ADVISOR SELECT P R UL I F E. Pruco Life of New Jersey Variable Appreciable Account

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1 Pruco Life of New Jersey Variable Appreciable Account Pruco Life Insurance Company of New Jersey (in New Jersey and New York) P R UL I F E ADVISOR SELECT V ARIABLE UNIVERSAL LIFE INSURANCE PROSPECTUS MAY 1, 2003

2 SUPPLEMENT DATED OCTOBER 24, 2003 TO PROSPECTUS DATED MAY 1, 2003 FOR PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT with respect to PruLife Advisor Select Variable Universal Life Insurance Contracts The following replaces the fourth paragraph in the Transfers section on page 27 in the PruLife Advisor Select prospectus: Contract owners who provide us with a power of attorney authorizing an investment advisor that: has a minimum of $200 million in assets under management and (1) has a minimum of $20 million in assets under management within PruLife Advisor Select variable universal life insurance contracts, or (2) for a period of nine months following first authorization of the investment advisor by power of attorney to manage assets within PruLife Advisor Select variable universal life insurance contracts, has committed to $20 million in assets under management within PruLife Advisor Select variable universal life insurance contracts by the end of that nine month period; signs and adheres to certain indemnification agreements with us; demonstrates systems and technology capabilities that we require and has the ability to meet specific protocols in transmitting trading activity; and is registered as an investment advisor with the SEC or state(s), as appropriate; will be allowed a later cut-off time for asset allocations, re-allocations and transfers, and will be authorized by us to transmit the trading activity directly to ProFund Advisors LLC. Cut-off times by which ProFund Advisors LLC must receive trading activity directly will vary by fund. VULPASNJSUP

3 PROSPECTUS May 1, 2003 PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT PruLife Advisor Select This prospectus describes individual flexible premium variable universal life insurance contracts, PruLife Advisor Select (the "Contract") offered by Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey," "us," "we," or "our"). Pruco Life of New Jersey is an indirect, wholly-owned subsidiary of The Prudential Insurance Company of America. You may choose to invest your Contract s premiums and its earnings in one or more of 37 available ProFund VP variable investment options of the Pruco Life of New Jersey Variable Appreciable Account (the Account ): ProFund VP variable investment options ProFund VP Bull ProFund VP Small-Cap ProFund VP OTC ProFund VP Asia 30 ProFund VP Japan ProFund VP Europe 30 ProFund VP Mid-Cap Value ProFund VP Mid-Cap Growth ProFund VP Small-Cap Value ProFund VP Small-Cap Growth ProFund VP U.S. Government Plus ProFund VP UltraBull ProFund VP UltraMid-Cap ProFund VP UltraSmall-Cap ProFund VP UltraOTC ProFund VP Bear ProFund VP Short Small-Cap ProFund VP Short OTC ProFund VP Rising Rates Opportunity ProFund VP Banks ProFund VP Basic Materials ProFund VP Biotechnology ProFund VP Consumer Cyclical ProFund VP Consumer Non-Cyclical ProFund VP Energy ProFund VP Financial ProFund VP Healthcare ProFund VP Industrial ProFund VP Internet ProFund VP Pharmaceuticals ProFund VP Precious Metals ProFund VP Real Estate ProFund VP Semiconductor ProFund VP Technology ProFund VP Telecommunications ProFund VP Utilities ProFund VP Money Market For a complete list of the 37 available ProFund VP variable investment options, their investment objectives, and their investment adviser, see The Funds, page 10. Please Read this Prospectus. Please read this prospectus before purchasing a PruLife Advisor Select variable appreciable life insurance contract and keep it for future reference. A current prospectus for the underlying mutual fund accompanies this prospectus. These prospectuses contains important information about the mutual fund. Please read these prospectuses and keep them for reference. Neither the Securities and Exchange Commission ( SEC ) nor any state securities commission has approved or disapproved of these securities or determined that this contract is a good investment, nor has the SEC determined that this prospectus is complete or accurate. It is a criminal offense to state otherwise. The Contract may be purchased through registered representatives located in banks and other financial institutions. Investment in a variable life insurance policy is subject to risk, including the possible loss of your money. An investment in PruLife Advisor Select is not a bank deposit and is not insured by the Federal Deposit Insurance Corporation ( FDIC ) or any other governmental agency. Pruco Life Insurance Company of New Jersey 213 Washington Street Newark, New Jersey Telephone: (800)

4 35263(&786&217(176 Page SUMMARY OF CHARGES AND EXPENSES...1 Expenses other than Portfolio Expenses...1 Portfolio Expenses...3 SUMMARY OF THE CONTRACT AND CONTRACT BENEFITS...3 Brief Description of the Contract...3 Target Term Rider...3 Types of Death Benefit Available Under the Contract...4 Death Benefit Guarantee...4 The Contract Fund...4 Premium Payments...4 Allocation of Premiums...5 Investment Choices...5 Transfers Among Investment Options...5 Increasing or Decreasing Basic Insurance Amount...5 Access to Contract Values...6 Contract Loans...6 Canceling the Contract ( Free-Look )...6 SUMMARY OF CONTRACT RISKS...6 Contract Values are not Guaranteed...6 Increase in Charges...6 Contract Lapse...7 Risks of Using the Contract as a Short-Term Savings Vehicle...7 Risks of Taking Withdrawals...7 Limitations on Transfers...7 Limitations and Charges on Surrender of the Contract...8 Risks of Taking a Contract Loan...8 Tax Consequences of Buying this Contract...8 Replacement of the Contract...9 SUMMARY OF RISKS ASSOCIATED WITH THE PROFUND VP VARIABLE INVESTMENT OPTIONS...9 Risks Associated with the ProFund VP Variable Investment Options...9 Learn More about the Funds...10 GENERAL DESCRIPTIONS OF THE REGISTRANT, DEPOSITOR, AND PORTFOLIO COMPANY...10 Pruco Life Insurance Company of New Jersey...10 The Pruco Life of New Jersey Variable Appreciable Account...10 The Funds...10 Voting Rights...17 Substitution of Funds...17 CHARGES AND EXPENSES...17 Sales Load Charges...17 Surrender Charges...18 Cost of Insurance...19 Taxes Attributable to Premiums...20 Monthly Deductions from the Contract Fund...20 Daily Deduction from the ProFund VP Variable Investment Options...21 Transaction Charges...21 Allocated Charges...21 Charges After Age Portfolio Charges...22 Rider Charges...22

5 PERSONS HAVING RIGHTS UNDER THE CONTRACT...22 Contract Owner...22 Beneficiary...22 OTHER GENERAL CONTRACT PROVISIONS...22 Assignment...22 Incontestability...23 Misstatement of Age or Sex...23 Settlement Options...23 Suicide Exclusion...23 RIDERS...23 Target Term Rider...23 Enhanced Disability Benefit...25 Living Needs Benefit...25 REQUIREMENTS FOR ISSUANCE OF A CONTRACT...26 PREMIUMS...26 Minimum Initial Premium...26 Available Types of Premium...26 Allocation of Premiums...27 Transfers...27 DEATH BENEFITS...29 Contract Date...29 When Proceeds Are Paid...29 Types of Death Benefit...29 Changing the Type of Death Benefit...30 Death Benefit Guarantee...31 Increases in Basic Insurance Amount...33 Decreases in Basic Insurance Amount...34 CONTRACT VALUES...35 How a Contract s Cash Surrender Value Will Vary...35 Surrender of a Contract...35 Loans...35 Withdrawals...36 LAPSE AND REINSTATEMENT...37 TAXES...37 Tax Treatment of Contract Benefits...37 LEGAL PROCEEDINGS...40 ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS...40 ADDITIONAL INFORMATION...42 DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS...43 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION...45

6 6800$5<2)&+$5*(6$1'(;3(16(6 Capitalized terms used in this prospectus are defined where first used or in the DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS on page 43 of this prospectus. ([SHQVHVRWKHUWKDQ3RUWIROLR([SHQVHV The following tables describe the maximum fees and expenses that you could pay when buying, owning, and surrendering the Contract. Generally, our current fees and expenses are lower than the maximum fees and expenses reflected in the following tables. For more information about fees and expenses, see CHARGES AND EXPENSES, page 17. The first table describes the maximum fees and expenses that you will pay at the time you buy the Contract, surrender the Contract, or transfer cash value between investment options. Transaction and Optional Rider Fees Charge When Charge is Deducted Amount Deducted Maximum Sales Charge on (1) Premiums (Load) Deducted from premium payments. 6% of premium payment. Taxes Attributable to Premiums (2) Deducted from premium payments. 7.5% of premium payment. Surrender fees (3) Upon lapse, surrender, or decrease in basic insurance amount. 90.0% of the Sales Load Target Premium less premium for riders and extras. Withdrawal fee Upon withdrawal. Lesser of $25 or 2% of the withdrawal amount. Insurance Amount Change fee Upon change in basic insurance amount or Target Term Rider coverage. $25. Living Needs Benefit fee When benefit is paid. $150. (1) This charge is deducted from premium payments for the first 10 Contract years (or the first 10 years of a coverage segment representing an increase in basic insurance amount). (2) For these purposes, taxes attributable to premiums shall include any federal, state or local income, premium, excise, business, or any other type of tax (or component thereof) measured by or based upon the amount of premium received by Pruco Life of New Jersey. (3) The percentage varies by age, sex, and underwriting class, and reduces annually at a constant rate to zero. The duration of the charge also varies by age ranging from ten years at ages 0 55 to three years at ages 69 and above. 1

7 Periodic Contract and Optional Rider Charges Other Than The Funds Operating Expenses Charge When Charge is Deducted Amount Deducted Cost of Insurance( COI ) for base amount of insurance and Target Term Rider coverage. Minimum and Maximum charges Monthly $.06 to $83.34 per $1,000 of net amount at risk.(1)(2) Initial COI for a representative Contract owner, male age 32 in the preferred non-smoker underwriting class, no riders. Monthly $.15 per $1,000 of net amount at risk. Mortality and Expense Risk fees Daily Annual rate of 0.45% of assets in variable investment options. Net interest on loans (3) Annually 1% Administrative fee for basic insurance amount. (4) Monthly $20 plus up to $1.12 per $1,000 of basic insurance amount. Administrative fee for an increase to basic insurance amount. (4) Monthly $12 per increase segment plus $1.12 per $1,000 of increase. Administrative fee for the Target Term Rider or an increase to the Target Term Rider. (4) Monthly $1.12 per $1,000 of Target Term Rider. Administrative fee for Enhanced Disability Benefit Rider. (4) Monthly 10.44% of the greater of: 9% of the policy target premium or the total of monthly deductions. (1) The charge varies based on the individual characteristics of the insured, including such characteristics as: age, sex, and underwriting class. (2) For example, the highest COI rate is representative of an insured who is a male/female age 99. You may obtain more information about the particular COI charges that apply to you by contacting your Pruco Life of New Jersey representative. (3) The maximum loan rate reflects the net difference between a standard loan with an effective annual interest rate of 5% and an effective annual interest credit equal to 4%. Preferred loans are charged a lower effective annual interest rate. See Loans, page 35. (4) Duration of charge is limited. See CHARGES AND EXPENSES, page 17. 2

8 3RUWIROLR([SHQVHV This table shows the minimum and maximum total operating expenses charged by the Funds that you will pay periodically during the time you own the Contract. More detail concerning each Fund s fees and expenses is contained in the prospectus for each of the Funds. Total Annual Fund Operating Expenses Minimum Maximum (expenses that are deducted from the Fund s assets, including management fees, distribution [and/or service] (12b-1) fees, and other expenses) 1.51% 2.65% %ULHI'HVFULSWLRQRIWKH&RQWUDFW 6800$5<2)7+(&2175$&7 $1'&2175$&7%(1(),76 PruLife Advisor Select is a form of variable appreciable life insurance. A variable appreciable life insurance contract is a flexible form of life insurance. It has a death benefit and a Contract Fund, the value of which changes every day according to the investment performance of the investment options to which you have allocated your net premiums. You may invest premiums in one or more of the 37 available ProFund VP variable investment options. Although the value of your Contract Fund will increase if there is favorable investment performance in the ProFund VP variable investment options you select, investment returns in the ProFund VP variable investment options are NOT guaranteed. There is a risk that investment performance will be unfavorable and that the value of your Contract Fund will decrease. The risk will be different, depending upon which investment options you choose. You bear the risk of any decrease. The Contract is designed to be flexible to meet your specific life insurance needs. Within certain limits, the Contract will provide you with flexibility in determining the amount and timing of your premium payments. The ProFund VP variable investment options of the Contract were chosen to accommodate those who plan to use programmed, large, or frequent transfers among the ProFund VP variable investment options, or market timing. We will allow you to designate an investment adviser that you select, compensate, and supervise, to request transfers between ProFund VP variable investment options on your behalf. 7DUJHW7HUP5LGHU These Contracts may be issued with a Target Term Rider (not available in states where it is not approved) that could have a significant effect on the performance of your Contract. Target Term Rider provides a flexible term insurance benefit to attained age 100 on the life of the insured. You specify the amount of term rider coverage, up to four times the base Contract s basic insurance amount. A Contract with a Target Term Rider will offer higher cash values and death benefits than an all-base Contract with the same death benefit if Pruco Life of New Jersey does not change its current charges. This is because the current sales expense charge attributable to the Target Term Rider is 2% rather than the 4% charge attributable to the Sales Load Target Premium under the base policy. We currently assess lower current Cost of Insurance ( COI ) charges under the term rider; and we currently charge no monthly administrative charge under the rider. However, a Contract with a Target Term Rider offers the potential for a greater reduction of cash values and death benefits than an all-base Contract with the same death benefit if Pruco Life of New Jersey raises its current charges to the maximum contractual level. This is because guaranteed maximum charges attributable to the basic insurance amount and the Target Term Rider coverage amount are the same except for the per $1,000 of insurance portion of the monthly administrative charge which extends for 10 years on the rider and only 5 years on the base policy. The surrender charge does not apply to the Target Term Rider. Not all Contract benefits and guarantees are available to Contracts issued with a Target Term Rider. For the factors to consider when adding a Target Term Rider to your Contract, see RIDERS, page 23. 3

9 7\SHVRI'HDWK%HQHILW$YDLODEOH8QGHUWKH&RQWUDFW There are three types of death benefit available. You may choose a Contract with a Type A (fixed) death benefit under which the death benefit generally remains at the basic insurance amount you initially chose. However, the Contract Fund (described below) may grow to a point where the death benefit may increase and vary with investment experience. If you choose a Type B (variable) Contract, your death benefit will vary with investment experience. For Type A and Type B death benefits, as long as the Contract is in-force, the death benefit will never be less than the basic insurance amount shown in your Contract. If you choose a Contract with a Type C (return of premium) death benefit, the death benefit is increased by the amount of premiums paid into the Contract, less withdrawals. With any type of death benefit, the death benefit may be increased to ensure that the Contract will satisfy the Internal Revenue Code s definition of life insurance. You may change your Contract s death benefit type after issue, however, if you choose a Type A or Type B death benefit at issue, you will not be able to change to a Type C death benefit thereafter. See Types of Death Benefit, page 29 and Changing the Type of Death Benefit, page 30. 'HDWK%HQHILW*XDUDQWHH We agree to keep the Contract in-force for a specified period, regardless of the investment performance under your Contract, as long as your accumulated premiums (reduced to reflect withdrawals) are at least equal to the Death Benefit Guarantee Values shown in your Contract. An outstanding Contract loan will negate the guarantee. See Withdrawals, page 36, and Loans, page 35. There are three separate guarantee periods, each associated with a corresponding level of premium payments. For example, payment of the Short-Term Premium at the beginning of each Contract year guarantees that your Contract will not lapse during the first five Contract years, assuming no loans or withdrawals. Paying the Target Premium at the beginning of each Contract year guarantees your Contract against lapse until the later of the insured's age 65 or for 10 years after issue, whichever comes later, assuming no loans or withdrawals. Finally, paying the Lifetime Premium at the beginning of each Contract year guarantees your Contract against lapse for the insured's lifetime, assuming no loans or withdrawals. The Death Benefit Guarantee available on Contracts with a Target Term Rider is limited to five years. See Death Benefit Guarantee, page 31, and PREMIUMS, page 26. Unless the Death Benefit Guarantee is in effect, the Contract will go into default if the Contract Fund less any Contract debt and less any applicable surrender charges fall to zero or less. Your Pruco Life of New Jersey representative can tell you the premium amounts you will need to make to maintain these guarantees. 7KH&RQWUDFW)XQG Your net premiums are invested in one or more of the ProFund VP variable investment options as you instruct us. Your Contract Fund value changes daily, reflecting: (1) increases or decreases in the value of the ProFund VP variable investment options; (2) interest credited on any loan; and (3) the daily asset charge for mortality and expense risks assessed against the ProFund VP variable investment options. The Contract Fund value also changes to reflect the receipt of premium payments and the monthly deductions described under CHARGES AND EXPENSES, page 17. 3UHPLXP3D\PHQWV Except for the minimum initial premium, and subject to a minimum of $25 per subsequent payment, you choose the timing and amount of premium payments. The Contract will remain in-force if the Contract Fund less any applicable surrender charges is greater than zero and more than any Contract debt. Paying insufficient premiums, poor investment results, or the taking of loans or withdrawals from the Contract will increase the possibility that the Contract will lapse. However, if the premiums you paid, accumulated at an effective annual rate of 4%, less withdrawals also accumulated at 4% ( Accumulated Net Payments ) are high enough and there is no Contract debt, Pruco Life of New Jersey guarantees that your Contract will not lapse even if investment experience is very unfavorable and the Contract Fund drops below zero. The length of time that the guarantee against lapse is available depends on your Contract's death benefit type and the definition of life insurance test selected at issue. See PREMIUMS, page 26, Death Benefit Guarantee, page 31 and LAPSE AND REINSTATEMENT, page 37. If you pay more premium than permitted under section 7702A of the Internal Revenue Code, your Contract would be classified as a modified endowment contract, which would affect the federal income tax treatment of loans and withdrawals. For more information, see Modified Endowment Contracts on page 39. 4

10 $OORFDWLRQRI3UHPLXPV Before your premiums are allocated to your investment choices, we deduct a charge for taxes attributable to premiums. We also deduct a charge for sales expenses. For more detail, see CHARGES AND EXPENSES, page 17. The amount remaining after the deduction of these charges is called the net premium. When you apply for the Contract, you tell us how to allocate your premiums. You may change the way in which subsequent premiums are allocated by giving written notice to a Service Office or by telephoning a Service Office, provided you are enrolled to use the Telephone Transfer System. See Allocation of Premiums, page 27. Generally, your initial net premium is applied to your Contract as of the Contract date. If we do not receive your initial premium before the Contract date, we apply the initial premium to your Contract as of the end of the valuation period in which it is received in Good Order at a Service Office. On the Contract date: (1) we deduct the charge for sales expenses and the charge for taxes attributable to premiums from the initial premium; (2) we allocate the remainder of the initial premium and any other premium received during the short-term cancellation right ( free-look ) period to the Money Market investment option. At the end of the freelook period, these funds will be transferred out of the Money Market investment option and allocated among the ProFund VP variable investment options according to your most current allocation request.,qyhvwphqw&krlfhv You may choose to invest your Contract's premiums and its earnings in one or more of 37 available ProFund VP variable investment options. See The Funds, page 10. You may transfer money among your investment choices, subject to restrictions. Please see Transfers on page 27. Pruco Life of New Jersey may add additional ProFund VP variable investment options in the future. 7UDQVIHUV$PRQJ,QYHVWPHQW2SWLRQV You may transfer amounts among the ProFund VP variable investment options without charge. You may transfer amounts by proper written notice to a Service Office, by telephone, provided you are enrolled to use the Telephone Transfer System, or electronically by using electronic tools and procedures that we require. We will allow you to designate an investment adviser that you select, compensate, and supervise to request transfers between ProFund VP variable investment options on your behalf. We must first receive a proper limited power of attorney, and we may require your investment adviser to provide acceptable identification, before we will allow any investment adviser to perform transfers on your behalf. We reserve the right to prohibit transfer requests we determine to be disruptive to the investment option or to the disadvantage of other contract owners, or if we are informed by one or more of the Funds that they intend to restrict the purchase of shares that would have a detrimental effect on the price of the Fund shares.,qfuhdvlqjru'hfuhdvlqj%dvlf,qvxudqfh$prxqw Subject to state approval and to conditions determined by Pruco Life of New Jersey, after the issue of the Contract you may increase the amount of insurance by increasing the basic insurance amount of the Contract. When you do this, you create an additional coverage segment. Each coverage segment will be subject to its own surrender charge and will have its own surrender charge period beginning on that segment s effective date. See Increases in Basic Insurance Amount, page 33, and Surrender Charges, page 18. Subject to certain limitations, you also have the option of decreasing the basic insurance amount of your Contract after the issue of the Contract. See Decreases in Basic Insurance Amount, page 34. For Contracts with more than one coverage segment, a decrease in basic insurance amount will reduce each coverage segment based on the proportion of the coverage segment amount to the total of all coverage segment amounts in effect just before the change. A decrease in basic insurance amount may result in a surrender charge. See Surrender Charges, page 18. 5

11 We may decline a reduction if we determine it would cause the Contract to fail to qualify as "life insurance" for purposes of Section 7702 of the Internal Revenue Code. In addition, if the basic insurance amount is either increased or decreased, there is a possibility that the Contract will be classified as a Modified Endowment Contract. See Tax Treatment of Contract Benefits, page 37. No administrative processing charge is currently being made in connection with either an increase or a decrease in basic insurance amount. However, we reserve the right to make such a charge in an amount of up to $25. See CHARGES AND EXPENSES, page 17. $FFHVVWR&RQWUDFW9DOXHV A Contract may be surrendered for its cash surrender value (the Contract Fund minus any Contract debt and minus any applicable surrender charge) while the insured is living. To surrender a Contract, we may require you to deliver or mail the Contract with a written request in a form that meets Pruco Life of New Jersey s needs, to a Service Office. The cash surrender value of a surrendered Contract will be determined as of the end of the valuation period in which such a request is received in a Service Office. Surrender of a Contract may have tax consequences. See Surrender of a Contract, page 35, and Tax Treatment of Contract Benefits, page 37. Under certain circumstances, you may withdraw a part of the Contract's cash surrender value without surrendering the Contract. The amount withdrawn must be at least $100. There is an administrative processing fee for each withdrawal which is the lesser of: (a) $25 and; (b) 2% of the withdrawal amount. Withdrawal of the cash surrender value may have tax consequences. See Withdrawals, page 36, and Tax Treatment of Contract Benefits, page 37. &RQWUDFW/RDQV You may borrow money from us using your Contract as security for the loan, provided the Contract is not in default. The maximum loan amount is equal to 90% of the cash value. The cash value is equal to the Contract Fund less any surrender charge. A Contract in default has no loan value. The minimum loan amount you may borrow is $500. See Loans, page 35. &DQFHOLQJWKH&RQWUDFW )UHH/RRNµ 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. In general, you will receive a refund of all premium payments made. However, if applicable law permits a market value free-look, you will receive the greater of (1) the Contract Fund plus the amount of any charges that have been deducted or (2) all premium payments made. A Contract returned according to this provision shall be deemed void from the beginning. 6800$5<2)&2175$&75,6 6 &RQWUDFW9DOXHVDUHQRW*XDUDQWHHG Your benefits (including life insurance) are not guaranteed, but may be entirely dependent on the investment performance of the ProFund VP variable investment options you select. The value of your Contract Fund rises and falls with the performance of the investment options you choose and the charges that we deduct. Poor investment performance could cause your Contract to lapse and you could lose your insurance. However, payment of the Death Benefit may be guaranteed under the Death Benefit Guarantee feature. The ProFund VP variable investment options you choose may not perform to your expectations. Investing in the Contract involves risks including the possible loss of your entire investment. For more detail, please see Risks Associated with the ProFund VP Variable Investment Options on page 9.,QFUHDVHLQ&KDUJHV In several instances we will use the terms maximum charge and current charge. The maximum charge, in each instance, is the highest charge that Pruco Life of New Jersey is entitled to make under the Contract. The current charge is the lower amount that Pruco Life of New Jersey is now charging. If circumstances change, we reserve the right to increase each current charge, up to the maximum charge, without giving any advance notice. 6

12 &RQWUDFW/DSVH Each month we determine the value of your Contract Fund. If the Contract Fund less any applicable surrender charges is zero or less, the Contract is in default unless it remains in-force under the Death Benefit Guarantee. See Death Benefit Guarantee, page 31. Your Contract will also be in default if at any time the Contract debt equals or exceeds the Contract Fund less any applicable surrender charges. Should this happen, we will notify you of the payment to prevent your Contract from terminating. See Loans, page 35. Your payment must be received at a Service Office within the 61-day grace period after the notice of default is mailed or the Contract will end and have no value. See LAPSE AND REINSTATEMENT, page 37. If you have an outstanding loan when your Contract lapses, you may have taxable income as a result. See Tax Treatment of Contract Benefits % Pre-Death Distributions on page 37. 5LVNVRI8VLQJWKH&RQWUDFWDVD6KRUW7HUP6DYLQJV9HKLFOH Because the Contract provides for an accumulation of a Contract Fund as well as a Death Benefit, you may wish to use it for various financial planning purposes. Purchasing the Contract for such purposes may involve certain risks. For example, a life insurance policy could play an important role in helping you to meet the future costs of a child s education. The Contract s Death Benefit could be used to provide for education costs should something happen to you, and its investment features could help you accumulate savings. However, if the ProFund VP variable investment options you choose perform poorly, if you do not pay sufficient premiums, or if you access the values in your Contract through withdrawals or Contract loans, your Contract may lapse or you may not accumulate the funds you need. The Contract is designed to provide benefits on a long-term basis. Consequently, you should not purchase the Contract as a short-term investment or savings vehicle. Because of the long-term nature of the Contract, you should consider whether the purchasing the Contract is consistent with the purpose for which it is being considered. 5LVNVRI7DNLQJ:LWKGUDZDOV If your Contract meets certain requirements, you may make withdrawals from your Contract s cash surrender value while the Contract is in-force. The amount withdrawn must be at least $100. The withdrawal amount is limited by the requirement that the net cash value after withdrawal may not be less than or equal to zero after deducting any charges associated with the withdrawal and an amount that we estimate will be sufficient to cover the Contract Fund deductions for two monthly dates following the date of withdrawal. There is an administrative processing fee for each withdrawal which is the lesser of: (a) $25 and; (b) 2% of the withdrawal amount. Withdrawal of the cash surrender value may have tax consequences. See Tax Treatment of Contract Benefits, page 37. Whenever a withdrawal is made, the death benefit will immediately be reduced by at least the amount of the withdrawal. Withdrawals under Type B (variable) and Type C (return of premium) Contracts, will not change the basic insurance amount. However, under a Type A (fixed) Contract, the withdrawal may require a reduction in the basic insurance amount and a surrender charge may be deducted. See CHARGES AND EXPENSES, page 17. No withdrawal will be permitted under a Type A (fixed) Contract if it would result in a basic insurance amount of less than the minimum basic insurance amount. See REQUIREMENTS FOR ISSUANCE OF A CONTRACT, page 26. It is important to note, however, that if the basic insurance amount is decreased, there is a possibility that the Contract might be classified as a Modified Endowment Contract. Accessing the values in your Contract through withdrawals may significantly affect current and future Contract values or death benefit proceeds and may increase the chance that your Contract will lapse. Before making any withdrawal that causes a decrease in basic insurance amount, you should consult with your tax adviser and your Pruco Life of New Jersey representative. See Withdrawals, page 36, and Tax Treatment of Contract Benefits, page 37. /LPLWDWLRQVRQ7UDQVIHUV All or a portion of the amount credited to a ProFund VP variable investment option may be transferred to another ProFund VP variable investment option. You may transfer amounts by proper written notice to a Service Office, by telephone, provided you are enrolled to use the Telephone Transfer System, or electronically, using the electronic tools and procedures that we require. See Transfers, page 27. We will allow you to designate an investment adviser that you select, compensate, and supervise to request transfers between ProFund VP variable investment options on your behalf. We must first receive a proper 7

13 limited power of attorney, and we may require your investment adviser to provide acceptable identification, before we will allow any investment adviser to perform transfers on your behalf. We use reasonable procedures to confirm that instructions given by telephone are genuine. However, we are not liable for following telephone instructions that we reasonably believe to be genuine. In addition, we 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. The ProFund VP variable investment options available through this Contract were chosen to accommodate those who plan to use programmed, large, or frequent transfers among the ProFund VP variable investment options, or market timing. However, transfers between the ProFund VP variable investment options are subject to restrictions concerning the time of day by which the transfer request must be properly received in our Service Office. We reserve the right to further limit transfers in any Contract year if excessive transfers have a detrimental effect on the performance of any investment option, share price of any Fund, or other Contract owners. /LPLWDWLRQVDQG&KDUJHVRQ6XUUHQGHURIWKH&RQWUDFW You may surrender your Contract at any time. We deduct a surrender charge from the surrender proceeds. In addition, the surrender of your Contract may have tax consequences. See Tax Treatment of Contract Benefits on page 37. A Contract may be surrendered for its cash surrender value while the insured is living. We will assess a surrender charge if, during the first 10 Contract years (or during the first 10 years of a coverage segment representing an increase in basic insurance amount), the Contract lapses, is surrendered, or the basic insurance amount is decreased (including as a result of a withdrawal or a death benefit type change). The surrender charge varies by issue age. It is calculated as described in Surrender Charges on page 18. While the amount of the surrender charge decreases over time, it may be a substantial portion or even equal to your Contract value. Surrender of a Contract may have tax consequences. See Tax Treatment of Contract Benefits, page 37. 5LVNVRI7DNLQJD&RQWUDFW/RDQ Accessing the values in your Contract through Contract loans may significantly affect current and future Contract values or Death Benefit proceeds and may increase the chance that your Contract will lapse. Your Contract will be in default, if at any time, the Contract lapses or is surrendered, the amount of unpaid Contract debt will be treated as a distribution and will be immediately taxable to the extent of the gain in the Contract. In addition, if your Contract is a Modified Endowment Contract for tax purposes, taking a Contract loan may have tax consequences. See Tax Treatment of Contract Benefits, page 37. 7D[&RQVHTXHQFHVRI%X\LQJWKLV&RQWUDFW Your Contract is structured to meet the definition of life insurance under Section 7702 of the Internal Revenue Code. At issue, the Contract owner chooses one of the following definition of life insurance tests: (1) Cash Value Accumulation Test or (2) Guideline Premium Test. Under the Cash Value Accumulation Test, there is a minimum death benefit to cash value ratio. Under the Guideline Premium Test, there is a limit to the amount of premiums that can be paid into the Contract, as well as a minimum death benefit to cash value ratio. Consequently, we reserve the right to refuse to accept a premium payment that would, in our opinion, cause this Contract to fail to qualify as life insurance. We also have the right to refuse to accept any payment that increases the death benefit by more than it increases the Contract Fund. 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 insure that the Contract will qualify as life insurance. Current federal tax law generally excludes all death benefits from the gross income of the beneficiary of a life insurance policy. However, your death benefit could be subject to estate tax. In addition, you generally are not subject to taxation on any increase in the Contract value until it is withdrawn. Generally, you are taxed on surrender proceeds and the proceeds of any partial withdrawals only if those amounts, when added to all previous distributions, exceed the 8

14 total premiums paid. Amounts received upon surrender or withdrawal, including any outstanding Contract loans, in excess of premiums paid are treated as ordinary income. Special rules govern the tax treatment of life insurance policies that meet the federal definition of a modified endowment contract. The Contract could be classified as a Modified Endowment Contract if premiums in amounts that are too large 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. Under current tax law, death benefit payments under modified endowment contracts, like death benefit payments under other life insurance contracts, generally are excluded from the gross income of the beneficiary. However, 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 and assignments, made during the two-year period before the time that the Contract became a Modified Endowment Contract. 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 59½, 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. 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. For more information, see Tax Treatment of Contract Benefits, page 37. 5HSODFHPHQWRIWKH&RQWUDFW 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 with a tax adviser. 6800$5<2)5,6 6$662&,$7(':,7+ 7+(352)81'939$5,$%/(,19(670(17237,216 You may choose to invest your Contract's premiums and its earnings in one or more of 37 available ProFund VP variable investment options. See The Funds, page 10. 5LVNV$VVRFLDWHGZLWKWKH3UR)XQG939DULDEOH,QYHVWPHQW2SWLRQV Each of the ProFund VP variable investment options is a subaccount of the Pruco Life of New Jersey Variable Appreciable Account. Each subaccount invests in the shares of an open-end management investment company registered under the Investment Company Act of 1940 or a separate investment series of an open-end management investment company (each a Fund ). Each Fund holds its assets separate from the assets of the other Funds, and each Fund has its own investment objective and policies, which are described in the accompanying Fund prospectuses for the portfolios. The income, gains and losses of one Fund generally have no effect on the investment performance of any other. For an additional discussion of the portfolios, please see The Funds on page 10. We do not promise that the Funds will meet their investment objectives. Amounts you have allocated to the ProFund VP variable investment options may grow in value, decline in value or grow less than you expect, depending on the investment performance of the Funds in which the subaccounts invest. You bear the investment risk that the Funds may not meet their investment objectives. A description of each portfolio's investment policies and a comprehensive statement of each Fund's risks may be found in its prospectus. For additional information, please see The Funds on page 10. 9

15 /HDUQ0RUHDERXWWKH)XQGV Before allocating amounts to the ProFund VP variable investment options, you should read the Funds current prospectuses for detailed information concerning their investment objectives and strategies, and their investment risks. *(1(5$/'(6&5,37,2162)7+(5(*,675$17'(326,725 $1'3257)2/,2&203$1< 3UXFR/LIH,QVXUDQFH&RPSDQ\RI1HZ-HUVH\ The Contracts are issued by Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey") is a stock life insurance company, organized in 1982 under the laws of the state of New Jersey. It is licensed to sell life insurance and annuities only in the states of New Jersey and New York. Pruco Life of New Jersey s principal Executive Office is located at 213 Washington Street, Newark, New Jersey KH3UXFR/LIHRI1HZ-HUVH\9DULDEOH$SSUHFLDEOH$FFRXQW Pruco Life of New Jersey has established a separate account, the Pruco Life of New Jersey Variable Appreciable Account (the "Account") to hold the assets that are associated with the Contracts. The Account was established on January 13, 1984 under New Jersey law and is registered with the Securities and Exchange Commission ( SEC ) under the Investment Company Act of 1940 as a unit investment trust, which is a type of investment company. The Account meets the definition of a "separate account" under the federal securities laws. The Account holds assets that are segregated from all of Pruco Life of New Jersey's other assets. Pruco Life of New Jersey is the legal owner of the assets in the Account. Pruco Life of New Jersey 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 Contract. In addition to these assets, the Account's assets may include funds contributed by Pruco Life of New Jersey to commence operation of the Account and may include accumulations of the charges Pruco Life of New Jersey makes against the Account. From time to time these additional assets will be transferred to Pruco Life of New Jersey's general account. Pruco Life of New Jersey will consider any possible adverse impact the transfer might have on the Account before making any such transfer. Income, gains and losses credited to, or charged against, the Account reflect the Account s own investment experience and not the investment experience of Pruco Life of New Jersey s other assets. The assets of the Account may not be charged with liabilities that arise from any other business Pruco Life of New Jersey conducts. The obligations to Contract owners and beneficiaries arising under the Contracts are general corporate obligations of Pruco Life of New Jersey. Currently, you may invest in one or a combination of 37 available variable investment options, each of which is a subaccount of the Pruco Life of New Jersey Variable Appreciable Account. When you choose a variable investment option, we purchase shares of a mutual fund or a separate investment series of a mutual fund that is held as an investment for that option. We hold these shares in the subaccount. Pruco Life of New Jersey may add additional variable investment options in the future. The Account s financial statements are available in the Statement of Additional Information to this prospectus. 7KH)XQGV Listed below are the ProFunds VP in which the ProFund VP variable investment options invest and their investment objectives and strategies. The ProFunds VP are each a series of ProFunds, and have a separate prospectus ( Fund prospectus ) that is provided with this prospectus. You should carefully read the entire Fund prospectus, including the risks and strategies of each ProFund VP, before you decide to allocate assets to a ProFund VP variable investment option using that ProFund VP. There is no assurance that the investment objective of any ProFund VP will be met. 10

16 ProFund VP variable investment options: ProFund VP Bull: The investment objective is daily investment results, before fees and expenses, that correspond to the daily performance of the S&P 500 Index. ProFund VP Bull may take positions in equity securities and/or financial instruments that should have similar daily price return characteristics as the S&P 500 Index. ProFund VP Bull may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Small-Cap: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Russell 2000 Index. ProFund VP Small-Cap invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the Russell 2000 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Small-Cap may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP OTC: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the NASDAQ-100 Index. OTC in the name of ProFund VP OTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of ProFund VP OTC takes positions in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the NASDAQ-100 Index. ProFund VP OTC may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Mid-Cap Value: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the S&P MidCap 400/Barra Value Index. ProFund VP Mid-Cap Value invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the S&P MidCap 400/Barra Value Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Mid-Cap Value may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Mid-Cap Growth: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the S&P MidCap 400/Barra Growth Index. ProFund VP Mid- Cap Growth invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the S&P MidCap 400/Barra Growth Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Mid-Cap Growth may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Small-Cap Value: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the S&P SmallCap 600/Barra Value Index. ProFund VP Small- Cap Value invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the S&P SmallCap 600/Barra Value Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Small-Cap Value may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Small-Cap Growth: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the S&P SmallCap 600/Barra Growth Index. ProFund VP Small-Cap Growth invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the S&P SmallCap 600/Barra Growth Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Small-Cap Growth may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. 11

17 ProFund VP Asia 30: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the ProFunds Asia 30 Index. ProFund VP Asia 30 invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the ProFunds Asia 30 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities of Asian companies contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Asia 30 may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Asia 30 will have industry concentrations to approximately the same extent as its Index. ProFund VP Europe 30: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the ProFunds Europe 30 Index. ProFund VP Europe 30 invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the ProFunds Europe 30 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Europe 30 may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Japan: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Nikkei 225 Stock Average. ProFund VP Japan invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the Nikkei 225 Stock Average. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Japan may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP UltraBull (formerly ProFund VP Bull Plus): The investment objective is to seek daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the S&P 500 Index. ProFund VP UltraBull takes positions in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as twice (200%) the S&P 500 Index. ProFund VP UltraBull will employ leveraged investment techniques and may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP UltraMid-Cap: The investment objective is to seek daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the S&P MidCap 400 Index. ProFund VP UltraMid-Cap invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as twice (200%) the S&P MidCap 400 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP UltraMid-Cap will employ leveraged investment techniques and may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP UltraSmall-Cap: The investment objective is to seek daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the Russell 2000 Index. ProFund VP UltraSmall-Cap invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as twice (200%) the Russell 2000 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP UltraSmall-Cap will employ leveraged investment techniques and may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP UltraOTC: The investment objective is to seek daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the NASDAQ-100 Index. ProFund VP UltraOTC takes positions in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as twice (200%) the NASDAQ-100 Index. ProFund VP UltraOTC will employ leveraged investment techniques and may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. 12

18 ProFund VP Bear: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the S&P 500 Index. ProFund VP Bear takes positions in financial instruments that should have similar daily price return characteristics as the inverse of the S&P 500 Index. Assets not invested in financial instruments may be invested in debt instruments or money market instruments. ProFund VP Short Small-Cap: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the Russell 2000 Index. Principal Investment Strategy. ProFund VP Short Small-Cap, under normal circumstances, will commit at least 80% of its assets to financial instruments with similar economic characteristics that, in combination, should have similar daily price return characteristics as the inverse of the Russell 2000 Index. Assets not invested in financial instruments may be invested in debt instruments or money market instruments. ProFund VP Short OTC: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the NASDAQ-100 Index. ProFund VP Short Small- Cap invests in financial instruments that should have similar daily price return characteristics as the inverse of the Russell 2000 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to financial instruments with economic characteristics that should be inverse to those of the Index. Assets not invested in financial instruments may be invested in debt instruments or money market instruments. ProFund VP Banks: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Banks Index. ProFund VP Banks invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Banks Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Banks may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Banks will have industry concentrations to approximately the same extent as its Index. ProFund VP Basic Materials: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Basic Materials Sector Index. ProFund VP Basic Materials invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Basic Materials Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Basic Materials may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Basic Materials will have industry concentrations to approximately the same extent as its Index. ProFund VP Biotechnology: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Biotechnology Index. ProFund VP Biotechnology invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Biotechnology Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Biotechnology may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Biotechnology will have industry concentrations to approximately the same extent as its Index. ProFund VP Consumer Cyclical: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Consumer Cyclical Sector Index. ProFund VP Consumer Cyclical invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Consumer Cyclical Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Consumer Cyclical may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Consumer Cyclical will have industry concentrations to approximately the same extent as its Index. 13

19 ProFund VP Consumer Non-Cyclical: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Consumer Non-Cyclical Sector Index. ProFund VP Consumer Non-Cyclical invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Consumer Non- Cyclical Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Consumer Non-Cyclical may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Consumer Non-Cyclical will have industry concentrations to approximately the same extent as its Index. ProFund VP Energy: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Energy Sector Index. ProFund VP Energy invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Energy Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Energy may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Energy will have industry concentrations to approximately the same extent as its Index. ProFund VP Financial: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Financial Sector Index. ProFund VP Financial invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Financial Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Financial may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Financial will have industry concentrations to approximately the same extent as its Index. ProFund VP Healthcare: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Healthcare Sector Index. ProFund VP Healthcare invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Healthcare Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Healthcare may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Healthcare will have industry concentrations to approximately the same extent as its Index. ProFund VP Industrial: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Industrial Sector Index. ProFund VP Industrial invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Industrial Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Industrial may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Industrial will have industry concentrations to approximately the same extent as its Index. ProFund VP Internet: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones Composite Internet Index. ProFund VP Internet invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones Composite Internet Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Internet may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money 14

20 market instruments. ProFund VP Internet will have industry concentrations to approximately the same extent as its Index. ProFund VP Pharmaceuticals: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Pharmaceuticals Index. ProFund VP Pharmaceuticals invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Pharmaceuticals Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Pharmaceuticals may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Pharmaceuticals will have industry concentrations to approximately the same extent as its Index. ProFund VP Precious Metals: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Philadelphia Stock Exchange Gold/Silver Sector (SM) Index. ProFund VP Precious Metals invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Philadelphia Stock Exchange Gold/Silver Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Precious Metals may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Precious Metals will have industry concentrations to approximately the same extent as its Index. ProFund VP Real Estate: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Real Estate Index. ProFund VP Real Estate invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Real Estate Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Real Estate may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Real Estate will have industry concentrations to approximately the same extent as its Index. ProFund VP Semiconductor: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Semiconductor Index. ProFund VP Semiconductor invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Semiconductor Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Semiconductor may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Semiconductor will have industry concentrations to approximately the same extent as its Index. ProFund VP Technology: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Technology Sector Index. ProFund VP Technology invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Technology Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Technology may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Technology will have industry concentrations to approximately the same extent as its Index. ProFund VP Telecommunications: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Telecommunications Sector Index. ProFund VP Telecommunications invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Telecommunications Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in 15

21 the Index and/or financial instruments with similar economic characteristics. ProFund VP Telecommunications may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Telecommunications will have industry concentrations to approximately the same extent as its Index. ProFund VP Utilities: The investment objective is to seek daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Utilities Sector Index. ProFund VP Utilities invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Utilities Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Utilities may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Utilities will have industry concentrations to approximately the same extent as its Index. ProFund VP U.S. Government Plus: The investment objective is to seek daily investment results, before fees and expenses, that correspond to one and one quarter times (125%) the daily price movement of the most recently issued 30-year U.S. Treasury Bond ( Long Bond ). ProFund VP U.S. Government Plus invests in debt instruments and/or financial instruments that, in combination, should have similar daily price return characteristics as one and onequarter times (125%) the daily price movement of the Long Bond. Under normal circumstances, this ProFund commits at least 80% of its assets to U.S. Government securities and/or financial instruments with similar economic characteristics. ProFund VP U.S. Government Plus will employ leveraged investment techniques in seeking its investment objective. ProFund VP Rising Rates Opportunity: The investment objective is to seek daily investment results, before fees and expenses, that correspond to 125% of the inverse (opposite) of the daily price movement of the most recently issued 30-year U.S. Treasury Bond ( Long Bond ). ProFund VP Rising Rates Opportunity takes positions in debt instruments and/or financial instruments that, in combination, should have similar daily price return characteristics as one and one-quarter times (125%) the inverse of the daily price movement of the Long Bond. ProFund VP Rising Rates Opportunity will employ leveraged investment techniques in seeking its investment objective. ProFund VP Money Market: The investment objective is to seek a high level of current income as is consistent with liquidity and preservation of capital. Under normal circumstances, all Mid-Cap and Small-Cap ProFunds VP, ProFund VP Asia 30, ProFund VP Europe 30, ProFund VP Japan, and all Sector ProFunds VP seek their investment objectives by committing at least 80% of their assets to investments that have economic characteristics similar to the type of investment suggested by their names and that, in combination, should have similar daily price return characteristics as their benchmarks. These investments may include, without limitation, securities, futures contracts, options on futures contracts, swap agreements, options on securities and indices, money market instruments, or a combination of the foregoing. The ProFunds VP subject to this policy will provide shareholders with at least 60 days prior notice of any change in the policy. ProFund VP Money Market may invest in high-quality, short-term, dollar-denominated money market securities paying a fixed, variable or floating interest rate such as: debt instruments, U.S. government securities and repurchase agreements. ProFund Advisors LLC is the investment advisor and is responsible for the day-to-day management of the ProFunds VP and other business affairs of the ProFunds VP. ProFund Advisors LLC s principal business address is 7501 Wisconsin Ave, Suite 1000, Bethesda, Maryland A fund or portfolio may have a similar name or an investment objective and investment policies resembling those of a mutual fund managed by the same investment adviser that is sold directly to the public. Despite such similarities, there can be no assurance that the investment performance of any such fund or portfolio will resemble that of the publicly available mutual fund. Each of the ProFunds VP, an affiliate of the ProFunds and/or certain other entities may compensate Pruco Life based upon an annual percentage of the average assets held in the ProFunds by Pruco Life under the Contracts. These 16

22 percentages may vary by ProFund VP and reflect administrative and other services provided by ProFund Advisors LLC. 9RWLQJ5LJKWV We are the legal owner of the shares of the mutual funds associated with the ProFund VP variable investment options. However, we vote the shares of the mutual funds according to voting instructions we receive from Contract owners. We will mail you a proxy, which is a form you need to complete and return to us to tell us how you wish us to vote. When we receive those instructions, we will vote all of the shares we own on your behalf in accordance with those instructions. We vote shares for which we do not receive instructions, and any other shares that we own in our own right, in the same proportion as the shares for which instructions are received. We may change the way your voting instructions are calculated if it is required by federal or state regulation. Should the applicable federal securities laws or regulations, or their current interpretation, change so as to permit Pruco Life of New Jersey to vote shares of the Funds in its own right, it may elect to do so. Pruco Life of New Jersey 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 a Fund s portfolios, or to approve or disapprove an investment advisory contract for a Fund. In addition, Pruco Life of New Jersey 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 of New Jersey reasonably disapproves such changes in accordance with applicable federal regulations. If Pruco Life of New Jersey does disregard voting instructions, it will advise Contract owners of that action and its reasons for such action in the next annual or semi-annual report to Contract owners. 6XEVWLWXWLRQRI)XQGV We may substitute one or more of the mutual funds used by the ProFund VP variable investment options. We may also cease to allow investments in existing funds. We do this only if events such as investment policy changes or tax law changes make the mutual fund unsuitable. We would not do this without the approval of the Securities and Exchange Commission and necessary state insurance department approvals. You will be given specific notice in advance of any substitution we intend to make. &+$5*(6$1'(;3(16(6 The total amount invested at any time in the Contract Fund consists of the sum of the amount credited to the ProFund VP variable investment options and the principal amount of any Contract loan plus the amount of interest credited to the Contract upon that loan. See Loans, page 35. Most charges, although not all, are made by reducing the Contract Fund. Charges deducted from premium payments and the Contract Fund may change from time to time, subject to maximum charges. In deciding whether to change any of these charges, we will periodically consider factors such as mortality, persistency, expenses, taxes and interest and/or investment experience to see if a change in our assumptions is needed. Charges for taxes attributable to premiums will be set at one rate for all contracts like this one. Changes in other factors will be by class. We will not recoup prior losses or distribute prior gains by means of these changes. This section provides a more detailed description of each charge that is described briefly in the charts beginning on page 1. In several instances we will use the terms "maximum charge" and "current charge." The "maximum charge," in each instance, is the highest charge that Pruco Life of New Jersey is entitled to make under the Contract. The "current charge" is the lower amount that Pruco Life of New Jersey is now charging. If circumstances change, we reserve the right to increase each current charge, up to the maximum charge, without giving any advance notice. 6DOHV/RDG&KDUJHV We reserve the right to charge up to 6% of premiums paid for sales expenses in all Contract years. This charge, often called a sales load, is deducted to compensate us for the costs of selling the Contracts, including commissions, advertising and the printing and distribution of prospectuses and sales literature. 17

23 Currently, the charge is equal to 4% of premiums paid up to the amount of the Sales Load Target Premium and 2% of premiums paid in excess of this amount for the first 10 Contract years (or the first 10 years of a coverage segment representing an increase in basic insurance amount); 0% thereafter. The Sales Load Target Premium may vary from the Target Premium, depending on the issue age and rating class of the insured, any extra risk charges, or additional riders. For Contracts issued on an unrated insured below age 56, the Sales Load Target Premium is generally equal to what the Target Premium for a Type A Contract would be if the insured was either in the Nonsmoker or Smoker rating class, and there were no extra risk charges or riders on the Contract. For Contracts issued on an unrated insured below age 56 in a more favorable rating class, the Sales Load Target Premium will be greater than the Target Premium, if there are no extra risk charges or riders on the Contract. For Contracts issued on insureds age 56 or greater or with substandard ratings, the Sales Load Target Premium will generally be less than the Target Premium. See PREMIUMS, page 26. Paying more than the Sales Load Target Premium in any of the first 10 Contract years could reduce your total sales load. For example, assume that a Contract with no riders or extra insurance charges has a Sales Load Target Premium of $884 and the Contract owner would like to pay 10 premiums. If the Contract owner paid $1,768 (two times the amount of the Sales Load Target Premium) in every other Contract year up to the ninth year (i.e. in years 1, 3, 5, 7, 9), the total sales load charge would be $ If the Contract owner paid $884 in each of the first 10 Contract years, the total sales load would be $ For additional information, see Increases in Basic Insurance Amount, page 33. Attempting to structure the timing and amount of premium payments to reduce the potential sales load may increase the risk that your Contract will lapse without value. Delaying the payment of premium amounts to later years will adversely affect the Death Benefit Guarantee if the accumulated premium payments do not reach the Death Benefit Guarantee Values shown on your Contract data pages. See Death Benefit Guarantee, page 31. In addition, there are circumstances where payment of premiums that are too large may cause the Contract to be characterized as a Modified Endowment Contract, which could be significantly disadvantageous. See Tax Treatment of Contract Benefits, page 37. 6XUUHQGHU&KDUJHV We will assess a surrender charge if, during the first 10 Contract years (or during the first 10 years of a coverage segment representing an increase in basic insurance amount), the Contract lapses, is surrendered, or the basic insurance amount is decreased (including as a result of a withdrawal or a death benefit type change). The surrender charge is a percentage of one year s Sales Load Target Premium, less premiums for riders and extras, as determined at the time the Contract is issued. A separate surrender charge is based on one year s Sales Load Target Premium for each new coverage segment determined at the time each new coverage segment is issued. The percentage varies by issue age. For all issue ages 0-45, the maximum first year percentage is 90%, and is reduced annually at a constant rate to zero by the end of the 10 th year. These surrender charges are similar to what is often referred to as deferred sales load charges and compensate Pruco Life of New Jersey for administrative costs associated with the sale of the Contracts. The duration of the surrender charge also varies by age. The chart below shows the maximum percentages for all ages at the beginning of the first Contract year, the rate at which the percentages is reduced annually, and the end of the last Contract year for which a surrender charge is shown. The surrender charge is not deducted from the death benefit if the insured should die during this period. This charge is deducted to cover sales and administrative costs, such as: the cost of processing applications, conducting examinations, determining insurability and the insured s rating class, and establishing records. A schedule showing the maximum surrender charges for a full surrender occurring during each year for which a surrender charge may be payable is found in the Contract Data pages of the Contract. 18

24 Issue Age Percentage at start of year 1 Maximum Percentages for Surrender Charges Reduction in percentage points each year To the end of year Issue Age Percentage at start of year 1 Reduction in percentage points each year % 9.00% % 6.79% % 8.70% % 7.50% % 8.40% % 7.08% % 8.10% % 8.00% % 7.80% % 9.37% % 7.50% % 8.75% % 7.20% % 8.50% % 6.90% % 8.37% % 6.60% % 8.25% % 6.30% % 10.83% % 6.00% % 10.67% % 6.39% % 10.50% % 6.87% % 10.33% % 6.56% % 10.17% % 7.14% 7 74 and above 30.0% 10.00% 3 To the end of year We will show a surrender charge threshold for each coverage segment in the Contract data pages. This threshold amount is the segment s lowest coverage amount since its effective date. If during the first 10 Contract years (or during the first 10 years of a coverage segment representing an increase in basic insurance amount), the basic insurance amount is decreased (including as a result of a withdrawal or a change in type of death benefit), and the new basic insurance amount for any coverage segment is below the threshold for that segment, we will deduct a percentage of the surrender charge for that segment. The percentage will be the amount by which the new coverage segment is less than the threshold, divided by the basic insurance amount at issue. After this transaction, the threshold will be updated and a corresponding new surrender charge schedule will also be determined to reflect that portion of surrender charges deducted in the past. See Increases in Basic Insurance Amount, page 33 and Decreases in Basic Insurance Amount, page 34. &RVWRI,QVXUDQFH We deduct, monthly, a cost of insurance ("COI") charge proportionately from the dollar amounts held in each of the chosen investment options. The purpose of this charge is to provide insurance coverage. When an insured dies, the amount payable to the beneficiary (assuming there is no Contract debt) is larger than the Contract Fund - significantly larger if the insured dies in the early years of a Contract. The cost of insurance charges collected from all Contract owners enables Pruco Life of New Jersey to pay this larger death benefit. The maximum COI charge is determined by multiplying the amount by which the Contract s death benefit exceeds the Contract Fund ("net amount at risk") under a Contract by maximum COI rates. The net amount at risk is affected by factors such as: investment performance, premium payments, charges, and simplified underwriting. For example, if we are using simplified underwriting, which would cause a healthy individual to pay more than a substantially similar policy using a different underwriting method, the COI rates are higher for healthy individuals under this underwriting method than a similar policy using a different underwriting method. The maximum COI rates are based upon the 1980 Commissioners Standard Ordinary ("CSO") Mortality Tables and an insured's current attained age, sex (except where unisex rates apply), smoker/non-smoker status, and extra rating class, if any. At most ages, Pruco Life of New Jersey's current COI rates are lower than the maximum rates. Current COI charges range from $.006 to $83.34 per $1,000 of net amount at risk. For additional information, see Increases in Basic Insurance Amount, page

25 7D[HV$WWULEXWDEOHWR3UHPLXPV We reserve the right to charge up to 7.5% for taxes attributable to premiums. For these purposes, "taxes attributable to premiums" shall include any federal, state or local income, premium, excise, business or any other type of tax (or component thereof) measured by or based upon the amount of premium received by Pruco Life of New Jersey. This charge is made up of two parts, which currently equal a total of 3.75% of the premiums received. The first part is a charge for state and local premium taxes. The current amount for this first part is 2.5% of the premium and is Pruco Life of New Jersey s estimate of the average burden of state taxes generally. Tax rates vary from jurisdiction to jurisdiction and generally range from 0% to 5%. The rate applies uniformly to all Contract owners without regard to state of residence. Pruco Life of New Jersey may collect more for this charge than it actually pays for state and local premium taxes. The second part is for federal income taxes measured by premiums, and it is currently equal to 1.25% of premiums. We believe that this charge is a reasonable estimate of an increase in Pruco Life of New Jersey s federal income taxes resulting from a 1990 change in the Internal Revenue Code. It is intended to recover this increased tax. Under current law, Pruco Life of New Jersey 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 of New Jersey that are attributable to the Account may result in a corresponding charge against the Account. 0RQWKO\'HGXFWLRQVIURPWKH&RQWUDFW)XQG Pruco Life of New Jersey deducts the following monthly charges proportionately from the dollar amounts held in each of the chosen investment option[s] or you may select up to two ProFund VP variable investment options from which we deduct your Contract's monthly charges. See Allocated Charges, page 21. (a) An administrative charge based on the basic insurance amount is deducted. The charge is intended to compensate us for things like processing claims, keeping records, and communicating with Contract owners. Currently, the first part of the charge is equal to $20 per Contract for the first two Contract years and $12.50 per Contract thereafter. Pruco Life of New Jersey reserves the right, however, to charge up to $20 per Contract for each Contract year. The second part of this charge is equal to an amount up to $1.12 per $1,000 of the basic insurance amount for the first five Contract years and zero thereafter. The amount per $1,000 varies by sex, issue age, smoker/nonsmoker status, and extra rating class, if any. (b) If the Contract includes a coverage segment representing an increase in basic insurance amount, we will deduct $12 per segment for the first two years of the coverage segment and zero thereafter; plus an amount up to $1.12 per $1,000 of the coverage segment for an increase in basic insurance amount for the first five years from the effective date of the increase and zero thereafter. The amount per $1,000 varies by sex, issue age, smoker/nonsmoker status, extra rating class, if any, and the effective date of the increase. In either of the instances described above, the highest charge per thousand is $1.12 and applies to male and female smoker and non-smoker above age 74 at certain rating classes. The lowest charge per thousand is $0.03 and applies to female age 0-14, non-smoker at certain rating classes. The amount of the charge that applies to a particular Contract is shown on the Contract Data pages under the heading Adjustments to the Contract Fund. The following table provides sample per thousand charges: Issue Age Male Male Female Female Non-Smoker Smoker Non-Smoker Smoker 35 $0.14 $0.23 $0.12 $ $0.24 $0.34 $0.19 $ $0.40 $0.45 $0.31 $ $0.67 $0.76 $0.53 $

26 (c) You may add one or more of several riders to the Contract. Some riders are charged for separately. If you add such a rider to the basic Contract, additional charges will be deducted. See RIDERS, page 23. (d) If an insured is in a substandard risk classification (for example, a person in a hazardous occupation), additional charges will be deducted. (e) A charge may be deducted to cover federal, state or local taxes (other than taxes attributable to premiums described above) that are imposed upon the operations of the Account. At present no such taxes are imposed and no charge is made. The earnings of the Account are taxed as part of the operations of Pruco Life of New Jersey. Currently, no charge is being made to the Account for Pruco Life of New Jersey s federal income taxes, other than the 1.25% charge for federal income taxes measured by premiums. See Taxes Attributable to Premiums, page 20. Pruco Life of New Jersey periodically reviews the question of a charge to the Account for Company federal income taxes. We may make such a charge in the future for any federal income taxes that would be attributable to the Contracts. 'DLO\'HGXFWLRQIURPWKH3UR)XQG939DULDEOH,QYHVWPHQW2SWLRQV Each day we deduct a charge from the assets of each of the ProFund VP variable investment options in an amount equivalent to an effective annual rate of up to 0.45%. Currently, we charge 0.25%. This charge is intended to compensate Pruco Life of New Jersey for assuming mortality and expense risks under the Contract. The mortality risk assumed is that insureds may live for shorter periods of time than Pruco Life of New Jersey estimated when it determined what mortality charge to make. The expense risk assumed is that expenses incurred in issuing and administering the Contract will be greater than Pruco Life of New Jersey estimated in fixing its administrative charges. 7UDQVDFWLRQ&KDUJHV (a) We currently charge an administrative processing fee equal to the lesser of: (a) $25 and; (b) 2% of the withdrawal amount in connection with each withdrawal. (b) We may charge an administrative processing fee of up to $25 for any change in basic insurance amount. (c) We may charge an administrative processing fee of up to $25 for any change in the Target Term Rider coverage amount for Contracts with this rider. (d) We may charge an administrative processing fee of up to $150 for Living Needs Benefit payments. $OORFDWHG&KDUJHV You may choose from which ProFund VP variable investment option(s) we deduct your Contract's monthly charges. Monthly charges include: (1) monthly administrative charges, (2) COI charges, (3) any rider charges, and (4) any charge for substandard risk classification. You may select up to two ProFund VP variable investment options for the allocation of monthly charges. Allocations must be designated in whole percentages. For example, 33% can be selected but 33D% cannot. Of course, the total allocation to the selected ProFund VP variable investment options must equal 100%. See Monthly Deductions from the Contract Fund, page 20. If there are insufficient funds in one or both of the selected ProFund VP variable investment options to cover the monthly charges, the selected ProFund VP variable investment option(s) will be reduced to zero. Any remaining charge will be deducted from all other ProFund VP variable investment options proportionately to the dollar amount in each. Furthermore, if you do not specify an allocation of monthly charges, we will deduct monthly charges proportionately from your ProFund VP variable investment options. &KDUJHV$IWHU$JH Beginning on the contract anniversary when the insured reaches attained age 100, premiums will no longer be accepted and monthly charges will no longer be deducted from the Contract Fund. You may continue the contract until the insured's death, or until you surrender the contract for its cash surrender value. You may continue to make transfers, loans and withdrawals, subject to the limitations on these transactions described elsewhere. Mortality and 21

27 expense risk charges and investment advisory fees will continue to be deducted daily. Any outstanding loan will remain on the policy, unless repaid, and will continue to accrue interest. 3RUWIROLR&KDUJHV Charges deducted from, and expenses paid out of, the assets of the Funds as described in the Fund prospectuses. 5LGHU&KDUJHV Enhanced Disability Benefit Rider & We deduct an administrative charge monthly for this rider which provides invested premium amounts while the insured is totally disabled. If we approve a claim for this benefit, the monthly charge will be waived while the insured is totally disabled. The current charge is based on age, sex, and underwriting class. It ranges from 5.56% to 10.44% of the greater of: 9% of the policy target premium or the total of monthly deductions, and is payable to age 60. Target Term Rider & We may deduct an administrative charge monthly for this rider, which provides a flexible term insurance benefit to attained age 100 on the life of the insured. Currently, we do not deduct an administrative charge for this rider. However, we currently deduct a Cost of Insurance ( COI ) charge for this rider, which is lower than the COI charge deducted for the basic amount of insurance, and is based on age, sex, and underwriting class of the insured. Living Needs Benefit Rider & We deduct a $150 fee for this rider only if benefits are paid. 3(56216+$9,1*5,*+7681'(57+(&2175$&7 &RQWUDFW2ZQHU Unless a different owner is named in the application, the Contract owner is the insured. If a different Contract owner is named, we will show that Contract owner in an endorsement to the Contract. This ownership arrangement will remain in effect unless you ask us to change it. You may change the ownership of the Contract by sending us a request in a form that meets our needs. We may ask you to send us the Contract to be endorsed. If we receive your request in a form that meets our needs, and the Contract if we ask for it, we will file and record the change, and it will take effect as of the date you signed the request. While the insured is living, the Contract owner alone is entitled to any Contract benefit and value, and to the exercise of any right and privilege granted by the Contract or by us. For example, the Contract owner is entitled to surrender the Contract, access Contract values through loans or withdrawals, assign the Contract, and to name or change the beneficiary. %HQHILFLDU\ The beneficiary is entitled to receive any benefit payable on the death of the insured. You may designate or change a beneficiary by sending us a request in a form that meets our needs. We may ask you to send us the contract to be endorsed. If we receive your request, and the contract if we ask for it, we will file and record the change and it will take effect as of the date you signed the request. But if we make any payment(s) before we receive the request, we will not have to make the payment(s) again. Any beneficiary s interest is subject to the rights of any assignee we know of. When a beneficiary is designated, any relationship shown is to the insured, unless otherwise stated. $VVLJQPHQW 27+(5*(1(5$/&2175$&73529,6,216 This Contract may not be assigned if the assignment would violate any federal, state or local law or regulation prohibiting sex distinct rates for insurance. Generally, the Contract may not be assigned to an employee benefit plan or program without Pruco Life of New Jersey's consent. Pruco Life of New Jersey assumes no responsibility for the validity or sufficiency of any assignment. We will not be obligated to comply with any assignment unless we receive a copy at our Service Office. 22

28 ,QFRQWHVWDELOLW\ We will not contest the Contract after it has been in-force during the insured s lifetime for two years from the issue date except for non-payment of enough premium to pay the required charges and when any change is made in the Contract that requires Pruco Life of New Jersey'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. 0LVVWDWHPHQWRI$JHRU6H[ If the insured's stated age or sex or both are incorrect in the Contract, Pruco Life of New Jersey will adjust the death benefits payable and any amount to be paid, as required by law, to reflect the correct age and sex. Any such benefit will be based on what the most recent deductions from the Contract Fund would have provided at the insured's correct age and sex. 6HWWOHPHQW2SWLRQV 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. Pruco Life of New Jersey and Prudential have entered into an agreement under which Prudential furnishes Pruco Life of New Jersey the same administrative support services that it provides in the operation of its own business with regard to the payment of death claim proceeds by way of Prudential s Alliance Account. Pruco Life of New Jersey transfers to Prudential an amount equal to the amount of the death claim, and Prudential establishes an individual account within its Alliance Account in the name of the beneficiary and makes all payments necessary to satisfy such obligations. Any Pruco Life of New Jersey representative authorized to sell this Contract can explain these options upon request. 6XLFLGH([FOXVLRQ Generally, if the insured, whether sane or insane, dies by suicide within two years from the Contract date, the Contract will end and Pruco Life of New Jersey will return the premiums paid, less any Contract debt, and less any withdrawals. Generally, if the insured, whether sane or insane, dies by suicide after two years from the issue date, but within two years of the effective date of an increase in the basic insurance amount, we will pay, as to the increase in amount, no more than the sum of the premiums paid on and after the effective date of an increase. 5,'(56 Contract owners may be able to obtain extra fixed benefits which may require additional charges. These optional insurance benefits will be described in what is known as a "rider" to the Contract. Charges applicable to the riders will be deducted from the Contract Fund on each Monthly date. The amounts of these benefits do not depend on the performance of the Account, although they will no longer be available if the Contract lapses. Certain restrictions may apply and are clearly described in the applicable rider. Your Pruco Life of New Jersey representative can explain all of these extra benefits further. Also, samples of the provisions are available from Pruco Life of New Jersey upon written request. 7DUJHW7HUP5LGHU The Target Term Rider (not available in states where it is not approved) provides a flexible term insurance benefit to attained age 100 on the life of the insured. You specify the amount of term rider coverage you desire, up to four times the base Contract's basic insurance amount. This amount is called the rider coverage amount and is the maximum death benefit payable under the rider. After issue, while the rider is in-force, you may increase the rider coverage amount subject to a minimum increase amount of $25,000 and the underwriting requirements determined by Pruco Life. The rider coverage amount after the increase cannot exceed four times the base Contract's basic insurance amount. You may also decrease your rider coverage amount after issue, subject to a minimum decrease amount of $10,000. The rider death benefit fluctuates as the base Contract's death benefit changes. When the Contract Fund has not grown to the point where the base Contract's death benefit is increased to satisfy the Internal Revenue Code s definition of life insurance, the rider death benefit equals the rider coverage amount. However, if the Contract Fund has grown to the point where the base Contract s death benefit begins to vary as required by the Internal Revenue Code's definition of life insurance, the rider s death benefit will decrease (or increase) dollar for dollar as the base 23

29 Contract s death benefit increases (or decreases). The rider death benefit will never increase beyond the rider coverage amount. It is possible, however, for the Contract Fund and, consequently, the base Contract s death benefit to grow to the point where the rider death benefit is reduced to zero. $500,000 Basic Insurance Amount and $500,000 Target Term Rider Type A Death Benefit $1,500,000 $1,200,000 $900,000 $600,000 Rider Death Benefit Base Contract Death $300,000 Benefit $ Policy Year You should consider the following factors when purchasing a Contract with a Target Term Rider: A Contract with a Target Term Rider will offer higher cash values and death benefits than an all base policy with the same death benefit if Pruco Life of New Jersey does not change its current charges. This is because: (1) the Sales Load Target Premium will be lower for a Contract with a Target Term Rider than for an all base policy with the same death benefit and this may result in lower current sales expense charges, (2) the monthly administrative charge will also be lower for a Contract with a Target Term Rider than for an all base policy with the same death benefit, and (3) we currently take lower current Cost of Insurance charges under the Target Term Rider. However, a Contract with a Target Term Rider offers the potential for lower cash values and death benefits than an all base policy with the same death benefit if Pruco Life of New Jersey raises its current charges to the maximum contractual level. This is because guaranteed maximum charges under the Contract and Target Term Rider are the same except for the per $1,000 of insurance portion of the monthly administrative charge which extends for 10 years on the rider and only five years on the base Contract. The surrender charge does not apply to the Target Term Rider. Other factors to consider are: The length of the Death Benefit Guarantee available on Contracts with a Target Term Rider is limited to five years. If it is important to you to have a Death Benefit Guarantee period longer than five years, you may want to purchase a Contract without a Target Term Rider. See Death Benefit Guarantee, page 31. The Enhanced Disability Benefit is unavailable on Contracts with a Target Term Rider. If it is important to you to have the Enhanced Disability Benefit, you may want to purchase a Contract without a Target Term Rider. See Enhanced Disability Benefit, below. The Living Needs Benefit does not apply to the portion of the death benefit that is attributable to a Target Term Rider. If it is important to you that the Living Needs Benefit applies to the entire death benefit, you may want to purchase a Contract without a Target Term Rider. See Living Needs Benefit, below. The rider coverage amount terminates at the insured s age 100. If it is important to you that no coverage amount then in effect terminates at the insured s attained age 100, you may want to purchase a contract without a Target Term Rider. Some of the factors outlined above can have effects on the financial performance of a Contract, including the amount of the Contract's cash value and death benefit. It is important that you ask your Pruco Life of New Jersey representative to provide illustrations based on different combinations of base Contract basic insurance amount and 24

30 rider coverage amount. You can then discuss with your Pruco Life of New Jersey representative how these combinations may address your objectives. (QKDQFHG'LVDELOLW\%HQHILW The Enhanced Disability Benefit pays certain amounts into the Contract if the insured is totally disabled, as defined in the benefit provision. The Enhanced Disability Benefit is unavailable on Contracts with a Target Term Rider. If it is important to you to have the Enhanced Disability Benefit, you may want to purchase a Contract without a Target Term Rider. /LYLQJ1HHGV%HQHILW The Living Needs Benefit is available in states where it is approved. The benefit may vary by state. There is no charge for adding the benefit to a Contract. However, an administrative charge (not to exceed $150) will be made at the time the Living Needs Benefit is paid. The Living Needs Benefit does not apply to the portion of the death benefit that is attributable to a Target Term Rider. If it is important to you that the Living Needs Benefit applies to the entire death benefit, you may want to purchase a Contract without a Target Term Rider. 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 of New Jersey representative should be consulted as to whether additional options may be available. Terminal Illness Option. This option is available if the insured is diagnosed as terminally ill with a life expectancy of six months or less. When satisfactory evidence is provided, Pruco Life of New Jersey will provide an accelerated payment of the portion of the death benefit selected by the Contract owner as a Living Needs Benefit. 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 satisfactory evidence is provided, including certification by a licensed physician, that the insured is expected to remain in the nursing home until death, Pruco Life of New Jersey will provide an accelerated payment of the portion of the death benefit selected by the Contract owner as a Living Needs Benefit. 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 2), depending upon the age of the insured. If the insured dies before all of the payments have been made, the present value of the remaining payments will be paid to the beneficiary designated in the Living Needs Benefit claim form in a single sum. Subject to state approval, all or part of the Contract s death benefit may be accelerated under the Living Needs Benefit. If the benefit is only partially accelerated, a death benefit of at least $25,000 must remain under the Contract. Pruco Life of New Jersey reserves the right to determine the minimum amount that may be accelerated. No benefit will be payable if you are required to elect it in order to meet the claims of creditors or to obtain a government benefit. Pruco Life of New Jersey can furnish details about the amount of Living Needs Benefit that is available to an eligible Contract owner, and the effect on the Contract 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 Contracts, the Living Needs Benefit is excluded from income if the insured is terminally ill or chronically ill as defined in the tax law (although the exclusion in the latter case may be limited). You should consult a 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. 25

31 5(48,5(0(176)25,668$1&(2)$&2175$&7 The Contract may generally be issued on insureds through age 90 for death benefit types A and B, and through age 70 for type C. Currently, the minimum face amount is $250,000. For Contracts with a Target Term Rider, the minimum total face amount (basic insurance amount plus any Target Term Rider coverage amount combined) is $250,000. Furthermore, if the Target Term Rider is added to the Contract, the minimum face amount of the base Contract is $100,000, while the minimum rider coverage amount is $5,000. See RIDERS, page 23. Pruco Life of New Jersey may change the minimum face amounts of the Contracts it will issue. Pruco Life of New Jersey requires evidence of insurability, which may include a medical examination, before issuing any Contract. Preferred Best non-smokers are offered more favorable cost of insurance rates than smokers. We charge a higher cost of insurance rate and/or an additional amount if an extra mortality risk is involved. These are the current underwriting requirements. We reserve the right to change them on a non-discriminatory basis. 35(0,806 0LQLPXP,QLWLDO3UHPLXP The Contract is a flexible premium contract. The minimum initial premium is due on or before the Contract date. It is the premium needed to start the Contract. The minimum initial premium is equal to 9% of the Target Premium. There is no insurance under the Contract unless the minimum initial premium is paid. Thereafter, you decide when to make premium payments and, subject to a $25 minimum, in what amounts. Premiums after the minimum initial premium must be received at our Service Office sixty minutes prior to any announced closing of the New York Stock Exchange or they will be applied as of the end of the valuation period the next business day. We may require an additional premium if adjustments to premium payments exceed the minimum initial premium or there are Contract Fund charges due on or before the payment date. We reserve the right to refuse to accept any payment that increases the death benefit by more than it increases the Contract Fund. Furthermore, there are circumstances under which the payment of premiums in amounts that are too large may cause the Contract to be characterized as a Modified Endowment Contract, which could be significantly disadvantageous. If you make a payment that would cause the Contract to be characterized as a Modified Endowment Contract, we will send you a letter to advise you of your options. Generally, you have 60 days from when we received your payment to remove the excess premiums and any accrued interest. If you choose not to remove the excess premium and accrued interest, your Contract will become permanently characterized as a Modified Endowment Contract. See Tax Treatment of Contract Benefits, page 37. Generally, your initial net premium is applied to your Contract as of the Contract date. If we do not receive your initial premium before the Contract date, we apply the initial premium to your Contract as of the end of the valuation period in which it is received in Good Order at a Service Office. $YDLODEOH7\SHVRI3UHPLXP Once the minimum initial premium payment is made, there are no required premiums. However, there are several types of premiums which are described below. Understanding them may help you understand how the Contract works. Target Premiums are premiums that, if paid at the beginning of each Contract year, will keep the Contract in-force until the insured s age 65, or if later, during the first 10 Contract years, regardless of investment performance and assuming no loans or withdrawals (not applicable to Contracts with the Target Term Rider). If you choose to continue the Death Benefit Guarantee beyond this period, you will have to begin paying premiums substantially higher than the Target Premium. However, not all Contracts offer the Death Benefit Guarantee beyond this period. The length of the Death Benefit Guarantee available to you depends on your Contract s death benefit type, the definition of life insurance test selected at issue, and whether the Target Term Rider is on the Contract. See Death Benefit Guarantee, page 31. When you purchase a Contract, your Pruco Life of New Jersey representative can tell you the amount[s] of the Target Premium. For a Contract with no riders or extra risk charges, these premiums will be level. 26

32 Short-Term Premiums are premiums that, in some instances, make it possible to pay a premium lower than the Target Premium. These Short-Term Premiums, if paid at the beginning of each Contract year, will keep the Contract in-force during the first five Contract years, regardless of investment performance and assuming no loans or withdrawals. To continue the Death Benefit Guarantee beyond this period, you will have to begin paying premiums higher than the Short-Term Premium. However, not all Contracts offer the Death Benefit Guarantee beyond five Contract years. The length of the Death Benefit Guarantee available to you depends on your Contract s death benefit type, the definition of life insurance test selected at issue, and whether the Target Term Rider is on the Contract. See Death Benefit Guarantee, page 31. When you purchase a Contract, your Pruco Life of New Jersey representative can tell you the amount[s] of the Short-Term Premium. As is the case with the Target Premium, for a Contract with no riders or extra risk charges, these premiums will be level. Lifetime Premiums are premiums that, if paid at the beginning of each Contract year, will keep the Contract inforce during the lifetime of the insured, regardless of investment performance and assuming no loans or withdrawals (not applicable to all Contracts). See Death Benefit Guarantee, page 31. As is the case with the Target Premium, for a Contract with no riders or extra risk charges, these premiums will be level. When you purchase a Contract, your Pruco Life of New Jersey representative can tell you the amount[s] of the Lifetime Premium. We can bill you for the amount you select annually, semi-annually, or quarterly. Because the Contract is a flexible premium contract, there are no scheduled premium due dates. When you receive a premium notice, you are not required to pay this amount. The Contract will remain in-force if: (1) the Contract Fund, less any applicable surrender charges, is greater than zero and more than any Contract debt or (2) you have paid sufficient premiums, on an accumulated basis, to meet the Death Benefit Guarantee conditions and Contract debt is not equal to or greater than the Contract Fund, less any applicable surrender charges. When you apply for the Contract, you should discuss with your Pruco Life of New Jersey representative how frequently you would like to be billed (if at all) and for what amount. $OORFDWLRQRI3UHPLXPV On the Contract date, we deduct the charge for sales expenses and the charge for taxes attributable to premiums from the initial premium and first monthly deductions are made. The remainder of the initial premium and any other net premium received in Good Order during the short-term cancellation right ( free-look ) period will be allocated to the ProFund VP Money Market investment option, as of the later of the Contract date and of the valuation period in which it is received in Good Order at a Service Office. At the end of the free-look period, these funds will be transferred out of the ProFund VP Money Market investment option and allocated among the ProFund VP variable investment options according to your desired allocation, as specified in the application form. If the first premium is received before the Contract date, there will be a period during which the Contract owner's initial premium will not be invested. The charge for sales expenses and the charge for taxes attributable to premiums also apply to all subsequent premium payments. The remainder of each subsequent premium payment will be invested as of the end of the valuation period in which it is received in Good Order at our Service Office, in accordance with the allocation you previously designated. Provided the Contract is not in default, you may change the way in which subsequent premiums are allocated by giving written notice to our Service Office or by telephoning our Service Office, provided you are enrolled to use the Telephone Transfer System. Premium allocation changes must be received at our Service Office sixty minutes prior to any announced closing of the New York Stock Exchange or they will take effect as of the end of the valuation period the next business day. There is no charge for reallocating future premiums. All percentage allocations must be in whole numbers. For example, 33% can be selected but 33D% cannot. Of course, the total allocation to all selected investment options must equal 100%. 7UDQVIHUV You may transfer amounts among the ProFund VP variable investment options without charge. All or a portion of the amount credited to a ProFund VP variable investment option may be transferred. Transfers will not be made until the end of the "free-look" period. The request may be in terms of dollars, such as a request to transfer $5,000 from one ProFund VP variable investment option to another, or may be in terms of a percentage reallocation among ProFund VP variable investment options. In the latter case, as with premium reallocations, the percentages must be in whole numbers. You may transfer amounts by written notice to our Service Office or by telephone, provided you are enrolled to use the Telephone Transfer System. You will automatically be enrolled to use the Telephone Transfer System unless the Contract is jointly owned 27

33 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. See Assignment, page 22. Any written transfer request that is received in Good Order at our Service Office after sixty minutes prior to any announced closing of the New York Stock Exchange (generally 3:00 Eastern time) and prior to the end of the valuation period that day will take effect as of the end of the valuation period the next business day. The "cut-off" time for transfer requests we receive in Good Order that are submitted electronically to us, using electronic tools and procedures that we require, will be extended to thirty minutes prior to any announced closing of the New York Stock Exchange (generally 3:30 Eastern time). We may set a later cut-off time for transfers and other financial transactions, but we will tell you if we do that. Contract owners who provide us with a power of attorney authorizing an investment advisor that: has a minimum of $200 million in assets under management and (1) has a minimum of $20 million in assets under management within PruLife Advisor Select variable appreciable life insurance contracts, or (2) for a period of six months following first authorization of the investment advisor by power of attorney to manage assets within PruLife Advisor Select variable appreciable life insurance contracts, has committed to $20 million in assets under management within PruLife Advisor Select variable appreciable life insurance contracts by the end of that six month period; signs and adheres to certain indemnification agreements with us; demonstrates systems and technology capabilities that we require and has the ability to meet specific protocols in transmitting trading activity; and is registered as an investment advisor with the SEC or state(s), as appropriate; will be allowed a later cut-off time for asset allocations, re-allocations and transfers, and will be authorized by us to transmit the trading activity directly to ProFund Advisors LLC. Cut-off times by which ProFund Advisors LLC must receive trading activity directly will vary by fund. The cut-off time will be six minutes prior to any announced closing of the New York Stock Exchange (generally 3:54 p.m. Eastern time) for ProFund VP Bull, ProFund VP OTC, ProFund VP U.S. Government Plus, ProFund VP UltraBull, ProFund VP UltraOTC, ProFund VP Bear, ProFund VP Short OTC, ProFund VP Rising Rates Opportunity and ProFund VP Money Market. The cut-off time will be ten minutes prior to any announced closing of the New York Stock Exchange (generally 3:50 p.m. Eastern time) for ProFund VP Small-Cap, ProFund VP Asia 30, ProFund VP Europe 30, ProFund VP Japan, ProFund VP Mid-Cap Value, ProFund VP Mid-Cap Growth, ProFund VP Short Small-Cap, ProFund VP Small-Cap Value, ProFund VP Small-Cap Growth, ProFund VP UltraMid-Cap and ProFund VP UltraSmall-Cap. The cut-off time will be twenty seven minutes prior to any announced closing of the New York Stock Exchange (generally 3:33 p.m. Eastern time) for ProFund VP Basic Materials, ProFund VP Banks, ProFund VP Biotechnology, ProFund VP Consumer Cyclical, ProFund VP Consumer Non-Cyclical, ProFund VP Energy, ProFund VP Financial, ProFund VP Healthcare, ProFund VP Industrial, ProFund VP Internet, ProFund VP Pharmaceuticals, ProFund VP Precious Metals, ProFund VP Real Estate, ProFund VP Semiconductor, ProFund VP Technology, ProFund VP Telecommunications and ProFund VP Utilities. We will use reasonable procedures, such as asking you to provide certain personal information provided on your application for insurance, to confirm that instructions given by telephone are genuine. We will not be held liable for following telephone instructions that we reasonably believe to be genuine. Pruco Life of New Jersey cannot guarantee that you will be able to get through to complete a telephone transfer during peak periods such as periods of drastic economic or market change. Transfer activity by Contract owners, such investment advisors or third parties may result in unusually large transfers which may interfere with our ability or the ability of the underlying Fund to process transactions. Such activity may also adversely affect the investment performance of the Funds. We reserve the right to limit transfers in any Contract year, or to refuse any of your transfer requests, if: 28

34 we believe that excessive transfers, a specific transfer request, or a group of transfer requests by an owner or the owner s investment advisor may have a detrimental effect on the performance of any investment option or the share prices of any Fund or would be detrimental to other Contract owners; or we are informed by one or more Funds that they intend to restrict the purchase of portfolio shares because of excessive trading or because they believe that a specific transfer or group of transfers would have a detrimental effect on the price of Fund shares. We may apply the restrictions in a non-discriminatory manner reasonably designed to prevent transfers that we consider to be disadvantageous to other Contract owners. We currently have no intention of limiting transfers or refusing transfer requests, however, we reserve the right to do so in the future. For example, we might need to exercise this right in the event of a change in the investment policy for a ProFund VP variable investment option, or in the event we add new ProFund VP variable investment options not designed to accommodate frequent or large transfers. If we exercise this right at the time of a transfer request, we will immediately notify you. We do not recommend, supervise or select your investment advisor. We are not responsible for any advice provided by your investment advisor. To use an investment advisor to effect allocations and transfers among the investment options, you must: notify us in writing of the name of your investment advisor; and provide us with a power of attorney approved by us authorizing your investment advisor to give us asset allocation/transfer instructions. There is no assurance that your investment advisor will successfully predict market fluctuations. In selecting your investment advisor, you should carefully consider his or her background, experience and reputation. '($7+%(1(),76 &RQWUDFW'DWH If the minimum initial premium is received before the Contract is issued, the premium will be applied as of the Contract date. If a medical examination is required, the Contract date will ordinarily be the date the examination is completed. If the minimum initial premium is received on or after the Contract date, it will be applied as of the date of receipt in Good Order at a Service Office. Under certain circumstances, we may allow the Contract to be backdated for the purpose of lowering the insured's issue age, but only to a date not earlier than six months prior to the application date. This may be advantageous for some Contract owners as a lower issue age may result in lower current charges. For a Contract that is backdated, we will credit the initial premium as of the date of receipt in Good Order at a Service Office and will deduct any charges due on or before that date. :KHQ3URFHHGV$UH3DLG Pruco Life of New Jersey will generally pay any death benefit, cash surrender value, loan proceeds or withdrawal within seven days after all the documents required for such a payment are received at our Service 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 our Service Office. However, Pruco Life of New Jersey may delay payment of proceeds from the ProFund VP variable investment option[s] and the variable portion of the death benefit due under the Contract if the disposal 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. 7\SHVRI'HDWK%HQHILW You may select from three types of death benefit at issue. Generally, a Contract with a Type A (fixed) death benefit has a death benefit equal to the basic insurance amount. This type of death benefit does not vary with the investment performance of the investment options you selected, except where the premiums you pay or favorable investment performance causes the Contract Fund to grow to the point where Pruco Life of New Jersey increases the death 29

35 benefit to ensure that the Contract will satisfy the Internal Revenue Service s definition of life insurance. The payment of additional premiums and favorable investment results of the ProFund VP variable investment options to which the assets are allocated will generally increase the cash surrender value and decrease the net amount at risk and result in lower charges. See How a Contract s Cash Surrender Value Will Vary, page 35. A Contract with a Type B (variable) death benefit has a death benefit which will generally equal the basic insurance amount plus the Contract Fund. Since the Contract Fund is a part of the death benefit, favorable investment performance and payment of additional premiums generally result in an increase in the death benefit as well as in the cash surrender value. Over time, however, the increase in the cash surrender value will be less than under a Type A (fixed) Contract. This is because, given two Contracts with the same basic insurance amount and equal Contract Funds, generally the cost of insurance charge for a Type B (variable) Contract will be greater due to a greater net amount at risk. See How a Contract s Cash Surrender Value Will Vary, page 35. Unfavorable investment performance will result in decreases in the death benefit and in the cash surrender value. However, as long as the Contract is not in default, the death benefit may not fall below the basic insurance amount stated in the Contract. A Contract with a Type C (return of premium) death benefit has a death benefit which will generally equal the basic insurance amount plus the total premiums paid into the Contract, less withdrawals. This death benefit allows the Contract owner, in effect, to recover the cost of the Contract upon the death of the insured. Under certain circumstances, it is possible for a Type C Contract s death benefit to fall below the basic insurance amount. Favorable investment performance and payment of additional premiums will generally increase the Contract's cash value. Over time, however, the increase in cash value will be less than under a Type A (fixed) Contract due to a greater net amount at risk and higher cost of insurance charges. See How a Contract s Cash Surrender Value Will Vary, page 35. The Type C death benefit is not available in states where it is not approved. In choosing a death benefit type, you should also consider whether you intend to use the withdrawal feature. Contract owners of Type A (fixed) Contracts should note that any withdrawal may result in a reduction of the basic insurance amount and the deduction of any applicable surrender charges. We will not allow you to make a withdrawal that will decrease the basic insurance amount below the minimum basic insurance amount. For Type B (variable) and Type C (return of premium) Contracts, withdrawals will not change the basic insurance amount. See Withdrawals, page 36. The way in which the cash surrender values and death benefits will change depends significantly upon the investment results that are actually achieved. &KDQJLQJWKH7\SHRI'HDWK%HQHILW You may change the type of death benefit any time after issue and subject to Pruco Life's approval. We will increase or decrease the basic insurance amount so that the death benefit immediately after the change matches the death benefit immediately before the change. The basic insurance amount after a change may not be lower than the minimum basic insurance amount applicable to the Contract. See REQUIREMENTS FOR ISSUANCE OF A CONTRACT, page 26. We reserve the right to make an administrative processing charge of up to $25 for any change in the basic insurance amount, although we do not currently do so. A type change that reduces the basic insurance amount may result in the assessment of surrender charges. See CHARGES AND EXPENSES, page 17. Furthermore, if you choose a Type A or Type B death benefit at issue, you will NOT be able to change to a Type C death benefit after issue. If you are changing your Contract s type of death benefit from a Type A (fixed) to a Type B (variable) death benefit, we will reduce the basic insurance amount by the amount in your Contract Fund on the date the change takes place. If you are changing from a Type A (fixed) to a Type C (return of premium) death benefit, we will change the basic insurance amount by subtracting the total premiums paid on this Contract minus total withdrawals on the date the change takes effect. This change is only available to Contracts which were issued with a Type C death benefit and subsequently changed to a Type A death benefit. If you are changing from a Type B (variable) to a Type A (fixed) death benefit, we will increase the basic insurance amount by the amount in your Contract Fund on the date the change takes place. If you are changing from a Type B (variable) to a Type C (return of premium) death benefit, we first find the difference between: (1) the amount in your Contract Fund and (2) the total premiums paid on this Contract minus total withdrawals, determined on the date the change takes effect. If (1) is larger than (2), we will increase the basic 30

36 insurance amount by that difference. If (2) is larger than (1), we will reduce the basic insurance amount by that difference. This change is only available to Contracts which were issued with a Type C death benefit and subsequently changed to a Type B death benefit. If you are changing from a Type C (return of premium) to a Type A (fixed) death benefit, we will change the basic insurance amount by adding the total premiums paid minus total withdrawals to this Contract on the date the change takes place. If you are changing from a Type C (return of premium) to a Type B (variable) death benefit, we first find the difference between: (1) the amount in your Contract Fund and (2) the total premiums paid on this Contract minus total withdrawals, determined on the date the change takes effect. If (2) is larger than (1), we will increase the basic insurance amount by that difference. If (1) is larger than (2), we will reduce the basic insurance amount by that difference. The following chart illustrates the changes in basic insurance amount with each change of death benefit type described above. The chart assumes a $50,000 Contract Fund and a $300,000 death benefit. For changes to and from a Type C death benefit, the chart assumes $40,000 in total premiums minus total withdrawals and the rate chosen to accumulate premiums is 0%. %DVLF,QVXUDQFH$PRXQW ) Type A $300,000 Type B $250,000 Type C $260,000 Type B $250,000 Type A $300,000 Type A $300,000 Type C $260,000 Type C $260,000 Type B $250,000 To request a change, fill out an application for change which can be obtained from your Pruco Life of New Jersey representative or our Service Office. If the change is approved, we will recompute the Contract s charges and appropriate tables and send you new Contract data pages. We may require you to send us your Contract before making the change. The Type C death benefit is not available in states where it is not approved. 'HDWK%HQHILW*XDUDQWHH Although you decide what premium amounts you wish to pay, sufficient premium payments, on an accumulated basis, will guarantee that your Contract will not lapse and a death benefit will be paid upon the death of the insured. This will be true even if, because of unfavorable investment experience, your Contract Fund value drops to zero. Withdrawals may adversely affect the status of the Death Benefit Guarantee. Likewise, a Contract loan may adversely affect any Death Benefit Guarantee. See Withdrawals, page 36, and Loans, page 35. You should consider how important the Death Benefit Guarantee is to you when deciding what premium amounts to pay into the Contract. At the Contract date and on each Monthly date, during the Death Benefit Guarantee period shown on your Contract data pages, we calculate your Contract s "Accumulated Net Payments" as of that date. Accumulated Net Payments equal the premiums you paid, accumulated at an effective annual rate of 4%, less withdrawals also accumulated at 4%. We also calculate Death Benefit Guarantee Values. These are values used solely to determine if a Death Benefit Guarantee is in effect. These are not cash values that you can realize by surrendering the Contract, nor are they payable death benefits. Your Contract data pages contain a table of Death Benefit Guarantee Values, calculated as of Contract anniversaries. Values for non-anniversary Monthly dates will reflect the number of months elapsed between Contract anniversaries. 31

37 At each Monthly date, during the Death Benefit Guarantee period shown on your Contract data pages, we will compare your Accumulated Net Payments to the Death Benefit Guarantee Value as of that date. If your Accumulated Net Payments equal or exceed the Death Benefit Guarantee Value or Contract debt does not equal or exceed the Contract Fund less any applicable surrender charges, then the Contract is kept in-force, regardless of the amount in the Contract Fund. Short-Term, Target, and Lifetime Premiums are payments which correspond to the Death Benefit Guarantee Values shown on your Contract data pages. For example, payment of the Short-Term Premium at the beginning of each Contract year guarantees that your Contract will not lapse during the first five Contract years, assuming no loans or withdrawals. However, payment of the Short-Term Premium after year five will not assure that your Contract s Accumulated Net Payments will continue to meet the Death Benefit Guarantee Values. See PREMIUMS, page 26. If you want a Death Benefit Guarantee to last longer than five years, you should expect to pay at least the Target Premium at the start of each Contract year. Paying the Target Premium at the beginning of each Contract year guarantees your Contract against lapse until the insured s age 65 or for 10 years after issue, whichever comes later, assuming no loans or withdrawals. However, payment of the Target Premium after this Death Benefit Guarantee period, will not assure that your Contract s Accumulated Net Payments will meet the subsequent, much higher, Death Benefit Guarantee Values. If you want a Death Benefit Guarantee to last the lifetime of the insured, then you should expect to pay at least the Lifetime Premium at the start of each Contract year. Paying the Lifetime Premium at the beginning of each Contract year guarantees your Contract against lapse for the insured s lifetime, assuming no loans or withdrawals. The following table provides sample Short-Term, Target, and Lifetime Premiums (to the nearest dollar) for Basic Insurance Amounts and increases dated on or after May 1, The examples assume: (1) the insured is a male, Preferred Best, with no extra risk or substandard ratings; (2) a $250,000 basic insurance amount; (3) no extra benefit riders have been added to the Contract; and (4) the Cash Value Accumulation Test has been elected for definition of life insurance testing. Illustrative Annual Premiums Age of insured at issue or increase Type of Death Benefit Chosen Short-Term Premium Target Premium Lifetime Premium 40 Type A (Fixed) $1,125 $2,138 $4, Type B (Variable) $1,210 $2,220 $14, Type C (Return of Premium) $1,130 N/A N/A 60 Type A (Fixed) $3,363 $7,158 $12, Type B (Variable) $4,415 $7,218 $33, Type C (Return of Premium) $4,163 N/A N/A 80 Type A (Fixed) $16,203 $39,345 $47, Type B (Variable) $22,353 $43,980 $83, Type C (Return of Premium) N/A N/A N/A Paying the Short-Term, Target, or Lifetime Premiums at the start of each Contract year is one way of reaching the Death Benefit Guarantee Values; it is certainly not the only way. The Death Benefit Guarantee allows considerable flexibility as to the timing of premium payments. Your Pruco Life of New Jersey representative can supply sample 32

38 illustrations of various premium amount and frequency combinations that correspond to the Death Benefit Guarantee Values. When determining what premium amounts to pay and the frequency of your payments, you should consider carefully the value of maintaining the Death Benefit Guarantee. If you desire the Death Benefit Guarantee until the later of the insured s age 65 or 10 years after issue, you may prefer to pay at least the Target Premium in all years, rather than paying the lower Short-Term Premium in the first five years. If you pay only enough premium to meet the Death Benefit Guarantee Values in the first five years, you will need to pay more than the Target Premium at the beginning of the 6th year in order to continue the Death Benefit Guarantee. Similarly, if you desire the Death Benefit Guarantee for lifetime protection, you may prefer to pay generally higher premiums in all years, rather than trying to make such payments on an as needed basis. For example, if you pay only enough premium to meet the Death Benefit Guarantee Values until the later of the insured s age 65 or 10 years after issue, a substantial amount may be required to meet the subsequent Death Benefit Guarantee Values and continue the guarantee. In addition, it is possible that the payment required to continue the guarantee beyond this period could exceed the premium payments allowed to be paid without causing the Contract to become a Modified Endowment Contract. See Tax Treatment of Contract Benefits, page 37. Not all Contracts will have the Death Benefit Guarantee available in all years. Type A and Type B Contracts with the Cash Value Accumulation Test elected for definition of life insurance testing will have the Death Benefit Guarantee available for the lifetime of the insured. However, Type A and Type B Contracts with the Guideline Premium Test elected for definition of life insurance testing will have the Death Benefit Guarantee available until the insured s age 65 or 10 years after issue, whichever is later. Furthermore, Type C Contracts with either the Cash Value Accumulation Test or Guideline Premium Test elected for definition of life insurance testing, will only have the Death Benefit Guarantee available for the first five Contract years. Contracts with the Target Term Rider will also have the Death Benefit Guarantee available for only the first five Contract years. Your Contract data pages will show Death Benefit Guarantee Values for the duration available with your Contract. See Types of Death Benefit, page 29 and Tax Treatment of Contract Benefits, page 37.,QFUHDVHVLQ%DVLF,QVXUDQFH$PRXQW Subject to state approval and subject to the underwriting requirements determined by Pruco Life of New Jersey, after the first Contract anniversary, you may increase the amount of insurance by increasing the basic insurance amount of the Contract, thus, creating an additional coverage segment. The following conditions must be met: (1) you must ask for the change in a form that meets Pruco Life of New Jersey s needs; (2) the amount of the increase must be at least equal to the minimum increase in basic insurance amount shown under Contract Limitations in your Contract data pages; (3) you must prove to us that the insured is insurable for any increase; (4) the Contract must not be in default; (5) we must not be paying premiums into the Contract as a result of the insured s total disability; and (6) if we ask you to do so, you must send us the Contract to be endorsed. If we approve the change, we will send you new Contract data pages showing the amount and effective date of the change and the recomputed charges, values and limitations. If the insured is not living on the effective date, the change will not take effect. No administrative processing charge is currently being made in connection with an increase in basic insurance amount. However, we reserve the right to make such a charge in an amount of up to $25. The Sales Load Target Premium is calculated separately for each coverage segment. When premiums are paid, each payment is allocated to each coverage segment based on the proportion of the Sales Load Target Premium in each segment to the total Sales Load Target Premiums of all segments. Currently, the sales load charge for each segment is equal to 4% of the allocated premium paid in each Contract year up to the Sales Load Target Premium and 2% of allocated premiums paid in excess of this amount for the first 10 Contract years; 0% thereafter. See the definition of Contract year for an increase in basic insurance amount under DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS, page

39 Each coverage segment will have its own surrender charge period beginning on that segment s effective date and its own surrender charge threshold. The surrender charge threshold is the segment s lowest coverage amount since its effective date. See Decreases in Basic Insurance Amount, page 34, and Surrender Charges, page 18. The COI rates for a coverage segment representing an increase in basic insurance amount are based upon 1980 CSO Tables, the age at the effective date of the increase and the number of years since then, total basic insurance amount, sex (except where unisex rates apply), underwriting class, smoker/nonsmoker status, and extra rating class, if any. The net amount at risk for the whole Contract (the death benefit minus the Contract Fund) is allocated to each coverage segment based on the proportion of its basic insurance amount to the total of all coverage segments. In addition, the attained age factor for a Contract with an increase in basic insurance amount is based on the insured's attained age for the initial coverage segment. Each Contract owner who elects to increase the basic insurance amount of his or her Contract will receive a "free-look" right which will apply only to the increase in basic insurance amount, not the entire Contract. This right is comparable to the right afforded to a purchaser of a new Contract except that, any cost of insurance charge for the increase in the basic insurance amount will be returned to the Contract Fund instead of a refund of premium. Generally, the "free-look" right would have to be exercised no later than 10 days after receipt of the Contract as increased. An increase in basic insurance amount may cause the Contract to be classified as a Modified Endowment Contract. See Tax Treatment of Contract Benefits, page 37. Therefore, before increasing the basic insurance amount, you should consult with your tax adviser and your Pruco Life of New Jersey representative. 'HFUHDVHVLQ%DVLF,QVXUDQFH$PRXQW As explained earlier, you may make a withdrawal. See Withdrawals, page 36. You also have the option of decreasing the basic insurance amount of your Contract without withdrawing any cash surrender value at any time after the first Contract anniversary. Contract owners who conclude that, because of changed circumstances, the amount of insurance is greater than needed will be able to decrease their amount of insurance protection, and the monthly deductions for the cost of insurance. The amount of the decrease must be at least equal to the minimum decrease in basic insurance amount shown under Contract Limitations in your Contract data pages. In addition, the basic insurance amount after the decrease must be at least equal to the minimum basic insurance amount shown under Contract Limitations in your Contract data pages. No administrative processing charge is currently being made in connection with a decrease in basic insurance amount. However, we reserve the right to make such a charge in an amount of up to $25. See CHARGES AND EXPENSES, page 17. If we ask you to, you must send us your Contract to be endorsed. The Contract will be amended to show the new basic insurance amount, charges, values in the appropriate tables and the effective date of the decrease. A decrease will not take effect if the insured is not living on the effective date. For Contracts with more than one coverage segment, a decrease in basic insurance amount will reduce each coverage segment based on the proportion of the coverage segment amount to the total of all coverage segment amounts in effect just before the change. Each coverage segment will have its own surrender charge threshold equal to the segment s lowest coverage amount since its effective date. If the decrease in basic insurance amount reduces a coverage segment to an amount equal to or greater than its surrender charge threshold, we will not impose a surrender charge. However, if the decrease in basic insurance amount reduces a coverage segment below its threshold, we will subtract the new coverage segment amount from the threshold amount. We will then multiply the surrender charge by the lesser of this difference and the amount of the decrease, divide by the basic insurance amount at issue, and deduct the result from the Contract Fund. See Surrender Charges, page 18. We may decline a reduction if we determine it would cause the Contract to fail to qualify as "life insurance" for purposes of Section 7702 of the Internal Revenue Code. See Tax Treatment of Contract Benefits, page 37. Furthermore, a decrease will not take effect if the insured is not living on the effective date. It is important to note, however, that if the basic insurance amount is decreased, there is a possibility that the Contract will be classified as a Modified Endowment Contract. See Tax Treatment of Contract Benefits, page 37. Before requesting any decrease in basic insurance amount, you should consult with your tax adviser and your Pruco Life of New Jersey representative. 34

40 &2175$&79$/8(6 +RZD&RQWUDFWV&DVK6XUUHQGHU9DOXH:LOO9DU\ You may surrender the Contract for its cash surrender value (referred to as net cash value in the Contract). The Contract s cash surrender value on any date will be the Contract Fund less any applicable surrender charges and less any Contract debt. See Loans, page 35. The Contract Fund value changes daily, reflecting: (1) increases or decreases in the value of the ProFund VP variable investment option[s]; (2) interest credited on any loan; and (3) the daily asset charge for mortality and expense risks assessed against the ProFund VP variable investment options. The Contract Fund value also changes to reflect the receipt of premium payments and the monthly deductions described under CHARGES AND EXPENSES, page 17. Upon request, Pruco Life of New Jersey will tell you the cash surrender value of your Contract. It is possible for the cash surrender value of a Contract to decline to zero because of unfavorable investment performance or outstanding Contract debt. The tables on pages T1 through T5 in this prospectus illustrate approximately what the cash surrender values would be for representative Contracts paying certain premium amounts (see PREMIUMS, page 26), and assuming hypothetical uniform investment results in the Fund portfolios. The tables assume maximum charges will be made. See ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS, page 40. 6XUUHQGHURID&RQWUDFW A Contract may be surrendered for its cash surrender value while the insured is living. To surrender a Contract, we may require you to deliver or mail the Contract with a signed written request in a form that meets Pruco Life s needs, to our Service Office. The surrender request must be received at our Service Office sixty minutes prior to any announced closing of the New York Stock Exchange or it will take effect as of the end of the valuation period the next business day. Surrender of a Contract may have tax consequences. See Tax Treatment of Contract Benefits, page 37. /RDQV You may borrow from Pruco Life of New Jersey an amount up to the current loan value of your Contract less any existing Contract debt using the Contract as the only security for the loan. The loan value at any time is equal to 90% of the cash value, provided the Contract is not in default. The cash value is equal to the Contract Fund less any surrender charge. A Contract in default has no loan value. The minimum loan amount you may borrow is $500. The loan request must be received at our Service Office sixty minutes prior to any announced closing of the New York Stock Exchange or it will take effect as of the end of the valuation period the next business day. Interest charged on a loan accrues daily. Interest is due on each Contract anniversary or when the loan is paid back, whichever comes first. If interest is not paid when due, it becomes part of the loan and we will charge interest on it, too. Except in the case of preferred loans, we charge interest at an effective annual rate of 5%. A portion of any amount you borrow on or after the 10th Contract anniversary may be considered a preferred loan. The maximum preferred loan amount is the total amount you may borrow minus the total net premiums paid (net premiums equal premiums paid less total withdrawals, if any). If the net premium amount is less than zero, we will, for purposes of this calculation, consider it to be zero. Only new loans borrowed after the 10th Contract anniversary may be considered preferred loans. Standard loans will not automatically be converted into preferred loans. Preferred loans are charged interest at an effective annual rate of 4.10%. 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 equals or exceeds the Contract Fund less any applicable surrender charges, the Contract will go into default. If the Contract debt equals or exceeds the Contract Fund less any applicable surrender charges and you fail to keep the Contract in-force, the amount of unpaid Contract debt will be treated as a distribution and will be immediately taxable to the extent of gain in the Contract. Reinstatement of the Contract after lapse will not eliminate the taxable income which we are required to report to the Internal Revenue Service. See LAPSE AND REINSTATEMENT, page 37 and Tax Treatment of Contract Benefits & Pre-Death Distributions, page

41 When a loan is made, an amount equal to the loan proceeds is transferred out of the Account. Unless you ask us to take the loan amount from specific investment options and we agree, the reduction will be made in the same proportions as the value in each ProFund VP variable investment 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. It will be credited with an effective annual rate of return of 4%. On each Monthly date, we will increase the portion of the Contract Fund in the investment options by interest credits accrued on the loan since the last Monthly date. The net cost of a standard loan is 1% and the net cost of a preferred loan is 0.10%. Loans you take against the Contract are ordinarily treated as debt and are not considered distributions subject to tax. However, you should know that the Internal Revenue Service may take the position that the loan should be treated as a distribution for tax purposes because of the relatively low differential between the loan interest rate and the Contract s crediting rate. Distributions are subject to income tax. Were the Internal Revenue Service to take this position, Pruco Life of New Jersey would take reasonable steps to attempt to avoid this result, including modifying the Contract s loan provisions, but cannot guarantee that such efforts would be successful. A loan will not cause the Contract to lapse as long as Contract debt does not equal or exceed the Contract Fund, less any applicable surrender charges. Loans from Modified Endowment Contracts may be treated for tax purposes as distributions of income. See Tax Treatment of Contract Benefits, page 37. Any Contract debt will directly reduce a Contract's cash surrender value and will be subtracted from the death benefit to determine the amount payable. In addition, even if the loan is fully repaid, it may have an effect on future death benefits because the investment results of the selected investment options will apply only to the amount remaining invested under those options. The longer the loan is outstanding, the greater the effect is likely to be. The effect could be favorable or unfavorable. If investment results are greater than the rate being credited on the 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. When you repay all or part of a loan, we will increase the portion of the Contract Fund in the investment options by the amount of the loan you repay using the investment allocation for future premium payments as of the loan payment date, plus interest credits accrued on the loan since the last transaction date. If loan interest is paid when due, it will not change the portion of the Contract Fund allocated to the investment options. We reserve the right to change the manner in which we allocate loan repayments. :LWKGUDZDOV 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 net cash value after withdrawal may not be less than or equal to zero after deducting any charges associated with the withdrawal and an amount that we estimate will be sufficient to cover the contract fund deductions for two monthly dates following the date of withdrawal. The amount withdrawn must be at least $100. There is an administrative processing fee for each withdrawal which is equal to the lesser of $25 and 2% of the amount withdrawn. An amount withdrawn may not be repaid except as a premium subject to the applicable charges. Upon request, we will tell you how much you may withdraw. The withdrawal request must be received at our Service Office sixty minutes prior to any announced closing of the New York Stock Exchange or it will take effect as of the end of the valuation period the next business day. Withdrawal of the cash surrender value may have tax consequences. See Tax Treatment of Contract Benefits, page 37. Whenever a withdrawal is made, the death benefit will immediately be reduced by at least the amount of the withdrawal. Withdrawals under Type B (variable) and Type C (return of premium) Contracts, will not change the basic insurance amount. However, under a Type A (fixed) Contract, the withdrawal may require a reduction in the basic insurance amount. If a decrease in basic insurance amount reduces a coverage segment below its surrender charge threshold, a surrender charge may be deducted. See CHARGES AND EXPENSES, page 17. No withdrawal will be permitted under a Type A (fixed) Contract if it would result in a basic insurance amount of less than the minimum basic insurance amount. See REQUIREMENTS FOR ISSUANCE OF A CONTRACT, page 26. It is important to note, however, that if the basic insurance amount is decreased, there is a possibility that the Contract might be classified as a Modified Endowment Contract. Before making any withdrawal which causes a decrease in basic insurance amount, you should consult with your tax adviser and your Pruco Life of New Jersey representative. See Tax Treatment of Contract Benefits, page

42 Currently, when you request a transaction which causes a decrease in basic insurance amount resulting in a Contract that is classified as a Modified Endowment Contract, we will provide an authorization form. The authorization form will confirm that you are aware that the Contract will become a Modified Endowment Contract if the transaction is completed. When we receive that properly completed form in a Service Office, we will complete the transaction and send a confirmation notice. When a withdrawal is made, the Contract Fund is reduced by the sum of the cash surrender value withdrawn, the withdrawal fee, and any surrender charge. An amount equal to the reduction in the Contract Fund will be withdrawn proportionally from the investment options unless you direct otherwise. Withdrawal of any portion 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 go into default. Withdrawals may also affect whether a Contract is kept in-force under the Death Benefit Guarantee, since withdrawals decrease your Accumulated Net Payments. See Death Benefit Guarantee, page 31. Generally, Pruco Life of New Jersey will pay any withdrawn portion of cash surrender value or withdrawal amount within seven days after all the documents required for such a payment are received at a Service Office. A Contract returned during the free-look period shall be deemed void from the beginning, and not considered a surrender or withdrawal. /$36($1'5(,167$7(0(17 Pruco Life of New Jersey will determine the value of the Contract Fund on each Monthly date. If the Contract Fund less any applicable surrender charges is zero or less, the Contract is in default unless it remains in-force under the Death Benefit Guarantee, assuming there are no outstanding loans. See Death Benefit Guarantee, page 31. Separately, if the Contract debt ever grows to be equal to or more than the Contract Fund less any applicable surrender charges, the Contract will be in default. Should this happen, Pruco Life of New Jersey will send you a notice of default setting forth the payment which we estimate will keep the Contract in-force for three months from the date of default. This payment must be received at our Service Office within the 61-day grace period after the notice of default is mailed or the Contract will end and have no value. A Contract that lapses with an outstanding Contract loan may have tax consequences. See Tax Treatment of Contract Benefits, page 37. A Contract that ended in default may be reinstated within five years after the date of default, if the following conditions are met: (1) renewed evidence of insurability is provided on the insured; (2) submission of certain payments sufficient to bring the Contract up to date plus a premium that we estimate will cover all charges and deductions for the next three months; and (3) any Contract debt with interest to date is restored or paid back. If the Contract debt is restored and the debt with interest would exceed the loan value of the reinstated Contract, the excess must be paid to us before reinstatement. The reinstatement date will be the date we approve your request. We will deduct all required charges from your payment and the balance will be placed into your Contract Fund. If we approve the reinstatement, we will credit the Contract Fund with an amount equal to the surrender charge applicable as of the date of reinstatement. 7D[7UHDWPHQWRI&RQWUDFW%HQHILWV 7$;(6 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 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. For further information on the diversification requirements, see Tax Information in the Fund prospectus. 37

43 In order to meet the definition of life insurance rules for federal income tax purposes, the Contract must satisfy one of the two following tests: (1) Cash Value Accumulation Test or (2) Guideline Premium Test. At issue, the Contract owner chooses which of these two tests will apply to their Contract. This choice cannot be changed thereafter. Under the Cash Value Accumulation Test, the Contract must maintain a minimum ratio of death benefit to cash value. Therefore, in order to ensure that the Contract qualifies as life insurance, the Contract s death benefit may increase as the Contract Fund value increases. The death benefit, at all times, must be at least equal to the Contract Fund multiplied by the applicable attained age factor. A listing of attained age factors can be found on your Contract data pages. Under the Guideline Premium Test, there is a limit as to the amount of premium that can be paid into the Contract in relation to the death benefit. In addition, there is a minimum ratio of death benefit to cash value associated with this test. This ratio, however, is less than the required ratio under the Cash Value Accumulation test. Therefore, the death benefit required under this test is generally lower than that of the Cash Value Accumulation test. The selection of the definition of life insurance test most appropriate for you is dependent on several factors, including the insured s age at issue, actual Contract earnings, and whether or not the Contract is classified as a Modified Endowment Contract. You should consult your own tax adviser for complete information and advice with respect to the selection of the definition of life insurance test. We believe we have taken adequate steps to insure that the Contract qualifies as life insurance for tax purposes. Generally speaking, this means that: you will not be taxed on the growth of the funds in the Contract, unless you receive a distribution from the Contract, and the Contract's death benefit will be income tax free to your beneficiary. However, your death benefit could be subject to estate tax. 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 insure that the Contract will qualify as life insurance. Pre-Death Distribution-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. 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. In other words, you will immediately have taxable income to the extent of gain in the Contract. Reinstatement of the Contract after lapse will not eliminate the taxable income which we are required to report to the Internal Revenue Service. The tax consequences of a surrender may differ if you take the proceeds under an income payment settlement option. 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. 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. Loans you take against the Contract are ordinarily treated as debt and are not considered distributions subject to tax. However, you should know that the Internal Revenue Service may take the position that the preferred loan should be treated as a distribution for tax purposes because of the relatively 38

44 low differential between the loan interest rate and Contract s crediting rate. Were the Internal Revenue Service to take this position, Pruco Life of New Jersey would take reasonable steps to avoid this result, including modifying the Contract s loan provisions. Modified Endowment Contracts. 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 in amounts that are too large 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. You should first consult a tax adviser and your Pruco Life of New Jersey representative if you are contemplating any of these steps. 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 and assignments, made during the two-year period before the time that the Contract became a Modified Endowment Contract. 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 59½, 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. 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. Investor Control. Treasury Department regulations do not provide guidance concerning the extent to which you may direct your investment in the particular ProFund VP variable investment options without causing you, instead of Pruco Life of New Jersey, to be considered the owner of the underlying assets. Because of this uncertainty, Pruco Life of New Jersey reserves the right to make such changes as it deems necessary to assure that the Contract qualifies as life insurance for tax purposes. Any such changes will apply uniformly to affected Contract owners and will be made with such notice to affected Contract owners as is feasible under the circumstances. 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, 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. 39

45 /(*$/352&((',1*6 We are subject to legal and regulatory actions in the ordinary course of our business, including class action lawsuits. Pending legal and regulatory actions include proceedings that are specific to us and proceedings generally applicable to the businesses in which we operate. We are also subject to litigation arising out of our general business activities, such as our investments and third party contracts. In certain of these matters, the plaintiffs are seeking large and/or indeterminate amounts, including punitive or exemplary damages. We have been subject to substantial regulatory actions and civil litigation, including class actions, involving individual life insurance sales practices from 1982 through As of January 31, 2003, Pruco Life of New Jersey has resolved those regulatory actions, its sales practices class action litigation and all of the individual sales practices actions filed by policyholders who opted out of the sales practices class action. Prudential has indemnified Pruco Life of New Jersey for any liabilities incurred in connection with sales practices litigation covering policyholders of individual permanent life insurance policies issued in the United States from 1982 to Pruco Life of New Jersey s litigation is subject to many uncertainties, and given the complexity and scope, the outcomes cannot be predicted. It is possible that the results of operations or the cash flow of Pruco Life of New Jersey in a particular quarterly or annual period could be materially affected by an ultimate unfavorable resolution of pending litigation and regulatory matters. Management believes, however, that the ultimate outcome of all pending litigation and regulatory matters should not have a material adverse effect on Pruco Life of New Jersey s financial position.,//8675$7,2162)&$6+6855(1'(59$/8(6'($7+ %(1(),76$1'$&&808/$7('35(0,806 The following tables (pages T1 through T5) show how a Contract s death benefit and cash surrender values change with the investment experience of the Account. They are "hypothetical" because they are based, in part, upon several assumptions, which are described below. All five tables assume the following: a Contract bought by a 35 year old male, Preferred Best, with no extra risks or substandard ratings. a given premium amount is paid on each Contract anniversary and no loans are taken. maximum contractual charges, before any fee waivers, reimbursement of expenses, or expense reductions, if any, have been made. the Contract Fund has been invested in equal amounts in each of the 37 Funds. The first table (page T1) assumes: (1) a Type A (fixed) Contract has been purchased, (2) a $250,000 basic insurance amount and no riders have been added to the Contract, and (3) a Cash Value Accumulation Test has been elected for definition of life insurance testing. See Tax Treatment of Contract Benefits, page 37 and Types of Death Benefit, page 29. The second table (pages T2) assumes: (1) a Type A (fixed) Contract has been purchased, (2) a $100,000 basic insurance amount and a $150,000 Target Term Rider has been added to the Contract, and (3) a Cash Value Accumulation Test has been elected for definition of life insurance testing. See Tax Treatment of Contract Benefits, page 37 and Types of Death Benefit, page 29. The third table (page T3) assumes: (1) a Type A (fixed) Contract has been purchased, (2) a $250,000 basic insurance amount and no riders have been added to the Contract, and (3) a Guideline Premium Test has been elected for definition of life insurance testing. See Tax Treatment of Contract Benefits, page 37 and Types of Death Benefit, page 29. The fourth table (page T4) assumes: (1) a Type B (variable) Contract has been purchased, (2) a $250,000 basic insurance amount and no riders have been added to the Contract, and (3) a Cash Value Accumulation Test has been elected for definition of life insurance testing. See Tax Treatment of Contract Benefits, page 37 and Types of Death Benefit, page 29. The fifth table (page T5) assumes: (1) a Type C (return of premium) Contract has been purchased, (2) a $250,000 basic insurance amount and no riders have been added to the Contract, and (3) a Cash Value Accumulation Test has 40

46 been elected for definition of life insurance testing. See Tax Treatment of Contract Benefits, page 37 and Types of Death Benefit, page 29. Finally, there are three 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 two assumptions are that investment performance will be at a uniform gross annual rate of 6% 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%, 6%, and 12% but fluctuated from those averages throughout the years. Nevertheless, these assumptions help show how the Contract values will change with investment experience. The first column in the following illustrations (pages T1 through T5) shows the Contract year. The second column, to provide context, shows what the aggregate amount would be if the premiums had been invested to earn interest, after taxes, at 4% compounded annually. The next four columns show the death benefit payable in each of the years shown for the three different assumed investment returns. The last four columns show the cash surrender value payable in each of the years shown for the three 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 37 portfolios of 2.12%, and the daily deduction from the Contract Fund of 0.45% per year for the tables based on maximum charges. Thus, assuming maximum charges, gross returns of 0%, 6%, and 12% are the equivalent of net returns of -2.57%, 3.43% and 9.43%, respectively. The actual fees and expenses of the portfolios associated with a particular Contract may be more or less than 2.12% and will depend on which variable investment options are selected. The death benefits and cash surrender values shown reflect the deduction of all expenses and charges both from the Funds and under the Contract. The Contract allows you to invest your net premium dollars in professionally managed funds. Fluctuating investment returns in these funds, together with the actual pattern of your premium payments, our Contract charges, and any loans and withdrawals you may make will generate different Contract values than those illustrated, even if the averages of the investment rates of return over the years were to match those illustrated. Because of this, we strongly recommend periodic Contract reviews with your Pruco Life of New Jersey representative. Reviews are an excellent way to monitor the performance of the Contract against your expectations and to identify adjustments that may be necessary. 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 using maximum charges, 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 of New Jersey representative can provide you with a hypothetical illustration using current charges for your own age, sex, and rating class. 41

47 ILLUSTRATIONS PRULIFE ADVISOR SELECT CASH VALUE ACCUMULATION TEST TYPE A (FIXED) DEATH BENEFIT MALE PREFERRED BEST ISSUE AGE 35 $250,000 BASIC INSURANCE AMOUNT ASSUME PAYMENT OF $1,725 ANNUAL PREMIUMS IN ALL YEARS USING MAXIMUM CHARGES Death Benefit (1) Cash Surrender Value (1) 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 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross Year Per Year (-2.57% Net) (3.43% Net) (9.43% Net) (-2.57% Net) (3.43% Net) (9.43% Net) $ 1,794 $250,000 $250,000 $250,000 $ 0 $ 0 $ 0 2 $ 3,660 $250,000 $250,000 $250,000 $ 0 $ 0 $ 0 3 $ 5,600 $250,000 $250,000 $250,000 $ 0 $ 0 $ 0 4 $ 7,618 $250,000 $250,000 $250,000 $ 0 $ 305 $ $ 9,717 $250,000 $250,000 $250,000 $ 375 $ 873 $ 1,477 6 $ 11,900 $250,000 $250,000 $250,000 $1,168 $1,840 $ 2,688 7 $ 14,170 $250,000 $250,000 $250,000 $1,904 $2,790 $ 3,951 8 $ 16,530 $250,000 $250,000 $250,000 $2,581 $3,721 $ 5,270 9 $ 18,986 $250,000 $250,000 $250,000 $3,196 $4,627 $ 6, $ 21,539 $250,000 $250,000 $250,000 $3,745 $5,503 $ 8, $ 35,922 $250,000 $250,000 $250,000 $4,585 $8,389 $15, $ 53,422 $250,000 $250,000 $250,000 $2,651 $8,816 $23, $ 74,713 $250,000 $250,000 $250,000 $ 0 $4,253 $31, $100,616 $250,000 $250,000 $250,000 $ 0 $ 0 $35, $132,132 $ 0(2) $ 0(2) $250,000 $ 0(2) $ 0(2) $27, $170,476 $ 0 $ 0 $ 0(2) $ 0 $ 0 $ 0(2) 45 $217,127 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 50 $273,885 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 55 $342,940 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 60 $426,955 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 65 $529,173 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 (1) Assumes no Contract loan has been made. (2) Based on a gross return of 0%, the Contract would go into default in policy year 31, unless an additional premium payment was made. Based on a gross return of 6%, the Contract would go into default in policy year 31, unless an additional premium payment was made. Based on a gross return of 12%, the Contract would go into default in policy year 39, unless an additional premium payment was 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%, 6%, 12% over a period of years, but also fluctuated above or below those averages for individual contract years. No representations can be made by Pruco Life of New Jersey or the Series Fund that these hypothetical rates of return can be achieved for any one year or sustained over any period of time. T1

48 PRULIFE ADVISOR SELECT CASH VALUE ACCUMULATION TEST TYPE A (FIXED) DEATH BENEFIT MALE PREFERRED BEST ISSUE AGE 35 $250,000 TARGET COVERAGE AMOUNT($100,000 BASIC INSURANCE AMOUNT, $150,000 TARGET TERM RIDER) ASSUME PAYMENT OF $1,725 ANNUAL PREMIUMS IN ALL YEARS USING MAXIMUM CHARGES Death Benefit (1) Cash Surrender Value (1) 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 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross Year Per Year (-2.57% Net) (3.43% Net) (9.43% Net) (-2.57% Net) (3.43% Net) (9.43% Net) $ 1,794 $250,000 $250,000 $250,000 $ 0 $ 0 $ 0 2 $ 3,660 $250,000 $250,000 $250,000 $ 0 $ 88 $ $ 5,600 $250,000 $250,000 $250,000 $ 352 $ 585 $ $ 7,618 $250,000 $250,000 $250,000 $ 709 $1,065 $ 1,478 5 $ 9,717 $250,000 $250,000 $250,000 $1,026 $1,524 $ 2,128 6 $ 11,900 $250,000 $250,000 $250,000 $1,462 $2,126 $ 2,966 7 $ 14,170 $250,000 $250,000 $250,000 $1,846 $2,701 $ 3,830 8 $ 16,530 $250,000 $250,000 $250,000 $2,177 $3,247 $ 4,721 9 $ 18,986 $250,000 $250,000 $250,000 $2,451 $3,758 $ 5, $ 21,539 $250,000 $250,000 $250,000 $2,666 $4,227 $ 6, $ 35,922 $250,000 $250,000 $250,000 $3,520 $6,717 $12, $ 53,422 $250,000 $250,000 $250,000 $1,687 $6,775 $19, $ 74,713 $ 0(2) $250,000 $250,000 $ 0(2) $1,712 $24, $100,616 $ 0 $ 0(2) $250,000 $ 0 $ 0(2) $23, $132,132 $ 0 $ 0 $250,000 $ 0 $ 0 $ 6, $170,476 $ 0 $ 0 $ 0(2) $ 0 $ 0 $ 0(2) 45 $217,127 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 50 $273,885 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 55 $342,940 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 60 $426,955 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 65 $529,173 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 (1) Assumes no Contract loan has been made. (2) Based on a gross return of 0%, the Contract would go into default in policy year 22, unless an additional premium payment was made. Based on a gross return of 6%, the Contract would go into default in policy year 26, unless an additional premium payment was made. Based on a gross return of 12%, the Contract would go into default in policy year 36, unless an additional premium payment was 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%, 6%, 12% over a period of years, but also fluctuated above or below those averages for individual contract years. No representations can be made by Pruco Life of New Jersey or the Series Fund that these hypothetical rates of return can be achieved for any one year or sustained over any period of time. T2

49 PRULIFE ADVISOR SELECT GUIDELINE PREMIUM TEST TYPE A (FIXED) DEATH BENEFIT MALE PREFERRED BEST ISSUE AGE 35 $250,000 BASIC INSURANCE AMOUNT ASSUME PAYMENT OF $1,725 ANNUAL PREMIUMS IN ALL YEARS USING MAXIMUM CHARGES Death Benefit (1) Cash Surrender Value (1) 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 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross Year Per Year (-2.57% Net) (3.43% Net) (9.43% Net) (-2.57% Net) (3.43% Net) (9.43% Net) $ 1,794 $250,000 $250,000 $250,000 $ 0 $ 0 $ 0 2 $ 3,660 $250,000 $250,000 $250,000 $ 0 $ 0 $ 0 3 $ 5,600 $250,000 $250,000 $250,000 $ 0 $ 0 $ 0 4 $ 7,618 $250,000 $250,000 $250,000 $ 0 $ 305 $ $ 9,717 $250,000 $250,000 $250,000 $ 375 $ 873 $ 1,477 6 $ 11,900 $250,000 $250,000 $250,000 $1,168 $1,840 $ 2,688 7 $ 14,170 $250,000 $250,000 $250,000 $1,904 $2,790 $ 3,951 8 $ 16,530 $250,000 $250,000 $250,000 $2,581 $3,721 $ 5,270 9 $ 18,986 $250,000 $250,000 $250,000 $3,196 $4,627 $ 6, $ 21,539 $250,000 $250,000 $250,000 $3,745 $5,503 $ 8, $ 35,922 $250,000 $250,000 $250,000 $4,585 $8,389 $15, $ 53,422 $250,000 $250,000 $250,000 $2,651 $8,816 $23, $ 74,713 $250,000 $250,000 $250,000 $ 0 $4,253 $31, $100,616 $250,000 $250,000 $250,000 $ 0 $ 0 $35, $132,132 $ 0(2) $ 0(2) $250,000 $ 0(2) $ 0(2) $27, $170,476 $ 0 $ 0 $ 0(2) $ 0 $ 0 $ 0(2) 45 $217,127 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 50 $273,885 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 55 $342,940 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 60 $426,955 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 65 $529,173 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 (1) Assumes no Contract loan has been made. (2) Based on a gross return of 0%, the Contract would go into default in policy year 31, unless an additional premium payment was made. Based on a gross return of 6%, the Contract would go into default in policy year 31, unless an additional premium payment was made. Based on a gross return of 12%, the Contract would go into default in policy year 39, unless an additional premium payment was 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%, 6%, 12% over a period of years, but also fluctuated above or below those averages for individual contract years. No representations can be made by Pruco Life of New Jersey or the Series Fund that these hypothetical rates of return can be achieved for any one year or sustained over any period of time. T3

50 PRULIFE ADVISOR SELECT CASH VALUE ACCUMULATION TEST TYPE B (VARIABLE) DEATH BENEFIT MALE PREFERRED BEST ISSUE AGE 35 $250,000 BASIC INSURANCE AMOUNT ASSUME PAYMENT OF $1,725 ANNUAL PREMIUMS IN ALL YEARS USING MAXIMUM CHARGES Death Benefit (1) Cash Surrender Value (1) 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 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross Year Per Year (-2.57% Net) (3.43% Net) (9.43% Net) (-2.57% Net) (3.43% Net) (9.43% Net) $ 1,794 $250,378 $250,432 $250,487 $ 0 $ 0 $ 0 2 $ 3,660 $250,724 $250,856 $250,996 $ 0 $ 0 $ 0 3 $ 5,600 $251,032 $251,264 $251,522 $ 0 $ 0 $ 0 4 $ 7,618 $251,300 $251,653 $252,063 $ 0 $ 293 $ $ 9,717 $251,526 $252,020 $252,619 $ 360 $ 854 $ 1,452 6 $ 11,900 $252,120 $252,785 $253,624 $1,148 $1,813 $ 2,652 7 $ 14,170 $252,653 $253,529 $254,676 $1,876 $2,752 $ 3,898 8 $ 16,530 $253,127 $254,251 $255,778 $2,543 $3,668 $ 5,195 9 $ 18,986 $253,536 $254,945 $256,929 $3,147 $4,556 $ 6, $ 21,539 $253,879 $255,604 $258,128 $3,684 $5,409 $ 7, $ 35,922 $254,431 $258,103 $264,769 $4,431 $8,103 $14, $ 53,422 $252,383 $258,153 $271,856 $2,383 $8,153 $21, $ 74,713 $ 0(2) $253,044 $277,037 $ 0(2) $3,044 $27, $100,616 $ 0 $ 0(2) $275,232 $ 0 $ 0(2) $25, $132,132 $ 0 $ 0 $255,429 $ 0 $ 0 $ 5, $170,476 $ 0 $ 0 $ 0(2) $ 0 $ 0 $ 0(2) 45 $217,127 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 50 $273,885 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 55 $342,940 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 60 $426,955 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 65 $529,173 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 (1) Assumes no Contract loan has been made. (2) Based on a gross return of 0%, the Contract would go into default in policy year 22, unless an additional premium payment was made. Based on a gross return of 6%, the Contract would go into default in policy year 27, unless an additional premium payment was made. Based on a gross return of 12%, the Contract would go into default in policy year 36, unless an additional premium payment was 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%, 6%, 12% over a period of years, but also fluctuated above or below those averages for individual contract years. No representations can be made by Pruco Life of New Jersey or the Series Fund that these hypothetical rates of return can be achieved for any one year or sustained over any period of time. T4

51 PRULIFE ADVISOR SELECT CASH VALUE ACCUMULATION TEST TYPE C (RETURN OF PREMIUM) DEATH BENEFIT MALE PREFERRED BEST ISSUE AGE 35 $250,000 BASIC INSURANCE AMOUNT ASSUME PAYMENT OF $1,725 ANNUAL PREMIUMS IN ALL YEARS USING MAXIMUM CHARGES Death Benefit (1) Cash Surrender Value (1) 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 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross Year Per Year (-2.57% Net) (3.43% Net) (9.43% Net) (-2.57% Net) (3.43% Net) (9.43% Net) $ 1,794 $251,725 $251,725 $251,725 $ 0 $ 0 $ 0 2 $ 3,660 $253,450 $253,450 $253,450 $ 0 $ 0 $ 0 3 $ 5,600 $255,175 $255,175 $255,175 $ 0 $ 0 $ 0 4 $ 7,618 $256,900 $256,900 $256,900 $ 0 $ 270 $ $ 9,717 $258,625 $258,625 $258,625 $ 324 $ 817 $ 1,414 6 $ 11,900 $260,350 $260,350 $260,350 $1,095 $1,757 $ 2,594 7 $ 14,170 $262,075 $262,075 $262,075 $1,802 $2,673 $ 3,816 8 $ 16,530 $263,800 $263,800 $263,800 $2,443 $3,561 $ 5,081 9 $ 18,986 $265,525 $265,525 $265,525 $3,016 $4,414 $ 6, $ 21,539 $267,250 $267,250 $267,250 $3,516 $5,226 $ 7, $ 35,922 $275,875 $275,875 $275,875 $3,942 $7,554 $14, $ 53,422 $284,500 $284,500 $284,500 $1,138 $6,731 $20, $ 74,713 $ 0(2) $ 0(2) $293,125 $ 0(2) $ 0(2) $23, $100,616 $ 0 $ 0 $301,750 $ 0 $ 0 $17, $132,132 $ 0 $ 0 $ 0(2) $ 0 $ 0 $ 0(2) 40 $170,476 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 45 $217,127 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 50 $273,885 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 55 $342,940 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 60 $426,955 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 65 $529,173 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 (1) Assumes no Contract loan has been made. (2) Based on a gross return of 0%, the Contract would go into default in policy year 22, unless an additional premium payment was made. Based on a gross return of 6%, the Contract would go into default in policy year 25, unless an additional premium payment was made. Based on a gross return of 12%, the Contract would go into default in policy year 34, unless an additional premium payment was 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%, 6%, 12% over a period of years, but also fluctuated above or below those averages for individual contract years. No representations can be made by Pruco Life of New Jersey or the Series Fund that these hypothetical rates of return can be achieved for any one year or sustained over any period of time. T5

52 $'',7,21$/,1)250$7,21 Pruco Life of New Jersey has filed a registration statement with the SEC under the Securities Act of 1933, relating to the offering described in this prospectus. This prospectus does not include all 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 , or by telephoning (800) SEC-0330, upon payment of a prescribed fee. To reduce costs, we now generally send only a single copy of prospectuses and shareholder reports to each household ("householding"), in lieu of sending a copy to each contract owner that resides in the household. You should be aware that you can revoke or "opt out" of householding at any time by calling Further information may also be obtained from Pruco Life of New Jersey. Its address and telephone number are set forth on the inside front cover of this prospectus. 42

53 '(),1,7,2162)63(&,$/7(50686(',17+, (&786 Accumulated Net Payments The actual premium payments you make, accumulated at an effective annual rate of 4%, less any withdrawals you make, also accumulated at an effective annual rate of 4%. attained age The insured s age on the Contract date plus the number of years since then. For any coverage segment effective after the Contract date, the insured s attained age is the issue age of that segment plus the length of time since its effective date. basic insurance amount The amount of life insurance as shown in the Contract, not including riders. Also referred to as "face amount." cash surrender value The amount payable to the Contract owner upon surrender of the Contract. It is equal to the Contract Fund minus any Contract debt and minus any applicable surrender charge. Also referred to in the Contract as "Net Cash Value." Commissionable Target Premium A premium that is used to determine sales commissions based on issue age and rating class of the insured, and any extra risk charges, or additional riders. Contract The variable appreciable life insurance policy described in this prospectus. Contract anniversary The same date as the Contract date in each later year. Contract date The date the Contract is effective, as specified in the Contract. Contract debt The principal amount of all outstanding loans plus any interest accrued thereon. Contract Fund The total amount credited to a specific Contract. On any date it is equal to the sum of the amounts in all the ProFund VP variable investment options, and the principal amount of any Contract debt plus any interest earned thereon. Contract owner You. Unless a different owner is named in the application, the owner of the Contract is the insured. Contract year A year that starts on the Contract date or on a Contract anniversary. For any coverage segment representing an increase, Contract year is a year that starts on the effective date of the increase (referred to as Target year in the Contract). See Increases in Basic Insurance Amount, page 33. death benefit If the Contract is not in default, this is the amount we will pay upon the death of the insured, assuming no Contract debt. Death Benefit Guarantee Sufficient premium payments, on an accumulated basis, will guarantee that your Contract will not lapse and a death benefit will be paid upon the death of the insured, regardless of investment experience and assuming no loans. See Death Benefit Guarantee, page 31. Funds The separate ProFund VP portfolios. One or more of the available Funds may be chosen as an underlying investment for the Contract. Good Order An instruction received at our Service Office utilizing such forms, signatures, and dating as we require, which is sufficiently clear and complete and for which we do not need to exercise any discretion to follow such instructions. Monthly date The Contract date and the same date in each subsequent month. Pruco Life Insurance Company of New Jersey Us, we, our, Pruco Life of New Jersey. The company offering the Contract. Sales Load Target Premium A premium that is used to determine sales load based on issue age and rating class of the insured, and any extra risk charges or riders, if applicable. separate account Amounts under the Contract that are allocated to the ProFund VP variable investment options are held by us in a separate account called the Pruco Life of New Jersey Variable Appreciable Account (the "Account"). The separate account is set apart from all of the general assets of Pruco Life Insurance Company of New Jersey. Target Premiums Premiums that, if paid at the beginning of each Contract year, will keep the Contract in-force until the insured s age 65, or if later, during the first 10 Contract years, regardless of investment performance and assuming no loans or withdrawals. Target Term Rider A Rider that provides a flexible term insurance benefit to attained age 100 on the life of the insured. valuation period The period of time from one determination of the value of the amount invested in a ProFund VP variable investment option to the next. Such determinations are made when the net asset values of the portfolios of the Funds are calculated, which is generally at 4:00 p.m. Eastern time on each day during which the New York Stock Exchange is open. 43

54 ProFund VP variable investment options The portfolios of the mutual funds available under this Contract, whose shares are held in the separate account. you The owner of the Contract. 44

55 To Learn More About PruLife Advisor Select To learn more about the PruLife Advisor Select variable appreciable life policy, you can request a copy of the Statement of Additional Information ( SAI ) dated May 1, 2003, or view online at See the Table of Contents of the SAI below. 7$%/(2)&217(1762)7+( 67$7(0(172)$'',7,21$/,1)250$7,21 7$%/(2)&217(176 Page GENERAL INFORMATION AND HISTORY... 1 Description of Pruco Life Insurance Company of New Jersey... 1 Control of Pruco Life Insurance Company of New Jersey... 1 State Regulation... 1 Records... 1 Services and Third Party Administration Agreements... 1 INITIAL PREMIUM PROCESSING... 2 ADDITIONAL INFORMATION ABOUT... 3 OPERATION OF CONTRACTS... 3 Legal Considerations Relating to Sex-Distinct Premiums and Benefits... 3 How a Type A (Fixed) Contract s Death Benefit Will Vary... 3 How a Type B (Variable) Contract s Death Benefit Will Vary... 4 How a Type C (Return of Premium) Contract s Death Benefit Will Vary... 5 Reports to Contract Owners... 6 UNDERWRITING PROCEDURES... 6 ADDITIONAL INFORMATION ABOUT CHARGES... 7 Charges for Increases in Basic Insurance Amount... 7 ADDITIONAL INFORMATION ABOUT CONTRACTS IN DEFAULT... 7 DISTRIBUTION AND COMMISSIONS... 7 Service Fees... 7 EXPERTS... 7 PERFORMANCE DATA... 7 Average Annual Total Return... 7 Non-Standard Total Return... 8 Money Market Subaccount Yield... 8 FINANCIAL STATEMENTS

56 The SAI is legally a part of this prospectus, both of which are filed with the Securities and Exchange Commission ( SEC ) under the Securities Act of 1933, Registration No All of these filings can be reviewed and copied at the SEC s Public Reference Room in Washington, D.C. Information on the operation of the public reference room may be obtained by calling the Commission at (202) The SEC also maintains a Web site ( that contains PruLife Advisor Select SAI, material incorporated by reference, and other information about Pruco Life of New Jersey. Copies of these materials can also be obtained, upon payment of duplicating fees, from the SEC s Public Reference Section, th Street N.W., Washington, D.C You can call us at to ask us questions, request information about the Contract, and obtain copies of the Statement of Additional Information, personalized illustrations, or other documents. You can also view the Statement of Additional Information located with the prospectus at or request a copy by writing us at: Pruco Life Insurance Company of New Jersey 213 Washington Street Newark, New Jersey Investment Company Act of 1940: Registration No

57 CLASSIC PROFUNDS VP Bull Small-Cap OTC Mid-Cap Value Mid-Cap Growth Small-Cap Value Small-Cap Growth Asia 30 Europe 30 Japan ULTRA PROFUNDS VP UltraBull UltraMid-Cap UltraOTC UltraSmall-Cap INVERSE PROFUNDS VP Bear Short Small-Cap Short OTC SECTOR PROFUNDS VP Banks Basic Materials Biotechnology Consumer Cyclical Consumer Non-Cyclical Energy Financial Healthcare Industrial Internet Pharmaceuticals Precious Metals Real Estate Semiconductor Technology Telecommunications Utilities BOND BENCHMARKED PROFUNDS VP U.S. Government Plus Rising Rates Opportunity PROFUND VP MONEY MARKET > Prospectus May 1, 2003 This Prospectus should be read in conjunction with the separate account s prospectus describing the variable insurance contract in which you invest. Please read both prospectuses and retain them for future reference. Like shares of all mutual funds, these securities have not been approved or disapproved by the Securities and Exchange Commission nor has the Securities and Exchange Commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

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59 > Table of Contents 4 P ROFUNDS VP OVERVIEW 7 C L ASSIC PROFUNDS VP 8 Bull 9 Small-Cap 10 OTC 11 Mid-Cap Value 12 Mid-Cap Growth 13 Small-Cap Value 14 Small-Cap Growth 15 Asia Europe Japan 19 ULTRA PROFUNDS VP 20 UltraBull 21 UltraMid-Cap 22 UltraOTC 23 UltraSmall-Cap 25 INVERSE PROFUNDS VP 26 Bear 27 Short Small-Cap 28 Short OTC 29 SECTOR PROFUNDS VP 30 Banks 31 Basic Materials 32 Biotechnology 33 Consumer Cyclical 34 Consumer Non-Cyclical 35 Energy 36 Financial 37 Healthcare 38 Industrial 39 Internet 40 Pharmaceuticals 41 Precious Metals 42 Real Estate 43 Semiconductor 44 Technology 45 Telecommunications 46 Utilities 47 BOND BENCHMARKED PROFUNDS VP 48 U.S. Government Plus 49 Rising Rates Opportunity 51 PROFUND VP MONEY MARKET 55 STRATEGIES AND RISKS 61 PROFUNDS MANAGEMENT 65 GENERAL PROFUNDS VP INFORMATION 69 FINANCIAL HIGHLIGHTS

60 Except for ProFund VP Money Market, the ProFunds VP described in this Prospectus seek to provide daily investment results, before fees and expenses, that correspond to the performance of a particular benchmark. 1 Classic ProFunds VP Classic ProFunds VP seek to provide daily investment results, before fees and expenses, that match (100%) the daily performance of their benchmark indexes. ProFund VP Index Daily Benchmark Types of Companies in Index Bull S&P 500 Index Match (100%) Diverse, widely traded, large capitalization Small-Cap Russell 2000 Index Match (100%) Diverse, small capitalization OTC NASDAQ-100 Index Match (100%) Large capitalization, non-financial companies listed on The NASDAQ Stock Market Mid-Cap Value S&P MidCap 400/Barra Value Index Match (100%) Diverse, widely traded, mid-capitalization Mid-Cap Growth S&P MidCap 400/Barra Growth Index Match (100%) Diverse, widely traded, mid-capitalization Small-Cap Value S&P SmallCap 600/Barra Value Index Match (100%) Diverse, small capitalization Small-Cap Growth S&P SmallCap 600/Barra Growth Index Match (100%) Diverse, small capitalization Asia 30 ProFunds Asia 30 Index Match (100%) Companies whose principal offices are located in the Asia/Pacific region, excluding Japan, whose securities are traded in the U.S. Europe 30 ProFunds Europe 30 Index Match (100%) Companies whose principal offices are located in European countries, whose securities are traded in the U.S. Japan Nikkei 225 Stock Average Match (100%) Large capitalization, widely traded Japanese stocks Ultra ProFunds VP Ultra ProFunds VP seek to provide daily investment results, before fees and expenses, that correspond to double (200%) the daily performance of their benchmark indexes. ProFund VP Index Daily Benchmark Types of Companies in Index UltraBull S&P 500 Index Double (200%) Diverse, widely traded, large capitalization UltraMid-Cap S&P MidCap 400 Index Double (200%) Diverse, widely traded, mid-capitalization UltraSmall-Cap Russell 2000 Index Double (200%) Diverse, small capitalization UltraOTC NASDAQ-100 Index Double (200%) Large capitalization, non-financial companies listed on The NASDAQ Stock Market Inverse ProFunds VP Inverse ProFunds VP seek to provide daily investment results, before fees and expenses, that match (100%) the inverse (opposite) of the daily performance of their benchmark indexes. ProFund VP Index Daily Benchmark Types of Companies in Index Bear S&P 500 Index 100% of the Inverse Diverse, widely traded, large capitalization Short Small-Cap Russell 2000 Index 100% of the Inverse Diverse, small capitalization Short OTC NASDAQ-100 Index 100% of the Inverse Large capitalization, non-financial companies listed on The NASDAQ Stock Market 1 A benchmark may be any standard of investment performance to which a mutual fund seeks to measure its return, such as a stock index or a multiple thereof. A stock index reflects the price of a group of stocks of specified companies. For example, ProFund VP UltraBull has a daily benchmark of twice the daily return of the S&P 500 Index. 4 < ProFunds VP Overview

61 Sector ProFunds VP Sector ProFunds VP seek to provide daily investment results, before fees and expenses, that match (100%) the daily performance of their benchmark indexes. ProFund VP Index Daily Benchmark Types of Companies in Index Banks Dow Jones U.S. Banks Index Match (100%) Securities representing the banking industry in the U.S. equity market Basic Materials Dow Jones U.S. Basic Materials Sector Index Match (100%) Securities within the basic materials sector of the U.S. equity market Biotechnology Dow Jones U.S. Biotechnology Index Match (100%) Securities representing the biotechnology industry in the U.S. equity market Consumer Cyclical Dow Jones U.S. Consumer Cyclical Match (100%) Securities within the consumer cyclical sector Sector Index of the U.S. equity market Consumer Non-Cyclical Dow Jones U.S. Consumer Non-Cyclical Match (100%) Securities within the consumer non-cyclical sector Sector Index of the U.S. equity market Energy Dow Jones U.S. Energy Sector Index Match (100%) Securities within the energy sector of the U.S. equity market Financial Dow Jones U.S. Financial Sector Index Match (100%) Securities within the financial sector of the U.S. equity market Healthcare Dow Jones U.S. Healthcare Sector Index Match (100%) Securities within the healthcare sector of the U.S. equity market Industrial Dow Jones U.S. Industrial Sector Index Match (100%) Securities within the industrial sector of the U.S. equity market Internet Dow Jones Composite Internet Index Match (100%) U.S. equity securities of companies that generate the majority of their revenue from the Internet Pharmaceuticals Dow Jones U.S. Pharmaceuticals Index Match (100%) Securities within the pharmaceuticals industry of the U.S. equity market Precious Metals Philadelphia Stock Exchange Gold/Silver Match (100%) Securities of companies involved in the SectorSM Index gold and silver mining industry Real Estate Dow Jones U.S. Real Estate Index Match (100%) Securities representing the real estate industry in the U.S. equity market Semiconductor Dow Jones U.S. Semiconductor Index Match (100%) Securities representing the semiconductor industry in the U.S. equity market Technology Dow Jones U.S. Technology Sector Index Match (100%) Securities within the technology sector of the U.S. equity market Telecommunications Dow Jones U.S. Telecommunications Match (100%) Securities within the telecommunications sector Sector Index of the U.S. equity market Utilities Dow Jones U.S. Utilities Sector Index Match (100%) Securities within the utilities sector of the U.S. equity market Bond Benchmarked ProFunds VP Bond Benchmarked ProFunds VP seek to provide daily investment results, before fees and expenses, that correspond to one and one-quarter times (125%) the daily performance, or the inverse daily performance, of the most recently issued 30-year U.S. Treasury Bond. ProFund VP Security Daily Benchmark Types of Securities U.S. Government Plus Most recently issued 30-year 125% U.S. Treasury securities U.S. Treasury Bond Rising Rates Opportunity Most recently issued 30-year 125% of the Inverse U.S. Treasury securities U.S. Treasury Bond An investment in a ProFund VP is not a deposit of a bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. ProFunds VP are not guaranteed to achieve their investment objectives, and an investment in a ProFund VP could lose money. No single ProFund VP is a complete investment program. ProFunds Overview > 5

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63 > Classic ProFunds VP Daily ProFund VP Index Benchmark Bull S&P 500 Index Match (100%) Small-Cap Russell 2000 Index Match (100%) OTC NASDAQ-100 Index Match (100%) Mid-Cap Value S&P MidCap 400/Barra Value Index Match (100%) Mid-Cap Growth S&P MidCap 400/Barra Growth Index Match (100%) Small-Cap Value S&P SmallCap 600/Barra Value Index Match (100%) Small-Cap Growth S&P SmallCap 600/Barra Growth Index Match (100%) Asia 30 ProFunds Asia 30 Index Match (100%) Europe 30 ProFunds Europe 30 Index Match (100%) Japan Nikkei 225 Stock Average Match (100%) Classic ProFunds VP may be appropriate for investors who: > May be appropriate for investors who want to achieve investment results approximating the daily performance of a particular index. Classic ProFunds VP > 7

64 > ProFund VP Bull INVESTMENT OBJECTIVE ProFund VP Bull seeks daily investment results, before fees and expenses, that correspond to the daily performance of the S&P 500 Index. The S&P 500 Index is a widely used measure of large-cap U.S. stock market performance. It includes a representative sample of leading companies in leading industries. Companies are selected for inclusion in the Index by Standard & Poor s based on adequate liquidity, appropriate market capitalization, financial viability and public float. PRINCIPAL INVESTMENT STRATEGY ProFund VP Bull takes positions in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the S&P 500 Index. ProFund VP Bull may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Bull are market risk, equity risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. For more information on ProFund VP Bull s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Bull for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Bull by comparing average annual total returns of ProFund VP Bull to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Bull or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Bull % % 05/01/01 S&P 500 Index (1) % % 05/01/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Bull. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 0.91% Total Annual ProFund Operating Expenses 1.91% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. Example: This example is intended to help you compare the cost of investing in ProFund VP Bull with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Bull $194 $600 $1,032 $2,233 Annual Return as of December 31 5% 0% 5% 10% 15% 20% 25% 23.98% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Bull for one quarter was [7.73% (quarter ended December 31, 2002) and the lowest return was % (quarter ended September 30, 2002)]. 8 < ProFund VP Bull

65 > ProFund VP Small Cap INVESTMENT OBJECTIVE ProFund VP Small-Cap seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Russell 2000 Index. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, representing approximately 8% of the total market capitalization of the Russell 3000 Index, which in turn represents approximately 98% of the investable U.S. equity market. As of March 31, 2003, the Russell 2000 Index included companies with capitalizations between $3.2 million and $2.1 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Small-Cap invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the Russell 2000 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Small-Cap may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Small-Cap are market risk, equity risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk and small-cap company investment risk. For more information on ProFund VP Small-Cap s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Small-Cap % % 05/01/01 Russell 2000 Index (1) % % 05/01/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Small-Cap. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 0.97% Total Annual ProFund Operating Expenses 1.97% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. Example: This example is intended to help you compare the cost of investing in ProFund VP Small-Cap with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Small-Cap $200 $618 $1,062 $2,296 FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Small-Cap for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Small-Cap by comparing average annual total returns of ProFund VP Small-Cap to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Small-Cap or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Return as of December 31 5% 0% 5% 10% 15% 20% 25% 22.44% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Small-Cap for one quarter was [4.24% (quarter ended March 31, 2002) and the lowest return was % (quarter ended September 30, 2002)]. ProFund VP Small Cap > 9

66 > ProFund VP OTC INVESTMENT OBJECTIVE ProFund VP OTC seeks daily investment results, before fees and expenses, that correspond to the daily performance of the NASDAQ-100 Index. OTC in the name of ProFund VP OTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. Companies selected for inclusion are non-financial companies currently not in bankruptcy proceedings with appropriate trading volumes and adjusted market capitalization. PRINCIPAL INVESTMENT STRATEGY ProFund VP OTC takes positions in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the NASDAQ-100 Index. ProFund VP OTC may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP OTC are market risk, equity risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk and technology investment risk. For more information on ProFund VP OTC s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP OTC for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP OTC by comparing average annual total returns of ProFund VP OTC to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP OTC or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP OTC % % 01/22/01 NASDAQ-100 Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP OTC. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.03% Total Annual ProFund Operating Expenses 2.03% Fee Waivers/Reimbursements** -0.05% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to investors. Example: This example is intended to help you compare the cost of investing in ProFund VP OTC with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP OTC $201 $632 $1,089 $2,354 Annual Return as of December 31 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 38.62% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP OTC for one quarter was [17.47% (quarter ended December 31, 2002) and the lowest return was % (quarter ended June 30, 2002)]. 10 < ProFund VP OTC

67 > ProFund VP Mid Cap Value INVESTMENT OBJECTIVE ProFund VP Mid-Cap Value seeks daily investment results, before fees and expenses, that correspond to the daily performance of the S&P MidCap 400/Barra Value Index. The S&P MidCap 400/Barra Value Index is a market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index that have comparatively low price-to-book ratios (238 stocks as of March 31, 2003). The Index is rebalanced semi-annually on or about January 1st and July 1st and consists of approximately half of the companies in the S&P MidCap 400 Index. As of March 31, 2003, the S&P MidCap 400/Barra Value Index included companies with capitalizations between $194.4 million and $4.9 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Mid-Cap Value invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the S&P MidCap 400/Barra Value Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Mid-Cap Value may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Mid-Cap Value are market risk, equity risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk, mid-cap company investment risk and value investing risk. For more information on ProFund VP Mid-Cap Value s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Mid-Cap Value. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.25% Total Annual ProFund Operating Expenses 2.25% Fee Waivers/Reimbursements** -0.27% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Mid-Cap Value with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Mid-Cap Value $201 $677 $1,180 $2,564 FUND PERFORMANCE Because ProFund VP Mid-Cap Value commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. ProFund VP Mid Cap Value > 11

68 > ProFund VP Mid Cap Growth INVESTMENT OBJECTIVE ProFund VP Mid-Cap Growth seeks daily investment results, before fees and expenses, that correspond to the daily performance of the S&P MidCap 400/Barra Growth Index. The S&P MidCap 400/Barra Growth Index is a market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index that have comparatively high price-tobook ratios (162 stocks as of March 31, 2003). The Index is rebalanced semi-annually on or about January 1st and July 1st and consists of approximately half of the companies in the S&P MidCap 400 Index. As of March 31, 2003, the S&P MidCap 400/Barra Growth Index included companies with capitalizations between $162.3 million and $8.3 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Mid-Cap Growth invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the S&P MidCap 400/Barra Growth Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Mid-Cap Growth may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Mid-Cap Growth are market risk, equity risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk, mid-cap company investment risk and growth investing risk. For additional information on ProFund VP Mid-Cap Growth s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Mid-Cap Growth. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.22% Total Annual ProFund Operating Expenses 2.22% Fee Waivers/Reimbursements** -0.24% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Mid-Cap Growth with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Mid-Cap Growth $201 $671 $1,168 $2,536 FUND PERFORMANCE Because ProFund VP Mid-Cap Growth commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. 12 < ProFund VP Mid Cap Growth

69 > ProFund VP Small Cap Value INVESTMENT OBJECTIVE ProFund VP Small-Cap Value seeks daily investment results, before fees and expenses, that correspond to the daily performance of the S&P SmallCap 600/Barra Value Index. The S&P SmallCap 600/Barra Value Index is a market capitalization weighted index comprised of the stocks in the S&P SmallCap 600 Index that have comparatively low priceto-book ratios (388 stocks as of March 31, 2003). The S&P SmallCap 600 Index is an unmanaged index comprising 600 domestic stocks, with a market capitalization generally valued at under one and a half billion dollars, chosen for market size, liquidity and industry group representation. The Index comprises stocks from the industrial, utility, financial and transportation sectors. The Index is rebalanced twice per year. As of March 31, 2003, the S&P SmallCap 600/Barra Value Index included companies with capitalizations between $30.7 million and $1.5 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Small-Cap Value invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the S&P SmallCap 600/Barra Value Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Small-Cap Value may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Small-Cap Value are market risk, equity risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk, smallcap company investment risk and value investing risk. For more information on ProFund VP Small-Cap Value s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Small-Cap Value. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.45% Total Annual ProFund Operating Expenses 2.45% Fee Waivers/Reimbursements** -0.47% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Small-Cap Value with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Small-Cap Value $201 $719 $1,263 $2,751 FUND PERFORMANCE Because ProFund VP Small-Cap Value commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. ProFund VP Small Cap Value > 13

70 > ProFund VP Small Cap Growth INVESTMENT OBJECTIVE ProFund VP Small-Cap Growth seeks daily investment results, before fees and expenses, that correspond to the daily performance of the S&P SmallCap 600/Barra Growth Index. The S&P SmallCap 600/Barra Growth Index is a market capitalization weighted index comprised of the stocks in the S&P SmallCap 600 Index that have comparatively high price-tobook ratios (212 stocks as of March 31, 2003). The S&P SmallCap 600 Index is an unmanaged index comprising 600 domestic stocks, with a market capitalization generally valued at under one and a half billion dollars, chosen for market size, liquidity and industry group representation. The Index comprises stocks from the industrial, utility, financial and transportation sectors. As of March 31, 2003, the S&P SmallCap 600/Barra Growth Index included companies with capitalizations between $77.6 million and $2.4 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Small-Cap Growth invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the S&P SmallCap 600/Barra Growth Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Small-Cap Growth may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Small-Cap Growth are market risk, equity risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk, small-cap company investment risk and growth investing risk. For more information on ProFund VP Small-Cap Growth s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Small-Cap Growth. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.20% Total Annual ProFund Operating Expenses 2.20% Fee Waivers/Reimbursements** -0.22% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Small-Cap Growth with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Small-Cap Growth $201 $667 $1,160 $2,517 FUND PERFORMANCE Because ProFund VP Small-Cap Growth commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. 14 < ProFund VP Small Cap Growth

71 > ProFund VP Asia 30 INVESTMENT OBJECTIVE ProFund VP Asia 30 seeks daily investment results, before fees and expenses, that correspond to the daily performance of the ProFunds Asia 30 Index. The ProFunds Asia 30 Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in the Asia/Pacific region, excluding Japan, and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. The component companies in the ProFunds Asia 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on a modified market capitalization method. As of March 31, 2003, the ProFunds Asia 30 Index included companies with capitalizations between $870.7 million and $39.0 billion. The component companies of the Index are listed in an appendix to the Statement of Additional Information. PRINCIPAL INVESTMENT STRATEGY ProFund VP Asia 30 invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the ProFunds Asia 30 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities of Asian companies contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Asia 30 may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Asia 30 will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Asia 30 are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, nondiversification risk, geographic concentration risk, active investor risk, repurchase agreement risk, foreign investment risk and small-cap company investment risk. To the extent ProFunds Asia 30 Index is concentrated in issuers conducting business in the telecommunications sector, the telecommunications companies making up ProFund VP Asia 30 s investments are subject to the following risks: companies in the telecommunications sector need to commit substantial capital to meet increasing competition, particularly in formulating new products and services using new technology; technological innovations may make the products and services of telecommunications companies obsolete; and securities of companies in the telecommunications sector may underperform those of other sectors and/or fixed income investments. For more information on ProFund VP Asia 30 s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE Because ProFund VP Asia 30 commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Asia 30. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.03% Total Annual ProFund Operating Expenses 2.03% Fee Waivers/Reimbursements** -0.05% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Asia 30 with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Asia 30 $201 $632 $1,089 $2,354 ProFund VP Asia 30 > 15

72 > ProFund VP Europe 30 INVESTMENT OBJECTIVE ProFund VP Europe 30 seeks daily investment results, before fees and expenses, that correspond to the daily performance of the ProFunds Europe 30 Index. The ProFunds Europe 30 Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in Europe and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. The component companies in the ProFunds Europe 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on a modified market capitalization method. As of March 31, 2003, the ProFunds Europe 30 Index included companies with capitalizations between $10.3 billion and $143.7 billion. The component companies of the Index are listed in an appendix to the Statement of Additional Information. PRINCIPAL INVESTMENT STRATEGY ProFund VP Europe 30 invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the ProFunds Europe 30 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Europe 30 may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Europe 30 are market risk, equity risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, geographic concentration risk, active investor risk, repurchase agreement risk and foreign investment risk. For more information on ProFund VP Europe 30 s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart and table below provide an indication of the risks of investing in ProFund VP Europe 30 by showing the variability of ProFund VP Europe 30 returns from year to year and by comparing average annual total returns of ProFund VP Europe 30 to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Europe 30 or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Europe % % 10/18/99 Dow Jones STOXX 50 Index (1)(2) % % 10/18/99 ProFunds Europe 30 Index (1) % % 10/18/99 (1) Reflects no deduction for fees or expenses. (2) The Dow Jones STOXX 50 Index is a capitalization-weighted index of 50 European blue-chip stocks. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Europe 30. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.03% Total Annual ProFund Operating Expenses 2.03% Fee Waivers/Reimbursements** -0.05% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Europe 30 with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Europe 30 $201 $632 $1,089 $2,354 Annual Returns as of December 31 each year 5% 0% 5% 10% 15% 20% 25% 30% 12.75% 24.14% 25.76% During the period covered in the bar chart, the highest return on shares of ProFund VP Europe 30 for one quarter was [10.63% (quarter ended December 31, 2002) and the lowest return was % (quarter ended September 30, 2002)]. 16 < ProFund VP Europe 30

73 > ProFund VP Japan INVESTMENT OBJECTIVE ProFund VP Japan seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Nikkei 225 Stock Average. Since the Japanese markets are not open when ProFund VP Japan values its shares, ProFund VP Japan determines its success in meeting this investment objective by comparing its daily return on a given day with the daily performance of related futures contracts traded in the United States related to the Nikkei 225 Stock Average. The Nikkei 225 Stock Average is a price-weighted index of 225 large, actively traded Japanese stocks traded on the Tokyo Stock Exchange. The Index is computed and distributed by the Nihon Keizai Shimbun. PRINCIPAL INVESTMENT STRATEGY ProFund VP Japan invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as the Nikkei 225 Stock Average. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Japan may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Japan are market risk, equity risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, geographic concentration risk, active investor risk, repurchase agreement risk and foreign investment risk. The performance of ProFund VP Japan will depend heavily on how Japanese stock markets perform. When Japanese stock prices fall, investors should generally expect the value of their investment to fall as well. ProFund VP Japan is also subject to valuation time risk. ProFund VP Japan generally values its assets as of the close of the New York Stock Exchange. Such valuation will reflect market perceptions and trading activity on the U.S. financial markets since the calculation of the closing level of the Nikkei 225 Stock Average. The Nikkei 225 Stock Average is determined in the early morning U.S. Eastern time prior to the opening of the New York Stock Exchange. As a result, the day-to-day correlation of ProFund VP Japan s performance may vary from the closing performance of the Nikkei 225 Stock Average. However, ProFund Advisors believes that over time ProFund VP Japan s performance will correlate highly with the movement of the Nikkei 225 Stock Average. For more information on ProFund VP Japan s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE Because ProFund VP Japan commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Japan. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.06% Total Annual ProFund Operating Expenses 2.06% Fee Waivers/Reimbursements** -0.08% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Japan with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Japan $201 $638 $1,101 $2,383 ProFund VP Japan > 17

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75 > Ultra ProFunds VP Daily ProFund VP Index Benchmark UltraBull S&P 500 Index Double (200%) UltraMid-Cap S&P MidCap 400 Index Double (200%) UltraSmall-Cap Russell 2000 Index Double (200%) UltraOTC NASDAQ-100 Index Double (200%) Ultra ProFunds VP may be appropriate for investors who: > Believe that the value of a particular index will increase, and that by investing with the objective of achieving a multiple of the index s daily return they will achieve superior results. > Are seeking to approximate an index s daily return with less than the amount required of a conventional index fund. Ultra ProFunds VP > 19

76 > ProFund VP UltraBull (formerly ProFund VP Bull Plus) INVESTMENT OBJECTIVE ProFund VP UltraBull seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the S&P 500 Index. Prior to May 1, 2003, ProFund VP UltraBull was named ProFund VP Bull Plus and sought daily investment results that corresponded to one and one-half times (150%) the daily performance of the S&P 500 Index. If ProFund VP UltraBull is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P 500 Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. The S&P 500 Index is a widely used measure of large-cap U.S. stock market performance. It includes a representative sample of leading companies in leading industries. Companies are selected for inclusion in the Index by Standard & Poor s based on adequate liquidity, appropriate market capitalization, financial viability and public float. PRINCIPAL INVESTMENT STRATEGY ProFund VP UltraBull takes positions in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as twice (200%) the S&P 500 Index. ProFund VP UltraBull will employ leveraged investment techniques and may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP UltraBull are market risk, equity risk, correlation risk, leverage risk, liquidity risk, aggressive investment technique risk, nondiversification risk, active investor risk, repurchase agreement risk and volatility risk. For more information on ProFund VP UltraBull s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The performance information set forth below was achieved during a period in which ProFund VP UltraBull pursued daily investment results, before fees and expenses, that corresponded to one and one-half times (150%) the daily performance of the S&P 500 Index. The bar chart below shows the performance of ProFund VP UltraBull for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP UltraBull by comparing average annual total returns of ProFund VP UltraBull to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP UltraBull or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Return as of December 31 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 36.11% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP UltraBull for one quarter was [11.02% (quarter ended December 31, 2002) and the lowest return was % (quarter ended September 30, 2002)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP UltraBull % % 01/22/01 S&P 500 Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP UltraBull. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.12% Total Annual ProFund Operating Expenses 2.12% Fee Waivers/Reimbursements** -0.27% Total Net Annual ProFund Operating Expenses 1.85% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.85% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP UltraBull with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP UltraBull $188 $638 $1,114 $2, < ProFund VP UltraBull

77 > ProFund VP UltraMid-Cap INVESTMENT OBJECTIVE ProFund VP UltraMid-Cap seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the S&P MidCap 400 Index. If ProFund VP UltraMid-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P MidCap 400 Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. The S&P MidCap 400 Index is a widely used measure of midsize company U.S. stock market performance. Companies are selected for inclusion in the Index by Standard & Poor s based on adequate liquidity, appropriate market capitalization, financial viability and public float. As of March 31, 2003, the S&P MidCap 400 Index included companies with capitalizations between $162.3 million and $8.3 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP UltraMid-Cap invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as twice (200%) the S&P MidCap 400 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP UltraMid-Cap will employ leveraged investment techniques and may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.36% Total Annual ProFund Operating Expenses 2.36% Fee Waivers/Reimbursements** -0.38% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP UltraMid-Cap with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP UltraMid-Cap $201 $700 $1,226 $2,667 PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP UltraMid-Cap are market risk, equity risk, correlation risk, leverage risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk, volatility risk and mid-cap company investment risk. For more information on ProFund VP UltraMid-Cap s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE Because ProFund VP UltraMid-Cap commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP UltraMid-Cap. ProFund VP UltraMid-Cap > 21

78 > ProFund VP UltraOTC INVESTMENT OBJECTIVE ProFund VP UltraOTC seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the NASDAQ-100 Index. If ProFund VP UltraOTC is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the NASDAQ-100 Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. OTC in the name of ProFund VP UltraOTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. Companies selected for inclusion are non-financial companies currently not in bankruptcy proceedings with appropriate trading volumes and adjusted market capitalization. PRINCIPAL INVESTMENT STRATEGY ProFund VP UltraOTC takes positions in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as twice (200%) the NASDAQ-100 Index. ProFund VP UltraOTC will employ leveraged investment techniques and may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP UltraOTC are market risk, equity risk, correlation risk, leverage risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk, volatility risk and technology investment risk. For more information on ProFund VP UltraOTC s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart and table below provide an indication of the risks of investing in ProFund VP UltraOTC by showing the variability of ProFund VP UltraOTC returns from year to year and by comparing average annual total returns of ProFund VP UltraOTC to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP UltraOTC or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Returns as of December 31 each year 10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 73.37% 68.72% 68.94% During the period covered in the bar chart, the highest return on shares of ProFund VP UltraOTC for one quarter was [71.28% (quarter ended December 31, 2001) and the lowest return was % (quarter ended September 30, 2001)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP UltraOTC % % 10/18/99 NASDAQ-100 Index (1) % % 10/18/99 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP UltraOTC. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.08% Total Annual ProFund Operating Expenses 2.08% Fee Waivers/Reimbursements** -0.13% Total Net Annual ProFund Operating Expenses 1.95% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.95% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP UltraOTC with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP UltraOTC $198 $639 $1,107 $2, < ProFund VP UltraOTC

79 > ProFund VP UltraSmall-Cap INVESTMENT OBJECTIVE ProFund VP UltraSmall-Cap seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the Russell 2000 Index. If ProFund VP UltraSmall-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the Russell 2000 Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, representing approximately 8% of the total market capitalization of the Russell 3000 Index, which in turn represents approximately 98% of the investable U.S. equity market. As of March 31, 2003, the Russell 2000 Index included companies with capitalizations between $3.2 million and $2.1 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP UltraSmall-Cap invests in equity securities and/or financial instruments that, in combination, should have similar daily price return characteristics as twice (200%) the Russell 2000 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP UltraSmall-Cap will employ leveraged investment techniques and may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP UltraSmall-Cap are market risk, equity risk, correlation risk, leverage risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk, volatility risk and small-cap company investment risk. For more information on ProFund VP UltraSmall-Cap s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart and table below provide an indication of the risks of investing in ProFund VP UltraSmall-Cap by showing the variability of ProFund VP UltraSmall-Cap returns from year to year and by comparing average annual total returns of ProFund VP UltraSmall-Cap to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP UltraSmall-Cap or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Returns as of December 31 each year 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 22.14% 7.61% 42.61% During the period covered in the bar chart, the highest return on shares of ProFund VP UltraSmall-Cap for one quarter was [43.56% (quarter ended December 31, 2001) and the lowest return was % (quarter ended September 30, 2002)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP UltraSmall-Cap % % 10/18/99 Russell 2000 Index (1) % -2.50% 10/18/99 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP UltraSmall-Cap. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.15% Total Annual ProFund Operating Expenses 2.15% Fee Waivers/Reimbursements** -0.17% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP UltraSmall-Cap with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP UltraSmall-Cap $201 $657 $1,139 $2,469 ProFund VP UltraSmall-Cap > 23

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81 > Inverse ProFunds VP Daily ProFund VP Index Benchmark Bear S&P 500 Index 100% of the Inverse Short Small-Cap Russell 2000 Index 100% of the Inverse Short OTC NASDAQ-100 Index 100% of the Inverse Inverse ProFunds VP may be appropriate for investors who: > Expect the value of a particular index to decrease and desire to earn a profit as a result of the index declining. > Want to protect (hedge) the value of a diversified portfolio of stocks and/or stock mutual funds from a market downturn they anticipate. Inverse ProFunds VP > 25

82 > ProFund VP Bear INVESTMENT OBJECTIVE ProFund VP Bear seeks daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the S&P 500 Index. If ProFund VP Bear is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the S&P 500 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. The S&P 500 Index is a widely used measure of large-cap U.S. stock market performance. It includes a representative sample of leading companies in leading industries. Companies are selected for inclusion in the Index by Standard & Poor s based on adequate liquidity, appropriate market capitalization, financial viability and public float. PRINCIPAL INVESTMENT STRATEGY ProFund VP Bear takes positions in financial instruments that should have similar daily price return characteristics as the inverse of the S&P 500 Index. Assets not invested in financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Bear are market risk, equity risk, inverse correlation risk, correlation risk, liquidity risk, aggressive investment technique risk, nondiversification risk, active investor risk, short sale risk and repurchase agreement risk. For more information on ProFund VP Bear s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Bear for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Bear by comparing average annual total returns of ProFund VP Bear to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Bear or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Bear 20.82% 19.48% 01/22/01 S&P 500 Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Bear. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.03% Total Annual ProFund Operating Expenses 2.03% Fee Waivers/Reimbursements** -0.05% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Bear with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Bear $201 $632 $1,089 $2,354 Annual Return as of December 31 25% 20% 15% 10% 5% 0% 5% 20.82% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Bear for one quarter was [17.66% (quarter ended September 30, 2002) and the lowest return was -9.79% (quarter ended December 31, 2002)]. 26 < ProFund VP Bear

83 > ProFund VP Short Small-Cap INVESTMENT OBJECTIVE ProFund VP Short Small-Cap seeks daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the Russell 2000 Index. If ProFund VP Short Small-Cap is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the Russell 2000 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, representing approximately 8% of the total market capitalization of the Russell 3000 Index, which in turn represents approximately 98% of the investable U.S. equity market. As of March 31, 2003, the Russell 2000 Index included companies with capitalizations between $3.2 million and $2.1 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Short Small-Cap invests in financial instruments that should have similar daily price return characteristics as the inverse of the Russell 2000 Index. Under normal circumstances, this ProFund commits at least 80% of its assets to financial instruments with economic characteristics that should be inverse to those of the Index. Assets not invested in financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Short Small- Cap are market risk, equity risk, inverse correlation risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, short sale risk, repurchase agreement risk and small-cap company investment risk. For more information on ProFund VP Short Small-Cap s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE Because ProFund VP Short Small-Cap commenced operations on September 3, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Short Small-Cap. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses** 0.73% Total Annual ProFund Operating Expenses 1.73% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **Other expenses are estimates as this ProFund VP had not been in operations for six months as of December 31, Example: This example is intended to help you compare the cost of investing in ProFund VP Short Small-Cap with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years ProFund VP Short Small-Cap $176 $545 ProFund VP Short Small-Cap > 27

84 > ProFund VP Short OTC INVESTMENT OBJECTIVE ProFund VP Short OTC seeks daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the NASDAQ-100 Index. If ProFund VP Short OTC is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the NASDAQ-100 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. OTC in the name of ProFund VP Short OTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. Companies selected for inclusion are non-financial companies currently not in bankruptcy proceedings with appropriate trading volumes and adjusted market capitalization. PRINCIPAL INVESTMENT STRATEGY ProFund VP Short OTC takes positions in financial instruments that should have similar daily price return characteristics as the inverse of the NASDAQ-100 Index. Assets not invested in financial instruments may be invested in debt instruments or money market instruments. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Short OTC are market risk, equity risk, inverse correlation risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, short sale risk and technology investment risk. For more information on ProFund VP Short OTC s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE Because ProFund VP Short OTC commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Short OTC. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 0.96% Total Annual ProFund Operating Expenses 1.96% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. Example: This example is intended to help you compare the cost of investing in ProFund VP Short OTC with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Short OTC $199 $615 $1,057 $2, < ProFund VP Short OTC

85 > Sector ProFunds VP Daily ProFund VP Index Benchmark Banks Dow Jones U.S. Banks Index Match (100%) Basic Materials Dow Jones U.S. Basic Materials Sector Index Match (100%) Biotechnology Dow Jones U.S. Biotechnology Index Match (100%) Consumer Cyclical Dow Jones U.S. Consumer Cyclical Sector Index Match (100%) Consumer Non-Cyclical Dow Jones U.S. Consumer Non-Cyclical Sector Index Match (100%) Energy Dow Jones U.S. Energy Sector Index Match (100%) Financial Dow Jones U.S. Financial Sector Index Match (100%) Healthcare Dow Jones U.S. Healthcare Sector Index Match (100%) Industrial Dow Jones U.S. Industrial Sector Index Match (100%) Internet Dow Jones Composite Internet Index Match (100%) Pharmaceuticals Dow Jones U.S. Pharmaceuticals Index Match (100%) Precious Metals Philadelphia Stock Exchange Gold/ Match (100%) Silver Sector SM Index Real Estate Dow Jones U.S. Real Estate Index Match (100%) Semiconductor Dow Jones U.S. Semiconductor Index Match (100%) Technology Dow Jones U.S. Technology Sector Index Match (100%) Telecommunications Dow Jones U.S. Telecommunications Sector Index Match (100%) Utilities Dow Jones U.S. Utilities Sector Index Match (100%) Sector ProFunds VP may be appropriate for investors who: > Desire to add investments in economic sectors with perceived above-average growth potential. > Actively rotate their investments to perceived strong sectors and out of perceived weak sectors, as market and economic conditions change. > Want to protect (hedge) against anticipated price decreases of other holdings. > Want to gain investment exposure to a particular economic sector of the U.S. or global economy. Sector ProFunds VP > 29

86 > ProFund VP Banks INVESTMENT OBJECTIVE ProFund VP Banks seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Banks Index. The Dow Jones U.S. Banks Index measures the performance of the banking industry of the U.S. equity market. Component companies include all regional and major U.S. domiciled international banks, savings and loans, savings banks, thrifts and building associations and societies. Investment and merchant banks are excluded. As of March 31, 2003, the weighted average capitalization of the Index was approximately $6.7 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Banks invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Banks Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Banks may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Banks will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Banks are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Banks is also subject to risks faced by companies in the banking industry, including: extensive governmental regulation that affects the scope of their activities, the prices they can charge and the amount of capital they must maintain; adverse effects on profitability due to increases in interest rates or loan losses (which usually increase in economic downturns); severe price competition; and newly enacted laws expected to result in increased inter-industry consolidation and competition. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Banks investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Banks. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.11% Total Annual ProFund Operating Expenses 2.11% FeeWaivers/Reimbursements** -0.13% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. ** ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Banks with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Banks $201 $648 $1,122 $2,431 FUND PERFORMANCE Because ProFund VP Banks commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. 30 < ProFund VP Banks

87 > ProFund VP Basic Materials INVESTMENT OBJECTIVE ProFund VP Basic Materials seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Basic Materials Sector Index. The Dow Jones U.S. Basic Materials Sector Index measures the performance of the basic materials economic sector of the U.S. equity market. Component companies are involved in the production of aluminum, commodity chemicals, specialty chemicals, forest products, non-ferrous metals, paper products, precious metals and steel. As of March 31, 2003, the weighted average capitalization of the Index was approximately $3.2 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Basic Materials invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Basic Materials Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Basic Materials may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Basic Materials will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Basic Materials are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Basic Materials is also subject to risks faced by companies in the basic materials economic sector, including: adverse effects from commodity price volatility, exchange rates, import controls and increased competition; production of industrial materials often exceeds demand as a result of overbuilding or economic downturns, leading to poor investment returns; risk for environmental damage and product liability claims; and adverse effects from depletion of resources, technical progress, labor relations and government regulations. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Basic Materials investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Basic Materials. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.21% Total Annual ProFund Operating Expenses 2.21% Fee Waivers/Reimbursements** -0.23% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Basic Materials with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Basic Materials $201 $669 $1,164 $2,526 FUND PERFORMANCE Because ProFund VP Basic Materials commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. ProFund VP Basic Materials > 31

88 > ProFund VP Biotechnology INVESTMENT OBJECTIVE ProFund VP Biotechnology seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Biotechnology Index. The Dow Jones U.S. Biotechnology Index measures the performance of the biotechnology industry of the U.S. equity market. Component companies include those engaged in genetic research, and/or the marketing and development of recombinant DNA products. Makers of artificial blood and contract biotechnology researchers are also included in the Index. As of March 31, 2003, the weighted average capitalization of the Index was approximately $2.6 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Biotechnology invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Biotechnology Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Biotechnology may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Biotechnology will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Biotechnology are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Biotechnology is also subject to risks faced by companies in the biotechnology industry, including: heavy dependence on patents and intellectual property rights, with profitability affected by the loss or impairment of such rights; risks of new technologies and competitive pressures; large expenditures on research and development of products or services that may not prove commercially successful or may become obsolete quickly; regulation by, and the restrictions of, the Food and Drug Administration, the Environmental Protection Agency, state and local governments, and foreign regulatory authorities; and thin capitalization and limited product lines, markets, financial resources or personnel. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Biotechnology s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. Annual Return as of December 31 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 37.51% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Biotechnology for one quarter was [-7.99% (quarter ended December 31, 2002) and the lowest return was % (quarter ended June 30, 2002)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Biotechnology % % 01/22/01 S&P 500 Index (1) % % 01/22/01 Dow Jones U.S. Biotechnology Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Biotechnology. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.16% Total Annual ProFund Operating Expenses 2.16% FeeWaivers/Reimbursements** -0.18% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Biotechnology with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Biotechnology $201 $659 $1,143 $2,479 FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Biotechnology for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Biotechnology by comparing average annual total returns of ProFund VP Biotechnology to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Biotechnology or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. 32 < ProFund VP Biotechnology

89 > ProFund VP Consumer Cyclical INVESTMENT OBJECTIVE ProFund VP Consumer Cyclical seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Consumer Cyclical Sector Index. The Dow Jones U.S. Consumer Cyclical Sector Index measures the performance of the consumer cyclical economic sector of the U.S. equity market. Component companies include airlines, auto manufacturers, auto parts, tires, casinos, consumer electronics, recreational products and services, restaurants, lodging, toys, home construction, home furnishings and appliances, footwear, clothing and fabrics. As of March 31, 2003, the weighted average capitalization of the Index was approximately $4.5 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Consumer Cyclical invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Consumer Cyclical Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Consumer Cyclical may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Consumer Cyclical will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Consumer Cyclical are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Consumer Cyclical is also subject to risks faced by companies in the consumer cyclical economic sector, including: securities prices and profitability may be tied closely to the performance of the domestic and international economy, interest rates, competition and consumer confidence; heavy dependence on disposable household income and consumer spending; severe competition; and changes in demographics and consumer tastes can affect the success of consumer products. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Consumer Cyclical s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Consumer Cyclical. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.65% Total Annual ProFund Operating Expenses 2.65% FeeWaivers/Reimbursements** -0.67% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Consumer Cyclical with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Consumer Cyclical $201 $760 $1,345 $2,934 FUND PERFORMANCE Because ProFund VP Consumer Cyclical commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. ProFund VP Consumer Cyclical > 33

90 > ProFund VP Consumer Non-Cyclical INVESTMENT OBJECTIVE ProFund VP Consumer Non-Cyclical seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Consumer Non-Cyclical Sector Index. The Dow Jones U.S. Consumer Non-Cyclical Sector Index measures the performance of the consumer non-cyclical economic sector of the U.S. equity market. Component companies include beverage companies, consumer service companies, durable and non-durable household product manufacturers, cosmetic companies, food products and agriculture and tobacco products. As of March 31, 2003, the weighted average capitalization of the Index was approximately $7.8 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Consumer Non-Cyclical invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Consumer Non-Cyclical Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Consumer Non-Cyclical may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Consumer Non-Cyclical will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Consumer Non- Cyclical are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Consumer Non-Cyclical is also subject to risks faced by companies in the consumer non-cyclical economic sector, including: governmental regulation affecting the permissibility of using various food additives and production methods could affect profitability; tobacco companies may be adversely affected by new laws or by litigation; securities prices and profitability of food, soft drink and fashion related products might be strongly affected by fads, marketing campaigns and other factors affecting supply and demand; and because food and beverage companies may derive a substantial portion of their net income from foreign countries, they may be impacted by international events. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Consumer Non-Cyclical s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Consumer Non-Cyclical. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.10% Total Annual ProFund Operating Expenses 2.10% FeeWaivers/Reimbursements** -0.12% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Consumer Non-Cyclical with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Consumer Non-Cyclical $201 $646 $1,118 $2,422 FUND PERFORMANCE Because ProFund VP Consumer Non-Cyclical commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. 34 < ProFund VP Consumer Non-Cyclical

91 > ProFund VP Energy INVESTMENT OBJECTIVE ProFund VP Energy seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Energy Sector Index. The Dow Jones U.S. Energy Sector Index measures the performance of the energy sector of the U.S. equity market. Component companies include oil drilling equipment and services, coal, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies. As of March 31, 2003, the weighted average capitalization of the Index was approximately $7.2 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Energy invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Energy Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Energy may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Energy will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Energy are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Energy is also subject to risks faced by companies in the energy sector, including: effects on profitability from changes in worldwide energy prices and exploration, and production spending; adverse effects from changes in exchange rates, government regulation, world events and economic conditions; market, economic and political risks of the countries where energy companies are located or do business; and risk for environmental damage claims. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Energy s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Energy for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Energy by comparing average annual total returns of ProFund VP Energy to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Energy or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Return as of December 31 5% 0% 5% 10% 15% 20% 17.04% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Energy for one quarter was [7.91% (quarter ended March 31, 2002) and the lowest return was % (quarter ended September 30, 2002)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Energy % % 01/22/01 S&P 500 Index (1) % % 01/22/01 Dow Jones U.S. Energy Sector Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Energy. Annual Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.16% Total Annual ProFund Operating Expenses 2.16% FeeWaivers/Reimbursements** -0.18% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Energy with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Energy $201 $659 $1,143 $2,479 ProFund VP Energy > 35

92 > ProFund VP Financial INVESTMENT OBJECTIVE ProFund VP Financial seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Financial Sector Index. The Dow Jones U.S. Financial Sector Index measures the performance of the financial services economic sector of the U.S. equity market. Component companies include regional banks; major U.S. domiciled international banks; full line, life, and property and casualty insurance companies; companies that invest, directly or indirectly in real estate; diversified financial companies such as Fannie Mae, credit card insurers, check cashing companies, mortgage lenders and investment advisers; securities brokers and dealers including investment banks, merchant banks and online brokers; and publicly traded stock exchanges. As of March 31, 2003, the weighted average capitalization of the Index was approximately $6.1 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Financial invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Financial Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Financial may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Financial will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Financial are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, nondiversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Financial is also subject to risks faced by companies in the financial services economic sector, including: extensive governmental regulation that affects the scope of their activities, the prices they can charge and the amount of capital they must maintain; adverse effects from increases in interest rates; effects on profitability by loan losses, which usually increase in economic downturns; banks and insurance companies may be subject to severe price competition; and newly enacted laws are expected to result in increased inter-industry consolidation and competition in the financial sector. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Financial s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Financial for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Financial by comparing average annual total returns of ProFund VP Financial to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Financial or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Return as of December 31 5% 0% 5% 10% 15% 20% 14.88% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Financial for one quarter was [6.00% (quarter ended December 31, 2002) and the lowest return was % (quarter ended September 30, 2002)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Financial % % 01/22/01 S&P 500 Index (1) % % 01/22/01 Dow Jones U.S. Financial Sector Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Financial. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.14% Total Annual ProFund Operating Expenses 2.14% Fee Waivers/Reimbursements** -0.16% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Financial with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Financial $201 $655 $1,135 $2, < ProFund VP Financial

93 > ProFund VP Healthcare INVESTMENT OBJECTIVE ProFund VP Healthcare seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Healthcare Sector Index. The Dow Jones U.S. Healthcare Sector Index measures the performance of the healthcare economic sector of the U.S. equity market. Component companies include health care providers, biotechnology companies, medical supplies, advanced medical devices and pharmaceuticals. As of March 31, 2003, the weighted average capitalization of the Index was approximately $7.6 billion. Annual Return as of December 31 5% 0% 22.69% 5% 10% 15% 20% 25% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Healthcare for one quarter was [3.73% (quarter ended December 31, 2002) and the lowest return was % (quarter ended June 30, 2002)]. PRINCIPAL INVESTMENT STRATEGY ProFund VP Healthcare invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Healthcare Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Healthcare may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Healthcare will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Healthcare are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, nondiversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Healthcare is also subject to risks faced by companies in the healthcare economic sector, including: heavy dependence on patent protection, with profitability affected by the expiration of patents; expenses and losses from extensive litigation based on product liability and similar claims; competitive forces that may make it difficult to raise prices and, in fact, may result in price discounting; long and costly process for obtaining new product approval by the Food and Drug Administration; healthcare providers may have difficulty obtaining staff to deliver service; susceptibility to product obsolescence; and thin capitalization and limited product lines, markets, financial resources or personnel. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Healthcare s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Healthcare for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Healthcare by comparing average annual total returns of ProFund VP Healthcare to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Healthcare or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Healthcare % % 01/22/01 S&P 500 Index (1) % % 01/22/01 Dow Jones U.S. Healthcare Sector Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Healthcare. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.14% Total Annual ProFund Operating Expenses 2.14% Fee Waivers/Reimbursements** -0.16% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Healthcare with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Healthcare $201 $655 $1,135 $2,460 ProFund VP Healthcare > 37

94 > ProFund VP Industrial INVESTMENT OBJECTIVE ProFund VP Industrial seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Industrial Sector Index. The Dow Jones U.S. Industrial Sector Index measures the performance of the industrial economic sector of the U.S. equity market. Component companies include building materials, heavy construction, factory equipment, heavy machinery, industrial services, pollution control, containers and packaging, industrial diversified, air freight, marine transportation, railroads, trucking, land-transportation equipment, shipbuilding, transportation services, advanced industrial equipment, electric components and equipment, and aerospace. As of March 31, 2003, the weighted average capitalization of the Index was approximately $3.8 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Industrial invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Industrial Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Industrial may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Industrial will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Industrial are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, nondiversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Industrial is also subject to risks faced by companies in the industrial economic sector, including: effects on stock prices by supply and demand both for their specific product or service and for industrial sector products in general; decline in demand for products due to rapid technological developments and frequent new product introduction; effects on securities prices and profitability from government regulation, world events and economic conditions; and risks for environmental damage and product liability claims. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Industrial s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Industrial. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.65% Total Annual ProFund Operating Expenses 2.65% Fee Waivers/Reimbursements** -0.67% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Industrial with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Industrial $201 $760 $1,345 $2,934 FUND PERFORMANCE Because ProFund VP Industrial commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. 38 < ProFund VP Industrial

95 > ProFund VP Internet INVESTMENT OBJECTIVE ProFund VP Internet seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones Composite Internet Index. The Dow Jones Composite Internet Index measures the performance of stocks in the U.S. equity markets that generate the majority of their revenues from the Internet. The Index is composed of two sub-groups: Internet Commerce - companies that derive the majority of their revenues from providing goods and/or services through an open network, such as a web site. Internet Services - companies that derive the majority of their revenues from providing access to Internet or providing services to people using Internet. As of March 31, 2003, the weighted average capitalization of the Index was approximately $2.5 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Internet invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones Composite Internet Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Internet may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Internet will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Internet are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, nondiversification risk, active investor risk, repurchase agreement risk and technology investment risk. In addition to the risks noted above, ProFund VP Internet is also subject to risks faced by companies in the Internet sector, including: heavy spending on research and development for products or services that may not prove commercially successful or may become obsolete quickly; adverse effects from greater governmental regulation as compared to companies in other sectors, changes in governmental policies and the need for regulatory approvals; risks of new technologies and competitive pressures, heavy dependence on patents and intellectual property rights, with profitability affected by the loss or impairment of these rights; and thin capitalization and limited product lines, markets, financial resources or personnel. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Internet s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Internet. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.04% Total Annual ProFund Operating Expenses 2.04% Fee Waivers/Reimbursements** -0.06% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Internet with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Internet $201 $634 $1,093 $2,364 FUND PERFORMANCE Because ProFund VP Internet commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. ProFund VP Internet > 39

96 > ProFund VP Pharmaceuticals INVESTMENT OBJECTIVE ProFund VP Pharmaceuticals seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Pharmaceuticals Index. The Dow Jones U.S. Pharmaceuticals Index measures the performance of the pharmaceuticals industry of the U.S. equity market. Component companies include the makers of prescription drugs such as birth control pills and vaccines, and over-the-counter drugs, such as aspirin and cold remedies, as well as companies engaged in contract drug research. As of March 31, 2003, the weighted average capitalization of the Index was approximately $24.9 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Pharmaceuticals invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Pharmaceuticals Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Pharmaceuticals may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Pharmaceuticals will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Pharmaceuticals are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Pharmaceuticals is also subject to risks faced by companies in the pharmaceuticals industry, including: securities prices may fluctuate widely due to government regulation and approval of products and services, which can have a significant effect on their price and availability; heavy spending on research and development for products and services that may not prove commercially successful or may become obsolete quickly; liability for products that are later alleged to be harmful or unsafe may be substantial, which may have a significant impact on market value and/or securities prices; adverse effects from government regulation, world events and economic conditions; and market, economic and political risks of the countries where pharmaceutical companies are located or do business. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Pharmaceuticals investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Pharmaceuticals. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.12% Total Annual ProFund Operating Expenses 2.12% Fee Waivers/Reimbursements** -0.14% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Pharmaceuticals with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Pharmaceuticals $201 $650 $1,126 $2,441 FUND PERFORMANCE Because ProFund VP Pharmaceuticals commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. 40 < ProFund VP Pharmaceuticals

97 > ProFund VP Precious Metals INVESTMENT OBJECTIVE ProFund VP Precious Metals seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Philadelphia Stock Exchange Gold/Silver Sector Index. The Philadelphia Stock Exchange Gold/Silver Sector Index measures the performance of the gold and silver mining industry of the global equity market. Component companies include companies involved in the mining and production of gold, silver, and other precious metals, precious stones and pearls. The Index does not include producers of commemorative medals and coins that are made of these metals. As of March 31, 2003, the weighted average capitalization of the Index was approximately $4.0 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Precious Metals invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Philadelphia Stock Exchange Gold/Silver Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Precious Metals may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Precious Metals will have industry concentrations to approximately the same extent as its Index. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Precious Metals. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 0.98% Total Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. Example: This example is intended to help you compare the cost of investing in ProFund VP Precious Metals with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Precious Metals $201 $621 $1,068 $2,306 PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Precious Metals are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Precious Metals is also subject to risks faced by companies in the gold and silver mining industry, including: the prices of precious metals may fluctuate widely due to changes in inflation or inflation expectations or currency fluctuations, speculation, and worldwide demand; adverse effects from government regulation, world events and economic conditions; market, economic and political risks of the countries where precious metals companies are located or do business; thin capitalization and limited product lines, markets, financial resources or personnel; securities prices may underperform those of other sectors and/or fixed income investments; and certain of the securities represented in the Index may be illiquid, which may limit the ability to dispose of these securities quickly at fair value when ProFund Advisors deems it desirable to do so. In addition, illiquid securities may be more difficult to value than liquid securities, and typically entail higher transaction expenses. For more information on ProFund VP Precious Metals investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE Because ProFund VP Precious Metals commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. ProFund VP Precious Metals > 41

98 > ProFund VP Real Estate INVESTMENT OBJECTIVE ProFund VP Real Estate seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Real Estate Index. The Dow Jones U.S. Real Estate Index measures the performance of the real estate industry of the U.S. equity market. Component companies include those that invest directly or indirectly through development, management or ownership of shopping malls, apartment buildings and housing developments; and real estate investment trusts ( REITs ) that invest in apartments, office and retail properties. REITs are passive investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. As of March 31, 2003, the weighted average capitalization of the Index was approximately $1.7 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Real Estate invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Real Estate Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Real Estate may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Real Estate will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Real Estate are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, nondiversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Real Estate is also subject to risks faced by companies in the real estate industry, including: adverse changes in national, state or local real estate conditions (such as oversupply of or reduced demand for space and changes in market rental rates); obsolescence of properties; changes in the availability, cost and terms of mortgage funds; the impact of environmental laws; a REIT that fails to comply with the federal tax requirements affecting REITs would be subject to federal income taxation; and the federal tax requirement that a REIT distribute substantially all of its net income to its shareholders could result in a REIT having insufficient capital for future expenditures. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Real Estate s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Real Estate for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Real Estate by comparing average annual total returns of ProFund VP Real Estate to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Real Estate or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Returns as of December % 0% 0.02% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Real Estate for one quarter was [7.00% (quarter ended March 31, 2002) and the lowest return was -9.71% (quarter ended September 30, 2002)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Real Estate 0.02% 4.59% 01/22/01 S&P 500 Index (1) % % 01/22/01 Dow Jones U.S. Real Estate Index (1) -2.96% 1.01% 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Real Estate. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.13% Total Annual ProFund Operating Expenses 2.13% Fee Waivers/Reimbursements** -0.15% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Real Estate with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Real Estate $201 $653 $1,130 $2, < ProFund VP Real Estate

99 > ProFund VP Semiconductor INVESTMENT OBJECTIVE ProFund VP Semiconductor seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Semiconductor Index. The Dow Jones U.S. Semiconductor Index measures the performance of the semiconductor industry of the U.S. equity market. Component companies are engaged in the production of semiconductors and other integrated chips, as well as other related products such as circuit boards and motherboards. As of March 31, 2003, the weighted average capitalization of the Index was approximately $5.3 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Semiconductor invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Semiconductor Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Semiconductor may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Semiconductor will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Semiconductor are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, repurchase agreement risk and technology investment risk. In addition to the risks noted above, ProFund VP Semiconductor is also subject to risks faced by companies in the semiconductor industry, including: intense competition, both domestically and internationally, including competition from subsidized foreign competitors with lower production costs; securities prices may fluctuate widely due to risks of rapid obsolescence of products; economic performance of the customers of semiconductor companies; research costs and the risks that their products may not prove commercially successful; capital equipment expenditures could be substantial and suffer from rapid obsolescence; and thin capitalization and limited product lines, markets, financial resources or personnel. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Semiconductor s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Semiconductor. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.33% Total Annual ProFund Operating Expenses 2.33% Fee Waivers/Reimbursements** -0.35% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Semiconductor with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Semiconductor $201 $694 $1,214 $2,639 FUND PERFORMANCE Because ProFund VP Semiconductor commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. ProFund VP Semiconductor > 43

100 > ProFund VP Technology INVESTMENT OBJECTIVE ProFund VP Technology seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Technology Sector Index. The Dow Jones U.S. Technology Sector Index measures the performance of the technology sector of the U.S. equity market. Component companies include those involved in computers and office equipment, software, communications technology, semiconductors, diversified technology services and Internet services. As of March 31, 2003, the weighted average capitalization of the Index was approximately $4.8 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Technology invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Technology Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Technology may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Technology will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Technology are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, nondiversification risk, active investor risk, repurchase agreement risk and technology investment risk. In addition to the risks noted above, ProFund VP Technology is also subject to risks faced by companies in the technology sector, including: intense competition, both domestically and internationally; limited product lines, markets, financial resources or personnel; product obsolescence due to rapid technological developments and frequent new product introduction; dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel; loss of key personnel to form competitive concerns; and heavy dependence on patent and intellectual property rights, with profitability affected by loss or impairment of these rights. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Technology s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Technology for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Technology by comparing average annual total returns of ProFund VP Technology to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Technology or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Return as of December 31 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 40.68% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Technology for one quarter was [21.41% (quarter ended December 31, 2002) and the lowest return was % (quarter ended June 30, 2002)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Technology % % 01/22/01 S&P 500 Index (1) % % 01/22/01 Dow Jones U.S. Technology Sector Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Technology. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.27% Total Annual ProFund Operating Expenses 2.27% Fee Waivers/Reimbursements** -0.29% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Technology with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Technology $201 $682 $1,189 $2, < ProFund VP Technology

101 > ProFund VP Telecommunications INVESTMENT OBJECTIVE ProFund VP Telecommunications seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Telecommunications Sector Index. The Dow Jones U.S. Telecommunications Sector Index measures the performance of the telecommunications economic sector of the U.S. equity market. Component companies include fixed-line communications and wireless communications companies. As of March 31, 2003, the weighted average capitalization of the Index was approximately $14.3 billion. Annual Return as of December 31 5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 37.83% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Telecommunications for one quarter was [34.64% (quarter ended December 31, 2002) and the lowest return was % (quarter ended September 30, 2002)]. PRINCIPAL INVESTMENT STRATEGY ProFund VP Telecommunications invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Telecommunications Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Telecommunications may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Telecommunications will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Telecommunications are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Telecommunications is also subject to risks faced by companies in the telecommunications economic sector, including: a telecommunications market characterized by increasing competition and regulation by the Federal Communications Commission and various state regulatory authorities; the need to commit substantial capital to meet increasing competition, particularly in formulating new products and services using new technology; and technological innovations may make various products and services obsolete. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Telecommunications investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Telecommunications for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Telecommunications by comparing average annual total returns of ProFund VP Telecommunications to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Telecommunications or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Telecommunications % % 01/22/01 S&P 500 Index (1) % % 01/22/01 Dow Jones U.S. Telecommunications Sector Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Telecommunications. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.19% Total Annual ProFund Operating Expenses 2.19% Fee Waivers/Reimbursements** -0.21% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Telecommunications with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Telecommunications $201 $665 $1,115 $2,507 ProFund VP Telecommunications > 45

102 > ProFund VP Utilities INVESTMENT OBJECTIVE ProFund VP Utilities seeks daily investment results, before fees and expenses, that correspond to the daily performance of the Dow Jones U.S. Utilities Sector Index. The Dow Jones U.S. Utilities Sector Index measures the performance of the utilities economic sector of the U.S. equity market. Component companies include electric utilities, gas utilities and water utilities. As of March 31, 2003, the weighted average capitalization of the Index was approximately $3.4 billion. PRINCIPAL INVESTMENT STRATEGY ProFund VP Utilities invests in equity securities and/or financial instruments that, in combination, are expected to have similar daily price return characteristics as the Dow Jones U.S. Utilities Sector Index. Under normal circumstances, this ProFund commits at least 80% of its assets to equity securities contained in the Index and/or financial instruments with similar economic characteristics. ProFund VP Utilities may use sampling techniques in seeking its investment objective. Assets not invested in equity securities or financial instruments may be invested in debt instruments or money market instruments. ProFund VP Utilities will have industry concentrations to approximately the same extent as its Index. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Utilities are market risk, equity risk, concentration risk, correlation risk, liquidity risk, aggressive investment technique risk, nondiversification risk, active investor risk and repurchase agreement risk. In addition to the risks noted above, ProFund VP Utilities is also subject to risks faced by companies in the utilities economic sector, including: review and limitation of rates by governmental regulatory commissions; the value of regulated utility debt instruments (and, to a lesser extent, equity securities) tends to have an inverse relationship to the movement of interest rates; as deregulation allows utilities to diversify outside of their original geographic regions and their traditional lines of business, utilities may engage in riskier ventures where they have little or no experience; and greater competition as a result of deregulation, which may adversely affect profitability due to lower operating margins, higher costs and diversification into unprofitable business lines. Further, stocks in the Index may underperform fixed income investments and stock market indices that track other markets, segments and sectors. For more information on ProFund VP Utilities investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Utilities for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Utilities by comparing average annual total returns of ProFund VP Utilities to a broad measure of market performance. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Utilities or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Return as of December 31 5% 0% 5% 10% 15% 20% 25% 23.94% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Utilities for one quarter was [3.69% (quarter ended March 31, 2002) and the lowest return was % (quarter ended September 30, 2002)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Utilities % % 01/22/01 S&P 500 Index (1) % % 01/22/01 Dow Jones U.S. Utilities Sector Index (1) % % 01/22/01 (1) Reflects no deduction for fees or expenses. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Utilities. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.17% Total Annual ProFund Operating Expenses 2.17% Fee Waivers/Reimbursements** -0.19% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Utilities with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Utilities $201 $661 $1,147 $2, < ProFund VP Utilities

103 > Bond Benchmarked ProFunds VP Daily ProFund Security Objective U.S. Government Plus Most recently issued 30-year U.S. Treasury Bond 125% Rising Rates Opportunity Most recently issued 30-year U.S. Treasury Bond 125% of the Inverse ProFund VP U.S. Government Plus may be appropriate for investors who: > Expect the yield on the most recently issued 30-year U.S. Treasury Bond to decrease. ProFund VP Rising Rates Opportunity may be appropriate for investors who: > Expect the yield on the most recently issued 30-year U.S. Treasury Bond to increase. > Want to protect (hedge) the value of a diversified portfolio of high grade and/or government bonds from a market downturn they anticipate. Bond Benchmarked ProFunds VP > 47

104 > ProFund VP U.S. Government Plus INVESTMENT OBJECTIVE ProFund VP U.S. Government Plus seeks daily investment results, before fees and expenses, that correspond to one and one-quarter times (125%) the daily price movement of the most recently issued 30-year U.S. Treasury Bond ( Long Bond ). In accordance with its stated objective, the net asset value of ProFund VP U.S. Government Plus generally should decrease as interest rates rise. If ProFund VP U.S. Government Plus is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times as much, on a percentage basis, as any daily increase in the price of the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter as much, on a percentage basis, as any daily decrease in the price of the Long Bond on a given day. PRINCIPAL INVESTMENT STRATEGY ProFund VP U.S. Government Plus invests in debt instruments and/or financial instruments that, in combination, should have similar daily price return characteristics as one and onequarter times (125%) the daily price movement of the Long Bond. Under normal circumstances, this ProFund commits at least 80% of its assets to U.S. Government securities and/or financial instruments with similar economic characteristics. ProFund VP U.S. Government Plus will employ leveraged investment techniques in seeking its investment objective. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP U.S Government Plus. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.50% Distribution (12b-1) Fees 0.25% Other Expenses 0.96% Total Annual ProFund Operating Expenses 1.71% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. Example: This example is intended to help you compare the cost of investing in ProFund VP U.S. Government Plus with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP U.S. Government Plus $174 $539 $928 $2,019 PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP U.S. Government Plus are market risk, debt instrument risk, correlation risk, leverage risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, interest rate risk, repurchase agreement risk and volatility risk. For more information on ProFund VP U.S. Government Plus investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE Because ProFund VP U.S. Government Plus commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other investment companies or broad measures of securities market performance, such as indices. 48 < ProFund VP U.S. Government Plus

105 > ProFund VP Rising Rates Opportunity INVESTMENT OBJECTIVE ProFund VP Rising Rates Opportunity seeks daily investment results, before fees and expenses, that correspond to one and one-quarter times (125%) the inverse (opposite) of the daily price movement of the most recently issued 30-year U.S. Treasury Bond ( Long Bond ). In accordance with its stated objective, the net asset value of ProFund VP Rising Rates Opportunity generally should decrease as interest rates fall. If ProFund VP Rising Rates Opportunity is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times as much, on a percentage basis, as any daily decrease in the price of the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter times as much, on a percentage basis, as any daily increase in the price of the Long Bond on a given day. PRINCIPAL INVESTMENT STRATEGY ProFund VP Rising Rates Opportunity takes positions in debt instruments and/or financial instruments that, in combination, should have similar daily price return characteristics as one and one-quarter times (125%) the inverse of the daily price movement of the Long Bond. ProFund VP Rising Rates Opportunity will employ leveraged investment techniques in seeking its investment objective. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Rising Rates Opportunity are market risk, debt instrument risk, inverse correlation risk, correlation risk, leverage risk, liquidity risk, aggressive investment technique risk, non-diversification risk, active investor risk, interest rate risk, repurchase agreement risk, short sale risk and volatility risk. For more information on ProFund VP Rising Rates Opportunity s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Rising Rates Opportunity. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 1.13% Total Annual ProFund Operating Expenses 2.13% Fee Waivers/Reimbursements** -0.15% Total Net Annual ProFund Operating Expenses 1.98% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.98% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Rising Rates Opportunity with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Rising Rate Opportunity $201 $653 $1,130 $2,450 FUND PERFORMANCE Because ProFund VP Rising Rates Opportunity commenced operations on May 1, 2002, it does not have a record of performance for a full calendar year to compare against other mutual funds or broad measures of securities market performance, such as indices. ProFund VP Rising Rates Opportunity > 49

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107 > ProFund VP Money Market ProFund VP Money Market may be appropriate for investors who: > Seek a high level of current income consistent with liquidity and preservation of capital. > Want to maintain a neutral exposure to the stock market. The income earned from an investment in ProFund VP Money Market can keep their capital at work. ProFund VP Money Market > 51

108 > ProFund VP Money Market INVESTMENT OBJECTIVE ProFund VP Money Market seeks a high level of current income consistent with liquidity and preservation of capital. PRINCIPAL INVESTMENT STRATEGY ProFund VP Money Market may invest in high-quality, shortterm, dollar-denominated money market securities paying a fixed, variable or floating interest rate such as: debt instruments, U.S. Government securities and repurchase agreements. ProFund VP Money Market may also invest in assetbacked securities, which are generally participations in a pool of assets whose payment is derived from the payments generated by the underlying assets. Payments on the asset-backed security generally consist of interest and/or principal on requirements. In order to maintain a stable share price, it maintains a dollarweighted average maturity of 90 days or less. Generally, securities in ProFund VP Money Market are valued in U.S. dollars and have remaining maturities of 397 days (about 13 months) or less on their purchase date. ProFund VP Money Market also may invest in securities that have features that reduce their effective maturities to 397 days or less on their purchase date. ProFund VP Money Market buys U.S. Government debt obligations, money market instruments and other debt obligations that at the time of purchase: >have received the highest short-term rating from two nationally recognized statistical rating organizations; > have received the highest short-term rating from one rating organization (if only one organization rates the security); >if unrated, are determined to be of similar quality by ProFund Advisors; or >have no short-term rating, but are rated in the three highest long-term rating categories, or are determined to be of similar quality by ProFund Advisors. Because many of the principal investments of ProFund VP Money Market are issued or credit-enhanced by banks and other financial institutions, it may invest more than 25% of its total assets in obligations of domestic banks. ProFund VP Money Market may invest in other types of instruments, as described in the Statement of Additional Information. PRINCIPAL RISK CONSIDERATIONS The principal risks of investing in ProFund VP Money Market are market risk, interest rate risk, debt instrument risk, active investor risk and repurchase agreement risk. In addition, ProFund VP Money Market is also subject to the following risks: >Credit Risk: A money market instrument s credit quality depends on the issuer s ability to pay interest on the security and repay the debt. The lower the credit rating, the greater the risk that the security s issuer will default, or fail to meet its payment obligations. The credit risk of a security may also depend on the credit quality of any bank or financial institution that provides credit enhancement for it. > Security Selection Risk: While ProFund VP Money Market invests in short-term securities, which by nature should be relatively stable investments, the risk remains that the securities selected will not perform as expected. This could cause ProFund VP Money Market s yield to lag behind those of similar money market funds. >Prepayment Risk: When a bond issuer, such as an issuer of asset-backed securities, retains the right to pay off a highyielding bond before it comes due, ProFund VP Money Market may have to reinvest the proceeds at lower interest rates. Thus, prepayment may reduce ProFund VP Money Market s income. It may also create a capital gains tax liability, because bond issuers usually pay a premium for the right to pay off bonds early. >Financial Services Industry Concentration Risk: Because ProFund VP Money Market may invest more than 25% of its total assets in the financial services industry, it may be vulnerable to setbacks in that industry. Banks and other financial service companies are highly dependent on short-term interest rates and can be adversely affected by downturns in the U.S. and foreign economies or changes in banking regulations. An investment in ProFund VP Money Market is not a deposit in a bank, nor is it insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. While ProFund VP Money Market tries to maintain a stable net asset value of $1.00 per share, there is no guarantee that ProFund VP Money Market will do so, and you could lose money by investing in this ProFund VP. For more information on ProFund VP Money Market s investment strategies and risks, including a description of the terms listed in bold, please refer to Strategies and Risks later in this Prospectus. FUND PERFORMANCE The bar chart below shows the performance of ProFund VP Money Market for the latest calendar year. The table below provides an indication of the risks of investing in ProFund VP Money Market by showing the variability of the annual total returns of ProFund VP Money Market. The information does not reflect charges and fees associated with a separate account that invests in ProFund VP Money Market or any insurance contract for which it is an investment option. The charges and fees will reduce returns. Past performance is no guarantee of future results. Annual Return as of December 31 2% 1% 0% 0.21% 2002 During the period covered in the bar chart, the highest return on shares of ProFund VP Money Market for one quarter was [0.09% (quarter ended December 31, 2002) and the lowest return was 0.00% (quarter ended September 30, 2002)]. Average Annual Total Returns One Since Inception As of December 31, 2002 Year Inception Date ProFund VP Money Market 0.21% 0.25% 10/29/01 The 7-day yield (the income for the previous 7 days projected over a full year) for ProFund VP Money Market as of December 31, 2002 was 0.36%. 52 < ProFund VP Money Market

109 > ProFund VP Money Market FEES AND EXPENSES OF THE FUND The table below describes the fees and expenses you may pay if you buy and hold shares of ProFund VP Money Market. Annual Fund Operating Expenses* (as a percentage of average daily net assets) Investment Advisory Fees 0.75% Distribution (12b-1) Fees 0.25% Other Expenses 0.51% Total Annual ProFund Operating Expenses 1.51% Fee Waivers/Reimbursements** -0.16% Total Net Annual ProFund Operating Expenses 1.35% *The expenses shown do not reflect charges and fees associated with insurance company separate accounts or insurance contracts, which could have the effect of increasing overall expenses. Policy holders should consult the prospectus for their contract or policy. **ProFund Advisors has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Operating Expenses, as a percentage of average daily net assets, exceed 1.35% through December 31, After such date, the expense limitation may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be recouped by ProFund Advisors within three years of the waiver or reimbursement to the extent that recoupment will not cause the ProFund VP s expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to the investors. Example: This example is intended to help you compare the cost of investing in ProFund VP Money Market with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time period indicated and then redeem all of your shares at the end of each period. The example also assumes that your investment has a 5% return each year and that the Fund s operating expenses remain the same. It does not reflect separate account or insurance contract fees and charges. Although your actual cost may be higher or lower, based on these assumptions your cost would be: 1 Year 3 Years 5 Years 10 Years ProFund VP Money Market $137 $462 $809 $1,788 ProFund VP Money Market > 53

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111 > Strategies and Risks The non-money market ProFunds VP take positions in securities and other financial instruments that ProFund Advisors believes should have similar investment characteristics as,and simulate the movement of, their respective benchmarks. Strategies and Risks > 55

112 > Strategies and Risks MORE ON STRATEGIES In seeking to achieve the ProFunds VP investment objectives (other than ProFund VP Money Market), of seeking daily investment results, before fees and expenses, that correspond to a specific benchmark, ProFund Advisors uses a mathematical approach to investing. Using this approach, ProFund Advisors determines the type, quantity and mix of investment positions that a ProFund VP should hold to approximate the performance of its benchmark. The investment objective of each ProFund VP is non-fundamental and may be changed without shareholder approval. Each ProFund VP reserves the right to substitute a different index or security for the index or security underlying its benchmark. ProFund Advisors does not invest the assets of the ProFunds VP in stocks or financial instruments based on ProFund Advisors view of the investment merit of a particular security, instrument, or company, nor does it conduct conventional stock research or analysis, or forecast stock market movement or trends, in managing the assets of the ProFunds VP. The ProFunds VP, other than ProFund VP Money Market, are designed to correspond to the daily performance, the inverse of the daily performance, or a multiple of the daily performance or inverse performance, of a benchmark index whether the benchmark index is rising or falling. Each ProFund VP seeks to remain fully invested at all times in securities or financial instruments that provide exposure to its benchmark index without regard to market conditions, trends or direction. The ProFunds also do not take temporary defensive positions. The ProFunds VP do not seek to provide correlation with their benchmarks over a period of time other than daily because mathematical compounding prevents the ProFunds VP from achieving such results. The ProFunds VP take positions in securities and other financial instruments that ProFund Advisors believes should have similar investment characteristics as, and simulate the movement of, their respective benchmarks. A ProFund VP may invest in securities or instruments that are not included in the index underlying its benchmark if ProFund Advisors believes it is appropriate in view of the ProFund VP s investment objective. In addition to each ProFund VP s principal investment strategy, each ProFund VP is permitted to use other securities, investment strategies and techniques in pursuit of its investment objective. Under normal circumstances, all Mid-Cap and Small-Cap ProFunds VP, ProFund VP Asia 30, ProFund VP Europe 30, ProFund VP Japan, and all Sector ProFunds VP seek their investment objectives by committing at least 80% of their assets to investments that have economic characteristics similar to the type of investment suggested by their names and that, in combination, should have similar daily price return characteristics as their benchmarks. These investments may include, without limitation, securities, futures contracts, options on futures contracts, swap agreements, options on securities and indices, money market instruments, or a combination of the foregoing. The ProFunds VP subject to this policy will provide shareholders with at least 60 days prior notice of any change in the policy. Investors should be aware that investments made by a ProFund VP at any given time are not expected to be the same as those made by other mutual funds for which ProFund Advisors acts as investment adviser, including mutual funds with names, investment objectives and policies similar to a ProFund VP. Important Concepts and Definitions: This section describes important concepts that may be unfamiliar to an investor. > Collar is the simultaneous purchase of an equity floor and the sale of an equity cap (specified financial terms are described in this section). > Debt Instruments include bonds and other instruments, such as certificates of deposit, euro time deposits, commercial paper (including asset-backed commercial paper), notes, funding agreements and U.S. Government securities, that are used by U.S. and foreign banks, financial institutions, corporations, or other entities, to borrow money from investors. Holders of debt instruments have a higher priority claim to assets than do holders of equity securities. Typically, the debt issuer pays the investor a fixed, variable or floating rate of interest and must repay the borrowed amount at maturity. Some debt instruments, such as zero coupon bonds, are sold at a discount from their face values instead of paying interest. > Depositary Receipts (DRs), include American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), and New York Shares (NYSs). ADRs represent the right to receive securities of foreign issuers deposited in a bank or trust company. ADRs are an alternative to purchasing the underlying securities in their national markets and currencies. Investment in ADRs has certain advantages over direct investment in the underlying foreign securities since: (i) ADRs are U.S. dollar-denominated investments that are easily transferable and for which market quotations are readily available, and (ii) issuers whose securities are represented by ADRs are generally subject to auditing, accounting and financial reporting standards similar to those applied to domestic issuers. GDRs are receipts for shares in a foreign-based corporation traded in capital markets around the world. While ADRs permit foreign corporations to offer shares to American citizens, GDRs allow companies in Europe, Asia, the United States and Latin America to offer shares in many markets around the world. NYSs (or direct shares ) are foreign stocks, denominated in U.S. dollars, traded on American exchanges without being converted into ADRs. These stocks come from countries like the Netherlands, Israel, Italy, or Bolivia, that do not restrict the trading of their stocks on other nations exchanges. > Equity Cap is an agreement in which one party, for a premium paid up-front, agrees to pay the other party at a specific time period if a designated stock market benchmark moves above a certain level, agreed upon in advance. > Equity Securities are securities that include common stock, preferred securities, depositary receipts, convertible securities and rights and warrants. Stocks represent an ownership interest in a corporation. > Financial Instruments The ProFunds VP (excluding ProFund VP Money Market) may utilize a variety of financial instruments in pursuing their investment objectives, including investment contracts whose value is derived from the value of an underlying asset, interest rate or index such as futures contracts, options on futures contracts, equity caps, collars, 56 < Strategies and Risks

113 > Strategies and Risks floors, swap agreements, forward contracts, structured notes, options on securities and stock indices and investments covering such positions. The ProFunds VP may invest in financial instruments as a substitute for investing directly in stocks or bonds in order to gain exposure to the appropriate benchmark index or security. Financial instruments may also be used to produce economically leveraged investment results. > Floors are agreements in which one party, for a premium paid up-front, agrees to pay the other party at a specific time period if a designated stock market benchmark falls below a certain level, agreed upon in advance. > Forward contracts are two-party contracts entered into with dealers or financial institutions where a purchase or sale of a specific quantity of a commodity, security, foreign currency or other financial instrument at a set price, with delivery and settlement at a specified future date. Forwards may also be structured for cash settlement, rather than physical delivery. > Futures or futures contracts are contracts to pay a fixed price for an agreed-upon amount of commodities or securities, or the cash value of the commodity or securities on an agreedupon date. > Leverage and leveraged investment techniques offer a means of magnifying market movements into larger changes in an investment s value. Swap agreements, borrowing, futures contracts, short sales, and options on securities indexes and futures contracts all may be used to create leverage. While only certain ProFunds VP employ leverage, all of the ProFunds VP (except ProFund VP Money Market) may use leveraged investment techniques for investment purposes. > Money Market Instruments are short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality credit profiles. Money market instruments include U.S. Government securities and repurchase agreements. > Option Contracts grant one party a right, for a price, either to buy or sell a security or futures contract at a fixed price during a specified period or on a specified day. Call options give investors the right to buy a stock at an agreed-upon price on or before a certain date. A put option gives you the right to sell a stock at an agreed-upon price on or before a certain date. > Ordinary Shares are capital stock or equity of a publicly traded company, often referred to as common stock. Ordinary shares receive secondary preference to preferred stock in the distribution of dividends and often assets. Ordinary shares of foreign companies may trade directly on U.S. exchanges. > Repurchase Agreements are agreements between a seller and a buyer, usually of U.S. Government securities, whereby the seller agrees to repurchase the securities at an agreed upon price and, usually, at a stated time. > Reverse Repurchase Agreements involve the sale of a security by a fund to another party (generally a bank or dealer) in return for cash and an agreement by the fund to buy the security back at a specified price and time. > Sampling Techniques If ProFund Advisors believes it is appropriate in view of a ProFund VP s investment objective, a ProFund VP may hold a representative sample of the securities in the index underlying a ProFund VP s benchmark, which have aggregate characteristics similar to those of the index. In addition, a ProFund VP may invest in securities that are not included in the index or may overweight or underweight certain securities or groups of securities contained in the index. > Selling Short is selling a stock, usually borrowed, and buying it back at a later date. > Structured Notes are complex debt instruments in which the issuer enters into one or more swap arrangements to change the cash flows it is required to make. > Swap Agreements are two-party contracts where the parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. > U.S. Government Securities are issued or guaranteed as to principal or interest by the U.S. Government or one of its agencies or instrumentalities. Some U.S. Government securities are backed by the full faith and credit of the federal government. Other U.S. Government securities are backed by the issuer s right to borrow from the U.S. Treasury and some are backed only by the credit of the issuing organization. MORE ON RISKS Like all investments, the ProFunds VP entail risks. Many factors affect the value of an investment in a ProFund VP. The factors most likely to have a significant impact on a ProFund VP s portfolio are called principal risks. The principal risks for each ProFund VP are identified in each ProFund VP description and are described below. A ProFund VP may be subject to risks in addition to those identified as principal risks and risks other than those described below. The Statement of Additional Information contains additional information about the ProFunds VP, their investment strategies and related risks. In addition to the general risks described above, the following risks may apply: Active Investor Risk (All ProFunds VP). ProFund Advisors expects a significant portion of the assets of the ProFunds VP to come from professional money managers and investors who use ProFunds as part of market timing investment strategies. These strategies often call for frequent trading of ProFund shares to take advantage of anticipated changes in market conditions. Active trading could increase the rate of portfolio turnover. A high level of portfolio turnover may negatively impact performance by increasing transaction expenses. In addition, large movements of assets into and out of the ProFunds VP may negatively impact a ProFund VP s ability to achieve its investment objective or maintain a consistent level of operating expenses. In certain circumstances, a ProFund VP s expense ratio may vary from current estimates or the historical ratio disclosed in this Prospectus. Aggressive Investment Technique Risk (All ProFunds VP except ProFund VP Money Market). The ProFunds VP use investment techniques that may be considered aggressive, including the use of futures contracts, options on futures contracts, swap agreements, options on securities and indices, forward contracts and similar instruments. Such techniques, particularly when used to create leverage, may expose the ProFunds VP to potentially dramatic changes in the value of the instruments and imperfect correlation between the value of the instruments and the security or index. The use of aggressive investment techniques may also expose a ProFund VP to risks different from, or possibly greater than, the risks associated with investing directly in securities contained in a ProFund VP s benchmark index, including: 1) the risk that an instrument is mispriced; 2) credit or performance risk on the amount each ProFund VP expects to receive from a counterparty; 3) the risk that securities prices, interest rates and currency markets will move adversely and a ProFund will incur significant losses; Strategies and Risks > 57

114 > Strategies and Risks 4) imperfect correlation between the price of derivative instruments and movements in the prices of the underlying securities; and 5) the possible absence of a liquid secondary market for any particular instrument and possible exchange imposed price fluctuation limits, both of which may make it difficult or impossible to adjust a ProFund VP s position in a particular instrument when desired. Concentration Risk (ProFund VP Asia 30 and Sector ProFunds VP). Concentration risk results from maintaining exposure to issuers conducting business in specific market or industry sectors, and the risk that those issuers (or market sector) will perform poorly and therefore negatively impact the ProFunds VP subject to this risk. Each of ProFund VP Short Small-Cap, ProFund VP Short OTC, ProFund VP U.S. Government Plus and ProFund VP Rising Rates Opportunity may concentrate its investments in a particular industry or group of industries to approximately the same extent as the Index is so concentrated. Correlation Risk (All ProFunds VP except ProFund VP Money Market). A number of factors may affect a ProFund VP s ability to achieve a high correlation with its benchmark, and there can be no guarantee that a ProFund VP will achieve a high degree of correlation. A failure to achieve a high degree of correlation may prevent a ProFund VP from achieving its investment objective. The following factors, including fees and expenses and income items, may adversely affect a ProFund VP s correlation with its benchmark. A ProFund VP may invest in securities or in other financial instruments not included in its benchmark index. A ProFund VP may not have investment exposure to all securities in its benchmark index, or its weighting of investment exposure to such stocks or industries may be different from that of the index. A ProFund VP may be subject to large movements of assets into and out of the ProFund VP and may receive information on purchases and redemptions into or out of a ProFund VP after the relevant exchange or market closes, potentially resulting in the ProFund VP being over- or under-exposed. An exchange or market may close early or issue trading halts, or the ability to buy or sell certain securities may be restricted, which may result in a ProFund VP being unable to buy or sell certain securities or financial instruments. In such circumstances, a ProFund VP may be unable to rebalance its portfolio, accurately price its investments and/or may incur substantial trading losses. Activities surrounding the annual Russell 2000 Index reconstitution on the last business day of June may impair the ProFunds VP benchmarked to the Russell 2000 Index from meeting their daily investment objective on that day. Debt Instrument Risk (ProFund VP U.S. Government Plus, ProFund VP Rising Rates Opportunity and ProFund VP Money Market). Each ProFund VP may invest in debt instruments, and ProFund VP U.S. Government Plus, ProFund VP Rising Rates Opportunity and ProFund VP Money Market may invest principally in, or seek exposure to, debt instruments. Debt instruments may have varying levels of sensitivity to changes in interest rates and other factors. Typically, the price of a debt instrument falls when interest rates rise. Debt instruments with longer maturities may fluctuate more in response to interest rate changes than instruments with shorter maturities. Many types of debt instruments are subject to prepayment risk, which is the risk that the issuer of the security can repay principal prior to the maturity date. Debt instruments allowing prepayment may offer less potential for gains during a period of declining interest rates. In addition, changes in the credit quality of the issuer of a debt instrument can also affect the price of a debt instrument, as can an issuer s default on its payment obligations. Such factors may cause the value of an investment in a ProFund VP to decrease. Equity Risk (All Classic, Ultra, Inverse and Sector ProFunds VP). The equity markets are volatile, and the value of securities, futures, options contracts and other instruments correlated with the equity markets may fluctuate dramatically from dayto-day. This volatility may cause the value of an investment in a ProFund VP to decrease. The Inverse ProFunds VP respond differently to these risks than positively correlated funds. Foreign Investment Risk (ProFund VP Asia 30, ProFund VP Europe 30 and ProFund VP Japan). Foreign stocks and financial instruments correlated to such stocks may be more volatile than their U.S. counterparts for a variety of reasons, such as economic or political developments, public health and safety issues, demographic changes, market inefficiencies, or a higher risk that essential investment information is incomplete, unavailable or inaccurate. Additionally, certain countries may lack uniform accounting and disclosure standards, or have standards that differ from U.S. standards. Securities or financial instruments purchased by a ProFund VP may be impacted by fluctuations in foreign currencies. The value of such securities or instruments could change significantly as the currencies strengthen or weaken relative to the U.S. dollar. ProFund Advisors does not engage in activities designed to hedge against foreign currency fluctuations. Geographic Concentration Risk (ProFund VP Asia 30, ProFund VP Europe 30 and ProFund VP Japan). Certain ProFunds VP may be particularly susceptible to economic, political or regulatory events affecting companies and countries within the specific geographic regions in which they focus their investments. For example, in 1997 and 1998, the values of some Asian currencies declined significantly, triggering a loss of investor confidence that resulted in a decline in the value of the stock markets, and individual company stocks, in the affected countries. Similar devaluations could occur in countries that have not yet experienced currency devaluation to date, or could continue to occur in countries that have already experienced such devaluations. Similarly, European companies could be hurt by such factors as regional economic downturns, policies adopted in the European Economic and Monetary Union, or difficulties experienced as certain countries, and particularly those in Eastern Europe, implement significant free market economic reforms. Japanese economic growth has weakened and Japan s stock markets have significantly declined since the early 1990s, and the current economic conditions remain uncertain. Japanese companies could be hurt by a failure to successfully implement significant proposed reforms to Japan s economy and financial system, among other considerations. Growth Investing Risk (ProFund VP Mid-Cap Growth and ProFund VP Small-Cap Growth). An investment in growth stocks may be susceptible to rapid price swings, especially during periods of economic uncertainty. Growth stocks typically have little or no dividend income to cushion the effect of adverse market conditions and may be particularly volatile in the event of earnings disappointments or other financial difficulties experienced by the issuer. Interest Rate Risk (ProFund VP U.S. Government Plus, ProFund VP Rising Rates Opportunity and ProFund VP Money Market). Interest rate risk is the risk that securities may fluctuate in value due to changes in interest rates and other factors. Generally, investments subject to interest rate risk will decrease in value when interest rates rise and increase in value when interest rates decline. The value of securities with longer maturities may fluctuate more in response to interest rate changes than securities with shorter maturities. 58 < Strategies and Risks

115 > Strategies and Risks Inverse Correlation Risk (Inverse ProFunds VP and ProFund VP Rising Rates Opportunity). Shareholders in the Inverse ProFunds VP and ProFund VP Rising Rates Opportunity should lose money when the index or security underlying such ProFund VP s benchmark rises a result that is the opposite from traditional equity or bond mutual funds. Leverage Risk (Ultra ProFunds VP and Bond Benchmarked ProFunds VP). Leverage offers a means of magnifying market movements into larger changes in an investment s value and provides greater investment exposure than an unleveraged investment. Leverage should cause investors to lose more money in market environments adverse to their daily investment objective. Liquidity Risk (All ProFunds VP except ProFund VP Money Market). In certain circumstances, such as the disruption of the orderly markets for the securities or financial instruments in which the ProFunds VP invest, the ProFunds VP might not be able to dispose of certain holdings quickly or at prices that represent true market value in the judgment of ProFund Advisors. This may prevent the ProFunds VP from limiting losses or realizing gains. Market Risk (All ProFunds VP). The ProFunds VP are subject to market risks that will affect the value of their shares, including general economic and market conditions, as well as developments that impact specific economic sectors, industries or companies. Investors in the ProFunds VP, other than the Inverse ProFunds VP, ProFund VP Rising Rates Opportunity and ProFund VP Money Market, should normally lose value on days when the index underlying their benchmark declines (adverse market conditions for these ProFunds VP). Investors in the Inverse ProFunds VP and ProFund VP Rising Rates Opportunity should lose value on days when the index underlying their benchmark increases (adverse market conditions for these ProFunds VP). Mid-Cap Company Investment Risk (ProFund VP Mid-Cap Value, ProFund VP Mid-Cap Growth and ProFund VP UltraMid-Cap). Mid-cap company stocks tend to have greater fluctuations in price than the stocks of large companies, but not as drastic as the stocks of small companies. Further, stocks of mid-sized companies could be more difficult to liquidate during market downturns compared to larger, more widely traded companies. Non-Diversification Risk (All ProFunds VP). The ProFunds VP are classified as non-diversified under the federal securities laws. They have the ability to concentrate a relatively high percentage of their investments in the securities of a small number of issuers, if ProFund Advisors determines that doing so is the most efficient means of meeting their daily objective. This would make the performance of a ProFund VP more susceptible to a single economic, political or regulatory event than a more diversified mutual fund might be. This risk may be particularly acute with respect to a ProFund VP whose index underlying its benchmark comprises a small number of stocks or other securities. Repurchase Agreement Risk (All ProFunds VP). Repurchase agreement risk is the risk that the counterparty to the repurchase agreement that sells the securities may default on its obligation to repurchase them. In this circumstance, a ProFund VP may lose money because: it may not be able to sell the securities at the agreed-upon time and price, the securities may lose value before they can be sold, the selling institution may default or declare bankruptcy or the ProFund VP may have difficulty exercising rights to the collateral. Short Sale Risk (Inverse ProFunds VP and ProFund VP Rising Rates Opportunity). Selling short is a technique that may be employed by a ProFund VP to seek gains when its benchmark index or security declines or to adjust investment exposure to a benchmark index. If a ProFund VP buys back the security at a price lower than the price at which it sold the security plus interest incurred, the ProFund VP will earn a positive return (profit) on the difference. If the current market price is greater when the time comes to buy back the security plus interest accrued, the ProFund VP will incur a negative return (loss) on the transaction. The ProFunds VP use of short sales involves additional transaction costs and other expenses. Under certain market conditions, short sales can increase the volatility, and decrease the liquidity, of a ProFund VP and may lower a ProFund VP s return or result in a loss. Small-Cap Company Investment Risk (ProFund VP Small-Cap, ProFund VP Small-Cap Value, ProFund VP Small-Cap Growth, ProFund VP Asia 30, ProFund VP UltraSmall-Cap and ProFund VP Short-Small Cap). The risk of equity investing may be particularly acute with securities of issuers with small market capitalization. Small-cap company stocks may trade at greater spreads, lower trading volumes and may be less liquid than the stocks of larger companies. Liquidating positions in turbulent market conditions could become difficult. Small-cap company stocks tend to have greater fluctuations in price than the stocks of large companies and there can be a shortage of reliable information on certain small companies. In addition, small-cap companies tend to lack the financial and personnel resources to handle economic or industry-wide setbacks and, as a result, such setbacks could have a greater effect on small-cap companies share prices. Technology Investment Risk (ProFund VP OTC, ProFund VP UltraOTC, ProFund VP Short OTC, ProFund VP Internet, ProFund VP Semiconductor and ProFund VP Technology). Technology companies are subject to intense competition, both domestically and internationally, and may have limited product lines, markets, financial resources or personnel. Due to rapid technological developments and frequent new product introduction, technology companies bear the additional risk of product obsolescence as well as the dramatic and often unpredictable changes in growth rates and competition for qualified personnel. These companies also are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Value Investing Risk (ProFund VP Mid-Cap Value and ProFund VP Small-Cap Value). Value investing carries the risk that the market will not recognize a security s intrinsic value for a long time, or that a stock deemed to be undervalued may actually be appropriately priced. Value stocks can react differently to issuer, political, market and economic developments than the market as a whole and other types of stocks. Volatility Risk (Ultra ProFunds VP and Bond Benchmarked ProFunds VP). The ProFunds VP subject to volatility risk seek to achieve a multiple or the inverse of a multiple of an index. Therefore, they experience greater volatility than the indexes underlying their benchmarks and thus have the potential for greater losses. Strategies and Risks > 59

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117 > ProFunds Management The Board of Trustees is responsible for the general supervision of the Trust, including the ProFunds VP. The Trust s officers are responsible for the day-to-day operations of the ProFunds VP. ProFunds Management > 61

118 > ProFunds Management BOARD OF TRUSTEES AND OFFICERS The ProFunds VP are series of ProFunds (the Trust ), a registered investment company. The Board of Trustees is responsible for the general supervision of all series of the Trust, including the ProFunds VP. The Trust s officers are responsible for day-to-day operations of the ProFunds VP. INVESTMENT ADVISER ProFund Advisors LLC ProFund Advisors LLC, located at 7501 Wisconsin Avenue, Suite 1000, Bethesda, Maryland 20814, serves as the investment adviser to all of the ProFunds VP and provides investment advice and management services to the ProFunds VP. ProFund Advisors oversees the investment and reinvestment of the assets in each ProFund VP. It is entitled to receive annual fees equal to 0.75% of the average daily net assets of each ProFund VP, except ProFund VP U.S. Government Plus, for which it is entitled to receive annual fees equal to 0.50% of the average daily net assets of such ProFund VP. ProFund Advisors bears the costs of providing advisory services. During the year ended December 31, 2002, each ProFund VP which had a full year of operations, paid ProFund Advisors fees in the following amounts: Fees Paid (as a percentage of average daily net assets) Bull 0.75% Small-Cap 0.75% OTC 0.71% Europe % UltraBull 0.63% UltraSmall-Cap 0.61% UltraOTC 0.67% Bear 0.71% Biotechnology 0.61% Energy 0.60% Financial 0.62% Healthcare 0.62% Real Estate 0.62% Technology 0.52% Telecommunications 0.58% Utilities 0.59% Money Market 0.61% Michael L. Sapir, Chairman and Chief Executive Officer of ProFund Advisors LLC since 1997, formerly served as senior vice president of Padco Advisors, Inc., which advises Rydex Funds. In addition, Mr. Sapir practiced law, primarily representing financial institutions for over 13 years, most recently as a partner in a Washington-based law firm. He holds degrees from Georgetown University Law Center (J.D.) and University of Miami (M.B.A. and B.A.). Louis M. Mayberg, President of ProFund Advisors LLC since 1997, co-founded National Capital Companies, L.L.C., an investment bank specializing in financial service companies mergers and acquisitions and equity underwritings in 1986, and managed its financial services hedge fund. He holds a Bachelor of Business Administration degree with a major in Finance from George Washington University. William E. Seale, Ph.D., Director of Portfolio for ProFund Advisors LLC since 1997, has more than 30 years of experience in the financial markets. His background includes a five-year presidential appointment as a commissioner of the U.S. Commodity Futures Trading Commission and Chairman of the Finance Department at George Washington University. He earned his degrees at the University of Kentucky. Each ProFund VP is managed by an investment team chaired by Dr. Seale. O THER SERVICE PROVIDERS ProFunds Distributors, Inc., located at 3435 Stelzer Road, Columbus, Ohio, 43219, acts as the distributor of ProFund VP shares and is an affiliate of BISYS Fund Services Limited Partnership ( BISYS ). BISYS, located at 3435 Stelzer Road, Columbus, Ohio 43219, acts as the administrator to the ProFunds VP, providing operations, compliance and administrative services. ProFund Advisors also performs certain management services, including client support and other administrative services, for the ProFunds VP under a Management Services Agreement. ProFund Advisors is entitled to receive annual fees equal to 0.15% of the average daily net assets of each ProFund VP for such services. During the year ended December 31, 2002, each ProFund VP which had a full year of operations paid ProFund Advisors fees in the following amounts: Fees Paid (as a percentage of average daily net assets) Bull 0.15% Small-Cap 0.15% OTC 0.14% Europe % UltraBull 0.13% UltraSmall-Cap 0.12% UltraOTC 0.13% Bear 0.14% Biotechnology 0.12% Energy 0.12% Financial 0.12% Healthcare 0.12% Real Estate 0.12% Technology 0.10% Telecommunications 0.12% Utilities 0.12% Money Market 0.12% INDEX INFORMATION Standard & Poor s, S&P, S&P 500, Standard & Poor s 500, 500, and S&P MidCap 400, Standard & Poor s MidCap 400, S&P Small-Cap 600, Standard & Poor s Small-Cap 600, S&P MidCap 400/Barra Growth Index, S&P MidCap 400/Barra Value Index, S&P SmallCap 600/Barra Growth Index, and S&P Small-Cap 600/Barra Value Index are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by ProFunds. Russell 2000 Index is a trademark of the Frank Russell Company. NASDAQ-100 Index is a trademark of the NASDAQ Stock Markets, Inc. ( NASDAQ ). Philadelphia Stock Exchange, PHLX, PHLX Gold/Silver Sector SM and XAU SM are trademarks or service marks of the Philadelphia Stock Exchange, Inc. The ProFunds VP are not sponsored, endorsed, sold or promoted by Standard & Poor s, NASDAQ, the Philadelphia Stock Exchange or the Frank Russell Company and neither Standard & Poor s, NASDAQ, the Philadelphia Stock Exchange nor the Frank Russell Company makes any representation regarding the advisability of investing in ProFunds VP. Dow Jones and the name of each Dow Jones sector index are service marks of Dow Jones & Company, Inc. 62 < ProFunds Management

119 > ProFunds Management Dow Jones does not: >Sponsor, endorse, sell or promote Sector ProFunds VP (the ProFunds VP ). >Recommend that any person invest in the ProFunds VP or any other securities. > Have any responsibility or liability for or make any decisions about timing, amount or pricing of the ProFunds VP. > Have any responsibility or liability for the administration, management of marketing of the ProFunds VP. >Consider the needs of the ProFunds VP or the owners of the ProFunds VP in determining, composing or calculating the Dow Jones sector indices or have any obligation to do so. Dow Jones will not have any liability in connection with the ProFunds VP. Specifically, Dow Jones does not make any warranty, express or implied, and Dow Jones disclaims any warranty about: >The results to be obtained by the ProFunds VP, the owner of the ProFunds VP or any other person in connection with the use of the Dow Jones sector indices and the data included in such indices; >The accuracy or completeness of the Dow Jones sector indices and their data; or >The merchantability and the fitness for a particular purpose or use of the Dow Jones sector indices and their data. Dow Jones will have no liability for any errors, omission or interruptions in the Dow Jones sector indices or their data. Under no circumstances will Dow Jones be liable for any lost profits or indirect, punitive, special or consequential damages or losses, even if Dow Jones knows that they might occur. The licensing agreement between ProFunds and Dow Jones is solely for their benefit and not for the benefit of the investors in the ProFunds VP or any other third parties. (Please see the Statement of Additional Information, which sets forth certain additional disclaimers and limitations of liabilities). ProFunds Management > 63

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121 > General ProFunds VP Information Purchases, redemptions and exchanges of shares are effected at the net asset value per share next determined after a purchase order, redemption or exchange request is received in good order. General ProFunds VP Information > 65

122 > General ProFunds VP Information CALCULATING SHARE PRICES (All ProFunds VP Except ProFund VP Money Market) Each ProFund VP calculates its daily share price on the basis of the net asset value of shares at the close of regular trading on the New York Stock Exchange ( NYSE ) (normally, 4:00 p.m., Eastern time) every day the NYSE is open for business. Purchases, redemptions and exchanges of shares are effected at the net asset value per share next determined after a purchase order, redemption or exchange request is received in good order. If a ProFund VP s portfolio investments trade in markets on days when the ProFund VP s principal trading market(s) is closed, the ProFund VP s net asset value may vary on days when investors cannot purchase or redeem shares. Each ProFund VP determines its net asset value per share by dividing the market value of the ProFund VP s assets, less the ProFund VP s liabilities, by the number of the ProFund VP s outstanding shares. A ProFund VP s assets are valued primarily on the basis of market quotations. Certain short-term securities are valued on the basis of amortized cost. If market quotations are not readily available, that investment may be valued by another method that the Board of Trustees believes accurately reflects fair value. The use of this fair valuation method may be appropriate if, for example, market quotations do not accurately reflect fair value for an investment, an investment s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (for example, a foreign exchange or market), a trading halt closes an exchange or market early, or other events result in an exchange or market delaying its normal close. This procedure incurs the unavoidable risk that the fair value of an investment may be higher or lower than the investment might actually command if the ProFund VP sold it. See the Statement of Additional Information for more details. The NYSE is open every week, Monday through Friday, except when the following holidays are celebrated: New Year s Day, Martin Luther King, Jr. Day (the third Monday in January), Presidents Day (the third Monday in February), Good Friday, Memorial Day (the last Monday in May), July 4th, Labor Day (the first Monday in September), Thanksgiving Day (the fourth Thursday in November) and Christmas Day. Exchange holiday schedules are subject to change without notice. The NYSE may close early on the day before each of these holidays and the day after Thanksgiving Day. If the exchange or market on which a ProFund VP s underlying investments are primarily traded closes early, the net asset value may be calculated prior to its normal calculation time. For example, if the Bond Market Association recommends an early close of the bond markets, ProFund VP U.S. Government Plus and ProFund VP Rising Rates Opportunity may also close early. CALCULATING THE PROFUND VP MONEY MARKET S SHARE PRICE ProFund VP Money Market calculates daily share prices on the basis of the net asset value of shares at the close of regular trading on the NYSE (normally, 4:00 p.m., Eastern time) every day the NYSE is open for business. The bond markets or other primary trading markets for ProFund VP Money Market may close early on the day before certain holidays on which the NYSE is closed, and the day after Thanksgiving. If the Bond Market Association recommends an early close of the bond markets, ProFund VP Money Market also may close early. ProFund VP Money Market will cease taking transaction requests at such times, including requests to exchange to or from other ProFunds VP. ProFund VP Money Market s net asset value will normally be $1.00, although ProFund Advisors cannot guarantee that this will always be the case. ProFund VP Money Market uses the amortized cost method to account for any premiums or discounts above or below the face value of any securities it buys. This method does not reflect daily fluctuations in market value. DIVIDENDS AND DISTRIBUTIONS Each of the ProFunds VP intends to declare and distribute to its shareholders annually all of the year s net investment income and net capital gains. Each ProFund VP will reinvest these distributions in additional shares of the ProFund VP making the distribution unless the insurance company separate account has written to request a direct cash distribution. As a general policy, ProFunds VP do not announce dividend distribution dates in advance. ProFund VP U.S. Government Plus and ProFund VP Money Market declare dividends from net investment income daily and pay the dividends on a monthly basis. ProFund VP Real Estate declares dividends from net investment income quarterly and pays the dividends on a quarterly basis. ProFund VP U.S. Government Plus, ProFund VP Money Market and ProFund VP Real Estate will pay annually any long-term capital gains as well as any short-term capital gains that they did not distribute during the year, but reserve the right to include in the dividend any short-term capital gains on securities that they sell. Each of the other ProFunds VP declares and distributes net investment income, if any, and net capital gains, if any, at least annually. Each ProFund VP, however, may declare an additional capital gains distribution if such a distribution would be in the best interest of the shareholders of the ProFund VP. ProFund VP Money Market may revise these policies, postpone the payment of dividends and interest or take other actions in order to maintain a constant net asset value of $1.00 per share. PURCHASING AND REDEEMING SHARES Shares of the ProFunds VP are available for purchase by insurance company separate accounts to serve as an investment medium for variable insurance contracts, and by qualified pension and retirement plans, certain insurance companies, and ProFund Advisors. Shares of the ProFunds VP are purchased or redeemed at the net asset value per share next determined after receipt and acceptance of a purchase order or receipt of a redemption request. Each ProFund VP reserves the right to reject or refuse, in its discretion, any order for the purchase of its shares, in whole or in part. Investors do not deal directly with the ProFunds VP to purchase or redeem shares. Please refer to the prospectus for the separate account for information on the allocation of premiums and on transfers of accumulated value among sub-accounts of the separate accounts that invest in the ProFunds VP. Payment for shares redeemed normally will be made within seven days of redemption. The ProFunds VP intend to pay cash for all shares redeemed, but under abnormal conditions which make payment in cash unwise, payment may be made wholly or partly in portfolio securities at their then market value equal to the redemption price. A shareholder may incur brokerage costs in converting such securities to cash. Payment for shares may be delayed under extraordinary circumstances or as permitted by the Securities and Exchange Commission in order to protect remaining investors. The ProFunds VP currently do not foresee any disadvantages to investors if the ProFunds VP served as investment media for both variable annuity contracts and variable life insurance policies. 66 < General ProFunds VP Information

123 > General ProFunds VP Information However, it is theoretically possible that the interest of owners of annuity contracts and insurance policies for which a ProFund VP served as an investment medium might at some time be in conflict due to differences in tax treatment or other considerations. The Board of Trustees and each participating insurance company would be required to monitor events to identify any material conflicts between variable annuity contract owners and variable life insurance policy owners, and would have to determine what action, if any, should be taken in the event of such a conflict. If such a conflict occurred, an insurance company participating in the ProFund VP might be required to redeem the investment of one or more of its separate accounts from the ProFund VP, which might force the ProFund VP to sell securities at disadvantageous prices. The ProFunds VP reserve the right to discontinue offering shares at any time, or to cease investment operations entirely. In the event that a ProFund VP ceases offering its shares, any investments allocated to the ProFund VP may, subject to any necessary regulatory approvals, be invested in another ProFund VP deemed appropriate by the Board of Trustees. DISTRIBUTION (12b-1) PLAN FEES Under a distribution plan adopted by the Board of Trustees pursuant to Rule 12b-1 under the Investment Company Act of 1940, each ProFund VP may pay financial intermediaries an annual fee of up to 0.25% of its average daily net assets as reimbursement or compensation for providing or procuring a variety of services relating to the promotion, sale and servicing of shares of the ProFund VP. Over time, fees paid under the plan will increase the cost of your investment and may cost you more than other types of sales charges. SERVICE FEES Each ProFund VP may pay insurers for a variety of administrative services provided in connection with offering the ProFunds VP as investment options under contracts issued by the insurers. In addition, ProFund Advisors may pay, out of its own assets and at no cost to the ProFunds VP, amounts to insurers, broker-dealers or other financial intermediaries in connection with the provision of services to the ProFunds VP and investors, such as sub-administration, sub-transfer agency and other services, and/or the distribution of ProFund VP shares. TAX INFORMATION Each ProFund VP intends to qualify as a regulated investment company under the provisions of Subchapter M of the Internal Revenue Code of 1986, as amended (the Code ). If each ProFund VP qualifies as a regulated investment company and complies with the appropriate provisions of the Code, each ProFund VP will be relieved of federal income tax on the amounts distributed. Each ProFund VP intends to diversify its investments in a manner intended to comply with tax requirements generally applicable to mutual funds. In addition, each ProFund VP will diversify its investments so that on the last day of each quarter of a calendar year, no more than 55% of the value of its total 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. For this purpose, securities of a single issuer are treated as one investment and each U.S. Government agency or instrumentality is treated as a separate issuer. Any security issued, guaranteed, or insured (to the extent so guaranteed or insured) by the U.S. Government or an agency or instrumentality of the U.S. Government is treated as a security issued by the U.S. Government or its agency or instrumentality, whichever is applicable. If a ProFund VP fails to meet this diversification requirement, income with respect to variable insurance contracts invested in that ProFund VP at any time during the calendar year in which the failure occurred could become currently taxable to the owners of the contracts. Similarly, income for the prior periods with respect to such contracts also could be taxable, most likely in the year of the failure to achieve the required diversification. Other adverse tax consequences could also ensue. Since the shareholders of the ProFunds VP will be separate accounts, no discussion is included here as to the federal income tax consequences at the shareholder level. For information concerning the federal income tax consequences to purchasers of the variable life insurance policies and variable annuity contracts, see the prospectus for the relevant variable insurance contract. See the Statement of Additional Information for more information on taxes. General ProFunds VP Information > 67

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125 > Financial Highlights The following tables provide a picture of the performance of each of the ProFunds VP for each year ended December 31 since inception. The total return information represents the rate of return and the per share operating performance that an investor would have earned on an investment in a ProFund VP, assuming reinvestment of all dividends and distributions. This information has been audited by PricewaterhouseCoopers LLP, independent accountants, whose report on the financial statements of the ProFunds VP appear in the annual report of the ProFunds VP for the fiscal year ended December 31, The annual report is available free of charge by calling (888) Financial Highlights > 69