1.479) (0.767) (1.053) (1.208)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in Net Asset Value..... 2.363 (1.461) 0.952 (0.283) 2.292 (0.450) 1.323 0.797 (1.229) 0.745
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value at end of
year................... $17.859 $15.496 $16.957 $16.005 $16.288 $13.996 $14.446 $13.123 $12.326 $ 13.555
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Investment Rate of
Return:**.............. 24.13 % (3.16 %) 15.58 % 7.61 % 25.43 % 1.91 % 21.77 % 12.83 % (1.83 %) 15.48 %
Ratios/Supplemental Data:
Net assets at end of year
(in millions).......... $4,261.2 $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
Ratio of expenses net of
reimbursement to
average net assets..... 0.63 % 0.66 % 0.66 % 0.67 % 0.67 % 0.69 % 0.69 % 0.70 % 0.71 % 0.67 %
Ratio of net investment
income to average net
assets................. 3.30 % 2.90 % 3.30 % 3.63 % 4.23 % 5.13 % 5.66 % 5.52 % 4.09 % 4.43 %
Portfolio turnover
rate................... 173.30 % 123.63 % 62.99 % 59.03 % 93.13 % 51.87 % 141.04 % 128.45 % 123.83 % 133.76 %
Number of shares
outstanding at end of
period (in millions)... 238.6 224.7 194.1 152.2 122.2 107.7 96.0 84.1 86.2 43.8
</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.

<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 12/31/95 for the 5 year
and 10 year periods ending on that date, and from the inception date of each
Portfolio to December 31, 1995. 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.

CONSERVATIVE
BALANCED 5/83 17.3% 10.7% 10.1% 10.4% 17.3% -1.0% 12.2%

CONSERVATIVE
BALANCED 6.9% 19.1% 5.3% 17.0% 10.2% 1.5% 14.2%
</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.

7
<PAGE>

<TABLE>
<CAPTION>
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 (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET) (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 181 $5,003 $5,007 $ 5,011 $ 5,016 $ 0 $ 0 $ 2 $ 6
2 $ 369 $5,002 $5,013 $ 5,024 $ 5,036 $ 48 $ 59 $ 70 $ 82
3 $ 564 $5,000 $5,019 $ 5,040 $ 5,063 $101 $ 121 $ 142 $ 165
4 $ 767 $5,000 $5,024 $ 5,058 $ 5,096 $153 $ 185 $ 219 $ 256
5 $ 978 $5,000 $5,028 $ 5,079 $ 5,136 $204 $ 249 $ 300 $ 357
6 $ 1,198 $5,000 $5,033 $ 5,104 $ 5,187 $268 $ 329 $ 400 $ 482
7 $ 1,427 $5,000 $5,038 $ 5,134 $ 5,247 $330 $ 411 $ 506 $ 620
8 $ 1,665 $5,000 $5,042 $ 5,167 $ 5,319 $392 $ 493 $ 618 $ 770
9 $ 1,912 $5,000 $5,046 $ 5,204 $ 5,403 $452 $ 577 $ 735 $ 934
10 $ 2,169 $5,000 $5,050 $ 5,246 $ 5,501 $511 $ 663 $ 859 $ 1,114
15 $ 3,617 $5,000 $5,056 $ 5,541 $ 6,266 $719 $1,045 $ 1,529 $ 2,255
20 $ 5,379 $5,000 $5,044 $ 6,020 $ 9,093 $880 $1,454 $ 2,430 $ 4,111
25 $ 7,523 $5,000 $5,010 $ 6,960 $13,506 $967 $1,876 $ 3,631 $ 7,046
30 (Age 65) $10,132 $5,000 $5,000 $ 8,713 $19,529 $936 $2,294 $ 5,181 $11,613
35 $13,305 $5,000 $5,000 $10,670 $27,840 $694 $2,681 $ 7,124 $18,587
40 $17,166 $5,000 $5,000 $12,902 $39,427 $ 44 $2,995 $ 9,507 $29,054
45 $21,864 $5,000 $5,000 $15,510 $55,797 $ 0 $3,146 $12,369 $44,496
</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 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

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 (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET) (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% 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 $ 243 $ 276 $ 310 $ 345
3 $ 1,269 $20,002 $20,065 $20,132 $ 20,204 $ 442 $ 505 $ 573 $ 644
4 $ 1,726 $20,000 $20,081 $20,194 $ 20,316 $ 635 $ 739 $ 851 $ 974
5 $ 2,202 $20,000 $20,095 $20,265 $ 20,456 $ 832 $ 985 $ 1,156 $ 1,346
6 $ 2,697 $20,000 $20,111 $20,355 $ 20,635 $1,083 $ 1,295 $ 1,539 $ 1,818
7 $ 3,211 $20,000 $20,126 $20,459 $ 20,851 $1,334 $ 1,616 $ 1,948 $ 2,340
8 $ 3,746 $20,000 $20,139 $20,577 $ 21,108 $1,581 $ 1,942 $ 2,380 $ 2,911
9 $ 4,302 $20,000 $20,149 $20,712 $ 21,412 $1,822 $ 2,273 $ 2,835 $ 3,535
10 $ 4,881 $20,000 $20,157 $20,863 $ 21,768 $2,058 $ 2,609 $ 3,315 $ 4,220
15 $ 8,140 $20,000 $20,157 $21,938 $ 24,573 $2,896 $ 4,111 $ 5,892 $ 8,528
20 $12,106 $20,000 $20,078 $23,714 $ 34,411 $3,541 $ 5,716 $ 9,352 $ 15,557
25 $16,931 $20,000 $20,000 $26,772 $ 51,149 $3,888 $ 7,368 $13,967 $ 26,684
30 (Age 65) $22,801 $20,000 $20,000 $33,547 $ 73,995 $3,759 $ 8,994 $19,950 $ 44,003
35 $29,942 $20,000 $20,000 $41,116 $105,519 $2,780 $10,454 $27,451 $ 70,449
40 $38,631 $20,000 $20,000 $49,746 $149,472 $ 153 $11,532 $36,658 $110,146
45 $49,203 $20,000 $20,000 $59,831 $211,561 $ 0 $11,760 $47,713 $168,712
</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 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

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 (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET) (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% 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 $ 5,022 $ 35 $ 45 $ 56 $ 67
3 $ 564 $5,000 $5,000 $ 5,018 $ 5,039 $ 82 $ 100 $ 120 $ 142
4 $ 767 $5,000 $5,000 $ 5,028 $ 5,063 $128 $ 157 $ 189 $ 224
5 $ 978 $5,000 $5,000 $ 5,040 $ 5,093 $172 $ 214 $ 261 $ 314
6 $ 1,198 $5,000 $5,000 $ 5,054 $ 5,129 $228 $ 284 $ 350 $ 425
7 $ 1,427 $5,000 $5,000 $ 5,070 $ 5,174 $283 $ 356 $ 442 $ 546
8 $ 1,665 $5,000 $5,000 $ 5,089 $ 5,227 $336 $ 428 $ 540 $ 678
9 $ 1,912 $5,000 $5,000 $ 5,111 $ 5,290 $388 $ 500 $ 642 $ 821
10 $ 2,169 $5,000 $5,000 $ 5,136 $ 5,364 $438 $ 574 $ 749 $ 977
15 $ 3,617 $5,000 $5,000 $ 5,318 $ 5,950 $601 $ 885 $1,306 $ 1,938
20 $ 5,379 $5,000 $5,000 $ 5,622 $ 7,682 $712 $1,202 $2,031 $ 3,473
25 $ 7,523 $5,000 $5,000 $ 6,099 $11,204 $739 $1,498 $2,965 $ 5,845
30 (Age 65) $10,132 $5,000 $5,000 $ 6,993 $15,870 $632 $1,736 $4,159 $ 9,438
35 $13,305 $5,000 $5,000 $ 8,411 $22,115 $280 $1,840 $5,616 $14,765
40 $17,166 $5,000 $5,000 $ 9,959 $30,539 $ 0 $1,651 $7,339 $22,504
45 $21,864 $5,000 $5,000 $11,677 $41,993 $ 0 $ 731 $9,312 $33,488
</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 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

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 (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET) (-1.51% NET) (2.49% NET) (6.49% NET) (10.49% NET)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,000 $20,000 $20,009 $ 20,028 $ 12 $ 24 $ 35 $ 46
2 $ 829 $20,000 $20,000 $20,024 $ 20,056 $ 191 $ 221 $ 253 $ 286
3 $ 1,269 $20,000 $20,000 $20,045 $ 20,111 $ 364 $ 423 $ 485 $ 551
4 $ 1,726 $20,000 $20,000 $20,073 $ 20,185 $ 532 $ 627 $ 730 $ 843
5 $ 2,202 $20,000 $20,000 $20,109 $ 20,283 $ 704 $ 843 $ 999 $ 1,173
6 $ 2,697 $20,000 $20,000 $20,153 $ 20,406 $ 924 $1,116 $ 1,337 $ 1,590
7 $ 3,211 $20,000 $20,000 $20,206 $ 20,559 $1,144 $1,397 $ 1,696 $ 2,048
8 $ 3,746 $20,000 $20,000 $20,269 $ 20,744 $1,358 $1,681 $ 2,072 $ 2,547
9 $ 4,302 $20,000 $20,000 $20,343 $ 20,965 $1,567 $1,968 $ 2,466 $ 3,089
10 $ 4,881 $20,000 $20,000 $20,428 $ 21,227 $1,769 $2,257 $ 2,880 $ 3,679
15 $ 8,140 $20,000 $20,000 $21,061 $ 23,332 $2,429 $3,480 $ 5,015 $ 7,287
20 $12,106 $20,000 $20,000 $22,149 $ 28,871 $2,874 $4,713 $ 7,787 $ 13,052
25 $16,931 $20,000 $20,000 $23,887 $ 42,162 $2,984 $5,854 $11,349 $ 21,996
30 (Age 65) $22,801 $20,000 $20,000 $26,744 $ 59,769 $2,553 $6,742 $15,904 $ 35,543
35 $29,942 $20,000 $20,000 $32,210 $ 83,331 $1,136 $7,056 $21,505 $ 55,635
40 $38,631 $20,000 $20,000 $38,177 $115,111 $ 0 $6,109 $28,133 $ 84,826
45 $49,203 $20,000 $20,000 $44,799 $158,323 $ 0 $2,012 $35,726 $126,256
</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 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 Conservative Balanced Portfolio and the
other of which invests in the Flexible Managed 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
12. 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.

8
<PAGE>

DETAILED INFORMATION FOR PROSPECTIVE
CONTRACT OWNERS

REQUIREMENTS FOR ISSUANCE OF A CONTRACT

The Contract may generally be issued on insureds below the age of 76. 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. For proposed insureds 21
years of age or younger, the minimum initial guaranteed death benefit that can
be applied for is $10,000. 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 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.
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% (but in some instances it may
exceed 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.
During 1995 and 1994, Pruco Life of New Jersey received a total of approximately
$153,339 and $149,988, 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. If you pay premiums more frequently, for example under a payroll
deduction plan with your employer, the charge may be more than $24 per year.
During 1995 and 1994, Pruco Life of New Jersey received a total of approximately
$169,672 and $116,312, 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 Conservative Balanced Portfolio and 0.6% for the
Flexible Managed Portfolio.

9
<PAGE>

These expenses also vary from portfolio to portfolio. The total expenses of each
portfolio for the year 1995 expressed as a percentage of the average assets
during the year are shown below:

- ---------------------------------------------------------------------
OTHER TOTAL
PORTFOLIO ADVISORY EXPENSES EXPENSES
FEE
- ---------------------------------------------------------------------
Conservative Balanced 0.55% 0.03% 0.58%
Flexible Managed 0.60% 0.03% 0.63%
- ---------------------------------------------------------------------

For the years 1995, 1994, and 1993, The Prudential received a total of
$77,610,207, $66,413,206, and $51,197,499, 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 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. During 1995 and 1994, Pruco Life of New Jersey
received a total of approximately $351,003 and $203,885, 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. During 1995 and 1994, Pruco Life of New
Jersey received a total of approximately $19,558 and $12,917, 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 12, 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 1995 and 1994, Pruco
Life of New Jersey received a total of approximately $1,028,516 and $680,579,
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.

10
<PAGE>

(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

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 of New Jersey 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 of New Jersey 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 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. During 1995 and 1994, Pruco Life of New Jersey received a
total of approximately $71,857 and $31,792, respectively, in mortality and
expense risk charges.

Surrender or Withdrawal Charges

- --------------------------------------------------------------------------------
Cumulative
Cumulative Total Sales
SURRENDER, Cumulative Sales Load Contingent Total Load as Per-
LAST DAY OF Scheduled Deducted Deferred Sales centage of
YEAR NO. Premiums from Sales Load Load Scheduled
Paid Contract Premiums
Fund 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 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 1995
and 1994, Pruco Life of New Jersey received a total of approximately $22,963 and
$10,806, respectively, for surrendered or lapsed Contracts.

Transaction Charges

11
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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.

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

12
<PAGE>

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 18.

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 18.

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 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 33 1/3% 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 (usually the business day) in which a proper transfer request is received
at a Home Office. The valuation period is defined as 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 are
calculated, which is generally at 4:15 p.m. New York City time on each day
during which the New York Stock Exchange is open. 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 using the Telephone Transfer System unless you elect not to have
this privilege. 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 will not be held
liable for following telephone instructions that we reasonably believe to be
genuine. 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

13
<PAGE>

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.

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 16, 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.

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. If
you fail to keep the Contract in force, the amount of unpaid Contract debt

14
<PAGE>

will be treated as a distribution which may be taxable. See TAX TREATMENT OF
CONTRACT BENEFITS, page 18, and LAPSE AND REINSTATEMENT, page 15 .

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.

SURRENDER OF A CONTRACT

LAPSE AND REINSTATEMENT

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 18.

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.

15
<PAGE>

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 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
18.

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 of New Jersey 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 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 18. A Contract in effect under a paid-up insurance option will
have cash surrender and loan values.

16
<PAGE>

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 18.

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

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.

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.

17
<PAGE>

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 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.

TAX TREATMENT OF CONTRACT BENEFITS

The tax treatment of life insurance is complex and may change. Each prospective
purchaser is urged to consult a qualified tax advisor. The following discussion
is not intended as tax advice, and it is not a complete statement of what the
effect of federal income taxes will be under all circumstances. Rather, it
provides information about how Pruco Life of New Jersey believes the tax laws
apply in the most commonly occurring circumstances. A more technical discussion
of what follows is contained in the Statement of Additional Information.

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: (1) except as noted below, the Contract owner should not be taxed on any
part of the Contract Fund, including additions attributable to interest or
appreciation; and (2) the death benefit should be excludible from the gross
income of the beneficiary under section 101(a) of the Code.

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<PAGE>

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 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.

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 25 and described in greater detail in the Statement
of Additional Information.

FURTHER INFORMATION ABOUT THE SERIES FUND

19
<PAGE>

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.

INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS

BALANCED PORTFOLIOS

Asset Type Minimum Normal Maximum
---------- ------- ------ -------
Stocks 15% 35% 50%
Bonds and Money Market 25% 65% 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 or, if unrated, of comparable quality in the opinion of the
portfolio manager. 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 Flexible Managed
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.

20
<PAGE>

FLEXIBLE MANAGED 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 nonUnited 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.

21
<PAGE>

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.

FOREIGN SECURITIES

OPTIONS, FUTURES CONTRACTS AND SWAPS

22
<PAGE>

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

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

LOANS OF PORTFOLIO SECURITIES

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.

23
<PAGE>

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, 1995 was over $314 billion, which includes over
$219 billion owned by The Prudential and approximately $95 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 Conservative Balanced and Flexible Managed Portfolios, are furnished by its
wholly-owned subsidiary PIC, pursuant to the Service Agreement between The
Prudential and PIC which provides that a portion of the fee received by The
Prudential for providing investment advisory services will be paid to PIC. The
Conservative Balanced and Flexible Managed Portfolios are managed by PIC, using
a team of portfolio managers under the supervision of Theresa Hamacher and Mark
Stumpp, Managing Directors, PIC. PIC is registered as an investment advisor
under the Investment Advisers Act of 1940.

For the year ended December 31, 1995, the Series Fund's total expenses were
0.55% 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.

PORTFOLIO BROKERAGE AND RELATED PRACTICES

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.

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<PAGE>

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.

On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Pruco Life of New Jersey. There have been no disagreements with
Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statements disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of the accountant, would have caused them to make a
reference to the matter in their reports.

LITIGATION

Several actions have been brought against Pruco Life of New Jersey on behalf of
those persons who purchased life insurance policies based on complaints about
sales practices engaged in by The Prudential, Pruco Life of New Jersey and
agents appointed by The Prudential and Pruco Life of New Jersey. The Prudential
has agreed to indemnify Pruco Life of New Jersey for any and all losses
resulting from such litigation.

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.

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. For new Contracts issued on or about July 1, 1996, the
commission rates for the second through tenth years will change to no more
than 6% of the Scheduled Premiums 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.

25
<PAGE>

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.

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.

26
<PAGE>

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.

27
<PAGE>

FINANCIAL STATEMENTS OF THE
FLEXIBLE MANAGED AND CONSERVATIVE BALANCED
SUBACCOUNTS OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF NET ASSETS

December 31, 1995

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

FLEXIBLE CONSERVATIVE
MANAGED BALANCED
-------------- --------------
<S> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 297,266,309 $ 94,432,471
-------------- --------------
-------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 297,126,259 $ 94,287,759
Equity of Pruco Life Insurance Company of New
Jersey........................................ 140,050 144,712
-------------- --------------
$ 297,266,309 $ 94,432,471
-------------- --------------
-------------- --------------
</TABLE>

STATEMENTS OF OPERATIONS

For the year ended December 31, 1995

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

FLEXIBLE CONSERVATIVE
MANAGED BALANCED
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 8,628,964 $ 3,716,087

EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 1,585,674 538,559
Reimbursement for excess expenses [Note 3D]..... (646,788) (161,773)
-------------- --------------
NET EXPENSES...................................... 938,886 376,786
-------------- --------------
NET INVESTMENT INCOME............................. 7,690,078 3,339,301
-------------- --------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Capital gains distributions received............ 12,349,890 3,199,302
Realized gain on shares redeemed
[average cost basis].......................... 862,723 395,934
Net unrealized gain on investments.............. 35,084,463 6,759,491
-------------- --------------
NET GAIN ON INVESTMENTS........................... 48,297,076 10,354,727
-------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 55,987,154 $ 13,694,028
-------------- --------------
-------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A3 AND A4.
A1

<PAGE>

FINANCIAL STATEMENTS OF THE
FLEXIBLE MANAGED AND CONSERVATIVE BALANCED
SUBACCOUNTS OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the years ended December 31, 1995 and 1994

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

FLEXIBLE CONSERVATIVE
MANAGED BALANCED
------------------------------ ------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>

OPERATIONS:
Net investment income............ $ 7,690,078 $ 5,619,063 $ 3,339,301 $ 2,486,229
Capital gains distributions
received....................... 12,349,890 6,536,164 3,199,302 863,296
Realized gain on shares redeemed
[average cost basis]........... 862,723 469,942 395,934 84,451
Net unrealized gain (loss) on
investments.................... 35,084,463 (20,633,412) 6,759,491 (4,531,190)
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 55,987,154 (8,008,243) 13,694,028 (1,097,214)
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 7,645,276 10,588,266 (668,617) 1,744,736
-------------- -------------- -------------- --------------

NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (84,390) 28,940 (183,597) 139,892
-------------- -------------- -------------- --------------

TOTAL INCREASE IN NET ASSETS....... 63,548,040 2,608,963 12,841,814 787,414

NET ASSETS:
Beginning of year................ 233,718,269 231,109,306 81,590,657 80,803,243
-------------- -------------- -------------- --------------
End of year...................... $ 297,266,309 $ 233,718,269 $ 94,432,471 $ 81,590,657
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A3 AND A4.
A2

<PAGE>

NOTES TO FINANCIAL STATEMENTS OF THE
FLEXIBLE MANAGED AND CONSERVATIVE BALANCED
SUBACCOUNTS OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

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 thirteen 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 Flexible Managed and Conservative Balanced
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
-------------------------------
PORTFOLIO FLEXIBLE CONSERVATIVE
INFORMATION MANAGED BALANCED
- ---------------------------- -------------- ---------------
<S> <C> <C>
Number of shares: 16,644,884 6,168,525
Net asset value per share: $ 17.8593 $ 15.3088
Cost: $ 253,095,408 $ 83,689,007
</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.

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, Diversified Bond,
Equity, Flexible Managed and the Conservative Balanced Portfolios of the
Series Fund.

<PAGE>

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 (withdrawals) 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, 1995 and December 31, 1994,
respectively, were directed to the Flexible Managed subaccount. Equity of
Contract owners in that subaccount at December 31, 1995 and December 31, 1994
includes approximately $104.1 million and $73.6 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 Flexible
Managed and Conservative Balanced subaccounts of the Pruco Life of New Jersey
Variable Appreciable Account of Pruco Life Insurance Company of New Jersey as of
December 31, 1995, the related statements of operations for the year then ended,
and the statements of changes in net assets for each of the two years in the
period 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 Flexible Managed and
Conservative Balanced subaccounts of the Pruco Life of New Jersey Variable
Appreciable Account as of December 31, 1995, the results of their operations for
the year then ended, and the changes in their net assets for each of the two
years in the period then ended in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996

<PAGE>

<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

STATEMENTS OF FINANCIAL POSITION
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------- ----------
($000'S)
<S> <C> <C>
ASSETS
Fixed maturities (market value $513,433
and $509,821)................................................. $ 498,041 $ 527,304
Policy loans...................................................... 98,194 85,277
Short-term investments............................................ 45,308 41,695
---------- ----------
Total Investments............................................. 641,543 654,276
Cash.............................................................. - 17
Accrued investment income......................................... 11,579 11,262
Premiums due and deferred......................................... 2,770 2,753
Receivable from affiliate......................................... 3,616 1,827
Federal income taxes.............................................. 368 8,597
Other assets...................................................... 253 1,549
Assets held in Separate Accounts.................................. 789,427 642,049
---------- ----------
TOTAL ASSETS........................................................... $1,449,556 $1,322,330
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy liabilities and insurance reserves:
Future policy benefits and claims............................. $ 449,617 $ 497,353
Other policy claims and benefits payable...................... 2,494 3,268
Interest maintenance reserve (IMR) ........................... 8,216 6,931
Payable to affiliates............................................. 5,375 4,568
Other liabilities................................................. 8,878 14,117
Asset valuation reserve (AVR)..................................... 5,749 5,512
Liabilities related to Separate Accounts.......................... 777,620 627,515
---------- ----------
TOTAL LIABILITIES...................................................... 1,257,949 1,159,264
---------- ----------
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 ............................................... 64,607 36,066
---------- ----------
TOTAL STOCKHOLDER'S EQUITY............................................. 191,607 163,066
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............................. $1,449,556 $1,322,330
========== ==========
</TABLE>

<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
-------- -------- --------
($000'S)
<S> <C> <C> <C>
REVENUE
Premiums and annuity considerations................................. $ 97,660 $106,117 $105,390
Net investment income............................................... 44,580 44,381 47,700
Net realized investment gains/(losses).............................. 1,257 (2,825) 6,066
Other income........................................................ 3,900 3,201 2,831
-------- -------- --------
TOTAL REVENUE......................................................... 147,397 150,874 161,987
-------- --------- --------
BENEFITS AND EXPENSES
Current and future benefits and claims.............................. 89,115 100,555 100,514
Commission expenses................................................. 2,538 3,075 3,038
General, administrative and other expenses.......................... 18,133 17,149 19,182
-------- -------- --------
TOTAL BENEFITS AND EXPENSES........................................... 109,786 120,779 122,734
-------- -------- --------
Income before provision in lieu of federal
income tax . . . . . . ......................................... 37,611 30,095 39,253
Provision in lieu of federal
income tax...................................................... (8,833) (16,765) (19,460)
-------- -------- --------
NET INCOME.......................................................... $ 28,778 $ 13,330 $ 19,793
======== ======== ========
</TABLE>

SEE NOTES TO THE FINANCIAL STATEMENTS

B-1

<PAGE>

<TABLE>

FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

STATEMENTS OF STOCKHOLDER'S EQUITY
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
-------- -------- --------
($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......................................... 36,066 22,942 29,333
Net income ........................................................ 28,778 13,330 19,793
Net unrealized investment gains/(losses) ......................... - - -
(Increase)/Decrease in AVR ........................................ (237) (206) (184)
Dividends to stockholder........................................... - - (26,000)
-------- -------- --------
Balance, end of year............................................... 64,607 36,066 22,942
-------- -------- --------
TOTAL STOCKHOLDER'S EQUITY............................................ $191,607 $163,066 $149,942
======== ======== ========

STATEMENTS OF CASH FLOWS

CASH FLOW FROM OPERATING ACTIVITIES
Net income ........................................................ $ 28,778 $ 13,330 $ 19,793
Adjustments to reconcile net income to
net cash from operations:
Increase (decrease) in policy
liabilities and insurance reserves........................... (48,509) (40,237) (13,998)
Net (increase) decrease in Separate
Accounts..................................................... 2,728 1,220 3,426
Net realized investment (gains)/loss............................ (1,257) 2,825 (6,066)
Amortization and other non-cash items........................... 879 1,696 1,791
(Increase) decrease in operating assets:
Policy loans................................................. (12,917) (15,511) (13,921)
Accrued investment income.................................... (317) (679) 500
Premiums due and deferred.................................... (17) 268 115
Receivable from affiliate.................................... (1,789) (132) (953)
Federal income taxes ........................................ 8,229 (8,448) 4,065
Other assets................................................. 1,296 2,760 (3,808)
Increase (decrease) in operating liabilities:
Payable to affiliates........................................ 807 (3,419) 732
Federal income taxes........................................... - - -
Other liabilities............................................ (5,239) 10,522 (1,271)
-------- -------- --------
CASH FLOW FROM (USED FOR) OPERATING ACTIVITIES........................ (27,328) (35,805) (9,595)
-------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity of:
Fixed maturities................................................ 553,681 705,889 443,879
Payments for the purchase of:
Fixed maturities................................................ (522,757) (658,008) (391,561)
Net proceeds (payments) of short-term
investments..................................................... (3,613) (12,096) (17,838)
-------- -------- --------
CASH FLOW FROM (USED FOR) INVESTING ACTIVITIES........................ 27,311 35,785 34,480
-------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid..................................................... - - (26,000)
-------- -------- --------
Net increase (decrease) in Cash.................................... (17) (20) (1,115)
Cash, beginning of year............................................ 17 37 1,152
-------- -------- --------
CASH, END OF YEAR..................................................... $ 0 $ 17 $ 37
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid in lieu of income taxes.................................. $ 7,900 $ 17,679 $ 15,396
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Dividends paid in the form of fixed
maturities...................................................... $ - $ - $ -
======== ======== ========
</TABLE>

SEE NOTES TO THE FINANCIAL STATEMENTS

B-2

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

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

The 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 the National
Associations of Insurance Commissioners ("NAIC") and their respective
domiciliary home state insurance departments. Prescribed statutory
accounting practices include publications of the NAIC, state laws,
regulations and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so
prescribed.

Certain reclassifications have been made to the 1993 and 1994 financial
statements and footnotes to conform to the 1995 presentation. Included
in the Statement of Operations are certain items which, under statutory
accounting practices, are charged or credited directly to surplus.

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").

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.

The following is a reconciliation of Statutory Net Income with net
income per the financial statements.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------- ------- -------
($000'S)
<S> <C> <C> <C>
Statutory net income including net
gains and losses on sales of investments ................. $25,567 $16,309 $20,075
Adjustments to reconcile to net income
as follows:
Change in General Account reserve
due to changes in valuation basis ........................ 24 3,156 166
Gain/(Loss) due to income tax applicable
to other than current year................................ 5,266 (7,534) -
Net gain/(loss) from operations in
Separate Accounts......................................... (2,080) 1,372 (458)
Other........................................................ 1 27 10
------- ------- -------
Net Income................................................... $28,778 $13,330 $19,793
======= ======= =======
</TABLE>

B. FUTURE APPLICATION OF ACCOUNTING STANDARDS

B-3

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

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 judgement. The Company is assessing
the impact of Interpretation No. 40 on its consolidated financial
statements, such effort has not been completed. Management currently
believes surplus will increase significantly.

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 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 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 deferred individual annuity contracts are determined using
the Commissioner's Annuity Reserve Valuation Method (CARVM) and the Net
Level Premium Method.

For life insurance and annuities, unpaid claims include estimates of
both death benefits on reported claims and those which are incurred but
not reported.

Reserves for other deposit funds or other liabilities with life
contingencies reflect the contract deposit account or experience
accumulation for the contract and any purchased annuity reserves.

E. REVENUE RECOGNITION AND RELATED EXPENSES

Premium revenues are recognized as income over the premium paying
period of the related policy. Annuity considerations are recognized as
revenue when received. Expenses, including new business acquisition
costs such as commissions, are charged to operations as incurred.

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 year 1993, 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"). Since
1994, the Company has no longer been 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.

G. ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE

The Asset Valuation Reserve (AVR) and the Interest Maintenance Reserve
(IMR) are required for life insurance companies under NAIC regulations.
The AVR is calculated based on a statutory formula and designed to
mitigate the effects of valuation and credit-related losses on
unassigned surplus.

B-4

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

The components of AVR at December 31, 1995 and 1994 are as follows:

FIXED MATURITIES
($000,s)
----------------
Beginning of Year 1994 -- AVR .................... $ 5,306
Additions ........................................ 206
Deductions ....................................... -
-------
End of Year 1994 -- AVR .......................... $ 5,512
=======
Beginning of Year 1995 -- AVR .................... $ 5,512
Additions ........................................ 237
Deductions ....................................... -
=======
End of Year 1995 -- AVR .......................... $ 5,749
=======

The IMR captures net realized capital gains and losses resulting from
changes in the general level of interest rates. These gains and losses
are amortized into investment income over the expected remaining life
of the investment sold. The IMR balance was $8.2 million, and $ 6.9
million at December 31, 1995 and 1994 respectively. "Net realized
investment gains/(losses)" of $2.3 million and $(5.5) million were
deferred in 1995 and 1994, respectively. Amortized into "Net investment
income" were $1.1 million and $2.0 million of IMR for the year ended
December 31, 1995 and 1994, 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. 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 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, 1995, 1994 and 1993 were $152 million,
$(7) million and $86 million, respectively.

B-5

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

3. 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.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
------- ------- -------
($000'S)
<S> <C> <C> <C>
Income before provision in lieu of federal income taxes....... $37,611 $30,095 $39,253
Statutory tax rate............................................ 35% 35% 35%
------- ------- -------
Expected federal income taxes ................................ $13,164 $10,533 $13,739
Tax effect of:
Statutory/tax policy reserve difference.................. (3,994) 4,279 1,367
Timing differences in tax/book income recognition........ 1,366 (2,743) 2,151
Timing differences in tax/book income recognition--other. (840) (78) (25)
(Increase)/Decrease in life insurance
premiums deferred and uncollected .................... (14) 94 40
Capitalization of policy acquisition expenses............ (849) 4,680 1,541
Allocated equity tax..................................... - - 647
------- ------- -------
Federal income taxes. . . .................................... $ 8,833 $16,765 $19,460
======= ======= =======
Effective tax rate............................................ 23% 56% 50%
======= ======= =======
</TABLE>

4. NET INVESTMENT INCOME

Net investment income consisted of:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
------- ------- -------
($000'S)
<S> <C> <C> <C>
Gross investment income
Fixed maturities........................................... $36,861 $36,565 $40,546
Policy loans............................................... 5,029 4,290 3,506
Short-term investments..................................... 2,290 2,364 1,817
Other...................................................... 51 44 25
------- ------- -------
44,231 43,263 45,894
Investment expenses........................................... (701) (906) (581)
------- ------- -------
43,530 42,357 45,313
Amortization of interest maintenance reserve.................. 1,050 2,024 2,387
------- ------- -------
Net investment income............................................ $44,580 $44,381 $47,700
======= ======= =======
</TABLE>
B-6

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

5. INVESTMENTS AND INVESTMENT GAINS (LOSSES)

Net realized and unrealized gains (losses) were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
------- ------- -------
($000'S)
<S> <C> <C> <C>
Realized Gains
Fixed maturities....................................... $ 3,593 $(8,311) $13,225
Short-term investments................................. - 1 26
Tax effected amounts transferred to
interest maintenance reserve........................... (2,335) 5,485 (7,185)
------- ------- -------
Net realized investment gains.............................. $ 1,258 $(2,825) $ 6,066
======= ======= =======
Unrealized Gains (Losses)
Fixed maturities....................................... $ - $ - $ -
------- ------- -------
Net unrealized investment gains ........................... - - -
Balance beginning of year.................................. - - -
------- ------- -------
Balance end of year........................................ $ - $ - $ -
======= ======= =======
</TABLE>

<TABLE>
FIXED MATURITIES
----------------
($000'S)
<CAPTION>

AT DECEMBER 31,
INCREASE (DECREASE) IN
AMORTIZED MARKET DIFFERENCE BETWEEN MARKET VALUE
COST VALUE AND AMORTIZED COST DURING THE YEAR
-------- -------- ----------------------------------
<S> <C> <C> <C>
1995.................. $498,041 $513,433 $32,875
1994.................. 527,304 509,821 (36,813)
1993.................. 587,213 606,543 (1,472)
</TABLE>

The amortized cost and estimated market values of investments in fixed
maturities at December 31, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
1995
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............................... $ 81,806 $ 1,287 $ - $ 83,093
Debt securities issued by foreign
governments and their agencies............. 25,849 1,128 - 26,977
Corporate securities......................... 353,514 11,131 340 364,305
Mortgage-backed securities................... 36,871 2,192 5 39,058
-------- ------- ------- --------
Total........................................ $498,040 $15,738 $ 345 $513,433
======== ======= ======= ========
</TABLE>
B-7

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<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............................... $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
======== ======= ======= ========
</TABLE>

The amortized cost and estimated market value of fixed maturities at
December 31, 1995 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........................................................... $ 57,798 $ 58,194
Due after one year through five years............................................. 329,260 339,601
Due after five years through ten years............................................ 55,151 57,404
Due after ten years............................................................... 18,960 19,176
-------- --------
461,169 474,375
Mortgage-backed securities........................................................ 36,872 39,058
-------- --------
Total............................................................................. $498,041 $513,433
======== ========
</TABLE>

Proceeds from the sale/maturity of fixed maturities during 1995, 1994 and
1993 were $553.7 million, $705.9 million and $443.9 million, respectively.
Gross gains of $6.8 million, $3.3 million and $13.4 million and gross
losses of $3.2 million, $11.6 million and $.2 million were realized on
those sales during 1995, 1994 and 1993, respectively.

The Company invests in both investment grade and non-investment grade
securities. The Securities Valuation Office (SVO) of the NAIC rates fixed
maturities held by insurers (SVO rated securities accounted for
approximately 94.3% and 99.0% of the Company's total fixed maturities
balances at December 31, 1995 and 1994, respectively) 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. At December 31, 1995 the Company held two securities at statement
value of $4.5 million with a NAIC rating of 4. At December 31, 1994, 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 $16 million, $15 million, and $17 million for the years ended
December 31, 1995, 1994 and 1993, respectively.

B-8

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

B. EMPLOYEES BENEFIT PLANS

PENSION PLANS

The Company is a wholly-owned subsidiary of The Prudential which,
sponsors several defined benefit pension plans that cover
substantially all of its employees. Benefits are generally based on
career average earnings and credited 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 1995, 1994 or 1993 because the plan was subject to the full
funding limitation under the Internal Revenue Code.

POSTRETIREMENT LIFE AND HEALTH BENEFITS

The Prudential also sponsors certain life insurance and health care
benefits for its retired employees. Substantially all employees may
become eligible to receive a benefit if they retire after age 55 with
at least 10 years of service. Postretirement benefits, with respect to
The Prudential, are recognized in accordance with prescribed NAIC
policy. The Prudential has elected to amortized its 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, 1995, 1994 and 1993.

C. REINSURANCE

The Company currently has one reinsurance agreement in place with The
Prudential (the reinsurer). Specifically: 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). This agreement had no material effect on net
income for the years ended December 31, 1995, 1994, 1993.

D. 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 are $12 million each for the years ended
December 31, 1995, 1994 and 1993, 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 $26 million in dividend
distributions in 1996, 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

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.

B-9

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993

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, 1995 and
1994.

<TABLE>
<CAPTION>
($000's) ($000's)

1995 1994
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities ......................... $498,041 $513,433 $527,304 $509,821
Policy loans ............................. 98,194 99,057 85,277 76,734
Short-term investments ................... 45,308 45,308 41,695 41,695

Financial Liabilities:
Investment-type insurance contracts ...... $100,625 $ 99,929 $166,183 $159,463

</TABLE>

9. CONTINGENCIES

Several actions have been brought against the Company on behalf of those
persons who purchased life insurance policies based on complaints about
sales practices engaged in by The Prudential, the Company, and agents
appointed by The Prudential and the Company. The Prudential has agreed to
indemnify the Company for any and all losses resulting from such
litigation.

B-10

<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 (the "Company") as of December 31, 1995 and
1994, and the related statements of operations, stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 1995. 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 the Pruco Life Insurance Company of New
Jersey as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1995
in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Parsippany, New Jersey
March 15, 1996

B-11

<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, 1996
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, 1996, 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.

CONTENTS

CROSS-REFERENCE TO
PAGE PAGE IN PROSPECTUS
---- -------------------
<S> <C> <C>
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS
GENERAL............................................................................... 1 10
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 30
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS........................................... 4 26
INTEREST RATE SWAPS................................................................... 6
ILLIQUID SECURITIES................................................................... 6

INVESTMENT RESTRICTIONS.................................................................. 7 32

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES.......................................... 10 32

DETERMINATION OF NET ASSET VALUE......................................................... 11 33

FURTHER INFORMATION ABOUT THE ZERO COUPON BOND PORTFOLIOS................................ 13 14

OTHER INFORMATION CONCERNING THE SERIES FUND
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................................. 14 37
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT.............................. 15 38
EXPERTS............................................................................... 15
LICENSES.............................................................................. 16

MANAGEMENT OF THE SERIES FUND............................................................ 16 10

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-2 Ed 5-96 Catalog No. 646674P

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS

GENERAL

The Prudential Series Fund, Inc. (the "Series Fund") is made up of fifteen
separate portfolios: the Money Market Portfolio, the Diversified Bond Portfolio,
the Government Income Portfolio, the Zero Coupon Bond Portfolios 2000 and 2005,
the Conservative Balanced Portfolio, the Flexible Managed Portfolio, the High
Yield Bond Portfolio, the Stock Index Portfolio, the Equity Income Portfolio,
the Equity Portfolio, the Prudential Jennison Portfolio, the Small
Capitalization Stock Portfolio, the Global 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 10.

Each of the fifteen 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 Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global, 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
Diversified Bond and the High Yield Bond Portfolios may invest in debt
securities that are offered together with warrants but only when the debt
security meets the portfolio's investment criteria and the value of the warrant
is relatively very small. If the warrant later becomes valuable, it 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
DIVERSIFIED BOND, GOVERNMENT INCOME, CONSERVATIVE BALANCED, FLEXIBLE MANAGED,
HIGH YIELD BOND, EQUITY INCOME, EQUITY, PRUDENTIAL JENNISON, SMALL
CAPITALIZATION STOCK, GLOBAL, AND NATURAL RESOURCES PORTFOLIOS.

<PAGE>

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 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>

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.

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.

<PAGE>

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 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 Conservative Balanced, Flexible Managed,
Equity Income, Equity, Prudential Jennison, Global, 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

<PAGE>

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.

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.

<PAGE>

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.

INTEREST RATE SWAPS

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 purposes of the 15% test, that
certain commercial paper issued in reliance on the exemption from registration
in Section 4(2) of the Securities Act of 1933 will not be considered illiquid,
whether or not it may be resold under Rule 144A. To make that determination, the
following conditions must be met: (1) the security must not be traded flat or in
default as to principal or interest; (2) the security must be rated in one of
the two highest rating categories by at least two nationally recognized
statistical rating organizations ("NRSROs"), or if only one NRSRO rates the
security, by that NRSRO; if the security is unrated, the 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

<PAGE>

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:

1. Buy or sell real estate and mortgages, although the portfolios may buy and
sell securities that are secured by real estate and securities of real
estate investment trusts and of other issuers that engage in real estate
operation. Buy or sell commodities or commodities contracts, except that
the Diversified Stock, Balanced, and Specialized Portfolios may purchase
and sell stock index futures contracts and related options; the Fixed
Income Portfolios (other than the Money Market and Zero Coupon Bond
Portfolios), the Global Portfolio, and the Balanced Portfolios may purchase
and sell interest rate futures contracts and related options; and all
portfolios (other than the Money Market, Government Income, Zero Coupon
Bond, and Small Capitalization Stock Portfolios) may purchase and sell
foreign currency futures contracts and related options and forward foreign
currency exchange contracts.

2. 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 Diversified Bond, High Yield Bond, Government Income, Conservative
Balanced and Flexible Managed Portfolios may sell securities short up to
25% of their net assets and except that the portfolios (other than the
Money Market and Zero Coupon Bond Portfolios) may make short sales against
the box. Collateral arrangements entered into with respect to options,
futures contracts and forward contracts are not deemed to be short sales.
Collateral arrangements entered into with respect to interest rate swap
agreements are not deemed to be short sales.

5. Purchase securities on margin or otherwise borrow money or issue senior
securities except that the Diversified Bond, High Yield Bond and Government
Income Portfolios, as well as the fixed income portions of the Balanced
Portfolios, may enter into reverse repurchase agreements, dollar rolls and
may purchase securities on a when-issued and delayed delivery basis; except
that the Money Market Portfolio and the money market portion of any
portfolio may enter into reverse repurchase agreements and may purchase
securities on a when-issued and delayed delivery basis; and except that the
Equity, Prudential Jennison, Small Capitalization Stock, Equity Income,
Natural Resources, Global, Flexible Managed and Conservative Balanced
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); Diversified Bond and High
Yield Bond Portfolios (options on debt securities, foreign currencies);
Government Income 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.

<PAGE>

market value less liabilities other than reverse repurchase agreements);
except that the Diversified Bond, High Yield Bond, and Government Income
Portfolios, as well as the fixed income portions of the Conservative
Balanced and Flexible Managed Portfolios, may enter into reverse repurchase
agreements and dollar rolls provided that the portfolio's obligations with
respect to those instruments do not exceed 30% of the portfolio's net
assets (defined to mean total assets at market value less liabilities other
than reverse repurchase agreements and dollar rolls).

7. Pledge or mortgage assets, except that no more than 10% of the value of any
portfolio may be pledged (taken at the time the pledge is made) to secure
authorized borrowing and except that a portfolio may enter into reverse
repurchase agreements. Collateral arrangements entered into with respect to
futures and forward contracts and the writing of options are not deemed to
be the pledge of assets. Collateral arrangements entered into with respect
to interest rate swap agreements are not deemed to be the pledge of assets.

8. Lend money, except that loans of up to 10% of the value of each portfolio
may be made through the purchase of privately placed bonds, debentures,
notes, and other evidences of indebtedness of a character customarily
acquired by institutional investors that may or may not be convertible into
stock or accompanied by warrants or rights to acquire stock. Repurchase
agreements and the purchase of publicly traded debt obligations are not
considered to be "loans" for this purpose and may be entered into or
purchased by a portfolio in accordance with its investment objectives and
policies.

9. Underwrite the securities of other issuers, except where the 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. This restriction shall not apply to
mortgage-backed securities, collateralized mortgage obligations or
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

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

<PAGE>

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 or callable securities.

3. Invest in any security with a remaining maturity in excess of 397 days,
except that securities held pursuant to repurchase agreements may have a
remaining maturity of more than 397 days.

Certain additional non-fundamental investment policies are applicable only to
the High Yield Bond Portfolio. That portfolio will not:

1. Invest in any non-fixed income equity securities, including warrants,
except when attached to or included in a unit with fixed income securities,
but not including preferred stock.

2. Invest more than 20% of the market or other fair value of its total assets
in United States currency denominated issues of foreign governments and
other foreign issuers; or invest more than 10% of the market or other fair
value of its total assets in securities which are payable in currencies
other than United States dollars. The portfolio will not engage in
investment activity in non-U.S. dollar denominated issues without first
obtaining authorization to do so from the 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.

<PAGE>

of the Appendix to the prospectus. In addition, the Series Fund adheres to
additional restrictions relating to such practices as the lending of securities,
borrowing, and the purchase of put and call options, futures contracts, and
derivative instruments on securities to comply with investment guidelines issued
by the California Department of Insurance.

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 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 Prudential Jennison 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, Diversified Bond, Government Income, Zero Coupon Bond, Equity
Income, 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
Equity and Natural Resources Portfolios, the fee is equal to an annual rate of
0.45% of the average daily net assets of each of the portfolios. The fee for the
Conservative Balanced and High Yield Bond Portfolios is equal to an annual rate
of 0.55% of the average daily net assets of each of the portfolios. For the
Flexible Managed and Prudential Jennison Portfolios, the fee is equal to an
annual rate of 0.6% of the average daily net assets of the portfolio. The fee
for the Global Portfolio is equal to an annual rate of 0.75% of the average
daily net assets of the portfolio. Under the Service Agreement, The Prudential
pays PIC a portion of the fee it receives for providing investment advisory
services. The Prudential pays Jennison a portion of the fee it receives for
providing investment advisory services to the Prudential Jennison Portfolio.

For the years 1995, 1994, and 1993, The Prudential received a total of
$77,610,207, $66,413,206, and $51,197,499, 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

<PAGE>

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 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 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 March 1, 1996 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 Prudential
Jennison and Small Capitalization Stock Portfolios. A Supplemental Advisory
Agreement regarding the Prudential Jennison 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 Prudential Jennison 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
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 Prudential Jennison 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. In the event the New York Stock
Exchange closes early on any business day, the net asset value of each portfolio
shall be determined at a

<PAGE>

time between such closing and 4:15 p.m. New York City time. 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 Diversified Bond, Government Income,
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.

All short-term debt obligations in the Money Market Portfolio of 397 days'
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
397 days and must maintain a dollar-weighted average 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 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, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global, 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 Equity
Income and Natural Resources Portfolios are valued on the same basis as
securities in the Diversified 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.

<PAGE>

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.

In determining the net asset value of the shares of the Zero Coupon Bond
Portfolios 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 2000
and 2005 is to achieve the highest predictable compounded investment return for
a specified period of time, consistent with the safety of invested capital. This
discussion provides a more detailed explanation of the investment policies that
will be employed to manage these portfolios.

If each Zero Coupon Bond Portfolio held only stripped securities that were
obligations of the United States Government, maturing on the liquidation date,
the compounded yield of the portfolio from the date of initial 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.

<PAGE>

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 may
rise above 20% 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 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.

<PAGE>

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.

For the years 1995, 1994, and 1993, the Series Fund paid a total of $11,607,197,
$11,579,886, and $9,492,283, respectively, in brokerage commissions. Of those
amounts, $899,739, $560,155, and $977,695, for 1995, 1994, and 1993,
respectively, was paid out to Prudential Securities Incorporated. For 1995, the
commissions paid to this affiliated broker constituted 7.75% of the total
commissions paid by the Series Fund for that year. Transactions through this
affiliated broker accounted for 5.81% 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 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 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 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.

<PAGE>

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.

<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.

MENDEL A. MELZER*, Chairman of the Board--Chief Financial Officer of the Money
Management Group of The Prudential since 1995; 1993 to 1995: Senior Vice
President and Chief Financial Officer of Prudential Preferred Financial
Services; Prior to 1993: Managing Director, The Prudential Investment
Corporation.

E. MICHAEL CAULFIELD*, President and Director--Chief Executive Officer of the
Money Management Group of The Prudential since 1995; 1995: Chief Executive
Officer, Prudential Preferred Financial Services; 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--Principal, Scott McDonald & Associates since
1995; Prior to 1995: Executive Vice President of Fairleigh Dickinson University.
Address: 9 Zamrok Way, Morristown, New Jersey, 07960.

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

I. EDWARD PRICE, Vice President. -- Senior Vice President and Actuary,
Prudential Individual Insurance Group since 1995; 1994 to 1995: Chief Executive
Officer, Prudential International Insurance; 1993 to 1994: President, Prudential
International Insurance; Prior to 1993: Senior Vice President and Company
Actuary of The Prudential.

STEPHEN P. TOOLEY, Comptroller--Vice President and Comptroller of the Individual
Insurance Group of The Prudential since 1995; 1993 to 1995: Vice President and
Comptroller of Prudential Insurance and Financial Services; 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. Melzer 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.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments................................ $610,184,940
Cash....................................... 1,689
Interest receivable........................ 3,877,634
------------
Total Assets............................. 614,064,263
------------
LIABILITIES
Accrued expenses........................... 115,780
Payable to investment adviser.............. 628,843
------------
Total Liabilities........................ 744,623
------------
NET ASSETS................................... $613,319,640
------------
------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 613,320
Paid-in capital, in excess of par........ 612,706,320
------------
Net assets, December 31, 1995.............. $613,319,640
------------
------------
Net asset value per share of 61,331,964
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 10.0000
------------
------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Interest................................... $ 36,565,684
-------------
EXPENSES
Investment management fee.................. 2,399,559
Shareholders' reports...................... 137,786
Accounting fees............................ 66,340
Professional fees.......................... 30,370
Custodian expense -- net................... 10,710
Directors' expense......................... 2,988
Miscellaneous expenses..................... 928
S.E.C. fees................................ (3,240)
-------------
2,645,441
-------------
NET INVESTMENT INCOME........................ 33,920,243
-------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 33,920,243
-------------
-------------
<TABLE>
<CAPTION>

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
---------------------------------
1995 1994
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................. $ 33,920,243 $ 21,549,333

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................................................. (33,920,243) (21,549,333)

CAPITAL TRANSACTIONS:
Capital stock sold [13,987,392 and 18,862,200 shares, respectively] 139,873,920 188,622,000
Reinvestment of dividend distributions [3,392,024 and 2,154,934 shares,
respectively] ......................................................................... 33,920,243 21,549,333
Capital stock repurchased [(14,375,600) and (10,162,500) shares, respectively] ......... (143,756,000) (101,625,000)
------------ -------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ......................... 30,038,163 108,546,333
------------ -------------

TOTAL INCREASE IN NET ASSETS ............................................................. 30,038,163 108,546,333

NET ASSETS:
Beginning of year ...................................................................... 583,281,477 474,735,144
------------ -------------
End of year ............................................................................ $613,319,640 $ 583,281,477
------------ -------------
------------ -------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
DIVERSIFIED BOND PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

NET ASSETS................................... $655,836,426
------------
------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 579,713
Paid-in capital, in excess of par........ 629,568,137
------------
630,147,850
Undistributed net investment income........ 714,398
Accumulated net realized losses............ (8,288,762)
Net unrealized appreciation................ 33,262,940
------------
Net assets, December 31, 1995.............. $655,836,426
------------
------------
Net asset value per share of 57,971,325
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 11.3131
------------
------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Interest................................... $ 43,710,915
------------
EXPENSES
Investment management fee.................. 2,337,700
Shareholders' reports...................... 147,832
Accounting fees............................ 56,490
Custodian expense -- net................... 42,968
Professional fees.......................... 19,278
Directors' expense......................... 2,862
Miscellaneous expenses..................... 863
S.E.C. fees................................ (3,513)
------------
2,604,480
------------
NET INVESTMENT INCOME........................ 41,106,435
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments --
Securities transactions.................. 3,993,423
Options written.......................... (48,047)
------------
Net realized gain on investments........... 3,945,376
Net unrealized gain on investments......... 65,195,088
------------
NET GAIN ON INVESTMENTS...................... 69,140,464
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $110,246,899
------------
------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------
1995 1994
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................. $ 41,106,435 $ 36,112,155
Net realized gain (loss) on investments ................................................ 3,945,376 (4,246,256)
Net unrealized gain (loss) on investments .............................................. 65,195,088 (50,839,016)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................ 110,246,899 (18,973,117)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................................................. (40,773,047) (35,627,999)
Net realized gain from investment transactions ......................................... (1,426,845) (1,267,553)
------------ ------------
TOTAL DIVIDENDS TO SHAREHOLDERS ........................................................ (42,199,892) (36,895,552)
------------ ------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,596,587 and 3,414,897 shares, respectively] ...................... 39,971,262 36,662,212
Reinvestment of dividend distributions [3,793,654 and 3,610,015 shares,
respectively] ......................................................................... 42,199,892 36,895,552
Capital stock repurchased [(3,376,822) and (4,963,909) shares, respectively] ........... (36,030,334) (52,266,357)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ......................... 46,140,820 21,291,407
------------ ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ............................................................................ 114,187,827 (34,577,262)

NET ASSETS:
Beginning of year ...................................................................... 541,648,599 576,225,861
------------ ------------
End of year ............................................................................ $655,836,426 $541,648,599
------------ ------------
------------ ------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GOVERNMENT INCOME PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

NET ASSETS................................... $501,775,305
------------
------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 428,176
Paid-in capital, in excess of par........ 486,408,830
------------
486,837,006
Undistributed net investment income........ 1,261,089
Accumulated net realized losses............ (23,743,417)
Net unrealized appreciation................ 37,420,627
------------
Net assets, December 31, 1995.............. $501,775,305
------------
------------
Net asset value per share of 42,817,582
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 11.7189
------------
------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Interest................................... $ 33,602,845
-------------
EXPENSES
Investment management fee.................. 1,913,517
Shareholders' reports...................... 122,340
Accounting fees............................ 68,428
Custodian expense -- net................... 32,925
Professional fees.......................... 9,933
Directors' expense......................... 2,908
Miscellaneous expenses..................... 774
S.E.C. fees................................ (11,433)
-------------
2,139,392
-------------
NET INVESTMENT INCOME........................ 31,463,453
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (12,819,604)
Net unrealized gain on investments......... 66,364,196
-------------
NET GAIN ON INVESTMENTS...................... 53,544,592
-------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 85,008,045
-------------
-------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1995 1994
------------ ------------
<S> <C> <C>

OPERATIONS:
Net investment income .................................................................. $ 31,463,453 $ 33,431,928
Net realized loss on investments ....................................................... (12,819,604) (10,380,614)
Net unrealized gain (loss) on investments .............................................. 66,364,196 (52,690,952)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................ 85,008,045 (29,639,638)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................................................. (31,133,859) (32,955,665)
------------ ------------
CAPITAL TRANSACTIONS:
Capital stock sold [863,496 and 3,591,224 shares, respectively] ........................ 9,888,081 41,656,912
Reinvestment of dividend distributions [2,693,392 and 3,094,061 shares,
respectively] ......................................................................... 31,133,859 32,955,665
Capital stock repurchased [(7,346,525) and (5,912,961) shares, respectively] ........... (80,695,126) (64,569,681)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS .............. (39,673,186) 10,042,896
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................................................. 14,201,000 (52,552,407)

NET ASSETS:
Beginning of year ...................................................................... 487,574,305 540,126,712
------------ ------------
End of year ............................................................................ $501,775,305 $487,574,305
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A3
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 1995 PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Total Assets............................. $ 0
--------------
LIABILITIES
Total Liabilities........................ $ 0
--------------
NET ASSETS
--------------
--------------
Net assets, December 31, 1995.............. $ 0
--------------
--------------
Net asset value per share of -0- outstanding
shares of common stock (authorized
25,000,000 shares)....................... $ 0
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Interest................................... $ 717,426
---------------
EXPENSES
Investment management fee.................. 42,824
Accounting fees............................ 1,876
Custodian expense -- net................... 8,044
Shareholders' reports...................... 2,251
S.E.C...................................... (954)
Directors' expense......................... 2,374
Professional fees.......................... 3,487
Miscellaneous expenses..................... 27
---------------
59,929
---------------
NET INVESTMENT INCOME........................ 657,497
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments........... 170,059
Net unrealized loss on investments......... (36,893)
---------------
NET GAIN ON INVESTMENTS...................... 133,166
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 790,663
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1995 1994
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................... $ 657,497 $ 1,027,426
Net realized gain on investments ......................................................... 170,059 1,948
Net unrealized loss on investments ....................................................... (36,893) (1,029,896)
------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... 790,663 (522)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................................................... (684,785) (1,001,231)
Net realized gain from investment transactions ........................................... (169,638) (3,573)
------------ ------------
TOTAL DIVIDENDS TO SHAREHOLDERS .......................................................... (854,423) (1,004,804)
------------ ------------
CAPITAL TRANSACTIONS:
Capital stock sold [11,399 and 301,289 shares, respectively] ............................. 123,131 3,295,000
Reinvestment of dividend distributions [81,330 and 94,042 shares, respectively] .......... 854,423 1,004,804
Capital stock repurchased [(10,740) and (52,950) shares, respectively] ................... (116,000) (592,000)
Initial capitalization repurchased [(680,487) and (18,027) shares, respectively] ......... (7,346,506) (197,000)
Capital stock repurchased at liquidation date [(1,075,615) and 0 shares,
respectively] ........................................................................... (11,184,920) 0
------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ................ (17,669,872) 3,510,804
------------ ------------
TOTAL INCREASE/(DECREASE) IN NET ASSETS .................................................... (17,733,632) 2,505,478

NET ASSETS:
Beginning of year ........................................................................ 17,733,632 15,228,154
------------ ------------
End of year .............................................................................. $ 0 $ 17,733,632
------------ ------------
------------ ------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 2000 PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$22,164,986)............................. $ 25,287,653
Cash....................................... 311
Interest receivable........................ 200
--------------
Total Assets............................. 25,288,164
--------------
LIABILITIES
Accrued expenses and other liabilities..... 4,480
Payable to investment adviser.............. 24,865
--------------
Total Liabilities........................ 29,345
--------------
NET ASSETS................................... $ 25,258,819
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 19,030
Paid-in capital, in excess of par........ 22,151,149
--------------
22,170,179
Distributions in excess of net investment
income................................... (34,156)
Accumulated net realized gains............. 129
Net unrealized appreciation................ 3,122,667
--------------
Net assets, December 31, 1995.............. $ 25,258,819
--------------
--------------
Net asset value per share of 1,903,021
outstanding shares of common stock
(authorized 25,000,000 shares)........... $ 13.2730
--------------
--------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1995

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1995 1994
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................................................... $ 1,045,991 $ 1,414,358
Net realized gain on investments ........................................................... 945,638 38,776
Net unrealized gain (loss) on investments .................................................. 2,457,617 (3,049,221)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................ 4,449,246 (1,596,087)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ...................................................................... (1,046,055) (1,398,377)
Net realized gain from investment transactions ............................................. (945,910) (38,912)
------------ ------------
TOTAL DIVIDENDS TO SHAREHOLDERS ............................................................ (1,991,965) (1,437,289)
------------ ------------
CAPITAL TRANSACTIONS:
Capital stock sold [111,200 and 102,167 shares, respectively] .............................. 1,481,434 1,340,000
Reinvestment of dividend distributions [151,186 and 118,462 shares, respectively] .......... 1,991,965 1,437,289
Capital stock repurchased [(89,987) and (60,345) shares, respectively] ..................... (1,195,434) (787,000)
Initial capitalization repurchased [(8,965) and (38,338) shares, respectively] ............. (111,423) (507,000)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ............................. 2,166,542 1,483,289
------------ ------------

TOTAL INCREASE (DECREASE) IN NET ASSETS ...................................................... 4,623,823 (1,550,087)

NET ASSETS:
Beginning of year .......................................................................... 20,634,996 22,185,083
------------ ------------
End of year ................................................................................ $ 25,258,819 $ 20,634,996
------------ ------------
------------ ------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 2005 PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$19,934,260)............................. $ 23,588,178
Cash....................................... 915
Interest receivable........................ 605
Receivable for portfolio shares sold....... 85,000
--------------
Total Assets............................. 23,674,698
--------------
LIABILITIES
Accrued expenses........................... 5,550
Payable to investment adviser.............. 22,029
--------------
Total Liabilities........................ 27,579
--------------

NET ASSETS................................... $ 23,647,119
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 17,928
Paid-in capital, in excess of par........ 19,955,995
--------------
19,973,923
Undistributed net investment income........ 19,278
Net unrealized appreciation................ 3,653,918
--------------
Net assets, December 31, 1995.............. $ 23,647,119
--------------
--------------
Net asset value per share of 1,792,815
outstanding shares of common stock
(authorized 50,000,000 shares)........... $ 13.1899
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Interest................................... $ 1,122,819
---------------
EXPENSES
Investment management fee.................. 76,677
Accounting fees............................ 6,748
Shareholders' reports...................... 4,342
Custodian expense -- net................... 3,459
Directors' expense......................... 2,531
Professional fees.......................... 1,763
Miscellaneous expenses..................... 26
---------------
95,546
---------------
NET INVESTMENT INCOME........................ 1,027,273
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 471,329
Net unrealized gain on investments......... 3,840,819
---------------
NET GAIN ON INVESTMENTS...................... 4,312,148
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 5,339,421
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1995 1994
----------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................... $ 1,027,273 $ 955,176
Net realized gain on investments ......................................................... 471,329 0
Net unrealized gain (loss) on investments ................................................ 3,840,819 (2,370,041)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... 5,339,421 (1,414,865)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................................................... (1,031,193) (938,283)
Net realized gain from investment transactions ........................................... (471,329) (3,855)
------------ ------------
TOTAL DIVIDENDS TO SHAREHOLDERS .......................................................... (1,502,522) (942,138)
------------ ------------
CAPITAL TRANSACTIONS:
Capital stock sold [292,895 and 461,883 shares, respectively] ............................ 3,700,000 5,262,071
Reinvestment of dividend distributions [116,304 and 86,081 shares, respectively] ......... 1,502,522 942,138
Capital stock repurchased [(152,641) and (31,239) shares, respectively] .................. (1,898,000) (366,000)
Initial capitalization repurchased [-0- and (122,127) shares, respectively] .............. 0 (1,448,071)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ........................... 3,304,522 4,390,138
------------ ------------

TOTAL INCREASE IN NET ASSETS ............................................................... 7,141,421 2,033,135

NET ASSETS:
Beginning of year ........................................................................ 16,505,698 14,472,563
------------ ------------
End of year .............................................................................. $ 23,647,119 $ 16,505,698
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$3,622,931,201).......................... $3,912,781,300
Cash....................................... 44,660
Interest and dividends receivable.......... 30,959,621
Receivable for securities sold............. 2,833,722
Receivable for portfolio shares sold....... 23,400
--------------
Total Assets............................. 3,946,642,703
--------------
LIABILITIES
Accrued expenses........................... 165,851
Payable for securities purchased........... 374,361
Payable to investment adviser.............. 5,328,226
--------------
Total Liabilities........................ 5,868,438
--------------
NET ASSETS................................... $3,940,774,265
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,574,196
Paid-in capital, in excess of par........ 3,629,566,275
--------------
3,632,140,471
Distributions in excess of net investment
income................................... (2,286,857)
Accumulated net realized gains............. 21,070,552
Net unrealized appreciation................ 289,850,099
--------------
Net assets, December 31, 1995.............. $3,940,774,265
--------------
--------------
Net asset value per share of 257,419,587
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 15.3088
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Dividends (net of $401,184 foreign
withholding tax)......................... $ 23,484,206
Interest................................... 153,295,065
---------------
176,779,271
---------------
EXPENSES
Investment management fee.................. 20,327,574
Shareholders' reports...................... 902,869
Accounting fees............................ 97,831
Custodian expense -- net................... 92,207
Professional fees.......................... 74,702
Miscellaneous expenses..................... 5,573
Directors' expense......................... 4,934
S.E.C. fees................................ (20,409)
---------------
21,485,281
---------------
NET INVESTMENT INCOME........................ 155,293,990
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 167,342,297
Net unrealized gain on investments......... 264,773,974
---------------
NET GAIN ON INVESTMENTS...................... 432,116,271
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 587,410,261
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------
1995 1994
------------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................................ $ 155,293,990 $ 122,670,711
Net realized gain on investments ..................................................... 167,342,297 30,751,021
Net unrealized gain (loss) on investments ............................................ 264,773,974 (184,854,002)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................... 587,410,261 (31,432,270)
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ................................................................ (154,987,434) (120,740,360)
Net realized gain from investment transactions ....................................... (133,660,168) (37,214,012)
--------------- ---------------
TOTAL DIVIDENDS TO SHAREHOLDERS ...................................................... (288,647,602) (157,954,372)
--------------- ---------------
CAPITAL TRANSACTIONS:
Capital stock sold [5,345,143 and 34,889,459 shares, respectively] ................... 81,026,772 514,344,688
Reinvestment of dividend distributions [19,023,739 and 11,198,868 shares,
respectively] ....................................................................... 288,647,602 157,954,372
Capital stock repurchased [(15,343,313) and (5,887,371) shares, respectively] ........ (228,767,054) (84,977,146)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ....................... 140,907,320 587,321,914
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ........................................................... 439,669,979 397,935,272

NET ASSETS:
Beginning of year .................................................................... 3,501,104,286 3,103,169,014
--------------- ---------------
End of year .......................................................................... $ 3,940,774,265 $ 3,501,104,286
--------------- ---------------
--------------- ---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A7
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

FLEXIBLE MANAGED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$3,687,627,278).......................... $4,228,358,720
Cash....................................... 626
Interest and dividends receivable.......... 25,934,506
Receivable for securities sold............. 59,091,478
Receivable for portfolio shares sold....... 42,700
--------------
Total Assets............................. 4,313,428,030
--------------
LIABILITIES
Accrued expenses........................... 178,423
Payable for securities purchased........... 45,774,778
Payable to investment adviser.............. 6,269,992
--------------
Total Liabilities........................ 52,223,193
--------------
NET ASSETS................................... $4,261,204,837
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,385,984
Paid-in capital, in excess of par........ 3,657,681,610
--------------
3,660,067,594
Distributions in excess of net investment
income................................... (5,751,188)
Accumulated Net Realized Gains............. 66,155,086
Net unrealized appreciation
Securities............................... 540,731,442
Foreign currency translations............ 1,903
--------------
Net assets, December 31, 1995.............. $4,261,204,837
--------------
--------------
Net asset value per share of 238,598,423
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 17.8593
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Dividends (net of $632,445 foreign
withholding tax)......................... $ 47,779,646
Interest................................... 103,109,112
---------------
150,888,758
---------------
EXPENSES
Investment management fee.................. 22,971,401
Shareholders' reports...................... 933,420
Custodian expense -- net................... 170,999
Professional fees.......................... 86,407
Accounting fees............................ 84,962
Miscellaneous expenses..................... 5,560
Directors' expense......................... 4,806
S.E.C. fees................................ (9,458)
---------------
24,248,097
---------------
NET INVESTMENT INCOME........................ 126,640,661
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on investments and
foreign currencies--
Securities transactions.................. 291,714,860
Foreign currency transactions............ (1,080)
Futures contracts........................ 554,055
---------------
Net realized gain on investments and
foreign currencies....................... 292,267,835
---------------
Net unrealized gain on investments and
foreign currencies--
Securities............................... 410,037,562
Foreign currency translations............ 3,540
---------------
Net unrealized gain on investments and
foreign currencies....................... 410,041,102
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 702,308,937
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 828,949,598
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------
1995 1994
------------------ ---------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 126,640,661 $ 98,878,114
Net realized gain on investments and foreign currency transactions..................... 292,267,835 23,838,273
Net unrealized gain(loss) on investments and foreign currency translations............. 410,041,102 (230,571,359)
--------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 828,949,598 (107,854,972)
--------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (124,621,227) (96,126,295)
Net realized gain from investment transactions......................................... (176,844,671) (98,311,584)
--------------- --------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (301,465,898) (194,437,879)
--------------- --------------
CAPITAL TRANSACTIONS:
Capital stock sold [8,486,525 and 22,611,559 shares, respectively]..................... 146,641,074 370,947,414
Reinvestment of dividend distributions [17,050,711 and 12,531,550 shares,
respectively]......................................................................... 301,465,898 194,437,879
Capital stock repurchased [(11,612,102) and (4,617,224) shares, respectively].......... (195,926,134) (73,719,278)
--------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 252,180,838 491,666,015
--------------- --------------
TOTAL INCREASE IN NET ASSETS............................................................. 779,664,538 189,373,164
NET ASSETS:
Beginning of year...................................................................... 3,481,540,299 3,292,167,135
--------------- --------------
End of year............................................................................ $ 4,261,204,837 $3,481,540,299
--------------- --------------
--------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

HIGH YIELD BOND PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$354,568,957)............................ $ 361,288,048
Cash....................................... 632
Interest and dividends receivable.......... 5,586,015
Receivable for portfolio shares sold....... 1,576,000
--------------
Total Assets............................. 368,450,695
--------------
LIABILITIES
Accrued expenses........................... 51,477
Payable to investment adviser.............. 489,831
--------------
Total Liabilities........................ 541,308
--------------
NET ASSETS................................... $ 367,909,387
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 471,654
Paid-in capital, in excess of par........ 384,457,545
--------------
384,929,199
Distributions in excess of net investment
income................................... (2,640,746)
Accumulated net realized losses............ (21,098,157)
Net unrealized appreciation................ 6,719,091
--------------
Net assets, December 31, 1995.............. $ 367,909,387
--------------
--------------
Net asset value per share of 47,165,429
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 7.8004
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Dividends.................................. $ 704,709
Interest................................... 36,153,363
---------------
36,858,072
---------------
EXPENSES
Investment management fee.................. 1,845,783
Accounting fees............................ 103,280
Shareholders' reports...................... 78,409
Professional fees.......................... 17,800
Custodian expense -- net................... 7,782
Directors' expense......................... 2,729
Miscellaneous expenses..................... 488
S.E.C. fees................................ (106)
---------------
2,056,165
---------------
NET INVESTMENT INCOME........................ 34,801,907
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (14,399,977)
Net unrealized gain on investments......... 33,692,744
---------------
NET GAIN ON INVESTMENTS...................... 19,292,767
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 54,094,674
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31
------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 34,801,907 $ 30,009,666
Net realized loss on investments....................................................... (14,399,977) (4,761,509)
Net unrealized gain(loss) on investments............................................... 33,692,744 (34,417,342)
---------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 54,094,674 (9,169,185)
---------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (36,032,307) (30,650,298)
Net realized gain from investment transactions......................................... 0 (228)
---------------- --------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (36,032,307) (30,650,526)
---------------- --------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,596,182 and 7,836,280 shares, respectively]...................... 36,443,000 64,526,000
Reinvestment of dividend distributions [4,650,470 and 4,067,658 shares,
respectively]......................................................................... 36,032,307 30,650,526
Capital stock repurchased [(3,656,896) and (3,976,156) shares, respectively]........... (28,853,000) (31,985,000)
---------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 43,622,307 63,191,526
---------------- --------------
TOTAL INCREASE IN NET ASSETS............................................................. 61,684,674 23,371,815
NET ASSETS:
Beginning of year...................................................................... 306,224,713 282,852,898
---------------- --------------
End of year............................................................................ $ 367,909,387 $ 306,224,713
---------------- --------------
---------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$726,828,799)............................ $1,034,546,771
Cash....................................... 388
Interest and dividends receivable.......... 2,009,493
Receivable for securities sold............. 104,888
Receivable for portfolio shares sold....... 593,387
Receivable for daily variation margin on
open futures contracts (see Note 2)...... 42,000
--------------
Total Assets............................. 1,037,296,927
--------------
LIABILITIES
Accrued expenses and other liabilities..... 17,953
Payable for securities purchased........... 5,143,518
Payable to investment adviser.............. 857,388
--------------
Total Liabilities........................ 6,018,859
--------------
NET ASSETS................................... $1,031,278,068
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 516,774
Paid-in capital, in excess of par........ 720,145,607
--------------
720,662,381
Distributions in excess of net investment
income................................... (317,155)
Accumulated net realized gains............. 3,562,520
Net unrealized appreciation (depreciation)
Securities............................... 307,717,972
Futures contracts........................ (347,650)
--------------
Net assets, December 31, 1995.............. $1,031,278,068
--------------
--------------
Net asset value per share of 51,677,409
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 19.9561
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Dividends (net of $107,942 foreign
withholding tax)......................... $ 20,346,508
Interest................................... 1,720,583
---------------
22,067,091
---------------
EXPENSES
Investment management fee.................. 2,904,883
Shareholders' reports...................... 187,848
Accounting fees............................ 71,353
Professional fees.......................... 17,219
Custodian expense -- net................... 15,898
Directors' expense......................... 3,279
Miscellaneous expenses..................... 1,233
---------------
3,201,713
---------------
NET INVESTMENT INCOME........................ 18,865,378
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments --
Securities transactions.................. 4,372,198
Futures contracts........................ 7,787,530
---------------
Net realized gain on investments........... 12,159,728
---------------
Net unrealized gain (loss) on investments
-- Securities............................ 226,745,682
Futures contracts........................ (862,800)
---------------
Net unrealized gain on investments......... 225,882,882
---------------
NET GAIN ON INVESTMENTS...................... 238,042,610
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 256,907,988
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 18,865,378 $ 15,899,579
Net realized gain (loss) on investments................................................ 12,159,728 (811,766)
Net unrealized gain(loss) on investments............................................... 225,882,882 (8,435,032)
---------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 256,907,988 6,652,781
---------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (18,734,051) (15,754,398)
Net realized gain from investment transactions......................................... (7,293,493) (958,203)
---------------- --------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (26,027,544) (16,712,601)
---------------- --------------
CAPITAL TRANSACTIONS:
Capital stock sold [7,147,197 and 4,553,644 shares, respectively]...................... 130,752,103 68,598,345
Reinvestment of dividend distributions [1,331,092 and 1,130,115 shares,
respectively]......................................................................... 26,027,544 16,712,601
Capital stock repurchased [(1,230,332) and (1,718,830) shares, respectively]........... (20,916,230) (25,854,984)
---------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 135,863,417 59,455,962
---------------- --------------
TOTAL INCREASE IN NET ASSETS............................................................. 366,743,861 49,396,142
NET ASSETS:
Beginning of year...................................................................... 664,534,207 615,138,065
---------------- --------------
End of year............................................................................ $ 1,031,278,068 $ 664,534,207
---------------- --------------
---------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A10

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

EQUITY INCOME PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$1,029,615,764).......................... $1,106,522,324
Cash....................................... 327
Interest and dividends receivable.......... 5,277,929
Receivable for securities sold............. 256,065
--------------
Total Assets............................. 1,112,056,645
--------------
LIABILITIES
Accrued expenses........................... 37,511
Payable for securities purchased........... 967,161
Payable to investment adviser.............. 1,088,778
--------------
Total Liabilities........................ 2,093,450
--------------
NET ASSETS................................... $1,109,963,195
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 682,177
Paid-in capital, in excess of par........ 1,017,172,654
--------------
1,017,854,831
Undistributed net investment income........ 1,279,672
Accumulated net realized gains............. 13,922,132
Net unrealized appreciation................ 76,906,560
--------------
Net assets, December 31, 1995.............. $1,109,963,195
--------------
--------------
Net asset value per share of 68,217,704
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 16.2709
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Dividends (net of $104,796 foreign
withholding tax)......................... $ 35,978,077
Interest................................... 8,258,536
---------------
44,236,613
---------------
EXPENSES
Investment management fee.................. 3,999,197
Shareholders' reports...................... 214,575
Accounting fees............................ 71,068
Custodian expense -- net................... 14,712
Professional fees.......................... 13,351
Directors' expense......................... 3,134
S.E.C. fees................................ 2,880
Miscellaneous expenses..................... 1,378
---------------
4,320,295
---------------
NET INVESTMENT INCOME........................ 39,916,318
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments --
Securities transactions.................. 61,983,178
Futures contracts........................ (716,385)
---------------
Net realized gain on investments........... 61,266,793
Net unrealized gain on investments......... 90,522,832
---------------
NET GAIN ON INVESTMENTS...................... 151,789,625
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 191,705,943
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31
------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 39,916,318 $ 29,929,976
Net realized gain on investments....................................................... 61,266,793 41,343,251
Net unrealized gain (loss) on investments.............................................. 90,522,832 (64,632,006)
---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 191,705,943 6,641,221
---------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (38,782,405) (29,421,933)
Net realized gain from investment transactions......................................... (46,564,566) (44,325,396)
---------------- ----------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (85,346,971) (73,747,329)
---------------- ----------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,803,598 and 16,514,586 shares, respectively]..................... 76,990,000 261,909,000
Reinvestment of dividend distributions [5,213,794 and 5,080,100 shares,
respectively]......................................................................... 85,346,971 73,747,329
Capital stock repurchased [(1,152,259) and (746,813) shares, respectively]............. (18,404,000) (11,659,000)
---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 143,932,971 323,997,329
---------------- ----------------
TOTAL INCREASE IN NET ASSETS............................................................. 250,291,943 256,891,221
NET ASSETS:
Beginning of year...................................................................... 859,671,252 602,780,031
---------------- ----------------
End of year............................................................................ $ 1,109,963,195 $ 859,671,252
---------------- ----------------
---------------- ----------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A11

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

EQUITY PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$3,003,199,288).......................... $3,802,800,150
Cash....................................... 114
Interest and dividends receivable.......... 7,563,838
Receivable for securities sold............. 8,368,268
Receivable for portfolio shares sold....... 1,112,768
--------------
Total Assets............................. 3,819,845,138
--------------
LIABILITIES
Accrued expenses........................... 111,877
Payable for securities purchased........... 1,777,024
Payable to investment adviser.............. 4,145,541
Unrealized depreciation on foreign exchange
contracts................................ 6,569
--------------
Total Liabilities........................ 6,041,011
--------------
NET ASSETS................................... $3,813,804,127
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 1,487,452
Paid-in capital, in excess of par........ 2,910,528,030
--------------
2,912,015,482
Distributions in excess of net investment
income................................... (3,492,970)
Accumulated net realized gain.............. 105,687,322
Net unrealized appreciation on investments
and foreign currency translations........ 799,594,293
--------------
Net assets, December 31, 1995.............. $3,813,804,127
--------------
--------------
Net asset value per share of 148,745,174
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 25.6399
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Dividends (net of $668,015 foreign
withholding tax)......................... $ 61,955,672
Interest................................... 27,142,094
---------------
89,097,766
---------------
EXPENSES
Investment management fee.................. 14,518,058
Shareholders' reports...................... 717,827
Accounting fees............................ 67,844
Professional fees.......................... 51,182
Custodian expense -- net................... 37,963
S.E.C. fees................................ 13,790
Directors' expense......................... 4,525
Miscellaneous expenses..................... 4,216
---------------
15,415,405
---------------
NET INVESTMENT INCOME........................ 73,682,361
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain on investments........... 234,571,951
Net unrealized gain (loss) on investments
and foreign currencies--
Securities............................... 553,129,317
Foreign currency translations............ (6,569)
---------------
Net unrealized gain on investments and
foreign currencies....................... 553,122,748
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 787,694,699
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 861,377,060
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31
-----------------------------------
1995 1994
--------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................................... $ 73,682,361 $ 57,699,769
Net realized gain on investments ........................................................ 234,571,951 84,713,465
Net unrealized gain (loss) on investments and foreign currency translations ............. 553,122,748 (76,779,978)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................................... 861,377,060 65,633,256
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ................................................................... (71,456,482) (56,757,732)
Net realized gain from investment transactions .......................................... (132,219,093) (106,046,594)
--------------- ---------------
TOTAL DIVIDENDS TO SHAREHOLDERS ......................................................... (203,675,575) (162,804,326)
--------------- ---------------
CAPITAL TRANSACTIONS:
Capital stock sold [15,687,254 and 19,167,446 shares, respectively] ..................... 374,478,697 412,393,503
Reinvestment of dividend distributions [8,038,373 and 7,934,974 shares,
respectively] .......................................................................... 203,675,575 162,804,326
Capital stock repurchased [(1,673,110) and (2,170,186) shares, respectively] ............ (39,823,647) (46,752,467)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS .......................... 538,330,625 528,445,362
--------------- ---------------
TOTAL INCREASE IN NET ASSETS .............................................................. 1,196,032,110 431,274,292
NET ASSETS:
Beginning of year ....................................................................... 2,617,772,017 2,186,497,725
--------------- ---------------
End of year ............................................................................. $ 3,813,804,127 $ 2,617,772,017
--------------- ---------------
--------------- ---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52

A12

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

PRUDENTIAL JENNISON

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$62,811,423)............................. $ 66,855,842
Cash....................................... 666
Interest and dividends receivable.......... 46,157
Receivable for securities sold............. 169,111
Receivable for portfolio shares sold....... 430,000
--------------
Total Assets............................. 67,501,776
--------------
LIABILITIES
Accrued expenses........................... 31,994
Payable for securities purchased........... 4,310,619
Payable to investment adviser.............. 68,593
--------------
Total Liabilities........................ 4,411,206
--------------
NET ASSETS................................... $ 63,090,570
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 50,284
Paid-in capital, in excess of par........ 58,830,254
--------------
58,880,538
Undistributed net investment income........ 35,015
Accumulated net realized gains............. 130,598
Net unrealized appreciation................ 4,044,419
--------------
Net assets, December 31, 1995.............. $ 63,090,570
--------------
--------------
Net asset value per share of 5,028,425
outstanding shares of common stock
(authorized 50,000,000 shares)........... $ 12.5468
--------------
--------------

STATEMENT OF OPERATIONS
For the Period April 25, 1995
(Commencement of Business) to December 31, 1995

INVESTMENT INCOME
Dividends (net of $1,840 foreign
withholding tax)......................... $ 129,428
Interest................................... 83,481
---------------
212,909
---------------
EXPENSES
Investment management fee.................. 118,016
Accounting fees............................ 20,964
Custodian expense -- net................... 18,469
Shareholders' reports...................... 7,755
Professional fees.......................... 3,530
Directors' expense......................... 1,622
---------------
170,356
---------------
NET INVESTMENT INCOME........................ 42,553
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 130,598
Net unrealized gain on investments......... 4,044,419
---------------
NET GAIN ON INVESTMENTS...................... 4,175,017
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 4,217,570
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

FOR THE PERIOD
APRIL 25, 1995
(COMMENCEMENT OF BUSINESS)
TO DECEMBER 31, 1995
--------------------------
<S> <C>
OPERATIONS:
Net investment income ............................................................. $ 42,553
Net realized gain on investments .................................................. 130,598
Net unrealized gain on investments ................................................ 4,044,419
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................. 4,217,570
------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ............................................................. (7,538)
------------
CAPITAL TRANSACTIONS:
Initial capitalization [990,000 shares] ........................................... 9,900,000
Capital stock sold [4,215,890 shares] ............................................. 51,219,000
Reinvestment of dividend distributions [667 shares] ............................... 7,538
Capital stock repurchased [(188,132) shares] ...................................... (2,346,000)
------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS .................... 58,780,538
------------
TOTAL INCREASE IN NET ASSETS ........................................................ 62,990,570
NET ASSETS:
Beginning of year ................................................................. *100,000
------------
End of year ....................................................................... $ 63,090,570
------------
------------
</TABLE>

*Prior to April 25, 1995 (commencement of business), the Portfolio issued 10,000
shares to The Prudential for $100,000.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A13

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

SMALL CAPITALIZATION STOCK

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$47,793,195)............................. $ 50,390,130
Interest and dividends receivable.......... 36,959
Receivable for securities sold............. 340,996
Receivable for portfolio shares sold....... 151,000
Receivable for daily variation margin on
open futures contracts (see Note 2)...... 16,780
--------------
Total Assets............................. 50,935,865
--------------
LIABILITIES
Bank overdraft............................. 125
Accrued expenses........................... 10,003
Payable for securities purchased........... 3,420,232
Payable to investment adviser.............. 38,579
--------------
Total Liabilities........................ 3,468,939
--------------
NET ASSETS................................... $ 47,466,926
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 40,113
Paid-in capital, in excess of par........ 44,389,420
--------------
44,429,533
Undistributed net investment income........ 32,633
Accumulated net realized gains............. 396,600
Net unrealized appreciation
Securities................................. 2,596,935
Futures contracts.......................... 11,225
--------------
Net assets, December 31, 1995.............. $ 47,466,926
--------------
--------------
Net asset value per share of 4,011,270
outstanding shares of common stock
(authorized 50,000,000 shares)........... $ 11.8334
--------------
--------------

STATEMENT OF OPERATIONS
For the Period April 25, 1995
(Commencement of Business) to December 31, 1995

INVESTMENT INCOME
Dividends.................................. $ 173,046
Interest................................... 128,246
---------------
301,292
---------------
EXPENSES
Investment management fee.................. 72,904
Accounting fees............................ 24,836
Custodian expense -- net................... 22,778
Shareholders' reports...................... 2,875
Directors' expense......................... 1,622
Professional fees.......................... 758
---------------
125,773
---------------
NET INVESTMENT INCOME........................ 175,519
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments --
Securities transactions.................. 735,017
Futures contracts........................ 66,230
---------------
Net realized gain on investments........... 801,247
---------------
Net unrealized gain on investments --
Securities............................... 2,596,935
Futures contracts........................ 11,225
---------------
Net unrealized gain on investments......... 2,608,160
---------------
NET GAIN ON INVESTMENTS...................... 3,409,407
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 3,584,926
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

FOR THE PERIOD
APRIL 25, 1995
(COMMENCEMENT OF BUSINESS)
TO DECEMBER 31, 1995
----------------------------
<S> <C>
OPERATIONS:
Net investment income........................................................................... $ 175,519
Net realized gain on investments................................................................ 801,247
Net unrealized gain on investments.............................................................. 2,608,160
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................ 3,584,926
----------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income........................................................................... (142,886)
Net realized gain from investment transactions.................................................. (404,647)
----------------
TOTAL DIVIDENDS TO SHAREHOLDERS................................................................. (547,533)
----------------
CAPITAL TRANSACTIONS:
Initial capitalization [990,000 shares]......................................................... 9,900,000
Capital stock sold [3,181,402 shares]........................................................... 36,389,000
Reinvestment of dividend distributions [46,817 shares].......................................... 547,533
Capital stock repurchased [(216,949) shares].................................................... (2,507,000)
----------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS.................................. 44,329,533
----------------
TOTAL INCREASE IN NET ASSETS...................................................................... 47,366,926
NET ASSETS:
Beginning of year............................................................................... *100,000
----------------
End of year..................................................................................... $ 47,466,926
----------------
----------------
</TABLE>

*Prior to April 25, 1995 (commencement of business), the Portfolio issued 10,000
shares to The Prudential for $100,000.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A14

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

GLOBAL PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$338,204,955)............................ $ 380,896,625
Foreign currency, at value (cost:
$13,535,659)............................. 13,526,107
Cash....................................... 6,836
Dividends and interest receivable.......... 358,772
Forward foreign exchange contracts
receivable............................... 3,237,470
Receivable for securities sold............. 6,143,019
Other assets............................... 217,575
--------------
Total Assets............................. 404,386,404
--------------
LIABILITIES
Accrued expenses........................... 1,099,231
Payable for securities purchased........... 2,424,949
Payable to investment adviser.............. 748,469
Payable for portfolio shares redeemed...... 14,221
--------------
Total Liabilities........................ 4,286,870
--------------
NET ASSETS................................... $ 400,099,534
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 257,577
Paid-in capital, in excess of par........ 353,239,217
--------------
353,496,794
Distributions in excess of net investment
income................................... (4,668,585)
Accumulated net realized gains............. 5,349,172
Net unrealized appreciation on securities
and foreign currency transactions........ 45,922,153
--------------
Net assets, December 31, 1995.............. $ 400,099,534
--------------
--------------
Net asset value per share of 25,757,706
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 15.5332
--------------
--------------

STATEMENT OF OPERATIONS
December 31, 1995

INVESTMENT INCOME
Dividends (net of $501,975 foreign
withholding tax)......................... $ 5,245,748
Interest................................... 314,961
---------------
5,560,709
---------------
EXPENSES
Investment management fee.................. 2,806,038
Custodian expense -- net................... 973,290
Accounting fees............................ 144,789
Shareholders' reports...................... 7,653
Miscellaneous expenses..................... 4,198
Directors' expense......................... 2,031
Professional fees.......................... 1,760
---------------
3,939,759
---------------
NET INVESTMENT INCOME........................ 1,620,950
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain on investments and
foreign currency transactions............ 13,763,168
Net unrealized gain on investments and
foreign currency translations............ 39,034,318
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 52,797,486
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 54,418,436
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
------------------------------
1995 1994
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................................... 1,620,950 474,722
Net realized gain (loss) on investments and foreign currency transactions ....... 13,763,168 (578,250)
Net unrealized gain (loss) on investments and foreign currency translations ..... 39,034,318 (16,334,560)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................. 54,418,436 (16,438,088)
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ........................................................... (5,982,859) (499,141)
Net realized gain from investment transactions .................................. (7,583,630) (394,438)
------------- -------------
TOTAL DIVIDENDS TO SHAREHOLDERS ................................................. (13,566,489) (893,579)
------------- -------------
CAPITAL TRANSACTIONS:
Capital stock sold [2,817,622 and 17,513,960 shares, respectively] .............. 42,294,857 254,421,899
Reinvestment of dividend distributions [872,571 and 64,991 shares, respectively] 13,566,489 893,579
Capital stock repurchased [(2,794,423) and (751,122) shares, respectively] ...... (41,558,737) (10,781,034)
Initial capitalization repurchased [(48,679) and (735,674) shares, respectively] (789,000) (10,558,000)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS .................. 13,513,609 233,976,444
------------- -------------
TOTAL INCREASE IN NET ASSETS ...................................................... 54,365,556 216,644,777

NET ASSETS:
Beginning of year ............................................................... 345,733,978 129,089,201
------------- -------------
End of year ..................................................................... $ 400,099,534 $ 345,733,978
------------- -------------
------------- -------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A15

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

NATURAL RESOURCES PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$251,010,642)............................ $ 293,115,218
Cash....................................... 330
Interest and dividends receivable.......... 528,400
--------------
Total Assets............................. 293,643,948
--------------
LIABILITIES
Accrued expenses........................... 24,887
Outstanding call options written, at value
(premiums received: $163,675)............ 132,000
Payable to investment adviser.............. 315,432
--------------
Total Liabilities........................ 472,319
--------------
NET ASSETS................................... $ 293,171,629
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 169,740
Paid-in capital, in excess of par........ 243,474,453
--------------
243,644,193
Distributions in excess of net investment
income................................... (41,370)
Accumulated net realized gains............. 7,432,593
Net unrealized appreciation on investments
and foreign currency translations........ 42,136,213
--------------
Net assets, December 31, 1995.............. $ 293,171,629
--------------
--------------
Net asset value per share of 16,974,000
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 17.2718
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Dividends (net of $92,277 foreign
withholding tax)......................... $ 3,977,254
Interest................................... 624,350
---------------
4,601,604
---------------
EXPENSES
Investment management fee.................. 1,183,826
Shareholders' reports...................... 58,258
Accounting fees............................ 52,795
Professional fees.......................... 7,376
Custodian expense -- net................... 3,554
Directors' expense......................... 2,668
S.E.C. fees................................ 777
Miscellaneous expenses..................... 363
---------------
1,309,617
---------------
NET INVESTMENT INCOME........................ 3,291,987
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) on investments and
foreign currencies--
Securities transactions.................. 19,566,210
Options written.......................... 191,132
Foreign currency transactions............ (22,895)
---------------
Net realized gain on investments and
foreign currencies....................... 19,734,447
---------------
Net unrealized gain (loss) on investments
and foreign currencies--
Securities............................... 39,030,629
Options written.......................... 31,675
Foreign currency translations............ (38)
---------------
Net unrealized gain on investments and
foreign currencies....................... 39,062,266
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 58,796,713
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 62,088,700
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
--------------------------------
1995 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................................................... $ 3,291,987 $ 2,229,099
Net realized gain on investments and foreign currency transactions ........................ 19,734,447 4,072,054
Net unrealized gain(loss) on investments and foreign currency translations ................ 39,062,266 (16,859,455)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................... 62,088,700 (10,558,302)
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ..................................................................... (3,370,234) (2,145,214)
Net realized gain from investment transactions ............................................ (13,348,694) (4,370,759)
------------- -------------
TOTAL DIVIDENDS TO SHAREHOLDERS ........................................................... (16,718,928) (6,515,973)
------------- -------------
CAPITAL TRANSACTIONS:
Capital stock sold [1,205,152 and 5,475,055 shares, respectively] ......................... 19,186,000 85,097,000
Reinvestment of dividend distributions [981,450 and 446,624 shares, respectively] ......... 16,718,928 6,515,973
Capital stock repurchased [(948,328) and (393,177) shares, respectively] .................. (15,377,000) (6,107,000)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ............................ 20,527,928 85,505,973
------------- -------------
TOTAL INCREASE IN NET ASSETS ................................................................ 65,897,700 68,431,698
NET ASSETS:
Beginning of year ......................................................................... 227,273,929 158,842,231
------------- -------------
End of year ............................................................................... $ 293,171,629 $ 227,273,929
------------- -------------
------------- -------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A16

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS -- 99.5% AMOUNT VALUE
------------- --------------
BANK-RELATED INSTRUMENTS -- 12.2%
Bank of Montreal, C.D.,
5.800%, 01/22/96............................. $ 10,000,000 $ 10,000,000
Banque Nationale De Paris, C.D.,
5.770%, 01/29/96............................. 5,000,000 4,999,815
5.780%, 01/17/96............................. 2,000,000 1,999,978
5.800%, 02/02/96............................. 7,000,000 7,000,000
Bayerische Hypotheken, C.D.,
5.780%, 01/16/96............................. 4,000,000 3,999,931
5.800%, 01/16/96............................. 5,000,000 4,999,987
5.820%, 01/16/96............................. 15,000,000 15,000,058
Commerzbank, C.D.,
7.100%, 02/02/96............................. 2,000,000 2,000,733
7.320%, 01/24/96............................. 1,000,000 1,000,397
National Westminster Bank, C.D. PLC,
5.810%, 01/12/96............................. 12,000,000 12,000,000
Societe Generale, C.D.,
5.800%, 02/01/96............................. 12,000,000 12,000,000
--------------
75,000,899
--------------
COMMERCIAL PAPER -- 57.7%
American Express Credit Corp.,
5.600%, 02/09/96............................. 5,000,000 4,970,444
5.650%, 02/09/96............................. 1,315,000 1,307,157
American Honda Finance Corp.,
5.750%, 01/17/96............................. 2,000,000 1,995,208
5.800%, 01/30/96-02/15/96.................... 6,000,000 5,960,044
5.850%, 01/22/96............................. 1,000,000 996,750
Aristar, Inc.,
5.770%, 02/05/96............................. 1,000,000 994,551
Associates Corp. of North America,
4.500%, 09/30/96, Tranche #TR0076............ 2,000,000 1,981,016
4.750%, 08/01/96............................. 1,500,000 1,490,086
5.680%, 02/08/96............................. 10,000,000 9,941,622
5.710%, 02/02/96............................. 11,610,000 11,552,914
Barnett Banks, Inc.,
5.800%, 01/19/96............................. 5,000,000 4,986,306
Bradford & Bingley Building Society,
5.520%, 03/05/96............................. 4,000,000 3,961,360
5.740%, 01/17/96............................. 2,000,000 1,995,217
Caterpillar Financial Services Corp.,
5.660%, 02/21/96............................. 2,000,000 1,984,278
5.670%, 02/27/96............................. 2,000,000 1,982,360
Chase Manhattan Corp.,
5.670%, 02/12/96............................. 5,000,000 4,967,713
CIT Group Holdings, Inc.,
5.670%, 02/05/96............................. 4,000,000 3,978,580
5.680%, 02/07/96............................. 10,000,000 9,943,200
5.780%, 01/25/96............................. 11,270,000 11,228,382
Countrywide Funding Corp.,
6.100%, 01/04/96-01/08/96.................... 17,585,000 17,570,230
Dean Witter Discover and Company,
5.700%, 02/08/96-02/14/96.................... 7,000,000 6,956,142
Duracell Inc.,
5.950%, 01/02/96............................. 1,124,000 1,124,000
Finova Capital Corp.,
5.970%, 01/05/96-01/08/96.................... 8,000,000 7,994,030
6.000%, 01/12/96............................. 5,640,000 5,630,600
First Union Corp.,
5.710%, 02/09/96............................. 13,000,000 12,921,646

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
Ford Motor Credit Co.,
5.670%, 02/13/96............................. $ 1,000,000 $ 993,385
5.680%, 02/08/96............................. 15,000,000 14,912,433
5.710%, 02/01/96............................. 2,305,000 2,294,032
Ford Motor Credit Corp.,
5.530%, 03/04/96............................. 3,000,000 2,971,428
General Electric Capital Corp.,
5.580%, 04/09/96-04/11/96.................... 13,000,000 12,799,430
5.660%, 02/08/96............................. 10,000,000 9,941,828
General Motors Acceptance Corp.,
5.730%, 02/06/96............................. 7,919,000 7,874,885
5.750%, 02/09/96-02/20/96.................... 11,500,000 11,412,632
GTE Corp.,
5.950%, 01/30/96............................. 2,000,000 1,990,744
Hanson Finance, PLC,
5.700%, 01/30/96-02/08/96.................... 15,000,000 14,924,792
Heinz (H.J.) Company,
5.580%, 02/12/96............................. 7,000,000 6,955,515
Heller Financial, Inc.,
5.900%, 01/11/96............................. 4,000,000 3,994,100
International Business Machines Credit, Corp.,
5.590%, 03/05/96............................. 22,000,000 21,784,786
Merrill Lynch & Co. Inc,
5.760%, 01/31/96............................. 1,000,000 995,360
5.600%, 03/29/96............................. 2,000,000 1,972,933
5.640%, 02/29/96............................. 10,000,000 9,909,133
5.720%, 01/31/96............................. 3,000,000 2,986,177
Mitsubishi International Corp.,
5.600%, 02/27/96............................. 1,500,000 1,486,933
5.780%, 01/31/96............................. 1,700,000 1,692,085
%Money Market Auto Loan Trust
1990-1,
6.085%, 01/15/96............................. 4,120,000 4,120,218
Morgan Stanley Group, Inc.,
5.750%, 01/25/96............................. 11,000,000 10,959,590
National Westminster Bank, PLC,
5.800%, 01/31/96............................. 10,000,000 10,000,000
NYNEX Corporation,
5.750%, 02/06/96............................. 2,850,000 2,834,068
5.800%, 01/19/96............................. 1,000,000 997,261
5.820%, 01/09/96-01/16/96.................... 5,000,000 4,992,078
PNC Funding Corp.,
5.730%, 02/08/96............................. 2,000,000 1,988,222
5.710%, 03/01/96............................. 2,000,000 1,981,284
Preferred Receivables Funding Corp.,
5.500%, 03/07/96............................. 4,575,000 4,529,568
5.750%, 02/06/96............................. 3,825,000 3,803,617
Riverwood Funding Corp.,
5.680%, 02/16/96............................. 1,000,000 992,900
5.700%, 02/06/96............................. 3,000,000 2,983,375
5.710%, 02/07/96............................. 1,000,000 994,290
Robins (A.H.) Co., Inc.,
5.800%, 01/26/96............................. 4,000,000 3,984,533
Sears Roebuck Acceptance Corp.,
5.720%, 02/26/96............................. 2,000,000 1,982,522
5.700%, 02/06/96............................. 4,000,000 3,977,833
Smith Barney,
5.740%, 01/30/96............................. 5,000,000 4,977,678
Sumitomo Corp. of America,
5.900%, 01/22/96............................. 3,175,000 3,164,593

<PAGE>

MONEY MARKET PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- -------------
Transamerica Financial Corp.,
5.700%, 02/05/96............................. $ 1,700,000 $ 1,690,848
WCP Funding, Inc.,
5.750%, 01/24/96............................. 1,000,000 996,486
Whirlpool Financial Corp.,
5.710%, 03/04/96............................. 9,000,000 8,911,495
5.800%, 01/29/96-01/30/96.................... 2,000,000 1,991,139
--------------
353,160,045
--------------
TERM NOTES -- 24.6%
American Express Centurion Bank,
%5.938%, 02/16/96, Tranche #TR00088.......... 1,000,000 999,975
Associates Corp. of North America,
8.800%, 03/01/96............................. 3,600,000 3,613,799
Bank of America,
5.79%, 01/16/96, Tranche #TR00034............ 2,000,000 1,999,992
Bank One Indianapolis N.A.,
7.180%, 02/05/96, Tranche #TR00002........... 1,000,000 1,000,365
Bayerische Hypotheken,
6.376%, 04/24/96, Tranche #TR00005........... 3,000,000 2,999,328
Beneficial Corp.,
5.25%, 01/23/96, Tranche #TR00776............ 3,000,000 2,999,532
BP America, Inc.,
10.150%, 03/15/96............................ 1,000,000 1,006,580
CIT Group Holdings, Inc.,
4.750%, 03/15/96............................. 1,000,000 996,571
8.875%, 06/15/96............................. 1,800,000 1,822,135
Federal National Mortgage Association,
5.755%, 09/27/96............................. 10,000,000 10,000,000
First Union National Bank of North Carolina,
5.800%, 01/31/96, Tranche #TR00037........... 8,000,000 8,000,000
Ford Motor Credit Co.,
8.250%, 05/15/96............................. 2,500,000 2,517,966
8.875%, 03/15/96............................. 2,000,000 2,008,408
General Electric Capital Corp.,
6.950%, 03/01/96, Tranche #TR00649........... 4,000,000 4,001,974
General Motors Acceptance Corp.,
4.800%, 01/16/96, Tranche #TR00001........... 1,000,000 999,473
8.250%, 08/01/96............................. 1,500,000 1,518,456
8.800%, 07/03/96, Tranche #TR00612........... 1,000,000 1,012,522
%5.975%, 02/21/96, Tranche #TR00407.......... 1,000,000 1,000,146
6.300%, 02/02/96............................. 2,000,000 2,000,418
8.650%, 05/29/96, Tranche #TR00579........... 5,500,000 5,557,531
Goldman Sachs Group, L.P.,
%5.813%, 01/25/97, Tranche #TR00023.......... 2,000,000 2,000,000
%5.813%, 01/25/97, Tranche #TR00017.......... 28,000,000 28,000,000
International Lease Finance Corp.,
6.625%, 06/01/96............................. 1,000,000 1,002,359
International Lease Finance Corp.,
5.400%, 04/01/96, Tranche #TR00139........... 1,000,000 996,648

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- ------------
Merrill Lynch & Co., Inc.,
%5.977%, 10/02/96, Tranche #TR00195.......... $ 11,000,000 $ 10,997,604
9.000%, 03/22/96............................. 1,000,000 1,006,863
Morgan Stanley Group, Inc.,
%6.062%, 01/15/96, Tranche #TR00100.......... 4,000,000 4,000,000
%6.070%, 02/14/96, Tranche #TR00102.......... 7,000,000 7,000,000
NationsBank of Texas, N.A.,
7.000%, 02/06/96, Tranche #TR00050........... 8,000,000 8,000,146
7.300%, 01/26/96, Tranche #TR00043........... 5,000,000 5,001,365
7.550%, 01/09/96, Tranche #TR00037........... 3,000,000 3,000,456
SMM Trust 1995-Q,
%5.938%, 01/15/96............................ 19,000,000 18,998,189
Student Loan Marketing Association,
%5.700%, 05/14/96............................ 3,000,000 2,998,345
Westdeutsche Landesbank,
6.850%, 03/01/96, Tranche #TR00021........... 3,000,000 3,000,764
--------------
152,057,910
--------------
PROMISSORY NOTES -- 2.0%
75 State Street Capital Corp.,
6.000%, 01/19/96............................. 5,000,000 4,985,833
Lehman Brothers Holdings, Inc.,
%6.142%, 05/29/96............................ 7,000,000 7,000,000
--------------
11,985,833
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 3.0%
Federal Home Loan Bank,
6.050%, 06/13/96............................. 4,000,000 4,001,050
Federal Home Loan Mortgage Corp.,
5.645%, 08/15/96............................. 10,000,000 9,984,266
Federal National Mortgage Association,
5.710%, 06/10/96............................. 4,000,000 3,994,937
--------------
17,980,253
--------------
TOTAL SHORT-TERM INVESTMENTS.................................... 610,184,940
--------------
OTHER ASSETS -- 0.5%
(net of liabilities).......................................... 3,134,700
--------------
TOTAL NET ASSETS -- 100.0%...................................... $ 613,319,640
--------------
--------------

The following abbreviations are used in portfolio descriptions:

C.D. Certificates of Deposit

PLC Public Limited Company (British Corporation)

%Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

<PAGE>

DIVERSIFIED BOND PORTFOLIO

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS -- 95.0% VALUE VALUE
------------- --------------
FINANCIAL -- 18.7%
Advanta Mortgage Loan Trust, Series 1994-3
8.490%, 01/25/26............................. $ 8,500,000 $ 8,930,313
Advanta National Bank, C.D.,
6.260%, 09/01/97............................. 5,000,000 5,045,000
Allmerica Finance,
7.625%, 10/15/25............................. 4,000,000 4,202,760
Aristar, Inc.,
5.750%, 07/15/98............................. 2,000,000 2,004,940
7.500%, 07/01/99............................. 2,000,000 2,105,140
Associates Corp. of North America,
8.375%, 01/15/98............................. 500,000 526,905
%Baybanks, Inc.,
5.812%, 09/30/97............................. 5,000,000 4,991,200
Chase Manhattan Corp.,
8.000%, 06/15/99............................. 2,000,000 2,134,680
Chemical Bank,
6.625%, 08/15/05............................. 2,000,000 2,046,960
Chrysler Financial Corp.,
9.500%, 12/15/99............................. 5,000,000 5,619,400
Citicorp, M.T.N.
8.500%, 02/24/97, Tranche #TR00128........... 3,000,000 3,094,650
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
**7.875%, 03/15/98, Tranche #TR00003......... 5,000,000 5,188,125
**8.750%, 12/15/99, Tranche #TR00001......... 3,000,000 3,260,700
**Equitable Life Assurance Society,
6.950%, 12/01/05............................. 8,500,000 8,622,188
Ford Motor Credit Co.,
6.250%, 02/26/98............................. 3,000,000 3,044,730
6.375%, 10/06/00............................. 4,000,000 4,072,400
General Motors Acceptance Corp.,
8.400%, 10/15/99............................. 3,700,000 4,018,570
General Motors Acceptance Corp., M.T.N.,
7.500%, 11/04/97, Tranche #TR00598........... 2,000,000 2,066,320
Los Angeles County, California, MBIA Insured,
Zero Coupon, 06/30/08........................ 15,000,000 6,565,500
Mellon Financial Co.,
6.500%, 12/01/97............................. 2,000,000 2,032,140
**Nationwide CSN Trust,
9.875%, 02/15/25............................. 5,000,000 5,782,950
Orion Capital Corp.,
9.125%, 09/01/02............................. 8,844,000 9,989,740
**Potomac Capital Investment Corp., M.T.N.,
6.190%, 04/28/97, Series B................... 3,500,000 3,519,688
**Principal Mutual Life Insurance,
7.875%, 03/01/24............................. 5,000,000 5,101,750
Santander Financial Issuances, Inc.,
7.250%, 11/01/15............................. 2,500,000 2,560,700
Sears Roebuck Acceptance Corp.,
6.750%, 09/15/05............................. 10,000,000 10,371,200
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038........... 3,000,000 3,047,670

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Union Bank of Finland, Ltd.,
5.250%, 06/15/96............................. $ 3,000,000 $ 2,987,340
--------------
122,933,658
--------------
FOREIGN -- 12.9%
African Development Bank,
6.875%, 10/15/15............................. 5,000,000 5,151,350
Australia & New Zealand Banking Group, Ltd.,
6.250%, 02/01/04............................. 3,000,000 3,000,870
**Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
8.625%, 06/02/00, Tranche #TR00001........... 2,000,000 2,056,000
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001........... 4,100,000 4,202,500
Banco Nacional de Comercio Exterior,
7.500%, 07/01/00............................. 5,000,000 4,350,000
Central Puerto and Cent Neuquen, SA,
10.750%, 11/02/97............................ 3,000,000 3,052,500
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03............................. 3,000,000 2,955,000
**Financiera Energetica Nacional, SA, M.T.N.
9.000%, 11/08/99............................. 1,750,000 1,835,312
Hydro-Quebec,
8.050%, 07/07/24............................. 5,000,000 5,708,800
Kansallis-Osake Pankki, N.Y.,
**%8.650%, 12/29/49.......................... 5,000,000 5,312,500
10.000%, 05/01/02............................ 5,000,000 5,982,200
National Australia Bank, Ltd.,
9.700%, 10/15/98............................. 1,700,000 1,868,164
Nippon Telegraph & Telephone Corp.,
9.500%, 07/27/98............................. 1,800,000 1,965,852
Nova Scotia, Province of Canada,
8.875%, 07/01/19............................. 3,000,000 3,640,800
Ontario, Province of Canada,
15.750%, 03/15/12............................ 3,475,000 4,059,565
**%Petroleos Mexicanos,
6.812%, 03/08/99............................. 2,500,000 2,212,500
**Petroliam Nasional Berhad,
7.125%, 08/15/05............................. 5,000,000 5,284,600
Quebec, Province of Canada,
7.125%, 02/09/24............................. 5,250,000 5,279,557
Republic of Columbia,
7.250%, 02/23/04............................. 2,500,000 2,398,100
8.750%, 10/06/99............................. 1,750,000 1,849,960
Republic of South Africa,
9.625%, 12/15/99............................. 4,750,000 5,123,208
Saskatchewan, Province of Canada,
8.000%, 07/15/04............................. 4,000,000 4,458,880
)United States of Mexico with Rights,
6.250%, 12/31/19, Series B................... 4,000,000 2,620,000
--------------
84,368,218
--------------

<PAGE>

DIVERSIFIED BOND PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- -------------
INDUSTRIAL -- 40.1%
AMR Corp.,
9.000%, 08/01/12............................. $ 9,000,000 $ 10,149,930
Arkla, Inc., M.T.N.,
9.320%, 12/18/00, Tranche #TR00043........... 2,000,000 2,180,960
9.380%, 03/15/96, Tranche #TR00018........... 1,300,000 1,306,851
Auburn Hills Trust,
12.000%, 05/01/20............................ 10,000,000 15,737,600
Boise Cascade Corp.,
9.875%, 02/15/01............................. 1,000,000 1,103,070
Canadian Pacific Forest Products Ltd.,
10.250%, 01/15/03............................ 4,000,000 4,682,960
Columbia Gas Systems, Inc.,
7.620%, 11/28/25............................. 6,500,000 6,616,935
Columbia/HCA Healthcare Corp.,
6.910%, 06/15/05............................. 10,000,000 10,447,400
7.050%, 12/01/27............................. 2,000,000 2,013,140
Comsat Corp.,
8.125%, 04/01/04............................. 4,000,000 4,470,120
**Continental Cablevision, Inc.,
8.300%, 05/15/06............................. 3,000,000 3,011,250
Crane Co.,
7.250%, 06/15/99............................. 3,000,000 3,100,680
Delta Air Lines, Inc.,
9.250%, 03/15/22............................. 9,000,000 10,631,250
9.875%, 05/15/00............................. 6,000,000 6,783,960
Delta Air Lines, Inc., M.T.N.,
7.790%, 12/01/98............................. 1,000,000 1,037,710
8.380%, 06/12/98, Tranche #TR00017........... 2,000,000 2,086,700
Federal Express Corp.,
9.650%, 06/15/12............................. 3,000,000 3,702,390
Federated Dept Stores,
8.125%, 10/15/02............................. 8,000,000 8,040,000
10.000%, 02/15/01............................ 3,000,000 3,240,000
Fleming Companies, Inc.,
10.625%, 12/15/01............................ 3,500,000 3,395,000
J.C. Penney Co., Inc.,
9.750%, 06/15/21............................. 6,400,000 7,731,968
News America Holdings, Inc.,
7.500%, 03/01/00............................. 6,000,000 6,310,500
Noble Affiliates, Inc.,
7.250%, 10/15/23............................. 2,000,000 1,967,580
Occidental Petroleum Corp.,
10.125%, 11/15/01............................ 5,000,000 5,979,950
11.125%, 08/01/10............................ 5,000,000 6,896,500
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013........... 3,000,000 2,999,100
Paramount Communications, Inc.,
7.500%, 01/15/02............................. 5,000,000 5,184,000
Parker & Parsley Petroleum Co.,
8.250%, 08/15/07............................. 4,000,000 4,324,880
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01............................. 5,750,000 6,444,542
RJR Nabisco, Inc.,
6.700%, 06/15/02............................. 5,000,000 5,084,450
8.750%, 08/15/05............................. 2,000,000 2,048,620
Rodamco NV,
7.300%, 05/15/05............................. 5,000,000 5,376,750

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- ------------

Rogers Cablesystems Ltd.,
10.000%, 03/15/05, Series B.................. $ 4,000,000 $ 4,300,000
Royal Caribbean Cruises Ltd.,
11.375%, 05/15/02............................ 5,000,000 5,450,000
TCI Communications, Inc.,
8.650%, 09/15/04............................. 7,000,000 7,778,190
8.750%, 08/01/15............................. 12,900,000 14,301,843
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23............................. 9,000,000 9,688,590
Time Warner, Inc.,
7.750%, 06/15/05............................. 5,000,000 5,205,150
Transco Energy Co.,
9.125%, 05/01/98............................. 3,000,000 3,205,380
9.375%, 08/15/01............................. 6,000,000 6,884,940
United Air Lines, Inc.,
9.125%, 01/15/12............................. 7,700,000 8,604,750
11.210%, 05/01/14, Series B.................. 4,250,000 5,625,513
USX Corp.,
9.800%, 07/01/01............................. 4,900,000 5,644,261
Viacom, Inc.,
7.625%, 01/15/16............................. 2,500,000 2,529,688
7.750%, 06/01/05............................. 7,550,000 8,017,873
Westinghouse Electric Corp.,
8.375%, 06/15/02............................. 2,000,000 2,062,800
Westvaco Corp.,
9.750%, 06/15/20............................. 5,000,000 6,762,400
Whitman Corp.,
7.500%, 08/15/01............................. 3,000,000 3,201,300
--------------
263,349,424
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 21.6%
Federal Farm Credit Bank,
8.650%, 10/01/99, Series A................... 150,000 165,633
Federal Farm Credit Bank, M.T.N.,
7.900%, 03/01/96............................. 2,800,000 2,808,988
Federal Home Loan Bank,
9.800%, 03/25/96............................. 4,000,000 4,040,000
Federal Home Loan Mortgage Corp.,
6.820%, 06/29/05............................. 10,000,000 10,310,900
Federal National Mortgage Association,
6.550%, 09/12/05............................. 5,500,000 5,774,120
9.000%, 10/01/16-09/01/21.................... 713,710 759,332
Government National Mortgage Association,
7.500%, 05/20/02-12/15/09.................... 20,469,529 21,158,711
International Bank for Reconstruction and
Development,
12.375%, 10/15/02............................ 750,000 1,022,573
Resolution Funding Corp.,
Zero Coupon, 10/15/15........................ 17,100,000 4,936,086
8.125%, 10/15/19, Principle Only............. 700,000 861,329
8.625%, 01/15/21............................. 200,000 260,032
United States Treasury Bonds,
11.250%, 02/15/15............................ 5,000,000 8,003,900
12.000%, 08/15/13............................ 22,000,000 33,897,160
United States Treasury Notes,
5.500%, 02/28/99............................. 3,000,000 3,020,610
5.875%, 08/15/98-11/15/05.................... 6,500,000 6,612,650
6.500%, 08/15/05............................. 6,100,000 6,498,391
7.250%, 02/15/98............................. 5,000,000 5,199,200
7.500%, 02/29/96............................. 9,300,000 9,333,387

<PAGE>

DIVERSIFIED BOND PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
7.875%, 07/31/96............................. $ 7,000,000 $ 7,102,830
9.250%, 01/15/96............................. 10,000,000 10,014,100
--------------
141,779,931
--------------
UTILITIES -- 1.7%
Norsk Hydro A.S.,
7.750%, 06/15/23............................. 5,000,000 5,588,250
Pennsylvania Power & Light Co.,
9.375%, 07/01/21............................. 1,150,000 1,350,307
Texas Utilities Electric Co.,
5.875%, 04/01/98............................. 4,000,000 4,013,840
--------------
10,952,397
--------------
TOTAL LONG-TERM BONDS
(Cost $590,122,688)........................................... 623,383,628
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 3.1% AMOUNT VALUE
------------- --------------
MEDIUM TERM NOTES -- 1.5%
%Salomon, Inc.,
6.725%, 02/14/96............................. 10,000,000 10,002,000
--------------
REPURCHASE AGREEMENTS -- 1.6%
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)................ 10,188,000 10,188,000
--------------
TOTAL SHORT-TERM INVESTMENTS.................................... 20,190,000
--------------
OTHER ASSETS -- 1.9%
(net of liabilities).......................................... 12,262,798
--------------
TOTAL NET ASSETS -- 100.0%...................................... $ 655,836,426
--------------
--------------

The following abbreviations are used in portfolio descriptions:

M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

**Indicates a restricted security; the aggregate cost of the restricted
securities is $55,826,086. The aggregate value, $58,345,063 is
approximately 8.9% of net assets. (See Note 2)

%Indicates a variable rate security.

)These rights are indexed to the average price of Mexican crude oil exports and
will pay a rate of return, beginning on June 30, 1996, if certain economic
events occur.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

GOVERNMENT INCOME PORTFOLIO

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS -- 94.7% VALUE VALUE
------------- --------------
FINANCIAL -- 3.1%
Chase Manhattan Credit Card Trust,

%6.067%, 08/15/01, Series 1995-2............. $ 12,500,000 $ 12,496,000
Equicon Home Equity Loan Trust, CMO,
7.850%, 03/18/14, Series 1994-2.............. 3,000,000 3,106,406
--------------
15,602,406
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 91.6%
Federal Home Loan Bank,
6.780%, 07/24/02............................. 10,000,000 10,239,100
Federal Home Loan Mortgage Corp.,
6.710%, 06/11/02............................. 5,000,000 5,150,800
6.820%, 06/29/05............................. 5,000,000 5,155,450
%6.875%, 06/01/25............................ 17,120,560 17,644,877
6.970%, 06/16/05............................. 15,000,000 15,506,250
Federal National Mortgage Association,
8.500%, 05/01/24-04/01/25.................... 40,501,200 42,273,127
9.000%, 02/01/25-04/01/25.................... 17,931,541 18,884,065
Federal National Mortgage Association
Debentures,
6.550%, 08/10/00............................. 6,000,000 6,140,640
Government National Mortgage Association,
7.000%, 09/15/22-05/15/24.................... 28,079,102 28,423,397
8.000%, 09/15/23-10/15/25.................... 24,906,302 25,949,136
Main Place Funding,
%5.960%, 07/17/98............................ 10,000,000 10,025,000
Resolution Funding Corp.,
Zero Coupon, 07/15/20........................ 22,500,000 4,745,250
8.125%, 10/15/19, Principle Only Class A..... 4,200,000 5,167,974
Student Loan Market Association,
7.500%, 03/08/00............................. 12,000,000 12,855,000
United States Treasury Bonds,
7.500%, 11/15/24............................. 35,000,000 42,071,050
8.125%, 08/15/19............................. 50,000,000 62,867,000
United States Treasury Notes,
5.000%, 01/31/99............................. 16,000,000 15,880,000
7.500%, 11/15/01............................. 15,000,000 16,521,150
7.750%, 12/31/99............................. 57,000,000 61,854,120
7.875%, 11/15/04............................. 45,000,000 52,087,500
--------------
459,440,886
--------------
TOTAL LONG-TERM BONDS
(Cost $437,622,665)........................................... 475,043,292
--------------

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.0% AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)................ $ 19,985,000 $ 19,985,000
--------------
OTHER ASSETS -- 1.3%
(net of liabilities).......................................... 6,747,013
--------------
TOTAL NET ASSETS -- 100.0%...................................... $ 501,775,305
--------------
--------------

The following abbreviations are used in portfolio descriptions:

CMO Collateralized Mortgage Obligations

%Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

ZERO COUPON BOND 2000 PORTFOLIO

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS -- 98.9% VALUE VALUE
------------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS
United States Treasury Bonds, Stripped,
Zero Coupon, 02/15/00-02/15/02.............. $ 33,250,000 $ 24,979,653
--------------
24,979,653
--------------
TOTAL LONG-TERM BONDS
(Cost $21,856,986)........................................... 24,979,653
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 1.2% AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)............... 308,000 308,000
--------------
LIABILITIES -- (0.1%)
(net of other assets)........................................ (28,834)
--------------
TOTAL NET ASSETS -- 100.0%..................................... $ 25,258,819
--------------
--------------

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

ZERO COUPON BOND 2005 PORTFOLIO

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS -- 95.8% VALUE VALUE
------------- --------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS
Financing Corp. Coupon Strips,
Zero Coupon, 03/07/04......................... $ 3,350,000 $ 2,079,278
Resolution Funding Corp., Stripped,
Zero Coupon, 07/15/07......................... 10,000,000 5,050,700
United States Treasury Bonds, Stripped, Interest
Only,
Zero Coupon, 11/15/05-05/15/06............... 18,000,000 10,060,130
United States Treasury Bonds, Stripped,
Principal Only,
Zero Coupon, 11/15/04........................ 9,000,000 5,465,070
--------------
TOTAL LONG-TERM BONDS
(Cost $19,001,260)............................................ 22,655,178
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.0% AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)................ 933,000 933,000
--------------
OTHER ASSETS -- 0.2%
(net of liabilities).......................................... 58,941
--------------
TOTAL NET ASSETS -- 100.0%...................................... $ 23,647,119
--------------
--------------

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 39.6% SHARES VALUE
------------ -------------
AEROSPACE -- 0.8%
+Coltec Industries, Inc........................ 311,000 $ 3,615,375
GenCorp, Inc................................... 676,800 8,290,800
Loral Corp..................................... 77,800 2,752,175
Rockwell International Corp.................... 253,100 13,382,661
+UNC, Inc...................................... 289,100 1,734,600
--------------
29,775,611
--------------
AIRLINES -- 0.3%
+AMR Corp...................................... 100,000 7,425,000
+USAir Group, Inc.............................. 335,000 4,438,750
--------------
11,863,750
--------------
AUTOS - CARS & TRUCKS -- 3.1%
A.O. Smith Corp................................ 466,800 9,686,100
Chrysler Corp.................................. 500,000 27,687,500
Ford Motor Co.................................. 318,300 9,230,700
General Motors Corp............................ 500,000 26,437,500
General Motors Corp. (Class 'E' Stock)......... 243,900 12,682,800
General Motors Corp. (Class 'H' Stock)......... 465,900 22,887,337
Titan Wheel International, Inc................. 748,350 12,160,686
--------------
120,772,623
--------------
BANKS AND SAVINGS & LOANS -- 1.8%
First Bank System, Inc......................... 366,600 18,192,525
First Interstate Bancorp....................... 120,000 16,380,000
KeyCorp........................................ 502,800 18,226,500
Norwest Corp................................... 570,400 18,823,200
--------------
71,622,225
--------------
CHEMICALS -- 1.2%
+FMC Corp...................................... 110,800 7,492,850
Imperial Chemical Industries, PLC, ADR......... 371,300 17,358,275
OM Group, Inc.................................. 308,400 10,215,750
W.R. Grace & Co................................ 218,800 12,936,550
--------------
48,003,425
--------------
CHEMICALS - SPECIALTY -- 0.7%
Ferro Corp..................................... 655,200 15,233,400
M.A. Hanna Co.................................. 489,700 13,711,600
--------------
28,945,000
--------------
COMPUTER SERVICES -- 0.9%
+Amdahl Corp................................... 900,000 7,650,000
National Data Corp............................. 620,100 15,347,475
+Paxar Corp.................................... 1,022,928 13,553,794
--------------
36,551,269
--------------
CONSTRUCTION -- 0.2%
+J. Ray McDermott, SA.......................... 500,000 8,937,500
--------------
CONTAINERS -- 0.2%
+Sealed Air Corp............................... 290,400 8,167,500
--------------
DIVERSIFIED GAS -- 0.6%
+Basin Exploration, Inc........................ 148,000 730,750
Sonat Offshore Drilling, Inc................... 228,100 10,207,475
Tidewater, Inc................................. 73,600 2,318,400
Weatherford Enterra, Inc....................... 321,353 9,279,066
Western Gas Resources, Inc..................... 162,100 2,613,863
--------------
25,149,554
--------------
DRUGS AND HOSPITAL SUPPLIES -- 0.2%
United States Surgical Corp.................... 365,500 7,812,563
--------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
ELECTRICAL EQUIPMENT -- 0.5%
+Anixter International, Inc.................... 337,400 $ 6,284,075
Belden, Inc.................................... 524,300 13,500,725
--------------
19,784,800
--------------
ELECTRONICS -- 0.7%
+ADT Ltd....................................... 620,000 9,300,000
+Digital Equipment Corp........................ 200,000 12,825,000
+IMO Industries, Inc........................... 596,900 4,103,686
--------------
26,228,686
--------------
FINANCIAL SERVICES -- 2.2%
American Express Co............................ 319,000 13,198,625
Dean Witter Discover and Company............... 736,500 34,615,500
Lehman Brothers Holdings, Inc.................. 400,000 8,500,000
Reinsurance Group of America, Inc.............. 487,800 17,865,675
Salomon, Inc................................... 300,000 10,650,000
--------------
84,829,800
--------------
FOODS -- 0.4%
Philip Morris Companies, Inc................... 188,000 17,014,000
--------------
FOREST PRODUCTS -- 0.9%
Louisiana-Pacific Corp......................... 700,000 16,975,000
Mead Corp...................................... 350,800 18,329,300
--------------
35,304,300
--------------
FURNITURE -- 0.2%
Leggett & Platt, Inc........................... 380,200 9,219,850
--------------
GAS PIPELINES -- 0.6%
Enron Oil & Gas Co............................. 332,700 7,984,800
+Global Marine, Inc............................ 615,800 5,388,250
+Seagull Energy Corp........................... 387,200 8,615,200
--------------
21,988,250
--------------
HOSPITAL MANAGEMENT -- 0.6%
Columbia/HCA Healthcare Corp................... 161,816 8,212,160
+Tenet Healthcare Corp......................... 825,000 17,118,750
--------------
25,330,910
--------------
HOUSING RELATED -- 0.9%
+Giant Cement Holdings, Inc.................... 415,200 4,774,800
+Owens-Corning Fiberglas Corp.................. 662,800 29,743,150
--------------
34,517,950
--------------
INSURANCE -- 2.9%
Allstate Corp.................................. 129,599 5,329,758
Equitable of Iowa Companies.................... 372,700 11,972,987
Financial Security Assurance Holdings, Ltd..... 226,200 5,626,725
National Re Corp............................... 207,600 7,888,800
PennCorp Financial Group, Inc.................. 638,400 18,753,000
Provident Companies, Inc....................... 177,200 6,002,650
TIG Holdings, Inc.............................. 588,300 16,766,550
Trenwick Group, Inc............................ 276,200 15,536,250
W.R. Berkley Corp.............................. 192,800 10,363,000
Western National Corp.......................... 900,000 14,512,500
--------------
112,752,220
--------------
MACHINERY -- 1.2%
Case Corp...................................... 642,800 29,408,100
DT Industries, Inc............................. 234,500 3,165,750
+Global Industrial Technologies, Inc........... 390,700 7,374,463
Parker-Hannifin Corp........................... 204,750 7,012,688
--------------
46,961,001
--------------

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
MEDIA -- 2.3%
Central Newspapers, Inc. (Class 'A' Stock)..... 331,700 $ 10,407,088
Comcast Corp. (Class 'A' Stock)................ 362,500 6,389,063
Comcast Corp. (Special Class 'A' Stock)........ 9,600 174,600
+Cox Communications, Inc. (Class 'A' Stock).... 246,115 4,799,243
Gannett Co., Inc............................... 200,000 12,275,000
Hollinger International, Inc................... 161,400 1,694,700
Knight-Ridder, Inc............................. 200,000 12,500,000
Lee Enterprises, Inc........................... 337,400 7,760,200
McGraw-Hill, Inc............................... 96,200 8,381,425
Media General, Inc. (Class 'A' Stock).......... 123,600 3,754,350
+Tele-Communications, Inc. (Series 'A' Stock).. 606,200 12,048,225
Times Mirror Co. (Class 'A' Stock)............. 280,276 9,494,350
--------------
89,678,244
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 3.6%
BW/IP, Inc. (Class 'A' Stock).................. 379,200 6,256,800
Danaher Corp................................... 455,600 14,465,300
Donaldson Company, Inc......................... 400,400 10,060,050
+IDEX Corp..................................... 285,600 11,638,200
+Jan Bell Marketing, Inc....................... 1,000,000 2,500,000
+Litton Industries, Inc........................ 259,700 11,556,650
Mark IV Industries, Inc........................ 572,565 11,308,158
Mascotech, Inc................................. 650,000 7,068,750
Pentair, Inc................................... 472,950 23,529,263
+SPS Transaction Services, Inc................. 192,800 5,711,700
Textron, Inc................................... 96,400 6,507,000
Trinity Industries, Inc........................ 385,500 12,143,250
+Wolverine Tube, Inc........................... 279,500 10,481,250
York International Corp........................ 199,000 9,353,000
--------------
142,579,371
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.3%
Eastman Kodak Co............................... 372,300 24,944,100
Houghton Mifflin Co............................ 132,600 5,701,800
Whitman Corp................................... 913,400 21,236,550
--------------
51,882,450
--------------
PETROLEUM -- 1.0%
Amerada Hess Corp.............................. 100,000 5,300,000
Cabot Oil & Gas Corp. (Class 'A' Stock)........ 594,400 8,693,100
Elf Aquitaine, ADR............................. 530,100 19,481,175
Parker & Parsley Petroleum Co.................. 257,800 5,671,600
--------------
39,145,875
--------------
PETROLEUM SERVICES -- 2.5%
Baker Hughes, Inc.............................. 300,000 7,312,500
Coflexip, ADR.................................. 500,000 9,437,500
+ENSCO International, Inc...................... 600,000 12,450,000
+Hornbeck Offshore Services, Inc............... 208,000 4,082,000
ICO, Inc....................................... 500,000 2,437,500
+Marine Drilling Co., Inc...................... 1,000,000 5,125,000
+Mesa, Inc..................................... 1,008,400 3,781,500
Murphy Oil Corp................................ 190,800 7,918,200
Noble Affiliates, Inc.......................... 200,000 5,975,000
+Noble Drilling Corp........................... 800,000 7,200,000
+Oryx Energy Co................................ 849,400 11,360,725

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

+Pride Petroleum Services, Inc................. 360,100 $ 3,826,063
+Rowan Companies, Inc.......................... 269,400 2,660,325
+Western Atlas, Inc............................ 300,000 15,150,000
--------------
98,716,313
--------------
RAILROADS -- 0.9%
Burlington Northern, Inc....................... 259,000 20,202,000
Illinois Central Corp.......................... 440,000 16,885,000
--------------
37,087,000
--------------
REAL ESTATE DEVELOPMENT -- 0.5%
Zeneca Group, PLC, ADR......................... 357,400 20,863,225
--------------
RETAIL -- 1.7%
+Best Products Company, Inc.................... 1,094,500 5,198,875
+Burlington Coat Factory Warehouse............. 244,600 2,507,150
Charming Shoppes, Inc.......................... 2,000,000 5,750,000
Dillard Department Stores, Inc. (Class 'A'
Stock)....................................... 500,000 14,250,000
+Filene's Basement Corp........................ 160,000 370,000
K mart Corp.................................... 1,058,700 7,675,575
Rite Aid Corp.................................. 6,000 205,500
Sears, Roebuck & Co............................ 139,800 5,452,200
TJX Companies, Inc............................. 914,900 17,268,738
Woolworth Corp................................. 600,000 7,800,000
--------------
66,478,038
--------------
RUBBER -- 0.3%
Goodyear Tire & Rubber Co...................... 269,800 12,242,175
--------------
STEEL -- 1.6%
+Bethlehem Steel Corp.......................... 1,000,000 14,000,000
+LTV Corp...................................... 1,500,000 20,625,000
+Material Sciences Corp........................ 675,000 10,040,625
+National Steel Corp. (Class 'B' Stock)........ 300,000 3,862,500
USX-U.S. Steel Group........................... 450,000 13,837,500
--------------
62,365,625
--------------
TELECOMMUNICATIONS -- 1.2%
+Airtouch Communications, Inc.................. 385,500 10,890,375
Century Telephone Enterprises, Inc............. 337,300 10,709,275
Frontier Corp.................................. 297,700 8,931,000
MCI Communications Corp........................ 331,100 8,649,988
+Nextel Communications, Inc. (Class 'A'
Stock)....................................... 495,400 7,307,150
--------------
46,487,788
--------------
TEXTILES -- 1.2%
+Farah, Inc.................................... 258,500 1,227,874
+Fieldcrest Cannon, Inc........................ 460,000 7,647,500
+Fruit of the Loom, Inc. (Class 'A' Stock)..... 500,000 12,187,500
+Owens-Illinois, Inc........................... 552,700 8,014,150
Phillips-Van Heusen Corp....................... 600,000 5,925,000
+Tultex Corp................................... 579,000 2,388,375
V.F. Corp...................................... 154,600 8,155,149
--------------
45,545,549
--------------
TOBACCO -- 0.4%
RJR Nabisco Holdings Corp...................... 500,000 15,437,500
--------------
TOTAL COMMON STOCKS
(Cost $1,308,436,835)......................................... 1,560,041,940
--------------

B10

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
PREFERRED STOCKS -- 0.1% SHARES VALUE
------------- --------------
MEDIA
Times Mirror Co. (Cum. Conv.), Series B........ 119,724 $ 3,090,376
--------------
(Cost $2,725,059)

PAR MARKET
LONG-TERM BONDS -- 33.2% VALUE VALUE
------------- --------------

FINANCIAL -- 10.0%
Advanta Corp Mid,
8.180%, 02/09/97, Tranche #TR00028........... $ 10,000,000 $ 10,271,700
Advanta Corp.,
5.125%, 11/15/96............................. 12,535,000 12,464,303
Allmerica Finance,
7.625%, 10/15/25............................. 7,200,000 7,564,968
Associates Corp. of North America,
8.375%, 01/15/98............................. 1,100,000 1,159,191
Banc One Credit Card Master Trust, Series 94-B
7.750%, 12/15/99............................. 5,100,000 5,292,831
Capital One Bank, M.T.N.,
6.660%, 08/17/98, Tranche #TR00055........... 10,050,000 10,237,734
6.740%, 05/31/99, Tranche #TR00038........... 22,250,000 22,756,410
8.125%, 02/27/98, Tranche #TR00032........... 6,500,000 6,788,860
Chrysler Financial Corp., M.T.N.,
5.390%, 08/27/96, Tranche #TR00041........... 7,300,000 7,287,079
CIGNA Mortgage Securities, Inc.,
Series 88-1
9.400%, 01/15/02............................. 2,285,774 2,319,878
Discover Card Trust, Series 1991-C, Class B
7.875%, 04/16/98............................. 10,000,000 10,050,000
**Equitable Life Assurance Society,
6.950%, 12/01/05............................. 25,000,000 25,359,375
Federal Express Corp., M.T.N.,
10.010%, 06/01/98, Tranche #TR00067.......... 3,000,000 3,255,300
10.050%, 06/15/99, Tranche #TR00068.......... 500,000 557,650
First Union Corp.,
9.450%, 06/15/99............................. 4,000,000 4,450,800
Ford Motor Credit Co.,
6.375%, 10/06/00............................. 26,500,000 26,979,650
Ford Motor Credit, Co., M.T.N.,
6.137%, 10/04/99............................. 23,750,000 23,808,188
6.850%, 08/15/00............................. 8,500,000 8,823,255
General Motors Acceptance Corp.,
8.250%, 08/01/96............................. 5,000,000 5,066,300
General Motors Acceptance Corp., M.T.N.,
6.300%, 09/10/97, Tranche #TR00532........... 5,000,000 5,058,300
6.700%, 04/30/97, Tranche #TR00319........... 11,000,000 11,158,840
7.375%, 07/20/98, Tranche #TR00667........... 4,650,000 4,837,070
7.850%, 03/05/97, Tranche #TR00187........... 3,300,000 3,384,744

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
[]Marine Midland Bank N.A.,
5.812%, 09/27/96............................. $ 6,500,000 $ 6,487,000
Mellon Financial Co.,
6.500%, 12/01/97............................. 1,650,000 1,676,516
Okobank,
**[]7.387%, 10/29/49......................... 3,500,000 3,539,375
[]7.387%, 10/29/49........................... 9,000,000 9,101,250
[]7.375%, 09/27/49........................... 18,750,000 19,341,563
Salomon Inc., M.T.N.,
5.440%, 01/13/97, Tranche #TR00641........... 5,000,000 4,972,000
5.470%, 08/29/97, Tranche #SR00492........... 10,500,000 10,446,660
5.320%, 09/16/96, Tranche #TR00572........... 10,400,000 10,347,168
5.470%, 09/22/97, Tranche #SR00504........... 12,525,000 12,377,706
Santander Financial Issuances, Inc.,
7.250%, 11/01/15............................. 14,500,000 14,852,060
Sears Roebuck Acceptance Corp.,
6.750%, 09/15/05............................. 35,050,000 36,351,056
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038........... 11,000,000 11,174,790
Standard Credit Card Master Trust,
5.950%, 03/07/96............................. 4,650,000 4,612,196
Union Bank of Finland, Ltd.,
5.250%, 06/15/96............................. 16,650,000 16,579,737
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #TR00248........... 2,600,000 2,616,276
--------------
383,407,779
--------------
FOREIGN -- 6.0%
**Banco de Commercio Exterior, SA, M.T.N.,
8.625%, 06/02/00, Tranche #TR00001........... 5,500,000 5,654,000
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001........... 7,300,000 7,482,500
**Cemex, SA, M.T.N.,
9.500%, 09/20/01, Tranche #TR00010........... 12,500,000 11,375,000
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03............................. 7,600,000 7,486,000
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98............................. 5,190,000 4,567,200
Empresa Columbia de Petroleos,
7.250%, 07/08/98............................. 8,250,000 8,208,750
Financiera Energetica Nacional,
6.625%, 12/13/96............................. 5,000,000 5,000,000
Financiera Energetica Nacional, SA, M.T.N.,
9.000%, 11/08/99............................. 2,000,000 2,097,500
**9.000%, 11/08/99........................... 5,375,000 5,637,031
Fomento Economico Mexicano, SA,
9.500%, 07/22/97............................. 5,150,000 5,104,938
**Grupo Condumex, SA, M.T.N.,
6.250%, 07/27/96............................. 4,300,000 4,165,625
**Grupo Embotellador Mexicana,
10.750%, 11/19/97............................ 8,015,000 7,994,963

B11

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Grupo Televisa, SA,
10.000%, 11/09/97............................ $ 7,250,000 $ 7,105,000
Hydro-Quebec,
8.050%, 07/07/24............................. 22,100,000 25,232,896
Kansallis-Osake Pankki, N.Y.,
**[]8.650%, 12/29/49......................... 10,000,000 10,625,000
9.750%, 12/15/98............................. 16,950,000 18,736,022
Kansallis-Osake Pankki, N.Y., C.D.,
6.125%, 05/15/98............................. 6,160,000 6,227,375
Quebec, Province of Canada,
7.500%, 07/15/02............................. 8,625,000 9,157,766
Republic of Columbia,
7.125%, 05/11/98............................. 2,775,000 2,795,813
7.250%, 02/23/04............................. 5,400,000 5,179,896
8.750%, 10/06/99............................. 4,950,000 5,232,744
Republic of Italy,
6.875%, 09/27/23............................. 15,000,000 14,648,250
Republic of South Africa,
9.625%, 12/15/99............................. 22,221,000 23,966,904
**Telekom Malaysia,
7.875%, 08/01/25............................. 22,000,000 24,159,520
United Mexican States,
5.820%, 06/28/01............................. 1,375,000 990,000
6.970%, 08/12/00............................. 2,300,000 1,840,000
8.500%, 09/15/02............................. 6,850,000 5,959,500
--------------
236,630,193
--------------
INDUSTRIAL -- 13.0%
AMR Corp.,
10.000%, 04/15/21............................ 5,000,000 6,213,250
9.000%, 08/01/12............................. 10,000,000 11,277,700
9.800%, 10/01/21............................. 5,000,000 5,944,000
9.880%, 06/15/20............................. 9,565,000 11,501,913
Arkla, Inc., M.T.N.,
9.250%, 12/18/97, Tranche #TR00027........... 3,000,000 3,151,590
Auburn Hills Trust,
12.000%, 05/01/20............................ 28,670,000 45,119,699
Coca-Cola Enterprises, Inc.,
6.500%, 11/15/97............................. 3,750,000 3,808,875
Columbia Gas Systems, Inc.,
7.620%, 11/28/25............................. 6,500,000 6,616,935
Columbia/HCA Healthcare Corp.,
7.050%, 12/01/27............................. 32,200,000 32,411,554
7.580%, 09/15/25, M.T.N., Tranche #TR00015... 16,000,000 17,157,120
Delta Air Lines, Inc.,
9.750%, 05/15/21............................. 5,000,000 6,168,650
Federated Dept Stores,
8.125%, 10/15/02............................. 10,500,000 10,552,500
Hanson Overseas Corp.,
5.500%, 01/15/96............................. 2,000,000 1,999,840
Nabisco, Inc.,
6.850%, 06/15/05............................. 20,000,000 20,312,000
News America Holdings, Inc.,
7.750%, 12/01/45............................. 51,000,000 51,659,940
9.125%, 10/15/99............................. 15,000,000 16,580,700
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01............................. 8,950,000 10,031,070
RJR Nabisco, Inc.,
8.750%, 08/15/05............................. 4,000,000 4,097,240
Sears, Roebuck & Co., M.T.N.,
9.420%, 04/01/96............................. 1,000,000 1,014,375
Sears, Roebuck Acceptance Corp.,
9.000%, 09/15/96............................. 2,000,000 2,043,760

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Service Corp. International,
7.000%, 06/01/15............................. $ 2,500,000 $ 2,785,575
TCI Communications, Inc.,
8.750%, 08/01/15............................. 27,175,000 30,128,107
Tele-Communications, Inc.,
7.875%, 08/01/13............................. 5,250,000 5,399,678
9.250%, 04/15/02............................. 5,000,000 5,680,900
9.800%, 02/01/12............................. 18,000,000 21,585,060
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23-07/15/33.................... 33,740,000 36,131,467
9.625%, 05/01/02............................. 14,140,000 16,379,352
Time Warner, Inc.,
7.750%, 06/15/05............................. 10,000,000 10,410,300
United Air Lines, Inc.,
9.750%, 08/15/21............................. 15,000,000 17,993,550
10.670%, 05/01/04............................ 21,750,000 26,236,590
11.210%, 05/01/14............................ 2,500,000 3,309,125
Viacom, Inc.,
7.625%, 01/15/16............................. 16,000,000 16,190,000
7.750%, 06/01/05............................. 45,175,000 47,974,494
Westinghouse Electric Corp., M.T.N.,
8.700%, 06/20/96, Tranche #TR00029........... 2,950,000 2,970,680
--------------
510,837,589
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 4.2%
Federal National Mortgage Association,
9.050%, 04/10/00............................. 14,000,000 15,837,500
United States Treasury Bonds,
7.625%, 02/15/25............................. 200,000 244,562
12.000%, 08/15/13............................ 5,400,000 8,320,212
United States Treasury Notes,
6.125%, 07/31/00............................. 3,350,000 3,448,390
6.500%, 04/30/97............................. 61,000,000 61,981,490
5.875%, 08/15/98-11/15/05.................... 32,200,000 32,850,580
6.125%, 09/30/00............................. 13,500,000 13,905,000
6.375%, 08/15/02............................. 26,500,000 27,787,635
6.500%, 05/15/05............................. 2,900,000 3,085,339
--------------
167,460,708
--------------
TOTAL LONG-TERM BONDS
(Cost $1,260,456,592)......................................... 1,298,336,269
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 26.4% AMOUNT VALUE
------------- --------------
BANK-RELATED INSTRUMENTS -- 3.4%
Abbey National Treasury Services, C.D. PLC,
5.850%, 01/03/96............................. 48,000,000 48,000,012
Advanta National Bank, C.D.
6.260%, 09/01/97............................. 10,500,000 10,594,500
Bayerische Hypotheken, C.D.,
5.800%, 01/16/96............................. 12,000,000 11,999,970
5.830%, 01/16/96............................. 23,000,000 23,000,176
Berliner Handels, C.D.,
5.830%, 01/16/96............................. 12,000,000 12,000,046
National Westminister Bank, C.D. PLC,
5.810%, 01/12/96............................. 36,000,000 36,000,000
Societe Generale Bank, C.D.,
7.650%, 01/08/96............................. 3,000,000 3,000,472
--------------
144,595,176
--------------

B12

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------

COMMERCIAL PAPER -- 16.1%
American Express Credit Corp.,
5.590%, 03/15/96............................. $ 14,000,000 $ 13,841,306
American Home Products Corp.,
5.680%, 03/07/96............................. 13,000,000 12,866,678
American Honda Finance Corp.,
5.750%, 02/08/96............................. 6,000,000 5,964,542
5.850%, 01/12/96-01/22/96.................... 9,000,000 8,978,875
Aristar Inc.,
5.800%, 02/02/96............................. 2,000,000 1,990,011
Asset Securitization Cooperative Corp.,
5.660%, 02/20/96............................. 28,000,000 27,784,291
Associates Corp. of North America,
5.680%, 02/08/96-02/12/96.................... 43,300,000 43,026,208
Banque Nationale De Paris,
5.780%, 01/22/96............................. 11,000,000 10,999,845
Bradford & Bingley Building Society,
5.680%, 02/06/96............................. 22,000,000 21,878,511
Caterpillar Financial Services Corp.,
5.660%, 02/21/96............................. 3,000,000 2,976,417
5.670%, 02/27/96............................. 3,000,000 2,973,540
Chase Manhattan Corp.,
5.670%, 02/12/96............................. 8,000,000 7,948,340
CIT Group Holdings, Inc.,
5.670%, 02/05/96............................. 8,000,000 7,957,160
5.680%, 02/07/96............................. 17,000,000 16,903,440
5.780%, 01/25/96............................. 16,981,000 16,918,293
Cogentrix of Richmond, Inc.,
5.950%, 01/24/96............................. 18,457,000 18,389,888
Corporate Receivables Corp.,
5.750%, 01/16/96-01/18/96.................... 8,000,000 7,980,514
Countrywide Funding Corp.,
5.830%, 01/16/96............................. 2,000,000 1,995,466
5.840%, 01/18/96............................. 8,000,000 7,979,236
5.870%, 01/22/96............................. 3,000,000 2,990,217
6.000%, 01/22/96............................. 8,000,000 7,973,333
Dean Witter Discover and Company,
5.700%, 02/14/96............................. 4,000,000 3,972,767
Finova Capital Corp.,
5.970%, 01/05/96-01/25/96.................... 19,360,000 19,324,797
First Union Corp.,
5.710%, 02/09/96............................. 15,000,000 14,909,592
Fleet Mortgage Group, Inc.,
5.800%, 01/16/96............................. 6,000,000 5,986,467
Ford Motor Credit Co.,
5.530%, 03/04/96............................. 20,800,000 20,601,903
6.070%, 01/05/96............................. 14,300,000 14,292,767
General Electric Capital Corp.,
5.580%, 04/08/96-04/09/96.................... 10,000,000 9,848,565
5.660%, 02/08/96............................. 36,000,000 35,790,580
General Motors Acceptance Corp.,
5.650%, 02/09/96............................. 4,261,000 4,235,588
5.750%, 02/20/96............................. 9,000,000 8,929,563
5.800%, 02/09/96............................. 20,000,000 19,877,556
Goldman Sachs Group L.P,
6.050%, 01/11/96-01/12/96.................... 22,000,000 21,964,540
GTE Corp.,
5.870%, 01/19/96............................. 4,000,000 3,988,912
5.950%, 01/29/96............................. 4,544,000 4,523,722
5.970%, 01/30/96-01/31/96.................... 7,491,000 7,455,719
Hanson Finance, PLC,
5.650%, 02/29/96............................. 8,000,000 7,927,178
5.700%, 01/26/96-02/08/96.................... 19,389,000 19,296,480

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------

McKenna Triangle National Corp.,
5.750%, 01/16/96............................. $ 3,831,000 $ 3,822,433
Merrill Lynch & Co., Inc.,
5.750%, 01/26/96............................. 21,000,000 20,919,500
Mitsubishi International Corp.,
5.780%, 01/29/96............................. 2,500,000 2,489,163
5.810%, 01/23/96............................. 4,200,000 4,185,766
Morgan Stanley Group, Inc.,
5.750%, 01/25/96............................. 34,000,000 33,875,097
NYNEX Corporation,
5.800%, 01/19/96............................. 2,000,000 1,994,522
5.820%, 01/09/96-01/16/96.................... 6,000,000 5,990,947
PHH Corporation,
5.830%, 01/23/96............................. 3,000,000 2,989,798
PNC Funding Corp,
5.730%, 02/08/96............................. 2,000,000 1,988,222
Preferred Receivables Funding Corp.,
5.680%, 02/07/96............................. 7,150,000 7,109,388
5.850%, 01/17/96............................. 15,000,000 14,963,438
Riverwood Funding Corp.,
5.680%, 02/16/96............................. 4,000,000 3,971,600
Sears Roebuck Acceptance Corp.,
5.720%, 02/26/96............................. 11,000,000 10,903,872
Special Purpose A/R Cooperative Corp.,
5.750%, 01/24/96............................. 4,000,000 3,985,944
5.780%, 01/24/96............................. 3,000,000 2,989,403
Transamerica Corp.,
5.780%, 01/19/96............................. 16,072,000 16,028,132
Whirlpool Corp.,
5.800%, 01/23/96............................. 2,000,000 1,993,233
Whirlpool Financial Corp.,
5.710%, 03/04/96............................. 18,972,000 18,785,431
5.800%, 02/02/96............................. 1,300,000 1,293,507
--------------
633,522,203
--------------
TERM NOTES -- 5.6%
Associates Corp. of North America,
8.800%, 03/01/96............................. 2,000,000 2,007,278
Bank of America,
5.79%, 01/16/96, Tranche #TR00034............ 2,000,000 1,999,992
Bank One Indianapolis N.A.,
7.180%, 02/05/96, Tranche #TR00002........... 6,000,000 6,002,187
Bayerische Hypotheken,
5.770%, 01/23/96............................. 4,000,000 3,999,789
Beneficial Corp.,
5.25%, 01/23/96, Tranche #TR00776............ 5,000,000 4,999,220
Exxon Capital Corp.,
7.875%, 04/15/96............................. 5,500,000 5,527,256
First Union National Bank of North Carolina,
5.800%, 01/31/96............................. 13,000,000 13,000,000
Ford Motor Credit Co.,
5.000%, 03/25/96............................. 4,000,000 3,991,407
8.900%, 04/08/96............................. 4,300,000 4,332,346
9.850%, 02/27/96............................. 5,000,000 5,024,368
General Motors Acceptance Corp.,
[]5.70%, 10/20/97............................ 8,000,000 7,996,425
6.300%, 02/02/96, Tranche #TR00646........... 2,000,000 2,000,418
8.250%, 08/01/96............................. 2,000,000 2,024,935

B13

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------

[]Merrill Lynch & Co., Inc.,
5.929%, 09/13/96, Tranche #TR00197........... $ 27,000,000 $ 26,994,526
NationsBank of Texas, N.A.,
7.000%, 02/06/96, Tranche #TR00037........... 40,000,000 40,002,205
7.300%, 01/26/96, Tranche #TR00043........... 4,000,000 4,001,092
7.550%, 01/09/96, Tranche #TR00050........... 8,500,000 8,501,291
[]Norwest Corp.,
5.929%, 05/23/96, Tranche #TR00176........... 5,500,000 5,499,923
[]Salomon, Inc.,
6.725%, 02/14/96............................. 25,000,000 25,000,000
[]SMM Trust,
5.937%, 12/16/96............................. 27,000,000 26,997,556
Society National Bank,
6.000%, 04/25/96, Tranche #TR00010........... 1,940,000 1,940,000
Student Loan Marketing Association,
[]5.20%, 08/09/96............................ 7,650,000 7,641,227
[]5.22%, 02/08/96............................ 3,000,000 2,999,276
USX Corp.,
6.562%, 02/15/96............................. 7,500,000 7,502,619
--------------
219,985,336

--------------
PROMISSORY NOTES -- 0.3%
[]Lehman Brothers Holdings, Inc.,
6.142%, 05/29/96............................. 10,000,000 10,000,000
--------------
REPURCHASE AGREEMENTS -- 1.0%
Joint Repurchase Agreement Account,
5.839%, 01/02/96............................. 43,210,000 43,210,000
--------------
TOTAL SHORT-TERM INVESTMENTS.................................... 1,051,312,715
--------------
OTHER ASSETS -- 0.7%
(net of liabilities).......................................... 27,992,965
--------------
TOTAL NET ASSETS -- 100.0%...................................... $3,940,774,265
--------------
--------------

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
C.D. Certificates of Deposit
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 $96,403,735. The aggregate value, $96,894,639 is
approximately 2.5% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

[]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

B14

<PAGE>

FLEXIBLE MANAGED PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 60.3% SHARES VALUE
------------- --------------

AEROSPACE -- 1.9%
Boeing Co...................................... 582,600 $ 45,661,275
+Coltec Industries, Inc........................ 503,800 5,856,675
United Technologies Corp....................... 300,000 28,462,500
--------------
79,980,450

--------------
AUTOS - CARS & TRUCKS -- 1.8%
Chrysler Corp.................................. 870,000 48,176,250
General Motors Corp. (Class 'E' Stock)......... 542,400 28,204,800
--------------
76,381,050

--------------
BANKS AND SAVINGS & LOANS -- 3.9%
Bank of New York Company, Inc.................. 1,000,000 48,750,000
J.P. Morgan & Co., Inc......................... 550,000 44,137,500
NationsBank Corp............................... 568,800 39,602,700
Norwest Corp................................... 997,800 32,927,400
UJB Financial Company.......................... 120,200 4,297,150
--------------
169,714,750
--------------
CHEMICALS -- 2.4%
Agrium, Inc.................................... 907,300 40,828,500
Arcadian Corp.................................. 694,200 13,450,125
E.I. Du Pont de Nemours & Co................... 600,000 41,925,000
+McWhorter Technologies, Inc................... 35,000 516,250
+Mississippi Chemical Corp..................... 324,700 7,549,275
--------------
104,269,150
--------------
CHEMICALS - SPECIALTY -- 0.7%
IMC Global, Inc................................ 703,500 28,755,563
--------------
COMMUNICATIONS -- 0.1%
Infinity Broadcasting Corp. (Class 'A' Stock).. 86,400 3,218,400
--------------
COMPUTER SERVICES -- 3.1%
Automatic Data Processing, Inc................. 740,400 54,974,700
+Bay Networks, Inc............................. 400,000 16,450,000
+Cisco Systems, Inc............................ 202,700 15,126,488
First Data Corp................................ 422,500 28,254,687
+Sun Microsystems, Inc......................... 350,000 15,968,750
--------------
130,774,625
--------------
COSMETICS & SOAPS -- 0.6%
Procter & Gamble Co............................ 325,000 26,975,000
--------------
DIVERSIFIED GAS -- 0.4%
Cross Timbers Oil Co........................... 1,010,000 17,801,250
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.6%
International Business Machines Corp........... 290,500 26,653,375
--------------
DRUGS AND HOSPITAL SUPPLIES -- 3.5%
American Home Products Corp.................... 448,100 43,465,700
Baxter International, Inc...................... 725,000 30,359,375
Genzyme Corp................................... 168,700 10,522,664
Pharmacia & Upjohn, Inc........................ 1,100,000 42,625,000
Schering-Plough Corp........................... 400,000 21,900,000
--------------
148,872,739
--------------
ELECTRICAL EQUIPMENT -- 0.6%
Baldor Electric Co............................. 602,460 12,124,508
Belden, Inc.................................... 519,900 13,387,425
--------------
25,511,933
--------------
ELECTRONICS -- 2.6%
+ADT Ltd....................................... 1,641,200 24,618,000
Emerson Electric Co............................ 600,000 49,050,000

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Hewlett-Packard Co............................. 175,000 $ 14,656,250
Teleflex, Inc.................................. 500,000 20,500,000
--------------
108,824,250
--------------
FINANCIAL SERVICES -- 3.6%
Dean Witter, Discover and Co................... 800,000 37,600,000
Federal Home Loan Mortgage Corp................ 684,700 57,172,450
Manufactured Home Communities, Inc............. 59,300 1,037,750
MBNA Corp...................................... 981,100 36,178,063
Morgan Stanley Group, Inc...................... 300,000 24,187,500
--------------
156,175,763
--------------
FOODS -- 2.8%
Nabisco Holdings Corporation (Class 'A'
Stock)....................................... 564,000 18,400,500
Philip Morris Companies, Inc................... 600,000 54,300,000
Pioneer Hi-Bred International, Inc............. 808,400 44,967,250
--------------
117,667,750
--------------
FOREST PRODUCTS -- 1.4%
Kimberly-Clark Corp............................ 277,800 22,987,950
Willamette Industries, Inc..................... 686,000 38,587,500
--------------
61,575,450
--------------
HEALTHCARE -- 0.3%
+Sybron International Corp..................... 520,400 12,359,500
--------------
HOSPITAL MANAGEMENT -- 1.7%
Columbia/HCA Healthcare Corp................... 498,362 25,291,872
Guidant Corp................................... 307,486 12,991,284
+Health Care and Retirement Corp............... 590,800 20,678,000
+Tenet Healthcare Corp......................... 583,600 12,109,700
--------------
71,070,856
--------------
INSURANCE -- 4.2%
American International Group, Inc.............. 657,700 60,837,250
CIGNA Corp..................................... 125,000 12,906,250
General Re Corp................................ 215,000 33,325,000
Mid Ocean Ltd Ordinary Shares.................. 525,000 19,490,625
NAC Re Corp.................................... 277,400 9,986,400
TIG Holdings, Inc.............................. 268,500 7,652,250
W.R. Berkley Corp.............................. 610,000 32,787,500
--------------
176,985,275
--------------
LEISURE -- 2.3%
+Argosy Gaming Co.............................. 30,500 232,563
+Bally Entertainment Corp...................... 1,946,000 27,244,000
Carnival Corp. (Class 'A' Stock)............... 1,100,000 26,812,500
Hasbro, Inc.................................... 500,000 15,500,000
+Mirage Resorts, Inc........................... 632,200 21,810,900
Royal Caribbean Cruise, Ltd.................... 233,800 5,143,600
--------------
96,743,563
--------------
MACHINERY -- 0.7%
+Thermo Fibertek, Inc.......................... 149,350 3,379,044
+Varity Corp................................... 658,400 24,443,100
--------------
27,822,144
--------------
MEDIA -- 2.8%
Comcast Corp. (Class 'A' Stock)................ 830,400 14,635,800
Shaw Communications, Inc. (Class 'B' Stock).... 703,700 4,448,072
+Tele-Communications, Inc. (Series 'A' Stock).. 1,934,400 38,446,200

B15

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Tele-Communications, Inc. (Series 'A' Stock)... 483,600 $ 12,996,750
+Viacom, Inc. (Class 'B' Stock)................ 994,500 47,114,438
--------------
117,641,260
--------------
MINERAL RESOURCES -- 2.3%
Pittston Services Group........................ 350,000 10,981,250
Potash Corp. of Saskatchewan, Inc.............. 608,300 43,113,263
+Sante Fe Pacific Gold Corp.................... 974,000 11,809,750
Vigoro Corp.................................... 533,100 32,918,925
--------------
98,823,188
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 4.2%
+American Business Information, Inc............ 510,150 9,884,156
General Electric Co............................ 327,300 23,565,600
Illinois Tool Works, Inc....................... 710,000 41,890,000
Libbey, Inc.................................... 521,700 11,738,250
Martin Marietta Materials, Inc................. 647,600 13,356,750
Modine Manufacturing Co........................ 289,100 6,938,400
Pentair, Inc................................... 263,200 13,094,200
TJ International, Inc.......................... 539,700 9,984,450
Tyco International Ltd......................... 687,600 24,495,750
York International Corp........................ 500,000 23,500,000
--------------
178,447,556
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.3%
+DeVRY, Inc.................................... 529,200 14,288,400
--------------
PETROLEUM -- 1.8%
Exxon Corp..................................... 410,000 32,851,250
Royal Dutch Petroleum Co., ADR................. 300,000 42,337,500
--------------
75,188,750
--------------
PETROLEUM SERVICES -- 1.3%
Baker Hughes, Inc.............................. 581,700 14,178,938
Halliburton Co................................. 267,200 13,527,000
Total SA, ADR.................................. 757,500 25,755,000
--------------
53,460,938
--------------
RAILROADS -- 1.6%
Illinois Central Corp.......................... 682,000 26,171,750
Norfolk Southern Corp.......................... 549,400 43,608,625
--------------
69,780,375
--------------
REAL ESTATE DEVELOPMENT -- 0.7%
Crescent Real Estate Equities, Inc............. 492,600 16,809,975
Duke Realty Investments, Inc................... 444,800 13,955,600
--------------
30,765,575
--------------
RETAIL -- 2.2%
Dollar General Corporation..................... 600,000 12,450,000
+Federated Department Stores, Inc.............. 1,500,000 41,250,000
Harcourt General, Inc.......................... 320,500 13,420,938
Nine West Group................................ 350,000 13,125,000
Office Depot, Inc.............................. 700,000 13,825,000
--------------
94,070,938
--------------
TELECOMMUNICATIONS -- 2.5%
+Airtouch Communications, Inc.................. 641,100 18,111,075
AT&T Corp...................................... 350,000 22,662,500
MCI Communications Corp........................ 1,000,000 26,125,000
SBC Communications, Inc........................ 475,000 27,312,500
TCA Cable TV, Inc.............................. 494,300 13,655,038
--------------
107,866,113
--------------
TEXTILES -- 0.0%
Unifi, Inc..................................... 90,000 1,991,250
--------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

TOBACCO -- 1.4%
RJR Nabisco Holdings Corp...................... 1,905,000 $ 58,816,875
--------------
TOTAL COMMON STOCKS
(Cost $2,074,306,562)......................................... 2,569,274,054
--------------

MARKET
PREFERRED STOCKS -- 0.7% SHARES VALUE
------------- --------------
LEISURE -- 0.2%
Bally Entertainment Corporation (Conv.)........ 600,000 8,175,000
--------------
MEDIA -- 0.5%
News Corp., Ltd., ADR.......................... 1,140,000 21,945,000
--------------
TOTAL PREFERRED STOCKS
(Cost $24,005,010)............................................ 30,120,000
--------------

PAR MARKET
LONG-TERM BONDS -- 26.3% VALUE VALUE
------------- --------------
FINANCIAL -- 7.0%
Advanta Corp.,
5.125%, 11/15/96............................. $ 9,000,000 $ 8,949,240
Advanta National Bank, CD,
6.140%, 02/28/97............................. 17,000,000 17,174,760
Allmerica Financial Corp.,
7.625%, 10/15/25............................. 7,200,000 7,564,968
Banc One Credit Card Master Trust,
7.750%, 12/15/99, Series 94-B Class B........ 5,000,000 5,189,050
Capital One Bank, M.T.N.,
6.740%, 05/31/99, Tranche #TR00038........... 22,250,000 22,756,410
8.125%, 02/27/98, Tranche #TR00032........... 6,500,000 6,788,860
Chase Manhattan Credit Card Master Trust,
7.400%, 05/15/00, Series 1992-1.............. 5,000,000 5,096,850
Equitable Life Assurance Society,
**6.950%, 12/01/05........................... 10,000,000 10,143,750
First USA Bank, M.T.N.,
[]6.237%, 10/16/97........................... 20,000,000 19,970,000
Ford Motor Credit Co.,
6.375%, 10/06/00............................. 13,500,000 13,744,350
Ford Motor Credit, Co., M.T.N.,
6.137%, 10/04/99............................. 6,250,000 6,265,313
6.850%, 08/15/00............................. 8,500,000 8,823,255
General Motors Acceptance Corp., M.T.N.,
7.000%, 05/19/97, Tranche #TR00041........... 10,000,000 10,189,300
7.000%, 06/02/97, Tranche #TR00476........... 6,000,000 6,116,460
7.375%, 07/20/98, Tranche #TR00667........... 4,500,000 4,681,035
7.850%, 03/05/97, Tranche #TR00187........... 3,200,000 3,282,176
7.875%, 03/15/00............................. 5,000,000 5,366,600
Marine Midland Bank N.A.,
[]5.812%, 09/27/96........................... 6,500,000 6,487,000
MBNA Master Credit Card Trust,
[]6.370%, 01/15/02, Series 1994-1 Class A.... 7,500,000 7,509,375

B16

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------

Okobank,
**[]7.387%, 10/29/49......................... $ 3,500,000 $ 3,539,375
[]7.387%, 10/29/49........................... 9,000,000 9,101,250
[]7.375%, 09/27/49........................... 18,750,000 19,341,563
Salomon, Inc., M.T.N.,
5.470%, 09/22/97, Tranche #SR00504........... 15,000,000 14,823,600
5.790%, 11/26/97, Tranche #TR00571........... 6,700,000 6,647,338
5.880%, 07/29/97, Tranche #SR00456........... 5,650,000 5,626,101
Santander Financial Issuances, LTD.,
7.250%, 11/01/15............................. 11,000,000 11,267,080
Sears Roebuck Acceptance Corp.,
6.750%, 09/15/05............................. 34,950,000 36,247,344
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038........... 10,000,000 10,158,900
Standard Credit Card Master Trust,
5.950%, 10/07/04, Series 1993-2A............. 4,500,000 4,463,415
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #TR00248........... 3,330,000 3,350,846
--------------
300,665,564
--------------
FOREIGN -- 5.1%
Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
**8.625%, 06/02/00, Tranche #TR00001......... 5,500,000 5,654,000
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99............................. 2,300,000 2,357,500
**9.750%, 08/26/99, Tranche #TR00001......... 5,000,000 5,125,000
Banco Nacional de Comercio Exterior,
7.500%, 07/01/00............................. 5,000,000 4,350,000
Cemex, SA, M.T.N.,
**9.500%, 09/20/01, Tranche #TR00010......... 12,500,000 11,375,000
Compania Sud Americana de Vapores, SA,
**7.375%, 12/08/03........................... 5,650,000 5,565,250
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98............................. 15,100,000 13,288,000
Empresa Columbia de Petroleos,
7.250%, 07/08/98............................. 8,250,000 8,208,750
Empresas La Moderna, SA,
10.250%, 11/12/97............................ 2,000,000 1,980,000
Financiera Energetica Nacional,
6.625%, 12/13/96............................. 5,100,000 5,100,000
Financiera Energetica Nacional, M.T.N.,
9.000%, 11/08/99............................. 2,000,000 2,097,500
**9.000%, 11/08/99........................... 5,375,000 5,637,031
Fomento Economico Mexicano, SA,
9.500%, 07/22/97............................. 6,300,000 6,244,875
Grupo Embotellador Mexicana,
**10.750%, 11/19/97.......................... 8,020,000 7,999,950
Grupo Televisa, SA,
10.000%, 11/09/97............................ 4,000,000 3,920,000
Hydro-Quebec,
8.050%, 07/07/24............................. 17,100,000 19,524,096

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Kansallis-Osake Pankki, N.Y.,
**[]8.650%, 12/29/49......................... $ 9,000,000 $ 9,562,500
9.750%, 12/15/98............................. 16,760,000 18,526,001
New Zealand Government,
9.875%, 01/15/11............................. 7,300,000 9,746,814
Quebec, Province of Canada,
7.500%, 07/15/02............................. 8,500,000 9,025,045
Republic of Columbia,
7.125%, 05/11/98............................. 2,700,000 2,720,250
7.250%, 02/23/04............................. 4,100,000 3,932,884
8.750%, 10/06/99............................. 4,925,000 5,206,316
Republic of Italy,
6.875%, 09/27/23............................. 15,000,000 14,648,250
Republic of South Africa,
9.625%, 12/15/99............................. 21,750,000 23,458,898
Telekom Malaysia,
**7.875%, 08/01/25........................... 3,000,000 3,294,480
United Mexican States,
5.820%, 06/28/01............................. 1,375,000 990,000
6.970%, 08/12/00............................. 2,300,000 1,840,000
8.500%, 09/15/02............................. 6,925,000 6,024,750
--------------
217,403,140
--------------
INDUSTRIAL -- 13.3%
AMR Corp.,
9.000%, 08/01/12............................. 5,000,000 5,638,850
9.800%, 10/01/21............................. 5,000,000 5,944,000
Auburn Hills Trust,
12.000%, 05/01/20............................ 26,300,000 41,389,888
Columbia Gas Systems,
7.620%, 11/28/25............................. 6,500,000 6,616,935
Columbia/HCA Healthcare Corp.,
7.050%, 12/01/27............................. 21,200,000 21,339,284
7.580%, 09/15/25, M.T.N., Tranche #TR00015... 10,000,000 10,723,200
Comdisco, Inc.,
7.250%, 04/15/98............................. 10,000,000 10,296,800
Continental Cablevision, Inc.,
**8.300%, 05/15/06........................... 5,000,000 5,018,750
Delta Air Lines, Inc.,
9.250%, 03/15/22............................. 8,709,000 10,287,506
9.750%, 05/15/21............................. 34,956,000 43,126,266
9.875%, 01/01/98............................. 6,000,000 6,400,080
Federated Dept Stores,
8.125%, 10/15/02............................. 30,600,000 30,753,000
Fleming Companies, Inc, M.T.N.,
9.125%, 02/27/98, Tranche #TR00018........... 6,000,000 6,259,800
9.240%, 02/28/00, Tranche #TR00019........... 5,000,000 5,367,700
Fleming Companies, Inc.,
10.625%, 12/15/01............................ 22,750,000 22,067,500
Nabisco, Inc.,
6.850%, 06/15/05............................. 10,000,000 10,156,000
News America Holdings, Inc.,
7.750%, 12/01/45............................. 53,000,000 53,685,820
9.125%, 10/15/99............................. 5,000,000 5,526,900
Oryx Energy Co.,
9.300%, 05/01/96............................. 2,350,000 2,372,866
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013........... 10,500,000 10,496,850
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01............................. 7,600,000 8,518,004

B17

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
RJR Nabisco, Inc.,
8.750%, 08/15/05............................. $ 3,000,000 $ 3,072,930
Rogers Cablesystems Ltd.,
10.000%, 03/15/05, Series B.................. 2,000,000 2,150,000
Service Corp. International,
7.000%, 06/01/15............................. 2,500,000 2,785,575
TCI Communications, Inc.,
8.750%, 08/01/15............................. 27,050,000 29,989,524
Tele-Communications, Inc.,
7.875%, 08/01/13............................. 5,250,000 5,399,678
9.250%, 04/15/02............................. 5,000,000 5,680,900
9.800%, 02/01/12............................. 13,000,000 15,589,210
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23-07/15/33.................... 28,250,000 30,234,433
Time Warner Entertainment Co., L.P.,
9.625%, 05/01/02............................. 14,140,000 16,379,352
Time Warner, Inc.,
7.750%, 06/15/05............................. 10,000,000 10,410,300
Transco Energy Co.,
9.125%, 05/01/98............................. 14,000,000 14,958,440
United Air Lines, Inc.,
9.750%, 08/15/21............................. 13,000,000 15,594,410
10.670%, 05/01/04, Series A.................. 21,750,000 26,236,590
11.210%, 05/01/14, Series B.................. 2,500,000 3,309,125
Viacom, Inc.,
7.625%, 01/15/16............................. 15,500,000 15,684,063
7.750%, 06/01/05............................. 40,675,000 43,195,630
Woolworth Corp,
7.000%, 06/01/00............................. 2,084,000 2,120,637
--------------
564,776,796
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.9%
Federal National Mortgage Association,
Zero Coupon, 10/09/19........................ 11,800,000 2,546,204
United States Treasury Notes,
5.875%, 08/15/98-11/15/05, Series Y 1998..... 14,200,000 14,445,580
6.125%, 09/30/00............................. 3,500,000 3,605,000
6.375%, 08/15/02, Series 2002................ 17,000,000 17,826,030
6.500%, 05/15/05............................. 1,450,000 1,542,670
--------------
39,965,484
--------------
TOTAL LONG-TERM BONDS
(Cost $1,083,162,024)......................................... 1,122,810,984
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 11.9% AMOUNT VALUE
------------- --------------
BANK-RELATED INSTRUMENTS -- 0.5%
Abbey National Treasury Services, C.D. PLC,
5.850%, 01/03/96............................. $ 5,000,000 $ 5,000,001
Abn-Amro Bank North America, C.D.,
5.770%, 02/01/96............................. 1,000,000 999,969
Banque Nationale De Paris, C.D.,
5.780%, 01/17/96............................. 2,000,000 1,999,978
Barclays Bank PLC, C.D.,
5.700%, 02/13/96............................. 1,000,000 999,872
Bayerische Hypotheken, C.D.,
5.780%, 01/16/96............................. 1,000,000 999,983
5.800%, 01/16/96............................. 2,000,000 1,999,995
5.830%, 01/16/96............................. 3,000,000 3,000,023

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
Berliner Handels, C.D.,
5.830%, 01/16/96............................. $ 2,000,000 $ 2,000,008
National Westminister Bank, C.D. PLC,
5.810%, 01/12/96............................. 4,000,000 4,000,000
--------------
20,999,829
--------------
COMMERCIAL PAPER -- 1.8%
American Express Credit Corp.,
5.590%, 03/15/96............................. 1,000,000 988,665
American Home Products Corp.,
5.680%, 03/07/96............................. 2,000,000 1,979,489
American Honda Finance Corp.,
5.750%, 02/08/96............................. 1,000,000 994,090
5.850%, 01/12/96............................. 1,000,000 998,375
5.900%, 01/29/96............................. 1,000,000 995,575
Aristar, Inc.,
5.770%, 02/05/96............................. 1,000,000 994,551
Asset Securitization Cooperative Corp.,
5.660%, 02/20/96............................. 3,000,000 2,976,888
Associates Corp. of North America,
5.680%, 02/12/96............................. 1,700,000 1,689,003
Bradford & Bingley Building Society,
5.680%, 02/06/96............................. 1,000,000 994,478
Caterpillar Financial Services Corp.,
5.670%, 02/27/96............................. 1,000,000 991,180
Chase Manhattan Corp.,
5.670%, 02/12/96............................. 1,000,000 993,543
CIT Group Holdings, Inc.,
5.670%, 02/05/96............................. 4,000,000 3,978,580
5.780%, 01/25/96............................. 2,019,000 2,011,544
Cogentrix of Richmond, Inc.,
5.950%, 01/24/96............................. 1,869,000 1,862,204
Countrywide Funding Corp.,
5.870%, 01/22/96............................. 1,000,000 996,739
6.000%, 01/22/96............................. 1,182,000 1,178,060
Dean Witter Discover and Company,
5.700%, 02/14/96............................. 1,000,000 993,192
Finova Capital Corp.,
5.970%, 01/25/96-01/26/96.................... 1,640,000 1,633,575
First Union Corp.,
5.710%, 02/09/96............................. 2,000,000 1,987,946
Fleet Mortgage Group, Inc.,
5.800%, 01/16/96............................. 1,000,000 997,744
Ford Motor Credit Corp.,
5.530%, 03/04/96............................. 1,600,000 1,584,762
General Electric Capital Corp.,
5.580%, 04/08/96-04/09/96.................... 2,000,000 1,969,775
5.660%, 02/08/96............................. 4,000,000 3,976,731
General Motors Acceptance Corp.,
5.650%, 02/09/96............................. 1,232,000 1,224,652
5.750%, 02/20/96............................. 1,000,000 992,174
5.800%, 02/09/96............................. 2,000,000 1,987,756
Goldman Sachs Group L.P,
6.050%, 01/11/96-01/12/96.................... 2,000,000 1,996,807
GTE Corp.,
5.870%, 01/19/96............................. 1,000,000 997,228
5.970%, 01/30/96............................. 1,009,000 1,004,315
Hanson Finance, PLC,
5.650%, 02/29/96............................. 1,565,000 1,550,754
5.700%, 01/26/96-02/08/96.................... 3,265,000 3,249,110
Merrill Lynch & Co. Inc,
5.760%, 01/31/96............................. 2,000,000 1,990,720

B18

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
Mitsubishi International Corp.,
5.780%, 01/31/96............................. $ 1,000,000 $ 995,344
Morgan Stanley Group, Inc.,
5.750%, 01/25/96............................. 5,000,000 4,981,632
National Westminister Bank, PLC,
5.800%, 01/31/96............................. 1,000,000 1,000,000
Nynex Corp,
5.820%, 01/10/96-01/16/96.................... 1,847,000 1,843,790
PNC Funding Corp,
5.730%, 02/08/96............................. 1,000,000 994,111
Preferred Receivables Funding Corp.,
5.650%, 02/06/96............................. 5,000,000 4,972,535
5.700%, 02/12/96............................. 1,650,000 1,639,289
Riverwoods Funding Corp,
5.750%, 02/15/96............................. 1,000,000 992,972
Sears Roebuck Acceptance Corp.,
5.720%, 02/26/96............................. 4,000,000 3,965,044
Special Purpose A/R Cooperative Corp,
5.750%, 01/24/96............................. 1,000,000 996,486
Transamerica Finance Group, Inc.,
5.700%, 02/05/96............................. 1,000,000 994,617
Whirlpool Corp.,
5.710%, 03/04/96............................. 1,028,000 1,017,891
--------------
77,153,916
--------------
TERM NOTES -- 1.6%
Associates Corp. of North America,
4.500%, 02/15/96............................. 3,200,000 3,191,504
8.800%, 03/01/96............................. 2,000,000 2,007,278
Bank One Indianapolis N.A.,
7.180%, 02/05/96, Tranche #TR00002........... 1,000,000 1,000,365
First Union National Bank of North Carolina,
5.800%, 01/31/96, Tranche #TR00037........... 2,000,000 2,000,000
Ford Motor Credit Co.,
5.150%, 03/15/96, Tranche #TR00690........... 2,000,000 1,994,761
[]6.082%, 06/17/96, Tranche #TR00826......... 1,000,000 1,001,128
8.250%, 05/15/96............................. 2,300,000 2,320,274
General Motors Acceptance Corp.,
5.300%, 07/12/96, Tranche #TR00760........... 1,500,000 1,495,485
[]5.700%, 10/20/97, Tranche #TR00065......... 1,000,000 999,553
Merrill Lynch & Co., Inc.,
[]5.929%, 09/13/96, Tranche #TR00197......... 4,000,000 3,999,189
NationsBank of Texas N.A.,
7.000%, 02/06/96, Tranche #TR00050........... 9,000,000 9,000,391
Salomon, Inc.,
[]6.725%, 02/14/96........................... 25,000,000 25,000,000
SMM Trust,
[]5.937%, 12/16/96........................... 6,375,000 6,374,423
USX Corp.,
6.562%, 02/15/96............................. 7,500,000 7,502,619
--------------
67,886,970
--------------

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
PROMISSORY NOTES -- 0.0%
Lehman Brothers Holdings, Inc.,
6.142%, 05/29/96............................. $ 1,000,000 $ 1,000,000
--------------
REPURCHASE AGREEMENTS -- 7.9%
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (See Note 4)................ 335,658,000 335,658,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
Student Loan Marketing Association,
[]5.400%, 03/20/96........................... 3,455,000 3,454,967
--------------
TOTAL SHORT-TERM INVESTMENTS.................................... 506,153,682
--------------
OTHER ASSETS -- 0.8%
(net of liabilities).......................................... 32,846,117
--------------
TOTAL NET ASSETS -- 100.0%...................................... $4,261,204,837
--------------
--------------

The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
C.D. Certificates of Deposit
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 $72,616,786. The aggregate value, $72,915,086 is
approximately 1.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

[]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B19

<PAGE>

HIGH YIELD BOND PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 0.1% SHARES VALUE
------------- --------------

BEVERAGES -- 0.0%
**+Dr. Pepper Bottling Holdings, Inc.
(Class 'B'Stock)............................. 5,807 $ 20,325
--------------
CONTAINERS -- 0.0%
+Gaylord Container Corp. (Class 'A' Stock)..... 9,301 74,989
--------------
FINANCIAL SERVICES -- 0.0%
**+PM Holdings Corp............................ 1,103 0
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.1%
**Sam Houston Race Park, Ltd., Equity.......... 149 200,000
--------------
RETAIL -- 0.0%
**+Loehmann's Holdings, Inc.................... 19,708 24,635
--------------
TOTAL COMMON STOCKS
(Cost $513,891)............................................... 319,949
--------------

MARKET
PREFERRED STOCKS -- 1.2% SHARES VALUE
------------- --------------

BANKS AND SAVINGS & LOANS -- 0.5%
**Riggs National Corp., Series B............... 75,000 2,081,250
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.7%
o Harvard Industries, Inc. (Cum. Ex.).......... 47,701 1,267,058
o PNP Prime Corp. (Cum. Ex.)................... 82,384 0
o Supermarkets General Holdings Corp. (Ex.).... 45,645 1,141,125
--------------
2,408,183
--------------
RETAIL -- 0.0%
Color Tile, Inc................................ 10,000 10,000
**oGrand Union Holdings Corp., Series C
(Cum.)....................................... 9,000 0
--------------
10,000
--------------
TOTAL PREFERRED STOCKS
(Cost $8,319,552)............................................. 4,499,433
--------------

MARKET
RIGHTS AND WARRANTS -- 0.1% SHARES VALUE
------------- --------------

COMMUNICATIONS -- 0.0%
**++American Telecasting (Warrants)............ 6,500 0
++Clearnet Communications, Inc. (Warrants)..... 6,732 0
**++Dial Call Communications, Inc. (Warrants).. 1,543 15
++Dial Call Communications, Inc. (Warrants).... 2,250 22
--------------
37
--------------
HOUSING RELATED -- 0.0%
++Miles Homes, Inc. (Warrants)................. 15,000 150
--------------
LEISURE -- 0.0%
++Casino America, Inc. (Warrants).............. 6,526 20
**++Casino Magic Corp. (Warrants).............. 10,500 105
++Cellular Communications International Inc.
(Warrants)................................... 4,375 0
**++Fitzgeralds Gaming Corp. (Warrant)......... 500 5,000
**++Louisiana Casino Cruise, Inc. (Warrants)... 4,200 0
++President Casinos Inc. (Warrants)............ 15,000 7,500
++President Casinos, Inc. (Warrants)........... 22,075 11,038
++Sam Houston Race Park, Ltd. (Warrants)....... 4,000 20,000
--------------
43,663
--------------
MACHINERY -- 0.0%
**++Terex Corp. (Rights)....................... 8,000 0
--------------

DECEMBER 31, 1995

MARKET
RIGHTS AND WARRANTS (CONTINUED) SHARES VALUE
------------- --------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.1%
++CellNet Data System, Inc. (Warrants)......... 17,000 $ 0
++Foamex - JPS Automotive, L.P. (Warrants)..... 2,000 10,000
++Gaylord Container (Warrants)................. 11,958 89,685
**++Pagemart Nationwide, Inc. (Warrants)....... 13,125 123,047
--------------
222,732
--------------
TELECOMMUNICATIONS -- 0.0%
++IntelCom Group, Inc. (Warrants).............. 20,790 103,950
**++Pagemart, Inc. (Warrants).................. 9,200 55,200
--------------
159,150
--------------
UTILITY - COMMUNICATIONS -- 0.0%
**++Intermedia Communications of Florida, Inc.
(Warrants)................................... 3,000 0
--------------
TOTAL RIGHTS AND WARRANTS
(Cost $61,218)................................................ 425,732
--------------

PAR MARKET
LONG-TERM BONDS -- 93.9% VALUE VALUE
------------- --------------
FINANCIAL -- 3.2%
Empress River Casino Finance Corp.,
10.750%, 04/01/02............................ $ 4,500,000 $ 4,646,250
Indah Kiat International Finance Co.,
12.500%, 06/15/06............................ 3,000,000 2,970,000
*PM Holdings Corp.,
Zero Coupon, 09/01/05, Series B.............. 2,981,000 1,565,025
PSF Finance, L.P.,
12.250%, 06/15/04............................ 1,000,000 920,000
Reliance Group Holdings, Inc.,
9.750%, 11/15/03............................. 1,500,000 1,545,000
--------------
11,646,275
--------------
FOREIGN -- 0.8%
*Diamond Cable Communications Co., PLC,
13.250%, 09/30/04............................ 2,000,000 1,410,000
*Videotron Holdings, PLC,
Zero Coupon, 07/01/04........................ 2,175,000 1,517,063
--------------
2,927,063
--------------
INDUSTRIAL -- 89.5%
*American Standard, Inc.,
Zero Coupon, 06/01/05........................ 5,000,000 4,287,500
American Telecasting,
*Zero Coupon, 06/15/04....................... 3,000,000 2,062,500
* **Zero Coupon, 08/15/05...................... 6,500,000 4,103,125
'Anacomp, Inc.,
15.000%, 11/01/00............................ 3,118,000 2,182,600
*Apparel Retailers, Inc.,
Zero Coupon, 08/15/05, Series B.............. 4,000,000 2,440,000
Applied Extrusion Technologies, Inc.,
11.500%, 04/01/02, Series B.................. 1,700,000 1,827,500
Bally's Park Place Funding, Inc.,
9.250%, 03/15/04............................. 5,500,000 5,596,250
Benedek Broadcasting Corp.,
11.875%, 03/01/05............................ 2,800,000 2,975,000
Big Flower Press, Inc.,
10.750%, 08/01/03............................ 1,334,000 1,420,710
Boyd Gaming Corp., Series B
10.750%, 09/01/03............................ 5,500,000 5,802,500
Bruno's Inc.,
10.500%, 08/01/05............................ 2,000,000 1,980,000
*Building Materials Corp. of America,
Zero Coupon, 07/01/04, Series B.............. 5,000,000 3,400,000

B20

<PAGE>

HIGH YIELD BOND PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Cablevision Systems Corp.,
9.250%, 11/01/05............................. $ 3,575,000 $ 3,735,875
9.875%, 02/15/13............................. 1,300,000 1,381,250
10.750%, 04/01/04............................ 1,000,000 1,055,000
CAI Wireless Systems Inc.,
12.250%, 09/15/02............................ 3,000,000 3,225,000
Casino America, Inc.,
11.500%, 11/15/01............................ 4,225,000 3,908,125
*CellNet Data System, Inc.,
Zero Coupon, 06/15/05........................ 4,250,000 2,550,000
*Cellular Communications International Inc.,
Zero Coupon, 08/15/00........................ 4,375,000 2,690,625
*Cencall Communications Corp.,
Zero Coupon, 01/15/04........................ 2,625,000 1,483,125
Centennial Cellular Corp.,
10.125%, 05/15/05............................ 4,500,000 4,736,250
Chancellor Broadcasting Co.,
12.500%, 10/01/04............................ 1,600,000 1,708,000
Clark R & M Holdings, Inc.,
Zero Coupon, 02/15/00........................ 1,500,000 995,625
**Clark USA Inc.,
10.875%, 12/01/05............................ 1,875,000 1,968,750
Clean Harbors, Inc.,
12.500%, 05/15/01............................ 200,000 90,000
*Clearnet Communications,
Zero Coupon, 12/15/05........................ 2,040,000 1,065,900
Comcast Cellular,
Zero Coupon, 03/05/00, Series B.............. 4,000,000 3,080,000
Comcast Corp.,
9.125%, 10/15/06............................. 1,500,000 1,563,750
9.375%, 05/15/05............................. 5,000,000 5,287,500
*Comcast UK Cable,
Zero Coupon, 11/15/07........................ 2,500,000 1,462,500
Continental Cablevision, Inc.,
**8.300%, 05/15/06........................... 1,000,000 1,003,750
9.500%, 08/01/13............................. 7,000,000 7,525,000
**+X+Del Monte Corp.,
12.250%, 09/01/02............................ 2,689,000 2,124,310
Dial Call Communications, Inc.,
*Zero Coupon, 04/15/04....................... 2,250,000 1,282,500
* **Zero Coupon, 12/15/05, Series B............ 1,000,000 530,000
*Diamond Cable Communications Co., PLC,
Zero Coupon, 12/15/05........................ 3,500,000 2,056,250
Dictaphone Corp,
11.750%, 08/01/05............................ 3,350,000 3,316,500
Dominick's Finer Foods, Inc.,
10.875%, 05/01/05............................ 2,250,000 2,390,625
Exide Corp.,
*Zero Coupon, 12/15/04....................... 2,000,000 1,690,000
10.000%, 04/15/05............................ 2,750,000 2,983,750
Fairchild Industries, Inc.,
12.250%, 02/01/99............................ 2,340,000 2,480,400
Falcon Drilling Co. Inc.,
9.750%, 01/15/01, Series B................... 1,500,000 1,541,250
12.500%, 03/15/05, Series B.................. 2,500,000 2,737,500
+X+Falcon Holdings Group, L.P.,
11.000%, 09/15/03............................ 3,311,058 3,162,061
Foamex, L.P.,
11.250%, 10/01/02............................ 1,500,000 1,500,000
11.875%, 10/01/04............................ 500,000 490,000
*Foamex - JPS Automotive, L.P.,
Zero Coupon, 07/01/04, Series B.............. 2,000,000 1,120,000
*Food 4 Less Inc.,
Zero Coupon, 07/15/05, Series B.............. 1,900,000 902,500
Fresh Del Monte Produce,
10.000%, 05/01/03, Series B.................. 3,000,000 2,700,000
G-I Holdings, Inc.,
Zero Coupon, 10/01/98, Series B.............. 4,200,000 3,244,500

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
*Gaylord Container Corp.,
Zero Coupon, 05/15/05........................ $ 2,615,000 $ 2,562,700
11.500%, 05/15/01............................ 500,000 515,000
*Geotek Communication Inc.,
Zero Coupon, 07/15/05, Series B.............. 3,000,000 1,425,000
Grand Casinos Inc.,
10.125%, 12/01/03............................ 2,800,000 2,936,500
* **GST Telecommunications, Inc.,
Zero Coupon, 12/15/05........................ 4,860,000 2,308,500
Gulf Canada Resources, Ltd.,
9.625%, 07/01/05............................. 4,000,000 4,220,000
Harvard Industries, Inc.,
11.125%, 08/01/05............................ 750,000 750,000
12.000%, 07/15/04............................ 1,125,000 1,184,063
Herff Jones Inc.,
11.000%, 08/15/05............................ 3,500,000 3,745,000
**HMC Acquisition Properties,
9.000%, 12/15/07............................. 5,500,000 5,555,000
HMH Properties, Inc.,
9.500%, 05/15/05, Series B................... 3,550,000 3,629,875
Hollywood Casino Corp.,
12.750%, 11/01/03............................ 1,500,000 1,361,250
Horsehead Industries, Inc.,
14.000%, 06/01/99............................ 2,000,000 2,093,400
Host Marriott Travel Plaza,
9.500%, 05/15/05, Series B................... 5,000,000 4,950,000
Imo Industries, Inc.,
12.000%, 11/01/01............................ 1,500,000 1,530,000
*Indspec Chemical Corp.,
Zero Coupon, 12/01/03, Class B............... 2,500,000 2,087,500
*IntelCom Group (USA), Inc.,
Zero Coupon, 09/15/05........................ 6,300,000 3,654,000
Interlake Corp.,
12.000%, 11/15/01............................ 2,260,000 2,282,600
12.125%, 03/01/02............................ 1,865,000 1,771,750
Intermedia Communications of Florida, Inc.,
13.500%, 06/01/05, Series B.................. 3,000,000 3,345,000
International Cabletel, Inc.,
*Zero Coupon, 04/15/05, Series A............. 4,350,000 2,751,375
*Zero Coupon, 10/15/03....................... 1,500,000 1,080,000
Jones Intercable, Inc.,
10.500%, 03/01/08............................ 2,000,000 2,190,000
11.500%, 07/15/04............................ 1,250,000 1,387,500
JPS Automotive Products Corp.,
11.125%, 06/15/01............................ 2,250,000 2,238,750
K & F Industries, Inc.,
11.875%, 12/01/03............................ 1,500,000 1,612,500
13.750%, 08/01/01............................ 778,000 807,175
Kaiser Aluminum & Chemical Corp.,
9.875%, 02/15/02............................. 4,190,000 4,305,225
Lenfest Communications Inc.,
8.375%, 11/01/05............................. 3,000,000 3,011,250
Louisiana Casino Cruises, Inc.,
11.500%, 12/01/98............................ 1,400,000 1,309,000
*Marcus Cable Operating Co., L.P.,
Zero Coupon, 08/01/04........................ 5,750,000 4,326,875
*Maxxam Group, Inc.,
Zero Coupon, 08/01/03........................ 2,500,000 1,712,500
Metrocall Inc.,
10.375%, 10/01/07............................ 4,500,000 4,770,000
*MFS Communications Company, Inc.,
Zero Coupon, 01/15/04........................ 6,500,000 5,248,750
Miles Homes Services, Inc.,
12.000%, 04/01/01............................ 1,250,000 925,000
MobileMedia Corp.,
9.375%, 11/01/07............................. 3,500,000 3,605,000
**Mohegan Tribal Gaming,
13.500%, 11/15/02............................ 2,000,000 2,160,000

B21

<PAGE>

HIGH YIELD BOND PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Motor Wheel Corp.,
11.500%, 03/01/00, Series B.................. $ 2,500,000 $ 2,200,000
NewCity Communications, Inc.,
11.375%, 11/01/03............................ 2,250,000 2,070,000
Newflo Corp.,
13.250%, 11/15/02............................ 1,500,000 1,560,000
*Nextel Communications, Inc.,
Zero Coupon, 09/01/03-08/15/04............... 3,525,000 2,144,187
*Pagemart Nationwide, Inc.,
Zero Coupon, 02/01/05........................ 6,500,000 4,257,500
*Pagemart, Inc.,
Zero Coupon, 11/01/03........................ 2,000,000 1,485,000
Paging Network, Inc.,
10.125%, 08/01/07............................ 5,250,000 5,683,125
Pathmark Stores, Inc.,
11.625%, 06/15/02............................ 2,500,000 2,506,250
Penn Traffic Co.,
10.375%, 10/01/04............................ 2,880,000 2,721,600
10.650%, 11/01/04............................ 3,150,000 3,008,250
Petroleum Heat & Power Company, Inc.,
9.375%, 02/01/06............................. 2,000,000 1,920,000
12.250%, 02/01/05............................ 1,250,000 1,378,125
Pilgrim's Pride Corp.,
10.875%, 08/01/03............................ 1,835,000 1,623,975
*Pricecellular Wireless CRP,
Zero Coupon, 10/01/03........................ 4,490,000 3,468,525
Ralph's Grocery Co., Inc.,
10.450%, 06/15/04............................ 1,450,000 1,471,750
* **Remington Arms Co.,
10.00%, 12/01/03............................. 1,000,000 830,000
Repap New Brunswick, Inc.,
9.875%, 07/15/00............................. 2,100,000 2,079,000
Republic Engineered Steel, Inc.,
9.875%, 12/15/01............................. 2,000,000 1,800,000
Revlon Consumer Products Corp.,
9.375%, 04/01/01............................. 3,000,000 3,037,500
Revlon Worldwide Corp.,
Zero Coupon, 03/15/98, Series B.............. 3,500,000 2,598,750
Rogers Cablesystems Ltd.,
10.000%, 03/15/05-12/01/07, Series B......... 5,250,000 5,646,250
++Sam Houston Race Park, Ltd.,
11.000%, 07/15/99............................ 504,736 200,000
Sinclair Broadcast Group,
10.000%, 09/30/05............................ 2,450,000 2,505,125
Specialty Retailers, Inc., Series B,
11.000%, 08/15/03............................ 1,500,000 1,365,000
SPX Corp.,
11.750%, 06/01/02............................ 2,500,000 2,650,000
Stone Consolidated Corp.,
10.250%, 12/15/00............................ 3,500,000 3,745,000
Stone Container Corp.,
10.750%, 10/01/02............................ 1,500,000 1,548,750
12.625%, 07/15/98............................ 1,500,000 1,582,500
*Talley Industries, Inc.,
Zero Coupon, 10/15/05........................ 2,500,000 1,843,750
*Telewest PLC,
Zero Coupon, 10/01/07........................ 9,025,000 5,448,843
Tenet Healthcare Corp.,
8.625%, 12/01/03............................. 2,500,000 2,625,000
10.125%, 03/01/05............................ 4,500,000 5,006,250
**Terex Corp.,
13.750%, 05/15/02............................ 2,000,000 1,750,000
Terra Industries, Inc.,
10.500%, 06/15/05, Series B.................. 2,500,000 2,756,250
Trism, Inc.,
10.750%, 12/15/00............................ 2,150,000 2,117,750
*Triton Energy Corp.,
Zero Coupon, 12/15/00........................ 2,000,000 1,885,000
+X+Trump Taj Mahal Funding, Inc.,
11.350%, 11/15/99, Series A.................. 5,120,000 4,928,000

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
United International Holdings, Inc.,
Zero Coupon, 11/15/99, Series B.............. $ 1,750,000 $ 1,093,750
United Stationer Supply,
12.750%, 05/01/05............................ 3,500,000 3,823,750
*Videotron Holdings PLC,
Zero Coupon, 08/15/05........................ 3,200,000 1,984,000
Waters Corp.,
12.750%, 09/30/04, Series B.................. 1,715,000 1,920,800
Westpoint Stevens, Inc.,
9.375%, 12/15/05............................. 1,500,000 1,481,250
* **Winstar Communications, Inc.,
Zero Coupon, 10/15/05........................ 6,825,000 3,605,647
--------------
329,550,096
--------------
UTILITIES -- 0.4%
*California Energy Co., Inc.,
Zero Coupon, 01/15/04........................ 1,500,000 1,417,500
--------------
TOTAL LONG-TERM BONDS
(Cost $335,172,296)........................................... 345,540,934
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 2.9% AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.839%, 01/02/96 (see Note 4)................ $ 10,502,000 10,502,000
--------------
OTHER ASSETS -- 1.8%
(net of liabilities).......................................... 6,621,339
--------------
TOTAL NET ASSETS -- 100.0%...................................... $ 367,909,387
--------------
--------------

The following abbreviations are used in portfolio descriptions:

L.P. Limited Partnership

PLC Public Limited Company (British 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 $29,810,655. The aggregate value, $28,448,659 is
approximately 7.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

++Non-income producing.

[Payment-in-kind preferred stock--dividend is paid in additional preferred
shares in lieu of cash.

+X+Payment-in-kind bonds--interest is paid in additional bonds in lieu of
cash.

'Bond is currently in default.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

B22

<PAGE>

STOCK INDEX PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 96.1% SHARES VALUE
------------- --------------
AEROSPACE -- 2.3%
AlliedSignal, Inc.............................. 60,600 $ 2,878,500
Boeing Co...................................... 74,150 5,811,506
General Dynamics Corp.......................... 13,600 804,100
Lockheed Martin Corp........................... 42,849 3,385,071
Loral Corp..................................... 36,800 1,301,800
McDonnell Douglas Corp......................... 24,100 2,217,200
Northrop Grumman Corp.......................... 10,700 684,800
Raytheon Co.................................... 52,600 2,485,350
Rockwell International Corp.................... 46,200 2,442,825
United Technologies Corp....................... 26,700 2,533,163
--------------
24,544,315
--------------
AIRLINES -- 0.3%
+AMR Corp...................................... 16,800 1,247,400
Delta Air Lines, Inc........................... 11,000 812,625
Southwest Airlines Co.......................... 30,700 713,775
+USAir Group, Inc.............................. 16,100 213,325
--------------
2,987,125
--------------
ALUMINUM -- 0.4%
Alcan Aluminum, Ltd............................ 49,050 1,526,680
Aluminum Co. of America........................ 38,500 2,035,688
Reynolds Metals Co............................. 13,300 753,113
--------------
4,315,481
--------------
AUTOS - CARS & TRUCKS -- 2.3%
Chrysler Corp.................................. 82,100 4,546,288
Cummins Engine Co., Inc........................ 8,300 307,100
Dana Corp...................................... 21,500 628,875
Echlin, Inc.................................... 13,000 474,500
Ford Motor Co.................................. 232,000 6,728,000
General Motors Corp............................ 161,200 8,523,450
Genuine Parts Co............................... 26,650 1,092,650
Johnson Controls, Inc.......................... 8,700 598,125
+Navistar International Corp................... 14,500 152,250
Safety Kleen Corp.............................. 11,050 172,656
--------------
23,223,894
--------------
BANKS AND SAVINGS & LOANS -- 6.3%
Banc One Corp.................................. 84,822 3,202,030
Bank of Boston Corp............................ 24,200 1,119,250
Bank of New York Company, Inc.................. 43,000 2,096,250
BankAmerica Corp............................... 79,948 5,176,632
Bankers Trust NY Corp.......................... 16,500 1,097,250
Barnett Banks, Inc............................. 20,900 1,233,100
Boatmen's Bancshares, Inc...................... 28,800 1,177,200
Chase Manhattan Corp........................... 38,705 2,346,491
Chemical Banking Corp.......................... 53,682 3,153,817
Citicorp....................................... 91,100 6,126,475
Comerica, Inc.................................. 24,400 979,050
CoreStates Financial Corp...................... 30,200 1,143,825
First Bank System, Inc......................... 28,900 1,434,162
First Chicago NBD Corp......................... 68,115 2,690,543
First Fidelity Bancorp......................... 17,500 1,319,063
First Interstate Bancorp....................... 16,300 2,224,950
First Union Corp............................... 36,700 2,041,438
Fleet Financial Group, Inc..................... 55,100 2,245,325
Golden West Financial Corp..................... 12,200 674,050
Great Western Financial Corp................... 29,800 759,900
H.F. Ahmanson & Co............................. 25,000 662,500
J.P. Morgan & Co., Inc......................... 40,250 3,230,063
KeyCorp........................................ 51,000 1,848,750
Mellon Bank Corp............................... 31,350 1,685,063
NationsBank Corp............................... 58,139 4,047,928
Norwest Corp................................... 75,100 2,478,300

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
PNC Bank Corp.................................. 50,100 $ 1,615,725
Suntrust Banks, Inc............................ 24,400 1,671,400
U.S. Bancorp................................... 32,600 1,096,175
Wachovia Corp.................................. 36,400 1,665,300
Wells Fargo & Co............................... 10,400 2,246,400
--------------
64,488,405
--------------
BEVERAGES -- 3.6%
Adolph Coors Co. (Class 'B' Stock)............. 9,500 210,187
Anheuser-Busch Companies, Inc.................. 55,000 3,678,125
Brown-Forman Corp. (Class 'B' Stock)........... 15,300 558,450
Coca-Cola Co................................... 270,500 20,084,625
PepsiCo, Inc................................... 170,000 9,498,750
Seagram Co., Ltd............................... 79,900 2,766,538
--------------
36,796,675
--------------
CHEMICALS -- 2.4%
Air Products & Chemicals, Inc.................. 23,900 1,260,725
Dow Chemical Co................................ 57,600 4,053,600
E.I. du Pont de Nemours & Co................... 119,900 8,378,012
Eastman Chemical Co............................ 17,100 1,070,887
+FMC Corp...................................... 8,000 541,000
Hercules, Inc.................................. 24,100 1,358,638
Mallinckrodt Group, Inc........................ 17,300 629,288
Monsanto Co.................................... 24,900 3,050,250
Nalco Chemical Co.............................. 13,900 418,738
Rohm & Haas Co................................. 14,600 939,875
Sigma-Aldrich Corp............................. 10,600 524,700
Union Carbide Corp............................. 29,900 1,121,250
W.R. Grace & Co................................ 20,400 1,206,150
--------------
24,553,113
--------------
CHEMICALS - SPECIALTY -- 0.4%
Engelhard Corp................................. 31,375 682,406
Great Lakes Chemical Corp...................... 13,700 986,400
Morton International, Inc...................... 32,000 1,148,000
Praxair, Inc................................... 29,000 975,125
Raychem Corp................................... 9,500 540,313
--------------
4,332,244
--------------
COMMERCIAL SERVICES -- 0.5%
+CUC International, Inc........................ 38,350 1,308,694
Deluxe Corp.................................... 17,800 516,200
Dun & Bradstreet Corp.......................... 36,160 2,341,360
John H. Harland Co............................. 5,900 123,162
Moore Corp., Ltd............................... 22,800 424,650
Ogden Corp..................................... 11,000 235,125
--------------
4,949,191
--------------
COMPUTER SERVICES -- 3.8%
3Com Corp...................................... 24,000 1,119,000
+Amdahl Corp................................... 23,300 198,050
Autodesk, Inc.................................. 9,700 332,225
Automatic Data Processing, Inc................. 31,200 2,316,600
+Cabletron Systems, Inc........................ 15,300 1,239,300
+Ceridian Corp................................. 14,200 585,750
+Cisco Systems, Inc............................ 58,800 4,387,950
+COMPAQ Computer Corp.......................... 57,100 2,740,800
Computer Associates International, Inc......... 52,475 2,984,516
+Computer Sciences Corp........................ 11,900 835,975
First Data Corp................................ 48,000 3,210,000
+Intergraph Corp............................... 11,300 177,975
+Microsoft Corp................................ 128,300 11,258,325
+Novell, Inc................................... 81,400 1,159,950

B23

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
+Oracle Corp................................... 94,050 $ 3,985,369
+Silicon Graphics, Inc......................... 35,700 981,750
+Sun Microsystems, Inc......................... 41,000 1,870,625
+Tandem Computers, Inc......................... 24,900 264,562
--------------
39,648,722
--------------
CONSTRUCTION -- 0.2%
Fluor Corp..................................... 18,400 1,214,400
Foster Wheeler Corp............................ 9,000 382,500
Kaufman & Broad Home Corp...................... 6,366 94,694
Pulte Corp..................................... 5,900 198,388
--------------
1,889,982
--------------
CONTAINERS -- 0.1%
Ball Corp...................................... 6,300 173,250
Bemis Co., Inc................................. 11,400 292,125
+Crown Cork & Seal Co., Inc.................... 20,200 843,350
--------------
1,308,725
--------------
COSMETICS & SOAPS -- 2.2%
Alberto Culver Co. (Class 'B' Stock)........... 5,700 195,937
Avon Products, Inc............................. 14,400 1,085,400
Clorox Co...................................... 11,400 816,525
Colgate Palmolive Co........................... 31,300 2,198,825
Gillette Co.................................... 96,100 5,009,213
International Flavors & Fragrances, Inc........ 23,900 1,147,200
Procter & Gamble Co............................ 147,852 12,271,716
--------------
22,724,816
--------------
DIVERSIFIED GAS -- 0.2%
Ashland, Inc................................... 13,400 470,675
Coastal Corp................................... 22,400 834,400
Eastern Enterprises............................ 4,100 144,525
ENSERCH Corp................................... 14,400 234,000
NICOR, Inc..................................... 10,300 283,250
ONEOK, Inc..................................... 6,400 146,400
--------------
2,113,250
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 1.9%
Alco Standard Corp............................. 23,776 1,084,780
Avery Dennison Corp............................ 11,500 576,438
Honeywell, Inc................................. 27,700 1,346,912
International Business Machines Corp........... 122,800 11,266,900
Pitney Bowes, Inc.............................. 32,500 1,527,500
+Unisys Corp................................... 36,100 203,063
Xerox Corp..................................... 23,182 3,175,934
--------------
19,181,527
--------------
DRUGS AND HOSPITAL SUPPLIES -- 9.1%
Abbott Laboratories............................ 170,600 7,122,550
Allergan, Inc.................................. 13,500 438,750
+ALZA Corp..................................... 17,000 420,750
American Home Products Corp.................... 67,700 6,566,900
+Amgen, Inc.................................... 58,800 3,491,250
Bausch & Lomb, Inc............................. 12,300 487,387
Baxter International, Inc...................... 60,300 2,525,062
Becton, Dickinson & Co......................... 14,000 1,050,000
+Biomet, Inc................................... 26,100 466,537
+Boston Scientific Corp........................ 35,400 1,734,600
Bristol-Myers Squibb Co........................ 109,440 9,398,160
C.R. Bard, Inc................................. 12,800 412,800
Eli Lilly & Co................................. 118,800 6,682,500
Johnson & Johnson.............................. 139,700 11,961,813
Medtronic, Inc................................. 49,600 2,771,400
Merck & Co., Inc............................... 266,550 17,525,663

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
Pfizer, Inc.................................... 137,000 $ 8,631,000
+Pharmacia & Upjohn, Inc....................... 108,525 4,205,344
Schering-Plough Corp........................... 80,000 4,380,000
St. Jude Medical, Inc.......................... 15,000 645,000
United States Surgical Corp.................... 12,200 260,775
Warner-Lambert Co.............................. 28,900 2,806,913
--------------
93,985,154
--------------
ELECTRICAL EQUIPMENT -- 0.3%
+Applied Materials, Inc........................ 38,300 1,508,063
W.W. Grainger, Inc............................. 10,500 695,625
Westinghouse Electric Corp..................... 84,100 1,387,650
--------------
3,591,338
--------------
ELECTRONICS -- 4.2%
+Advanced Micro Devices, Inc................... 21,800 359,700
AMP, Inc....................................... 47,344 1,816,826
Apple Computer, Inc............................ 26,000 828,750
+Cray Research, Inc............................ 4,700 116,325
+Data General Corp............................. 9,000 123,750
+Digital Equipment Corp........................ 32,300 2,071,238
EG&G, Inc...................................... 11,800 286,150
Emerson Electric Co............................ 48,600 3,973,050
Harris Corp.................................... 8,100 442,462
Hewlett-Packard Co............................. 110,300 9,237,625
Intel Corp..................................... 179,200 10,169,600
+LSI Logic Corp................................ 27,000 884,250
Micron Technology, Inc......................... 44,400 1,759,350
Motorola, Inc.................................. 127,000 7,239,000
+National Semiconductor Corp................... 27,500 611,875
Perkin-Elmer Corp.............................. 9,300 351,075
Tandy Corp..................................... 14,965 621,048
Tektronix, Inc................................. 7,200 353,700
Texas Instruments, Inc......................... 40,400 2,090,700
Thomas & Betts Corp............................ 4,000 295,000
--------------
43,631,474
--------------
ENVIRONMENTAL SERVICES -- 0.1%
Laidlaw, Inc. (Class 'B' Stock)................ 61,800 633,450
--------------
FINANCIAL SERVICES -- 2.7%
American Express Co............................ 104,000 4,303,000
Beneficial Corp................................ 11,300 526,862
Dean Witter Discover and Company............... 36,345 1,708,215
Federal Home Loan Mortgage Corp................ 39,250 3,277,375
Federal National Mortgage Association.......... 58,900 7,310,962
H & R Block, Inc............................... 22,600 915,300
Household International , Inc.................. 21,300 1,259,362
MBNA Corp...................................... 32,300 1,191,063
Merrill Lynch & Co., Inc....................... 38,100 1,943,100
Morgan Stanley Group, Inc...................... 16,500 1,330,313
National City Corp............................. 32,400 1,073,250
Republic New York Corp......................... 12,300 764,138
Salomon, Inc................................... 22,800 809,400
Transamerica Corp.............................. 14,800 1,078,550
--------------
27,490,890
--------------
FOODS -- 4.4%
Archer-Daniels-Midland Co...................... 115,722 2,082,996
Campbell Soup Co............................... 53,500 3,210,000
ConAgra, Inc................................... 51,900 2,140,875
CPC International, Inc......................... 31,400 2,154,825
Fleming Companies, Inc......................... 7,400 152,625
General Mills, Inc............................. 34,000 1,963,500
Giant Food, Inc. (Class 'A' Stock)............. 12,200 384,300
H.J. Heinz & Co................................ 78,650 2,605,281

B24

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
Hershey Foods Corp............................. 17,600 $ 1,144,000
Kellogg Co..................................... 47,100 3,638,475
Philip Morris Companies, Inc................... 181,200 16,398,600
Pioneer Hi-Bred International, Inc............. 18,300 1,017,937
Quaker Oats Co................................. 28,400 979,800
Ralston-Ralston Purina Group................... 22,940 1,430,883
Sara Lee Corp.................................. 104,000 3,315,000
Sysco Corp..................................... 38,900 1,264,250
W. M. Wrigley, Jr. Co.......................... 24,900 1,307,250
--------------
45,190,597
--------------
FOREST PRODUCTS -- 1.6%
Boise Cascade Corp............................. 9,886 342,302
Champion International Corp.................... 21,100 886,200
Federal Paper Board Co., Inc................... 10,400 539,500
Georgia-Pacific Corp........................... 19,300 1,324,462
International Paper Co......................... 54,600 2,067,975
James River Corp. of Virginia.................. 18,500 446,313
Kimberly-Clark Corp............................ 60,194 4,981,054
Louisiana-Pacific Corp......................... 24,200 586,850
Mead Corp...................................... 11,700 611,325
Potlatch Corp.................................. 5,800 232,000
Stone Container Corp........................... 21,566 310,011
Temple Inland, Inc............................. 12,100 533,913
Union Camp Corp................................ 15,200 723,900
Westvaco Corp.................................. 21,300 591,075
Weyerhaeuser Co................................ 43,700 1,890,025
Willamette Industries, Inc..................... 12,000 675,000
--------------
16,741,905
--------------
GAS PIPELINES -- 0.6%
+Columbia Gas System, Inc...................... 10,700 469,462
Consolidated Natural Gas Co.................... 19,900 902,962
Enron Corp..................................... 54,000 2,058,750
NorAm Energy Corp.............................. 29,700 263,588
Panhandle Eastern Corp......................... 33,190 925,171
Peoples Energy Corp............................ 7,900 250,825
Williams Companies, Inc........................ 22,100 969,638
--------------
5,840,396
--------------
HOSPITAL MANAGEMENT -- 0.8%
+Beverly Enterprises, Inc...................... 20,200 214,625
Columbia/HCA Healthcare Corp................... 95,632 4,853,324
Community Psychiatric Centers.................. 7,900 96,775
+Humana, Inc................................... 34,400 941,700
Manor Care, Inc................................ 13,050 456,750
Service Corp. International.................... 22,900 1,007,600
Shared Medical Systems Corp.................... 4,700 255,563
+Tenet Healthcare Corp......................... 43,500 902,625
--------------
8,728,962
--------------
HOUSING RELATED -- 0.5%
Armstrong World Industries, Inc................ 7,800 483,600
Centex Corp.................................... 6,000 208,500
Fleetwood Enterprises, Inc..................... 9,600 247,200
Lowe's Companies, Inc.......................... 34,900 1,169,150
Masco Corp..................................... 34,300 1,076,163
Maytag Corp.................................... 23,000 465,750
+Owens-Corning Fiberglas Corp.................. 11,800 529,525
Stanley Works.................................. 9,500 489,250
Whirlpool Corp................................. 16,400 873,300
--------------
5,542,438
--------------
INSURANCE -- 4.0%
Aetna Life & Casualty Co....................... 24,500 1,696,625
Alexander & Alexander Services, Inc............ 9,400 178,600

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
Allstate Corp.................................. 96,594 $ 3,972,428
American General Corp.......................... 44,000 1,534,500
American International Group, Inc.............. 102,437 9,475,422
Chubb Corp..................................... 19,000 1,838,250
CIGNA Corp..................................... 16,300 1,682,975
General Re Corp................................ 17,650 2,735,750
+ITT Hartford Group, Inc....................... 25,000 1,209,375
Jefferson-Pilot Corp........................... 15,375 714,938
Lincoln National Corp.......................... 22,700 1,220,125
Marsh & McLennan Companies, Inc................ 15,600 1,384,500
Providian Corp................................. 20,500 835,375
SAFECO Corp.................................... 26,800 924,600
St. Paul Companies, Inc........................ 18,300 1,017,938
Torchmark Corp................................. 16,000 724,000
Travelers Group, Inc........................... 68,731 4,321,461
U.S. Healthcare, Inc........................... 32,600 1,515,900
United Healthcare Corp......................... 37,700 2,469,350
UNUM Corp...................................... 15,300 841,500
USF&G Corp..................................... 23,800 401,625
USLIFE Corp.................................... 6,900 206,138
--------------
40,901,375
--------------
LEISURE -- 1.0%
+Bally Entertainment Corporation............... 10,200 142,800
Brunswick Corp................................. 20,300 487,200
Handleman Co................................... 5,850 33,638
+Harrah's Entertainment, Inc................... 22,450 544,412
Hasbro, Inc.................................... 18,900 585,900
+King World Productions, Inc................... 7,550 293,506
Mattel, Inc.................................... 47,445 1,458,934
Outboard Marine Corp........................... 3,900 79,463
Walt Disney Co................................. 113,200 6,678,800
--------------
10,304,653
--------------
LODGING -- 0.4%
Hilton Hotels Corp............................. 10,600 651,900
Loews Corp..................................... 25,200 1,975,050
Marriott International, Inc.................... 26,900 1,028,925
--------------
3,655,875
--------------
MACHINERY -- 1.0%
Briggs & Stratton Corp......................... 6,300 273,262
Caterpillar, Inc............................... 42,200 2,479,250
Cincinnati Milacron, Inc....................... 6,900 181,125
Cooper Industries, Inc......................... 23,000 845,250
Deere & Co..................................... 56,300 1,984,575
Dover Corp..................................... 24,600 907,125
Eaton Corp..................................... 18,200 975,975
Giddings & Lewis, Inc.......................... 6,900 113,850
Harnischfeger Industries, Inc.................. 9,500 315,875
Ingersoll-Rand Co.............................. 22,900 804,363
PACCAR, Inc.................................... 8,630 363,539
Parker-Hannifin Corp........................... 16,150 553,138
Snap-On, Inc................................... 9,000 407,250
Timken Co...................................... 6,400 244,800
+Varity Corp................................... 8,810 327,071
--------------
10,776,448
--------------
MEDIA -- 2.5%
Capital Cities/ABC, Inc........................ 33,100 4,083,713
Comcast Corp. (Special Class 'A' Stock)........ 50,500 918,469
Dow Jones & Co., Inc........................... 21,500 857,313
Gannett Co., Inc............................... 30,000 1,841,250
Interpublic Group of Companies, Inc............ 17,400 754,725
Knight-Ridder, Inc............................. 10,500 656,250

B25

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
McGraw-Hill, Corporation, Inc................... 10,900 $ 949,663
Meredith Corp................................... 5,800 242,875
New York Times Co. (Class 'A' Stock)............ 21,300 631,013
R. R. Donnelley & Sons Co....................... 32,800 1,291,500
+Tele-Communications, Inc. (Series 'A' Stock)... 142,500 2,832,187
Time Warner, Inc................................ 82,840 3,137,565
Times Mirror Co. (Class 'A' Stock).............. 24,000 813,000
Tribune Co...................................... 13,700 837,412
+US West Media Group............................ 101,700 1,932,300
+Viacom, Inc. (Class 'B' Stock)................. 78,867 3,736,323
--------------
25,515,558
--------------
MINERAL RESOURCES -- 1.0%
ASARCO, Inc..................................... 8,700 278,400
Barrick Gold Corporation........................ 75,400 1,988,675
Burlington Resources, Inc....................... 27,700 1,087,225
Cyprus Amax Minerals Co......................... 20,800 543,400
Echo Bay Mines, Ltd............................. 26,400 273,900
Freeport-McMoRan Copper & Gold, Inc. (Class 'B'
Stock)........................................ 42,800 1,203,750
Homestake Mining Co............................. 28,800 450,000
Inco, Ltd....................................... 26,000 864,500
Newmont Mining Corp............................. 20,200 914,050
Phelps Dodge Corp............................... 15,200 946,200
Pittston Services Group......................... 8,600 269,825
Placer Dome, Inc................................ 50,900 1,227,962
Sante Fe Pacific Gold Corp...................... 34,916 423,357
--------------
10,471,244
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 4.1%
Browning-Ferris Industries, Inc................. 46,200 1,362,900
Crane Co........................................ 6,600 243,375
Ecolab, Inc..................................... 13,400 402,000
General Electric Co............................. 361,500 26,028,000
General Signal Corp............................. 10,662 345,181
Illinois Tool Works, Inc........................ 25,100 1,480,900
ITT Corp........................................ 25,000 1,325,000
ITT Industries, Inc............................. 25,000 600,000
Millipore Corp.................................. 11,000 452,375
NACCO Industries, Inc. (Class 'A' Stock)........ 1,600 88,800
Pall Corp....................................... 25,100 674,563
PPG Industries Inc.............................. 43,200 1,976,400
Teledyne, Inc................................... 11,800 302,375
Textron, Inc.................................... 18,100 1,221,750
Trinova Corp.................................... 5,600 160,300
TRW, Inc........................................ 14,300 1,108,250
Tyco International, Ltd......................... 33,300 1,186,313
WMX Technologies, Inc........................... 104,100 3,109,988
--------------
42,068,470
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 2.1%
American Greetings Corp. (Class 'A' Stock)...... 16,300 450,288
Black & Decker Corp............................. 18,800 662,700
Corning, Inc.................................... 49,700 1,590,400
Dial Corp....................................... 20,900 619,163
Eastman Kodak Co................................ 74,100 4,964,700
Jostens, Inc.................................... 9,900 240,075
Minnesota Mining & Manufacturing Co............. 90,500 5,995,625
Polaroid Corp................................... 9,500 450,062
Premark International, Inc...................... 14,000 708,750
Rubbermaid, Inc................................. 33,300 849,150

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
Unilever N.V., ADR.............................. 34,500 $ 4,855,875
Whitman Corp.................................... 21,700 504,525
--------------
21,891,313
--------------
PETROLEUM -- 8.0%
Amerada Hess Corp............................... 19,900 1,054,700
Amoco Corp...................................... 107,130 7,699,969
Atlantic Richfield Co........................... 34,485 3,819,213
Chevron Corp.................................... 141,500 7,428,750
Exxon Corp...................................... 267,900 21,465,487
Kerr-McGee Corp................................. 11,400 723,900
Louisiana Land & Exploration Co................. 7,600 325,850
Mobil Corp...................................... 85,400 9,564,800
Occidental Petroleum Corp....................... 68,400 1,462,050
Pennzoil Co..................................... 10,000 422,500
Phillips Petroleum Co........................... 56,800 1,938,300
Royal Dutch Petroleum Co........................ 115,600 16,314,050
+Santa Fe Energy Resources, Inc................. 17,970 172,961
Sun Co., Inc.................................... 19,000 520,125
Tenneco, Inc.................................... 39,100 1,940,338
Texaco, Inc..................................... 56,700 4,450,950
Unocal Corp..................................... 53,300 1,552,363
USX-Marathon Group.............................. 63,700 1,242,150
--------------
82,098,456
--------------
PETROLEUM SERVICES -- 0.8%
Baker Hughes, Inc............................... 30,200 736,125
Dresser Industries, Inc......................... 40,400 984,750
Halliburton Co.................................. 24,800 1,255,500
Helmerich & Payne, Inc.......................... 5,100 151,725
McDermott International, Inc.................... 10,900 239,800
+Oryx Energy Co................................. 21,500 287,563
+Rowan Companies, Inc........................... 15,200 150,100
Schlumberger, Ltd............................... 52,200 3,614,850
Sonat, Inc...................................... 18,400 655,500
+Western Atlas, Inc............................. 11,300 570,650
--------------
8,646,563
--------------
RAILROADS -- 1.0%
Burlington Northern Sante Fe, Inc............... 31,642 2,468,076
Conrail Inc..................................... 17,000 1,190,000
CSX Corp........................................ 45,112 2,058,235
Norfolk Southern Corp........................... 27,900 2,214,563
Union Pacific Corp.............................. 43,800 2,890,800
--------------
10,821,674
--------------
RESTAURANTS -- 0.8%
Darden Restaurants, Inc......................... 35,000 415,625
Luby's Cafeterias, Inc.......................... 4,550 101,238
McDonald's Corp................................. 149,200 6,732,650
+Ryan's Family Steak Houses, Inc................ 8,500 59,500
+Shoney's, Inc.................................. 7,900 80,975
Wendy's International, Inc...................... 21,900 465,375
--------------
7,855,363
--------------
RETAIL -- 4.8%
Albertson's, Inc................................ 54,600 1,794,975
American Stores Co.............................. 31,900 853,325
Brown Group, Inc................................ 3,000 42,750
Charming Shoppes, Inc........................... 18,300 52,613
Circuit City Stores, Inc........................ 21,500 593,938
Dayton-Hudson Corp.............................. 15,214 1,141,050
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 24,850 708,225
+Federated Department Stores, Inc............... 43,500 1,196,250
Great Atlantic & Pacific Tea Co., Inc........... 9,100 209,300

B26

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
Harcourt General, Inc.......................... 15,406 $ 645,126
Home Depot, Inc................................ 103,949 4,976,558
J.C. Penney Co., Inc........................... 49,000 2,333,625
K mart Corp.................................... 95,000 688,750
+Kroger Co..................................... 26,600 997,500
Liz Claiborne, Inc............................. 15,600 432,900
Longs Drug Stores, Inc......................... 4,600 220,225
May Department Stores Co....................... 53,200 2,247,700
Melville Corp.................................. 22,400 688,800
Mercantile Stores Co., Inc..................... 8,000 370,000
Newell Co...................................... 34,800 900,450
Nike, Inc. (Class 'B' Stock)................... 30,600 2,130,525
Nordstrom, Inc................................. 17,200 696,600
Pep Boys-Manny, Moe & Jack..................... 13,200 338,250
+Price/Costco, Inc............................. 42,566 649,131
Reebok International, Ltd...................... 16,700 471,775
Rite Aid Corp.................................. 18,500 633,625
Sears, Roebuck & Co............................ 84,100 3,279,900
Sherwin-Williams Co............................ 18,300 745,725
Stride Rite Corp............................... 9,400 70,500
Supervalu, Inc................................. 15,100 475,650
The Gap, Inc................................... 30,500 1,281,000
The Limited, Inc............................... 76,600 1,330,925
TJX Companies, Inc............................. 14,300 269,913
+Toys 'R' Us, Inc.............................. 59,750 1,299,563
Wal-Mart Stores, Inc........................... 495,300 11,082,337
Walgreen Co.................................... 53,700 1,604,287
Winn Dixie Stores, Inc......................... 32,600 1,202,125
Woolworth Corp................................. 29,200 379,600
--------------
49,035,491
--------------
RUBBER -- 0.2%
B.F. Goodrich Co............................... 5,400 367,875
Cooper Tire & Rubber Co........................ 17,400 428,475
Goodyear Tire & Rubber Co...................... 33,100 1,501,913
--------------
2,298,263
--------------
STEEL -- 0.3%
+Armco, Inc.................................... 26,700 156,862
+Bethlehem Steel Corp.......................... 23,600 330,400
Inland Steel Industries, Inc................... 10,100 253,763
Nucor Corp..................................... 19,300 1,102,512
USX-U.S. Steel Group........................... 17,740 545,505
Worthington Industries, Inc.................... 19,100 397,519
--------------
2,786,561
--------------
TELECOMMUNICATIONS -- 5.1%
+Airtouch Communications, Inc.................. 106,800 3,017,100
Alltel Corp.................................... 41,600 1,227,200
Ameritech Corp................................. 119,100 7,026,900
+Andrew Corp................................... 8,050 307,913
AT&T Corp...................................... 343,373 22,233,401
+DSC Communications Corp....................... 25,000 921,875
MCI Communications Corp........................ 148,200 3,871,725
Northern Telecom, Ltd.......................... 55,300 2,377,900
SBC Communications, Inc........................ 131,600 7,567,000
Scientific-Atlanta, Inc........................ 16,500 247,500
Sprint Corp.................................... 74,800 2,982,650
+Tellabs, Inc.................................. 18,500 684,500
--------------
52,465,664
--------------
TEXTILES -- 0.2%
+Fruit of the Loom, Inc. (Class 'A' Stock)..... 18,000 438,750
National Service Industries, Inc............... 11,000 356,125
Russell Corp................................... 8,400 233,100

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
Springs Industries, Inc........................ 4,200 $ 173,775
V.F. Corp...................................... 13,918 734,175
--------------
1,935,925
--------------
TOBACCO -- 0.3%
American Brands, Inc........................... 40,000 1,785,000
UST, Inc....................................... 41,600 1,388,400
--------------
3,173,400
--------------
TRUCKING/SHIPPING -- 0.2%
Consolidated Freightways, Inc.................. 9,200 243,800
+Federal Express Corp.......................... 12,000 886,500
Roadway Services, Inc.......................... 8,400 410,550
Ryder System, Inc.............................. 17,900 443,025
Yellow Corp.................................... 6,000 74,250
--------------
2,058,125
--------------
UTILITY - COMMUNICATIONS -- 3.5%
Bell Atlantic Corp............................. 94,400 6,313,000
BellSouth Corp................................. 214,000 9,309,000
GTE Corp....................................... 208,920 9,192,480
NYNEX Corp..................................... 92,100 4,973,400
Pacific Telesis Group.......................... 92,600 3,113,675
U S West Communications, Inc................... 101,900 3,642,925
--------------
36,544,480
--------------

UTILITY - ELECTRIC -- 3.6%
American Electric Power Co., Inc............... 39,700 1,607,850
Baltimore Gas & Electric Co.................... 32,450 924,825
Carolina Power & Light Co...................... 33,100 1,141,950
Central & South West Corp...................... 41,000 1,142,875
CINergy Corp................................... 33,739 1,033,257
Consolidated Edison Co. of NY, Inc............. 50,200 1,606,400
Detroit Edison Co.............................. 31,000 1,069,500
Dominion Resources, Inc........................ 37,150 1,532,438
Duke Power Co.................................. 44,000 2,084,500
Entergy Corp................................... 48,500 1,418,625
FPL Group, Inc................................. 40,000 1,855,000
General Public Utilities Corp.................. 26,200 890,800
Houston Industries, Inc........................ 56,200 1,362,850
Niagara Mohawk Power Corp...................... 31,700 305,113
Northern States Power Co....................... 14,600 717,225
Ohio Edison Co................................. 33,700 791,950
P P & L Resources, Inc......................... 33,700 842,500
Pacific Enterprises............................ 19,100 539,575
Pacific Gas & Electric Co...................... 90,900 2,579,287
PacifiCorp..................................... 62,700 1,332,375
PECO Energy Co................................. 48,500 1,461,062
Public Service Enterprise Group, Inc........... 53,000 1,623,125
SCEcorp........................................ 95,100 1,688,025
Southern Co.................................... 143,800 3,541,075
Texas Utilities Co............................. 48,629 1,999,868
Unicom Corp.................................... 46,900 1,535,975
Union Electric Company......................... 21,800 910,150
--------------
37,538,175
--------------
TOTAL COMMON STOCKS
(Cost $683,558,889)........................................... 991,277,137
--------------

MARKET
PREFERRED STOCKS -- 0.0% SHARES VALUE
------------- --------------
MISCELLANEOUS - BASIC INDUSTRY
Teledyne, Inc. (Cum.), Series E................ 442 6,354
--------------
(Cost $6,630)

B27

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.2% AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS -- 4.1%
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)............... $ 41,878,000 $ 41,878,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
US Treasury Bills,
5.255%, 03/14/96............................ 1,300,000 1,286,336
5.280%, 03/14/96............................ 100,000 98,944
--------------
1,385,280
--------------
TOTAL SHORT-TERM INVESTMENTS.................................. 43,263,280
--------------
##VARIATION MARGIN ON OPEN FUTURES CONTRACTS -- 0.0%..........
42,000
--------------
LIABILITIES -- (0.3%)
(net of other assets)........................................ (3,310,703)
--------------
TOTAL NET ASSETS -- 100.0%..................................... $1,031,278,068
--------------
--------------

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,
1995.

##Open futures contracts as of December 31, 1995 are as follows:

PAR VALUE

COVERED BY CONTRACT TYPE EXPIRATION DATE VALUE OF CONTRACTS

$37,454,650 S&P 500 Index Futures Mar 96 $37,107,000
(120 contracts)

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B28

<PAGE>

EQUITY INCOME PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 78.7% SHARES VALUE
------------- --------------
AEROSPACE -- 4.0%
Northrop Grumman Corp.......................... 388,600 $ 24,870,400
Thiokol Corp................................... 606,100 20,531,638
--------------
45,402,038
--------------
AUTOS - CARS & TRUCKS -- 3.1%
Chrysler Corp.................................. 624,017 34,554,941
--------------
CHEMICALS -- 1.8%
Dow Chemical Co................................ 278,800 19,620,550
--------------
COMMERCIAL SERVICES -- 1.2%
Dun & Bradstreet Corp.......................... 195,600 12,665,100
John H. Harland Co............................. 32,400 676,350
--------------
13,341,450
--------------
COMPUTER SERVICES -- 1.5%
+Amdahl Corp................................... 800,000 6,800,000
+Intergraph Corp............................... 607,700 9,571,275
--------------
16,371,275
--------------
DIVERSIFIED GAS -- 0.5%
British Gas, PLC, ADR.......................... 110,600 4,327,225
Yankee Energy System, Inc...................... 30,400 767,600
--------------
5,094,825
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 4.0%
International Business Machines Corp........... 479,100 43,957,425
--------------
ELECTRICAL EQUIPMENT -- 3.1%
Kuhlman Corp................................... 560,000 7,000,000
Westinghouse Electric Corp..................... 1,669,500 27,546,750
--------------
34,546,750
--------------
ELECTRONICS -- 7.0%
+Digital Equipment Corp........................ 319,100 20,462,287
+IMO Industries, Inc........................... 434,600 2,987,875
Micron Technology, Inc......................... 451,000 17,870,875
+National Semiconductor Corp................... 320,000 7,120,000
Newport Corp................................... 300,500 2,441,563
Pacific Scientific Co.......................... 185,700 4,596,075
Texas Instruments, Inc......................... 429,000 22,200,750
--------------
77,679,425
--------------
FINANCIAL SERVICES -- 7.2%
A.G. Edwards, Inc.............................. 211,000 5,037,625
Bear Stearns Companies, Inc.................... 413,380 8,215,928
Lehman Brothers Holdings, Inc.................. 1,759,100 37,380,875
Manufactured Home Communities, Inc............. 581,500 10,176,250
Salomon, Inc................................... 560,000 19,880,000
--------------
80,690,678
--------------
FOODS -- 1.4%
Philip Morris Companies, Inc................... 175,000 15,837,500
--------------
FOREST PRODUCTS -- 0.7%
Fletcher Challenge, Ltd., ADR.................. 62,400 897,000
Louisiana-Pacific Corp......................... 71,700 1,738,725
Rayonier, Inc.................................. 149,900 5,002,912
--------------
7,638,637
--------------
GAS PIPELINES -- 1.9%
Nova Corp...................................... 927,000 7,416,000
Panhandle Eastern Corp......................... 299,600 8,351,350
TransCanada Pipelines, Ltd..................... 389,600 5,357,000
--------------
21,124,350
--------------
DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
HOUSING RELATED -- 0.7%
Irvine Apartment Communities, Inc.............. 400,000 $ 7,700,000
--------------
INSURANCE -- 6.4%
Alexander & Alexander Services, Inc............ 812,000 15,428,000
Fremont General Corp........................... 96,260 3,537,555
Marsh & McLennan Companies, Inc................ 243,800 21,637,250
Ohio Casualty Corp............................. 314,900 12,202,374
SAFECO Corp.................................... 350,200 12,081,900
Selective Insurance Group, Inc................. 198,800 7,057,400
--------------
71,944,479
--------------
MACHINERY -- 0.4%
+Esterline Technologies Corp................... 188,700 4,458,038
--------------
MEDIA -- 0.7%
Gannett Co., Inc............................... 120,000 7,365,000
--------------
MINERAL RESOURCES -- 0.6%
Coeur D'Alene Mines Corp....................... 194,678 3,333,861
Echo Bay Mines, Ltd............................ 298,499 3,096,926
--------------
6,430,787
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.5%
Morrison Knudsen Corp.......................... 1,172,900 4,984,825
United Industrial Corp......................... 31,700 182,275
--------------
5,167,100
--------------
PETROLEUM -- 3.1%
KN Energy, Inc................................. 261,900 7,627,837
Mobil Corp..................................... 600 67,200
Petroleum Heat and Power Co., Inc. (Class 'A'
Stock)....................................... 47,300 384,313
Quaker State Corp.............................. 544,400 6,873,050
Tenneco, Inc................................... 227,700 11,299,613
USX-Marathon Group............................. 430,600 8,396,700
--------------
34,648,713
--------------
PETROLEUM SERVICES -- 6.9%
Baker Hughes, Inc.............................. 908,200 22,137,375
**+Crestar Energy, Inc......................... 200,000 2,766,581
Dresser Industries, Inc........................ 577,600 14,079,000
McDermott International, Inc................... 1,091,400 24,010,800
Sonat, Inc..................................... 206,300 7,349,438
+Varco International, Inc...................... 558,900 6,706,800
--------------
77,049,994
--------------
REAL ESTATE DEVELOPMENT -- 13.2%
Alexander Haagen Properties, Inc............... 420,000 5,145,000
Amli Residential Properties Trust.............. 208,300 4,166,000
Avalon Properties, Inc......................... 265,000 5,697,500
Beacon Properties Corp......................... 184,800 4,250,400
Bradley Real Estate, Inc....................... 240,000 3,240,000
Carr Realty Corp............................... 26,500 645,937
Crescent Real Estate Equities, Inc............. 597,000 20,372,625
Crown American Realty Trust.................... 675,100 5,316,413
Equity Residential Properties Trust............ 901,000 27,593,125
Essex Property Trust, Inc...................... 146,000 2,810,500
First Union Real Estate Investments............ 122,100 854,700
Gables Residential Trust....................... 435,800 9,968,925
Glimcher Realty Trust.......................... 565,000 9,746,250
JDN Realty Corp................................ 293,200 6,560,350
JP Realty, Inc................................. 84,000 1,837,500
Kimco Realty Corp.............................. 56,250 1,532,813
Malan Realty Investors, Inc.................... 140,000 1,732,500
MGI Properties, Inc............................ 34,800 582,900
Patriot American Hospitality, Inc.............. 181,900 4,683,925

B29

<PAGE>

EQUITY INCOME PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
Pennsylvania Real Estate Investment Trust...... 50,100 $ 1,039,575
Security Capital Pacific Trust................. 527,034 10,408,921
Simon Property Group, Inc...................... 214,300 5,223,562
Sunstone Hotel Investors, Inc.................. 37,800 387,450
Vornado Realty Trust........................... 278,800 10,455,000
Weingarten Realty Investors.................... 62,500 2,375,000
--------------
146,626,871
--------------
RETAIL -- 2.2%
+Gibson Greetings, Inc......................... 469,900 7,518,400
J.C. Penney Co., Inc........................... 309,800 14,754,225
K mart Corp.................................... 299,200 2,169,200
--------------
24,441,825
--------------
STEEL -- 2.7%
+LTV Corp...................................... 90,000 1,237,500
USX-U.S. Steel Group........................... 928,500 28,551,375
--------------
29,788,875
--------------
TELECOMMUNICATIONS -- 0.6%
Telefonos de Mexico (Class 'L' Stock), ADR SA.. 198,000 6,311,250
--------------
TEXTILES -- 0.7%
Garan, Inc..................................... 2,900 48,938
Kellwood Co.................................... 338,900 6,905,087
Oxford Industries, Inc......................... 34,500 577,875
--------------
7,531,900
--------------
TOBACCO -- 1.2%
RJR Nabisco Holdings Corp...................... 420,000 12,967,500
--------------
TRUCKING/SHIPPING -- 0.3%
Yellow Corp.................................... 259,700 3,213,788
--------------
UTILITY - ELECTRIC -- 1.1%
Centerior Energy Corporation................... 46,600 413,575
Central Louisiana Electric Co.................. 6,100 163,938
Entergy Corp................................... 177,200 5,183,100
Pacific Gas & Electric Co...................... 240,000 6,810,000
--------------
12,570,613
--------------
TOTAL COMMON STOCKS
(Cost $798,340,265)........................................... 874,076,577
--------------

MARKET
PREFERRED STOCKS -- 9.7% SHARES VALUE
------------- --------------
ALUMINUM -- 1.0%
Kaiser Aluminum Corp. (Cum. Conv.)............. 319,900 4,118,712
Reynolds Metals Co. (Cum. Conv.)............... 146,900 7,436,812
--------------
11,555,524
--------------
DRUGS & HOSPITAL SUPPLIES -- 0.6%
U.S. Surgical Corp. (Cum. Conv.)............... 208,300 5,259,575
--------------
ELECTRICAL EQUIPMENT -- 2.1%
**Westinghouse Electric Corp. (Cum. Conv.),
Series C..................................... 1,457,000 22,492,438
--------------
FINANCIAL SERVICES -- 0.6%
**Parker & Parsley Capital, LLC (Cum. Conv.)... 118,800 5,613,300
--------------

DECEMBER 31, 1995

MARKET
PREFERRED STOCKS (CONTINUED) SHARES VALUE
------------- --------------
INSURANCE -- 0.6%
**Alexander & Alexander Services, Inc.
(Cum.Conv.), Series A........................ 100,000 $ 4,950,000
**Unocal Corp. (Cum. Conv.).................... 30,800 1,697,850
USF&G Corp. (Conv. Ex.), Series A.............. 10,900 558,625
--------------
7,206,475
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.2%
Hecla Mining Co. (Cum. Conv.), Series B........ 60,000 2,400,000
--------------
PETROLEUM SERVICES -- 1.0%
**McDermott International, Inc. (Cum. Conv.),
Series C..................................... 88,000 3,575,000
Noble Drilling Corp. (Cum. Conv.).............. 88,200 2,271,150
Reading & Bates Corp. (Cum. Conv.)............. 128,100 5,764,500
--------------
11,610,650
--------------
REAL ESTATE DEVELOPMENT -- 0.1%
Security Capital Pacific Trust (Cum. Conv.),
Series A..................................... 54,500 1,335,250
--------------
STEEL -- 1.5%
**Bethlehem Steel Corp. (Cum. Conv.)........... 264,000 11,682,000
USX Corp. (Cum. Conv.)......................... 114,600 5,457,825
--------------
17,139,825
--------------
TEXTILES -- 0.3%
Fieldcrest Cannon, Inc. (Cum. Conv.), Series
A............................................ 85,000 3,782,500
--------------
TOBACCO -- 1.7%
RJR Nabisco Holdings Corp. (Conv.), Series C... 2,955,000 18,838,125
--------------
TOTAL PREFERRED STOCKS
(Cost $108,249,201)........................................... 107,233,662
--------------

MARKET
RIGHTS AND WARRANTS -- 0.0% SHARES VALUE
------------- --------------
MACHINERY -- 0.0%
**+Terex Corp. (Rights)........................ 16,950 0
--------------

PAR MARKET
CONVERTIBLE BONDS -- 5.4% VALUE VALUE
------------- --------------
INDUSTRIAL -- 5.3%
AMR Corp.,
6.125%, 11/01/24............................. $ 34,675,000 $ 35,888,625
Baker Hughes, Inc.,
Zero Coupon, 05/05/08........................ 5,940,000 3,801,600
Cross Timbers Oil Co.,
5.250%, 11/01/03............................. 2,809,000 2,640,460
Malan Realty Investors, Inc.,
9.500%, 07/15/04............................. 3,000,000 2,490,000
Noble Affiliates, Inc.,
4.250%, 11/01/03............................. 11,701,000 11,701,000
Oryx Energy Co.,
7.500%, 05/15/14............................. 1,760,000 1,566,400
--------------
58,088,085
--------------

B30

<PAGE>

EQUITY INCOME PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
CONVERTIBLE BONDS (CONTINUED) VALUE VALUE
------------- --------------

REAL ESTATE DEVELOPMENT -- 0.1%
Alexander Haagen Properties, Inc.,
7.500%, 01/15/01............................. $ 600,000 $ 507,000
7.500%, 01/15/01............................. 1,000,000 835,000
--------------
1,342,000

--------------
TOTAL CONVERTIBLE BONDS
(Cost $57,244,298)............................................ 59,430,085
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 5.9% AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)................ 65,782,000 65,782,000
--------------
OTHER ASSETS -- 0.3%
(net of liabilities).......................................... 3,440,871
--------------
TOTAL NET ASSETS -- 100.0%...................................... $1,109,963,195
--------------
--------------

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
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 $55,599,606. The aggregate value, $52,777,169 is
approximately 4.8% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending Decenber 31,
1995.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B31

<PAGE>

EQUITY PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 78.9% SHARES VALUE
------------- -------------
AEROSPACE -- 2.3%
AAR Corp...................................... 650,000 $ 14,300,000
Lockheed Martin Corp.......................... 70,300 5,553,700
Loral Corp.................................... 1,800,000 63,675,000
United Technologies Corp...................... 40,900 3,880,388
--------------
87,409,088
--------------
ALUMINUM -- 1.0%
+Alumax, Inc.................................. 267,500 8,192,188
Aluminum Co. of America....................... 600,000 31,725,000
--------------
39,917,188
--------------
AUTOS - CARS & TRUCKS -- 3.9%
Chrysler Corp................................. 1,963,910 108,751,515
General Motors Corp........................... 700,000 37,012,500
+Navistar International Corp.................. 395,200 4,149,600
--------------
149,913,615

--------------
BANKS AND SAVINGS & LOANS -- 7.5%
Bank of New York Company, Inc................. 900,000 43,875,000
BankAmerica Corp.............................. 550,000 35,612,500
Chase Manhattan Corp.......................... 600,000 36,375,000
Comerica, Inc................................. 1,000,000 40,125,000
First of America Bank Corp.................... 187,000 8,298,125
Great Western Financial Corp.................. 1,000,000 25,500,000
J.P. Morgan & Co., Inc........................ 395,400 31,730,850
Mellon Bank Corp.............................. 276,398 14,856,392
Mercantile Bankshares Corp.................... 279,600 7,793,850
NationsBank Corp.............................. 600,000 41,775,000
--------------
285,941,717
--------------
CHEMICALS -- 0.8%
Eastman Chemical Co........................... 466,550 29,217,694
--------------
CHEMICALS - SPECIALTY -- 0.2%
Witco Corp.................................... 268,800 7,862,400
--------------
COMMERCIAL SERVICES -- 0.5%
Wellman, Inc.................................. 798,200 18,159,050
--------------
COMPUTER SERVICES -- 1.9%
+Amdahl Corp.................................. 4,000,000 34,000,000
Comdisco, Inc................................. 1,350,000 30,543,750
Gerber Scientific, Inc........................ 419,800 6,821,750
+Harris Computer Systems Corp................. 15,000 202,500
--------------
71,568,000
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.7%
International Business Machines Corp.......... 300,000 27,525,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 2.3%
Baxter International, Inc..................... 2,100,000 87,937,500
--------------
ELECTRICAL EQUIPMENT -- 0.0%
+Rexel, Inc................................... 107,199 1,447,187
--------------
ELECTRONICS -- 6.0%
+Digital Equipment Corp....................... 2,500,000 160,312,500
Harris Corp................................... 300,000 16,387,500
Tandy Corp.................................... 1,218,000 50,547,000
Zero Corp..................................... 120,500 2,138,875
--------------
229,385,875
--------------
FINANCIAL SERVICES -- 7.3%
American Express Co........................... 2,100,000 86,887,500
Dean Witter Discover and Company.............. 1,600,000 75,200,000
Lehman Brothers Holdings, Inc................. 900,000 19,125,000
Republic New York Corp........................ 225,000 13,978,125

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- -------------
Salomon, Inc.................................. 700,000 $ 24,850,000
Travelers Group, Inc.......................... 900,000 56,587,500
--------------
276,628,125

--------------
FOREST PRODUCTS -- 6.6%
Crown Vantage, Inc............................ 56,000 798,000
Georgia-Pacific Corp.......................... 250,000 17,156,250
International Paper Co........................ 1,325,400 50,199,525
James River Corp. of Virginia................. 560,000 13,510,000
Kimberly-Clark Corp........................... 1,610,676 133,283,438
Mead Corp..................................... 173,500 9,065,375
Rayonier, Inc................................. 125,000 4,171,875
Temple Inland, Inc............................ 231,100 10,197,288
Willamette Industries, Inc.................... 214,100 12,043,125
--------------
250,424,876

--------------
GAS PIPELINES -- 0.3%
NorAm Energy Corp............................. 1,300,000 11,537,500
--------------
HEALTHCARE -- 1.7%
+Foundation Health Corp....................... 1,547,900 66,559,700
--------------
HOSPITAL MANAGEMENT -- 1.8%
+Tenet Healthcare Corp........................ 3,237,832 67,185,014
--------------
HOUSING RELATED -- 0.5%
Centex Corp................................... 600,000 20,850,000
--------------
INSURANCE -- 9.8%
Alexander & Alexander Services, Inc........... 1,050,000 19,950,000
American Financial Group, Inc................. 303,700 9,300,813
American General Corp......................... 1,000,000 34,875,000
Chubb Corp.................................... 700,000 67,725,000
Citizens Corp................................. 700,000 13,037,500
Equitable Companies, Inc...................... 1,800,000 43,200,000
First Colony Corp............................. 1,253,600 31,810,100
Old Republic International Corp............... 1,000,590 35,520,945
Providian Corp................................ 340,500 13,875,375
SAFECO Corp................................... 1,600,000 55,200,000
St. Paul Companies, Inc....................... 476,900 26,527,563
Transport Holdings, Inc. (Class 'A' Stock).... 4,500 183,375
Western National Corp......................... 1,624,300 26,191,837
--------------
377,397,508
--------------
LODGING -- 2.5%
Loews Corp.................................... 1,200,000 94,050,000
--------------
MACHINERY -- 0.2%
+American Standard Companies.................. 273,900 7,669,200
--------------
MINERAL RESOURCES -- 1.1%
+Amax Gold, Inc............................... 131,342 952,230
Cyprus Amax Minerals Co....................... 1,533,200 40,054,850
+Nord Resources Corp.......................... 130,500 293,625
--------------
41,300,705
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.8%
American Water Works Co., Inc................. 135,000 5,248,125
TRW, Inc...................................... 309,000 23,947,500
+Worldtex, Inc................................ 107,199 616,394
--------------
29,812,019
--------------
PETROLEUM -- 3.6%
Amerada Hess Corp............................. 325,000 17,225,000
Atlantic Richfield Co......................... 250,000 27,687,500
Elf Aquitaine, ADR............................ 1,924,433 70,722,913
Occidental Petroleum Corp..................... 1,100,000 23,512,500
--------------
139,147,913
--------------

B32

<PAGE>

EQUITY PORTFOLIO (CONTINUED)

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- -------------
PETROLEUM SERVICES -- 1.9%
+B.J. Services Co............................. 500,000 $ 14,500,000
+Oryx Energy Co............................... 1,600,000 21,400,000
Total SA, ADR................................. 738,365 25,104,410
Union Texas Petroleum Holdings, Inc........... 504,500 9,774,688
--------------
70,779,098
--------------
RAILROADS -- 0.6%
Canadian National Railway..................... 192,300 2,884,500
+Southern Pacific Rail Corp................... 809,810 19,435,440
--------------
22,319,940
--------------
RETAIL -- 6.6%
Dayton-Hudson Corp............................ 119,600 8,970,000
Dillard Department Stores, Inc. (Class 'A'
Stock)...................................... 1,991,700 56,763,450
+Federated Department Stores, Inc............. 700,000 19,250,000
+Gibson Greetings, Inc........................ 750,000 12,000,000
K mart Corp................................... 6,000,000 43,500,000
Liz Claiborne, Inc............................ 1,200,000 33,300,000
Petrie Stores Corp............................ 540,000 1,485,000
TJX Companies, Inc............................ 1,790,600 33,797,574
+Toys 'R' Us, Inc............................. 854,000 18,574,500
+Waban, Inc................................... 1,300,000 24,375,000
--------------
252,015,524
--------------
STEEL -- 0.9%

+Bethlehem Steel Corp......................... 500,000 7,000,000
Birmingham Steel Corp......................... 1,468,400 21,842,450
Carpenter Technology Corp..................... 100,000 4,112,500
--------------
32,954,950
--------------
TELECOMMUNICATIONS -- 3.2%
Sprint Corp................................... 1,700,000 67,787,500
Telefonica de Espana, SA, ADR................. 1,300,000 54,437,500
--------------
122,225,000
--------------
TOBACCO -- 1.3%
RJR Nabisco Holdings Corp..................... 1,600,000 49,400,000
--------------
TRUCKING/SHIPPING -- 0.5%
+OMI Corp..................................... 1,000,000 6,500,000
Overseas Shipholding Group, Inc............... 600,000 11,400,000
--------------
17,900,000
--------------
UTILITY - ELECTRIC -- 0.6%
American Electric Power Co., Inc.............. 180,000 7,290,000
General Public Utilities Corp................. 500,000 17,000,000
--------------
24,290,000
--------------
TOTAL COMMON STOCKS
(Cost $2,210,630,913)......................... 3,010,731,386
--------------

MARKET
PREFERRED STOCKS -- 0.7% SHARES VALUE
------------- -------------
TOBACCO
RJR Nabisco Holdings Corp. (Conv.)............ 4,000,000 25,500,000
-------------
(Cost $25,999,610)
PRINCIPAL
SHORT-TERM INVESTMENTS -- 20.1% AMOUNT VALUE
------------- -------------
PROMISSORY NOTES -- 0.0%
Federal Home Loan Banks,
5.430%, 03/20/96............................ $ 1,550,000 1,531,764
-------------

DECEMBER 31, 1995
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- -------------
REPURCHASE AGREEMENTS -- 20.1%
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)............... $ 765,037,000 $ 765,037,000
-------------
TOTAL SHORT-TERM INVESTMENTS..................................... 766,568,764
-------------
* UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE
CONTRACTS...................................................... (6,569)
-------------
OTHER ASSETS -- 0.3%
(net of liabilities)........................................... 11,010,546
-------------
TOTAL NET ASSETS -- 100.0%....................................... 3,813,804,127
-------------
-------------

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt

SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

*Forward Foreign Exchange Contracts as of December 31, 1995 were as follows:

FOREIGN
CURRENCY EXPIRATION UNREALIZED
PURCHASED DATE (DEPRECIATION)
------------ ---------- --------------
C$ 2,067,225 March 1996 $(6,569)
Total (US $ Commitment - -------
$1,521,305) $(6,569)
=======

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

B33

<PAGE>

PRUDENTIAL JENNISON

DECEMBER 31, 1995
MARKET
COMMON STOCKS -- 94.0% SHARES VALUE
----------- -----------
AEROSPACE -- 3.3%
Boeing Co..................................... 26,400 $ 2,069,100
--------------
AIRLINES -- 1.6%
+AMR Corp..................................... 13,200 980,100
--------------
AUTOS - CARS & TRUCKS -- 0.6%
General Motors Corp. (Class 'E' Stock)........ 7,300 379,600
--------------
BEVERAGES -- 3.0%
Coca-Cola Co.................................. 9,700 720,225
PepsiCo, Inc.................................. 20,600 1,151,025
--------------
1,871,250
--------------
COMMERCIAL SERVICES -- 1.4%
+CUC International, Inc....................... 25,400 866,775
--------------
COMMUNICATIONS -- 1.6%
+Clear Channel Communications, Inc............ 22,800 1,006,050
--------------
COMPUTER SERVICES -- 18.9%
+3Com Corp.................................... 24,600 1,146,975
Adobe Systems, Inc............................ 15,400 954,800
+America Online, Inc.......................... 19,000 712,500
Autodesk, Inc................................. 21,800 746,650
Bay Networks, Inc............................. 15,750 647,718
+Broderbund Software, Inc..................... 7,900 479,925
+Cisco Systems, Inc........................... 19,600 1,462,650
Computer Associates International, Inc........ 22,600 1,285,375
First Data Corp............................... 16,174 1,081,630
+Intuit, Inc.................................. 11,900 928,200
+Microsoft Corp............................... 11,300 991,575
**SAP AG, ADR................................. 18,400 936,100
+Silicon Graphics, Inc........................ 19,900 547,250
--------------
11,921,348
--------------
COSMETICS & SOAPS -- 1.5%
Gillette Co................................... 18,000 938,250
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 1.4%
+COMPAQ Computer Corp......................... 19,000 912,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 12.3%
Astra AB (ADR A).............................. 38,000 1,501,000
+Chiron Corporation........................... 8,700 961,350
Eli Lilly & Co................................ 22,700 1,276,875
Johnson & Johnson............................. 8,700 744,937
Merck & Co., Inc.............................. 13,200 867,900
Pfizer, Inc................................... 13,400 844,200
Smithkline Beecham PLC, ADR, UTS.............. 28,600 1,587,300
--------------
7,783,562
--------------
ELECTRICAL EQUIPMENT -- 1.4%
+Applied Materials, Inc....................... 21,700 854,437
--------------
ELECTRONICS -- 16.4%
Duracell International, Inc................... 17,300 895,275
Hewlett-Packard Co............................ 22,000 1,842,500
Intel Corp.................................... 30,100 1,708,175
+International Rectifier Corp................. 41,200 1,030,000
+LSI Logic Corp............................... 35,200 1,152,800

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- --------------
+Macromedia Inc............................... 15,200 $ 794,200
Motorola, Inc................................. 12,300 701,100
Nokia AB Corp. (ADR A)........................ 16,900 656,988
+Symbol Technologies, Inc..................... 24,500 967,750
Texas Instruments, Inc........................ 12,200 631,350
--------------
10,380,138
--------------
FINANCIAL SERVICES -- 2.5%
Federal National Mortgage Association......... 12,900 1,601,213
--------------
HOSPITAL MANAGEMENT -- 1.0%
+PhyCor, Inc.................................. 12,300 621,919
--------------
INSURANCE -- 6.3%
CIGNA Corp.................................... 6,400 660,800
ITT Hartford Group, Inc....................... 6,000 290,250
MGIC Investment Corp.......................... 16,500 895,125
Mutual Risk Management, Ltd................... 15,200 695,400
United Healthcare Corp........................ 22,800 1,493,400
--------------
4,034,975
--------------
LEISURE -- 3.0%
+Harrah's Entertainment, Inc.................. 17,800 431,650
Walt Disney Co................................ 24,700 1,457,300
--------------
1,888,950
--------------
MACHINERY -- 1.2%
Harnischfeger Industries, Inc................. 23,400 778,050
--------------
MEDIA -- 3.5%
Omnicom Group, Inc............................ 33,400 1,244,150
Reuters Holdings PLC, ADR..................... 18,000 992,250
--------------
2,236,400
--------------
MINERAL RESOURCES -- 1.0%
Minerals Technologies, Inc.................... 16,500 602,250
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 2.9%
+ITT Corp..................................... 13,700 726,100
+Scholastic Corp.............................. 14,000 1,088,500
--------------
1,814,600
--------------
RESTAURANTS -- 0.2%
McDonald's Corp............................... 2,100 94,763
--------------
RETAIL -- 6.2%
+AutoZone, Inc................................ 36,400 1,051,050
Dollar General Corporation.................... 12,500 259,375
Home Depot, Inc............................... 21,100 1,010,162
+Kohl's Corp.................................. 17,300 908,250
+Micro Warehouse, Inc......................... 16,000 692,000
--------------
3,920,837
--------------
TELECOMMUNICATIONS -- 2.8%
+Tellabs, Inc................................. 24,700 913,900
Vodafone Group PLC, ADR....................... 23,500 828,375
--------------
1,742,275
--------------
TOTAL COMMON STOCKS
(Cost $55,254,423)........................................... 59,298,842
--------------

B34

<PAGE>

PRUDENTIAL JENNISON (CONTINUED)

DECEMBER 31, 1995
PRINCIPAL
SHORT-TERM INVESTMENTS -- 12.0% AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)............... $ 7,557,000 $ 7,557,000
--------------
LIABILITIES -- (6.0%)
(net of other assets)........................................ (3,765,272)
--------------
TOTAL NET ASSETS -- 100.0%..................................... $ 63,090,570
--------------
--------------

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
PLC Public Limited Company (British Corporation)
UTS Unit Trust Shares

**Indicates a restricted security; the aggregate cost of the restricted
securities is $920,661. The aggregate value, $936,100 is approximately
1.48% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

B35

<PAGE>

SMALL CAPITALIZATION STOCK

DECEMBER 31, 1995
MARKET
COMMON STOCKS -- 91.1% SHARES VALUE
------------- -------------
AEROSPACE -- 0.6%
AAR Corp...................................... 2,900 $ 63,800
+BE Aerospace, Inc............................ 2,900 30,813
Kaman Corp. (Class 'A' Stock)................. 3,200 35,600
+Orbital Sciences Corp........................ 5,100 65,025
+UNC, Inc..................................... 3,100 18,600
Watkins-Johnson Co............................ 1,500 65,625
--------------
279,463
--------------
AIRLINES -- 0.4%
Comair Holdings, Inc.......................... 5,550 149,156
+Mesa Airlines, Inc........................... 400 3,600
SkyWest, Inc.................................. 1,900 24,463
--------------
177,219
--------------
ALUMINUM -- 0.1%
+IMCO Recycling, Inc.......................... 2,200 53,900
--------------
AUTOS - CARS & TRUCKS -- 0.9%
A.O. Smith Corp............................... 3,900 80,925
+Custom Chrome, Inc........................... 1,000 23,125
Myers Industries, Inc......................... 3,120 51,090
Simpson Industries, Inc....................... 3,300 29,700
Spartan Motors, Inc........................... 2,400 26,400
Standard Motor Products, Inc.................. 2,500 37,500
Standard Products Co.......................... 3,100 54,638
+TBC Corp..................................... 4,000 34,500
Wabash National Corp.......................... 3,500 77,875
Wynn's International, Inc..................... 1,000 29,625
--------------
445,378
--------------
BANKS AND SAVINGS & LOANS -- 8.4%
+Astoria Financial Corp....................... 2,200 100,375
Bell Bancorp, Inc............................. 1,400 50,050
+California Federal Bank (Class 'A' Stock).... 9,100 143,325
CCB Financial Corp............................ 2,500 138,750
Center Financial Corp......................... 2,200 38,500
Centura Banks, Inc............................ 4,000 140,500
+Coast Savings Financial, Inc................. 3,400 117,725
Collective Bancorp, Inc....................... 3,500 88,812
+Commercial Federal Corp...................... 2,400 90,600
Cullen/Frost Bankers, Inc..................... 1,900 95,000
Deposit Guaranty Corp......................... 3,200 142,400
Downey Financial Corp......................... 3,230 70,656
First Commercial Corp......................... 4,787 157,971
First Financial Corp.......................... 5,200 119,600
First Michigan Bank Corp...................... 3,430 95,182
+FirstBank Puerto Rico........................ 2,700 60,413
Firstmerit Corp............................... 6,100 183,000
JSB Financial, Inc............................ 2,000 63,250
Keystone Financial, Inc....................... 4,200 126,000
Liberty Bancorp, Inc.......................... 1,600 59,600
Loyola Capital Corp........................... 1,300 49,237
Magna Group, Inc.............................. 4,500 106,875
Mark Twain Bancshares, Inc.................... 2,600 100,750
N.S. Bancorp, Inc............................. 1,000 38,750
North American Mortgage Co.................... 2,600 55,250
ONBANcorp, Inc................................ 2,700 90,113
+Premier Bancorp, Inc......................... 4,900 114,537
Provident Bancorp, Inc........................ 3,000 141,000
RCSB Financial, Inc........................... 2,500 59,375
+Riggs National Corp.......................... 5,000 65,000
Roosevelt Financial Group, Inc................ 7,200 139,500
Sovereign Bancorp, Inc........................ 8,500 86,063
St. Paul Bancorp, Inc......................... 3,500 89,250

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- --------------
Summit Bancorp................................ 6,000 $ 189,000
Union Planters Corp........................... 7,500 239,063
Whitney Holding Corp.......................... 2,500 77,500
Zions Bancorp................................. 2,700 216,675
--------------
3,939,647
--------------
BEVERAGES -- 0.1%
Coca Cola Bottling Co......................... 1,600 56,000
--------------
CHEMICALS -- 1.1%
Chemed Corp................................... 1,900 73,863
+Cytec Industries, Inc........................ 3,100 193,362
+Hauser Chemical Research, Inc................ 1,700 7,650
Lilly Industries, Inc. (Class 'A' Stock)...... 3,800 48,450
+McWhorter Technologies, Inc.................. 2,100 30,975
+Mycogen Corp................................. 3,100 52,700
Quaker Chemical Corp.......................... 1,400 18,900
+Scotts Co. (Class 'A' Stock)................. 3,200 63,600
WD-40 Co...................................... 1,200 49,200
--------------
538,700
--------------
CHEMICALS - SPECIALTY -- 0.3%
First Mississippi Corp........................ 3,800 100,700
Penwest, Ltd.................................. 1,100 27,225
--------------
127,925
--------------
COMMERCIAL SERVICES -- 2.1%
ABM Industries, Inc........................... 1,800 49,950
ADVO, Inc..................................... 3,900 101,400
Bowne & Company, Inc.......................... 3,200 64,000
+CDI Corp..................................... 3,700 66,600
+Corrections Corp. of America................. 5,500 204,187
+Franklin Quest Co............................ 4,100 79,950
+Insurance Auto Auction, Inc.................. 1,900 20,425
+Interim Services, Inc........................ 2,000 69,500
LSB Industries, Inc........................... 2,200 9,625
Merrill Corp.................................. 1,200 19,200
+NFO Research, Inc............................ 900 23,850
+Pharmaceutical Marketing Services, Inc....... 2,100 31,763
Plenum Publishing Corp........................ 700 27,300
+Primark Corp................................. 4,300 129,000
Thomas Nelson, Inc............................ 3,000 39,000
True North Communications, Inc................ 4,400 81,400
--------------
1,017,150
--------------
COMPUTER SERVICES -- 9.3%
+Acxiom Corp.................................. 3,900 106,763
+America Online, Inc.......................... 15,100 566,250
+American Management Systems, Inc............. 4,100 123,000
Amtech Corp................................... 2,800 14,350
+Auspex Systems, Inc.......................... 1,200 21,900
+BancTec, Inc................................. 3,300 61,050
+Banyan Systems, Inc.......................... 3,100 31,775
+BBN Corp..................................... 3,200 131,600
+BISYS Group, Inc............................. 3,700 113,775
+Broderbund Software, Inc..................... 3,900 236,925
+Cerner Corp.................................. 6,100 125,050
+Chips & Technologies, Inc.................... 3,800 34,200
+Comverse Technology, Inc..................... 4,000 80,000
+Continuum Inc................................ 3,500 138,250
+Control Data Systems, Inc.................... 2,400 47,100
+FileNet Corp................................. 2,400 112,800
Gerber Scientific, Inc........................ 4,400 71,500
+Hyperion Software Corp....................... 2,800 59,500
+Keane, Inc................................... 2,600 57,524

B36

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
--------- ------------
+Komag, Inc................................... 4,800 $ 221,400
National Data Corp............................ 4,000 99,000
+Network General Corp......................... 3,900 130,163
+Norand Corp.................................. 1,200 15,000
+Paxar Corp................................... 4,050 53,663
+Platinum Software Corp....................... 2,500 14,063
+PLATINUM Technology, Inc..................... 8,400 154,350
+Progress Software Corp....................... 2,200 82,500
+Read-Rite Corp............................... 8,500 197,625
+Standard Microsystems Corp................... 2,500 41,250
+Sterling Software, Inc....................... 4,900 305,637
+SunGard Data Systems, Inc.................... 7,200 205,200
System Software Associates, Inc............... 7,300 158,775
+Tech Data Corp............................... 7,200 108,000
Telxon Corp................................... 2,700 61,087
+Tricord Systems, Inc......................... 2,200 6,600
+Viewlogic Systems, Inc....................... 3,100 31,000
+Wall Data, Inc............................... 1,700 28,050
+Xircom, Inc.................................. 3,600 44,550
+Zebra Technologies Corp. (Class 'A' Stock)... 4,200 142,800
+Zilog, Inc................................... 3,600 131,850
--------------
4,365,875
--------------
CONSTRUCTION -- 0.7%
+BMC West Corp................................ 1,500 22,125
+Insituform Technologies, Inc. (Class 'A'
Stock)...................................... 5,100 59,287
+Kasler Holding Co............................ 5,100 33,150
M.D.C. Holdings, Inc.......................... 3,200 22,800
Ply-Gem Industries, Inc....................... 2,800 45,500
Republic Group, Inc........................... 1,900 26,600
+Southern Energy Homes, Inc................... 1,575 27,563
Stone & Webster, Inc.......................... 2,700 96,863
--------------
333,888
--------------
CONTAINERS -- 0.1%
+Shorewood Packaging Corp..................... 3,100 44,175
--------------
COSMETICS & SOAPS -- 0.2%
Helene Curtis Industries, Inc................. 1,900 60,088
Nature's Sunshine Products, Inc............... 2,000 50,500
--------------
110,588
--------------
DIVERSIFIED GAS -- 4.6%
Atmos Energy Corp............................. 2,900 66,700
+Barrett Resources Corp....................... 4,710 138,356
+Benton Oil & Gas Co.......................... 4,700 70,500
+Box Energy Corp. (Class 'B' Stock)........... 3,700 31,913
Cascade Natural Gas Corp...................... 1,722 27,766
Connecticut Energy Corp....................... 1,700 37,825
Cross Timbers Oil Co.......................... 3,300 58,163
Daniel Industries............................. 2,200 31,350
Devon Energy Corp............................. 4,200 107,100
Energen Corp.................................. 2,000 48,250
+Gerrity Oil & Gas Corp....................... 2,600 10,400
+HS Resources, Inc............................ 2,000 25,750
KCS Energy, Inc............................... 2,100 31,500
New Jersey Resources Corp..................... 3,200 96,400
Northwest Natural Gas Co...................... 2,600 85,800
+Oceaneering International, Inc............... 4,400 56,650
Pennsylvania Enterprises, Inc................. 1,000 37,875
Phoenix Resource Companies, Inc............... 2,800 48,300
+Plains Resources, Inc........................ 2,800 25,200
Pogo Producing Co............................. 6,100 172,325

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
----------- ------------
Public Service Company of North Carolina,
Inc......................................... 3,400 $ 60,775
Snyder Oil Corp............................... 5,700 69,113
Sonat Offshore Drilling, Inc.................. 5,100 228,225
Southwest Gas Corp............................ 4,500 79,313
Southwestern Energy Co........................ 4,600 58,650
St. Mary Land & Exploration Co................ 1,400 19,600
+Tuboscope Vetco International, Inc........... 3,400 19,337
United Cities Gas Co.......................... 2,200 41,250
+United Meridian Corp......................... 5,200 90,350
Vintage Petroleum, Inc........................ 3,600 81,000
Washington Energy Co.......................... 4,400 81,950
WICOR, Inc.................................... 3,400 109,650
Wiser Oil Co.................................. 1,700 20,400
--------------
2,167,736
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.2%
Nashua Corp................................... 1,200 16,350
New England Business Service, Inc............. 2,700 59,063
--------------
75,413
--------------
DRUGS AND HOSPITAL SUPPLIES -- 7.4%
ADAC Laboratories............................. 3,100 37,588
+Advanced Tissue Sciences, Inc................ 6,400 64,800
+Alliance Pharmaceutical Corp................. 4,700 64,038
Alpharma Inc. (Class 'A' Stock)............... 3,900 101,887
+American Medical Response, Inc............... 3,500 113,750
+Amsco International, Inc..................... 6,000 89,250
Ballard Medical Products...................... 5,000 89,375
+Calgene, Inc................................. 5,400 24,975
+CellPro, Inc................................. 2,700 43,200
+Cephalon, Inc................................ 4,200 171,150
+Circon Corp.................................. 2,300 46,575
Collagen Corp................................. 1,500 31,687
+COR Therapeutics, Inc........................ 3,100 25,963
+Cygnus, Inc.................................. 3,400 76,075
+CytRx Corp................................... 5,000 5,625
+Enzo Biochem, Inc............................ 4,070 78,347
+Heart Technology, Inc........................ 2,700 88,763
+IDEXX Laboratories, Inc...................... 5,700 267,900
+ImmuLogic Pharmaceutical Corp................ 3,300 63,525
Invacare Corp................................. 5,500 138,875
+Liposome Company, Inc........................ 5,300 106,000
+Medimmune, Inc............................... 2,600 52,000
+Molecular Biosystems, Inc.................... 2,200 15,125
+NBTY, Inc.................................... 3,100 14,725
+North American Vaccine, Inc.................. 5,500 77,687
+Noven Pharmaceuticals, Inc................... 3,000 33,750
Omnicare, Inc................................. 4,900 219,275
Owens & Minor, Inc............................ 5,800 73,950
+Patterson Dental Co.......................... 3,000 81,000
+Perseptive Biosystems, Inc................... 2,500 21,250
+Pharmaceutical Resources, Inc................ 3,200 24,000
+Protein Design Labs, Inc..................... 2,900 67,063
+Regeneron Pharmaceuticals, Inc............... 3,800 48,450
+Resound Corp................................. 2,600 18,850
+Respironics, Inc............................. 3,200 67,200
+Roberts Pharmaceutical Corp.................. 3,500 62,125
+SciClone Pharmaceuticals, Inc................ 2,700 13,837
+Sequus Pharmaceuticals, Inc.................. 4,700 66,975
+SpaceLabs Medical, Inc....................... 1,700 48,875
+STERIS Corp.................................. 3,400 109,650
+Summit Technology, Inc....................... 5,400 182,250
+Sunrise Medical, Inc......................... 3,400 62,900
+Syncor International Corp.................... 1,700 11,475

B37

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
----------- -----------
+TECNOL Medical Products, Inc................. 3,800 $ 68,400
+The Immune Response Corp..................... 3,200 17,800
+TheraTech, Inc............................... 2,100 37,800
+U.S. Bioscience, Inc......................... 7,300 33,763
+Vertex Pharmaceuticals, Inc.................. 3,100 82,150
+VISX, Inc.................................... 2,700 105,300
Vital Signs, Inc.............................. 2,300 60,662
+Zoll Medical Corp............................ 1,000 9,000
--------------
3,516,635
--------------
ELECTRICAL EQUIPMENT -- 2.1%
Augat, Inc.................................... 3,500 59,937
Baldor Electric Co............................ 5,150 103,644
Fluke Corp.................................... 1,500 56,625
+KEMET Corp................................... 7,200 171,900
+Kent Electronics Corp........................ 2,200 128,425
Kuhlman Corp.................................. 2,500 31,250
+Microchip Technology, Inc.................... 5,800 211,700
+Rexel, Inc................................... 4,400 59,400
+Valence Technology, Inc...................... 4,100 18,450
+Vicor Corp................................... 8,000 160,000
--------------
1,001,331
--------------
ELECTRONICS -- 7.0%
Allen Group, Inc.............................. 4,900 109,638
Bell Industries, Inc.......................... 1,320 29,700
+Benchmark Electronics, Inc................... 800 22,000
BMC Industries, Inc........................... 5,100 118,575
+C-COR Electronics, Inc....................... 600 14,100
Core Industries, Inc.......................... 1,800 23,175
+Cyrix Corp................................... 3,500 80,500
Dallas Semiconductor Corp..................... 4,900 101,675
+Dionex Corp.................................. 1,100 62,425
+Dynatech Corp................................ 2,800 47,600
+IMO Industries, Inc.......................... 3,100 21,313
+Input/Output, Inc............................ 3,800 219,450
+Integrated Circuit Systems, Inc.............. 2,000 24,750
+Intermagnetics General Corp.................. 2,218 46,577
+International Rectifier Corp................. 9,300 232,500
+Itron, Inc................................... 2,000 67,500
+Lattice Semiconductor Corp................... 3,900 127,238
+Marshall Industries.......................... 3,300 106,013
+Maxim Integrated Products, Inc............... 10,000 385,000
+Oak Industries, Inc.......................... 3,300 61,875
Pacific Scientific Co......................... 2,000 49,500
Pioneer Standard Electronics, Inc............. 3,900 51,675
+Plexus Corp.................................. 1,000 16,625
+S3, Inc...................................... 8,700 153,337
+Sanmina Corp................................. 1,200 62,250
+SCI Systems, Inc............................. 5,600 173,600
+StrataCom, Inc............................... 6,900 507,150
+Three-Five Systems, Inc...................... 1,500 25,312
Tseng Laboratories, Inc....................... 3,500 32,812
+Video Lottery Technologies, Inc.............. 2,000 9,500
+VLSI Technology, Inc......................... 8,800 159,500
Wyle Electronics.............................. 2,300 80,787
X-Rite, Inc................................... 3,600 50,850
Zero Corp..................................... 3,000 53,250
--------------
3,327,752
--------------
ENVIRONMENTAL SERVICES -- 1.8%
+Addington Resources, Inc..................... 2,700 39,487
+Allwaste, Inc................................ 7,400 35,150
Dames & Moore, Inc............................ 4,200 50,925
+Groundwater Technology, Inc.................. 1,200 16,800

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- -----------
+Ionics, Inc.................................. 2,600 $ 113,100
+OHM Corp..................................... 4,900 36,137
+Omega Environmental, Inc..................... 5,500 18,563
+Pure Technology International, Inc........... 4,700 11,456
+Sanifill, Inc................................ 3,300 110,138
+TETRA Technologies, Inc...................... 2,200 38,225
+U.S.A. Waste Services, Inc................... 10,575 199,603
+United States Filter Corp.................... 4,800 127,800
+Western Waste Industries..................... 2,700 73,913
--------------
871,297
--------------
FINANCIAL SERVICES -- 3.3%
Alex Brown, Inc............................... 2,900 121,800
+AMRESCO, Inc................................. 4,400 56,100
Charter One Financial, Inc.................... 8,240 252,350
Eaton Vance Corp.............................. 1,600 45,200
+Envoy Corporation............................ 2,100 36,356
Inter-Regional Financial Group, Inc........... 2,100 53,025
+Investors Financial Services Corp............ 69 1,432
Legg Mason, Inc............................... 2,500 68,750
+Medaphis Corp................................ 2,400 88,800
+National Auto Credit, Inc.................... 4,700 76,375
Pioneer Group, Inc............................ 4,700 128,075
Piper Jaffray Companies, Inc.................. 3,000 41,250
Quick & Reilly Group, Inc..................... 4,725 96,863
Raymond James Financial, Inc.................. 3,900 82,388
SEI Corp...................................... 3,500 76,125
TCF Financial Corp............................ 6,500 215,313
United States Trust Corp...................... 1,600 79,600
Waterhouse Investor Services, Inc............. 1,975 48,880
--------------
1,568,682
--------------
FOODS -- 1.5%
Chiquita Brands International, Inc............ 10,100 138,875
Dekalb Genetics Corp. (Class 'B' Stock)....... 800 36,100
GoodMark Foods, Inc........................... 1,300 23,075
Interstate Bakeries Corp...................... 6,800 152,150
+J & J Snack Foods Corp....................... 1,500 16,500
Nash-Finch Co................................. 1,900 34,675
Richfood Holdings, Inc........................ 4,900 131,075
Rykoff-Sexton, Inc............................ 2,700 47,250
+Smithfield Foods, Inc........................ 2,600 82,550
Super Food Services, Inc...................... 2,100 27,300
--------------
689,550
--------------
FOREST PRODUCTS -- 0.4%
Caraustar Industries, Inc..................... 4,600 92,000
Mosinee Paper Corp............................ 1,300 33,475
Pope & Talbot, Inc............................ 2,400 31,800
Universal Forest Products, Inc................ 2,900 26,825
--------------
184,100
--------------
FURNITURE -- 0.6%
+Ethan Allen Interiors, Inc................... 2,700 55,013
Interface, Inc. (Class 'A' Stock)............. 2,900 49,300
Juno Lighting, Inc............................ 3,200 51,200
La-Z-Boy Chair Co............................. 3,400 104,975
Thomas Industries, Inc........................ 1,900 44,650
--------------
305,138
--------------
HEALTHCARE -- 0.7%
+Coventry Corp................................ 6,100 125,813
+Sybron International Corp.................... 8,200 194,750
--------------
320,563
--------------

B38

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- ------------
HOSPITAL MANAGEMENT -- 4.2%
+Community Health Systems, Inc................ 3,500 $ 124,688
+Express Scripts, Inc. (Class 'A' Stock)...... 2,100 107,100
+Genesis Health Ventures, Inc................. 2,700 98,550
+GranCare, Inc................................ 4,300 62,350
Integrated Health Services, Inc............... 3,900 97,500
+Lincare Holdings, Inc........................ 5,100 127,500
+Living Centers of America, Inc............... 3,700 129,500
+Magellan Health Services, Inc................ 5,300 127,200
+Mariner Health Group, Inc.................... 3,600 60,300
+PhyCor, Inc.................................. 6,550 331,184
+Quantum Health Resources, Inc................ 2,800 27,475
+Universal Health Services, Inc. (Class 'B'
Stock)...................................... 2,500 110,937
+Vencor, Inc.................................. 13,388 435,110
+Vivra, Inc................................... 6,800 170,850
--------------
2,010,244
--------------
HOUSING RELATED -- 0.9%
+Champion Enterprises, Inc.................... 2,700 83,363
Continental Homes Holding Corp................ 1,200 29,550
Fedders Corp.................................. 7,100 40,825
Oakwood Homes Corp............................ 4,200 161,175
Ryland Group, Inc............................. 2,800 39,200
Skyline Corp.................................. 1,900 39,425
Standard-Pacific Corp......................... 5,700 35,625
--------------
429,163
--------------
INSURANCE -- 4.3%
Arthur J. Gallagher and Co.................... 2,800 104,300
Allied Group, Inc............................. 1,500 54,000
American Bankers Insurance Group, Inc......... 3,400 132,600
Capital Re Corp............................... 2,700 83,026
Capitol American Financial Corp............... 3,100 70,137
CMAC Investment Corp.......................... 2,000 88,000
Enhance Financial Services Group, Inc......... 3,300 87,863
Fidelity National Financial, Inc.............. 1,900 35,387
First American Financial Corp................. 2,100 56,175
Fremont General Corp.......................... 3,080 113,190
Frontier Insurance Group, Inc................. 2,300 73,600
Hilb, Rogal and Hamilton Co................... 2,700 36,113
Integon Corp.................................. 2,900 59,812
Life Partners Group, Inc...................... 5,200 70,850
Life Re Corp.................................. 2,700 67,500
Mutual Risk Management, Ltd................... 2,400 109,800
National Re Corp.............................. 3,100 117,800
Orion Capital Corp............................ 2,700 117,112
Protective Life Corp.......................... 5,100 159,375
Selective Insurance Group, Inc................ 2,700 95,850
+Sierra Health Services, Inc.................. 3,300 104,775
Trenwick Group, Inc........................... 1,000 56,250
Washington National Corp...................... 2,300 63,537
Zenith National Insurance Corp................ 3,200 68,400
--------------
2,025,452
--------------
LEISURE -- 2.4%
Anthony Industries, Inc....................... 2,100 48,300
Arctco, Inc................................... 5,600 72,800
+Aztar Corp................................... 7,000 56,000
+Bally Gaming International, Inc.............. 1,500 12,187
+Bell Sports Corp............................. 2,700 21,600
+Boomtown, Inc................................ 1,700 8,500

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- -----------
+Carmike Cinemas, Inc. (Class 'A' Stock)...... 2,000 $ 45,000
+Casino Magic Corp............................ 6,300 19,687
+Cineplex Odeon Corp.......................... 20,300 30,450
+Cobra Golf, Inc.............................. 3,400 121,125
+Grand Casinos, Inc........................... 7,650 177,863
+Hollywood Park, Inc.......................... 3,500 35,218
Huffy Corp.................................... 2,500 25,312
+International Lottery & Totalizator Systems,
Inc......................................... 3,200 4,400
+Players International, Inc................... 5,400 57,713
+Regal Cinemas, Inc........................... 3,350 99,663
+Roadmaster Industries, Inc................... 9,200 21,850
+Score Board, Inc............................. 1,900 8,313
Showboat, Inc................................. 2,800 73,850
Sturm Ruger & Company, Inc.................... 2,400 65,700
Thor Industries, Inc.......................... 1,600 31,000
Winnebago Industries, Inc..................... 4,600 35,650
+WMS Industries, Inc.......................... 4,600 75,325
--------------
1,147,506
--------------
LODGING -- 0.3%
Marcus Corp................................... 3,550 97,181
+Prime Hospitality Corp....................... 5,500 55,000
--------------
152,181
--------------
MACHINERY -- 2.3%
AGCO Corp..................................... 4,200 214,200
+Astec Industries, Inc........................ 1,900 18,762
+Cognex Corp.................................. 6,800 236,300
+Global Industrial Technologies, Inc.......... 4,300 81,162
Kysor Industrial Corp......................... 1,100 26,675
+Lindsay Manufacturing Co..................... 700 26,950
Manitowoc Company, Inc........................ 1,500 45,937
+Novellus Systems, Inc........................ 3,100 167,400
Regal Beloit Corp............................. 3,700 80,475
Roper Industries, Inc......................... 2,300 84,525
+Royal Appliance Manufacturing Co............. 4,400 11,000
SPX Corp...................................... 2,300 36,513
Toro Co....................................... 2,300 75,613
--------------
1,105,512
--------------
MEDIA -- 0.6%
+Catalina Marketing Corp...................... 1,700 106,675
+International Family Entertainment, Inc.
(Class 'B' Stock)........................... 6,800 111,350
+NTN Communications, Inc...................... 4,100 18,706
+Westcott Communications, Inc................. 3,700 50,875
--------------
287,606
--------------
METALS - DIVERSIFIED -- 1.0%
Amcast Industrial Corp........................ 1,600 29,200
AMCOL International Corp...................... 3,600 51,300
Brenco, Inc................................... 1,700 17,425
+Castech Aluminum Group, Inc.................. 2,400 32,400
Glamis Gold, Ltd.............................. 5,000 31,250
Handy & Harman................................ 2,700 44,550
+Hecla Mining Co.............................. 8,600 59,125
+Magma Copper Co.............................. 8,100 225,788
--------------
491,038
--------------
MINERAL RESOURCES -- 0.3%
Coeur D'Alene Mines Corp...................... 3,400 58,225
Dravo Corp.................................... 2,800 33,600
+Sunshine Mining and Refining Co.............. 34,200 47,025
-------------
138,850
-------------

B39

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
-------- -----------
MISCELLANEOUS - BASIC INDUSTRY -- 4.9%
Air Express International Corp................ 2,900 $ 66,700
+Alliant Techsystems, Inc..................... 2,300 116,438
AMTROL, Inc................................... 1,300 19,825
Apogee Enterprises, Inc....................... 2,600 44,200
Aquarion Co................................... 1,200 30,600
Bassett Furniture Industries, Inc............. 2,700 62,775
Butler Manufacturing Co....................... 1,400 54,950
BW/IP, Inc. (Class 'A' Stock)................. 4,200 69,300
Clarcor, Inc.................................. 2,700 55,013
Consumers Water Co............................ 1,300 23,725
+Cyrk International, Inc...................... 2,000 19,500
+Fibreboard Corp.............................. 1,600 35,800
+Figgie International, Inc. (Class 'A' Stock). 3,000 31,125
Fisher Scientific International, Inc.......... 3,000 100,125
+Flow International Corp...................... 2,800 26,250
+Gentex Corp.................................. 2,700 59,400
Greenfield Industries, Inc.................... 2,900 90,625
+Griffon Corp................................. 5,400 48,600
Harmon Industries, Inc........................ 1,200 18,900
Hayes Wheels International, Inc............... 3,200 82,000
Insteel Industries, Inc....................... 1,600 11,000
+Intermet Corp................................ 4,400 46,200
+Jan Bell Marketing, Inc...................... 4,500 11,250
Justin Industries, Inc........................ 4,900 53,900
K-Swiss, Inc. (Class 'A' Stock)............... 1,100 11,962
+L.A. Gear, Inc............................... 3,900 6,825
+Lydall, Inc.................................. 3,300 75,075
Medusa Corp................................... 3,000 79,500
+Mohawk Industries, Inc....................... 6,000 93,750
+Mueller Industries, Inc...................... 3,100 90,675
O'Sullivan Corp............................... 3,000 31,125
+Paragon Trade Brands, Inc.................... 2,100 49,088
+SPS Technologies, Inc........................ 1,000 53,375
Standex International Corp.................... 2,600 85,150
Texas Industries, Inc......................... 2,100 111,300
+Timberland Co. (Class 'A' Stock)............. 2,000 39,750
TJ International, Inc......................... 3,200 59,200
Tredegar Industries, Inc...................... 1,500 48,750
Valmont Industries, Inc....................... 2,300 56,924
Walbro Corp................................... 1,600 28,800
+Whittaker Corp............................... 1,500 32,625
+Wolverine Tube, Inc.......................... 2,600 97,500
Wolverine World Wide, Inc..................... 3,350 105,525
--------------
2,335,100
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.9%
+DeVRY, Inc................................... 3,000 81,000
Hughes Supply, Inc............................ 1,100 31,075
Ideon Group, Inc.............................. 5,200 52,650
+Mail Boxes, Etc.............................. 2,000 25,000
+Merisel, Inc................................. 5,600 24,500
Philadelphia Suburban Corp.................... 2,200 45,650
Southern California Water Co.................. 1,500 30,375
+Valassis Communications, Inc................. 8,200 143,500
--------------
433,750
--------------
PETROLEUM -- 0.4%
Cabot Oil & Gas Corp. (Class 'A' Stock)....... 4,200 61,425
KN Energy, Inc................................ 5,100 148,538
--------------
209,963
--------------

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- -----------
PETROLEUM SERVICES -- 1.8%
Camco International, Inc...................... 4,600 $ 128,800
+Hornbeck Offshore Services, Inc.............. 2,200 43,175
+Landmark Graphics Corp....................... 2,700 62,775
+Mesa, Inc.................................... 11,900 44,625
+Newfield Exploration Co...................... 3,100 83,700
+Noble Drilling Corp.......................... 15,200 136,800
+Offshore Logistics, Inc...................... 3,700 46,713
Piedmont Natural Gas Company, Inc............. 5,200 120,900
+Pool Energy Services Co...................... 2,400 22,800
+Pride Petroleum Services, Inc................ 4,600 48,875
Production Operators Corp..................... 1,600 52,800
+Seitel, Inc.................................. 1,722 60,915
--------------
852,878
--------------
RAILROADS -- 0.1%
+RailTex, Inc................................. 1,600 33,600
--------------
REAL ESTATE DEVELOPMENT -- 0.3%
+Toll Brothers, Inc........................... 6,300 144,900
--------------
RESTAURANTS -- 1.0%
Applebee's International, Inc................. 5,700 129,675
+Au Bon Pain, Inc. (Class 'A' Stock).......... 2,200 18,150
+Bertucci's, Inc.............................. 1,500 7,500
+Checkers Drive-In Restaurants, Inc........... 9,700 10,003
+Cheesecake Factory........................... 1,700 36,550
+Flagstar Companies, Inc...................... 7,700 24,063
+Foodmaker, Inc............................... 5,700 33,487
+Fresh Choice, Inc............................ 1,000 6,250
+IHOP Corp.................................... 1,700 44,200
+Showbiz Pizza Time, Inc...................... 2,300 27,888
+Sonic Corp................................... 2,350 44,650
+Taco Cabana (Class 'A' Stock)................ 800 4,000
TCBY Enterprises, Inc......................... 4,600 18,400
+TPI Enterprises, Inc......................... 3,600 11,250
+Triarc Companies, Inc. (Class 'A' Stock)..... 5,500 60,500
--------------
476,566
--------------
RETAIL -- 3.4%
Arbor Drugs, Inc.............................. 4,650 97,650
Big B, Inc.................................... 3,100 31,000
+Bombay Company, Inc.......................... 6,900 43,987
+Books-A-Million, Inc......................... 3,300 42,488
Casey's General Stores, Inc................... 4,500 98,438
Cash America International, Inc............... 5,000 27,500
Cato Corp. (Class 'A' Stock).................. 4,600 35,650
+CompUSA, Inc................................. 3,900 121,387
+Damark International, Inc.................... 1,400 10,500
+Designs, Inc................................. 2,900 20,300
+Dress Barn, Inc.............................. 3,900 38,513
+Eagle Hardware & Garden, Inc................. 4,300 32,250
Fabri-Centers of America (Class 'A' Stock).... 3,500 46,375
Fay's, Inc.................................... 3,800 28,500
+Filene's Basement Corp....................... 3,600 8,325
+Forschner Group, Inc......................... 1,400 17,325
+Gottschalks, Inc............................. 1,900 9,975
Hechinger Co. (Class 'A' Stock)............... 8,000 35,000
+Hi-Lo Automotive, Inc........................ 1,800 9,225
J. Baker, Inc................................. 2,600 14,950
+Lechters, Inc................................ 900 5,794
+Levitz Furniture, Inc........................ 5,600 18,900
Lillian Vernon Corp........................... 1,800 24,075
+Michaels Stores, Inc......................... 4,000 55,000

B40

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- -----------
+MicroAge, Inc................................ 2,700 $ 21,937
+Musicland Stores Corp........................ 6,400 27,200
Oshkosh B' Gosh, Inc. (Class 'A' Stock)....... 2,200 38,500
+Payless Cashways, Inc........................ 7,200 30,600
Pier 1 Imports, Inc........................... 7,300 83,037
+Proffitt's, Inc.............................. 1,800 47,250
Ross Stores, Inc.............................. 4,700 89,887
Russ Berrie & Company, Inc.................... 4,000 50,500
+Shoe Carnival, Inc........................... 2,300 8,625
Shopko Stores, Inc............................ 6,000 67,500
+Sports & Recreation, Inc..................... 3,700 26,363
+Stein Mart, Inc.............................. 4,000 44,000
Strawbridge & Clothier (Class 'A' Stock)...... 1,700 40,800
+Tyco Toys, Inc............................... 6,400 28,800
Venture Stores, Inc........................... 3,200 10,800
+Whole Foods Market, Inc...................... 2,500 34,687
+Williams-Sonoma, Inc......................... 4,600 85,100
--------------
1,608,693
--------------
STEEL -- 0.8%
+Acme Metals, Inc............................. 2,100 29,925
Birmingham Steel Corp......................... 5,400 80,325
Commercial Metals Co.......................... 2,900 71,775
+Material Sciences Corp....................... 2,900 43,138
+Northwestern Steel and Wire Co............... 4,500 36,563
+NS Group, Inc................................ 2,600 6,500
Quanex Corp................................... 2,400 46,500
Steel Technologies, Inc....................... 2,300 19,837
+WHX Corp..................................... 4,800 52,200
--------------
386,763
--------------
TELECOMMUNICATIONS -- 2.2%
+Aspect Telecommunications Corp............... 3,900 130,650
+BroadBand Technologies, Inc.................. 2,400 39,000
+California Microwave, Inc.................... 2,800 46,550
+Cellular Communications, Inc. (Class 'A'
Stock)...................................... 2,300 114,425
+Centigram Communications Corp................ 1,200 23,700
+CommNet Cellular, Inc........................ 2,500 72,187
+Compression Labs, Inc........................ 2,900 18,125
+Digi International, Inc...................... 2,600 49,400
+Digital Microwave Corp....................... 3,000 30,000
+Geotek Communications, Inc................... 9,500 59,968
+InterVoice, Inc.............................. 3,000 57,000
+Network Equipment Technologies, Inc.......... 3,600 98,550
+Picturetel Corp.............................. 5,800 250,125
+Symmetricom, Inc............................. 2,800 38,500
--------------
1,028,180
--------------
TEXTILES -- 1.9%
+Ashworth, Inc................................ 2,200 11,275
Authentic Fitness Corp........................ 3,700 76,775
+Cone Mills Corp.............................. 5,100 57,375
Delta Woodside Industries, Inc................ 4,600 30,475
Dixie Yarns, Inc.............................. 1,700 6,587
+Fieldcrest Cannon, Inc....................... 1,600 26,600
G & K Services, Inc. (Class 'A' Stock)........ 3,300 84,150

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
--------- ------------
+Galey & Lord, Inc............................ 2,100 $ 22,575
Guilford Mills, Inc........................... 2,600 52,975
Haggar Corp................................... 1,600 28,800
+Hartmarx Corp................................ 6,100 26,687
Johnston Industries, Inc...................... 1,800 14,400
Kellwood Co................................... 3,800 77,425
+Nautica Enterprises, Inc..................... 3,750 164,063
Oxford Industries, Inc........................ 1,600 26,800
Phillips-Van Heusen Corp...................... 5,000 49,375
+Pillowtex Corp............................... 1,900 22,087
St. John Knits, Inc........................... 1,600 85,000
+Tultex Corp.................................. 5,500 22,688
--------------
886,112
--------------
TOBACCO -- 0.3%
Dimon, Inc.................................... 6,800 119,850
--------------
TRUCKING/SHIPPING -- 1.3%
+American Freightways, Inc.................... 5,800 60,175
Arkansas Best Corp............................ 3,400 26,775
Frozen Food Express Industries, Inc........... 2,800 24,500
+Heartland Express, Inc....................... 3,233 63,852
+Kirby Corp................................... 5,100 82,875
+Landstar Systems, Inc........................ 2,300 61,525
+M.S. Carriers, Inc........................... 1,900 38,000
Rollins Truck Leasing Corp.................... 8,300 92,337
TNT Freightways Corp.......................... 3,900 78,487
Werner Enterprises, Inc....................... 4,600 93,150
--------------
621,676
--------------
UTILITY - ELECTRIC -- 1.6%
Bangor Hydro-Electric Co...................... 1,200 13,800
Central Hudson Gas & Electric Corp............ 3,300 101,888
Central Vermont Public Service Corp........... 2,200 29,425
Commonwealth Energy System.................... 2,000 89,500
Eastern Utilities Associates.................. 3,800 89,775
Green Mountain Power Corp..................... 900 24,975
Interstate Power Co........................... 1,800 59,850
Orange & Rockland Utilities, Inc.............. 2,500 89,375
Sierra Pacific Resources...................... 5,400 126,225
TNP Enterprises, Inc.......................... 2,000 37,500
United Illuminating Co........................ 2,600 97,175
--------------
759,488
--------------
TOTAL COMMON STOCKS
(Cost $40,606,241)........................................... 43,203,176
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 15.1% AMOUNT VALUE
------------- -------------
REPURCHASE AGREEMENTS -- 14.9%
Joint Repurchase Agreement Account,
5.839%, 01/02/96 (see Note 4)............... $ 7,088,000 $ 7,088,000
-------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.2%
US Treasury Bills,
5.230%, 03/14/96............................ 100,000 98,954
-------------
TOTAL SHORT-TERM INVESTMENTS.................................... $ 7,186,954
--------------

B41

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

DECEMBER 31, 1995

## VARIATION MARGIN ON OPEN FUTURES
CONTRACTS -- 0.0%...................................... $ 16,780
--------------
LIABILITIES -- (6.2%)
(net of other assets).................................... (2,939,984)
--------------
TOTAL NET ASSETS -- 100.0%................................. $ 47,466,926
--------------
--------------

+No dividend was paid on this security during the 12 months ending December 31,
1995.

##Open futures contracts as of December 31, 1995 are as follows:

PAR VALUE
COVERED BY CONTRACT TYPE EXPIRATION DATE VALUE OF CONTRACTS
- ------------------- ---- -----------------------------------

$3,257,100 MIDCAP 400 Index Mar 96 $3,270,750
Futures(30 contracts)
$ 930,100 S&P 500 Index Futures Mar 96 $ 927,675
---------- (3 contracts) ----------
$4,187,200 $4,198,425

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B42

<PAGE>

GLOBAL PORTFOLIO

DECEMBER 31, 1995
MARKET
COMMON STOCKS -- 93.4% SHARES VALUE
---------- --------------
AUSTRALIA -- 4.9% Brambles Industries, Ltd.
(Miscellaneous - Basic Industry)............ 393,500 $ 4,382,900
Broken Hill Proprietary Co., Ltd.
(Metals - Diversified)...................... 428,331 6,043,085
Coca-Cola Amatil, Ltd.
(Foods)..................................... 1,060,632 8,450,649
Publishing and Broadcasting, Ltd.
(Media)..................................... 152,400 530,742
Qantas Airways, Ltd.
(Airlines).................................. 317,000 527,270
--------------
19,934,646
--------------
BELGIUM -- 1.0%
Bekaert, SA
(Miscellaneous - Basic Industry)............ 4,900 4,036,694
--------------
FEDERAL REPUBLIC OF GERMANY -- 2.4%
Linde, AG
(Machinery)................................. 8,040 4,684,636
Siemens, AG
(Electrical Equipment)...................... 9,000 4,918,204
--------------
9,602,840
--------------
FINLAND -- 0.7%
Nokia Corp. (Class 'A' Stock)
(Telecommunications)........................ 71,900 2,772,427
--------------
FRANCE -- 5.7%
Carrefour Supermarche, SA
(Retail).................................... 9,400 5,691,919
Imetal
(Mineral Resources)......................... 29,552 3,523,473
**Lafarge, SA
(Construction).............................. 1,210 77,806
Lafarge, SA
(Construction).............................. 62,491 4,018,325
Legrand, SA
(Electrical Equipment)...................... 26,900 4,144,788
Plastic Omnium
(Autos - Cars & Trucks)..................... 7,265 497,511
Valeo, SA
(Autos - Cars & Trucks)..................... 105,785 4,889,848
--------------
22,843,670
--------------
HONG KONG -- 8.3%
CDL Hotels International, Ltd.
(Real Estate Development)................... 4,950,145 2,528,687
Citic Pacific, Ltd.
(Miscellaneous - Basic Industry)............ 1,870,000 6,396,573
Guoco Group, Ltd.
(Financial Services)........................ 1,553,000 7,531,523
Henderson Land Development
(Real Estate Development)................... 677,000 4,079,948
Hung Hing Printing Group, Ltd.
(Miscellaneous - Basic Industry)............ 3,452,000 830,355
Hutchison Whampoa, Ltd.
(Miscellaneous - Basic Industry)............ 1,051,000 6,388,231
New World Development Co., Ltd.
(Real Estate Development)................... 1,210,000 5,257,808
--------------
33,013,125
--------------

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- ------------
INDONESIA -- 1.0%
PT Kabelmetal Indonesia (Foreign)
(Telecommunications)........................ 943,400 $ 773,616
Sampoerna H.M. (Foreign)
(Tobacco)................................... 313,000 3,257,993
--------------
4,031,609
--------------
ITALY -- 1.2%
Telecom Italia Mobile SpA
(Telecommunications)........................ 2,700,000 4,750,548
--------------
JAPAN -- 16.9% Aiwa, Co.
(Electronics)............................... 127,000 2,970,904
Daibiru Corp.
(Real Estate Development)................... 177,000 2,001,837
DDI Corp.
(Telecommunications)........................ 540 4,175,930
Keyence Corp.
(Electrical Equipment)...................... 31,800 3,657,999
Mitsubishi Bank
(Banks and Savings & Loans)................. 81,000 1,902,658
Mitsui Fudosan
(Real Estate Development)................... 400,000 4,910,585
Nichiei Co., Ltd.
(Financial Services)........................ 96,000 7,145,481
Nintendo Corp. Ltd.
(Other Technology).......................... 129,000 9,788,787
Nippon Television Network
(Media)..................................... 20,500 5,469,309
Nissen Co., Ltd.
(Retail).................................... 1,420 33,218
Nomura Securities Co., Ltd
(Financial Services)........................ 200,000 4,349,928
Omron Corp.
(Electronics)............................... 178,000 4,095,118
Onward Kashiyama Co., Ltd.
(Textiles).................................. 100,000 1,623,973
Rohm Co.
(Electronics)............................... 88,000 4,959,304
Sanwa Bank, Ltd.
(Banks and Savings & Loans)................. 102,000 2,070,565
Sony Music Entertainment, Inc.
(Leisure)................................... 117,600 6,138,618
Sumitomo Bank
(Banks and Savings & Loans)................. 102,000 2,159,304
--------------
67,453,518
--------------
MALAYSIA -- 2.2%
I.J.M. Corp. Berhad
(Construction).............................. 3,250,000 5,171,328
Renong Berhad
(Miscellaneous - Basic Industry)............ 2,428,000 3,595,620
--------------
8,766,948
--------------
MEXICO -- 1.2%
Apasco, SA de CV
(Miscellaneous - Basic Industry)............ 469,700 1,926,349
Cifra, SA de CV (Class 'B' Stock)
(Retail).................................... 1,387,800 1,444,537
Fomento Economico Mexicano, SA de CV
(Class 'B' Stock)(Miscellaneous --
Basic Industry)............................ 665,100 1,496,799
--------------
4,867,685
--------------

B43

<PAGE>

GLOBAL PORTFOLIO (CONTINUED)

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
---------- -----------
NETHERLANDS -- 2.5%
Heineken, N.V.
(Beverages)................................. 34,225 $ 6,060,762
Royal Dutch Petroleum
(Petroleum)................................. 29,500 4,113,902
--------------
10,174,664
--------------
NEW ZEALAND -- 0.4%
Fletcher Challenge Forestry Division
(Forest Products)........................... 279,204 397,640
Fletcher Challenge, Ltd.
(Forest Products)........................... 453,800 1,046,531
--------------
1,444,171
--------------
REPUBLIC OF KOREA -- 0.9%
Samsung Electronics
(New Common 3)(Electronics)................. 587 106,315
Samsung Electronics Co.
(Electronics)............................... 13,830 2,513,735
Samsung Electronics Co. (New)
(Electronics)............................... 5,810 1,048,534
--------------
3,668,584
--------------
SINGAPORE -- 3.9%
Overseas Chinese Banking Corp., Ltd. (Foreign)
(Banks and Savings & Loans)................. 330,000 4,129,958
Overseas Union Bank, Ltd. (Foreign)
(Banks and Savings & Loans)................. 925,000 6,376,830
Sembawang Maritime, Ltd.
(Trucking/Shipping)......................... 883,500 2,811,107
Wing Tai Holdings, Ltd.
(Miscellaneous - Basic Industry)............ 1,070,250 2,186,964
--------------
15,504,859
--------------
SPAIN -- 2.2%
Banco Popular Espanol, SA
(Banks and Savings & Loans)................. 23,800 4,377,573
Centros Commerciales Pryca, SA
(Retail).................................... 116,762 2,443,317
Dragados Y Construcciones, SA
(Construction).............................. 141,500 1,855,699
--------------
8,676,589
--------------
SWEDEN -- 4.3%
Astra, AB (Series 'B' Free)
(Drugs and Hospital Supplies)............... 181,350 7,173,439
Autoliv, AB (Free)
(Autos - Cars & Trucks)..................... 60,000 3,501,363
Hennes & Mauritz (Series 'B' Free)
(Retail).................................... 71,000 3,951,065
Mo Och Domsjo, AB (Series 'B' Free)
(Forest Products)........................... 64,700 2,753,879
--------------
17,379,746
--------------
THAILAND -- 0.0%
Land & House Public Co., Ltd. (Foreign)
(Construction).............................. 7,500 123,263
--------------
UNITED KINGDOM -- 10.7%
Bank of Ireland
(Banks and Savings & Loans)................. 700,000 5,108,712
Barclays, PLC
(Banks and Savings & Loans)................. 294,000 3,369,141

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- -------------
Britannic Assurance, PLC
(Insurance)................................. 28,000 $ 333,914
British Sky Broadcasting Group, PLC
(Media)..................................... 738,900 4,664,033
Carlton Communications
(Communications)............................ 229,300 3,437,730
Commercial Union, PLC
(Insurance)................................. 324,000 3,159,513
Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)..................... 536,170 6,485,678
**Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)..................... 22,870 276,643
J. Sainsbury, PLC
(Retail).................................... 356,700 2,173,994
Siebe, PLC
(Machinery)................................. 596,340 7,347,784
Vodafone Group, PLC
(Telecommunications)........................ 1,790,700 6,423,183
--------------
42,780,325
--------------
UNITED STATES -- 23.0%
Gucci Group
(Textiles).................................. 106,900 4,155,738
Mattel, Inc.
(Leisure)................................... 280,887 8,637,275
McDonald's Corp.
(Restaurants)............................... 125,100 5,645,138
MCI Communications Corp.
(Telecommunications)........................ 251,800 6,578,275
+Microsoft Corp.
(Computer Services)......................... 95,700 8,397,675
+Mirage Resorts, Inc.
(Leisure)................................... 157,000 5,416,500
Mobil Corp.
(Petroleum)................................. 63,700 7,134,400
Norwest Corp.
(Banks and Savings & Loans)................. 203,600 6,718,800
+Oracle Corp.
(Computer Services)......................... 132,000 5,593,500
**Qantas Airways, Ltd., ADR
(Airlines).................................. 51,300 853,278
SGS Thomson Microelectronics, N.V.
(Electronics)............................... 76,000 3,059,000
+Silicon Graphics, Inc.
(Computer Services)......................... 252,000 6,930,000
Texas Instruments, Inc.
(Electronics)............................... 88,000 4,554,000
Tiffany & Co.
(Retail).................................... 72,000 3,627,000
Time Warner, Inc.
(Media)..................................... 135,800 5,143,425
+Viacom, Inc. (Class 'A' Stock)
(Media)..................................... 115,000 5,275,625
Walt Disney Co.
(Leisure)................................... 72,500 4,277,500
--------------
91,997,129
--------------
TOTAL COMMON STOCKS
(Cost $331,329,354).......................................... 373,823,040
-------------

B44

<PAGE>

GLOBAL PORTFOLIO (CONTINUED)

DECEMBER 31, 1995
MARKET
RIGHTS AND WARRANTS -- 1.0% SHARES VALUE
---------- -------------
FRANCE -- 0.0%
**Lafarge (Warrants), Expire 04/01/96,
(Construction).............................. 1,000 $ 428
--------------
SINGAPORE -- 0.5%
United Overseas Bank Ltd. (Warrants), Expire
06/17/97,
(Banks and Savings & Loans)................. 510,800 2,058,658
--------------
SWITZERLAND -- 0.1%
\Nitori Co., Ltd. (Warrants), Expire 02/06/98,
(Furniture)................................. 2,232 216,624
--------------
UNITED STATES -- 0.4%
#Onward Kashiyama Co., Ltd. (Warrants), Expire
03/26/96, (Textiles)........................ 580 1,634,875
--------------
TOTAL RIGHTS AND WARRANTS
(Cost $3,712,601)............................................ 3,910,585
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 0.8% AMOUNT VALUE
------------- ------------
UNITED STATES
)Triparty Repo,
5.900%, 1/2/96................................ $ 3,163,000 $ 3,163,000
------------
OTHER ASSETS -- 4.8%
(net of liabilities)........................................... 19,202,909
------------
TOTAL NET ASSETS -- 100.0%...................................... $ 400,099,534
-------------
-------------

The following abbreviations are used in portfolio descriptions:

AB Akiteboiag (Swedish Stock Company)
ADR American Depository Receipt
AG Aktiengesellschaft (West German Stock Company)
N.V. Naamloze Vennootschap (Dutch Corporation)
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 Swiss warrants with an underlying Japanese security.

**Indicates a restricted security; the aggregate cost of the restricted
securities is $1,003,876. The aggregate value, $1,208,155 is approximately
.30% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

)Triparty Repo, 5.900%, entered 12/29/95; maturing 01/02/96 in the amount of
$3,163,000; Collateralized by $3,174,000 United States Treasury Notes, 6.1250%,
05/31/97.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B45

<PAGE>

NATURAL RESOURCES PORTFOLIO

DECEMBER 31, 1995
MARKET
COMMON STOCKS -- 92.9% SHARES VALUE
------------- -------------
ALUMINUM -- 4.4%
Aluminum Co. of America....................... 175,000 $ 9,253,125
Comalco, Ltd., ADR............................ 134,900 3,617,532
--------------
12,870,657
--------------
CHEMICALS -- 2.7%
Arcadian Corp................................. 171,800 3,328,625
+Sherritt, Inc................................ 365,000 4,714,639
--------------
8,043,264
--------------
CHEMICALS - SPECIALTY -- 1.4%
First Mississippi Corp........................ 155,000 4,107,500
--------------
CONSTRUCTION -- 1.4%
+J. Ray McDermott, SA......................... 226,100 4,041,538
--------------
DIVERSIFIED GAS -- 11.3%
Arethusa (Off-Shore) Ltd...................... 142,500 3,990,000
+Beau Canada Exploration, Ltd. (Class 'A'
Stock)...................................... 810,900 968,682
Cross Timbers Oil Co.......................... 220,200 3,881,025
+Rigel Energy Corp............................ 318,600 2,807,663
Sonat Offshore Drilling, Inc.................. 132,700 5,938,325
+Talisman Energy, Inc......................... 316,500 6,407,704
USX-Delhi Group............................... 139,200 1,444,200
Weatherford Enterra, Inc...................... 103,174 2,979,149
Western Gas Resources, Inc.................... 294,400 4,747,200
--------------
33,163,948
--------------
ENVIRONMENTAL SERVICES -- 0.3%
+Core Laboratories N.V........................ 80,600 967,200
--------------
FOREST PRODUCTS -- 8.1%
+Asia Pacific Resource International Holdings
Ltd......................................... 441,700 2,098,075
Fletcher Challenge, Ltd., ADR................. 431,200 6,198,500
Louisiana-Pacific Corp........................ 270,000 6,547,500
Rayonier, Inc................................. 188,200 6,281,175
Timberwest Forest, Ltd........................ 244,700 2,555,497
--------------
23,680,747
--------------
GAS PIPELINES -- 4.7%
Enron Oil & Gas Co............................ 98,900 2,373,600
+Reading & Bates Offshore Drilling Co......... 253,500 3,802,500
+Seagull Energy Corp.......................... 161,900 3,602,275
+Tejas Gas Corp............................... 73,645 3,893,979
--------------
13,672,354
--------------
METALS - DIVERSIFIED -- 8.2%
Cambior, Inc.................................. 160,000 1,744,228
Cambior, Inc.................................. 380,000 4,132,500
Cameco Corporation............................ 166,300 6,185,214
+Firstmiss Gold, Inc.......................... 177,211 3,942,945
Kloof Gold Mining Company Ltd., ADR........... 257,900 2,433,931
+Stillwater Mining Co......................... 290,800 5,597,900
--------------
24,036,718
--------------
MINERAL RESOURCES -- 26.1%
Agnico-Eagle Mines, Ltd....................... 464,500 5,864,313
Barrick Gold Corporation...................... 229,953 6,065,010
+Barrington Petroleum Ltd..................... 398,400 1,153,301
Battle Mountain Gold Co....................... 154,200 1,291,425
+Chancellor Energy Resources, Inc............. 1,285,000 517,955
+Chancellor Energy Resources, Inc............. 1,423,100 573,620
Coeur D'Alene Mines Corp...................... 90,525 1,550,241
CRA Limited, ADR.............................. 65,700 3,858,935

DECEMBER 31, 1995
MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
----------- ------------
+Falcon Drilling Company, Inc................. 184,300 $ 2,764,500
Freeport-McMoRan Copper & Gold, Inc.
(Class 'A' Stock)............................ 147,200 4,103,200
Inco, Ltd..................................... 134,000 4,455,500
Newmont Mining Corp........................... 120,007 5,430,317
Pegasus Gold, Inc............................. 163,400 2,267,175
Placer Dome, Inc.............................. 189,700 4,576,513
Potash Corp. of Saskatchewan, Inc............. 119,400 8,462,475
+Rio Alto Exploration Ltd..................... 343,200 1,351,923
Sante Fe Pacific Gold Corp.................... 443,300 5,375,013
+Seacor Holdings.............................. 88,300 2,384,100
+Tesco Corporation............................ 293,800 1,426,474
+Tom Brown, Inc............................... 300,000 4,387,500
+TVX Gold, Inc................................ 570,000 4,061,250
Western Mining Corp. Holdings, Ltd., ADR...... 178,100 4,652,863
--------------
76,573,603
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.8%
TJ International, Inc......................... 131,400 2,430,900
--------------
PETROLEUM -- 6.8%
Anadarko Petroleum Corp....................... 90,300 4,887,488
NGC Corp...................................... 496,788 4,408,994
+Northstar Energy Corp........................ 548,400 5,626,676
Parker & Parsley Petroleum Co................. 137,800 3,031,600
+Stolt Comex Seaway, SA....................... 209,000 1,776,500
--------------
19,731,258
--------------
PETROLEUM SERVICES -- 16.7%
Abacan Resource Corp.......................... 522,600 1,404,488
+Cairn Energy USA, Inc........................ 252,500 3,535,000
Camco International, Inc...................... 125,000 3,500,000
Coflexip, ADR................................. 270,299 5,101,894
+Crestar Energy, Inc.......................... 19,000 262,825
**+Crestar Energy, Inc........................ 209,000 2,891,077
+Dreco Energy Services, Ltd. (Class 'A'
Stock)...................................... 83,700 1,485,675
+ENSCO International, Inc..................... 175,800 3,647,850
+Hornbeck Offshore Services, Inc.............. 147,800 2,900,575
ICO, Inc...................................... 182,700 890,663
+Marine Drilling Co., Inc..................... 1,147,900 5,882,988
+Newfield Exploration Co...................... 164,200 4,433,400
Noble Affiliates, Inc......................... 228,300 6,820,463
+Noble Drilling Corp.......................... 133,600 1,202,400
+PetroCorp, Inc............................... 206,600 1,497,850
+Pride Petroleum Services, Inc................ 227,000 2,411,875
+Varco International, Inc..................... 69,300 831,600
--------------
48,700,623
--------------
TOTAL COMMON STOCKS
(Cost $230,530,554).......................................... 272,020,310
--------------

MARKET
PREFERRED STOCKS -- 4.2% SHARES VALUE
----------- ------------
MINERAL RESOURCES -- 1.3%
Amax Gold, Inc. (Conv.), Series B............. 47,500 2,588,750
Freeport - McMoRan Copper & Gold, Inc......... 57,000 1,204,125
--------------
3,792,875
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 1.1%
Hecla Mining Co. (Cum. Conv.), Series B....... 82,700 3,308,000
-------------

B46

<PAGE>

NATURAL RESOURCES PORTFOLIO (CONTINUED)

DECEMBER 31, 1995
MARKET
PREFERRED STOCKS (CONTINUED) SHARES VALUE
------------- -------------
PETROLEUM SERVICES -- 1.8%
Noble Drilling Corp. (Cum. Conv.)............. 142,500 $ 3,669,375
Reading & Bates Corp. (Cum. Conv.)............ 37,900 1,705,500
--------------
5,374,875
--------------
TOTAL PREFERRED STOCKS
(Cost $12,008,616)........................................... 12,475,750
--------------

MARKET
RIGHTS AND WARRANTS -- 0.1% SHARES VALUE
------------- -------------
PETROLEUM SERVICES
BJ Services Company (Warrants)................ 32,440 247,355
--------------
(Cost $56,770)

PAR MARKET
CONVERTIBLE BONDS -- 1.3% VALUE VALUE
------------- -------------
INDUSTRIAL
Coeur d'Alene Mines Corp.,
6.375%, 01/31/04............................ $ 4,099,000 3,883,803
--------------
(Cost $3,926,702)

PRINCIPAL
SHORT-TERM INVESTMENTS -- 1.4% AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.839%, 01/02/96 (see Note 4)............... 4,488,000 4,488,000
--------------

CALL OPTIONS WRITTEN -- .1%

PAR STRIKE EXPIRATION
VALUE ISSUE PRICE DATE PREMIUMS PAID
----- ----- ------ ----------- -------------
44,000 Potash Corp. of 70 Jan. 20, (132,000)
Saskatchewan, Inc. 1996
Total Options Written (Premiums Received - $163,675) (132,000)

OTHER ASSETS -- 0.0%
(net of liabilities)....................................... 188,411
--------------
TOTAL NET ASSETS -- 100.0%.................................. $ 293,171,629
--------------
--------------

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 $2,649,951. The aggregate value, 2,891,077 is approximately
1% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B47

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

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 Zero Coupon Bond Portfolio 1995 was liquidated on November 15,
1995. On that date, all shares held were redeemed and unless otherwise
directed, the redemption proceeds were transferred to the Money Market
Portfolio in accordance with the prospectus.

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, Diversified Bond,
Equity, Flexible Managed and Conservative Balanced) 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.

Accounting Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

B48

<PAGE>

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 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 Portfolio may invest up to 100% of its total assets in
common stock and convertible securities denominated in a foreign
currency and issued by foreign or domestic issuers. The Diversified
Bond and High Yield Bond Portfolios may each invest up to 20% of their
assets in United States currency denominated debt securities issued
outside the United States by foreign or domestic issuers. In addition,
the bond components of the Conservative Balanced and Flexible Managed
Portfolios may each invest up to 20% of their assets in such
securities. [Further, the Equity Income and Flexible Managed
Portfolios may invest up to 30% of their total assets in debt and
equity securities denominated in a foreign currency and issued by
foreign or domestic issuers. In addition, Equity and Natural Resources
Portfolios may invest up to 30% of their total assets in nonUnited
States currency denominated common stock and fixed-income securities
convertible into common stock of foreign and U.S. issuers.]

B49

<PAGE>

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.

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, 1995, (based on an October 31 measurement period)
the High Yield Bond Portfolio had a net capital loss carry forward of
$20,939,951 ($3,756,791 expiring in 1999, $1,384,431 expiring in 2002,
and $15,798,729 expiring in 2003). The Government Income Portfolio had
a net capital loss carry forward of $22,539,329 ($6,229,349 expiring
in 2002, $16,310,043 expiring in 2003). Finally, the Prudential
Jennison Portfolio had a net capital loss carry forward of $102,752
(expiring in 2003). 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 Portfolio, for which Brown Brothers
Harriman & Co. is the custodian bank. For the year ended December 31,
1995, the total of the credits used was:

Money Market Portfolio.......................... $ 18,025
High Yield Bond Portfolio....................... 15,358
Flexible Managed Portfolio...................... 3,202
Government Income Portfolio..................... 1,612
Zero Coupon Bond 2000 Portfolio................. 1,218
Zero Coupon Bond 2005 Portfolio................. 637
Natural Resources Portfolio..................... 380
Stock Index Portfolio........................... 170

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,
Diversified Bond, Government Income, Zero Coupon Bond 1995, Zero
Coupon Bond 2000,

B50

<PAGE>

Zero Coupon Bond 2005, Equity Income, and Small Capitalization Stock
Portfolios; 0.45% of average daily net assets of the Equity and
Natural Resources Portfolios; 0.55% of the average daily net assets of
the Conservative Balanced and the High Yield Bond Portfolios; 0.60% of
the average daily net assets of the Flexible Managed and Prudential
Jennison Portfolios; and 0.75% of the average daily net assets of the
Global Portfolio. Under the Agreement, The Prudential has agreed to
refund to a portfolio (other than the Global 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
average daily net assets.

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, 1995,
Prudential Securities Inc., an indirect, wholly-owned subsidiary of
The Prudential, earned $899,739 in brokerage commissions from
Portfolio transactions executed on behalf of the Series Fund.

Other Transactions With Affiliates: As of December 31, 1995, The
Prudential had investments of $12,553,119 in the Prudential Jennison
Portfolio; $11,995,545 in the Small Capitalization Stock Portfolio;
and $560,555 in the Global 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,
$1,312,614,000 as of December 31, 1995. The Portfolios of the Series
Fund with cash invested in the joint account had the following
percentage participation in the account:

Equity Portfolio........................... 58.28%
Flexible Managed Portfolio................. 25.57%
Equity Income Portfolio.................... 5.01%
Conservative Balanced Portfolio............ 3.29%
Stock Index Portfolio...................... 3.19%
Government Income Portfolio................ 1.52%
High Yield Bond Portfolio.................. .80%
Diversified Bond Portfolio................. .78%
Prudential Jennison Portfolio.............. .58%
Small Capitalization Stock Portfolio....... .54%
Natural Resources Portfolio................ .34%
Zero Coupon Bond 2005 Portfolio............ .07%
Zero Coupon Bond 2000 Portfolio............ .03%
------
100.00%

Bear Stearns Repurchase Agreement, dated 12/29/95, in the principal
amount of $43,000,000, repurchase price $43,027,710, due 1/2/96;
collateralized by $5,190,000 U.S. Treasury Notes, 6.25%, due 8/31/00;
$38,036,000 U.S. Treasury Notes, 5.50%, due 4/30/96.

Goldman Sachs Repurchase Agreement, dated 12/29/95, in the principal
amount of $418,000,000, repurchase price $418,270,770, due 1/2/96;
collateralized by $339,980,000 U.S. Treasury Diversified Bonds,
7.875%, due 2/15/21.

J.P. Morgan Securities Repurchase Agreement, dated 12/29/95, in the
principal amount of $300,000,000, repurchase price $300,193,333, due
1/2/96; collateralized by $50,000,000 U.S. Treasury Notes, 7.625%, due
4/30/96; $53,212,000 U.S. Treasury Notes, 7.0%, due 4/15/99;
$51,060,000 U.S. Treasury Notes, 5.125%, due 11/30/98; $49,755,000
U.S. Treasury Notes, 6.875%, due 7/31/99; $37,947,000 U.S. Treasury
Notes, 6.125%, due 5/31/00; $52,695,000 U.S. Treasury Notes, 6.0%, due
8/31/97.

Morgan Stanley and Company Repurchase Agreement, dated 12/29/95, in
the principal amount of $418,000,000, repurchase price $418,273,552,
due 1/2/96; collateralized by $300,000,000 U.S. Treasury Notes, 6.75%,
due 4/30/00; $108,300,000 U.S. Treasury Notes, 5.125%, due 11/30/98.

B51

<PAGE>

Salomon Brothers Repurchase Agreement, dated 12/29/95, in the
principal amount of $75,000,000, repurchase price $75,048,748, due
1/2/96; collateralized by $8,717,000 U.S. Treasury Notes, 7.25%, due
11/30/96; $26,000,000 U.S. Treasury Notes, 6.125%, due 5/15/98;
$40,000,000 U.S. Treasury Notes, 5.75%, due 9/30/97.

Smith Barney Repurchase Agreement, dated 12/29/95, in the principal
amount of $58,614,000, repurchase price $58,651,447, due 1/2/96;
collateralized by $62,440,000 U.S. Treasury Bills, 5.75%, due
10/17/96.

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, 1995 were as follows:

Cost of Purchases:
<TABLE>
<CAPTION>

Debt Securities... $1,152,659,582 $885,113,323 $ 0 $16,200,140 $14,191,504 $4,882,722,531 $4,212,735,834 $473,648,052
Equity
Securities...... $ 0 $ 0 $ 0 $ 0 $ 0 $ 480,812,048 $1,827,087,395 $ 4,647,944

</TABLE>

SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION NATURAL
INDEX INCOME EQUITY JENNISON STOCK GLOBAL RESOURCES
------------ ------------ ------------ ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities... $ 0 $120,205,175 $ 0 $ 0 $ 0 $ 0 $ 0
Equity
Securities...... $ 131,109,105 $579,685,171 $486,698,253 $66,053,630 $47,690,639 $ 224,358,200 $ 128,563,575

</TABLE>

Proceeds From Sales:

ZERO ZERO ZERO HIGH
DIVERSIFIED GOVERNMENT COUPON COUPON COUPON CONSERVATIVE FLEXIBLE YIELD
BOND INCOME 1995 2000 2005 BALANCED MANAGED BOND
------------ ------------ ------------ ----------- ----------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt Securities... $1,109,474,697 $888,238,284 $ 18,395,935 $16,435,388 $12,825,478 $4,679,687,138 $4,084,931,841 $425,797,501
Equity
Securities...... $ 0 $ 0 $ 0 $ 0 $ 0 $ 428,286,138 $1,842,532,499 $ 12,914,791

</TABLE>

SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION NATURAL
INDEX INCOME EQUITY JENNISON STOCK GLOBAL RESOURCES
------------ ------------ ------------ ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities... $ 0 $134,773,213 $ 0 $ 0 $ 0 $ 0 $ 1,752,580
Equity
Securities...... $ 9,292,175 $460,810,015 $560,871,071 $10,929,805 $ 7,819,414 $ 209,264,836 $ 116,657,662

</TABLE>

Transactions in call options during the six months ended December 31, 1995 were
as follows:

DIVERSIFIED BOND DIVERSIFIED BOND NATURAL RESOURCES
------------------------ ------------------------ ------------------------
CALL OPTIONS WRITTEN PUT OPTIONS WRITTEN CALL OPTIONS WRITTEN
------------------------ ------------------------ ------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED CONTRACTS RECEIVED
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>

Options outstanding at December 31, 1994....... 0 $ 0 0 $ 0 0 $ 0
Options written........... 1,500 99,609 1,500 45,703 1,280 388,647
Options terminated in closing purchase
transactions............ (1,500) (99,609) (1,500) (45,703) (840) (224,972)
------- --------- ------- --------- ------- ---------
Options outstanding at December 31, 1995....... 0 $ 0 0 $ 0 440 $ 163,675

</TABLE>

The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of December 31, 1995 were as follows:

ZERO ZERO ZERO
MONEY DIVERSIFIED GOVERNMENT COUPON COUPON COUPON
MARKET BOND INCOME 1995 2000 2005
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>

Gross Unrealized Appreciation... $ 0 $ 34,614,448 $ 37,434,616 $ 0 $3,122,667 $ 3,653,918
Gross Unrealized Depreciation... 0 (1,351,508) (13,989) 0 0 0
Total Net Unrealized............ 0 33,262,940 37,420,627 0 3,122,667 3,653,918
Tax Basis....................... $610,184,940 $ 610,310,688 $457,607,665 $ 0 $22,164,986 $19,934,260

</TABLE>

CONSERVATIVE FLEXIBLE
BALANCED MANAGED
--------------- ---------------

Gross Unrealized Appreciation... $ 378,149,704 $ 568,373,680
Gross Unrealized Depreciation... (88,299,605) (27,642,238)
Total Net Unrealized............ 289,850,099 540,731,442
Tax Basis....................... $3,622,931,201 $3,687,627,278

HIGH SMALL
YIELD STOCK EQUITY PRUDENTIAL CAPITALIZATION
BOND INDEX INCOME EQUITY JENNISON STOCK
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>

Gross Unrealized Appreciation... $16,024,184 $ 319,972,806 $119,718,028 $895,616,406 $ 5,890,547 $ 4,726,512
Gross Unrealized Depreciation... (9,488,623) (12,254,834) (42,811,468) (96,015,544) (1,846,128) (2,129,577)
Total Net Unrealized............ 6,535,561 307,717,972 76,906,560 799,600,862 4,044,419 2,596,935
Tax Basis....................... $354,752,487 $ 726,828,799 1$,029,615,764 3$,003,199,288 $62,811,423 $47,793,195

</TABLE>
NATURAL
GLOBAL RESOURCES
--------------- ---------------

Gross Unrealized Appreciation... $ 52,646,874 $ 53,158,550
Gross Unrealized Depreciation... (9,955,204) (11,053,974)
Total Net Unrealized............ 42,691,670 42,104,576
Tax Basis....................... $ 338,204,955 $ 251,010,642

B52

<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, Diversified Bond, Equity,
Flexible Managed, Conservative Balanced, Zero Coupon Bond 1995, Zero Coupon Bond
2000, Zero Coupon Bond 2005, High Yield Bond, Stock Index, Equity Income,
Natural Resources, Government Income and Global Portfolios of The Prudential
Series Fund, Inc. as of December 31, 1995, the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended and the financial highlights contained
in the prospectus for each of the periods presented. We also have audited the
accompanying statements of assets and liabilities, including the schedules of
investments, of Small Capitalization Stock and Prudential Jennison Portfolios of
The Prudential Series Fund, Inc. as of December 31, 1995, and the related
statements of operations and changes in net assets and the financial highlights
for the period April 25, 1995 (commencement of business) to December 31, 1995.
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, 1995 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,
1995, the results of their operations, changes in their net assets, and the
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.

Deloitte & Touche LLP

Parsippany, New Jersey
February 15, 1996

B53
<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.

<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.

<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, 1996

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, 1996 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 15
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS........................................... 4 14
INTEREST RATE SWAPS................................................................... 5
ILLIQUID SECURITIES................................................................... 6

INVESTMENT RESTRICTIONS.................................................................. 6 20

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES.......................................... 9 21

DETERMINATION OF NET ASSET VALUE......................................................... 10 22

OTHER INFORMATION CONCERNING THE SERIES FUND
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................................. 11 25
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT.............................. 13 25
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 5-96

<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
Diversified Bond Portfolio, the Government Income Portfolio, the Conservative
Balanced Portfolio, the Flexible Managed Portfolio, the Stock Index Portfolio,
the Equity Portfolio, and the Global 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 Conservative Balanced, Flexible Managed, Equity, and Global 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
Diversified 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
DIVERSIFIED BOND, GOVERNMENT INCOME, CONSERVATIVE BALANCED, FLEXIBLE MANAGED,
EQUITY, AND GLOBAL 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 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

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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.

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.

C. RISKS OF TRANSACTIONS IN OPTIONS ON EQUITY AND DEBT SECURITIES.

2
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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.

D. RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDICES.

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 sells the call which in either case
would occur no earlier than the day following the day the exercise notice was
filed.

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E. RISKS OF TRANSACTIONS IN OPTIONS ON FOREIGN CURRENCY.

F. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS.

G. Risks of Transactions in Options on Futures Contracts.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

As explained in the prospectus, the Conservative Balanced, Flexible Managed,
Equity, and Global 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.

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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.

INTEREST RATE SWAPS

The Diversified Bond and Government Income Portfolios and the fixed income
portions of the Conservative Balanced and Flexible Managed Portfolios may use
interest rate swaps subject to the limitations set forth in the prospectus.

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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.

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

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 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 Portfolio, and the Balanced Portfolios
may purchase and sell interest rate futures contracts and related
options; and all portfolios (other than the Government Income
Portfolio) may purchase and sell foreign currency futures contracts
and related options and forward foreign currency exchange contracts.

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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 Diversified Bond, Government Income, Conservative Balanced
and Flexible Managed Portfolios may sell securities short up to 25% of
their net assets and except that the portfolios make short sales
against the box. Collateral arrangements entered into with respect to
options, futures contracts and forward contracts are not deemed to be
short sales. Collateral arrangements entered into with respect to
interest rate swap agreements are not deemed to be short sales.

5. Purchase securities on margin or otherwise borrow money or issue
senior securities except that the Diversified Bond and Government
Income Portfolios, as well as the fixed income portions of the
Balanced Portfolios, may enter into reverse repurchase agreements,
dollar rolls and may purchase securities on a when-issued and delayed
delivery basis; except that the money market portion of any portfolio
may enter into reverse repurchase agreements and may purchase
securities on a when-issued and delayed delivery basis; and except
that the Equity, Global, Flexible Managed and Conservative Balanced
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);
Diversified Bond Portfolio (options on debt securities, foreign
currencies); Government Income 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 Diversified Bond and Government Income
Portfolios, as well as the fixed income portions of the Conservative
Balanced and Flexible Managed Portfolios, may enter into reverse
repurchase agreements and dollar rolls provided that the portfolio's
obligations with respect to those instruments do not exceed 30% of the
portfolio's net assets (defined to mean total assets at market value
less liabilities other than reverse repurchase agreements and dollar
rolls).

7. Pledge or mortgage assets, except that no more than 10% of the value
of any portfolio may be pledged (taken at the time the pledge is made)
to secure authorized borrowing and except that a portfolio may enter
into reverse repurchase agreements. Collateral arrangements entered
into with respect to futures and forward contracts and the writing of
options are not deemed to be the pledge of assets. Collateral
arrangements entered into with respect to interest rate swap
agreements are not deemed to be the pledge of assets.

8. Lend money, except that loans of up to 10% of the value of each
portfolio may be made through the purchase of privately placed bonds,
debentures, notes, and other evidences of indebtedness of a character
customarily acquired by institutional investors that may or may not be
convertible into stock or accompanied by warrants or rights to acquire
stock. Repurchase agreements and the purchase of publicly traded debt
obligations are not considered to be "loans" for this purpose and may
be entered into or purchased by a portfolio in accordance with its
investment objectives and policies.

9. Underwrite the securities of other issuers, except where the 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.

<PAGE>

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. 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. This restriction shall not apply to
mortgage-backed securities, collateralized mortgage obligations or
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities.

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>

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. In addition, the Series
Fund adheres to additional restrictions relating to such practices as the
lending of securities, borrowing, and the purchase of put and call options,
futures contracts, and derivative instruments on securities to comply with
investment guidelines issued by the California Department of Insurance.

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 which are
registered investment companies. 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
Diversified Bond and Government Income 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
Equity 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 Conservative Balanced
Portfolio is equal to an annual rate of 0.55% of the average daily net assets of
the portfolio. For the Flexible Managed 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 Portfolio is equal to an annual rate of 0.75% of the average daily net
assets of the portfolio. Under the Service Agreement, The Prudential pays PIC a
portion of the fee it receives for providing investment advisory services.

For the years 1995, 1994, and 1993, The Prudential received a total of
$77,610,207, $66,413,206, and $51,197,499, respectively, in investment
management fees for all of the Series Fund's portfolios.

<PAGE>

lawsuit. The Series Fund's Board of Directors has determined that this is an
appropriate method of allocating expenses.

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 March 1, 1996 with respect
to all portfolios available to The Prudential Variable Contract Account-24. The
Investment Advisory Agreement was most recently approved by the shareholders in
accordance with instructions from Contract owners and Participants at their 1989
annual meeting with respect to all portfolios available to The 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. In the event the New York Stock
Exchange closes early on any business day, the net asset value of each portfolio
shall be determined at a time between such closing and 4:15 p.m. New York City
time. 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.

<PAGE>

The net asset value of the Stock Index, Equity, and Global 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 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 Diversified Bond Portfolio, and common stocks and
convertible debt securities are valued in the same way as such securities are
valued in the Equity 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

PORTFOLIO TRANSACTIONS AND BROKERAGE

<PAGE>

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.

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.

<PAGE>

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 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 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 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.

EXPERTS

LICENSES

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

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.

I. EDWARD PRICE, Vice President.--Senior Vice President and Actuary,
Prudential Individual Insurance Group since 1995; 1994 to 1995: Chief Executive
Officer, Prudential International Insurance; 1993 to 1994: President, Prudential
International Insurance; Prior to 1993: Senior Vice President and Company
Actuary 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.
DIVERSIFIED BOND PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$610,310,688)............................ $ 643,573,628
Cash....................................... 395
Interest receivable........................ 12,716,449
Receivable for portfolio shares sold....... 216,916
--------------
Total Assets............................. 656,507,388
--------------
LIABILITIES
Accrued expenses........................... 36,960
Payable to investment adviser.............. 634,002
--------------
Total Liabilities........................ 670,962
--------------
NET ASSETS................................... $ 655,836,426
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 579,713
Paid-in capital, in excess of par........ 629,568,137
--------------
630,147,850
Undistributed net investment income........ 714,398
Accumulated net realized losses............ (8,288,762)
Net unrealized appreciation................ 33,262,940
--------------
Net assets, December 31, 1995.............. $ 655,836,426
--------------
--------------
Net asset value per share of 57,971,325
outstanding shares of common stock
(authorized 200,000,000 shares).......... $ 11.3131
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Interest................................... $ 43,710,915
---------------
EXPENSES
Investment management fee.................. 2,337,700
Shareholders' reports...................... 147,832
Accounting fees............................ 56,490
Custodian expense -- net................... 42,968
Professional fees.......................... 19,278
Directors' expense......................... 2,862
Miscellaneous expenses..................... 863
S.E.C. fees................................ (3,513)
---------------
2,604,480
---------------
NET INVESTMENT INCOME........................ 41,106,435
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments --
Securities transactions.................. 3,993,423
Options written.......................... (48,047)
---------------
Net realized gain on investments........... 3,945,376
Net unrealized gain on investments......... 65,195,088
---------------
NET GAIN ON INVESTMENTS...................... 69,140,464
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 110,246,899
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------
1995 1994
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................. $ 41,106,435 $ 36,112,155
Net realized gain (loss) on investments ................................................ 3,945,376 (4,246,256)
Net unrealized gain (loss) on investments .............................................. 65,195,088 (50,839,016)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................ 110,246,899 (18,973,117)
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................................................. (40,773,047) (35,627,999)
Net realized gain from investment transactions ......................................... (1,426,845) (1,267,553)
------------- -------------
TOTAL DIVIDENDS TO SHAREHOLDERS ........................................................ (42,199,892) (36,895,552)
------------- -------------
CAPITAL TRANSACTIONS:
Capital stock sold [3,596,587 and 3,414,897 shares, respectively] ...................... 39,971,262 36,662,212
Reinvestment of dividend distributions [3,793,654 and 3,610,015 shares,
respectively] ......................................................................... 42,199,892 36,895,552
Capital stock repurchased [(3,376,822) and (4,963,909) shares, respectively] ........... (36,030,334) (52,266,357)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ......................... 46,140,820 21,291,407
------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ............................................................................ 114,187,827 (34,577,262)
NET ASSETS:
Beginning of year ...................................................................... 541,648,599 576,225,861
------------- -------------
End of year ............................................................................ $ 655,836,426 $ 541,648,599
------------- -------------
------------- -------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GOVERNMENT INCOME PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS
Investments, at value (cost:
$457,607,665)............................ $ 495,028,292
Cash....................................... 648
Interest receivable........................ 7,178,766
Receivable for portfolio shares sold....... 57,123
Other Assets............................... 5,758
--------------
Total Assets............................. 502,270,587
--------------
LIABILITIES
Payable to investment adviser.............. 495,282
--------------
NET ASSETS................................... $ 501,775,305
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 428,176
Paid-in capital, in excess of par........ 486,408,830
--------------
486,837,006
Undistributed net investment income........ 1,261,089
Accumulated net realized losses............ (23,743,417)
Net unrealized appreciation................ 37,420,627
--------------
Net assets, December 31, 1995.............. $ 501,775,305
--------------
--------------
Net asset value per share of 42,817,582
outstanding shares of common stock
(authorized 100,000,000 shares).......... $ 11.7189
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Interest................................... $ 33,602,845
---------------
EXPENSES
Investment management fee.................. 1,913,517
Shareholders' reports...................... 122,340
Accounting fees............................ 68,428
Custodian expense -- net................... 32,925
Professional fees.......................... 9,933
Directors' expense......................... 2,908
Miscellaneous expenses..................... 774
S.E.C. fees................................ (11,433)
---------------
2,139,392
---------------
NET INVESTMENT INCOME........................ 31,463,453
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investments........... (12,819,604)
Net unrealized gain on investments......... 66,364,196
---------------
NET GAIN ON INVESTMENTS...................... 53,544,592
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 85,008,045
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31
---------------------------------------
1995 1994
------------------ -------------------
<S> <C> <C>

OPERATIONS:
Net investment income ................................................................ $ 31,463,453 $ 33,431,928
Net realized loss on investments ..................................................... (12,819,604) (10,380,614)
Net unrealized gain (loss) on investments ............................................ 66,364,196 (52,690,952)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................... 85,008,045 (29,639,638)
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ................................................................ (31,133,859) (32,955,665)
------------- -------------
CAPITAL TRANSACTIONS:
Capital stock sold [863,496 and 3,591,224 shares, respectively] ...................... 9,888,081 41,656,912
Reinvestment of dividend distributions [2,693,392 and 3,094,061 shares,
respectively] ....................................................................... 31,133,859 32,955,665
Capital stock repurchased [(7,346,525) and (5,912,961) shares, respectively].......... (80,695,126) (64,569,681)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ............ (39,673,186) 10,042,896
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................................................ 14,201,000 (52,552,407)

NET ASSETS:
Beginning of year .................................................................... 487,574,305 540,126,712
------------- -------------
End of year .......................................................................... $ 501,775,305 $ 487,574,305
------------- -------------
------------- -------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

A2
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------
1995 1994
--------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................................ $ 155,293,990 $ 122,670,711
Net realized gain on investments ..................................................... 167,342,297 30,751,021
Net unrealized gain(loss) on investments ............................................. 264,773,974 (184,854,002)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROMOPERATIONS ....................... 587,410,261 (31,432,270)
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ................................................................ (154,987,434) (120,740,360)
Net realized gain from investment transactions ....................................... (133,660,168) (37,214,012)
--------------- ---------------
TOTAL DIVIDENDS TO SHAREHOLDERS ...................................................... (288,647,602) (157,954,372)
--------------- ---------------
CAPITAL TRANSACTIONS:
Capital stock sold [5,345,143 and 34,889,459 shares, respectively] ................... 81,026,772 514,344,688
Reinvestment of dividend distributions [19,023,739 and 11,198,868 shares,
respectively] ....................................................................... 288,647,602 157,954,372
Capital stock repurchased [(15,343,313) and (5,887,371) shares, respectively] ........ (228,767,054) (84,977,146)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ....................... 140,907,320 587,321,914
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ........................................................... 439,669,979 397,935,272
NET ASSETS:
Beginning of year .................................................................... 3,501,104,286 3,103,169,014
--------------- ---------------
End of year .......................................................................... $ 3,940,774,265 $ 3,501,104,286
--------------- ---------------
--------------- ---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

A3
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FLEXIBLE MANAGED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31
--------------------------------------
1995 1994
---------------- -----------------
<S> <C> <C>

OPERATIONS:
Net investment income.................................................................. $ 126,640,661 $ 98,878,114
Net realized gain on investments and foreign currency transactions..................... 292,267,835 23,838,273
Net unrealized gain(loss) on investments and foreign currency translations............. 410,041,102 (230,571,359)
------------------ -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 828,949,598 (107,854,972)
------------------ -------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (124,621,227) (96,126,295)
Net realized gain from investment transactions......................................... (176,844,671) (98,311,584)
------------------ -------------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (301,465,898) (194,437,879)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [8,486,525 and 22,611,559 shares, respectively]..................... 146,641,074 370,947,414
Reinvestment of dividend distributions [17,050,711 and 12,531,550 shares,
respectively]......................................................................... 301,465,898 194,437,879
Capital stock repurchased [(11,612,102) and (4,617,224) shares, respectively].......... (195,926,134) (73,719,278)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 252,180,838 491,666,015
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 779,664,538 189,373,164
NET ASSETS:
Beginning of year...................................................................... 3,481,540,299 3,292,167,135
------------------ -------------------
End of year............................................................................ $ 4,261,204,837 $3,481,540,299
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

A4
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME
Dividends (net of $107,942 foreign
withholding tax)......................... $ 20,346,508
Interest................................... 1,720,583
---------------
22,067,091
---------------
EXPENSES
Investment management fee.................. 2,904,883
Shareholders' reports...................... 187,848
Accounting fees............................ 71,353
Professional fees.......................... 17,219
Custodian expense -- net................... 15,898
Directors' expense......................... 3,279
Miscellaneous expenses..................... 1,233
---------------
3,201,713
---------------
NET INVESTMENT INCOME........................ 18,865,378
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on investments --
Securities transactions.................. 4,372,198
Futures contracts........................ 7,787,530
---------------
Net realized gain on investments........... 12,159,728
---------------
Net unrealized gain (loss) on investments
--
Securities............................... 226,745,682
Futures contracts........................ (862,800)
---------------
Net unrealized gain on investments......... 225,882,882
---------------
NET GAIN ON INVESTMENTS...................... 238,042,610
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 256,907,988
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31
--------------------------------------
1995 1994
--------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................................ $ 18,865,378 $ 15,899,579
Net realized gain (loss) on investments .............................................. 12,159,728 (811,766)
Net unrealized gain(loss) on investments ............................................. 225,882,882 (8,435,032)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................. 256,907,988 6,652,781
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ................................................................ (18,734,051) (15,754,398)
Net realized gain from investment transactions ....................................... (7,293,493) (958,203)
--------------- ---------------
TOTAL DIVIDENDS TO SHAREHOLDERS ...................................................... (26,027,544) (16,712,601)
--------------- ---------------
CAPITAL TRANSACTIONS:
Capital stock sold [7,147,197 and 4,553,644 shares, respectively] .................... 130,752,103 68,598,345
Reinvestment of dividend distributions [1,331,092 and 1,130,115 shares,
respectively] ....................................................................... 26,027,544 16,712,601
Capital stock repurchased [(1,230,332) and (1,718,830) shares, respectively] ......... (20,916,230) (25,854,984)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ....................... 135,863,417 59,455,962
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ........................................................... 366,743,861 49,396,142
NET ASSETS:
Beginning of year .................................................................... 664,534,207 615,138,065
--------------- ---------------
End of year .......................................................................... $ 1,031,278,068 $ 664,534,207
--------------- ---------------
--------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
EQUITY PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------
1995 1994
--------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................................ $ 73,682,361 $ 57,699,769
Net realized gain on investments ..................................................... 234,571,951 84,713,465
Net unrealized gain (loss) on investments and foreign currency translations .......... 553,122,748 (76,779,978)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................. 861,377,060 65,633,256
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ................................................................ (71,456,482) (56,757,732)
Net realized gain from investment transactions ....................................... (132,219,093) (106,046,594)
--------------- ---------------
TOTAL DIVIDENDS TO SHAREHOLDERS ...................................................... (203,675,575) (162,804,326)
--------------- ---------------
CAPITAL TRANSACTIONS:
Capital stock sold [15,687,254 and 19,167,446 shares, respectively] .................. 374,478,697 412,393,503
Reinvestment of dividend distributions [8,038,373 and 7,934,974 shares,
respectively] ....................................................................... 203,675,575 162,804,326
Capital stock repurchased [(1,673,110) and (2,170,186) shares, respectively] ......... (39,823,647) (46,752,467)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ....................... 538,330,625 528,445,362
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ........................................................... 1,196,032,110 431,274,292
NET ASSETS:
Beginning of year .................................................................... 2,617,772,017 2,186,497,725
--------------- ---------------
End of year .......................................................................... $ 3,813,804,127 $ 2,617,772,017
--------------- ---------------
--------------- ---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GLOBAL PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
1995 1994
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................... 1,620,950 474,722
Net realized gain (loss) on investments and foreign currency transactions ................ 13,763,168 (578,250)
Net unrealized gain (loss) on investments and foreign currency translations .............. 39,034,318 (16,334,560)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... 54,418,436 (16,438,088)
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................................................... (5,982,859) (499,141)
Net realized gain from investment transactions ........................................... (7,583,630) (394,438)
------------- -------------
TOTAL DIVIDENDS TO SHAREHOLDERS .......................................................... (13,566,489) (893,579)
------------- -------------
CAPITAL TRANSACTIONS:
Capital stock sold [2,817,622 and 17,513,960 shares, respectively] ....................... 42,294,857 254,421,899
Reinvestment of dividend distributions [872,571 and 64,991 shares, respectively] ......... 13,566,489 893,579
Capital stock repurchased [(2,794,423) and (751,122) shares, respectively] ............... (41,558,737) (10,781,034)
Initial capitalization repurchased [(48,679) and (735,674) shares, respectively] ......... (789,000) (10,558,000)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ........................... 13,513,609 233,976,444
------------- -------------
TOTAL INCREASE IN NET ASSETS ............................................................... 54,365,556 216,644,777
NET ASSETS:
Beginning of year ........................................................................ 345,733,978 129,089,201
------------- -------------
End of year .............................................................................. $ 400,099,534 $ 345,733,978
------------- -------------
------------- -------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

A7
<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
DIVERSIFIED BOND PORTFOLIO

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS -- 95.0% VALUE VALUE
------------- --------------
FINANCIAL -- 18.7%
Advanta Mortgage Loan Trust, Series 1994-3
8.490%, 01/25/26............................. $ 8,500,000 $ 8,930,313
Advanta National Bank, C.D.,
6.260%, 09/01/97............................. 5,000,000 5,045,000
Allmerica Finance,
7.625%, 10/15/25............................. 4,000,000 4,202,760
Aristar, Inc.,
5.750%, 07/15/98............................. 2,000,000 2,004,940
7.500%, 07/01/99............................. 2,000,000 2,105,140
Associates Corp. of North America,
8.375%, 01/15/98............................. 500,000 526,905
[]Baybanks, Inc.,
5.812%, 09/30/97............................. 5,000,000 4,991,200
Chase Manhattan Corp.,
8.000%, 06/15/99............................. 2,000,000 2,134,680
Chemical Bank,
6.625%, 08/15/05............................. 2,000,000 2,046,960
Chrysler Financial Corp.,
9.500%, 12/15/99............................. 5,000,000 5,619,400
Citicorp, M.T.N.
8.500%, 02/24/97, Tranche #TR00128........... 3,000,000 3,094,650
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
**7.875%, 03/15/98, Tranche #TR00003......... 5,000,000 5,188,125
**8.750%, 12/15/99, Tranche #TR00001......... 3,000,000 3,260,700
**Equitable Life Assurance Society,
6.950%, 12/01/05............................. 8,500,000 8,622,188
Ford Motor Credit Co.,
6.250%, 02/26/98............................. 3,000,000 3,044,730
6.375%, 10/06/00............................. 4,000,000 4,072,400
General Motors Acceptance Corp.,
8.400%, 10/15/99............................. 3,700,000 4,018,570
General Motors Acceptance Corp., M.T.N.,
7.500%, 11/04/97, Tranche #TR00598........... 2,000,000 2,066,320
Los Angeles County, California, MBIA Insured,
Zero Coupon, 06/30/08........................ 15,000,000 6,565,500
Mellon Financial Co.,
6.500%, 12/01/97............................. 2,000,000 2,032,140
**Nationwide CSN Trust,
9.875%, 02/15/25............................. 5,000,000 5,782,950
Orion Capital Corp.,
9.125%, 09/01/02............................. 8,844,000 9,989,740
**Potomac Capital Investment Corp., M.T.N.,
6.190%, 04/28/97, Series B................... 3,500,000 3,519,688
**Principal Mutual Life Insurance,
7.875%, 03/01/24............................. 5,000,000 5,101,750
Santander Financial Issuances, Inc.,
7.250%, 11/01/15............................. 2,500,000 2,560,700
Sears Roebuck Acceptance Corp.,
6.750%, 09/15/05............................. 10,000,000 10,371,200

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038........... $ 3,000,000 $ 3,047,670
Union Bank of Finland, Ltd.,
5.250%, 06/15/96............................. 3,000,000 2,987,340
--------------
122,933,658
--------------
FOREIGN -- 12.9%
African Development Bank,
6.875%, 10/15/15............................. 5,000,000 5,151,350
Australia & New Zealand Banking Group, Ltd.,
6.250%, 02/01/04............................. 3,000,000 3,000,870
**Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
8.625%, 06/02/00, Tranche #TR00001........... 2,000,000 2,056,000
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001........... 4,100,000 4,202,500
Banco Nacional de Comercio Exterior,
7.500%, 07/01/00............................. 5,000,000 4,350,000
Central Puerto and Cent Neuquen, SA,
10.750%, 11/02/97............................ 3,000,000 3,052,500
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03............................. 3,000,000 2,955,000
**Financiera Energetica Nacional, SA, M.T.N.
9.000%, 11/08/99............................. 1,750,000 1,835,312
Hydro-Quebec,
8.050%, 07/07/24............................. 5,000,000 5,708,800
Kansallis-Osake Pankki, N.Y.,
**[]8.650%, 12/29/49......................... 5,000,000 5,312,500
10.000%, 05/01/02............................ 5,000,000 5,982,200
National Australia Bank, Ltd.,
9.700%, 10/15/98............................. 1,700,000 1,868,164
Nippon Telegraph & Telephone Corp.,
9.500%, 07/27/98............................. 1,800,000 1,965,852
Nova Scotia, Province of Canada,
8.875%, 07/01/19............................. 3,000,000 3,640,800
Ontario, Province of Canada,
15.750%, 03/15/12............................ 3,475,000 4,059,565
**[]Petroleos Mexicanos,
6.812%, 03/08/99............................. 2,500,000 2,212,500
**Petroliam Nasional Berhad,
7.125%, 08/15/05............................. 5,000,000 5,284,600
Quebec, Province of Canada,
7.125%, 02/09/24............................. 5,250,000 5,279,557
Republic of Columbia,
7.250%, 02/23/04............................. 2,500,000 2,398,100
8.750%, 10/06/99............................. 1,750,000 1,849,960
Republic of South Africa,
9.625%, 12/15/99............................. 4,750,000 5,123,208
Saskatchewan, Province of Canada,
8.000%, 07/15/04............................. 4,000,000 4,458,880

B1
<PAGE>

DIVERSIFIED BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
)United States of Mexico with Rights,
6.250%, 12/31/19, Series B................... 4,000,000 2,620,000
--------------
84,368,218
--------------
INDUSTRIAL -- 40.1%
AMR Corp.,
9.000%, 08/01/12............................. 9,000,000 10,149,930
Arkla, Inc., M.T.N.,
9.320%, 12/18/00, Tranche #TR00043........... 2,000,000 2,180,960
9.380%, 03/15/96, Tranche #TR00018........... 1,300,000 1,306,851
Auburn Hills Trust,
12.000%, 05/01/20............................ 10,000,000 15,737,600
Boise Cascade Corp.,
9.875%, 02/15/01............................. 1,000,000 1,103,070
Canadian Pacific Forest Products Ltd.,
10.250%, 01/15/03............................ 4,000,000 4,682,960
Columbia Gas Systems, Inc.,
7.620%, 11/28/25............................. 6,500,000 6,616,935
Columbia/HCA Healthcare Corp.,
6.910%, 06/15/05............................. 10,000,000 10,447,400
7.050%, 12/01/27............................. 2,000,000 2,013,140
Comsat Corp.,
8.125%, 04/01/04............................. 4,000,000 4,470,120
**Continental Cablevision, Inc.,
8.300%, 05/15/06............................. 3,000,000 3,011,250
Crane Co.,
7.250%, 06/15/99............................. 3,000,000 3,100,680
Delta Air Lines, Inc.,
9.250%, 03/15/22............................. 9,000,000 10,631,250
9.875%, 05/15/00............................. 6,000,000 6,783,960
Delta Air Lines, Inc., M.T.N.,
7.790%, 12/01/98............................. 1,000,000 1,037,710
8.380%, 06/12/98, Tranche #TR00017........... 2,000,000 2,086,700
Federal Express Corp.,
9.650%, 06/15/12............................. 3,000,000 3,702,390
Federated Dept Stores,
8.125%, 10/15/02............................. 8,000,000 8,040,000
10.000%, 02/15/01............................ 3,000,000 3,240,000
Fleming Companies, Inc.,
10.625%, 12/15/01............................ 3,500,000 3,395,000
J.C. Penney Co., Inc.,
9.750%, 06/15/21............................. 6,400,000 7,731,968
News America Holdings, Inc.,
7.500%, 03/01/00............................. 6,000,000 6,310,500
Noble Affiliates, Inc.,
7.250%, 10/15/23............................. 2,000,000 1,967,580
Occidental Petroleum Corp.,
10.125%, 11/15/01............................ 5,000,000 5,979,950
11.125%, 08/01/10............................ 5,000,000 6,896,500
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013........... 3,000,000 2,999,100
Paramount Communications, Inc.,
7.500%, 01/15/02............................. 5,000,000 5,184,000
Parker & Parsley Petroleum Co.,
8.250%, 08/15/07............................. 4,000,000 4,324,880
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01............................. 5,750,000 6,444,542
RJR Nabisco, Inc.,
6.700%, 06/15/02............................. 5,000,000 5,084,450
8.750%, 08/15/05............................. 2,000,000 2,048,620

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Rodamco NV,
7.300%, 05/15/05............................. 5,000,000 5,376,750
Rogers Cablesystems Ltd.,
10.000%, 03/15/05, Series B.................. 4,000,000 4,300,000
Royal Caribbean Cruises Ltd.,
11.375%, 05/15/02............................ 5,000,000 5,450,000
TCI Communications, Inc.,
8.650%, 09/15/04............................. 7,000,000 7,778,190
8.750%, 08/01/15............................. 12,900,000 14,301,843
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23............................. 9,000,000 9,688,590
Time Warner, Inc.,
7.750%, 06/15/05............................. 5,000,000 5,205,150
Transco Energy Co.,
9.125%, 05/01/98............................. 3,000,000 3,205,380
9.375%, 08/15/01............................. 6,000,000 6,884,940
United Air Lines, Inc.,
9.125%, 01/15/12............................. 7,700,000 8,604,750
11.210%, 05/01/14, Series B.................. 4,250,000 5,625,513
USX Corp.,
9.800%, 07/01/01............................. 4,900,000 5,644,261
Viacom, Inc.,
7.625%, 01/15/16............................. 2,500,000 2,529,688
7.750%, 06/01/05............................. 7,550,000 8,017,873
Westinghouse Electric Corp.,
8.375%, 06/15/02............................. 2,000,000 2,062,800
Westvaco Corp.,
9.750%, 06/15/20............................. 5,000,000 6,762,400
Whitman Corp.,
7.500%, 08/15/01............................. 3,000,000 3,201,300
--------------
263,349,424
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 21.6%
Federal Farm Credit Bank,
8.650%, 10/01/99, Series A................... 150,000 165,633
Federal Farm Credit Bank, M.T.N.,
7.900%, 03/01/96............................. 2,800,000 2,808,988
Federal Home Loan Bank,
9.800%, 03/25/96............................. 4,000,000 4,040,000
Federal Home Loan Mortgage Corp.,
6.820%, 06/29/05............................. 10,000,000 10,310,900
Federal National Mortgage Association,
6.550%, 09/12/05............................. 5,500,000 5,774,120
9.000%, 10/01/16-09/01/21.................... 713,710 759,332
Government National Mortgage Association,
7.500%, 05/20/02-12/15/09.................... 20,469,529 21,158,711
International Bank for Reconstruction and
Development,
12.375%, 10/15/02............................ 750,000 1,022,573
Resolution Funding Corp.,
Zero Coupon, 10/15/15........................ 17,100,000 4,936,086
8.125%, 10/15/19, Principle Only............. 700,000 861,329
8.625%, 01/15/21............................. 200,000 260,032
United States Treasury Bonds,
11.250%, 02/15/15............................ 5,000,000 8,003,900
12.000%, 08/15/13............................ 22,000,000 33,897,160
United States Treasury Notes,
5.500%, 02/28/99............................. 3,000,000 3,020,610
5.875%, 08/15/98-11/15/05.................... 6,500,000 6,612,650
6.500%, 08/15/05............................. 6,100,000 6,498,391
7.250%, 02/15/98............................. 5,000,000 5,199,200
7.500%, 02/29/96............................. 9,300,000 9,333,387

B2
<PAGE>

DIVERSIFIED BOND PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS -- 3.1% AMOUNT VALUE
------------- --------------
MEDIUM TERM NOTES -- 1.5%
[]Salomon, Inc.,
6.725%, 02/14/96.............................. 10,000,000 10,002,000
--------------
REPURCHASE AGREEMENTS -- 1.6%
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)................. 10,188,000 10,188,000
--------------
TOTAL SHORT-TERM INVESTMENTS.................................... 20,190,000
--------------
OTHER ASSETS -- 1.9%
(net of liabilities).......................................... 12,262,798
--------------
TOTAL NET ASSETS -- 100.0%...................................... $ 655,836,426
--------------
--------------

The following abbreviations are used in portfolio descriptions:

M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

**Indicates a restricted security; the aggregate cost of the restricted
securities is $55,826,086. The aggregate value, $58,345,063 is
approximately 8.9% of net assets. (See Note 2)

[]Indicates a variable rate security.

)These rights are indexed to the average price of Mexican crude oil exports
and will pay a rate of return, beginning on June 30, 1996, if certain
economic events occur.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

B3
<PAGE>

GOVERNMENT INCOME PORTFOLIO

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS -- 94.7% VALUE VALUE
------------- --------------
FINANCIAL -- 3.1%
Chase Manhattan Credit Card Trust,
[]6.067%, 08/15/01, Series 1995-2............ $ 12,500,000 $ 12,496,000
Equicon Home Equity Loan Trust, CMO,
7.850%, 03/18/14, Series 1994-2.............. 3,000,000 3,106,406
--------------
15,602,406
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 91.6%
Federal Home Loan Bank,
6.780%, 07/24/02............................. 10,000,000 10,239,100
Federal Home Loan Mortgage Corp.,
6.710%, 06/11/02............................. 5,000,000 5,150,800
6.820%, 06/29/05............................. 5,000,000 5,155,450
[]6.875%, 06/01/25........................... 17,120,560 17,644,877
6.970%, 06/16/05............................. 15,000,000 15,506,250
Federal National Mortgage Association,
8.500%, 05/01/24-04/01/25.................... 40,501,200 42,273,127
9.000%, 02/01/25-04/01/25.................... 17,931,541 18,884,065
Federal National Mortgage Association
Debentures,
6.550%, 08/10/00............................. 6,000,000 6,140,640
Government National Mortgage Association,
7.000%, 09/15/22-05/15/24.................... 28,079,102 28,423,397
8.000%, 09/15/23-10/15/25.................... 24,906,302 25,949,136
Main Place Funding,
[]5.960%, 07/17/98........................... 10,000,000 10,025,000
Resolution Funding Corp.,
Zero Coupon, 07/15/20........................ 22,500,000 4,745,250
8.125%, 10/15/19, Principle Only Class A..... 4,200,000 5,167,974
Student Loan Market Association,
7.500%, 03/08/00............................. 12,000,000 12,855,000
United States Treasury Bonds,
7.500%, 11/15/24............................. 35,000,000 42,071,050
8.125%, 08/15/19............................. 50,000,000 62,867,000
United States Treasury Notes,
5.000%, 01/31/99............................. 16,000,000 15,880,000
7.500%, 11/15/01............................. 15,000,000 16,521,150
7.750%, 12/31/99............................. 57,000,000 61,854,120
7.875%, 11/15/04............................. 45,000,000 52,087,500
--------------
459,440,886
--------------
TOTAL LONG-TERM BONDS
(Cost $437,622,665)........................................... 475,043,292
--------------

DECEMBER 31, 1995

The following abbreviations are used in portfolio descriptions:

CMO Collateralized Mortgage Obligations

[]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

B4
<PAGE>

CONSERVATIVE BALANCED PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 39.6% SHARES VALUE
------------- --------------
AEROSPACE -- 0.8%
+Coltec Industries, Inc........................ 311,000 $ 3,615,375
GenCorp, Inc................................... 676,800 8,290,800
Loral Corp..................................... 77,800 2,752,175
Rockwell International Corp.................... 253,100 13,382,661
+UNC, Inc...................................... 289,100 1,734,600
--------------
29,775,611
--------------
AIRLINES -- 0.3%
+AMR Corp...................................... 100,000 7,425,000
+USAir Group, Inc.............................. 335,000 4,438,750
--------------
11,863,750
--------------
AUTOS - CARS & TRUCKS -- 3.1%
A.O. Smith Corp................................ 466,800 9,686,100
Chrysler Corp.................................. 500,000 27,687,500
Ford Motor Co.................................. 318,300 9,230,700
General Motors Corp............................ 500,000 26,437,500
General Motors Corp. (Class 'E' Stock)......... 243,900 12,682,800
General Motors Corp. (Class 'H' Stock)......... 465,900 22,887,337
Titan Wheel International, Inc................. 748,350 12,160,686
--------------
120,772,623
--------------
BANKS AND SAVINGS & LOANS -- 1.8%
First Bank System, Inc......................... 366,600 18,192,525
First Interstate Bancorp....................... 120,000 16,380,000
KeyCorp........................................ 502,800 18,226,500
Norwest Corp................................... 570,400 18,823,200
--------------
71,622,225
--------------
CHEMICALS -- 1.2%
+FMC Corp...................................... 110,800 7,492,850
Imperial Chemical Industries, PLC, ADR......... 371,300 17,358,275
OM Group, Inc.................................. 308,400 10,215,750
W.R. Grace & Co................................ 218,800 12,936,550
--------------
48,003,425
--------------
CHEMICALS - SPECIALTY -- 0.7%
Ferro Corp..................................... 655,200 15,233,400
M.A. Hanna Co.................................. 489,700 13,711,600
--------------
28,945,000
--------------
COMPUTER SERVICES -- 0.9%
+Amdahl Corp................................... 900,000 7,650,000
National Data Corp............................. 620,100 15,347,475
+Paxar Corp.................................... 1,022,928 13,553,794
--------------
36,551,269
--------------
CONSTRUCTION -- 0.2%
+J. Ray McDermott, SA.......................... 500,000 8,937,500
--------------
CONTAINERS -- 0.2%
+Sealed Air Corp............................... 290,400 8,167,500
--------------
DIVERSIFIED GAS -- 0.6%
+Basin Exploration, Inc........................ 148,000 730,750
Sonat Offshore Drilling, Inc................... 228,100 10,207,475
Tidewater, Inc................................. 73,600 2,318,400
Weatherford Enterra, Inc....................... 321,353 9,279,066
Western Gas Resources, Inc..................... 162,100 2,613,863
--------------
25,149,554
--------------
DRUGS AND HOSPITAL SUPPLIES -- 0.2%
United States Surgical Corp.................... 365,500 7,812,563
--------------

DECEMBER 31, 1995

B5
<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

+Pride Petroleum Services, Inc................. 360,100 $ 3,826,063
+Rowan Companies, Inc.......................... 269,400 2,660,325
+Western Atlas, Inc............................ 300,000 15,150,000
--------------
98,716,313
--------------
RAILROADS -- 0.9%
Burlington Northern, Inc....................... 259,000 20,202,000
Illinois Central Corp.......................... 440,000 16,885,000
--------------
37,087,000
--------------
REAL ESTATE DEVELOPMENT -- 0.5%
Zeneca Group, PLC, ADR......................... 357,400 20,863,225
--------------
RETAIL -- 1.7%
+Best Products Company, Inc.................... 1,094,500 5,198,875
+Burlington Coat Factory Warehouse............. 244,600 2,507,150
Charming Shoppes, Inc.......................... 2,000,000 5,750,000
Dillard Department Stores, Inc. (Class 'A'
Stock)....................................... 500,000 14,250,000
+Filene's Basement Corp........................ 160,000 370,000
K mart Corp.................................... 1,058,700 7,675,575
Rite Aid Corp.................................. 6,000 205,500
Sears, Roebuck & Co............................ 139,800 5,452,200
TJX Companies, Inc............................. 914,900 17,268,738
Woolworth Corp................................. 600,000 7,800,000
--------------
66,478,038
--------------
RUBBER -- 0.3%
Goodyear Tire & Rubber Co...................... 269,800 12,242,175
--------------
STEEL -- 1.6%
+Bethlehem Steel Corp.......................... 1,000,000 14,000,000
+LTV Corp...................................... 1,500,000 20,625,000
+Material Sciences Corp........................ 675,000 10,040,625
+National Steel Corp. (Class 'B' Stock)........ 300,000 3,862,500
USX-U.S. Steel Group........................... 450,000 13,837,500
--------------
62,365,625
--------------
TELECOMMUNICATIONS -- 1.2%
+Airtouch Communications, Inc.................. 385,500 10,890,375
Century Telephone Enterprises, Inc............. 337,300 10,709,275
Frontier Corp.................................. 297,700 8,931,000
MCI Communications Corp........................ 331,100 8,649,988
+Nextel Communications, Inc. (Class 'A'
Stock)....................................... 495,400 7,307,150
--------------
46,487,788
--------------
TEXTILES -- 1.2%
+Farah, Inc.................................... 258,500 1,227,874
+Fieldcrest Cannon, Inc........................ 460,000 7,647,500
+Fruit of the Loom, Inc. (Class 'A' Stock)..... 500,000 12,187,500
+Owens-Illinois, Inc........................... 552,700 8,014,150
Phillips-Van Heusen Corp....................... 600,000 5,925,000
+Tultex Corp................................... 579,000 2,388,375
V.F. Corp...................................... 154,600 8,155,149
--------------
45,545,549
--------------
TOBACCO -- 0.4%
RJR Nabisco Holdings Corp....................... 500,000 15,437,500
--------------
TOTAL COMMON STOCKS
(Cost $1,308,436,835)......................................... 1,560,041,940
--------------

B6
<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

MARKET
PREFERRED STOCKS -- 0.1% SHARES VALUE
------------- --------------
MEDIA
Times Mirror Co. (Cum. Conv.), Series B........ 119,724 $ 3,090,376
--------------
(Cost $2,725,059)

PAR MARKET
LONG-TERM BONDS -- 33.2% VALUE VALUE
------------- --------------

DECEMBER 31, 1995

B7
<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Grupo Televisa, SA,
10.000%, 11/09/97............................ $ 7,250,000 $ 7,105,000
Hydro-Quebec,
8.050%, 07/07/24............................. 22,100,000 25,232,896
Kansallis-Osake Pankki, N.Y.,
**[ ]8.650%, 12/29/49........................ 10,000,000 10,625,000
9.750%, 12/15/98............................. 16,950,000 18,736,022
Kansallis-Osake Pankki, N.Y., C.D.,
6.125%, 05/15/98............................. 6,160,000 6,227,375
Quebec, Province of Canada,
7.500%, 07/15/02............................. 8,625,000 9,157,766
Republic of Columbia,
7.125%, 05/11/98............................. 2,775,000 2,795,813
7.250%, 02/23/04............................. 5,400,000 5,179,896
8.750%, 10/06/99............................. 4,950,000 5,232,744
Republic of Italy,
6.875%, 09/27/23............................. 15,000,000 14,648,250
Republic of South Africa,
9.625%, 12/15/99............................. 22,221,000 23,966,904
**Telekom Malaysia,
7.875%, 08/01/25............................. 22,000,000 24,159,520
United Mexican States,
5.820%, 06/28/01............................. 1,375,000 990,000
6.970%, 08/12/00............................. 2,300,000 1,840,000
8.500%, 09/15/02............................. 6,850,000 5,959,500
--------------
236,630,193
--------------
INDUSTRIAL -- 13.0%
AMR Corp.,
10.000%, 04/15/21............................ 5,000,000 6,213,250
9.000%, 08/01/12............................. 10,000,000 11,277,700
9.800%, 10/01/21............................. 5,000,000 5,944,000
9.880%, 06/15/20............................. 9,565,000 11,501,913
Arkla, Inc., M.T.N.,
9.250%, 12/18/97, Tranche #TR00027........... 3,000,000 3,151,590
Auburn Hills Trust,
12.000%, 05/01/20............................ 28,670,000 45,119,699
Coca-Cola Enterprises, Inc.,
6.500%, 11/15/97............................. 3,750,000 3,808,875
Columbia Gas Systems, Inc.,
7.620%, 11/28/25............................. 6,500,000 6,616,935
Columbia/HCA Healthcare Corp.,
7.050%, 12/01/27............................. 32,200,000 32,411,554
7.580%, 09/15/25, M.T.N., Tranche #TR00015... 16,000,000 17,157,120
Delta Air Lines, Inc.,
9.750%, 05/15/21............................. 5,000,000 6,168,650
Federated Dept Stores,
8.125%, 10/15/02............................. 10,500,000 10,552,500
Hanson Overseas Corp.,
5.500%, 01/15/96............................. 2,000,000 1,999,840
Nabisco, Inc.,
6.850%, 06/15/05............................. 20,000,000 20,312,000
News America Holdings, Inc.,
7.750%, 12/01/45............................. 51,000,000 51,659,940
9.125%, 10/15/99............................. 15,000,000 16,580,700
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01............................. 8,950,000 10,031,070
RJR Nabisco, Inc.,
8.750%, 08/15/05............................. 4,000,000 4,097,240
Sears, Roebuck & Co., M.T.N.,
9.420%, 04/01/96............................. 1,000,000 1,014,375
Sears, Roebuck Acceptance Corp.,
9.000%, 09/15/96............................. 2,000,000 2,043,760

DECEMBER 31, 1995

B8
<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
COMMERCIAL PAPER -- 16.1%
American Express Credit Corp.,
5.590%, 03/15/96............................. $ 14,000,000 $ 13,841,306
American Home Products Corp.,
5.680%, 03/07/96............................. 13,000,000 12,866,678
American Honda Finance Corp.,
5.750%, 02/08/96............................. 6,000,000 5,964,542
5.850%, 01/12/96-01/22/96.................... 9,000,000 8,978,875
Aristar Inc.,
5.800%, 02/02/96............................. 2,000,000 1,990,011
Asset Securitization Cooperative Corp.,
5.660%, 02/20/96............................. 28,000,000 27,784,291
Associates Corp. of North America,
5.680%, 02/08/96-02/12/96.................... 43,300,000 43,026,208
Banque Nationale De Paris,
5.780%, 01/22/96............................. 11,000,000 10,999,845
Bradford & Bingley Building Society,
5.680%, 02/06/96............................. 22,000,000 21,878,511
Caterpillar Financial Services Corp.,
5.660%, 02/21/96............................. 3,000,000 2,976,417
5.670%, 02/27/96............................. 3,000,000 2,973,540
Chase Manhattan Corp.,
5.670%, 02/12/96............................. 8,000,000 7,948,340
CIT Group Holdings, Inc.,
5.670%, 02/05/96............................. 8,000,000 7,957,160
5.680%, 02/07/96............................. 17,000,000 16,903,440
5.780%, 01/25/96............................. 16,981,000 16,918,293
Cogentrix of Richmond, Inc.,
5.950%, 01/24/96............................. 18,457,000 18,389,888
Corporate Receivables Corp.,
5.750%, 01/16/96-01/18/96.................... 8,000,000 7,980,514
Countrywide Funding Corp.,
5.830%, 01/16/96............................. 2,000,000 1,995,466
5.840%, 01/18/96............................. 8,000,000 7,979,236
5.870%, 01/22/96............................. 3,000,000 2,990,217
6.000%, 01/22/96............................. 8,000,000 7,973,333
Dean Witter Discover and Company,
5.700%, 02/14/96............................. 4,000,000 3,972,767
Finova Capital Corp.,
5.970%, 01/05/96-01/25/96.................... 19,360,000 19,324,797
First Union Corp.,
5.710%, 02/09/96............................. 15,000,000 14,909,592
Fleet Mortgage Group, Inc.,
5.800%, 01/16/96............................. 6,000,000 5,986,467
Ford Motor Credit Co.,
5.530%, 03/04/96............................. 20,800,000 20,601,903
6.070%, 01/05/96............................. 14,300,000 14,292,767
General Electric Capital Corp.,
5.580%, 04/08/96-04/09/96.................... 10,000,000 9,848,565
5.660%, 02/08/96............................. 36,000,000 35,790,580
General Motors Acceptance Corp.,
5.650%, 02/09/96............................. 4,261,000 4,235,588
5.750%, 02/20/96............................. 9,000,000 8,929,563
5.800%, 02/09/96............................. 20,000,000 19,877,556
Goldman Sachs Group L.P,
6.050%, 01/11/96-01/12/96.................... 22,000,000 21,964,540
GTE Corp.,
5.870%, 01/19/96............................. 4,000,000 3,988,912
5.950%, 01/29/96............................. 4,544,000 4,523,722
5.970%, 01/30/96-01/31/96.................... 7,491,000 7,455,719
Hanson Finance, PLC,
5.650%, 02/29/96............................. 8,000,000 7,927,178
5.700%, 01/26/96-02/08/96.................... 19,389,000 19,296,480

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
McKenna Triangle National Corp.,
5.750%, 01/16/96............................. $ 3,831,000 $ 3,822,433
Merrill Lynch & Co., Inc.,
5.750%, 01/26/96............................. 21,000,000 20,919,500
Mitsubishi International Corp.,
5.780%, 01/29/96............................. 2,500,000 2,489,163
5.810%, 01/23/96............................. 4,200,000 4,185,766
Morgan Stanley Group, Inc.,
5.750%, 01/25/96............................. 34,000,000 33,875,097
NYNEX Corporation,
5.800%, 01/19/96............................. 2,000,000 1,994,522
5.820%, 01/09/96-01/16/96.................... 6,000,000 5,990,947
PHH Corporation,
5.830%, 01/23/96............................. 3,000,000 2,989,798
PNC Funding Corp,
5.730%, 02/08/96............................. 2,000,000 1,988,222
Preferred Receivables Funding Corp.,
5.680%, 02/07/96............................. 7,150,000 7,109,388
5.850%, 01/17/96............................. 15,000,000 14,963,438
Riverwood Funding Corp.,
5.680%, 02/16/96............................. 4,000,000 3,971,600
Sears Roebuck Acceptance Corp.,
5.720%, 02/26/96............................. 11,000,000 10,903,872
Special Purpose A/R Cooperative Corp.,
5.750%, 01/24/96............................. 4,000,000 3,985,944
5.780%, 01/24/96............................. 3,000,000 2,989,403
Transamerica Corp.,
5.780%, 01/19/96............................. 16,072,000 16,028,132
Whirlpool Corp.,
5.800%, 01/23/96............................. 2,000,000 1,993,233
Whirlpool Financial Corp.,
5.710%, 03/04/96............................. 18,972,000 18,785,431
5.800%, 02/02/96............................. 1,300,000 1,293,507
--------------
633,522,203
--------------
TERM NOTES -- 5.6%
Associates Corp. of North America,
8.800%, 03/01/96............................. 2,000,000 2,007,278
Bank of America,
5.79%, 01/16/96, Tranche #TR00034............ 2,000,000 1,999,992
Bank One Indianapolis N.A.,
7.180%, 02/05/96, Tranche #TR00002........... 6,000,000 6,002,187
Bayerische Hypotheken,
5.770%, 01/23/96............................. 4,000,000 3,999,789
Beneficial Corp.,
5.25%, 01/23/96, Tranche #TR00776............ 5,000,000 4,999,220
Exxon Capital Corp.,
7.875%, 04/15/96............................. 5,500,000 5,527,256
First Union National Bank of North Carolina,
5.800%, 01/31/96............................. 13,000,000 13,000,000
Ford Motor Credit Co.,
5.000%, 03/25/96............................. 4,000,000 3,991,407
8.900%, 04/08/96............................. 4,300,000 4,332,346
9.850%, 02/27/96............................. 5,000,000 5,024,368
General Motors Acceptance Corp.,
[ ]5.70%, 10/20/97........................... 8,000,000 7,996,425
6.300%, 02/02/96, Tranche #TR00646........... 2,000,000 2,000,418
8.250%, 08/01/96............................. 2,000,000 2,024,935

B9
<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
[ ]Merrill Lynch & Co., Inc.,
5.929%, 09/13/96, Tranche #TR00197........... $ 27,000,000 $ 26,994,526
NationsBank of Texas, N.A.,
7.000%, 02/06/96, Tranche #TR00037........... 40,000,000 40,002,205
7.300%, 01/26/96, Tranche #TR00043........... 4,000,000 4,001,092
7.550%, 01/09/96, Tranche #TR00050........... 8,500,000 8,501,291
[ ]Norwest Corp.,
5.929%, 05/23/96, Tranche #TR00176........... 5,500,000 5,499,923
[ ]Salomon, Inc.,
6.725%, 02/14/96............................. 25,000,000 25,000,000
[ ]SMM Trust,
5.937%, 12/16/96............................. 27,000,000 26,997,556
Society National Bank,
6.000%, 04/25/96, Tranche #TR00010........... 1,940,000 1,940,000
Student Loan Marketing Association,
[ ]5.20%, 08/09/96........................... 7,650,000 7,641,227
[ ]5.22%, 02/08/96........................... 3,000,000 2,999,276
USX Corp.,
6.562%, 02/15/96............................. 7,500,000 7,502,619
--------------
219,985,336
--------------
PROMISSORY NOTES -- 0.3%
[ ]Lehman Brothers Holdings, Inc.,
6.142%, 05/29/96............................. 10,000,000 10,000,000
--------------
REPURCHASE AGREEMENTS -- 1.0%
Joint Repurchase Agreement Account,
5.839%, 01/02/96............................. 43,210,000 43,210,000
--------------
TOTAL SHORT-TERM INVESTMENTS.................................... 1,051,312,715
--------------
OTHER ASSETS -- 0.7%
(net of liabilities).......................................... 27,992,965
--------------
TOTAL NET ASSETS -- 100.0%...................................... $3,940,774,265
--------------
--------------

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $96,403,735. The aggregate value, $96,894,639 is
approximately 2.5% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1995.

[ ]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C27 THROUGH C31.

B10
<PAGE>

FLEXIBLE MANAGED PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 60.3% SHARES VALUE
------------- --------------
AEROSPACE -- 1.9%
Boeing Co...................................... 582,600 $ 45,661,275
+Coltec Industries, Inc........................ 503,800 5,856,675
United Technologies Corp....................... 300,000 28,462,500
--------------
79,980,450
--------------
AUTOS - CARS & TRUCKS -- 1.8%
Chrysler Corp.................................. 870,000 48,176,250
General Motors Corp. (Class 'E' Stock)......... 542,400 28,204,800
--------------
76,381,050
--------------
BANKS AND SAVINGS & LOANS -- 3.9%
Bank of New York Company, Inc.................. 1,000,000 48,750,000
J.P. Morgan & Co., Inc......................... 550,000 44,137,500
NationsBank Corp............................... 568,800 39,602,700
Norwest Corp................................... 997,800 32,927,400
UJB Financial Company.......................... 120,200 4,297,150
--------------
169,714,750
--------------
CHEMICALS -- 2.4%
Agrium, Inc.................................... 907,300 40,828,500
Arcadian Corp.................................. 694,200 13,450,125
E.I. Du Pont de Nemours & Co................... 600,000 41,925,000
+McWhorter Technologies, Inc................... 35,000 516,250
+Mississippi Chemical Corp..................... 324,700 7,549,275
--------------
104,269,150
--------------
CHEMICALS - SPECIALTY -- 0.7%
IMC Global, Inc................................ 703,500 28,755,563
--------------
COMMUNICATIONS -- 0.1%
Infinity Broadcasting Corp. (Class 'A' Stock).. 86,400 3,218,400
--------------
COMPUTER SERVICES -- 3.1%
Automatic Data Processing, Inc................. 740,400 54,974,700
+Bay Networks, Inc............................. 400,000 16,450,000
+Cisco Systems, Inc............................ 202,700 15,126,488
First Data Corp................................ 422,500 28,254,687
+Sun Microsystems, Inc......................... 350,000 15,968,750
--------------
130,774,625
--------------
COSMETICS & SOAPS -- 0.6%
Procter & Gamble Co............................ 325,000 26,975,000
--------------
DIVERSIFIED GAS -- 0.4%
Cross Timbers Oil Co........................... 1,010,000 17,801,250
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.6%
International Business Machines Corp........... 290,500 26,653,375
--------------
DRUGS AND HOSPITAL SUPPLIES -- 3.5%
American Home Products Corp.................... 448,100 43,465,700
Baxter International, Inc...................... 725,000 30,359,375
Genzyme Corp................................... 168,700 10,522,664
Pharmacia & Upjohn, Inc........................ 1,100,000 42,625,000
Schering-Plough Corp........................... 400,000 21,900,000
--------------
148,872,739
--------------
ELECTRICAL EQUIPMENT -- 0.6%
Baldor Electric Co............................. 602,460 12,124,508
Belden, Inc.................................... 519,900 13,387,425
--------------
25,511,933
--------------
ELECTRONICS -- 2.6%
+ADT Ltd....................................... 1,641,200 24,618,000
Emerson Electric Co............................ 600,000 49,050,000

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
Hewlett-Packard Co............................. 175,000 $ 14,656,250
Teleflex, Inc.................................. 500,000 20,500,000
--------------
108,824,250
--------------
FINANCIAL SERVICES -- 3.6%
Dean Witter, Discover and Co................... 800,000 37,600,000
Federal Home Loan Mortgage Corp................ 684,700 57,172,450
Manufactured Home Communities, Inc............. 59,300 1,037,750
MBNA Corp...................................... 981,100 36,178,063
Morgan Stanley Group, Inc...................... 300,000 24,187,500
--------------
156,175,763
--------------
FOODS -- 2.8%
Nabisco Holdings Corporation (Class 'A'
Stock)....................................... 564,000 18,400,500
Philip Morris Companies, Inc................... 600,000 54,300,000
Pioneer Hi-Bred International, Inc............. 808,400 44,967,250
--------------
117,667,750
--------------
FOREST PRODUCTS -- 1.4%
Kimberly-Clark Corp............................ 277,800 22,987,950
Willamette Industries, Inc..................... 686,000 38,587,500
--------------
61,575,450
--------------
HEALTHCARE -- 0.3%
+Sybron International Corp..................... 520,400 12,359,500
--------------
HOSPITAL MANAGEMENT -- 1.7%
Columbia/HCA Healthcare Corp................... 498,362 25,291,872
Guidant Corp................................... 307,486 12,991,284
+Health Care and Retirement Corp............... 590,800 20,678,000
+Tenet Healthcare Corp......................... 583,600 12,109,700
--------------
71,070,856
--------------
INSURANCE -- 4.2%
American International Group, Inc.............. 657,700 60,837,250
CIGNA Corp..................................... 125,000 12,906,250
General Re Corp................................ 215,000 33,325,000
Mid Ocean Ltd Ordinary Shares.................. 525,000 19,490,625
NAC Re Corp.................................... 277,400 9,986,400
TIG Holdings, Inc.............................. 268,500 7,652,250
W.R. Berkley Corp.............................. 610,000 32,787,500
--------------
176,985,275
--------------
LEISURE -- 2.3%
+Argosy Gaming Co.............................. 30,500 232,563
+Bally Entertainment Corp...................... 1,946,000 27,244,000
Carnival Corp. (Class 'A' Stock)............... 1,100,000 26,812,500
Hasbro, Inc.................................... 500,000 15,500,000
+Mirage Resorts, Inc........................... 632,200 21,810,900
Royal Caribbean Cruise, Ltd.................... 233,800 5,143,600
--------------
96,743,563
--------------
MACHINERY -- 0.7%
+Thermo Fibertek, Inc.......................... 149,350 3,379,044
+Varity Corp................................... 658,400 24,443,100
--------------
27,822,144
--------------
MEDIA -- 2.8%
Comcast Corp. (Class 'A' Stock)................ 830,400 14,635,800
Shaw Communications, Inc. (Class 'B' Stock).... 703,700 4,448,072
+Tele-Communications, Inc. (Series 'A' Stock).. 1,934,400 38,446,200

B11
<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
Tele-Communications, Inc. (Series 'A' Stock)... 483,600 $ 12,996,750
+Viacom, Inc. (Class 'B' Stock)................ 994,500 47,114,438
--------------
117,641,260
--------------
MINERAL RESOURCES -- 2.3%
Pittston Services Group........................ 350,000 10,981,250
Potash Corp. of Saskatchewan, Inc.............. 608,300 43,113,263
+Sante Fe Pacific Gold Corp.................... 974,000 11,809,750
Vigoro Corp.................................... 533,100 32,918,925
--------------
98,823,188
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 4.2%
+American Business Information, Inc............ 510,150 9,884,156
General Electric Co............................ 327,300 23,565,600
Illinois Tool Works, Inc....................... 710,000 41,890,000
Libbey, Inc.................................... 521,700 11,738,250
Martin Marietta Materials, Inc................. 647,600 13,356,750
Modine Manufacturing Co........................ 289,100 6,938,400
Pentair, Inc................................... 263,200 13,094,200
TJ International, Inc.......................... 539,700 9,984,450
Tyco International Ltd......................... 687,600 24,495,750
York International Corp........................ 500,000 23,500,000
--------------
178,447,556
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 0.3%
+DeVRY, Inc.................................... 529,200 14,288,400
--------------
PETROLEUM -- 1.8%
Exxon Corp..................................... 410,000 32,851,250
Royal Dutch Petroleum Co., ADR................. 300,000 42,337,500
--------------
75,188,750
--------------
PETROLEUM SERVICES -- 1.3%
Baker Hughes, Inc.............................. 581,700 14,178,938
Halliburton Co................................. 267,200 13,527,000
Total SA, ADR.................................. 757,500 25,755,000
--------------
53,460,938
--------------
RAILROADS -- 1.6%
Illinois Central Corp.......................... 682,000 26,171,750
Norfolk Southern Corp.......................... 549,400 43,608,625
--------------
69,780,375
--------------
REAL ESTATE DEVELOPMENT -- 0.7%
Crescent Real Estate Equities, Inc............. 492,600 16,809,975
Duke Realty Investments, Inc................... 444,800 13,955,600
--------------
30,765,575
--------------
RETAIL -- 2.2%
Dollar General Corporation..................... 600,000 12,450,000
+Federated Department Stores, Inc.............. 1,500,000 41,250,000
Harcourt General, Inc.......................... 320,500 13,420,938
Nine West Group................................ 350,000 13,125,000
Office Depot, Inc.............................. 700,000 13,825,000
--------------
94,070,938
--------------
TELECOMMUNICATIONS -- 2.5%
+Airtouch Communications, Inc.................. 641,100 18,111,075
AT&T Corp...................................... 350,000 22,662,500
MCI Communications Corp........................ 1,000,000 26,125,000
SBC Communications, Inc........................ 475,000 27,312,500
TCA Cable TV, Inc.............................. 494,300 13,655,038
--------------
107,866,113
--------------
TEXTILES -- 0.0%
Unifi, Inc..................................... 90,000 1,991,250
--------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------
TOBACCO -- 1.4%
RJR Nabisco Holdings Corp...................... 1,905,000 $ 58,816,875
--------------
TOTAL COMMON STOCKS
(Cost $2,074,306,562)......................................... 2,569,274,054
--------------

PAR MARKET
LONG-TERM BONDS -- 26.3% VALUE VALUE
------------- --------------
FINANCIAL -- 7.0%
Advanta Corp.,
5.125%, 11/15/96............................. $ 9,000,000 $ 8,949,240
Advanta National Bank, CD,
6.140%, 02/28/97............................. 17,000,000 17,174,760
Allmerica Financial Corp.,
7.625%, 10/15/25............................. 7,200,000 7,564,968
Banc One Credit Card Master Trust,
7.750%, 12/15/99, Series 94-B Class B........ 5,000,000 5,189,050
Capital One Bank, M.T.N.,
6.740%, 05/31/99, Tranche #TR00038........... 22,250,000 22,756,410
8.125%, 02/27/98, Tranche #TR00032........... 6,500,000 6,788,860
Chase Manhattan Credit Card Master Trust,
7.400%, 05/15/00, Series 1992-1.............. 5,000,000 5,096,850
Equitable Life Assurance Society,
**6.950%, 12/01/05........................... 10,000,000 10,143,750
First USA Bank, M.T.N.,
[ ]6.237%, 10/16/97.......................... 20,000,000 19,970,000
Ford Motor Credit Co.,
6.375%, 10/06/00............................. 13,500,000 13,744,350
Ford Motor Credit, Co., M.T.N.,
6.137%, 10/04/99............................. 6,250,000 6,265,313
6.850%, 08/15/00............................. 8,500,000 8,823,255
General Motors Acceptance Corp., M.T.N.,
7.000%, 05/19/97, Tranche #TR00041........... 10,000,000 10,189,300
7.000%, 06/02/97, Tranche #TR00476........... 6,000,000 6,116,460
7.375%, 07/20/98, Tranche #TR00667........... 4,500,000 4,681,035
7.850%, 03/05/97, Tranche #TR00187........... 3,200,000 3,282,176
7.875%, 03/15/00............................. 5,000,000 5,366,600
Marine Midland Bank N.A.,
[ ]5.812%, 09/27/96.......................... 6,500,000 6,487,000
MBNA Master Credit Card Trust,
[ ]6.370%, 01/15/02, Series 1994-1 Class A... 7,500,000 7,509,375

B12
<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Okobank,
**[ ]7.387%, 10/29/49........................ $ 3,500,000 $ 3,539,375
[ ]7.387%, 10/29/49.......................... 9,000,000 9,101,250
[ ]7.375%, 09/27/49.......................... 18,750,000 19,341,563
Salomon, Inc., M.T.N.,
5.470%, 09/22/97, Tranche #SR00504........... 15,000,000 14,823,600
5.790%, 11/26/97, Tranche #TR00571........... 6,700,000 6,647,338
5.880%, 07/29/97, Tranche #SR00456........... 5,650,000 5,626,101
Santander Financial Issuances, LTD.,
7.250%, 11/01/15............................. 11,000,000 11,267,080
Sears Roebuck Acceptance Corp.,
6.750%, 09/15/05............................. 34,950,000 36,247,344
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038........... 10,000,000 10,158,900
Standard Credit Card Master Trust,
5.950%, 10/07/04, Series 1993-2A............. 4,500,000 4,463,415
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #TR00248........... 3,330,000 3,350,846
--------------
300,665,564
--------------
FOREIGN -- 5.1%
Banco de Commercio Exterior de
Columbia, SA, M.T.N.,
**8.625%, 06/02/00, Tranche #TR00001......... 5,500,000 5,654,000
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99............................. 2,300,000 2,357,500
**9.750%, 08/26/99, Tranche #TR00001......... 5,000,000 5,125,000
Banco Nacional de Comercio Exterior,
7.500%, 07/01/00............................. 5,000,000 4,350,000
Cemex, SA, M.T.N.,
**9.500%, 09/20/01, Tranche #TR00010......... 12,500,000 11,375,000
Compania Sud Americana de Vapores, SA,
**7.375%, 12/08/03........................... 5,650,000 5,565,250
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98............................. 15,100,000 13,288,000
Empresa Columbia de Petroleos,
7.250%, 07/08/98............................. 8,250,000 8,208,750
Empresas La Moderna, SA,
10.250%, 11/12/97............................ 2,000,000 1,980,000
Financiera Energetica Nacional,
6.625%, 12/13/96............................. 5,100,000 5,100,000
Financiera Energetica Nacional, M.T.N.,
9.000%, 11/08/99............................. 2,000,000 2,097,500
**9.000%, 11/08/99........................... 5,375,000 5,637,031
Fomento Economico Mexicano, SA,
9.500%, 07/22/97............................. 6,300,000 6,244,875
Grupo Embotellador Mexicana,
**10.750%, 11/19/97.......................... 8,020,000 7,999,950
Grupo Televisa, SA,
10.000%, 11/09/97............................ 4,000,000 3,920,000
Hydro-Quebec,
8.050%, 07/07/24............................. 17,100,000 19,524,096

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Kansallis-Osake Pankki, N.Y.,
**[ ]8.650%, 12/29/49.......................... $ 9,000,000 $ 9,562,500
9.750%, 12/15/98............................. 16,760,000 18,526,001
New Zealand Government,
9.875%, 01/15/11............................. 7,300,000 9,746,814
Quebec, Province of Canada,
7.500%, 07/15/02............................. 8,500,000 9,025,045
Republic of Columbia,
7.125%, 05/11/98............................. 2,700,000 2,720,250
7.250%, 02/23/04............................. 4,100,000 3,932,884
8.750%, 10/06/99............................. 4,925,000 5,206,316
Republic of Italy,
6.875%, 09/27/23............................. 15,000,000 14,648,250
Republic of South Africa,
9.625%, 12/15/99............................. 21,750,000 23,458,898
Telekom Malaysia,
**7.875%, 08/01/25........................... 3,000,000 3,294,480
United Mexican States,
5.820%, 06/28/01............................. 1,375,000 990,000
6.970%, 08/12/00............................. 2,300,000 1,840,000
8.500%, 09/15/02............................. 6,925,000 6,024,750
--------------
217,403,140
--------------
INDUSTRIAL -- 13.3%
AMR Corp.,
9.000%, 08/01/12............................. 5,000,000 5,638,850
9.800%, 10/01/21............................. 5,000,000 5,944,000
Auburn Hills Trust,
12.000%, 05/01/20............................ 26,300,000 41,389,888
Columbia Gas Systems,
7.620%, 11/28/25............................. 6,500,000 6,616,935
Columbia/HCA Healthcare Corp.,
7.050%, 12/01/27............................. 21,200,000 21,339,284
7.580%, 09/15/25, M.T.N., Tranche #TR00015... 10,000,000 10,723,200
Comdisco, Inc.,
7.250%, 04/15/98............................. 10,000,000 10,296,800
Continental Cablevision, Inc.,
**8.300%, 05/15/06........................... 5,000,000 5,018,750
Delta Air Lines, Inc.,
9.250%, 03/15/22............................. 8,709,000 10,287,506
9.750%, 05/15/21............................. 34,956,000 43,126,266
9.875%, 01/01/98............................. 6,000,000 6,400,080
Federated Dept Stores,
8.125%, 10/15/02............................. 30,600,000 30,753,000
Fleming Companies, Inc, M.T.N.,
9.125%, 02/27/98, Tranche #TR00018........... 6,000,000 6,259,800
9.240%, 02/28/00, Tranche #TR00019........... 5,000,000 5,367,700
Fleming Companies, Inc.,
10.625%, 12/15/01............................ 22,750,000 22,067,500
Nabisco, Inc.,
6.850%, 06/15/05............................. 10,000,000 10,156,000
News America Holdings, Inc.,
7.750%, 12/01/45............................. 53,000,000 53,685,820
9.125%, 10/15/99............................. 5,000,000 5,526,900
Oryx Energy Co.,
9.300%, 05/01/96............................. 2,350,000 2,372,866
Oryx Energy Co., M.T.N.,
6.050%, 02/01/96, Tranche #TR00013........... 10,500,000 10,496,850
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01............................. 7,600,000 8,518,004

B13
<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

DECEMBER 31, 1995

B14
<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
Mitsubishi International Corp.,
5.780%, 01/31/96............................. $ 1,000,000 $ 995,344
Morgan Stanley Group, Inc.,
5.750%, 01/25/96............................. 5,000,000 4,981,632
National Westminister Bank, PLC,
5.800%, 01/31/96............................. 1,000,000 1,000,000
Nynex Corp,
5.820%, 01/10/96-01/16/96.................... 1,847,000 1,843,790
PNC Funding Corp,
5.730%, 02/08/96............................. 1,000,000 994,111
Preferred Receivables Funding Corp.,
5.650%, 02/06/96............................. 5,000,000 4,972,535
5.700%, 02/12/96............................. 1,650,000 1,639,289
Riverwoods Funding Corp,
5.750%, 02/15/96............................. 1,000,000 992,972
Sears Roebuck Acceptance Corp.,
5.720%, 02/26/96............................. 4,000,000 3,965,044
Special Purpose A/R Cooperative Corp,
5.750%, 01/24/96............................. 1,000,000 996,486
Transamerica Finance Group, Inc.,
5.700%, 02/05/96............................. 1,000,000 994,617
Whirlpool Corp.,
5.710%, 03/04/96............................. 1,028,000 1,017,891
--------------
77,153,916
--------------
TERM NOTES -- 1.6%
Associates Corp. of North America,
4.500%, 02/15/96............................. 3,200,000 3,191,504
8.800%, 03/01/96............................. 2,000,000 2,007,278
Bank One Indianapolis N.A.,
7.180%, 02/05/96, Tranche #TR00002........... 1,000,000 1,000,365
First Union National Bank of North Carolina,
5.800%, 01/31/96, Tranche #TR00037........... 2,000,000 2,000,000
Ford Motor Credit Co.,
5.150%, 03/15/96, Tranche #TR00690........... 2,000,000 1,994,761
[ ]6.082%, 06/17/96, Tranche #TR00826........ 1,000,000 1,001,128
8.250%, 05/15/96............................. 2,300,000 2,320,274
General Motors Acceptance Corp.,
5.300%, 07/12/96, Tranche #TR00760........... 1,500,000 1,495,485
[ ]5.700%, 10/20/97, Tranche #TR00065........ 1,000,000 999,553
Merrill Lynch & Co., Inc.,
[ ]5.929%, 09/13/96, Tranche #TR00197........ 4,000,000 3,999,189
NationsBank of Texas N.A.,
7.000%, 02/06/96, Tranche #TR00050........... 9,000,000 9,000,391
Salomon, Inc.,
[ ]6.725%, 02/14/96.......................... 25,000,000 25,000,000
SMM Trust,
[ ]5.937%, 12/16/96.......................... 6,375,000 6,374,423
USX Corp.,
6.562%, 02/15/96............................. 7,500,000 7,502,619
--------------
67,886,970
--------------

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
PROMISSORY NOTES -- 0.0%
Lehman Brothers Holdings, Inc.,
6.142%, 05/29/96............................. $ 1,000,000 $ 1,000,000
--------------
REPURCHASE AGREEMENTS -- 7.9%
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (See Note 4)................ 335,658,000 335,658,000
--------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
Student Loan Marketing Association,
[ ]5.400%, 03/20/96.......................... 3,455,000 3,454,967
--------------
TOTAL SHORT-TERM INVESTMENTS.................................... 506,153,682
--------------
OTHER ASSETS -- 0.8%
(net of liabilities).......................................... 32,846,117
--------------
TOTAL NET ASSETS -- 100.0%...................................... $4,261,204,837
--------------
--------------

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $72,616,786. The aggregate value, $72,915,086 is
approximately 1.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1995.

[ ]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C27 THROUGH C31.

B15
<PAGE>

STOCK INDEX PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 96.1% SHARES VALUE
------------- --------------

AEROSPACE -- 2.3%
AlliedSignal, Inc.............................. 60,600 $ 2,878,500
Boeing Co...................................... 74,150 5,811,506
General Dynamics Corp.......................... 13,600 804,100
Lockheed Martin Corp........................... 42,849 3,385,071
Loral Corp..................................... 36,800 1,301,800
McDonnell Douglas Corp......................... 24,100 2,217,200
Northrop Grumman Corp.......................... 10,700 684,800
Raytheon Co.................................... 52,600 2,485,350
Rockwell International Corp.................... 46,200 2,442,825
United Technologies Corp....................... 26,700 2,533,163
--------------
24,544,315
--------------
AIRLINES -- 0.3%
+AMR Corp...................................... 16,800 1,247,400
Delta Air Lines, Inc........................... 11,000 812,625
Southwest Airlines Co.......................... 30,700 713,775
+USAir Group, Inc.............................. 16,100 213,325
--------------
2,987,125
--------------
ALUMINUM -- 0.4%
Alcan Aluminum, Ltd............................ 49,050 1,526,680
Aluminum Co. of America........................ 38,500 2,035,688
Reynolds Metals Co............................. 13,300 753,113
--------------
4,315,481
--------------
AUTOS - CARS & TRUCKS -- 2.3%
Chrysler Corp.................................. 82,100 4,546,288
Cummins Engine Co., Inc........................ 8,300 307,100
Dana Corp...................................... 21,500 628,875
Echlin, Inc.................................... 13,000 474,500
Ford Motor Co.................................. 232,000 6,728,000
General Motors Corp............................ 161,200 8,523,450
Genuine Parts Co............................... 26,650 1,092,650
Johnson Controls, Inc.......................... 8,700 598,125
+Navistar International Corp................... 14,500 152,250
Safety Kleen Corp.............................. 11,050 172,656
--------------
23,223,894
--------------
BANKS AND SAVINGS & LOANS -- 6.3%
Banc One Corp.................................. 84,822 3,202,030
Bank of Boston Corp............................ 24,200 1,119,250
Bank of New York Company, Inc.................. 43,000 2,096,250
BankAmerica Corp............................... 79,948 5,176,632
Bankers Trust NY Corp.......................... 16,500 1,097,250
Barnett Banks, Inc............................. 20,900 1,233,100
Boatmen's Bancshares, Inc...................... 28,800 1,177,200
Chase Manhattan Corp........................... 38,705 2,346,491
Chemical Banking Corp.......................... 53,682 3,153,817
Citicorp....................................... 91,100 6,126,475
Comerica, Inc.................................. 24,400 979,050
CoreStates Financial Corp...................... 30,200 1,143,825
First Bank System, Inc......................... 28,900 1,434,162
First Chicago NBD Corp......................... 68,115 2,690,543
First Fidelity Bancorp......................... 17,500 1,319,063
First Interstate Bancorp....................... 16,300 2,224,950
First Union Corp............................... 36,700 2,041,438
Fleet Financial Group, Inc..................... 55,100 2,245,325
Golden West Financial Corp..................... 12,200 674,050
Great Western Financial Corp................... 29,800 759,900
H.F. Ahmanson & Co............................. 25,000 662,500
J.P. Morgan & Co., Inc......................... 40,250 3,230,063
KeyCorp........................................ 51,000 1,848,750
Mellon Bank Corp............................... 31,350 1,685,063
NationsBank Corp............................... 58,139 4,047,928
Norwest Corp................................... 75,100 2,478,300

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

PNC Bank Corp.................................. 50,100 $ 1,615,725
Suntrust Banks, Inc............................ 24,400 1,671,400
U.S. Bancorp................................... 32,600 1,096,175
Wachovia Corp.................................. 36,400 1,665,300
Wells Fargo & Co............................... 10,400 2,246,400
--------------
64,488,405
--------------
BEVERAGES -- 3.6%
Adolph Coors Co. (Class 'B' Stock)............. 9,500 210,187
Anheuser-Busch Companies, Inc.................. 55,000 3,678,125
Brown-Forman Corp. (Class 'B' Stock)........... 15,300 558,450
Coca-Cola Co................................... 270,500 20,084,625
PepsiCo, Inc................................... 170,000 9,498,750
Seagram Co., Ltd............................... 79,900 2,766,538
--------------
36,796,675
--------------
CHEMICALS -- 2.4%
Air Products & Chemicals, Inc.................. 23,900 1,260,725
Dow Chemical Co................................ 57,600 4,053,600
E.I. du Pont de Nemours & Co................... 119,900 8,378,012
Eastman Chemical Co............................ 17,100 1,070,887
+FMC Corp...................................... 8,000 541,000
Hercules, Inc.................................. 24,100 1,358,638
Mallinckrodt Group, Inc........................ 17,300 629,288
Monsanto Co.................................... 24,900 3,050,250
Nalco Chemical Co.............................. 13,900 418,738
Rohm & Haas Co................................. 14,600 939,875
Sigma-Aldrich Corp............................. 10,600 524,700
Union Carbide Corp............................. 29,900 1,121,250
W.R. Grace & Co................................ 20,400 1,206,150
--------------
24,553,113
--------------
CHEMICALS - SPECIALTY -- 0.4%
Engelhard Corp................................. 31,375 682,406
Great Lakes Chemical Corp...................... 13,700 986,400
Morton International, Inc...................... 32,000 1,148,000
Praxair, Inc................................... 29,000 975,125
Raychem Corp................................... 9,500 540,313
--------------
4,332,244
--------------
COMMERCIAL SERVICES -- 0.5%
+CUC International, Inc........................ 38,350 1,308,694
Deluxe Corp.................................... 17,800 516,200
Dun & Bradstreet Corp.......................... 36,160 2,341,360
John H. Harland Co............................. 5,900 123,162
Moore Corp., Ltd............................... 22,800 424,650
Ogden Corp..................................... 11,000 235,125
--------------
4,949,191
--------------
COMPUTER SERVICES -- 3.8%
3Com Corp...................................... 24,000 1,119,000
+Amdahl Corp................................... 23,300 198,050
Autodesk, Inc.................................. 9,700 332,225
Automatic Data Processing, Inc................. 31,200 2,316,600
+Cabletron Systems, Inc........................ 15,300 1,239,300
+Ceridian Corp................................. 14,200 585,750
+Cisco Systems, Inc............................ 58,800 4,387,950
+COMPAQ Computer Corp.......................... 57,100 2,740,800
Computer Associates International, Inc......... 52,475 2,984,516
+Computer Sciences Corp........................ 11,900 835,975
First Data Corp................................ 48,000 3,210,000
+Intergraph Corp............................... 11,300 177,975
+Microsoft Corp................................ 128,300 11,258,325
+Novell, Inc................................... 81,400 1,159,950

B16

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

+Oracle Corp................................... 94,050 $ 3,985,369
+Silicon Graphics, Inc......................... 35,700 981,750
+Sun Microsystems, Inc......................... 41,000 1,870,625
+Tandem Computers, Inc......................... 24,900 264,562
--------------
39,648,722
--------------
CONSTRUCTION -- 0.2%
Fluor Corp..................................... 18,400 1,214,400
Foster Wheeler Corp............................ 9,000 382,500
Kaufman & Broad Home Corp...................... 6,366 94,694
Pulte Corp..................................... 5,900 198,388
--------------
1,889,982
--------------
CONTAINERS -- 0.1%
Ball Corp...................................... 6,300 173,250
Bemis Co., Inc................................. 11,400 292,125
+Crown Cork & Seal Co., Inc.................... 20,200 843,350
--------------
1,308,725
--------------
COSMETICS & SOAPS -- 2.2%
Alberto Culver Co. (Class 'B' Stock)........... 5,700 195,937
Avon Products, Inc............................. 14,400 1,085,400
Clorox Co...................................... 11,400 816,525
Colgate Palmolive Co........................... 31,300 2,198,825
Gillette Co.................................... 96,100 5,009,213
International Flavors & Fragrances, Inc........ 23,900 1,147,200
Procter & Gamble Co............................ 147,852 12,271,716
--------------
22,724,816
--------------
DIVERSIFIED GAS -- 0.2%
Ashland, Inc................................... 13,400 470,675
Coastal Corp................................... 22,400 834,400
Eastern Enterprises............................ 4,100 144,525
ENSERCH Corp................................... 14,400 234,000
NICOR, Inc..................................... 10,300 283,250
ONEOK, Inc..................................... 6,400 146,400
--------------
2,113,250
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 1.9%
Alco Standard Corp............................. 23,776 1,084,780
Avery Dennison Corp............................ 11,500 576,438
Honeywell, Inc................................. 27,700 1,346,912
International Business Machines Corp........... 122,800 11,266,900
Pitney Bowes, Inc.............................. 32,500 1,527,500
+Unisys Corp................................... 36,100 203,063
Xerox Corp..................................... 23,182 3,175,934
--------------
19,181,527
--------------
DRUGS AND HOSPITAL SUPPLIES -- 9.1%
Abbott Laboratories............................ 170,600 7,122,550
Allergan, Inc.................................. 13,500 438,750
+ALZA Corp..................................... 17,000 420,750
American Home Products Corp.................... 67,700 6,566,900
+Amgen, Inc.................................... 58,800 3,491,250
Bausch & Lomb, Inc............................. 12,300 487,387
Baxter International, Inc...................... 60,300 2,525,062
Becton, Dickinson & Co......................... 14,000 1,050,000
+Biomet, Inc................................... 26,100 466,537
+Boston Scientific Corp........................ 35,400 1,734,600
Bristol-Myers Squibb Co........................ 109,440 9,398,160
C.R. Bard, Inc................................. 12,800 412,800
Eli Lilly & Co................................. 118,800 6,682,500
Johnson & Johnson.............................. 139,700 11,961,813
Medtronic, Inc................................. 49,600 2,771,400
Merck & Co., Inc............................... 266,550 17,525,663

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Pfizer, Inc.................................... 137,000 $ 8,631,000
+Pharmacia & Upjohn, Inc....................... 108,525 4,205,344
Schering-Plough Corp........................... 80,000 4,380,000
St. Jude Medical, Inc.......................... 15,000 645,000
United States Surgical Corp.................... 12,200 260,775
Warner-Lambert Co.............................. 28,900 2,806,913
--------------
93,985,154
--------------
ELECTRICAL EQUIPMENT -- 0.3%
+Applied Materials, Inc........................ 38,300 1,508,063
W.W. Grainger, Inc............................. 10,500 695,625
Westinghouse Electric Corp..................... 84,100 1,387,650
--------------
3,591,338
--------------
ELECTRONICS -- 4.2%
+Advanced Micro Devices, Inc................... 21,800 359,700
AMP, Inc....................................... 47,344 1,816,826
Apple Computer, Inc............................ 26,000 828,750
+Cray Research, Inc............................ 4,700 116,325
+Data General Corp............................. 9,000 123,750
+Digital Equipment Corp........................ 32,300 2,071,238
EG&G, Inc...................................... 11,800 286,150
Emerson Electric Co............................ 48,600 3,973,050
Harris Corp.................................... 8,100 442,462
Hewlett-Packard Co............................. 110,300 9,237,625
Intel Corp..................................... 179,200 10,169,600
+LSI Logic Corp................................ 27,000 884,250
Micron Technology, Inc......................... 44,400 1,759,350
Motorola, Inc.................................. 127,000 7,239,000
+National Semiconductor Corp................... 27,500 611,875
Perkin-Elmer Corp.............................. 9,300 351,075
Tandy Corp..................................... 14,965 621,048
Tektronix, Inc................................. 7,200 353,700
Texas Instruments, Inc......................... 40,400 2,090,700
Thomas & Betts Corp............................ 4,000 295,000
--------------
43,631,474
--------------
ENVIRONMENTAL SERVICES -- 0.1%
Laidlaw, Inc. (Class 'B' Stock)................ 61,800 633,450
--------------
FINANCIAL SERVICES -- 2.7%
American Express Co............................ 104,000 4,303,000
Beneficial Corp................................ 11,300 526,862
Dean Witter Discover and Company............... 36,345 1,708,215
Federal Home Loan Mortgage Corp................ 39,250 3,277,375
Federal National Mortgage Association.......... 58,900 7,310,962
H & R Block, Inc............................... 22,600 915,300
Household International, Inc .................. 21,300 1,259,362
MBNA Corp...................................... 32,300 1,191,063
Merrill Lynch & Co., Inc....................... 38,100 1,943,100
Morgan Stanley Group, Inc...................... 16,500 1,330,313
National City Corp............................. 32,400 1,073,250
Republic New York Corp......................... 12,300 764,138
Salomon, Inc................................... 22,800 809,400
Transamerica Corp.............................. 14,800 1,078,550
--------------
27,490,890
--------------
FOODS -- 4.4%
Archer-Daniels-Midland Co...................... 115,722 2,082,996
Campbell Soup Co............................... 53,500 3,210,000
ConAgra, Inc................................... 51,900 2,140,875
CPC International, Inc......................... 31,400 2,154,825
Fleming Companies, Inc......................... 7,400 152,625
General Mills, Inc............................. 34,000 1,963,500
Giant Food, Inc. (Class 'A' Stock)............. 12,200 384,300
H.J. Heinz & Co................................ 78,650 2,605,281

B17

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Hershey Foods Corp............................. 17,600 $ 1,144,000
Kellogg Co..................................... 47,100 3,638,475
Philip Morris Companies, Inc................... 181,200 16,398,600
Pioneer Hi-Bred International, Inc............. 18,300 1,017,937
Quaker Oats Co................................. 28,400 979,800
Ralston-Ralston Purina Group................... 22,940 1,430,883
Sara Lee Corp.................................. 104,000 3,315,000
Sysco Corp..................................... 38,900 1,264,250
W. M. Wrigley, Jr. Co.......................... 24,900 1,307,250
--------------
45,190,597
--------------
FOREST PRODUCTS -- 1.6%
Boise Cascade Corp............................. 9,886 342,302
Champion International Corp.................... 21,100 886,200
Federal Paper Board Co., Inc................... 10,400 539,500
Georgia-Pacific Corp........................... 19,300 1,324,462
International Paper Co......................... 54,600 2,067,975
James River Corp. of Virginia.................. 18,500 446,313
Kimberly-Clark Corp............................ 60,194 4,981,054
Louisiana-Pacific Corp......................... 24,200 586,850
Mead Corp...................................... 11,700 611,325
Potlatch Corp.................................. 5,800 232,000
Stone Container Corp........................... 21,566 310,011
Temple Inland, Inc............................. 12,100 533,913
Union Camp Corp................................ 15,200 723,900
Westvaco Corp.................................. 21,300 591,075
Weyerhaeuser Co................................ 43,700 1,890,025
Willamette Industries, Inc..................... 12,000 675,000
--------------
16,741,905
--------------
GAS PIPELINES -- 0.6%
+Columbia Gas System, Inc...................... 10,700 469,462
Consolidated Natural Gas Co.................... 19,900 902,962
Enron Corp..................................... 54,000 2,058,750
NorAm Energy Corp.............................. 29,700 263,588
Panhandle Eastern Corp......................... 33,190 925,171
Peoples Energy Corp............................ 7,900 250,825
Williams Companies, Inc........................ 22,100 969,638
--------------
5,840,396
--------------
HOSPITAL MANAGEMENT -- 0.8%
+Beverly Enterprises, Inc...................... 20,200 214,625
Columbia/HCA Healthcare Corp................... 95,632 4,853,324
Community Psychiatric Centers.................. 7,900 96,775
+Humana, Inc................................... 34,400 941,700
Manor Care, Inc................................ 13,050 456,750
Service Corp. International.................... 22,900 1,007,600
Shared Medical Systems Corp.................... 4,700 255,563
+Tenet Healthcare Corp......................... 43,500 902,625
--------------
8,728,962
--------------
HOUSING RELATED -- 0.5%
Armstrong World Industries, Inc................ 7,800 483,600
Centex Corp.................................... 6,000 208,500
Fleetwood Enterprises, Inc..................... 9,600 247,200
Lowe's Companies, Inc.......................... 34,900 1,169,150
Masco Corp..................................... 34,300 1,076,163
Maytag Corp.................................... 23,000 465,750
+Owens-Corning Fiberglas Corp.................. 11,800 529,525
Stanley Works.................................. 9,500 489,250
Whirlpool Corp................................. 16,400 873,300
--------------
5,542,438
--------------
INSURANCE -- 4.0%
Aetna Life & Casualty Co....................... 24,500 1,696,625
Alexander & Alexander Services, Inc............ 9,400 178,600

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Allstate Corp.................................. 96,594 $ 3,972,428
American General Corp.......................... 44,000 1,534,500
American International Group, Inc.............. 102,437 9,475,422
Chubb Corp..................................... 19,000 1,838,250
CIGNA Corp..................................... 16,300 1,682,975
General Re Corp................................ 17,650 2,735,750
+ITT Hartford Group, Inc....................... 25,000 1,209,375
Jefferson-Pilot Corp........................... 15,375 714,938
Lincoln National Corp.......................... 22,700 1,220,125
Marsh & McLennan Companies, Inc................ 15,600 1,384,500
Providian Corp................................. 20,500 835,375
SAFECO Corp.................................... 26,800 924,600
St. Paul Companies, Inc........................ 18,300 1,017,938
Torchmark Corp................................. 16,000 724,000
Travelers Group, Inc........................... 68,731 4,321,461
U.S. Healthcare, Inc........................... 32,600 1,515,900
United Healthcare Corp......................... 37,700 2,469,350
UNUM Corp...................................... 15,300 841,500
USF&G Corp..................................... 23,800 401,625
USLIFE Corp.................................... 6,900 206,138
--------------
40,901,375
--------------
LEISURE -- 1.0%
+Bally Entertainment Corporation............... 10,200 142,800
Brunswick Corp................................. 20,300 487,200
Handleman Co................................... 5,850 33,638
+Harrah's Entertainment, Inc................... 22,450 544,412
Hasbro, Inc.................................... 18,900 585,900
+King World Productions, Inc................... 7,550 293,506
Mattel, Inc.................................... 47,445 1,458,934
Outboard Marine Corp........................... 3,900 79,463
Walt Disney Co................................. 113,200 6,678,800
--------------
10,304,653
--------------
LODGING -- 0.4%
Hilton Hotels Corp............................. 10,600 651,900
Loews Corp..................................... 25,200 1,975,050
Marriott International, Inc.................... 26,900 1,028,925
--------------
3,655,875
--------------
MACHINERY -- 1.0%
Briggs & Stratton Corp......................... 6,300 273,262
Caterpillar, Inc............................... 42,200 2,479,250
Cincinnati Milacron, Inc....................... 6,900 181,125
Cooper Industries, Inc......................... 23,000 845,250
Deere & Co..................................... 56,300 1,984,575
Dover Corp..................................... 24,600 907,125
Eaton Corp..................................... 18,200 975,975
Giddings & Lewis, Inc.......................... 6,900 113,850
Harnischfeger Industries, Inc.................. 9,500 315,875
Ingersoll-Rand Co.............................. 22,900 804,363
PACCAR, Inc.................................... 8,630 363,539
Parker-Hannifin Corp........................... 16,150 553,138
Snap-On, Inc................................... 9,000 407,250
Timken Co...................................... 6,400 244,800
+Varity Corp................................... 8,810 327,071
--------------
10,776,448
--------------
MEDIA -- 2.5%
Capital Cities/ABC, Inc........................ 33,100 4,083,713
Comcast Corp. (Special Class 'A' Stock)........ 50,500 918,469
Dow Jones & Co., Inc........................... 21,500 857,313
Gannett Co., Inc............................... 30,000 1,841,250
Interpublic Group of Companies, Inc............ 17,400 754,725
Knight-Ridder, Inc............................. 10,500 656,250

B18

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

McGraw-Hill, Corporation, Inc................... 10,900 $ 949,663
Meredith Corp................................... 5,800 242,875
New York Times Co. (Class 'A' Stock)............ 21,300 631,013
R. R. Donnelley & Sons Co....................... 32,800 1,291,500
+Tele-Communications, Inc. (Series 'A' Stock)... 142,500 2,832,187
Time Warner, Inc................................ 82,840 3,137,565
Times Mirror Co. (Class 'A' Stock).............. 24,000 813,000
Tribune Co...................................... 13,700 837,412
+US West Media Group............................ 101,700 1,932,300
+Viacom, Inc. (Class 'B' Stock)................. 78,867 3,736,323
--------------
25,515,558
--------------
MINERAL RESOURCES -- 1.0%
ASARCO, Inc..................................... 8,700 278,400
Barrick Gold Corporation........................ 75,400 1,988,675
Burlington Resources, Inc....................... 27,700 1,087,225
Cyprus Amax Minerals Co......................... 20,800 543,400
Echo Bay Mines, Ltd............................. 26,400 273,900
Freeport-McMoRan Copper & Gold, Inc. (Class 'B'
Stock)........................................ 42,800 1,203,750
Homestake Mining Co............................. 28,800 450,000
Inco, Ltd....................................... 26,000 864,500
Newmont Mining Corp............................. 20,200 914,050
Phelps Dodge Corp............................... 15,200 946,200
Pittston Services Group......................... 8,600 269,825
Placer Dome, Inc................................ 50,900 1,227,962
Sante Fe Pacific Gold Corp...................... 34,916 423,357
--------------
10,471,244
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 4.1%
Browning-Ferris Industries, Inc................. 46,200 1,362,900
Crane Co........................................ 6,600 243,375
Ecolab, Inc..................................... 13,400 402,000
General Electric Co............................. 361,500 26,028,000
General Signal Corp............................. 10,662 345,181
Illinois Tool Works, Inc........................ 25,100 1,480,900
ITT Corp........................................ 25,000 1,325,000
ITT Industries, Inc............................. 25,000 600,000
Millipore Corp.................................. 11,000 452,375
NACCO Industries, Inc. (Class 'A' Stock)........ 1,600 88,800
Pall Corp....................................... 25,100 674,563
PPG Industries Inc.............................. 43,200 1,976,400
Teledyne, Inc................................... 11,800 302,375
Textron, Inc.................................... 18,100 1,221,750
Trinova Corp.................................... 5,600 160,300
TRW, Inc........................................ 14,300 1,108,250
Tyco International, Ltd......................... 33,300 1,186,313
WMX Technologies, Inc........................... 104,100 3,109,988
--------------
42,068,470
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 2.1%
American Greetings Corp. (Class 'A' Stock)...... 16,300 450,288
Black & Decker Corp............................. 18,800 662,700
Corning, Inc.................................... 49,700 1,590,400
Dial Corp....................................... 20,900 619,163
Eastman Kodak Co................................ 74,100 4,964,700
Jostens, Inc.................................... 9,900 240,075
Minnesota Mining & Manufacturing Co............. 90,500 5,995,625
Polaroid Corp................................... 9,500 450,062
Premark International, Inc...................... 14,000 708,750
Rubbermaid, Inc................................. 33,300 849,150

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Unilever N.V., ADR.............................. 34,500 $ 4,855,875
Whitman Corp.................................... 21,700 504,525
--------------
21,891,313
--------------
PETROLEUM -- 8.0%
Amerada Hess Corp............................... 19,900 1,054,700
Amoco Corp...................................... 107,130 7,699,969
Atlantic Richfield Co........................... 34,485 3,819,213
Chevron Corp.................................... 141,500 7,428,750
Exxon Corp...................................... 267,900 21,465,487
Kerr-McGee Corp................................. 11,400 723,900
Louisiana Land & Exploration Co................. 7,600 325,850
Mobil Corp...................................... 85,400 9,564,800
Occidental Petroleum Corp....................... 68,400 1,462,050
Pennzoil Co..................................... 10,000 422,500
Phillips Petroleum Co........................... 56,800 1,938,300
Royal Dutch Petroleum Co........................ 115,600 16,314,050
+Santa Fe Energy Resources, Inc................. 17,970 172,961
Sun Co., Inc.................................... 19,000 520,125
Tenneco, Inc.................................... 39,100 1,940,338
Texaco, Inc..................................... 56,700 4,450,950
Unocal Corp..................................... 53,300 1,552,363
USX-Marathon Group.............................. 63,700 1,242,150
--------------
82,098,456
--------------
PETROLEUM SERVICES -- 0.8%
Baker Hughes, Inc............................... 30,200 736,125
Dresser Industries, Inc......................... 40,400 984,750
Halliburton Co.................................. 24,800 1,255,500
Helmerich & Payne, Inc.......................... 5,100 151,725
McDermott International, Inc.................... 10,900 239,800
+Oryx Energy Co................................. 21,500 287,563
+Rowan Companies, Inc........................... 15,200 150,100
Schlumberger, Ltd............................... 52,200 3,614,850
Sonat, Inc...................................... 18,400 655,500
+Western Atlas, Inc............................. 11,300 570,650
--------------
8,646,563
--------------
RAILROADS -- 1.0%
Burlington Northern Sante Fe, Inc............... 31,642 2,468,076
Conrail Inc..................................... 17,000 1,190,000
CSX Corp........................................ 45,112 2,058,235
Norfolk Southern Corp........................... 27,900 2,214,563
Union Pacific Corp.............................. 43,800 2,890,800
--------------
10,821,674
--------------
RESTAURANTS -- 0.8%
Darden Restaurants, Inc......................... 35,000 415,625
Luby's Cafeterias, Inc.......................... 4,550 101,238
McDonald's Corp................................. 149,200 6,732,650
+Ryan's Family Steak Houses, Inc................ 8,500 59,500
+Shoney's, Inc.................................. 7,900 80,975
Wendy's International, Inc...................... 21,900 465,375
--------------
7,855,363
--------------
RETAIL -- 4.8%
Albertson's, Inc................................ 54,600 1,794,975
American Stores Co.............................. 31,900 853,325
Brown Group, Inc................................ 3,000 42,750
Charming Shoppes, Inc........................... 18,300 52,613
Circuit City Stores, Inc........................ 21,500 593,938
Dayton-Hudson Corp.............................. 15,214 1,141,050
Dillard Department Stores, Inc. (Class 'A'
Stock)........................................ 24,850 708,225
+Federated Department Stores, Inc............... 43,500 1,196,250
Great Atlantic & Pacific Tea Co., Inc........... 9,100 209,300

B19

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Harcourt General, Inc.......................... 15,406 $ 645,126
Home Depot, Inc................................ 103,949 4,976,558
J.C. Penney Co., Inc........................... 49,000 2,333,625
K mart Corp.................................... 95,000 688,750
+Kroger Co..................................... 26,600 997,500
Liz Claiborne, Inc............................. 15,600 432,900
Longs Drug Stores, Inc......................... 4,600 220,225
May Department Stores Co....................... 53,200 2,247,700
Melville Corp.................................. 22,400 688,800
Mercantile Stores Co., Inc..................... 8,000 370,000
Newell Co...................................... 34,800 900,450
Nike, Inc. (Class 'B' Stock)................... 30,600 2,130,525
Nordstrom, Inc................................. 17,200 696,600
Pep Boys-Manny, Moe & Jack..................... 13,200 338,250
+Price/Costco, Inc............................. 42,566 649,131
Reebok International, Ltd...................... 16,700 471,775
Rite Aid Corp.................................. 18,500 633,625
Sears, Roebuck & Co............................ 84,100 3,279,900
Sherwin-Williams Co............................ 18,300 745,725
Stride Rite Corp............................... 9,400 70,500
Supervalu, Inc................................. 15,100 475,650
The Gap, Inc................................... 30,500 1,281,000
The Limited, Inc............................... 76,600 1,330,925
TJX Companies, Inc............................. 14,300 269,913
+Toys 'R' Us, Inc.............................. 59,750 1,299,563
Wal-Mart Stores, Inc........................... 495,300 11,082,337
Walgreen Co.................................... 53,700 1,604,287
Winn Dixie Stores, Inc......................... 32,600 1,202,125
Woolworth Corp................................. 29,200 379,600
--------------
49,035,491
--------------
RUBBER -- 0.2%
B.F. Goodrich Co............................... 5,400 367,875
Cooper Tire & Rubber Co........................ 17,400 428,475
Goodyear Tire & Rubber Co...................... 33,100 1,501,913
--------------
2,298,263
--------------
STEEL -- 0.3%
+Armco, Inc.................................... 26,700 156,862
+Bethlehem Steel Corp.......................... 23,600 330,400
Inland Steel Industries, Inc................... 10,100 253,763
Nucor Corp..................................... 19,300 1,102,512
USX-U.S. Steel Group........................... 17,740 545,505
Worthington Industries, Inc.................... 19,100 397,519
--------------
2,786,561
--------------
TELECOMMUNICATIONS -- 5.1%
+Airtouch Communications, Inc.................. 106,800 3,017,100
Alltel Corp.................................... 41,600 1,227,200
Ameritech Corp................................. 119,100 7,026,900
+Andrew Corp................................... 8,050 307,913
AT&T Corp...................................... 343,373 22,233,401
+DSC Communications Corp....................... 25,000 921,875
MCI Communications Corp........................ 148,200 3,871,725
Northern Telecom, Ltd.......................... 55,300 2,377,900
SBC Communications, Inc........................ 131,600 7,567,000
Scientific-Atlanta, Inc........................ 16,500 247,500
Sprint Corp.................................... 74,800 2,982,650
+Tellabs, Inc.................................. 18,500 684,500
--------------
52,465,664
--------------
TEXTILES -- 0.2%
+Fruit of the Loom, Inc. (Class 'A' Stock)..... 18,000 438,750
National Service Industries, Inc............... 11,000 356,125
Russell Corp................................... 8,400 233,100

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Springs Industries, Inc........................ 4,200 $ 173,775
V.F. Corp...................................... 13,918 734,175
--------------
1,935,925
--------------
TOBACCO -- 0.3%
American Brands, Inc........................... 40,000 1,785,000
UST, Inc....................................... 41,600 1,388,400
--------------
3,173,400
--------------
TRUCKING/SHIPPING -- 0.2%
Consolidated Freightways, Inc.................. 9,200 243,800
+Federal Express Corp.......................... 12,000 886,500
Roadway Services, Inc.......................... 8,400 410,550
Ryder System, Inc.............................. 17,900 443,025
Yellow Corp.................................... 6,000 74,250
--------------
2,058,125
--------------
UTILITY - COMMUNICATIONS -- 3.5%
Bell Atlantic Corp............................. 94,400 6,313,000
BellSouth Corp................................. 214,000 9,309,000
GTE Corp....................................... 208,920 9,192,480
NYNEX Corp..................................... 92,100 4,973,400
Pacific Telesis Group.......................... 92,600 3,113,675
U S West Communications, Inc................... 101,900 3,642,925
--------------
36,544,480
--------------
UTILITY - ELECTRIC -- 3.6%
American Electric Power Co., Inc............... 39,700 1,607,850
Baltimore Gas & Electric Co.................... 32,450 924,825
Carolina Power & Light Co...................... 33,100 1,141,950
Central & South West Corp...................... 41,000 1,142,875
CINergy Corp................................... 33,739 1,033,257
Consolidated Edison Co. of NY, Inc............. 50,200 1,606,400
Detroit Edison Co.............................. 31,000 1,069,500
Dominion Resources, Inc........................ 37,150 1,532,438
Duke Power Co.................................. 44,000 2,084,500
Entergy Corp................................... 48,500 1,418,625
FPL Group, Inc................................. 40,000 1,855,000
General Public Utilities Corp.................. 26,200 890,800
Houston Industries, Inc........................ 56,200 1,362,850
Niagara Mohawk Power Corp...................... 31,700 305,113
Northern States Power Co....................... 14,600 717,225
Ohio Edison Co................................. 33,700 791,950
P P & L Resources, Inc......................... 33,700 842,500
Pacific Enterprises............................ 19,100 539,575
Pacific Gas & Electric Co...................... 90,900 2,579,287
PacifiCorp..................................... 62,700 1,332,375
PECO Energy Co................................. 48,500 1,461,062
Public Service Enterprise Group, Inc........... 53,000 1,623,125
SCEcorp........................................ 95,100 1,688,025
Southern Co.................................... 143,800 3,541,075
Texas Utilities Co............................. 48,629 1,999,868
Unicom Corp.................................... 46,900 1,535,975
Union Electric Company......................... 21,800 910,150
--------------
37,538,175
--------------
TOTAL COMMON STOCKS
(Cost $683,558,889)........................................... 991,277,137
--------------

MARKET
PREFERRED STOCKS -- 0.0% SHARES VALUE
------------- --------------

MISCELLANEOUS - BASIC INDUSTRY
Teledyne, Inc. (Cum.), Series E................ 442 6,354
--------------
(Cost $6,630)

B20

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.2% AMOUNT VALUE
------------- --------------

REPURCHASE AGREEMENTS -- 4.1%
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)................. $ 41,878,000 $ 41,878,000
-------------
U. S. GOVERNMENT & AGENCY OBLIGATIONS -- 0.1%
US Treasury Bills,
5.255%, 03/14/96.............................. 1,300,000 1,286,336
5.280%, 03/14/96.............................. 100,000 98,944
--------------
1,385,280
--------------
TOTAL SHORT-TERM INVESTMENTS................................... 43,263,280
--------------
##VARIATION MARGIN ON OPEN FUTURES CONTRACTS -- 0.0%........... 42,000
--------------
LIABILITIES -- (0.3%)
(net of other assets)........................................ (3,310,703)
--------------
TOTAL NET ASSETS -- 100.0%..................................... $1,031,278,068
--------------
--------------

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, 1995.

##Open futures contracts as of December 31, 1995 are as follows:

PAR VALUE
COVERED BY CONTRACT TYPE EXPIRATION DATE VALUE OF CONTRACTS
$37,454,650 S&P 500 Index Futures Mar 96 $37,107,000
(120 contracts)

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

B21

<PAGE>

EQUITY PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 78.9% SHARES VALUE
------------- --------------

AEROSPACE -- 2.3%
AAR Corp....................................... 650,000 $ 14,300,000
Lockheed Martin Corp........................... 70,300 5,553,700
Loral Corp..................................... 1,800,000 63,675,000
United Technologies Corp....................... 40,900 3,880,388
--------------
87,409,088
--------------
ALUMINUM -- 1.0%
+Alumax, Inc................................... 267,500 8,192,188
Aluminum Co. of America........................ 600,000 31,725,000
--------------
39,917,188
--------------
AUTOS - CARS & TRUCKS -- 3.9%
Chrysler Corp.................................. 1,963,910 108,751,515
General Motors Corp............................ 700,000 37,012,500
+Navistar International Corp................... 395,200 4,149,600
--------------
149,913,615
--------------
BANKS AND SAVINGS & LOANS -- 7.5%
Bank of New York Company, Inc.................. 900,000 43,875,000
BankAmerica Corp............................... 550,000 35,612,500
Chase Manhattan Corp........................... 600,000 36,375,000
Comerica, Inc.................................. 1,000,000 40,125,000
First of America Bank Corp..................... 187,000 8,298,125
Great Western Financial Corp................... 1,000,000 25,500,000
J.P. Morgan & Co., Inc......................... 395,400 31,730,850
Mellon Bank Corp............................... 276,398 14,856,392
Mercantile Bankshares Corp..................... 279,600 7,793,850
NationsBank Corp............................... 600,000 41,775,000
--------------
285,941,717
--------------
CHEMICALS -- 0.8%
Eastman Chemical Co............................ 466,550 29,217,694
--------------
CHEMICALS - SPECIALTY -- 0.2%
Witco Corp..................................... 268,800 7,862,400
--------------
COMMERCIAL SERVICES -- 0.5%
Wellman, Inc................................... 798,200 18,159,050
--------------
COMPUTER SERVICES -- 1.9%
+Amdahl Corp................................... 4,000,000 34,000,000
Comdisco, Inc.................................. 1,350,000 30,543,750
Gerber Scientific, Inc......................... 419,800 6,821,750
+Harris Computer Systems Corp.................. 15,000 202,500
--------------
71,568,000
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.7%
International Business Machines Corp........... 300,000 27,525,000
--------------
DRUGS AND HOSPITAL SUPPLIES -- 2.3%
Baxter International, Inc...................... 2,100,000 87,937,500
--------------
ELECTRICAL EQUIPMENT -- 0.0%
+Rexel, Inc.................................... 107,199 1,447,187
--------------
ELECTRONICS -- 6.0%
+Digital Equipment Corp........................ 2,500,000 160,312,500
Harris Corp.................................... 300,000 16,387,500
Tandy Corp..................................... 1,218,000 50,547,000
Zero Corp...................................... 120,500 2,138,875
--------------
229,385,875
--------------
FINANCIAL SERVICES -- 7.3%
American Express Co............................ 2,100,000 86,887,500
Dean Witter Discover and Company............... 1,600,000 75,200,000
Lehman Brothers Holdings, Inc.................. 900,000 19,125,000
Republic New York Corp......................... 225,000 13,978,125

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Salomon, Inc................................... 700,000 $ 24,850,000
Travelers Group, Inc........................... 900,000 56,587,500
--------------
276,628,125
--------------
FOREST PRODUCTS -- 6.6%
Crown Vantage, Inc............................. 56,000 798,000
Georgia-Pacific Corp........................... 250,000 17,156,250
International Paper Co......................... 1,325,400 50,199,525
James River Corp. of Virginia.................. 560,000 13,510,000
Kimberly-Clark Corp............................ 1,610,676 133,283,438
Mead Corp...................................... 173,500 9,065,375
Rayonier, Inc.................................. 125,000 4,171,875
Temple Inland, Inc............................. 231,100 10,197,288
Willamette Industries, Inc..................... 214,100 12,043,125
--------------
250,424,876
--------------
GAS PIPELINES -- 0.3%
NorAm Energy Corp.............................. 1,300,000 11,537,500
--------------
HEALTHCARE -- 1.7%
+Foundation Health Corp........................ 1,547,900 66,559,700
--------------
HOSPITAL MANAGEMENT -- 1.8%
+Tenet Healthcare Corp......................... 3,237,832 67,185,014
--------------
HOUSING RELATED -- 0.5%
Centex Corp.................................... 600,000 20,850,000
--------------
INSURANCE -- 9.8%
Alexander & Alexander Services, Inc............ 1,050,000 19,950,000
American Financial Group, Inc.................. 303,700 9,300,813
American General Corp.......................... 1,000,000 34,875,000
Chubb Corp..................................... 700,000 67,725,000
Citizens Corp.................................. 700,000 13,037,500
Equitable Companies, Inc....................... 1,800,000 43,200,000
First Colony Corp.............................. 1,253,600 31,810,100
Old Republic International Corp................ 1,000,590 35,520,945
Providian Corp................................. 340,500 13,875,375
SAFECO Corp.................................... 1,600,000 55,200,000
St. Paul Companies, Inc........................ 476,900 26,527,563
Transport Holdings, Inc. (Class 'A' Stock)..... 4,500 183,375
Western National Corp.......................... 1,624,300 26,191,837
--------------
377,397,508
--------------
LODGING -- 2.5%
Loews Corp..................................... 1,200,000 94,050,000
--------------
MACHINERY -- 0.2%
+American Standard Companies................... 273,900 7,669,200
--------------
MINERAL RESOURCES -- 1.1%
+Amax Gold, Inc................................ 131,342 952,230
Cyprus Amax Minerals Co........................ 1,533,200 40,054,850
+Nord Resources Corp........................... 130,500 293,625
--------------
41,300,705
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.8%
American Water Works Co., Inc.................. 135,000 5,248,125
TRW, Inc....................................... 309,000 23,947,500
+Worldtex, Inc................................. 107,199 616,394
--------------
29,812,019
--------------
PETROLEUM -- 3.6%
Amerada Hess Corp.............................. 325,000 17,225,000
Atlantic Richfield Co.......................... 250,000 27,687,500
Elf Aquitaine, ADR............................. 1,924,433 70,722,913
Occidental Petroleum Corp...................... 1,100,000 23,512,500
--------------
139,147,913
--------------

B22

<PAGE>

EQUITY PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

PETROLEUM SERVICES -- 1.9%
+B.J. Services Co............................. 500,000 $ 14,500,000
+Oryx Energy Co............................... 1,600,000 21,400,000
Total SA, ADR................................. 738,365 25,104,410
Union Texas Petroleum Holdings, Inc........... 504,500 9,774,688
--------------
70,779,098
--------------
RAILROADS -- 0.6%
Canadian National Railway..................... 192,300 2,884,500
+Southern Pacific Rail Corp................... 809,810 19,435,440
--------------
22,319,940
--------------
RETAIL -- 6.6%
Dayton-Hudson Corp............................ 119,600 8,970,000
Dillard Department Stores, Inc. (Class 'A'
Stock)...................................... 1,991,700 56,763,450
+Federated Department Stores, Inc............. 700,000 19,250,000
+Gibson Greetings, Inc........................ 750,000 12,000,000
K mart Corp................................... 6,000,000 43,500,000
Liz Claiborne, Inc............................ 1,200,000 33,300,000
Petrie Stores Corp............................ 540,000 1,485,000
TJX Companies, Inc............................ 1,790,600 33,797,574
+Toys 'R' Us, Inc............................. 854,000 18,574,500
+Waban, Inc................................... 1,300,000 24,375,000
--------------
252,015,524
--------------
STEEL -- 0.9%
+Bethlehem Steel Corp......................... 500,000 7,000,000
Birmingham Steel Corp......................... 1,468,400 21,842,450
Carpenter Technology Corp..................... 100,000 4,112,500
--------------
32,954,950
--------------
TELECOMMUNICATIONS -- 3.2%
Sprint Corp................................... 1,700,000 67,787,500
Telefonica de Espana, SA, ADR................. 1,300,000 54,437,500
--------------
122,225,000
--------------
TOBACCO -- 1.3%
RJR Nabisco Holdings Corp..................... 1,600,000 49,400,000
--------------
TRUCKING/SHIPPING -- 0.5%
+OMI Corp..................................... 1,000,000 6,500,000
Overseas Shipholding Group, Inc............... 600,000 11,400,000
--------------
17,900,000
--------------
UTILITY - ELECTRIC -- 0.6%
American Electric Power Co., Inc.............. 180,000 7,290,000
General Public Utilities Corp................. 500,000 17,000,000
--------------
24,290,000
--------------
TOTAL COMMON STOCKS
(Cost $2,210,630,913)........................................ 3,010,731,386
--------------

MARKET
PREFERRED STOCKS -- 0.7% SHARES VALUE
------------- --------------

TOBACCO
RJR Nabisco Holdings Corp. (Conv.)............ 4,000,000 25,500,000
--------------
(Cost $25,999,610)

PRINCIPAL
SHORT-TERM INVESTMENTS -- 20.1% AMOUNT VALUE
------------- --------------

PROMISSORY NOTES -- 0.0%
Federal Home Loan Banks,
5.430%, 03/20/96............................ $ 1,550,000 1,531,764
--------------

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------

REPURCHASE AGREEMENTS -- 20.1%
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)............... $ 765,037,000 $ 765,037,000
--------------
TOTAL SHORT-TERM INVESTMENTS................................... 766,568,764
--------------
*UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE
CONTRACTS.................................................... (6,569)
--------------
OTHER ASSETS -- 0.3%
(net of liabilities)......................................... 11,010,546
--------------
TOTAL NET ASSETS -- 100.0%..................................... $3,813,804,127
--------------
--------------

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

+No dividend was paid on this security during the 12 months ending December
31, 1995.

*Forward Foreign Exchange Contracts as of December 31, 1995 were as
follows:

FOREIGN
CURRENCY EXPIRATION UNREALIZED
PURCHASED DATE (DEPRECIATION)
C$ 2,067,225 March 1996 $(6,569)
Total (US $ Commitment - -------
$1,521,305) $(6,569)
=======

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B27 THROUGH B31.

B23

<PAGE>

GLOBAL PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 93.4% SHARES VALUE
------------- --------------

AUSTRALIA -- 4.9%
Brambles Industries, Ltd.
(Miscellaneous - Basic Industry).............. 393,500 $ 4,382,900
Broken Hill Proprietary Co., Ltd.
(Metals - Diversified)........................ 428,331 6,043,085
Coca-Cola Amatil, Ltd.
(Foods)....................................... 1,060,632 8,450,649
Publishing and Broadcasting, Ltd.
(Media)....................................... 152,400 530,742
Qantas Airways, Ltd.
(Airlines).................................... 317,000 527,270
--------------
19,934,646
--------------
BELGIUM -- 1.0%
Bekaert, SA
(Miscellaneous - Basic Industry).............. 4,900 4,036,694
--------------
FEDERAL REPUBLIC OF GERMANY -- 2.4%
Linde, AG
(Machinery)................................... 8,040 4,684,636
Siemens, AG
(Electrical Equipment)........................ 9,000 4,918,204
--------------
9,602,840
--------------
FINLAND -- 0.7%
Nokia Corp. (Class 'A' Stock)
(Telecommunications).......................... 71,900 2,772,427
--------------
FRANCE -- 5.7%
Carrefour Supermarche, SA
(Retail)...................................... 9,400 5,691,919
Imetal
(Mineral Resources)........................... 29,552 3,523,473
**Lafarge, SA
(Construction)................................ 1,210 77,806
Lafarge, SA
(Construction)................................ 62,491 4,018,325
Legrand, SA
(Electrical Equipment)........................ 26,900 4,144,788
Plastic Omnium
(Autos - Cars & Trucks)....................... 7,265 497,511
Valeo, SA
(Autos - Cars & Trucks)....................... 105,785 4,889,848
--------------
22,843,670
--------------
HONG KONG -- 8.3%
CDL Hotels International, Ltd.
(Real Estate Development)..................... 4,950,145 2,528,687
Citic Pacific, Ltd.
(Miscellaneous - Basic Industry).............. 1,870,000 6,396,573
Guoco Group, Ltd.
(Financial Services).......................... 1,553,000 7,531,523
Henderson Land Development
(Real Estate Development)..................... 677,000 4,079,948
Hung Hing Printing Group, Ltd.
(Miscellaneous - Basic Industry).............. 3,452,000 830,355
Hutchison Whampoa, Ltd.
(Miscellaneous - Basic Industry).............. 1,051,000 6,388,231
New World Development Co., Ltd.
(Real Estate Development)..................... 1,210,000 5,257,808
--------------
33,013,125
--------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

INDONESIA -- 1.0%
PT Kabelmetal Indonesia (Foreign)
(Telecommunications).......................... 943,400 $ 773,616
Sampoerna H.M. (Foreign)
(Tobacco)..................................... 313,000 3,257,993
--------------
4,031,609
--------------
ITALY -- 1.2%
Telecom Italia Mobile SpA
(Telecommunications).......................... 2,700,000 4,750,548
--------------
JAPAN -- 16.9%
Aiwa, Co.
(Electronics)................................. 127,000 2,970,904
Daibiru Corp.
(Real Estate Development)..................... 177,000 2,001,837
DDI Corp.
(Telecommunications).......................... 540 4,175,930
Keyence Corp.
(Electrical Equipment)........................ 31,800 3,657,999
Mitsubishi Bank
(Banks and Savings & Loans)................... 81,000 1,902,658
Mitsui Fudosan
(Real Estate Development)..................... 400,000 4,910,585
Nichiei Co., Ltd.
(Financial Services).......................... 96,000 7,145,481
Nintendo Corp. Ltd.
(Other Technology)............................ 129,000 9,788,787
Nippon Television Network
(Media)....................................... 20,500 5,469,309
Nissen Co., Ltd.
(Retail)...................................... 1,420 33,218
Nomura Securities Co., Ltd
(Financial Services).......................... 200,000 4,349,928
Omron Corp.
(Electronics)................................. 178,000 4,095,118
Onward Kashiyama Co., Ltd.
(Textiles).................................... 100,000 1,623,973
Rohm Co.
(Electronics)................................. 88,000 4,959,304
Sanwa Bank, Ltd.
(Banks and Savings & Loans)................... 102,000 2,070,565
Sony Music Entertainment, Inc.
(Leisure)..................................... 117,600 6,138,618
Sumitomo Bank
(Banks and Savings & Loans)................... 102,000 2,159,304
--------------
67,453,518
--------------
MALAYSIA -- 2.2%
I.J.M. Corp. Berhad
(Construction)................................ 3,250,000 5,171,328
Renong Berhad
(Miscellaneous - Basic Industry).............. 2,428,000 3,595,620
--------------
8,766,948
--------------
MEXICO -- 1.2%
Apasco, SA de CV
(Miscellaneous - Basic Industry).............. 469,700 1,926,349
Cifra, SA de CV (Class 'B' Stock)
(Retail)...................................... 1,387,800 1,444,537
Fomento Economico Mexicano, SA de CV (Class 'B'
Stock)
(Miscellaneous - Basic Industry).............. 665,100 1,496,799
--------------
4,867,685
--------------

B24

<PAGE>

GLOBAL PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

NETHERLANDS -- 2.5%
Heineken, N.V.
(Beverages)................................... 34,225 $ 6,060,762
Royal Dutch Petroleum
(Petroleum)................................... 29,500 4,113,902
--------------
10,174,664
--------------
NEW ZEALAND -- 0.4%
Fletcher Challenge Forestry Division
(Forest Products)............................. 279,204 397,640
Fletcher Challenge, Ltd.
(Forest Products)............................. 453,800 1,046,531
--------------
1,444,171
--------------
REPUBLIC OF KOREA -- 0.9%
Samsung Electronics (New Common 3)
(Electronics)................................. 587 106,315
Samsung Electronics Co.
(Electronics)................................. 13,830 2,513,735
Samsung Electronics Co. (New)
(Electronics)................................. 5,810 1,048,534
--------------
3,668,584
--------------
SINGAPORE -- 3.9%
Overseas Chinese Banking Corp., Ltd. (Foreign)
(Banks and Savings & Loans)................... 330,000 4,129,958
Overseas Union Bank, Ltd. (Foreign)
(Banks and Savings & Loans)................... 925,000 6,376,830
Sembawang Maritime, Ltd.
(Trucking/Shipping)........................... 883,500 2,811,107
Wing Tai Holdings, Ltd.
(Miscellaneous - Basic Industry).............. 1,070,250 2,186,964
--------------
15,504,859
--------------
SPAIN -- 2.2%
Banco Popular Espanol, SA
(Banks and Savings & Loans)................... 23,800 4,377,573
Centros Commerciales Pryca, SA
(Retail)...................................... 116,762 2,443,317
Dragados Y Construcciones, SA
(Construction)................................ 141,500 1,855,699
--------------
8,676,589
--------------
SWEDEN -- 4.3%
Astra, AB (Series 'B' Free)
(Drugs and Hospital Supplies)................. 181,350 7,173,439
Autoliv, AB (Free)
(Autos - Cars & Trucks)....................... 60,000 3,501,363
Hennes & Mauritz (Series 'B' Free)
(Retail)...................................... 71,000 3,951,065
Mo Och Domsjo, AB (Series 'B' Free)
(Forest Products)............................. 64,700 2,753,879
--------------
17,379,746
--------------
THAILAND -- 0.0%
Land & House Public Co., Ltd. (Foreign)
(Construction)................................ 7,500 123,263
--------------
UNITED KINGDOM -- 10.7%
Bank of Ireland
(Banks and Savings & Loans)................... 700,000 5,108,712
Barclays, PLC
(Banks and Savings & Loans)................... 294,000 3,369,141

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Britannic Assurance, PLC
(Insurance)................................... 28,000 $ 333,914
British Sky Broadcasting Group, PLC
(Media)....................................... 738,900 4,664,033
Carlton Communications
(Communications).............................. 229,300 3,437,730
Commercial Union, PLC
(Insurance)................................... 324,000 3,159,513
Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)....................... 536,170 6,485,678
**Guest Kean & Nettlefolds, PLC
(Autos - Cars & Trucks)....................... 22,870 276,643
J. Sainsbury, PLC
(Retail)...................................... 356,700 2,173,994
Siebe, PLC
(Machinery)................................... 596,340 7,347,784
Vodafone Group, PLC
(Telecommunications).......................... 1,790,700 6,423,183
--------------
42,780,325
--------------
UNITED STATES -- 23.0%
Gucci Group
(Textiles).................................... 106,900 4,155,738
Mattel, Inc.
(Leisure)..................................... 280,887 8,637,275
McDonald's Corp.
(Restaurants)................................. 125,100 5,645,138
MCI Communications Corp.
(Telecommunications).......................... 251,800 6,578,275
+Microsoft Corp.
(Computer Services)........................... 95,700 8,397,675
+Mirage Resorts, Inc.
(Leisure)..................................... 157,000 5,416,500
Mobil Corp.
(Petroleum)................................... 63,700 7,134,400
Norwest Corp.
(Banks and Savings & Loans)................... 203,600 6,718,800
+Oracle Corp.
(Computer Services)........................... 132,000 5,593,500
**Qantas Airways, Ltd., ADR
(Airlines).................................... 51,300 853,278
SGS Thomson Microelectronics, N.V.
(Electronics)................................. 76,000 3,059,000
+Silicon Graphics, Inc.
(Computer Services)........................... 252,000 6,930,000
Texas Instruments, Inc.
(Electronics)................................. 88,000 4,554,000
Tiffany & Co.
(Retail)...................................... 72,000 3,627,000
Time Warner, Inc.
(Media)....................................... 135,800 5,143,425
+Viacom, Inc. (Class 'A' Stock)
(Media)....................................... 115,000 5,275,625
Walt Disney Co.
(Leisure)..................................... 72,500 4,277,500
--------------
91,997,129
--------------
TOTAL COMMON STOCKS
(Cost $331,329,354)........................................... 373,823,040
--------------

B25

<PAGE>

GLOBAL PORTFOLIO (CONTINUED)
DECEMBER 31, 1995

MARKET
RIGHTS AND WARRANTS -- 1.0% SHARES VALUE
------------- --------------

FRANCE -- 0.0%
**Lafarge (Warrants), Expire 04/01/96,
(Construction)................................ 1,000 $ 428
--------------
SINGAPORE -- 0.5%
United Overseas Bank Ltd.
(Warrants), Expire 06/17/97,
(Banks and Savings & Loans)................... 510,800 2,058,658
--------------
SWITZERLAND -- 0.1%
\Nitori Co., Ltd. (Warrants), Expire 02/06/98,
(Furniture)................................... 2,232 216,624
--------------
UNITED STATES -- 0.4%
#Onward Kashiyama Co., Ltd.
(Warrants), Expire 03/26/96,
(Textiles).................................... 580 1,634,875
--------------
TOTAL RIGHTS AND WARRANTS
(Cost $3,712,601)............................................. 3,910,585
--------------

PRINCIPAL
SHORT-TERM INVESTMENTS -- 0.8% AMOUNT VALUE
------------- --------------

UNITED STATES
)Triparty Repo,
5.900%, 1/2/96................................ $ 3,163,000 $ 3,163,000
--------------
OTHER ASSETS -- 4.8%
(net of liabilities).......................................... 19,202,909
--------------
TOTAL NET ASSETS -- 100.0%...................................... $ 400,099,534
--------------
--------------

The following abbreviations are used in portfolio descriptions:
AB Akiteboiag (Swedish Stock Company)
ADR American Depository Receipt
AG Aktiengesellschaft (West German Stock Company)
N.V. Naamloze Vennootschap (Dutch Corporation)
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 Swiss warrants with an underlying Japanese security.

**Indicates a restricted security; the aggregate cost of the restricted
securities is $1,003,876. The aggregate value, $1,208,155 is approximately
.30% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December
31, 1995.

)Triparty Repo, 5.900%, entered 12/29/95; maturing 01/02/96 in the amount of
$3,163,000; Collateralized by $3,174,000 United States Treasury Notes,
6.1250%, 05/31/97.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C27 THROUGH C31.

B26

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF THE DIVERSIFIED BOND, EQUITY,
FLEXIBLE MANAGED, CONSERVATIVE BALANCED,
STOCK INDEX, GLOBAL AND GOVERNMENT INCOME PORTFOLIOS OF
THE PRUDENTIAL SERIES FUND, INC.
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

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. The Diversified Bond, Equity, Flexible Managed, Conservative
Balanced, Stock Index, Global, and Government Income portfolios presented herein
are available only for investment by VCA-24 and other various 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, Diversified Bond, Equity, Flexible Managed and
Conservative Balanced) 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.

The portfolios of the Fund may invest up to 15% of their total assets in
securities which are subject to legal or contractual restrictions on resale or
for which no readily available market exists ("restricted securities").
Restricted securities are valued pursuant to the valuation procedures noted
above.

ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

B27

<PAGE>

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 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.

B28

<PAGE>

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.

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, 1995, (based on an October 31 measurement period) the Government
Income Portfolio had a net capital loss carry forward of $22,539,392 ($6,229,349
expiring in 2002, $16,310,043 expiring in 2003). These amounts will be available
to offset any future taxable gains.

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 Portfolio, for which Brown Brothers Harriman & Co. is the
custodian bank. For the year ended December 31, 1995, the total of the credits
used was:

Flexible Managed Portfolio............................... $ 3,202
Government Income Portfolio.............................. 1,612
Stock Index Portfolio.................................... 170

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 Diversified Bond and Government Income Portfolios; 0.45% of average daily
net assets of the Equity Portfolio; 0.55% of the average daily net assets of the
Conservative Balanced Portfolio; 0.60% of the average daily net assets of the
Flexible Managed Portfolio; and 0.75% of the average daily net assets of the
Global Portfolio. Under the Agreement, The Prudential has agreed to refund to a
portfolio (other than the Global 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 average daily net assets.

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, 1995, Prudential
Securities Inc., an indirect, wholly-owned subsidiary of The Prudential, earned
$899,739 in brokerage commissions from Portfolio transactions executed on behalf
of the Series Fund.

B29

<PAGE>

OTHER TRANSACTIONS WITH AFFILIATES: As of December 31, 1995, The Prudential had
investments of $560,555 in the Global 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, $1,312,614,000 as of December 31, 1995. The
Portfolios of the Series Fund with cash invested in the joint account had the
following percentage participation in the account:

Equity Portfolio.............................................. 58.28%
Flexible Managed Portfolio.................................... 25.57%
Conservative Balanced Portfolio............................... 3.29%
Stock Index Portfolio......................................... 3.19%
Government Income Portfolio................................... 1.52%
Diversified Bond Portfolio.................................... .78%
All other portfolios (currently not available to VCA-24)...... 7.37%
----------
100.00%

As of such date, each repurchase agreement in the joint account and the
collateral thereof were as follows:

Bear Stearns Repurchase Agreement, dated 12/29/95, in the principal amount of
$43,000,000, repurchase price $43,027,710, due 1/2/96; collateralized by
$5,190,000 U.S. Treasury Notes, 6.25%, due 8/31/00; $38,036,000 U.S. Treasury
Notes, 5.50%, due 4/30/96.

Goldman Sachs Repurchase Agreement, dated 12/29/95, in the principal amount of
$418,000,000, repurchase price $418,270,770, due 1/2/96; collateralized by
$339,980,000 U.S. Treasury Bonds, 7.875%, due 2/15/21.

J.P. Morgan Securities Repurchase Agreement, dated 12/29/95, in the principal
amount of $300,000,000, repurchase price $300,193,333, due 1/2/96;
collateralized by $50,000,000 U.S. Treasury Notes, 7.625%, due 4/30/96;
$53,212,000 U.S. Treasury Notes, 7.0%, due 4/15/99; $51,060,000 U.S. Treasury
Notes, 5.125%, due 11/30/98; $49,755,000 U.S. Treasury Notes, 6.875%, due
7/31/99; $37,947,000 U.S. Treasury Notes, 6.125%, due 5/31/00; $52,695,000 U.S.
Treasury Notes, 6.0%, due 8/31/97.

Morgan Stanley and Company Repurchase Agreement, dated 12/29/95, in the
principal amount of $418,000,000, repurchase price $418,273,552, due 1/2/96;
collateralized by $300,000,000 U.S. Treasury Notes, 6.75%, due 4/30/00;
$108,300,000 U.S. Treasury Notes, 5.125%, due 11/30/98.

Salomon Brothers Repurchase Agreement, dated 12/29/95, in the principal amount
of $75,000,000, repurchase price $75,048,748, due 1/2/96; collateralized by
$8,717,000 U.S. Treasury Notes, 7.25%, due 11/30/96; $26,000,000 U.S. Treasury
Notes, 6.125%, due 5/15/98; $40,000,000 U.S. Treasury Notes, 5.75%, due 9/30/97.

Smith Barney Repurchase Agreement, dated 12/29/95, in the principal amount of
$58,614,000, repurchase price $58,651,447, due 1/2/96; collateralized by
$62,440,000 U.S. Treasury Bills, 5.75%, due 10/17/96.

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, 1995 were as
follows:

Cost of Purchases:
<TABLE>
<CAPTION>

DIVERSIFIED GOVERNMENT CONSERVATIVE FLEXIBLE STOCK
BOND INCOME BALANCED MANAGED INDEX EQUITY GLOBAL
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities.......... $1,152,659,582 $885,113,323 $4,882,722,531 $4,212,735,834 $ 0 $ 0 $ 0
Equity Securities........ $ 0 $ 0 $ 480,812,048 $1,827,087,395 $131,109,105 $486,698,253 $224,358,200
</TABLE>

B30

<PAGE>

Proceeds From Sales:
<TABLE>
<CAPTION>

DIVERSIFIED GOVERNMENT CONSERVATIVE FLEXIBLE STOCK
BOND INCOME BALANCED MANAGED INDEX EQUITY GLOBAL
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities.......... $1,109,474,697 $888,238,284 $4,679,687,138 $4,084,931,841 $ 0 $ 0 $ 0
Equity Securities........ $ 0 $ 0 $ 428,286,138 $1,842,532,499 $ 9,292,175 $560,871,071 $209,264,836
</TABLE>

The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of December 31, 1995 were as follows:

DIVERSIFIED GOVERNMENT CONSERVATIVE FLEXIBLE STOCK
BOND INCOME BALANCED MANAGED INDEX EQUITY GLOBAL
----------- ------------ ------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Unrealized Appreciation... $ 34,614,448 $ 37,434,616 $ 378,149,704 $ 568,373,680 $319,972,806 $ 895,616,406 $ 52,646,874
Gross Unrealized Depreciation... (1,351,508) (13,989) (88,299,605) (27,642,238) (12,254,834) (96,015,544) (9,955,204)
Total Net Unrealized............ 33,262,940 37,420,627 289,850,099 540,731,442 307,717,972 799,600,862 42,691,670
Tax Basis....................... $610,310,688 $457,607,665 $3,622,931,201 $3,687,627,278 $726,828,799 $3,003,199,288 $338,204,955
</TABLE>

B31

<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 Diversified Bond, Equity, Flexible Managed,
Conservative Balanced, Stock Index, Government Income and Global Portfolios
(seven of the portfolios comprising The Prudential Series Fund, Inc.) as of
December 31, 1995, the related statements of operations for the year then ended,
the statements of changes in net assets for each of the years in the two-year
period then ended and the 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, 1995, 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.

Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996

B32

<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:

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:

- --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.

<PAGE>

Standard & Poor's Corporation describes its grades of corporate debt securities
and its "A" commercial paper as follows:

Bonds:

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.

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.

C2
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1996

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.

The Prudential Insurance Company of America offers two forms of variable life
insurance contracts 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 contracts can be
invested in one or more of fifteen subaccounts of The Prudential Variable
Appreciable Account. The assets invested in each subaccount are in turn invested
in a corresponding portfolio of The Prudential Series Fund, Inc., a diversified,
open-end management investment company (commonly known as a mutual fund) that is
intended to provide a range of investment alternatives to variable contract
owners. Each portfolio is, for investment purposes, in effect a separate fund.
The fifteen Series Fund portfolios are: the MONEY MARKET PORTFOLIO, the
DIVERSIFIED BOND PORTFOLIO, the GOVERNMENT INCOME PORTFOLIO, the two ZERO COUPON
BOND PORTFOLIOS with different liquidation dates -- 2000 and 2005, the
CONSERVATIVE BALANCED PORTFOLIO, the FLEXIBLE MANAGED PORTFOLIO, the HIGH YIELD
BOND PORTFOLIO, the STOCK INDEX PORTFOLIO, the EQUITY INCOME PORTFOLIO, the
EQUITY PORTFOLIO, the PRUDENTIAL JENNISON PORTFOLIO, the SMALL CAPITALIZATION
STOCK PORTFOLIO, the GLOBAL 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 of The Prudential and
certain other insurers to fund the benefits under variable life insurance and
variable annuity contracts issued by those companies.

The Variable APPRECIABLE LIFE(R) Insurance Contract owner may also choose to
invest in a fixed-rate option or in The Prudential Variable Contract Real
Property Account, which is described in a separate prospectus attached to the
prospectus of The Prudential Variable Appreciable Account.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS OF THE PRUDENTIAL VARIABLE APPRECIABLE
ACCOUNT DATED MAY 1, 1996, WHICH IS AVAILABLE WITHOUT CHARGE UPON WRITTEN
REQUEST TO THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, PRUDENTIAL PLAZA,
NEWARK, NEW JERSEY 07102-3777 OR BY TELEPHONING (800) 437-4016 EXT. 46.

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-SAI Ed 5-96
Catalog No. 640466W

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
CONTENTS

PAGE

MORE DETAILED INFORMATION ABOUT THE CONTRACT............................... 1
SALES LOAD UPON SURRENDER............................................. 1
REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS...... 1
SALES TO PERSONS 14 YEARS OF AGE OR YOUNGER........................... 1
PAYING PREMIUMS BY PAYROLL DEDUCTION.................................. 2
UNISEX PREMIUMS AND BENEFITS.......................................... 2
HOW THE DEATH BENEFIT WILL VARY....................................... 2
WITHDRAWAL OF EXCESS CASH SURRENDER VALUE............................. 3
INCREASES IN FACE AMOUNT.............................................. 4
DECREASES IN FACE AMOUNT.............................................. 5
TAX TREATMENT OF CONTRACT BENEFITS.................................... 5
SALE OF THE CONTRACT AND SALES COMMISSIONS............................ 7
TAX-QUALIFIED PENSION PLANS........................................... 8
OTHER STANDARD CONTRACT PROVISIONS.................................... 8
EXCHANGE OF FIXED-DOLLAR CONTRACT TO VARIABLE CONTRACT................ 9

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS....................... 9
GENERAL ............................................................. 9
CONVERTIBLE SECURITIES................................................ 9
WARRANTS ............................................................. 9
OPTIONS AND FUTURES................................................... 10
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES........................... 16
SHORT SALES........................................................... 17
SHORT SALES AGAINST THE BOX........................................... 17
INTEREST RATE SWAPS................................................... 17
LOANS OF PORTFOLIO SECURITIES......................................... 18
ILLIQUID SECURITIES................................................... 18
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS........................... 18
FURTHER INFORMATION ABOUT THE POLICIES OF THE STOCK INDEX PORTFOLIO... 20
FURTHER INFORMATION ABOUT THE ZERO COUPON BOND PORTFOLIOS............. 20

INVESTMENT RESTRICTIONS.................................................... 21

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES............................ 24

PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... 26

DETERMINATION OF NET ASSET VALUE........................................... 27

SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY CURRENTLY INVEST........ 29

DEBT RATINGS............................................................... 31

POSSIBLE REPLACEMENT OF THE SERIES FUND.................................... 32

OTHER INFORMATION CONCERNING THE SERIES FUND............................... 33
INCORPORATION AND AUTHORIZED STOCK.................................... 33
DIVIDENDS, DISTRIBUTIONS AND TAXES.................................... 33
CUSTODIAN AND TRANSFER AGENT.......................................... 33
EXPERTS ............................................................. 33
LICENSES ............................................................. 34

DIRECTORS AND OFFICERS OF THE PRUDENTIAL................................... 34

FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC. .................. A1

THE PRUDENTIAL SERIES FUND, INC. SCHEDULE OF INVESTMENTS.................. B1

<PAGE>

MORE DETAILED INFORMATION ABOUT THE CONTRACT

SALES LOAD UPON SURRENDER

A contingent deferred sales load is assessed if the Contract lapses or is
surrendered during the first 10 Contract years, or if a withdrawal is made under
a Form A Contract during that 10 year period. No such charge is applicable to
the death benefit, no matter when that may become payable. Subject to the
additional limitations described below, for Contracts that lapse or are
surrendered during the first 5 Contract years the charge will be equal to 50% of
the first year's primary annual premium. In the next 5 Contract years that
percentage is reduced uniformly on a daily basis until it reaches zero on the
tenth Contract anniversary. Thus, for Contracts surrendered at the end of the
sixth year, the maximum deferred sales charge will be 40% of the first year's
primary annual premium, for Contracts surrendered at the end of year 7, the
maximum deferred sales charge will be 30% of the first year's primary annual
premium, and so forth.

The contingent deferred sales load is also subject to a further limit at older
issue ages (approximately above age 67) in order to comply with certain
requirements of state law. Specifically, the contingent deferred sales load for
such insureds is no more than $32.50 per $1,000 of face amount.

The sales load is subject to a further important limitation that may,
particularly for Contracts that lapse or are surrendered within the first 5 or 6
years, result in a lower contingent deferred sales load than that described
above. (This limitation might also, under unusual circumstances, apply to reduce
the monthly sales load deductions described in the prospectus in item (c) under
MONTHLY DEDUCTIONS FROM CONTRACT FUND.) The limitation is applied in order to
conform with the requirements of the Investment Company Act of 1940 and
regulations adopted thereunder, which limit the amount of non-refundable sales
load that may be charged on contracts within the first 2 years.

The limitation is as follows: (Every Contract has associated with it a Guideline
Annual Premium ("GAP"), which is an amount, generally larger than the gross
annual scheduled premium for the Contract, determined actuarially in accordance
with a definition set forth in a regulation of the Securities and Exchange
Commission ("SEC").) The maximum aggregate sales load that The Prudential will
charge (that is, the sum of the monthly sales load deduction and the contingent
deferred sales charge) will not be more than 30% of the premiums actually paid
until those premiums total one GAP plus no more than 9% of the next premiums
paid until total premiums are equal to 5 GAPS, plus no more than 6% of all
subsequent premiums. If the sales charges described above would at any time
exceed this maximum amount then the charge, to the extent of any excess, will
not be made.

REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS

The Prudential may reduce the sales charges and/or other charges on individual
Contracts sold to members of a class of associated individuals, or to a trustee,
employer or other entity representing such a class, where it is expected that
such multiple sales will result in savings of sales or administrative expenses.
The Prudential determines both the eligibility for such reduced charges, as well
as the amount of such reductions, by considering the following factors: (1) the
number of individuals; (2) the total amount of premium payments expected to be
received from these Contracts; (3) the nature of the association between these
individuals, and the expected persistency of the individual Contracts; (4) the
purpose for which the individual Contracts are purchased and whether that
purpose makes it likely that expenses will be reduced; and (5) any other
circumstances which The Prudential believes to be relevant in determining
whether reduced sales or administrative expenses may be expected. Some of the
reductions in charges for these sales may be contractually guaranteed; other
reductions may be withdrawn or modified by The Prudential on a uniform basis.
The Prudential's reductions in charges for these sales will not be unfairly
discriminatory to the interests of any individual Contract owners.

SALES TO PERSONS 14 YEARS OF AGE OR YOUNGER

Both Form A and Form B Contracts covering insureds of 14 years of age or less
contain a special provision providing that the face amount of insurance will
automatically be increased on the Contract anniversary after the insured's 21st
birthday to 150% of the initial face amount, so long as the Contract is not then
in default. The death benefit will also usually increase, at the same time, by
the same dollar amount. In certain circumstances, however, it may increase by a
smaller amount. See HOW A CONTRACT'S DEATH BENEFIT WILL VARY in the prospectus.
This increase in death benefit will also generally increase the net amount at
risk under the Contract, thus increasing the mortality charge deducted each
month from amounts invested under the Contract. See item (b) under MONTHLY
DEDUCTIONS FROM CONTRACT FUND in the prospectus. The automatic increase in the
face amount of insurance may affect future premium payments if the Contract
owner wants to avoid the Contract being classified as a Modified Endowment
Contract. A Contract owner should consult his or her Prudential representative
before making unscheduled premium payments.

<PAGE>

PAYING PREMIUMS BY PAYROLL DEDUCTION

In addition to the annual, semi-annual, quarterly and monthly premium payment
modes, a payroll budget method of paying premiums may also be available under
certain Contracts. The employer generally deducts the necessary amounts from
employee paychecks and sends premium payments to The Prudential monthly. Some
Contracts sold using the payroll budget method may be eligible for a guaranteed
issue program under which the initial minimum death benefit is $25,000 and the
Contracts are based on unisex mortality tables. Any Prudential representative
authorized to sell this Contract can provide further details concerning the
payroll budget method of paying premiums.

UNISEX PREMIUMS AND BENEFITS

The Contract generally employs mortality tables that distinguish between males
and females. Thus, premiums and benefits under Contracts issued on males and
females of the same age will generally differ. However, in those states that
have adopted regulations prohibiting sex-distinct insurance rates, premiums and
cost of insurance charges will be based on a blended unisex rate whether the
insured is male or female. In addition, employers and employee organizations
considering purchase of a Contract should consult their legal advisors to
determine whether purchase of a Contract based on sex-distinct actuarial tables
is consistent with Title VII of the Civil Rights Act of 1964 or other applicable
law. The Prudential may offer the Contract with unisex mortality rates to such
prospective purchasers.

HOW THE DEATH BENEFIT WILL VARY

As noted above, there are two Forms of the Contract, Form A and Form B. The
death benefit under a Form B Contract varies with investment performance while
the death benefit under a Form A Contract does not, unless it must be increased
to satisfy tax requirements.

Under a Form A Contract, the guaranteed minimum death benefit is equal to the
face amount of insurance. (However, should the death benefit become payable
while a Contract loan is outstanding, the debt will be deducted from the death
benefit.) If the Contract is kept in force for several years and if investment
performance is reasonably favorable, the Contract Fund value may grow to the
point where it is necessary to increase the death benefit in order to ensure
that the Contract will satisfy the Internal Revenue Code's definition of life
insurance. Thus, the death benefit under a Form A Contract will always be the
greater of (1) the guaranteed minimum death benefit; and (2) the Contract Fund
divided by the "net single premium" per $1 of death benefit at the insured's
attained age on that date. The latter provision ensures that the Contract will
always have a death benefit large enough to be treated as life insurance for tax
purposes under current law. The net single premium is used only in the
calculation of the death benefit, not for premium payment purposes. The
following is a table of illustrative net single premiums for $1 of death benefit
under Contracts issued on insureds in the preferred rating class.

- --------------------------------------------------------------------------------
INCREASE IN INSURANCE
MALE NET SINGLE AMOUNT PER $1
ATTAINED AGE PREMIUM INCREASE IN CONTRACT FUND
- --------------------------------------------------------------------------------
5 .09151 $10.93
25 .17000 $ 5.88
35 .23700 $ 4.22
55 .45209 $ 2.21
65 .59468 $ 1.68
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
INCREASE IN INSURANCE
FEMALE NET SINGLE AMOUNT PER $1
ATTAINED AGE PREMIUM INCREASE IN CONTRACT FUND
- --------------------------------------------------------------------------------
5 .07919 $12.63
25 .15112 $ 6.62
35 .21127 $ 4.73
55 .40090 $ 2.49
65 .53639 $ 1.86
- --------------------------------------------------------------------------------

Whenever the death benefit is determined in this way, The Prudential reserves
the right to refuse to accept further premium payments, although in practice the
payment of the lesser of 2 years' scheduled premiums or the average of all
premiums paid over the last 5 years will generally be allowed.

<PAGE>

Under a Form B Contract, the death benefit will vary with investment experience.
Assuming no withdrawals, the death benefit will be equal to the face amount of
insurance plus the amount (if any) by which the Contract Fund value exceeds the
applicable "Tabular Contract Fund value" for the Contract (subject to an
exception described below under which the death benefit is higher). Each
Contract contains a table that sets forth the Tabular Contract Fund value as of
the end of each of the first 20 years of the Contract. Tabular Contract Fund
values between Contract anniversaries are determined by interpolation. The
"Tabular Contract Fund value" for each Contract year is an amount that is
slightly less than the Contract Fund value that would result as of the end of
such year if only scheduled premiums were paid, they were paid when due, the
selected investment options earned a net return at a uniform rate of 4% per
year, full mortality charges based upon the 1980 CSO Table were deducted,
maximum sales load and expense charges were deducted, and there was no Contract
debt.

Thus, under a Form B Contract with no withdrawals, the death benefit will equal
the face amount if the Contract Fund equals the Tabular Contract Fund value. If,
due to investment results greater than a net return of 4%, or to payment of
greater than scheduled premiums, or to smaller than maximum charges, the
Contract Fund value is a given amount greater than the Tabular Contract Fund
value, the death benefit will be the face amount plus that excess amount. If,
due to investment results less favorable than a net return of 4%, the Contract
Fund value is less than the tabular Contract Fund value, the death benefit will
not fall below the initial face amount stated in the Contract; however, this
unfavorable investment experience must first be offset by favorable performance
or additional payments that bring the Contract Fund up to the tabular level
before favorable investment results or additional payments will increase the
death benefit. Again, the death benefit will reflect a deduction for the amount
of any Contract debt. See CONTRACT LOANS in the prospectus.

As is the case under a Form A Contract, the Contract Fund of a Form B Contract
could grow to the point where it is necessary to increase the death benefit by a
greater amount in order to ensure that the Contract will satisfy the Internal
Revenue Code's definition of life insurance. Thus, the death benefit under a
Form B Contract will always be the greatest of (1) the face amount plus the
Contract Fund minus the tabular Contract Fund value; (2) the guaranteed minimum
death benefit; and (3) the Contract Fund divided by the net single premium per
$1 of death benefit at the insured's attained age on that date.

A Contract owner may also increase or decrease the face amount of his or her
Contract, subject to certain conditions. See INCREASE IN FACE AMOUNT and
DECREASE IN FACE AMOUNT, below.

WITHDRAWAL OF EXCESS CASH SURRENDER VALUE

Under certain circumstances, a Contract owner may withdraw a portion of the
Contract's cash surrender value without surrendering the Contract in whole or in
part. The amount that a Contract owner may withdraw is limited by the
requirement that the Contract Fund after withdrawal must not be less than the
tabular Contract Fund value. (A Table of Tabular Contract Fund Values is
included in the Contract; the values increase with each year the Contract
remains in force.) But because the Contract Fund may be made up in part by an
outstanding Contract loan, there is a further limitation that the amount
withdrawn may not be larger than an amount sufficient to reduce the cash
surrender value to zero. The amount withdrawn must be at least $2,000 under a
Form A Contract (in which the death benefit is generally equal to the
face-amount of insurance) and at least $500 under a Form B Contract (in which
the death benefit varies daily). An owner may make no more than four such
withdrawals in each Contract year, and there is an administrative processing fee
for each withdrawal equal to the lesser of $15 or 2% of the amount withdrawn. An
amount withdrawn may not be repaid except as a scheduled or unscheduled premium
subject to the applicable charges. Upon request, The Prudential will tell a
Contract owner how much he or she may withdraw. Withdrawal of part of the cash
surrender value may have tax consequences. See TAX TREATMENT OF CONTRACT
BENEFITS, page 5. A temporary need for funds may also be met by making a loan
and you should consult your Prudential representative about how best to meet
your needs.

Under a Form A Contract, the face amount of insurance is reduced by not more
than the amount of the withdrawal. No partial withdrawal will be permitted under
a Form A Contract if it would result in a new face amount of less than the
minimum face amount applicable to the insured's Contract. See REQUIREMENTS FOR
ISSUANCE OF A CONTRACT in the prospectus. It is important to note, however, that
if the face amount is decreased at any time during the first 7 Contract years,
there is a danger that the Contract might be classified as a Modified Endowment
Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 5. Before making any
withdrawal which causes a decrease in face amount, a Contract owner should
consult with his or her Prudential representative. Also, if a withdrawal under a
Form A Contract is made before the end of the tenth year, the Contract Fund may
be reduced not only by the amount withdrawn but also by a proportionate amount
of any surrender charges that would be made if the Contract were surrendered.
The proportion is based on the percentage reduction in face amount. Form A
Contract owners who make a partial withdrawal will be sent replacement Contract
pages showing the new face amount, scheduled premiums, maximum surrender
charges, tabular values, and monthly deductions.

<PAGE>

Under a Form B Contract, the cash surrender value and Contract Fund value are
reduced by the amount of the withdrawal, and the death benefit is accordingly
reduced. Neither the face amount of insurance nor the amount of scheduled
premiums will be changed due to a withdrawal of excess cash surrender value
under a Form B Contract. No surrender charges will be assessed upon a withdrawal
under a Form B Contract.

Withdrawal of part of the cash surrender value increases the risk that the
Contract Fund may be insufficient to provide for benefits under the Contract. If
such a withdrawal is followed by unfavorable investment experience, the Contract
may lapse even if scheduled premiums continue to be paid when due. This is
because, for purposes of determining whether a lapse has occurred, The
Prudential treats withdrawals as a return of premium.

INCREASES IN FACE AMOUNT

An owner who wishes to increase the amount of his or her insurance may do so by
increasing the face amount of the Contract (which is also the guaranteed minimum
death benefit), subject to state approval and underwriting requirements
determined by The Prudential. An increase in face amount is in many ways similar
to the purchase of a second Contract, but it differs in the following respects:
the minimum permissible increase is $25,000, while the minimum for a new
Contract is $60,000; monthly fees are lower because only a single $3 per month
administrative charge is made rather than two; a combined premium payment
results in deduction of a single $2 per premium processing charge while separate
premium payments for separate Contracts would involve two charges; the monthly
expense charge of $0.03 per $1,000 of face amount may be lower if the increase
is to a face amount greater than $100,000; and the Contract will lapse as a
unit, unlike the case if two separate Contracts are purchased. These differences
aside, the decision to increase face amount is comparable to the purchase of a
second Contract in that it involves a commitment to higher scheduled premiums in
exchange for greater insurance benefits.

A Contract owner may elect to increase the face amount of his or her Contract no
earlier than the first anniversary of the Contract. The following conditions
must be met: (1) the owner must ask for the increase in writing on an
appropriate form; (2) the amount of the increase in face amount must be at least
$25,000; (3) the insured must supply evidence of insurability for the increase
satisfactory to The Prudential; (4) if The Prudential requests, the owner must
send in the Contract to be suitably endorsed; (5) the Contract must not be in
default on the date the increase takes effect; (6) the owner must pay an
appropriate premium at the time of the increase; (7) The Prudential has the
right to deny more than one increase in a Contract year; and (8) if The
Prudential has, between the Contract Date and the date that any requested
increase in face amount will take effect, changed any of the bases on which
benefits and charges are calculated under newly issued Contracts, The Prudential
has the right to deny the increase. An increase in face amount resulting in a
total face amount under the Contract of at least $100,000 may, subject to strict
underwriting requirements, render the Contract eligible for a Select Rating.

Upon an increase in face amount, The Prudential will recompute the Contract's
scheduled premiums, contingent deferred sales and administrative charges,
tabular values, and monthly deductions from the Contract Fund. The Contract
owner has a choice, limited only by applicable state law, as to whether the
recomputation will be made as of the prior or next Contract anniversary. There
will be a payment required on the date of increase; the amount of the payment
will depend, in part, on which Contract anniversary the Contract owner selects
for the recomputation. The Prudential will tell the owner the amount of the
required payment. If should also be noted that an increase in face amount may
impact the status of the Contract as a Modified Endowment Contract. See TAX
TREATMENT OF CONTRACT BENEFITS, page 5. Therefore, before increasing the face
amount, a Contract owner should consult with his or her Prudential
representative.

The effective date of the increase in the amount of insurance will be determined
by the same rules that apply when a new Contract is purchased. Generally
speaking, an increase will take effect on the latest of the date the owner
applies for it, the date satisfactory evidence of insurability is provided to
The Prudential or the date designated by the Contract owner, provided the
necessary payment is made on or before that date.

The Prudential will supply the Contract owner with pages which show the
increased face amount, the effective date of the increase, and the recomputed
items described two paragraphs above. The pages will also describe how the
increase in face amount affects the various provisions of the Contract,
including a statement that, for the amount of the increase in face amount, the
period stated in the Incontestability and Suicide provisions (see OTHER STANDARD
CONTRACT PROVISIONS, below on page 8) will run from the effective date of the
increase.

For the purpose of determining the sales load that will be charged after the
increase and upon any subsequent lapse or surrender, the Contract is treated as
if there were two separate Contracts, a "base Contract" representing the
Contract before the increase and an "incremental Contract" representing the
increase viewed as a separate Contract. At the time of the increase, a certain
portion of the Contract Fund is allocated to the incremental Contract as a
prepayment of premiums for purposes of the sales load limit. That portion is
equal to the Guideline Annual Premium ("GAP") of the incremental Contract
divided by the GAP of the entire Contract after the increase. Premium payments
made after the increase are also allocated between the base Contract and the
incremental

<PAGE>

Contract for purposes of the sales load limit. A portion of each premium payment
after the increase is allocated to the increase based on the GAP for the
incremental Contract divided by the GAP for the entire Contract. A monthly
deduction equal to 0.5% of the primary annual premium for each part of the
Contract (i.e., the base and incremental Contracts, respectively) will be made
until each part of the Contract has been in force for 5 years, although The
Prudential reserves the right to continue to make this deduction thereafter.
Similarly, the amount, if any, of sales charges upon lapse or surrender and the
application of the overall limitation upon sales load, as described above in
SALES LOAD UPON SURRENDER, page 1, will be determined as explained in that
section as if there were two Contracts rather than one. Moreover, the contingent
deferred administrative charge is also determined as if there were two separate
Contracts. Thus, an owner considering an increase in face amount should be aware
that such an increase will entail charges, including periodic sales load
deductions and contingent deferred sales and administrative charges, comparable
to the purchase of a new Contract.

Each Contract owner who elects to increase the face amount of his or her
Contract will be granted a "free-look" right which will apply only to the
increase in face amount, not the entire Contract. The right is comparable to the
right afforded to a purchaser of a new Contract. See SHORT-TERM CANCELLATION
RIGHT OR "FREE LOOK" in the prospectus. The "free-look" right would have to be
exercised no later than 45 days after execution of the application for the
increase or, if later, within 10 days after either receipt of the Contract as
increased or receipt of the withdrawal right notice by the owner. Upon exercise
of the "free-look" right, the owner will receive a refund in the amount of the
aggregate premiums paid since the increase was requested and attributable to the
increase, not the base Contract, as determined pursuant to the proportional
premium allocation rule described above. There will be no adjustment for
investment experience. All charges deducted after the increase will be reduced
to what they would have been had no increase been effected. A Contract owner may
transfer the total amount attributable to the increase in face amount from the
subaccounts or the Real Property Account to the fixed-rate option at any time
within 2 years after the increase in face amount.

DECREASES IN FACE AMOUNT

A Contract owner may effect a partial surrender of a Contract (see SURRENDER OF
A CONTRACT in the prospectus) or a partial withdrawal of excess cash surrender
value (see WITHDRAWAL OF EXCESS CASH SURRENDER VALUE above). A Contract owner
also has the additional option of decreasing the face amount (which is also the
guaranteed minimum death benefit) of his or her Contract without withdrawing any
such surrender value. Contract owners who conclude that, because of changed
circumstances, the amount of insurance is greater than needed will thus be able
to decrease their amount of insurance protection, and the monthly deductions for
the cost of insurance, without decreasing their current cash surrender value.
The cash surrender value of the Contract on the date of the decrease will not
change, except that an administrative processing fee of $15 may be deducted from
that value (unless that fee is separately paid at the time the decrease in face
amount is requested). The Contract's Contract Fund value, however, will be
reduced by deduction of a proportionate part of the then applicable contingent
deferred sales and administrative charges, if any. Scheduled premiums for the
Contract will also be proportionately reduced. The Contracts of owners who
exercise the right to reduce face amount will be amended to show the new face
amount, tabular values, scheduled premiums, monthly charges, and, if applicable,
the remaining contingent deferred sales and administrative charges.

The minimum permissible decrease is $10,000. No decrease will be permitted that
causes the face amount of the Contract to drop below the minimum face amount
applicable to the insured's Contract. See REQUIREMENTS FOR ISSUANCE OF A
CONTRACT in the prospectus. No reduction will be permitted to the extent that it
would cause the Contract to fail to qualify as "life insurance" for purposes of
Section 7702 of the Internal Revenue Code. If the face amount of a Contract in
force on a Select Rating basis is reduced below $100,000, it is no longer
eligible for the Select Rating. A decrease in face amount will generally be
effected as of the Monthly date immediately preceding receipt of a proper
request to decrease face amount. A decrease requested while the Contract is in
default, however, will be effected as of the Monthly date the Contract went into
default. Monthly charges previously deducted on the effective date of the
decrease and attributed to the decreased portion of the face amount will be
credited to the Contract Fund as of that date.

It is important to note, however, that if the face amount is decreased at any
time during the first 7 Contract years, there is a danger the Contract might be
classified as a Modified Endowment Contract. See TAX TREATMENT OF CONTRACT
BENEFITS, below. Before requesting any decreases in face amount, a Contract
owner should consult his or her Prudential representative.

TAX TREATMENT OF CONTRACT BENEFITS

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commonly occurring circumstances. There is no guarantee, however, that the
current federal income tax laws and regulations or interpretations will not
change.

TREATMENT AS LIFE INSURANCE. The Contract will be treated as "life insurance" as
long as it satisfies certain definitional tests set forth in Section 7702 of the
Internal Revenue Code (the "Code") and as long as the underlying investments for
the Contract satisfy diversification requirements set forth in Treasury
Regulations issued pursuant to Section 817(h) of the Code.

These diversification requirements must ordinarily be met within 1 year after
Contract owner funds are first allocated to the particular portfolio of the
Series Fund, and within 30 days after the end of each calendar quarter
thereafter. 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% 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. Compliance with 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 Prudential believes that it has taken adequate steps to cause the Contract
to be treated as life insurance for tax purposes. This means that (1) except as
noted below, the Contract owner should not be taxed on any part of the Contract
Fund, including additions attributable to interest, dividends or appreciation;
and (2) the death benefit should be excludible from the gross income of the
beneficiary under section 101(a) of the Code.

However, Section 7702 of the Code, which defines life insurance for tax
purposes, gives the Secretary of the Treasury authority to prescribe regulations
to carry out the purposes of the Section. In this regard, proposed regulations
governing mortality charges were issued in 1991 and proposed regulations under
Sections 101, 7702, and 7702A governing the treatment of life insurance policies
that provide accelerated death benefits were issued in 1992. None of these
proposed regulations has yet been finalized. Additional regulations under
Section 7702 may also be promulgated in the future. Moreover, in connection with
the issuance of temporary regulations under Section 817(h), the Treasury
Department announced that such regulations do not provide guidance concerning
the extent to which Contract owners may direct their investments to particular
divisions of a separate account. Such guidance will be included in regulations
or rulings under Section 817(d) relating to the definition of a variable
contract.

The Prudential intends to comply with final regulations issued under sections
7702 and 817. Therefore, it reserves the right to make such changes as it deems
necessary to assure that the Contract continues to qualify as life insurance for
tax purposes. Any such changes will apply uniformly to affected Contract owners
and will be made only after advance written notice to affected Contract owners.

PRE-DEATH DISTRIBUTIONS. The taxation of pre-death distributions depends on
whether the Contract is classified as a Modified Endowment Contract. The
following discussion first deals with distributions under Contracts not so
classified, and then with Modified Endowment Contracts.

1. A surrender or lapse of the Contract may have tax consequences. Upon
surrender, the owner will not be taxed on the cash surrender value
except for the amount, if any, that exceeds the gross premiums paid
less the untaxed portion of any prior withdrawals. The amount of any
unpaid Contract debt will, upon surrender or lapse, be added to the
cash surrender value and treated, for this purpose, as if it had been
received. Any loss incurred upon surrender is generally not deductible.
The tax consequences of a surrender may differ if the proceeds are
received under any income payment settlement option.

A withdrawal generally is not taxable unless it exceeds total premiums
paid to the date of withdrawal less the untaxed portion of any prior
withdrawals. However, under certain limited circumstances, in the first
15 Contract years all or a portion of a withdrawal may be taxable if
the Contract Fund exceeds the total premiums paid less the untaxed
portions of any prior withdrawals, even if total withdrawals do not
exceed total premiums paid to date.

Extra premiums for optional benefits and riders generally do not count
in computing the gross premiums paid, which in turn determines the
extent to which a withdrawal might be taxed.

<PAGE>

Loans received under the Contract will ordinarily be treated as
indebtedness of the owner and will not be considered to be
distributions subject to tax.

2. Some of the above rules are changed if the Contract is classified as a
Modified Endowment Contract under section 7702A of the Code. It is
possible for the Contract to be classified as a Modified Endowment
Contract under at least two circumstances: premiums substantially in
excess of scheduled premiums are paid; or a decrease in the face amount
of insurance is made (or a rider removed) during the first 7 Contract
years. Moreover, the addition of a rider or the increase in the face
amount of insurance after the Contract Date may have an impact on the
Contract's status as a Modified Endowment Contract. Contract owners
contemplating any of these steps should first consult a qualified tax
advisor and their Prudential representative.

If the Contract is classified as a Modified Endowment Contract, then
pre-death distributions, including loans and withdrawals, are
includible in income to the extent that the Contract Fund prior to
surrender charges exceeds the gross premiums paid for the Contract
increased by the amount of any loans previously includible in income
and reduced by any untaxed amounts previously received other than the
amount of any loans excludible from income. These rules may also apply
to pre-death distributions, including loans, made during the 2 year
period prior to the Contract becoming a Modified Endowment Contract.

In addition, pre-death distributions from such Contracts (including
full surrenders) will be subject to a penalty of 10 per cent of the
amount includible in income unless the amount is distributed on or
after age 59 1/2, on account of the taxpayer's disability or as a life
annuity. It is presently unclear how the penalty tax provisions apply
to Contracts owned by nonnatural persons such as corporations.

Under certain circumstances, Modified Endowment Contracts issued during
any calendar year will be treated as a single contract for purposes of
applying the above rules.

WITHHOLDING. The taxable portion of any amounts received under the Contract will
be subject to withholding to meet federal income tax obligations if the Contract
owner fails to elect that no taxes be withheld or in certain other
circumstances. Contract owners who do not provide a social security number or
other taxpayer identification number will not be permitted to elect out of
withholding. All recipients of such amounts may be subject to penalties under
the estimated tax payment rules if withholding and estimated tax payments are
not sufficient.

OTHER TAX CONSIDERATIONS. Transfer of the Contract to a new owner or assignment
of the Contract may have tax consequences depending on the circumstances. In the
case of a transfer of the Contract for a valuable consideration, the death
benefit may be subject to federal income taxes under section 101(a)(2) of the
Code. In addition, a transfer of the Contract to or the designation of a
beneficiary who is either 37 1/2 years younger than the Contract owner or a
grandchild of the Contract owner may have Generation Skipping Transfer tax
consequences under Section 2601 of the Code.

In certain circumstances, deductions for interest paid or accrued on Contract
debt or on other loans that are incurred or continued to purchase or carry the
Contract may be denied under section 163 of the Code as personal interest or
under section 264 of the Code. Contract owners should consult a tax advisor
regarding the application of these provisions to their circumstances.

Business-owned life insurance is subject to additional rules. Section 264(a)(1)
of the Code generally precludes business Contract owners from deducting premium
payments. Under section 264(a)(4) of the Code, a deduction is not allowed for
any interest paid or accrued on any Contract debt on an insurance policy to the
extent the indebtedness exceeds $50,000 per officer, employee or financially
interested person. The Congress is also considering legislation to deny interest
deductions generally for loans on business-owned policies. The Code also imposes
an indirect tax upon additions to the Contract Fund or the receipt of death
benefits under business-owned life insurance policies under certain
circumstances by way of the corporate alternative minimum tax.

The individual situation of each Contract owner or beneficiary will determine
the federal estate taxes and the state and local estate, inheritance and other
taxes due if the owner or insured dies.

SALE OF THE CONTRACT AND SALES COMMISSIONS

Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
The Prudential, acts as the principal underwriter of the Contract. Prusec,
organized in 1971 under New Jersey law, is registered as a broker and dealer
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. Prusec's principal business address is
1111 Durham Avenue, South Plainfield, New Jersey 07080. The Contract is sold by
registered representatives of Prusec who are also authorized by state insurance
departments to do so. The Contract may also be sold through other broker-dealers
authorized by Prusec and applicable law to do so. Registered representatives of
such other broker-dealers may be paid on a different basis than described below.
Where the insured is less than 60 years of age, the representative will
generally receive a commission of no more

<PAGE>

than 50% of the Scheduled Premiums for the first year, no more than 10% of the
Scheduled Premiums for the second, third, and fourth years, no more than 3% of
the Scheduled Premiums for the fifth through tenth years, and no more than 2% of
the Scheduled Premiums thereafter. For new Contracts issued on or about July 1,
1996, the commission rates for the second through tenth years will change to no
more than 6% of the Scheduled Premiums. For insureds over 59 years of age, the
commission will be lower. The representative may be required to return all or
part of the first year commission if the Contract is not continued through the
second year. Representatives with less than 3 years of service may be paid on a
different basis. Representatives who meet certain productivity, profitability,
and persistency standards with regard to the sale of the Contract will be
eligible for additional compensation.

Sales expenses in any year are not equal to the deduction for sales load in that
year. The Prudential expects to recover its total sales expenses over the
periods the Contracts are in effect. To the extent that the sales charges are
insufficient to cover total sales expenses, the sales expenses will be recovered
from The Prudential's surplus, which may include amounts derived from the
mortality and expense risk charge and the guaranteed minimum death benefit risk
charge described in the prospectus under DAILY DEDUCTION FROM THE CONTRACT FUND,
and item (d) under MONTHLY DEDUCTIONS FROM CONTRACT FUND.

TAX-QUALIFIED PENSION PLANS

The Contracts may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Internal Revenue
Code. Such Contracts may be issued with a minimum face amount of $10,000, and
increases and decreases in face amount may be effected in minimum increments of
$10,000. The monthly charge for anticipated mortality costs and the scheduled
premiums under such Contracts will be the same for male and female insureds of a
particular age and underwriting classification. Illustrations reflecting such
premiums and charges will be given to purchasers of Contracts issued in
connection with qualified plans. Only certain of the riders normally available
with the Contracts are available to Contracts issued in connection with
qualified plans. See RIDERS in the prospectus. Moreover, fixed reduced paid-up
insurance and payment of the cash surrender value are the only options on lapse
available to Contracts issued in connection with qualified plans. See LAPSE AND
REINSTATEMENT in the prospectus. Finally, Contracts issued in connection with
qualified plans may not invest in the Real Property Account.

Prior to purchase of a Contract in connection with a qualified plan, the
provisions of the Code relating to such plans and life insurance thereunder
should be examined.

OTHER STANDARD CONTRACT PROVISIONS

BENEFICIARY. The beneficiary is designated and named in the application by the
Contract owner. Thereafter, the owner may change the beneficiary, provided it is
in accordance with the terms of the Contract. Should the insured die with no
surviving beneficiary, the insured's estate will become the beneficiary.

INCONTESTABILITY. After the Contract has been in force during the insured's
lifetime for 2 years from the Contract Date or, with respect to any change in
the Contract that requires The Prudential's approval and could increase its
liability, after the change has been in effect during the insured's lifetime for
2 years from the effective date of the change, The Prudential will not contest
its liability under the Contract in accordance with its terms.

MISSTATEMENT OF AGE OR SEX. If the insured's stated age or sex (except where
unisex rates apply) or both are incorrect in the Contract, The Prudential will
adjust the death benefits payable, as required by law, to reflect the correct
age and sex. Any death benefit will be based on what the most recent charge for
mortality would have provided at the correct age and sex.

SUICIDE EXCLUSION. Generally, if the insured, whether sane or insane, dies by
suicide within 2 years from the Contract Date, The Prudential will pay no more
under the Contract than the sum of the premiums paid.

If the insured, whether sane or insane, dies by suicide within 2 years from the
effective date of an increase in the face amount of insurance, The Prudential
will pay, with respect to the amount of the increase, no more than the sum of
the scheduled premiums attributable to the increase.

ASSIGNMENT. This Contract may not be assigned if such assignment would violate
any federal, state, or local law or regulation. Generally, the Contract may not
be assigned to an employee benefit plan or program without The Prudential's
consent. The Prudential assumes no responsibility for the validity or
sufficiency of any assignment, and it will not be obligated to comply with any
assignment unless it has received a copy at one of its Home Offices.

SETTLEMENT OPTIONS. The Contract grants to most owners, or to the beneficiary, a
variety of optional ways of receiving Contract proceeds, other than in a lump
sum. Any Prudential representative authorized to sell this Contract can explain
these options upon request.

<PAGE>

EXCHANGE OF FIXED-DOLLAR CONTRACT TO VARIABLE CONTRACT

The Prudential may, on a non-discriminatory basis, permit the owner of an
APPRECIABLE LIFE insurance policy issued by The Prudential (an APPRECIABLE LIFE
policy is a general account, universal life type policy with guaranteed minimum
values) to exchange his or her policy for a comparable Variable APPRECIABLE LIFE
Contract with the same Contract Date, scheduled premiums, and Contract fund. No
charge will be made for the exchange. There is no new "free look" right when an
APPRECIABLE LIFE insurance policy owner elects to exchange his or her policy for
a comparable Variable APPRECIABLE LIFE Contract.

Although The Prudential does not give tax advice, The Prudential does believe,
based on its understanding of federal income tax laws as currently interpreted,
that the original date exchange of an APPRECIABLE LIFE Contract should be
considered to be a tax-free exchange under the Internal Revenue Code of 1986 as
amended. It should be noted, however, that the exchange of an APPRECIABLE LIFE
Contract for a Variable APPRECIABLE LIFE Contract may impact the status of the
Contract as Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS,
page 5. A contract owner should consult with his or her tax advisor and
Prudential representative before making an exchange.

INVESTMENT OBJECTIVES AND POLICIES OF THE
PORTFOLIOS

GENERAL

The Prudential Series Fund, Inc. (the "Series Fund") has fifteen separate
portfolios available to Contract owners: the Money Market Portfolio, the
Diversified Bond Portfolio, the Government Income Portfolio, the two Zero Coupon
Bond Portfolios with different liquidation dates -- 2000 and 2005, the
Conservative Balanced Portfolio, the Flexible Managed Portfolio, the High Yield
Bond Portfolio, the Stock Index Portfolio, the Equity Income Portfolio, the
Equity Portfolio, the Prudential Jennison Portfolio, the Small Capitalization
Stock Portfolio, the Global Portfolio, and the Natural Resources Portfolio. The
portfolios are managed by The Prudential Insurance Company of America ("The
Prudential"), see INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES, page 24.

The investment objectives of the Series Fund's portfolios can be found under
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS in the prospectus. The
policies employed to manage the Zero Coupon Bond Portfolios are also discussed
in greater detail in FURTHER INFORMATION ABOUT THE ZERO COUPON BOND PORTFOLIOS,
page 20.

CONVERTIBLE SECURITIES

The Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global, and Natural Resources Portfolios
may invest in convertible securities and such securities may constitute a major
part of the holdings of the Equity Income, Natural Resources and Global
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 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.

WARRANTS

The Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global, 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

<PAGE>

level that justifies the exercise or sale of the warrant before it expires. From
time to time, the Diversified Bond and the High Yield Bond Portfolios may invest
in debt securities that are offered together with warrants, but only when the
debt security meets the portfolio's investment criteria and the value of the
warrant is relatively very small. If the warrant later becomes valuable, it will
ordinarily be sold rather than be exercised.

OPTIONS AND FUTURES

OPTIONS ON EQUITY SECURITIES. The Conservative Balanced, Flexible Managed,
Equity Income, Equity, Prudential Jennison, Small Capitalization Stock, Global,
and Natural Resources Portfolios may purchase and write (i.e., sell) put and
call options on equity securities that are traded on securities exchanges or
that 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 security
at the exercise price upon exercise by the holder of the put.

The Conservative Balanced, Flexible Managed, Equity Income, Equity, Prudential
Jennison, Small Capitalization Stock, Global, and Natural Resources 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 below under Options on Debt Securities and Options on Stock
Indices.

<PAGE>

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.

A portfolio's use of options on equity 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 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 a portfolio will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange or otherwise may exist. In
such event it might not be possible to effect closing transactions in particular
options, with the result that the portfolio would have to exercise its options
in order to realize any profit and would incur brokerage commissions upon the
exercise of such options and upon the subsequent disposition of underlying
securities acquired through the exercise of call options or upon the purchase of
underlying securities for the exercise of put options. If a portfolio as a
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.

Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be 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, which might cause an exchange to institute special
procedures that might interfere with the timely execution of customers' orders.

The purchase and sale of OTC options will also be subject to certain risks.
Unlike exchange-traded options, OTC options generally do not have a continuous
liquid market. Consequently, a portfolio will 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 general supervision of
the Series Fund's Board of Directors.

OPTIONS ON DEBT SECURITIES. The Diversified Bond, Government Income,
Conservative Balanced, Flexible Managed, 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 ("over-the-counter" or "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.

<PAGE>

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 above in Options on Equity Securities, page 10. 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.

The use of debt options is subject to the same risks described above in
connection with stock options.

OPTIONS ON STOCK INDICES. The Conservative Balanced, Flexible Managed, Equity
Income, Equity, Prudential Jennison, Global, and Natural Resources Portfolios
may purchase and sell put and call options on stock indices traded on securities
exchanges or 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 functionally comparable to a long
stock index futures position as described below under Additional Information
Regarding the Use of Options and Futures Contracts by the Stock Index Portfolio.
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.

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
one 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.

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(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 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.

The purchase and sale of options on stock indices will be subject to the risks
described above under Options on Equity Securities. 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, might 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.

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. The portfolios, however, will follow the "cover"
procedures described above.

<PAGE>

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 the
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 sells the call, which in either case
would occur no earlier than the day following the day the exercise notice was
filed.

OPTIONS ON FOREIGN CURRENCIES. The Conservative Balanced, Flexible Managed,
Equity Income, Equity, Prudential Jennison, Global, 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 (see FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS, page 18) and futures
contracts on foreign currencies (discussed under Futures Contracts, page 15)
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.

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), the 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.

<PAGE>

depends upon a liquid secondary market. There is no assurance that liquid
secondary markets will exist for any particular option at any particular time.

Because there are two currencies involved, developments in either or both
countries can affect the values of options on foreign currencies. In addition,
the quantities of currency underlying option contracts represent odd lots in a
market dominated by transactions between banks; this can mean extra transaction
costs upon exercise. Option markets may be closed while round-the-clock
interbank currency markets are open, and this can create price and rate
discrepancies.

FUTURES CONTRACTS. The Conservative Balanced, Flexible Managed, Stock Index,
Equity Income, Equity, Prudential Jennison, Small Capitalization Stock, Global,
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 Diversified Bond, High Yield Bond, Government Income, Conservative Balanced,
Flexible Managed, and Global 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").

There are several additional 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 future 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.

In addition, 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.

ADDITIONAL INFORMATION REGARDING THE USE OF OPTIONS AND FUTURES CONTRACTS 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

<PAGE>

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.

OPTIONS ON FUTURES CONTRACTS. To the extent permitted by applicable insurance
law and federal regulations, the Conservative Balanced, Flexible Managed, Stock
Index, Equity Income, Equity, Prudential Jennison, Small Capitalization Stock,
Global and Natural Resources, Portfolios may enter into certain transactions
involving options on stock index futures contracts, and the Diversified Bond,
Government Income, Conservative Balanced, Flexible Managed, High Yield Bond, and
Global Portfolios may enter into certain transactions involving options on
interest rate futures contracts; and the Conservative Balanced, Flexible
Managed, Equity Income, Equity, Prudential Jennison, Global, and Natural
Resources 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 a 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. As noted above, 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. The other
portfolios intend to utilize options on futures contracts for the same purposes
that they use the underlying futures contracts.

Options on futures contracts are subject to risks similar to those described
above with respect to option 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.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

<PAGE>

money market securities on a when-issued or delayed delivery basis on the terms
set forth under item 6 in SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY
CURRENTLY INVEST, page 29.

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 Diversified Bond, Government Income, and High Yield Bond Portfolios and the
fixed income portions of the Conservative Balanced and Flexible Managed
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.

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>

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.

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.

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. Variable and
floating rate instruments that cannot be disposed of within seven days and
repurchase agreements with a maturity of greater than seven days are considered
illiquid.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

To the extent permitted by applicable insurance law, the Conservative Balanced,
Flexible Managed, Equity Income, Equity, Prudential Jennison, Global, and
Natural Resources Portfolios may purchase 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

<PAGE>

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.

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' 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
hedge currency, at the same time they tend to limit any potential gain which
might result should the value of such currency increase.

<PAGE>

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.

FURTHER INFORMATION ABOUT THE POLICIES OF THE STOCK INDEX PORTFOLIO

Under normal circumstances, the Stock Index 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. Prior to the
commencement of the public offering of this portfolio's shares, The Prudential
purchased $25,000,000 worth of shares of this portfolio in order to permit the
portfolio to make an initial investment in the 500 stocks (in proportion to
their weighting in the S&P 500 index). As additional cash is received from the
purchase of shares in the portfolio, it may be held temporarily in short-term,
high quality investments of the sort in which the Money Market Portfolio
invests, 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.

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 above
under Options on Stock Indices, Stock Index Futures Contracts, and Options on
Futures Contracts on pages 12 through 16. 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 Additional Information Regarding the Use of Options and
Futures Contracts by the Stock Index and Small Capitalization Stock Portfolios,
page 15, for a more detailed discussion of the manner in which the portfolio
will employ these instruments, and Options on Stock Indices, page 12, 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.

FURTHER INFORMATION ABOUT THE ZERO COUPON BOND PORTFOLIOS

As stated in the prospectus, the objective of Zero Coupon Portfolios 2000 and
2005 is to achieve the highest predictable compounded investment return for a
specified period of time, consistent with the safety of invested capital. This
discussion provides a more detailed explanation of the investment policies that
will be employed to manage these portfolios.

<PAGE>

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 (The Prudential) 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.

INVESTMENT RESTRICTIONS

None of the portfolios will:

<PAGE>

the Balanced Portfolios may purchase and sell interest rate futures
contracts and related options; and all portfolios (other than the Money
Market, Government Income and 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.

3. Acquire securities for the purpose of exercising control or management of
any company except in connection with a merger, consolidation, acquisition
or reorganization.

5. Purchase securities on margin or otherwise borrow money or issue senior
securities except that the Diversified Bond, High Yield Bond and
Government Income Portfolios, as well as the fixed income portions of the
Balanced Portfolios, may enter into reverse repurchase agreements, dollar
rolls and may purchase securities on a when-issued and delayed delivery
basis; except that the Money Market Portfolio and the money market portion
of any portfolio may enter into reverse repurchase agreements and may
purchase securities on a when-issued and delayed delivery basis; and
except that the Equity, Prudential Jennison, Small Capitalization Stock,
Equity Income, Natural Resources, Global, Flexible Managed and
Conservative Balanced 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);
Diversified Bond and High Yield Bond Portfolios (options on debt
securities, foreign currencies); Government Income 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 Diversified Bond, High Yield Bond, and Government Income
Portfolios, as well as the fixed income portions of the Conservative
Balanced and Flexible Managed Portfolios, may enter into reverse
repurchase agreements and dollar rolls provided that the portfolio's
obligations with respect to those instruments do not exceed 30% of the
portfolio's net assets (defined to mean total assets at market value less
liabilities other than reverse repurchase agreements and dollar rolls).

7. Pledge or mortgage assets, except that no more than 10% of the value of
any portfolio may be pledged (taken at the time the pledge is made) to
secure authorized borrowing and except that a 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

<PAGE>

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.

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. This restriction shall not apply to
mortgage-backed securities, collateralized mortgage obligations or
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

Certain additional non-fundamental investment policies are applicable only to
the Money Market Portfolio. That portfolio will not:

1. Invest in oil and gas interests, common stock, preferred stock, warrants
or other equity securities.
2. Write or purchase any put or call option or combination of them, except
that it may purchase putable or callable securities.

3. Invest in any security with a remaining maturity in excess of 397 days,
except that securities held pursuant to repurchase agreements may have a
remaining maturity of more than 397 days.

Certain additional non-fundamental investment policies are applicable only to
the High Yield Bond Portfolio. That portfolio will not:

1. Invest in any non-fixed income equity securities, including warrants,
except when attached to or included in a unit with fixed income
securities, but not including preferred stock.

<PAGE>

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 9.

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.

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
described in item 2 of SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY
CURRENTLY INVEST, page 29. In addition, the Series Fund adheres to additional
restrictions relating to such practices as the lending of securities, borrowing,
and the purchase of put and call options, futures contracts, and derivative
instruments on securities to comply with investment guidelines issued by the
California Department of Insurance.

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 and not the Contract owners, are
considered the owners of assets held in the Account for federal income tax
purposes. See TAX TREATMENT OF CONTRACT BENEFITS, page 5. The Prudential intends
to maintain the assets of each portfolio pursuant to those diversification
requirements.

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES

The Series Fund and The Prudential have entered into an Investment Advisory
Agreement 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. As
noted in the prospectus, The Prudential has also 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 the Investment Advisory Agreement. In
addition, The Prudential has entered into a Subadvisory Agreement with its
wholly-owned

<PAGE>

subsidiary Jennison Associates Capital Corp. ("Jennison") under which Jennison
furnishes investment advisory services in connection with the management of the
Prudential Jennison Portfolio.

The investment management fee for the Stock Index Portfolio is equal to an
annual rate of 0.35% of the average daily net assets of the portfolio. For the
Money Market, Diversified Bond, Government Income, Equity Income, and 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 Equity and Natural Resources Portfolios, the fee is equal to an annual
rate of 0.45% of the average daily net assets of each of the portfolios. The fee
for the Conservative Balanced and High Yield Bond Portfolios is equal to an
annual rate of 0.55% of the average daily net assets of each of the portfolios.
For the Flexible Managed and Prudential Jennison Portfolios, the fee is equal to
an annual rate of 0.6% of the average daily net assets of the portfolio. The fee
for the Global Portfolio is equal to an annual rate of 0.75% of the average
daily net assets of the portfolio. Under the Service Agreement, The Prudential
pays PIC a portion of the fee it receives for providing investment advisory
services. The Prudential pays Jennison a portion of the fee it receives for
providing investment advisory services to the Prudential Jennison Portfolio.

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 portfolios 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.

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 March 1, 1996 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 Prudential
Jennison and Small Capitalization Stock Portfolios. A Supplemental Advisory
Agreement regarding the Prudential Jennison 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 Prudential Jennison 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
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.

<PAGE>

portfolios and the Investment Subadvisory Agreement with Jennison were ratified
by the sole shareholder of those portfolios on 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 investor 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.

PORTFOLIO TRANSACTIONS AND BROKERAGE

<PAGE>

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 non-interested directors, 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
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.

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 separate 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
to the Series Fund. As such, The Prudential receives no underwriting
compensation from the Series Fund.

As noted in the prospectus, the net asset value of the shares of each portfolio
is determined once daily on each day 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. In the event the New York Stock Exchange
closes early on any business day, the net asset value of each portfolio shall be
determined at a time between such closing and 4:15 p.m. New York City time.

In determining the net asset value of the Diversified Bond, High Yield Bond, and
Government Income 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 33. 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 Contract owners of any such
alteration.

<PAGE>

amortized cost method of valuation, the Money Market Portfolio may not purchase
any security with a remaining maturity of more than 397 days and must maintain a
dollar-weighted average 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 Series Fund's 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 below in SECURITIES IN WHICH
THE MONEY MARKET PORTFOLIO MAY CURRENTLY INVEST.

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 values 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 are valued in the Diversified Bond Portfolio, and common stocks
and convertible debt securities are valued in the same way as such securities
are valued in the Equity 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 Series Fund's 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 below in SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY CURRENTLY
INVEST.

<PAGE>

SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY
CURRENTLY INVEST

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.
For a description of corporate bond ratings, see DEBT RATINGS, page 31. 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 (which as noted above is currently The Prudential)
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 domestics 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 default

<PAGE>

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 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.

5. Reverse Repurchase Agreements. The Money Market Portfolio may use reverse
repurchase agreements, which are described under REVERSE REPURCHASE AGREEMENTS
AND DOLLAR ROLLS in the prospectus. No portfolio may obligate more than 10% of
its net assets in connection with reverse repurchase agreements, except that the
Diversified Bond, High Yield Bond, and Government Income Portfolios, as well as
the fixed income portions of the Conservative Balanced and Flexible Managed
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.

<PAGE>

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 an 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 if 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.

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.

<PAGE>

Commercial paper:

-- 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.

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
predominately reflect money rates in their market behavior,
but to some extent, also economic conditions.

BBB Bonds rated BBB, or medium grade, are 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
borrowings. 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.

POSSIBLE REPLACEMENT OF THE SERIES FUND

Although The Prudential believes it to be unlikely, it is possible that in the
judgment of its management, one or more of the portfolios of the Series Fund may
become unsuitable for investment by Contract owners because of investment policy
changes, tax law changes, or the unavailability of shares for investment. In
that event, The Prudential may seek to substitute the shares of another
portfolio or of an entirely different mutual fund. Before this can be done, the
approval of the SEC, and possibly one or more state insurance departments, will
be required. Contract owners will be notified of such substitution.

<PAGE>

Although neither the companies which invest in the Series Fund nor the Series
Fund currently foresees any such disadvantage, the Series Fund's Board of
Directors intends to monitor events in order to identify any material conflict
between variable life insurance and variable annuity contract owners and to
determine what action, if any, should be taken in response thereto. Material
conflicts could result from such things as: (1) changes in state insurance law;
(2) changes in federal income tax law; (3) changes in the investment management
of any portfolio of the Series Fund; or (4) difference between voting
instructions given by variable life insurance and variable annuity contract
owners. The Prudential will bear the expense, if it does become necessary, of
remedying any material conflict including establishing a new underlying
investment company and segregating the assets held under variable life insurance
and variable annuity contracts.

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 fifteen
classes: Money Market Portfolio Capital Stock (225 million shares), Diversified
Bond Portfolio Capital Stock (200 million shares), Government Income Portfolio
Capital Stock (100 million shares), Zero Coupon Bond Portfolio 2000 Capital
Stock (25 million shares), Zero Coupon Bond Portfolio 2005 Capital Stock (50
million shares), Conservative Balanced Portfolio Capital Stock (300 million
shares), Flexible Managed Portfolio Capital Stock (300 million shares), High
Yield Bond Portfolio Capital Stock (100 million shares), Stock Index Portfolio
Capital Stock (100 million shares), Equity Income Portfolio Capital Stock (100
million shares), Equity Portfolio Capital Stock (200 million shares), Prudential
Jennison Portfolio Capital Stock (50 million shares), Small Capitalization Stock
Portfolio Capital Stock (50 million shares), Global Portfolio Capital Stock (100
million shares), Natural Resources Portfolio Capital Stock (100 million shares).
The shares of each portfolio, 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.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The Series Fund is qualified as a regulated investment company under Section 851
of the Internal Revenue Code and distributes substantially all of each
portfolio's net investment income and realized gains from securities
transactions to the respective subaccounts, which immediately reinvest it. For
each taxable year in which it and each of its portfolios so qualify, the Series
Fund will not be subject to tax on net investment income and realized gains from
securities transactions distributed to shareholders.

CUSTODIAN AND TRANSFER AGENT

Chemical Bank, 4 New York Plaza, New York, N.Y. 10004, is the custodian of the
assets held by all the portfolios, except the Global 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 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 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.

EXPERTS

The financial statements of the Series Fund included in this statement of
additional information and the FINANCIAL HIGHLIGHTS included in the 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.

<PAGE>

LICENSES

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 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.

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

DIRECTORS AND OFFICERS OF THE PRUDENTIAL

The directors and certain officers of The Prudential, listed with their
principal occupations during the past 5 years, are shown below.

DIRECTORS OF THE PRUDENTIAL

FRANKLIN E. AGNEW. Director. -- Business Consultant and former Senior Vice
President of H.J. Heinz. Address: One Mellon Bank Center, Suite 2120,
Pittsburgh, PA 15219.

FREDERIC K. BECKER, Director. -- President of Wilentz, Goldman, and Spitzer (law
firm). Address: 90 Woodbridge Center Drive, Woodbridge, NJ 07095.

WILLIAM W. BOESCHENSTEIN, Director.--Director, Owens-Corning Fiberglas
Corporation. Address: One Seagate, Toledo, OH 43604.

LISLE C. CARTER, JR., Director.--Former Senior Vice President and General
Counsel, United Way of America. Address: 701 North Fairfax Avenue, Alexandria,
VA 22314.

JAMES G. CULLEN, Director.--Vice Chairman, Bell Atlantic Corporation since 1995;
1993 to 1995: President, Bell Atlantic Corporation; Prior to 1993: President,
New Jersey Bell. Address: 1310 North Court House Road, 11th floor, Alexandria,
VA 22201.

CAROLYNE K. DAVIS, Director.--Health Care Advisor, Ernst & Young. Address: 5480
Cayuga Lake Road, Romulus, NY 14541.

<PAGE>

ROGER A. ENRICO, Director.--Chairman and Chief Executive Officer, Pepsico
Worldwide Restaurants since 1994; 1993 to 1994: Vice Chairman, Pepsi Co. Inc.;
1991 to 1993: Chairman and Chief Executive Officer, Pepsi Co.
Worldwide Foods. Address: 6303 Forest Park, Dallas, TX 75235.

ALLAN D. GILMOUR, Director.--Former Vice Chairman, Ford Motor Company. Address:
Prudential Plaza, Newark, NJ 07102-3777.

WILLIAM H. GRAY, III, Director.--President and Chief Executive Officer, United
Negro College Fund, Inc. since 1991. Address: 8260 Willow Oaks Corporate Drive,
Fairfax, VA 22031.

JON F. HANSON, Director.--Chairman, Hampshire Management Co. Address: 235 Moore
Street, Suite 200, Hackensack, NJ 07601.

CONSTANCE J. HORNER, Director.--Guest Scholar, The Brookings Institution since
1993; 1991 to 1992 Assistant to the President and Director of Presidential
Personnel, U.S. Government. Address: 1775 Massachusetts Avenue, N.W.,
Washington, DC 20036-2188.

ALLEN F. JACOBSON, Director.--Former Chairman and Chief Executive Officer,
Minnesota Mining & Manufacturing Co. Address: 30 Seventh Street East, St. Paul,
MN 55101-4901.

GARNETT L. KEITH, JR., Director and Vice Chairman.--Vice Chairman of The
Prudential. Address: Prudential Plaza, Newark, NJ 07102-3777.

BURTON G. MALKIEL, Director.--Professor, Princeton University. Address:
Princeton University, 110 Fisher Hall, Prospect Avenue, Princeton, NJ
08544-1021.

JOHN R. OPEL, Director.--Prior to 1994, Chairman of the Executive Committee,
International Business Machines Corporation. Address: 590 Madison Avenue, New
York, NY 10022.

ARTHUR F. RYAN, Chairman of the Board, President, and Chief Executive Officer.
- -- Chairman of the Board, President, and Chief Executive Officer, The Prudential
since 1994; Prior to 1994, President and Chief Operating Officer, Chase
Manhattan Corporation. Address: 751 Broad Street, Newark, NJ 07102-3777.

CHARLES R. SITTER, Director.--Former President and Director, Exxon Corporation.
Address: 225 John W. Carpenter Freeway, Irving, TX 75062.

DONALD L. STAHELI, Director.--Chairman and Chief Executive Officer, Continental
Grain Company since 1994; Prior to 1994; Chairman, Continental Grain Company.
Address: 277 Park Avenue, New York, NY 10172.

RICHARD M. THOMSON, Director.--Chairman of the Board and Chief Executive
Officer, The Toronto-Dominion Bank. Address: P.O. Box 1, Toronto-Dominion
Centre, Toronto, Ontario, M5K 1A2, Canada.

P. ROY VAGELOS, M.D., Director.--Former Chairman, President and Chief Executive
Officer, Merck & Co., Inc. Address: One Crossroads Drive, Bedminster, NJ 07921.

STANLEY C. VAN NESS, Director.--Attorney, Picco, Herbert, and Kennedy (law
firm). Address: One State Street Square, Suite 1000, Trenton, NJ 08607-1388.

PAUL A. VOLCKER, Director.--Chairman, James D. Wolfensohn, Inc. Address: 599
Lexington Avenue, New York, NY 10022.

JOSEPH H. WILLIAMS, Director.--Director, The Williams Companies since 1994;
Prior to 1994: Chairman and Chief Executive Officer, The Williams Companies.
Address: P.O. Box 2400, Tulsa, OK 74102.

OTHER EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

MARK B. GRIER, Chief Financial Officer.--Chief Financial Officer of The
Prudential since 1995; Prior to 1995: Executive Vice President and Head of
Global Markets, Chase Manhattan Corporation.

SUSAN L. BLOUNT, Vice President and Secretary.--Vice President and Secretary of
The Prudential since 1995; Prior to 1995: Assistant General Counsel for
Prudential Residential Services Company.

C. EDWARD CHAPLIN, Vice President and Treasurer.--Vice President and Treasurer
of The Prudential since 1995; 1993 to 1995: Managing Director and Assistant
Treasurer of The Prudential; 1992 to 1993: Vice President and Assistant
Treasurer, Banking and Cash Management for The Prudential; Prior to 1992:
Regional Vice President of Prudential Mortgage Capital Company.

<PAGE>

MANAGEMENT OF THE SERIES FUND

MENDEL A. MELZER*, Chairman of the Board--Chief Financial Officer of the Money
Management Group of The Prudential since 1995; 1993 to 1995: Senior Vice
President and Chief Financial Officer of Prudential Preferred Financial
Services; 1991 to 1993: Managing Director, The Prudential Investment
Corporation.

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--Principal, Scott McDonald & Associates since
1995; Prior to 1995: Executive Vice President of Fairleigh Dickinson University.
Address: 9 Zamrok Way, Morristown, New Jersey 07960.

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

I. EDWARD PRICE, Vice President--Senior Vice President and Actuary, Prudential
Individual Insurance Group since 1995; 1994 to 1995: Chief Executive Officer,
Prudential International Insurance; 1993 to 1994: President, Prudential
International Insurance; Prior to 1993: Senior Vice President and Company
Actuary 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.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................................................. (33,920,243) (21,549,333)

TOTAL INCREASE IN NET ASSETS ............................................................. 30,038,163 108,546,333

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
DIVERSIFIED BOND PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
GOVERNMENT INCOME PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1995 1994
------------ ------------
<S> <C> <C>

A3
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 1995 PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 2000 PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

INVESTMENT INCOME
Interest................................... $ 1,156,958
---------------
EXPENSES
Investment management fee.................. 92,250
Accounting fees............................ 6,931
Shareholders' reports...................... 4,623
Custodian expense -- net................... 2,995
Directors' expense......................... 2,533
Professional fees.......................... 1,602
Miscellaneous expenses..................... 33
---------------
110,967
---------------
NET INVESTMENT INCOME........................ 1,045,991
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments........... 945,638
Net unrealized gain on investments......... 2,457,617
---------------
NET GAIN ON INVESTMENTS...................... 3,403,255
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 4,449,246
---------------
---------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1995 1994
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................................................... $ 1,045,991 $ 1,414,358
Net realized gain on investments ........................................................... 945,638 38,776
Net unrealized gain (loss) on investments .................................................. 2,457,617 (3,049,221)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................ 4,449,246 (1,596,087)
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ...................................................................... (1,046,055) (1,398,377)
Net realized gain from investment transactions ............................................. (945,910) (38,912)
------------ ------------
TOTAL DIVIDENDS TO SHAREHOLDERS ............................................................ (1,991,965) (1,437,289)
------------ ------------
CAPITAL TRANSACTIONS:
Capital stock sold [111,200 and 102,167 shares, respectively] .............................. 1,481,434 1,340,000
Reinvestment of dividend distributions [151,186 and 118,462 shares, respectively] .......... 1,991,965 1,437,289
Capital stock repurchased [(89,987) and (60,345) shares, respectively] ..................... (1,195,434) (787,000)
Initial capitalization repurchased [(8,965) and (38,338) shares, respectively] ............. (111,423) (507,000)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS ............................. 2,166,542 1,483,289
------------ ------------

TOTAL INCREASE (DECREASE) IN NET ASSETS ...................................................... 4,623,823 (1,550,087)

A5
<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
ZERO COUPON BOND 2005 PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS

TOTAL INCREASE IN NET ASSETS ............................................................... 7,141,421 2,033,135

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

FLEXIBLE MANAGED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

HIGH YIELD BOND PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
STOCK INDEX PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 18,865,378 $ 15,899,579
Net realized gain (loss) on investments................................................ 12,159,728 (811,766)
Net unrealized gain(loss) on investments............................................... 225,882,882 (8,435,032)
---------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 256,907,988 6,652,781
---------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (18,734,051) (15,754,398)
Net realized gain from investment transactions......................................... (7,293,493) (958,203)
---------------- --------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (26,027,544) (16,712,601)
---------------- --------------
CAPITAL TRANSACTIONS:
Capital stock sold [7,147,197 and 4,553,644 shares, respectively]...................... 130,752,103 68,598,345
Reinvestment of dividend distributions [1,331,092 and 1,130,115 shares,
respectively]......................................................................... 26,027,544 16,712,601
Capital stock repurchased [(1,230,332) and (1,718,830) shares, respectively]........... (20,916,230) (25,854,984)
---------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 135,863,417 59,455,962
---------------- --------------
TOTAL INCREASE IN NET ASSETS............................................................. 366,743,861 49,396,142
NET ASSETS:
Beginning of year...................................................................... 664,534,207 615,138,065
---------------- --------------
End of year............................................................................ $ 1,031,278,068 $ 664,534,207
---------------- --------------
---------------- --------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A10

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

EQUITY INCOME PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

YEARS ENDED DECEMBER 31
------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 39,916,318 $ 29,929,976
Net realized gain on investments....................................................... 61,266,793 41,343,251
Net unrealized gain (loss) on investments.............................................. 90,522,832 (64,632,006)
---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 191,705,943 6,641,221
---------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (38,782,405) (29,421,933)
Net realized gain from investment transactions......................................... (46,564,566) (44,325,396)
---------------- ----------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (85,346,971) (73,747,329)
---------------- ----------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,803,598 and 16,514,586 shares, respectively]..................... 76,990,000 261,909,000
Reinvestment of dividend distributions [5,213,794 and 5,080,100 shares,
respectively]......................................................................... 85,346,971 73,747,329
Capital stock repurchased [(1,152,259) and (746,813) shares, respectively]............. (18,404,000) (11,659,000)
---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 143,932,971 323,997,329
---------------- ----------------
TOTAL INCREASE IN NET ASSETS............................................................. 250,291,943 256,891,221
NET ASSETS:
Beginning of year...................................................................... 859,671,252 602,780,031
---------------- ----------------
End of year............................................................................ $ 1,109,963,195 $ 859,671,252
---------------- ----------------
---------------- ----------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A11

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

EQUITY PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52

A12

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

PRUDENTIAL JENNISON

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
For the Period April 25, 1995
(Commencement of Business) to December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

*Prior to April 25, 1995 (commencement of business), the Portfolio issued 10,000
shares to The Prudential for $100,000.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A13

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

SMALL CAPITALIZATION STOCK

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
For the Period April 25, 1995
(Commencement of Business) to December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

*Prior to April 25, 1995 (commencement of business), the Portfolio issued 10,000
shares to The Prudential for $100,000.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A14

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

GLOBAL PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A15

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

NATURAL RESOURCES PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

A16

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO

DECEMBER 31, 1995

<PAGE>

MONEY MARKET PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

The following abbreviations are used in portfolio descriptions:

C.D. Certificates of Deposit

PLC Public Limited Company (British Corporation)

%Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

<PAGE>

DIVERSIFIED BOND PORTFOLIO

DECEMBER 31, 1995

<PAGE>

DIVERSIFIED BOND PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- ------------

<PAGE>

DIVERSIFIED BOND PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

The following abbreviations are used in portfolio descriptions:

M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

**Indicates a restricted security; the aggregate cost of the restricted
securities is $55,826,086. The aggregate value, $58,345,063 is
approximately 8.9% of net assets. (See Note 2)

%Indicates a variable rate security.

)These rights are indexed to the average price of Mexican crude oil exports and
will pay a rate of return, beginning on June 30, 1996, if certain economic
events occur.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

GOVERNMENT INCOME PORTFOLIO

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS -- 94.7% VALUE VALUE
------------- --------------
FINANCIAL -- 3.1%
Chase Manhattan Credit Card Trust,

DECEMBER 31, 1995

The following abbreviations are used in portfolio descriptions:

CMO Collateralized Mortgage Obligations

%Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

ZERO COUPON BOND 2000 PORTFOLIO

DECEMBER 31, 1995

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

ZERO COUPON BOND 2005 PORTFOLIO

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS -- 4.0% AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS
Joint Repurchase Agreement Account,
5.838%, 01/02/96 (see Note 4)................ 933,000 933,000
--------------
OTHER ASSETS -- 0.2%
(net of liabilities).......................................... 58,941
--------------
TOTAL NET ASSETS -- 100.0%...................................... $ 23,647,119
--------------
--------------

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO

DECEMBER 31, 1995

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

B10

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
PREFERRED STOCKS -- 0.1% SHARES VALUE
------------- --------------
MEDIA
Times Mirror Co. (Cum. Conv.), Series B........ 119,724 $ 3,090,376
--------------
(Cost $2,725,059)

PAR MARKET
LONG-TERM BONDS -- 33.2% VALUE VALUE
------------- --------------

DECEMBER 31, 1995

B11

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

B12

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------

B13

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $96,403,735. The aggregate value, $96,894,639 is
approximately 2.5% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

[]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

B14

<PAGE>

FLEXIBLE MANAGED PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 60.3% SHARES VALUE
------------- --------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

B15

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

B16

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------

DECEMBER 31, 1995

B17

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

B18

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

**Indicates a restricted security; the aggregate cost of the restricted
securities is $72,616,786. The aggregate value, $72,915,086 is
approximately 1.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

[]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B19

<PAGE>

HIGH YIELD BOND PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 0.1% SHARES VALUE
------------- --------------

MARKET
PREFERRED STOCKS -- 1.2% SHARES VALUE
------------- --------------

MARKET
RIGHTS AND WARRANTS -- 0.1% SHARES VALUE
------------- --------------

DECEMBER 31, 1995

B20

<PAGE>

HIGH YIELD BOND PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

B21

<PAGE>

HIGH YIELD BOND PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

The following abbreviations are used in portfolio descriptions:

L.P. Limited Partnership

PLC Public Limited Company (British 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 $29,810,655. The aggregate value, $28,448,659 is
approximately 7.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

++Non-income producing.

[Payment-in-kind preferred stock--dividend is paid in additional preferred
shares in lieu of cash.

+X+Payment-in-kind bonds--interest is paid in additional bonds in lieu of
cash.

'Bond is currently in default.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

B22

<PAGE>

STOCK INDEX PORTFOLIO

DECEMBER 31, 1995

B23

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

B24

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

B25

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

B26

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
PREFERRED STOCKS -- 0.0% SHARES VALUE
------------- --------------
MISCELLANEOUS - BASIC INDUSTRY
Teledyne, Inc. (Cum.), Series E................ 442 6,354
--------------
(Cost $6,630)

B27

<PAGE>

STOCK INDEX PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

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,
1995.

##Open futures contracts as of December 31, 1995 are as follows:

PAR VALUE

COVERED BY CONTRACT TYPE EXPIRATION DATE VALUE OF CONTRACTS

$37,454,650 S&P 500 Index Futures Mar 96 $37,107,000
(120 contracts)

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B28

<PAGE>

EQUITY INCOME PORTFOLIO

DECEMBER 31, 1995

B29

<PAGE>

EQUITY INCOME PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
RIGHTS AND WARRANTS -- 0.0% SHARES VALUE
------------- --------------
MACHINERY -- 0.0%
**+Terex Corp. (Rights)........................ 16,950 0
--------------

B30

<PAGE>

EQUITY INCOME PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
CONVERTIBLE BONDS (CONTINUED) VALUE VALUE
------------- --------------

--------------
TOTAL CONVERTIBLE BONDS
(Cost $57,244,298)............................................ 59,430,085
--------------

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
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 $55,599,606. The aggregate value, $52,777,169 is
approximately 4.8% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending Decenber 31,
1995.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B31

<PAGE>

EQUITY PORTFOLIO

DECEMBER 31, 1995

B32

<PAGE>

EQUITY PORTFOLIO (CONTINUED)

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt

SA Sociedad Anonima (Spanish Corporation) or Societe
Anonyme (French Corporation)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

*Forward Foreign Exchange Contracts as of December 31, 1995 were as follows:

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

B33

<PAGE>

PRUDENTIAL JENNISON

B34

<PAGE>

PRUDENTIAL JENNISON (CONTINUED)

The following abbreviations are used in portfolio descriptions:

ADR American Depository Receipt
PLC Public Limited Company (British Corporation)
UTS Unit Trust Shares

**Indicates a restricted security; the aggregate cost of the restricted
securities is $920,661. The aggregate value, $936,100 is approximately
1.48% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES C48 THROUGH C52.

B35

<PAGE>

SMALL CAPITALIZATION STOCK

B36

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

B37

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

B38

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

B39

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

B40

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

B41

<PAGE>

SMALL CAPITALIZATION STOCK (CONTINUED)

DECEMBER 31, 1995

+No dividend was paid on this security during the 12 months ending December 31,
1995.

##Open futures contracts as of December 31, 1995 are as follows:

PAR VALUE
COVERED BY CONTRACT TYPE EXPIRATION DATE VALUE OF CONTRACTS
- ------------------- ---- -----------------------------------

$3,257,100 MIDCAP 400 Index Mar 96 $3,270,750
Futures(30 contracts)
$ 930,100 S&P 500 Index Futures Mar 96 $ 927,675
---------- (3 contracts) ----------
$4,187,200 $4,198,425

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B42

<PAGE>

GLOBAL PORTFOLIO

B43

<PAGE>

GLOBAL PORTFOLIO (CONTINUED)

B44

<PAGE>

GLOBAL PORTFOLIO (CONTINUED)

The following abbreviations are used in portfolio descriptions:

#These are American 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 $1,003,876. The aggregate value, $1,208,155 is approximately
.30% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

)Triparty Repo, 5.900%, entered 12/29/95; maturing 01/02/96 in the amount of
$3,163,000; Collateralized by $3,174,000 United States Treasury Notes, 6.1250%,
05/31/97.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B45

<PAGE>

NATURAL RESOURCES PORTFOLIO

B46

<PAGE>

NATURAL RESOURCES PORTFOLIO (CONTINUED)

MARKET
RIGHTS AND WARRANTS -- 0.1% SHARES VALUE
------------- -------------
PETROLEUM SERVICES
BJ Services Company (Warrants)................ 32,440 247,355
--------------
(Cost $56,770)

CALL OPTIONS WRITTEN -- .1%

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 $2,649,951. The aggregate value, 2,891,077 is approximately
1% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B48 THROUGH B52.

B47

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

NOTE 1: GENERAL

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

B48

<PAGE>

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.

The Global Portfolio may invest up to 100% of its total assets in
common stock and convertible securities denominated in a foreign
currency and issued by foreign or domestic issuers. The Diversified
Bond and High Yield Bond Portfolios may each invest up to 20% of their
assets in United States currency denominated debt securities issued
outside the United States by foreign or domestic issuers. In addition,
the bond components of the Conservative Balanced and Flexible Managed
Portfolios may each invest up to 20% of their assets in such
securities. [Further, the Equity Income and Flexible Managed
Portfolios may invest up to 30% of their total assets in debt and
equity securities denominated in a foreign currency and issued by
foreign or domestic issuers. In addition, Equity and Natural Resources
Portfolios may invest up to 30% of their total assets in nonUnited
States currency denominated common stock and fixed-income securities
convertible into common stock of foreign and U.S. issuers.]

B49

<PAGE>

NOTE 3: INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

B50

<PAGE>

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.

NOTE 4: JOINT REPURCHASE AGREEMENT ACCOUNT

B51

<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, 1995 were as follows:

Cost of Purchases:
<TABLE>
<CAPTION>

</TABLE>

</TABLE>

Proceeds From Sales:

</TABLE>

SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION NATURAL
INDEX INCOME EQUITY JENNISON STOCK GLOBAL RESOURCES
------------ ------------ ------------ ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt Securities... $ 0 $134,773,213 $ 0 $ 0 $ 0 $ 0 $ 1,752,580
Equity
Securities...... $ 9,292,175 $460,810,015 $560,871,071 $10,929,805 $ 7,819,414 $ 209,264,836 $ 116,657,662

</TABLE>

Transactions in call options during the six months ended December 31, 1995 were
as follows:

</TABLE>

The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of December 31, 1995 were as follows:

</TABLE>

CONSERVATIVE FLEXIBLE
BALANCED MANAGED
--------------- ---------------

NATURAL
GLOBAL RESOURCES
--------------- ---------------

B52

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors of The Prudential Series Fund, Inc.:

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, 1995 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.

Deloitte & Touche LLP

Parsippany, New Jersey
February 15, 1996

B53

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1996

PRUCO LIFE INSURANCE COMPANY
PRUVIDER VARIABLE APPRECIABLE ACCOUNT

PRUVIDER
VARIABLE
APPRECIABLE
LIFE(R)___________________
INSURANCE CONTRACTS

PROVIDING FOR THE INVESTMENT
OF ASSETS IN THE
INVESTMENT PORTFOLIOS OF

THE PRUDENTIAL SERIES
FUND, INC.

The Pruco Life Insurance Company, a stock life insurance company that is a
wholly-owned subsidiary of the Prudential Insurance Company of America, offers a
variable life insurance contract called the PRUVIDER Variable APPRECIABLE
LIFE(R) Insurance Contract*. The Contract provides whole-life insurance
protection. The death benefit varies daily with investment experience but will
never be less than the "face amount" of insurance specified in the Contract. The
Contract also generally provides a cash surrender value which also varies with
investment experience. There is no guaranteed minimum cash surrender value.

The assets held for the purpose of paying benefits under these contracts can be
invested in one or both of the two current subaccounts of the Pruco Life
PRUVIDER Variable Appreciable Account. The assets invested in each subaccount
are in turn invested in a corresponding portfolio of The Prudential Series Fund,
Inc., a diversified, open-end management investment company (commonly known as a
mutual fund) that is intended to provide a range of investment alternatives to
variable contract owners. Each portfolio is, for investment purposes, in effect
a separate fund. The two available Series Fund portfolios are the CONSERVATIVE
BALANCED PORTFOLIO and the FLEXIBLE MANAGED PORTFOLIO. A separate class of
capital stock is issued for each portfolio. Shares of the Series Fund are
currently sold only to separate accounts of Pruco Life and certain other
insurers to fund the benefits under variable life insurance and variable annuity
contracts issued by those companies.

The PRUVIDER Variable APPRECIABLE LIFE(R) Insurance Contract owner may also
choose to invest in a FIXED-RATE OPTION which is described in the prospectus of
The Pruco Life PRUVIDER Variable Appreciable Account.

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

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS OF THE PRUCO LIFE PRUVIDER VARIABLE
APPRECIABLE ACCOUNT DATED MAY 1, 1996, WHICH IS AVAILABLE WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE PRUCO LIFE INSURANCE COMPANY, 213 WASHINGTON STREET,
NEWARK, NEW JERSEY 07102-2992 OR BY TELEPHONING (800) 437-4016, EXT. 46.

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

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-1SAI Ed 5-96
Catalog No. 64M086G

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
CONTENTS
PAGE

MORE DETAILED INFORMATION ABOUT THE CONTRACT .............................. 1
SALES LOAD UPON SURRENDER ........................................... 1
REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS .... 1
PAYING PREMIUMS BY PAYROLL DEDUCTION ................................ 1
UNISEX PREMIUMS AND BENEFITS ........................................ 1
HOW THE DEATH BENEFIT WILL VARY ..................................... 2
WITHDRAWAL OF EXCESS CASH SURRENDER VALUE ........................... 2
TAX TREATMENT OF CONTRACT BENEFITS .................................. 2
TREATMENT AS LIFE INSURANCE ................................... 3
PRE-DEATH DISTRIBUTIONS ....................................... 3
WITHHOLDING ................................................... 4
OTHER TAX CONSIDERATIONS ...................................... 4
SALE OF THE CONTRACT AND SALES COMMISSIONS .......................... 4
RIDERS .............................................................. 5
OTHER STANDARD CONTRACT PROVISIONS .................................. 5
BENEFICIARY ................................................... 5
INCONTESTABILITY .............................................. 5
MISSTATEMENT OF AGE OR SEX .................................... 5
SUICIDE EXCLUSION ............................................. 5
ASSIGNMENT .................................................... 5
SETTLEMENT OPTIONS ............................................ 5

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS ...................... 5
GENERAL ............................................................. 5
CONVERTIBLE SECURITIES .............................................. 6
WARRANTS ............................................................ 6
OPTIONS AND FUTURES ................................................. 6
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES ......................... 12
SHORT SALES ......................................................... 12
SHORT SALES AGAINST THE BOX ......................................... 13
INTEREST RATE SWAPS ................................................. 13
LOANS OF PORTFOLIO SECURITIES ....................................... 13
ILLIQUID SECURITIES ................................................. 14
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS ......................... 14

INVESTMENT RESTRICTIONS ................................................... 15

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES ........................... 18

PORTFOLIO TRANSACTIONS AND BROKERAGE ...................................... 19

DETERMINATION OF NET ASSET VALUE .......................................... 20

SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY CURRENTLY INVEST ....... 21

DEBT RATINGS .............................................................. 23

POSSIBLE REPLACEMENT OF THE SERIES FUND ................................... 25

OTHER INFORMATION CONCERNING THE SERIES FUND .............................. 26
INCORPORATION AND AUTHORIZED STOCK .................................. 26
DIVIDENDS, DISTRIBUTIONS AND TAXES .................................. 26
CUSTODIAN AND TRANSFER AGENT ........................................ 26
EXPERTS ............................................................. 26
LICENSE ............................................................. 26

DIRECTORS AND OFFICERS OF PRUCO LIFE AND MANAGEMENT OF THE SERIES FUND .... 27

FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC ................... A1

THE PRUDENTIAL SERIES FUND, INC. SCHEDULE OF INVESTMENTS .................. B1

<PAGE>

MORE DETAILED INFORMATION ABOUT THE CONTRACT

SALES LOAD UPON SURRENDER

A contingent deferred sales load is assessed if the Contract lapses or is
surrendered during the first 10 Contract years. No such charge is applicable to
the death benefit, no matter when that may become payable. Subject to the
additional limitations described below, for Contracts that lapse or are
surrendered during the first 5 Contract years the charge will be equal to 50% of
the first year's primary annual premium. In the next 5 Contract years that
percentage is reduced uniformly on a daily basis until it reaches zero on the
tenth Contract anniversary. Thus, for Contracts surrendered at the end of the
sixth year, the maximum deferred sales charge will be 40% of the first year's
primary annual premium, for Contracts surrendered at the end of year 7, the
maximum deferred sales charge will be 30% of the first year's primary annual
premium, and so forth.

The contingent deferred sales load is also subject to a further limit at older
issue ages (approximately above age 61) in order to comply with certain
requirements of state law. Specifically, the contingent deferred sales load for
such insureds is no more than $32.50 per $1,000 of face amount.

The sales load is subject to a further important limitation that may,
particularly for Contracts that lapse or are surrendered within the first 5 or 6
years, result in a lower contingent deferred sales load than that described
above. (This limitation might also, under unusual circumstances, apply to reduce
the monthly sales load deductions described in the prospectus in item (a) under
MONTHLY DEDUCTIONS FROM CONTRACT FUND.) The limitation is applied in order to
conform with the requirements of the Investment Company Act of 1940 and
regulations adopted thereunder, which limit the amount of non-refundable sales
load that may be charged on contracts within the first 2 years.

The limitation is as follows: (Every Contract has associated with it a Guideline
Annual Premium ("GAP"), which is an amount determined actuarially in accordance
with a definition set forth in a regulation of the Securities and Exchange
Commission ("SEC").) The maximum aggregate sales load that Pruco Life will
charge (that is, the sum of the monthly sales load deduction and the contingent
deferred sales charge) will not be more than 30% of the premiums actually paid
until those premiums total one GAP plus no more than 9% of the next premiums
paid until total premiums are equal to 5 GAPS, plus no more than 6% of all
subsequent premiums. If the sales charges described above would at any time
exceed this maximum amount then the charge, to the extent of any excess, will
not be made.

REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS

Pruco Life may reduce the sales charges and/or other charges on individual
Contracts sold to members of a class of associated individuals, or to a trustee,
employer or other entity representing such a class, where it is expected that
such multiple sales will result in savings of sales or administrative expenses.
Pruco Life determines both the eligibility for such reduced charges, as well as
the amount of such reductions, by considering the following factors: (1) the
number of individuals; (2) the total amount of premium payments expected to be
received from these Contracts; (3) the nature of the association between these
individuals, and the expected persistency of the individual Contracts; (4) the
purpose for which the individual Contracts are purchased and whether that
purpose makes it likely that expenses will be reduced; and (5) any other
circumstances which Pruco Life believes to be relevant in determining whether
reduced sales or administrative expenses may be expected. Some of the reductions
in charges for these sales may be contractually guaranteed; other reductions may
be withdrawn or modified by Pruco Life on a uniform basis. Pruco Life's
reductions in charges for these sales will not be unfairly discriminatory to the
interests of any individual Contract owners.

PAYING PREMIUMS BY PAYROLL DEDUCTION

UNISEX PREMIUMS AND BENEFITS

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purchase of a Contract based on sex-distinct actuarial tables is consistent with
Title VII of the Civil Rights Act of 1964 or other applicable law. Pruco Life
may offer the Contract with unisex mortality rates to such prospective
purchasers.

HOW THE DEATH BENEFIT WILL VARY

The death benefit will vary with investment experience. Assuming no withdrawals,
the death benefit will be equal to the face amount of insurance plus the amount
(if any) by which the Contract Fund value exceeds the applicable "Tabular
Contract Fund value" for the Contract (subject to an exception described below
under which the death benefit is higher). Each Contract contains a table that
sets forth the Tabular Contract Fund value as of the end of each of the first 20
years of the Contract. Tabular Contract Fund values between Contract
anniversaries are determined by interpolation. The "Tabular Contract Fund value"
for each Contract year is an amount that is slightly less than the Contract Fund
value that would result as of the end of such year if only scheduled premiums
were paid, they were paid when due, the selected investment options earned a net
return at a uniform rate of 4% per year, full mortality charges based upon the
1980 CSO Table were deducted, maximum sales load and expense charges were
deducted, and there was no Contract debt.

Thus, for a Contract with no withdrawals, the death benefit will equal the face
amount if the Contract Fund equals the Tabular Contract Fund value. If, due to
investment results greater than a net return of 4%, or to payment of greater
than scheduled premiums, or to smaller than maximum charges, the Contract Fund
value is a given amount greater than the Tabular Contract Fund value, the death
benefit will be the face amount plus that excess amount. If, due to investment
results less favorable than a net return of 4%, the Contract Fund value is less
than the tabular Contract Fund value, the death benefit will not fall below the
initial face amount stated in the Contract; however, this unfavorable investment
experience must first be offset by favorable performance or additional payments
that bring the Contract Fund up to the tabular level before favorable investment
results or additional payments will increase the death benefit. Again, the death
benefit will reflect a deduction for the amount of any Contract debt.
See CONTRACT LOANS in the prospectus.

The Contract Fund could grow to the point where it is necessary to increase the
death benefit by a greater amount in order to ensure that the Contract will
satisfy the Internal Revenue Code's definition of life insurance. Thus, the
death benefit will always be the greatest of (1) the face amount plus the
Contract Fund minus the tabular Contract Fund value; (2) the guaranteed minimum
death benefit; and (3) the Contract Fund times the attained age factor that
applies.

WITHDRAWAL OF EXCESS CASH SURRENDER VALUE

Under certain circumstances, a Contract owner may withdraw a portion of the
Contract's cash surrender value without surrendering the Contract in whole or in
part. The amount that a Contract owner may withdraw is limited by the
requirement that the Contract Fund after withdrawal must not be less than the
tabular Contract Fund value. (A Table of Tabular Contract Fund Values is
included in the Contract; the values increase with each year the Contract
remains in force.) But because the Contract Fund may be made up in part by an
outstanding Contract loan, there is a further limitation that the amount
withdrawn may not be larger than an amount sufficient to reduce the cash
surrender value to zero. The amount withdrawn must be at least $200. An owner
may make no more than four such withdrawals in each Contract year, and there is
a $15 administrative processing fee for each withdrawal. An amount withdrawn may
not be repaid except as a scheduled or unscheduled premium subject to the
applicable charges. Upon request, Pruco Life will tell a Contract owner how much
he or she may withdraw. Withdrawal of part of the cash surrender value may have
tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, below. A temporary
need for funds may also be met by making a loan and you should consult your
Pruco Life representative about how best to meet your needs.

When a withdrawal is made, the cash surrender value and Contract Fund value are
reduced by the amount of the withdrawal, and the death benefit is accordingly
reduced. Neither the face amount of insurance nor the amount of scheduled
premiums will be changed due to a withdrawal of excess cash surrender value. No
surrender charges will be assessed upon a withdrawal.

Withdrawal of part of the cash surrender value increases the risk that the
Contract Fund may be insufficient to provide for benefits under the Contract. If
such a withdrawal is followed by unfavorable investment experience, the Contract
may lapse even if scheduled premiums continue to be paid when due. This is
because, for purposes of determining whether a lapse has occurred, Pruco Life
treats withdrawals as a return of premium.

TAX TREATMENT OF CONTRACT BENEFITS

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commonly occurring circumstances. There is no guarantee, however, that the
current federal income tax laws and regulations or interpretations will not
change.

Pruco Life believes that it has taken adequate steps to cause the Contract to be
treated as life insurance for tax purposes. This means that: (1) except as noted
below, the Contract owner should not be taxed on any part of the Contract Fund,
including additions attributable to interest or appreciation; and (2) the death
benefit should be excludible from the gross income of the beneficiary under
section 101(a) of the Code.

Pruco Life intends to comply with final regulations issued under sections 7702
and 817. Therefore, it reserves the right to make such changes as it deems
necessary to assure that the Contract continues to qualify as life insurance for
tax purposes. Any such changes will apply uniformly to affected Contract owners
and will be made only after advance written notice to affected Contract owners.

1. A surrender or lapse of the Contract may have tax consequences. Upon
surrender, the owner will not be taxed on the cash surrender value except
for the amount, if any, that exceeds the gross premiums paid less the
untaxed portion of any prior withdrawals. The amount of any unpaid
Contract debt will, upon surrender or lapse, be added to the cash
surrender value and treated, for this purpose, as if it had been received.
Any loss incurred upon surrender is generally not deductible. The tax
consequences of a surrender may differ if the proceeds are received under
any income payment settlement option.

A withdrawal generally is not taxable unless it exceeds total premiums
paid to the date of withdrawal less the untaxed portion of any prior
withdrawals. However, under certain limited circumstances, in the first 15
Contract years all or a portion of a withdrawal may be taxable if the
Contract Fund exceeds the total premiums paid less the untaxed portion of
any prior withdrawals, even if total withdrawals do not exceed total
premiums paid to date.

Extra premiums for optional benefits and riders generally do not count in
computing gross premiums paid, which in turn determines the extent to
which a withdrawal might be taxed.

Loans received under the Contract will ordinarily be treated as
indebtedness of the owner and will not be considered to be distributions
subject to tax.

<PAGE>

2. Some of the above rules are changed if the Contract is classified as a
Modified Endowment Contract under section 7702A of the Code. 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 a rider is added or
removed from the Contract. You should consult with your tax advisor before
making any of these policy changes.

If the Contract is classified as a Modified Endowment Contract, then
pre-death distributions, including loans and withdrawals, are includible
in income to the extent that the Contract fund prior to surrender charges
exceeds the gross premiums paid for the Contract increased by the amount
of any loans previously includible in income and reduced by any untaxed
amounts previously received other than the amount of any loans excludible
from income. These rules may also apply to pre-death distributions,
including loans, made during the 2 year period prior to the Contract
becoming a Modified Endowment Contract.

In addition, pre-death distributions from such Contracts (including full
surrenders) will be subject to a penalty of 10 percent of the amount
includible in income unless the amount is distributed on or after age 59
1/2, on account of the taxpayer's disability, or as a life annuity. It is
presently unclear how the penalty tax provisions apply to Contracts owned
by nonnatural persons such as corporations.

Under certain circumstances, Modified Endowment Contracts issued during
any calendar year will be treated as a single contract for purposes of
applying the above rules.

WITHHOLDING. The taxable portions of any amounts received under the Contract
will be subject to withholding to meet federal income tax obligations if the
Contract owner fails to elect that no taxes be withheld or in certain other
circumstances. Contract owners who do not provide a social security number or
other taxpayer identification number will not be permitted to elect out of
withholding. All recipients of such amounts may be subject to penalties under
the estimated tax rules if withholding and estimated tax payments are not
sufficient.

Business-owned life insurance is subject to additional rules. Section 264(a)(1)
of the Code generally precludes business Contract owners from deducting premium
payments. Under section 264(a)(4) of the Code, a deduction is not allowed for
any interest paid or accrued on any Contract debt on an insurance policy to the
extent the indebtedness exceeds $50,000 per officer, employee or financially
interested person. The Congress is also considering legislation to deny interest
deductions generally for loans on business-owned policies. The Code also imposes
an indirect tax upon additions to the Contract fund or the receipt of death
benefits under business-owned life insurance policies under certain
circumstances by way of the corporate alternative minimum tax.

The individual situation of each Contract owner or beneficiary will determine
the federal estate taxes and the state and local estate, inheritance and other
taxes due if the owner or insured dies.

SALE OF THE CONTRACT AND SALES COMMISSIONS

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second, third, and fourth years, no more than 3% of the scheduled premiums for
the fifth through tenth years, and no more than 2% of the scheduled premiums
thereafter. For new Contracts issued on or about July 1, 1996, the commission
rates for the second through tenth years will change to no more than 6% of the
scheduled premiums. For insureds over 59 years of age, the commission will be
lower. The representative may be required to return all or part of the first
year commission if the Contract is not continued through the second year.
Representatives with less than 3 years of service may be paid on a different
basis.

Sales expenses in any year are not equal to the deduction for sales load in that
year. Pruco Life expects to recover its total sales expenses over the periods
the Contracts are in effect. To the extent that the sales charges are
insufficient to cover total sales expenses, the sales expenses will be recovered
from Pruco Life's surplus, which may include amounts derived from the mortality
and expense risk charge and the guaranteed minimum death benefit risk charge
described in the prospectus under DAILY DEDUCTION FROM THE CONTRACT FUND and
item (d) under MONTHLY DEDUCTIONS FROM CONTRACT FUND.

RIDERS

The Contract owner may be able to obtain extra fixed benefits which may require
an additional premium. These optional insurance benefits will be described in
what is known as a "rider" to the Contract. Charges for the riders will be
deducted from the Contract Fund on each Monthly date. 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 child should
die. The amounts of these benefits are fully guaranteed at issue; they do not
depend on the performance of the Account. Certain restrictions may apply; they
are clearly described in the applicable rider.

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

OTHER STANDARD CONTRACT PROVISIONS.

INCONTESTABILITY. After the Contract has been in force during the insured's
lifetime for 2 years from the Contract date or, with respect to any change in
the Contract that requires Pruco Life's approval and could increase its
liability, after the change has been in effect during the insured's lifetime for
2 years from the effective date of the change, Pruco Life will not contest its
liability under the Contract in accordance with its terms.

MISSTATEMENT OF AGE OR SEX. If the insured's stated age or sex (except where
unisex rates apply) or both are incorrect in the Contract, Pruco Life will
adjust the death benefits payable, as required by law, to reflect the correct
age and sex. Any death benefit will be based on what the most recent charge for
mortality would have provided at the correct age and sex.

SUICIDE EXCLUSION. Generally, if the insured, whether sane or insane, dies by
suicide within 2 years from the Contract date, Pruco Life will pay no more under
the Contract than the sum of the premiums paid.

ASSIGNMENT. This Contract may not be assigned if such assignment would violate
any federal, state, or local law or regulation. Generally, the Contract may not
be assigned to an employee benefit plan or program without Pruco Life's consent.
Pruco Life assumes no responsibility for the validity or sufficiency of any
assignment, and it will not be obligated to comply with any assignment unless it
has received a copy at one of its Home Offices.

SETTLEMENT OPTIONS. The Contract grants to most owners, or to the beneficiary, a
variety of optional ways of receiving Contract proceeds, other than in a lump
sum. Any Pruco Life representative authorized to sell this Contract can explain
these options upon request.

INVESTMENT OBJECTIVES AND POLICIES OF THE
PORTFOLIOS

GENERAL

The Prudential Series Fund, Inc. (the "Series Fund") has fifteen separate
portfolios, two of which, the Conservative Balanced Portfolio and the Flexible
Managed Portfolio, are available to PRUVIDER Contract owners. The portfolios are
managed by The Prudential Insurance Company of America ("The Prudential"), see
INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES, page 18.

<PAGE>

The investment objectives of the Series Fund's portfolios that are available to
PRUVIDER Contract owners can be found under INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS in the prospectus.

CONVERTIBLE SECURITIES

The Conservative Balanced and Flexible Managed Portfolios may invest in
convertible securities. 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 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.

WARRANTS

The Conservative Balanced and Flexible Managed 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.

OPTIONS AND FUTURES

OPTIONS ON EQUITY SECURITIES. The Conservative Balanced and Flexible Managed
Portfolios may purchase and write (i.e., sell) put and call options on equity
securities that are traded on securities exchanges or that 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 security at the exercise price upon
exercise by the holder of the put.

<PAGE>

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 below under OPTIONS ON DEBT
SECURITIES and OPTIONS ON STOCK INDICES.

The 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.

<PAGE>

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 general supervision of the Series
Fund's Board of Directors.

OPTIONS ON DEBT SECURITIES. The Conservative Balanced and Flexible Managed
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 ("over-the-counter" or "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.

The 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.

The 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 above in Options on Equity Securities, page 6. 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.

The 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.

The use of debt options is subject to the same risks described above in
connection with stock options.

OPTIONS ON STOCK INDICES. The Conservative Balanced and Flexible Managed
Portfolios may purchase and sell put and call options on stock indices traded on
securities exchanges or listed on NASDAQ or that result from privately
negotiated transactions with broker-dealers ("OTC options"). 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

<PAGE>

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.

The 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
one 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.

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 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.

The purchase and sale of options on stock indices will be subject to the risks
described under OPTIONS ON EQUITY SECURITIES, page 6. 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, might be
unable to exercise an option it holds, which could result in substantial losses
to the portfolio. It is the policy of the

<PAGE>

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.

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. The portfolios, however, will follow the "cover"
procedures described above.

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 the
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 sells the call, which in either case
would occur no earlier than the day following the day the exercise notice was
filed.

OPTIONS ON FOREIGN CURRENCIES. The Conservative Balanced and Flexible Managed
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 (see FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS, page 14) and futures
contracts on foreign currencies (discussed under FUTURES CONTRACTS, page 11)
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.

<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), the 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.

FUTURES CONTRACTS. The Conservative Balanced and Flexible Managed 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 Conservative Balanced and Flexible Managed 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 Conservative Balanced and Flexible Managed 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.

<PAGE>

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.

OPTIONS ON FUTURES CONTRACTS. To the extent permitted by applicable insurance
law and federal regulations, the Conservative Balanced and Flexible Managed
Portfolios may enter into certain transactions involving options on stock index
futures contracts, options on interest rate futures contracts, and 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 a 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 portfolios intend
to utilize options on futures contracts for the same purposes that they use the
underlying futures contracts.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

From time to time, in the ordinary course of business, the Conservative Balanced
and Flexible Managed Portfolios may purchase or sell 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. The 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 short-term portions of the portfolios may purchase money market
securities on a when-issued or delayed delivery basis on the terms set forth
under item 6 in SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY CURRENTLY
INVEST, page 21.

SHORT SALES

The Conservative Balanced and Flexible Managed 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

<PAGE>

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

The 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 fixed income portions of the Conservative Balanced and Flexible Managed
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.

LOANS OF PORTFOLIO SECURITIES

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. 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.

<PAGE>

ILLIQUID SECURITIES

The portfolios 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. Variable and floating rate instruments that cannot be disposed of
within seven days and 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.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

To the extent permitted by applicable insurance law, the Conservative Balanced
and Flexible Managed Portfolios may purchase 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>

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' 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
hedge currency, at the same time they tend to limit any potential gain which
might result should the value of such currency increase.

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.

Neither of the portfolios available to PRUVIDER Contract owners will:

<PAGE>

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 Conservative Balanced and Flexible Managed Portfolios may sell
securities short up to 25% of their net assets and 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 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 Flexible Managed and Conservative
Balanced 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 options on debt
securities, equity securities, stock indices and foreign currencies by the
Flexible Managed and Conservative Balanced Portfolios are not deemed to be
the issuance of a senior security or the purchase of a security on margin.
Collateral arrangements entered into by 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
fixed income portions of the Conservative Balanced and Flexible Managed
Portfolios may enter into reverse repurchase agreements and dollar rolls
provided that the portfolio's obligations with respect to those instruments
do not exceed 30% of the portfolio's net assets (defined to mean total
assets at market value less liabilities other than reverse repurchase
agreements and dollar rolls).

<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.

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. This restriction
shall not apply to mortgage-backed securities, collateralized mortgage
obligations or obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.

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.

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
described in item 2 of SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY
CURRENTLY INVEST, page 21. In addition, the Series Fund adheres to additional
restrictions relating to such practices as the lending of securities, borrowing,
and the purchase of put and call options, futures contracts, and derivative
instruments on securities to comply with investment guidelines issued by the
California Department of Insurance.

<PAGE>

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 and not the Contract owners, are
considered the owners of assets held in the Account for federal income tax
purposes. See TAX TREATMENT OF CONTRACT BENEFITS, page 2. 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 Conservative Balanced Portfolio is equal
to an annual rate of 0.55% of the average daily net assets of each of the
portfolios. For the Flexible Managed Portfolio, the fee is equal to an annual
rate of 0.6% of the average daily net assets of the portfolio.

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 portfolios 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
the Conservative Balanced and Flexible Managed Portfolios the portion of the
investment management fee for that portfolio equal to the amount that the
aggregate annual ordinary operating expenses of that portfolio (excluding
interest, taxes, and brokerage fees and commissions but including investment
management fees) exceeds 0.75% of the portfolio's average daily net assets.

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 March 1, 1996 with respect
to the Balanced Portfolios. The Investment Advisory Agreement was most recently
approved by shareholders in accordance with instructions from Contract owners at
their 1989 annual meeting with respect to the Balanced Portfolios. 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.

<PAGE>

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
the Balanced Portfolios. 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. Under the
Service Agreement, The Prudential pays PIC a portion of the fee it receives for
providing investment advisory services.

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 investor 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.

PORTFOLIO TRANSACTIONS AND BROKERAGE

<PAGE>

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 transac tions 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 non-interested directors, 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
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.

For the years 1995, 1994, and 1993, the Series Fund paid a total of $11,607,197,
$11,579,886, and $9,492,283, respectively, in brokerage commissions for all
portfolios. Of those amounts, $899,739, $560,155, and $977,695, for 1995, 1994,
and 1993, respectively, was paid out to Prudential Securities Incorporated. For
1995, the commissions paid to this affiliated broker constituted 7.75% of the
total commissions paid by the Series Fund for that year. Transactions through
this affiliated broker accounted for 5.81% of the aggregate dollar amount of
transactions for all of the portfolios of the Series Fund involving the payment
of commissions.

DETERMINATION OF NET ASSET VALUE

In determining the net asset value of any intermediate or long-term fixed income
securities of the Balanced Portfolios (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.

All short-term debt obligations in the money market portions of the Balanced
Portfolios of 12 months maturity or less are valued on an amortized cost basis
in accordance with an order obtained from the Securities and Exchange
Commission. 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 12 months and must maintain a
dollar-weighted average portfolio maturity of 120 days or less. In the event of
sizeable changes in interest rates, however, the value determined by this method
may be

<PAGE>

higher or lower than the price that would be received if the obligation were
sold. The Series Fund's 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 SECURITIES IN WHICH THE MONEY MARKET
PORTFOLIO MAY CURRENTLY INVEST, page 21.

The net asset value of the common stocks and convertible debt securities of the
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) are valued on the same basis as
intermediate or long-term fixed income securities, 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 values 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.

SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO
MAY CURRENTLY INVEST*

* Although the Money Market Portfolio is not available to PRUVIDER Contract
owners, any short-term portion of the Balanced Portfolios may be invested in the
types of securities described in this section.

<PAGE>

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.

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.
For a description of corporate bond ratings, see DEBT RATINGS, page 23. 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 (which as noted above is currently The Prudential)
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 domestics 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 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 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.

<PAGE>

5. Reverse Repurchase Agreements. The Money Market Portfolio may use reverse
repurchase agreements, which are described under REVERSE REPURCHASE AGREEMENTS
AND DOLLAR ROLLS in the prospectus. No portfolio may obligate more than 10% of
its net assets in connection with reverse repurchase agreements, except that the
fixed income portions of the Conservative Balanced and Flexible Managed
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.

The Board of Directors of the Series Fund has adopted policies for the Money
Market Portfolio to conform to amendments of an SEC rule applicable to money
market funds, like the portfolio. These policies do not apply to any other
portfolio. The policies are as follows: (1) The portfolio will not invest more
than 5% of its assets in the securities of any one issuer (except U.S.
Government securities); however, the portfolio may exceed the 5% limit with
respect to a single security rated in the highest rating category for up to
three business days after the purchase thereof; (2) To be eligible for
investment, a security must be a United States dollar-denominated instrument
that the Series Fund's Board has determined to present minimal credit risks and
must be rated in one of the two highest rating categories by at least two
nationally recognized statistical rating organizations ("NRSROs") assigning a
rating to the security or issue, or if only one NRSRO has assigned a rating,
that NRSRO. An unrated security must be deemed to be of comparable quality as
determined by the Series Fund's Board. In other words, the portfolio will invest
in only first tier or second tier securities. First tier securities are
securities which are rated by at least two NRSROs, or by the only NRSRO that has
rated the security, in the highest short-term rating category, or unrated
securities of comparable quality as determined by the Series Fund's Board.
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 an 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 if 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.

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:

<PAGE>

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 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:

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 are
predominately reflect money rates in their market behavior, but
to some extent, also economic conditions.

<PAGE>

BBB Bonds rated BBB, or medium grade, are 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:

POSSIBLE REPLACEMENT OF THE SERIES FUND

In addition, although it is highly unlikely, it is conceivable that in the
future it may become disadvantageous for both variable life insurance and
variable annuity contract separate accounts to invest in the same underlying
mutual fund. Although neither the companies which invest in the Series Fund nor
the Series Fund currently foresees any such disadvantage, the Series Fund's
Board of Directors intends to monitor events in order to identify any material
conflict between variable life insurance and variable annuity contract owners
and to determine what action, if any, should be taken in response thereto.
Material conflicts could result from such things as: (1) changes in state
insurance law; (2) changes in federal income tax law; (3) changes in the
investment management of any portfolio of the Series Fund; or (4) difference
between voting instructions given by variable life insurance and variable
annuity contract owners. The Prudential will bear the expense, if it does become
necessary, of remedying any material conflict including establishing a new
underlying investment company and segregating the assets held under variable
life insurance and variable annuity contracts.

<PAGE>

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 fifteen
classes: MONEY MARKET PORTFOLIO Capital Stock (225 million shares), DIVERSIFIED
BOND PORTFOLIO Capital Stock (200 million shares), HIGH YIELD BOND PORTFOLIO
Capital Stock (100 million shares), GOVERNMENT INCOME PORTFOLIO Capital Stock
(100 million shares), EQUITY PORTFOLIO Capital Stock (200 million shares), STOCK
INDEX PORTFOLIO Capital Stock (100 million shares), EQUITY INCOME PORTFOLIO
Capital Stock (100 million shares), NATURAL RESOURCES PORTFOLIO Capital Stock
(100 million shares), GLOBAL PORTFOLIO Capital Stock (100 million shares),
CONSERVATIVE BALANCED PORTFOLIO Capital Stock (300 million shares), FLEXIBLE
MANAGED PORTFOLIO Capital Stock (300 million shares), ZERO COUPON BOND PORTFOLIO
2000 Capital Stock (25 million shares), ZERO COUPON BOND PORTFOLIO 2005 Capital
Stock (50 million shares), PRUDENTIAL JENNISON PORTFOLIO Capital Stock (50
million shares), SMALL CAPITALIZATION STOCK PORTFOLIO Capital Stock (50 million
shares). The shares of each portfolio, 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.

DIVIDENDS, DISTRIBUTIONS AND TAXES

CUSTODIAN AND TRANSFER AGENT

EXPERTS

LICENSE

<PAGE>

DIRECTORS AND OFFICERS OF PRUCO LIFE AND
MANAGEMENT OF THE SERIES FUND

DIRECTORS AND OFFICERS OF PRUCO LIFE

The directors and major officers of Pruco Life, listed with their principal
occupations during the past 5 years, are shown below.

DIRECTORS OF PRUCO LIFE

E. MICHAEL CAULFIELD, Director. -- Chief Executive Officer, Prudential Money
Management Group 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.

GARNETT L. KEITH, JR., Director. -- Vice Chairman of The Prudential.

IRA J. KLEINMAN, Director. -- Chief Marketing and Product Development Officer,
Prudential Individual Insurance Group since 1995; 1993 to 1995: President,
Prudential Select; Prior to 1993: Senior Vice President of The Prudential.

ESTHER H. MILNES, President and Director. -- Vice President and Actuary,
Prudential Individual Insurance Group since 1996; 1993 to 1996: Senior Vice
President and Chief Actuary, Prudential Insurance and Financial Services; Prior
to 1993: Vice President and Associate Actuary of The Prudential.

I. EDWARD PRICE, Vice Chairman and Director. -- Senior Vice President and
Actuary, Prudential Individual Insurance Group since 1995; 1994 to 1995: Chief
Executive Officer, Prudential International Insurance; 1993 to 1994: President,
Prudential International Insurance; Prior to 1993: Senior Vice President and
Company Actuary of The Prudential.

WILLIAM F. YELVERTON, Director. --Chief Executive Officer, Prudential Individual
Insurance Group since 1995; Prior to 1995: Chief Executive Officer, New York
Life Worldwide.

OFFICERS WHO ARE NOT DIRECTORS

BEVERLY R. BARNEY, Senior Vice President. -- Vice President and Re-Engineering
Officer, Prudential Individual Insurance Group since 1995; 1993 to 1995: Senior
Vice President and Associate Actuary, Prudential Direct; Prior to 1993: Senior
Vice President and Actuary of Pruco Life.

SUSAN L. BLOUNT, Secretary.--Vice President and Secretary of The Prudential
since 1995; Prior to 1995: Assistant General Counsel for Prudential Residential
Services Company.

C. EDWARD CHAPLIN, Treasurer. -- Vice President and Treasurer of The Prudential
since 1995; 1993 to 1995: Managing Director and Assistant Treasurer of The
Prudential; 1992 to 1993: Vice President and Assistant Treasurer, Banking and
Cash Management for The Prudential; Prior to 1992: Regional Vice President of
Prudential Mortgage Capital Company.

CLIFFORD E. KIRSCH, Chief Legal Officer. -- Chief Counsel, Variable Products,
Law Department of The Prudential since 1995; 1994 to 1995: Associate General
Counsel with Paine Webber; Prior to 1994: Assistant Director in the Division of
Investment Management with the Securities and Exchange Commission.

RICHARD F. LAMBERT, Senior Vice President and Chief Actuary. -- Vice President
and Actuary, Prudential Individual Insurance Group since 1996; 1994 to 1996:
Vice President and Chief Actuary, Prudential Preferred Financial Services; 1993
to 1994: Vice President and Actuary, Prudential Preferred Financial Services;
Prior to 1993: Vice President and Associate Actuary of The Prudential.

FRANK MARINO, Senior Vice President. -- Vice President, Policyholder Relations
Department, Prudential Individual Insurance Group since 1996; Prior to 1996:
Senior Vice President, Prudential Mutual Fund Services.

MICHAEL R. SHAPIRO, Senior Vice President. -- Vice President, Marketing and
Product Development, Prudential Individual Insurance Group since 1996; Prior to
1996: Senior Vice President, Prudential Select Brokerage.

STEPHEN P. TOOLEY, Vice President, Comptroller and Chief Accounting Officer. --
Vice President, Product Performance, Prudential Individual Insurance Group since
1996; 1993 to 1996: Vice President and Comptroller, Prudential Insurance and
Financial Services; Prior to 1993: Director, Financial Analysis for The
Prudential.

The business address of all directors and officers of Pruco Life is 213
Washington Street, Newark, New Jersey 07102-2992.

* SUBSIDIARY OF THE PRUDENTIAL

<PAGE>

MANAGEMENT OF THE SERIES FUND

MENDEL A. MELZER*, Chairman of the Board--Chief Financial Officer of the Money
Management Group of The Prudential since 1995; 1993 to 1995: Senior Vice
President and Chief Financial Officer of Prudential Preferred Financial
Services; 1991 to 1993: Managing Director, The Prudential Investment
Corporation; Prior to 1991: Senior Vice President, Prudential Capital
Corporation.

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--Principal, Scott McDonald & Associates since
1995; Prior to 1995: Executive Vice President of Fairleigh Dickinson University.
Address: 8 Zamrok Way, Morristown, New Jersey 07960.

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

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.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

CONSERVATIVE BALANCED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS

Investments, at value (cost:

$3,622,931,201).......................... $3,912,781,300
Cash....................................... 44,660
Interest and dividends receivable.......... 30,959,621
Receivable for securities sold............. 2,833,722
Receivable for portfolio shares sold....... 23,400
--------------
Total Assets............................. 3,946,642,703
--------------
LIABILITIES

Accrued expenses........................... 165,851
Payable for securities purchased........... 374,361
Payable to investment adviser.............. 5,328,226
--------------
Total Liabilities........................ 5,868,438
--------------
NET ASSETS................................... $3,940,774,265
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,574,196
Paid-in capital, in excess of par........ 3,629,566,275
--------------
3,632,140,471

Distributions in excess of net investment
income................................... (2,286,857)
Accumulated net realized gains............. 21,070,552
Net unrealized appreciation................ 289,850,099
--------------
Net assets, December 31, 1995.............. $3,940,774,265
--------------
--------------
Net asset value per share of 257,419,587
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 15.3088
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME

Dividends (net of $401,184 foreign
withholding tax)......................... $ 23,484,206
Interest................................... 153,295,065
---------------
176,779,271
---------------
EXPENSES

Investment management fee.................. 20,327,574
Shareholders' reports...................... 902,869
Accounting fees............................ 97,831
Custodian expense -- net................... 92,207
Professional fees.......................... 74,702
Miscellaneous expenses..................... 5,573
Directors' expense......................... 4,934
S.E.C. fees................................ (20,409)
---------------
21,485,281
---------------
NET INVESTMENT INCOME........................ 155,293,990
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS

Net realized gain on investments........... 167,342,297
Net unrealized gain on investments......... 264,773,974

NET GAIN ON INVESTMENTS...................... 432,116,271
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 587,410,261
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>

OPERATIONS:

Net investment income.................................................................. $ 155,293,990 $ 122,670,711
Net realized gain on investments....................................................... 167,342,297 30,751,021
Net unrealized gain(loss) on investments............................................... 264,773,974 (184,854,002)
---------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 587,410,261 (31,432,270)
---------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:

Net investment income.................................................................. (154,987,434) (120,740,360)
Net realized gain from investment transactions......................................... (133,660,168) (37,214,012)
---------------- ---------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (288,647,602) (157,954,372)
---------------- ---------------
CAPITAL TRANSACTIONS:

Capital stock sold [5,345,143 and 34,889,459 shares, respectively]..................... 81,026,772 514,344,688
Reinvestment of dividend distributions [19,023,739 and 11,198,868 shares,
respectively]......................................................................... 288,647,602 157,954,372
Capital stock repurchased [(15,343,313) and (5,887,371) shares, respectively].......... (228,767,054) (84,977,146)
---------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 140,907,320 587,321,914
---------------- ---------------
TOTAL INCREASE IN NET ASSETS............................................................. 439,669,979 397,935,272

NET ASSETS:
Beginning of year...................................................................... 3,501,104,286 3,103,169,014
---------------- ---------------
End of year............................................................................ $ 3,940,774,265 $ 3,501,104,286
---------------- ---------------
---------------- ---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B12 THROUGH B15.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

FLEXIBLE MANAGED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS

Investments, at value (cost:
$3,687,627,278).......................... $4,228,358,720
Cash....................................... 626
Interest and dividends receivable.......... 25,934,506
Receivable for securities sold............. 59,091,478
Receivable for portfolio shares sold....... 42,700
--------------
Total Assets............................. 4,313,428,030
--------------
LIABILITIES

Accrued expenses........................... 178,423
Payable for securities purchased........... 45,774,778
Payable to investment adviser.............. 6,269,992
--------------
Total Liabilities........................ 52,223,193
--------------
NET ASSETS................................... $4,261,204,837
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 2,385,984
Paid-in capital, in excess of par........ 3,657,681,610
--------------
3,660,067,594

Distributions in excess of net investment
income................................... (5,751,188)
Accumulated Net Realized Gains............. 66,155,086
Net unrealized appreciation
Securities............................... 540,731,442
Foreign currency translations............ 1,903
--------------
Net assets, December 31, 1995.............. $4,261,204,837
--------------
--------------
Net asset value per share of 238,598,423
outstanding shares of common stock
(authorized 300,000,000 shares).......... $ 17.8593
--------------
--------------

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

Investment management fee.................. 22,971,401
Shareholders' reports...................... 933,420
Custodian expense -- net................... 170,999
Professional fees.......................... 86,407
Accounting fees............................ 84,962
Miscellaneous expenses..................... 5,560
Directors' expense......................... 4,806
S.E.C. fees................................ (9,458)
---------------
24,248,097
---------------
NET INVESTMENT INCOME........................ 126,640,661
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES

Net realized gain (loss) on investments and
foreign currencies--
Securities transactions.................. 291,714,860
Foreign currency transactions............ (1,080)
Futures contracts........................ 554,055
---------------
Net realized gain on investments and
foreign currencies....................... 292,267,835
---------------
Net unrealized gain on investments and
foreign currencies--
Securities............................... 410,037,562
Foreign currency translations............ 3,540
---------------
Net unrealized gain on investments and
foreign currencies....................... 410,041,102
---------------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES................................... 702,308,937
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 828,949,598
---------------
---------------

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 126,640,661 $ 98,878,114
Net realized gain on investments and foreign currency transactions..................... 292,267,835 23,838,273
Net unrealized gain (loss) on investments and foreign currency translations............ 410,041,102 (230,571,359)
---------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 828,949,598 (107,854,972)
---------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (124,621,227) (96,126,295)
Net realized gain from investment transactions......................................... (176,844,671) (98,311,584)
---------------- ---------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (301,465,898) (194,437,879)
---------------- ---------------
CAPITAL TRANSACTIONS:
Capital stock sold [8,486,525 and 22,611,559 shares, respectively]..................... 146,641,074 370,947,414
Reinvestment of dividend distributions [17,050,711 and 12,531,550 shares,
respectively]......................................................................... 301,465,898 194,437,879
Capital stock repurchased [(11,612,102) and (4,617,224) shares, respectively].......... (195,926,134) (73,719,278)
---------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 252,180,838 491,666,015
---------------- ---------------
TOTAL INCREASE IN NET ASSETS............................................................. 779,664,538 189,373,164
NET ASSETS:
Beginning of year...................................................................... 3,481,540,299 3,292,167,135
---------------- ---------------
End of year............................................................................ $ 4,261,204,837 $ 3,481,540,299
---------------- ---------------
---------------- ---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B12 THROUGH B15.

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS

CONSERVATIVE BALANCED PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 39.6% SHARES VALUE
------------- --------------

AEROSPACE -- 0.8%
+Coltec Industries, Inc........................ 311,000 $ 3,615,375
GenCorp, Inc................................... 676,800 8,290,800
Loral Corp..................................... 77,800 2,752,175
Rockwell International Corp.................... 253,100 13,382,661
+UNC, Inc...................................... 289,100 1,734,600
--------------
29,775,611
--------------
AIRLINES -- 0.3%
+AMR Corp...................................... 100,000 7,425,000
+USAir Group, Inc.............................. 335,000 4,438,750
--------------
11,863,750
--------------
AUTOS - CARS & TRUCKS -- 3.1%
A.O. Smith Corp................................ 466,800 9,686,100
Chrysler Corp.................................. 500,000 27,687,500
Ford Motor Co.................................. 318,300 9,230,700
General Motors Corp............................ 500,000 26,437,500
General Motors Corp. (Class 'E' Stock)......... 243,900 12,682,800
General Motors Corp. (Class 'H' Stock)......... 465,900 22,887,337
Titan Wheel International, Inc................. 748,350 12,160,686
--------------
120,772,623
--------------
BANKS AND SAVINGS & LOANS -- 1.8%
First Bank System, Inc......................... 366,600 18,192,525
First Interstate Bancorp....................... 120,000 16,380,000
KeyCorp........................................ 502,800 18,226,500
Norwest Corp................................... 570,400 18,823,200
--------------
71,622,225
--------------
CHEMICALS -- 1.2%
+FMC Corp...................................... 110,800 7,492,850
Imperial Chemical Industries, PLC, ADR......... 371,300 17,358,275
OM Group, Inc.................................. 308,400 10,215,750
W.R. Grace & Co................................ 218,800 12,936,550
--------------
48,003,425
--------------
CHEMICALS - SPECIALTY -- 0.7%
Ferro Corp..................................... 655,200 15,233,400
M.A. Hanna Co.................................. 489,700 13,711,600
--------------
28,945,000
--------------
COMPUTER SERVICES -- 0.9%
+Amdahl Corp................................... 900,000 7,650,000
National Data Corp............................. 620,100 15,347,475
+Paxar Corp.................................... 1,022,928 13,553,794
--------------
36,551,269
--------------
CONSTRUCTION -- 0.2%
+J. Ray McDermott, SA.......................... 500,000 8,937,500
--------------
CONTAINERS -- 0.2%
+Sealed Air Corp............................... 290,400 8,167,500
--------------
DIVERSIFIED GAS -- 0.6%
+Basin Exploration, Inc........................ 148,000 730,750
Sonat Offshore Drilling, Inc................... 228,100 10,207,475
Tidewater, Inc................................. 73,600 2,318,400

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

Weatherford Enterra, Inc....................... 321,353 $ 9,279,066
Western Gas Resources, Inc..................... 162,100 2,613,863
--------------
25,149,554
--------------
DRUGS AND HOSPITAL SUPPLIES -- 0.2%
United States Surgical Corp.................... 365,500 7,812,563
--------------
ELECTRICAL EQUIPMENT -- 0.5%
+Anixter International, Inc.................... 337,400 6,284,075
Belden, Inc.................................... 524,300 13,500,725
--------------
19,784,800
--------------
ELECTRONICS -- 0.7%
+ADT Ltd....................................... 620,000 9,300,000
+Digital Equipment Corp........................ 200,000 12,825,000
+IMO Industries, Inc........................... 596,900 4,103,686
--------------
26,228,686
--------------
FINANCIAL SERVICES -- 2.2%
American Express Co............................ 319,000 13,198,625
Dean Witter Discover and Company............... 736,500 34,615,500
Lehman Brothers Holdings, Inc.................. 400,000 8,500,000
Reinsurance Group of America, Inc.............. 487,800 17,865,675
Salomon, Inc................................... 300,000 10,650,000
--------------
84,829,800
--------------
FOODS -- 0.4%
Philip Morris Companies, Inc................... 188,000 17,014,000
--------------
FOREST PRODUCTS -- 0.9%
Louisiana-Pacific Corp......................... 700,000 16,975,000
Mead Corp...................................... 350,800 18,329,300
--------------
35,304,300
--------------
FURNITURE -- 0.2%
Leggett & Platt, Inc........................... 380,200 9,219,850
--------------
GAS PIPELINES -- 0.6%
Enron Oil & Gas Co............................. 332,700 7,984,800
+Global Marine, Inc............................ 615,800 5,388,250
+Seagull Energy Corp........................... 387,200 8,615,200
--------------
21,988,250
--------------
HOSPITAL MANAGEMENT -- 0.6%
Columbia/HCA Healthcare Corp................... 161,816 8,212,160
+Tenet Healthcare Corp......................... 825,000 17,118,750
--------------
25,330,910
--------------
HOUSING RELATED -- 0.9%
+Giant Cement Holdings, Inc.................... 415,200 4,774,800
+Owens-Corning Fiberglas Corp.................. 662,800 29,743,150
--------------
34,517,950
--------------
INSURANCE -- 2.9%
Allstate Corp.................................. 129,599 5,329,758
Equitable of Iowa Companies.................... 372,700 11,972,987
Financial Security Assurance Holdings, Ltd..... 226,200 5,626,725
National Re Corp............................... 207,600 7,888,800
PennCorp Financial Group, Inc.................. 638,400 18,753,000
Provident Companies, Inc....................... 177,200 6,002,650
TIG Holdings, Inc.............................. 588,300 16,766,550
Trenwick Group, Inc............................ 276,200 15,536,250

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

W.R. Berkley Corp.............................. 192,800 $ 10,363,000
Western National Corp.......................... 900,000 14,512,500
--------------
112,752,220
--------------
MACHINERY -- 1.2%
Case Corp...................................... 642,800 29,408,100
DT Industries, Inc............................. 234,500 3,165,750
+Global Industrial Technologies, Inc........... 390,700 7,374,463
Parker-Hannifin Corp........................... 204,750 7,012,688
--------------
46,961,001
--------------
MEDIA -- 2.3%
Central Newspapers, Inc. (Class 'A' Stock)..... 331,700 10,407,088
Comcast Corp. (Class 'A' Stock)................ 362,500 6,389,063
Comcast Corp. (Special Class 'A' Stock)........ 9,600 174,600
+Cox Communications, Inc. (Class 'A' Stock).... 246,115 4,799,243
Gannett Co., Inc............................... 200,000 12,275,000
Hollinger International, Inc................... 161,400 1,694,700
Knight-Ridder, Inc............................. 200,000 12,500,000
Lee Enterprises, Inc........................... 337,400 7,760,200
McGraw-Hill, Inc............................... 96,200 8,381,425
Media General, Inc. (Class 'A' Stock).......... 123,600 3,754,350
+Tele-Communications, Inc. (Series 'A' Stock).. 606,200 12,048,225
Times Mirror Co. (Class 'A' Stock)............. 280,276 9,494,350
--------------
89,678,244
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 3.6%
BW/IP, Inc. (Class 'A' Stock).................. 379,200 6,256,800
Danaher Corp................................... 455,600 14,465,300
Donaldson Company, Inc......................... 400,400 10,060,050
+IDEX Corp..................................... 285,600 11,638,200
+Jan Bell Marketing, Inc....................... 1,000,000 2,500,000
+Litton Industries, Inc........................ 259,700 11,556,650
Mark IV Industries, Inc........................ 572,565 11,308,158
Mascotech, Inc................................. 650,000 7,068,750
Pentair, Inc................................... 472,950 23,529,263
+SPS Transaction Services, Inc................. 192,800 5,711,700
Textron, Inc................................... 96,400 6,507,000
Trinity Industries, Inc........................ 385,500 12,143,250
+Wolverine Tube, Inc........................... 279,500 10,481,250
York International Corp........................ 199,000 9,353,000
--------------
142,579,371
--------------
MISCELLANEOUS - CONSUMER GROWTH/STABLE -- 1.3%
Eastman Kodak Co............................... 372,300 24,944,100
Houghton Mifflin Co............................ 132,600 5,701,800
Whitman Corp................................... 913,400 21,236,550
--------------
51,882,450
--------------
PETROLEUM -- 1.0%
Amerada Hess Corp.............................. 100,000 5,300,000
Cabot Oil & Gas Corp. (Class 'A' Stock)........ 594,400 8,693,100
Elf Aquitaine, ADR............................. 530,100 19,481,175
Parker & Parsley Petroleum Co.................. 257,800 5,671,600
--------------
39,145,875
--------------
PETROLEUM SERVICES -- 2.5%
Baker Hughes, Inc.............................. 300,000 7,312,500
Coflexip, ADR.................................. 500,000 9,437,500
+ENSCO International, Inc...................... 600,000 12,450,000
+Hornbeck Offshore Services, Inc............... 208,000 4,082,000

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

ICO, Inc....................................... 500,000 $ 2,437,500
+Marine Drilling Co., Inc...................... 1,000,000 5,125,000
+Mesa, Inc..................................... 1,008,400 3,781,500
Murphy Oil Corp................................ 190,800 7,918,200
Noble Affiliates, Inc.......................... 200,000 5,975,000
+Noble Drilling Corp........................... 800,000 7,200,000
+Oryx Energy Co................................ 849,400 11,360,725
+Pride Petroleum Services, Inc................. 360,100 3,826,063
+Rowan Companies, Inc.......................... 269,400 2,660,325
+Western Atlas, Inc............................ 300,000 15,150,000
--------------
98,716,313
--------------
RAILROADS -- 0.9%
Burlington Northern, Inc....................... 259,000 20,202,000
Illinois Central Corp.......................... 440,000 16,885,000
--------------
37,087,000
--------------
REAL ESTATE DEVELOPMENT -- 0.5%
Zeneca Group, PLC, ADR......................... 357,400 20,863,225
--------------
RETAIL -- 1.7%
+Best Products Company, Inc.................... 1,094,500 5,198,875
+Burlington Coat Factory Warehouse............. 244,600 2,507,150
Charming Shoppes, Inc.......................... 2,000,000 5,750,000
Dillard Department Stores, Inc. (Class 'A'
Stock)....................................... 500,000 14,250,000
+Filene's Basement Corp........................ 160,000 370,000
K mart Corp.................................... 1,058,700 7,675,575
Rite Aid Corp.................................. 6,000 205,500
Sears, Roebuck & Co............................ 139,800 5,452,200
TJX Companies, Inc............................. 914,900 17,268,738
Woolworth Corp................................. 600,000 7,800,000
--------------
66,478,038
--------------
RUBBER -- 0.3%
Goodyear Tire & Rubber Co...................... 269,800 12,242,175
--------------
STEEL -- 1.6%
+Bethlehem Steel Corp.......................... 1,000,000 14,000,000
+LTV Corp...................................... 1,500,000 20,625,000
+Material Sciences Corp........................ 675,000 10,040,625
+National Steel Corp. (Class 'B' Stock)........ 300,000 3,862,500
USX-U.S. Steel Group........................... 450,000 13,837,500
--------------
62,365,625
--------------
TELECOMMUNICATIONS -- 1.2%
+Airtouch Communications, Inc.................. 385,500 10,890,375
Century Telephone Enterprises, Inc............. 337,300 10,709,275
Frontier Corp.................................. 297,700 8,931,000
MCI Communications Corp........................ 331,100 8,649,988
+Nextel Communications, Inc. (Class 'A'
Stock)....................................... 495,400 7,307,150
--------------
46,487,788
--------------
TEXTILES -- 1.2%
+Farah, Inc.................................... 258,500 1,227,874
+Fieldcrest Cannon, Inc........................ 460,000 7,647,500
+Fruit of the Loom, Inc. (Class 'A' Stock)..... 500,000 12,187,500
+Owens-Illinois, Inc........................... 552,700 8,014,150
Phillips-Van Heusen Corp....................... 600,000 5,925,000
+Tultex Corp................................... 579,000 2,388,375
V.F. Corp...................................... 154,600 8,155,149
--------------
45,545,549
--------------
B2

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE

------------- --------------
TOBACCO -- 0.4%
RJR Nabisco Holdings Corp....................... 500,000 $ 15,437,500
--------------
TOTAL COMMON STOCKS
(Cost $1,308,436,835)......................................... 1,560,041,940
--------------

MARKET
PREFERRED STOCKS -- 0.1% SHARES VALUE
------------- --------------
MEDIA
Times Mirror Co. (Cum. Conv.), Series B......... 119,724 3,090,376
--------------
(Cost $2,725,059)

PAR MARKET
LONG-TERM BONDS -- 33.2% VALUE VALUE
------------- --------------
FINANCIAL -- 10.0%
Advanta Corp Mid,
8.180%, 02/09/97, Tranche #TR00028............ $ 10,000,000 $ 10,271,700
Advanta Corp.,
5.125%, 11/15/96.............................. 12,535,000 12,464,303
Allmerica Finance,
7.625%, 10/15/25.............................. 7,200,000 7,564,968
Associates Corp. of North America,
8.375%, 01/15/98.............................. 1,100,000 1,159,191
Banc One Credit Card Master Trust, Series 94-B
7.750%, 12/15/99.............................. 5,100,000 5,292,831
Capital One Bank, M.T.N.,
6.660%, 08/17/98, Tranche #TR00055............ 10,050,000 10,237,734
6.740%, 05/31/99, Tranche #TR00038............ 22,250,000 22,756,410
8.125%, 02/27/98, Tranche #TR00032............ 6,500,000 6,788,860
Chrysler Financial Corp., M.T.N.,
5.390%, 08/27/96, Tranche #TR00041............ 7,300,000 7,287,079
CIGNA Mortgage Securities, Inc.,
Series 88-1
9.400%, 01/15/02.............................. 2,285,774 2,319,878
Discover Card Trust, Series 1991-C, Class B
7.875%, 04/16/98.............................. 10,000,000 10,050,000
**Equitable Life Assurance Society,
6.950%, 12/01/05.............................. 25,000,000 25,359,375
Federal Express Corp., M.T.N.,
10.010%, 06/01/98, Tranche #TR00067........... 3,000,000 3,255,300
10.050%, 06/15/99, Tranche #TR00068........... 500,000 557,650
First Union Corp.,
9.450%, 06/15/99.............................. 4,000,000 4,450,800
Ford Motor Credit Co.,
6.375%, 10/06/00.............................. 26,500,000 26,979,650
Ford Motor Credit, Co., M.T.N.,
6.137%, 10/04/99.............................. 23,750,000 23,808,188
6.850%, 08/15/00.............................. 8,500,000 8,823,255
General Motors Acceptance Corp.,
8.250%, 08/01/96.............................. 5,000,000 5,066,300

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
General Motors Acceptance Corp., M.T.N.,
6.300%, 09/10/97, Tranche #TR00532............ $ 5,000,000 $ 5,058,300
6.700%, 04/30/97, Tranche #TR00319............ 11,000,000 11,158,840
7.375%, 07/20/98, Tranche #TR00667............ 4,650,000 4,837,070
7.850%, 03/05/97, Tranche #TR00187............ 3,300,000 3,384,744
[]Marine Midland Bank N.A.,
5.812%, 09/27/96.............................. 6,500,000 6,487,000
Mellon Financial Co.,
6.500%, 12/01/97.............................. 1,650,000 1,676,516
Okobank,
**[]7.387%, 10/29/49.......................... 3,500,000 3,539,375
[]7.387%, 10/29/49............................ 9,000,000 9,101,250
[]7.375%, 09/27/49............................ 18,750,000 19,341,563
Salomon Inc., M.T.N.,
5.440%, 01/13/97, Tranche #TR00641............ 5,000,000 4,972,000
5.470%, 08/29/97, Tranche #SR00492............ 10,500,000 10,446,660
5.320%, 09/16/96, Tranche #TR00572............ 10,400,000 10,347,168
5.470%, 09/22/97, Tranche #SR00504............ 12,525,000 12,377,706
Santander Financial Issuances, Inc.,
7.250%, 11/01/15.............................. 14,500,000 14,852,060
Sears Roebuck Acceptance Corp.,
6.750%, 09/15/05.............................. 35,050,000 36,351,056
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038............ 11,000,000 11,174,790
Standard Credit Card Master Trust,
5.950%, 03/07/96.............................. 4,650,000 4,612,196
Union Bank of Finland, Ltd.,
5.250%, 06/15/96.............................. 16,650,000 16,579,737
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #TR00248............ 2,600,000 2,616,276
--------------
383,407,779
--------------
FOREIGN -- 6.0%
**Banco de Commercio Exterior, SA, M.T.N.,
8.625%, 06/02/00, Tranche #TR00001............ 5,500,000 5,654,000
**Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99, Tranche #TR00001............ 7,300,000 7,482,500
**Cemex, SA, M.T.N.,
9.500%, 09/20/01, Tranche #TR00010............ 12,500,000 11,375,000
**Compania Sud Americana de Vapores, SA,
7.375%, 12/08/03.............................. 7,600,000 7,486,000
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98.............................. 5,190,000 4,567,200
Empresa Columbia de Petroleos,
7.250%, 07/08/98.............................. 8,250,000 8,208,750
Financiera Energetica Nacional,
6.625%, 12/13/96.............................. 5,000,000 5,000,000

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Financiera Energetica Nacional, SA, M.T.N.,
9.000%, 11/08/99............................. $ 2,000,000 $ 2,097,500
**9.000%, 11/08/99........................... 5,375,000 5,637,031
Fomento Economico Mexicano, SA,
9.500%, 07/22/97............................. 5,150,000 5,104,938
**Grupo Condumex, SA, M.T.N.,
6.250%, 07/27/96............................. 4,300,000 4,165,625
**Grupo Embotellador Mexicana,
10.750%, 11/19/97............................ 8,015,000 7,994,963
Grupo Televisa, SA,
10.000%, 11/09/97............................ 7,250,000 7,105,000
Hydro-Quebec,
8.050%, 07/07/24............................. 22,100,000 25,232,896
Kansallis-Osake Pankki, N.Y.,
**[]8.650%, 12/29/49......................... 10,000,000 10,625,000
9.750%, 12/15/98............................. 16,950,000 18,736,022
Kansallis-Osake Pankki, N.Y., C.D.,
6.125%, 05/15/98............................. 6,160,000 6,227,375
Quebec, Province of Canada,
7.500%, 07/15/02............................. 8,625,000 9,157,766
Republic of Columbia,
7.125%, 05/11/98............................. 2,775,000 2,795,813
7.250%, 02/23/04............................. 5,400,000 5,179,896
8.750%, 10/06/99............................. 4,950,000 5,232,744
Republic of Italy,
6.875%, 09/27/23............................. 15,000,000 14,648,250
Republic of South Africa,
9.625%, 12/15/99............................. 22,221,000 23,966,904
**Telekom Malaysia,
7.875%, 08/01/25............................. 22,000,000 24,159,520
United Mexican States,
5.820%, 06/28/01............................. 1,375,000 990,000
6.970%, 08/12/00............................. 2,300,000 1,840,000
8.500%, 09/15/02............................. 6,850,000 5,959,500
--------------
236,630,193
--------------
INDUSTRIAL -- 13.0%
AMR Corp.,
10.000%, 04/15/21............................ 5,000,000 6,213,250
9.000%, 08/01/12............................. 10,000,000 11,277,700
9.800%, 10/01/21............................. 5,000,000 5,944,000
9.880%, 06/15/20............................. 9,565,000 11,501,913
Arkla, Inc., M.T.N.,
9.250%, 12/18/97, Tranche #TR00027........... 3,000,000 3,151,590
Auburn Hills Trust,
12.000%, 05/01/20............................ 28,670,000 45,119,699
Coca-Cola Enterprises, Inc.,
6.500%, 11/15/97............................. 3,750,000 3,808,875
Columbia Gas Systems, Inc.,
7.620%, 11/28/25............................. 6,500,000 6,616,935
Columbia/HCA Healthcare Corp.,
7.050%, 12/01/27............................. 32,200,000 32,411,554
7.580%, 09/15/25, M.T.N., Tranche #TR00015... 16,000,000 17,157,120
Delta Air Lines, Inc.,
9.750%, 05/15/21............................. 5,000,000 6,168,650
Federated Dept Stores,
8.125%, 10/15/02............................. 10,500,000 10,552,500
Hanson Overseas Corp.,
5.500%, 01/15/96............................. 2,000,000 1,999,840
Nabisco, Inc.,
6.850%, 06/15/05............................. 20,000,000 20,312,000

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
News America Holdings, Inc.,
7.750%, 12/01/45............................. $ 51,000,000 $ 51,659,940
9.125%, 10/15/99............................. 15,000,000 16,580,700
PT Alatief Freeport Financial Co.,
9.750%, 04/15/01............................. 8,950,000 10,031,070
RJR Nabisco, Inc.,
8.750%, 08/15/05............................. 4,000,000 4,097,240
Sears, Roebuck & Co., M.T.N.,
9.420%, 04/01/96............................. 1,000,000 1,014,375
Sears, Roebuck Acceptance Corp.,
9.000%, 09/15/96............................. 2,000,000 2,043,760
Service Corp. International,
7.000%, 06/01/15............................. 2,500,000 2,785,575
TCI Communications, Inc.,
8.750%, 08/01/15............................. 27,175,000 30,128,107
Tele-Communications, Inc.,
7.875%, 08/01/13............................. 5,250,000 5,399,678
9.250%, 04/15/02............................. 5,000,000 5,680,900
9.800%, 02/01/12............................. 18,000,000 21,585,060
Time Warner Entertainment Co., L.P.,
8.375%, 03/15/23-07/15/33.................... 33,740,000 36,131,467
9.625%, 05/01/02............................. 14,140,000 16,379,352
Time Warner, Inc.,
7.750%, 06/15/05............................. 10,000,000 10,410,300
United Air Lines, Inc.,
9.750%, 08/15/21............................. 15,000,000 17,993,550
10.670%, 05/01/04............................ 21,750,000 26,236,590
11.210%, 05/01/14............................ 2,500,000 3,309,125
Viacom, Inc.,
7.625%, 01/15/16............................. 16,000,000 16,190,000
7.750%, 06/01/05............................. 45,175,000 47,974,494
Westinghouse Electric Corp., M.T.N.,
8.700%, 06/20/96, Tranche #TR00029........... 2,950,000 2,970,680
--------------
510,837,589
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 4.2%
Federal National Mortgage Association,
9.050%, 04/10/00............................. 14,000,000 15,837,500
United States Treasury Bonds,
7.625%, 02/15/25............................. 200,000 244,562
12.000%, 08/15/13............................ 5,400,000 8,320,212
United States Treasury Notes,
6.125%, 07/31/00............................. 3,350,000 3,448,390
6.500%, 04/30/97............................. 61,000,000 61,981,490
5.875%, 08/15/98-11/15/05.................... 32,200,000 32,850,580
6.125%, 09/30/00............................. 13,500,000 13,905,000
6.375%, 08/15/02............................. 26,500,000 27,787,635
6.500%, 05/15/05............................. 2,900,000 3,085,339
--------------
167,460,708
--------------
TOTAL LONG-TERM BONDS
(Cost $1,260,456,592)......................................... 1,298,336,269
--------------

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
Bayerische Hypotheken, C.D.,
5.800%, 01/16/96............................. $ 12,000,000 $ 11,999,970
5.830%, 01/16/96............................. 23,000,000 23,000,176
Berliner Handels, C.D.,
5.830%, 01/16/96............................. 12,000,000 12,000,046
National Westminister Bank, C.D. PLC,
5.810%, 01/12/96............................. 36,000,000 36,000,000
Societe Generale Bank, C.D.,
7.650%, 01/08/96............................. 3,000,000 3,000,472
--------------
144,595,176
--------------
COMMERCIAL PAPER -- 16.1%
American Express Credit Corp.,
5.590%, 03/15/96............................. 14,000,000 13,841,306
American Home Products Corp.,
5.680%, 03/07/96............................. 13,000,000 12,866,678
American Honda Finance Corp.,
5.750%, 02/08/96............................. 6,000,000 5,964,542
5.850%, 01/12/96-01/22/96.................... 9,000,000 8,978,875
Aristar Inc.,
5.800%, 02/02/96............................. 2,000,000 1,990,011
Asset Securitization Cooperative Corp.,
5.660%, 02/20/96............................. 28,000,000 27,784,291
Associates Corp. of North America,
5.680%, 02/08/96-02/12/96.................... 43,300,000 43,026,208
Banque Nationale De Paris,
5.780%, 01/22/96............................. 11,000,000 10,999,845
Bradford & Bingley Building Society,
5.680%, 02/06/96............................. 22,000,000 21,878,511
Caterpillar Financial Services Corp.,
5.660%, 02/21/96............................. 3,000,000 2,976,417
5.670%, 02/27/96............................. 3,000,000 2,973,540
Chase Manhattan Corp.,
5.670%, 02/12/96............................. 8,000,000 7,948,340
CIT Group Holdings, Inc.,
5.670%, 02/05/96............................. 8,000,000 7,957,160
5.680%, 02/07/96............................. 17,000,000 16,903,440
5.780%, 01/25/96............................. 16,981,000 16,918,293
Cogentrix of Richmond, Inc.,
5.950%, 01/24/96............................. 18,457,000 18,389,888
Corporate Receivables Corp.,
5.750%, 01/16/96-01/18/96.................... 8,000,000 7,980,514
Countrywide Funding Corp.,
5.830%, 01/16/96............................. 2,000,000 1,995,466
5.840%, 01/18/96............................. 8,000,000 7,979,236
5.870%, 01/22/96............................. 3,000,000 2,990,217
6.000%, 01/22/96............................. 8,000,000 7,973,333
Dean Witter Discover and Company,
5.700%, 02/14/96............................. 4,000,000 3,972,767
Finova Capital Corp.,
5.970%, 01/05/96-01/25/96.................... 19,360,000 19,324,797
First Union Corp.,
5.710%, 02/09/96............................. 15,000,000 14,909,592
Fleet Mortgage Group, Inc.,
5.800%, 01/16/96............................. 6,000,000 5,986,467
Ford Motor Credit Co.,
5.530%, 03/04/96............................. 20,800,000 20,601,903
6.070%, 01/05/96............................. 14,300,000 14,292,767
General Electric Capital Corp.,
5.580%, 04/08/96-04/09/96.................... 10,000,000 9,848,565
5.660%, 02/08/96............................. 36,000,000 35,790,580

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------

General Motors Acceptance Corp.,
5.650%, 02/09/96............................. $ 4,261,000 $ 4,235,588
5.750%, 02/20/96............................. 9,000,000 8,929,563
5.800%, 02/09/96............................. 20,000,000 19,877,556
Goldman Sachs Group L.P,
6.050%, 01/11/96-01/12/96.................... 22,000,000 21,964,540
GTE Corp.,
5.870%, 01/19/96............................. 4,000,000 3,988,912
5.950%, 01/29/96............................. 4,544,000 4,523,722
5.970%, 01/30/96-01/31/96.................... 7,491,000 7,455,719
Hanson Finance, PLC,
5.650%, 02/29/96............................. 8,000,000 7,927,178
5.700%, 01/26/96-02/08/96.................... 19,389,000 19,296,480
McKenna Triangle National Corp.,
5.750%, 01/16/96............................. 3,831,000 3,822,433
Merrill Lynch & Co., Inc.,
5.750%, 01/26/96............................. 21,000,000 20,919,500
Mitsubishi International Corp.,
5.780%, 01/29/96............................. 2,500,000 2,489,163
5.810%, 01/23/96............................. 4,200,000 4,185,766
Morgan Stanley Group, Inc.,
5.750%, 01/25/96............................. 34,000,000 33,875,097
NYNEX Corporation,
5.800%, 01/19/96............................. 2,000,000 1,994,522
5.820%, 01/09/96-01/16/96.................... 6,000,000 5,990,947
PHH Corporation,
5.830%, 01/23/96............................. 3,000,000 2,989,798
PNC Funding Corp,
5.730%, 02/08/96............................. 2,000,000 1,988,222
Preferred Receivables Funding Corp.,
5.680%, 02/07/96............................. 7,150,000 7,109,388
5.850%, 01/17/96............................. 15,000,000 14,963,438
Riverwood Funding Corp.,
5.680%, 02/16/96............................. 4,000,000 3,971,600
Sears Roebuck Acceptance Corp.,
5.720%, 02/26/96............................. 11,000,000 10,903,872
Special Purpose A/R Cooperative Corp.,
5.750%, 01/24/96............................. 4,000,000 3,985,944
5.780%, 01/24/96............................. 3,000,000 2,989,403
Transamerica Corp.,
5.780%, 01/19/96............................. 16,072,000 16,028,132
Whirlpool Corp.,
5.800%, 01/23/96............................. 2,000,000 1,993,233
Whirlpool Financial Corp.,
5.710%, 03/04/96............................. 18,972,000 18,785,431
5.800%, 02/02/96............................. 1,300,000 1,293,507
--------------
633,522,203
--------------
TERM NOTES -- 5.6%
Associates Corp. of North America,
8.800%, 03/01/96............................. 2,000,000 2,007,278
Bank of America,
5.79%, 01/16/96, Tranche #TR00034............ 2,000,000 1,999,992
Bank One Indianapolis N.A.,
7.180%, 02/05/96, Tranche #TR00002........... 6,000,000 6,002,187
Bayerische Hypotheken,
5.770%, 01/23/96............................. 4,000,000 3,999,789
Beneficial Corp.,
5.25%, 01/23/96, Tranche #TR00776............ 5,000,000 4,999,220

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
Exxon Capital Corp.,
7.875%, 04/15/96............................. $ 5,500,000 $ 5,527,256
First Union National Bank of North Carolina,
5.800%, 01/31/96............................. 13,000,000 13,000,000
Ford Motor Credit Co.,
5.000%, 03/25/96............................. 4,000,000 3,991,407
8.900%, 04/08/96............................. 4,300,000 4,332,346
9.850%, 02/27/96............................. 5,000,000 5,024,368
General Motors Acceptance Corp.,
[]5.70%, 10/20/97............................ 8,000,000 7,996,425
6.300%, 02/02/96, Tranche #TR00646........... 2,000,000 2,000,418
8.250%, 08/01/96............................. 2,000,000 2,024,935
[]Merrill Lynch & Co., Inc.,
5.929%, 09/13/96, Tranche #TR00197........... 27,000,000 26,994,526
NationsBank of Texas, N.A.,
7.000%, 02/06/96, Tranche #TR00037........... 40,000,000 40,002,205
7.300%, 01/26/96, Tranche #TR00043........... 4,000,000 4,001,092
7.550%, 01/09/96, Tranche #TR00050........... 8,500,000 8,501,291
[]Norwest Corp.,
5.929%, 05/23/96, Tranche #TR00176........... 5,500,000 5,499,923
[]Salomon, Inc.,
6.725%, 02/14/96............................. 25,000,000 25,000,000
[]SMM Trust,
5.937%, 12/16/96............................. 27,000,000 26,997,556
Society National Bank,
6.000%, 04/25/96, Tranche #TR00010........... 1,940,000 1,940,000
Student Loan Marketing Association,
[]5.20%, 08/09/96............................ 7,650,000 7,641,227
[]5.22%, 02/08/96............................ 3,000,000 2,999,276
USX Corp.,
6.562%, 02/15/96............................. 7,500,000 7,502,619
--------------
219,985,336
--------------
PROMISSORY NOTES -- 0.3%
[]Lehman Brothers Holdings, Inc.,
6.142%, 05/29/96............................. 10,000,000 10,000,000
--------------

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------
REPURCHASE AGREEMENTS -- 1.0%
Joint Repurchase Agreement Account,
5.839%, 01/02/96............................. $ 43,210,000 $ 43,210,000
--------------
TOTAL SHORT-TERM INVESTMENTS.................................... 1,051,312,715
--------------
OTHER ASSETS -- 0.7%
(net of liabilities).......................................... 27,992,965
--------------
TOTAL NET ASSETS -- 100.0%...................................... $3,940,774,265
--------------
--------------

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $96,403,735. The aggregate value, $96,894,639 is
approximately 2.5% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

[]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B12 THROUGH B15.

<PAGE>

FLEXIBLE MANAGED PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PAR MARKET
LONG-TERM BONDS (CONTINUED) VALUE VALUE
------------- --------------
Okobank,
**[]7.387%, 10/29/49......................... $ 3,500,000 $ 3,539,375
[]7.387%, 10/29/49........................... 9,000,000 9,101,250
[]7.375%, 09/27/49........................... 18,750,000 19,341,563
Salomon, Inc., M.T.N.,
5.470%, 09/22/97, Tranche #SR00504........... 15,000,000 14,823,600
5.790%, 11/26/97, Tranche #TR00571........... 6,700,000 6,647,338
5.880%, 07/29/97, Tranche #SR00456........... 5,650,000 5,626,101
Santander Financial Issuances, LTD.,
7.250%, 11/01/15............................. 11,000,000 11,267,080
Sears Roebuck Acceptance Corp.,
6.750%, 09/15/05............................. 34,950,000 36,247,344
Sears Roebuck Acceptance Corp., M.T.N.,
6.340%, 10/12/00, Tranche #TR00038........... 10,000,000 10,158,900
Standard Credit Card Master Trust,
5.950%, 10/07/04, Series 1993-2A............. 4,500,000 4,463,415
Westinghouse Credit Corp., M.T.N.,
8.750%, 06/03/96, Tranche #TR00248........... 3,330,000 3,350,846
--------------
300,665,564
--------------
FOREIGN -- 5.1%
Banco de Commercio Exterior de Columbia, SA,
M.T.N.,
**8.625%, 06/02/00, Tranche #TR00001......... 5,500,000 5,654,000
Banco Ganadero, SA, M.T.N.,
9.750%, 08/26/99............................. 2,300,000 2,357,500
**9.750%, 08/26/99, Tranche #TR00001......... 5,000,000 5,125,000
Banco Nacional de Comercio Exterior,
7.500%, 07/01/00............................. 5,000,000 4,350,000
Cemex, SA, M.T.N.,
**9.500%, 09/20/01, Tranche #TR00010......... 12,500,000 11,375,000
Compania Sud Americana de Vapores, SA,
**7.375%, 12/08/03........................... 5,650,000 5,565,250
Controladora Commercial Mexicana, SA,
8.750%, 04/21/98............................. 15,100,000 13,288,000
Empresa Columbia de Petroleos,
7.250%, 07/08/98............................. 8,250,000 8,208,750
Empresas La Moderna, SA,
10.250%, 11/12/97............................ 2,000,000 1,980,000
Financiera Energetica Nacional,
6.625%, 12/13/96............................. 5,100,000 5,100,000
Financiera Energetica Nacional, M.T.N.,
9.000%, 11/08/99............................. 2,000,000 2,097,500
**9.000%, 11/08/99........................... 5,375,000 5,637,031
Fomento Economico Mexicano, SA,
9.500%, 07/22/97............................. 6,300,000 6,244,875
Grupo Embotellador Mexicana,
**10.750%, 11/19/97.......................... 8,020,000 7,999,950
Grupo Televisa, SA,
10.000%, 11/09/97............................ 4,000,000 3,920,000
Hydro-Quebec,
8.050%, 07/07/24............................. 17,100,000 19,524,096

DECEMBER 31, 1995

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

B10

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $72,616,786. The aggregate value, $72,915,086 is
approximately 1.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

[]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B12 THROUGH B15.

B11

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF THE
CONSERVATIVE BALANCED AND FLEXIBLE MANAGED
PORTFOLIOS OF THE PRUDENTIAL SERIES FUND, INC.
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

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 Portfolio options available to PRUvider contract owners are the
Conservative Balanced and the Flexible Managed Portfolios.

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 (including the Conservative Balanced and Flexible Balanced
Portfolios) 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

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 procedure noted above.

B12

<PAGE>

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.

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 bond components of the Conservative Balanced and Flexible Balanced
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. Further, the Flexible Managed Portfolio may invest up to 30%
of its total assets in debt and equity securities denominated in a foreign
currency and issued by foreign or domestic 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.

B13

<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.

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. For the
year ended December 31, 1995, the total of the credit used was:

Flexible Managed Portfolio................................... $ 3,202

NOTE 3: INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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.

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, $1,312,614,000 as of December 31, 1995. The
Portfolios of the Series Fund with cash invested in the joint account had the
following percentage participation in the account:

Conservative Balanced Portfolio............................... 3.29%
Flexible Managed Portfolio................................... 25.57%
All other portfolios (currently not available to PRUvider).... 71.14%
-------
100.00%

B14

<PAGE>

As of such date, each repurchase agreement in the joint account and the
collateral thereof were as follows:

Bear Stearns Repurchase Agreement, dated 12/29/95, in the principal amount of
$43,000,000, repurchase price $43,027,710, due 1/2/96; collateralized by
$5,190,000 U.S. Treasury Notes, 6.25%, due 8/31/00; $38,036,000 U.S. Treasury
Notes, 5.50%, due 4/30/96.

Goldman Sachs Repurchase Agreement, dated 12/29/95, in the principal amount of
$418,000,000, repurchase price $418,270,770, due 1/2/96; collateralized by
$339,980,000 U.S. Treasury Bonds, 7.875%, due 2/15/21.

J.P. Morgan Securities Repurchase Agreement, dated 12/29/95, in the principal
amount of $300,000,000, repurchase price $300,193,333, due 1/2/96;
collateralized by $50,000,000 U.S. Treasury Notes, 7.625%, due 4/30/96;
$53,212,000 U.S. Treasury Notes, 7.0%, due 4/15/99; $51,060,000 U.S. Treasury
Notes, 5.125%, due 11/30/98; $49,755,000 U.S. Treasury Notes, 6.875%, due
7/31/99; $37,947,000 U.S. Treasury Notes, 6.125%, due 5/31/00; $52,695,000 U.S.
Treasury Notes, 6.0%, due 8/31/97.

Morgan Stanley and Company Repurchase Agreement, dated 12/29/95, in the
principal amount of $418,000,000, repurchase price $418,273,552, due 1/2/96;
collateralized by $300,000,000 U.S. Treasury Notes, 6.75%, due 4/30/00;
$108,300,000 U.S. Treasury Notes, 5.125%, due 11/30/98.

Salomon Brothers Repurchase Agreement, dated 12/29/95, in the principal amount
of $75,000,000, repurchase price $75,048,748, due 1/2/96; collateralized by
$8,717,000 U.S. Treasury Notes, 7.25%, due 11/30/96; $26,000,000 U.S. Treasury
Notes, 6.125%, due 5/15/98; $40,000,000 U.S. Treasury Notes, 5.75%, due 9/30/97.

Smith Barney Repurchase Agreement, dated 12/29/95, in the principal amount of
$58,614,000, repurchase price $58,651,447, due 1/2/96; collateralized by
$62,440,000 U.S. Treasury Bills, 5.75%, due 10/17/96.

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, 1995 were as
follows:

Cost of Purchases:

CONSERVATIVE FLEXIBLE
BALANCED BALANCED
-------------- --------------
Debt Securities................. $4,882,722,531 $4,212,735,834
Equity Securities............... $ 480,812,048 $1,827,087,395

Proceeds From Sales:

CONSERVATIVE FLEXIBLE
BALANCED BALANCED
-------------- --------------
Debt Securities................. $4,679,687,138 $4,084,931,841
Equity Securities............... $ 428,286,138 $1,842,532,499

The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of December 31, 1995 were as follows:

CONSERVATIVE FLEXIBLE
BALANCED BALANCED
-------------- --------------
Gross Unrealized Appreciation... $ 378,149,704 $ 568,373,680
Gross Unrealized Depreciation... (88,299,605) (27,642,238)
Total Net Unrealized............ 289,850,099 540,731,442
Tax Basis....................... 3,622,931,201 3,687,627,278

B15

<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 Flexible Managed and Conservative Balanced
Portfolios (two of the portfolios comprising The Prudential Series Fund, Inc.),
as of December 31, 1995, the related statements of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights contained in the
prospectus for each of the years in the ten-year period then ended. 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, 1995, by correspondence with the custodian 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.

Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996

B16

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1996

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT

PRUVIDER
VARIABLE
APPRECIABLE
LIFE(R)___________________
INSURANCE CONTRACTS

PROVIDING FOR THE INVESTMENT
OF ASSETS IN THE
INVESTMENT PORTFOLIOS OF

THE PRUDENTIAL SERIES
FUND, INC.

The Pruco Life Insurance Company of New Jersey, a stock life insurance company
that is an indirect wholly-owned subsidiary of the Prudential Insurance Company
of America, offers a variable life insurance contract called the PRUVIDER
Variable APPRECIABLE LIFE(R) Insurance Contract*. The Contract provides
whole-life insurance protection. The death benefit varies daily with investment
experience but will never be less than the "face amount" of insurance specified
in the Contract. The Contract also generally provides a cash surrender value
which also varies with investment experience. There is no guaranteed minimum
cash surrender value.

The assets held for the purpose of paying benefits under these contracts can be
invested in one or both of the two current subaccounts of the Pruco Life of New
Jersey Variable Appreciable Account. The assets invested in each subaccount are
in turn invested in a corresponding portfolio of The Prudential Series Fund,
Inc., a diversified, open-end management investment company (commonly known as a
mutual fund) that is intended to provide a range of investment alternatives to
variable contract owners. Each portfolio is, for investment purposes, in effect
a separate fund. The two available Series Fund portfolios are the CONSERVATIVE
BALANCED PORTFOLIO and the FLEXIBLE MANAGED PORTFOLIO. A separate class of
capital stock is issued for each portfolio. Shares of the Series Fund are
currently sold only to separate accounts of Pruco Life of New Jersey and certain
other insurers to fund the benefits under variable life insurance and variable
annuity contracts issued by those companies.

The PRUVIDER Variable APPRECIABLE LIFE(R) Insurance Contract owner may also
choose to invest in a fixed-rate option which is described in the prospectus of
The Pruco Life of New Jersey Variable Appreciable Account.

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

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS OF THE PRUCO LIFE OF NEW JERSEY VARIABLE
APPRECIABLE ACCOUNT DATED MAY 1, 1996, WHICH IS AVAILABLE WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY, 213
WASHINGTON STREET, NEWARK, NEW JERSEY 07102-2992 OR BY TELEPHONING (800)
437-4016, EXT. 46.

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

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-2SAI Ed 5-96
Catalog No. 64M087E

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STATEMENT OF ADDITIONAL INFORMATION
CONTENTS
PAGE

MORE DETAILED INFORMATION ABOUT THE CONTRACT .............................. 1
SALES LOAD UPON SURRENDER ........................................... 1
REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS .... 1
PAYING PREMIUMS BY PAYROLL DEDUCTION ................................ 1
UNISEX PREMIUMS AND BENEFITS ........................................ 1
HOW THE DEATH BENEFIT WILL VARY ..................................... 2
WITHDRAWAL OF EXCESS CASH SURRENDER VALUE ........................... 2
TAX TREATMENT OF CONTRACT BENEFITS .................................. 3
Treatment as Life Insurance ................................... 3
Pre-Death Distributions ....................................... 3
WITHHOLDING ................................................... 4
OTHER TAX CONSIDERATIONS ...................................... 4
SALE OF THE CONTRACT AND SALES COMMISSIONS .......................... 4
RIDERS .............................................................. 5
OTHER STANDARD CONTRACT PROVISIONS .................................. 5
Beneficiary ................................................... 5
Incontestability .............................................. 5
Misstatement of Age or Sex .................................... 5
Suicide Exclusion ............................................. 5
Assignment .................................................... 5
Settlement Options ............................................ 5

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS ...................... 6

GENERAL ............................................................. 6
CONVERTIBLE SECURITIES .............................................. 6
WARRANTS ............................................................ 6
OPTIONS AND FUTURES ................................................. 6
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES ......................... 12
SHORT SALES ......................................................... 12
SHORT SALES AGAINST THE BOX ......................................... 13
INTEREST RATE SWAPS ................................................. 13
LOANS OF PORTFOLIO SECURITIES ....................................... 13
ILLIQUID SECURITIES ................................................. 14
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS ......................... 14

INVESTMENT RESTRICTIONS ................................................... 15

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES ........................... 18

PORTFOLIO TRANSACTIONS AND BROKERAGE ...................................... 19

DETERMINATION OF NET ASSET VALUE .......................................... 20

SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO MAY CURRENTLY INVEST ....... 21

DEBT RATINGS .............................................................. 23

POSSIBLE REPLACEMENT OF THE SERIES FUND ................................... 25

OTHER INFORMATION CONCERNING THE SERIES FUND .............................. 25
INCORPORATION AND AUTHORIZED STOCK .................................. 25
DIVIDENDS, DISTRIBUTIONS AND TAXES .................................. 26
CUSTODIAN AND TRANSFER AGENT ........................................ 26
EXPERTS ............................................................. 26
LICENSE ............................................................. 26

DIRECTORS AND OFFICERS OF PRUCO LIFE OF NEW JERSEY AND MANAGEMENT OF
THE SERIES FUND ......................................................... 27

FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC ................... A1

THE PRUDENTIAL SERIES FUND, INC. SCHEDULE OF INVESTMENTS ................. B1

<PAGE>

MORE DETAILED INFORMATION ABOUT THE CONTRACT

SALES LOAD UPON SURRENDER

The sales load is subject to a further important limitation that may,
particularly for Contracts that lapse or are surrendered within the first 5 or 6
years, result in a lower contingent deferred sales load than that described
above. (This limitation might also, under unusual circumstances, apply to reduce
the monthly sales load deductions described in the prospectus in item (a) under
MONTHLY DEDUCTIONS FROM CONTRACT FUND.) The limitation is applied in order to
conform with the requirements of the Investment Company Act of 1940 and
regulations adopted thereunder, which limit the amount of non-refundable sales
load that may be charged on contracts within the first 2 years.

The limitation is as follows: (Every Contract has associated with it a Guideline
Annual Premium ("GAP"), which is an amount determined actuarially in accordance
with a definition set forth in a regulation of the Securities and Exchange
Commission ("SEC").) The maximum aggregate sales load that Pruco Life of New
Jersey will charge (that is, the sum of the monthly sales load deduction and the
contingent deferred sales charge) will not be more than 30% of the premiums
actually paid until those premiums total one GAP plus no more than 9% of the
next premiums paid until total premiums are equal to 5 GAPS, plus no more than
6% of all subsequent premiums. If the sales charges described above would at any
time exceed this maximum amount then the charge, to the extent of any excess,
will not be made.

REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS

Pruco Life of New Jersey may reduce the sales charges and/or other charges on
individual Contracts sold to members of a class of associated individuals, or to
a trustee, employer or other entity representing such a class, where it is
expected that such multiple sales will result in savings of sales or
administrative expenses. Pruco Life of New Jersey determines both the
eligibility for such reduced charges, as well as the amount of such reductions,
by considering the following factors: (1) the number of individuals; (2) the
total amount of premium payments expected to be received from these Contracts;
(3) the nature of the association between these individuals, and the expected
persistency of the individual Contracts; (4) the purpose for which the
individual Contracts are purchased and whether that purpose makes it likely that
expenses will be reduced; and (5) any other circumstances which Pruco Life of
New Jersey believes to be relevant in determining whether reduced sales or
administrative expenses may be expected. Some of the reductions in charges for
these sales may be contractually guaranteed; other reductions may be withdrawn
or modified by Pruco Life of New Jersey on a uniform basis. Pruco Life of New
Jersey's reductions in charges for these sales will not be unfairly
discriminatory to the interests of any individual Contract owners.

PAYING PREMIUMS BY PAYROLL DEDUCTION

In addition to the annual, semi-annual, quarterly and monthly premium payment
modes, a payroll budget method of paying premiums may also be available under
certain Contracts. The employer generally deducts the necessary amounts from
employee paychecks and sends premium payments to Pruco Life of New Jersey
monthly. Any Pruco Life of New Jersey representative authorized to sell this
Contract can provide further details concerning the payroll budget method of
paying premiums.

UNISEX PREMIUMS AND BENEFITS

<PAGE>

employee organizations considering purchase of a Contract should consult their
legal advisors to determine whether purchase of a Contract based on sex-distinct
actuarial tables is consistent with Title VII of the Civil Rights Act of 1964 or
other applicable law. Pruco Life of New Jersey may offer the Contract with
unisex mortality rates to such prospective purchasers.

HOW THE DEATH BENEFIT WILL VARY

WITHDRAWAL OF EXCESS CASH SURRENDER VALUE

Under certain circumstances, a Contract owner may withdraw a portion of the
Contract's cash surrender value without surrendering the Contract in whole or in
part. The amount that a Contract owner may withdraw is limited by the
requirement that the Contract Fund after withdrawal must not be less than the
tabular Contract Fund value. (A Table of Tabular Contract Fund Values is
included in the Contract; the values increase with each year the Contract
remains in force.) But because the Contract Fund may be made up in part by an
outstanding Contract loan, there is a further limitation that the amount
withdrawn may not be larger than an amount sufficient to reduce the cash
surrender value to zero. The amount withdrawn must be at least $200. An owner
may make no more than four such withdrawals in each Contract year, and there is
a $15 administrative processing fee for each withdrawal. An amount withdrawn may
not be repaid except as a scheduled or unscheduled premium subject to the
applicable charges. Upon request, Pruco Life of New Jersey will tell a Contract
owner how much he or she may withdraw. Withdrawal of part of the cash surrender
value may have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, below.
A temporary need for funds may also be met by making a loan and you should
consult your Pruco Life of New Jersey representative about how best to meet your
needs.

Withdrawal of part of the cash surrender value increases the risk that the
Contract Fund may be insufficient to provide for benefits under the Contract. If
such a withdrawal is followed by unfavorable investment experience, the Contract
may lapse even if scheduled premiums continue to be paid when due. This is
because, for purposes of determining whether a lapse has occurred, Pruco Life of
New Jersey treats withdrawals as a return of premium.

<PAGE>

TAX TREATMENT OF CONTRACT BENEFITS

Each prospective purchaser is urged to consult a qualified tax advisor. The
following discussion is not intended as tax advice, and it is not a complete
statement of what the effect of federal income taxes will be under all
circumstances. Rather, it provides information about how Pruco Life of New
Jersey believes the tax laws apply in the most commonly occurring circumstances.
There is no guarantee, however, that the current federal income tax laws and
regulations or interpretations will not change.

Treatment as Life Insurance. The Contract will be treated as "life insurance" as
long as it satisfies certain definitional tests set forth in Section 7702 of the
Internal Revenue Code (the "Code") and as long as the underlying investments for
the Contract satisfy diversification requirements set forth in Treasury
Regulations issued pursuant to Section 817(h) of the Code.

Pruco Life of New Jersey believes that it has taken adequate steps to cause the
Contract to be treated as life insurance for tax purposes. This means that: (1)
except as noted below, the Contract owner should not be taxed on any part of the
Contract Fund, including additions attributable to interest or appreciation; and
(2) the death benefit should be excludible from the gross income of the
beneficiary under section 101(a) of the Code.

Pruco Life of New Jersey intends to comply with final regulations issued under
sections 7702 and 817. Therefore, it reserves the right to make such changes as
it deems necessary to assure that the Contract continues to qualify as life
insurance for tax purposes. Any such changes will apply uniformly to affected
Contract owners and will be made only after advance written notice to affected
Contract owners.

Pre-Death Distributions. The taxation of pre-death distributions depends on
whether the Contract is classified as a Modified Endowment Contract. The
following discussion first deals with distributions under Contracts not so
classified, and then with Modified Endowment Contracts.

1. A surrender or lapse of the Contract may have tax consequences. Upon
surrender, the owner will not be taxed on the cash surrender value except
for the amount, if any, that exceeds the gross premiums paid less the
untaxed portion of any prior withdrawals. The amount of any unpaid
Contract debt will, upon surrender or lapse, be added to the cash
surrender value and treated, for this purpose, as if it had been received.
Any loss incurred upon surrender is generally not deductible. The tax
consequences of a surrender may differ if the proceeds are received under
any income payment settlement option.

A withdrawal generally is not taxable unless it exceeds total premiums
paid to the date of withdrawal less the untaxed portion of any prior
withdrawals. However, under certain limited circumstances, in the first 15
Contract years all or a portion of a withdrawal may be taxable if the
Contract Fund exceeds the total premiums paid less the untaxed portion of
any prior withdrawals, even if total withdrawals do not exceed total
premiums paid to date.

Extra premiums for optional benefits and riders generally do not count in
computing gross premiums paid, which in turn determines the extent to
which a withdrawal might be taxed.

<PAGE>

Loans received under the Contract will ordinarily be treated as
indebtedness of the owner and will not be considered to be distributions
subject to tax.

2. Some of the above rules are changed if the Contract is classified as a
Modified Endowment Contract under section 7702A of the Code. 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 a decrease in the face amount of
insurance is made (or a rider removed) during the first 7 Contract years.
Moreover, the addition of a rider after the Contract date may have an
impact on the Contract's status as a Modified Endowment Contract. Contract
owners contemplating any of these steps should first consult a qualified
tax advisor and their Pruco Life of New Jersey representative.

If the Contract is classified as a Modified Endowment Contract, then
pre-death distributions, including loans and withdrawals, are includible
in income to the extent that the Contract fund prior to surrender charges
exceeds the gross premiums paid for the Contract increased by the amount
of any loans previously includible in income and reduced by any untaxed
amounts previously received other than the amount of any loans excludible
from income. These rules may also apply to pre-death distributions,
including loans, made during the 2 year period prior to the Contract
becoming a Modified Endowment Contract.

In addition, pre-death distributions from such Contracts (including full
surrenders) will be subject to a penalty of 10 percent of the amount
includible in income unless the amount is distributed on or after age 59
1/2, on account of the taxpayer's disability, or as a life annuity. It is
presently unclear how the penalty tax provisions apply to Contracts owned
by nonnatural persons such as corporations.

Under certain circumstances, Modified Endowment Contracts issued during
any calendar year will be treated as a single contract for purposes of
applying the above rules.

Business-owned life insurance is subject to additional rules. Section 264(a)(1)
of the Code generally precludes business Contract owners from deducting premium
payments. Under section 264(a)(4) of the Code, a deduction is not allowed for
any interest paid or accrued on any Contract debt on an insurance policy to the
extent the indebtedness exceeds $50,000 per officer, employee or financially
interested person. The Congress is also considering legislation to deny interest
deductions generally for loans in business-owned policies. The Code also imposes
an indirect tax upon additions to the Contract fund or the receipt of death
benefits under business-owned life insurance policies under certain
circumstances by way of the corporate alternative minimum tax.

The individual situation of each Contract owner or beneficiary will determine
the federal estate taxes and the state and local estate, inheritance and other
taxes due if the owner or insured dies.

SALE OF THE CONTRACT AND SALES COMMISSIONS

<PAGE>

is sold by registered representatives of Prusec who are also authorized by state
insurance departments to do so. The Contract may also be sold through other
broker-dealers authorized by Prusec and applicable law to do so. Registered
representatives of such other broker-dealers may be paid on a different basis
than described below. Where the insured is less than 60 years of age, the
representative will generally receive a commission of no more than 50% of the
scheduled premiums for the first year, no more than 10% of the scheduled
premiums for the second, third, and fourth years, no more than 3% of the
scheduled premiums for the fifth through tenth years, and no more than 2% of the
scheduled premiums thereafter. For new Contracts issued on or about July 1,
1996, the commission rates for the second through tenth years will change to no
more than 6% of the scheduled premiums. For insureds over 59 years of age, the
commission will be lower. The representative may be required to return all or
part of the first year commission if the Contract is not continued through the
second year. Representatives with less than 3 years of service may be paid on a
different basis.

Sales expenses in any year are not equal to the deduction for sales load in that
year. Pruco Life of New Jersey expects to recover its total sales expenses over
the periods the Contracts are in effect. To the extent that the sales charges
are insufficient to cover total sales expenses, the sales expenses will be
recovered from Pruco Life of New Jersey's surplus, which may include amounts
derived from the mortality and expense risk charge and the guaranteed minimum
death benefit risk charge described in the prospectus under DAILY DEDUCTION FROM
THE CONTRACT FUND and item (d) under MONTHLY DEDUCTIONS FROM CONTRACT FUND.

RIDERS

Any Pruco Life of New Jersey representative authorized to sell the Contract can
explain these extra benefits further. Samples of the provisions are available
from Pruco Life of New Jersey upon written request.

OTHER STANDARD CONTRACT PROVISIONS

Beneficiary. The beneficiary is designated and named in the application by the
Contract owner. Thereafter, the owner may change the beneficiary, provided it is
in accordance with the terms of the Contract. Should the insured die with no
surviving beneficiary, the insured's estate will become the beneficiary.

Incontestability. After the Contract has been in force during the insured's
lifetime for 2 years from the Contract date or, with respect to any change in
the Contract that requires Pruco Life of New Jersey's approval and could
increase its liability, after the change has been in effect during the insured's
lifetime for 2 years from the effective date of the change, Pruco Life of New
Jersey will not contest its liability under the Contract in accordance with its
terms.

Misstatement of Age or Sex. If the insured's stated age or sex (except where
unisex rates apply) or both are incorrect in the Contract, Pruco Life of New
Jersey will adjust the death benefits payable, as required by law, to reflect
the correct age and sex. Any death benefit will be based on what the most recent
charge for mortality would have provided at the correct age and sex.

Suicide Exclusion. Generally, if the insured, whether sane or insane, dies by
suicide within 2 years from the Contract date, Pruco Life of New Jersey will pay
no more under the Contract than the sum of the premiums paid.

Assignment. This Contract may not be assigned if such assignment would violate
any federal, state, or local law or regulation. Generally, the Contract may not
be assigned to an employee benefit plan or program without Pruco Life of New
Jersey's consent. Pruco Life of New Jersey assumes no responsibility for the
validity or sufficiency of any assignment, and it will not be obligated to
comply with any assignment unless it has received a copy at one of its Home
Offices.

Settlement Options. The Contract grants to most owners, or to the beneficiary, a
variety of optional ways of receiving Contract proceeds, other than in a lump
sum. Any Pruco Life of New Jersey representative authorized to sell this
Contract can explain these options upon request.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES OF
THE PORTFOLIOS

GENERAL

The investment objectives of the Series Fund's portfolios that are available to
PRUVIDER Contract owners can be found under INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS in the prospectus.

CONVERTIBLE SECURITIES

WARRANTS

OPTIONS AND FUTURES

Options on Equity Securities. The Conservative Balanced and Flexible Managed
Portfolios may purchase and write (i.e., sell) put and call options on equity
securities that are traded on securities exchanges or that 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 security at the exercise price upon
exercise by the holder of the put.

<PAGE>

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 Conservative Balanced and Flexible Managed 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 below
under Options on Debt Securities and Options on Stock Indices.

<PAGE>

Options on Debt Securities. The Conservative Balanced and Flexible Managed
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 ("over-the-counter" or "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.

<PAGE>

The use of debt options is subject to the same risks described above in
connection with stock options.

Options on Stock Indices. The Conservative Balanced and Flexible Managed
Portfolios may purchase and sell put and call options on stock indices traded on
securities exchanges or listed on NASDAQ or that result from privately
negotiated transactions with broker-dealers ("OTC options"). 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. 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 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.

<PAGE>

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. The portfolios, however, will follow the "cover"
procedures described above.

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 the
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 sells the call, which in either case
would occur no earlier than the day following the day the exercise notice was
filed.

Options on Foreign Currencies. The Conservative Balanced and Flexible Managed
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 (see FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS, page 14) and futures
contracts on foreign currencies (discussed under Futures Contracts, page 11)
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.

<PAGE>

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), the 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.

Futures Contracts. The Conservative Balanced and Flexible Managed 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.

<PAGE>

Options on Futures Contracts. To the extent permitted by applicable insurance
law and federal regulations, the Conservative Balanced and Flexible Managed
Portfolios may enter into certain transactions involving options on stock index
futures contracts, options on interest rate futures contracts, and 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 a 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 portfolios intend
to utilize options on futures contracts for the same purposes that they use the
underlying futures contracts.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

SHORT SALES

<PAGE>

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

INTEREST RATE SWAPS

LOANS OF PORTFOLIO SECURITIES

<PAGE>

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.

ILLIQUID SECURITIES

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.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

<PAGE>

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' 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
hedge currency, at the same time they tend to limit any potential gain which
might result should the value of such currency increase.

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.

Neither of the portfolios available to PRUVIDER Contract owners will:

<PAGE>

contracts and related options, and 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.

5. Purchase securities on margin or otherwise borrow money or issue senior
securities except that 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 Flexible Managed and Conservative
Balanced 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 options on debt
securities, equity securities, stock indices and foreign currencies by the
Conservative Balanced and Flexible Managed Portfolios are not deemed to be
the issuance of a senior security or the purchase of a security on margin.
Collateral arrangements entered into by 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
fixed income portions of the Conservative Balanced and Flexible Managed
Portfolios may enter into reverse repurchase agreements and dollar rolls
provided that the portfolio's obligations with respect to those instruments
do not exceed 30% of the portfolio's net assets (defined to mean total
assets at market value less liabilities other than reverse repurchase
agreements and dollar rolls).

<PAGE>

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.

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.

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>

adheres to additional restrictions relating to such practices as the lending of
securities, borrowing, and the purchase of put and call options, futures
contracts, and derivative instruments on securities to comply with investment
guidelines issued by the California Department of Insurance.

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 and not the Contract owners, are
considered the owners of assets held in the Account for federal income tax
purposes. See TAX TREATMENT OF CONTRACT BENEFITS, page 3. The Prudential intends
to maintain the assets of each portfolio pursuant to those diversification
requirements.

INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES

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 portfolios 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.

<PAGE>

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 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 investor 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.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Bonds, including convertible bonds, and equity securities traded in the
over-the-counter market 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.

<PAGE>

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 transac tions 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 non-interested directors, 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
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.

DETERMINATION OF NET ASSET VALUE

<PAGE>

amortized cost method of valuation, the Money Market Portfolio may not purchase
any security with a remaining maturity of more than 12 months and must maintain
a dollar-weighted average portfolio maturity of 120 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 Series Fund's 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 SECURITIES IN WHICH
THE MONEY MARKET PORTFOLIO MAY CURRENTLY INVEST, page 21.

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 values 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.

SECURITIES IN WHICH THE MONEY MARKET PORTFOLIO
MAY CURRENTLY INVEST*

<PAGE>

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.

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.
For a description of corporate bond ratings, see DEBT RATINGS page 23. 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 (which as noted above is currently The Prudential)
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 domestics 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 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 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

<PAGE>

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.

5. Reverse Repurchase Agreements. The Money Market Portfolio may use reverse
repurchase agreements, which are described under REVERSE REPURCHASE AGREEMENTS
AND DOLLAR ROLLS in the prospectus. No portfolio may obligate more than 10% of
its net assets in connection with reverse repurchase agreements, except that the
fixed income portions of the Conservative Balanced and Flexible Managed
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.

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:

<PAGE>

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 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:

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.

<PAGE>

Interest and principal are regarded as safe. They are
predominately reflect money rates in their market behavior, but
to some extent, also economic conditions.

BBB Bonds rated BBB, or medium grade, are 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:

POSSIBLE REPLACEMENT OF THE SERIES FUND

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 fifteen
classes: MONEY MARKET PORTFOLIO Capital Stock (225 million shares), DIVERSIFIED
BOND PORTFOLIO Capital Stock (200 million shares), HIGH YIELD BOND PORTFOLIO
Capital Stock (100 million shares), GOVERNMENT INCOME PORTFOLIO Capital Stock
(100 million shares), EQUITY PORTFOLIO Capital Stock (200 million shares), STOCK
INDEX PORTFOLIO Capital Stock (100 million shares), EQUITY INCOME PORTFOLIO
Capital Stock (100 million shares), NATURAL RESOURCES PORTFOLIO Capital Stock
(100 million shares), GLOBAL PORTFOLIO Capital Stock (100 million shares),
CONSERVATIVE BALANCED PORTFOLIO Capital Stock (300 million shares), FLEXIBLE
MANAGED PORTFOLIO Capital Stock (300 million shares), ZERO COUPON BOND PORTFOLIO
2000 Capital Stock (25 million shares), ZERO COUPON BOND PORTFOLIO 2005 Capital
Stock (50 million shares), PRUDENTIAL JENNISON PORTFOLIO Capital Stock (50
million shares), SMALL CAPITALIZATION STOCK PORTFOLIO Capital Stock (50 million
shares). The shares of each portfolio, when issued, will be fully paid and
non-assessable, will have no conversion, exchange or similar rights, and will be
freely

<PAGE>

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.

DIVIDENDS, DISTRIBUTIONS AND TAXES

CUSTODIAN AND TRANSFER AGENT

EXPERTS

LICENSE

<PAGE>

DIRECTORS AND OFFICERS OF PRUCO LIFE OF NEW JERSEY
AND MANAGEMENT OF THE SERIES FUND

DIRECTORS AND OFFICERS OF PRUCO LIFE OF NEW JERSEY

The directors and major officers of Pruco Life of New Jersey, listed with their
principal occupations during the past 5 years, are shown below.

DIRECTORS OF PRUCO LIFE OF NEW JERSEY

GARNETT L. KEITH, JR., Director. -- Vice Chairman of The Prudential.

WILLIAM F. YELVERTON, Director. --Chief Executive Officer, Prudential Individual
Insurance Group since 1995; Prior to 1995: Chief Executive Officer, New York
Life Worldwide.

OFFICERS WHO ARE NOT DIRECTORS

SUSAN L. BLOUNT, Secretary.--Vice President and Secretary of The Prudential
since 1995; Prior to 1995: Assistant General Counsel for Prudential Residential
Services Company.

The business address of all directors and officers of Pruco Life of New Jersey
is 213 Washington Street, Newark, New Jersey 07102-2992.

* SUBSIDIARY OF THE PRUDENTIAL

<PAGE>

MANAGEMENT OF THE SERIES FUND

MENDEL A. MELZER*, Chairman of the Board--Chief Financial Officer of the Money
Management Group of The Prudential since 1995; 1993 to 1995: Senior Vice
President and Chief Financial Officer of Prudential Preferred Financial
Services; 1991 to 1993: Managing Director, The Prudential Investment
Corporation; Prior to 1991: Senior Vice President, Prudential Capital
Corporation.

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.

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.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

CONSERVATIVE BALANCED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS

Investments, at value (cost:

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

INVESTMENT INCOME

Dividends (net of $401,184 foreign
withholding tax)......................... $ 23,484,206
Interest................................... 153,295,065
---------------
176,779,271
---------------
EXPENSES

Net realized gain on investments........... 167,342,297
Net unrealized gain on investments......... 264,773,974

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>

OPERATIONS:

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B12 THROUGH B15.

<PAGE>

FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.

FLEXIBLE MANAGED PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995

ASSETS

STATEMENT OF OPERATIONS
Year Ended December 31, 1995

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31
------------------------------------
1995 1994
------------------ ----------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................................. $ 126,640,661 $ 98,878,114
Net realized gain on investments and foreign currency transactions..................... 292,267,835 23,838,273
Net unrealized gain (loss) on investments and foreign currency translations............ 410,041,102 (230,571,359)
---------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ 828,949,598 (107,854,972)
---------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.................................................................. (124,621,227) (96,126,295)
Net realized gain from investment transactions......................................... (176,844,671) (98,311,584)
---------------- ---------------
TOTAL DIVIDENDS TO SHAREHOLDERS........................................................ (301,465,898) (194,437,879)
---------------- ---------------
CAPITAL TRANSACTIONS:
Capital stock sold [8,486,525 and 22,611,559 shares, respectively]..................... 146,641,074 370,947,414
Reinvestment of dividend distributions [17,050,711 and 12,531,550 shares,
respectively]......................................................................... 301,465,898 194,437,879
Capital stock repurchased [(11,612,102) and (4,617,224) shares, respectively].......... (195,926,134) (73,719,278)
---------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 252,180,838 491,666,015
---------------- ---------------
TOTAL INCREASE IN NET ASSETS............................................................. 779,664,538 189,373,164
NET ASSETS:
Beginning of year...................................................................... 3,481,540,299 3,292,167,135
---------------- ---------------
End of year............................................................................ $ 4,261,204,837 $ 3,481,540,299
---------------- ---------------
---------------- ---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B12 THROUGH B15.

<PAGE>

THE PRUDENTIAL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS

CONSERVATIVE BALANCED PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS -- 39.6% SHARES VALUE
------------- --------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE

MARKET
PREFERRED STOCKS -- 0.1% SHARES VALUE
------------- --------------
MEDIA
Times Mirror Co. (Cum. Conv.), Series B......... 119,724 3,090,376
--------------
(Cost $2,725,059)

DECEMBER 31, 1995

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- --------------

<PAGE>

CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $96,403,735. The aggregate value, $96,894,639 is
approximately 2.5% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

[]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B12 THROUGH B15.

<PAGE>

FLEXIBLE MANAGED PORTFOLIO

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

DECEMBER 31, 1995

MARKET
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- --------------

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

B10

<PAGE>

FLEXIBLE MANAGED PORTFOLIO (CONTINUED)

DECEMBER 31, 1995

The following abbreviations are used in portfolio descriptions:

**Indicates a restricted security; the aggregate cost of the restricted
securities is $72,616,786. The aggregate value, $72,915,086 is
approximately 1.7% of net assets. (See Note 2)

+No dividend was paid on this security during the 12 months ending December 31,
1995.

[]Indicates a variable rate security.

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B12 THROUGH B15.

B11

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS OF THE
CONSERVATIVE BALANCED AND FLEXIBLE MANAGED
PORTFOLIOS OF THE PRUDENTIAL SERIES FUND, INC.
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994

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 Portfolio options available to PRUvider contract owners are the
Conservative Balanced and the Flexible Managed Portfolios.

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 (including the Conservative Balanced and Flexible Balanced
Portfolios) 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

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 procedure noted above.

B12

<PAGE>

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.

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.

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.

B13

<PAGE>

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. For the
year ended December 31, 1995, the total of the credit used was:

Flexible Managed Portfolio................................... $ 3,202

NOTE 3: INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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.

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, $1,312,614,000 as of December 31, 1995. The
Portfolios of the Series Fund with cash invested in the joint account had the
following percentage participation in the account:

B14

<PAGE>

As of such date, each repurchase agreement in the joint account and the
collateral thereof were as follows:

Bear Stearns Repurchase Agreement, dated 12/29/95, in the principal amount of
$43,000,000, repurchase price $43,027,710, due 1/2/96; collateralized by
$5,190,000 U.S. Treasury Notes, 6.25%, due 8/31/00; $38,036,000 U.S. Treasury
Notes, 5.50%, due 4/30/96.

Goldman Sachs Repurchase Agreement, dated 12/29/95, in the principal amount of
$418,000,000, repurchase price $418,270,770, due 1/2/96; collateralized by
$339,980,000 U.S. Treasury Bonds, 7.875%, due 2/15/21.

J.P. Morgan Securities Repurchase Agreement, dated 12/29/95, in the principal
amount of $300,000,000, repurchase price $300,193,333, due 1/2/96;
collateralized by $50,000,000 U.S. Treasury Notes, 7.625%, due 4/30/96;
$53,212,000 U.S. Treasury Notes, 7.0%, due 4/15/99; $51,060,000 U.S. Treasury
Notes, 5.125%, due 11/30/98; $49,755,000 U.S. Treasury Notes, 6.875%, due
7/31/99; $37,947,000 U.S. Treasury Notes, 6.125%, due 5/31/00; $52,695,000 U.S.
Treasury Notes, 6.0%, due 8/31/97.

Morgan Stanley and Company Repurchase Agreement, dated 12/29/95, in the
principal amount of $418,000,000, repurchase price $418,273,552, due 1/2/96;
collateralized by $300,000,000 U.S. Treasury Notes, 6.75%, due 4/30/00;
$108,300,000 U.S. Treasury Notes, 5.125%, due 11/30/98.

Salomon Brothers Repurchase Agreement, dated 12/29/95, in the principal amount
of $75,000,000, repurchase price $75,048,748, due 1/2/96; collateralized by
$8,717,000 U.S. Treasury Notes, 7.25%, due 11/30/96; $26,000,000 U.S. Treasury
Notes, 6.125%, due 5/15/98; $40,000,000 U.S. Treasury Notes, 5.75%, due 9/30/97.

Smith Barney Repurchase Agreement, dated 12/29/95, in the principal amount of
$58,614,000, repurchase price $58,651,447, due 1/2/96; collateralized by
$62,440,000 U.S. Treasury Bills, 5.75%, due 10/17/96.

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, 1995 were as
follows:

Cost of Purchases:

CONSERVATIVE FLEXIBLE
BALANCED BALANCED
-------------- --------------
Debt Securities................. $4,882,722,531 $4,212,735,834
Equity Securities............... $ 480,812,048 $1,827,087,395

Proceeds From Sales:

CONSERVATIVE FLEXIBLE
BALANCED BALANCED
-------------- --------------
Debt Securities................. $4,679,687,138 $4,084,931,841
Equity Securities............... $ 428,286,138 $1,842,532,499

The federal income tax basis and unrealized appreciation/depreciation of the
Fund's investments as of December 31, 1995 were as follows:

B15

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors of The Prudential Series Fund, Inc.:

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, 1995, by correspondence with the custodian 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.

Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996

B16

<PAGE>

PART C

OTHER INFORMATION

<PAGE>

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

Financial statements of The Prudential Series Fund, Inc. will be filed by
Post-Effective Amendment.

(b) Exhibits

<TABLE>
<S> <C>
(i) (1) Articles of Incorporation of The Prudential Incorporated by reference to Registrant's Form N-1A
Series Fund, Inc. filed December 15, 1982.

(2) Supplemental Investment Advisory Incorporated by reference to Post-Effective
Agreement between The Prudential Amendment No. 28 to this Registration Statement,
Insurance Company of America and The filed February 1, 1995.
Prudential Series Fund, Inc.

(3) Articles Supplementary to the Articles of Incorporated by reference to Post-Effective
Incorporation of The Prudential Series Amendment No. 19 to this Registration Statement,
Fund, Inc. filed March 1, 1990.

(4) Subadvisory Agreement between The Incorporated by reference to Post-Effective
Prudential Insurance Company of America Amendment No. 28 to this Registration Statement,
and Jennison Associates Capital Corp. filed February 1, 1995.

(ii) By-laws of The Prudential Series Fund, Incorporated by reference to Post-Effective
Inc., as amended February 16, 1990. Amendment No. 19 to this Registration Statement,
filed March 1, 1990.

(v) (1) Investment Advisory Agreement, as Incorporated by reference to Post-Effective
amended July 14, 1988 between The Amendment No. 16 to this Registration Statement,
Prudential Insurance Company of America filed September 1, 1988.
and The Prudential Series Fund, Inc.

(2) Service Agreement between The Incorporated by reference to Post-Effective
Prudential Insurance Company of America Amendment No. 3 to this Registration Statement,
and The Prudential Investment filed March 12, 1985.
Corporation.

(vi) Distribution Agreement between The Incorporated by reference to Post-Effective
Prudential Series Fund, Inc. and Pruco Amendment No. 20 to this Registration Statement,
Securities Corporation. filed April 26, 1990.

(viii) (1) Custodian Agreement between Chemical Incorporated by reference to Post-Effective
Bank (formerly Manufacturers Hanover Amendment No. 6 to this Registration Statement,
Trust Company) and The Prudential Series filed October 2, 1986.
Fund, Inc.

(2) Custodian Agreement between Brown Incorporated by reference to Post-Effective
Brothers Harriman & Co. and The Amendment No. 16 to this Registration Statement,
Prudential Series Fund, Inc. filed September 1, 1988.

(3) Custodian Agreement between Morgan Incorporated by reference to Post-Effective
Guaranty Trust Company and The Amendment No. 21 to this Registration Statement,
Prudential Series Fund, Inc. filed March 1, 1991.

(ix) (1) Indemnification Agreement Incorporated by reference to Post-Effective
Regarding Reg. No. 33-20000. Amendment No. 25 to this Registration Statement,
filed April 8, 1993.

(2) Indemnification Agreement Incorporated by reference to Post-Effective
Regarding Reg. No. 33-49994. Amendment No. 26 to this Registration Statement,
filed March 2, 1994.

(3) Indemnification Agreement Incorporated by reference to Post-Effective
Regarding Reg. No. 33-57186. Amendment No. 26 to this Registration Statement,
filed March 2, 1994.

</TABLE>

C-1

(xi) Consent of independent auditors. Filed herewith.

(xvii) Powers of Attorney. Filed herewith.

27. Financial Data Schedule Filed herewith.

</TABLE>

C-2

<PAGE>

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

All of Registrant's outstanding securities are owned by The Prudential Insurance
Company of America ("The Prudential"), a mutual life insurance company organized
under the laws of New Jersey, and the following separate accounts which are
registered as unit investment trusts under the Investment Company Act of 1940
(the "Act"): The Prudential Variable Appreciable Account, The Prudential
Individual Variable Contract Account, The Prudential Qualified Individual
Variable Contract Account, The Prudential Variable Contract Account-24 (separate
accounts of The Prudential); the Pruco Life Flexible Premium Variable Annuity
Account; the Pruco Life PRUvider Variable Appreciable Account; the Pruco Life
Variable Universal Account, the Pruco Life Variable Insurance Account, the Pruco
Life Variable Appreciable Account, the Pruco Life Single Premium Variable Life
Account, the Pruco Life Single Premium Variable Annuity Account (separate
accounts of Pruco Life Insurance Company ["Pruco Life"]); the Pruco Life of New
Jersey Variable Insurance Account, the Pruco Life of New Jersey Variable
Appreciable Account, the Pruco Life of New Jersey Single Premium Variable Life
Account, and the Pruco Life of New Jersey Single Premium Variable Annuity
Account (separate accounts of Pruco Life Insurance Company of New Jersey ["Pruco
Life of New Jersey"]). Pruco Life, a corporation organized under the laws of
Arizona, is a direct wholly-owned subsidiary of The Prudential. Pruco Life of
New Jersey, a corporation organized under the laws of New Jersey, is a direct
wholly-owned subsidiary of Pruco Life, and an indirect wholly-owned subsidiary
of The Prudential.

Registrant's shares will be voted in proportion to the directions of persons
having interests in the above-referenced separate accounts. Registrant may
nonetheless be deemed to be controlled by such entities by virtue of the
presumption contained in Section 2(a)(9) of the Act, although Registrant
disclaims such control.

The subsidiaries of The Prudential and short descriptions of each are set forth
on the following pages. In addition to those subsidiaries, The Prudential holds
all of the voting securities of Prudential's Gibraltar Fund, a Delaware
corporation, in three of its separate accounts. The Gibraltar Fund is registered
as an open-end, diversified, management investment company under the Act. The
separate accounts are registered as unit investment trusts under the Act.
Registrant may also be deemed to be under common control with The Prudential
Variable Contract Account-2, The Prudential Variable Contract Account-10, The
Prudential Variable Account Contract Account-11, (separate accounts of The
Prudential which are registered as open-end, diversified management investment
companies) and The Prudential Variable Contract Account-24 (separate account of
The Prudential which is registered as a unit investment trust under the Act).

C-3

<PAGE>

6/30/95

SHORT DESCRIPTION OF EACH SUBSIDIARY

A. SUBSIDIARIES OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

1. FINE HOMES, L.P. (A Limited Partnership) (99% owned by Prudential, the
limited partner, and 1% owned by Prudential Homes Corporation, the general
partner) (See Section C for direct and indirect subsidiaries)

A limited partnership to hold real estate related subsidiaries.

2. GIBRALTAR CASUALTY COMPANY (Incorporated in Delaware) (100%)

Previously wrote unusual and non-standard property and casualty risks on a
Surplus Line basis. The company is currently servicing policies that it had
issued, but is not actively seeking new business.

3. HEALTH VENTURES PARTNER, INC. (Incorporated in Illinois) (100%)

Operates as a general partner of the joint venture Rush Prudential Health
Plans.

4. HSG HEALTH SYSTEMS GROUP LIMITED (Incorporated in Canada) (100%)

Provides consulting and administrative services to corporate fitness
facilities and wellness programs in Canada.

5. INDUSTRIAL TRUST COMPANY (Incorporated in Prince Edward Island, Canada)
(100%)

Holds a permit to operate as a trust and loan company in Prince Edward
Island. Currently inactive.

6. JENNISON ASSOCIATES CAPITAL CORP. (Incorporated in New York) (100%)

Provides institutional clients (employee benefit plans, endowments,
foundations, etc.) with discretionary management of portfolios investing in
stocks and bonds and acts as an advisor to The Prudential Institutional
Fund.

6a. JACC SERVICES CORP. (Incorporated in New York) (Owned by Jennison
Associates Capital Corp.) (100%)

Provides computer and accounting support necessary to handle portfolio
accounting and reporting.

7. PGR ADVISORS I, INC. (Incorporated in Delaware) (100%)

A general partner which provides management, advisory, and administrative
services to Global Realty Advisors, a Bermudian partnership that acts as
investment manager to the Prudential Global Real EstateInvestment
Programme. Also owns Global Realty Advisors (Bermuda) Limited, a Bermuda
limited liability company which acts as an investment manager to The South
East Asia Property Company Limited and to Seaprime Investments Pte Ltd. (an
unaffiliated entity).

8. PIC HOLDINGS LIMITED (Incorporated in U.K.) (100%) (See section B for
direct and indirect subsidiaries)

Acts as a holding company to house the operating entities of Clive Discount
Company Limited., Clivco Nominees Limited, Clive Agency Bond Broking
Limited, Clivwell Securities Limited, PRICOA Capital Group Limited, PRICOA
Funding Limited, PRICOA Investment Company, PRICOA Property Investment
Management Limited., PRICOA P.I.M. (Regulated) Limited, TransEuropean
Properties (General Partner) Limited, Northern Retail Properties (General
Partner) Limited, TransEuropean Properties (General Partner) II Limited,
Varsity Fund (General Partner) Limited and PRICOA Realty Group Limited.

9. PIC REALTY CANADA LIMITED (Incorporated in Canada) (100%)

Owns, develops, operates, manages and leases real estate in Canada.

C-4

<PAGE>

10. PREMISYS REAL ESTATE SERVICES, INC. (Incorporated in Pennsylvania) (100%)

Provides real estate properties/facilities management for The Prudential
and third parties and advisory services with respect to activities of this
type.

10a. PREMISYS REAL ESTATE SERVICES INC. OF COLORADO (Incorporated in Colorado)
(Owned by Premisys Real Estate Services, Inc.) (80%)

Provides real estate management and related services to unrelated third
parties in Colorado.

11. PRICOA VIDA, SOCIEDAD ANONIMA DE SEGUROS Y REASEGUROS (Incorporated in
Spain) (Less than 1% owned by PRUCO, Inc. and The Prudential Investment
Corporation. The remainder is owned by The Prudential)

Conducts individual life, group pension and group life business in Spain.

11a. PRICOA INVEST, SOCIEDAD ANONIMA, S.G.C. (Incorporated in Spain) (100% owned
by PRICOA Vida Sociedad Anonima de Seguros y Reaseguros)

Licensed to engage in third party investment management and actuarial
consulting in Spain.

12. PRICOA VITA S.P.A. (Incorporated in Italy) (100%)

Organized to sell life insurance and related financial products within
Italy.

13. PRUCO, INC. (Incorporated in New Jersey) (100%) (See Section F for direct
and indirect subsidiaries)

A holding company for other subsidiaries.

14. PRUCO LIFE INSURANCE COMPANY (Incorporated in Arizona) (100%)

Conducts individual life insurance and single pay deferred annuity business
in all states except New York. In addition, the Company markets individual
life insurance through its branch office in Taiwan.

14a. PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (Incorporated in New Jersey)
(Owned by Pruco Life Insurance Company) (100%)

Issues a product line corresponding to that of Pruco Life Insurance Company
in the states of New Jersey and New York.

14b. THE PRUDENTIAL LIFE INSURANCE COMPANY OF ARIZONA (Incorporated in Arizona)
(Owned by Pruco Life Insurance Company) (100%)

A company licensed to sell life insurance in the state of Arizona.

15. PRUDENTIAL DIRECT ADVISERS, INC. (Incorporated in New Jersey) (100%)

Acts as the general partner and manages the affairs of the Prudential
Direct Advisers, L.P.

16. PRUDENTIAL DIRECT DISTRIBUTORS, INC. (Incorporated in New Jersey) (100%)

Serves as the distributor of mutual funds and related no-load products
managed or advised by the Prudential Direct Advisers, L.P.

17. PRUDENTIAL FUND MANAGEMENT CANADA LIMITED (Incorporated in Canada) (100%)

Manages and distributes mutual funds in Canada.

C-5

<PAGE>

18. PRUDENTIAL GLOBAL FUNDING, INC. (Incorporated in Delaware) (100%)

Provides interest rate and currency swaps and other derivative products.

19. PRUDENTIAL-BACHE CAPITAL FUNDING (SWAPS) Limited (Incorporated in Canada)
(Owned by Prudential Global Funding, Inc.) (100%)

In liquidation.

20. PRUDENTIAL HOMES CORPORATION (Incorporated in New York) (100%)

Acts as the sole general partner of Fine Homes, L.P. and Prudential
Residential Services, Limited Partnership. It also acts as one of the two
general partners of The Prudential Relocation Management, Limited
Partnership.

20a. PRUDENTIAL TEXAS RESIDENTIAL SERVICES CORPORATION (Incorporated in Texas)
(Owned by Prudential Homes Corporation) (100%)

Acts as one of the two general partners of The Prudential Relocation
Management, Limited Partnership.

21. PRUDENTIAL MORTGAGE ASSET CORPORATION (Incorporated in Delaware) (100%)

Involved in the purchase and sale of mortgage related assets, mortgage
loans and mortgage pass-through certificates.

22. PRUDENTIAL MORTGAGE ASSET CORPORATION II (Incorporated in Delaware) (50%)

Inactive.

23. PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. (Incorporated in Delaware) (15%
owned by The Prudential and 85% owned by Prudential Securities
Incorporated)

Mutual fund management company.

24. PRUDENTIAL OF AMERICA GENERAL INSURANCE COMPANY (CANADA) (Incorporated in
Canada) (100%)

Provides automobile and homeowner insurance in Canada.

24a. OTIP/RAEO INSURANCE COMPANY, INC. (Incorporated in Canada) (95% owned by
Prudential of America General Insurance Company [Canada])

Provides automobile and homeowner insurance in Canada. This company markets
its products to those employed in the education sector.

25. PRUDENTIAL OF AMERICA LIFE INSURANCE COMPANY (CANADA) (Incorporated in
Canada) (75%)

Markets specialized life insurance products to the upper income segment of
the Canadian market place.

26. PRUDENTIAL PRIVATE PLACEMENT INVESTORS, INC. (Incorporated in New Jersey)
(100%)

Serves as General Partner to a newly formed partnership, Prudential Private
Placement Investors, L.P. ("PPPI, LP"), a Delaware Limited Partnership. It
is anticipated that PPPI, LP will provide investment advisory services to
pension plans and other institutional investors.

27. PRUDENTIAL REALTY SECURITIES II, INC. (Incorporated in Delaware) (87% owned
by The Prudential and 13% owned by PRUCO, Inc.)

Issues bonds secured by real estate mortgages.

28. PRUDENTIAL SELECT HOLDINGS, INC. (Incorporated in Delaware) (100%)

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A holding company for the Prudential Select Life Insurance Company of
America.

29. PRUDENTIAL SELECT LIFE INSURANCE COMPANY OF AMERICA (Incorporated in
Minnesota) (Owned by Prudential Select Holdings, Inc.) (100%)

Intends to sell universal life insurance products to upper income and high
net worth individuals and corporations in all states except New York.

30. PRUDENTIAL SERVICE BUREAU, INC. (INCORPORATED IN KENTUCKY) (100%)

Provides administrative services for employee benefits packages (i.e. COBRA
and FLEX) and pays medical and dental claims.

31. PRULEASE, INC. (INCORPORATED IN DELAWARE) (100%)

Has an investment portfolio of loans, leases, and other forms of financing.

32. PRUSERVICOS PARTICIPACOES, S.A. (Incorporated in Brazil) (Less than 1%
owned by PRUCO, Inc. The remainder owned by The Prudential Insurance
Company of America.)

A holding company owning preferred shares, having certain limited voting
rights, representing 49 percent of the share capital of
Atlantica-Prudential Participacoes S.A., which in turn owns approximately
95 percent of the share capital of Prudential-Atlantica Companhia
Brasileria de Seguros, a Brazilian property and casualty insurer.

33. RESIDENTIAL SERVICES CORPORATION OF AMERICA (Incorporated in Delaware)
(100%) (See Section D for direct and indirect subsidiaries)

A company which engages in the activities of its direct wholly owned
subsidiaries: Lender's Service, Inc., Private Label Mortgage Services
Corporation, Securitized Asset Sales, Inc., Securitized Asset Services
Corporation, The Prudential Home Mortgage Company, Inc., Residential
Information Services, Inc. and their subsidiaries.

34. PRUDENTIAL HEALTHCARE AND LIFE INSURANCE COMPANY OF AMERICA (Incorporated
in New Jersey) (100%)

A life insurance company which presently is qualified only in New Jersey.
It has not yet commenced as an insurance business.

35. THE PRUDENTIAL INVESTMENT CORPORATION (Incorporated in New Jersey) (100%)
(See Section H for direct and indirect subsidiaries)

Has responsibility for the investment business of The Prudential. It in
turn owns all the outstanding stock of Gateway Holdings, S.A., Prudential
Asset Sales and Syndications, Inc., Prudential Home Building Investors,
Inc., PruSupply, Inc., The Prudential Asset Management Company, Inc.,
Prudential Investment Advisory Company, Ltd., TRGOAG Company, Inc., The
Prudential Property Company, Inc., and The Prudential Realty Advisors, Inc.

36. THE PRUDENTIAL LIFE INSURANCE COMPANY OF KOREA, LTD. (Incorporated in
Korea) (100%)

Organized to sell life insurance products within Korea.

37. THE PRUDENTIAL LIFE INSURANCE COMPANY, LTD. (Incorporated in Japan) (100%)

Organized to sell traditional and variable life insurance products within
Japan.

38. THE PRUDENTIAL REAL ESTATE AFFILIATES, INC. (Incorporated in Delaware)
(100%) (See Section E for direct and indirect subsidiaries)

Offers franchises to independently owned residential real estate brokers.

39. U.S. HIGH YIELD MANAGEMENT COMPANY (Incorporated in New Jersey) (100%)

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Provides management services (through the Capital Markets Group) to the
U.S. High Yield Fund, a high yield corporate bond fund organized in
Luxembourg.

B. SUBSIDIARIES OF PIC HOLDINGS LIMITED

1. CLIVE DISCOUNT COMPANY LIMITED (Incorporated in U.K.) (Owned by PIC
Holdings Limited) (100%)

Operates as a discount house in the London market.

1a. CLIVCO NOMINEES LIMITED (Incorporated in the U.K.) (Owned by Clive Discount
Company Limited) (100%)

Inactive.

1b. CLIVE AGENCY BOND BROKING LIMITED (Incorporated in U.K.) (Owned by Clive
Discount Company Limited) (100%)

Identifies attractive investment opportunities in the business of brokering
Government Bonds in the United Kingdom and continental Europe.

2. CLIVWELL SECURITIES LIMITED (Incorporated in U.K.) (Owned by PIC Holdings
Limited) (100%)

An investment company which consists of Mithras Investment Trust holdings
and an 8.5% interest in a real estate investment trust which holds a
leasehold interest in a 12 story commercial building in London, England.

3. PRICOA CAPITAL GROUP LIMITED (Incorporated in U.K.) (Owned by PIC Holdings
Limited) (100%)

Identifies attractive investment opportunities in the United Kingdom and
continental Europe.

4. PRICOA FUNDING LIMITED (Incorporated in U.K.) (Owned by PIC Holdings
Limited) (100%)

A finance company borrowing capital from The Prudential, and lending the
capital to its subsidiary company PRICOA Investment Company to fund its
investment activities.

4a. PRICOA INVESTMENT COMPANY (Incorporated in U.K.) (Owned by PRICOA Funding
Limited) (100%)

To identify attractive investment opportunities in the United Kingdom and
continental Europe for sale to, or managed on behalf of, third party
clients.

5. PRICOA PROPERTY INVESTMENT MANAGEMENT LIMITED (Incorporated in U.K.) (Owned
by PIC Holdings Limited) (100%)

Provides investment management and investment advisory services to
international institutional clients who invest in U.K. and continental
European real estate.

5a. NORTHERN RETAIL PROPERTIES (GENERAL PARTNER) LIMITED (Incorporated in U.K.)
(Owned by PRICOA Property Investment Management Limited) (100%)

Serves as general partner to Northern Retail Property Ltd. Partnership. A
U.K. limited partnership whose principle activity is investment in three
retail units in northern Britain.

5b. PRICOA P. I. M. (REGULATED) LIMITED (Incorporated in the U.K.) (Owned by
PRICOA Property Investment Management Limited) (100%)

Provides investment management and investment advisory services to
international institutional clients who invest in U.K. and continental
European real estate.

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5c. TRANSEUROPEAN PROPERTIES (GENERAL PARTNER) LIMITED (Incorporated in the
U.K.) (Owned by PRICOA Property Investment Management Limited) (100%)

Serves as general partner to TransEuropean Property Limited Partnership, a
U.K. limited partnership. The principal activity of TransEuropean Property
Limited Partnership is investment in European property.

5d. TRANSEUROPEAN PROPERTIES (GENERAL PARTNER) II LIMITED (Incorporated in the
U.K.) (Owned by PRICOA Property Investment Management Limited) (100%)

Will serve as the general partner to TransEuropean Property Limited
Partnership II, a partnership formed to invest in European real estate.

5e. VARSITY FUND (GENERAL PARTNER) LIMITED (Incorporated in the U.K.) (100%
owned by PRICOA Property Investment Management Limited)

Formed to serve as general partner of a limited partnership investing in
U.K. college and university student accommodations. The plans for this fund
changed, and this entity is currently "on the shelf" and not being used.

6. PRICOA REALTY GROUP LIMITED (Incorporated in U.K.) (Owned by PIC Holdings
Limited) (100%)

Provides international real estate services to PGR Advisors I, Inc. in
connection with the Prudential Global Real Estate Programme, and provides
The Prudential with a presence in London to monitor developments and
identify attractive investment opportunities in European property markets,
as well as identifying investment opportunities in other international
markets.

C. SUBSIDIARIES OF FINE HOMES, L.P.

Subsidiaries C.1 through C.9 are 100% owned by Prudential Residential
Services, Limited Partnership ("PRS LP").

1. MAJOR ESCROW CORP. (Incorporated in California) (100%)

Inactive.

2. ML/MSB ACQUISITION, INC. (Incorporated in Delaware) (100%)

Acts as the general partner of Moran, Stahl & Boyer, L.P.

3. PRICOA RELOCATION MANAGEMENT, LTD. (Incorporated in U.K.) (100%)

Involved in the relocation consulting business.

4. PRS ESCROW SERVICES, INC. (Incorporated in California) (100%)

Inactive.

5. PRUDENTIAL COMMUNITY INTERACTION CONSULTING, INC. (Incorporated in
Delaware) (100%)

Consulting activities involving community relations for Prudential
Resources Managements corporate clients with facilities which have had or
might have an adverse environmental impact on surrounding communities.

6. PRUDENTIAL NEW YORK HOMES CORPORATION (Incorporated in New York) (100%)

General partner of Moran, Stahl & Boyer, a New York general partnership and
PrudentialRelocation Management, a New York general partnership.

7. PRUDENTIAL OKLAHOMA HOMES CORPORATION (Incorporated in Oklahoma) (100%)

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Inactive.

8. PRUDENTIAL RELOCATION MANAGEMENT COMPANY OF CANADA LTD. (Incorporated in
Ontario, Canada) (100%)

Involved in the relocation business.

9. PRUDENTIAL RESOURCES MANAGEMENT ASIA, LIMITED (Incorporated in Hong Kong)
(100%)

Provides relocation services in Asia - on-site center for Goldman Sachs in
Hong Kong.

10. THE RELOCATION FUNDING CORPORATION OF AMERICA (Incorporated in California)
(100%)

Involved in the relocation business.

D. SUBSIDIARIES OF RESIDENTIAL SERVICES CORPORATION OF AMERICA

1. LENDER'S SERVICE, INC. (Incorporated in Delaware) (100%)

Obtains residential mortgage appraisals on behalf of mortgage lenders,
provides title agency services, and manages the provision of closing
services.

1a. LENDER'S SERVICE TITLE AGENCY, INC. (Incorporated in Ohio) (Owned by
Lender's Service, Inc.) (100%)

Acts as a title agent in the state of Ohio.

2. PRIVATE LABEL MORTGAGE SERVICES CORPORATION (Incorporated in Delaware)
(100%)

Provides residential mortgage loan underwriting and origination services to
other companies for a fee.

3. RESIDENTIAL INFORMATION SERVICES, INC. (Incorporated in Delaware) (100%)

Serves as the sole general partner of Residential Information Services
Limited Partnership, which provides technology and information services to
mortgage banking industry.

4. SECURITIZED ASSET SALES, INC. (Incorporated in Delaware) (100%)

Registrant of new rent-a-shelf business and sells public and private
mortgage-backed securities.

5. SECURITIZED ASSET SERVICES CORPORATION (Incorporated in New Jersey) (100%)

Services and administers mortgage loans and related real property and
provides security administration services.

6. THE PRUDENTIAL HOME MORTGAGE COMPANY, INC. (Incorporated in New Jersey)
(100%)

Finances residential mortgage loans, through direct origination and
purchases, services and sells residential mortgage loans, and engages in
other residential mortgage banking activities.

6a. THE PRUDENTIAL HOME MORTGAGE SECURITIES COMPANY, INC. (Incorporated in
Delaware) (Owned by The Prudential Home Mortgage Company, Inc.) (100%)

Issues public and private mortgage-backed securities.

E. SUBSIDIARIES OF THE PRUDENTIAL REAL ESTATE AFFILIATES, INC.

1. PRUDENTIAL REFERRAL SERVICES, INC. (Incorporated in Delaware) (100%)

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Operates a residential real estate referral network.

2. THE PRUDENTIAL REAL ESTATE FINANCIAL SERVICES OF AMERICA, INC.
(Incorporated in California) (100%)

Inactive.

2a. THE PRUDENTIAL REAL ESTATE FINANCIAL SERVICES OF LONG ISLAND, INC.
(Incorporated in California) (Owned by The Prudential Real Estate Financial
Services of America, Inc.) (100%)

Inactive.

F. SUBSIDIARIES OF PRUCO, INC.

1. CAPITAL AGRICULTURAL PROPERTY SERVICES, INC. (Incorporated in Delaware)
(100%)

Provides management and real estate brokerage services for agricultural
properties of The Prudential and others.

2. FLOR-AG CORPORATION (Incorporated in Florida) (100%)

Engages primarily in the purchase, development, operation, lease and sale
of farmland in Florida.

3. GIB LABORATORIES, INC. (Incorporated in New Jersey) (100%)

Provides clinical bioanalytical services to The Prudential, as well as to
other insurance companies and industries in the United States and Canada.

4. P.G. REALTY, INC. (Incorporated in Nebraska) (100%)

Engages primarily in the purchase, development, operation, lease and sale
of farmland in Nebraska.

5. PIC REALTY CORPORATION (Incorporated in Delaware) (100%)

Engages in the business of owning, developing, operating, managing, and
leasing real estate property in the United States either directly or
through participation in joint venture partnerships.

6. PRUCO SECURITIES CORPORATION (Incorporated in New Jersey) (100%)

Acts as a registered securities broker-dealer, licensed in every state,
Washington D.C. and Guam. Serves primarily as the medium through which
registered agents of The Prudential sell Prudential Securities Incorporated
mutual funds and offer variable products from Pruco Life and The
Prudential.

7. PRUDENTIAL AGRICULTURAL CREDIT, INC. (Incorporated in Tennessee) (100%)

Provides a broad range of financial services to agriculture, including farm
real estate mortgages, short term financing and equipment leasing.

8. PRUDENTIAL CAPITAL AND INVESTMENT SERVICES, INC. (Incorporated in Delaware)
(100%) (See Section G for direct and indirect subsidiaries)

A holding company for other subsidiaries.

9. PRUDENTIAL DENTAL MAINTENANCE ORGANIZATION, INC. (Incorporated in Texas)
(100%)

A Dental Maintenance Organization which serves the state of Texas.

10. PRUDENTIAL DIRECT, INC. (Incorporated in Georgia) (100%)

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Provides direct response and direct marketing services to The Prudential
and its subsidiaries.

11. PRUDENTIAL EQUITY INVESTORS, INC. (Incorporated in New York) (100%)

As a registered investment advisor, it makes private equity investments
through Limited Partnerships comprised of institutional investors including
The Prudential.

12. PRUDENTIAL FUNDING CORPORATION (Incorporated in New Jersey) (100%)

Serves as a financing company for The Prudential and its subsidiaries.
Funds are obtained primarily through the issuance of commercial paper,
private placement medium term notes, Eurobonds, Eurocommercial paper,
Euro-medium term notes and master notes.

13. PRUDENTIAL HEALTH CARE PLAN, INC. (Incorporated in Texas) (100%)

A federally-qualified Health Maintenance Organization which serves the New
Jersey; Houston, Dallas, San Antonio, Austin and El Paso, Texas; Nashville
and Memphis, Tennessee; Chicago, Illinois; Jacksonville, Tampa, Orlando and
South Florida, Florida; Richmond, Virginia; St. Louis and Kansas City,
Missouri; Columbus, Cleveland and Cincinnati, Ohio; Charlotte, and
Raleigh/Durham/Chapel Hill, North Carolina; Denver, Colorado; Oklahoma City
and Tulsa, Oklahoma; Baltimore, Maryland; Washington, D.C.; Philadelphia,
Pennsylvania; Kansas City, Kansas; Little Rock, Arkansas; Massachusetts and
Indiana areas.

14. PRUDENTIAL HEALTH CARE PLAN OF CALIFORNIA, INC. (Incorporated in
California) (100%)

A Health Maintenance Organization which serves the California area.

15. PRUDENTIAL HEALTH CARE PLAN OF CONNECTICUT, INC. (Incorporated in
Connecticut) (100%)

A Health Maintenance Organization which serves the Connecticut area.

16. PRUDENTIAL HEALTH CARE PLAN OF GEORGIA, INC. (Incorporated in Georgia)
(100%)

A Health Maintenance Organization which serves the Georgia area.

17. PRUDENTIAL HEALTH CARE PLAN OF NEW YORK, INC. (Incorporated in New York)
(100%)

A Health Maintenance Organization which serves the New York area.

18. PRUDENTIAL HOLDINGS, INC. (Incorporated in Delaware) (100%)

A holding company that does not currently hold any other companies.

19. PRUDENTIAL INSTITUTIONAL FUND MANAGEMENT, INC. (Incorporated in
Pennsylvania) (100%)

A registered investment advisor which manages a series of mutual funds. The
funds are offered to institutional investors, principally
employer-sponsored defined contribution plans.

20. PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY (Incorporated in
Indiana) (100%)

Provides dwelling, fire, automobile, homeowners or personal catastrophe
insurance for all states except New Jersey.

20a. PRUDENTIAL COMMERCIAL INSURANCE COMPANY (Incorporated in Delaware) (Owned
by Prudential Property and Casualty Insurance Company) (100%)

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Writes automobile insurance and various commercial coverage in many states.
The company's contract as a servicing carrier, for the New Jersey
Automobile Full Insurance Underwriting Association, expired in March, 1989.
The company will continue to service claims during the run-off period.

20b. PRUDENTIAL GENERAL INSURANCE COMPANY (Incorporated in Delaware) (Owned by
Prudential Property and Casualty Insurance Company) (100%)

Provides coverage for preferred homeowners and private passenger
automobiles in many states.

20c. PRUDENTIAL INSURANCE BROKERAGE, INC. (Incorporated in Arizona) (Owned by
Prudential Property and Casualty Insurance Company) (100%)

Acts as an insurance broker and agency in many states.

20d. THE PRUDENTIAL LLOYDS (Incorporated in Texas) (100% owned by Prudential
Property and Casualty Insurance Company by virtue of a trust agreement with
each underwriter.)

A Lloyds insurer authorized to transact fire and casualty insurance
business within the State of Texas.

20e. THE PRUDENTIAL PROPERTY AND CASUALTY GENERAL AGENCY, INC. (Incorporated in
Texas) (Owned by Prudential Property and Casualty Insurance Company) (100%)

Acts as Managing General Agency in the state of Texas.

21. THE PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY OF NEW JERSEY
(Incorporated in New Jersey) (100%)

Writes automobile, homeowner and personal catastrophe liability lines of
business in the state of New Jersey.

22. PRUDENTIAL REALTY PARTNERSHIPS, INC. (Incorporated in Delaware) (100%)

Acts as a general partner in limited partnerships which own real estate.

23. PRUDENTIAL REALTY SECURITIES, INC. (Incorporated in Delaware) (100%)

Issues zero coupon bonds secured by residential mortgages.

24. PRUDENTIAL REALTY SECURITIES II, INC. (Incorporated in Delaware) (87% owned
by The Prudential and 13% owned by PRUCO, Inc.)

Issues bonds secured by real estate mortgages.

25. PRUDENTIAL REINSURANCE HOLDINGS, INC. (Incorporated in Delaware) (100%)

A holding company which is the sole owner of Prudential Reinsurance
Company.

25a. PRUDENTIAL REINSURANCE COMPANY (Incorporated in Delaware) (Owned by
Prudential Reinsurance Holdings, Inc.) (100%)

Writes substantially all types of property and casualty reinsurance.

25b. LE ROCHER REINSURANCE LTD. (Incorporated in U.K.) (Owned by Prudential
Reinsurance Company) (100%)

Engages in the property and casualty reinsurance business, principally in
Europe.

25c. PRUDENTIAL NATIONAL INSURANCE COMPANY (Incorporated in Arizona) (Owned by
Prudential Reinsurance Company) (100%)

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Writes commercial property and casualty insurance in the alternative risk
market.

26. PRUDENTIAL RETIREMENT SERVICES, INC. (Incorporated in New Jersey) (100%)

Acts as the broker-dealer which distributes securities on behalf of
Prudential Defined Contribution Services. These securities consist of
shares of the Prudential Institutional Fund and four registered separate
accounts of The Prudential.

27. PRUDENTIAL TRUST COMPANY (Incorporated in Pennsylvania) (100%)

Responsible for the management of assets in trust of certain employee
benefit trusts and other tax exempt trusts.

27a. PTC SERVICES, INC. (Incorporated in New Jersey) (Owned by Prudential Trust
Company) (100%)

Oversees the activities of investment advisers who manage certain assets
held in trust by Prudential Trust Company.

28. PRUDENTIAL UNIFORMED SERVICES ADMINISTRATORS, INC. (Incorporated in
Oklahoma) (100%)

Established to administer CHAMPUS (Civilian Health and Medical Program of
Uniformed Service) Insurance for all CHAMPUS eligibles in the states of
Texas, Oklahoma, Arkansas and Louisiana. Currently inactive.

29. THE PRUDENTIAL BANK AND TRUST COMPANY (Incorporated in Georgia) (100%)

Operates as a Georgia chartered commercial bank, it issues credit cards,
and provides commercial, home equity and consumer loans and deposit
products (other than demand deposits) on a national basis, and trust
services in selected states.

29a. PBT MORTGAGE CORPORATION (Incorporated in Georgia) (Owned by The Prudential
Bank and Trust Company) (100%)

As a wholly-owned subsidiary of The Prudential Bank and Trust Company, it
holds home equity loans in various states.

30. THE PRUDENTIAL SAVINGS BANK, F.S.B. (Incorporated in Georgia) (100%)

Operating as a federal savings bank, it provides commercial and consumer
loans and deposit products in the state of Georgia. It also originates home
equity loans and offers deposit products on a national basis.

G. SUBSIDIARIES OF PRUDENTIAL CAPITAL AND INVESTMENT SERVICES, INC.

1. LAPINE HOLDING COMPANY (Incorporated in Delaware) (67%)

Holding company for Lapine Technology Corporation.

2. LAPINE TECHNOLOGY CORPORATION (Incorporated in California) (Owned by Lapine
Holding Company) (100%)

Inactive.

3. PRUDENTIAL SECURITIES GROUP INC. (Incorporated in Delaware) (PRUCO, Inc.
owns 100% Series B common stock and Prudential Capital & Investment
Services, Inc. owns 100% Series A common stock.)

A holding company.

4. BACHE INSURANCE AGENCY OF ARKANSAS, INC. (Incorporated in Arkansas) (Owned
by Prudential Securities Group Inc.)(100%)

Insurance agent in the state of Arkansas.

5. BACHE INSURANCE AGENCY OF LOUISIANA, INC. (Incorporated in Louisiana)
(Owned by Prudential Securities Group Inc.)(100%)

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Insurance agent in the state of Louisiana. Holding company for
Prudential-Bache Securities (Germany) Inc.

6. PRUDENTIAL-BACHE SECURITIES (GERMANY) INC. (Incorporated in Delaware)
(Owned by Bache Insurance Agency of Louisiana, Inc.) (100%)

Correspondent of Prudential Securities Incorporated in Germany.

7. BRAELOCH SUCCESSOR CORPORATION (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Owns Braeloch Holdings Inc. which is an oil and gas company engaged in
partnership management, oil and gas property management, and gas marketing
and transportation.

8. BRAELOCH HOLDINGS INC. (Incorporated in Delaware) (Owned by BraeLoch
Successor Corporation) (100%)

Holding company.

9. GRAHAM RESOURCES, INC. (Incorporated in Delaware) (Owned by BraeLoch
Holdings Inc.) (100%)

Holding company for all partnership management and administration
activities.

10. GRAHAM DEPOSITORY COMPANY II (Incorporated in Delaware) (Owned by Graham
Resources, Inc.) (100%)

Growth Fund depository company.

11. GRAHAM ENERGY, LTD. (Incorporated in Louisiana) (Owned by Graham Resources,
Inc.) (100%)

General Partner in Growth Fund and related products involved primarily in
the investment in oil and gas related companies and assets.

12. GRAHAM EXPLORATION, LTD. (Incorporated in Louisiana) (Owned by Graham
Resources, Inc.) (100%)

General Partner in various limited and general partnerships involved in
exploratory oil and gas operations.

13. GRAHAM ROYALTY, LTD. (Incorporated in Louisiana) (Owned by Graham
Resources, Inc.) (100%)

General Partner of Prudential-Bache Energy Income Funds. Named operator of
oil and gas properties.

14. GRAHAM PRODUCTION COMPANY (Incorporated in Delaware) (Owned by Graham
Royalty, Ltd.) (100%)

Inactive.

15. GRAHAM SECURITIES CORPORATION (Incorporated in Delaware) (Owned by Graham
Resources, Inc.) (100%)

In liquidation.

16. PB BULLION COMPANY, INC. (Incorporated in Delaware) (Owned by Prudential
Securities Group Inc.) (100%)

Purchases metals for resale to processors, fabricators, and other dealers.

17. PB SERVICES (U.K.) (Incorporated in U.K.) (Owned by Prudential Securities
Group Inc.) (100%)

Holds unsecured subordinated loan stock for Prudential-Bache International
(U.K) Limited.

18. PGR ADVISORS, INC. (Incorporated in Delaware) (Owned by Prudential
Securities Group Inc.) (100%)

Vehicle utilized in home office relocation.

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19. PRUDENTIAL-BACHE AGRICULTURE INC. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Inactive.

20. PRUDENTIAL-BACHE CAPITAL FUNDING (AUSTRALIA) LIMITED (Incorporated in
Australia) (Owned by Prudential Securities Group Inc.) (100%)

Dealer in fixed interest securities.

21. PRUDENTIAL-BACHE CAPITAL FUNDING BV (Incorporated in The Netherlands)
(Owned by Prudential Securities Group Inc.) (100%)

Management company for special purpose vehicle (Audley Finance BV).

21a. AUDLEY FINANCE BV (Incorporated in Haarlem, The Netherlands) (Owned by
Prudential-Bache Capital Funding BV) (100%)

Investment vehicle.

22. PRUDENTIAL-BACHE ENERGY CORP. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Inactive.

23. PRUDENTIAL-BACHE ENERGY PRODUCTION INC. (Incorporated in Delaware) (Owned
by Prudential Securities Group Inc.) (100%)

Inactive.

24. PRUDENTIAL-BACHE HOLDINGS INC. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Holding company for Prudential-Bache Partners Inc.

25. PRUDENTIAL-BACHE PARTNERS INC. (Incorporated in Nevada) (Owned by
Prudential-Bache Holdings Inc.) (100%)

Insurance agent in the State of Nevada; general partner to employee
investment partnership.

26. PRUDENTIAL-BACHE INTERNATIONAL BANK S.A. (Incorporated in Luxembourg)
(Owned by Prudential Securities Group Inc.) (100%)

Private banking institution providing secured loan and deposit facilities
and investment services brokerage for retail and institutional clients.

27. PRUDENTIAL-BACHE INTERNATIONAL (UK) LIMITED (Incorporated in U.K.) (Owned
by Prudential Securities Group Inc.) (100%)

Holding & service company for U.K. subsidiaries.

28. CLIVE DISCOUNT HOLDINGS INTERNATIONAL LIMITED (Incorporated in U.K.) (Owned
by Prudential-Bache International [UK] Limited) (100%)

Inactive.

29. PAGE & GWYTHER HOLDINGS LIMITED (Incorporated in U.K.) (Owned by
Prudential-Bache International [UK] Limited) (100%)

Inactive.

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30. PAGE & GWYTHER LIMITED (Incorporated in U.K.) (Owned by Prudential-Bache
International [U.K.] Limited) (100%)

Inactive.

31. PRUDENTIAL-BACHE CAPITAL FUNDING (EQUITIES) LIMITED (Incorporated in U.K.)
(Owned by Prudential-Bache International (UK) Limited) (100%)

London Stock Exchange broker and group custodian services.

32. CIRCLE (NOMINEES) LIMITED (Incorporated in U.K.) (Owned by Prudential-Bache
Capital Funding [Equities] Limited) (100%)

To hold stock for Prudential Capital Funding (Equities) Limited and
Prudential Securities' customers in nominee name.

33. PRUDENTIAL-BACHE CAPITAL FUNDING (GILTS) LIMITED (Incorporated in U.K.)
(Owned by Prudential-Bache International [UK] Limited) (100%)

Inactive.

34. PRUDENTIAL-BACHE CAPITAL FUNDING (MONEY BROKERS) LIMITED (Incorporated in
U.K.) (Owned by Prudential-Bache International [UK] Limited) (100%)

London Stock Exchange money broker.

35. PRUDENTIAL-BACHE (FUTURES) LIMITED (Incorporated in England) (Owned by
Prudential-Bache International [U.K.] Limited) (100%)

Broker/trader in financial futures and commodities.

36. PRUDENTIAL-BACHE INVESTOR SERVICES INC. (Incorporated in Delaware) (Owned
by Prudential Securities Group Inc.) (100%)

Serves as assignor limited partner for public deals offered by the
Specialty Finance Department.

37. PRUDENTIAL-BACHE INVESTOR SERVICES II, INC. (Incorporated in Delaware)
(Owned by Prudential Securities Group Inc.) (100%)

Serves as an assignor limited partner for public deals offered by the
Specialty Finance Department.

38. PRUDENTIAL-BACHE LEASING INC. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Inactive.

39. PRUDENTIAL-BACHE MINERALS INC. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Acts as co-general partner in the Prudential Securities/Barrick Gold
Acquisition Fund (a limited partnership).

40. PRUDENTIAL-BACHE PROGRAM SERVICES INC. (Incorporated in New York) (Owned by
Prudential Securities Group Inc.) (100%)

Issuer of puts in municipal bond offerings underwritten by Prudential
Securities Incorporated.

41. PRUDENTIAL-BACHE PROPERTIES, INC. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Monitors syndicated private placements of investments in real estate and
acts as general partner for real estate and other limited partnerships.

C-17

<PAGE>

42. PRUDENTIAL-BACHE REAL ESTATE, INC. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Inactive.

43. PRUDENTIAL-BACHE SECURITIES (AUSTRALIA) LIMITED (Incorporated in Australia)
(Owned by Prudential Securities Group Inc.) (100%)

Stock brokerage.

44. BACHE NOMINEES LTD. (Incorporated in Australia) (Owned by Prudential-Bache
Securities [Australia] Limited) (100%)

Nominee company for the fixed income department.

45. CORCARR FUNDS MANAGEMENT LIMITED (Incorporated in Australia) (Owned by
Prudential-Bache Securities [Australia] Limited) (100%)

Inactive.

46. CORCARR MANAGEMENT PTY LIMITED (Incorporated in Australia) (Owned by
Prudential-Bache Securities [Australia] Limited) (100%)

Inactive.

47. CORCARR NOMINEES PTY LIMITED (Incorporated in Australia) (Owned by
Prudential-Bache Securities [Australia] Limited) (100%)

Nominee company for the safe custody of clients' scrip.

48. CORCARR SUPERANNUATION PTY LIMITED (Incorporated in Australia) (Owned by
Prudential-Bache Securities [Australia] Limited) (100%)

Inactive.

49. DIVSPLIT NOMINEES PTY LIMITED (Incorporated in Australia) (Owned by
Prudential-Bache Securities [Australia] Limited) (100%)

Nominee company for the protection of client dividends, new issues and
takeovers.

50. PRUBACHE NOMINEES PTY. LTD. (Incorporated in Australia) (50% Owned by
Prudential-Bache Securities [Australia] Limited and 50% owned by Corcarr
Nominees Pty. Limited, as trustee for Prudential-Bache Securities
(Australia) Limited)

Nominee/custodian for clients of Prudential-Bache Securities (Australia)
Limited and Prudential Securities Incorporated.

51. PRUDENTIAL-BACHE TRADE SERVICES INC. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Holding company for PB Trade Ltd., and Prudential-Bache Forex (USA) Inc.

52. PB TRADE LTD. (Incorporated in U.K.) (Owned by Prudential-Bache Trade
Services Inc.) (100%)

Inactive.

53. PRUDENTIAL-BACHE FOREX (USA) INC. (Incorporated in Delaware) (Owned by
Prudential-Bache Trade Services Inc.) (100%)

C-18

<PAGE>

To engage in the foreign exchange business; holding company for
Prudential-Bache Forex (Hong Kong) Limited and Prudential-Bache Forex
(U.K.) Limited.

54. PRUDENTIAL-BACHE FOREX (HONG KONG) LIMITED (Incorporated in Hong Kong)
(Owned by Prudential-Bache Forex [USA] Inc.) (100%)

Foreign exchange.

55. PRUDENTIAL-BACHE FOREX (U.K.) LIMITED (Incorporated in U.K.) (Owned by
Prudential-Bache Forex [USA] Inc.) (100%)

Foreign exchange.

56. PRUDENTIAL-BACHE TRANSFER AGENT SERVICES, INC. (Incorporated in New York)
(Owned by Prudential Securities Group Inc.) (100%)

Acts as a transfer agent for limited partnerships sponsored by Prudential
Securities Group Inc. or sold by Prudential Securities Incorporated.

57. PRUDENTIAL SECURITIES INCORPORATED (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Securities and commodity broker-dealer, underwriter.

58. BACHE & CO. (LEBANON) S.A.L. (Incorporated in Lebanon) (Owned by Prudential
Securities Incorporated) (100%)

Inactive.

59. BACHE & CO. S.A. DE C.V. (MEXICO) (Incorporated in Mexico) (96% owned by
Prudential Securities Incorporated 4% owned by other individuals)

Inactive.

60. BACHE HALSEY STUART SHIELDS (ANTILLES) N.V. (Incorporated in The
Netherlands Antilles) (Prudential Securities Incorporated) (100%)

Inactive.

61. BACHE INSURANCE AGENCY, INCORPORATED (Incorporated in Massachusetts) (Owned
by Prudential Securities Incorporated) (100%)

Insurance agent in Massachusetts.

62. BACHE INSURANCE OF ARIZONA INC. (Incorporated in Arizona) (Owned by
Prudential Securities Incorporated) (100%)

Inactive.

63. BACHE INSURANCE OF KENTUCKY, INC. (Incorporated in Kentucky) (Owned by
Prudential Securities Incorporated) (100%)

Insurance agent in Kentucky.

64. BACHE SHIELDS SECURITIES CORPORATION (Incorporated in Delaware) (Owned by
Prudential Securities Incorporated) (100%)

Inactive.

65. BANOM CORPORATION (Incorporated in New York) (Owned by Prudential
Securities Incorporated) (100%)

C-19

<PAGE>

Inactive.

66. GELFAND, QUINN & ASSOCIATES INC. (Incorporated in Ohio) (Owned by
Prudential Securities Incorporated) (100%)

Inactive.

67. P-B HOLDING JAPAN INC. (Incorporated in Delaware) (Owned by Prudential
Securities Incorporated) (100%)

Holding company of Prudential Securities (Japan) Ltd.

68. PRUDENTIAL SECURITIES (JAPAN) LIMITED (Incorporated in Delaware) (Owned by
P-B Holding Japan Inc.) (100%)

Service affiliate of Prudential Securities Incorporated; registered
broker-dealer.

69. PRUDENTIAL-BACHE FUTURES ASIA PACIFIC LTD. (Incorporated in Delaware)
(Owned by Prudential Securities Incorporated) (100%)

To introduce customers to Prudential Securities for futures transactions on
U.S. Exchanges and execute futures orders on the behalf of Prudential
Securities on SIMEX.

70. PRUDENTIAL-BACHE FUTURES (HONG KONG) LIMITED (Incorporated in Hong Kong)
(Owned by Prudential Securities Incorporated) (100%)

Non-active clearing member of the Hong Kong Futures Exchange.

71. PRUDENTIAL-BACHE NOMINEES (HONG KONG) LIMITED (Incorporated in Hong Kong)
(Owned by Prudential Securities Incorporated) (100%)

Acting as a nominee company for Hong Kong equities.

72. PRUDENTIAL-BACHE SECURITIES ASIA PACIFIC LTD. (Incorporated in New York)
(Owned by Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Singapore.

73. PRUDENTIAL-BACHE SECURITIES (BELGIUM) INC. (Incorporated in Delaware)
(Owned by Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Belgium.

74. PRUDENTIAL-BACHE SECURITIES (ESPANA) S.A. (Incorporated in Spain) (Owned by
Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Spain.

75. PRUDENTIAL-BACHE SECURITIES (FRANCE) S.A. (Incorporated in France) (Owned
by Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in France.

76. PRUDENTIAL-BACHE SECURITIES (HOLLAND) INC. (Incorporated in Delaware)
(Owned by Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Holland.

C-20

<PAGE>

77. PRUDENTIAL-BACHE SECURITIES (HOLLAND) N.V. (Incorporated in Holland) (Owned
by Prudential-Bache Securities [Holland] Inc.) (100%)

Inactive.

78. PRUDENTIAL-BACHE SECURITIES (HONG KONG) LIMITED (Incorporated in Hong Kong)
(Owned by Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Hong Kong.

79. PRUDENTIAL-BACHE SECURITIES (LUXEMBOURG) INC. (Incorporated in Delaware)
(Owned by Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Luxembourg.

80. PRUDENTIAL-BACHE SECURITIES (MONACO) INC. (Incorporated in New York) (Owned
by Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Monaco.

81. PRUDENTIAL-BACHE SECURITIES (SWITZERLAND) INC. (Incorporated in Delaware)
(Owned by Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Switzerland.

82. PRUDENTIAL-BACHE SECURITIES (U.K.) INC. (Incorporated in Delaware) (Owned
by Prudential Securities Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in the U.K.

82a. SHIELDS MODEL ROLAND COMPANY (Incorporated in U.K.) (Owned by
Prudential-BacheSecurities (U.K.) Inc.) (100%)

Inactive.

83. PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. (Incorporated in Delaware) (15%
owned by The Prudential and 85% owned by Prudential Securities
Incorporated)

Mutual fund management company.

84. PRUDENTIAL MUTUAL FUND DISTRIBUTORS, INC. (Incorporated in Delaware) (Owned
by Prudential Mutual Fund Management, Inc.) (100%)

Principal underwriter and distributor of mutual funds.

85. PRUDENTIAL MUTUAL FUND SERVICES, INC. (Incorporated in New Jersey) (Owned
by Prudential Mutual Fund Management, Inc.) (100%)

Mutual fund transfer agent and shareholder services company.

86. PRUDENTIAL SECURITIES (CHILE) INC. (Incorporated in Delaware) (Owned by
Prudential Securities Incorporated) (100%)

Inactive.

87. PRUDENTIAL SECURITIES CMO ISSUER INC. (Incorporated in Delaware) (Owned by
Prudential Securities Incorporated) (100%)

C-21

<PAGE>

Ownership of Delaware Business Trust utilized by Mortgage Finance Unit to
facilitate CALI Transaction.

88. PRUDENTIAL SECURITIES FUTURES MANAGEMENT INC. (Incorporated in Delaware)
(Owned by Prudential Securities Incorporated) (100%)

1) General partner of a limited partnership with assets invested in
commodities, futures contracts and commodity-related products and 2)
Commodities and futures contract business.

89. PRUDENTIAL SECURITIES (SOUTH AMERICA) Incorporated (Incorporated in
Delaware) (Owned by Prudential Securities Incorporated) (100%)

Holding company for Prudential Securities (Argentina) Incorporated and
Prudential Securities (Uruguay) S.A.

90. PRUDENTIAL SECURITIES (ARGENTINA) Incorporated (Incorporated in Delaware)
(Owned by Prudential Securities [South America] Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Argentina.

91. PRUDENTIAL SECURITIES (URUGUAY) S.A. (Incorporated in Uruguay) (Owned by
Prudential Securities [South America] Incorporated) (100%)

Service affiliate of Prudential Securities Incorporated in Uruguay.

92. SHIELDS MODEL ROLAND SECURITIES INCORPORATED (Incorporated in New York)
(Owned by Prudential Securities Incorporated) (100%)

Inactive.

93. WEXFORD CLEARING SERVICES CORPORATION (Incorporated in Delaware) (Owned by
Prudential Securities Incorporated) (100%)

Inactive.

94. PRUDENTIAL SECURITIES LEASE HOLDING INC. (Incorporated in New York) (Owned
by Prudential Securities Group Inc.) (100%)

Owns IBM computers and leases them to Prudential Securities Incorporated.

95. PRUDENTIAL SECURITIES MUNICIPAL DERIVATIVES, INC. (Incorporated in
Delaware) (Owned by Prudential Securities Group Inc.) (100%)

Serves as a general partner in a limited partnership structure providing
floating rate & inverse floating rate municipal securities.

96. PRUDENTIAL SECURITIES REALTY FUNDING CORPORATION (Incorporated in Delaware)
(Owned by Prudential Securities Group Inc.) (100%)

Purchase and sale of residential first mortgage whole loans, including
purchase and sales under repurchase agreements. Sales may be in whole loan,
participation certificates, agency or securitized format.

97. PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION (Incorporated in
Delaware) (Owned by Prudential Securities Group Inc.) (100%)

Purchase and securitization of mortgages and other assets.

C-22

<PAGE>

98. PRUDENTIAL SECURITIES STRUCTURED ASSETS, INC. (Incorporated in Ohio) (Owned
by Prudential Securities Group Inc.) (100%)

Inactive.

99. P-B FINANCE LTD. (Incorporated in The Cayman Islands) (Owned by Prudential
Securities Structured Assets, Inc) (100%)

Finances commodity margin calls, both original and variation, and does
other financing transactions for a select group of international and
domestic customers.

100. R&D FUNDING CORP. (Incorporated in Delaware) (Owned by Prudential
Securities Group Inc.) (100%)

Acts as a general partner in research and development partnerships.

101. SEAPORT FUTURES MANAGEMENT, INC. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

1) General partner of limited partnership with assets invested in
commodities, futures contracts and commodity-related products,
2) Commodities and futures contracts business.

102. SPECIAL SITUATIONS MANAGEMENT INC. (Incorporated in Delaware) (Owned by
Prudential Securities Group Inc.) (100%)

Inactive.

H. SUBSIDIARIES OF THE PRUDENTIAL INVESTMENT CORPORATION

1. GATEWAY HOLDINGS, S.A. (Incorporated in Luxembourg) (100%)

A financial holding company which owns Luxembourg registered investment
management companies. Gateway Holdings, S.A. is the parent of Amicus
Investment Company, Global Income Fund Management Company, S.A., Global
Series Fund II Management Company, S.A., Jennison Long Bond Management
Company, and PAEC Management Company.

2. AMICUS INVESTMENT COMPANY (Incorporated in the Cayman Islands) (Owned by
Gateway Holdings, S.A.) (100%)

Provides promotion and sponsorship functions for the Amicus Equity Fund, an
open-ended investment trust established under the jurisdiction of the
Cayman Islands.

3. GLOBAL INCOME FUND MANAGEMENT COMPANY, S.A. (Incorporated in Luxembourg)
(Owned by Gateway Holdings, S.A.)(100%)

Acts as the management company for Global Income Fund, an investment fund
organized in Luxembourg.

4. GLOBAL SERIES FUND II MANAGEMENT COMPANY, S.A. (Incorporated in Luxembourg)
(Owned by Gateway Holdings, S.A.) (100%)

Acts as the management company for Global Series Fund II, an investment
fund organized in Luxembourg.

5. JENNISON LONG BOND MANAGEMENT COMPANY (Incorporated in Luxembourg) (Owned
by Gateway Holdings, S.A.) (100%)

Acts as the management company for Jennison Long Bond Fund, an investment
fund organized in Luxembourg. The Fund invests in a diversified portfolio
of securities issued or guaranteed by the U.S. Government of which units of
the fund are offered privately to Japanese institutional investors through
PIC's Japan representative office in Tokyo.

6. PAEC MANAGEMENT COMPANY (Incorporated in Luxembourg) (Owned by Gateway
Holdings, S.A.) (100%)

Inactive.

C-23

<PAGE>

7. PRUDENTIAL ASSET SALES AND SYNDICATIONS, INC. (Incorporated in Delaware)
(100%)

Registered broker/dealer which engages in the investment banking business.
Also responsible for the syndication or sale of Prudential originated
private placement deals.

8. PRUDENTIAL HOME BUILDING INVESTORS, INC. (Incorporated in New Jersey)
(100%)

Acts as the general partner of a limited partnership, Prudential Home
Building Advisors, L.P. Through this partnership it provides investment
advisory services in a portfolio of residential land improvement and/or
single family home construction projects.

9. PRUSUPPLY, INC. (Incorporated in Delaware) (100%)

Serves as an inventory facility, holding investments pending sale for
Prudential Asset Sales and Syndications, Inc. Enters into contracts for the
supply of fossil fuel and other inventory.

10. PRUSUPPLY CAPITAL ASSETS, INC. (Incorporated in New Jersey) (Owned by
PruSupply, Inc.) (100%)

Serves as a capital base for the syndication activity of Prudential Asset
Sales and Syndications, Inc. It will hold, invest, and reinvest stocks,
bonds, etc. to support the borrowing capacity of PruSupply, Inc.

11. THE PRUDENTIAL ASSET MANAGEMENT COMPANY, INC. (Incorporated in New Jersey)
(100%)

Provides various record keeping, benefit payment, and plan consulting
services to The Prudential and its clients. It also acts as a solicitor on
behalf of affiliates who are investment advisors.

12. CSI ASSET MANAGEMENT, INC. (Incorporated in Delaware) (Owned by The
Prudential Asset Management Company, Inc.) (100%)

Provides institutional clients (primarily state and municipal employee
benefit plans) with discretionary management of portfolios investing in
U.S. stocks and bonds.

13. ENHANCED INVESTMENT TECHNOLOGIES, INC. (Incorporated in New Jersey) (Owned
by The Prudential Asset Management Company, Inc.) (100%)

Provides investment advisory services to institutional clients using
domestic index portfolios.

14. MERCATOR ASSET MANAGEMENT, INC. (Incorporated in Florida) (Owned by The
Prudential Asset Management Company, Inc.) (100%)

Serves as an investment advisor with a focus on global and international
investing for institutional clients.

15. PCM INTERNATIONAL, INC. (Incorporated in New Jersey) (Owned by The
Prudential Asset Management Company, Inc.) (100%)

Serves as an investment advisor with a focus on global and international
investing for institutional clients.

16. PRUDENTIAL ASIA INVESTMENTS LIMITED (Incorporated in the British Virgin
Islands) (Common stock 100% owned by The Prudential Asset Management
Company, Inc. and preferred stock 50% owned by The Prudential Asset
Management Company, Inc. and 50% owned by Prudential Securities Group Inc.)

A holding company for subsidiaries engaged in investment management,
merchant banking, portfolio management and direct investment activities in
the Far East.

17. PRUASIA DBS LIMITED (Incorporated in Hong Kong) (Owned by Prudential Asia
Investments Limited) (50%)

C-24

<PAGE>

Provides corporate finance services in the Far East.

18. PRUDENTIAL ASIA FUND MANAGEMENT LIMITED (BVI) (Incorporated in the British
Virgin Islands) (Owned by Prudential Asia Investments Limited) (100%)

A holding company for Prudential Asia Fund Management Limited and
Prudential Asia Fund Managers (HK) Limited and engages in portfolio
investment management and advisory services with a concentration on
publicly traded securities.

19. PRUDENTIAL ASIA FUND MANAGEMENT LIMITED (Incorporated in Hong Kong) (Owned
by Prudential Asia Fund Management Limited [BVI]) (100%)

Provides investment advisory activities in the United States.

20. PRUDENTIAL ASIA FUND MANAGERS (HK) LIMITED (Incorporated in Hong Kong)
(Owned by Prudential Asia Fund Management Limited [BVI]) (100%)

Provides investment advisory activities in Hong Kong.

21. PRUDENTIAL ASSET MANAGEMENT ASIA LIMITED (BVI) (Incorporated in the British
Virgin Islands) (Owned by Prudential Asia Investments Limited) (100%)

Makes direct investments and provides investment advisory services in
China, Taiwan, Korea, Japan, Australia and New Zealand.

22. PAMA (INDONESIA) LIMITED (Incorporated in the British Virgin Islands)
(Owned by Prudential Asset Management Asia Limited (BVI)) (75%)

Engaged in the management and operation of PT PAMA Indonesia, an Indonesian
Venture Capital Company, and a unit trust which makes direct investments in
Indonesian companies.

23. PAMA (SINGAPORE) PRIVATE LIMITED (Incorporated in Singapore) (Owned by
Prudential Asset Management Asia Limited [BVI]) (100%)

Engaged in direct investments, corporate finance and portfolio management
activities in Singapore.

24. PRUDENTIAL ASSET MANAGEMENT ASIA HONG KONG LIMITED (Incorporated in Hong
Kong) (Owned by Prudential Asset Management Asia Limited [BVI]) (100%)

Engaged in direct investments and portfolio management activities in Hong
Kong.

25. P.T. PAMA VENTURA INDONESIA (Incorporated in Indonesia) (Owned by
Prudential Asset Management Asia Limited [BVI]) (65%)

An Indonesian Venture Capital Company which invests directly in Indonesian
companies or in a trust that invests in Indonesian companies.

26. SJ BEDDING B.V. (Incorporated in the Netherlands) (Owned by Prudential Asia
Investments Limited) (100%)

A holding company for Prudential Asia Investments Limited's investment in
the shares of Simmons Co., Limited.

27. SIMMONS BEDDING AND FURNITURE (HK) LIMITED (Incorporated in Hong Kong)
(Owned by SJ Bedding BV) (66.24%)

Collectively with its affiliates engages in the manufacturing, sales and
distribution of bedding products, furniture and accessories in Japan, Hong
Kong, Singapore and Macau.

C-25

<PAGE>

28. SIMMONS ASIA LIMITED (Incorporated in the British Virgin Islands) (Owned by
Simmons Bedding & Furniture [HK] Limited) (90%)

Engages in the business of licensing Simmons related trademarks and
technology in Asia Pacific countries other than those covered by Simmons
Co., Limited.

29. SIMMONS (SOUTHEAST ASIA) PRIVATE LIMITED (Incorporated in Singapore) (Owned
by Simmons Asia Limited) (100%)

Carries out manufacturing and distribution activities of the bedding
products, furniture and accessories in Singapore.

30. SIMMONS CO., LIMITED (Incorporated in Japan) (Owned by SJ Bedding B.V.)
(66.24%)

A holding company for Simmons Bedding and Furniture (HK) Limited.

31. PRUDENTIAL ASSET MANAGEMENT COMPANY SECURITIES CORPORATION (Incorporated in
Delaware) (Owned by The Prudential Asset Management Company, Inc.) (100%)

Markets to institutional clients investment products developed by other
Prudential affiliates that must be sold by an SEC registered broker-dealer
with a membership in the NASD.

32. PRUDENTIAL TIMBER INVESTMENTS, INC. (Incorporated in New Jersey) (100% of
common stock owned by The Prudential Asset Management Company, Inc.) (100%
of preferred stock owned by The Prudential Insurance Company of America.)

Provides timber investment management services to institutional clients.
Acquires and manages commercial timber properties with the goal of
generating competitive returns.

33. THE PRUDENTIAL INVESTMENT ADVISORY COMPANY, LTD. (Incorporated in Japan)
(100%)

Provides investment management services to Japanese institutional investors
and for Prudential's General Account with respect to Japanese and global
securities.

34. THE PRUDENTIAL PROPERTY COMPANY, INC. (Incorporated in New Jersey) (100%)

Inactive.

35. THE PRUDENTIAL REALTY ADVISORS, INC. (Incorporated in New Jersey) (100%)

Provides advice and administrative services to others with respect to the
ownership, sale, and management of real property.

36. TRGOAG COMPANY, INC. (Incorporated in Delaware) (100%)

Organized to own interests in oil and gas properties.

C-26
<PAGE>

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

Title of Class Number of Record Holders
-------------- ------------------------
Money Market Portfolio
Capital Stock 13

Diversified Bond Portfolio
Capital Stock 14

High Yield Bond Portfolio
Capital Stock 13

Government Income Portfolio
Capital Stock 13

Equity Portfolio
Capital Stock 14

Stock Index Portfolio
Capital Stock 14

Equity Income Portfolio
Capital Stock 13

Natural Resources Portfolio
Capital Stock 13

Global Portfolio
Capital Stock 15

Conservative Balanced Portfolio
Capital Stock 15

Flexible Managed Portfolio
Capital Stock 15

Zero Coupon Bond 2000 Portfolio
Capital Stock 5

Zero Coupon Bond 2005 Portfolio
Capital Stock 5

Small Capitalization Stock Portfolio
Capital Stock 13

Prudential Jennison Portfolio 13
Capital Stock

C-27

<PAGE>

ITEM 27. INDEMNIFICATION

Article VI, paragraph (4) of Registrant's Articles of Incorporation provides
that "(e)ach director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the General Laws of the State
of Maryland and as provided in the by-laws of the Corporation." Article VIII of
the Registrant's Articles of Incorporation provides, in pertinent part, that
"(n)o provision of these Articles of Incorporation shall be effective to (a)
require a waiver of compliance with any provision of the Securities Act of 1933,
as amended, or the Investment Company Act of 1940, as amended, or of any valid
rule, regulation or order of the Securities and Exchange Commission thereunder
or (b) protect or purport to protect any director or officer of the Corporation
against any liability to the Corporation or its security holders to which he
would otherwise by subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office."

Paragraph 6 of both the Investment Advisory Agreement and the Supplemental
Investment Advisory Agreement between Registrant and The Prudential provides
that "Prudential will not be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, except for a loss resulting from willful misfeasance,
bad faith, or gross negligence in the performance of its duties on behalf of the
Fund or from reckless disregard of its obligation and duties under this
Agreement."

The Prudential Directors' and Officers' Liability and Corporation Reimbursement
Insurance Program, purchased by The Prudential from Aetna Casualty & Surety
Company, CNA Insurance Companies, Lloyds of London, Great American Insurance
Company, Reliance Insurance Company, Corporate Officers & Directors Assurance
Ltd., A.C.E. Insurance Company, Ltd., XL Insurance Company, Ltd., and
Zurich-American Insurance Company, provides reimbursement for "Loss" (as defined
in the policies) which the Company pays as indemnification to its directors or
officers resulting from any claim for any actual or alleged act, error,
misstatement, misleading statement, omission, or breach of duty by persons in
the discharge of their duties in their capacities as directors or officers of
The Prudential, any of its subsidiaries, or certain investment companies
affiliated with The Prudential. Coverage is also provided to the individual
directors or officers for such Loss, for which they shall not be indemnified.
Loss essentially is the legal liability on claims against a director or officer,
including adjudicated damages, settlements and reasonable and necessary legal
fees and expenses incurred in defense of adjudicatory proceedings and appeals
therefrom. Loss does not include punitive or exemplary damages or the multiplied
portion of any multiplied damage award, criminal or civil fines or penalties
imposed by law, taxes or wages, or matters which are uninsurable under the law
pursuant to which the policies are construed.

There are a number of exclusions from coverage. Among the matters excluded are
Losses arising as the result of (1) claims brought about or contributed to by
the criminal or fraudulent acts or omissions or the willful violation of any law
by a director or officer, (2) claims based on or attributable to directors or
officers gaining personal profit or advantage to which they were not legally
entitled, and (3) claims arising from actual or alleged performance of, or
failure to perform, services as, or in any capacity similar to, an investment
adviser, investment banker, underwriter, broker or dealer, as those terms are
defined in the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Advisers Act of 1940, the Investment Company Act of 1940, any rules
or regulations thereunder, or any similar federal, state or local statute, rule
or regulation.

The limit of coverage under the Program for both individual and corporate
reimbursement coverage is $150,000,000. The retention for corporate
reimbursement coverage is $10,000,000 per loss.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

C-28

<PAGE>

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

The Prudential does not have other business of a substantial nature besides
activities relating to the assets of the registrant. The Prudential is involved
in insurance, reinsurance, securities, pension services, real estate and
banking.

The Prudential Investment Corporation (PIC) is the investment unit of Prudential
and actively engages in the business of giving investment advice. The officers
and directors of Prudential and PIC who are engaged directly or indirectly in
activities relating to the registrant have no other business, profession,
vocation, or employment of a substantial nature, and have not had such other
connections during the past two years.

The business and other connections of The Prudential's Directors are listed in
the statement of additional information in Post-Effective Amendment No. 27 to
the Registration Statement of The Prudential Variable Contract Account-10,
Registration No. 2-76580, filed April __, 1996, the text of which is hereby
incorporated by reference.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Pruco Securities Corporation also acts as principal underwriter of
Prudential's Gibraltar Fund.

(b) NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
----------------- ---------------------

Edward P. Baird * Director
E. Michael Caulfield * Director
Ira J. Kleinman ** Director
Joseph Mahoney**** Director
Stephen P. Tooley *** Director
Thomas C. Castano ** Vice President and Comptroller
Secretary

* Principal Business Address: Prudential Plaza, Newark, NJ 07102
** Principal Business Address: 213 Washington Street, Newark, NJ 07102
*** Principal Business Address: 1111 Durham Avenue, South Plainfield, NJ
07080
**** Principal Business Address: 477 Martinsville Road, Liberty Corner, NJ
07938

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books, or other documents required to be maintained by Section 31
(a) of the 1940 Act and the rules promulgated thereunder are maintained by the
Registrant, Prudential Plaza, Newark, New Jersey 07102-3777; the Registrant's
Investment Advisor, The Prudential Insurance Company of America, Prudential
Plaza, Newark, New Jersey 07102-3777 or the Registrant's Custodians, Chemical
Bank, 4 New York Plaza, New York, NY 10004, Brown Brothers Harriman & Co., 40
Water Street, Boston, MA 02109 and Morgan Guaranty Trust Company, 60 Wall
Street, New York, NY 10260.

ITEM 31. MANAGEMENT SERVICES

Not Applicable.

ITEM 32. UNDERTAKINGS

(c) The undersigned Registrant hereby undertakes to furnish each person to whom
a prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders upon request and without charge.

C-29

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that this Amendment is filed
solely for one or more of the purposes specified in Rule 485(b)(1) under the
Securities Act of 1933 and that no material event requiring disclosure in the
prospectus, other than one listed in Rule 485(b)(1), has occurred since the
filing date of a Post-Effective Amendment filed under Rule 485(a) which has not
become effective and has caused this Post-Effective Amendment No. 31 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newark, State of New Jersey, on the 25th day of
April, 1996.

THE PRUDENTIAL SERIES FUND, INC.

By: /s/ Mendel A. Melzer
-------------------------------
Mendel A. Melzer
Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 31 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.

Signature and Title Date
- ------------------- ----

<S> <C> <C>
/s/ * April 25, 1996
- ------------------------------------
E. Michael Caulfield
President and Director

/s/ * April 25, 1996
- ------------------------------------
Mendel A. Melzer
Chairman of the Board of Directors,
Principal Executive Officer, and
Principal Financial Officer

/s/ * April 25, 1996
- ------------------------------------
Stephen P. Tooley
Comptroller

/s/ * April 25, 1996 *By: /s/ Thomas C. Castano
- ------------------------------------ ---------------------
Saul K. Fenster Thomas C. Castano
Director (Attorney-in-Fact)

/s/ * April 25, 1996
- ------------------------------------
W. Scott McDonald, Jr.
Director

/s/ * April 25, 1996
- ------------------------------------
Joseph Weber
Director

</TABLE>

C-30

<PAGE>

EXHIBIT INDEX

(xi) Consent of independent auditors. Page C-32

(xviii) Powers of Attorney. Page C-33

27 Financial Data Schedule Page C-39

C-31

Exhibit (xi)

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Post-Effective Amendment No. 31 to Registration
Statement No. 2-80896 on Form N-1A of The Prudential Series Fund, Inc. of:
(1) our report dated February 15, 1996, relating to the financial statements of
The Prudential Variable Appreciable Account of The Prudential Insurance Company
of America, and of our report dated March 1, 1996, relating to the consolidated
financial statements of The Prudential Insurance Company of America and
subsidiaries appearing in the prospectus of The Prudential Variable Appreciable
Account, which is part of this Registration Statement; (2) our report dated
February 15, 1996, relating to the financial statements of Pruco Life PRUvider
Variable Appreciable Account of Pruco Life Insurance Company, and of our report
dated March 21, 1996, relating to the consolidated financial statements of Pruco
Life Insurance Company and subsidiaries appearing in the prospectus of Pruco
Life PRUvider Variable Appreciable Account, which is part of this Registration
Statement; (3) our report dated February 15, 1996, relating to the financial
statements of Pruco Life of New Jersey Variable Appreciable Account of Pruco
Life Insurance Company of New Jersey, and of our report dated March 21, 1996
relating to the financial statements of Pruco Life Insurance Company of New
Jersey appearing in the prospectus of Pruco Life of New Jersey Variable
Appreciable Account, which is part of this Registration Statement; and (4) our
reports dated February 15, 1996 relating to the financial statements of: (a) The
Prudential Series Fund, Inc. appearing in Part B of this Registration Statement;
(b) the Flexible Managed and Conservative Balanced portfolios (two of the
portfolios comprising The Prudential Series Fund, Inc.) appearing in Part B of
this Registration Statement; and (c) the Diversified Bond, Equity, Flexible
Managed, Conservative Balanced, Stock Index, Government Income and Global
portfolios (seven of the portfolios comprising The Prudential Series Fund, Inc.)
appearing in Part B of this Registration Statement.

We also consent to the references to us under the heading "Experts" in such
Registration Statement.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Parsippany, New Jersey
April 25, 1996

C-32

Exhibit (xii)

POWER OF ATTORNEY

Know all men by these presents:

That I, E. MICHAEL CAULFIELD, of NEWARK, NEW JERSEY, a member of the Board of
Directors of The Prudential Series Fund, Inc., do hereby make, constitute and
appoint as my true and lawful attorneys in fact THOMAS C. CASTANO, THOMAS J.
LOFTUS and CLIFFORD E. KIRSCH, or any of them severally for me and in my name,
place and stead to sign registration statements and any and all amendments
thereto executed in behalf of The Prudential Series Fund, Inc., and filed with
the Securities and Exchange Commission, as follows:

Registration Statement on Form N-1A for the registration under the
Securities Act of 1933 and the Investment Company Act of 1940 of The
Prudential Series Fund, Inc.

IN WITNESS WHEREOF, I have hereunto set my hand this 1 day of March, 1996.

E. Michael Caulfield
-------------------------
Signature

State of NJ )
SS:
County of Essex )

On this 1st day of March, 1996, before me personally appeared E. Michael
Caulfield, to me known and known to me to be the person mentioned and described
in and who executed the foregoing instruments and he duly acknowledged to me
that he executed the same.

Darla Purefoy
----------------------
Notary Public

My commission expires: October 30, 1996

C-33

<PAGE>

POWER OF ATTORNEY

Know all men by these presents:

That I, SAUL K. FENSTER, of NEWARK, NEW JERSEY, a member of the Board of
Directors of The Prudential Series Fund, Inc., do hereby make, constitute and
appoint as my true and lawful attorneys in fact THOMAS C. CASTANO, THOMAS J.
LOFTUS and CLIFFORD E. KIRSCH, or any of them severally for me and in my name,
place and stead to sign registration statements and any and all amendments
thereto executed in behalf of The Prudential Series Fund, Inc., and filed with
the Securities and Exchange Commission, as follows:

Registration Statement on Form N-1A for the registration under the
Securities Act of 1933 and the Investment Company Act of 1940 of The
Prudential Series Fund, Inc.

IN WITNESS WHEREOF, I have hereunto set my hand this 1 day of March, 1996.

Saul K. Fenster
----------------------------
Signature

State of NJ )
SS:
County of Essex )

On this 1st day of March, 1996, before me personally appeared Saul K.
Fenster, to me known and known to me to be the person mentioned and described
in and who executed the foregoing instruments and he duly acknowledged to me
that he executed the same.

Darla Purefoy
-----------------------------
Notary Public

My commission expires: October 30, 1996

C-34

<PAGE>

POWER OF ATTORNEY

Know all men by these presents:

That I, W. SCOTT McDONALD, JR., of NEWARK, NEW JERSEY, a member of the Board
of Directors of The Prudential Series Fund, Inc., do hereby make, constitute and
appoint as my true and lawful attorneys in fact THOMAS C. CASTANO, THOMAS J.
LOFTUS and CLIFFORD E. KIRSCH, or any of them severally for me and in my name,
place and stead to sign registration statements and any and all amendments
thereto executed in behalf of The Prudential Series Fund, Inc., and filed with
the Securities and Exchange Commission, as follows:

Registration Statement on Form N-1A for the registration under the
Securities Act of 1933 and the Investment Company Act of 1940 of The
Prudential Series Fund, Inc.

IN WITNESS WHEREOF, I have hereunto set my hand this 1 day of March, 1996.

W. Scott McDonald, Jr.
-----------------------------
Signature

State of NJ )
SS:
County of Essex )

On this 1st day of March, 1996, before me personally appeared W. Scott
McDonald, Jr, to me known and known to me to be the person mentioned and
described in and who executed the foregoing instruments and he duly acknowledged
to me that he executed the same.

Darla Purefoy
------------------------
Notary Public

My commission expires: October 30, 1996

C-35

<PAGE>

POWER OF ATTORNEY

Know all men by these presents:

That I, MENDEL A. MELZER, of NEWARK, NEW JERSEY, a member of the Board of
Directors of The Prudential Series Fund, Inc., do hereby make, constitute and
appoint as my true and lawful attorneys in fact THOMAS C. CASTANO, THOMAS J.
LOFTUS and CLIFFORD E. KIRSCH, or any of them severally for me and in my name,
place and stead to sign registration statements and any and all amendments
thereto executed in behalf of The Prudential Series Fund, Inc., and filed with
the Securities and Exchange Commission, as follows:

Registration Statement on Form N-1A for the registration under the
Securities Act of 1933 and the Investment Company Act of 1940 of The
Prudential Series Fund, Inc.

IN WITNESS WHEREOF, I have hereunto set my hand this 16 day of February,
1996.

Mendel Melzer
---------------------
Signature

State of NJ )
SS:
County of Essex )

On this 16th day of February, 1996, before me personally appeared Mendel
A. Melzer, to me known and known to me to be the person mentioned and described
in and who executed the foregoing instruments and he duly acknowledged to me
that he executed the same.

Darla Purefoy
---------------------
Notary Public

My commission expires: October 30, 1996

C-36

<PAGE>

POWER OF ATTORNEY

Know all men by these presents:

That I, STEPHEN P. TOOLEY, of NEWARK, NEW JERSEY, Comptroller of The
Prudential Series Fund, Inc., do hereby make, constitute and appoint as my true
and lawful attorneys in fact THOMAS C. CASTANO, THOMAS J. LOFTUS and CLIFFORD E.
KIRSCH, or any of them severally for me and in my name, place and stead to sign
registration statements and any and all amendments thereto executed in behalf of
The Prudential Series Fund, Inc., and filed with the Securities and Exchange
Commission, as follows:

Registration Statement on Form N-1A for the registration under the
Securities Act of 1933 and the Investment Company Act of 1940 of The
Prudential Series Fund, Inc.

IN WITNESS WHEREOF, I have hereunto set my hand this 1 day of March, 1996.

Stephen P. Tooley
---------------------------
Signature

State of NJ )
SS:
County of Essex )

On this 1st day of March, 1996, before me personally appeared Stephen P.
Tooley, to me known and known to me to be the person mentioned and described in
and who executed the foregoing instruments and he duly acknowledged to me that
he executed the same.

Darla Purefoy
---------------------------
Notary Public

My commission expires: October 30, 1996

C-37

<PAGE>

POWER OF ATTORNEY

Know all men by these presents:

That I, JOSEPH WEBER, of NEWARK, NEW JERSEY, a member of the Board of
Directors of The Prudential Series Fund, Inc., do hereby make, constitute and
appoint as my true and lawful attorneys in fact THOMAS C. CASTANO, THOMAS J.
LOFTUS and CLIFFORD E. KIRSCH, or any of them severally for me and in my name,
place and stead to sign registration statements and any and all amendments
thereto executed in behalf of The Prudential Series Fund, Inc., and filed with
the Securities and Exchange Commission, as follows:

Registration Statement on Form N-1A for the registration under the
Securities Act of 1933 and the Investment Company Act of 1940 of The
Prudential Series Fund, Inc.

IN WITNESS WHEREOF, I have hereunto set my hand this 1 day of March, 1996.

Joseph Weber
---------------------------
Signature

State of NJ )
SS:
County of Essex )

On this 1st day of March, 1996, before me personally appeared Joseph Weber,
to me known and known to me to be the person mentioned and described in and
who executed the foregoing instruments and he duly acknowledged to me that he
executed the same.

Darla Purefoy
---------------------------
Notary Public

My commission expires: October 30, 1996

C-38

<ARTICLE> 6
<SERIES>
<NAME> MONEY MARKET PORTFOLIO
<NUMBER> 01
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 610,185
<INVESTMENTS-AT-VALUE> 610,185
<RECEIVABLES> 3,878
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 614,064
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 745
<TOTAL-LIABILITIES> 745
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 612,706
<SHARES-COMMON-STOCK> 61,332
<SHARES-COMMON-PRIOR> 58,328
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 613,320
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 36,566
<OTHER-INCOME> 0
<EXPENSES-NET> 2,645
<NET-INVESTMENT-INCOME> 33,920
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 33,920
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 33,920
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,987
<NUMBER-OF-SHARES-REDEEMED> 14,376
<SHARES-REINVESTED> 3,392
<NET-CHANGE-IN-ASSETS> 30,038
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,400
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,645
<AVERAGE-NET-ASSETS> 601,817
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> .564
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .564
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.000
<EXPENSE-RATIO> .44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> DIVERSIFIED BOND PORTFOLIO
<NUMBER> 02
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 610,311
<INVESTMENTS-AT-VALUE> 643,574
<RECEIVABLES> 12,933
<ASSETS-OTHER> 217
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 656,507
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 670
<TOTAL-LIABILITIES> 670
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 629,568
<SHARES-COMMON-STOCK> 57,971
<SHARES-COMMON-PRIOR> 53,958
<ACCUMULATED-NII-CURRENT> 714
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,289)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,263
<NET-ASSETS> 655,836
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 43,711
<OTHER-INCOME> 0
<EXPENSES-NET> 2,604
<NET-INVESTMENT-INCOME> 41,106
<REALIZED-GAINS-CURRENT> 3,945
<APPREC-INCREASE-CURRENT> 65,195
<NET-CHANGE-FROM-OPS> 110,247
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 40,773
<DISTRIBUTIONS-OF-GAINS> 1,427
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,597
<NUMBER-OF-SHARES-REDEEMED> 3,377
<SHARES-REINVESTED> 3,794
<NET-CHANGE-IN-ASSETS> 114,188
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,914
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,604
<AVERAGE-NET-ASSETS> 587,260
<PER-SHARE-NAV-BEGIN> 10.038
<PER-SHARE-NII> .763
<PER-SHARE-GAIN-APPREC> 1.293
<PER-SHARE-DIVIDEND> .755
<PER-SHARE-DISTRIBUTIONS> .026
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.313
<EXPENSE-RATIO> .44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> GOVERNMENT INCOME PORTFOLIO
<NUMBER> 14
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 457,608
<INVESTMENTS-AT-VALUE> 495,029
<RECEIVABLES> 7,236
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6
<TOTAL-ASSETS> 502,271
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 495
<TOTAL-LIABILITIES> 495
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 486,409
<SHARES-COMMON-STOCK> 42,818
<SHARES-COMMON-PRIOR> 46,607
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,261
<ACCUMULATED-NET-GAINS> (23,743)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 37,421
<NET-ASSETS> 501,775
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,603
<OTHER-INCOME> 0
<EXPENSES-NET> 2,139
<NET-INVESTMENT-INCOME> 31,464
<REALIZED-GAINS-CURRENT> (12,820)
<APPREC-INCREASE-CURRENT> 66,364
<NET-CHANGE-FROM-OPS> 85,008
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31,134
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 863
<NUMBER-OF-SHARES-REDEEMED> 7,347
<SHARES-REINVESTED> 2,693
<NET-CHANGE-IN-ASSETS> 14,201
<ACCUMULATED-NII-PRIOR> 931
<ACCUMULATED-GAINS-PRIOR> (10,924)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,914
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,139
<AVERAGE-NET-ASSETS> 480,582
<PER-SHARE-NAV-BEGIN> 10.461
<PER-SHARE-NII> .741
<PER-SHARE-GAIN-APPREC> 1.275
<PER-SHARE-DIVIDEND> .758
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.719
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> ZERO COUPON BOND 1995 PORTFOLIO
<NUMBER> 07
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 1,674
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 717
<OTHER-INCOME> 0
<EXPENSES-NET> 60
<NET-INVESTMENT-INCOME> 657
<REALIZED-GAINS-CURRENT> 170
<APPREC-INCREASE-CURRENT> (37)
<NET-CHANGE-FROM-OPS> 791
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 685
<DISTRIBUTIONS-OF-GAINS> 170
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11
<NUMBER-OF-SHARES-REDEEMED> 1,767
<SHARES-REINVESTED> 81
<NET-CHANGE-IN-ASSETS> (17,734)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 16
<OVERDIST-NET-GAINS-PRIOR> 37
<GROSS-ADVISORY-FEES> 43
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 60
<AVERAGE-NET-ASSETS> 12,200
<PER-SHARE-NAV-BEGIN> 10.593
<PER-SHARE-NII> .538
<PER-SHARE-GAIN-APPREC> .109
<PER-SHARE-DIVIDEND> .841
<PER-SHARE-DISTRIBUTIONS> 10.399
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> ZERO COUPON BOND 2000 PORTFOLIO
<NUMBER> 08
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 22,165
<INVESTMENTS-AT-VALUE> 25,288
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,288
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29
<TOTAL-LIABILITIES> 29
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,151
<SHARES-COMMON-STOCK> 1,903
<SHARES-COMMON-PRIOR> 1,740
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 34
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,123
<NET-ASSETS> 25,259
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,157
<OTHER-INCOME> 0
<EXPENSES-NET> 111
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> ZERO COUPON BOND 2005 PORTFOLIO
<NUMBER> 06
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 23,647
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<EXPENSES-NET> 96
<NET-INVESTMENT-INCOME> 1,027
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<APPREC-INCREASE-CURRENT> 3,841
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<NET-CHANGE-IN-ASSETS> 7,141
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<GROSS-EXPENSE> 96
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<PER-SHARE-NAV-BEGIN> 10.744
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.190
<EXPENSE-RATIO> .49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> CONSERVATIVE BALANCED PORTFOLIO
<NUMBER> 05
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3,622,931
<INVESTMENTS-AT-VALUE> 3,912,781
<RECEIVABLES> 33,817
<ASSETS-OTHER> 0
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<TOTAL-ASSETS> 3,946,643
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<TOTAL-LIABILITIES> 5,868
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,629,566
<SHARES-COMMON-STOCK> 257,420
<SHARES-COMMON-PRIOR> 248,394
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,287
<ACCUMULATED-NET-GAINS> 21,071
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 289,850
<NET-ASSETS> 3,940,774
<DIVIDEND-INCOME> 23,484
<INTEREST-INCOME> 153,295
<OTHER-INCOME> 0
<EXPENSES-NET> 21,485
<NET-INVESTMENT-INCOME> 155,294
<REALIZED-GAINS-CURRENT> 167,342
<APPREC-INCREASE-CURRENT> 264,774
<NET-CHANGE-FROM-OPS> 587,410
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 154,987
<DISTRIBUTIONS-OF-GAINS> 133,660
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,345
<NUMBER-OF-SHARES-REDEEMED> 15,343
<SHARES-REINVESTED> 19,024
<NET-CHANGE-IN-ASSETS> 439,670
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 2,593
<OVERDIST-NET-GAINS-PRIOR> 12,612
<GROSS-ADVISORY-FEES> 20,328
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,485
<AVERAGE-NET-ASSETS> 3,703,701
<PER-SHARE-NAV-BEGIN> 14.095
<PER-SHARE-NII> .635
<PER-SHARE-GAIN-APPREC> 1.775
<PER-SHARE-DIVIDEND> .643
<PER-SHARE-DISTRIBUTIONS> .553
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.309
<EXPENSE-RATIO> .58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> FLEXIBLE MANAGED PORTFOLIO
<NUMBER> 4
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3,687,627
<INVESTMENTS-AT-VALUE> 4,228,359
<RECEIVABLES> $ 85,069
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,313,428
<PAYABLE-FOR-SECURITIES> 45,775
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,448
<TOTAL-LIABILITIES> 52,223
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,657,682
<SHARES-COMMON-STOCK> 238,598
<SHARES-COMMON-PRIOR> 224,673
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 5,751
<ACCUMULATED-NET-GAINS> 66,155
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 540,733
<NET-ASSETS> 4,261,205
<DIVIDEND-INCOME> 47,780
<INTEREST-INCOME> 103,109
<OTHER-INCOME> 0
<EXPENSES-NET> 24,248
<NET-INVESTMENT-INCOME> 126,641
<REALIZED-GAINS-CURRENT> 292,268
<APPREC-INCREASE-CURRENT> 410,041
<NET-CHANGE-FROM-OPS> 828,950
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 124,621
<DISTRIBUTIONS-OF-GAINS> 176,845
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,487
<NUMBER-OF-SHARES-REDEEMED> 11,612
<SHARES-REINVESTED> 17,051
<NET-CHANGE-IN-ASSETS> 779,665
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 7,771
<OVERDIST-NET-GAINS-PRIOR> 49,268
<GROSS-ADVISORY-FEES> 22,971
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24,248
<AVERAGE-NET-ASSETS> 3,837,004
<PER-SHARE-NAV-BEGIN> 15.496
<PER-SHARE-NII> .564
<PER-SHARE-GAIN-APPREC> 3.149
<PER-SHARE-DIVIDEND> .560
<PER-SHARE-DISTRIBUTIONS> .790
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.859
<EXPENSE-RATIO> .63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> HIGH YIELD BOND PORTFOLIO
<NUMBER> 09
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 354,569
<INVESTMENTS-AT-VALUE> 361,288
<RECEIVABLES> 7,162
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 368,451
<PAYABLE-FOR-SECURITIES> 0
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<TOTAL-LIABILITIES> 541
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 384,458
<SHARES-COMMON-STOCK> 47,165
<SHARES-COMMON-PRIOR> 41,576
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,641
<ACCUMULATED-NET-GAINS> (21,098)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,719
<NET-ASSETS> 367,909
<DIVIDEND-INCOME> 705
<INTEREST-INCOME> 36,153
<OTHER-INCOME> 0
<EXPENSES-NET> 2,056
<NET-INVESTMENT-INCOME> 34,802
<REALIZED-GAINS-CURRENT> (14,400)
<APPREC-INCREASE-CURRENT> 33,692
<NET-CHANGE-FROM-OPS> 54,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 36,032
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,596
<NUMBER-OF-SHARES-REDEEMED> 3,657
<SHARES-REINVESTED> 4,650
<NET-CHANGE-IN-ASSETS> 61,685
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (6,698)
<OVERDISTRIB-NII-PRIOR> 1,410
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,846
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,056
<AVERAGE-NET-ASSETS> 262,423
<PER-SHARE-NAV-BEGIN> 7.366
<PER-SHARE-NII> .812
<PER-SHARE-GAIN-APPREC> .460
<PER-SHARE-DIVIDEND> .838
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.800
<EXPENSE-RATIO> .61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> STOCK INDEX PORTFOLIO
<NUMBER> 10
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 726,829
<INVESTMENTS-AT-VALUE> 1,034,547
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<SENIOR-EQUITY> 0
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<SHARES-COMMON-PRIOR> 44,429
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (317)
<ACCUMULATED-NET-GAINS> 3,563
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 307,370
<NET-ASSETS> 1,031,278
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<EXPENSES-NET> 3,202
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<NUMBER-OF-SHARES-SOLD> 7,147
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<OVERDIST-NET-GAINS-PRIOR> (1,304)
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<GROSS-EXPENSE> 3,202
<AVERAGE-NET-ASSETS> 831,917
<PER-SHARE-NAV-BEGIN> 14.957
<PER-SHARE-NII> .403
<PER-SHARE-GAIN-APPREC> 5.126
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.956
<EXPENSE-RATIO> .38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> EQUITY INCOME PORTFOLIO
<NUMBER> 11
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,029,616
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<TOTAL-LIABILITIES> 2,093
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,017,173
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<ACCUMULATED-NII-CURRENT> 1,280
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,922
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 76,907
<NET-ASSETS> 1,109,963
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<OTHER-INCOME> 0
<EXPENSES-NET> 4,320
<NET-INVESTMENT-INCOME> 39,916
<REALIZED-GAINS-CURRENT> 61,267
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<NET-CHANGE-FROM-OPS> 191,705
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<DISTRIBUTIONS-OF-GAINS> 46,565
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<NUMBER-OF-SHARES-SOLD> 4,804
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<SHARES-REINVESTED> 5,214
<NET-CHANGE-IN-ASSETS> 250,292
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 780
<GROSS-ADVISORY-FEES> 3,999
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<GROSS-EXPENSE> 4,320
<AVERAGE-NET-ASSETS> 999,147
<PER-SHARE-NAV-BEGIN> 14.484
<PER-SHARE-NII> .644
<PER-SHARE-GAIN-APPREC> 2.495
<PER-SHARE-DIVIDEND> .618
<PER-SHARE-DISTRIBUTIONS> .734
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.271
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> EQUITY PORTFOLIO
<NUMBER> 03
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3,003,199
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<TOTAL-ASSETS> 3,819,845
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<PAID-IN-CAPITAL-COMMON> 2,910,528
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<OVERDISTRIBUTION-NII> 3,493
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 799,594
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<OTHER-INCOME> 0
<EXPENSES-NET> 15,415
<NET-INVESTMENT-INCOME> 73,682
<REALIZED-GAINS-CURRENT> 234,572
<APPREC-INCREASE-CURRENT> 553,123
<NET-CHANGE-FROM-OPS> 861,377
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 71,456
<DISTRIBUTIONS-OF-GAINS> 132,219
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<NUMBER-OF-SHARES-SOLD> 15,687
<NUMBER-OF-SHARES-REDEEMED> 1,673
<SHARES-REINVESTED> 8,038
<NET-CHANGE-IN-ASSETS> 1,196,032
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<ACCUMULATED-GAINS-PRIOR> 3,334
<OVERDISTRIB-NII-PRIOR> 5,719
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<GROSS-EXPENSE> 15,415
<AVERAGE-NET-ASSETS> 3,228,536
<PER-SHARE-NAV-BEGIN> 20.662
<PER-SHARE-NII> .546
<PER-SHARE-GAIN-APPREC> 5.891
<PER-SHARE-DIVIDEND> .515
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 25.640
<EXPENSE-RATIO> .48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> PRUDENTIAL JENNISON PORTFOLIO
<NUMBER> 16
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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<ACCUMULATED-NII-CURRENT> 35
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<ACCUMULATED-NET-GAINS> 131
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,044
<NET-ASSETS> 63,091
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<INTEREST-INCOME> 83
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<EXPENSES-NET> 170
<NET-INVESTMENT-INCOME> 42
<REALIZED-GAINS-CURRENT> 131
<APPREC-INCREASE-CURRENT> 4,044
<NET-CHANGE-FROM-OPS> 4,217
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<DISTRIBUTIONS-OF-INCOME> 8
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<NUMBER-OF-SHARES-SOLD> 4,216
<NUMBER-OF-SHARES-REDEEMED> 188
<SHARES-REINVESTED> 667
<NET-CHANGE-IN-ASSETS> 62,991
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 118
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 170
<AVERAGE-NET-ASSETS> 28,007
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> .077
<PER-SHARE-GAIN-APPREC> 1.916
<PER-SHARE-DIVIDEND> .044
<PER-SHARE-DISTRIBUTIONS> .116
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.833
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> SMALL CAPITALIZATION STOCK PORTFOLIO
<NUMBER> 15
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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<INVESTMENTS-AT-VALUE> 50,390
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<TOTAL-ASSETS> 50,396
<PAYABLE-FOR-SECURITIES> 3,420
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<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 3,469
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44,389
<SHARES-COMMON-STOCK> 4,011
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 33
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 397
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,608
<NET-ASSETS> 47,467
<DIVIDEND-INCOME> 173
<INTEREST-INCOME> 128
<OTHER-INCOME> 0
<EXPENSES-NET> 126
<NET-INVESTMENT-INCOME> 176
<REALIZED-GAINS-CURRENT> 801
<APPREC-INCREASE-CURRENT> 2,608
<NET-CHANGE-FROM-OPS> 3,585
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<DISTRIBUTIONS-OF-INCOME> 143
<DISTRIBUTIONS-OF-GAINS> 405
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<NUMBER-OF-SHARES-SOLD> 3,181
<NUMBER-OF-SHARES-REDEEMED> 217
<SHARES-REINVESTED> 47
<NET-CHANGE-IN-ASSETS> 47,367
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 126
<AVERAGE-NET-ASSETS> 25,912
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> .077
<PER-SHARE-GAIN-APPREC> 1.916
<PER-SHARE-DIVIDEND> .044
<PER-SHARE-DISTRIBUTIONS> .116
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.833
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> GLOBAL PORTFOLIO
<NUMBER> 13
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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<INVESTMENTS-AT-VALUE> 380,897
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<TOTAL-LIABILITIES> 4,287
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 353,239
<SHARES-COMMON-STOCK> 25,757
<SHARES-COMMON-PRIOR> 24,911
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 4,668
<ACCUMULATED-NET-GAINS> 5,349
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 45,922
<NET-ASSETS> 345,734
<DIVIDEND-INCOME> 5,246
<INTEREST-INCOME> 315
<OTHER-INCOME> 0
<EXPENSES-NET> 3,940
<NET-INVESTMENT-INCOME> 1,621
<REALIZED-GAINS-CURRENT> 13,763
<APPREC-INCREASE-CURRENT> 39,034
<NET-CHANGE-FROM-OPS> 54,418
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,983
<DISTRIBUTIONS-OF-GAINS> 7,584
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,817
<NUMBER-OF-SHARES-REDEEMED> 2,843
<SHARES-REINVESTED> 873
<NET-CHANGE-IN-ASSETS> 54,366
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (830)
<OVERDISTRIB-NII-PRIOR> 307
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,806
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,939
<AVERAGE-NET-ASSETS> 372,420
<PER-SHARE-NAV-BEGIN> 13.879
<PER-SHARE-NII> .065
<PER-SHARE-GAIN-APPREC> 2.138
<PER-SHARE-DIVIDEND> .242
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<PER-SHARE-NAV-END> 15.533
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NAME> NATURAL RESOURCES PORTFOLIO
<NUMBER> 12
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 251,011
<INVESTMENTS-AT-VALUE> 293,115
<RECEIVABLES> 528
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 293,644
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 472
<TOTAL-LIABILITIES> 472
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 243,474
<SHARES-COMMON-STOCK> 16,974
<SHARES-COMMON-PRIOR> 15,736
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 41
<ACCUMULATED-NET-GAINS> 7,433
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,136
<NET-ASSETS> 293,172
<DIVIDEND-INCOME> 3,977
<INTEREST-INCOME> 624
<OTHER-INCOME> 0
<EXPENSES-NET> 1,310
<NET-INVESTMENT-INCOME> 3,292
<REALIZED-GAINS-CURRENT> 19,734
<APPREC-INCREASE-CURRENT> 39,062
<NET-CHANGE-FROM-OPS> 62,089
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,370
<DISTRIBUTIONS-OF-GAINS> 13,349
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,205
<NUMBER-OF-SHARES-REDEEMED> 948
<SHARES-REINVESTED> 981
<NET-CHANGE-IN-ASSETS> 65,898
<ACCUMULATED-NII-PRIOR> 37
<ACCUMULATED-GAINS-PRIOR> 1,047
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,184
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,310
<AVERAGE-NET-ASSETS> 262,423
<PER-SHARE-NAV-BEGIN> 14.443
<PER-SHARE-NII> .204
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.272
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>