PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT, 485BPOS, 1996-04-25

PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
485BPOS, 1996-04-25

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AS FILED WITH THE SEC ON _____________. REGISTRATION NO. 33-49994

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM S-6

POST-EFFECTIVE AMENDMENT NO. 7

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2

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

PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
(Exact Name of Trust)

PRUCO LIFE INSURANCE COMPANY
(Name of Depositor)

213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 437-4016, EXT. 46
(Address and telephone number of principal executive offices)

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

THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(Name and address of agent for service)

Copy to:
JEFFREY C. MARTIN
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036

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

PRUvider Variable Appreciable Life Insurance Contracts--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>

CROSS REFERENCE SHEET
(AS REQUIRED BY FORM N-8B-2)

N-8B-2 ITEM NUMBER LOCATION
------------------ --------

1. Cover Page

2. Cover Page

3. Not Applicable

4. Sale of the Contract and Sales Commissions
(Part 1B)

5. Pruco Life PRUVIDER Variable Appreciable
Account

6. Pruco Life PRUVIDER Variable Appreciable
Account

7. Not Applicable

8. Not Applicable

9. Litigation

10. Brief Description of the Contract;
Short-Term Cancellation Right or "Free
Look"; Transfers; How the Contract Fund
Changes with Investment Experience; How a
Contract's Death Benefit Will Vary;
Surrender of a Contract; Withdrawal of
Excess Cash Surrender Value (Part 1B); When
Proceeds are Paid; Contract Loans; Lapse and
Reinstatement; Paid-Up Insurance Option; The
Fixed-Rate Option; Voting Rights; Possible
Replacement of Series Fund (Part 1B)

11. Brief Description of the Contract; Pruco
Life PRUVIDER Variable Appreciable Account

12. Cover Page; Brief Description of the
Contract; Flexible Portfolios; Further
Information About The Series Fund; Sale of
the Contract and Sales Commissions (Part 1B)

13. Brief Description of the Contract; Premiums;
Allocation of Premiums; Contract Fees and
Charges; Reduction of Charges for Concurrent
Sales to Several Individuals; (Part 1B);
Sale of the Contract and Sales Commissions
(Part 1B)

14. Brief Description of the Contract; Detailed
Information for Prospective Contract Owners

15. Brief Description of the Contract; Premiums;
Allocation of Premiums; Transfers; General
Information About Pruco Life PRUVIDER
Variable Appreciable Account, and The Fixed
Rate Option

16. Brief Description of the Contract; Detailed
Information for Prospective Contract Owners

17. Surrender of a Contract; Withdrawal of
Excess Cash Surrender Value (Part 1B); When
Proceeds are Paid

18. Pruco Life PRUVIDER Variable Appreciable
Account; How the Contract Fund Changes with
Investment Experience

19. Reports to Contract Owners

20. Not Applicable

<PAGE>

N-8B-2 ITEM NUMBER LOCATION
------------------ --------

21. Contract Loans

22. Not Applicable

23. Not Applicable

24. Other Standard Contract Provisions (Part
1B); Possible Replacement of The Series Fund
(Part 1B)

25. Brief Description of the Contract

26. Brief Description of the Contract; Contract
Fees and Charges

27. Brief Description of the Contract

28. Brief Description of the Contract; Directors
and Officers of Pruco Life and Management of
the Series Fund (Part 1B)

29. Brief Description of the Contract

30. Not Applicable

31. Not Applicable

32. Not Applicable

33. Not Applicable

34. Not Applicable

35. Brief Description of the Contract

36. Not Applicable

37. Not Applicable

38. Sale of the Contract and Sales Commissions
(Part 1B)

39. Sale of the Contract and Sales Commissions
(Part 1B)

40. Not Applicable

41. Sale of the Contract and Sales Commissions
(Part 1B)

42. Not Applicable

43. Not Applicable

44. Brief Description of the Contract; Further
Information About the Series Fund; How the
Contract Fund Changes with Investment
Experience; How a Contract's Death Benefit
Will Vary

45. Not Applicable

46. Brief Description of the Contract; Pruco
Life PRUVIDER Variable Appreciable Account;
Further Information About the Series Fund

47. Pruco Life PRUVIDER Variable Appreciable
Account; Further Information About the
Series Fund

48. Not Applicable

49. Not Applicable

50. Not Applicable

51. Not Applicable

52. Possible Replacement of the Series Fund
(Part 1B)

<PAGE>

N-8B-2 ITEM NUMBER LOCATION
------------------ --------

53. Tax Treatment of Contract Benefits; Tax
Treatment of Contract Benefits (Part 1B)

54. Not Applicable

55. Not Applicable

56. Not Applicable

57. Not Applicable

58. Not Applicable

59. Financial Statements; Consolidated Financial
Statements of Pruco Life Insurance Company
and Subsidiaries

<PAGE>

PART I

INFORMATION REQUIRED IN PROSPECTUS

<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

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 25.

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.

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. 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

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 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 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.

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 2 available portfolios of the Series
Fund for each year, beginning with the year after the Series Fund was
established. They are prepared on a per share basis and therefore provide useful
information about the investment performance of each portfolio.

NOTE, HOWEVER, THAT THESE TABLES DO NOT TELL YOU HOW YOUR CONTRACT FUND WOULD
HAVE CHANGED DURING THIS PERIOD BECAUSE THEY DO NOT REFLECT THE DEDUCTIONS FROM
THE CONTRACT FUND OTHER THAN THE PORTFOLIO DEDUCTIONS.

<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.

*The per share information of the Portfolios of The Prudential Series Fund,
Inc. has not been restated to reflect the operations of the Pruco Life Series
Fund, Inc. prior to the November 1, 1986 merger.

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

<PAGE>

PORTFOLIO RATES OF RETURN

The following table, based upon the immediately preceding condensed financial
information for the Series Fund, shows first the average annual compounded net
rates of return for each Portfolio for the year ended 12/31/95 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.

<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.

<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.

<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.

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.
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.

(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 as follows:

<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>

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

Daily Deduction from the Contract Fund

Each day a charge is deducted from the assets of each of the subaccounts 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
- --------------------------------------------------------------------------------

A significant feature of this Contract is that it permits you to pay greater
than Scheduled Premiums. This may be done by making occasional unscheduled
premium payments or on a periodic basis. If you wish, you may select a higher
contemplated premium than the Scheduled Premium. Pruco Life will then bill you
for the chosen premium. In general, the regular payment of higher premiums will
result in higher cash surrender values and higher death

<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.

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.

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 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 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.

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, 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.

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. 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.

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

<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 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, 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.

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

The Prudential is the investment advisor of the Series Fund. The Prudential has
entered into a Service Agreement with its wholly-owned subsidiary The Prudential
Investment Corporation ("PIC"), which provides that PIC will furnish to The
Prudential such services as The Prudential may require in connection with the
performance of its obligations under an Investment Advisory Agreement with the
Series Fund. See INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES, page 24.

<PAGE>

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 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 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

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 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.

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 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.

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 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.

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

<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."

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 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 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.

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.

<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.

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 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.

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. It is set forth on page 9.

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

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

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

<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.

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

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

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.

<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

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 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.

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 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.

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.

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

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

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>

PART IB

INFORMATION IN STATEMENT OF ADDITIONAL INFORMATION

<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

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 monthly. Any Pruco
Life 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

<PAGE>

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

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

<PAGE>

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.

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.

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.

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.

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.

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.

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.

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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.

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 than 50% of the scheduled premiums for
the first year, no more than 10% of the scheduled premiums for the

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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.

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'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.

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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 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.

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 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

<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.

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.

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

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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.

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.

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.

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.

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.

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.

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.

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. The portfolios, however, will follow the "cover"
procedures described above.

Price movements in a portfolio's equity security portfolio probably will not
correlate precisely with movements in the level of the index and, therefore, in
writing a call on a stock index a portfolio bears the risk that the price of the
securities held by the portfolio may not increase as much as the index. In such
event, the portfolio would bear a loss on the call which is not completely
offset by movement in the price of the portfolio's equity securities. It is also
possible that the index may rise when the portfolio's securities do not rise in
value. If this occurred, the portfolio would experience a loss on the call which
is not offset by an increase in the value of its securities portfolio and might
also experience a loss in its securities portfolio. However, because the value
of a diversified securities portfolio will, over time, tend to move in the same
direction as the market, movements in the value of a portfolio's securities in
the opposite direction as the market would be likely to occur for only a short
period or to a small degree.

When a portfolio has written a call, there is also a risk that the market may
decline between the time the portfolio has a call exercised against it, at a
price which is fixed as of the closing level of the index on the date of 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.

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.

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.

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

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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.

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.

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 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.

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.

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,

<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.

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.

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.

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

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.

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

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.

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.

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>

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.

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.

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

<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 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
hedge currency, at the same time they tend to limit any potential gain which
might result should the value of such currency increase.

Although the portfolios value their assets daily in terms of U.S. dollars, they
do not intend physically to convert their holdings of foreign currencies into
U.S. dollars on a daily basis. They will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to a portfolio at one rate, while offering a lesser rate of exchange should the
portfolio desire to resell that currency to the dealer.

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:

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 Balanced Portfolios may purchase and sell stock index futures contracts
and related options, purchase and sell interest rate futures contracts and
related options, and 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

<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).

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

<PAGE>

assets. If there is an authoritative decision that any of these obligations
are not "securities" for purposes of this diversification test, this
limitation would not apply to the purchase of such obligations.

11. Purchase securities of a company in any industry if, as a result of the
purchase, a portfolio's holdings of securities issued by companies in that
industry would exceed 25% of the value of the portfolio, except that this
restriction does not apply to purchases of obligations issued or guaranteed
by the U.S. Government, its agencies and instrumentalities or issued by
domestic banks. For purposes of this restriction, neither finance companies
as a group nor utility companies as a group are considered to be a single
industry and will be grouped instead according to their services; for
example, gas, electric, and telephone utilities will each be considered a
separate industry. For purposes of this exception, domestic banks shall
include all banks which are organized under the laws of the United States
or a state (as defined in the 1940 Act), U.S. branches of foreign banks
that are subject to the same regulations as U.S. banks and foreign branches
of domestic banks (as permitted by the SEC).

12. Invest more than 15% of its net assets in illiquid securities or invest
more than 10% of its net assets in the securities of unseasoned issuers.
For purposes of this restriction, (a) illiquid securities are those deemed
illiquid pursuant to SEC regulations and guidelines, as they may be revised
from time to time: and (b) unseasoned issuers are issuers (other than U.S.
Government agencies or instrumentalities) having a record, together with
predecessors, of less than 3 years' continuous operation. 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 are generally subject to certain
additional restrictions under the laws of the State of New Jersey. In the event
of future amendments to the applicable New Jersey statutes, each portfolio will
comply, without the approval of the shareholders, with the statutory
requirements as so modified. The pertinent provisions of New Jersey law as they
stand are, in summary form, as follows:

1. An Account may not purchase any evidence of indebtedness issued, assumed or
guaranteed by any institution created or existing under the laws of the
U.S., any U.S. state or territory, District of Columbia, Puerto Rico,
Canada or any Canadian province, if such evidence of indebtedness is in
default as to interest. "Institution" includes any corporation, joint stock
association, business trust, business joint venture, business partnership,
savings and loan association, credit union or other mutual savings
institution.

2. The stock of a corporation may not be purchased unless: (i) the corporation
has paid a cash dividend on the class of stock during each of the past 5
years preceding the time of purchase; or (ii) during the 5-year period the
corporation had aggregate earnings available for dividends on such class of
stock sufficient to pay average dividends of 4% per annum computed upon the
par value of such stock or upon stated value if the stock has no par value.
This limitation does not apply to any class of stock which is preferred as
to dividends over a class of stock whose purchase is not prohibited.

3. Any common stock purchased must be: (i) listed or admitted to trading on a
securities exchange in the United States or Canada; or (ii) included in the
National Association of Securities Dealers' national price listings of
"over-the-counter" securities; or (iii) determined by the Commissioner of
Insurance of New Jersey to be publicly held and traded and have market
quotations available.

4. Any security of a corporation may not be purchased if after the purchase
more than 10% of the market value of the assets of a portfolio would be
invested in the securities of such corporation.

As a result of these currently applicable requirements of New Jersey law, which
impose substantial limitations on the ability of the Series Fund to invest in
the stock of companies whose securities are not publicly traded or who have not
recorded a 5-year history of dividend payments or earnings sufficient to support
such payments, the portfolios will not generally hold the stock of newly
organized corporations. Nonetheless, an investment not otherwise eligible under
items 1 or 2 above may be made if, after giving effect to the investment, the
total cost of all such non-eligible investments does not exceed 5% of the
aggregate market value of the assets of the portfolio.

Investment limitations also arise under the insurance laws and regulations of
Arizona and may arise under the laws and regulations of other states. Although
compliance with the requirements of New Jersey law set forth above will
ordinarily result in compliance with any applicable laws of other states, under
some circumstances the laws of other states could impose additional restrictions
on the portfolios. For example, the Series Fund will generally invest no more
than 10% of its assets in the obligations of banks of the foreign countries
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 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.

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.

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 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 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

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.

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.

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

<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

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 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.

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.

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

* 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.

"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.
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>

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 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:

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

<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:

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.

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:

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.

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

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.

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 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.

LICENSE

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.

<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

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; 1991 to 1993: Managing Director, The Prudential Investment
Corporation; Prior to 1991: Senior Vice President, Prudential Capital
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: 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.

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.

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 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

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

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

<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:

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 B12 THROUGH B15.

<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

<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

<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

<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

B10

<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 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

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 procedure 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.

B12

<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 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>

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.

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. 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

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 0.55% of the average daily
net assets of the Conservative Balanced Portfolio and 0.60% of the average daily
net assets of the Flexible Balanced Portfolio. Under the Agreement, The
Prudential has agreed to refund to a 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.

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.

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

B16

<PAGE>

PART II

OTHER INFORMATION

<PAGE>

UNDERTAKING TO FILE REPORTS

Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.

UNDERTAKING WITH RESPECT TO INDEMNIFICATION

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.

The relevant provisions of New Jersey law permitting or requiring
indemnification, New Jersey being the state of organization of The Prudential,
can be found in Section 14A:3-5 of the New Jersey Statutes Annotated. The
relevant provisions of Arizona law, Arizona being the state of organization of
Pruco Life, can be found in Section 10-005 of the Arizona Statutes Annotated.
The text of The Prudential's by-law 26, which relates to indemnification of
officers and directors, is incorporated by reference to Exhibit 1.A.(6)(b) of
Post-Effective Amendment No. 1 to Form S-6, Registration No. 33-61079, filed
April 25, 1996, on behalf of The Prudential Variable Appreciable Account. The
text of Pruco Life's by-laws, Article VIII, which relates to indemnification of
officers and directors, is incorporated by reference to Exhibit 1.A.(6)(b) to
this Registration Statement.

Insofar as indemnification for liabilities 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.

II-1

<PAGE>

CONTENTS OF REGISTRATION STATEMENT

This Registration Statement comprises the following papers and documents:

The facing sheet.

Cross-reference to items required by Form N-8B-2.

The prospectus consisting of 53 pages.

The Statement of Additional Information consisting of 48 pages.

The undertaking to file reports.

The undertaking with respect to indemnification.

The signatures.

Written consents of the following persons:

1. Deloitte and Touche LLP, independent auditors.
2. Clifford E. Kirsch, Esq.
3. Nancy Davis, FSA, MAAA

The following exhibits:

1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:

A. (1) Resolution of Board of Directors of Pruco Life Insurance Company
establishing the Pruco Life PRUvider Variable Appreciable
Account. (Note 5)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities
Corporation and Pruco Life Insurance Company. (Note 5)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the
Sale of the Contracts. (Note 5)
(c) Schedules of Sales Commissions. (Note 5)
(4) Not Applicable.
(5) PRUvider Variable Appreciable Life Insurance Contract. (Note 5)
(6) (a) Articles of Incorporation of Pruco Life Insurance
Company, as amended July 25, 1972. (Note 2)
(b) By-laws of Pruco Life Insurance Company, as amended
June 14, 1983. (Note 3)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form Part I for PRUvider Variable Appreciable
Life Insurance Contract. (Note 5)
(b) Application Form Part II for PRUvider Variable
Appreciable Life Insurance Contract. (Note 5)
(c) Supplement to the Application for PRUvider Variable
Appreciable Life Insurance Contract. (Note 5)
(11) Form of Notice of Withdrawal Right. (Note 6)
(12) Memorandum describing Pruco Life Insurance Company's issuance,
transfer, and redemption procedures for the Contracts pursuant
to Rule 6e-3(T)(b)(12)(iii) and method of computing cash
adjustment upon exercise of right to exchange for fixed-benefit
insurance pursuant to Rule 6e-3(T)(b)(13)(v)(B). (Note 1)
(13) Available Contract Riders.
(a) Rider for Insured's Payment of Premium Benefit. (Note 5)
(b) Rider for Applicant's Payment of Premium Benefit.
(Note 5)
(c) Rider for Insured's Accidental Death and Dismemberment
Benefit. (Note 5)
(d) Rider for Option to Purchase Additional Insurance on Life
of Insured. (Note 5)
(e) Rider for Level Term Insurance Benefit on Dependent
Children. (Note 5)
(f) Rider for Level Term Insurance Benefit on Dependent
Children--from Term

II-2

<PAGE>

Conversions. (Note 5)
(g) Rider for Level Term Insurance Benefit on Dependent
Children--from Term
Conversions or Attained Age Change. (Note 5)
(h) Living Needs Benefit Rider
(i) for use in Florida. (Note 4)
(ii)for use in all approved jurisdictions except Florida.
(Note 4)
(i) Rider for Term Insurance Benefit on Life of
Insured--Decreasing Amount. (Note 7)
(j) Rider for Term Insurance Benefit on Life of Insured
Spouse--Decreasing Amount. (Note 7)
(k) Endorsement altering the Assignment provision ORD
89224--94-P. (Note 10)

2. See Exhibit 1.A.(5).

3. Opinion and Consent of Clifford E. Kirsch, Esq. as to the legality of the
securities being registered. (Note 1)

4. None.

5. Not Applicable.

6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as to actuarial matters
pertaining to the securities being registered. (Note 1)

7. Indemnification Agreement. (Note 8)

8. Powers of Attorney.

(a) E. Michael Caulfield, Garnett L. Keith, Jr.
Ira J. Kleinman, Esther H. Milnes, I. Edward Price,
Stephen P. Tooley (Note 9)

(b) William F. Yelverton (Note 11)

27. Financial Data Schedule. (Note 1)

(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Exhibit 1.A.(6)(a), Form N-8B-2
Registration No. 2-80513, filed November 22, 1982, on behalf of the
Pruco Life Variable Insurance Account.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 13 to Form
S-6, Registration No. 2-89558, filed March 2, 1989, on behalf of the
Pruco Life Variable Appreciable Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 16 to Form
S-6, Registration No. 2-89558, filed April 26, 1990, on behalf of the
Pruco Life Variable Appreciable Account.
(Note 5) Incorporated by reference to Registrant's Form S-6, filed July 24,
1992.
(Note 6) Incorporated by reference to Pre-Effective Amendment No. 1 to this
Registration Statement, filed October 22, 1992.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 2 to Form
S-6, Registration No. 33-49994, filed April 28, 1993.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 3 to Form
S-6, Registration No. 33-49994, filed March 2, 1994.

(Note 9) Incorporated by reference to Form N-4, Registration No. 33-61125,
filed July 19, 1995 on behalf of the Pruco Life Flexible Premium
Variable Annuity Account.

(Note 10) Incorporated by reference to Post-Effective Amendment No. 5 to Form
S-6, Registration No. 33-49994, filed February 13, 1995.

(Note 11) Incorporated by reference to Pre-Effective Amendment No. 1 to Form
N-4, Registration No. 33- 61125, filed November 17, 1995 on behalf of
the Pruco Life Flexible Premium Variable Annuity Account.

II-3

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant, the
Pruco Life PRUvider Variable Appreciable Account, 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 effective date of the most recent Post-Effective Amendment to the
Registration Statement which included a prospectus and has caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal hereunto affixed and attested, all in the city of
Newark and the State of New Jersey, on this 25th day of April, 1996.

(Seal) PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
(Registrant)

By: PRUCO LIFE INSURANCE COMPANY
(Depositor)

Attest: /s/ Thomas C. Castano By: /s/ Esther H. Milnes
--------------------------- ---------------------------
Thomas C. Castano Esther H. Milnes
Assistant Secretary President

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 7 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 25th day of April, 1996.

SIGNATURE AND TITLE
-------------------

/s/ *
- ----------------------------------------
Esther Milnes
President and Director

/s/ *
- ----------------------------------------
Stephen Tooley
Chief Accounting Officer and Comptroller

/s/ *
- ----------------------------------------
E. Michael Caulfield
Director

/s/ *
- ---------------------------------------- *By: /s/ Thomas C. Castano
Garnett L. Keith, Jr. ----------------------------
Director Thomas C. Castano
(Attorney-in-Fact)

/s/ *
- ----------------------------------------
Ira J. Kleinman
Director

/s/ *
- ----------------------------------------
I. Edward Price
Director

/s/ *
- ----------------------------------------
William F. Yelverton
Director

II-4

<PAGE>

EXHIBIT INDEX

Consent of Deloitte & Touche LLP, independent auditors Page II-5

1.A.(12) Memorandum describing Pruco Life Insurance Company's Page II-7
issuance, transfer, and redemption procedures for the
Contracts pursuant to Rule 6e-3(T)(b)(12)(iii) and method of
computing cash adjustment upon exercise of right to exchange
for fixed-benefit insurance pursuant to Rule 6e-
3(T)(b)(13)(v)(B).

3. Opinion and Consent of Clifford E. Kirsch, Esq. as to Page II-17
the legality of the securities being registered.

6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as to Page II-18
actuarial matters pertaining to the securities being
registered.

27. Financial Data Schedule. Page II-19

II-6

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Post-Effective Amendment No. 7 to Registration
Statement No. 33-49994 on Form S-6 of Pruco Life PRUvider Variable Appreciable
Account of Pruco Life Insurance Company of our report dated February 15, 1996,
relating to the financial statements of the Flexible Managed and Conservative
Balanced subaccounts of Pruco Life PRUvider Variable Appreciable Account, our
report dated February 15, 1996, relating to the financial statements of the
Flexible Managed and Conservative Balanced Portfolios of The Prudential Series
Fund, Inc., and of our report dated March 15, 1996, relating to the consolidated
financial statements of Pruco Life Insurance Company and subsidiaries appearing
in the Prospectus, which is part of such Registration Statement, and to the
reference to us under the heading "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP
Parsippany, New Jersey
April 25, 1996

II-5

Exhibit 1.A.(12)

Description of Pruco Life's Issuance, Transfer
and Redemption Procedures for
PRUvider Variable Appreciable Life Insurance Contracts
Pursuant to Rule 6e-3(T)(b)(12)(iii)

and

Method of Computing Adjustments in
Payments and Cash Surrender Values Upon
Conversion to Fixed Benefit Policies
Pursuant to Rule 6e-3(T)(b)(13)(v)(B)

This document sets forth the administrative procedures that will be
followed by Pruco Life Insurance Company ("Pruco Life") in connection with the
issuance of its PRUvider Variable Appreciable Life Insurance Contract
("Contract"), the transfer of assets held thereunder, and the redemption by
contract owners of their interests in said Contracts. The document also explains
the method that Pruco Life will follow in making a cash adjustment when a
Contract is exchanged for a fixed benefit insurance policy pursuant to Rule
6e-3(T)(b)(13)(v)(B).

I. Procedures Relating to Issuance and Purchase of the Contracts

A. Premiums Schedules and Underwriting Standards

Premiums for the Contract will not be the same for all owners. Insurance is
based on the principle of pooling and distribution of mortality risks, which
assumes that each owner pays a premium commensurate with the Insured's mortality
risk as actuarially determined utilizing factors such as age, sex (in most
cases), smoking status, health and occupation. A uniform premium for all
Insureds would discriminate unfairly in favor of those Insureds representing
greater risks. However, for a given face amount of insurance, Contracts issued
on insureds in a given risk classification will have the same scheduled premium.

The underwriting standards and premium processing practices followed by
Pruco Life are similar to those followed in connection with the offer and sale
of fixed-benefit life insurance, modified where necessary to meet the
requirements of the federal securities laws.

B. Application and Initial Premium Processing

Upon receipt of a completed application form from a prospective owner,
Pruco Life will follow certain insurance underwriting (i.e., evaluation of risk)
procedures designed to determine whether the proposed Insured is insurable. In
the majority of cases this will involve only evaluation of the answers to the
questions on the application and will not include a medical examination. In
other cases, the process may involve such verification

II-7

<PAGE>

procedures as medical examinations and may require that further information be
provided by the proposed Insured before a determination can be made. A Contract
cannot be issued, i.e., physically issued through Pruco Life's computerized
issue system, until this underwriting procedure has been completed.

These processing procedures are designed to provide immediate benefits to
every prospective owner who pays the initial scheduled premium at the time the
application is submitted, without diluting any benefit payable to any existing
owner. Although a Contract cannot be issued until after the underwriting process
has been completed, such a proposed Insured will receive immediate insurance
coverage for the face amount of the Contract, if he or she proves to be
insurable and the owner has paid the first scheduled premium.

The Contract Date marks the date on which benefits begin to vary in
accordance with the investment performance of the selected investment option(s).
It is also the date as of which the insurance age of the proposed Insured is
determined. It represents the first day of the Contract year and therefore
determines the Contract anniversary and also the Monthly Dates. It also
represents the commencement of the suicide and contestable periods for purposes
of the Contract.

If the initial scheduled premium is paid with the application and no
medical examination is required (so that Part 2 of the application is not
completed) the Contract Date will ordinarily be the date of the application. If
an unusual delay is encountered (for example, if a request for further
information is not met promptly), the Contract Date will be 21 days prior to the
date on which the Contract is physically issued. If a medical examination is
required, the Contract Date will ordinarily be the date on which Part 2 of the
application (the medical report) is completed, subject to the same qualification
as that noted above.

If the initial scheduled premium is not paid with the application, the
Contract Date will be the Contract Date stated in the Contract, which will
generally be the date the initial premium is received from the owner and the
Contract is delivered.

There are two principal variations from the foregoing procedure. First, if
the owner wishes permanent insurance protection and variability of benefits to
commence at a future date, he or she can designate that date and purchase term
insurance in a fixed amount for the intervening period. The maximum length of
initial term insurance available is eleven months.

Second, if permitted by the insurance laws of the state in which the
Contract is issued, the Contract may be back dated up to six months, provided
that all past due scheduled premiums are paid with the application and

II-8

<PAGE>

that the backdating results in a lower insurance age for the Insured. The values
under the Contract and the amount(s) deposited into the selected investment
option(s) will be calculated upon the assumptions that the Contract has been
issued on the Contract Date and all scheduled premiums had been received on
their due dates. If the initial premium paid is in excess of the aggregate of
the scheduled premiums due since the Contract Date, the excess (after the
front-end deductions) will be credited to the Contract and placed in the
selected investment option(s) on the date of receipt.

In general, (1) the invested portion of the initial scheduled premium will
be placed in the Contract Fund and allocated to the selected investment options
as of the Contract Date; and (2) the invested portion of any premiums in excess
of the initial scheduled premium will be placed in the Contract Fund and
allocated to the selected investment options as of the later of the Contract
Date and the date received.

If, however, one or more premium due dates has passed before all
requirements for the issuance of the Contract have been satisfied, (1) the
invested portion of the initial scheduled premium will be placed in the Contract
Fund as of the Contract Date, (2) scheduled premiums will be placed in the
Contract Fund as of the intervening premium due dates, and (3) any premium
payments in excess of the aggregate premiums due since the Contract Date will be
placed in the Contract Fund as of the date of receipt.

C. Premium Processing

Whenever a premium after the first is received, unless the Contract is in
default past its days of grace, Pruco Life will subtract the front-end
deductions. What is left will be invested in the selected investment option(s)
on the date received (or, if that is not a business day, on the next business
day). There is an exception if the Contract is in default within its days of
grace. Then, to the extent necessary to end the default, premiums will be
credited as of the date of the default or the Monthly Date after default, and
premiums greater than this amount will be credited when received. The Contract
provides a grace period of 61 days from the date Pruco Life mails the Contract
owner a notice of default. As an administrative practice, Pruco Life extends the
grace period by seven days to minimize manual processing required when premium
payments are processed shortly after the 61st day.

D. Reinstatement

The Contract may be reinstated within five years after default (this period
will be longer if required by state law) unless the Contract has been
surrendered for its cash surrender value. A Contract will be reinstated upon
receipt by Pruco Life of a written application for reinstatement, production of
evidence of insurability satisfactory

II-9

<PAGE>

to Pruco Life and payment of at least the amount required to bring the premium
account up to zero on the first monthly date on which a scheduled premium is due
after the date of reinstatement. Any contract debt under reduced paid-up
insurance must be repaid with interest or carried over to the reinstated
contract.

Pruco Life will treat the amount paid upon reinstatement as a premium. It
will deduct the front-end charges, plus any charges in arrears, other than
mortality charges, with interest. The contract fund of the reinstated Contract
will, immediately upon reinstatement, be equal to this net premium payment, plus
the cash surrender value of the Contract immediately before reinstatement, plus
a refund of that part of the deferred sales and administrative charges which
would be charged if the Contract were surrendered immediately after
reinstatement. The original Contract Date still controls for purposes of
calculating any contingent deferred sales and administrative charges, and any
termination dividends.

The reinstatement will take effect as of the date the required proof of
insurability and payment of the reinstatement amount have been received by Pruco
Life at its Home Office.

Pruco Life may agree to accept a lower amount than described above. This
lower amount must be at least the amount necessary to bring the contract fund
after reinstatement up to the tabular contract fund, plus the estimated monthly
charges for the next three months. The contract fund after reinstatement will be
calculated in the same way as described above. In this case, the premium account
after reinstatement will be negative, so payment of future scheduled premiums
does not guarantee that the contract will not lapse at some time in the future.

There is an alternative to this reinstatement procedure that applies only
if reinstatement is requested within three months after the contract went into
default. In such a case evidence of insurability will not be required and the
amount of the required payment will be the lesser of the unpaid scheduled
premiums and the amount necessary to make the contract fund equal to the tabular
contract fund on the third Monthly Date following the date on which the Contract
went into default.

E. Repayment of Loan

A loan made under the Contract may be repaid with an amount equal to the
monies borrowed plus interest which accrues daily, at a fixed annual rate of
5-1/2%.

When a loan is made, Pruco Life will transfer an amount equal to the
contract loan from the investment option(s). Under the loan provision, the
amount of contract fund attributable to the outstanding contract loan will

II-10

<PAGE>

be credited with interest at an annual rate of at least 4%, and Pruco Life thus
will realize the difference between that rate and the fixed loan interest rate,
which will be used to cover the loan investment expenses, income taxes, if any,
and processing costs.

Upon repayment of Contract debt, the loan portion of the payment
(i.e., not the interest) will be added to the investment option(s). Amounts
originally borrowed from the fixed-rate option will be allocated to the
fixed-rate option, and the rest will be allocated among the variable investment
option(s) in proportion to the amounts in each variable investment option
attributable to the Contract as of the date of repayment.

II. Transfers

The Pruco Life PRUvider Variable Appreciable Account ("Account") currently
has two subaccounts, each of which is invested in shares of a corresponding
portfolio of The Prudential Series Fund, Inc. ("Fund"), which is registered
under the 1940 Act as an open-end diversified management investment company. In
addition, a fixed-rate option is available for investment by contract owners.
Provided the Contract is not in default or is in force as variable reduced
paid-up insurance, the owner may, up to four times in each contract year,
transfer amounts from one subaccount to another subaccount or to the fixed-rate
option. All or a portion of the amount credited to a subaccount may be
transferred.

In addition, the entire amount of the contract fund may be transferred to
the fixed-rate option at any time during the first two contract years. A
contract owner who wishes to convert his or her variable contract to a
fixed-benefit contract in this manner must request a complete transfer of funds
to the fixed-rate option and his or her allocation instructions regarding any
future premiums.

Transfers among subaccounts will take effect at the end of the valuation
period during which a proper written request or authorized telephone request is
received at a Home Office. The request may be in terms of dollars, such as a
request to transfer $1,000 from one account 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.

Transfers from the fixed-rate option to other investment options are
currently permitted only once each contract year and only during the thirty-day
period beginning on the contract anniversary. The maximum amount which may
currently be transferred out of the fixed-rate option each year is the greater
of: (a) 25% of the amount in the fixed-rate option, and (b) $1,000. Such
transfer requests received prior to the contract anniversary will be effected on
the contract anniversary. Transfer requests received within the thirty-day
period beginning on the

II-11

<PAGE>

contract anniversary will be effected as of the end of the valuation period
during which the request is received. These limits are subject to change in the
future.

III. "Redemption" Procedures: Surrender and Related Transactions

A. Surrender for Cash Surrender Value

If the insured party under a Contract is alive, Pruco Life will pay, within
seven days, the Contract's cash surrender value as of the date of receipt at its
Home Office of the Contract and a signed request for surrender.
The Contract's cash surrender value is computed as follows:

1. If the Contract is not in default: The cash surrender value is the
contract fund, minus any surrender charge, consisting of a deferred sales charge
and a deferred administrative charge, minus any contract debt.

The deferred sales charge and deferred administrative charge are described
in the prospectus. The deferred administrative charge is designed to recover the
administrative expenses, such as underwriting expenses, incurred in connection
with the issuance of a Contract. As a result, in the early months after issue,
there may be no cash surrender value if only scheduled premiums are paid.

2. If the Contract is in default during its days of grace, Pruco Life
will compute the cash surrender value as of the date the Contract went into
default. It will adjust this value for any loan the owner took out or paid back
or any premium payments or withdrawals made in the days of grace.

3. If the Contract is in default beyond its days of grace, the cash
surrender value as of any date will be either the value on that date of any
extended insurance benefits then in force, or the value on that date of any
fixed or variable reduced paid-up insurance benefit then in force, less any
Contract debt.

In lieu of the payment of the cash surrender value in a single sum upon
surrender of a Contract, an election may be made by the owner to apply all or a
portion of the proceeds under one of the fixed benefit settlement options
described in the Contract or, with the approval of Pruco Life, a combination of
options. An option is available only if the proceeds to be applied are $2,000 or
more or would result in periodic payments of at least $20.00. The fixed-benefit
settlement options are subject to the restrictions and limitations set forth in
the Contract.

II-12

<PAGE>

B. Withdrawal of Excess Cash Surrender Value

A withdrawal may be made only if the following conditions are satisfied.
First, the amount withdrawn, plus the cash surrender value after withdrawal, may
not be more than the cash surrender value before withdrawal. Second, the
contract fund after the withdrawal must not be less than the tabular contract
fund after the withdrawal. Third, the amount withdrawn must be at least $200. An
owner may make no more than four such withdrawals in a Contract year, and there
is a fee of the lesser of $15 and 2% of the amount withdrawn for each such
withdrawal. An amount withdrawn may not be repaid except as a premium subject to
the Contract charges.

Whenever a withdrawal is made, the death benefit payable will immediately
be reduced by at least the amount of the withdrawal. This will not change the
guaranteed minimum amount of insurance (i.e., the face amount) nor the amount of
the scheduled premium that will be payable thereafter on such a Contract.

C. Death Claims

Pruco Life will pay a death benefit to the beneficiary within seven days
after receipt at its Home Office of due proof of death of the Insured and all
other requirements necessary to make payment. State Insurance laws impose
various requirements, such as receipt of tax waiver, before payment of the death
benefit may be made. In addition, payment of the death benefit is subject to the
provisions of the Contract regarding suicide and incontestability. In the event
Pruco Life should contest the validity of a death claim, an amount up to the
portion of the Contract fund in the variable investment options will be
withdrawn, if appropriate, and held in Pruco Life's general account.

The following describes the death benefit if the Contract is not in default
past its days of grace. The death benefit is the face amount, plus any excess of
the contract fund over the tabular contract fund, less any contract debt. There
may be an additional amount payable from an extra benefit added to the Contract
by rider. Tabular contract funds on Contract anniversaries are shown in the
contract data pages. Tabular contract funds at intermediate times can be
obtained by interpolation.

If the contract fund grows to exceed the net single premium at the
insured's attained age for the death benefit described above, the death benefit
will be the contract fund, divided by such net single premium. The death benefit
will be adjusted for any contract debt and any extra benefits in the same manner
as above.

The proceeds payable on death also will include interest (at a rate
determined by The Prudential from time to time) from the date that the death
benefit is computed (the date of death) until the date of payment.

II-13

<PAGE>

Pruco Life will make payment of the death benefit out of its general
account, and will transfer assets, if appropriate, from the Account to the
general account in an amount up to the contract fund.

In lieu of payment of the death benefit in a single sum, an election may be
made to apply all or a portion of the proceeds under one of the fixed benefit
settlement options described in the Contract or, with the approval of Pruco
Life, a combination of options. The election may be made by the owner during the
Insured's lifetime, or, at death, by the beneficiary.

An option in effect at death may not be changed to another form of benefit
after death. An option is available only if the proceeds to be applied are
$1,000 or more or would result in periodic payments of at least $20.00. The
fixed benefit settlement options are subject to the restrictions and limitations
set forth in the Contract.

D. Default and Options on Lapse

The Contract is in default on any Monthly Date on which the premium account
is less than zero and the contract fund is less than an amount which will grow
at the assumed net rate of return to the tabular contract fund applicable on the
next Monthly Date. Monthly Dates occur on the Contract Date and in each later
month on the same day of the month as the Contract Date. The Contract provides
for a grace period commencing on the Monthly Date on which the Contract goes
into default and extending at least 61 days after the mailing date of the notice
of default. The insurance coverage continues in force during the grace period,
but if the Insured dies during the grace period, any charges due during the
grace period are deducted from the amount payable to the beneficiary.

Except for Contracts issued on certain insureds in high risk rating
classes, a lapsed Contract will normally provide extended term insurance at
expiration of the grace period. The death benefit of the extended term insurance
is equal to the death benefit of the Contract (excluding riders) as of the date
of default, less any Contract debt. The extended term insurance will continue
for a length of time that depends on the cash surrender value on the due date of
first unpaid premium, the amount of insurance, and the age and sex of the
insured. However, extended term insurance may be exchanged, if the contract
owner so elects, for fixed or variable reduced paid-up insurance within three
months of the due date of the premium in default. The face amount of the reduced
paid-up insurance will depend on the cash surrender value on the due date of the
premium in default, and the age and sex

II-14

<PAGE>

of the insured. Variable reduced paid-up is only available if the amount of such
insurance is at least as great as the amount of extended insurance, and if the
insured is not in a high risk rating class.

Contracts issued on the above-mentioned high risk insureds will be
converted to fixed reduced paid-up whole-life insurance at expiration of the
grace period.

If the amount of variable reduced paid-up (VRPU) is at least equal to the
amount of extended term insurance, and VRPU is available, then VRPU will be the
automatic option on lapse.

E. Loans

The Contract provides that an owner, if no premium is in default beyond the
grace period, may take out a loan at any time a loan value is available. The
Contract also provides for a loan value if the Contract is in effect under the
contract value option for fixed or variable reduced paid-up insurance, but not
if it is in effect as extended term insurance. The owner may borrow money on
completion of a form satisfactory to Pruco Life. The Contract is the only
security for the loan. Disbursement of the amount of the loan will be made
within seven days of receipt of the form at a Home Office. The investment
options will be debited in the amount of the loan on the date the form is
received. The percentage of the loan withdrawn from each investment option will
normally be equal to the percentage of the value of such assets held in the
investment option. An owner may borrow up to the Contract's full loan value. The
loan provision is described in the prospectus.

A loan does not affect the amount of premiums due. When a loan is made, the
contract fund is not reduced, but the value of the assets relating to the
Contract held in the investment option(s) is reduced. Accordingly, the daily
changes in the cash surrender value will be different from what they would have
been had no loan been taken. Cash surrender values and the death benefit are
thus permanently affected by any Contract debt, whether or not repaid.

The guaranteed minimum death benefit is not affected by Contract debt if
premiums are duly paid. However, on settlement the amount of any Contract debt
is subtracted from the insurance proceeds. If Contract debt ever becomes equal
to or more than what the cash surrender value would be if there was no Contract
debt, all the Contract's benefits will end 31 days after notice is mailed to the
owner and any known assignee, unless payment of an amount sufficient to end the
default is made within that period.

II-15

<PAGE>

F. Optional Paid-Up Benefit

The Contract has an optional paid-up benefit that may be exercised if the
guaranteed paid-up insurance amount is equal to or exceeds the greater of the
face amount and the face amount plus the contract fund, before deduction of any
monthly charges, minus the tabular contract fund. The guaranteed paid-up
insurance amount is the value of the contract fund minus the present value of
the future charges, the result multiplied by the attained age factor (the
reciprocal of the net single premium). Once exercised you may not make future
premium payments without Pruco Life's permission.

IV. Cash Adjustment Upon Exchange of Contract

As described previously, at any time during the first 24 months after a
Contract is issued, so long as the Contract is not in default, the Owner may
transfer all amounts in the variable investment options into the fixed-rate
option. This option is provided in lieu of the option to exchange to a
comparable fixed-benefit life insurance combined.

II-16

Exhibit 3
April 25, 1996

Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992

To Pruco Life Insurance Company:

In my capacity as Chief Legal Officer of Pruco Life Insurance Company ("Pruco
Life"), I have reviewed the establishment of the Pruco Life PRUvider Variable
Appreciable Account (the "Account") on July 10, 1992 by the Executive Committee
of the Board of Directors of Pruco Life as a separate account for assets
applicable to certain variable life insurance contracts, pursuant to the
provisions of Section 20-651 of the Arizona Insurance Code. I was responsible
for oversight of the preparation and review of the Registration Statement on
Form S-6, as amended, filed by Pruco Life with the Securities and Exchange
Commission (Registration No. 33-49994) under the Securities Act of 1933 for the
registration of certain variable appreciable life insurance contracts issued
with respect to the Account.

I am of the following opinion:

(1) Pruco Life was duly organized under the laws of Arizona and is a
validly existing corporation.

(2) The Account has been duly created and is validly existing as a
separate account pursuant to the aforesaid provisions of Arizona law.

(3) The portion of the assets held in the Account equal to the reserve
and other liabilities for variable benefits under the variable life
insurance contracts is not chargeable with liabilities arising out of
any other business Pruco Life may conduct.

(4) The variable life insurance contracts are legal and binding
obligations of Pruco Life in accordance with their terms.

In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as I judged to be necessary or
appropriate.

I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.

Very truly yours,

Clifford E. Kirsch

vider.pl

II-17

Exhibit 6

April 25, 1996

Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992

To Pruco Life Insurance Company:

This opinion is furnished in connection with the registration by Pruco Life
Insurance Company of variable life insurance contracts ("Contracts") under the
Securities Act of 1933. The prospectus included in Post-Effective Amendment No.
7 to Registration Statement No. 33-49994 on Form S-6 describes the Contracts. I
have reviewed the Contract form and I have participated in the preparation and
review of the Registration Statement and Exhibits thereto. In my opinion:

(1) The illustrations of cash surrender values and death benefits
included in the section of the prospectus entitled "Illustrations",
based on the assumptions stated in the illustrations, are consistent
with the provisions of the Contract. The rate structure of the
Contract has not been designed so as to make the relationship between
premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Contract issued on a male
age 35 than to prospective purchasers of Contracts on males of other
ages or on females.

(2) The illustration of the effect of a Contract loan on the cash
surrender value included in the section of the prospectus entitled
"Contract Loans", based on the assumptions stated in the
illustration, is consistent with the provisions of the Contract.

(3) The deduction in an amount equal to 1.25% of each premium is a
reasonable charge in relation to the additional income tax burden
imposed upon Pruco Life and its parent company, The Prudential
Insurance Company of America, as the result of the enactment of
Section 848 of the Internal Revenue Code. In reaching that conclusion
a number of factors were taken into account that, in my opinion, were
appropriate and which resulted in a projected after-tax rate of
return that is a reasonable rate to use in discounting the tax
benefit of the deductions allowed in Section 848 in taxable years
subsequent to the year in which the premiums are received.

I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.

Very truly yours,

Nancy D. Davis, FSA, MAAA
Vice President and Assistant Actuary
The Prudential Insurance Company of America

vider.pl

II-18

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