PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT, 485BPOS, 1999-04-27

PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
485BPOS, 1999-04-27

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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. 11

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) 778-2255
(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

----------

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, 1999 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

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

<PAGE>

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

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

19. Reports to Contract Owners

20. Not Applicable

21. Contract Loans

22. Not Applicable

23. Not Applicable

24. Other Standard Contract Provisions (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

<PAGE>

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

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. Not Applicable

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; Financial Statements of
the Pruco Life Variable Appreciable Account;
Consolidated Financial Statements of Pruco Life
Insurance Company and Subsidiaries

<PAGE>

PART I

INFORMATION REQUIRED IN PROSPECTUS

<PAGE>

PRUVIDER VARIABLE(SM)
APPRECIABLE LIFE(R) INSURANCE

PROSPECTUS

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

MAY 1, 1999

PRUCO LIFE INSURANCE COMPANY

<PAGE>

PROSPECTUS

MAY 1, 1999

PRUCO LIFE INSURANCE COMPANY
PRUVIDER VARIABLE APPRECIABLE ACCOUNT

PRUVIDER(SM)
VARIABLE APPRECIABLE LIFE(R)
INSURANCE CONTRACT

This prospectus describes a variable life insurance contract (the "Contract")
offered by Pruco Life Insurance Company ("Pruco Life", "us", or "we") under the
name PRUVIDER(SM) Variable APPRECIABLE LIFE(R) Insurance. Pruco Life, a stock
life insurance company, is a wholly-owned subsidiary of The Prudential Insurance
Company of America ("Prudential"). 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). There is no guaranteed minimum cash
surrender value.

AS OF MAY 1, 1999, PRUCO LIFE NO LONGER OFFERED THESE CONTRACTS FOR SALE.

You, the Contract owner, may choose to invest your Contract's premiums and their
earnings in one or more of the following ways:

o Invest in either one or both of two available subaccounts of the Pruco Life
PRUVIDER Variable Appreciable Account, each of which invests in a
corresponding portfolio of The Prudential Series Fund, Inc. (the "Fund"):
the CONSERVATIVE BALANCED PORTFOLIO and the FLEXIBLE MANAGED PORTFOLIO.
Pruco Life may add additional subaccounts in the future.

o Invest in the FIXED-RATE OPTION, which pays a guaranteed interest rate.
Pruco Life will credit interest daily on any portion of the premium payment
that you have allocated to the fixed-rate option at rates periodically
declared by Pruco Life, in its sole discretion. Any such interest rate will
never be less than an effective annual rate of 4%.

You have considerable flexibility as to when and in what amounts you pay
premiums. On the other hand, it may be to your advantage to pay a Scheduled
Premium amount on the dates due, which are at least once a year but may be more
often.

This prospectus describes the Contract generally and the Pruco Life PRUVIDER
Variable Appreciable Account. The prospectus and its statement of additional
information also describe the investment objectives and the risks of investing
in the Fund portfolios. The statement of additional information is available
without charge by telephoning (800) 778-2255.

Before you sign an application to purchase this life insurance contract, you
should carefully read this prospectus. If you do purchase the Contract, you
should retain this prospectus, together with the Contract, for future reference.

The Securities and Exchange Commission ("SEC") maintains a Web site
(http://www.sec.gov) that contains material incorporated by reference and other
information regarding registrants that file electronically with the SEC.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 778-2255

PRUVIDER is a service mark of Prudential.
APPRECIABLE LIFE is a registered mark of Prudential.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION AND SUMMARY.......................................................................................................1
BRIEF DESCRIPTION OF THE CONTRACT...........................................................................................1
INVESTMENT OPTIONS..........................................................................................................1
CHARGES.....................................................................................................................2
PREMIUM PAYMENTS............................................................................................................3
LAPSE AND GUARANTEE AGAINST LAPSE...........................................................................................4
REFUND......................................................................................................................4

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

ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS AND ACCUMULATED PREMIUMS................................................8

GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY, PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT AND THE FIXED RATE
OPTION.........................................................................................................................9
PRUCO LIFE INSURANCE COMPANY................................................................................................9
THE PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT........................................................................9
THE FIXED-RATE OPTION......................................................................................................10

DETAILED INFORMATION FOR CONTRACT OWNERS......................................................................................10
REQUIREMENTS FOR ISSUANCE OF A CONTRACT....................................................................................10
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"...............................................................................10
CONTRACT FEES AND CHARGES..................................................................................................11
DEDUCTIONS FROM PREMIUMS.................................................................................................11
DEDUCTIONS FROM PORTFOLIOS...............................................................................................11
MONTHLY DEDUCTIONS FROM CONTRACT FUND....................................................................................11
DAILY DEDUCTION FROM THE CONTRACT FUND...................................................................................12
SURRENDER OR WITHDRAWAL CHARGES..........................................................................................13
TRANSACTION CHARGES......................................................................................................13
CONTRACT DATE..............................................................................................................13
PREMIUMS...................................................................................................................14
ALLOCATION OF PREMIUMS.....................................................................................................15
TRANSFERS..................................................................................................................15
HOW THE CONTRACT FUND CHANGES WITH INVESTMENT EXPERIENCE...................................................................16
HOW A CONTRACT'S DEATH BENEFIT WILL VARY...................................................................................16
CONTRACT LOANS.............................................................................................................16
SURRENDER OF A CONTRACT....................................................................................................17
LAPSE AND REINSTATEMENT....................................................................................................17
FIXED EXTENDED TERM INSURANCE............................................................................................18
FIXED REDUCED PAID-UP INSURANCE..........................................................................................18
VARIABLE REDUCED PAID-UP INSURANCE.......................................................................................18
WHAT HAPPENS IF NO REQUEST IS MADE?......................................................................................18
PAID-UP INSURANCE OPTION...................................................................................................18
REDUCED PAID-UP INSURANCE OPTION...........................................................................................19
WHEN PROCEEDS ARE PAID.....................................................................................................19
LIVING NEEDS BENEFIT.......................................................................................................19
TERMINAL ILLNESS OPTION..................................................................................................19
NURSING HOME OPTION......................................................................................................20
VOTING RIGHTS..............................................................................................................20
REPORTS TO CONTRACT OWNERS.................................................................................................21
TAX TREATMENT OF CONTRACT BENEFITS.........................................................................................21
TREATMENT AS LIFE INSURANCE..............................................................................................21
PRE-DEATH DISTRIBUTIONS..................................................................................................21
WITHHOLDING..............................................................................................................22
OTHER TAX CONSEQUENCES...................................................................................................22
OTHER CONTRACT PROVISIONS..................................................................................................22

FURTHER INFORMATION ABOUT THE FUND............................................................................................22
RISK/RETURN SUMMARIES......................................................................................................22
CONSERVATIVE BALANCED PORTFOLIO............................................................................................22
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES............................................................................22
</TABLE>

<PAGE>

<TABLE>
<S> <C>
PRINCIPAL RISKS..........................................................................................................22
EVALUATING PERFORMANCE...................................................................................................23
FLEXIBLE MANAGED PORTFOLIO.................................................................................................24
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES............................................................................24
PRINCIPAL RISKS..........................................................................................................24
EVALUATING PERFORMANCE...................................................................................................24

HOW THE PORTFOLIOS INVEST.....................................................................................................25
CONSERVATIVE BALANCED PORTFOLIO............................................................................................25
INVESTMENT OBJECTIVE AND POLICIES........................................................................................25
DERIVATIVES AND OTHER STRATEGIES.........................................................................................26
ADDITIONAL STRATEGIES....................................................................................................27
FLEXIBLE MANAGED PORTFOLIO.................................................................................................27
INVESTMENT OBJECTIVE AND POLICIES........................................................................................27
DERIVATIVES AND OTHER STRATEGIES.........................................................................................28
ADDITIONAL STRATEGIES....................................................................................................29

INVESTMENT RISKS..............................................................................................................31

HOW THE PORTFOLIOS ARE MANAGED................................................................................................35
PURCHASE AND SALE OF FUND SHARES...........................................................................................35

OTHER FUND INFORMATION........................................................................................................36
DISTRIBUTOR................................................................................................................36
MONITORING FOR POSSIBLE CONFLICTS..........................................................................................36

STATE REGULATION..............................................................................................................36

EXPERTS.......................................................................................................................36

LITIGATION....................................................................................................................36

YEAR 2000 COMPLIANCE..........................................................................................................37

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.............................................................38

ADDITIONAL INFORMATION........................................................................................................40

FINANCIAL STATEMENTS..........................................................................................................40

FINANCIAL STATEMENTS OF THE PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT..................................................A1

CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES............................................B1
</TABLE>

<PAGE>

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

INTRODUCTION AND SUMMARY

THIS SUMMARY PROVIDES ONLY AN OVERVIEW OF THE MORE SIGNIFICANT PROVISIONS OF THE
CONTRACT. WE PROVIDE FURTHER DETAIL IN THE SUBSEQUENT SECTIONS 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
THE STATEMENT OF ADDITIONAL INFORMATION IS ON PAGE 37.

AS OF MAY 1, 1999, PRUCO LIFE NO LONGER OFFERED THESE CONTRACTS FOR SALE.

As you read this prospectus, you should keep in mind that this is a variable
life insurance contract. Variable life insurance has significant investment
aspects and requires you to make investment decisions, and therefore it is also
a "security." Securities that are offered to the public must be registered with
the Securities and Exchange Commission. The prospectus that is a part of the
registration statement must be given to all prospective purchasers. A
substantial part of the premium pays for life insurance that will pay a benefit
to the beneficiary, in the event of the insured's death. This death benefit
generally far exceeds total premium payments. You should not purchase this
Contract, therefore, unless the major reason for the purchase is to provide life
insurance protection. Because the Contract provides whole life insurance, it
also serves a second important objective. It can be expected to provide a cash
surrender value that can be used during your lifetime.

BRIEF DESCRIPTION OF THE CONTRACT

The Pruco Life PRUVIDER Variable APPRECIABLE LIFE Insurance Contract (the
"Contract") is issued and sold by Pruco Life Insurance Company ("Pruco Life",
"us", or "we"). The Contract is a form of flexible premium variable life
insurance. It is based on a Contract Fund, the value of which changes every
business day. The Contract Fund amount represents the value of your Contract on
that day. There is a surrender charge if you decide to surrender the Contract
during the first 10 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
the Pruco Life PRUVIDER Variable Appreciable Account (the "Account") under
Arizona law as a separate investment account whose assets are segregated from
all other assets of Pruco Life. The Account is divided into two subaccounts, and
you decide which one[s] will hold the assets of your Contract Fund. Whenever you
pay a premium, Pruco Life first deducts certain charges and, except for amounts
allocated to the fixed-rate option, puts the remainder - the "net premium" -
into the Account. The money allocated to each subaccount is immediately invested
in a corresponding portfolio of The Prudential Series Fund, Inc. (the "Fund"), a
series mutual fund for which Prudential is the investment adviser. The two Fund
portfolios -- 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.

The Fund is an investment company registered under the Investment Company Act of
1940.

INVESTMENT OPTIONS

When you first buy the Contract you give instructions to Pruco Life as to what
combination of the three investment options 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 22 of this prospectus, are as follows:

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

<PAGE>

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

VARIABLE INVESTMENT OPTIONS

o CONSERVATIVE BALANCED PORTFOLIO. The investment objective is a total
investment return consistent with a conservatively managed diversified
portfolio. The Portfolio invests in a mix of equity securities, debt
obligations, and money market instruments. This Portfolio is appropriate
for an investor desiring diversification with a relatively lower risk of
loss than that associated with the Flexible Managed Portfolio.

o FLEXIBLE MANAGED PORTFOLIO. The investment objective is a total investment
return consistent with an aggressively managed diversified portfolio. The
Portfolio invests in a mix of equity securities, debt obligations, and
money market instruments. This Portfolio is appropriate for an investor
desiring diversification, who is willing to accept a relatively high level
of loss, in an effort to achieve greater appreciation.

FIXED-RATE OPTION

The fixed-rate option provides a guarantee against loss of principal plus income
at a rate which may change at yearly intervals, for new premium deposits, it
changes monthly, but will never be lower than an effective annual rate of 4%.

CHARGES

Pruco Life deducts certain charges from each premium payment and from the
amounts held in the designated subaccounts and the fixed rate option. 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 11. In brief, Pruco Life may make the following charges:

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

2
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<PAGE>

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

DAILY CHARGES

o We deduct management fees and expenses from the Fund assets. The total
expenses of each portfolio for the year 1998, expressed as a percentage of
the average assets during the year, are as follows:

PORTFOLIOS CONSERVATIVE BALANCED FLEXIBLE MANAGED
---------- --------------------- ----------------
Advisory Fee 0.55% 0.60%
Other Expenses 0.02% 0.01%
Total Expenses 0.57% 0.61%

o We deduct a daily mortality and expense risk charge equivalent to an annual
rate of up to 0.9% from the assets of the subaccounts.

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

MONTHLY CHARGES

o We deduct a sales charge from the Contract Fund in the amount of 1/2 of 1%
of the primary annual premium.

o We reduce the Contract Fund by a guaranteed minimum death benefit risk
charge of not more than $0.01 per $1,000 of the face amount of insurance.

o We reduce the Contract Fund 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 We deduct a charge for anticipated mortality. The maximum charge is based
on the non-smoker/smoker 1980 CSO Tables.

o If the Contract includes riders, we deduct rider charges from the Contract
Fund.

o If the rating class of the insured results in an extra charge, we will
deduct that charge from the Contract Fund.

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

POSSIBLE ADDITIONAL CHARGES

o During the first 10 years, we will assess a contingent deferred sales
charge if the Contract lapses or is surrendered. During the first five
years, the maximum contingent deferred sales charge is 50% of the first
year's primary annual premium. This charge is both subject to other
important limitations and reduced for Contracts that have been inforce for
more than five years.

o During the first 10 years, we will assess a contingent deferred
administrative charge if the Contract lapses or is surrendered. During the
first five years, this charge equals $5 per $1,000 of face amount. It
begins to decline uniformly after the fifth Contract year so that it
disappears on the 10th Contract anniversary.

o We assess an administrative processing charge of up to $15 for 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 to, and have the financial capability to, keep it
for a substantial period.

PREMIUM PAYMENTS

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

3
- --------------------------------------------------------------------------------
<PAGE>

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

missed premiums are paid later, with interest), the death benefit will be paid
upon the death of the insured. Your Contract will not lapse even if investment
experience is so unfavorable that the Contract Fund value drops to 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 21.

LAPSE AND GUARANTEE AGAINST LAPSE

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,
with two important distinctions:

o 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, at least, the face amount of insurance
will be paid upon the death of the insured. This is true even if, because
of unfavorable investment experience, the Contract Fund value should drop
to zero.

o If all premiums are not paid when due (or not made up later), the Contract
will still not lapse as long as the Contract Fund is higher than a stated
amount set forth in a table in the Contract. This amount is called the
"Tabular Contract Fund", and it increases each year. In later years it
becomes quite high. The Contract lapses when the Contract Fund falls below
this stated amount, rather than when it drops to zero. This means that,
when a PRUvider Variable Appreciable Life Contract lapses, it may still
have considerable value, and you may have a substantial incentive to
reinstate it. If you choose not to reinstate, on the other hand, you may
take the cash surrender value under several options.

REFUND

For a limited time, a Contract may be returned for a refund in accordance with
the terms of its "free look" provision. See SHORT-TERM CANCELLATION RIGHT OR
"FREE LOOK", page 10.

----------

THE REPLACEMENT OF LIFE INSURANCE IS GENERALLY NOT IN YOUR BEST INTEREST. IN
MOST CASES, IF YOU REQUIRE ADDITIONAL COVERAGE, THE BENEFITS OF YOUR EXISTING
CONTRACT CAN BE PROTECTED BY PURCHASING ADDITIONAL INSURANCE OR A SUPPLEMENTAL
CONTRACT. IF YOU ARE CONSIDERING REPLACING A CONTRACT, YOU SHOULD COMPARE THE
BENEFITS AND COSTS OF SUPPLEMENTING YOUR EXISTING CONTRACT WITH THE BENEFITS AND
COSTS OF PURCHASING THE CONTRACT DESCRIBED IN THIS PROSPECTUS AND YOU SHOULD
CONSULT A QUALIFIED TAX ADVISER.

THIS PROSPECTUS MAY ONLY BE OFFERED IN JURISDICTIONS IN WHICH THE OFFERING IS
LAWFUL. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ITS STATEMENT OF
ADDITIONAL INFORMATION.

In the following pages of this prospectus we describe in much greater detail all
of the provisions of the Contract. The description is preceded by two sets of
tables. The first set provides, in condensed form, financial information about
the portfolios of the 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.

4
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<PAGE>

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

FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS OF
THE FUND

The tables that follow provide information about the annual investment income,
capital appreciation and expenses of the two available portfolios of the Fund
for each year, beginning with the year after the 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.

5
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<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights will help you evaluate the financial performance of
each Portfolio. The TOTAL RETURN in each chart represents the rate that a
shareholder earned on an investment in that share class of the Portfolio,
assuming reinvestment of all dividends and other distributions. The charts do
not reflect charges under any variable contract. The information is for Class I
for the periods indicated.

The information for the THREE YEARS ENDED DECEMBER 31, 1998 has been audited by
PRICEWATERHOUSECOOPERS LLP, whose unqualified report, along with the financial
statements, appear in the SAI, which is available upon request. THE INFORMATION
FOR THE TWO YEARS ENDED DECEMBER 31, 1995 WAS AUDITED BY OTHER INDEPENDENT
AUDITORS WHOSE REPORT WAS ALSO UNQUALIFIED.

<TABLE>
<CAPTION>
CONSERVATIVE BALANCED
------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995(A) 1994(A)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year ............ $ 14.97 $ 15.52 $ 15.31 $ 14.10 $ 14.91
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.66 0.76 0.66 0.63 0.53
Net realized and unrealized gains
(losses) on investment ...................... 1.05 1.26 1.24 1.78 (0.68)
-------- -------- -------- -------- --------
Total from investment operations 1.71 2.02 1.90 2.41 (0.15)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.66) (0.76) (0.66) (0.64) (0.51)
Distributions from net realized gains ......... (0.94) (1.81) (1.03) (0.56) (0.15)
-------- -------- -------- -------- --------
Total Distributions ...................... (1.60) (2.57) (1.69) (1.20) (0.66)
-------- -------- -------- -------- --------
Net Asset Value, end of year .................. $ 15.08 $ 14.97 $ 15.52 $ 15.31 $ 14.10
======== ======== ======== ======== ========

TOTAL INVESTMENT RETURN:(B) ................... 11.74% 13.45% 12.63% 17.27% (0.97%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions) ......... $4,796.0 $4,744.2 $4,478.8 $3,940.8 $3,501.1
Ratios to average net assets:
Expenses .................................... 0.57% 0.56% 0.59% 0.58% 0.61%
Net investment income ....................... 4.19% 4.48% 4.13% 4.19% 3.61%
Portfolio turnover rate ....................... 167% 295% 295% 201% 125%
</TABLE>

(a) Calculations are based on average month-end shares outstanding.
(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions.

6
<PAGE>

FINANCIAL HIGHLIGHTS

The information for the THREE YEARS ENDED December 31, 1998 has been audited by
PRICEWATERHOUSECOOPERS LLP, whose unqualified report, along with the financial
statements, appear in the SAI, which is available upon request. THE INFORMATION
FOR THE TWO YEARS ENDED DECEMBER 31, 1995 WAS AUDITED BY OTHER INDEPENDENT
AUDITORS WHOSE REPORT WAS ALSO UNQUALIFIED.

<TABLE>
<CAPTION>
FLEXIBLE MANAGED
------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995(A) 1994(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year ............ $ 17.28 $ 17.79 $ 17.86 $ 15.50 $ 16.96
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.58 0.59 0.57 0.56 0.47
Net realized and unrealized gains
(losses) on investment ...................... 1.14 2.52 1.79 3.15 (1.02)
-------- -------- -------- -------- --------
Total from investment operations 1.72 3.11 2.36 3.71 (0.55)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.59) (0.58) (0.58) (0.56) (0.45)
Distributions from net realized gains ......... (1.85) (3.04) (1.85) (0.79) (0.46)
-------- -------- -------- -------- --------
Total Distributions ...................... (2.44) (3.62) (2.43) (1.35) (0.91)
-------- -------- -------- -------- --------
Net Asset Value, end of year .................. $ 16.56 $ 17.28 $ 17.79 $ 17.86 $ 15.50
======== ======== ======== ======== ========

TOTAL INVESTMENT RETURN:(b) ................... 10.24% 17.96% 13.64% 24.13% (3.16%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions) ......... $5,410.0 $5,490.1 $4,896.9 $4,261.2 $3,481.5
Ratios to average net assets:
Expenses .................................... 0.61% 0.62% 0.64% 0.63% 0.66%
Net investment income ....................... 3.21% 3.02% 3.07% 3.30% 2.90%
Portfolio turnover rate ....................... 138% 227% 233% 173% 124%
</TABLE>

7
<PAGE>

ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS
AND ACCUMULATED PREMIUMS

The following four tables show how a Contract's death benefit and cash surrender
values change with the investment performance of the Account. They are
"hypothetical" because they are based, in part, upon several assumptions which
are described below. All four tables assume the following:

o a Contract of a given face amount bought by a 35 year old male, non-smoker,
with no extra risks or substandard ratings, and no extra benefit riders
added to the Contract.

o the Scheduled Premium is paid on each Contract anniversary, the deduction
for taxes attributable to premiums is 3.25% and no loans are taken.

o the Contract fund has been invested in equal amounts in each of the two
available portfolios of the Fund and no portion of the Contract Fund has
been allocated to the fixed-rate option.

The first table (page T1) assumes a Contract with a $5,000 face amount has been
purchased and the second table (page T2) assumes a Contract with a $20,000 face
amount has been purchased. Both assume the current charges will continue for the
indefinite future. The third and fourth tables (pages T3 and T4) are based upon
the same assumptions except it is assumed the maximum contractual charges have
been made from the beginning.

Finally, there are four assumptions, shown separately, about the average
investment performance of the portfolios. The first is that there will be a
uniform 0% gross rate of return with the average value of the Contract Fund
uniformly adversely affected by very unfavorable investment performance. The
other three assumptions are that investment performance will be at a uniform
gross annual rate of 4%, 8% and 12%. Actual returns will fluctuate from year to
year. In addition, death benefits and cash surrender values would be different
from those shown if investment returns averaged 0%, 4%, 8% and 12% but
fluctuated from those averages throughout the years. Nevertheless, these
assumptions help show how the Contract values change with investment experience.

The first column in the following four tables (pages T1 through T4) shows the
Contract year. The second column, to provide context, shows what the aggregate
amount would be if the Scheduled Premiums had been invested to earn interest,
after taxes, at 4% compounded annually. The next four columns show the death
benefit payable at the end of each of the years shown for the four different
assumed investment returns. The last four columns show the cash surrender value
payable at the end of each of the years shown for the four different assumed
investment returns. The cash surrender values in the first 10 years reflect the
surrender charges that would be deducted if the Contract were surrendered in
those years.

A gross return (as well as the net return) is shown at the top of each column.
The gross return represents the combined effect of investment income and capital
gains and losses, realized or unrealized, of the portfolios before any reduction
is made for investment advisory fees or other Fund expenses. The net return
reflects average total annual expenses of the two portfolios of 0.59%, and the
daily deduction from the Contract Fund of 0.9% per year. Thus, based on the
above assumptions, gross investment returns of 0%, 4%, 8% and 12% are the
equivalent of net investment returns of -1.49%, 2.51%, 6.51%, and 10.51%,
respectively. The actual fees and expenses of the portfolios associated with a
particular Contract may be more or less than 0.59% and will depend on which
subaccounts are selected. The death benefits and cash surrender values shown
reflect the deduction of all expenses and charges, including monthly charges,
both from the Fund and under the Contract.

If you are considering the purchase of a variable life insurance contract from
another insurance company, you should not rely upon these tables for comparison
purposes. A comparison between two tables, each showing values for a 35 year old
man, may be useful for a 35 year old man but would be inaccurate if made for
insureds of other ages or sex. Your Pruco Life representative can provide you
with a hypothetical illustration for a person of your own age, sex, and rating
class.

8
<PAGE>

ILLUSTRATIONS
-------------

THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$5,000 GUARANTEED DEATH BENEFIT
$173.70 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES

<TABLE>
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
---------------------------------------------------- ----------------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------------- ----------------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 4% GROSS 8% GROSS 12% GROSS 0% GROSS 4% GROSS 8% GROSS 12% GROSS
YEAR PER YEAR (-1.49% NET) (2.51% NET) (6.51% NET) (10.51% NET) (-1.49% NET) (2.51% NET) (6.51% NET) (10.51% 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 $ 5,025 $ 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 $154 $ 185 $ 219 $ 257
5 $ 978 $5,000 $5,028 $ 5,079 $ 5,136 $205 $ 249 $ 300 $ 357
6 $ 1,198 $5,000 $5,034 $ 5,105 $ 5,187 $268 $ 330 $ 401 $ 483
7 $ 1,427 $5,000 $5,039 $ 5,134 $ 5,248 $331 $ 411 $ 507 $ 620
8 $ 1,665 $5,000 $5,043 $ 5,167 $ 5,320 $392 $ 494 $ 618 $ 771
9 $ 1,912 $5,000 $5,047 $ 5,205 $ 5,404 $452 $ 578 $ 736 $ 935
10 $ 2,169 $5,000 $5,050 $ 5,248 $ 5,503 $511 $ 663 $ 861 $ 1,116
15 $ 3,617 $5,000 $5,058 $ 5,544 $ 6,271 $721 $1,047 $ 1,532 $ 2,259
20 $ 5,379 $5,000 $5,048 $ 6,027 $ 9,117 $882 $1,457 $ 2,436 $ 4,122
25 $ 7,523 $5,000 $5,016 $ 6,983 $13,550 $970 $1,882 $ 3,643 $ 7,069
30 (Age 65) $10,132 $5,000 $5,000 $ 8,747 $19,608 $940 $2,304 $ 5,202 $11,661
35 $13,305 $5,000 $5,000 $10,721 $27,975 $700 $2,696 $ 7,157 $18,678
40 $17,166 $5,000 $5,000 $12,973 $39,652 $ 52 $3,019 $ 9,560 $29,220
45 $21,864 $5,000 $5,000 $15,607 $56,163 $ 0 $3,189 $12,446 $44,788
</TABLE>

(1) If premiums are paid more frequently than annually, the payments would be
$89.46 semi-annually, $46.15 quarterly or $16.90 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.

(2) Assumes no Contract loan has been made.

The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rates of
inflation. The death benefit and cash surrender value for a contract would be
different from those shown if the actual rates of return averaged 0%, 4%, 8%,
and 12% over a period of years but also fluctuated above or below those averages
for individual contract years. No representations can be made by Pruco Life or
the Series Fund that these hypothetical rates of return can be achieved for any
one year or sustained over any period of time.

<PAGE>

THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES

<TABLE>
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
---------------------------------------------------- ----------------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------------- ----------------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 4% GROSS 8% GROSS 12% GROSS 0% GROSS 4% GROSS 8% GROSS 12% GROSS
YEAR PER YEAR (-1.49% NET) (2.51% NET) (6.51% NET) (10.51% NET) (-1.49% NET) (2.51% NET) (6.51% NET) (10.51% NET)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,012 $20,024 $20,036 $ 20,048 $ 39 $ 50 $ 62 $ 74
2 $ 829 $20,013 $20,046 $20,080 $ 20,115 $ 243 $ 276 $ 310 $ 345
3 $ 1,269 $20,002 $20,065 $20,133 $ 20,204 $ 442 $ 506 $ 573 $ 644
4 $ 1,726 $20,000 $20,082 $20,195 $ 20,317 $ 636 $ 739 $ 852 $ 974
5 $ 2,202 $20,000 $20,095 $20,266 $ 20,457 $ 833 $ 986 $ 1,157 $ 1,347
6 $ 2,697 $20,000 $20,112 $20,357 $ 20,636 $1,084 $ 1,296 $ 1,540 $ 1,820
7 $ 3,211 $20,000 $20,128 $20,461 $ 20,853 $1,335 $ 1,617 $ 1,950 $ 2,342
8 $ 3,746 $20,000 $20,141 $20,579 $ 21,111 $1,582 $ 1,944 $ 2,383 $ 2,914
9 $ 4,302 $20,000 $20,152 $20,715 $ 21,416 $1,824 $ 2,276 $ 2,839 $ 3,539
10 $ 4,881 $20,000 $20,160 $20,867 $ 21,773 $2,060 $ 2,612 $ 3,319 $ 4,225
15 $ 8,140 $20,000 $20,164 $21,949 $ 24,589 $2,900 $ 4,119 $ 5,903 $ 8,544
20 $12,106 $20,000 $20,092 $23,738 $ 34,499 $3,549 $ 5,730 $ 9,376 $ 15,597
25 $16,931 $20,000 $20,000 $26,860 $ 51,316 $3,900 $ 7,391 $14,013 $ 26,771
30 (Age 65) $22,801 $20,000 $20,000 $33,679 $ 74,293 $3,775 $ 9,031 $20,028 $ 44,181
35 $29,942 $20,000 $20,000 $41,307 $106,029 $2,801 $10,514 $27,578 $ 70,789
40 $38,631 $20,000 $20,000 $50,014 $150,318 $ 181 $11,630 $36,856 $110,771
45 $49,203 $20,000 $20,000 $60,199 $212,938 $ 0 $11,934 $48,007 $169,812
</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>

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

<TABLE>
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
---------------------------------------------------- ---------------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------------- ---------------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 4% GROSS 8% GROSS 12% GROSS 0% GROSS 4% GROSS 8% GROSS 12% GROSS
YEAR PER YEAR (-1.49% NET) (2.51% NET) (6.51% NET) (10.51% NET) -1.49% NET) (2.51% NET) (6.51% NET) (10.51% 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 $ 5,040 $ 82 $ 101 $ 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 $ 5,130 $228 $ 285 $ 350 $ 426
7 $ 1,427 $5,000 $5,000 $ 5,071 $ 5,174 $283 $ 356 $ 443 $ 547
8 $ 1,665 $5,000 $5,000 $ 5,090 $ 5,228 $336 $ 428 $ 541 $ 679
9 $ 1,912 $5,000 $5,000 $ 5,112 $ 5,291 $388 $ 501 $ 643 $ 822
10 $ 2,169 $5,000 $5,000 $ 5,137 $ 5,366 $439 $ 574 $ 750 $ 979
15 $ 3,617 $5,000 $5,000 $ 5,320 $ 5,954 $603 $ 887 $1,309 $ 1,942
20 $ 5,379 $5,000 $5,000 $ 5,627 $ 7,702 $713 $1,205 $2,037 $ 3,482
25 $ 7,523 $5,000 $5,000 $ 6,110 $11,242 $742 $1,503 $2,975 $ 5,865
30 (Age 65) $10,132 $5,000 $5,000 $ 7,022 $15,936 $635 $1,744 $4,176 $ 9,477
35 $13,305 $5,000 $5,000 $ 8,452 $22,224 $284 $1,853 $5,643 $14,837
40 $17,166 $5,000 $5,000 $10,014 $30,713 $ 0 $1,672 $7,379 $22,633
45 $21,864 $5,000 $5,000 $11,750 $42,268 $ 0 $ 767 $9,370 $33,708
</TABLE>

(2) Assumes no Contract loan has been made.

<PAGE>

THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING MAXIMUM CONTRACTUAL CHARGES

<TABLE>
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
---------------------------------------------------- ----------------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------------- ----------------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 4% GROSS 8% GROSS 12% GROSS 0% GROSS 4% GROSS 8% GROSS 12% GROSS
YEAR PER YEAR (-1.49% NET) (2.51% NET) (6.51% NET) (10.51% NET) (-1.49% NET) (2.51% NET) (6.51% NET) (10.51% NET)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,000 $20,000 $20,009 $ 20,020 $ 12 $ 24 $ 35 $ 46
2 $ 829 $20,000 $20,000 $20,024 $ 20,057 $ 191 $ 222 $ 253 $ 286
3 $ 1,269 $20,000 $20,000 $20,045 $ 20,111 $ 364 $ 423 $ 485 $ 551
4 $ 1,726 $20,000 $20,000 $20,074 $ 20,186 $ 533 $ 628 $ 731 $ 843
5 $ 2,202 $20,000 $20,000 $20,110 $ 20,284 $ 705 $ 844 $ 1,000 $ 1,174
6 $ 2,697 $20,000 $20,000 $20,154 $ 20,408 $ 925 $1,117 $ 1,338 $ 1,591
7 $ 3,211 $20,000 $20,000 $20,208 $ 20,561 $1,145 $1,398 $ 1,697 $ 2,050
8 $ 3,746 $20,000 $20,000 $20,271 $ 20,746 $1,360 $1,683 $ 2,074 $ 2,549
9 $ 4,302 $20,000 $20,000 $20,345 $ 20,968 $1,569 $1,970 $ 2,469 $ 3,092
10 $ 4,881 $20,000 $20,000 $20,431 $ 21,232 $1,772 $2,260 $ 2,883 $ 3,683
15 $ 8,140 $20,000 $20,000 $21,070 $ 23,346 $2,433 $3,487 $ 5,024 $ 7,300
20 $12,106 $20,000 $20,000 $22,169 $ 28,945 $2,881 $4,725 $ 7,807 $ 13,086
25 $16,931 $20,000 $20,000 $23,925 $ 42,300 $2,994 $5,874 $11,387 $ 22,068
30 (Age 65) $22,801 $20,000 $20,000 $26,854 $ 60,009 $2,566 $6,774 $15,970 $ 35,686
35 $29,942 $20,000 $20,000 $32,365 $ 83,731 $1,153 $7,105 $21,608 $ 55,902
40 $38,631 $20,000 $20,000 $38,386 $115,758 $ 0 $6,187 $28,287 $ 85,303
45 $49,203 $20,000 $20,000 $45,078 $159,345 $ 0 $2,146 $35,948 $127,073
</TABLE>

(2) Assumes no Contract loan has been made.

<PAGE>

GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY, PRUCO LIFE PRUVIDER
VARIABLE APPRECIABLE ACCOUNT AND THE
FIXED RATE OPTION

PRUCO LIFE INSURANCE COMPANY

Pruco Life Insurance Company ("Pruco Life", "us", or "we") is 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. Pruco Life is a wholly-owned subsidiary
of Prudential, a mutual insurance company founded in 1875 under the laws of the
State of New Jersey. Prudential is currently considering reorganizing itself
into a publicly traded stock company through a process known as
"demutualization." On February 10, 1998, the Company's Board of Directors
authorized management to take the preliminary steps necessary to allow the
Company to demutualize. On July 1, 1998, legislation was enacted in New Jersey
that would permit this conversion to occur and that specified the process for
conversion. Demutualization is a complex process involving development of a plan
of reorganization, adoption of a plan by the Company's Board of Directors, a
public hearing, voting by qualified policyholders and regulatory approval, all
of which could take two or more years to complete. Prudential's management and
Board of Directors have not yet determined to demutualize and it is possible
that, after careful review, Prudential could decide not to go public.

The plan of reorganization, which hasn't been developed and approved, would
provide the criteria for determining eligibility and the methodology for
allocating shares or other consideration to those who would be eligible.
Generally, the amount of shares or other consideration eligible customers would
receive would be based on a number of factors, including the types, amounts and
issue years of their policies. As a general rule, owners of Prudential-issued
insurance policies and annuity contracts would be eligible, while mutual fund
customers and customers of the Company's subsidiaries, such as the Pruco Life
insurance companies, would not be. It has not yet been determined whether any
exceptions to that general rule will be made with respect to policyholders and
contract owners of Prudential's subsidiaries.

As of December 31, 1998, Prudential has invested over $442 million in Pruco Life
in connection with Pruco Life's organization and operation. Prudential may make
additional capital contributions to Pruco Life as needed to enable it to meet
its reserve requirements and expenses. 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.

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 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 a unit investment trust, which is a type of investment company.
It is registered with the Securities and Exchange Commission ("SEC") under the
Investment Company Act of 1940 ("1940 Act"). This does not involve any
supervision by the SEC of the management, investment policies, or practices of
the Account. For state law purposes, the Account is treated as a part or
division of Pruco Life.

9
<PAGE>

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 Fund. We may add additional subaccounts 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, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF FEDERAL
SECURITIES LAWS.

You may choose to allocate, either initially or by transfer, all or part of your
Contract Fund to the fixed-rate option. This amount becomes part of Pruco Life's
general account. Pruco Life's general account 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 general account assets.
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, the following steps are taken for crediting interest rates: (1)
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 on page 13); 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 we 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, you will
be advised of the interest rates that currently apply to your Contract. The term
Monthly Date means the day of each month that is the same as the Contract Date.

Transfers from the fixed-rate option are subject to strict limits. See
Transfers, page 15. The payment of any cash surrender value attributable to the
fixed-rate option may be delayed up to six months. See When Proceeds Are Paid,
page 19.

DETAILED INFORMATION FOR CONTRACT OWNERS

REQUIREMENTS FOR ISSUANCE OF A CONTRACT

Generally, the Contract may be issued on insureds below the age of 76. You may
apply for a minimum initial guaranteed death benefit of $5,000; the maximum you
may apply for is $25,000. Proposed insureds, 21 years of age or less, may apply
for a minimum initial guaranteed death benefit of $10,000. 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. Pruco Life charges a higher premium
if an extra mortality risk is involved. These are the current underwriting
requirements. We reserve 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. Some states allow a longer period of time during which a Contract
may be returned for a refund. You can request a refund 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. However, if
applicable law so requires and if you exercise your short-term cancellation
right, you will receive a refund of all premium payments made, with no
adjustment for investment experience.

10
<PAGE>

CONTRACT FEES AND CHARGES

This section provides a more detailed description of each charge that is
described briefly in the chart on page 2.

In several instances we use the terms "maximum charge" and "current charge." The
"maximum charge," in each instance, is the highest charge that Pruco Life is
entitled to make under the Contract. The "current charge" is the lower amount
that we are now charging. If circumstances change, we reserve the right to
increase each current charge, up to the maximum charge, without giving any
advance notice.

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

DEDUCTIONS FROM PREMIUMS

(a) Pruco Life deducts a charge for taxes attributable to premiums from each
premium payment. That charge is currently made up of two parts. The first part
is a charge for state and local premium-based taxes. The tax rate varies from
state to state, generally ranging from 0.75% to 5% (but in some instances may
exceed 5%) of the premium received by Pruco Life. The amount charged may be more
than Pruco Life actually pays. The second part is a charge for federal income
taxes measured by premiums, equal to 1.25% of the premium. We believe 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 1998, 1997, and 1996, we received a total of
approximately $1,571,427, $1,668,969, and $2,187,535, respectively, in charges
for taxes attributable to premiums.

(b) Pruco Life deducts a charge of $2 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 1998, 1997, and 1996, we received a total of approximately $1,244,849,
$1,239,689, and $1,155,021, respectively, in processing charges.

Deductions from Portfolios

Pruco Life deducts an investment advisory fee daily from each portfolio at a
rate, on an annualized basis, of 0.55% for the Conservative Balanced Portfolio
and 0.60% for the Flexible Managed Portfolio.

We pay expenses incurred in conducting the investment operations of the
portfolios (such as investment advisory fees, custodian fees and preparation and
distribution of annual reports) out of the portfolio's income. These expenses
also vary by portfolio. The total expenses of each portfolio for the year 1998,
expressed as a percentage of the average assets during the year, are as follows:

- --------------------------------------------------------------------------------
ADVISORY OTHER TOTAL
PORTFOLIO FEE EXPENSES EXPENSES
- --------------------------------------------------------------------------------
Conservative Balanced 0.55% 0.02% 0.57%
Flexible Managed 0.60% 0.01% 0.61%
- --------------------------------------------------------------------------------

MONTHLY DEDUCTIONS FROM CONTRACT FUND

Pruco Life deducts the following monthly charges proportionately from the dollar
amounts held in each of the chosen investment option[s].

(a) Pruco Life deducts a sales charge, often called a "sales load", to pay part
of the costs of 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." The primary annual premium 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 sales load is charged whether the Contract owner is
paying premiums

11
<PAGE>

annually or more frequently. It is lower on Contracts issued on insureds over 60
years of age. To summarize, for most Contracts, this charge is somewhat less
than 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, page 13. During 1998, 1997, and 1996, we
received a total of approximately $3,192,589, $3,998,082, and $3,685,080,
respectively, in sales load charges.

(b) Pruco Life deducts a charge of not more than $0.01 per $1000 of face amount
of insurance to compensate for the risk we assume in 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 inforce pursuant to
an option on lapse. During 1998, 1997, and 1996, we received a total of
approximately $153,083, $158,412, and $147,942, respectively, for this risk
charge.

(c) Pruco Life deducts an administrative charge of $6 plus up to $0.19 per
$1,000 of face amount of insurance. 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 14, 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
inforce pursuant to an option on lapse. During 1998, 1997, and 1996, we received
a total of approximately $8,434,299, $8,726,448, and $8,169,343, respectively,
in monthly administrative charges.

(d) Pruco Life deducts a mortality charge 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 enable us to pay the death benefit for the few insureds who die. We
determine the maximum mortality charge 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. We 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 inforce pursuant to an option on lapse.
See LAPSE AND REINSTATEMENT, page 17.

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

(f) Pruco Life may deduct a charge 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. We will review the question of a charge to the Account for company federal
income taxes periodically. We may make such a charge in future years for any
federal income taxes that would be attributable to the Account.

Under current law, Pruco Life may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant
and they are not charged against the Account. If there is a material change in
the applicable state or local tax laws, the imposition of any such taxes upon
Pruco Life that are attributable to the Account may result in a corresponding
charge against the Account.

DAILY DEDUCTION FROM THE CONTRACT FUND

Each day Pruco Life deducts a charge 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 us for assuming mortality and expense risks under the
Contract. The mortality risk assumed is that insureds may live for shorter
periods of time than we estimated when we determined what mortality charge to
make. The expense risk assumed is that expenses incurred in issuing and
administering the Contract will be greater than we estimated in fixing our
administrative charges. This charge is not assessed against amounts allocated to
the fixed-rate option. During 1998, 1997, and 1996, we received a total of
approximately $2,044,132, $1,776,910, and $1,391,951, respectively, in mortality
and expense risk charges.

12
<PAGE>

SURRENDER OR WITHDRAWAL CHARGES

(a) Pruco Life charges an additional contingent deferred sales load (the CDSL)
if a Contract lapses or is surrendered during the first 10 Contract years. No
such charge is applicable to the death benefit, no matter when it may become
payable. The maximum contingent deferred charge is equal to 50% of the first
year's primary annual premium upon Contracts that lapse or are surrendered
during the first five Contract years. That percentage is reduced uniformly on a
daily basis starting from the Contract's fifth anniversary until it disappears
on the 10th anniversary. Other important limitations apply. They are described
more fully in the statement of additional information. The amount of this charge
can be more easily understood by reference to the following table which shows
the sales loads that would be paid by a 35 year old man with $20,000 face amount
of insurance, both through the monthly deductions from the Contract Fund
described above and upon the surrender of the Contract.

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

CUMULATIVE
SURRENDER, CUMULATIVE CUMULATIVE CONTINGENT TOTAL SALES TOTAL SALES LOAD AS
LAST DAY OF SCHEDULED PREMIUMS SALES LOAD DEDUCTED DEFERRED SALES LOAD PER-
YEAR NO. PAID FROM CONTRACT FUND LOAD* CENTAGE OF SCHEDULED
PREMIUMS PAID**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $ 390.90 $ 18.24 $ 87.22 $105.46 26.98%
2 781.80 36.48 104.16 140.64 17.99%
3 1,172.70 54.72 121.10 175.82 14.99%
4 1,563.60 72.96 138.04 211.00 13.49%
5 1,954.50 91.20 146.55 237.75 12.16%
6 2,345.40 109.44 121.80 231.24 9.86%
7 2,736.30 127.68 91.40 219.08 8.01%
8 3,127.20 145.92 60.80 206.72 6.61%
9 3,518.10 164.16 30.40 194.56 5.53%
10 3,909.00 182.40 0.00 182.40 4.67%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

* The maximum CDSL is $152.20 for years one through five; $121.80 for year
six; $91.40 for year seven; $60.80 for year eight; $30.40 for year nine;
and zero for year 10.

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

(b) Pruco Life deducts an administrative charge of $5 per $1,000 of face amount
of insurance 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 10th Contract anniversary. We
are currently allowing partial surrenders of the Contract, but we reserve the
right to cancel this administrative practice. If the Contract is partially
surrendered during the first 10 years, we deduct a proportionate amount of the
charge from the Contract Fund. During 1998, 1997, and 1996, we received a total
of approximately $222,698, $295,205, and $269,611, respectively, for surrendered
or lapsed Contracts. Surrender of all or part of a Contract may have tax
consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 21.

TRANSACTION CHARGES

Pruco Life will make an administrative processing charge equal to the lesser of
$15 or 2% of the amount withdrawn in connection with each withdrawal of excess
cash surrender value of a Contract. This charge is described in more detail in
the statement of additional information.

CONTRACT DATE

When the first premium payment is paid with the application for a Contract, the
Contract Date will ordinarily be the later of the date of the application date
and the medical examination date. In most cases no medical examination will be
necessary. If the first premium is not paid with the application, the Contract
Date will ordinarily be the date the first premium is paid and the Contract is
delivered. It may be advantageous for a Contract owner to have an earlier
Contract Date when that will result in Pruco Life using a lower issue age in
determining the Scheduled Premium

13
<PAGE>

amount. Pruco Life will permit a Contract to be back-dated but only to a date
not earlier than six months prior to the date of the application. 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 three 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 11. 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.

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. You may make unscheduled premium payments occasionally
or on a periodic basis. If you wish, you may select a higher contemplated
premium than the Scheduled Premium. Pruco Life will then bill you for the chosen
premium. In general, the regular payment of higher premiums will result in
higher cash surrender values and higher death benefits. Conversely, a Scheduled
Premium payment does not need to be made if the Contract Fund is large enough to
enable the charges due under the Contract to be made without causing the
Contract to lapse. SEE LAPSE AND

14
<PAGE>

REINSTATEMENT, page 17. The payment of premiums in excess of Scheduled Premiums
may cause the Contract to become a Modified Endowment Contract for federal
income tax purposes. If this happens, loans and other distributions which would
otherwise not be taxable events may be subject to federal income taxation. See
TAX TREATMENT OF CONTRACT BENEFITS, page 21.

Pruco Life will generally accept any premium payment of at least $25. Pruco Life
reserves the right 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 16. 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 21.

ALLOCATION OF PREMIUMS

On the Contract Date, Pruco Life deducts a $2 processing charge and the charge
for taxes attributable to premiums from the initial premium, and deducts the
first monthly charges. The remainder of the initial premium is allocated on the
Contract Date among the subaccount[s] or the fixed-rate option according to the
allocation you specified in the application form. The invested portion of any
part of the initial premium in excess of the Scheduled Premium is generally
placed in the selected investment option[s] on the date of receipt at a Home
Office, but not earlier than the Contract Date. If Pruco Life receives the
initial premium prior to the Contract Date, there will be a period during which
it will not be invested. Each subsequent premium payment, after the deductions
from premiums, will be invested as of the end of the valuation period when
received at a Home Office in accordance with the allocation previously
designated. A valuation period is the period of time from one determination of
the value of the amount invested in a subaccount to the next. Such
determinations are made when the net asset values of the portfolios are
calculated, which is generally 4:15 p.m. Eastern time on each day during which
the New York Stock Exchange is open. 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 a 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 inforce as variable
reduced paid-up insurance (see LAPSE AND REINSTATEMENT, page 17), 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. Currently, you may make additional
transfers with our consent without 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 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 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, if you are
enrolled to use the Telephone Transfer System. You will automatically be
enrolled to use the Telephone Transfer System unless the Contract is jointly
owned or you elect not to have this privilege. Telephone transfers may not be
available on Contracts that are assigned, depending on the terms of the
assignment. We will use reasonable procedures, such as asking you for certain
personal information provided on your application for insurance, to confirm that
instructions given by telephone are genuine. 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 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

15
<PAGE>

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 effective on the Contract anniversary.
Transfer requests received within the 30-day period beginning on the Contract
anniversary will be effective as of the end of the valuation period in which a
proper transfer request is received at a Home Office. Pruco Life may change
these limits in the future.

HOW THE CONTRACT FUND CHANGES WITH INVESTMENT EXPERIENCE

As explained earlier, after the 10th 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 11. This amount is placed in the subaccounts you choose and/or the
fixed rate option. Thereafter, the Contract Fund value changes daily, reflecting
increases or decreases in the value of the subaccount assets, 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
subaccounts. 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 you the cash surrender value of your 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 you continue to pay Scheduled Premiums when due.

The tables on pages T1 through T4 of this prospectus (immediately following page
8) 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 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 18), if the net investment
performance is 4% per year or higher and Scheduled Premiums are paid when due,
the death benefit will increase. If the net investment performance is below 4%,
the death benefit will decrease, but Pruco Life guarantees that it will not
decrease below the face amount of insurance. Any unfavorable experience must be
offset by favorable experience, however, before the death benefit begins to
increase again.

If the Contract is kept inforce for several years and if investment performance
is relatively favorable, the Contract Fund value may grow to the point where the
death benefit must be increased to comply with certain provisions of the
Internal Revenue Code, which require that the death benefit always be greater
than the Contract Fund value. 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

You 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
subaccounts and to any prior loan[s] supported by the subaccounts, minus the
portion of any charges attributable to the subaccounts 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 Contract debt is 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

16
<PAGE>

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 inforce for a limited time. If you fail to keep the
Contract inforce, the amount of unpaid Contract debt will be treated as a
distribution which may be taxable. See TAX TREATMENT OF CONTRACT BENEFITS, page
21, and LAPSE AND REINSTATEMENT, page 17.

When a loan is made, an amount equal to the loan proceeds (the "loan amount") is
transferred out of the subaccounts 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 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 eight and repaid at the end
of Contract year 10 and loan interest was paid when due. Upon repayment, the
cash surrender value would be $3,242.58. 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
6.51% net return for the designated subaccount[s] resulting from the 8% gross
return in the underlying Fund. Loans from Modified Endowment Contracts may be
treated for tax purposes as distributions of income. See TAX TREATMENT OF
CONTRACT BENEFITS, page 21.

SURRENDER OF A CONTRACT

You may surrender a Contract, in whole or in part, for its cash surrender value
while the insured is living. To surrender a Contract, in whole or in part, you
must deliver or mail it, together with a written request in a form that meets
Pruco Life's needs, to a Home Office. The cash surrender value of a surrendered
or partially surrendered Contract (taking into account the deferred sales and
administrative charges, if any) will be determined as of the end of the
valuation period in which such a request is received in a Home Office. Surrender
of all or part of a Contract may have tax consequences. See Tax Treatment of
Contract Benefits, page 21.

LAPSE AND REINSTATEMENT

As explained earlier, 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 or
outstanding loans, a Contract will remain inforce 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.

In addition, even if a Scheduled Premium is not paid, the Contract will remain
inforce 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 inforce.) 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 inforce, the Contract will go into default.
Should this happen, Pruco Life will send the Contract owner a notice of default
setting forth the payment necessary to keep the Contract inforce 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 21.

17
<PAGE>

A Contract that has lapsed may be reinstated within five 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 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 you take a Contract loan. Upon request, we
will tell you what the amount of 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. See TAX
TREATMENT OF CONTRACT BENEFITS, page 21.

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
subaccounts and/or the fixed rate option. There will be a new guaranteed minimum
death benefit. Loans will be available subject to the same rules that apply to
premium-paying Contracts.

Variable reduced paid-up insurance is the automatic option provided upon lapse
only 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. In addition, 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.
See TAX TREATMENT OF CONTRACT BENEFITS, page 21.

WHAT HAPPENS IF NO REQUEST IS MADE?

Except in the two situations that follow, if no request is made the "automatic
option" will be fixed extended term insurance. If fixed extended term insurance
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 if the Contract lapses and there is a Contract debt outstanding.

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 inforce 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.

18
<PAGE>

Upon request, Pruco Life will tell you 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 this amount is received within two weeks of the date it was quoted.
There is no guarantee if the payment is received within the two week period and
is less than the quoted amount or if the payment is received outside the two
week period. In that case, Pruco Life will add the payment 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
calculated is below the face amount, you 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 Home Office to be endorsed. It is possible for this Contract to be
classified as a Modified Endowment Contract if this option is exercised. See TAX
TREATMENT OF CONTRACT BENEFITS, page 21. A Contract in effect under a paid-up
insurance option will have cash surrender and loan values.

REDUCED PAID-UP INSURANCE OPTION

Like the paid-up insurance option, reduced paid-up insurance provides the
insured with lifetime insurance coverage without the payment of additional
premiums. However, reduced paid-up insurance provides insurance coverage which
is generally lower than the death benefit of the Contract. Reduced paid-up
insurance is based upon a Contract's current net cash value and can be requested
at any time. This option is available only when the Contract is not in default
and Pruco Life is not paying any premiums in accordance with any payment of
premium benefit that may be included in the Contract. In order to receive
reduced paid-up insurance, a Contract owner must make a proper written request,
and Pruco Life may request that the owner send the Contract to a Home Office to
be endorsed. It is possible for this Contract to be classified as a Modified
Endowment Contract if this option is exercised. See TAX TREATMENT OF CONTRACT
BENEFITS, page 21.

WHEN PROCEEDS ARE PAID

Pruco Life will generally pay any death benefit, cash surrender value, loan
proceeds or withdrawal within seven days after all the documents required for
such payment are received at a Home Office. 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 at a
Home Office. Pruco Life may delay payment of proceeds from the subaccount[s] and
the variable portion of the death benefit due under the Contract if the sale or
valuation of the Account's assets is not reasonably practicable because the New
York Stock Exchange is closed for other than a regular holiday or weekend,
trading is restricted by the SEC, or the SEC declares that an emergency exists.

With respect to the amount of any cash surrender value allocated to the
fixed-rate option, and with respect to a Contract inforce 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 six 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

You may elect to add the LIVING NEEDS BENEFITSM to your Contract at issue. The
benefit may vary 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.

Subject to state regulatory approval, the LIVING NEEDS BENEFIT allows you 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. 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 six months or less. When you provide satisfactory evidence,
Pruco Life will provide an accelerated payment of the portion of the death
benefit

19
<PAGE>

you select as a LIVING NEEDS BENEFIT. The Contract owner may (1) elect to
receive the benefit in a single sum or (2) receive equal monthly payments for
six 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 six months or more. When you provide satisfactory evidence,
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 you select as a LIVING NEEDS
BENEFIT. The Contract owner 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 two), 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, and the adjusted premium payments that
would be in effect if less than the entire death benefit is accelerated.

You should consider whether adding this settlement option is appropriate in your
given situation. Adding the LIVING NEEDS BENEFIT to the Contract has no adverse
consequences; however, electing to use it could. With the exception of certain
business-related policies, the LIVING NEEDS BENEFIT is excluded from income if
the insured is terminally ill or chronically ill as defined by the tax law
(although the exclusion in the latter case may be limited). You should consult a
qualified tax adviser before electing to receive this benefit. Receipt of a
LIVING NEEDS BENEFIT payment may also affect your eligibility for certain
government benefits or entitlements.

VOTING RIGHTS

As explained earlier, all of the assets held in the subaccounts will be invested
in shares of the corresponding portfolios of the Fund. Pruco Life is the legal
owner of those shares and has the right to vote on any matter voted on at Fund
shareholders meetings. However, Pruco Life will vote the shares of the Fund in
accordance with voting instructions received from Contract owners at any regular
and special shareholders meetings. The Fund will not hold annual shareholders
meetings when not required to do so under Maryland law or the Investment Company
Act of 1940. Fund shares for which no timely instructions from Contract owners
are received, and any shares attributable to general account investments of
Pruco Life, will be voted in the same proportion as shares in the respective
portfolios for which instructions are received. If the applicable federal
securities laws or regulations, or their current interpretation, change so as to
permit Pruco Life to vote shares of the Fund in its own right, it may elect to
do so.

Matters on which Contract owners may give voting instructions including the
following: (1) election of the Board of Directors of the Fund; (2) ratification
of the independent accountant of the Fund; (3) approval of the investment
advisory agreement for a portfolio of the 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 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 a Contract owner 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
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.

Pruco Life may, if required by state insurance regulations, disregard voting
instructions if they 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 Fund's

20
<PAGE>

portfolios, or to approve or disapprove an investment advisory contract for the
Fund. In addition, Pruco Life itself may disregard voting instructions that
would require changes in the investment policy or investment adviser of one or
more of the 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 inforce as fixed extended
term insurance or fixed reduced paid-up insurance), Pruco Life will send you a
statement that provides certain information pertinent to your own Contract. The
statement shows all transactions during the year that affected the value of your
Contract Fund, including monthly changes attributable to investment experience.
The 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 also receive, usually at the end of February, an annual report of the
operations of the Fund. That report will list the investments held in both
portfolios and include audited financial statements for the Fund. A semi-annual
report with similar unaudited information will be sent to you, usually at the
end of August.

TAX TREATMENT OF CONTRACT BENEFITS

We urge each prospective purchaser to consult a qualified tax adviser. 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. Current federal income tax laws and regulations or
interpretations may change. A more detailed discussion of what follows is
contained in the statement of additional information.

TREATMENT AS LIFE INSURANCE

We believe we have taken adequate steps to ensure that the Contract qualifies as
life insurance for tax purposes. Generally speaking, this means that:

o You will not be taxed on the growth of the funds in the Contract,
unless you receive a distribution from the Contract.

o The Contract's death benefit will be tax free to your beneficiary.

Although we believe 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 ensure that the Contract will continue to qualify as
life insurance.

PRE-DEATH DISTRIBUTIONS

The tax treatment of any distribution you receive before the insured's death
depends on whether the Contract is classified as a Modified Endowment Contract.

If the Contract is not classified as a Modified Endowment Contract, you
generally will not be taxed on proceeds received in the event of a lapse,
surrender of the Contract, or withdrawal of part of the cash surrender value
unless the total amount received exceeds the gross premiums paid less the
untaxed portion of any prior withdrawals. In certain limited circumstances, you
may be taxed on all or a portion of a withdrawal during the first 15 contract
years 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, amounts you
receive under the Contract before the insured's death, including loans and
withdrawals (even those made during the two year period before the Contract
became a Modified Endowment Contract), are included in income to the extent of
gain in the Contract. In addition, any taxable income on pre-death distributions
is subject to a penalty of 10% of the amount includible in income unless the
amount is received on or after age 591/2, on account of your becoming
disabled, or as a life annuity.

21
<PAGE>

A Contract will be classified as a Modified Endowment Contract if the premium
payments are in excess of the "7 Pay Limit." The 7 Pay Limit is generally the
amount that would be required to pay for the insurance policy in seven equal
annual installments. The 7 Pay Limit is actuarially determined based on IRS
guidelines, which consider the death benefit, supplemental benefits such as
dependent coverage and waiver of premium, riders and the age of the insured.

For example, if the 7 Pay Limit is determined to be $1,000 per year, cumulative
premiums paid may not exceed $1,000 in year one, $2,000 in year two, $3,000 in
year three, $4,000 in year four, $5,000 in year five, $6,000 in year six, and
$7,000 in year seven. If cumulative premiums paid exceed the 7 Pay Limit then
pre-death distributions are subject to the less favorable income tax treatment
previously described.

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. 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, or if the face amount of insurance is increased, or
if a rider is added or removed from the Contract. You should consult your tax
adviser before making any of these policy changes.

Prudential tests premium payments and reductions in coverage to determine
whether a policy is a MEC. If a premium payment or reduction causes MEC status,
Prudential will notify you and advise you as to any available options to avoid
MEC status. For example, subject to IRS time limits, a premium payment in excess
of the 7 Pay Limit may be returned to you to restore non-MEC status.

WITHHOLDING

The taxable portion of any amounts received under the Contract will be subject
to withholding to meet federal income tax obligations if you fail to elect that
no taxes will be withheld or in certain other circumstances.

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 on page 37, and described in greater detail in the
statement of additional information.

FURTHER INFORMATION ABOUT THE FUND

RISK/RETURN SUMMARIES

This section provides information about the Conservative Balanced and Flexible
Managed Portfolios, including a summary of the principal investment risks
associated with each.

CONSERVATIVE BALANCED PORTFOLIO

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is A TOTAL INVESTMENT RETURN CONSISTENT WITH A
CONSERVATIVELY MANAGED DIVERSIFIED PORTFOLIO. This Portfolio may be appropriate
for an investor who wants diversification with a relatively lower risk of loss
than that associated with the Flexible Managed Portfolio (see below). To achieve
our objective, we invest in a mix of equity securities, debt obligations and
money market instruments. Up to 30% of the Portfolio's total assets may be

22
<PAGE>

invested in foreign securities. In addition, we may invest a portion of the
Portfolio's assets in high yield/high risk debt securities. While we make every
effort to achieve our objective, we can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Equity
securities - such as common stocks - are subject to COMPANY RISK. The price of
the stock of a particular company can vary based on a variety of factors, such
as the company's financial performance, changes in management and product
trends, and the potential for takeover and acquisition. Common stocks are also
subject to market risk stemming from factors independent of any particular
security. Investment markets fluctuate. All markets go through cycles and market
risk involves being on the wrong side of a cycle. Factors affecting market risk
include political events, broad economic and social changes, and the mood of the
investing public. You can see market risk in action during large drops in the
stock market. If investor sentiment turns gloomy, the price of all stocks may
decline. It may not matter that a particular company has great profits and its
stock is selling at a relatively low price. If the overall market is dropping,
the values of all stocks are likely to drop.

Since the Portfolio also invests in debt obligations, there is the risk that the
value of a particular obligation could decrease. Debt obligations may involve
credit risk--the risk that the borrower will not repay an obligation, and market
risk--the risk that interest rates may change and affect the value of the
obligation. High-yield debt securities - also known as "junk bonds" - have a
higher risk of default and tend to be less liquid.

The Portfolio's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to the same types
of regulatory requirements that U.S. banks and companies are. Foreign political
developments and changes in currency rates may adversely affect the value of
foreign securities.

There is also risk involved in the investment strategies we may use. Some of our
strategies require us to try to predict whether the price or value of an
underlying investment will go up or down over a certain period of time. There is
always the risk that investments will not perform as we thought they would. Like
any mutual fund, an investment in the Portfolio could lose value, and you could
lose money. For more information about risk, see "Investment Risks."

EVALUATING PERFORMANCE

A number of factors - including risk - affect how the Portfolio performs. The
following bar chart and table show the Portfolio's performance for each full
calendar year of operation for the last 10 years. They demonstrate the risk of
investing in the Portfolio and how returns can change from year to year. Past
performance does not mean that the Portfolio will achieve similar results in the
future.

Annual Returns* (Class I shares)

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

1989 16.99%
1990 5.27%
1991 19.07%
1992 6.95%
1993 12.20%
1994 -0.97%
1995 17.27%
1996 12.63%
1997 13.45%
1998 11.74%

Best Quarter: 7.62% (2nd quarter of 1997) Worst Quarter: (3.17)% (3rd quarter of
1998)

*These annual returns do not include contract charges. If contract charges were
included, the annual returns would be lower than those shown. See the
accompanying contract prospectus.

23
<PAGE>

Average Annual Returns* (as of 12/31/98)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (5/13/83)
------ ------- -------- ---------
<S> <C> <C> <C> <C>

Class I shares 11.74% 10.65% 11.31% 10.86%
S&P 500** 28.60% 24.05% 19.19% 17.29%
Lipper Average*** 14.79% 13.73% 12.21% 8.94%
</TABLE>

*The Portfolio's returns are after deduction of expenses and do not include
Contract charges.

** The Standard & Poor's 500 Stock Index (S&P 500 ) - an unmanaged index of 500
stocks of large U.S. companies - gives a broad look at how stock prices have
performed. These returns do not include the effect of any investment management
expenses. These returns would be lower if they included the effect of these
expenses. The "Since Inception" return reflects the closest calendar month-end
return (4/30/83). Source: Lipper, Inc.

*** The Lipper/Variable Insurance Products (VIP) Balanced Average is calculated
by Lipper Analytical Services, Inc. and reflects the investment return of
certain portfolios underlying variable life and annuity products. The returns
are net of investment fees and fund expenses but not product charges. The "Since
Inception" return reflects the closest calendar month-end return (4/30/83).
Source: Lipper, Inc.

FLEXIBLE MANAGED PORTFOLIO

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

Our investment objective is a high total return consistent with an aggressively
managed diversified portfolio. This Portfolio may be appropriate for an investor
who wants diversification and is willing to accept a relatively high level of
loss in an effort to achieve greater appreciation. To achieve our objective, we
invest in a mix of equity securities, debt obligations and money market
instruments. The Portfolio may also invest in foreign securities. A portion of
the debt portion of the Portfolio may be invested in high-yield/high-risk debt
securities which have speculative characteristics and generally are riskier than
higher-rated securities. While we make every effort to achieve our objective, we
can't guarantee success.

PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Since the
Portfolio invests in debt obligations, there is the risk that the value of a
particular obligation could decrease. Debt obligations may involve CREDIT
RISK--the risk that the borrower will not repay an obligation, and MARKET
RISK--the risk that interest rates may change and affect the value of the
obligation.

A substantial portion of the Portfolio's assets may also be invested in equity
securities. Equity securities - such as common stocks - are subject to COMPANY
RISK. The price of the stock of a particular company can vary based on a variety
of factors, such as the company's financial performance, changes in management
and product trends, and the potential for takeover and acquisition. Common
stocks are also subject to MARKET RISK stemming from factors independent of any
particular security. Investment markets fluctuate. All markets go through cycles
and market risk involves being on the wrong side of a cycle. Factors affecting
market risk include political events, broad economic and social changes and the
mood of the investing public. If investor sentiments turn gloomy, the price of
all stocks may decline. It may not matter that a particular company has great
profits and its stock is selling at a relatively low price. If the overall
market is dropping, the value of all stocks are likely to drop.

24
<PAGE>

EVALUATING PERFORMANCE

Annual Returns* (Class I shares)

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

1989 21.77%
1990 1.91%
1991 25.43%
1992 7.61%
1993 15.58%
1994 -3.16%
1995 24.13%
1996 13.64%
1997 17.96%
1998 10.24%

Best Quarter: 10.89% (2nd quarter of 1997) Worst Quarter: (8.50)% (3rd quarter
of 1998)

* These annual returns do not include contract charges. If contract charges were
included, the annual returns would be lower than those shown. See the
accompanying contract prospectus.

Average Annual Returns* (as of 12/31/98)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS (5/13/83)
------ ------- -------- ---------
<S> <C> <C> <C> <C>

Class I shares 10.24% 12.19% 13.15% 12.06%
S&P 500** 28.60% 24.05% 19.19% 17.29%
Lipper Average*** 13.50% 13.64% 14.00% 12.84%
</TABLE>

*The Portfolio's returns are after deduction of expenses and do not include
Contract charges.

** The Standard & Poor's 500 Stock Index (S&P 500) - an unmanaged index of 500
stocks of large U.S. companies - gives a broad look at how stock prices have
performed. These returns do not include the effect of any investment management
expenses. These returns would be lower if they included the effect of these
expenses. The "Since Inception" return reflects the closest calendar month-end
return (4/30/83). Source: Lipper, Inc.

***The Lipper Variable Insurance Products (VIP) Flexible Average is calculated
by Lipper Analytical Services, Inc. and reflects the investment return of
certain portfolios underlying variable life and annuity products. The returns
are net of investment fees and fund expenses but not product charges. The "Since
Inception" return reflects the closest calendar month-end return (4/30/83).
Source: Lipper, Inc.

HOW THE PORTFOLIOS INVEST

CONSERVATIVE BALANCED PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is to seek A TOTAL INVESTMENT RETURN
CONSISTENT WITH A CONSERVATIVELY MANAGED DIVERSIFIED PORTFOLIO.

25
<PAGE>

- -------------------------------------------------
BALANCED PORTFOLIO

We invest in all three types of securities -
equity, debt and money market - in order to
achieve diversification in a single portfolio.
We seek to maintain a conservative blend of
investments that will have strong performance
in a down market and solid, but not necessarily
outstanding, performance in up markets. This
Portfolio may be appropriate for an investor
looking for diversification with less risk than
that of the Flexible Managed Portfolio, while
recognizing that this reduces the chances of
greater appreciation.

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

To achieve our objective, we invest in a mix of equity and equity-related
securities, debt obligations and money market instruments. We adjust the
percentage of Portfolio assets in each category depending on our expectations
regarding the different markets. While we make every effort to achieve our
objective, we can't guarantee success.

We will vary how much of the Portfolio's assets are invested in a particular
type of security depending how we think the different markets will perform.
Under normal conditions, we intend to keep at least 25% of the Portfolio's total
assets invested in debt securities.

In general, we will invest within the ranges shown below:

ASSET TYPE MINIMUM NORMAL MAXIMUM
---------- ------- ------ -------

Stocks 15% 35% 75%

Debt obligations and money 25% 65% 85%
market securities

DEBT SECURITIES in general are basically written promises to repay a debt. There
are numerous types of debt securities which vary as to the terms of repayment
and the commitment of other parties to honor the obligations of the issuer. Most
of the securities in the debt portion of this Portfolio will be rated
"investment grade." This means major rating services, like Standard & Poor's
Ratings Group (S&P) or Moody's Investors Service, Inc. (Moody's), have rated the
securities within one of their four highest rating categories.

The Portfolio may also invest in lower-rated securities, which are riskier and
are considered speculative. These securities are sometimes referred to as "junk
bonds." We may also invest in instruments that are not rated, but which we
believe are of comparable quality to the instruments described above.

The Portfolio may also invest up to 30% of its total assets in FOREIGN EQUITY
and DEBT SECURITIES that are not denominated in the U.S. dollar. In addition, up
to 20% of the Portfolio's total assets may be invested in debt securities that
are issued outside the U.S. by foreign or U.S. issuers, provided the securities
are denominated in U.S. dollars. For these purposes, we do not consider American
Depositary Receipts (ADRs) as foreign securities. (ADRs are certificates
representing the right to receive foreign securities that have been deposited
with a U.S. bank or a foreign branch of a U.S. bank.)

The stock portion of the Portfolio will be invested mainly in EQUITY and
EQUITY-RELATED securities of major, established corporations which we believe
are in sound financial condition and offer better total returns than broad based
market indexes.

The money market portion of the Portfolio will be invested in high-quality money
market instruments. We manage this portion of the Portfolio to comply with
specific rules designed for money market mutual funds. We will not acquire any
security with a remaining maturity exceeding thirteen months, and we will
maintain a dollar-weighted average portfolio of 90 days or less. (Weighted
average maturity is calculated by adding the maturities of all the bonds in a
portfolio and dividing by the number of bonds on a weighted basis.)

In response to adverse market, conditions or when restructuring the Portfolio,
we may temporarily invest up to 100% of the Portfolio's total assets in money
market instruments. Investing heavily in these securities limits our ability to
achieve capital appreciation, but can help to preserve the value of the
Portfolio's assets when the markets are unstable.

We may also invest in loans arranged through private negotiations between a
corporation which is the borrower and one or more financial institutions that
are the lenders. Generally, these types of investments are in the form of LOAN
PARTICIPATIONS. In loan participations, the Portfolio will have a contractual
relationship with the lender but not with the

26
<PAGE>

borrower. This means the Portfolio will only have rights to principal and
interest received by the lender. It will not be able to enforce compliance by
the borrower with the terms of the loan and may not have a right to any
collateral securing the loan. If the lender becomes insolvent, the Portfolio may
be treated as a general creditor and not benefit from any set-off between the
lender and the borrower.

DERIVATIVES AND OTHER STRATEGIES

We may also use alternative investment strategies - including DERIVATIVES - to
try to improve the Portfolio's returns, protect its assets or for short-term
cash management. There is no guarantee that these strategies will work, that the
instruments necessary to implement these strategies will be available or that
the Portfolio will not lose money. With derivatives, we try to predict whether
the underlying investment - a security, market index, currency, interest rate or
some other benchmark will go up or down at some future date. We may use
derivatives to try to reduce risk or to increase return consistent with the
Portfolio's overall investment objective.

We may: purchase and sell OPTIONS on equity securities, debt securities, stock
indexes and foreign currencies; purchase and sell stock index, interest rate and
foreign currency FUTURES CONTRACTS and options on those contracts; enter into
forward FOREIGN CURRENCY EXCHANGE CONTRACTS; and purchase securities on a
WHEN-ISSUED or DELAYED-DELIVERY basis.

The Portfolio may also enter into SHORT SALES. In a short sale we sell a
security we do not own to take advantage of an anticipated decline in the
security's price. The Portfolio borrows the security for delivery and if it can
buy the security later at a lower price, a profit results. No more than 25% of
the Portfolio's net assets may be used as collateral or segregated for purposes
of securing a short sale obligation. The Portfolio may also enter into SHORT
SALES AGAINST-THE-BOX which means it owns securities identical to those sold
short.

We may also use INTEREST RATE SWAPS in the management of the Portfolio. In an
interest rate swap the Portfolio and another party agree to exchange interest
payments. For example, the Portfolio may wish to exchange a floating rate of
interest for a fixed rate. We would enter into this type of a swap if we think
interest rates are going down.

The Portfolio may also enter into REPURCHASE AGREEMENTS. In a repurchase
transaction, the Portfolio agrees to purchase certain securities and the seller
agrees to repurchase the same securities at an agreed upon price on a specified
date. This creates a fixed return for the Portfolio. The Portfolio may
participate with certain other Portfolios of the Fund in a JOINT REPURCHASE
ACCOUNT under an order obtained from the SEC. In a joint repurchase transaction,
uninvested cash balances of various Portfolios are added together and invested
in one or more repurchase agreements. Each of the participating Portfolios
receives a portion of the income earned in the joint account based on the
percentage of its investment.

We may also invest in REVERSE REPURCHASE AGREEMENTS and DOLLAR ROLLS in the
management of the fixed-income portion of the Portfolio. In a reverse repurchase
transaction, the Portfolio sells a security it owns and agrees to buy it back at
set price and date. During the period the security is held by the other party,
the Portfolio may continue to receive principal and interest payments on the
security. Dollar rolls involve the sale by the Portfolio of a security for
delivery in the current month with a promise to repurchase from the buyer a
substantially similar - but not necessarily the same - security at a set price
and date in the future. During the "roll period," the Portfolio does not receive
any principal or interest on the security. Instead it is compensated by the
difference between the current sales price and the price of the future purchase,
as well as any interest earned on the cash proceeds from the original sale. The
Portfolio will not use more than 30% of its net assets in connection with
reverse repurchase transactions and dollar rolls.

We will consider other factors (such as cost) in deciding whether to employ any
particular strategy or use any particular instrument. Any derivatives we use may
not match the Portfolio's underlying holdings. For more information about these
strategies, see the SAI, "Description of the Portfolios, Their Investments and
Risks - Risk Management and Return Enhancement Strategies."

ADDITIONAL STRATEGIES

The Portfolio also follows certain policies when it BORROWS MONEY (the Portfolio
may borrow up to 5% of the value of its total assets); LENDS ITS SECURITIES; and
holds ILLIQUID SECURITIES (the Portfolio may hold up to 15% of its net assets in
illiquid securities, including securities with legal or contractual restrictions
on resale, those without a readily available market and repurchase agreements
with maturities longer than seven days). The Portfolio is subject to certain

27
<PAGE>

investment restrictions that are fundamental policies, which means they cannot
be changed without shareholder approval. For more information about these
restrictions, see the SAI.

FLEXIBLE MANAGED PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of this Portfolio is to seek A HIGH TOTAL RETURN
CONSISTENT WITH AN AGGRESSIVELY MANAGED DIVERSIFIED PORTFOLIO.

- -----------------------------------------------------
BALANCED PORTFOLIO

We invest in all three types of securities -
equity, debt and money market - in order to achieve
diversification in a single portfolio. We seek to
maintain a more aggressive mix of investments than
the Conservative Balanced Portfolio. This
Portfolio may be appropriate for an investor
looking for diversification who is willing to
accept a relatively high level of loss in an effort
to achieve greater appreciation.

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

Generally, we will invest within the ranges shown below:

ASSET TYPE MINIMUM NORMAL MAXIMUM
---------- ------- ------ -------

Stocks 25% 60% 100%
Fixed income securities 0% 40% 75%
Money market securities 0% 0% 75%

The stock portion of the Portfolio will be invested in a broadly diversified
portfolio of stocks generally consisting of large and mid-size companies,
although it may also hold stocks of smaller companies. We will invest in
companies and industries that, in our judgment, will provide either attractive
long-term returns, or are desirable to hold in the Portfolio to manage risk.

Most of the securities in the fixed income portion of this Portfolio will be
investment grade, however, we may also invest up to 25% of this portion of the
Portfolio in debt securities rated as low as BB, Ba or lower by a major rating
service at the time they are purchased. These high-yield or "junk bonds" are
riskier and considered speculative. We may also invest in instruments that are
not rated, but which we believe are of comparable quality to the instruments
described above.

The fixed income portion of the Portfolio may also include LOAN PARTICIPATIONS.
In loan participations, the Portfolio will have a contractual relationship with
the lender but not with the borrower. This means the Portfolio will only have
rights to principal and interest received by the lender. It will not be able to
enforce compliance by the borrower with the terms of the loan and may not have a
right to any collateral securing the loan. If the lender becomes insolvent, the
Portfolio may be treated as a general creditor and will not benefit from any
set-off between the lender and the borrower.

The Portfolio may also invest up to 30% of its total assets in FOREIGN EQUITY
and DEBT SECURITIES that are not denominated in the U.S. dollar. In addition, up
to 20% of the Portfolio's total assets may be invested in debt securities that
are issued outside of the U.S. by foreign or U.S. issuers provided the
securities are denominated in U.S. dollars. For these purposes, we do not
consider American Depositary Receipts (ADRs) as foreign securities. (ADRs are
certificates representing the right to receive foreign securities that have been
deposited with a U.S. bank or a foreign branch of a U.S. bank.)

The money market portion of the Portfolio will be invested in high-quality money
market instruments. In response to adverse market conditions or when we are
restructuring the Portfolio, we may temporarily invest up to 100% of the
Portfolio's assets in money market instruments. Investing heavily in these
securities limits our ability to achieve capital appreciation, but can help to
preserve the Portfolio's assets when the markets are unstable.

28
<PAGE>

The Portfolio may also invest in REAL ESTATE INVESTMENT TRUSTS (REITs). A REIT
is a company that manages a portfolio of real estate to earn profits for its
shareholders. Some REITs acquire equity interests in real estate and then
receive income from rents and capital gains when the buildings are sold. Other
REITs lend money to real estate developers and receive interest income from the
mortgages. Some REITs invest in both types of interests.

DERIVATIVES AND OTHER STRATEGIES

We may: purchase and sell OPTIONS on equity securities, debt securities, stock
indexes, and foreign currencies; purchase and sell stock index, interest rate
and foreign currency FUTURES CONTRACTS and options on those contracts; enter
into FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS; and purchase securities on a
WHEN-ISSUED or DELAY-DELIVERY basis.

The Portfolio may also enter into REPURCHASE AGREEMENTS. In a repurchase
transaction, the Portfolio agrees to purchase certain securities and the seller
agrees to repurchase the same securities at a set price on a specified date.
This creates a fixed return for the Portfolio. The Portfolio may participate
with certain other Portfolios of the Fund in a JOINT REPURCHASE ACCOUNT under an
order obtained from the SEC. In a joint repurchase transaction, uninvested cash
balances of various Portfolios are added together and invested in one or more
repurchase agreements. Each of the participating Portfolios receives a portion
of the income earned in the joint account based on the percentage of its
investment.

We will consider other factors (such as cost) in deciding whether to employ any
particular strategy or use any particular instrument. Any derivatives we use may
not match the Portfolio's underlying holdings. For more information about these
strategies, see the SAI, "Description of the Portfolios, their Investments and
Risks - Risk Management and Return Enhancement Strategies."

29
<PAGE>

ADDITIONAL STRATEGIES

30
<PAGE>

INVESTMENT RISKS

As noted, all investments involve risk, and investing in the Portfolios is no
exception. This chart outlines the key risks and potential rewards of the
principal investments and certain other investments each Portfolio may make. See
also, "Investment Objectives and Policies of the Portfolios" in the SAI.

<TABLE>
<CAPTION>
INVESTMENT TYPE RISKS POTENTIAL REWARDS
- ------------------------------------------ ----------------------------------------- -------------------------------------
<S> <C> <C>
HIGH-QUALITY MONEY MARKET o Credit risk - the risk that o Regular interest income
OBLIGATIONS OF ALL TYPES the borrower can't pay back
the money borrowed

o Generally more secure than
stocks and since

o Market risk - the risk that
the companies must pay their
debts before they pay
obligations may lose value
because dividends interest
rates change or there is a
lack of confidence in the
borrower

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

EQUITY AND EQUITY RELATED SECURITIES o Individual stocks could lose o Historically, stocks have
value outperformed other investments
over the long term
o The equity markets could go
down, resulting in a decline o Generally, economic growth
in value of a Portfolio's means higher corporate
investments profits, which leads to an
increase in stock prices,
o Companies that pay dividends known as capital appreciation
may not do so if they don't
have profits or adequate cash o May be a source of dividend
flow income

o Changes in economic or
political conditions, both
U.S. and international, may
result in a decline in the
value of a Portfolio's
investments o Highly successful small-cap
companies can outperform
o Small-cap companies are more larger ones
likely to reinvest earnings
and not pay dividends

o Changes in interest rates may
affect the securities of
small- and medium-sized
companies more than the
securities of larger companies

- ------------------------------------------ ----------------------------------------- -------------------------------------
</TABLE>

31
<PAGE>

<TABLE>
- ------------------------------------------ ----------------------------------------- -------------------------------------
<S> <C> <C>
o The Portfolio's holdings, o Bonds have generally
INVESTMENT GRADE DEBT SECURITIES share price, yield, and total outperformed money market
return may fluctuate in instruments over the long term
response to bond market with less risk than stocks
movements

o Most bonds will rise in value
o Credit risk - the default of when interest rates fall
an issuer would leave a
Portfolio with unpaid interest o Regular interest income
or principal. The lower a
bond's quality, the higher its o Investment grade bonds have a
potential volatility lower risk of default

o Market risk - the risk that o Generally more secure than
the market value of an stocks since companies must
investment may move up or pay their debts before they
down, sometimes rapidly or pay dividends
unpredictably. Market risk may
affect an industry, sector, or
the market as a whole

o Interest rate risk - the value
of most bonds will fall when
interest rates rise; the
longer a bond's maturity and
the lower its credit quality,
the more its value typically
falls. It can lead to price
volatility
- ------------------------------------------ ----------------------------------------- -------------------------------------
o Higher market risk o May offer higher interest income
HIGH-YIELD DEBT SECURITIES than higher quality debt
(JUNK BONDS) o Higher credit risk securities

o May be more illiquid (harder
to value and sell), in which
case valuation would depend
more on the investment
adviser's judgment than is
generally the case with higher
rated securities
- ------------------------------------------ ----------------------------------------- -------------------------------------
</TABLE>

32
<PAGE>

o Foreign markets, economies and o Investors can participate in
FOREIGN political systems may not be the growth of foreign markets
SECURITIES; as stable as in the U.S. and companies operating in
OPTIONS AND FUTURES ON those markets
FOREIGN CURRENCIES o Currency risk - changing
values of foreign currencies o Changing value of foreign
currencies
o May be less liquid than U.S.
stocks and bonds o Opportunities for
diversification

o Differences in foreign laws,
accounting standards, public
information, custody and
settlement practices

o Year 2000 conversion may be
more of a problem for some
foreign issuers
- ------------------------------------------ ----------------------------------------- -------------------------------------
o Derivatives , such as futures, o A Portfolio could make money
DERIVATIVES-- options and foreign currency and
forward protect against losses
if the investment contracts, o Derivatives that involves
may not fully offset the leverage could generate
analysis proves correct. substantial gains at low cost
underlying positions and this
could result in losses to a o One way to managed a
Portfolio that would not have Portfolio's risk/return
otherwise occurred balance is to lock in the
value of an investment ahead
OPTIONS ON EQUITY SECURITIES, o Derivatives used for risk of time.
DEBT SECURITIES, STOCK INDEXES; management may not have the
FUTURES CONTRACTS ON STOCK intended effects and may
INDEXES, DEBT SECURITIES AND result in losses or missed
INTEREST RATE INDEXES, opportunities
INTEREST RATE SWAPS
o The other party to a
derivatives contract could
default

o Derivatives that involve
leverage could magnify losses

o Certain types of derivatives
involve costs to a Portfolio
that can reduce returns
- ------------------------------------------ ----------------------------------------- -------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) o Performance depends on the o Real estate holdings can
strength of real estate generate good returns from
markets, REIT management and rents, rising market values,
property management which can etc.
be affected by many factors,
including national and o Greater diversification than
regional economic conditions direct ownership

- ------------------------------------------ ----------------------------------------- -------------------------------------
</TABLE>

33
<PAGE>

o May be difficult to value o May offer a more attractive
precisely yield than more widely traded
ILLIQUID SECURITIES securities
(UP TO 15% OF NET ASSETS) o May be difficult to sell at
the time or price desired

- ------------------------------------------ ----------------------------------------- -------------------------------------
LOAN PARTICIPATIONS o Credit risk o May offer right to receive
principal, interest and fees
o Market risk without as much risk as lender

o A Portfolio has no rights against
the borrower in the event the
borrower does not repay the loan
- ------------------------------------------ ----------------------------------------- -------------------------------------
o Use of such instruments and o Use of instruments may magnify
WHEN-ISSUED AND strategies may magnify underlying investment gains
DELAYED DELIVERY underlying investment losses
SECURITIES, REVERSE
REPURCHASE o Investment costs may exceed
AGREEMENTS, SHORT SALES AND SHORT potential underlying
SALES AGAINST THE BOX investment gains
- ------------------------------------------ ----------------------------------------- -------------------------------------
</TABLE>

34
<PAGE>

HOW THE PORTFOLIOS ARE MANAGED

Prudential is the investment manager of the Fund. Prudential has entered into a
Service Agreement with its wholly-owned subsidiary, The Prudential Investment
Corporation ("PIC"), which provides that PIC will furnish to Prudential such
services as Prudential may require in connection with the performance of its
obligations under an Investment Advisory Agreement with the Fund. One of PIC's
business groups is Prudential Investments.

The investment advisory fee paid in 1998 for the Conservative Balanced Portfolio
was 55% of the average net assets of the Portfolio. For the Flexible Managed
Portfolio, the fee paid in 1998 was 60% of the average net assets of the
Portfolio.

These Portfolios are managed by a team of portfolio managers. Mark Stumpp,
Ph.D., Senior Managing Director of Prudential Investments, a division of
Prudential, has been the lead portfolio manager of the Portfolios since 1994 and
is responsible for the overall asset allocation decisions.

Warren Spitz, Managing Director of Prudential Investments, has been a portfolio
manager of the Portfolios since 1995 and manages a portion of each Portfolio's
equity holdings.

Jose Rodriguez, Managing Director of Prudential Investments, has been a
portfolio manager of the Portfolios since 1993 and is responsible for the debt
portion of the Portfolios. Mr. Rodriquez has been a portfolio manager for
Prudential Investments since 1988.

John Moschberger, CFA, Vice President of Prudential Investments, manages the
portions of each Portfolio designed to duplicate the performance of the S&P 500
Index. Mr. Moschberger joined Prudential in 1980 and has been a portfolio
manager since 1986.

PURCHASE AND SALE OF FUND SHARES

The Fund offers two classes of shares in each Portfolio: Class I and Class II.
Class I shares are sold only to separate accounts of Prudential and its
affiliates as investment options under certain contracts, including the Contract
offered by this prospectus. Class II is offered only to separate accounts of
non-Prudential insurance companies as investment options under certain of their
contracts.

When the Account purchases or sells shares of a Portfolio, the price it will pay
or receive, as the case may be, is based on the share's value. This is known as
the net asset value or NAV. The NAV of each share class of each Portfolio is
determined once a day - at 4:15 p.m. New York Time - on each day the New York
Stock Exchange is open for business. If the New York Stock Exchange closes early
on a day, the Portfolios' NAVs will be calculated some time between the closing
time and 4:15 p.m.
on that day.

The NAV for each of the Portfolios is determined by a simple calculation. It's
the total value of a Portfolio (assets minus liabilities) divided by the total
number of shares outstanding.

To determine a Portfolio's NAV, its holdings are valued as follows:

EQUITY SECURITIES are generally valued at the last sale price on an exchange or
NASDAQ, or if there is not sale, at the mean between the most recent bid and
asked prices on that day. If there is no asked price, the security will be
valued at the bid price. Equity securities that are not sold on an exchange or
NASDAQ are generally valued by an independent pricing agent or principal market
maker.

A Portfolio may own securities that are primarily listed on foreign exchanges
that trade on weekends or other days when the Portfolios do not price their
shares. Therefore, the value of a Portfolio's assets may change on days when
shareholders cannot purchase or redeem Portfolio shares.

SHORT- TERM DEBT SECURITIES with remaining maturities of 12 months or less held
by the Conservative Balanced and Flexible Managed Portfolios are valued on an
amortized cost basis. This valuation method is widely used by mutual funds. It
means that the security is valued initially at its purchase price and then
decreases in value by equal amounts each day until the security matures. It
almost always results in a value that is extremely close to the actual market
value. The Fund's Board of Directors has established procedures to monitor
whether any material deviation between valuation and market value occurs and if
so, will promptly consider what action, if any, should be taken to prevent
unfair results to Contract owners.

OTHER DEBT SECURITIES - those that are not valued on an amortized costs basis -
are valued using an independent pricing service.

35
<PAGE>

OPTIONS ON STOCK AND STOCK INDEXES that are traded on an national securities
exchange are valued at the average of the bid and asked prices as of the close
of that exchange.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS are valued at the last sale
price at the close of the commodities exchange or board of trade on which they
are traded. If there has been no sale that day, the securities will be valued at
the mean between the most recently quoted bid and asked prices on that exchange
or board of trade.

SECURITIES FOR WHICH NO MARKET QUOTATIONS ARE AVAILABLE will be valued at fair
value by Prudential under the direction of the Fund's Board of Directors.

OTHER FUND INFORMATION

DISTRIBUTOR

Prudential Investment Management Services LLC ("PIMS") distributes the Fund's
shares under a Distribution Agreement with the Fund.

MONITORING FOR POSSIBLE CONFLICTS

The Fund sells its shares to fund variable life insurance contracts and variable
annuity contracts and may offer its shares to qualified retirement plans.
Because of differences in tax treatment and other considerations, it is possible
that the interest of variable life insurance contract owners, variable annuity
contract owners and participants in qualified retirement plans could conflict.
The Fund will monitor the situation and in the event that a material conflict
did develop, the Fund would determine what action, if any, to take in response.

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 of Pruco Life as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998 and the financial
statements of the Account as of December 31, 1998 and for each of the three
years in the period then ended included in this prospectus have been so included
in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. PricewaterhouseCoopers LLP's principal business address is 1177
Avenue of the Americas, New York, New York 10036.

Actuarial matters included in this prospectus have been examined by Nancy D.
Davis, FSA, MAAA, Vice President and Actuary of Prudential whose opinion is
filed as an exhibit to the registration statement.

LITIGATION

Several actions have been brought against Pruco Life alleging that Pruco Life
and its agents engaged in improper life insurance sales practices. Prudential
has agreed to indemnify Pruco Life for losses, if any, resulting from such
litigation. No other significant litigation is being brought against Pruco Life
that would have a material effect on its financial position.

36
<PAGE>

YEAR 2000 COMPLIANCE

The services provided to you as a purchaser of a PRUvider Variable Appreciable
Life Insurance Contract depend on the smooth functioning of numerous computer
systems. Many computer systems in use today are programmed to recognize only the
last two digits of a date as the year. As a result, any systems using this kind
of programming can not distinguish a date using "00" and may treat it as "1900"
instead of "2000." This problem may impact computer systems that store business
information, but it could also affect other equipment used in our business like
telephone, fax machines and elevators. If this problem is not corrected, the
"Year 2000" issue could affect the accuracy and integrity of business records.
Prudential's regular business operations could be interrupted as well as those
of other companies that deal with us.

In addition, the operations of the mutual funds associated with the PRUvider
Variable Appreciable Life Insurance Contract could experience problems resulting
from the Year 2000 issue. Please refer to the respective mutual fund's
prospectus for information regarding their approach to Year 2000 concerns. The
following describes Prudential's effort to address Year 2000 concerns.

To address this potential problem Prudential, as the parent company of Pruco
Life, organized its Year 2000 efforts around the following three areas:

o BUSINESS SYSTEMS - Computer programs directly used to support our business;

o INFRASTRUCTURE - Computers and other business equipment like telephones and
fax machines; and

o BUSINESS PARTNERS - Year 2000 readiness of essential business partners.

BUSINESS SYSTEMS. The business systems component includes a wide range of
computer programs that directly support Prudential's business operations
including systems for: insurance product processing, securities trading,
personnel record keeping and general accounting systems. All business systems
were analyzed to determine whether each computer program with a Year 2000
problem should be retired, replaced or renovated. The majority of this work has
been completed. A few remaining programs are currently being tested and
completion of this process is expected by June 1999.

INFRASTRUCTURE. As with business applications, we established a specific
methodology and process for addressing infrastructure issues. The infrastructure
effort includes mainframe computer system hardware and operating system
software, mid-range systems and servers, telecommunications equipment and
systems, buildings and facilities systems, personal computers, and vendor
hardware and software. Other than desktop systems, substantially all other
infrastructure systems have been tested. Presently a small number of midrange
computers, and building and facility systems are still in the testing phase. We
expect to have the infrastructure implementation process completed by June 1999.

BUSINESS PARTNERS. Prudential recognizes the importance of determining the Year
2000 readiness of external business relationships especially those that involve
electronic data transfer products and services, and products that impact our
essential business processes. Prudential first classified each business partner
as "highly critical" or "less critical" to our business and then began to
develop risk assessment and contingency plans to address the potential that a
business partner could experience a Year 2000 failure. All highly critical
business partner relationships have been assessed and contingency planning is
completed. Risk assessment and contingency planning continues for less critical
business partners, and the target completion date for these relationships is
June 1999.

Prudential believes that the Business Systems, Infrastructure and Business
Partners components of the Year 2000 project are substantially on schedule. A
small number of the projects may not meet their targeted completion date.
However, Prudential expects that these projects will be completed by September,
1999. If there are any delays, they should not have a significant impact on the
timing of the project as a whole.

THE COST OF YEAR 2000 READINESS

Prudential is funding the Year 2000 program from internal operating budgets, and
estimates that its total costs to address the Year 2000 issue will total
approximately $220 million. Because these expenses were part of the operating
budget, they did not impact the management of PRUvider Variable Appreciable Life
Insurance Contracts. During the course of the Year 2000 program, some optional
computer projects have been delayed, but these delays have not had any material
effect on PRUvider Variable Appreciable Life Insurance Contracts.

YEAR 2000 RISKS AND CONTINGENCY PLANNING

Prudential believes that it is well positioned to lessen the impact of the Year
2000 problem. However, given the nature of this issue, we can not be 100%
certain that we are completely prepared, particularly because we can not be
certain

37
<PAGE>

of Year 2000 readiness of third parties. As a result, we are unable to determine
at this time whether the consequences of Year 2000 failures may have a material
adverse effect on the results of Prudential's operations, liquidity or financial
condition. In the worst case, it is possible that a Year 2000 technology
failure, whether internal or external, could have a material impact on
Prudential's results of operations, liquidity, or financial position. If
Prudential is unable to address the Year 2000 problem, we may have difficulty in
responding to your incoming phone calls, calculating your unit values or
processing withdrawals and purchase payments. It is also possible that the
mutual funds associated with the PRUvider Variable Appreciable Life Insurance
Contract will be unable to value their securities, in turn creating difficulties
in purchasing or selling shares of the respective mutual fund and calculating
corresponding unit asset values. The objective of Prudential's Year 2000 program
has been to reduce these risks as much as possible.

Most of the operations of the PRUvider Variable Appreciable Life Insurance
Contract involve such a large number of individual transactions that they can
only be handled with the help of computers. As a result, our current contingency
plans include responses to the failure of specific business programs or
infrastructure components. However, our contingency responses are now being
reviewed and we expect to finalize them by June, 1999 to ensure that they are
workable under the special conditions of a Year 2000 failure. Prudential
believes that with the completion of its Year 2000 program as scheduled, the
possibility of significant interruptions of normal operations will be reduced.

EXPANDED TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

Included in the registration statements for the Contracts and the 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 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, no more than 6% of the Scheduled Premiums for the second
through tenth years and smaller commissions thereafter.

RIDERS. Various extra fixed-benefits may be obtained for an extra premium.
They are described in what are known as "riders" to the Contract.

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

38
<PAGE>

II. INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS.

General
Convertible Securities
Warrants

Foreign Securities
Options on Stock and Debt Securities
Options on Stock Indexes
Options on Foreign Currencies
Futures Contracts and Options on Futures Contracts
Forward Foreign Currency Exchange Contracts
Interest Rate Swaps
Loan Participations
Reverse Repurchase Agreements and Dollar Rolls
When-Issued and Delayed Delivery Securities
Short Sales Loans of Portfolio Securities
Illiquid Securities

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 AND DISTRIBUTION ARRANGEMENTS.

A fuller description than that in the prospectus is given.

V. OTHER INFORMATION CONCERNING THE FUND.

Incorporation and Authorized Shares
Portfolio Transactions and Brokerage
Taxation of the Fund
Custodians
Experts
Licenses

VI. DIRECTORS AND OFFICERS OF PRUCO LIFE AND MANAGEMENT OF THE FUND.

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

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

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

IX. DEBT RATINGS.

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

39
<PAGE>

ADDITIONAL INFORMATION

Pruco Life has filed a registration statement 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 Public Reference Section at
450 Fifth Street, N.W. Washington, D.C. 20549, or by telephoning (800) SEC-0330,
upon payment of a prescribed fee.

Further information may also be obtained from Pruco Life. Its address and
telephone number are on the inside front cover of this prospectus.

FINANCIAL STATEMENTS

The financial statements of the Account should be distinguished from the
consolidated financial statements of Pruco Life and subsidiaries, 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 Fund are in the
statement of additional information.

<PAGE>

FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF NET ASSETS
December 31, 1998

<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
---------------- ----------------
<S> <C> <C>
ASSETS
Investment in The Prudential Series Fund, Inc.
Portfolios, at net asset value [Note 3] ............. $ 124,635,035 $ 115,186,914
---------------- ----------------
Net Assets ............................................. $ 124,635,035 $ 115,186,914
================ ================

NET ASSETS, representing:
Equity of contract owners .............................. $ 124,635,035 $ 115,186,914
================ ================
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 THROUGH A6
A1
<PAGE>

<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996

<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
------------------------------------ ------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income ...................................... $ 3,885,455 $ 3,045,029 $2,436,249 $ 4,692,358 $ 4,605,400 $3,515,191
----------- ----------- ---------- ----------- ----------- ----------

EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A] ......... 1,056,568 890,696 662,587 987,564 886,214 729,364
----------- ----------- ---------- ----------- ----------- ----------
NET INVESTMENT INCOME ................................... 2,828,887 2,154,333 1,773,662 3,704,794 3,719,186 2,785,827
----------- ----------- ---------- ----------- ----------- ----------

NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received ................. 12,475,065 16,205,801 8,045,666 6,729,009 11,137,278 5,586,889
Realized gain on shares redeemed ..................... 27,544 130,940 0 64,871 212,244 3,248
Net change in unrealized gain (loss) on investments .. (5,044,498) (3,235,860) (782,631) 658,618 (3,623,420) 771,969
----------- ----------- ---------- ----------- ----------- ----------

NET GAIN ON INVESTMENTS ................................. 7,458,111 13,100,881 7,263,035 7,452,498 7,726,102 6,362,106
----------- ----------- ---------- ----------- ----------- ----------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $10,286,998 $15,255,214 $9,036,697 $11,157,292 $11,445,288 $9,147,933
=========== =========== ========== =========== =========== ==========

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 THROUGH A6
A2
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1998, 1997 and 1996

SUBACCOUNTS
---------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
--------------------------------------- -----------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income......................... $ 2,828,887 $ 2,154,333 $ 1,773,662 $ 3,704,794 $ 3,719,186 $ 2,785,827
Capital gains distributions received.......... 12,475,065 16,205,801 8,045,666 6,729,009 11,137,278 5,586,889
Realized gain on shares redeemed.............. 27,544 130,940 0 64,871 212,244 3,248
Net change in unrealized gain (loss) on
investments................................. (5,044,498) (3,235,860) (782,631) 658,618 (3,623,420) 771,969
------------ ------------ ----------- ------------ ------------ -----------

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..................... 10,286,998 15,255,214 9,036,697 11,157,292 11,445,288 9,147,933
------------ ------------ ----------- ------------ ------------ -----------

NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[Note 7]...................................... 5,477,105 6,605,926 16,291,683 166,881 427,926 12,500,355
------------ ------------ ----------- ------------ ------------ -----------

NET INCREASE (DECREASE) IN NET ASSETS
RETAINED IN THE ACCOUNT
[Note 8]...................................... 2,274 (328,229) 302,045 4,262 (322,721) 285,561
------------ ------------ ----------- ------------ ------------ -----------

TOTAL INCREASE IN NET ASSETS..................... 15,766,377 21,532,911 25,630,425 11,328,435 11,550,493 21,933,849

NET ASSETS
Beginning of year............................. 108,868,658 87,335,747 61,705,322 103,858,479 92,307,986 70,374,137
------------ ------------ ----------- ------------ ------------ -----------
End of year.................................. $124,635,035 $108,868,658 $87,335,747 $115,186,914 $103,858,479 $92,307,986
============ ============ =========== ============ ============ ===========

SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 THROUGH A6
A3
</TABLE>
<PAGE>

NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
DECEMBER 31, 1998

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
("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
Prudential.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements are prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of
the financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts and
disclosures. Actual results could differ from those estimates.

Investments--The investments in shares of the Series Fund are stated at
the net asset value of the respective portfolio.

Security Transactions--Realized gains and losses on security
transactions are reported on an average cost basis. Purchase and sale
transactions are recorded as of the trade date of the security being
purchased or sold.

Distributions Received--Dividend and capital gain distributions received
are reinvested in additional shares of the Series Fund and are recorded
on the ex-dividend date.

NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS

The net asset value per share (rounded) for each portfolio of the Series
Fund, the number of shares of each portfolio held by the PruVider
Variable Appreciable Life subaccounts of the Account and the aggregate
cost of investments in such shares at December 31, 1998 were as follows:

PORTFOLIOS
--------------------------------

FLEXIBLE CONSERVATIVE
MANAGED BALANCED
-------------- --------------
Number of shares: 7,525,925 7,638,106
Net asset value per share (rounded): $ 16.56 $ 15.08
Cost: $ 130,117,783 $ 115,609,228

NOTE 4: CONTRACT OWNER UNIT INFORMATION

Outstanding contract owner units, unit values and total value of
contract owner equity at December 31, 1998 were as follows:

SUBACCOUNTS
----------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
--------------- ---------------
Contract Owner Units Outstanding 38,041,166 41,876,253
Unit Value $ 3.27632 $ 2.75065
--------------- ---------------
TOTAL CONTRACT OWNER EQUITY $ 124,635,035 $ 115,186,914
=============== ===============

A4
<PAGE>

NOTE 5: 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. Mortality risk is
that contract owners may not live as long as estimated and expense
risk is that the cost of issuing and administering the policies may
exceed related charges by Pruco Life.

B. Deferred Sales Charge

Subsequent to a contract owner redemption, a deferred sales charge is
imposed upon surrenders 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

A charge is imposed by Pruco Life on partial withdrawals of the cash
surrender value. A charge equal to the lesser of $15 or 2% will be
made in connection with each partial withdrawal of the cash surrender
value of a contract.

D. Cost of Insurance Charges

Contract owner contributions are subject to certain deductions prior
to being invested in the Account. The deductions are for (1)
transaction costs which are deducted from each premium payment to
cover premium collection and processing costs; (2) state premium
taxes; (3) sales charges which are deducted in order to compensate
Pruco Life for the cost of selling the contract. Contracts are also
subject to monthly charges for the costs of administering the
contract and to compensate Pruco Life for the guaranteed minimum
death benefit risk.

NOTE 6: TAXES

Pruco Life is taxed as a "life insurance company" as defined by the
Internal Revenue Code and the results of operations of the Account form
a part of Prudential's consolidated federal tax return. Under current
federal law, no federal income taxes are payable by the Account. As
such, no provision for tax liability has been recorded in these
financial statements.

NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS

The following amounts represent contract owner activity components for
the years ended December 31, 1998 and 1997:

<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Contributions: .......... $ 25,870,745 $ 26,737,492 $ 17,110,194 $ 19,001,987
Policy Loans ........................... (1,252,962) (912,970) (799,965) (704,562)
Policy Loan Repayment and
Interest ............................. 542,622 390,085 440,486 350,979
Surrenders, Withdrawals and
Death Benefits ....................... (6,436,168) (6,402,537) (5,513,621) (6,555,299)
Net Transfers From (To) Other
Subaccounts or Fixed Rate Options .... 489,890 567,479 (443,976)
Administrative and Other Charges ....... (13,737,022) (13,773,623) (10,626,237) (11,188,850)
------------ ------------ ------------ ------------
Net Increase in Net Assets
Resulting From Premium Payments
and Other Operating Transfers ........ $ 5,477,105 $ 6,605,926 $ 166,881 $ 427,926
============ ============ ============ ============
</TABLE>

A5
<PAGE>

NOTE 8: NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN THE ACCOUNT

The increase (decrease) in net assets retained in the account represents
the net contributions (withdrawals) of Pruco Life to (from) the Account.
Effective October 13, 1998 Pruco Life no longer maintains a position in
the account. Previously, Pruco Life maintained a position in the Account
for liquidity purposes including unit purchases and redemptions, fund
share transactions and expense processing.

NOTE 9: UNIT ACTIVITY

Transactions in units (including transfers among subaccounts) for the
years ended December 31, 1998, 1997 and 1996 were as follows:

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

FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
------------------------------------------ -----------------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 8,645,893 9,998,784 14,116,349 6,780,289 8,324,436 13,901,187

Contact Owner
Redemptions: (6,905,049) (7,621,395) (7,281,505) (6,713,503) (8,122,804) (7,840,673)
</TABLE>

NOTE 10: PURCHASES AND SALES OF INVESTMENTS

The aggregate costs of purchases and proceeds from sales of investments
in the Series Fund for the year ended December 31, 1998 were as follows:

PORTFOLIOS
------------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
----------- ------------
Purchases ....................... $ 6,416,642 $ 2,311,063
Sales ........................... $(1,926,831) $(3,056,492)

A6
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Contract Owners of the
Pruco Life PRUvider Variable Appreciable Account
and the Board of Directors of
Pruco Life Insurance Company

In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets present fairly, in all
material respects, the financial position of the subaccounts (Flexible Managed
Portfolio and Conservative Balanced Portfolio) of the Pruco Life PRUvider
Variable Appreciable Account at December 31, 1998, the results of each of their
operations and the changes in each of their net assets for each of the three
years in the period then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Pruco Life
Insurance Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of fund shares owned at December 31, 1998, provide a reasonable
basis for the opinion expressed above.

PricewaterhouseCoopers LLP
New York, New York
March 19, 1999

<PAGE>

<TABLE>

Pruco Life Insurance Company and Subsidiaries

Consolidated Statements of Financial Position
December 31, 1998 and 1997 (In Thousands)
- --------------------------------------------------------------------------------

<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value (amortized cost, 1998: $2,738,654;
1997: $2,526,554) $ 2,763,926 $ 2,563,852
Held to maturity, at amortized cost (fair value, 1998: $421,845; 1997:
$350,056) 410,558 338,848
Equity securities - available for sale, at fair value (cost, 1998: $2,951; 2,847 1,982
1997: $1,289)
Mortgage loans on real estate 17,354 22,787
Policy loans 766,917 703,955
Short-term investments 240,727 316,355
Other long-term investments 1,047 1,317
------------ ------------
Total investments 4,203,376 3,949,096
Cash 89,679 71,358
Deferred policy acquisition costs 861,713 655,242
Accrued investment income 61,114 67,000
Other assets 65,145 86,692
Separate Account assets 11,531,754 8,022,079
------------ ------------
TOTAL ASSETS $ 16,812,781 $ 12,851,467
============ ============

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Policyholders' account balances $ 2,696,191 $ 2,380,460
Future policy benefits and other policyholder liabilities 534,599 472,460
Cash collateral for loaned securities 73,336 143,421
Securities sold under agreement to repurchase 49,708 --
Income taxes payable 44,524 71,703
Net deferred income tax liability 148,834 138,483
Payable to affiliate 66,568 70,375
Other liabilities 55,038 120,260
Separate Account liabilities 11,490,751 7,948,788
------------ ------------
Total liabilities 15,159,549 11,345,950
------------ ------------
Contingencies (See Note 11)
Stockholder's Equity
Common stock, $10 par value;
1,000,000 shares, authorized;
250,000 shares, issued and outstanding at
December 31, 1998 and 1997 2,500 2,500
Paid-in-capital 439,582 439,582
Retained earnings 1,202,833 1,050,871

Accumulated other comprehensive income
Net unrealized investment gains 9,902 17,129
Foreign currency translation adjustments (1,585) (4,565)
------------ ------------
Accumulated other comprehensive income 8,317 12,564
------------ ------------
Total stockholder's equity 1,653,232 1,505,517
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 16,812,781 $ 12,851,467
============ ============
</TABLE>

See Notes to Consolidated Financial Statements

B-1
<PAGE>

<TABLE>

Pruco Life Insurance Company and Subsidiaries

Consolidated Statements of Operations
Years Ended December 31, 1998, 1997 and 1996 (In Thousands)
- --------------------------------------------------------------------------------

<CAPTION>
1998 1997 1996
--------- --------- ---------
REVENUES
<S> <C> <C> <C>
Premiums $ 57,467 $ 49,496 $ 51,525
Policy charges and fee income 364,719 330,292 324,976
Net investment income 261,430 259,634 247,328
Realized investment gains, net 44,841 10,974 10,835
Other income 41,267 33,801 20,818
--------- --------- ---------

Total revenues 769,724 684,197 655,482
--------- --------- ---------

BENEFITS AND EXPENSES

Policyholders' benefits 186,527 179,419 186,873
Interest credited to policyholders' account balances 118,935 110,815 118,246
General, administrative and other expenses 228,067 225,721 122,006
--------- --------- ---------

Total benefits and expenses 533,529 515,955 427,125
--------- --------- ---------

Income from operations before income taxes 236,195 168,242 228,357
--------- --------- ---------

Income taxes
Current 69,768 73,326 60,196
Deferred 14,465 (11,458) 18,939
--------- --------- ---------

Total income taxes 84,233 61,868 79,135
--------- --------- ---------

NET INCOME 151,962 106,374 149,222
--------- --------- ---------

Other comprehensive income, net of tax:

Unrealized gains on securities, net of
reclassification adjustment (7,227) 3,025 (17,952)

Foreign currency translation adjustments 2,980 (2,863) (482)
--------- --------- ---------

Other comprehensive income (4,247) 162 (18,434)
--------- --------- ---------

TOTAL COMPREHENSIVE INCOME $ 147,715 $ 106,536 $ 130,788
========= ========= =========
</TABLE>

See Notes to Consolidated Financial Statements

B-2
<PAGE>

<TABLE>

Pruco Life Insurance Company and Subsidiaries

Consolidated Statements of Changes in Stockholder's Equity
Years Ended December 31, 1998, 1997, and 1996 (In Thousands)
- --------------------------------------------------------------------------------

<CAPTION>
Accumulated
other Total
Common Paid-in- Retained comprehensive stockholder's
stock capital earnings income equity
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ 2,500 $ 439,582 $ 795,275 $ 30,836 $ 1,268,193

Net income -- -- 149,222 -- 149,222

Change in foreign currency
translation adjustments -- -- -- (482) (482)

Change in net unrealized
investment gains, net of
reclassification adjustment -- -- -- (17,952) (17,952)

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

Balance, December 31, 1996 2,500 439,582 944,497 12,402 1,398,981

Net income -- -- 106,374 -- 106,374

Change in foreign currency
translation adjustments -- -- -- (2,863) (2,863)

Change in net unrealized
investment gains, net of
reclassification adjustment -- -- -- 3,025 3,025
----------- ----------- ----------- ----------- -----------

Balance, December 31, 1997 2,500 439,582 1,050,871 12,564 1,505,517

Net income -- -- 151,962 -- 151,962

Change in foreign currency
translation adjustments -- -- -- 2,980 2,980

Change in net unrealized
investment gains, net of
reclassification adjustment -- -- -- (7,227) (7,227)

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

Balance, December 31, 1998 $ 2,500 $ 439,582 $ 1,202,833 $ 8,317 $ 1,653,232

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

See Notes to Consolidated Financial Statements

B-3
<PAGE>

<TABLE>

Pruco Life Insurance Company and Subsidiaries

Consolidated Statements of Cash Flows
Years Ended December 31, 1998, 1997, and 1996 (In Thousands)
- --------------------------------------------------------------------------------

<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 151,962 $ 106,374 $ 149,222
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Policy charges and fee income (47,230) (40,783) (50,286)
Interest credited to policyholders' account balances 118,935 110,815 118,246
Realized investment gains, net (44,841) (10,974) (10,835)
Amortization and other non-cash items 18,611 (31,181) 29,334
Change in:
Future policy benefits and other policyholders' liabilities 62,139 39,683 54,176
Accrued investment income 5,886 (4,890) (2,248)
Separate Accounts 32,288 (13,894) (38,025)
Payable to affiliate (3,807) 20,547 16,519
Policy loans (62,962) (64,173) (70,509)
Deferred policy acquisition costs (206,471) (22,083) (66,183)
Income taxes payable (27,179) 78,894 (816)
Deferred income tax liability 10,351 (10,477) 7,912
Other, net (43,675) 34,577 7,814
----------- ----------- -----------
Cash Flows (Used In) From Operating Activities (35,993) 192,435 144,321
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Available for sale 5,429,396 2,828,665 3,886,254
Held to maturity 74,767 138,626 138,127
Equity securities 4,101 6,939 7,527
Mortgage loans on real estate 5,433 24,925 19,226
Other long-term investments 1,140 3,276 288
Investment real estate -- -- 4,488
Payments for the purchase of:
Fixed maturities:
Available for sale (5,617,208) (3,141,785) (4,008,810)
Held to maturity (145,919) (70,532) (114,494)
Equity securities (2,274) (4,594) (4,697)
Other long-term investments (409) (51) (657)
Cash collateral for loaned securities, net (70,085) 143,421 -
Securities sold under agreement to repurchase, net 49,708 - -
Short-term investments, net 75,771 (147,030) 58,186
----------- ----------- -----------
Cash Flows Used In Investing Activities (195,579) (218,140) (14,562)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 3,098,721 2,099,600 536,370
Withdrawals (2,848,828) (2,076,303) (633,798)
----------- ----------- -----------
Cash Flows From (Used in) Financing Activities 249,893 23,297 (97,428)
----------- ----------- -----------
Net increase (decrease) in Cash 18,321 (2,408) 32,331
Cash, beginning of year 71,358 73,766 41,435
----------- ----------- -----------
CASH, END OF PERIOD $ 89,679 $ 71,358 $ 73,766
=========== =========== ===========

SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid (received) $ 99,810 $ (7,904) $ 61,760
=========== =========== ===========
</TABLE>

See Notes to Consolidated Financial Statements

B-4
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

1. BUSINESS

Pruco Life Insurance Company (the Company) is a stock life insurance company,
organized in 1971 under the laws of the state of Arizona. The Company markets
individual life insurance, variable life insurance, variable annuities, fixed
annuities, and a group annuity program (the Contracts) in all states and
territories except the District of Columbia and Guam. In addition, the Company
markets individual life insurance through its branch office in Taiwan. The
Company has two wholly owned subsidiaries, Pruco Life Insurance Company of New
Jersey (PLNJ) and The Prudential Life Insurance Company of Arizona (PLICA). PLNJ
is a stock life insurance company organized in 1982 under the laws of the state
of New Jersey. It is licensed to sell individual life insurance, variable life
insurance, fixed annuities, and variable annuities only in the states of New
Jersey and New York. PLICA is a stock life insurance company organized in 1988
under the laws of the state of Arizona. PLICA had no new business sales in 1997
or 1998 and at this time will not be issuing new business.

The Company is a wholly owned subsidiary of The Prudential Insurance Company of
America (Prudential), a mutual insurance company founded in 1875 under the laws
of the state of New Jersey. Prudential intends to make additional capital
contributions to the Company, as needed, to enable it to comply with its reserve
requirements and fund expenses in connection with its business. Generally,
Prudential is under no obligation to make such contributions and its assets do
not back the benefits payable under the Contracts.

The Company is engaged in a business that is highly competitive because of the
large number of stock and mutual life insurance companies and other entities
engaged in marketing insurance products, and individual and group annuities.
There are approximately 1,620 stock, mutual and other types of insurers in the
life insurance business in the United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP"). All significant intercompany
balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 period. Actual results could differ from those estimates.

Investments

Fixed maturities classified as "available for sale" are carried at estimated
fair value. Fixed maturities that the Company has both the intent and ability to
hold to maturity are stated at amortized cost and classified as "held to
maturity". The amortized cost of fixed maturities is written down to estimated
fair value if a decline in value is considered to be other than temporary.
Unrealized gains and losses on fixed maturities "available for sale", including
the effect on deferred policy acquisition costs and participating annuity
contracts that would result from the realization of unrealized gains and losses,
net of income taxes, are included in a separate component of equity,
"Accumulated other comprehensive income."

Equity securities, available for sale, comprised of common and non-redeemable
preferred stock, are carried at estimated fair value. The associated unrealized
gains and losses, net of income tax, the effects on deferred policy acquisition
costs and on participating annuity contracts that would result from the
realization of unrealized gains and losses, are included in a separate component
of equity, "Accumulated other comprehensive income."

Mortgage loans on real estate are stated primarily at unpaid principal balances,
net of unamortized discounts and allowance for losses. The allowance for losses
is based upon a loan specific review and management's consideration of past
results, current trends, the estimated value of the underlying collateral,
composition of the loan portfolio, current economic conditions and other
relevant factors. Impaired loans are identified by management as loans in which
a probability exists that all amounts due according to the contractual terms of
the loan agreement will not be collected.

B-5
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impaired loans are measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate, or the fair value of the
collateral if the loan is collateral dependent.

Interest received on impaired loans, including loans that were previously
modified in a troubled debt restructuring, is either applied against the
principal or reported as revenue, according to management's judgment as to the
collectibility of principal. Management discontinues the accrual of interest on
impaired loans after the loans are 90 days delinquent as to principal or
interest, or earlier when management has serious doubts about collectibility.
When a loan is recognized as impaired, any accrued but unpaid interest
previously recorded on such loan is reversed against interest income of the
current period. Generally, a loan is restored to accrual status only after all
delinquent interest and principal are brought current and, in the case of loans
where interest has been interrupted for a substantial period, a regular payment
performance has been established.

Policy loans are carried at unpaid principal balances.

Short-term investments, consists primarily of highly liquid debt instruments
purchased with an original maturity of twelve months or less and are carried at
amortized cost, which approximates fair value.

Other long-term investments primarily represent the Company's investments in
joint ventures and partnerships in which the Company does not have control.
These investments are recorded using the equity method of accounting, reduced
for other than temporary declines in value.

Realized investment gains, net are computed using the specific identification
method. Costs of fixed maturity and equity securities are adjusted for
impairments considered to be other than temporary.

Cash

Cash includes cash on hand, amounts due from banks, and money market
instruments.

Deferred Policy Acquisition Costs

The costs which vary with and that are related primarily to the production of
new insurance business are deferred to the extent that they are deemed
recoverable from future profits. Such costs include certain commissions, costs
of policy issuance and underwriting, and certain variable field office expenses.
Deferred policy acquisition costs are subject to recoverability testing at the
time of policy issue and loss recognition testing at the end of each accounting
period. Deferred policy acquisition costs are adjusted for the impact of
unrealized gains or losses on investments as if these gains or losses had been
realized, with corresponding credits or charges included in "Accumulated other
comprehensive income."

Acquisition costs related to interest-sensitive life products and
investment-type contracts are deferred and amortized in proportion to total
estimated gross profits arising principally from investment results, mortality
and expense margins and surrender charges based on historical and anticipated
future experience. Amortization periods range from 15 to 30 years. For
participating life insurance, deferred policy acquisition costs are amortized
over the expected life of the contracts in proportion to estimated gross margins
based on historical and anticipated future experience, which is updated
periodically. Deferred policy acquisition costs are analyzed to determine if
they are recoverable from future income, including investment income. If such
costs are determined to be unrecoverable, they are expensed at the time of
determination. The effect of revisions to estimated gross profits on unamortized
deferred acquisition costs is reflected in earnings in the period such estimated
gross profits are revised.

Securities loaned

Securities loaned are treated as financing arrangements and are recorded at the
amount of cash received as collateral. The Company obtains collateral in an
amount equal to 102% of the fair value of the securities. The Company monitors
the market value of securities loaned on a daily basis with additional
collateral obtained as necessary. Non-cash collateral received is not reflected
in the consolidated statements of financial position. Substantially all of the
Company's securities loaned are with large brokerage firms.

B-6
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are treated as financing
arrangements and are carried at the amounts at which the securities will be
subsequently reacquired, including accrued interest, as specified in the
respective agreements. The Company's policy is to take possession of securities
purchased under agreements to resell. The market value of securities to be
repurchased is monitored and additional collateral is requested, where
appropriate, to protect against credit exposure.

Securities lending and securities repurchase agreements are used to generate net
investment income and facilitate trading activity. These instruments are
short-term in nature (usually 30 days or less). Securities loaned are
collateralized principally by U.S. Government and mortgage-backed securities.
Securities sold under repurchase agreements are collateralized principally by
cash. The carrying amounts of these instruments approximate fair value because
of the relatively short period of time between the origination of the
instruments and their expected realization.

Separate Account Assets and Liabilities

Separate Account assets and liabilities are reported at estimated fair value and
represent segregated funds which are invested for certain policyholders and
other customers. Separate Account assets include common stocks, fixed
maturities, real estate related securities, and short-term investments. The
assets of each account are legally segregated and are not subject to claims that
arise out of any other business of the Company. Investment risks associated with
market value changes are borne by the customers, except to the extent of minimum
guarantees made by the Company with respect to certain accounts. The investment
income and gains or losses for Separate Accounts generally accrue to the
policyholders and are not included in the Consolidated Statement of Operations.
Mortality, policy administration and surrender charges on the accounts are
included in "Policy charges and fee income."

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
Guaranteed 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 the Company.

Insurance Revenue and Expense Recognition

Premiums from insurance policies are generally recognized when due. Benefits are
recorded as an expense when they are incurred. For traditional life insurance
contracts, a liability for future policy benefits is recorded using the net
level premium method. For individual annuities in payout status, a liability for
future policy benefits is recorded for the present value of expected future
payments based on historical experience.

Premiums from non-participating group annuities with life contingencies are
generally recognized when due. For single premium immediate annuities, premiums
are recognized when due with any excess profit deferred and recognized in a
constant relationship to insurance in-force or, for annuities, the amount of
expected future benefit payments.

Amounts received as payment for interest-sensitive life, individual annuities,
and guaranteed investment contracts are reported as deposits to "Policyholders'
account balances." Revenues from these contracts reflected as "Policy charges
and fee income" consist primarily of fees assessed during the period against the
policyholders' account balances for mortality charges, policy administration
charges and surrender charges. In addition, interest earned from the investment
of these account balances is reflected in "Net investment income." Benefits and
expenses for these products include claims in excess of related account
balances, expenses of contract administration, interest credited and
amortization of deferred policy acquisition costs.

Foreign Currency Translation Adjustments

Assets and liabilities of the Taiwan branch are translated to U.S. dollars at
the exchange rate in effect at the end of the period. Revenues, benefits and
other expenses are translated at the average rate prevailing during the period.
Cumulative translation adjustments arising from the use of differing exchange
rates from period to period are charged or credited directly to "Other
comprehensive income." The cumulative effect of changes in foreign exchange
rates are included in "Accumulated other comprehensive income."

B-7
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Other Income

Other income consists primarily of asset management fees which are received by
the Company from Prudential for services Prudential provides to the Prudential
Series Fund, an underlying investment option of the Separate Accounts.

Derivative Financial Instruments

Derivatives are financial instruments whose values are derived from interest
rates, foreign exchange rates, various financial indices, or the value of
securities or commodities. Derivative financial instruments used by the Company
include futures, currency swaps, and options contracts and can be
exchange-traded or contracted in the over-the-counter market. The Company uses
derivative financial instruments to hedge market risk from changes in interest
rates or foreign currency exchange rates, and to alter interest rate or currency
exposures arising from mismatches between assets and liabilities. All
derivatives used by the Company are for other than trading purposes.

To qualify as a hedge, derivatives must be designated as hedges for existing
assets, liabilities, firm commitments, or anticipated transactions which are
identified and probable to occur, and effective in reducing the market risk to
which the Company is exposed. The effectiveness of the derivatives must be
evaluated at the inception of the hedge and throughout the hedge period.

When derivatives qualify as hedges, the changes in the fair value or cash flows
of the derivatives and the hedged items are recognized in earnings in the same
period. If the Company's use of other than trading derivatives does not meet the
criteria to apply hedge accounting, the derivatives are recorded at fair value
in "Other liabilities" in the Consolidated Statements of Financial Position, and
changes in their fair value are recognized in earnings in "Realized investment
gains, net" without considering changes in the hedged assets or liabilities.
Cash flows from other than trading derivative assets and liabilities are
reported in the operating activities section in the Consolidated Statements of
Cash Flows.

Income Taxes

The Company and its subsidiaries are members of the consolidated federal income
tax return of Prudential and files separate company state and local tax returns.
Pursuant to the tax allocation arrangement with Prudential, total federal income
tax expense is determined on a separate company basis. Members with losses
record tax benefits to the extent such losses are recognized in the consolidated
federal tax provision. Deferred income taxes are generally recognized, based on
enacted rates, when assets and liabilities have different values for financial
statement and tax reporting purposes. A valuation allowance is recorded to
reduce a deferred tax asset to that portion that is expected to be realized.

New Accounting Pronouncements

In June 1996, the Financial Accounting Standards Board ("FASB") issued the
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 125"). The statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
and provides consistent standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. SFAS 125
became effective January 1, 1997 and is to be applied prospectively. Subsequent
to June 1996, FASB issued SFAS No. 127 "Deferral of the Effective Date of
Certain Provisions of SFAS 125" ("SFAS 127"). SFAS 127 delays the implementation
of SFAS 125 for one year for certain transactions, including repurchase
agreements, dollar rolls, securities lending and similar transactions. Adoption
of SFAS 125 did not have a material impact on the Company's results of
operations, financial position and liquidity.

During 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
which was issued by the FASB in June 1997. This statement defines comprehensive
income and establishes standards for reporting and displaying comprehensive
income and its components in financial statements. The statement requires that
the Company classify items of other comprehensive income by their nature and
display the accumulated balance of other comprehensive income separately from
retained earnings in the equity section of the Statement of Financial Position.
Application of this statement did not change recognition or measurement of net
income and, therefore, did not affect the Company's financial position or
results of operations.

B-8
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

On January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants ("AICPA") Statement of Position 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments" ("SOP 97-3").
This statement provides guidance for determining when an insurance company or
other enterprise should recognize a liability for guaranty-fund assessments as
well as guidance for measuring the liability. The adoption of SOP 97-3 is not
expected to have a material effect on the Company's financial position or
results of operations.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. SFAS No. 133 provides, if certain conditions
are met, that a derivative may be specifically designated as (1) a hedge of the
exposure to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment (fair value hedge), (2) a hedge of the exposure to
variable cash flows of a forecasted transaction (cash flow hedge), or (3) a
hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security or a
foreign-currency-denominated forecasted transaction (foreign currency hedge).

SFAS No. 133 does not apply to most traditional insurance contracts. However,
certain hybrid contracts that contain features which can affect settlement
amounts similarly to derivatives may require separate accounting for the "host
contract" and the underlying "embedded derivative" provisions. The latter
provisions would be accounted for as derivatives as specified by the statement.

Under SFAS No. 133, the accounting for changes in fair value of a derivative
depends on its intended use and designation. For a fair value hedge, the gain or
loss is recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item. For a cash flow hedge, the effective
portion of the derivative's gain or loss is initially reported as a component of
other comprehensive income and subsequently reclassified into earnings when the
forecasted transaction affects earnings. For a foreign currency hedge, the gain
or loss is reported in other comprehensive income as part of the foreign
currency translation adjustment. For all other derivatives not designated as
hedging instruments, the gain or loss is recognized in earnings in the period of
change. The Company is required to adopt this Statement no later than January 1,
2000 and is currently assessing the effect of the new standard.

In October, 1998, the AICPA issued Statement of Position 98-7, "Deposit
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not
Transfer Insurance Risk," ("SOP 98-7"). This statement provides guidance on how
to account for insurance and reinsurance contracts that do not transfer
insurance risk. SOP 98-7 is effective for fiscal years beginning after June 15,
1999. The adoption of this statement is not expected to have a material effect
on the Company's financial position or results of operations.

Reclassifications

Certain amounts in the prior years have been reclassified to conform to current
year presentation.

B-9
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

3. INVESTMENTS

Fixed Maturities and Equity Securities:

The following tables provide additional information relating to fixed maturities
and equity securities as of December 31,:

<TABLE>
<CAPTION>
1998
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities available for sale
U.S. Treasury securities and obligations of
U.S. government corporations and agencies 110,294 864 318 110,840

Foreign government bonds 87,112 2,003 696 88,419

Corporate securities 2,540,498 30,160 6,897 2,563,761

Mortgage-backed securities 750 156 -- 906
---------- ---------- ---------- ----------
Total fixed maturities available for sale $2,738,654 $ 33,183 $ 7,911 $2,763,926
========== ========== ========== ==========

Equity securities available for sale $ 2,951 $ 168 $ 272 $ 2,847
========== ========== ========== ==========

Fixed maturities held to maturity
Corporate securities $ 410,558 $ 11,287 $ -- $ 421,845
---------- ---------- ---------- ----------
Total fixed maturities held to maturity $ 410,558 $ 11,287 $ -- $ 421,845
========== ========== ========== ==========

1997
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
Fixed maturities available for sale
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 177,691 $ 1,231 $ 20 $ 178,902

Foreign government bonds 83,889 1,118 19 84,988

Corporate securities 2,263,898 36,857 2,017 2,298,738

Mortgage-backed securities 1,076 180 32 1,224
---------- ---------- ---------- ----------
Total fixed maturities available for sale $2,526,554 $ 39,386 $ 2,088 $2,563,852
========== ========== ========== ==========

Equity securities available for sale $ 1,289 $ 802 $ 109 $ 1,982
========== ========== ========== ==========

Fixed maturities held to maturity
Corporate securities $ 338,848 $ 11,427 $ 219 $ 350,056
---------- ---------- ---------- ----------
Total fixed maturities held to maturity $ 338,848 $ 11,427 $ 219 $ 350,056
========== ========== ========== ==========
</TABLE>

B-10
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

3. INVESTMENTS (continued)

The amortized cost and estimated fair value of fixed maturities, categorized by
contractual maturities at December 31, 1998 are shown below:

<TABLE>
<CAPTION>
Available for Sale Held to Maturity
-------------------------------- ---------------------------------
Amortized Estimated Fair Amortized Estimated Fair
Cost Value Cost Value
--------- -------------- ---------- --------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 72,931 $ 73,254 $ 3,036 $ 3,064

Due after one year through five years 1,050,981 1,059,389 193,749 201,136

Due after five years through ten years 1,142,507 1,156,664 155,568 158,801

Due after ten years 471,485 473,713 58,205 58,844

Mortgage-backed securities 750 906 -- --
---------- ---------- ---------- ----------
Total $2,738,654 $2,763,926 $ 410,558 $ 421,845
========== ========== ========== ==========
</TABLE>

Actual maturities will differ from contractual maturities because, in certain
circumstances, issuers have the right to call or prepay obligations.

Proceeds from the sale of fixed maturities available for sale during 1998, 1997,
and 1996 were $5,327.3 million, $2,796.3 million, and $3,667.1 million,
respectively. Gross gains of $46.3 million, $18.6 million, and $22.1 million and
gross losses of $14.1 million, $7.9 million, and $17.6 million were realized on
those sales during 1998, 1997, and 1996, respectively.

Proceeds from the maturity of fixed maturities available for sale during 1998,
1997, and 1996 were $102.1 million, $32.4 million, and $219.2 million,
respectively. During the years ended December 31, 1998, 1997, and 1996, there
were no securities classified as held to maturity that were sold.

Writedowns for impairments of fixed maturities which were deemed to be other
than temporary were $2.8 million, $.1 million and $.1 million for the years
1998, 1997 and 1996, respectively.

B-11
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

3. INVESTMENTS (continued)

The following table describes the credit quality of the fixed maturity
portfolio, based on ratings assigned by the National Association of Insurance
Commissioners ("NAIC") or Standard & Poor's Corporation, an independent rating
agency as of December 31, 1998:

<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------------------ -------------------------------------

Amortized Estimated Fair Amortized Estimated Fair
Cost Value Cost Value
---------- -------------- ---------- --------------
(In Thousands) (In Thousands)
NAIC Standard & Poor's
<S> <C> <C> <C> <C>
1 AAA to AA- $1,195,301 $1,211,995 $ 180,070 $ 186,683
2 BBB+ to BBB- 1,254,522 1,263,656 182,298 185,417
3 BB+ to BB- 201,033 204,278 39,346 40,654
4 B+ to B- 59,799 57,695 8,821 9,068
5 CCC or lower 27,552 26,061 -- --
6 In or near default 447 241 23 23
---------- ---------- ---------- ----------
Total $2,738,654 $2,763,926 $ 410,558 $ 421,845
========== ========== ========== ==========
</TABLE>

The fixed maturity portfolio consists largely of investment grade assets (rated
"1" or "2" by the NAIC), with such investments accounting for 89% and 94% of the
portfolio at December 31, 1998 and 1997, respectively, based on fair value. As
of both of those dates, less than 1% of the fixed maturities portfolio was rated
"6" by the NAIC, defined as public and private placement securities which are
currently non-performing or believed subject to default in the near-term.

The Company continually reviews fixed maturities and identifies potential
problem assets which require additional monitoring. The Company defines
"problem" fixed maturities as those for which principal and/or interest payments
are in default. The Company defines "potential problem" fixed maturities as
assets which are believed to present default risk associated with future debt
service obligations and therefore require more active management. At December
31, 1998 management identified $264.0 thousand of fixed maturity investments as
problem or potential problem. An immaterial amount of problem or potential
problem fixed maturities were identified in 1997.

Mortgage Loans on Real Estate

The Company's mortgage loans were collateralized by the following property types
at December 31, 1998 and 1997.

1998 1997
------------------ -------------------
(In Thousands)

Office buildings $ -- -- $ 4,607 20%

Retail stores 7,356 42% 8,090 35%

Apartment complexes 5,988 35% 6,080 27%

Industrial buildings 4,010 23% 4,010 18%
------------------ ------------------
Net carrying value $17,354 100% $22,787 100%
================== ==================

B-12
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

3. INVESTMENTS (continued)

The largest concentration of mortgage loans are in the states of Pennsylvania
(35%), Washington (34%), and New Jersey (23%).

Special Deposits

Fixed maturities of $8.6 million and $8.3 million at December 31, 1998 and 1997,
respectively, were on deposit with governmental authorities or trustees as
required by certain insurance laws.

Other Long-Term Investments

The Company's "Other long-term investments" of $1.0 million and $1.3 million as
of December 31, 1998 and 1997, respectively, are comprised of joint ventures and
limited parterships. The Company's share of net income from these entities was
$.1 million, $2.2 million and $1.4 million for the years ended December 31,
1998, 1997 and 1996, respectively, and is reported in "Net investment income."

Investment Income and Investment Gains and Losses

Net investment income arose from the following sources for the years ended
December 31:

1998 1997 1996
--------- --------- ---------
(In Thousands)

Fixed maturities - available for sale $ 179,184 $ 161,140 $ 152,445
Fixed maturities - held to maturity 26,128 26,936 33,419
Equity securities 14 76 44
Mortgage loans on real estate 1,818 2,585 5,669
Policy loans 40,928 37,398 33,449
Short-term investments 23,110 22,011 16,780
Other 6,886 14,920 10,051
--------- --------- ---------
Gross investment income 278,068 265,066 251,857
Less: investment expenses (16,638) (5,432) (4,529)
--------- --------- ---------
Net investment income $ 261,430 $ 259,634 $ 247,328
========= ========= =========

Realized investment gains ,net including charges for other than temporary
reductions in value, for the years ended December 31, were from the following
sources:

1998 1997 1996
--------- --------- ---------
(In Thousands)

Fixed maturities - available for sale $ 29,330 $ 9,039 $ 9,036
Fixed maturities - held to maturity 487 821 --
Equity securities 3,489 8 781
Mortgage loans on real estate -- 797 1,677
Derivative instruments 12,414 -- --
Other (879) 309 (659)
--------- --------- ---------

Realized investment gains, net $ 44,841 $ 10,974 $ 10,835
========= ========= =========

B-13
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

3. INVESTMENTS (continued)

Net Unrealized Investment Gains

Net unrealized investment gains on securities available for sale are included in
the Consolidated Statement of Financial Position as a component of "Accumulated
other comprehensive income." Changes in these amounts include reclassification
adjustments to avoid double-counting in "Comprehensive income," items that are
included as part of "Net income" for a period that also have been part of "Other
comprehensive income" in earlier periods. The amounts for the years ended
December 31, net of tax, are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Net unrealized investment gains, beginning of year $ 17,129 $ 14,104 $ 32,056
Changes in net unrealized investment gains attributable to:
Investments:
Net unrealized gains on investments arising during the period 14,593 13,880 (20,405)
Reclassification adjustment for gains included in net income 22,799 6,680 6,165
-------- -------- --------
Change in net unrealized gains on investments, net of adjustments (8,206) 7,200 (26,570)
Impact of net unrealized investment gains on:
Policyholder's account balances (1,063) 1,293 (2,467)
Deferred policy acquisition costs 2,042 (5,468) 11,085
-------- -------- --------
Change in net unrealized investment gains (7,227) 3,025 (17,952)
-------- -------- --------
Net unrealized investment gains, end of year $ 9,902 $ 17,129 $ 14,104
======== ======== ========
</TABLE>

Unrealized gains (losses) on investments arising during the periods reported in
the above table are net of income tax (benefit) expense of $(8.2) million,
$(7.6) million and $12.1 million for the years ended December 31, 1998, 1997 and
1996, respectively.

Reclassification adjustments reported in the above table for the years ended
December 31, 1998, 1997 and 1996 are net of income tax expense of $12.8 million,
$3.6 million and $3.8 million, respectively.

Policyholder's account balances reported in the above table are net of income
tax (benefit) expense of $(.2) million, $.0 million and $1.4 million for the
years ended December 31, 1998, 1997 and 1996, respectively.

Deferred policy acquisition costs in the above tables for the years ended
December 31, 1998, 1997 and 1996 are net of income tax (benefit) expense of
$(1.1) million, $2.9 million and $(6.2) million, respectively.

4. POLICYHOLDERS' LIABILITIES

Future policy benefits and other policyholder liabilities at December 31 are as
follows:

1998 1997
-------- --------
(In Thousands)

Life insurance $506,249 $444,737
Annuities 28,350 27,723

-------- --------
$534,599 $472,460
======== ========

B-14
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

4. POLICYHOLDERS' LIABILITIES (continued)

Life insurance liabilities include reserves for death benefits. Annuity
liabilities include reserves for immediate annuities.

The following table highlights the key assumptions generally utilized in
calculating these reserves:

<TABLE>
<CAPTION>
Product Mortality Interest Rate Estimation Method
- ------------------------------ ------------------------- ------------- -----------------------
<S> <C> <C> <C>
Life insurance - Domestic Generally rates 2.5% to 7.5% Net level premium based
guaranteed in on non-forfeiture
calculating cash interest rate
surrender values

Life insurance - International Generally rates 6.25% to 6.5% Net level premium based
guaranteed in on the expected
calculating cash investment return
surrender values

Individual immediate annuities 1983 Individual Annuity 6.25% to 11.0% Present value of
Mortality Table with expected future payment
certain modifications based on historical
experience
</TABLE>

Policyholders' account balances at December 31, are as follows:

1998 1997
---------- ----------
(In Thousands)

Interest-sensitive life contracts $1,386,829 $1,345,089
Individual annuities 1,077,996 1,035,371
Guaranteed investment contracts 231,366 --
---------- ----------
$2,696,191 $2,380,460
========== ==========

Policyholders' account balances for interest-sensitive life, individual
annuities, and guaranteed investment contracts are equal to policy account
values plus unearned premiums. The policy account values represent an
accumulation of gross premium payments plus credited interest less withdrawals,
expenses, mortality charges.

Certain contract provisions that determine the policyholder account balances are
as follows:

<TABLE>
<CAPTION>
Product Interest Rate Withdrawal / Surrender Charges
- --------------------------------- -------------- ----------------------------------
<S> <C> <C>
Interest sensitive life contracts 4.0% to 6.5% Various up to 10 years

Individual annuities 3.0% to 5.6% 0% to 8% for up to 8 years

Guaranteed investment contracts 5.02% to 6.23% Subject to market value withdrawal
provisions for any funds withdrawn
other than for benefit responsive
and contractual payments
</TABLE>

B-15
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

5. REINSURANCE

The Company participates in reinsurance, with Prudential and other companies, in
order to provide greater diversification of business, provide additional
capacity for future growth and limit the maximum net loss potential arising from
large risks. Reinsurance ceded arrangements do not discharge the Company or the
insurance subsidiaries as the primary insurer, except for cases involving a
novation. Ceded balances would represent a liability to the Company in the event
the reinsurers were unable to meet their obligations to the Company under the
terms of the reinsurance agreements. The likelihood of a material reinsurance
liability reassumed by the Company is considered to be remote.

Reinsurance amounts included in the Consolidated Statement of Operations for the
year ended December 31 are below.

1998 1997 1996
-------- -------- --------
(In Thousands)

Direct Premiums $ 65,423 $ 51,851 $ 53.776
Reinsurance assumed 1,395 1,369 1,128
Reinsurance ceded - affiliated (6,532) (686) (254)
Reinsurance ceded - unaffiliated (2,819) (3,038) (3,125)
-------- -------- --------
Premiums $ 57,467 $ 49,496 $ 51,525
======== ======== ========
Policyholders' benefits ceded $ 27,991 $ 25,704 $ 26,796
======== ======== ========

Reinsurance recoverables, included in "Other assets" in the Company's
Consolidated Statements of Financial Position, at December 31 include amounts
recoverable on unpaid and paid losses and were as follows:

1998 1997
------- -------
(In Thousands)

Life insurance - affiliated $ 6,481 $ 2,618
Other reinsurance - affiliated 21,650 23,243
------- -------
$28,131 $25,861
======= =======

B-16
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

6. EMPLOYEE BENEFIT PLANS

Pension and Other Postretirement Plans

The Company has a non-contributory defined benefit pension plan which covers
substantially all of its Taiwanese employees. This plan was established as of
September 30, 1997 and the projected benefit obligation and related expenses at
September 30, 1998 was not material to the Consolidated Statements of Financial
Position or results of operations for the years presented. All other employee
benefit costs are allocated to the Company from Prudential in accordance with
the service agreement described in Note 13.

7. INCOME TAXES

The components of income taxes for the years ended December 31, are as follows:

1998 1997 1996
-------- -------- --------
(In Thousands)
Current tax expense (benefit):
U.S $ 67,272 $ 71,989 $ 59,489
State and local 2,496 1,337 703
Foreign -- -- 4
-------- -------- --------
Total 69,768 73,326 60,196
-------- -------- --------

Deferred tax expense (benefit):
U.S 14,059 (11,458) 18,413
State and local 406 -- 526
-------- -------- --------
Total 14,465 (11,458) 18,939
-------- -------- --------

Total income tax expense $ 84,233 $ 61,868 $ 79,135
======== ======== ========

The income tax expense for the years ended December 31, differs from the amount
computed by applying the expected federal income tax rate of 35% to income from
operations before income taxes for the following reasons:

1998 1997 1996
-------- -------- --------
(In Thousands)

Expected federal income tax expense $ 82,668 $ 58,885 $ 79,925
State and local income taxes 1,886 869 799
Other (321) 2,114 (1,589)
-------- -------- --------
Total income tax expense $ 84,233 $ 61,868 $ 79,135
======== ======== ========

B-17
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

7. INCOME TAXES (continued)

Deferred tax assets and liabilities at December 31, resulted from the items
listed in the following table:

1998 1997
-------- --------
(In Thousands)
Deferred tax assets
Insurance reserves $ 93,564 $ 52,144
-------- --------
Deferred tax assets 93,564 52,144
-------- --------

Deferred tax liabilities
Deferred acquisition costs 224,179 167,128
Net investment gains 12,241 16,068
Other 5,978 7,431
-------- --------
Deferred tax liabilities 242,398 190,627
-------- --------

Net deferred tax liability $148,834 $138,483
======== ========

Management believes that based on its historical pattern of taxable income, the
Company and its subsidiaries will produce sufficient income in the future to
realize its deferred tax assets after valuation allowance. Adjustments to the
valuation allowance will be made if there is a change in management's assessment
of the amount of the deferred tax asset that is realizable. At December 31, 1998
and 1997, respectively, the Company and its subsidiaries had no federal or state
operating loss carryforwards for tax purposes.

The Internal Revenue Service (the "Service") has completed examinations of all
consolidated federal income tax returns through 1989. The Service has examined
the years 1990 through 1992. Discussions are being held with the Service with
respect to proposed adjustments. However, management believes there are adequate
defenses against, or sufficient reserves to provide for, such adjustments. The
Service has begun their examination of the years 1993 through 1995.

B-18
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

8. EQUITY

Reconciliation of Statutory Surplus and Net Income

Accounting practices used to prepare statutory financial statements for
regulatory purposes differ in certain instances from GAAP. The following table
reconciles the Company's statutory net income and surplus as of and for the
years ended December 31, determined in accordance with accounting practices
prescribed or permitted by the Arizona and New Jersey Departments of Banking and
Insurance with net income and equity determined using GAAP.

1998 1997 1996
--------- --------- ---------
(In Thousands)
Statutory net income $ (33,097) $ 12,778 $ 48,846

Adjustments to reconcile to net
income on a GAAP basis:
Statutory income of subsidiaries 18,953 18,553 25,001
Deferred acquisition costs 202,375 38,003 48,862
Deferred premium 2,625 1,144 1,295
Insurance liabilities (24,942) 26,517 28,662
Deferred taxes (14,465) 11,458 (18,939)
Valuation of investments 20,077 506 365
Other, net (19,564) (2,585) 15,130
--------- --------- ---------
GAAP net income $ 151,962 $ 106,374 $ 149,222
========= ========= =========

1998 1997
----------- -----------
(In Thousands)
Statutory surplus $ 931,164 $ 853,130

Adjustments to reconcile to equity
on a GAAP basis:
Valuation of investments 117,254 97,787
Deferred acquisition costs 861,713 655,242
Deferred premium (15,625) (14,817)
Insurance liabilities (133,811) (107,525)
Deferred taxes (148,834) (138,483)
Other, net 41,371 160,183
----------- -----------
GAAP stockholder's equity $ 1,653,232 $ 1,505,517
=========== ===========

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values presented below have been determined using available
information and valuation methodologies. Considerable judgment is applied in
interpreting data to develop the estimates of fair value. Accordingly, such
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 estimated fair values (for all other
financial instruments presented in the table, the carrying value approximates
estimated fair value).

B-19
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

9. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Fixed maturities and Equity securities

Estimated fair values for fixed maturities and equity securities, other than
private placement securities, are based on quoted market prices or estimates
from independent pricing services. Fair values for private placement securities
are estimated using a discounted cash flow model which considers the current
market spreads between the U.S. Treasury yield curve and corporate bond yield
curve, adjusted for the type of issue, its current credit quality and its
remaining average life. The estimated fair value of certain non-performing
private placement securities is based on amounts estimated by management.

Mortgage loans on real estate

The estimated fair value of the mortgage loan portfolio is primarily based upon
the present value of the scheduled future cash flows discounted at the
appropriate U.S. Treasury rate, adjusted for the current market spread for a
similar quality mortgage.

Policy loans

The estimated fair value of policy loans is calculated using a discounted cash
flow model based upon current U.S. Treasury rates and historical loan
repayments.

Policyholders' account balances

Estimated fair values of policyholders' account balances are derived by using
discounted projected cash flows, based on interest rates being offered for
similar contracts, with maturities consistent with those remaining for the
contracts being valued.

Derivative financial instruments

The fair value of futures is estimated based on market quotes for a transactions
with similar terms.

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

<TABLE>
<CAPTION>
1998 1997
------------------------------- ---------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
----------- ----------- ------------- -----------
(In Thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities:
Available for sale $ 2,763,926 $ 2,763,926 $ 2,563,852 $ 2,563,852
Held to maturity 410,558 421,845 338,848 350,056
Equity securities 2,847 2,847 1,982 1,982
Mortgage loans 17,354 19,465 22,787 24,994
Policy loans 766,917 806,099 703,955 703,605
Short-term investments 240,727 240,727 316,355 316,355
Cash 89,679 89,679 71,358 71,358
Separate Account assets 11,531,754 11,531,754 8,022,079 8,022,079

Financial Liabilities:
Policyholders'
account balances $ 2,696,191 $ 2,703,725 $ 2,380,460 $ 2,374,040
Cash collateral for loaned
securities 123,044 123,044 143,421 143,421
Separate Account liabilities 11,490,751 11,490,751 7,948,788 7,948,788
Derivatives 1,723 2,374 653 653
</TABLE>

B-20
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

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

Futures & Options

The Company uses exchange-traded Treasury futures and options to reduce market
risks from changes in interest rates, to alter mismatches between the duration
of assets in a portfolio and the duration of liabilities supported by those
assets, and to hedge against changes in the value of securities it owns or
anticipates acquiring. The Company enters into exchange-traded futures and
options with regulated futures commissions merchants who are members of a
trading exchange. The fair value of futures and options is estimated based on
market quotes for a transaction with similar terms.

Under exchange-traded futures, the Company agrees to purchase a specified number
of contracts with other parties and to post variation margin on a daily basis in
an amount equal to the difference in the daily market values of those contracts.
Futures are typically used to hedge duration mismatches between assets and
liabilities by replicating Treasury performance. Treasury futures move
substantially in value as interest rates change and can be used to either
generate new or hedge existing interest rate risk. This strategy protects
against the risk that cash flow requirements may necessitate liquidation of
investments at unfavorable prices resulting from increases in interest rates.
This strategy can be a more cost effective way of temporarily reducing the
Company's exposure to a market decline than selling fixed income securities and
purchasing a similar portfolio when such a decline is believed to be over.

For futures that meet hedge accounting criteria, changes in their fair value are
deferred and recognized as an adjustment to the carrying value of the hedged
item. Deferred gains or losses from the hedges for interest-bearing financial
instruments are amortized as a yield adjustment over the remaining lives of the
hedged item. Futures that do not qualify as hedges are carried at fair value
with changes in value reported in current period earnings. The notional value of
futures contracts was $40.8 million and $115.7 million at December 31, 1998 and
1997, respectively. The fair value of futures contracts was immaterial at
December 31, 1998 and 1997.

When the Company anticipates a significant decline in the stock market which
will correspondingly affect its diversified portfolio, it may purchase put index
options where the basket of securities in the index is appropriate to provide a
hedge against a decrease in the value of the equity portfolio or a portion
thereof. This strategy effects an orderly sale of hedged securities. When the
Company has large cash flows which it has allocated for investment in equity
securities, it may purchase call index options as a temporary hedge against an
increase in the price of the securities it intends to purchase. This hedge
permits such investment transactions to be executed with the least possible
adverse market impact.

Option premium paid or received is reported as an asset or liability and
amortized into income over the life of the option. If options meet the criteria
for hedge accounting, changes in their fair value are deferred and recognized as
an adjustment to the hedged item. Deferred gains or losses from the hedges for
interest-bearing financial instruments are recognized as an adjustment to
interest income or expense of the hedged item. If the options do not meet the
criteria for hedge accounting, they are fair valued, with changes in fair value
reported in current period earnings. The fair value of options was immaterial at
December 31, 1998, and there were no options in 1997.

Currency Derivatives

The Company uses currency swaps to reduce market risks from changes in currency
values of investments denominated in foreign currencies that the Company either
holds or intends to acquire and to alter the currency exposures arising from
mismatches between such foreign currencies and the US Dollar.

Under currency swaps, the Company agrees with other parties to exchange, at
specified intervals, the difference between one currency and another at a
forward exchange rate and calculated by reference to an agreed principal amount.
Generally, the principal amount of each currency is exchanged at the beginning
and termination of the currency swap by each party. These transactions are
entered into pursuant to master agreements that provide for a single net payment
to be made by one counterparty for payments made in the same currency at each
due date.

If currency derivatives are effective as hedges of foreign currency translation
and transaction exposures, gains or losses are recorded in "Foreign currency
translation adjustments". If currency derivatives do not meet hedge accounting
criteria, gains or losses from those derivatives are recognized in current
period earnings.

As of December 31, 1998, the notional value of the swaps was $40.5 million with
a fair value of ($2.3) million. There were no currency swaps at year end 1997.

B-21
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

10. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (continued)

Credit Risk

The current credit exposure of the Company's derivative contracts is limited to
the fair value at the reporting date. Credit risk is managed by entering into
transactions with creditworthy counterparties and obtaining collateral where
appropriate and customary. The Company also attempts to minimize its exposure to
credit risk through the use of various credit monitoring techniques. As of
December 31, 1998, 47% of notional consisted of interest rate derivatives, 47%
of notional consisted of foreign currency derivatives, and 6% of notional
consisted of equity derivatives.

11. 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 Prudential, the Company and agents appointed by Prudential and the
Company. Prudential has agreed to indemnify the Company for any and all losses
resulting from such litigation.

In the normal course of business, the Company is subject to various claims and
assessments. Management believes the settlement of these matters would not have
a material effect on the financial position or results of operations of the
Company.

12. 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 twelve month period without notification or approval is limited to
the lesser of 10% of statutory 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, 1998, the
Company would not be permitted a dividend distribution in 1998.

13. RELATED PARTY TRANSACTIONS

Service Agreements

Prudential and Pruco Life operate under service and lease agreements whereby
services of officers and employees (except for those agents employed by the
Company in Taiwan), supplies, use of equipment and office space are provided by
Prudential. The net cost of these services allocated to the Company were $269.9
million, $139.5 million and $101.7 million for the years ended December 31,
1998, 1997, and 1996, respectively. These costs are treated in a manner
consistent with the Company's policy on deferred acquisition costs.

Prudential and Pruco Life have an agreement with respect to administrative
services for the Prudential Series Fund. The Company invests in the various
portfolios of the Series Fund through the Separate Accounts. Under this
agreement, Prudential pays compensation to Pruco Life in the amount equal to a
portion of the gross investment advisory fees paid by the Prudential Series
Fund. The Company received from Prudential its allocable share of such
compensation in the amount of $40.1 million, $29.4 million and $19.1 million
during 1998, 1997 and 1996, respectively, recorded in other income.

Reinsurance

The Company currently has three reinsurance agreements in place with Prudential
(the reinsurer). Specifically a reinsurance Group Annuity Contract, whereby the
reinsurer, in consideration for a single premium payment by the Company,
provides reinsurance equal to 100% of all payments due under the contract, and
two yearly renewable term agreements 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. The Company is not relieved of its primary obligation to the
policyholder as a result of these reinsurance transactions. These agreements had
no material effect on net income for the years ended December 31, 1998, 1997,
and 1996.

B-22
<PAGE>

Pruco Life Insurance Company and Subsidiaries

Notes to Consolidated Financial Statements

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

13. RELATED PARTY TRANSACTIONS (continued)

Debt Agreements

In July 1998, the Company established a revolving line of credit facility of up
to $300 million with Prudential Funding Corporation, a wholly owned subsidiary
of Prudential. There is no outstanding debt relating to this credit facility as
of December 31, 1998.

B-23
<PAGE>

Report of Independent Accountants
---------------------------------

To the Board of Directors of
Pruco Life Insurance Company

In our opinion, the accompanying consolidated statements of financial position
and the related consolidated statements of operations, of changes in
stockholder's equity and of cash flows present fairly, in all material respects,
the financial position of Pruco Life Insurance Company and its subsidiaries at
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP
New York, New York
February 26, 1999

B-24

<PAGE>

PRUVIDER(SM)
VARIABLE APPRECIABLE LIFE(R)
INSURANCE

PRUvider(SM) Variable APPRECIABLE LIFE(R) was issued by Pruco Life Insurance
Company, 213 Washington Street, Newark, NJ 07102-2992 and offered through Pruco
Securities Corporation, 751 Broad Street, Newark, NJ 07102-3777, both
subsidiaries of The Prudential Insurance Company of America, 751 Broad Street,
Newark, NJ 07102-3777. PRUvider is a service mark of Prudential. APPRECIABLE
LIFE is a registered mark of Prudential.

[LOGO] PRUDENTIAL

Pruco Life Insurance Company
213 Washington Street, Newark, NJ 07102-2992
Telephone 800 778-2255

SVAL-1 Ed. 5/99 CAT#6469898

<PAGE>

PART IB

INFORMATION IN STATEMENT OF ADDITIONAL INFORMATION

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999

PRUCO LIFE INSURANCE COMPANY
PRUVIDER VARIABLE APPRECIABLE ACCOUNT

PRUVIDER(SM)
VARIABLE
APPRECIABLE
LIFE(R)___________________
INSURANCE CONTRACTS

PROVIDING FOR THE INVESTMENT
OF ASSETS IN THE
INVESTMENT PORTFOLIOS OF

THE PRUDENTIAL SERIES
FUND, INC.

This statement of additional information describes a variable life insurance
contract (the "Contract") offered by Pruco Life Insurance Company ("Pruco Life",
"us", or "we") under the name PRUVIDER(SM) Variable APPRECIABLE LIFE(R)
Insurance. Pruco Life, a stock life insurance company, is a wholly-owned
subsidiary of The Prudential Insurance Company of America ("Prudential"). The
death benefit varies daily with investment experience but will never be less
than the "face amount" of insurance specified in the Contract. There is no
guaranteed minimum cash surrender value.

The assets under these contracts can be invested in one or both of the two
available 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(SM) 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
WITH THE PROSPECTUS OF THE PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
DATED MAY 1, 1999. THE PROSPECTUS 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.

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

PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 778-2255

PRUVIDER is a service mark of Prudential.
APPRECIABLE LIFE is a registered mark of Prudential.
SVAL-1SAI Ed 5-99
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.........................................3
TREATMENT AS LIFE INSURANCE............................................3
PRE-DEATH DISTRIBUTIONS................................................3
WITHHOLDING............................................................4
OTHER TAX CONSIDERATIONS...............................................4
BUSINESS-OWNED LIFE INSURANCE..........................................4
SALE OF THE CONTRACT AND SALES COMMISSIONS.................................4
RIDERS.....................................................................5
OTHER STANDARD CONTRACT PROVISIONS.........................................5
ASSIGNMENT.............................................................5
BENEFICIARY............................................................5
INCONTESTABILITY.......................................................5
MISSTATEMENT OF AGE OR SEX.............................................5
SETTLEMENT OPTIONS.....................................................5
SUICIDE EXCLUSION......................................................5

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS...........................6
GENERAL....................................................................6
CONVERTIBLE SECURITIES.....................................................6
WARRANTS...................................................................6
FOREIGN SECURITIES.........................................................6
OPTIONS ON STOCK AND DEBT SECURITIES.......................................7
OPTIONS ON STOCK.......................................................7
OPTIONS ON DEBT SECURITIES.............................................8
RISKS OF TRANSACTIONS IN OPTIONS ON EQUITY AND DEBT SECURITIES.........8
OPTIONS ON STOCK INDEXES...................................................9
STOCK INDEX OPTIONS....................................................9
RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEXES......................9
OPTIONS ON FOREIGN CURRENCIES.............................................10
OPTIONS ON FOREIGN CURRENCY...........................................10
RISKS OF TRANSACTIONS IN OPTIONS ON FOREIGN CURRENCY..................11
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS........................11
FUTURES AND OPTIONS ON FUTURES........................................11
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS............................12
RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES CONTRACTS.................12
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS...............................12
INTEREST RATE SWAPS.......................................................13
LOAN PARTICIPATIONS.......................................................14
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS............................14
DESCRIPTION OF REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS.........14
RISKS OF REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS...............14
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES...............................14
SHORT SALES...............................................................14
LOANS OF PORTFOLIO SECURITIES.............................................15
DESCRIPTION OF SECURITIES LOANS.......................................15
RISKS ASSOCIATED WITH LENDING SECURITIES..............................15
ILLIQUID SECURITIES.......................................................15

INVESTMENT RESTRICTIONS.......................................................16

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INVESTMENT MANAGEMENT AND DISTRIBUTION ARRANGEMENTS...........................18
INVESTMENT MANAGEMENT ARRANGEMENTS........................................18
DISTRIBUTION ARRANGEMENTS.................................................19

OTHER INFORMATION CONCERNING THE FUND.........................................19
INCORPORATION AND AUTHORIZED STOCK........................................19
PORTFOLIO TRANSACTIONS AND BROKERAGE......................................20
TAXATION OF THE FUND......................................................21
CUSTODIANS................................................................22
EXPERTS...................................................................22
LICENSES..................................................................22

DEBT RATINGS..................................................................23

DIRECTORS AND OFFICERS OF PRUCO LIFE AND MANAGEMENT OF THE FUND...............25

FINANCIAL STATEMENTS OF THE PRUDENTIAL SERIES FUND, INC.......................A1

THE PRUDENTIAL SERIES FUND, INC. SCHEDULE OF INVESTMENTS......................B1

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MORE DETAILED INFORMATION ABOUT THE CONTRACT

SALES LOAD UPON SURRENDER

Pruco Life assesses a contingent deferred sales load 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 five Contract years, the charge will be equal to
50% of the first year's primary annual premium. In the next five Contract years,
we reduce that percentage uniformly on a daily basis until it reaches zero on
the 10th 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 seven, the
maximum deferred sales charge will be 30% of the first year's primary annual
premium, and so forth. We are currently allowing partial surrenders of the
Contract, but we reserve the right to cancel this administrative practice. If
the Contract is partially surrendered during the first 10 years, we deduct a
proportionate amount of the charge from the Contract Fund. Surrender of all or
part of the Contract may have tax consequences. See TAX TREATMENT OF CONTRACT
BENEFITS, page 3.

The contingent deferred sales load is also further limited 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 five
or six 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 based on a Guideline Annual Premium ("GAP") that is associated
with every Contract. The GAP is a defined amount determined actuarially in
accordance with a regulation of the Securities and Exchange Commission ("SEC").
Pruco Life will charge a maximum aggregate sales load (that is, the sum of the
monthly sales load deduction and the contingent deferred sales charge) that 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 five 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,
to the extent of any excess, we will not make the charge.

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 uses mortality tables that distinguish between males and
females. Thus, premiums and benefits differ under Contracts issued on males and
females of the same age. 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

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considering purchase of a Contract should consult their legal advisers to
determine whether purchase of a Contract based on sex-distinct actuarial tables
is consistent with Title VII of the Civil Rights Act of 1964 or other applicable
law. Pruco Life may offer the Contract with unisex mortality rates to employers
and employee organizations.

HOW THE DEATH BENEFIT WILL VARY

The death benefit will vary with investment experience. 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: (1) you paid only Scheduled Premiums; (2) you paid
the Scheduled Premiums when due; (3) your selected investment options earned a
net return at a uniform rate of 4% per year; (4) we deducted full mortality
charges based upon the 1980 CSO Table; (5) we deducted the maximum sales load
and expense charges; and (6) there was no Contract debt.

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. Again, the death benefit will reflect a deduction for the amount of
any Contract debt. See Contract Loans in the prospectus. Any 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.

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, you may withdraw a portion of the Contract's cash
surrender value without surrendering the Contract. The withdrawal amount 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 inforce.) 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. You may
make no more than four such withdrawals in each Contract year, and there is an
administrative processing fee for each withdrawal equal to the lesser of $15 and
2% of the amount withdrawn. An amount withdrawn may not be repaid except as a
scheduled or unscheduled premium subject to the applicable charges. Upon
request, Pruco Life will tell you how much you may withdraw. Withdrawal of part
of the cash surrender value may have tax consequences. See TAX TREATMENT OF
CONTRACT BENEFITS, page 3. 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 reduced
accordingly. 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 for a withdrawal.

Withdrawal of part of the cash surrender value increases the risk that the
Contract Fund may be insufficient to provide Contract benefits. 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.

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TAX TREATMENT OF CONTRACT BENEFITS

This summary provides general information on the federal income tax treatment of
the Contract. It is not a complete statement of what the federal income taxes
will be in all circumstances. It is based on current law and interpretations,
which may change. It does not cover state taxes or other taxes. It is not
intended as tax advice. You should consult your own qualified tax adviser for
complete information and advice.

TREATMENT AS LIFE INSURANCE

The Contract must meet certain requirements to qualify as life insurance for tax
purposes. These requirements include certain definitional tests and rules for
diversification of the Contract's investments.

We believe we have taken adequate steps to ensure that the Contract qualifies as
life insurance for tax purposes. Generally speaking, this means that:

o you will not be taxed on the growth of the funds in the Contract,
unless you receive a distribution from the Contract,

o the Contract's death benefit will be tax free to your beneficiary.

Although we believe that the Contract should qualify as life insurance for tax
purposes, there are some uncertainties, particularly because the Secretary of
Treasury has not yet issued permanent regulations that bear on this question.
Accordingly, we reserve the right to make changes -- which will be applied
uniformly to all Contract owners after advance written notice -- that we deem
necessary to ensure that the Contract will qualify as life insurance.

PRE-DEATH DISTRIBUTIONS

The tax treatment of any distribution you receive before the insured's death
depends on whether the Contract is classified as a Modified Endowment Contract.

CONTRACTS NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.

o If you surrender the Contract or allow it to lapse, you will be taxed
on the amount you receive in excess of the premiums you paid less the
untaxed portion of any prior withdrawals. For this purpose, you will
be treated as receiving any portion of the cash surrender value used
to repay Contract debt. The tax consequences of a surrender may differ
if you take the proceeds under an income payment settlement option.

o Generally, you will be taxed on a withdrawal to the extent the amount
you receive exceeds the premiums you paid for the Contract less the
untaxed portion of any prior withdrawals. However, under some limited
circumstances, in the first 15 Contract years, all or a portion of a
withdrawal may be taxed if the Contract Fund exceeds the total
premiums paid less the untaxed portions of any prior withdrawals, even
if total withdrawals do not exceed total premiums paid.

o Extra premiums for optional benefits and riders generally do not count
in computing the premiums paid for the Contract for the purposes of
determining whether a withdrawal is taxable.

o Loans you take against the Contract are ordinarily treated as debt and
are not considered distributions subject to tax.

MODIFIED ENDOWMENT CONTRACTS.

o The rules change if the Contract is classified as a Modified Endowment
Contract. The Contract could be classified as a Modified Endowment
Contract if premiums substantially in excess of Scheduled Premiums are
paid or a decrease in the face amount of insurance is made (or a rider
removed). The addition of a rider or an increase in the face amount of
insurance may also cause the Contract to be classified as a Modified
Endowment Contract even though the Contract owner pays only Scheduled
Premiums or even less than the Scheduled Premiums. You should first
consult a qualified tax adviser and your Pruco Life representative if
you are contemplating any of these steps.

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o If the Contract is classified as a Modified Endowment Contract, then
amounts you receive under the Contract before the insured's death,
including loans and withdrawals, are included in income to the extent
that the Contract Fund before surrender charges exceeds the premiums
paid for the Contract increased by the amount of any loans previously
included in income and reduced by any untaxed amounts previously
received other than the amount of any loans excludible from income. An
assignment of a Modified Endowment Contract is taxable in the same
way. These rules also apply to pre-death distributions, including
loans, made during the two-year period before the time that the
Contract became a Modified Endowment Contract.

o Any taxable income on pre-death distributions (including full
surrenders) is subject to a penalty of 10 percent unless the amount is
received on or after age 592, on account of your becoming disabled or
as a life annuity. It is presently unclear how the penalty tax
provisions apply to Contracts owned by businesses.

o All Modified Endowment Contracts issued by us to you during the same
calendar year are treated as a single Contract for purposes of
applying these rules.

WITHHOLDING

You must affirmatively elect that no taxes be withheld from a pre-death
distribution. Otherwise, the taxable portion of any amounts you receive will be
subject to withholding. You are not permitted to elect out of withholding if you
do not provide a social security number or other taxpayer identification number.
You may be subject to penalties under the estimated tax payment rules if your
withholding and estimated tax payments are insufficient to cover the tax due.

OTHER TAX CONSIDERATIONS

If you transfer or assign the Contract to someone else, there may be gift,
estate and/or income tax consequences. If you transfer the Contract to a person
two or more generations younger than you (or designate such a younger person as
a beneficiary), there may be Generation Skipping Transfer tax consequences.
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. Your
individual situation or that of your beneficiary will determine the federal
estate taxes and the state and local estate, inheritance and other taxes due if
you or the insured dies.

BUSINESS-OWNED LIFE INSURANCE

If a business, rather than an individual, is the owner of the Contract, there
are some additional rules. Business Contract owners generally cannot deduct
premium payments. Business Contract owners generally cannot take tax deductions
for interest on Contract debt paid or accrued after October 13, 1995. An
exception permits the deduction of interest on policy loans on Contracts for up
to 20 key persons. The interest deduction for Contract debt on these loans is
limited to a prescribed interest rate and a maximum aggregate loan amount of
$50,000 per key insured person. The corporate alternative minimum tax also
applies to business-owned life insurance. This is an indirect tax on additions
to the Contract Fund or death benefits received under business-owned life
insurance policies.

SALE OF THE CONTRACT AND SALES COMMISSIONS

Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
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 751 Broad
Street, Newark, New Jersey 07102-3777. 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: (1) no more than 50% of the Scheduled Premiums for the first
year: (2) no more than 6% of the Scheduled Premiums for the second through 10th
years; and (3) no more than 2% of the Scheduled Premiums thereafter. 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 three years of service may be paid on a different basis.

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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

Contract owners may be able to obtain additional fixed benefits which may
increase the Scheduled Premium. If they do cause an increase in the Scheduled
Premium, they will be charged for by making monthly deductions from the Contract
Fund. These optional insurance benefits will be described in what is known as a
"rider" to the Contract. 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 spouse or child should die. The
amounts of these benefits are fully guaranteed at issue; they do not depend on
the performance of the Account, although they will no longer be available if the
Contract lapses. 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

ASSIGNMENT

This Contract may not be assigned if the 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 a Home Office.

BENEFICIARY

As the Contract owner, you designate and name your beneficiary in the
application. Thereafter, you 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

We will not contest the Contract after it has been inforce during the insured's
lifetime for two years from the issue date except when any change is made in the
Contract that requires Pruco Life's approval and would increase our liability.
We will not contest such change after it has been in effect for two years during
the lifetime of the insured.

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.

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.

SUICIDE EXCLUSION

Generally, if the insured, whether sane or insane, dies by suicide within two
years from the Contract Date, Pruco Life will pay no more under the Contract
than the sum of the premiums paid.

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INVESTMENT OBJECTIVES AND POLICIES OF THE
PORTFOLIOS

GENERAL

The Prudential Series Fund, Inc. (the "Fund") is a diversified, open-end
management investment company (commonly known as a "mutual fund") that is
intended to provide a range of investment alternatives through its seventeen
separate portfolios, each of which is for investment purposes, in effect a
separate fund. Two portfolios, the Conservative Balanced Portfolio and the
Flexible Managed Portfolio (the "Portfolios"), are available to PRUVIDER
Contract owners. The Fund Portfolios are managed by The Prudential Insurance
Company of America ("Prudential"). See INVESTMENT MANAGEMENT AND DISTRIBUTION
ARRANGEMENTS, page 18.

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 Fund's Portfolios that are available to
PRUVIDER Contract owners can be found under the Portfolio's RISK/RETURN SUMMARY
in the prospectus.

CONVERTIBLE SECURITIES

The Conservative Balanced and Flexible Managed Portfolios may invest in
convertible securities. A convertible security is a debt security - for example,
a bond or preferred stock - that may be converted into common stock of the same
or different issuer. The convertible security sets the price, quantity of shares
and time period in which it may be so converted. Convertible stock are senior to
a company's common stock but are usually subordinated to debt obligations of the
company. Convertible securities provide a steady stream of income which is
generally at a higher rate than the income on the issuer's common stock but
lower than the rate on the issuer's debt obligations. At the same time, they
offer - through their conversion mechanism - the chance to participate in the
capital appreciation of the underlying common stock. The price of a convertible
security tends to increase and decrease with the market value of the underlying
common stock.

WARRANTS

The Conservative Balanced and Flexible Managed Portfolios may invest in warrants
on common stocks. A warrant is a right to buy a number of shares of stock at a
specified price during a specified period of time. The risk associated with
warrants is that the market price of the underlying stock will stay below the
exercise price of the warrant during the exercise period. If this occurs, the
warrant becomes worthless and the investor loses the money he or she paid for
the warrant.

FOREIGN SECURITIES

The bond portions of the Conservative Balanced and Flexible Managed Portfolios
may each invest up to 20% of their assets in U.S. currency denominated debt
securities issued outside the U.S. by foreign or U.S. issuers. The 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 U.S. issuers.

American Depository Receipts ("ADRs") are not considered "foreign securities"
for purposes of the percentage limitations set forth in the preceding paragraph.
ADRs are U.S. dollar-denominated certificates issued by a U.S. bank or trust
company. ADRs represent the right to receive securities of a foreign issuer
deposited in a domestic bank or foreign branch of a U.S. bank and traded on a
U.S. exchange or in the over-the-counter (OTC) market. Investment in ADRs has
certain advantages over direct investments 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 U.S. issuers.

Foreign securities (including ADRs) involve certain risks, which should be
considered carefully by an investor. These risks include political or economic
instability in the country of an issuer, the difficulty of predicting
international trade patterns, the possibility of imposition of exchange controls
and, in the case of securities not denominated in U.S. currency, the risk of
currency fluctuations. Foreign securities may be subject to greater movement in
price than U.S. securities and under certain market conditions, may be less

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liquid than U.S securities. In addition, there may be less publicly available
information about a foreign company than a U.S company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to U.S. companies. There is
generally less government regulation of securities exchanges, brokers and listed
companies abroad than in the U.S., and, with respect to certain foreign
countries, there is a possibility of expropriations, confiscatory taxation or
diplomatic developments which could affect investment in those countries.
Finally, in the event of a default of any foreign debt obligations, it may be
more difficult for a Portfolio to obtain or enforce a judgment against the
issuers of such securities.

If a security is denominated in a foreign currency, it may be affected by
changes in currency rates and in exchange control regulations, and costs may be
incurred in connection with conversions between currencies. The Portfolios that
may invest in foreign securities may enter into forward foreign currency
exchange contracts for the purchase or sale of foreign currency for hedging
purposes, including: locking in the U.S. dollar price equivalent of interest or
dividends to be paid on such securities which are held by a Portfolio; and
protecting the U.S. dollar value of such securities which are held by the
Portfolio. A Portfolio will not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of foreign currency in excess of the
value of the Portfolio=s securities or other assets denominated in that
currency. In addition, the Portfolios may, for hedging purposes, enter into
certain transactions involving options on foreign currencies, foreign currency
futures contracts and options on foreign currency futures contracts.

OPTIONS ON STOCK AND DEBT SECURITIES

OPTIONS ON STOCK

The Conservative Balanced and Flexible Managed Portfolios may purchase and
"write" (that is, sell) put and call options on equity securities that are
traded on securities exchanges, listed on the National Association of Securities
Dealers Automated Quotations System (NASDAQ), or privately negotiated with
broker-dealers (OTC equity options).

A call option is a short-term contract that gives the option purchaser or
"holder" the right to acquire a particular equity security for a specified price
at any time during a specified period. For this right, the option purchaser pays
the option seller a certain amount of money or "premium" which is set before the
option contract is entered into. The seller or "writer" of the option is
obligated to deliver the particular security if the option purchaser exercises
the option.

A put option is a similar contract. In a put option, the option purchaser has
the right to sell a particular security to the option seller for a specified
price at any time during a specified period. In exchange for this right, the
option purchaser pays the option seller a premium.

The Portfolios will write only "covered" options on stocks. A call option is
covered if:

(1) the Portfolio owns the security underlying the option;

(2) the Portfolio has an absolute right to acquire the security immediately;

(3) the Portfolio has a call on the same security that underlies the option
which has an exercise price equal to or less than the exercise price of the
covered option (or, if the exercise price is greater, the Portfolio sets
aside, in a segregated account, liquid assets that are equal to the
difference).

A put option is covered if:

(1) the Portfolio sets aside, in a segregated account, liquid assets that are
equal to or greater than the exercise price of the option;

(2) the Portfolio holds a put on the same security that underlies the option
which has an exercise price equal to or greater than the exercise price of
the covered option (or, if the exercise price is less, the Portfolio sets
aside, in a segregated account, liquid assets that are equal to the
difference).

The Conservative Balanced and Flexible Managed Portfolios can also purchase
"protective puts" on equity securities. These are acquired to protect a
Portfolio's security from a decline in market value. In a protective put, a
Portfolio has the right to sell the underlying security at the exercise price,
regardless of how much the underlying security may decline in value. In exchange
for this right, the Portfolio pays the put seller a premium.

The Portfolios may use options for both hedging and investment purposes. Neither
of the Portfolios intend to use more than 5% of its net assets to acquire call
options on stocks. The Portfolios may purchase equity securities that have a put
or call option provided by the issuer.

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OPTIONS ON DEBT SECURITIES

The Conservative Balanced and Flexible Managed Portfolios may purchase and sell
put and call options on debt securities, including U.S. government debt
securities, that are traded on a U.S. securities exchange or privately
negotiated with primary U.S. government securities dealers that are recognized
by the Federal Reserve Bank of New York (OTC debt options). Neither of the
Portfolios currently intend to invest more than 5% of its net assets at any one
time in call options on debt securities.

Options on debt securities are similar to stock options (see above) except that
the option holder has the right to acquire or sell a debt security rather than
an equity security.

The Portfolios will write only covered options. Options on debt securities are
covered in much the same way as options on equity securities. One exception is
in the case of call options on U.S. Treasury Bills. With these options, a
Portfolio might own U.S. Treasury Bills of a different series from those
underlying the call option, but with a principal amount and value that matches
the option contract amount and a maturity date that is no later than the
maturity date of the securities underlying the option.

The Portfolios may also write straddles - which are simply combinations of a
call and a put written on the same security at the same strike price and
maturity date. When a Portfolio writes a straddle, the same security is used to
"cover" both the put and the call. If the price of the underlying security is
below the strike price of the put, the Portfolio will set aside liquid assets as
additional cover equal to the difference. A Portfolio will not use more than 5%
of its net assets as cover for straddles.

The Portfolios may also purchase protective puts to try to protect the value of
one of the securities it owns against a decline in market value, as well as
putable and callable debt securities.

RISKS OF TRANSACTIONS IN OPTIONS ON EQUITY AND DEBT SECURITIES

A Portfolio's use of options on equity or debt securities is subject to certain
special risks, in addition to the risk that the market value of the security
will move opposite to the Portfolio's option position. An exchange-traded option
position may be closed out only on an exchange, board of trade or other trading
facility which provides a secondary market for an option of the same series.
Although the Portfolios will generally purchase or write only those
exchange-traded options for which there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange will
exist for any particular option, or at any particular time, and for some options
no secondary market on an exchange or otherwise may exist. In such event it
might not be possible to effect closing transactions in particular options, with
the result that the Portfolio would have to exercise its options in order to
realize any profit and would incur brokerage commissions upon the exercise of
such options and upon the subsequent disposition of underlying securities
acquired through the exercise of call options or upon the purchase of underlying
securities for the exercise of put options. If a Portfolio as a covered call
option writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.

Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or a clearing
corporation may not be adequate at all times to handle the 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 would cease to exist, although outstanding options on that
exchange that had been issued by a clearing corporation as a result of trades on
that exchange would continue to be exercisable in accordance with their terms.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of any
of the clearing corporations inadequate, and thereby result in the institution
by an exchange of special procedures which may interfere with the timely
execution of customers' orders.

The purchase and sale of 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 enter into closing
transactions

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with the Portfolio, there can be no assurance that a 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, a Portfolio may be unable to
liquidate an OTC option. Prudential monitors the creditworthiness of dealers
with whom the Portfolios enter into OTC option transactions under the Board of
Directors' general supervision.

OPTIONS ON STOCK INDEXES

STOCK INDEX OPTIONS

The Conservative Balanced and Flexible Managed Portfolios may purchase and sell
put and call options on stock indexes that are traded on securities exchanges,
listed on NASDAQ or that are privately-negotiated with broker-dealers (OTC
options). Options on stock indexes are similar to options on stocks, except that
instead of giving the option holder the right to receive or sell a stock, it
gives the holder the right to receive an amount of cash if the closing level of
the stock index is greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. The amount of cash the holder
will receive is determined by multiplying the difference between the index=s
closing price and the option=s exercise price, expressed in dollars, by a
specified "multiplier." Unlike stock options, stock index options are always
settled in cash and gain or loss depends on price movements in the stock market
generally (or a particular market segment, depending on the index) rather than
the price movement of an individual stock.

A Portfolio will only sell or "write" covered options on stock indexes. A call
option is covered if the Portfolio holds stocks at least equal to the value of
the index times the multiplier times the number of contracts (the Option Value).
When a Portfolio writes a call option on a broadly based stock market index, the
Portfolio will set aside cash, cash equivalents or "qualified securities"
(defined below). The value of the assets to be segregated cannot be less than
100% of the Option Value as of the time the option is written.

If a Portfolio has written an option on an industry or market segment index, it
must set aside at least five "qualified securities," all of which are stocks of
issuers in that market segment, with a market value at the time the option is
written of not less than 100% of the Option Value. The qualified securities 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 set aside in the case of broadly based stock market
index options or 25% of such amount in the case of options on a market segment
index. If at the close of business on any day the market value of the qualified
securities falls below 100% of the Option Value as of that date, the Portfolio
will set aside an amount in liquid unencumbered assets 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 option is written - that is, the index=s value is
above the strike price the Portfolio will set aside liquid unencumbered assets
equal to the amount by which the call is in-the-money times the multiplier times
the number of contracts. Any amount so set aside 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 Option
Value. A "qualified security" is an equity security which is listed on a
securities exchange or listed on 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, the Portfolio will not be subject to
the requirement described in this paragraph if it holds a call on the same index
as the call written and 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 liquid
unencumbered assets in a segregated account with its custodian.

A put index option is covered if: (1) the Portfolio sets aside in a segregated
account liquid unencumbered assets 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 liquid unencumbered assets in a segregated account.

RISKS OF TRANSACTIONS IN OPTIONS ON STOCK INDEXES

A Portfolio's purchase and sale of options on stock indexes has the same risks
as stock options described in the previous section. In addition, the distinctive
characteristics of options on indexes create special risks. Index prices may be
distorted if trading of certain stocks included in the index is interrupted.
Trading in index options also may be interrupted in certain circumstances, such
as if trading were halted in a substantial number of stocks included in the
index. If this occurred, a Portfolio would not be able to close out options
which it had purchased or written and, if restrictions on exercise were imposed,
may be unable to exercise an option it holds, which could result in substantial
losses to the Portfolio. It is the policy of the Portfolios to purchase or write
options only on stock indexes which include a number of stocks sufficient to
minimize the likelihood of a trading halt in options on the index.

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The ability to establish and close out positions on stock index options are
subject to the existence of a liquid secondary market. A Portfolio will not
purchase or sell any index option contract unless and until, in the portfolio
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 additional risks associated with writing calls on stock
indexes. Because exercises of index options are settled in cash, a call writer
such as a Portfolio cannot determine the amount of its settlement obligations in
advance and, unlike call writing on specific stocks, cannot precisely provide in
advance for, or cover, its potential settlement obligations by acquiring and
holding the underlying securities. However, the Portfolios will follow the
"cover" procedures described above.

Price movements of a Portfolio's equity securities probably will not correlate
precisely with movements in the level of the index. 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 that case, the
Portfolio would bear a loss on the call which may not be 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 and might also experience a
loss in its securities. 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 stock index call, there is also a risk that the
market may decline between the time the Portfolio has a call exercised against
it, at a price which is fixed as of the closing level of the index on the date
of exercise, and the time the Portfolio is able to sell stocks in its portfolio.
As with stock options, a Portfolio will not learn that an index option has been
exercised until the day following the exercise date but, unlike a call on stock
where the Portfolio would be able to deliver the underlying securities in
settlement, the Portfolio may have to sell part of its stock portfolio in order
to make settlement in cash, and the price of such stocks might decline before
they can be sold. This timing risk makes certain strategies involving more than
one option substantially more risky with options in stock indexes 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 indexes. 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 this 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

OPTIONS ON FOREIGN CURRENCY

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 and futures contracts on
foreign currencies are employed (see below). Options on foreign currencies are
similar to options on stocks, 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 its securities denominated
in foreign currencies. If the U.S. dollar increases in value relative to a
foreign currency in which the Portfolio's securities are denominated, the value
of those securities will decline as well. To hedge against a decline of a
foreign currency a Portfolio may purchase put options on that foreign currency.
If the value of the foreign currency declines, the gain realized on the put
option would offset, at least in part, the decline in the value of the
Portfolio's holdings denominated in that foreign currency. Alternatively, a
Portfolio may write a call option on a foreign currency. If the foreign currency
declines, the option would not be exercised and the decline in the value of the
Portfolio's securities denominated in that foreign currency would be offset in
part by the premium the Portfolio received for the option.

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

RISKS OF TRANSACTIONS IN OPTIONS ON FOREIGN CURRENCY

A Portfolio's successful use of currency exchange options on foreign currencies
depends upon the portfolio 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. If the currency exchange rate does not change, the Portfolio's 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 the 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
risk. A Portfolio's ability to establish and maintain positions will depend on
market liquidity. The ability of the Portfolio to close out an option depends on
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 AND OPTIONS ON FUTURES CONTRACTS

FUTURES AND OPTIONS ON FUTURES

The Conservative Balanced and Flexible Managed Portfolio may purchase and sell
stock index futures contracts. A stock index futures contract is an agreement
between the buyer and the seller of the contract to transfer an amount of cash
equal to the daily variation margin of the contract. 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 futures contracts on
interest-bearing securities or interest rate indexes, and purchase and sell
futures contracts on foreign currencies.

When a futures contract is entered into, each party deposits with a futures
commission merchant (or in a segregated account) approximately 5% of the
contract amount. This is known as the "initial margin." Every day during the
futures contract, either the buyer or the futures commission merchant will make
payments of "variation margin." In other words, if the value of the underlying
security, index or interest rate increases, then the buyer will have to add to
the margin account so that the account balance equals approximately 5% of the
value of the contract on that day. The next day, the value of the underlying
security, index or interest rate may decrease, in which case the borrower would
receive money from the account equal to the amount by which the account balance
exceeds 5% of the value of the contract on that day.

The Portfolios may purchase or sell futures contracts without limit for hedging
purposes. This would be the case, for example, if a portfolio manager is using a
futures contract to reduce the risk of a particular position on a security. The
Portfolios can also purchase or sell futures contract for non-hedging purposes
provided the initial margins and premiums associated with the contracts do not
exceed 5% of the fair market value of the Portfolio's assets, taking into
account unrealized profits or unrealized losses on any such futures. This would
be the case if a portfolio manager uses futures for investment purposes, to
increase income or to adjust the Portfolio's asset mix.

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RISKS OF TRANSACTIONS IN FUTURES CONTRACTS

There are several risks associated with a Portfolio's use of futures contracts.
When used for investment purposes (that is, non-hedging purposes), successful
use of futures contracts, like successful investment in securities, depends on
the ability of the portfolio manager to predict correctly movements in the
relevant markets, interest rates and/or currency exchange rates. When used for
hedging purposes, there is a risk 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 indexes, the correlation between the price of the futures contract
and movements in the index might not be perfect. To compensate for differences
in volatility, a Portfolio could purchase or sell futures contracts with a
greater or lesser value than the securities or currency it wished to hedge or
purchase. Other risks apply to use for both hedging and investment purposes.
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.

The hours of trading of futures contracts may not conform to the hours during
which a 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.

RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES CONTRACTS

Options on futures contracts are subject to risks similar to those described
above with respect to options on securities, options on stock indexes, 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, a Portfolio might have to exercise an option it held in order to
realize any profit and might continue to be obligated under an option it had
written until the option expired or was exercised. If the Portfolio were unable
to close out an option it had written on a futures contract, it would continue
to be required to maintain initial margin and make variation margin payments
with respect to the option position until the option expired or was exercised
against the Portfolio.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Conservative Balanced and Flexible Managed Portfolios may enter into foreign
currency exchange contracts to protect the value of their foreign holdings
against future changes in the level of currency exchange rates. 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 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 manager believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, the Portfolio may enter into a forward contract for a fixed amount of
dollars, to sell the amount of foreign currency approximating the value of some
or all of the portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The Portfolios will not enter into such
forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate a Portfolio to deliver an amount of
foreign currency in excess of the value of the securities or other assets
denominated in that currency held by the Portfolio. Under normal circumstances,
consideration of the prospect for currency parities will be incorporated into
the long-term investment decisions made with regard to overall diversification
strategies. However, the Portfolios believe that it is important to have the
flexibility to enter into such forward contracts when it is determined that the
best interests of the Portfolios will thereby be served.

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The Portfolios generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, a Portfolio may
either sell the 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 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 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. If 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. If 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 a Portfolio's securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying prices of the
securities which are unrelated to exchange rates. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time they tend to limit any potential gain which
might result should the value of such currency increase.

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

INTEREST RATE SWAPS

The fixed income portions of the Conservative Balanced and Flexible Managed
Portfolios may use interest rate swaps subject to the limitations set forth in
the prospectus.

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 indexes 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 B
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 portfolio 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.

Each Portfolio will set aside 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.

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LOAN PARTICIPATIONS

The Conservative Balanced and Flexible Managed Portfolios may invest in fixed
and floating rate loans that are privately negotiated between a corporate
borrower and one or more financial institutions. The Portfolios will generally
invest in loans in the form of "loan participations." In the typical loan
participation, the Portfolio will have a contractual relationship with the
lender but not the borrower. This means that the Portfolio will not have any
right to enforce the borrower=s compliance with the terms of the loan and may
not benefit directly from any collateral supporting the loan. As a result, the
Portfolio will assume the credit risk of both the borrower and the lender. In
the event of the lender=s insolvency, the Portfolio may be treated as a general
creditor of the lender and may not benefit from any set-off between the lender
and the borrower.

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

DESCRIPTION OF REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS

The fixed portions of the Conservative Balanced and Flexible Managed Portfolios
may use up to 30% of their net assets for reverse repurchase agreements.

In a reverse repurchase transaction, a Portfolio sells one of its securities and
agrees to repurchase the same security at a set price on a specified date.
During the time the security is held by the other party, the Portfolio will
often continue to receive principal and interest payments on the security. The
terms of the reverse repurchase agreement reflect a rate of interest for use of
the money received by the Portfolio and thus, is similar to borrowing.

Dollar rolls involve the sale by the Portfolio of one of its securities for
delivery in the current month and a contract to repurchase substantially similar
securities (for example, with the same coupon) from the other party on a
specified date in the future at a specified amount. During the roll period, a
Portfolio does not receive any principal or interest earned on the security. The
Portfolio realizes a profit to the extent the current sale price is more than
the price specified for the future purchase, plus any interest earned on the
cash paid to the Portfolio on the initial sale.

A "covered roll" is a specific type of dollar roll where 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 participating in reverse repurchase or dollar roll transactions will
set aside liquid assets in a segregated account, which equal in value the
Portfolio's obligations under the reverse repurchase agreement or dollar roll,
respectively.

RISKS 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 a Portfolio may decline below the price of
the securities it has sold but is obligated to repurchase under the agreement.
If the other party in a reverse purchase or dollar roll transaction becomes
insolvent, a Portfolio=s use of the proceeds of the agreement may be restricted
pending a determination by a third party of whether to enforce the Portfolio=s
obligation to repurchase.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Conservative Balanced and Flexible Managed Portfolios may purchase or sell
securities on a when-issued or delayed delivery basis. This means that the
delivery and payment can take place a month or more after the date of the
transaction. A Portfolio will make commitments for when-issued transactions only
with the intention of actually acquiring the securities. A Portfolio's custodian
will maintain in a segregated account, liquid assets having a value equal to or
greater to such commitments. 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 security, incur a gain or loss.

SHORT SALES

The Conservative Balanced and Flexible Managed Portfolios may enter into short
sales. In a short sale, a Portfolio sells a security it does not own in
anticipation of a decline in the market value of those securities. To complete
the transaction, the Portfolio will borrow the security to make delivery to the
buyer. The Portfolio is then obligated to replace the security it borrowed by
purchasing it at the market price at the time of replacement. The price at that
time may be more or less than the price at which the Portfolio sold it. 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 fee which would increase the cost of the
security sold.

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Until a Portfolio replaces a borrowed security used in a short sale, it will set
aside liquid assets in a segregated account equal to the current market value of
the security sold short or otherwise cover the short position. No more than 25%
of any Portfolio=s net assets will be, when added together: (1) deposited as
collateral for the obligation to replace securities borrowed in connection with
short sales and (2) segregated in accounts in connection with short sales.

A Portfolio incurs a loss in a short sale if the price of the security increases
between the date of the short sale and the date the Portfolio replaces the
borrowed security. On the other hand, a Portfolio will realize gain if the
security=s price decreases between the date of the short sale and the date the
security is replaced.

LOANS OF PORTFOLIO SECURITIES

DESCRIPTION OF SECURITIES LOANS

The Portfolios may lend the securities they hold to broker-dealers, qualified
banks and certain institutional investors. All securities loans will be made
pursuant to a written agreement and continuously secured by collateral in the
form of cash, U.S. Government securities or irrevocable standby letters of
credit in an amount equal or greater than the market value of the loaned
securities plus the accrued interest and dividends. While a security is loaned,
the Portfolio will continue to receive the interest and dividends on the loaned
security while also receiving a fee from the borrower or earning interest on the
investment of the cash collateral. Upon termination of the loan, the borrower
will return to the Portfolio a security identical to the loaned security. The
Portfolio will not have the right to vote a security that is on loan, but would
be able to terminate the loan and retain the right to vote if that were
considered important with respect to the investment.

RISKS ASSOCIATED WITH LENDING SECURITIES

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 this
event, if the borrower fails to return the loaned security, 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 any shortfall and might not be
able to recover all or any of it.
However, this risk can be decreased by the careful selection of borrowers and
securities to be lent.

Neither of the Portfolios will lend securities to entities affiliated with
Prudential.

ILLIQUID SECURITIES

Each Portfolio may hold up to 15% of its net assets in illiquid securities.
Securities are "illiquid" if they cannot be sold in the ordinary course of
business within seven days at approximately the value at which the Portfolio has
them valued. 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. These securities will not be
considered illiquid so long as it is determined by the investment 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 investment 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 investment adviser, acting under guidelines
approved and monitored by the Board of Directors, may conditionally determine,
for purposes of the 15% test, that certain commercial paper issued in reliance
on the exemption from registration in Section 4(2) of the Securities Act of 1933
will not be considered illiquid, whether or not it may be resold under Rule
144A. To make that determination, the following conditions must be met: (1) the
security must not be traded flat or in default as to principal or interest; (2)
the security must be rated in one of the two highest rating categories by at
least two nationally recognized statistical rating organizations ("NRSROs"), or
if only one NRSRO rates the security, by that NRSRO; (if the security is
unrated, the investment adviser must determine that the security is of
equivalent quality); and (3) the investment adviser must consider the trading
market for the specific security, taking into account all relevant factors. The
investment 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.

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INVESTMENT RESTRICTIONS

Set forth below are certain investment restrictions applicable to the
Portfolios. Restrictions 1, 3, 5, and 8 through 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 Portfolios may purchase and sell interest rate futures contracts and
related options; and the Portfolios may purchase and sell foreign currency
futures contracts and related options and forward foreign currency exchange
contracts.

2. Except as part of a merger, consolidation, acquisition or reorganization,
invest more than 5% of the value of its total assets in the securities of
any one investment company or more than 10% of the value of its total
assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting
securities of any one investment company.

3. Acquire securities for the purpose of exercising control or management of
any company except in connection with a merger, consolidation, acquisition
or reorganization.

4. Make short sales of securities or maintain a short position, except that
the 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 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 Portfolios may purchase securities on a
when-issued or a delayed delivery basis; and except that the Portfolios may
purchase securities on a when-issued or a delayed delivery basis. The 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 results 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 arrangement with
respect to the writing of the following options by the Portfolios are not
deemed to be the issuance of a senior security or the purchase of a
security on margin: options on debt securities, equity securities, stock
indexes, foreign currencies. Collateral arrangements entered into by the
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 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

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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 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 Fund as a whole. Some uncertainty
exists as to whether certain of the types of bank obligations in which a
Portfolio may invest, such as certificates of deposit and bankers'
acceptances, should be classified as "cash items" rather than "other
securities" for purposes of this restriction, which is a diversification
requirement under the 1940 Act. Interpreting most bank obligations as
"other securities" limits the amount a Portfolio may invest in the
obligations of any one bank to 5% of its total assets. If there is an
authoritative decision that any of these obligations are not "securities"
for purposes of this diversification test, this limitation would not apply
to the purchase of such obligations.

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

12. Invest more than 15% of its net assets in illiquid securities. For purposes
of this restriction, illiquid securities are those deemed illiquid pursuant
to SEC regulations and guidelines, as they may be revised from time to
time.

Consistent with item 5 above, the Fund has entered into a joint $1 billion
revolving credit facility with other Prudential mutual funds to facilitate
redemptions if necessary. This credit facility, which was entered into on March
13, 1999, is a syndicated arrangement with 12 different major banks.

The investments of the 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.

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As a result of these currently applicable requirements of New Jersey law, which
impose substantial limitations on the ability of the 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.

Current federal income tax laws require that the assets of each Portfolio be
adequately diversified so that Prudential and other insurers with separate
accounts which invest in the Fund, as applicable, and not the Contract owners,
are considered the owners of assets held in the Accounts for federal income tax
purposes. See OTHER INFORMATION - FEDERAL INCOME TAXES in the prospectus.
Prudential intends to maintain the assets of each Portfolio pursuant to those
diversification requirements.

INVESTMENT MANAGEMENT AND DISTRIBUTION ARRANGEMENTS

INVESTMENT MANAGEMENT ARRANGEMENTS

Prudential is the investment adviser of the Fund. It is the largest insurance
company in the United States. The Fund has entered into an Investment Advisory
Agreement with Prudential under which Prudential will, subject to the direction
of the Board of Directors of the Fund, be responsible for the management of the
Fund, and provide investment advice and related services to each Portfolio.
Prudential has entered into a Service Agreement with its wholly-owned
subsidiary, The Prudential Investment Corporation ("PIC"), which provides that
PIC will furnish to Prudential such services as Prudential may require in
connection with Prudential's performance of its obligations under advisory
agreements with clients which are registered investment companies. In addition,
Prudential has entered into a Subadvisory Agreement with its wholly-owned
subsidiary Jennison Associates LLC ("Jennison") under which Jennison furnishes
investment advisory services in connection with the management of the Prudential
Jennison Portfolio. More detailed information about Prudential and its role as
investment adviser can be found in HOW THE PORTFOLIOS ARE MANAGED in the
prospectus.

Under the Investment Advisory Agreement, Prudential receives an investment
management fee as compensation for its services to the Fund. The fee is a daily
charge, payable quarterly, equal to an annual percentage of the average daily
net assets of each individual Portfolio. For the Conservative Balanced
Portfolio, the rate is 0.55%. For the Flexible Managed Portfolio, the rate is
0.60%.

The Investment Advisory Agreement requires Prudential to pay for maintaining any
Prudential staff and personnel who perform clerical, accounting, administrative,
and similar services for the Fund, other than investor services and any daily
Fund accounting services. It also requires 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 Fund who are affiliated
persons of Prudential or of any subsidiary of Prudential.

For the years ended 1998, 1997 and 1996, Prudential received a total of
$26,224,569, $25,757,735, and $23,052,572, respectively, in investment
management fees for the Conservative Balanced Portfolio and $33,049,940,
$31,740,440, and $27,247,674, respectively, for the Flexible Managed Portfolio.

Each Fund Portfolio pays all other expenses incurred in its individual operation
and also pays a portion of the 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 Fund
Portfolios include legal expenses, state franchise taxes, auditing services,
costs of printing proxies, prospectuses and statements of additional
information, costs of stock certificates, SEC fees, accounting costs, the fees
and expenses of directors of the Fund who are not affiliated persons of
Prudential or any subsidiary of Prudential, and other expenses properly payable
by the entire Fund. If the Fund is sued, litigation costs may be directly
applicable to one or more Portfolio or allocated on the basis of the size of the
respective Portfolios, depending upon the nature of the lawsuit.
The Fund's Board of Directors has determined that this is an appropriate method
of allocating expenses.

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Under the Investment Advisory Agreement, Prudential has agreed to refund to a
Portfolio the portion of the investment management fee for that Portfolio equal
to the amount that the aggregate annual ordinary operating expenses of that
Portfolio (excluding interest, taxes, and brokerage fees and commissions but
including investment management fees) exceeds 0.75% of the Portfolio's average
daily net assets.

The Investment Advisory Agreement with Prudential was most recently approved by
the Fund's Board of Directors, including a majority of the Directors who are not
interested persons of Prudential, on May 28, 1998 with respect to all
Portfolios. The Investment Advisory Agreement was most recently approved by the
shareholders in accordance with instructions from Contract owners at their 1989
annual meeting with respect to the Portfolios. The Investment Advisory Agreement
will continue in effect if approved annually by: (1) a majority of the
non-interested persons of the Fund's Board of Directors; and (2) by a majority
of the entire Board of Directors or by a majority vote of the shareholders of
each Portfolio. The required shareholder approval of the Agreements shall be
effective with respect to any Portfolio if a majority of the voting shares of
that Portfolio vote to approve the Agreements, even if the Agreements are not
approved by a majority of the voting shares of any other Portfolio or by a
majority of the voting shares of the entire Fund. The Agreements provide that
they may not be assigned by Prudential and that they may be terminated upon 60
days' notice by the Fund's Board of Directors or by a majority vote of its
shareholders. Prudential may terminate the Agreements upon 90 days' notice.

The Service Agreement between Prudential and PIC was most recently ratified by
shareholders of the Fund at their 1989 annual meeting with respect to the
Portfolios. The Service Agreement between Prudential and PIC will continue in
effect as to the 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 Prudential and the
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 Fund in
the event of the assignment or termination of the Investment Advisory Agreement
between Prudential and the Fund. Prudential is not relieved of its
responsibility for all investment advisory services under the Investment
Advisory Agreement.

Prudential also serves as the investment adviser to several other investment
companies. When investment opportunities arise that may be appropriate for more
than one entity for which Prudential serves as investment adviser, 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 Prudential
acts as investment adviser have different investment objectives and positions,
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.

Prudential is currently considering reorganizing itself into a publicly traded
stock company through a process known as "demutualization." On February 10,
1998, the Company's Board of Directors authorized management to take the
preliminary steps necessary to allow the Company to demutualize. On July 1,
1998, legislation was enacted in New Jersey that would permit the conversion to
occur and that specified the process for conversion. Demutualization is a
complex process involving development of a plan of reorganization, adoption of a
plan by the Company's Board of Directors, a public hearing, voting by qualified
policyholders and regulatory approval, all of which could take two or more years
to complete. Prudential's management and Board of Directors have not yet
determined to demutualize and it is possible that, after careful review,
Prudential could decide not to go public.

DISTRIBUTION ARRANGEMENTS

Prudential Investment Management Services LLC ("PIMS"), an indirect wholly-owned
subsidiary of Prudential, acts as the principal underwriter of the Fund. PIMS is
a limited liability corporation organized under Delaware law in 1996. PIMS is a
registered broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. PIMS= principal
business address is 751 Broad Street, Newark, New Jersey 07102-3777.

The Fund has two classes. Class I shares are sold to separate accounts of
Prudential and its affiliates. Class II shares are not available under the
Contract described in this SAI.

OTHER INFORMATION CONCERNING THE FUND

INCORPORATION AND AUTHORIZED STOCK

The Fund was incorporated under Maryland law on November 15, 1982. As of the
date of this SAI, the shares of capital stock are divided into thirty-four
classes: Conservative Balanced Portfolio Capital Stock - Class I, Conservative

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Balanced Portfolio Capital Stock - Class II, Diversified Bond Portfolio Capital
Stock - Class I, Diversified Bond Portfolio Capital Stock - Class II,
Diversified Conservative Growth Portfolio Capital Stock - Class I, Diversified
Conservative Growth Portfolio Capital Stock - Class II, Equity Portfolio Capital
Stock - Class I, Equity Portfolio Capital Stock - Class II, Equity Income
Portfolio Capital Stock - Class I, Equity Income Portfolio Capital Stock - Class
II, Flexible Managed Portfolio Capital Stock - Class I, Flexible Managed
Portfolio Capital Stock - Class II, Global Portfolio Capital Stock - Class I,
Global Portfolio Capital Stock - Class II, Government Income Portfolio Capital
Stock - Class I, Government Income Portfolio Capital Stock - Class II, High
Yield Bond Portfolio Capital Stock - Class I, High Yield Bond Portfolio Capital
Stock - Class II, Money Market Portfolio Capital Stock - Class I, Money Market
Portfolio Capital Stock - Class II, Natural Resources Portfolio Capital Stock -
Class I, Natural Resources Portfolio Capital Stock - Class II, Prudential
Jennison Portfolio Capital Stock - Class I, Prudential Jennison Portfolio
Capital Stock - Class II, Small Capitalization Stock Portfolio Capital Stock -
Class I, Small Capitalization Stock Portfolio Capital Stock - Class II, Stock
Index Portfolio Capital Stock - Class I, Stock Index Portfolio Capital Stock -
Class II, 20/20 Focus Portfolio Capital Stock - Class I, 20/20 Focus Portfolio
Capital Stock - Class II, Zero Coupon Bond 2000 Portfolio Capital Stock - Class
I, Zero Coupon Bond 2000 Portfolio Capital Stock - Class II, Zero Coupon Bond
2005 Portfolio Capital Stock - Class I and Zero Coupon Bond 2005 Portfolio
Capital Stock - Class II.

Each class of shares of each Portfolio represents an interest in the same assets
of the Portfolio and is identical in all respects except that: (1) Class II
shares are subject to distribution and administration fees whereas Class I
shares are not; (2) each class has exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and has
separate voting rights on any matter submitted to shareholders in which the
interest of one class differ from the interests of any class; and (3) each class
is offered to a limited group of investors.

The shares of each class, when issued, will be fully paid and non-assessable,
will have no conversion, or similar rights, and will be freely transferable.
Each share of each class is equal as to earnings, assets and voting privileges.
Class II bears the expenses related to the distribution of its shares. In the
event of liquidation, each share of a Portfolio is entitled to its portion of
all of the Portfolio=s assets after all debts and expenses of the Portfolio have
been paid. Since Class II shares bear distribution and administration expenses,
the liquidation proceeds to Class II shareholders are likely to be lower than to
Class I shareholders, whose shares are not subject to any distribution or
administration fees.

From time to time, Prudential has purchased shares of the Fund to provide
initial capital and to enable the Portfolios to avoid unrealistically poor
investment performance that might otherwise result because the amounts available
for investment are too small. Prudential will not redeem any of its shares until
a Portfolio is large enough so that redemption will not have an adverse effect
upon investment performance. Prudential will vote its shares in the same manner
and in the same proportion as the shares held by the separate accounts that
invest in the Fund, which in turn, are generally voted in accordance with
instructions from Contract owners.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Prudential, as the Portfolio=s investment adviser, is responsible for decisions
to buy and sell securities, options on securities and indexes, and futures and
related options for the Fund. 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 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 Prudential (APSI@).

Equity securities traded in the over-the-counter market and bonds, including
convertible bonds, are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and U.S.
Government agency securities may be purchased directly from the issuer, in which
case no commissions or discounts are paid. The Fund will not deal with PSI in
any transaction in which PSI acts as principal. Thus, it will not deal with PSI
if execution involves PSI's acting as principal with respect to any part of the
Fund's order.

Portfolio securities may not be purchased from any underwriting or selling
syndicate of which PSI, during the existence of the syndicate, is a principal
underwriter (as defined in the 1940 Act) except in accordance with rules of the
SEC. This limitation, in the opinion of the Fund, will not significantly affect
the Portfolios' current ability to pursue their respective investment
objectives. However, in the future it is possible that the Fund may under other
circumstances be at a disadvantage because of this limitation in comparison to
other funds not subject to such a limitation.

20
<PAGE>

In placing orders for portfolio securities of the Fund, Prudential's overriding
objective is to obtain the best possible combination of price and execution.
Prudential seeks to effect each transaction at a price and commission that
provides the most favorable total cost or proceeds reasonably attainable in the
circumstances. The factors that Prudential may consider in selecting a
particular broker, dealer or futures commission merchant firms are: Prudential's
knowledge of negotiated commission rates currently available and other
transaction costs; the nature of the portfolio transaction; the size of the
transaction; the desired timing of the trade; the activity existing and expected
in the market for the particular transaction; confidentiality; the execution,
clearance and settlement capabilities of the firms; the availability of research
and research related services provided through such firms; Prudential's
knowledge of the financial stability of the firms; Prudential's knowledge of
actual or apparent operational problems of firms; and the amount of capital, if
any, that would be contributed by firms executing the transaction. Given these
factors, the Fund may pay transaction costs in excess of that which another firm
might have charged for effecting the same transaction.

When Prudential selects a firm that executes orders or is a party to portfolio
transactions, relevant factors taken into consideration are whether that firm
has furnished research and research related products and/or services, such as
research reports, research compilations, statistical and economic data, computer
data bases, quotation equipment and services, research oriented
computer-software, hardware and services, reports concerning the performance of
accounts, valuations of securities, investment related periodicals, investment
seminars and other economic services and consultants. Such services are used in
connection with some or all of Prudential's investment activities; some of such
services, obtained in connection with the execution of transactions for one
investment account may be used in managing other accounts, and not all of these
services may be used in connection with the Fund.

PSI may act as a securities broker or futures commission merchant for the Fund.
In order for PSI to effect any transactions for the Portfolios, the commissions
received by PSI must be reasonable and fair compared to the commissions received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time. This standard would allow PSI 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 Fund, including a majority of the
directors who are not "interested" persons, has adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to PSI are consistent with the foregoing standard. In accordance with Rule
11a2-2(T) under the Securities Exchange Act of 1934, PSI may not retain
compensation for effecting transactions on a national securities exchange for
the Fund unless the Fund has expressly authorized the retention of such
compensation in a written contract executed by the Fund and PSI. Rule 11a2-2(T)
provides that PSI must furnish to the Fund at least annually a statement setting
forth the total amount of all compensation retained by PSI from transactions
effected for the Fund during the applicable period. Brokerage and futures
transactions with PSI are also subject to such fiduciary standards as may be
imposed by applicable law.

For the years 1998, 1997, and 1996, the Conservative Balanced Portfolio paid
$1,320,049, $3,338,897, and $2,192,303, respectively, in brokerage commissions
and the Flexible Managed Portfolio paid $2,176,922, $6,544,428, and $5,760,972,
respectively, in brokerage commissions. Of those amounts, for 1998, 1997, and
1996, the Conservative Balanced Portfolio paid $32,490, $256,752, and $120,976,
respectively, to Prudential Securities Incorporated, and the Flexible Managed
Portfolio paid $103,021, $428,008, and $582,317, respectively, to Prudential
Securities Incorporated. For 1998, the percentage of commissions paid to
Prudential Securities Incorporated was 2.46% for the Conservative Balanced
Portfolio and 4.73% for the Flexible Managed Portfolio. For 1998, the percentage
of the aggregate dollar amount of transactions effected through Prudential
Securities Incorporated was 0.79% for the Conservative Balanced Portfolio and
1.53% for the Flexible Managed Portfolio.

TAXATION OF THE FUND

The Fund intends to qualify as regulated investment company under Subchapter M
of the Internal Code of 1986, as amended (the "Code"). The Fund generally will
not be subject to federal income tax to the extent it distributes to
shareholders its net investment income and net capital gains in the manner
required by the Code. There is a 4% excise tax on the undistributed income of a
regulated investment company if that company fails to distribute the required
percentage of its net investment income and net capital gains. The Fund intends
to employ practices that will eliminate or minimize this excise tax.

Federal tax law requires that the assets underlying variable contracts,
including the Fund, meet certain diversification requirements. Each Portfolio is
required to diversify its investments each quarter so that no more than 55% of
the value of its assets is represented by any one investment, no more than 70%
is represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four investments.
Generally, securities of a single issuer are treated as one investment and
obligations of each U.S. Government agency and instrumentality (such as the
Government National Mortgage Association) are treated as issued by separate
issuers. In addition, any security issued, guaranteed or insured (to the extent
so guaranteed or

21
<PAGE>

insured) by the United States or an instrumentality of the U.S.
will be treated as a security issued by the U.S. Government or its
instrumentality, whichever is applicable.

Some foreign securities purchased by the Portfolios may be subject to foreign
taxes which could reduce the return on those securities.

This is a general and brief summary of the tax laws and regulations applicable
to the Fund. The law and regulations may change. You should consult a tax
adviser for complete information and advice.

CUSTODIANS

Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas City,
MO 64105-1716, is the custodian of the assets held by the Portfolios. IFTC is
also 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
Depository Trust Company and the facilities of the book-entry system of the
Federal Reserve Bank with respect to securities held by these Portfolios. IFTC
employs subcustodians, who were approved in accordance with regulations of the
SEC, for the purpose of providing custodial service for the Fund's foreign
assets held outside the United States.

EXPERTS

The financial statements included in this statement of additional information
and the FINANCIAL HIGHLIGHTS included in the prospectus for each of the three
years ended December 31, 1998 have been audited by PricewaterhouseCoopers LLP,
independent accountants, as stated in their report appearing herein. The Fund is
relying on PricewaterhouseCoopers' report which is given on their authority as
accounting and auditing experts. PricewaterhouseCoopers LLP's principal business
address is 1177 Avenue of the Americas, New York, NY 10036.

LICENSES

As part of the Investment Advisory Agreement, Prudential has granted the Fund a
royalty-free, non-exclusive license to use the words "The Prudential" and
"Prudential" and its registered service mark of a rock representing the Rock of
Gibraltar. However, Prudential may terminate this license if Prudential or a
company controlled by it ceases to be the Fund's investment adviser. 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 Fund of such notice, unless a
majority of the outstanding voting securities of the Fund vote to continue the
Agreement notwithstanding termination of the license.

The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's
("S&P"). S&P makes no representation or warranty, express or implied, to
Contract owners or any member of the public regarding the advisability of
investing in securities generally or in the Fund particularly or the ability of
the S&P 500 Index or the S&P SmallCap 600 Index to track general stock market
performance. S&P's only relationship to the Fund is the licensing of certain
trademarks and trade names of S&P and the S&P 500 Index. The S&P 500 Index and
the S&P SmallCap 600 Index are determined, composed and calculated by S&P
without regard to the Fund, the Stock Index Portfolio or the Small
Capitalization Stock Portfolio. S&P has no obligation to take the needs of the
Fund or the Contract owners into consideration in determining, composing or
calculating the S&P 500 Index or the S&P SmallCap 600 Index. S&P is not
responsible for and has not participated in the determination of the prices and
amount of the Fund shares or the timing of the issuance or sale of those shares
or in the determination or calculation of the equation by which the shares are
to be converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the Fund shares.

S&P does not guarantee the accuracy and/or the completeness of the S&P 500
Index, the S&P SmallCap 600 Index or any data included therein and S&P shall
have no liability for any errors, omissions, or interruptions therein. S&P makes
no warranty, express or implied as to the results to be obtained by the Fund,
Contract owners, or any other person or entity from the use of the S&P 500
Index, the S&P SmallCap 600 Index or any data included therein. S&P makes no
express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
S&P 500 Index, the S&P SmallCap 600 Index or any data included therein. Without
limiting any of the foregoing, in no event shall S&P have any liability for any
special, punitive, indirect, or consequential damages (including lost profits,
even if notifies of the possibility of such damages.

22
<PAGE>

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 edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa -- Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long
term risks appear somewhat larger than in Aaa securities.

A -- Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa -- Bonds which are rated "Baa" are considered as medium grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba -- Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class.

B -- Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.

Caa -- Bonds which are rated "Caa" are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.

Ca -- Bonds which are rated "Ca" represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.

C -- Bonds which are rated "C" are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.

COMMERCIAL PAPER:

o Issuers rated Prime-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:

- -- Leading market positions in well-established industries.

- -- High rates of return of funds employed.

- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

23
<PAGE>

- -- 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 supporting institutions) have a strong ability
for repayment of short-term debt 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, may 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 Ratings Services describes its grades of corporate debt
securities and its "A" commercial paper as follows:

BONDS:

AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.

A Debt rated "A" has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.

BBB Debt rated "BBB" is regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.

BB-B-CCC-CC-C

Debt rated "BB", "B", "CCC", "CC", and "C" is regarded as having
predominantly speculative characteristics with respect to capacity to
pay interest and repay principal. BB indicates the least degree of
speculation and C the highest. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.

COMMERCIAL PAPER:

Commercial paper rated A by Standard & Poor's Ratings Services has the
following characteristics: Liquidity ratios are better than the
industry average. Long term senior debt rating is "A" or better. In
some cases BBB credits may be acceptable. The issuer has access to at
least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowances made for unusual
circumstances. Typically, the issuer's industry is well established,
the issuer has a strong position within its industry and the
reliability and quality of management is unquestioned. Issuers rated A
are further referred to by use of numbers 1, 2 and 3 to denote
relative strength within this classification.

24
<PAGE>

DIRECTORS AND OFFICERS OF PRUCO LIFE AND
MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS

The directors and major officers of Pruco Life, listed with their principal
occupations during the past five years, are shown below.
DIRECTORS OF PRUCO LIFE

JAMES J. AVERY, JR., CHAIRMAN AND DIRECTOR. -- Senior Vice President and Chief
Actuary, Prudential Individual Insurance Group since 1997; 1995 to 1997:
President of Prudential Select; Prior to 1995: Chief Operating Officer of
Prudential Select.

WILLIAM M. BETHKE, DIRECTOR. -- Chief Investment Officer since 1997; Prior to
1997: President, Prudential Capital Markets Group.

IRA J. KLEINMAN, DIRECTOR. -- Executive Vice President, Prudential International
Insurance Group since 1997; 1995 to 1997: Chief Marketing and Product
Development Officer, Prudential Individual Insurance Group; Prior to 1995:
President, Prudential Select.

ESTHER H. MILNES, PRESIDENT AND DIRECTOR. -- Vice President and Actuary,
Prudential Individual Insurance Group since 1996; Prior to 1996: Senior Vice
President and Chief Actuary, Prudential Insurance and Financial Services.

I. EDWARD PRICE, VICE CHAIRMAN AND DIRECTOR. -- Senior Vice President and
Actuary, Prudential Individual Insurance Group since 1995; Prior to 1995: Chief
Executive Officer, Prudential International Insurance.

KIYOFUMI SAKAGUCHI, DIRECTOR. -- President, Prudential International Insurance
Group since 1995; Prior to 1995: Chairman and Chief Executive Officer, The
Prudential Life Insurance Co., Ltd.

OFFICERS WHO ARE NOT DIRECTORS

C. EDWARD CHAPLIN, TREASURER. -- Vice President and Treasurer of Prudential
since 1995; Prior to 1995: Managing Director and Assistant Treasurer of
Prudential.

JAMES C. DROZANOWSKI, SENIOR VICE PRESIDENT.-- Vice President and Operations
Executive, Prudential Individual Insurance Group since 1996; 1995 to 1996:
President and Chief Executive Officer of Chase Manhattan Bank; Prior to 1995:
Vice President, North America Customer Services, Chase Manhattan Bank.

CLIFFORD E. KIRSCH, CHIEF LEGAL OFFICER AND SECRETARY.-- Chief Counsel, Variable
Products, Law Department of Prudential since 1995; Prior to 1995: Associate
General Counsel with Paine Webber.

FRANK P. MARINO, SENIOR VICE PRESIDENT. -- Vice President, Policyowner Relations
Department, Prudential Individual Insurance Group since 1996; Prior to 1996:
Senior Vice President, Prudential Mutual Fund Services.

EDWARD A. MINOGUE, SENIOR VICE PRESIDENT. -- Vice President, Annuity Services,
Prudential Investments since 1997; Prior to 1997: Director, Merrill Lynch.

HIROSHI NAKAJIMA, SENIOR VICE PRESIDENT. -- President & Chief Executive Officer,
Pruco Life Insurance Company, Taiwan Branch since 1997; Prior to 1997: Senior
Managing Director, Prudential Life Insurance Co., Ltd.

IMANTS SAKSONS, SENIOR VICE PRESIDENT. -- Vice President, Compliance, Prudential
Individual Financial Services since 1998; Prior to 1998: Vice President, Market
Conduct, U.S. Operations, Manulife Financial.

SHIRLEY H. SHAO, SENIOR VICE PRESIDENT AND CHIEF ACTUARY. -- Vice President and
Associate Actuary, Prudential.

DENNIS G. SULLIVAN, VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER. -- Vice
President and Deputy Controller, Prudential since 1998; 1997 to 1998, Vice
President and Controller, ContiFinancial Corporation; Prior to 1997, Director,
Saloman Brothers.

The business address of all directors and officers of Pruco Life is 213
Washington Street, Newark, New Jersey 07102-2992.

Pruco Life directors and officers are elected annually.

25
<PAGE>

MANAGEMENT OF THE FUND

The names of all directors and major officers of the Fund and the principal
occupation of each during the last five years are shown below. Unless otherwise
stated, the address of each director and officer is 751 Broad Street , Newark,
New Jersey 07102-3777.

DIRECTORS OF THE FUND

E. MICHAEL CAULFIELD*, 52, DIRECTOR AND PRESIDENT-- Executive Vice President,
Prudential Financial Management since 1998; 1995 to 1998: Chief Executive
Officer of Prudential Investments; 1995: Chief Executive Officer, Prudential
Preferred Financial Services; prior to 1995: President, Prudential Preferred
Financial Services.

SAUL K. FENSTER, 66, DIRECTOR--President of New Jersey Institute of Technology.
Address: 323 Martin Luther King, Jr. Boulevard, Newark, New Jersey 07102.

W. SCOTT McDONALD, JR., 62, DIRECTOR--Vice President, Kaludis Consulting Group
since 1997; 1995 to 1996: Principal, Scott McDonald & Associates; Prior to 1995:
Executive Vice President of Fairleigh Dickinson University. Address: 9 Zamrok
Way, Morristown, New Jersey 07960.

JOSEPH WEBER, 75, DIRECTOR--Vice President, Interclass (international corporate
learning). Address: 37 Beachmont Terrace, North Caldwell, New Jersey 07006.

OFFICERS WHO ARE NOT DIRECTORS

CAREN A. CUNNINGHAM, Secretary--Assistant General Counsel of Prudential
Investments Fund Management, LLC ("PIFM") Inc. since 1997; prior to 1997: Vice
President and Associate General Counsel of Smith Barney Mutual Fund Management
Inc.

GRACE C. TORRES, TREASURER AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER--First
Vice President of PIFM since 1996; prior to 1996: First Vice President of
Prudential Securities Inc.

STEPHEN M. UNGERMAN, ASSISTANT TREASURER--Vice President and Tax Director of
Prudential Investments since 1996; prior to 1996: First Vice President of
Prudential Mutual Fund Management, Inc.

- --------
* This member of the Board is an interested person of Prudential, its affiliates
or the Fund as defined in the 1940 Act. Certain actions of the Board, including
the annual continuance of the Investment Advisory Agreement between the Fund and
Prudential, must be approved by a majority of the members of the Board who are
not interested persons of Prudential, its affiliates or the Fund. Mr. Caulfield,
one of the four members of the Board, is an interested person of Prudential and
the Fund, as that term is defined in the 1940 Act, because he is an officer
and/or affiliated person of Prudential, the investment advisor to the Fund.
Messrs. Fenster, McDonald, and Weber are not interested persons of Prudential,
its affiliates or the Fund. However, Mr. Fenster is President of the New Jersey
Institute of Technology. Prudential has issued a group annuity contract to the
Institute and provides group life and group health insurance to its employees.

No director or officer of the Fund who is also an officer, director or employee
of Prudential or its affiliates is entitled to any remuneration from the Fund
for services as one of its directors or officers. A single annual retainer fee
of $35,000 is paid to each of the directors who is not an interested person of
the Fund for services rendered to five different Prudential mutual funds,
including this Fund. (The amount paid in respect of each fund is determined on
the basis of the funds' relative average net assets.) The directors who are not
interested persons of the Fund are also reimbursed for all expenses incurred in
connection with attendance at meetings.

26
<PAGE>

The following table sets forth the aggregate compensation paid by the Fund to
the Directors who are not affiliated with Prudential for the fiscal year ended
December 31, 1998 and the aggregate compensation paid to such Directors for
service on the Fund's Board and the Boards of any other investment companies
managed by Prudential for the calendar year ended December 31, 1998. Below are
listed all Directors who have served the Fund during its most recent fiscal
year.

COMPENSATION TABLE

<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON RELATED TO FUNDS MANAGED
NAME AND POSITION FUND FUND EXPENSES RETIREMENT BY PRUDENTIAL (**)
- ----------------- ----------------- ------------------- ---------------- -----------------------
<S> <C> <C> <C> <C>

E. Michael Caulfield* -- --
Saul K. Fenster $14,000 None N/A $27,200 (5/19)
W. Scott McDonald $14,400 None N/A $27,200 (5/19)
Joseph Weber $14,400 None N/A $27,200 (5/19)

</TABLE>

* Directors who are "interested" do not receive compensation from Prudential
(including the Fund).

** Indicates number of funds and portfolios(including the Fund) to which
aggregate compensation relates.

As of April 1, 1999, the Directors and officers of the Fund, as a group,
beneficially owned less than one percent of the outstanding shares of the Fund
capital stock.

<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
CONSERVATIVE BALANCED PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<S> <C>
ASSETS
Investments, at value (cost:
$4,496,058,447).......................... $4,762,474,785
Cash....................................... 845,314
Interest and dividends receivable.......... 42,070,945
Receivable for investments sold............ 324,115
Due from broker -- variation margin........ 85,990
Receivable for capital stock sold.......... 263,037
--------------
Total Assets............................. 4,806,064,186
--------------
LIABILITIES
Payable to investment adviser.............. 6,472,779
Payable for capital stock repurchased...... 1,730,453
Payable for investments purchased.......... 1,518,060
Accrued expenses........................... 383,124
--------------
Total Liabilities........................ 10,104,416
--------------
NET ASSETS................................... $4,795,959,770
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 3,181,043
Paid-in capital, in excess of par........ 4,507,920,747
--------------
4,511,101,790
Accumulated net realized gains on
investments.............................. 15,961,929
Net unrealized appreciation on
investments.............................. 268,896,051
--------------
Net assets, December 31, 1998.............. $4,795,959,770
--------------
--------------
Net asset value and redemption price per
share, 318,104,322 outstanding shares of
common stock (authorized 350,000,000
shares).................................. $ 15.08
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1998
<S> <C>
INVESTMENT INCOME
Dividends (net of $227,089 foreign
withholding tax)......................... $ 24,862,659
Interest................................... 202,415,229
---------------
227,277,888
---------------
EXPENSES
Investment advisory fee.................... 26,224,569
Shareholders' reports...................... 335,000
Accounting fees............................ 270,000
Custodian expense.......................... 210,000
Audit fees................................. 45,000
Legal fees................................. 4,000
Directors' fees............................ 3,000
Miscellaneous expenses..................... 22,800
---------------
Total expenses........................... 27,114,369
Less: Custodian fee credit................. (37,735)
---------------
Net expenses............................. 27,076,634
---------------
NET INVESTMENT INCOME........................ 200,201,254
---------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on:
Investments.............................. 252,074,816
Futures contracts........................ 11,004,301
---------------
263,079,117
---------------
Net change in unrealized appreciation on:
Investments.............................. 62,217,963
Futures contracts........................ 4,254,938
---------------
66,472,901
---------------
NET GAIN ON INVESTMENTS...................... 329,552,018
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 529,753,272
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 200,201,254 $ 209,904,550
Net realized gain on investments....................................................... 263,079,117 525,175,186
Net change in unrealized appreciation (depreciation) on investments.................... 66,472,901 (148,830,270)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 529,753,272 586,249,466
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (201,150,300) (209,004,256)
Distributions from net realized capital gains.......................................... (284,059,981) (518,358,296)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (485,210,281) (727,362,552)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,155,780 and 4,585,160 shares, respectively]...................... 64,306,807 74,015,405
Capital stock issued in reinvestment of dividends and distributions [32,017,520 and
47,801,252 shares, respectively]...................................................... 485,210,281 727,362,552
Capital stock repurchased [(34,980,138) and (24,112,955) shares, respectively]......... (542,332,348) (394,841,365)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 7,184,740 406,536,592
------------------ -------------------
TOTAL INCREASE IN NET ASSETS............................................................. 51,727,731 265,423,506
NET ASSETS:
Beginning of year...................................................................... 4,744,232,039 4,478,808,533
------------------ -------------------
End of year (a)........................................................................ $ 4,795,959,770 $ 4,744,232,039
------------------ -------------------
------------------ -------------------
(a) Includes undistributed net investment income of:................................... $ -- $ 949,046
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

A1
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL SERIES FUND, INC.
FLEXIBLE MANAGED PORTFOLIO

<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<S> <C>
ASSETS
Investments, at value (cost:
$5,149,958,034).......................... $5,386,550,009
Cash....................................... 1,341
Interest and dividends receivable.......... 33,290,998
Due from broker -- variation margin........ 809,059
Receivable for investments sold............ 619,824
Receivable for capital stock sold.......... 232,095
--------------
Total Assets............................. 5,421,503,326
--------------
LIABILITIES
Payable to investment adviser.............. 7,882,895
Payable for capital stock repurchased...... 1,607,590
Payable for investments purchased.......... 1,595,867
Accrued expenses........................... 435,586
--------------
Total Liabilities........................ 11,521,938
--------------
NET ASSETS................................... $5,409,981,388
--------------
--------------
Net assets were comprised of:
Common stock, at $0.01 par value......... $ 3,267,182
Paid-in capital, in excess of par........ 5,110,844,004
--------------
5,114,111,186
Undistributed net investment income........ 170,556
Accumulated net realized gains on
investments.............................. 43,985,733
Net unrealized appreciation on
investments.............................. 251,713,913
--------------
Net assets, December 31, 1998.............. $5,409,981,388
--------------
--------------
Net asset value and redemption price per
share, 326,718,180 outstanding shares of
common stock (authorized 350,000,000
shares).................................. $ 16.56
--------------
--------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1998
<S> <C>
INVESTMENT INCOME
Dividends (net of $614,599 foreign
withholding tax)......................... $ 41,517,034
Interest................................... 170,024,349
---------------
211,541,383
---------------
EXPENSES
Investment advisory fee.................... 33,049,940
Shareholders' reports...................... 415,000
Accounting fees............................ 242,000
Custodian expense.......................... 234,000
Audit fees and expenses.................... 57,000
Directors' fees............................ 3,000
Miscellaneous expenses..................... 26,800
---------------
Total expenses........................... 34,027,740
Less: custodian fee credit................. (74,445)
---------------
Net expenses............................. 33,953,295
---------------
NET INVESTMENT INCOME........................ 177,588,088
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on:
Investments.............................. 471,749,472
Futures contracts........................ 42,134,442
---------------
513,883,914
---------------
Net change in unrealized appreciation on:
Investments.............................. (183,829,519)
Futures contracts........................ 16,684,360
---------------
(167,145,159)
---------------
NET GAIN ON INVESTMENTS...................... 346,738,755
---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $ 524,326,843
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income.................................................................. $ 177,588,088 $ 160,063,955
Net realized gain on investments....................................................... 513,883,914 867,691,914
Net change in unrealized appreciation on investments................................... (167,145,159) (163,603,096)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... 524,326,843 864,152,773
------------------ -------------------
DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income................................................... (178,186,396) (159,343,911)
Distributions from net realized capital gains.......................................... (552,345,875) (823,214,223)
------------------ -------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................................... (730,532,271) (982,558,134)
------------------ -------------------
CAPITAL TRANSACTIONS:
Capital stock sold [4,188,120 and 4,859,580 shares, respectively]...................... 74,668,669 92,765,042
Capital stock issued in reinvestment of dividends and distributions [43,615,212 and
56,453,647 shares, respectively]...................................................... 730,532,271 982,558,134
Capital stock repurchased [(38,796,213) and (18,791,325) shares, respectively]......... (679,156,218) (363,698,408)
------------------ -------------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS......................... 126,044,722 711,624,768
------------------ -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................................................. (80,160,706) 593,219,407
NET ASSETS:
Beginning of year...................................................................... 5,490,142,094 4,896,922,687
------------------ -------------------
End of year (a)........................................................................ $ 5,409,981,388 $ 5,490,142,094
------------------ -------------------
------------------ -------------------
(a) Includes undistributed net investment income of:................................... $ 170,556 $ 768,864
------------------ -------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

A2
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO
December 31, 1998
<TABLE>
<CAPTION>
LONG-TERM INVESTMENTS -- 94.3%

MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS -- 54.9% (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
AEROSPACE -- 1.3%
Raytheon Co.,
5.95%, 03/15/01............................... Baa1 $ 16,400 $ 16,543,992
6.00%, 12/15/10............................... Baa1 20,000 20,000,000
6.40%, 12/15/18............................... Baa1 25,000 24,812,500
--------------
61,356,492
--------------
AIRLINES -- 3.3%
Continental Airlines, Inc.,
8.00%, 12/15/05............................... Ba2 5,000 4,940,500
Delta Airlines, Inc.,
10.125%, 05/15/10............................. Baa3 20,000 25,019,000
10.375%, 02/01/11............................. Ba1 37,905 48,392,555
United Airlines, Inc.,
10.67%, 05/01/04.............................. Baa3 46,865 55,450,668
11.21%, 05/01/14.............................. Baa3 18,433 24,206,216
--------------
158,008,939
--------------
ASSET-BACKED SECURITIES -- 0.7%
California Infrastructure,
6.14%, 03/25/02............................... Aaa 5,500 5,517,930
6.17%, 03/25/03............................... Aaa 6,000 6,073,560
6.28%, 09/25/05............................... Aaa 7,000 7,167,160
Standard Credit Card Master Trust,
5.95%, 10/07/04............................... Aaa 4,650 4,718,262
Team Financing Corp.,
7.35%, 05/15/03............................... Aa2 11,000 11,304,219
--------------
34,781,131
--------------
BANKS AND SAVINGS & LOANS -- 3.3%
Bank of Nova Scotia,
6.50%, 07/15/07............................... A1 7,200 7,250,256
Bayerische Landesbank Girozentrale,
5.875%, 12/01/08.............................. Aaa 22,000 22,492,800
Capital One Bank,
6.97%, 02/04/02............................... Baa3 25,000 25,007,250
7.08%, 10/30/01............................... Baa3 35,100 35,295,507
7.35%, 06/20/00............................... Baa3 8,100 8,162,208
8.125%, 03/01/00.............................. Baa3 13,150 13,341,069
Citigroup,
6.375%, 11/15/08.............................. A1 17,500 18,094,475
Kansallis-Osake-Pankki, (Finland),
8.65%, 01/01/49............................... Baa1 10,000 10,147,200
National Australia Bank, (Australia),
6.40%, 12/10/07............................... A1 14,000 14,280,000
Okobank, (Finland),
6.75%, 09/27/49............................... A3 6,250 6,243,750
--------------
160,314,515
--------------
CABLE & PAY TELEVISION SYSTEMS -- 2.3%
Cable & Wire Communications, Inc.,
6.75%, 12/01/08............................... Baa1 17,000 17,329,800
Continental Cablevision, Inc.,
8.50%, 09/15/01............................... Ba2 5,545 5,881,914

<CAPTION>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
CABLE & PAY TELEVISION SYSTEMS (CONT'D.)
<S> <C> <C> <C>
Tele-Communications, Inc.,
6.34%, 02/01/02............................... Ba1 $ 12,000 $ 12,291,000
7.375%, 02/15/00.............................. Ba1 40,700 41,585,225
8.25%, 01/15/03............................... Baa3 2,000 2,194,800
9.25%, 04/15/02............................... Baa3 9,500 10,563,525
9.875%, 06/15/22.............................. Baa3 12,900 18,288,975
--------------
108,135,239
--------------
COMMERCIAL SERVICES -- 0.8%
Cendant Corp.,
7.75%, 12/01/03............................... Baa1 39,000 39,416,130
--------------
COMPUTERS SOFTWARE & SERVICES -- 0.6%
Computer Associates International, Inc.,
6.375%, 04/15/05.............................. Baa1 14,300 14,151,852
Qwest Comm,
7.25%, 11/01/08............................... Ba1 8,000 8,180,000
Worldcom Inc,
6.125%, 08/15/01.............................. Baa2 6,700 6,807,066
--------------
29,138,918
--------------
CONSULTING -- 2.6%
Comdisco Inc., M.T.N.,
5.94%, 04/13/00............................... Baa1 12,500 12,468,750
6.32%, 11/27/00............................... Baa1 37,750 37,925,915
6.375%, 11/30/01.............................. Baa1 21,500 21,593,095
6.65%, 11/13/01............................... Baa1 50,000 50,385,000
--------------
122,372,760
--------------
CONSUMER SERVICES -- 0.3%
Loewen Group, Inc.,
7.20%, 06/01/03............................... Ba3 10,000 8,400,000
7.60%, 06/01/08............................... Ba3 3,400 2,686,000
Service Corp. International,
7.00%, 06/01/15............................... Baa1 2,500 2,588,375
--------------
13,674,375
--------------
CONTAINERS -- 0.6%
Owens-Illinois, Inc.,
7.15%, 05/15/05............................... Ba1 30,000 30,066,300
7.50%, 05/15/10............................... Ba1 800 815,216
--------------
30,881,516
--------------
DRUGS & MEDICAL SUPPLIES -- 0.5%
Mallinckrodt, Inc.,
6.30%, 03/15/11(a)............................ Baa2 16,780 16,520,958
Merck & Co Inc.,
5.95%, 12/01/28............................... Aaa 10,000 9,982,500
--------------
26,503,458
--------------
ELECTRICAL -- 0.3%
Enersis Sa,
6.90%, 12/01/06............................... Baa1 10,000 9,182,000
7.40%, 12/01/16............................... Baa1 6,400 5,267,200
--------------
14,449,200
--------------
FINANCIAL SERVICES -- 13.2%
Advanta Corp., M.T.N.,
7.50%, 08/28/00............................... Ba2 35,000 32,866,400
Arkwright Corp.,
9.625%, 08/15/26.............................. Baa3 8,000 9,568,800
Associates Corp.,
6.25%, 11/01/08............................... Aa3 21,000 21,745,920
6.95%, 11/01/18............................... Aa3 24,000 25,573,920
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B1
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
FINANCIAL SERVICES (CONT'D.)
<S> <C> <C> <C>
AT&T Capital Corp, M.T.N.,
6.25%, 05/15/01............................... Baa3 $ 35,500 $ 35,016,845
7.50%, 11/15/00............................... Baa3 47,000 47,575,280
BCH Financial Services
5.72%, 04/28/05............................... A3 10,000 9,933,200
Bear Stearns & Co,
6.50%, 07/05/00............................... A2 20,000 20,203,400
Conseco Inc.,
6.80%, 06/15/05............................... Baa3 13,000 11,801,400
8.70%, 11/15/26............................... Ba2 29,813 27,237,594
8.796%, 04/01/27.............................. Ba2 7,500 6,857,250
ContiFinancial Corp.,
7.50%, 03/15/02............................... Ba1 31,300 21,910,000
8.375%, 08/15/03.............................. Ba1 16,085 11,259,500
Donaldson Lufkin, & Jenrette Inc.,
5.625%, 02/15/16.............................. Baa1 5,480 5,415,117
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
6.35%, 01/15/01............................... Baa3 11,200 11,226,992
6.95%, 03/01/04............................... Baa2 17,500 17,663,100
7.00%, 06/15/00............................... Baa3 23,000 23,098,210
7.50%, 06/15/03............................... Baa3 5,000 5,158,900
First Industrial, L.P.,
6.50%, 04/05/11............................... Baa2 9,000 8,864,730
General Motors Acceptance Corp., M.T.N.,
5.95%, 04/20/01............................... A2 30,300 30,542,400
Household Finance Corp.,
6.50%, 11/15/08............................... A2 72,000 74,520,000
Lehman Brothers Holdings, Inc.,
6.33%, 08/01/00............................... Baa1 17,200 17,317,476
6.40%, 08/30/00............................... Baa1 21,700 21,705,425
MCN Investment Corp.,
6.30%, 04/02/11............................... Baa2 8,250 8,194,725
Merrill Lynch, Pierce, Fenner & Smith, Inc.,
6.875%, 11/15/18.............................. Aa3 16,900 17,519,385
Morgan Stanley Dean Witter & Co., M.T.N.,
5.89%, 03/20/00............................... A1 20,000 20,140,800
6.09%, 03/09/11............................... A1 21,000 21,280,350
PaineWebber Group, Inc.,
7.015%, 02/10/04.............................. Baa1 6,000 6,288,840
7.625%, 10/15/08.............................. Baa1 5,000 5,387,250
PT Alatief Freeport Financial Co., Sr. Notes,
(Netherlands),
9.75%, 04/15/01 (b)/(c)....................... Ba2 8,950 6,444,000
Salomon, Inc.,
6.59%, 02/21/01............................... Baa1 9,750 9,937,200
6.75%, 02/15/03............................... Baa1 5,000 5,137,450
7.25%, 05/01/01............................... Baa1 8,625 8,933,430
Textron Financial Corp.,
6.05%, 03/16/09............................... Aaa 26,319 26,369,655
--------------
632,694,944
--------------

<CAPTION>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>

FOREST PRODUCTS -- 0.4%
Fort James Corp.,
6.234%, 03/15/11.............................. Baa3 $ 17,500 $ 17,664,675
--------------
INDUSTRIAL -- 2.5%
Compania Sud Americana de Vapores, S.A.,
(Chile),
7.375%, 12/08/03.............................. Baa 7,600 6,821,000
Scotia Pacific Co.,
7.11%, 01/20/14............................... A3 7,900 7,518,904
7.71%, 01/20/14............................... Baa2 23,800 21,321,944
Security Capital Group,
6.95%, 06/15/05............................... Baa1 4,500 4,297,500
U.S. Filter Corp.,
6.375%, 05/15/01.............................. Ba1 60,090 59,445,835
6.50%, 05/15/03............................... Ba1 20,000 19,481,800
--------------
118,886,983
--------------
LODGING -- 0.9%
ITT Corp.,
6.25%, 11/15/00............................... Ba1 23,703 22,867,232
6.75%, 11/15/03............................... Baa2 21,500 19,797,845
--------------
42,665,077
--------------
MEDIA -- 1.1%
Paramount Communications, Inc.,
7.50%, 01/15/02............................... Ba2 6,425 6,704,680
Time Warner, Inc.,
6.10%, 12/30/01............................... Ba1 27,650 27,926,500
8.11%, 08/15/06............................... Ba1 1,500 1,710,075
Viacom, Inc.,
7.75%, 06/01/05............................... Ba2 13,775 14,943,533
--------------
51,284,788
--------------
MISCELLANEOUS -- 0.1%
Tokai Pfd Capital,
9.98%, 12/29/49............................... A3 4,700 3,948,000
--------------
OIL & GAS -- 0.3%
B.J. Services Co.,
7.00%, 02/01/06............................... Ba1 4,000 4,139,880
Petro Canada,
7.00%, 11/15/28............................... A3 10,000 9,861,200
--------------
14,001,080
--------------
OIL & GAS SERVICES -- 3.7%
KN Energy, Inc.,
6.30%, 03/01/21............................... Baa2 27,550 27,627,416
6.45%, 11/30/01............................... Baa2 18,000 18,009,000
R&B Falcon Corp.
6.50%, 04/15/03............................... Ba1 44,350 40,283,992
6.75%, 04/15/05............................... Ba1 28,750 24,725,000
Seagull Energy Co.,
7.50%, 09/15/27............................... Ba1 8,000 7,165,360
Williams Companies, Inc.,
5.95%, 02/15/10............................... Baa2 59,000 59,064,900
--------------
176,875,668
--------------
REAL ESTATE INVESTMENT TRUST -- 3.5%
Camden Prop Trst,
7.23%, 10/30/00............................... Baa2 22,000 22,052,800
Colonial Realty,
7.00%, 07/14/07............................... Baa3 4,250 4,075,368
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B2
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
REAL ESTATE INVESTMENT TRUST (CONT'D.)
<S> <C> <C> <C>
EOP Operating, L.P.,
6.50%, 06/15/04............................... Baa1 $ 6,000 $ 5,900,400
6.625%, 02/15/05.............................. Baa 17,938 17,583,366
Equity Residential,
6.15%, 09/15/00............................... A3 45,000 44,703,000
ERP Operating, L.P.,
6.63%, 04/13/15............................... A3 22,400 22,103,424
Felcor Suite Hotels, Inc.,
7.625%, 10/01/07.............................. Ba1 8,000 7,620,000
Gables Realty Trust,
6.80%, 03/15/05............................... Baa2 7,500 7,157,175
Simon Debartolo Group, Inc.,
6.75%, 06/15/05............................... Baa1 17,500 16,969,750
6.75%, 07/15/04............................... Baa1 8,000 7,897,520
6.875%, 10/27/05.............................. Baa1 14,858 14,539,296
--------------
170,602,099
--------------
RETAIL -- 4.3%
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. Ba1 41,030 44,227,468
8.50%, 06/15/03............................... Ba1 32,400 35,736,552
Fred Meyer, Inc.,
7.15%, 03/01/03............................... Ba2 12,400 12,900,712
Rite Aid Corp.,
6.70%, 12/15/01............................... A3 5,000 5,128,000
Safeway Stores Inc.,
5.75%, 11/15/00............................... Baa2 6,000 6,012,000
6.05%, 11/15/03............................... Baa2 12,000 12,082,320
Saks Inc.,
7.25%, 12/01/04............................... Baa3 20,900 20,974,195
7.50%, 12/01/10............................... Baa3 22,500 22,498,425
8.25%, 11/15/08............................... Baa3 30,900 32,754,000
Sears Roebuk & Co.,
6.50%, 12/01/28............................... A2 16,000 15,704,480
--------------
208,018,152
--------------
TECHNOLOGY -- 0.7%
Time Warner Inc,
6.625%, 05/15/29.............................. Baa3 33,000 33,576,180
--------------
TELECOMMUNICATIONS -- 2.0%
360 Communication Co.,
7.125%, 03/01/03.............................. Ba2 22,550 23,863,538
7.60%, 04/01/09............................... Ba1 7,000 7,932,750
Sprint Cap Corp.,
5.70%, 11/15/03............................... Baa1 11,000 11,039,270
6.125%, 11/15/08.............................. Baa1 25,000 25,545,750
6.875%, 11/15/28.............................. Baa1 24,500 25,462,850
--------------
93,844,158
--------------
TOBACCO -- 1.3%
Philip Morris Cos., Inc.,
6.15%, 03/15/10............................... A2 40,000 40,332,000
RJR Nabisco, Inc.,
8.75%, 08/15/05............................... Baa3 6,900 6,962,584
9.25%, 08/15/13............................... Baa3 13,571 13,953,159
--------------
61,247,743
--------------

<CAPTION>
MOODY'S PRINCIPAL
LONG-TERM RATING AMOUNT VALUE
BONDS (CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
UTILITIES -- 0.5%
Commonwealth Edison Co.,
7.375%, 01/15/04.............................. Baa3 $ 14,000 $ 14,930,300
Niagara Mohawk Power,
7.375%, 08/01/03.............................. Ba2 10,000 10,569,100
--------------
25,499,400
--------------
WASTE MANAGEMENT -- 0.2%
USA Waste Service,
6.125%, 07/15/01.............................. Baa3 10,000 10,062,000
--------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 3.6%
United States Treasury Bond,
8.00%, 11/15/21............................... 55,300 73,937,759
United States Treasury Notes,
4.75%, 11/15/08............................... 8,600 8,667,166
5.50%, 08/15/28............................... 36,075 37,760,424
5.75%, 08/15/03............................... 3,900 4,072,458
5.875%, 11/15/05.............................. 2,200 2,346,784
6.375%, 08/15/27.............................. 27,000 31,032,990
7.50%, 02/15/05............................... 900 1,030,500
7.875%, 11/15/04.............................. 3,000 3,475,770
United States Treasury Strip,
6.50%, 05/15/05............................... 10,150 11,123,791
--------------
173,447,642
--------------
TOTAL LONG-TERM BONDS
(COST $2,694,909,653).................................................... 2,633,351,262
--------------
</TABLE>

<TABLE>
<CAPTION>
COMMON STOCKS -- 38.7% SHARES
-------------
<S> <C> <C>
AEROSPACE -- 0.6%
Aeroquip-Vickers, Inc..................................... 4,400 131,725
AlliedSignal, Inc......................................... 88,300 3,912,794
Boeing Co................................................. 156,500 5,105,812
GenCorp, Inc.............................................. 98,400 2,453,850
General Dynamics Corp..................................... 19,700 1,154,912
Goodrich (B.F.) Co........................................ 11,300 405,387
Litton Industries, Inc.(b)................................ 77,600 5,063,400
Lockheed Martin Corp...................................... 30,400 2,576,400
Northrop Grumman Corp..................................... 10,500 767,812
Parker-Hannifin Corp...................................... 60,625 1,985,469
Raytheon Co. (Class "B" Stock)............................ 52,900 2,816,925
United Technologies Corp.................................. 36,500 3,969,375
--------------
30,343,861
--------------
AIRLINES -- 0.4%
AMR Corp.(b).............................................. 183,600 10,901,250
Delta Air Lines, Inc...................................... 23,400 1,216,800
Southwest Airlines Co..................................... 51,900 1,164,506
US Airways Group, Inc.(b)................................. 128,200 6,666,400
--------------
19,948,956
--------------
APPAREL -- 0.1%
Fruit of the Loom, Inc. (Class "A" Stock)(b).............. 84,100 1,161,631
Nike, Inc. (Class "B" Stock).............................. 45,500 1,845,594
Phillips-Van Heusen Corp.................................. 94,700 680,656
Reebok International Ltd.................................. 8,800 130,900
--------------
3,818,781
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B3
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
AUTOS - CARS & TRUCKS -- 1.0%
<S> <C> <C>
Cummins Engine Co., Inc................................... 6,000 $ 213,000
DaimlerChrysler AG........................................ 80,071 7,691,820
Dana Corp................................................. 25,600 1,046,400
Ford Motor Co............................................. 281,900 16,544,006
General Motors Corp....................................... 213,000 15,242,813
Genuine Parts Co.......................................... 28,000 936,250
Johnson Controls, Inc..................................... 13,200 778,800
MascoTech, Inc............................................ 94,400 1,616,600
Midas, Inc................................................ 22,100 687,862
Navistar International Corp.(b)........................... 11,300 322,050
PACCAR, Inc............................................... 12,200 501,725
Titan International, Inc.................................. 101,250 961,875
TRW, Inc.................................................. 19,300 1,084,419
--------------
47,627,620
--------------
BANKS AND SAVINGS & LOANS -- 2.2%
Banc One Corp............................................. 183,772 9,383,858
Bank of New York Co., Inc................................. 118,000 4,749,500
BankAmerica Corp.......................................... 271,761 16,339,630
BankBoston Corp........................................... 45,600 1,775,550
Bankers Trust Corp........................................ 15,300 1,307,194
BB&T Corp................................................. 44,600 1,797,937
Chase Manhattan Corp...................................... 133,600 9,093,150
Comerica, Inc............................................. 24,700 1,684,231
First Union Corp.......................................... 151,500 9,213,094
Fleet Financial Group, Inc................................ 87,000 3,887,812
Golden West Financial Corp................................ 8,900 816,019
Huntington Bancshares, Inc................................ 33,000 992,062
KeyCorp................................................... 68,800 2,201,600
Mellon Bank Corp.......................................... 39,900 2,743,125
Mercantile Bancorporation, Inc............................ 22,700 1,047,037
Morgan (J.P.) & Co., Inc.................................. 27,800 2,920,737
National City Corp........................................ 51,400 3,726,500
Northern Trust Corp....................................... 17,500 1,527,969
PNC Bank Corp............................................. 47,800 2,587,175
Providian Financial Corp.................................. 22,350 1,676,250
Regions Financial Corp.................................... 30,000 1,209,375
Republic New York Corp.................................... 17,100 779,119
Summit Bancorp............................................ 27,600 1,205,775
Suntrust Banks, Inc....................................... 33,000 2,524,500
Synovus Financial Corp.................................... 41,150 1,003,031
U.S. Bancorp.............................................. 115,300 4,093,150
Union Planters Corp....................................... 17,000 770,312
Wachovia Corp............................................. 32,300 2,824,231
Wells Fargo & Co.......................................... 251,300 10,036,294
--------------
103,916,217
--------------
BUSINESS SERVICES -- 0.1%
Equifax, Inc.............................................. 23,500 803,406
Omnicom Group, Inc........................................ 25,400 1,473,200
--------------
2,276,606
--------------

<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
CHEMICALS -- 0.7%
Air Products & Chemicals, Inc............................. 36,900 $ 1,476,000
Dow Chemical Co........................................... 35,500 3,228,281
Du Pont (E.I.) de Nemours & Co............................ 177,200 9,402,675
Eastman Chemical Co....................................... 12,300 550,425
Engelhard Corp............................................ 22,600 440,700
Ferro Corp................................................ 134,900 3,507,400
FMC Corp.(b).............................................. 5,400 302,400
Grace (W.R.) & Co......................................... 11,600 181,975
Great Lakes Chemical Corp................................. 9,400 376,000
Hercules, Inc............................................. 15,100 413,362
Millennium Chemicals, Inc.(b)............................. 146,527 2,912,224
Monsanto Co............................................... 92,900 4,412,750
Morton International, Inc................................. 20,400 499,800
Nalco Chemical Co......................................... 10,400 322,400
OM Group, Inc............................................. 63,300 2,310,450
Praxair, Inc.............................................. 24,700 870,675
Raychem Corp.............................................. 13,300 429,756
Rohm & Haas Co............................................ 28,800 867,600
Sigma-Aldrich Corp........................................ 15,700 461,187
Union Carbide Corp........................................ 19,300 820,250
--------------
33,786,310
--------------
COMMERCIAL SERVICES -- 0.1%
Cendant Corp.(b).......................................... 129,900 2,476,219
Deluxe Corp............................................... 12,700 464,344
Moore Corp. Ltd........................................... 13,900 152,900
--------------
3,093,463
--------------
COMPUTER SERVICES -- 2.4%
3Com Corp.(b)............................................. 55,500 2,487,094
Adobe Systems, Inc........................................ 10,800 504,900
America Online, Inc.(b)................................... 10,500 1,680,000
Autodesk, Inc............................................. 7,300 311,619
Automatic Data Processing, Inc............................ 46,800 3,752,775
BMC Software, Inc.(b)..................................... 31,000 1,381,437
Cabletron Systems, Inc.(b)................................ 24,800 207,700
Ceridian Corp.(b)......................................... 11,300 788,881
Cisco Systems, Inc.(b).................................... 241,100 22,377,094
Computer Associates International, Inc.................... 85,500 3,644,437
Computer Sciences Corp.(b)................................ 24,400 1,572,275
Electronic Data Systems Corp.............................. 76,000 3,819,000
EMC Corp.(b).............................................. 77,700 6,604,500
First Data Corp........................................... 67,000 2,123,062
Microsoft Corp.(b)........................................ 383,300 53,158,919
Novell, Inc.(b)........................................... 55,000 996,875
Oracle Corp.(b)........................................... 154,100 6,645,562
Parametric Technology Corp.(b)............................ 40,200 658,275
Peoplesoft, Inc........................................... 30,000 568,125
Silicon Graphics, Inc.(b)................................. 29,400 378,525
Unisys Corp............................................... 39,100 1,346,506
--------------
115,007,561
--------------
COMPUTERS -- 1.5%
Apple Computer, Inc.(b)................................... 20,800 851,500
Compaq Computer Corp...................................... 258,789 10,852,964
Data General Corp.(b)..................................... 7,600 124,925
Dell Computer Corp.(b).................................... 196,300 14,366,706
Gateway 2000, Inc.(b)..................................... 24,300 1,243,856
Hewlett-Packard Co........................................ 162,900 11,128,106
International Business Machines Corp...................... 144,700 26,733,325
Seagate Technology, Inc.(b)............................... 37,900 1,146,475
Sun Microsystems, Inc.(b)................................. 59,100 5,060,437
--------------
71,508,294
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B4
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
CONSTRUCTION -- 0.2%
<S> <C> <C>
Centex Corp............................................... 9,300 $ 419,081
Fluor Corp................................................ 13,100 557,569
Foster Wheeler Corp....................................... 6,400 84,400
Oakwood Homes Corp........................................ 139,300 2,115,619
Pulte Corp................................................ 6,600 183,562
Standard Pacific Corp..................................... 154,000 2,175,250
Webb (Del E.) Corp........................................ 140,300 3,867,019
--------------
9,402,500
--------------
CONTAINERS -- 0.1%
Ball Corp................................................. 4,700 215,025
Bemis Co., Inc............................................ 8,300 314,881
Crown Cork & Seal Co., Inc................................ 20,100 619,331
Owens-Illinois, Inc.(b)................................... 81,500 2,495,937
Sealed Air Corp........................................... 12,900 658,706
--------------
4,303,880
--------------
COSMETICS & SOAPS -- 0.7%
Alberto Culver Co. (Class "B" Stock)...................... 8,900 237,519
Avon Products, Inc........................................ 41,400 1,831,950
Colgate-Palmolive Co...................................... 46,300 4,300,112
Gillette Co............................................... 175,400 8,474,012
International Flavors & Fragrances, Inc................... 17,100 755,606
Procter & Gamble Co....................................... 210,200 19,193,887
--------------
34,793,086
--------------
DIVERSIFIED CONSUMER PRODUCTS -- 0.1%
Eastman Kodak Co.......................................... 86,800 6,249,600
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.2%
Avery Dennison Corp....................................... 17,300 779,581
Pitney Bowes, Inc......................................... 42,800 2,827,475
Xerox Corp................................................ 51,000 6,018,000
--------------
9,625,056
--------------
DIVERSIFIED OPERATIONS -- 1.1%
Fortune Brands, Inc....................................... 26,900 850,712
General Electric Capital Corp............................. 504,700 51,510,944
--------------
52,361,656
--------------
DRUGS AND MEDICAL SUPPLIES -- 3.8%
Abbott Laboratories....................................... 239,600 11,740,400
Allergan, Inc............................................. 10,200 660,450
ALZA Corp.(b)............................................. 13,400 700,150
American Home Products Corp............................... 203,500 11,459,594
Amgen, Inc.(b)............................................ 41,200 4,307,975
Bard (C.R.), Inc.......................................... 8,900 440,550
Bausch & Lomb, Inc........................................ 8,700 522,000
Baxter International, Inc................................. 43,900 2,823,319
Becton, Dickinson & Co.................................... 38,200 1,630,662
Biomet, Inc............................................... 17,500 704,375
Boston Scientific Corp.(b)................................ 61,000 1,635,562
Bristol-Myers Squibb Co................................... 154,300 20,647,269
Cardinal Health, Inc...................................... 29,700 2,253,487
Guidant Corp.............................................. 23,600 2,601,900
Johnson & Johnson......................................... 210,600 17,664,075
Lilly (Eli) & Co.......................................... 171,700 15,259,837
Mallinckrodt, Inc......................................... 11,400 351,262
Medtronic, Inc............................................ 73,400 5,449,950
Merck & Co., Inc.......................................... 184,800 27,292,650
Pfizer, Inc.,............................................. 204,200 25,614,337
Pharmacia & Upjohn, Inc................................... 79,500 4,501,687
Schering-Plough Corp...................................... 229,400 12,674,350
St. Jude Medical, Inc.(b)................................. 14,400 398,700
Warner-Lambert Co......................................... 127,900 9,616,481
--------------
180,951,022
--------------

<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
ELECTRONICS -- 1.3%
Advanced Micro Devices, Inc.(b)........................... 22,200 $ 642,412
AMP Inc................................................... 34,500 1,796,156
Applied Materials, Inc.(b)................................ 57,300 2,445,994
Belden, Inc............................................... 67,100 1,421,681
EG&G, Inc................................................. 7,100 197,469
Emerson Electric Co....................................... 69,400 4,341,837
Grainger (W.W.), Inc...................................... 15,600 649,350
Harris Corp............................................... 12,500 457,812
Honeywell, Inc............................................ 19,900 1,498,719
Intel Corp................................................ 260,600 30,897,387
KLA-Tencor Corp.(b)....................................... 13,200 572,550
LSI Logic Corp.(b)........................................ 22,200 357,975
Micron Technology, Inc.................................... 33,100 1,673,619
Motorola, Inc............................................. 93,500 5,709,344
Perkin-Elmer Corp......................................... 7,600 741,475
Rockwell International Corp............................... 31,500 1,529,719
Solectron Corp............................................ 5,000 464,687
Tektronix, Inc............................................ 7,900 237,494
Texas Instruments, Inc.................................... 61,100 5,227,869
Thomas & Betts Corp....................................... 8,600 372,487
--------------
61,236,036
--------------
ENGINEERING & CONSTRUCTION
Giant Cement Holdings, Inc.(b)............................ 58,100 1,437,975
--------------
ENVIRONMENTAL SERVICES
Browning-Ferris Industries, Inc........................... 28,800 819,000
--------------
EXPLORATION & PRODUCTION
Apex Silver Mines Ltd..................................... 82,200 678,150
--------------
FINANCIAL SERVICES -- 2.2%
American Express Co....................................... 70,800 7,239,300
Associates First Capital Corp............................. 108,544 4,599,552
Bear Stearns Companies, Inc............................... 16,500 616,687
Block (H.R.), Inc......................................... 16,400 738,000
Capital One Financial Corp................................ 9,600 1,104,000
Citigroup, Inc............................................ 407,500 20,171,250
Countrywide Credit Industries, Inc........................ 17,000 853,187
Dun & Bradstreet Corp..................................... 26,700 842,719
Federal Home Loan Mortgage Corp........................... 105,700 6,811,044
Federal National Mortgage Assoc........................... 161,900 11,980,600
Fifth Third Bancorp....................................... 39,500 2,816,844
Franklin Resource, Inc.................................... 39,600 1,267,200
Household International, Inc.............................. 75,752 3,001,673
Lehman Brothers Holdings, Inc............................. 189,600 8,354,250
MBNA Corp................................................. 117,750 2,936,391
Merrill Lynch & Co., Inc.................................. 112,300 7,496,025
Morgan Stanley Dean Witter & Co........................... 146,790 10,422,090
Paychex, Inc.............................................. 23,000 1,183,062
Schwab (Charles) Corp.(b)................................. 62,400 3,506,100
SLM Holding Corp.......................................... 25,000 1,200,000
State Street Corp......................................... 25,200 1,752,975
Sunamerica, Inc........................................... 30,600 2,482,425
Transamerica Corp......................................... 9,800 1,131,900
Washington Mutual, Inc.................................... 89,178 3,405,485
--------------
105,912,759
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B5
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
FOOD & BEVERAGES -- 1.7%
<S> <C> <C>
Anheuser-Busch Companies, Inc............................. 76,700 $ 5,033,437
Archer-Daniels-Midland Co................................. 93,975 1,615,195
Bestfoods................................................. 45,100 2,401,575
Brown-Forman Corp. (Class "B" Stock)...................... 10,800 817,425
Campbell Soup Co.......................................... 71,500 3,932,500
Coca Cola Enterprises, Inc................................ 60,000 2,145,000
Coca-Cola Co.............................................. 383,500 25,646,562
ConAgra, Inc.............................................. 74,500 2,346,750
Coors (Adolph) Co. (Class "B" Stock)...................... 5,800 327,337
General Mills, Inc........................................ 24,800 1,928,200
Heinz (H.J.) & Co......................................... 57,200 3,238,950
Hershey Foods Corp........................................ 22,400 1,393,000
Kellogg Co................................................ 64,400 2,197,650
PepsiCo, Inc.............................................. 235,600 9,644,875
Pioneer Hi-Bred International, Inc........................ 38,300 1,034,100
Quaker Oats Co............................................ 21,700 1,291,150
Ralston-Ralston Purina Group.............................. 50,400 1,631,700
Sara Lee Corp............................................. 148,200 4,177,388
Seagram Co., Ltd.......................................... 55,800 2,120,400
Sysco Corp................................................ 53,300 1,462,419
Whitman Corp.............................................. 132,800 3,369,800
Wrigley (William) Jr. Co.................................. 18,200 1,630,037
--------------
79,385,450
--------------
FOREST PRODUCTS -- 0.6%
Boise Cascade Corp........................................ 152,000 4,712,000
Champion International Corp............................... 109,700 4,442,850
Fort James Corp........................................... 32,700 1,308,000
Georgia-Pacific Corp...................................... 14,500 849,156
International Paper Co.................................... 47,300 2,119,631
Louisiana-Pacific Corp.................................... 189,700 3,473,881
Mead Corp................................................. 111,300 3,262,481
Potlatch Corp............................................. 4,500 165,937
Temple-Inland, Inc........................................ 8,900 527,881
Union Camp Corp........................................... 10,900 735,750
Westvaco Corp............................................. 16,000 429,000
Weyerhaeuser Co........................................... 31,300 1,590,431
Willamette Industries, Inc................................ 86,500 2,897,750
--------------
26,514,748
--------------
GAS PIPELINES -- 0.1%
Columbia Energy Group..................................... 13,000 750,750
Consolidated Natural Gas Co............................... 15,000 810,000
Peoples Energy Corp....................................... 5,500 219,312
Sempra Energy............................................. 33,699 855,112
Sonat, Inc................................................ 17,200 465,475
Williams Companies, Inc................................... 64,400 2,008,475
--------------
5,109,124
--------------
HOSPITALS/ HEALTHCARE -- 0.3%
Columbia/HCA Healthcare Corp.............................. 301,900 7,472,025
HBO & Co.................................................. 69,000 1,979,437
Healthsouth Corp.(b)...................................... 63,600 981,825
Humana, Inc.(b)........................................... 25,700 457,781
IMS Health, Inc........................................... 25,400 1,916,112
Manor Care, Inc........................................... 12,000 352,500
Service Corp. International............................... 39,400 1,499,662
Shared Medical Systems Corp............................... 4,100 204,487
Tenet Healthcare Corp.(b)................................. 48,000 1,260,000
--------------
16,123,829
--------------

<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 0.2%
Clorox Co................................................. 16,200 $ 1,892,362
Kimberly-Clark Corp....................................... 87,000 4,741,500
Leggett & Platt, Inc...................................... 114,700 2,523,400
--------------
9,157,262
--------------
HOUSING RELATED -- 0.5%
Armstrong World Industries, Inc........................... 6,400 386,000
Fleetwood Enterprises, Inc................................ 5,700 198,075
Hanson, PLC, ADR, (United Kingdom)........................ 309,562 12,072,918
Kaufman & Broad Home Corp................................. 6,100 175,375
Lowe's Companies, Inc..................................... 54,800 2,805,075
Masco Corp................................................ 51,800 1,489,250
Maytag Corp............................................... 14,900 927,525
Owens Corning............................................. 106,900 3,788,269
Stanley Works............................................. 14,000 388,500
Tupperware Corp........................................... 9,600 157,800
Whirlpool Corp............................................ 11,700 647,887
--------------
23,036,674
--------------
INSURANCE -- 1.5%
Aetna, Inc................................................ 23,300 1,831,962
Allstate Corp............................................. 131,300 5,071,462
American General Corp..................................... 39,700 3,096,600
American International Group, Inc......................... 163,500 15,798,187
Aon Corp.................................................. 26,300 1,456,362
Berkley (W.R.) Corp....................................... 42,400 1,444,250
Berkshire Hathaway, Inc. (Class "B" Stock)................ 452 1,061,025
Chubb Corp................................................ 26,700 1,732,162
CIGNA Corp................................................ 34,800 2,690,475
Cincinnati Financial Corp................................. 25,800 944,925
Conseco, Inc.............................................. 49,021 1,498,204
Financial Security Assurance Holdings Ltd................. 34,000 1,844,500
Hartford Financial Services Group, Inc.................... 37,000 2,030,375
Jefferson-Pilot Corp...................................... 16,600 1,245,000
Lincoln National Corp..................................... 16,000 1,309,000
Loews Corp................................................ 47,000 4,617,750
Marsh & McLennan Companies, Inc........................... 39,900 2,331,656
MBIA, Inc................................................. 15,300 1,003,106
MGIC Investment Corp...................................... 17,900 712,644
Progressive Corp.......................................... 11,300 1,913,938
Provident Companies, Inc.................................. 70,400 2,921,600
Reinsurance Group of America, Inc......................... 115,550 8,088,500
SAFECO Corp............................................... 22,100 948,919
St. Paul Companies, Inc................................... 36,200 1,257,950
TIG Holdings, Inc......................................... 85,500 1,330,594
Torchmark Corp............................................ 21,900 773,329
Trenwick Group, Inc....................................... 64,850 2,115,731
United Healthcare Corp.................................... 29,500 1,270,344
UNUM Corp................................................. 21,700 1,266,737
--------------
73,607,287
--------------
INTRUMENTS-CONTROLS
Flowserve Corp............................................ 39,486 653,987
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B6
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
LEISURE -- 0.3%
<S> <C> <C>
Brunswick Corp............................................ 15,600 $ 386,100
Carnival Corp. (Class "A" Stock).......................... 78,500 3,768,000
Disney (Walt) Co.......................................... 317,100 9,513,000
Harrah's Entertainment, Inc.(b)........................... 15,800 247,862
Hilton Hotels Corp........................................ 39,200 749,700
King World Productions, Inc............................... 11,500 338,531
Marriott International, Inc. (Class "A" Stock)............ 40,000 1,160,000
Mirage Resorts, Inc.(b)................................... 28,100 419,744
--------------
16,582,937
--------------
MACHINERY -- 0.3%
Briggs & Stratton Corp.................................... 3,900 194,513
Case Corp................................................. 98,800 2,155,075
Caterpillar, Inc.......................................... 58,300 2,681,800
Cooper Industries, Inc.................................... 19,000 906,063
Deere & Co................................................ 39,100 1,295,188
Dover Corp................................................ 34,800 1,274,550
DT Industries, Inc........................................ 35,800 563,850
Eaton Corp................................................ 11,200 791,700
Global Industrial Technologies, Inc.(b)................... 61,400 656,213
Harnischfeger Industries, Inc............................. 7,500 76,406
Ingersoll-Rand Co......................................... 25,900 1,215,681
Milacron, Inc............................................. 6,300 121,275
Paxar Corp................................................ 229,925 2,054,955
Snap-On, Inc.............................................. 9,500 330,719
Timken Co................................................. 9,900 186,863
--------------
14,504,851
--------------
MANUFACTURING -- 0.3%
Hussmann International, Inc............................... 66,400 1,286,500
Illinois Tool Works, Inc.................................. 39,100 2,267,800
Smith (A.O.) Corp.,....................................... 105,450 2,590,116
Tyco International Ltd.................................... 98,651 7,441,985
--------------
13,586,401
--------------
MEDIA -- 1.3%
CBS Corp.(b).............................................. 304,000 9,956,000
Central Newspapers, Inc.(Class "A" Stock)................. 50,000 3,571,875
Clear Channel Communications, Inc.(b)..................... 38,600 2,103,700
Comcast Corp. (Special Class "A" Stock)................... 56,700 3,327,581
Donnelley (R.R.) & Sons Co................................ 22,800 998,925
Dow Jones & Co., Inc...................................... 15,100 726,688
Gannett Co., Inc.......................................... 44,400 2,938,725
Houghton Mifflin Co....................................... 58,700 2,773,576
Interpublic Group of Companies, Inc....................... 19,700 1,571,075
Knight-Ridder, Inc........................................ 70,600 3,609,425
Lee Enterprises, Inc...................................... 50,900 1,603,350
McGraw-Hill, Inc.......................................... 15,500 1,579,063
Mediaone Group, Inc....................................... 95,100 4,469,700
Meredith Corp............................................. 8,300 314,363
New York Times Co. (Class "A" Stock)...................... 30,000 1,040,625
Tele-Communications, Inc. (Series "A" Stock)(b)........... 79,400 4,391,813
Time Warner, Inc.......................................... 183,000 11,357,438
Times Mirror Co. (Class "A" Stock)........................ 13,900 778,400
Tribune Co................................................ 19,300 1,273,800
Viacom, Inc. (Class "B" Stock)(b)......................... 55,300 4,092,200
--------------
62,478,322
--------------

<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
METALS-FERROUS -- 0.3%
AK Steel Holding Corp..................................... 213,400 $ 5,014,900
Allegheny Teledyne, Inc................................... 30,700 627,431
Bethlehem Steel Corp.(b).................................. 241,500 2,022,563
LTV Corp.................................................. 204,900 1,190,981
Material Sciences Corp.(b)................................ 96,900 823,650
National Steel Corp. (Class "B" Stock)(b)................. 42,200 300,675
Nucor Corp................................................ 13,800 596,850
USX-U.S. Steel Group, Inc................................. 80,900 1,860,700
Worthington Industries, Inc............................... 15,200 190,000
--------------
12,627,750
--------------
METALS-NON FERROUS -- 0.3%
Alcan Aluminum Ltd........................................ 35,600 963,425
Aluminum Company of America............................... 184,300 13,741,869
Cyprus Amax Minerals Co................................... 14,600 146,000
Inco Ltd.................................................. 26,200 276,738
Reynolds Metals Co........................................ 11,600 611,175
--------------
15,739,207
--------------
MINERAL RESOURCES
ASARCO, Inc............................................... 6,300 94,894
Burlington Resources, Inc................................. 27,600 988,425
Homestake Mining Co....................................... 33,100 304,106
Phelps Dodge Corp......................................... 9,200 468,050
--------------
1,855,475
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.4%
AES Corp.................................................. 24,000 1,137,000
Coltec Industries, Inc.................................... 43,700 852,150
Crane Co.................................................. 10,800 326,025
Danaher Corp.............................................. 14,000 760,375
Donaldson Co., Inc........................................ 109,200 2,265,900
Ecolab, Inc............................................... 20,200 730,988
IDEX Corp................................................. 60,100 1,472,450
ITT Industries, Inc....................................... 18,500 735,375
Laidlaw, Inc.............................................. 51,500 518,219
Mark IV Industries, Inc................................... 86,542 1,125,046
Millipore Corp............................................ 6,800 193,375
NACCO Industries, Inc. (Class "A" Stock).................. 1,300 119,600
Pall Corp................................................. 19,500 493,594
PPG Industries, Inc....................................... 27,900 1,625,175
Textron, Inc.............................................. 25,700 1,951,594
Thermo Electron Corp.(b).................................. 24,900 421,744
Trinity Industries, Inc................................... 52,200 2,009,700
York International Corp................................... 27,000 1,101,938
--------------
17,840,248
--------------
MISCELLANEOUS - CONSUMER GROWTH/STAPLE -- 0.4%
American Greetings Corp. (Class "A" Stock)................ 11,400 468,113
Black & Decker Corp....................................... 14,900 835,331
Corning, Inc.............................................. 36,200 1,629,000
Jostens, Inc.............................................. 6,100 159,744
Minnesota Mining & Manufacturing Co....................... 64,000 4,552,000
Polaroid Corp............................................. 7,000 130,813
Rubbermaid, Inc........................................... 23,500 738,781
Unilever N.V., ADR, (United Kingdom)...................... 100,300 8,318,631
--------------
16,832,413
--------------
MISCELLANEOUS - INDUSTRIAL
Tenneco, Inc.............................................. 26,700 909,469
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B7
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
OIL & GAS -- 2.0%
<S> <C> <C>
Amerada Hess Corp......................................... 14,400 $ 716,400
Amoco Corp................................................ 149,000 8,995,875
Anadarko Petroleum Corp................................... 18,800 580,450
Ashland, Inc.............................................. 11,800 570,825
Atlantic Richfield Co..................................... 50,200 3,275,550
Basin Exploration, Inc.(b)................................ 17,400 218,588
Cabot Oil & Gas Corp. (Class "A" Stock)................... 88,600 1,329,000
Chevron Corp.............................................. 102,900 8,534,269
Coastal Corp.............................................. 33,200 1,159,925
Eastern Enterprises....................................... 3,200 140,000
Enron Oil & Gas Co........................................ 48,400 834,900
Exxon Corp................................................ 380,300 27,809,438
Kerr-McGee Corp........................................... 7,500 286,875
Mobil Corp................................................ 122,800 10,698,950
Murphy Oil Corp........................................... 27,600 1,138,500
NICOR, Inc................................................ 7,600 321,100
Noble Affiliates, Inc..................................... 50,900 1,253,413
Phillips Petroleum Co..................................... 41,200 1,756,150
Pioneer Natural Resources Co.............................. 334,644 2,928,135
Royal Dutch Petroleum Co.................................. 335,800 16,076,426
Seagull Energy Corp.(b)................................... 63,700 402,106
Sunoco, Inc............................................... 14,800 533,725
Texaco, Inc............................................... 85,800 4,536,675
Union Pacific Resources Group, Inc........................ 39,800 360,688
Unocal Corp............................................... 38,600 1,126,638
USX-Marathon Group........................................ 45,200 1,361,650
Western Gas Resources, Inc................................ 103,000 592,250
--------------
97,538,501
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 0.2%
Elf Aquitaine SA, ADR, (France)........................... 124,800 7,066,800
Occidental Petroleum Corp................................. 53,100 896,063
Oryx Energy Co.(b)........................................ 140,000 1,881,250
--------------
9,844,113
--------------
OIL & GAS SERVICES -- 0.5%
Apache Corp............................................... 15,000 379,688
Baker Hughes, Inc......................................... 49,450 874,647
Enron Corp................................................ 51,400 2,933,013
Halliburton Co............................................ 68,500 2,029,313
Helmerich & Payne, Inc.................................... 7,900 153,063
J. Ray McDermott, SA...................................... 163,800 4,002,864
McDermott International, Inc.............................. 431,600 10,655,125
ONEOK, Inc................................................ 4,900 177,013
Rowan Companies, Inc.(b).................................. 13,600 136,000
Schlumberger Ltd.......................................... 83,000 3,828,375
Wolverine Tube, Inc.(b)................................... 37,000 777,000
--------------
25,946,101
--------------
PRECIOUS METALS -- 0.1%
Barrick Gold Corp......................................... 58,500 1,140,750
Battle Mountain Gold Co................................... 36,000 148,500
Freeport-McMoRan Copper & Gold, Inc. (Class "B").......... 30,300 316,256
Newmont Mining Corp....................................... 24,500 442,531
Placer Dome, Inc.......................................... 38,700 445,050
--------------
2,493,087
--------------
RAILROADS -- 0.2%
Burlington Northern Santa Fe Corp......................... 73,500 2,480,625
CSX Corp.................................................. 34,200 1,419,300
Norfolk Southern Corp..................................... 59,100 1,872,731
Union Pacific Corp........................................ 38,700 1,743,919
--------------
7,516,575
--------------

<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
REAL ESTATE DEVELOPMENT -- 0.3%
Crescent Operating, Inc................................... 17,060 $ 81,035
Crescent Real Estate Equities Co.......................... 336,700 7,744,100
Equity Residential Properties Trust....................... 14,400 582,300
Vornado Operating, Inc.(b)................................ 4,920 39,668
Vornado Realty Trust(b)................................... 185,200 6,250,500
--------------
14,697,603
--------------
RESTAURANTS -- 0.2%
Darden Restaurants, Inc................................... 18,200 327,600
McDonald's Corp........................................... 107,900 8,267,838
Tricon Global Restaurants, Inc.(b)........................ 23,800 1,192,975
Wendy's International, Inc................................ 20,700 451,519
--------------
10,239,932
--------------
RETAIL -- 2.6%
Albertson's, Inc.......................................... 38,500 2,451,969
American Stores Co........................................ 42,800 1,580,925
AutoZone, Inc.(b)......................................... 23,800 783,913
Bombay Company, Inc.(b)................................... 139,200 774,300
Charming Shoppes, Inc.(b)................................. 811,300 3,498,731
Circuit City Stores, Inc.................................. 15,500 774,031
Consolidated Stores Corp.................................. 16,900 341,169
Costco Companies, Inc.(b)................................. 33,600 2,425,500
CVS Corp.................................................. 59,800 3,289,000
Dayton-Hudson Corp........................................ 68,500 3,716,125
Designs, Inc.(b).......................................... 51,900 100,556
Dillard's, Inc............................................ 49,100 1,393,213
Dollar General Corporation................................ 22,500 531,563
Federated Department Stores, Inc.(b)...................... 32,900 1,433,206
Fred Meyer, Inc........................................... 21,000 1,265,250
Great Atlantic & Pacific Tea Co., Inc..................... 6,000 177,750
Harcourt General, Inc..................................... 11,100 590,381
Home Depot, Inc........................................... 229,100 14,018,056
IKON Office Solutions, Inc................................ 21,100 180,669
J.C. Penney Co., Inc...................................... 39,100 1,832,813
Jan Bell Marketing, Inc.(b)............................... 73,200 471,225
Kmart Corp.(b)............................................ 685,800 10,501,313
Kohl's Corp.(b)........................................... 22,600 1,388,488
Kroger Co.(b)............................................. 39,923 2,415,342
Liz Claiborne, Inc........................................ 10,500 331,406
Longs Drug Stores, Inc.................................... 6,100 228,750
May Department Stores Co.................................. 36,200 2,185,575
Newell Co................................................. 24,900 1,027,125
Nordstrom, Inc............................................ 28,200 978,188
Pep Boys - Manny, Moe & Jack.............................. 9,900 155,306
Rite Aid Corp............................................. 40,400 2,002,325
Safeway, Inc.,(b)......................................... 71,000 4,326,563
Sears, Roebuck & Co....................................... 61,400 2,609,500
Sherwin-Williams Co....................................... 27,100 796,063
Staples, Inc.(b).......................................... 43,000 1,878,563
Supervalu, Inc............................................ 18,800 526,400
Tandy Corp................................................ 16,200 667,238
The Gap, Inc.............................................. 93,000 5,231,250
The Limited, Inc.......................................... 247,100 7,196,788
TJX Companies, Inc........................................ 50,600 1,467,400
Toys 'R' Us, Inc.(b)...................................... 131,700 2,222,439
Wal-Mart Stores, Inc...................................... 347,700 28,315,819
Walgreen Co............................................... 77,600 4,544,450
Winn-Dixie Stores, Inc.................................... 23,300 1,045,588
--------------
123,672,224
--------------
RUBBER -- 0.1%
Cooper Tire & Rubber Co................................... 12,300 251,381
Goodyear Tire & Rubber Co................................. 63,600 3,207,825
--------------
3,459,206
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B8
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
SEMICONDUCTORS
<S> <C> <C>
National Semiconductor Corp.(b)........................... 25,700 $ 346,950
--------------
TELECOMMUNICATIONS -- 3.5%
Airtouch Communications, Inc.(b).......................... 88,400 6,375,850
Alcatel Alsthom, ADR, (France)............................ 124,900 3,052,244
Alltel Corp............................................... 42,800 2,559,975
Ameritech Corp............................................ 171,400 10,862,476
Andrew Corp.(b)........................................... 13,900 229,350
Ascend Communications, Inc.(b)............................ 30,200 1,985,650
AT&T Corp................................................. 280,600 21,115,150
Bell Atlantic Corp........................................ 243,200 13,816,800
BellSouth Corp............................................ 305,200 15,221,850
Deutsche Telekom AG, ADR, (Germany)....................... 45,000 1,473,750
Frontier Corp............................................. 25,700 873,800
General Instrument Corp................................... 23,200 787,350
GTE Corp.................................................. 150,000 10,115,625
Lucent Technologies, Inc.................................. 205,400 22,594,000
MCI Worldcom, Inc......................................... 280,414 20,119,705
Nextel Communications, Inc. (Class "A" Stock)(b).......... 41,100 970,988
Northern Telecom Ltd...................................... 102,140 5,119,768
SBC Communications, Inc................................... 302,100 16,200,113
Scientific-Atlanta, Inc................................... 12,400 282,875
Sprint Corp............................................... 112,950 6,717,269
Tellabs, Inc.(b).......................................... 28,400 1,947,175
US West, Inc.............................................. 77,860 5,031,703
--------------
167,453,466
--------------
TEXTILES
National Service Industries, Inc.......................... 6,700 254,600
Pillowtex Corp.(b)........................................ 18,530 495,678
Russell Corp.............................................. 5,700 115,781
Springs Industries, Inc................................... 3,200 132,600
Tultex Corp.(b)........................................... 88,300 77,263
VF Corp................................................... 19,100 895,313
--------------
1,971,235
--------------
TOBACCO -- 0.7%
Philip Morris Co., Inc.................................... 479,600 25,658,600
RJR Nabisco Holdings Corp................................. 303,500 9,010,157
UST, Inc.................................................. 28,900 1,007,888
--------------
35,676,645
--------------
TOYS
Hasbro, Inc............................................... 20,800 751,400
Mattel, Inc............................................... 45,551 1,039,132
--------------
1,790,532
--------------
TRUCKING/SHIPPING -- 0.1%
Federal Express Corp...................................... 23,000 2,047,000
Ryder System, Inc......................................... 12,000 312,000
Yellow Corp.(b)........................................... 43,600 833,850
--------------
3,192,850
--------------

<CAPTION>
COMMON VALUE
STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
UTILITY - ELECTRIC -- 0.8%
Ameren Corp............................................... 21,500 $ 917,781
American Electric Power Co., Inc.......................... 29,700 1,397,757
Baltimore Gas & Electric Co............................... 23,100 713,213
Carolina Power & Light Co................................. 23,500 1,105,969
Central & South West Corp................................. 33,200 910,925
CINergy Corp.............................................. 24,700 849,063
Consolidated Edison, Inc.................................. 36,800 1,945,800
Dominion Resources, Inc................................... 30,300 1,416,525
DTE Energy Co............................................. 22,700 973,263
Duke Energy Corp.......................................... 56,400 3,613,125
Edison International...................................... 56,700 1,580,513
Entergy Corp.............................................. 38,200 1,188,975
FirstEnergy Corp.(b)...................................... 36,100 1,175,506
FPL Group, Inc............................................ 28,500 1,756,313
GPU, Inc.................................................. 19,900 879,331
Houston Industries, Inc................................... 44,300 1,423,138
New Century Energies, Inc................................. 15,000 731,250
Niagara Mohawk Power Corp.(b)............................. 22,600 364,425
Northern States Power Co.................................. 23,300 646,575
Pacific Gas & Electric Co................................. 59,700 1,880,550
PacifiCorp................................................ 46,400 977,300
PECO Energy Co............................................ 34,900 1,452,713
PP&L Resources, Inc....................................... 26,000 724,750
Public Service Enterprise Group, Inc...................... 36,300 1,452,000
Southern Co............................................... 108,100 3,141,656
Texas Utilities Co........................................ 41,600 1,942,200
Unicom Corp............................................... 33,900 1,307,269
--------------
36,467,885
--------------
WASTE MANAGEMENT -- 0.1%
Waste Management, Inc..................................... 127,902 5,963,431
--------------
TOTAL COMMON STOCKS
(COST $1,566,786,221).................................................... 1,853,914,159
--------------
<CAPTION>
PREFERRED STOCKS -- 0.7%
<S> <C> <C>
FINANCIAL SERVICES -- 0.6%
Central Hispano Capital Corp.............................. 1,225,900 31,289,903
--------------
TELECOMMUNICATIONS -- 0.1%
Telecomunicacoes Brasileiras S.A., ADR.................... 55,900 4,063,231
--------------
TOTAL PREFERRED STOCKS
(COST $36,876,618)....................................................... 35,353,134
--------------
TOTAL LONG-TERM INVESTMENTS
(COST $4,298,572,492).................................................... 4,522,618,555
--------------
</TABLE>

<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
SHORT-TERM RATING AMOUNT
INVESTMENTS -- 5.0% (UNAUDITED) (000)
------------ ---------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT-YANKEE
Alltel Corp.,
5.75%, 01/04/99............................... NR $ 1,200 1,200,000
Avery Dennison,
5.00%, 01/04/99............................... NR 1,174 1,174,000
--------------
2,374,000
--------------
COMMERCIAL PAPER -- 0.3%
Barton Capital Corp,
5.35%, 01/04/99............................... P1 1,200 1,199,465
Campbell Soup Company,
4.80%, 01/04/99............................... P1 1,270 1,269,492
Countrywide Home Loan,
5.40%, 01/04/99............................... P1 1,200 1,199,460
CXC Inc.,
5.30%, 01/04/99............................... P1 1,200 1,199,470
Dover,
5.30%, 01/04/99............................... P1 1,200 1,199,470
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B9
<PAGE>
CONSERVATIVE BALANCED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHORT-TERM MOODY'S PRINCIPAL
INVESTMENTS RATING AMOUNT VALUE
(CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
COMMERCIAL PAPER (CONT'D.)
<S> <C> <C> <C>
Duke Capital Corp,
5.05%, 01/04/99............................... P1 $ 1,200 $ 1,199,495
John Hancock Cap. Corp.,
5.25%, 01/07/99............................... P1 1,200 1,198,950
Novartis Finance Corp.,
5.25%, 01/04/99............................... P1 912 911,601
Pitney Bowes Credit Corp,
5.10%, 01/04/99............................... P1 1,206 1,205,488
Reed Elsevier, Inc.,
5.05%, 01/04/99............................... P1 1,200 1,199,495
SBC Communications,
5.00%, 01/04/99............................... P1 1,200 1,199,500
Sonoco Products,
5.35%, 01/04/99............................... P1 1,000 999,554
Triple-A One Plus Funding,,
5.30%, 01/04/99............................... P1 728 727,678
Xerox Capital Corp,
5.30%, 01/04/99............................... P1 1,200 1,199,470
--------------
15,908,588
--------------
OTHER CORPORATE OBLIGATIONS -- 2.3%
Advanta Corp., M.T.N.,
6.99%, 10/18/99............................... Ba3 15,000 14,448,000
7.25%, 08/16/99............................... Ba2 3,000 2,976,150
AT&T Capital Corp., M.T.N.,
6.65%, 04/30/99............................... Baa3 32,000 32,104,319
Comdisco, Inc.,
6.11%, 08/04/99............................... Baa1 12,500 12,541,375
Enterprise Rent-A-Car USA Finance Co., M.T.N.,
8.75%, 12/15/99............................... Baa3 5,000 5,120,350
Federal Express Corp.,
10.05%, 06/15/99.............................. Baa3 500 510,090
First Union Corp.,
9.45%, 06/15/99............................... A3 4,000 4,071,961
Lehman Brothers Holdings, Inc.,
6.71%, 10/12/99............................... Baa1 6,000 6,049,020
Okobank, (Finland),
6.793%, 1/14/99............................... A3 12,500 12,500,000
SunAmerica, Inc.,
6.20%, 10/31/99............................... Baa1 9,000 9,068,850
Tele-Communications, Inc.,
6.375%, 09/15/99.............................. Ba1 8,000 8,056,240
--------------
107,446,355
--------------
REPURCHASE AGREEMENT -- 2.3%
Joint Repurchase Agreement Account,
4.693%, 01/04/99 (Note 5)..................... $ 109,421 $ 109,421,000
--------------

<CAPTION>
SHORT-TERM MOODY'S PRINCIPAL
INVESTMENTS RATING AMOUNT VALUE
(CONTINUED) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
U. S. GOVERNMENT OBLIGATION -- 0.1%
United States Treasury Bills,
4.32%, 03/18/99 (a)........................... 100 99,088
4.36%, 03/18/99 (a)........................... 4,650 4,607,199
--------------
4,706,287
--------------
TOTAL SHORT-TERM INVESTMENTS
(COST $197,485,955)...................................................... 239,856,230
--------------
TOTAL INVESTMENTS -- 99.3%
(cost $4,496,058,447; Note 6)............................................ 4,762,474,785
VARIATION MARGIN ON OPEN FUTURES
CONTRACTS (d)............................................................ 85,990
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.7%.............................. 33,398,995
--------------
TOTAL NET ASSETS -- 100.0%................................................. $4,795,959,770
--------------
--------------
</TABLE>

The following abbreviations are used in portfolio descriptions:
AG Aktiengesellschaft (German Stock Company)
ADR American Depository Receipt
L.P. Limited Partnership
M.T.N. Medium Term Note
SA Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation)

(a) Security segregated as collateral for futures contracts.

(b) Non-income producing security.

(d) Open futures contracts as of December 31, 1998 are as follows:

<TABLE>
<CAPTION>
VALUE AT
NUMBER OF EXPIRATION VALUE AT DECEMBER 31, APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE 1998 DEPRECIATION
<C> <S> <C> <C> <C> <C>
Long Position:
307 U.S. T-Bond Mar 99 $39,190,000 $ 39,228,844 $ 38,844
148 S&P 500 Index Mar 99 $43,681,225 $ 46,083,500 $ 2,402,275
110 U.S. Treasury 5yr Mar 99 $12,429,218 $ 12,467,812 $ 38,594
-------------
$ 2,479,713
-------------
-------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B10
<PAGE>
FLEXIBLE MANAGED PORTFOLIO
DECEMBER 31, 1998
<TABLE>
<CAPTION>

LONG-TERM INVESTMENTS -- 88.7%
VALUE
COMMON STOCKS -- 52.8% SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
AEROSPACE -- 1.0%
Aeroquip-Vickers, Inc..................................... 4,500 $ 134,719
AlliedSignal, Inc......................................... 91,400 4,050,162
Boeing Co................................................. 162,100 5,288,512
GenCorp, Inc.............................................. 403,900 10,072,256
General Dynamics Corp..................................... 20,400 1,195,950
Goodrich (B.F.) Co........................................ 11,600 416,150
Litton Industries, Inc. (a)............................... 306,000 19,966,500
Lockheed Martin Corp...................................... 31,500 2,669,625
Northrop Grumman Corp..................................... 10,800 789,750
Raytheon Co. (Class "B" Stock)............................ 55,000 2,928,750
United Technologies Corp.................................. 37,700 4,099,875
--------------
51,612,249
--------------
AIRLINES -- 1.2%
AMR Corp. (a)............................................. 646,300 38,374,062
Delta Air Lines, Inc...................................... 24,200 1,258,400
Southwest Airlines Co..................................... 53,700 1,204,894
US Airways Group, Inc. (a)................................ 479,200 24,918,400
--------------
65,755,756
--------------
APPAREL -- 0.1%
Fruit of the Loom, Inc. (Class "A" Stock) (a)............. 310,300 4,286,018
Nike, Inc. (Class "B" Stock).............................. 47,200 1,914,550
Reebok International Ltd.................................. 9,100 135,362
--------------
6,335,930
--------------
AUTOS - CARS & TRUCKS -- 2.2%
Cummins Engine Co., Inc................................... 6,200 220,100
DaimlerChrysler AG........................................ 327,975 31,506,098
Dana Corp................................................. 26,550 1,085,231
Ford Motor Co............................................. 478,700 28,093,707
General Motors Corp....................................... 553,900 39,638,469
Genuine Parts Co.......................................... 29,000 969,687
Johnson Controls, Inc..................................... 13,700 808,300
MascoTech, Inc............................................ 388,000 6,644,500
Midas, Inc................................................ 90,866 2,828,204
Navistar International Corp. (a).......................... 11,700 333,450
PACCAR, Inc............................................... 12,600 518,175
Titan International, Inc.................................. 415,700 3,949,150
TRW, Inc.................................................. 19,900 1,118,131
--------------
117,713,202
--------------
BANKS AND SAVINGS & LOANS -- 2.0%
Banc One Corp............................................. 190,264 9,715,355
Bank of New York Co., Inc................................. 122,000 4,910,500
BankAmerica Corp.......................................... 281,141 16,903,603
BankBoston Corp........................................... 47,200 1,837,850
Bankers Trust Corp........................................ 15,900 1,358,456
BB&T Corp................................................. 46,200 1,862,437
Chase Manhattan Corp...................................... 136,700 9,304,144
Comerica, Inc............................................. 25,500 1,738,781
First Union Corp.......................................... 156,800 9,535,400
Fleet Financial Group, Inc................................ 90,000 4,021,875
Golden West Financial Corp................................ 9,200 843,525
Huntington Bancshares, Inc................................ 34,120 1,025,732
KeyCorp................................................... 71,200 2,278,400
Mellon Bank Corp.......................................... 41,300 2,839,375
Mercantile Bancorporation, Inc............................ 23,800 1,097,775
Morgan (J.P.) & Co., Inc.................................. 28,800 3,025,800
National City Corp........................................ 53,200 3,857,000
Northern Trust Corp....................................... 18,100 1,580,356
PNC Bank Corp............................................. 49,500 2,679,187

<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>

BANKS AND SAVINGS & LOANS (CONT'D.)
Providian Financial Corp.................................. 23,100 $ 1,732,500
Regions Financial Corp.................................... 32,000 1,290,000
Republic New York Corp.................................... 17,700 806,456
Summit Bancorp............................................ 28,500 1,245,094
Suntrust Banks, Inc....................................... 34,200 2,616,300
Synovus Financial Corp.................................... 42,500 1,035,937
U.S. Bancorp.............................................. 119,400 4,238,700
Union Planters Corp....................................... 18,000 815,625
Wachovia Corp............................................. 33,400 2,920,412
Wells Fargo & Co.......................................... 259,400 10,359,787
--------------
107,476,362
--------------
BUSINESS SERVICES
Equifax, Inc.............................................. 24,400 834,175
Omnicom Group, Inc........................................ 27,300 1,583,400
--------------
2,417,575
--------------
CHEMICALS -- 1.1%
Air Products & Chemicals, Inc............................. 38,100 1,524,000
Dow Chemical Co........................................... 36,800 3,346,500
Du Pont (E.I.) de Nemours & Co............................ 183,500 9,736,969
Eastman Chemical Co....................................... 12,700 568,325
Engelhard Corp............................................ 23,400 456,300
Ferro Corp................................................ 553,650 14,394,900
FMC Corp. (a)............................................. 5,600 313,600
Grace (W.R.) & Co......................................... 12,000 188,250
Great Lakes Chemical Corp................................. 9,700 388,000
Hercules, Inc............................................. 15,700 429,787
Millennium Chemicals, Inc. (a)............................ 601,600 11,956,800
Monsanto Co............................................... 96,200 4,569,500
Morton International, Inc................................. 21,200 519,400
Nalco Chemical Co......................................... 10,800 334,800
OM Group, Inc............................................. 260,300 9,500,950
Praxair, Inc.............................................. 25,600 902,400
Raychem Corp.............................................. 13,800 445,912
Rohm & Haas Co............................................ 29,700 894,712
Sigma-Aldrich Corp........................................ 16,300 478,812
Union Carbide Corp........................................ 20,800 884,000
--------------
61,833,917
--------------
COMMERCIAL SERVICES -- 0.1%
Cendant Corp. (a)......................................... 136,500 2,602,031
Deluxe Corp............................................... 13,200 482,625
Moore Corp. Ltd........................................... 14,300 157,300
--------------
3,241,956
--------------
COMPUTER SERVICES -- 2.2%
3Com Corp. (a)............................................ 57,500 2,576,719
Adobe Systems, Inc........................................ 11,200 523,600
America Online, Inc. (a).................................. 10,900 1,744,000
Autodesk, Inc............................................. 7,600 324,425
Automatic Data Processing, Inc............................ 48,500 3,889,094
BMC Software, Inc. (a).................................... 32,600 1,452,737
Cabletron Systems, Inc. (a)............................... 25,600 214,400
Ceridian Corp. (a)........................................ 11,700 816,806
Cisco Systems, Inc. (a)................................... 248,500 23,063,906
Computer Associates International, Inc.................... 88,600 3,776,575
Computer Sciences Corp. (a)............................... 25,300 1,630,269
Electronic Data Systems Corp.............................. 78,000 3,919,500
EMC Corp. (a)............................................. 80,400 6,834,000
First Data Corp........................................... 69,400 2,199,112
Microsoft Corp. (a)....................................... 396,700 55,017,331
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B11
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
COMPUTER SERVICES (CONT'D.)
Novell, Inc. (a).......................................... 56,900 $ 1,031,312
Oracle Corp. (a).......................................... 159,500 6,878,437
Parametric Technology Corp. (a)........................... 43,200 707,400
Peoplesoft, Inc........................................... 30,000 568,125
Silicon Graphics, Inc. (a)................................ 30,400 391,400
Unisys Corp............................................... 40,400 1,391,275
--------------
118,950,423
--------------
COMPUTERS -- 1.4%
Apple Computer, Inc. (a).................................. 21,600 884,250
Compaq Computer Corp...................................... 267,961 11,237,614
Data General Corp. (a).................................... 7,900 129,856
Dell Computer Corp. (a)................................... 203,200 14,871,700
Gateway 2000, Inc. (a).................................... 25,100 1,284,806
Hewlett-Packard Co........................................ 168,600 11,517,487
International Business Machines Corp...................... 149,800 27,675,550
Seagate Technology, Inc. (a).............................. 39,300 1,188,825
Sun Microsystems, Inc. (a)................................ 61,200 5,240,250
--------------
74,030,338
--------------
CONSTRUCTION -- 0.6%
Centex Corp............................................... 9,600 432,600
Fluor Corp................................................ 13,600 578,850
Foster Wheeler Corp....................................... 6,600 87,037
Oakwood Homes Corp........................................ 572,000 8,687,250
Pulte Corp................................................ 6,900 191,906
Standard Pacific Corp..................................... 632,400 8,932,650
Webb (Del E.) Corp........................................ 576,500 15,889,781
--------------
34,800,074
--------------
CONTAINERS -- 0.2%
Ball Corp................................................. 4,900 224,175
Bemis Co., Inc............................................ 8,600 326,262
Crown Cork & Seal Co., Inc................................ 20,800 640,900
Owens-Illinois, Inc. (a).................................. 260,800 7,987,000
Sealed Air Corp........................................... 13,400 684,237
--------------
9,862,574
--------------
COSMETICS & SOAPS -- 0.7%
Alberto Culver Co. (Class "B" Stock)...................... 9,200 245,525
Avon Products, Inc........................................ 42,800 1,893,900
Colgate-Palmolive Co...................................... 47,900 4,448,712
Gillette Co............................................... 181,600 8,773,550
International Flavors & Fragrances, Inc................... 17,700 782,119
Procter & Gamble Co....................................... 216,700 19,787,419
--------------
35,931,225
--------------
DIVERSIFIED OFFICE EQUIPMENT -- 0.2%
Avery Dennison Corp....................................... 17,300 779,581
Pitney Bowes, Inc......................................... 44,400 2,933,175
Xerox Corp................................................ 52,800 6,230,400
--------------
9,943,156
--------------
DIVERSIFIED OPERATIONS -- 1.3%
Fortune Brands, Inc....................................... 27,800 879,175
General Electric Corp..................................... 522,400 53,317,450
Loews Corp................................................ 183,800 18,058,350
--------------
72,254,975
--------------
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
DRUGS AND MEDICAL SUPPLIES -- 3.5%
Abbott Laboratories....................................... 248,000 $ 12,152,000
Allergan, Inc............................................. 10,600 686,350
ALZA Corp. (a)............................................ 13,900 726,275
American Home Products Corp............................... 210,700 11,865,044
Amgen, Inc. (a)........................................... 41,700 4,360,256
Bard (C.R.), Inc.......................................... 9,200 455,400
Bausch & Lomb, Inc........................................ 9,000 540,000
Baxter International, Inc................................. 45,400 2,919,787
Becton, Dickinson & Co.................................... 39,700 1,694,694
Biomet, Inc............................................... 18,100 728,525
Boston Scientific Corp. (a)............................... 63,200 1,694,550
Bristol-Myers Squibb Co................................... 159,700 21,369,856
Cardinal Health, Inc...................................... 32,250 2,446,969
Guidant Corp.............................................. 24,400 2,690,100
Johnson & Johnson......................................... 217,200 18,217,650
Lilly (Eli) & Co.......................................... 176,900 15,721,987
Mallinckrodt, Inc......................................... 11,800 363,587
Medtronic, Inc............................................ 75,900 5,635,575
Merck & Co., Inc.......................................... 191,200 28,237,850
Pfizer, Inc............................................... 210,500 26,404,594
Pharmacia & Upjohn, Inc................................... 82,300 4,660,237
Schering-Plough Corp...................................... 237,400 13,116,350
St. Jude Medical, Inc. (a)................................ 14,900 412,544
Warner-Lambert Co......................................... 132,400 9,954,825
--------------
187,055,005
--------------
ELECTRONICS -- 1.3%
Advanced Micro Devices, Inc. (a).......................... 23,000 665,562
AMP Inc................................................... 35,700 1,858,631
Applied Materials, Inc. (a)............................... 59,400 2,535,637
Belden, Inc............................................... 275,600 5,839,275
EG&G, Inc................................................. 7,300 203,031
Emerson Electric Co....................................... 71,900 4,498,244
Grainger (W.W.), Inc...................................... 16,100 670,162
Harris Corp............................................... 13,000 476,125
Honeywell, Inc............................................ 20,600 1,551,437
Intel Corp................................................ 269,700 31,976,306
KLA-Tencor Corp. (a)...................................... 13,700 594,237
LSI Logic Corp. (a)....................................... 23,000 370,875
Micron Technology, Inc.................................... 34,300 1,734,294
Motorola, Inc............................................. 96,800 5,910,850
National Semiconductor Corp. (a).......................... 26,700 360,450
Perkin-Elmer Corp......................................... 7,900 770,744
Rockwell International Corp............................... 32,500 1,578,281
Solectron Corp............................................ 5,200 483,275
Tektronix, Inc............................................ 8,200 246,512
Texas Instruments, Inc.................................... 63,200 5,407,550
Thomas & Betts Corp....................................... 9,000 389,812
--------------
68,121,290
--------------
ENGINEERING & CONSTRUCTION -- 0.1%
Giant Cement Holding, Inc. (a)............................ 244,900 6,061,275
--------------
ENVIRONMENTAL SERVICES -- 0.2%
Browning-Ferris Industries, Inc........................... 29,800 847,437
Waste Management, Inc..................................... 256,562 11,962,203
--------------
12,809,640
--------------
FINANCIAL SERVICES -- 3.0%
American Express Co....................................... 73,300 7,494,925
Associates First Capital Corp............................. 112,390 4,762,526
Bear Stearns Companies, Inc............................... 17,500 654,062
Block (H.R.), Inc......................................... 17,000 765,000
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B12
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
FINANCIAL SERVICES (CONT'D.)
Capital One Financial Corp................................ 10,200 $ 1,173,000
Citigroup, Inc............................................ 584,451 28,930,324
Countrywide Credit Industries, Inc........................ 17,600 883,300
Dun & Bradstreet Corp..................................... 27,600 871,125
Federal Home Loan Mortgage Corp........................... 109,600 7,062,350
Federal National Mortgage Association..................... 167,500 12,395,000
Fifth Third Bancorp....................................... 41,100 2,930,944
Franklin Resources, Inc................................... 41,000 1,312,000
Household International, Inc.............................. 78,392 3,106,283
Lehman Brothers Holdings, Inc............................. 724,900 31,940,906
MBNA Corp................................................. 121,800 3,037,387
Merrill Lynch & Co., Inc.................................. 294,000 19,624,500
Morgan Stanley Dean Witter & Co........................... 317,795 22,563,445
Paychex, Inc.............................................. 23,000 1,183,062
Schwab (Charles) Corp. (a)................................ 64,500 3,624,094
SLM Holding Corp.......................................... 26,000 1,248,000
State Street Corp......................................... 26,100 1,815,581
SunAmerica, Inc........................................... 31,700 2,571,662
Transamerica Corp......................................... 10,200 1,178,100
Washington Mutual, Inc.................................... 92,336 3,526,081
--------------
164,653,657
--------------
FOOD & BEVERAGES -- 2.3%
Anheuser-Busch Companies, Inc............................. 79,400 5,210,625
Archer-Daniels-Midland Co................................. 101,115 1,737,914
Bestfoods................................................. 46,700 2,486,775
Brown-Forman Corp. (Class "B" Stock)...................... 11,200 847,700
Campbell Soup Co.......................................... 74,000 4,070,000
Coca-Cola Co.............................................. 395,900 26,475,812
Coca-Cola Enterprises, Inc................................ 62,000 2,216,500
ConAgra, Inc.............................................. 77,100 2,428,650
Coors (Adolph) Co. (Class "B" Stock)...................... 6,000 338,625
General Mills, Inc........................................ 25,700 1,998,175
Heinz (H.J.) & Co......................................... 59,300 3,357,862
Hershey Foods Corp........................................ 23,200 1,442,750
Kellogg Co................................................ 66,600 2,272,725
PepsiCo, Inc.............................................. 240,300 9,837,281
Pioneer Hi-Bred International, Inc........................ 39,600 1,069,200
Quaker Oats Co............................................ 22,400 1,332,800
Ralston-Ralston Purina Group.............................. 52,000 1,683,500
RJR Nabisco Holdings Corp................................. 1,124,200 33,374,688
Sara Lee Corp............................................. 149,600 4,216,850
Seagram Co., Ltd.......................................... 57,800 2,196,400
Sysco Corp................................................ 55,200 1,514,550
Whitman Corp.............................................. 545,200 13,834,450
Wrigley (William) Jr. Co.................................. 18,800 1,683,775
--------------
125,627,607
--------------
FOREST PRODUCTS -- 1.5%
Boise Cascade Corp........................................ 669,400 20,751,400
Champion International Corp............................... 404,400 16,378,200
Fort James Corp........................................... 35,200 1,408,000
Georgia-Pacific Corp...................................... 15,000 878,437
International Paper Co.................................... 49,000 2,195,812
Louisiana-Pacific Corp.................................... 706,600 12,939,612
Mead Corp................................................. 406,800 11,924,325
Potlatch Corp............................................. 4,700 173,312
Temple-Inland, Inc........................................ 9,100 539,744
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>

FOREST PRODUCTS (CONT'D.)
Union Camp Corp........................................... 11,300 $ 762,750
Westvaco Corp............................................. 16,600 445,087
Weyerhaeuser Co........................................... 32,300 1,641,244
Willamette Industries, Inc................................ 302,500 10,133,750
--------------
80,171,673
--------------
GAS PIPELINES -- 0.1%
Columbia Energy Group..................................... 13,500 779,625
Consolidated Natural Gas Co............................... 15,500 837,000
Peoples Energy Corp....................................... 5,700 227,287
Sempra Energy............................................. 37,053 940,220
Sonat, Inc................................................ 17,800 481,712
Williams Companies, Inc................................... 66,600 2,077,087
--------------
5,342,931
--------------
HOSPITALS/HOSPITAL MANAGEMENT -- 0.6%
Columbia/HCA Healthcare Corp.............................. 911,500 22,559,625
HBO & Co.................................................. 71,300 2,045,419
Healthsouth Corp. (a)..................................... 65,700 1,014,244
Humana, Inc. (a).......................................... 26,600 473,812
IMS Health, Inc........................................... 26,300 1,984,006
Manor Care, Inc........................................... 13,300 390,687
Service Corp. International............................... 40,800 1,552,950
Shared Medical Systems Corp............................... 4,200 209,475
Tenet Healthcare Corp. (a)................................ 49,700 1,304,625
--------------
31,534,843
--------------
HOUSEHOLD PRODUCTS & PERSONAL CARE -- 0.3%
Clorox Co................................................. 16,700 1,950,769
Kimberly-Clark Corp....................................... 90,100 4,910,450
Leggett & Platt, Inc...................................... 470,800 10,357,600
--------------
17,218,819
--------------
HOUSING RELATED -- 1.3%
Armstrong World Industries, Inc........................... 6,500 392,031
Fleetwood Enterprises, Inc................................ 6,100 211,975
Hanson, PLC, ADR, (United Kingdom)........................ 1,221,100 47,622,900
Kaufman & Broad Home Corp................................. 6,400 184,000
Lowe's Companies, Inc..................................... 56,800 2,907,450
Masco Corp................................................ 53,500 1,538,125
Maytag Corp............................................... 15,400 958,650
Owens Corning............................................. 413,400 14,649,862
Stanley Works............................................. 14,400 399,600
Tupperware Corp........................................... 9,900 162,731
Whirlpool Corp............................................ 12,100 670,037
--------------
69,697,361
--------------
INSURANCE -- 2.3%
Aetna, Inc................................................ 24,100 1,894,862
Allstate Corp............................................. 135,800 5,245,275
American General Corp..................................... 41,100 3,205,800
American International Group, Inc......................... 169,200 16,348,950
Aon Corp.................................................. 27,100 1,500,662
Berkley (W.R.) Corp....................................... 175,850 5,989,891
Berkshire Hathaway, Inc. (Class "B" Stock)................ 494 1,159,725
Chubb Corp................................................ 27,600 1,790,550
CIGNA Corp................................................ 36,000 2,783,250
Cincinnati Financial Corp................................. 26,700 977,887
Conseco, Inc.............................................. 50,687 1,549,121
Financial Security Assurance Holdings Ltd................. 140,100 7,600,425
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B13
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
INSURANCE (CONT'D.)
Hartford Financial Services Group, Inc.................... 38,300 $ 2,101,712
Jefferson-Pilot Corp...................................... 17,200 1,290,000
Lincoln National Corp..................................... 16,600 1,358,087
Marsh & McLennan Companies, Inc........................... 41,300 2,413,469
MBIA, Inc................................................. 15,900 1,042,444
Magic Investment Corp..................................... 18,500 736,531
Progressive Corp.......................................... 11,700 1,981,687
Provident Companies, Inc.................................. 238,400 9,893,600
Reinsurance Group of America, Inc......................... 474,600 33,222,000
SAFECO Corp............................................... 22,900 983,269
St. Paul Companies, Inc................................... 37,400 1,299,650
TIG Holdings, Inc......................................... 351,200 5,465,550
Torchmark Corp............................................ 22,700 801,594
Trenwick Group, Inc....................................... 273,300 8,916,413
United Healthcare Corp.................................... 30,500 1,313,406
UNUM Corp................................................. 22,500 1,313,438
--------------
124,179,248
--------------
INTRUMENTS - CONTROLS -- 0.1%
Parker-Hannifin Corp...................................... 194,900 6,382,975
--------------
LEISURE -- 0.3%
Brunswick Corp............................................ 16,200 400,950
Carnival Corp. (Class "A" Stock).......................... 78,500 3,768,000
Disney (Walt) Co.......................................... 328,300 9,849,000
Harrah's Entertainment, Inc. (a).......................... 16,400 257,275
Hilton Hotels Corp........................................ 40,600 776,475
King World Productions, Inc............................... 11,900 350,306
Marriott International, Inc. (Class "A" Stock)............ 41,400 1,200,600
Mirage Resorts, Inc. (a).................................. 29,100 434,681
--------------
17,037,287
--------------
MACHINERY -- 0.6%
Briggs & Stratton Corp.................................... 4,000 199,500
Case Corp................................................. 369,200 8,053,175
Caterpillar, Inc.......................................... 60,400 2,778,400
Cooper Industries, Inc.................................... 19,600 934,675
Deere & Co................................................ 40,500 1,341,563
Dover Corp................................................ 36,100 1,322,163
DT Industries, Inc........................................ 146,800 2,312,100
Eaton Corp................................................ 11,600 819,975
Global Industrial Technologies, Inc. (a).................. 258,100 2,758,444
Harnischfeger Industries, Inc............................. 7,800 79,463
Ingersoll-Rand Co......................................... 26,900 1,262,619
Milacron, Inc............................................. 6,400 123,200
Paxar Corp................................................ 954,575 8,531,514
Snap-On, Inc.............................................. 9,900 344,644
Timken Co................................................. 10,200 192,525
--------------
31,053,960
--------------
MANUFACTURING -- 0.5%
Flowserve Corp............................................ 161,991 2,682,976
Hussmann International, Inc............................... 272,600 5,281,625
Illinois Tool Works, Inc.................................. 40,400 2,343,200
Smith (A.O.) Corp......................................... 433,350 10,644,159
Tyco International Ltd.................................... 102,157 7,706,469
--------------
28,658,429
--------------
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MEDIA -- 2.2%
CBS Corp. (a)............................................. 910,000 $ 29,802,500
Central Newspapers, Inc.(Class "A" Stock)................. 205,300 14,666,119
Clear Channel Communications, Inc. (a).................... 40,000 2,180,000
Comcast Corp. (Special Class "A" Stock)................... 57,600 3,380,400
Donnelley (R.R.) & Sons Co................................ 23,700 1,038,356
Dow Jones & Co., Inc...................................... 15,600 750,750
Gannett Co., Inc.......................................... 46,000 3,044,625
Houghton Mifflin Co....................................... 240,700 11,373,075
Interpublic Group of Companies, Inc....................... 21,200 1,690,700
Knight-Ridder, Inc........................................ 251,600 12,863,051
Lee Enterprises, Inc...................................... 208,900 6,580,350
McGraw-Hill, Inc.......................................... 16,100 1,640,188
Mediaone Group, Inc....................................... 98,500 4,629,500
Meredith Corp............................................. 8,600 325,725
New York Times Co. (Class "A" Stock)...................... 31,200 1,082,250
Tele-Communications, Inc. (Class "A" Stock) (a)........... 82,268 4,550,449
Time Warner, Inc.......................................... 189,400 11,754,638
Times Mirror Co. (Class "A" Stock)........................ 14,300 800,800
Tribune Co................................................ 19,900 1,313,400
Viacom, Inc. (Class "B" Stock) (a)........................ 57,300 4,240,200
--------------
117,707,076
--------------
METALS-FERROUS -- 0.8%
AK Steel Holding Corp..................................... 880,000 20,680,000
Allegheny Teledyne, Inc................................... 31,800 649,913
Bethlehem Steel Corp. (a)................................. 924,400 7,741,851
LTV Corp.................................................. 841,400 4,890,638
Material Sciences Corp. (a)............................... 397,900 3,382,150
National Steel Corp. (Class "B" Stock) (a)................ 172,800 1,231,200
Nucor Corp................................................ 14,200 614,150
USX-U.S. Steel Group, Inc................................. 291,100 6,695,300
Worthington Industries, Inc............................... 15,700 196,250
--------------
46,081,452
--------------
METALS-NON FERROUS -- 1.0%
Alcan Aluminum Ltd........................................ 36,900 998,606
Aluminum Company of America............................... 678,200 50,568,287
Cyprus Amax Minerals Co................................... 15,100 151,000
Inco Ltd.................................................. 27,000 285,188
Reynolds Metals Co........................................ 11,900 626,981
--------------
52,630,062
--------------
MINERAL RESOURCES
ASARCO, Inc............................................... 6,500 97,906
Burlington Resources, Inc................................. 28,600 1,024,237
Homestake Mining Co....................................... 34,300 315,131
Phelps Dodge Corp......................................... 9,500 483,313
--------------
1,920,587
--------------
MISCELLANEOUS - BASIC INDUSTRY -- 0.9%
AES Corp.................................................. 25,000 1,184,375
Coltec Industries, Inc.................................... 179,200 3,494,400
Crane Co.................................................. 11,100 335,081
Danaher Corp.............................................. 14,000 760,375
Donaldson Co., Inc........................................ 448,600 9,308,450
Ecolab, Inc............................................... 20,900 756,319
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B14
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
MISCELLANEOUS - BASIC INDUSTRY (CONT'D.)
IDEX Corp................................................. 246,700 $ 6,044,150
ITT Industries, Inc....................................... 19,300 767,175
Laidlaw, Inc.............................................. 53,300 536,331
Mark IV Industries, Inc................................... 355,500 4,621,500
Millipore Corp............................................ 7,000 199,063
NACCO Industries, Inc. (Class "A" Stock).................. 1,300 119,600
Pall Corp................................................. 20,200 511,313
PPG Industries, Inc....................................... 28,900 1,683,425
Textron, Inc.............................................. 26,700 2,027,531
Thermo Electron Corp. (a)................................. 25,800 436,988
Trinity Industries, Inc................................... 214,100 8,242,850
Wolverine Tube, Inc. (a).................................. 155,300 3,261,300
York International Corp................................... 110,600 4,513,863
--------------
48,804,089
--------------
MISCELLANEOUS - CONSUMER GROWTH/STAPLE -- 0.6%
American Greetings Corp. (Class "A" Stock)................ 11,800 484,538
Black & Decker Corp....................................... 15,400 863,362
Corning, Inc.............................................. 37,400 1,683,000
Eastman Kodak Co.......................................... 195,400 14,068,800
Jostens, Inc.............................................. 6,300 164,981
Minnesota Mining & Manufacturing Co....................... 66,200 4,708,475
Polaroid Corp............................................. 7,300 136,419
Rubbermaid, Inc........................................... 24,300 763,931
Unilever N.V., ADR, (United Kingdom)...................... 103,800 8,608,913
--------------
31,482,419
--------------
MISCELLANEOUS - INDUSTRIAL
Tenneco, Inc.............................................. 27,600 940,125
--------------
OIL & GAS -- 2.4%
Amerada Hess Corp......................................... 14,800 736,300
Amoco Corp................................................ 154,200 9,309,825
Anadarko Petroleum Corp................................... 19,400 598,975
Ashland, Inc.............................................. 12,200 590,175
Atlantic Richfield Co..................................... 52,000 3,393,000
Basin Exploration, Inc. (a)............................... 71,400 896,963
Cabot Oil & Gas Corp. (Class "A" Stock)................... 363,800 5,457,000
Chevron Corp.............................................. 106,500 8,832,844
Coastal Corp.............................................. 34,500 1,205,344
Eastern Enterprises....................................... 3,300 144,375
Enron Oil & Gas Co........................................ 198,700 3,427,575
Exxon Corp................................................ 393,100 28,745,438
Kerr-McGee Corp........................................... 7,700 294,525
Mobil Corp................................................ 125,500 10,934,188
Murphy Oil Corp........................................... 114,000 4,702,500
NICOR, Inc................................................ 7,800 329,550
Noble Affiliates, Inc..................................... 208,900 5,144,163
Phillips Petroleum Co..................................... 42,600 1,815,825
Pioneer Natural Resources Co.............................. 1,488,431 13,023,771
Royal Dutch Petroleum Co.................................. 345,700 16,550,388
Seagull Energy Corp. (a).................................. 245,500 1,549,719
Sunoco, Inc............................................... 15,300 551,756
Texaco, Inc............................................... 87,700 4,637,138
Union Pacific Resources Group, Inc........................ 41,200 373,375
Unocal Corp............................................... 39,900 1,164,581
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>

OIL & GAS (CONT'D.)
USX-Marathon Group........................................ 46,800 $ 1,409,850
Western Gas Resources, Inc................................ 423,100 2,432,825
--------------
128,251,968
--------------
OIL & GAS EXPLORATION/PRODUCTION -- 0.7%
Elf Aquitaine SA, ADR, (France)........................... 513,400 29,071,275
Occidental Petroleum Corp................................. 57,100 963,563
Oryx Energy Co. (a)....................................... 524,100 7,042,594
--------------
37,077,432
--------------
OIL & GAS SERVICES -- 1.3%
Apache Corp............................................... 15,500 392,344
Baker Hughes, Inc......................................... 51,340 908,076
Enron Corp................................................ 53,200 3,035,725
Halliburton Co............................................ 70,900 2,100,413
Helmerich & Payne, Inc.................................... 8,200 158,875
J. Ray McDermott, SA...................................... 672,900 16,443,994
McDermott International, Inc.............................. 1,745,600 43,094,501
ONEOK, Inc................................................ 5,000 180,625
Rowan Companies, Inc. (a)................................. 14,100 141,000
Schlumberger Ltd.......................................... 85,800 3,957,525
--------------
70,413,078
--------------
PRECIOUS METALS -- 0.1%
Apex Silver Mines Ltd..................................... 340,400 2,808,300
Barrick Gold Corp......................................... 60,400 1,177,800
Battle Mountain Gold Co................................... 37,200 153,450
Freeport-McMoRan Copper & Gold, Inc. (Class "B" Stock).... 31,400 327,738
Newmont Mining Corp....................................... 25,400 458,788
Placer Dome, Inc.......................................... 40,000 460,000
--------------
5,386,076
--------------
RAILROADS -- 0.1%
Burlington Northern Santa Fe Corp......................... 75,900 2,561,625
CSX Corp.................................................. 35,400 1,469,100
Norfolk Southern Corp..................................... 61,100 1,936,106
Union Pacific Corp........................................ 40,000 1,802,500
--------------
7,769,331
--------------
REAL ESTATE DEVELOPMENT -- 1.2%
Crescent Operating, Inc................................... 67,240 319,390
Crescent Real Estate Equities Co.......................... 1,377,600 31,684,800
Equity Residential Properties Trust....................... 150,900 6,102,019
Vornado Operating, Inc. (a)............................... 20,000 161,250
Vornado Realty Trust (a).................................. 745,100 25,147,125
--------------
63,414,584
--------------
RESTAURANTS -- 0.2%
Darden Restaurants, Inc................................... 19,000 342,000
McDonald's Corp........................................... 111,700 8,559,013
Tricon Global Restaurants, Inc. (a)....................... 24,600 1,233,075
Wendy's International, Inc................................ 21,500 468,969
--------------
10,603,057
--------------
RETAIL -- 3.7%
Albertson's, Inc.......................................... 39,800 2,534,763
American Stores Co........................................ 44,300 1,636,331
AutoZone, Inc. (a)........................................ 24,600 810,263
Bombay Co., Inc. (a)...................................... 571,600 3,179,525
Charming Shoppes, Inc. (a)................................ 3,332,400 14,370,975
Circuit City Stores, Inc.................................. 16,000 799,000
Consolidated Stores Corp.................................. 17,400 351,263
Costco Companies, Inc. (a)................................ 34,700 2,504,906
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B15
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
RETAIL (CONT'D.)
CVS Corp.................................................. 62,000 $ 3,410,000
Dayton-Hudson Corp........................................ 70,800 3,840,900
Designs, Inc. (a)......................................... 203,900 395,056
Dillard's, Inc............................................ 148,300 4,208,013
Dollar General Corp....................................... 27,500 649,688
Federated Department Stores, Inc. (a)..................... 34,000 1,481,125
Fred Meyer, Inc........................................... 23,000 1,385,750
Great Atlantic & Pacific Tea Co., Inc..................... 6,200 183,675
Harcourt General, Inc..................................... 11,500 611,656
Home Depot, Inc........................................... 237,200 14,513,675
IKON Office Solutions, Inc................................ 21,800 186,663
J.C. Penney Co., Inc...................................... 40,500 1,898,438
Jan Bell Marketing, Inc. (a).............................. 295,700 1,903,569
Kmart Corp. (a)........................................... 2,576,000 39,445,000
Kohl's Corp. (a).......................................... 25,200 1,548,225
Kroger Co. (a)............................................ 41,300 2,498,650
Liz Claiborne, Inc........................................ 10,900 344,031
Longs Drug Stores, Inc.................................... 6,300 236,250
May Department Stores Co.................................. 37,500 2,264,063
Newell Co................................................. 25,800 1,064,250
Nordstrom, Inc............................................ 28,900 1,002,469
Pep Boys - Manny, Moe & Jack.............................. 10,300 161,581
Phillips-Van Heusen Corp.................................. 389,200 2,797,375
Rite Aid Corp............................................. 41,800 2,071,713
Safeway, Inc. (a)......................................... 72,000 4,387,500
Sears, Roebuck & Co....................................... 63,500 2,698,750
Sherwin-Williams Co....................................... 28,000 822,500
Staples, Inc. (a)......................................... 43,000 1,878,563
Supervalu, Inc............................................ 19,400 543,200
Tandy Corp................................................ 16,700 687,831
The Gap, Inc.............................................. 96,300 5,416,875
The Limited, Inc.......................................... 826,500 24,071,813
TJX Companies, Inc........................................ 52,400 1,519,600
Toys 'R' Us, Inc. (a)..................................... 404,100 6,819,188
Wal-Mart Stores, Inc...................................... 360,200 29,333,788
Walgreen Co............................................... 80,300 4,702,569
Winn-Dixie Stores, Inc.................................... 24,100 1,081,488
--------------
198,252,506
--------------
RUBBER -- 0.2%
Cooper Tire & Rubber Co................................... 12,800 261,600
Goodyear Tire & Rubber Co................................. 186,400 9,401,550
--------------
9,663,150
--------------
TELECOMMUNICATIONS -- 3.4%
Airtouch Communications, Inc. (a)......................... 91,400 6,592,225
Alcatel Alsthom, ADR, (France)............................ 513,000 12,536,438
Alltel Corp............................................... 43,000 2,571,938
Ameritech Corp............................................ 177,500 11,249,063
Andrew Corp. (a).......................................... 14,300 235,950
Ascend Communications, Inc. (a)........................... 31,300 2,057,975
AT&T Corp................................................. 290,800 21,882,700
Bell Atlantic Corp........................................ 251,800 14,305,388
BellSouth Corp............................................ 316,000 15,760,500
Deutsche Telekom AG, ADR, (Germany)....................... 185,000 6,058,750
Frontier Corp............................................. 26,700 907,800
General Instrument Corp................................... 24,000 814,500
GTE Corp.................................................. 155,300 10,473,044
Lucent Technologies, Inc.................................. 211,000 23,210,000
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
TELECOMMUNICATIONS (CONT'D.)
MCI WorldCom, Inc......................................... 287,270 $ 20,611,623
Nextel Communications, Inc. (Class "A" Stock) (a)......... 42,500 1,004,063
Northern Telecom Ltd...................................... 105,800 5,303,225
SBC Communications, Inc................................... 313,200 16,795,350
Scientific-Atlanta, Inc................................... 12,800 292,000
Sprint Corp............................................... 69,700 5,863,513
Sprint Corp. (PCS Group).................................. 46,850 1,083,406
Tellabs, Inc. (a)......................................... 30,600 2,098,013
US West, Inc.............................................. 80,441 5,198,500
--------------
186,905,964
--------------
TEXTILES -- 0.1%
National Service Industries, Inc.......................... 6,900 262,200
Pillowtex Corp. (a)....................................... 73,932 1,977,681
Russell Corp.............................................. 5,900 119,844
Springs Industries, Inc................................... 3,300 136,744
Tultex Corp. (a).......................................... 362,600 317,275
VF Corp................................................... 19,800 928,125
--------------
3,741,869
--------------
TOBACCO -- 0.8%
Philip Morris Co., Inc.................................... 801,400 42,874,900
UST, Inc.................................................. 29,800 1,039,275
--------------
43,914,175
--------------
TOYS
Hasbro, Inc............................................... 21,600 780,300
Mattel, Inc............................................... 47,200 1,076,750
--------------
1,857,050
--------------
TRUCKING/SHIPPING -- 0.1%
Federal Express Corp. (a)................................. 23,800 2,118,200
Ryder System, Inc......................................... 12,400 322,400
Yellow Corp. (a).......................................... 178,700 3,417,638
--------------
5,858,238
--------------
UTILITY - ELECTRIC -- 0.7%
Ameren Corp............................................... 22,200 947,663
American Electric Power Co., Inc.......................... 30,700 1,444,819
Baltimore Gas & Electric Co............................... 24,000 741,000
Carolina Power & Light Co................................. 24,400 1,148,325
Central & South West Corp................................. 34,400 943,850
CINergy Corp.............................................. 25,600 880,000
Consolidated Edison, Inc.................................. 38,100 2,014,538
Dominion Resources, Inc................................... 31,400 1,467,950
DTE Energy Co............................................. 23,500 1,007,563
Duke Energy Corp.......................................... 58,300 3,734,844
Edison International...................................... 58,900 1,641,838
Entergy Corp.............................................. 39,600 1,232,550
FirstEnergy Corp. (a)..................................... 37,300 1,214,581
FPL Group, Inc............................................ 29,500 1,817,938
GPU, Inc.................................................. 20,600 910,263
Houston Industries, Inc................................... 47,600 1,529,150
New Century Energies, Inc................................. 15,000 731,250
Niagara Mohawk Power Corp. (a)............................ 24,300 391,838
Northern States Power Co.................................. 24,200 671,550
Pacific Gas & Electric Co................................. 61,800 1,946,700
PacifiCorp................................................ 48,100 1,013,106
PECO Energy Co............................................ 36,100 1,502,663
PP&L Resources, Inc....................................... 26,900 749,838
Public Service Enterprise Group, Inc...................... 37,600 1,504,000
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B16
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS (CONTINUED) SHARES (NOTE 2)
------------- --------------
<S> <C> <C>
UTILITY - ELECTRIC (CONT'D.)
Southern Co............................................... 111,800 $ 3,249,188
Texas Utilities Co........................................ 44,500 2,077,594
Unicom Corp............................................... 35,100 1,353,544
--------------
37,868,143
--------------
TOTAL COMMON STOCKS
(cost $2,611,554,092).................................................... 2,858,308,143
--------------
PREFERRED STOCKS -- 0.8%
FINANCIAL SERVICES -- 0.5%
Central Hispano Capital Corp. (Portugal).................. 1,000,000 25,000,000
--------------
TELECOMMUNICATIONS -- 0.3%
Telecomunicacoes Brasileiras S.A., ADR (Brazil)........... 223,400 16,238,388
--------------
TOTAL PREFERRED STOCKS
(cost $47,988,630)....................................................... 41,238,388
--------------
MOODY'S PRINCIPAL
RATING AMOUNT
LONG-TERM BONDS -- 35.1% (UNAUDITED) (000)
------------ ---------
AEROSPACE -- 0.7%
Raytheon Co.,
5.95%, 03/15/01............................... Baa1 $ 14,000 14,122,920
6.40%, 12/15/18............................... Baa1 25,000 24,812,500
--------------
38,935,420
--------------
AIRLINES -- 2.3%
Continental Airlines, Inc.,
8.00%, 12/15/05............................... Ba2 15,000 14,821,500
Delta Airlines, Inc.,
10.125%, 05/15/10............................. Baa3 19,335 24,187,118
10.375%, 02/01/11............................. Ba1 31,250 39,896,250
United Airlines, Inc.,
10.67%, 05/01/04.............................. Baa3 19,500 23,072,400
11.21%, 05/01/14.............................. Baa3 17,500 22,981,000
--------------
124,958,268
--------------
ASSET-BACKED SECURITIES -- 0.2%
California Infrastructure,
1997-1 6.17%, 03/25/03........................ A3 4,000 4,049,040
Standard Credit Card Master Trust, 1993-2A
5.95%, 10/07/04............................... Aaa 4,500 4,566,060
--------------
8,615,100
--------------
AUTO - CARS & TRUCKS -- 0.2%
Navistar International Corp.,
7.00%, 02/01/03............................... Ba1 11,500 11,501,797
--------------
BANKS AND SAVINGS & LOANS -- 1.9%
Banco de Commercio Exterior de Columbia, SA,
M.T.N. (Colombia),
8.625%, 06/02/00.............................. NR 5,500 5,390,000
Bank of Nova Scotia (Canada),
6.50%, 07/15/07............................... A1 5,400 5,437,692
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
BANKS AND SAVINGS & LOANS (CONT'D.)
Bayerische Landesbank Girozentrale (Germany),
5.875%, 12/01/08.............................. Aaa $ 12,500 $ 12,780,000
Capital One Bank,
6.844%, 06/13/00.............................. Baa3 23,900 24,081,401
Central Hispano Financial Services (Portugal),
6.188%, 04/28/05.............................. A3 5,000 4,966,600
Citicorp, M.T.N.,
6.375%, 11/15/08.............................. A1 12,500 12,924,625
Kansallis-Osake-Pankki (Finland),
8.65%, 01/01/49............................... Baa1 9,000 9,132,480
National Australia Bank (Australia),
6.40%, 12/10/07............................... A1 8,700 8,874,000
6.60%, 12/10/07............................... A1 5,000 5,182,500
Okobank (Finland),
6.75%, 09/27/49............................... A3 16,250 16,233,750
--------------
105,003,048
--------------
CABLE & PAY TELEVISION SYSTEMS -- 1.0%
Cable & Wire Communications PLC (United
Kingdom),
6.75%, 12/01/08............................... Baa1 12,100 12,334,740
Continental Cablevision, Inc.,
8.50%, 09/15/01............................... Ba2 5,100 5,409,876
Rogers Cablesystems, Inc. (Canada),
10.00%, 03/15/05.............................. Ba3 2,000 2,240,000
Tele-Communications, Inc.,
6.34%, 02/01/02............................... Ba1 8,500 8,706,125
7.375%, 02/15/00.............................. Ba1 6,000 6,130,500
9.875%, 06/15/22.............................. Baa3 12,878 18,257,784
--------------
53,079,025
--------------
COMPUTERS SOFTWARE & SERVICES -- 0.3%
Computer Associates International, Inc.,
6.375%, 04/15/05.............................. Baa1 13,750 13,607,550
--------------
CONSULTING -- 0.6%
Comdisco, Inc.,
5.94%, 04/13/00............................... Baa1 12,500 12,468,750
6.32%, 11/27/00............................... Baa1 19,000 19,088,540
6.375%, 11/30/01.............................. Baa1 2,700 2,711,691
--------------
34,268,981
--------------
CONSUMER SERVICES -- 0.6%
Loewen Group, Inc.,
7.20%, 06/01/03............................... Ba3 20,000 16,800,000
7.60%, 06/01/08............................... Ba3 16,200 12,798,000
Service Corp. International,
7.00%, 06/01/15............................... A3 2,500 2,588,375
--------------
32,186,375
--------------
CONTAINERS -- 0.7%
Owens-Illinois, Inc.,
7.15%, 05/15/05............................... Ba1 40,000 40,088,400
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B17
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
DRUGS & MEDICAL SUPPLIES -- 0.1%
Mallinckrodt, Inc.,
6.30%, 03/15/11 (b)........................... Baa2 $ 8,000 $ 7,876,500
--------------
FINANCIAL SERVICES -- 7.7%
Advanta Corp., M.T.N.,
6.99%, 10/18/99............................... Ba3 10,000 9,632,000
Associates Corp.,
6.95%, 11/01/18............................... Aa3 29,000 30,901,820
AT&T Capital Corp,
7.50%, 11/15/00............................... Baa3 40,000 40,489,600
AT&T Capital Corp., M.T.N.,
6.25%, 05/15/01............................... Baa3 16,500 16,275,435
Calair Capital Corp.,
8.125%, 04/01/08.............................. Ba2 6,000 5,867,700
Conseco, Inc.,
6.40%, 06/15/11............................... Baa2 25,000 23,972,500
6.80%, 06/15/05............................... Baa3 2,000 1,815,600
8.70%, 11/15/26............................... Ba2 30,038 27,443,161
8.796%, 04/01/27.............................. Ba2 10,200 9,325,860
ContiFinancial Corp.,
7.50%, 03/15/02............................... Ba1 7,740 5,418,000
8.125%, 04/01/08.............................. Ba1 10,700 7,276,000
8.375%, 08/15/03.............................. Ba1 8,000 5,600,000
Enterprise Rent-A-Car USA Finance Co.,
6.35%, 01/15/01............................... Baa3 21,000 21,050,610
6.95%, 03/01/04............................... Baa2 7,500 7,569,900
7.00%, 06/15/00............................... Baa3 13,500 13,557,645
General Motors Acceptance Corp., M.T.N.,
5.95%, 04/20/01............................... A3 14,700 14,817,600
International Lease Finance Corp.,
6.00%, 05/15/02............................... A1 43,100 43,502,123
Lehman Brothers Holdings, Inc.,
6.40%, 08/30/00............................... Baa1 25,650 25,656,413
MCN Investment Corp.,
6.30%, 04/02/11............................... Baa2 8,250 8,194,725
Merrill Lynch, Pierce, Fenner & Smith, Inc.,
6.875%, 11/15/18.............................. Aa3 18,500 19,178,025
Morgan Stanley Dean Witter & Co., M.T.N.,
5.89%, 03/20/00............................... A1 15,000 15,105,600
6.09%, 03/09/11............................... A1 15,000 15,200,250
PT Alatief Freeport Co. (Netherlands),
9.75%, 04/15/01(a)/(c)........................ Ba2 7,600 5,472,000
Salomon, Inc., M.T.N.,
6.59%, 02/21/01............................... Baa1 8,250 8,408,400
6.75%, 08/15/03............................... Baa1 5,000 5,162,200
7.25%, 05/01/01............................... Baa1 8,625 8,933,430
Textron Financial Corp.,
6.05%, 03/16/09 1997-A........................ Aaa 17,639 17,672,740
--------------
413,499,337
--------------
FOREST PRODUCTS -- 0.2%
Fort James Corp.,
6.234%, 03/15/11 1997-A....................... Baa3 11,000 11,103,510
--------------
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
INDUSTRIAL -- 2.0%
Compania Sud Americana de Vapores, S.A. (Chile),
7.375%, 12/08/03.............................. NR $ 5,650 $ 5,070,875
Scotia Pacific Co.,
7.71%, 01/20/14............................... NR 9,800 9,327,248
7.71%, 01/20/14............................... NR 29,500 26,428,460
Security Capital Group,
6.95%, 06/15/05............................... Baa1 4,500 4,297,500
U.S. Filter Corp.,
6.375%, 05/15/01.............................. Ba1 20,000 19,785,600
6.50%, 05/15/03............................... Ba1 42,000 40,911,780
--------------
105,821,463
--------------
LODGING -- 1.0%
ITT Corp.,
6.25%, 11/15/00............................... Baa2 41,983 40,502,679
6.75%, 11/15/03............................... Baa2 14,000 12,891,620
--------------
53,394,299
--------------
MEDIA -- 1.2%
Paramount Communications, Inc.,
7.50%, 01/15/02............................... Ba2 9,100 9,496,123
Time Warner Inc.,
6.625%, 05/15/29.............................. Baa3 36,000 36,628,560
Viacom, Inc.,
7.75%, 06/01/05............................... Ba2 16,850 18,279,386
--------------
64,404,069
--------------
MISCELLANEOUS -- 0.1%
Tokai Preferred Capital,
9.98%, 12/29/49............................... A3 6,000 5,040,000
--------------
OIL & GAS -- 0.1%
B.J. Services Co.,
7.00%, 02/01/06............................... Ba1 4,000 4,139,880
--------------
OIL & GAS SERVICES -- 2.0%
KN Energy, Inc.,
6.30%, 03/01/21............................... Baa2 20,000 20,056,200
R&B Falcon Corp.,
6.50%, 04/15/03............................... Ba1 15,375 13,965,420
6.75%, 04/15/05............................... Ba1 30,000 25,800,000
Seagull Energy Co.,
7.50%, 09/15/27............................... Ba1 8,225 7,366,886
Williams Companies, Inc.,
5.95%, 02/15/10............................... Baa2 41,000 41,045,100
--------------
108,233,606
--------------
REAL ESTATE INVESTMENT TRUST -- 2.1%
Colonial Realty,
7.00%, 07/14/07............................... Baa3 3,350 3,212,349
EOP Operating, L.P.,
6.50%, 06/15/04............................... Baa1 6,000 5,900,400
6.625%, 02/15/05.............................. Bbb 18,187 17,827,443
Equity Residential Properties Trust,
6.15%, 09/15/00............................... A3 25,000 24,835,000
6.63%, 04/13/15............................... A3 15,300 15,097,428
Felcor Suites, L.P.,
7.375%, 10/01/04.............................. Ba1 25,000 23,812,500
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B18
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
REAL ESTATE INVESTMENT TRUST (CONT'D.)
Gables Realty Trust,
6.80%, 03/15/05............................... Baa2 $ 7,500 $ 7,157,175
Simon DeBartolo Group, Inc.,
6.75%, 06/15/05............................... Baa1 17,500 16,969,750
--------------
114,812,045
--------------
RETAIL -- 2.8%
Dayton Hudson,
5.95%, 06/15/00............................... A3 9,000 9,072,270
Federated Department Stores, Inc.,
8.125%, 10/15/02.............................. Ba1 3,600 3,880,548
8.50%, 06/15/03............................... Ba1 54,890 60,542,572
Meyer (Fred), Inc.,
7.15%, 03/01/03............................... Ba2 12,445 12,947,529
Saks, Inc.,
7.50%, 12/01/10............................... Baa3 29,000 28,997,970
8.25%, 11/15/08............................... Baa3 19,700 20,882,000
Sears Roebuck & Co.,
6.50%, 12/01/28............................... A2 17,000 16,686,010
--------------
153,008,899
--------------
TELECOMMUNICATIONS -- 2.1%
360 Communication Co.,
7.125%, 03/01/03.............................. Ba2 23,776 25,160,952
7.60%, 04/01/09............................... Ba1 12,885 14,601,926
Qwest Communications International Inc.,
7.50%, 11/01/08............................... Ba1 39,000 40,560,000
Sprint Corp.,
6.875%, 11/15/28.............................. Baa1 26,000 27,021,800
Worldcom Inc,
6.125%, 08/15/01.............................. Baa2 7,600 7,721,448
--------------
115,066,126
--------------
TOBACCO -- 0.6%
Philip Morris Companies, Inc.,
6.15%, 03/15/10............................... A2 20,000 20,166,000
RJR Nabisco, Inc.,
8.75%, 08/15/05............................... Baa3 4,600 4,641,722
9.25%, 08/15/13............................... Baa3 7,000 7,197,120
--------------
32,004,842
--------------
TRANSPORTATION/TRUCKING/SHIPPING -- 0.2%
Ryder System, Inc.,
7.51%, 03/24/00............................... Baa1 3,000 3,076,080
8.34%, 01/26/00............................... Baa1 5,000 5,152,750
--------------
8,228,830
--------------
UTILITIES -- 1.3%
Calenergy Co., Inc.,
6.96%, 09/15/03............................... Ba1 15,000 15,267,450
8.48%, 09/15/28............................... Ba1 23,000 25,427,190
Enersis SA, (Chile)
7.40%, 12/01/16............................... Baa1 6,400 5,267,200
Niagara Mohawk Power,
7.00%, 10/01/00............................... Ba3 25,000 25,250,000
--------------
71,211,840
--------------
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
LONG-TERM BONDS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 3.1%
Federal National Mortgage Association,
Zero Coupon, 10/09/19......................... $ 11,800 $ 3,521,592
U.S. Treasury Bond,
6.25%, 08/15/23............................... 10,000 11,176,600
U.S. Treasury Note,
4.75%, 11/15/08 (b)........................... 3,700 3,728,897
5.50%, 08/15/28............................... 2,475 2,590,632
6.50%, 05/15/05............................... 9,600 10,521,024
7.50%, 02/15/05............................... 3,100 3,549,500
6.75%, 08/15/26............................... 109,900 131,656,903
--------------
166,745,148
--------------
TOTAL LONG-TERM BONDS
(cost $1,900,228,227).................................................... 1,896,834,358
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $4,559,770,949).................................................... 4,796,380,889
--------------

SHORT-TERM INVESTMENTS -- 10.9%
COMMERCIAL PAPER -- 0.4%
Barton Capital Corp,
5.35%, 01/04/99............................... P1 1,700 1,699,242
Campbell Soup Co.
4.80%, 01/04/99............................... P1 1,198 1,197,521
Countrywide Home Loan,
5.40%, 01/04/99............................... P2 1,700 1,699,235
CXC Inc.,
5.30%, 01/04/99............................... P1 1,700 1,699,249
Dover,
5.30%, 01/04/99............................... NR 1,700 1,699,249
Hershey,
5.00%, 01/04/99............................... P1 1,427 1,426,405
John Hancock Capital Corp.,
5.25%, 01/07/99............................... P1 1,700 1,698,513
Novartis Finance Corp.,
5.25%, 01/04/99............................... P1 1,500 1,499,344
Reed Elsevier, Inc.,
5.05%, 01/04/99............................... P1 1,700 1,699,285
SBC Communications,
5.00%, 01/04/99............................... P1 1,700 1,699,291
Sonoco Products,
5.35%, 01/04/99............................... P1 1,000 999,554
Triple-A One Plus Funding,
5.30%, 01/04/99............................... P1 1,500 1,499,338
Xerox Capital Corp,
5.30%, 01/04/99............................... P1 1,700 1,699,249
--------------
20,215,475
--------------
LOAN PARTICIPATIONS
Alltel Corp.,
5.75%, 01/04/99............................... P1 1,700 1,700,000
--------------
OTHER CORPORATE OBLIGATIONS -- 1.2%
AT&T Capital Corp., M.T.N.,
6.65%, 04/30/99............................... Baa3 24,500 24,579,870
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B19
<PAGE>
FLEXIBLE MANAGED PORTFOLIO (CONTINUED)
DECEMBER 31, 1998

<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
SHORT-TERM INVESTMENTS (CONT'D) (UNAUDITED) (000) (NOTE 2)
------------ --------- --------------
<S> <C> <C> <C>
OTHER CORPORATE OBLIGATIONS (CONT'D.)
Banco Ganadero, SA, M.T.N., (Colombia),
9.75%, 08/26/99............................... NR $ 7,300 $ 7,263,500
Comdisco, Inc.,
6.11%, 08/04/99............................... Baa1 12,500 12,541,375
Okobank (Finland)
6.793%, 1/14/99 (d)........................... NR 12,500 12,500,000
Tele-Communications, Inc.
6.375%, 09/15/99.............................. Ba1 6,400 6,444,992
--------------
63,329,737
--------------
U. S. GOVERNMENT OBLIGATION -- 0.4%
U.S. Treasury Bill,
4.32%, 03/18/99 (b)......................................... 100 99,088
4.36%, 03/18/99 (b)......................................... 22,400 22,193,820
--------------
22,292,908
--------------
REPURCHASE AGREEMENT -- 8.9%
Joint Repurchase Agreement Account
4.693%, 01/04/99 (Note 5)................................... 482,631 482,631,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $590,187,085)...................................................... 590,169,120
--------------
TOTAL INVESTMENTS -- 99.6%................................................. 5,386,550,009
(cost $5,149,958,034; Note 6)
VARIATION MARGIN ON OPEN FUTURES
CONTRACTS (e)............................................................ 809,059
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.4%...................................................... 22,622,320
--------------
TOTAL NET ASSETS -- 100.0%................................................. $5,409,981,388
--------------
--------------
</TABLE>

The following abbreviations are used in portfolio descriptions:
ADR American Depository Receipt
AG Aktiengesellschaft (German Stock Company)
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)

(a) Non-income producing security.

(b) Security segregated as collateral for futures contracts.

(d) Indicates a variable rate security. The maturity date presented for this
instrument is the later of the next date on which the security can be
redeemed at par or the next date on which the rate of interest is adjusted.
The interest rate shown reflects the rate in effect at December 31, 1998.

(e) Open futures contracts as of December 31, 1998 are as follows:

<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION/
CONTRACTS TYPE DATE TRADE DATE DECEMBER 31, 1998 DEPRECIATION
<S> <C> <C> <C> <C> <C>
Long positions:
1,241 U.S. Treasury Bond Mar 99 $159,480,156 $158,576,531 $ (903,625)
1,134 S&P 500 Index Mar 99 337,073,687 353,099,250 16,025,563
---------------
$15,121,938
---------------
---------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

B20
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
THE CONSERVATIVE BALANCED PORTFOLIO AND THE FLEXIBLE MANAGED PORTFOLIO OF
THE PRUDENTIAL SERIES FUND, INC.

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 fifteen Portfolios ("Portfolio" or "Portfolios"),
each with a separate series of capital stock. The information presented in these
financial statements pertains to only two Portfolios: Conservative Balanced
Portfolio and Flexible Managed Portfolio. 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 ("contracts") issued by the Companies. The accounts invest in shares
of the Series Fund through subaccounts that correspond to the Portfolios. The
accounts will redeem shares of the Series Fund to the extent necessary to
provide benefits under the contracts or for such other purposes as may be
consistent with the contracts.

NOTE 2: ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Series Fund in preparation of its financial statements.

SECURITIES VALUATION: Securities traded on an exchange (whether domestic or
foreign) are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market
(including securities listed on exchanges for which a last sales price is not
available) are valued at the average of the last reported bid and asked prices
or at the bid price on such day in the absence of an asked price. 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 determine prices by analysis of quality, coupon, maturity
and other factors. Any security for which a reliable market 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. Short-term securities are
valued at amortized cost.

REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements
with U.S. financial institutions, it is the Series Fund's policy that its
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, take possession of the underlying collateral securities,
the value of which exceeds the principal amount of the repurchase transaction
including accrued interest. If the seller defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the seller of the security, realization of the collateral by the Series Fund may
by delayed or limited. (See Note 5).

FOREIGN CURRENCY TRANSLATION: 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 investments securities, other assets and liabilities - at
the current rates of exchange.

(ii) purchases and sales of investment securities, income and expenses - at the
rate of exchange prevailing on the respective dates of such transactions.

Although the net assets of the Series Fund are presented at the foreign exchange
rates and market values at the close of the fiscal year, the Series Fund does
not isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from changes
in the market prices of securities held at the end of the fiscal year.
Similarly, the Series Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market prices
of long-term portfolio securities sold during the fiscal year. Accordingly,
these realized and unrealized foreign currency gains (losses) are included in
the reported net realized gains (losses) on investment transactions.

C1
<PAGE>
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains or losses from holdings of foreign currencies, currency
gains or losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes recorded on the Series Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized currency gains or losses from
valuing foreign currency denominated assets and liabilities (other than
investments) at fiscal year end exchange rates are reflected as a component of
net unrealized appreciation (depreciation) on investments and foreign
currencies.

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 governmental supervision and regulation of foreign securities
markets.

SHORT SALES: Conservative Balanced Portfolio and Flexible Managed Portfolio may
sell a security it does not own in anticipation of a decline in the market value
of that security (short sale). When a Portfolio makes a short sale, it must
borrow the security sold short and deliver it to the buyer. The proceeds of the
short sale will be retained by the broker-dealer through which it made the short
sale as collateral for its obligation to deliver the security upon conclusion of
the sale. The Portfolio may have to pay a fee to borrow the particular security
and may be obligated to remit any interest or dividends received on such
borrowed securities. A gain, limited to the price at which the Portfolio sold
the security short, or a loss, unlimited in magnitude, will be recognized upon
the termination of a short sale if the market price at termination is less than
or greater than, respectively, the proceeds originally received.

OPTIONS: The Series Fund may either purchase or write options in order to hedge
against adverse market movements or fluctuations in value with respect to
securities which the Series Fund currently owns or intends to purchase. The
Series Fund's principal reason for writing options is to realize, through
receipts of premiums, a greater current return than would be realized on the
underlying security alone. When the Series Fund purchases an option, it pays a
premium and an amount equal to that premium is recorded as an investment. When
the Series Fund writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The investment or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Series Fund realizes a gain or loss to the extent of the
premium received or paid. If an option is exercised, the premium received or
paid is an adjustment to the proceeds from the sales or the cost of the purchase
in determining whether the Series Fund has realized a gain or loss. The
difference between the premium and the amount received or paid on effecting a
closing purchase or sale transaction is also treated as a realized gain or loss.
Gain or loss on purchased options is included in net realized gain (loss) on
investment transactions. Gain or loss on written options is presented separately
as net realized gain (loss) on written option transactions.

The Series Fund, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Series Fund bears the market risk of an unfavorable change in the price of the
security underlying the written option. The Series Fund, as purchaser of an
option, bears the risk of the potential inability of the counterparties to meet
the terms of their contracts.

FINANCIAL FUTURES CONTRACTS: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series Fund is required to pledge to the broker an amount of cash and/or
other assets equal to a certain percentage of the contract amount. This amount
is known as the "initial margin." Subsequent payments, known as "variation
margin," are made or received by the Series Fund each day, depending on the
daily fluctuations in the value of the underlying security. Such variation
margin is recorded for financial statement purposes on a daily basis as
unrealized gain or loss. When the contract expires or is closed, the gain or
loss is realized and is presented in the statement of operations as net realized
gain (loss) on financial futures contracts.

The Series Fund invests in financial futures contracts in order to hedge its
existing portfolio securities or securities the Series Fund intends to purchase,
against fluctuations in value. Under a variety of circumstances, the Series Fund
may not achieve the anticipated benefits of the financial futures contracts and
may realize a loss. The use of futures transactions involves the risk of
imperfect correlation in movements in the price of futures contracts and the
underlying assets.

SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income, which is comprised of four elements: stated
coupon, original issue discount, market discount and market premium is recorded
on the accrual basis. Certain

C2
<PAGE>
portfolios own shares of real estate investment trusts ("REITs") which report
information on the source of their distributions annually. A portion of
distributions received from REITs during the year is estimated to be a return of
capital and is recorded as a reduction of their costs. Expenses are recorded on
the accrual basis which may require the use of certain estimates by management.
The Series Fund expenses are allocated to the respective Portfolios on the basis
of relative net assets except for expenses that are charged directly at a
Portfolio level.

CUSTODY FEE CREDITS: The Series Fund has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian. Such custody fee credits are presented as a reduction of gross
expenses in the accompanying Statement of Operations.

TAXES: For federal income tax purposes, each portfolio in the Series Fund is
treated as a separate taxpaying entity. It is the intent of the Series Fund to
continue to meet the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its net income to
shareholders. Therefore, no federal income tax provision is required.

Withholding taxes on foreign dividends, interest and capital gains have been
provided for in accordance with the Series Fund's understanding of the
applicable country's tax rules and regulations.

DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions of each Portfolio are
declared in cash and automatically reinvested in additional shares of the
Portfolio. Each Portfolio will declare and distribute dividends from net
investment income, if any, quarterly and net capital gains, if any, at least
annually. Dividends and distributions are recorded on the ex-dividend date.

Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.

NOTE 3: AGREEMENTS

The Series Fund has an investment advisory agreement with The Prudential.
Pursuant to this agreement The Prudential has responsibility for all investment
advisory services and supervises the subadvisers' performance of such services.
The Prudential has entered into a service agreement with 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 the investment advisory agreement with the
Series Fund. The Prudential pays for the cost of PIC's services, compensation of
officers of the Series Fund, occupancy and certain clerical and administrative
expenses of the Series Fund. The Series Fund bears all other costs and expenses.

The investment advisory fee paid The Prudential is computed daily and payable
quarterly, at the annual rates specified below of the value of each of the
Portfolio's average daily net assets.

<TABLE>
<CAPTION>
FUND INVESTMENT ADVISORY FEE
- --------------------------------------- ------------------------
<S> <C>
Conservative Balanced Portfolio........ 0.55%
Flexible Managed Portfolio............. 0.60
</TABLE>

The Prudential has agreed to refund to a Portfolio, the portion of the
investment advisory 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. No refund was required for the fiscal year ended December 31, 1998.

PIC is an indirect, wholly-owned subsidiary of The Prudential.

The Series Fund has a credit agreement (the "Agreement") with an unaffiliated
lender. The maximum commitment under the Agreement is $250,000,000. The
Agreement expired on December 18, 1998 and has been extended through February
28, 1999 under the same terms. Interest on any such borrowings outstanding will
be at market rates. The purpose of the Agreement is to serve as an alternative
source of funding for capital share redemptions. The Series Fund did not borrow
any amounts pursuant to the Agreement during the year ended December 31, 1998.
The Series Fund pays a commitment fee at an annual rate of .055 of 1% on the
unused portion of the credit facility. The commitment fee is accrued and paid
quarterly by the Series Fund.

C3
<PAGE>
NOTE 4: OTHER TRANSACTIONS WITH AFFILIATES

For the fiscal year ended December 31, 1998, Prudential Securities Incorporated,
an indirect, wholly-owned subsidiary of The Prudential, earned $135,511 in
brokerage commissions from transactions executed on behalf of the Conservative
Balanced Portfolio and the Flexible Managed Portfolio as follows:

<TABLE>
<CAPTION>
Fund Commission
- --------------------------------------- -----------
<S> <C>
Conservative Balanced Portfolio........ $ 32,490
Flexible Managed Portfolio............. 103,021
-----------
$ 135,511
</TABLE>

NOTE 5: JOINT REPURCHASE AGREEMENT ACCOUNT

The Portfolios of the Series Fund (excluding Global Portfolio) may transfer
uninvested cash balances into a single joint repurchase agreement 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 interest in the joint repurchase agreement account represented
$932,710,000 as of December 31, 1998. The Portfolios of the Series Fund with
cash invested in the joint accounts had the following principal amounts and
percentage participation in the account:

<TABLE>
<CAPTION>
PRINCIPAL PERCENTAGE
AMOUNT INTEREST
------------- ----------
<S> <C> <C>
Conservative Balanced Portfolio........ $ 109,421,000 11.73%
Flexible Managed Portfolio............. 482,631,000 51.75
All other portfolios (currently not
available to PRUvider)............... 340,658,000 36.52
------------- ----------
$ 932,710,000 100.00%
</TABLE>

As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:

Bear, Stearns & Co., Inc., 4.75%, in the principal amount of $255,000,000,
repurchase price $255,134,583, due 1/4/99. The value of the collateral including
accrued interest was $260,454,041.

Credit Suisse First Boston Corp., 4.88%, in the principal amount of $50,000,000,
repurchase price $50,027,111, due 1/4/99. The value of the collateral including
accrued interest was $52,533,163.

CIBC Oppenheimer, 4.75%, in the principal amount of $255,000,000, repurchase
price $255,134,583, due 1/4/99. The value of the collateral including accrued
interest was $260,553,672.

SBC Warburg Dillon Reed Inc., 4.70%, in the principal amount of $255,000,000,
repurchase price $255,133,167, due 1/4/99. The value of the collateral including
accrued interest was $261,037,802.

Morgan (JP) Securities, Inc., 4.35%, in the principal amount of $117,710,000,
repurchase price $117,766,893, due 1/4/99. The value of the collateral including
accrued interest was $120,272,486.

NOTE 6: PORTFOLIO SECURITIES

The aggregate cost of purchases and the proceeds from the sales of securities
(excluding short-term issues) for the fiscal year ended December 31, 1998 were
as follows:

Cost of Purchases:

<TABLE>
<CAPTION>
CONSERVATIVE FLEXIBLE
BALANCED MANAGED
--------------- ---------------
<S> <C> <C>
Government Securities.................. $ 2,907,392,972 $ 2,497,336,303
Non-Government Securities.............. $ 4,664,947,720 $ 4,533,514,880
</TABLE>

Proceeds from Sales:

<TABLE>
<CAPTION>
CONSERVATIVE FLEXIBLE
BALANCED MANAGED
--------------- ---------------
<S> <C> <C>
Government Securities.................. $ 2,956,094,381 $ 2,461,697,036
Non-Government Securities.............. $ 4,778,976,239 $ 5,139,626,859
</TABLE>

C4
<PAGE>
The federal income tax basis and unrealized appreciation (depreciation) of the
Fund's investments as of December 31, 1998 were as follows:

<TABLE>
<CAPTION>
CONSERVATIVE FLEXIBLE
BALANCED MANAGED
--------------- ---------------
<S> <C> <C>
Gross Unrealized Appreciation.......... $ 429,047,409 $ 555,358,703
Gross Unrealized Depreciation.......... 164,278,673 320,658,740
Total Net Unrealized................... 264,768,736 234,699,963
Tax Basis.............................. 4,497,706,049 5,151,850,046
</TABLE>

C5
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
CONSERVATIVE BALANCED
-----------------------------------------------------
YEAR ENDED
DECEMBER 31,
-----------------------------------------------------
1998 1997 1996 1995(a) 1994(a)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 14.97 $ 15.52 $ 15.31 $ 14.10 $ 14.91
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.66 0.76 0.66 0.63 0.53
Net realized and unrealized gains
(losses) on investments.............. 1.05 1.26 1.24 1.78 (0.68)
--------- --------- --------- --------- ---------
Total from investment operations... 1.71 2.02 1.90 2.41 (0.15)
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.66) (0.76) (0.66) (0.64) (0.51)
Distributions from net realized
gains................................ (0.94) (1.81) (1.03) (0.56) (0.15)
--------- --------- --------- --------- ---------
Total distributions................ (1.60) (2.57) (1.69) (1.20) (0.66)
--------- --------- --------- --------- ---------
Net Asset Value, end of year........... $ 15.08 $ 14.97 $ 15.52 $ 15.31 $ 14.10
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN:(b)............ 11.74% 13.45% 12.63% 17.27% (0.97)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $4,796.0 $4,744.2 $4,478.8 $3,940.8 $3,501.1
Ratios to average net assets:
Expenses............................. 0.57% 0.56% 0.59% 0.58% 0.61%
Net investment income................ 4.19% 4.48% 4.13% 4.19% 3.61%
Portfolio turnover rate................ 167% 295% 295% 201% 125%

FINANCIAL HIGHLIGHTS
</TABLE>

<TABLE>
<CAPTION>
FLEXIBLE MANAGED
-----------------------------------------------------
YEAR ENDED
DECEMBER 31,
-----------------------------------------------------
1998 1997 1996 1995(a) 1994(a)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, beginning of year..... $ 17.28 $ 17.79 $ 17.86 $ 15.50 $ 16.96
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................. 0.58 0.59 0.57 0.56 0.47
Net realized and unrealized gains
(losses) on investments.............. 1.14 2.52 1.79 3.15 (1.02)
--------- --------- --------- --------- ---------
Total from investment operations... 1.72 3.11 2.36 3.71 (0.55)
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.59) (0.58) (0.58) (0.56) (0.45)
Distributions from net realized
gains................................ (1.85) (3.04) (1.85) (0.79) (0.46)
--------- --------- --------- --------- ---------
Total distributions................ (2.44) (3.62) (2.43) (1.35) (0.91)
--------- --------- --------- --------- ---------
Net Asset Value, end of year........... $ 16.56 $ 17.28 $ 17.79 $ 17.86 $ 15.50
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN:(b)............ 10.24% 17.96% 13.64% 24.13% (3.16)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
millions)............................ $5,410.0 $5,490.1 $4,896.9 $4,261.2 $3,481.5
Ratios to average net assets:
Expenses............................. 0.61% 0.62% 0.64% 0.63% 0.66%
Net investment income................ 3.21% 3.02% 3.07% 3.30% 2.90%
Portfolio turnover rate................ 138% 227% 233% 173% 124%
</TABLE>

(a) Calculations are based on average month-end shares outstanding.

(b) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions.

SEE NOTES TO FINANCIAL STATEMENTS.

D1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE PRUDENTIAL SERIES FUND, INC.:

In our opinion, the accompanying statements of assets and liabilities, including
the Portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Conservative Balanced and
Flexible Managed Portfolios (the "Portfolios"), two of the fifteen portfolios
that comprise The Prudential Series Fund, Inc. at December 31, 1998, the results
of each of their operations for the year then ended, the changes in each of
their net assets for each of the two years in the period then ended and the
financial highlights for each of the three years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolios' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above. The accompanying financial
highlights for each of the two years in the period ended December 31, 1995 for
each of the Portfolios were audited by other independent accountants, whose
opinion dated February 15, 1996 was unqualified.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
February 12, 1999

TAX INFORMATION (UNAUDITED)

Although we understand that the vast majority, if not all, of the
shareholders/contract holders of the Series Fund currently maintain a tax
deferred status, we are nevertheless required by the Internal Revenue Code to
advise you within 60 days of the Series Fund's fiscal year end (December 31,
1998) as to the federal tax status of dividends paid by the Series Fund during
such fiscal year. Accordingly, we are advising you that in 1998, the Series Fund
paid dividends as follows:

<TABLE>
<CAPTION>
ORDINARY DIVIDENDS
----------------------------
SHORT-TERM LONG-TERM TOTAL
INCOME CAPITAL GAINS CAPITAL GAINS DIVIDENDS
----------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Conservative Balanced Portfolio $ 0.664 $ 0.898 $ 0.044 $ 1.606
Flexible Managed Portfolio 0.586 0.949 0.901 2.436
</TABLE>

E1
<PAGE>
BOARD OF
DIRECTORS THE PRUDENTIAL SERIES FUND, INC.

<TABLE>
<S> <C> <C>
MENDEL A. MELZER, CFA W. SCOTT McDONALD, JR., Ph.D. E. MICHAEL CAULFIELD
CHAIRMAN, VICE PRESIDENT, EXECUTIVE VICE PRESIDENT,
THE PRUDENTIAL SERIES FUND, INC. KALUDIS CONSULTING GROUP PRUDENTIAL FINANCIAL MANAGEMENT
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
</TABLE>

<TABLE>
<S> <C>
SAUL K. FENSTER, Ph.D. JOSEPH WEBER, Ph.D.
PRESIDENT, VICE PRESIDENT,
NEW JERSEY INSTITUTE OF TECHNOLOGY INTERCLASS (INTERNATIONAL CORPORATE LEARNING)
</TABLE>

<PAGE>

PRUVIDER(SM)
VARIABLE APPRECIABLE LIFE(R)
INSURANCE

[GRAPHIC OMITTED]

[LOGO] Prudential

Pruco Life Insurance Company
213 Washington Street, Newark, NJ 07102-2992
Telephone 800 778-2255

SVAL-1SAI Ed. 5/99 CAT# 64M086G

<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.

REPRESENTATION WITH RESPECT TO CHARGES

Pruco Life Insurance Company represents that the fees and charges deducted under
the PRUvider Variable Appreciable Life Insurance Contracts registered by this
registration statement, in the aggregate, are reasonable in relation to the
services rendered, the expenses to be incurred, and the risks assumed by the
depositor.

UNDERTAKING WITH RESPECT TO INDEMNIFICATION

The Registrant, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.

Arizona, being the state of organization of Pruco Life Insurance Company
("Pruco"), permits entities organized under its jurisdiction to indemnify
directors and officers with certain limitations. The relevant provisions of
Arizona law permitting indemnification can be found in Section 10-850 et seq. of
the Arizona Statutes Annotated. The text of Pruco's By-law, Article VIII, which
relates to indemnification of officers and directors, is incorporated by
reference to Exhibit 3(ii) to its Form 10-Q, SEC File No. 33-37587, filed August
15, 1997.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") 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 81 pages.

The Statement of Additional Information consisting of 61 pages.

The undertaking to file reports.

The representation with respect to charges.

The undertaking with respect to indemnification.

The signatures.

Written consents of the following persons:

1. PricewaterhouseCoopers LLP, independent accountants.
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 6)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities
Corporation and Pruco Life Insurance Company. (Note 6)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the
Sale of the Contracts. (Note 6)
(c) Schedules of Sales Commissions. (Note 6)
(4) Not Applicable.
(5) PRUvider Variable Appreciable Life Insurance Contract. (Note
6)
(6) (a) Articles of Incorporation of Pruco Life Insurance
Company, as amended October 19, 1993. (Note 2)
(b) By-laws of Pruco Life Insurance Company, as amended May
6, 1997. (Note 7)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form. (Note 2)
(b) Supplement to the Application for PRUvider Variable
Appreciable Life Insurance Contract. (Note 6)
(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
6)
(b) Rider for Applicant's Payment of Premium Benefit. (Note
6)
(c) Rider for Insured's Accidental Death and Dismemberment
Benefit. (Note 6)

II-2

<PAGE>

(d) Rider for Option to Purchase Additional Insurance on
Life of Insured. (Note 6)
(e) Rider for Level Term Insurance Benefit on Dependent
Children. (Note 6)
(f) Rider for Level Term Insurance Benefit on Dependent
Children--from Term Conversions. (Note 6)
(g) Rider for Level Term Insurance Benefit on Dependent
Children--from Term Conversions or Attained Age Change.
(Note 6)
(h) Living Needs Benefit Rider
(i) for use in Florida. (Note 2)
(ii) for use in all approved jurisdictions except
Florida. (Note 2)
(i) Rider for Term Insurance Benefit on Life of
Insured--Decreasing Amount. (Note 6)
(j) Rider for Term Insurance Benefit on Life of Insured
Spouse--Decreasing Amount. (Note 6)
(k) Endorsement altering the Assignment provision ORD
89224--94-P. (Note 6)

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 6)

8. Powers of Attorney.

(a) William M. Bethke, Ira J. Kleinman,
Esther H. Milnes, I. Edward Price (Note 5)
(b) Kiyofumi Sakaguchi (Note 6)
(c) James J. Avery, Jr. (Note 8)
(d) Dennis G. Sullivan (Note 3)

(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Form S-6, Registration No. 333-07451,
filed July 2, 1996 on behalf of the Pruco Life Variable Appreciable
Account.

(Note 3) Incorporated by reference to Post-Effective Amendment No. 6 to Form
S-1, Registration No. 33-86780, filed April 16, 1999 on behalf of the
Pruco Life Variable Contract Real Property Account.

(Note 4) Incorporated by reference to Post-Effective Amendment No. 7 to this
Registration Statement, filed April 25, 1996.
(Note 5) Incorporated by reference to Form 10-K, Registration No. 33-08698,
filed March 31, 1997 on behalf of the Pruco Life Variable Contract
Real Property Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 8 to this
Registration Statement, filed April 28, 1997.
(Note 7) Incorporated by reference to Form 10-Q, Registration No. 33-37587,
filed August 15, 1997, on behalf of the Pruco Life Insurance Company.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 2 to Form
S-6, Registration No. 333-07451, filed June 25, 1997 on behalf of the
Pruco Life Variable Appreciable 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 23rd day of April, 1999.

(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. 11 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 23rd day of April, 1999.

SIGNATURE AND TITLE

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

/s/ *
- ----------------------------------
Dennis G. Sullivan
Vice President and Chief
Accounting Officer

/s/ *
- ----------------------------------
James J. Avery, Jr.
Director

/s/ * *By: /s/ Thomas C. Castano
- ---------------------------------- ----------------------------------
William M. Bethke Thomas C. Castano
Director (Attorney-in-Fact)

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

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

/s/ *
- ----------------------------------
Kiyofumi Sakaguchi
Director

II-4

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 11 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated March 19, 1999, relating to the
financial statements of the Pruco Life PRUvider Variable Appreciable Account,
which appears in such Prospectus.

We also consent to the use in the Prospectus constituting part of this
Registration Statement of our report dated February 26, 1999, relating to the
consolidated financial statements of Pruco Life Insurance Company and
Subsidiaries, which appears in such Prospectus.

We also consent to the use in the Statement of Additional Information
constituting part of this Registration Statement of our report dated February
12, 1999, relating to the financial statements and financial highlights of the
Conservative Balanced and Flexible Managed Portfolios, two of the fifteen
portfolios that comprise The Prudential Series Fund, Inc., which appears in such
Statement of Additional Information.

We also consent to the references to us under the headings "Financial
Highlights" and "Experts" in the Prospectus and "Experts" in the Statement of
Additional Information.

PricewaterhouseCoopers LLP

New York, New York
April 23, 1999

II-5

<PAGE>

EXHIBIT INDEX

Consent of PricewaterhouseCoopers LLP, independent Page II-5
accountants

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.

II-6

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

II-7
<PAGE>

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
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

II-8
<PAGE>

be back dated up to six months, provided that all past due scheduled premiums
are paid with the application and 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

II-9
<PAGE>

upon receipt by Pruco Life of a written application for reinstatement,
production of evidence of insurability satisfactory 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

II-10
<PAGE>

will 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) $2,000. Such
transfer requests received prior to the contract

II-11
<PAGE>

anniversary will be effected on the contract anniversary. Transfer requests
received within the thirty-day period beginning on the 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 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

II-14
<PAGE>

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.

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<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.

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April 23, 1999

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,

/S/
- ----------------------------
Clifford E. Kirsch

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Exhibit 6

April 23, 1999

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.
11 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,

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

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