PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2, 497, 1998-09-18

PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2
497, 1998-09-18

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PROSPECTUS
SEPTEMBER 18, 1998

The Prudential Insurance Company of America
The Prudential Variable Contract Account GI-2

GROUP VARIABLE UNIVERSAL LIFE
INSURANCE CONTRACT
for J.P. Morgan & Co. Incorporated

This prospectus describes a Group Variable Universal Life Insurance Contract
offered by The Prudential Insurance Company of America ("Prudential") for group
insurance issued to J.P. Morgan & Co. Incorporated ("J.P. Morgan"). The benefits
available under the Group Variable Life Insurance Contract (which, from this
point on, is called the "Group Contract") are in addition to any Basic Employee
Term Life insurance benefits.

Each Eligible Group Member or spouse who obtains coverage under the Group
Contract (a "Participant") will receive a Certificate describing the coverage.
Eligible Group Members include full-time or regular part-time employees of J.P.
Morgan, its subsidiaries, or one of its affiliated companies (on U.S. payroll)
scheduled to work 20 or more hours weekly.

The Group Contract and Certificates provide life insurance protection with
flexible premium payments and a choice of underlying investment options. The
Death Benefit and Cash Surrender Value of a Certificate will vary daily with the
performance of the investment options the Participant selects, but the Death
Benefit will generally not be less than the Face Amount of the Certificate.
Subject to certain requirements and limitations, surrenders, partial
withdrawals, and loans are available.

The Prudential Variable Contract Account GI-2 (the "Separate Account") is
composed of a number of variable investment options (each, a "Subaccount"),
twelve of which are currently available to Participants. The assets of each
Subaccount will be invested in a corresponding mutual fund from one of three
families of mutual funds: The Prudential Series Fund, Inc. (the "Series Fund"),
the J.P. Morgan Series Trust II, or American Century Variable Portfolios, Inc.
(collectively, the "Funds"). Participants may direct premium payments only to
the Subaccounts corresponding to the Funds or to the Fixed Account, an
investment option under which Prudential guarantees an effective annual interest
rate of at least 4%.

The twelve available Funds are briefly described under THE FUNDS, beginning on
page 8. The investment objectives and policies of each Fund, and the risks of
investing in the Fund, are described in each Fund's prospectus and statement of
additional information. This prospectus will be followed by current prospectuses
for each of the available Funds.

THE REPLACEMENT OF LIFE INSURANCE IS GENERALLY NOT IN THE INTEREST OF THE
CUSTOMER. IN MOST CASES, WHEN A CUSTOMER REQUIRES ADDITIONAL COVERAGE,
SUPPLEMENTING THE EXISTING POLICY BY PURCHASING ADDITIONAL INSURANCE OR A NEW
POLICY SHOULD BE REQUESTED, THEREBY PROTECTING THE BENEFITS OF THE ORIGINAL
POLICY. IF YOU ARE CONSIDERING REPLACING A POLICY, YOU SHOULD COMPARE THE
BENEFITS AND COSTS OF SUPPLEMENTING YOUR EXISTING POLICY WITH THE BENEFITS AND
COSTS OF PURCHASING THE CERTIFICATE DESCRIBED IN THIS PROSPECTUS AND YOU SHOULD
CONSULT WITH A QUALIFIED TAX ADVISER.

PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT WILL BE
FOLLOWED BY CURRENT PROSPECTUSES FOR EACH OF THE FUNDS AVAILABLE TO YOU. EACH OF
THESE PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.

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

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
751 BROAD STREET
NEWARK, NEW JERSEY 07102-3777
TELEPHONE (800) 562-9874

GVUL-1b Ed. 9-98

<PAGE>

<TABLE>

TABLE OF CONTENTS

PAGE
----
<S> <C>
BRIEF DESCRIPTION OF THE GROUP CONTRACT
AND CERTIFICATES.................................................................................................. 1

HYPOTHETICAL ILLUSTRATIONS OF
DEATH BENEFITS AND CASH SURRENDER VALUES.......................................................................... 4

GENERAL INFORMATION ABOUT PRUDENTIAL, THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2, AND
THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER THE CERTIFICATES.................................................. 8
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA....................................................................... 8
THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2..................................................................... 8
THE FUNDS......................................................................................................... 8
THE FIXED ACCOUNT................................................................................................. 11

DETAILED INFORMATION ABOUT THE CERTIFICATES............................................................................. 11
PERSONS ELIGIBLE FOR COVERAGE..................................................................................... 11
ISSUANCE OF A CERTIFICATE......................................................................................... 12
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"...................................................................... 12
EVIDENCE OF INSURABILITY.......................................................................................... 12
PROCEDURES........................................................................................................ 12
PREMIUMS.......................................................................................................... 13
EFFECTIVE DATE OF INSURANCE....................................................................................... 13
ALLOCATION OF PREMIUMS............................................................................................ 13
TRANSFERS......................................................................................................... 14
DOLLAR COST AVERAGING............................................................................................. 14
DEATH BENEFITS.................................................................................................... 15
CHANGES IN FACE AMOUNT............................................................................................ 16
CHARGES AND EXPENSES.............................................................................................. 17
CASH SURRENDER VALUE.............................................................................................. 18
FULL SURRENDERS................................................................................................... 19
ELECTION OF PAID-UP INSURANCE..................................................................................... 19
PARTIAL WITHDRAWALS............................................................................................... 19
LOANS............................................................................................................. 20
LAPSE............................................................................................................. 20
TERMINATION OF THE GROUP CONTRACT................................................................................. 21
PARTICIPANTS WHO ARE NO LONGER ELIGIBLE GROUP MEMBERS (OR SPOUSES OF ELIGIBLE GROUP MEMBERS)...................... 21
OPTIONS ON TERMINATION OF COVERAGE................................................................................ 21
REINSTATEMENT..................................................................................................... 22
TAX TREATMENT OF CERTIFICATE BENEFITS............................................................................. 23
ERISA CONSIDERATIONS.............................................................................................. 25
WHEN PROCEEDS ARE PAID............................................................................................ 26
BENEFICIARY ...................................................................................................... 26
INCONTESTABILITY.................................................................................................. 26
MISSTATEMENT OF AGE............................................................................................... 26
SUICIDE EXCLUSION................................................................................................. 26
ASSIGNMENT........................................................................................................ 26
VOTING RIGHTS..................................................................................................... 27
SUBSTITUTION OF FUND SHARES....................................................................................... 27
ACCELERATED DEATH BENEFIT......................................................................................... 27
REPORTS........................................................................................................... 28
SALE OF THE CONTRACT AND SALES COMMISSIONS........................................................................ 28
RATINGS AND ADVERTISEMENTS........................................................................................ 28
STATE REGULATION.................................................................................................. 29
EXPERTS........................................................................................................... 29
LITIGATION........................................................................................................ 29
YEAR 2000 COMPLIANCE.............................................................................................. 30
ADDITIONAL INFORMATION............................................................................................ 30

DEFINITIONS OF SPECIAL TERMS
USED IN THIS PROSPECTUS........................................................................................... 31

DIRECTORS AND OFFICERS OF PRUDENTIAL.................................................................................... 33
</TABLE>

FINANCIAL STATEMENTS.................................................................................................... 37

CONSOLIDATED FINANCIAL STATEMENTS OF THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA AND SUBSIDIARIES.......................................................................................A-1

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR
EACH OF THE FUNDS.
</TABLE>

iii

<PAGE>

BRIEF DESCRIPTION OF THE GROUP CONTRACT
AND CERTIFICATES

The following section provides brief answers to some common questions about the
more significant features of the Group Variable Universal Life Insurance
Contract issued to J.P. Morgan and the Certificates issued under that Contract.
More detailed information is provided in the subsequent sections of this
prospectus and in the Group Contract and Certificate themselves.

WHAT IS THE GROUP VARIABLE UNIVERSAL LIFE INSURANCE CONTRACT?

It is the variable life insurance contract issued by Prudential to J.P. Morgan.
It sets forth the terms under which eligible members of the group and their
spouses can obtain variable life insurance protection for themselves. Group
members or spouses who obtain such insurance (each, a "Participant") receive a
Certificate describing their coverage. Certificates will provide for a Death
Benefit and a Cash Surrender Value. Both the Death Benefit and the Cash
Surrender Value of a Certificate will vary daily with the performance of the
investment options chosen by the Participant. The benefits available under the
Group Variable Life Insurance Contract are in addition to any Basic Employee
Term Life Insurance benefits.

HOW IS THE DEATH BENEFIT UNDER A CERTIFICATE COMPUTED?

A Participant will choose a Face Amount of insurance for his or her Certificate,
within certain limits. The Death Benefit will generally be that Face Amount plus
the value of the Participant's Certificate Fund as of the date of death. The
Certificate Fund initially consists of the Net Premiums invested in the
investment options chosen by the Participant. The value of the Certificate Fund
will vary daily to reflect the investment performance of the selected option(s)
and the deduction of charges by Prudential. Under certain circumstances, the
Death Benefit will be increased above the value of the Face Amount plus the
Certificate Fund to assure that the Certificate continues to meet the definition
of "life insurance" under the Internal Revenue Code. Any Death Benefit otherwise
payable will be reduced by any Certificate Debt and outstanding charges. See
DEATH BENEFITS, page 15.

HOW IS THE CASH SURRENDER VALUE OF A CERTIFICATE COMPUTED?

The Cash Surrender Value of a Certificate as of any date is equal to the value
of the Certificate Fund as of that date, reduced by any Certificate Debt and
outstanding charges. See CASH SURRENDER VALUE, page 18.

WHAT PREMIUMS MUST BE PAID?

A Participant generally has flexibility to select the frequency and amount of
premium payments. Participants employed (or whose spouses are employed) by J.P.
Morgan, its subsidiaries, or affiliates will generally make premium payments by
automatic payroll deduction. The insurance will remain in force so long as the
balance in the Certificate Fund is sufficient to pay the monthly charges under
the Certificate. If the balance in the Certificate Fund is not sufficient to pay
any month's charges, and the Participant fails to make premium payments
sufficient to bring the balance above this minimum amount during the grace
period, the Participant's insurance will lapse.
See PREMIUMS, page 13.

WHAT INVESTMENT OPTIONS ARE AVAILABLE?

The Separate Account has twelve Subaccounts that are currently available to
Participants. Each of these Subaccounts invests in a single corresponding Fund.
J.P. Morgan may in the future make additional Funds available, up to a maximum
of twenty Funds. Participants may allocate their premium payments to any of the
twelve available Subaccounts or to the Fixed Account, an option under which
interest is credited at rates declared periodically by Prudential. See THE FIXED
ACCOUNT, page 11. For more information about the Funds and their investment
objectives, see THE FUNDS, page 8. Additional information about each Fund
appears in its respective prospectus.

DO CERTIFICATES PROVIDE PARTICIPANTS WITH CHOICE AND FLEXIBILITY IN
ADDRESSING A RANGE OF DIFFERENT INSURANCE PROTECTION AND INVESTMENT
OBJECTIVES?

Yes. Because the Cash Surrender Value of a Participant's insurance will vary
with the investment experience of the investment options the Participant
chooses, a Certificate under the Group Contract offers an opportunity

1
<PAGE>

for the Cash Surrender Value to appreciate more than it would under comparable
insurance without variable investment options. It is also possible, however, for
the Cash Surrender Value to decrease in value if the investment experience of
the selected investment option(s) is unfavorable. The variable investment
options vary in their risks, and Participants can choose to direct the amounts
in their Certificate Fund to more aggressive or more conservative variable
investment options as their personal circumstances and investment objectives may
dictate over time.

Participants who prefer to avoid or reduce the risks involved in any of the
variable options may elect to allocate all or a portion of Net Premiums to the
Fixed Account. Prudential guarantees that the part of the Certificate Fund
allocated to this option will accrue interest daily at a rate that Prudential
declares periodically. Although this rate will change from time to time, it will
not be less than an effective annual rate of 4%. See THE FIXED ACCOUNT, page 11.

In short, the Certificate's investment options and premium flexibility can be
used to meet the changing needs of Participants over time.

WHAT CHARGES ARE MADE?

Prudential deducts certain charges from each premium payment and from the
amounts held in the designated investment option(s). All of these charges, which
are designed to compensate Prudential for insurance costs and risks, as well as
cover Prudential's expenses, are fully described under CHARGES AND EXPENSES,
page 17. The following diagram briefly outlines the charges that may be made.

2
<PAGE>

<TABLE>

-------------------------------------------------------------------------------------------------------
PREMIUM PAYMENT
-------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------
<S> <C>

o less a charge (currently 2.3%) for
taxes attributable to premium payments.
In some jurisdictions, this is called a
premium-based administrative charge.
o less a processing charge, if any. Prudential does not
currently impose a processing charge. If Prudential does
so in the future, it will not exceed $2 per premium
payment.
o less a sales charge, if any. Prudential does not currently
impose a sales charge. If Prudential does so in the
future, it will not exceed 3 1/2% of the premium payment.
--------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------
Net Premium Amount
<S> <C>
o To be invested in one or a combination of the investment options available to the Participant.
- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------
Daily Charges
<S> <C>
o A daily charge is deducted from the assets of the Subaccounts of the Separate Account for mortality and expense risks. The
current daily charge is equivalent to an effective annual rate of 0.45%. The charge is guaranteed not to exceed an effective
annual rate of 0.90%. This daily charge does not apply to the Fixed Account.
o Investment management fees and expenses are deducted from the assets of the Funds. In 1997, the total expenses (after expense
reimbursement) of the Funds ranged from 0.43% to 1.50% of their average net assets. See pages 9 through 11.
-------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------------
Monthly Charges
<S> <C>
o A charge for the cost of insurance is deducted from the Certificate Fund.
o A monthly administrative charge is also deducted from the Certificate Fund. Currently, the monthly administrative charge is $2.
Prudential may increase this charge in the future, but it will not exceed $6 per month.
- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------
Possible Additional Charges
<S> <C>
o Prudential will assess a charge of $20 for each transfer after the twelfth transfer in the same Certificate Year. This charge
will not increase.

o Prudential currently does not assess a charge for any other taxes imposed upon the operations of the Separate Account, but
reserves the right to assess such a charge.

o Participants who are no longer Eligible Group Members but who continue coverage on a Portable basis must pay an additional
administrative charge for direct billing of $3 per bill (which the Participant may receive quarterly, semi-annually, or
annually, at the Participant's option).

o Prudential also reserves the right to assess charges in connection with certain other transactions.
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

WHAT WITHDRAWAL OR LOAN RIGHTS DO PARTICIPANTS HAVE?

At any time while a Certificate is in effect, a Participant may elect to
surrender his or her insurance and receive its Cash Surrender Value. A
Participant may also request a partial withdrawal from the Certificate Fund. See
FULL SURRENDERS, page 19, and PARTIAL WITHDRAWALS, page 19.

A Participant may borrow a total amount up to the Loan Value of his or her
Certificate. The Loan Value of a Certificate at any time is determined by
multiplying the Certificate Fund by 90% (or higher where required by state law)
and then subtracting any existing loan with accrued interest, outstanding
charges, and the amount of the next month's charges. When a loan is taken, an
amount equal to the loan is transferred from the investment options to a Loan
Account that remains part of the Certificate Fund. This Loan Account earns
interest at an effective annual rate that is currently 1% less than the interest
charged on the loan. Any outstanding Certificate Debt will be deducted from
proceeds payable at the Covered Person's death or upon surrender. See LOANS,
page 20.

3
<PAGE>

HOW IS A PARTICIPANT'S INSURANCE AFFECTED IF HE OR SHE IS NO LONGER A
MEMBER OF THE GROUP?

A Participant who is no longer included in the group of eligible members (or is
no longer the spouse of an eligible member) may elect to continue the insurance
provided by the Group Contract on a Portable basis if he or she meets certain
eligibility requirements. Certificates continued on a Portable basis may be
subject to higher charges. A Participant may also surrender the Certificate for
its Cash Surrender Value, elect to use the Cash Surrender Value of the
Certificate to purchase paid-up insurance, or convert the Certificate to an
individual life insurance policy. See OPTIONS ON TERMINATION OF COVERAGE,
page 21.

WHAT IS THE FEDERAL INCOME TAX STATUS OF AMOUNTS RECEIVED UNDER A
CERTIFICATE?

Variable life insurance contracts, such as the one offered by this Prospectus,
receive the same federal income taxation treatment as conventional fixed benefit
life insurance. This means, first, that any Death Benefit paid would generally
be excluded from the gross income of the beneficiary. Second, any annual
increases in the value of the Certificate Fund, whether from income or capital
appreciation, would not be included in the taxable income of a Participant.
Third, assuming that premiums are not paid above levels that would make a
Certificate a "Modified Endowment Contract" as defined in the Internal Revenue
Code, pre-death distributions, whether in the form of surrenders or partial
withdrawals, would be treated first as a return of the Participant's investment
in the Certificate and then as a distribution of taxable income, and loans would
not be treated as distributions at the time the loan was made. See TAX TREATMENT
OF CERTIFICATE BENEFITS, page 23.

HYPOTHETICAL ILLUSTRATIONS OF
DEATH BENEFITS AND CASH SURRENDER VALUES

The two illustrations that follow show how the Death Benefit and Cash Surrender
Value change with the investment experience of the Separate Account. They are
not projections of values; they are intended to show how a Certificate works.
They are "hypothetical" because they are based upon several assumptions, as
described below.

Both illustrations assume that a 40-year old Covered Person has purchased the
Certificate with a Face Amount of $100,000 and makes one $100 payment on the
first day of each month, for a total of $1200 over the course of each year. Both
illustrations also assume that the monthly Certificate Fund charges are deducted
on the first day of each month. Both illustrations further assume that the
Certificate Fund has been invested in equal amounts in each of the twelve
available Funds, and that a charge equal to 2.3% of each premium payment has
been deducted for taxes attributable to premium payments.

The first illustration assumes that the maximum sales, processing,
administrative, mortality and expense risk, cost of insurance, and surrender
charges permitted under the Contract are charged for the indefinite future.
Specifically, the first illustration assumes (1) a sales charge of 3.5% of
premiums; (2) a premium processing charge of $2; (3) a monthly administrative
charge of $6; (4) daily charges for mortality and expense risks equivalent to an
effective annual rate of 0.90%; (5) the maximum guaranteed monthly cost of
insurance charges (which is 100% of the 1980 Commissioner's Standard Ordinary
Mortality Table, Male, Age Last Birthday, also known as the "1980 CSO Table");
and (6) a surrender charge equal to the lesser of $20 or 2% of the amount
received upon surrender. Current charges are less than these assumptions, but
Prudential reserves the right to charge up to these maximum amounts.

The second illustration assumes that the current sales, processing,
administrative, mortality and expense risk, cost of insurance, and surrender
charges deducted under the Contract are assessed for the indefinite future.
Specifically, the second illustration assumes (1) no sales charge; (2) no
premium processing charge; (3) a monthly administrative charge of $2; (4) daily
charges for mortality and expense risks equivalent to an effective annual rate
of 0.45%; (5) the cost of insurance charges currently imposed for a non-smoker
under the J.P. Morgan Contract; and (6) no surrender charge. These are the
charges that Prudential currently imposes.

Finally, there are three assumptions, shown separately in each illustration,
about average investment performance of the Covered Person's investment options.
The first is that there will be a uniform zero percent gross rate of return,
that is, that the average value of the Certificate Fund will uniformly be
adversely affected by very unfavorable investment performance. The other two
assumptions are that investment performance will be at a uniform gross annual
rate of 4.5% and 9%. These, of course, are merely assumptions, and actual
returns will fluctuate from year to year. Nevertheless, these illustrations show
how the Cash Surrender Value and the Death Benefit change with investment
experience.

4
<PAGE>

The first column in each illustration shows the Certificate Year. The second
column, to provide context, shows what the aggregate amount would be if the
assumed premiums had been invested in a savings account crediting interest at a
4% effective annual rate. Of course, if that were done, there would be no life
insurance protection. The next three columns show the Death Benefit payable in
each of the years shown for the three different assumed investment returns. Note
that a gross return (as well as the net return) is shown at the top of each
column. The gross return represents the combined effect of income and capital
appreciation of the twelve Funds before any reduction is made for investment
management fees or other Fund expenses. The net return reflects an average total
annual expense ratio of the twelve Funds of 0.88% and the daily mortality and
expense risks charge described above. Thus, assuming gross returns of 0%, 4.5%
and 9%, the equivalent net returns for the first illustration are -1.78%, 2.72%,
and 7.22%, respectively; and the net returns for the second illustration are
- -1.33%, 3.17%, and 7.67%, respectively. The Death Benefits and Cash Surrender
Values shown reflect the deduction of all expenses and charges both for the
Subaccounts and under the Certificate.

The amounts shown assume that there is no loan or partial withdrawal.

Upon request, Prudential will provide comparable hypothetical illustrations for
a Certificate reflecting the proposed Covered Person's age, risk class, proposed
Face Amount of insurance, and proposed premium payments and schedule.

5
<PAGE>

<TABLE>

ILLUSTRATIONS
(JP MORGAN)
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
SPECIFIED FACE AMOUNT: $100,000
ISSUE AGE 40
ASSUME PAYMENT OF $100 MONTHLY PREMIUMS FOR ALL YEARS
USING MAXIMUM CONTRACTUAL CHARGES

Death Benefit(1) Cash Surrender Value(1)
-------------------------------------- -----------------------------------------
Assuming Hypothetical (and Net) Assuming Hypothetical Gross (and Net)
Annual Invest Return of Annual Investment Return of
End of Premiums -------------------------------------- -----------------------------------------
Certificate Accumulated 0% Gross 4.5% Gross 9% Gross 0% Gross 4.5% Gross 9% Gross
Year at 4% per year (-1.78%) Net (2.72% Net) (7.22% Net) (-1.78%) Net (2.72% Net) (7.22% Net)
----------- -------------- ------------ ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $1,226 $100,712 $100,729 $100,747 $ 698 $ 715 $ 732
2 2,501 101,385 101,451 101,519 1,365 1,431 1,499
3 3,827 102,016 102,164 102,318 1,996 2,144 2,298
4 5,206 102,606 102,863 103,141 2,586 2,843 3,121
5 6,640 103,151 103,547 103,988 3,131 3,527 3,968
6 8,131 103,651 104,213 104,859 3,631 4,193 4,839
7 9,682 104,103 104,857 105,752 4,083 4,837 5,732
8 11,295 104,507 105,478 106,668 4,487 5,458 6,648
9 12,973 104,859 106,071 107,603 4,839 6,051 7,583
10 14,718 105,157 106,630 108,555 5,137 6,610 8,535
15 24,546 0 (2) 108,633 113,339 0 (2) 8,613 13,319
20 36,503 0 108,421 117,332 0 8,401 17,312
25 51,051 0 104,336 118,727 0 4,316 18,707
30 68,751 0 0 (2) 113,776 0 0 (2) 13,756
35 90,286 0 0 0 (2) 0 0 0 (2)
40 116,486 0 0 0 0 0 0

</TABLE>

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

(1) Assumes no loan or partial withdrawal has been made.

(2) Based on the interest rate and charges illustrated, the premiums paid are
insufficient to keep the certificate in force. The certificate would
lapse under this scenario.

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, FEDERAL AND
STATE INCOME TAXES, AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER
VALUE FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATE
OF RETURN AVERAGED 0%, 4.5%, AND 9% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE YEARS. NO
REPRESENTATIONS CAN BE MADE BY PRUDENTIAL OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER ANY PERIOD OF TIME.

6
<PAGE>

<TABLE>

ILLUSTRATIONS
(JPMORGAN)
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
SPECIFIED FACE AMOUNT: $100,000
ISSUE AGE 40
ASSUME PAYMENT OF $100 MONTHLY PREMIUMS FOR ALL YEARS
USING CURRENT EXPENSE CHARGES AND CURRENT NON-SMOKER COST OF INSURANCE CHARGES

Death Benefit(1) Cash Surrender Value(1)
----------------------------------------- -----------------------------------------
Assuming Hypothetical (and Net) Assuming Hypothetical Gross (and Net)
Annual Invest Return of Annual Investment Return of
End of Premiums ----------------------------------------- -----------------------------------------
Certificate Accumulated 0% Gross 4.5% Gross 9% Gross 0% Gross 4.5% Gross 9% Gross
Year at 4% per year (-1.33%) Net (3.17% Net) (7.67% Net) (-1.33%) Net (3.17% Net) (7.67% Net)
----------- -------------- ------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,226 $101,014 $101,039 $101,064 $ 1,014 $ 1,039 $ 1,064
2 2,501 102,015 102,111 102,209 2,015 2,111 2,209
3 3,827 103,003 103,218 103,442 3,003 3,218 3,442
4 5,206 103,977 104,359 104,770 3,977 4,359 4,770
5 6,640 104,939 105,536 106,200 4,939 5,536 6,200
6 8,131 105,800 106,662 107,647 5,800 6,662 7,647
7 9,682 106,650 107,823 109,206 6,650 7,823 9,206
8 11,295 107,489 109,020 110,884 7,489 9,020 10,884
9 12,973 108,316 110,256 112,692 8,316 10,256 12,692
10 14,718 109,133 111,531 114,637 9,133 11,531 14,637
15 24,546 112,392 117,795 126,014 12,392 17,795 26,014
20 36,503 114,494 124,056 141,289 14,494 24,056 41,289
25 51,051 114,998 129,735 161,556 14,998 29,735 61,556
30 68,751 112,211 132,721 186,793 12,211 32,721 86,793
35 90,286 103,807 129,712 216,034 3,807 29,712 116,034
40 116,486 0(2) 119,405 250,742 0 (2) 19,405 150,742

</TABLE>

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

(1) Assumes no loan or partial withdrawal has been made.

(2) Based on the interest rate and charges illustrated, the premiums paid are
insufficient to keep the certificate in force. The certificate would lapse
under this scenario.

7
<PAGE>

GENERAL INFORMATION ABOUT PRUDENTIAL, THE
PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2, AND
THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER
THE CERTIFICATES

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

The Prudential Insurance Company of America ("Prudential") is a mutual insurance
company, founded in 1875 under the laws of the State of New Jersey. Prudential
is currently considering reorganizing itself into a stock company. This form of
reorganization, known as demutualization, is a complex process that could take
two years to complete. No plan of demutualization has been adopted yet by
Prudential's Board of Directors. Any plan of reorganization adopted by the Board
of Directors would have to be approved by qualified policyholders and
appropriate state insurance regulators. Throughout the process, there will be a
continuing evaluation by the Board of Directors and management of Prudential as
to the desirability of demutualization. The Board of Directors, in its
discretion, may choose not to demutualize or to delay demutualization for a
time.

Prudential is licensed to sell life insurance and annuities in all states, in
the District of Columbia, and in all United States territories and possessions.
Prudential's consolidated financial statements begin on page A-1 (following page
37) and should be considered only as bearing upon Prudential's ability to meet
its obligations under the Group Contract and the insurance it provides under the
Contract. Prudential and its affiliates act in a variety of capacities with
respect to registered investment companies including as depositor, adviser, and
principal underwriter.

THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT GI-2

The Prudential Variable Contract Account GI-2 (the "Separate Account") was
established on June 14, 1988 under New Jersey law as a separate investment
account. The Separate Account meets the definition of a "separate account" under
the federal securities laws. The Separate Account holds assets that are
segregated from all of Prudential's other assets.

The obligations arising under the Group Contract and the Certificates are
general corporate obligations of Prudential. Prudential is also the legal owner
of the assets in the Separate Account. Prudential will maintain assets in the
Separate Account with a total market value at least equal to the liabilities
relating to the benefits attributable to the Separate Account. These assets may
not be charged with liabilities which arise from any other business Prudential
conducts. In addition to these assets, the Separate Account's assets may include
funds contributed by Prudential to commence operation of the Separate Account
and may include accumulations of the charges Prudential makes against the
Separate Account. From time to time, these additional assets will be transferred
to Prudential's general account. Before making any such transfer, Prudential
will consider any possible adverse impact the transfer might have on the
Separate Account.

The Separate Account is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 (the "1940 Act") as a unit
investment trust, which is a type of investment company. This does not involve
any supervision by the SEC of the management or investment policies or practices
of the Separate Account. For state law purposes, the Separate Account is treated
as a part or division of Prudential. There are currently 136 Subaccounts within
the Separate Account, twelve of which are available to Participants, and each of
which invests in a single corresponding Fund. Prudential reserves the right to
take all actions in connection with the operation of the Separate Account that
are permitted by applicable law (including those permitted upon regulatory
approval).

THE FUNDS

Set out below is a list of each available Fund, its investment objectives (and
in some cases, additional investment policies), investment management fees and
other expenses, and its investment adviser.

THE PRUDENTIAL SERIES FUND, INC.

The portfolios of the Series Fund currently available to Participants and their
investment objectives and fees are as follows:

MONEY MARKET PORTFOLIO: The maximum current income that is consistent with
stability of capital and maintenance of liquidity through investment in
high-quality short-term debt obligations.

8
<PAGE>

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

HIGH YIELD BOND PORTFOLIO: Achievement of a high total return through investment
in high yield/high risk fixed income securities in the medium to lower quality
ranges.

PRUDENTIAL JENNISON PORTFOLIO: Long-term growth of capital through investment
primarily in equity securities of established companies with above-average
growth prospects. Current income, if any, is incidental.

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

Prudential is the investment adviser of each of the portfolios of the Series
Fund. Prudential's principal business address is 751 Broad Street, Newark, New
Jersey 07102-3777. Prudential has a service agreement with its wholly-owned
subsidiary The Prudential Investment Corporation ("PIC"), which provides that,
subject to Prudential's supervision, PIC will furnish investment advisory
services in connection with the management of the Series Fund. In addition,
Prudential has entered into a subadvisory agreement with its wholly-owned
subsidiary Jennison Associates Capital Corp. ("Jennison"), under which Jennison
furnishes investment advisory services in connection with the management of the
Prudential Jennison Portfolio. Further detail is provided in the prospectus and
statement of additional information for the Series Fund. Prudential, PIC and
Jennison are registered as investment advisers under the Investment Advisers Act
of 1940.

<TABLE>

=================================================================================================================
Total Fund
Investment Annual Expenses
Management Other (After Expense
Funds Fee Expenses Reimbursements)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
THE SERIES FUND
Money Market Portfolio (1) 0.40% 0.03% 0.43%
Flexible Managed Portfolio (1) 0.60% 0.02% 0.62%
High Yield Bond Portfolio (1) 0.55% 0.02% 0.57%
Prudential Jennison Portfolio (1) 0.60% 0.04% 0.64%
Global Portfolio (1) 0.75% 0.10% 0.85%
=================================================================================================================
</TABLE>

(1) SERIES FUND. With respect to the Series Fund portfolios, except for the
Global Portfolio, Prudential reimburses a portfolio when its ordinary
operating expenses, excluding taxes, interest, and brokerage commissions
exceed 0.75% of the portfolio's average daily net assets. The amounts
listed for the portfolios under Other Expenses are based on amounts
incurred in the last fiscal year.

J.P. MORGAN SERIES TRUST II

The portfolios of the J.P. Morgan Series Trust II in which the Separate Account
may currently invest and their investment objectives, investment policies, and
fees are as follows:

J.P. MORGAN BOND PORTFOLIO: Seeks to provide a high total return consistent with
moderate risk of capital and maintenance of liquidity. Total return will consist
of realized and unrealized capital gains and losses plus income less expenses.
Although the net asset value of the Portfolio will fluctuate, the Portfolio
attempts to preserve the value of its investments to the extent consistent with
its objective. The Adviser also actively allocates the Portfolio's assets among
the broad sectors of the fixed income market including, but not limited to, U.S.
Government agency obligations, corporate securities, private placements,
asset-backed and mortgage-related securities.

J.P. MORGAN EQUITY PORTFOLIO: Seeks to provide a high total return from a
portfolio comprised of selected equity securities. Total return will consist of
realized and unrealized capital gains and losses plus income less expenses. The
Portfolio invests primarily in the common stock of U.S. corporations with market
capitalizations above $1.5 billion.

J.P. MORGAN INTERNATIONAL OPPORTUNITIES PORTFOLIO: Seeks to provide a high total
return from a portfolio of equity securities of foreign corporations. Total
return will consist of realized and unrealized capital gains and losses
9
<PAGE>

plus income less expenses. The Portfolio's primary equity investments are the
common stock of companies based in developed countries outside the U.S. and in
developing countries.

J.P. MORGAN SMALL COMPANY PORTFOLIO: Seeks to provide high total return from a
portfolio of equity securities of small companies. Total return will consist of
realized and unrealized capital gains and losses plus income less expenses. The
Portfolio invests at least 65% of the value of its total assets in the common
stock of small U.S. companies primarily with market capitalizations less than
$1 billion.

J.P. Morgan Investment Management, Inc. serves as the investment adviser to each
of the above-mentioned portfolios. The principal business address of J.P. Morgan
Investment Management, Inc. is 522 Fifth Avenue, New York, New York 10036. The
Trust's distributor is Funds Distributor, Inc. located at 60 State Street, Suite
1300, Boston, Massachusetts 02109.

<TABLE>

==============================================================================================================
Total Fund
Investment Annual Expenses
Management Other (After Expense
Funds Fee Expenses Reimbursements)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
J.P. MORGAN SERIES TRUST II
J.P. Morgan Bond Portfolio (1) 0.30% 0.45% 0.75%
J.P. Morgan Equity Portfolio (1) 0.40% 0.50% 0.90%
J.P. Morgan International 0.60% 0.60% 1.20%
Opportunities Portfolio (1)
J.P. Morgan Small Company Portfolio (1) 0.60% 0.55% 1.15%

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

(1) The information in the foregoing table has been restated to reflect an
agreement by Morgan Guaranty Trust Company of New York ("Morgan Guaranty"),
an affiliate of J.P. Morgan Investment Management, Inc., to reimburse the
Trust to the extent certain expenses exceed in any fiscal year 0.75%,
0.90%, 1.20% and 1.15% of the average daily net assets of J.P. Morgan Bond
Portfolio, J.P. Morgan Equity Portfolio, J.P. Morgan International
Opportunities Portfolio and J.P. Morgan Small Company Portfolio,
respectively. Without such reimbursements, total fund annual expenses would
have been 1.91% for the J.P. Morgan Bond Portfolio, 2.31% for the J.P.
Morgan Equity Portfolio, 4.25% for the J.P. Morgan International
Opportunities Portfolio and 3.81% for the J.P. Morgan Small Company
Portfolio.

AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.

The portfolios of American Century Variable Portfolios, Inc. in which the
Separate Account may currently invest and their investment objectives, policies,
and fees are as follows:

VP BALANCED PORTFOLIO: The investment objective of the VP Balanced Portfolio is
capital growth and current income. Management of the Portfolio intends to
maintain approximately 60% of the Portfolio's assets in the equity securities
described in the prospectus, and intends to maintain approximately 40% of the
Portfolio's assets in fixed income securities (with a minimum of 25% of that
amount in fixed income senior securities).

VP INTERNATIONAL PORTFOLIO: Seeks capital growth over time by investing in
common stocks of foreign companies considered to have better-than-average
prospects for appreciation.

VP VALUE PORTFOLIO: Seeks long-term capital growth with income as a secondary
objective. The fund seeks to achieve its objectives by investing primarily in
equity securities of well-established companies with intermediate-to- large
market capitalizations that are believed by management to be undervalued at the
time of purchase.

The investment adviser for each fund is American Century Investment Management,
Inc. ("ACIM"). ACIM's principal business address is American Century Tower, 4500
Main Street, Kansas City, Missouri 64111. The distributor of the funds is
American Century Investment Services, Inc., located at 4500 Main Street, Kansas
City, Missouri 64111.

10
<PAGE>

================================================================================
Total Fund
Funds Annual Expenses
- --------------------------------------------------------------------------------
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Balanced Portfolio (1) 1.00%
VP International Portfolio (1) 1.50%
VP Value Portfolio (1) 1.00%
================================================================================

(1) Fees are all-inclusive.

A FULL DESCRIPTION OF THE FUNDS, THEIR INVESTMENT OBJECTIVES, MANAGEMENT,
POLICIES, AND RESTRICTIONS, THEIR EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN, AND ALL OTHER ASPECTS OF THEIR OPERATIONS IS CONTAINED IN THE
PROSPECTUSES FOR EACH AVAILABLE FUND AND IN THE RELATED STATEMENTS OF ADDITIONAL
INFORMATION, WHICH SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS. THERE IS
NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE MET. SUBJECT TO COMPLIANCE
WITH APPLICABLE LAW, PRUDENTIAL MAY CEASE OFFERING ANY FUND AND MAY SUBSTITUTE
ANOTHER MUTUAL FUND FOR ANY FUND.

THE EXPENSES RELATING TO THE FUNDS (OTHER THAN THOSE OF THE SERIES FUND) HAVE
BEEN PROVIDED TO PRUDENTIAL BY THE FUNDS, AND HAVE NOT BEEN INDEPENDENTLY
VERIFIED BY PRUDENTIAL.

THE FIXED ACCOUNT

A Participant may elect to allocate all or part of the amount in his or her
Certificate Fund to the Fixed Account. The amount so allocated or transferred
becomes part of Prudential's general assets, commonly referred to as the general
account. Subject to applicable law, Prudential has sole discretion over the
investment of the assets of the general account, and Participants do not share
in the investment experience of those assets. Instead, Prudential guarantees
that the part of the Certificate Fund allocated to the Fixed Account will accrue
interest daily at a rate that Prudential declares periodically. This rate will
not be less than an effective annual rate of 4%. Prudential may in its sole
discretion periodically declare a higher rate. At least annually and on request,
a Participant will be advised of the interest rate that currently applies to his
or her Certificate.

By allocating premium payments to the Fixed Account in amounts sufficient to
cover the monthly Certificate Fund charges, a Participant can use the
Certificate as a way to obtain life insurance coverage, with little or no
accumulation of Cash Surrender Value. Even such a Participant retains, of
course, the option to build a Cash Surrender Value by paying larger premiums and
applying the excess amount to any of the investment options available under the
Certificate.

Transfers from the Fixed Account are subject to strict limits. See TRANSFERS,
page 14. The payment of any Cash Surrender Value attributable to the Fixed
Account may be delayed for up to 6 months. See WHEN PROCEEDS ARE PAID, page 26.

Because of exemptive and exclusionary provisions, interests in the Fixed Account
have not been registered under the Securities Act of 1933 and the general
account has not been registered as an investment company under the 1940 Act.
Accordingly, interests in the Fixed Account are not subject to the provisions of
these Acts, and Prudential has been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosure in this Prospectus relating
to the Fixed Account. Disclosures concerning the Fixed Account may, however, be
subject to certain provisions of the federal securities laws relating to the
accuracy of statements made in a prospectus.

DETAILED INFORMATION ABOUT THE CERTIFICATES

PERSONS ELIGIBLE FOR COVERAGE

Eligible Group Members include all full-time or regular part-time employees of
J.P. Morgan, its subsidiaries, and its affiliated companies (on U.S. payroll)
scheduled to work 20 or more hours weekly. Subsidiaries and affiliated companies
include all companies that J.P. Morgan has requested be included in the Group
Contract, provided that Prudential has granted the request. An Eligible Group
Member and his or her spouse may each separately apply for coverage under the
Group Contract for himself or herself. Former employees (and their spouses) who
retire or terminate employment after January 1, 1999 may, if they meet certain
eligibility

11
<PAGE>

requirements, continue coverage on a Portable basis. See PARTICIPANTS WHO ARE NO
LONGER ELIGIBLE GROUP MEMBERS, page 21.

ISSUANCE OF A CERTIFICATE

Eligible Group Members or their spouses wishing to obtain insurance coverage
through the Group Contract must complete the appropriate enrollment form. The
person to be insured (that is, the Eligible Group Member or his or her spouse)
must undergo any required medical underwriting, including in some cases medical
testing. See EVIDENCE OF INSURABILITY, page 12. If the enrollment form is
accepted, Prudential will issue a Certificate to the person applying for
insurance coverage (the "Participant") which will describe the rights, benefits,
coverage, and obligations with respect to the coverage. The minimum Face Amount
for a Certificate insuring the life of an Eligible Group Member is generally
$50,000 and the maximum Face Amount is generally the lesser of $1,500,000 or
five times that person's Annual Base Salary at enrollment. The minimum Face
Amount for the spouse of an Eligible Group Member is $50,000 and the maximum
Face Amount is $300,000. To be a Covered Person (that is, to obtain insurance
coverage), an individual must be between the ages of 18 and 74 at the time the
Certificate is issued. The maximum age beyond which a person may no longer be
covered under a Certificate is 100. At that time, the Participant may: (1) elect
to receive the Cash Surrender Value of the Certificate; (2) elect to purchase
Paid-Up Insurance; or (3) continue to hold the Certificate. If option 3 is
chosen, monthly charges attributable to the cost of insurance will end and the
Death Benefit will equal the Certificate Fund reduced by any Certificate Debt
and any outstanding charges. In addition, the Participant cannot make premium
contributions, although loan repayments will be permitted. Prudential believes a
cash distribution upon termination of coverage will be subject to the same tax
treatment as other cash surrenders. See TAX TREATMENT OF CERTIFICATE BENEFITS,
page 23.

SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"

A Certificate may be returned for a refund within 10 days after it is received
by the Participant. Some states allow a longer period of time during which a
Certificate may be returned for a refund. A refund can be requested by mailing
the Certificate to Prudential (or Prudential's designee) at the address
specified in the enrollment materials given to Participants or to such other
address specified by Prudential. The Participant who exercises his or her
short-term cancellation right will receive a refund of all premium payments
made, with no adjustment for investment experience. However, if applicable state
law so requires, the Participant will then receive a refund of all premium
payments made, plus or minus any change due to investment experience in the
value of the invested portion of the premiums, calculated as if no charges had
been made against the Separate Account or the Funds. During the first 10 days
following the Certificate Date, premium payments will be invested in the Series
Fund Money Market Portfolio. Prudential also reserves the right to limit
contributions and transactions during the Free Look period.

EVIDENCE OF INSURABILITY

Limited evidence of insurability is required for Face Amounts up to the lesser
of two times Annual Base Salary or $100,000. Medical testing is required for
Face Amounts greater than that, and may also be required for any applicant who
answers positively to any of the limited evidence of insurability questions.

A Covered Person who was enrolled and approved prior to January 1, 1999 requires
no evidence of insurability for any previously approved coverage amount.

PROCEDURES

An Eligible Group Member or spouse seeking coverage under the Group Contract
will submit enrollment forms to Prudential in the manner specified in the form.
Eligible Group Members generally will pay premium payments by automatic payroll
deduction. The spouse of an Eligible Group Member will generally pay premiums by
automatic deduction from the Eligible Group Member's pay. Participants should
submit other premium payments, transfer orders, reallocations, loan or
withdrawal requests, or other communications relating to the Participant's
insurance directly to Prudential. A Participant should consult the applicable
form, which will set forth the applicable procedures to submit a payment or
document, make transfers, request loans and withdrawals, or reallocate premium
payments. Forms are available from J.P. Morgan or Prudential upon request.
Enrollment forms and other documents, payments, orders, and all other
communications will be deemed received by Prudential when received in good order
at the address specified on the form.

12
<PAGE>

Financial transactions are normally reconciled at the end of the day, when most
banks and financial institutions have closed for the evening. As a result, some
transactions (for example, certain premium payments, loan repayments, or
withdrawals) cannot be executed until the next business day, when banks and
financial institutions have re-opened for business. In most cases, this will
result in a one-day delay in the movement of money from one investment vehicle
to another. The delay may be longer for payment of the Death Benefit, Cash
Surrender Value, partial withdrawal, or loan proceeds. See WHEN PROCEEDS ARE
PAID, page 26. Transfers among the Subaccounts and dollar cost averaging are not
subject to this possible delay. During any delay, Prudential may place this
money in an unallocated account owned by Prudential that pays a market rate of
interest. The short-term interest ("float") earned on this money will be
retained by Prudential as compensation for services rendered. This interest will
not be paid from a Participant's Certificate Fund, and will not reduce the value
of the Certificate Fund.

PREMIUMS

Participants are responsible for making all premium payments and generally have
flexibility in determining the amount and timing of these payments. A
Certificate will remain in force so long as the Certificate Fund is sufficient
to cover monthly Certificate Fund charges. In general, if the Certificate Fund
minus Certificate Debt and outstanding charges on any Semi-Monthly Deduction Day
(or Monthly Deduction Day for a Participant who does not generally pay premiums
by automatic payroll deduction) is insufficient to cover the charges to be
deducted, then the coverage will be in default and a grace period will begin.
See LAPSE, page 20.

Participants who are Eligible Group Members generally pay premiums through
automatic payroll deductions. Eligible Group Members whose spouses are
Participants also generally pay the spouse's premiums through automatic payroll
deduction. If an Eligible Group Member does pay premiums through automatic
payroll reductions, the minimum deduction per payroll period is $10.
Participants who no longer are Eligible Group Members (or the spouses of
Eligible Group Members) but continue their coverage on a Portable basis will be
direct billed by Prudential quarterly, semi-annually, or annually, at the
Participant's option. In addition to any premium paid on a routine basis, a
Participant may make additional premium payments at any time directly to
Prudential or its designee, subject to the applicable charges. Any additional
premium payment must be at least $100. Prudential reserves the right to limit
the amount of such additional premiums.

Due to the payment of additional premiums, or investment growth, the total
amount of insurance may have to be increased for the insurance to continue to
qualify as life insurance for federal tax purposes. In addition, if a
Participant makes premium payments in excess of certain limits, the tax status
of the insurance may change to that of a "Modified Endowment Contract" under
Section 7702A of the Internal Revenue Code, which could be significantly
disadvantageous from a tax standpoint. See TAX TREATMENT OF CERTIFICATE
BENEFITS, page 23. Prudential reserves the right not to accept or to return any
premium payment which would cause a Participant's insurance to fail to qualify
as life insurance under applicable tax laws, or which would increase the Death
Benefit by more than it increases the Certificate Fund.

EFFECTIVE DATE OF INSURANCE

A Participant's insurance will go into effect on the first day of the calendar
month after his or her enrollment form for participation under the Group
Contract, including underwriting, if any, is approved. That effective date is
the Certificate Date.

ALLOCATION OF PREMIUMS

BEFORE OR ON CERTIFICATE DATE. All premium payments received before the
Certificate Date will be deposited in Prudential's general account. Prudential
will not pay interest on these amounts. These premium payments, as well as any
payments received on the Certificate Date, will be applied to the Series Fund
Money Market Subaccount as of the Certificate Date, after the deduction of any
applicable charges. See CHARGES AND EXPENSES, page 17. These Net Premiums will
remain invested in the Series Fund Money Market Subaccount for the 10 days
following the Certificate Date and will thereafter be allocated to the
investment options selected by the Participant. However, if the Participant
fails to furnish an enrollment form containing complete investment allocation
information, then the Participant's Net Premiums will remain invested in the
Series Fund Money Market Subaccount until the Participant furnishes complete
information.

AFTER CERTIFICATE DATE. Premium payments made after the Certificate Date will be
reduced by any applicable charges. See CHARGES AND EXPENSES, page 17. If the
Participant has failed to furnish an enrollment form containing complete
investment allocation information, then the Participant's Net Premium payments
submitted

13
<PAGE>

after the Certificate Date will be invested in the Series Fund Money
Market Subaccount until the Participant furnishes complete information. Assuming
the Certificate has been effective for 10 days, the Net Premiums will be
allocated to the investment options selected by the Participant as of the end of
the Valuation Period in which Prudential (or Prudential's designee) receives the
premium payments. Premium payments received within the first 10 days after the
Certificate Date will be applied to the Series Fund Money Market Subaccount.

CHANGING PREMIUM ALLOCATIONS. If his or her insurance is not in default, a
Participant may change the way in which premiums are allocated among the
available investment option(s). Such a change will be effective as of the end of
the Valuation Period during which Prudential (or Prudential's designee) receives
the Participant's request on a form approved by Prudential. The minimum
percentage that a Participant may allocate to any available Subaccount or the
Fixed Account is 5%, and all allocations must be in whole percentages.
Currently, there is no transaction charge for reallocating future premiums,
although Prudential reserves the right to impose a transaction charge in the
future.

TRANSFERS

If his or her insurance is not in default, a Participant may transfer amounts
from one available Subaccount to another available Subaccount, or to the Fixed
Account. There is no limit on the number of transfers among available
Subaccounts or to the Fixed Account. Prudential will impose a transaction charge
of $20, however, for each transfer after the twelfth transfer in a Certificate
Year. This charge will not increase.

Transfers will take effect as of the end of the Valuation Period in which a
proper transfer request is received by Prudential (or Prudential's designee) on
a form approved by Prudential. The request may be in terms of dollars, such as a
request to transfer $10,000 from one available Subaccount to another available
Subaccount, or may be in terms of a percentage reallocation among available
Subaccounts. The minimum amount that may be transferred from any one investment
option is $100 or the entire balance in that investment option, whichever is
less. For transfer requests in percentage terms, as with premium reallocations,
the percentages must be in whole numbers and no allocation may be less than 5%.

Transfers from the Fixed Account to the available Subaccounts are currently
permitted once each Certificate Year. The amount of that transfer cannot exceed
$5,000 or 25% of the balance in the Fixed Account, whichever is greater. Such
transfer requests will take effect as of the end of the Valuation Period in
which a proper transfer request is received by Prudential (or Prudential's
designee) on a form approved by Prudential. These limits are subject to change
in the future.

The Group Contract and Certificates were not designed for professional market
timing organizations or other organizations or individuals using programmed,
large, or frequent transfers. A pattern of exchanges that coincides with a
"market timing" strategy may be disruptive to the Separate Account and the Funds
and will be discouraged. If such a pattern were to be found, Prudential may be
required to modify the transfer procedures, including but not limited to, not
accepting transfer requests of an agent acting under a power of attorney on
behalf of more than one Certificate owner.

DOLLAR COST AVERAGING

The Group Contract permits a Participant to elect Dollar Cost Averaging ("DCA").
DCA enables a Participant to systematically transfer specified dollar amounts
from the Series Fund Money Market Subaccount to the other available Subaccounts
at monthly intervals. The Participant can elect that a certain number of
transfers be made under the DCA feature.

To initiate DCA, a Participant must make a premium payment of at least $1,000 to
the Series Fund Money Market Subaccount. The minimum transfer amount is $100.
All DCA transfers will be made effective as of the end of the first Valuation
Period following the first of the month. Election of this arrangement may occur
at any time after the Certificate Date by properly completing the DCA election
form and returning it to the address specified on the form. If the DCA election
form is received by the tenth day of the month, then DCA processing will
commence during the next month. If the DCA election form is received after the
tenth day of a month, then DCA processing will commence during the month
immediately following the next succeeding month. Any transfers made pursuant to
DCA are not counted in determining the number of transfers subject to the
transfer charge.

DCA will terminate when any of the following occurs: (1) the number of
designated transfers has been completed; (2) the Series Fund Money Market
Subaccount value is insufficient to complete the next transfer; (3) Prudential
(or Prudential's designee) receives a written request for termination by the
tenth of the month

14
<PAGE>

in order to cancel the transfer scheduled to take effect the following month
(written requests received after the tenth day of the month will take effect
during the month immediately following the next succeeding month); or (4) the
Certificate is lapsed, surrendered or otherwise terminated.

There is currently no charge for DCA. Prudential reserves the right to charge
for this feature in the future.

The main objective of DCA is to shield investments from short-term price
fluctuations. Since the same dollar amount is transferred to an available
Subaccount with each transfer, more Subaccount units are purchased if the
Subaccount unit value is low, and fewer Subaccount units are purchased if the
unit value is high. Therefore, a lower than average cost per unit may be
achieved over the long term. This plan of investing does not assure a profit or
protect against a loss in declining markets.

DEATH BENEFITS

A Death Benefit is payable upon the death of the Covered Person. The Death
Benefit is generally the Face Amount of the Certificate, plus the value of the
Certificate Fund as of the date of death. The Death Benefit otherwise payable
will be reduced by any Certificate Debt and any past due monthly charges. If the
insurance is kept in force for several years and/or substantial premium payments
are made, the Certificate Fund may grow to a point where it is necessary to
increase the Death Benefit in order to ensure that the insurance will satisfy
the Internal Revenue Code's definition of life insurance. In that case, the
Death Benefit (before the subtraction of Certificate Debt and outstanding
charges) must at least equal the following "corridor percentage" of the
Certificate Fund based on the insured's Attained Age:

15
<PAGE>

<TABLE>

INSURED'S CORRIDOR INSURED'S CORRIDOR
ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE
------------ ---------- ------------ ----------
<S> <C> <C> <C>
0-40 250% 70 115%
41 243 71 113
42 236 72 111
43 229 73 109
44 222 74 107

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

45 215 75 105
46 209 76 105
47 203 77 105
48 197 78 105
49 191 79 105

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

50 185 80 105
51 178 81 105
52 171 82 105
53 164 83 105
54 157 84 105

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

55 150 85 105
56 146 86 105
57 142 87 105
58 138 88 105
59 134 89 105

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

60 130 90 105
61 128 91 104
62 126 92 103
63 124 93 102
64 122 94 101

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

65 120 95 100
66 119 96 100
67 118 97 100
68 117 98 100
69 116 99 100

</TABLE>

The Death Benefit may be received in a lump sum or deposited into Prudential's
Alliance Account, an interest-bearing account. The beneficiary has complete
ownership of funds held in the Alliance Account, and may draw on all or part of
the funds by writing a draft. Interest earnings in the Alliance Account are
compounded daily and credited monthly. The proceeds contained in the Alliance
Account are part of Prudential's general account.

CHANGES IN FACE AMOUNT

The Group Contract allows Participants to increase the Face Amount of their
insurance anytime if they can meet evidence of insurability requirements. The
Face Amount must remain within the limits of coverage. See ISSUANCE OF A
CERTIFICATE, page 12. An increase in the Face Amount will result in higher
insurance charges because the net amount at risk for Prudential will increase.

The Group Contract also permits Participants to decrease the Face Amount of
their insurance. In no event, however, may a Participant decrease the Face
Amount below $50,000 or below the minimum amount required to maintain status as
life insurance under the federal tax laws.

An increase or decrease in Face Amount, or the addition or removal of certain
additional insurance benefits, may cause the insurance to be treated as a
Modified Endowment Contract under the Internal Revenue Code. This is
particularly true of decreases in Face Amount at any time that insurance is in
force. See TAX TREATMENT

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OF CERTIFICATE BENEFITS, page 23. In addition, a decrease in coverage may limit
the amount of premiums that a Participant may contribute in the future.

CHARGES AND EXPENSES

The maximum deductions and charges described below will not be increased by
Prudential with respect to any Certificate in effect regardless of any changes
in mortality and expense experience. Where current charges are lower than
maximum charges, Prudential reserves the right to increase the current charges,
although it has no present intention to do so.

CHARGES DEDUCTED FROM PREMIUMS. The following charges are deducted from premium
payments before they are invested in the Separate Account or the Fixed Account.

1. Charges for Taxes Attributable to Premiums. A charge for taxes attributable
to premiums is deducted from each premium payment. 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 on the amount of premium received by
Prudential. That charge is currently made up of two parts. The first part
is for state and local premium taxes and is currently equal to 1.95% of the
premium received by Prudential. In some jurisdictions, this is called a
premium-based administrative charge. The second part is for federal income
taxes measured by premiums and is currently equal to 0.35% of premiums
received. Prudential believes that this second charge is a reasonable
estimate of the increased cost for premium-based federal income taxes
resulting from a 1990 change in the Internal Revenue Code. These charges
may be increased if the cost of Prudential's taxes related to premium
payments are increased.

2. Processing Fee. Prudential does not currently deduct a processing fee from
premium payments. However, Prudential reserves the right to deduct such a
charge in the future, which will not exceed $2 per premium payment.
Participants who are direct-billed by Prudential should also be aware that
Prudential assesses a charge of $3 per bill (which a Participant may
receive quarterly, semi-annually, or annually, at the Participant's
option).

3. Sales Charge. Prudential does not currently deduct a sales charge from
premium payments. However, Prudential reserves the right to deduct a sales
charge in the future to pay part of the costs Prudential incurs in selling
the Group Contract and the coverage under the Group Contract. If Prudential
were to deduct a sales charge, it would not exceed 3.5% of each premium
payment.

MONTHLY CERTIFICATE FUND CHARGES. Prudential calculates and deducts the
following charges either monthly or semi-monthly from the Participant's
Certificate Fund, depending upon whether the Participant generally pays premiums
by automatic payroll deduction. Prudential deducts these charges pro-rata from
each Subaccount and the Fixed Account. For Participants who are Eligible Group
Members (or their spouses) and who generally pay premiums by automatic payroll
deduction, Prudential generally will deduct the monthly Certificate Fund charges
two times per month, on the two Semi-Monthly Deduction Days. For each
Semi-Monthly Deduction Day, Prudential will calculate the applicable monthly
charges but will deduct only one half of these charges. The Semi-Monthly
Deduction Days will coincide with the two days that Prudential credits automatic
payroll deduction premium payments it receives from J.P. Morgan. J.P. Morgan has
informed Prudential that it intends to forward automatic payroll deduction
premium payments at the end of each pay period. Prudential accordingly
anticipates that the Semi-Monthly Deduction Days will fall around approximately
the middle and the end of each month, with the exact dates dependent upon when
J.P. Morgan forwards the payment. If J.P. Morgan has not transferred both
automatic payroll deduction premium payments by the 45th day following the first
day of a particular month, however, Prudential will deduct any remaining part of
that month's Certificate Fund charges on the next Business Day following that
45th day. For Participants who do not generally pay premiums by automatic
payroll deduction (including, for example, persons who are no longer Eligible
Group Members or spouses of Eligible Group Members), Prudential will deduct the
full monthly Certificate Fund charges on the Monthly Deduction Day, which is the
first Business Day of each Month.

1. Cost of Insurance. Prudential deducts a charge for the cost of the
Participant's insurance. When a Covered Person dies, the amount paid to the
beneficiary is generally larger than the Certificate Fund. The cost of
insurance charges are designed to enable Prudential to pay this larger
Death Benefit. The charge is determined by multiplying the "net amount at
risk" under a Certificate (the amount by which the Certificate's Death
Benefit, computed as if there was no Certificate Debt, exceeds the
Certificate Fund) by the cost of insurance rate applicable to the Covered
Person. The cost of insurance rates, which

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<PAGE>

are specified in the Certificate, are based on the age and rate class of
the Covered Person and the mortality characteristics of the Eligible Group
Members and spouses as a group. Separate cost of insurance rates may apply
to Certificates continued on a Portable basis. See PARTICIPANTS WHO ARE NO
LONGER ELIGIBLE GROUP MEMBERS, page 21. Since the cost of insurance rate
applicable under a Certificate increases as the Covered Person ages, the
monthly cost of insurance charge deducted from the Certificate Fund will
increase as the Covered Person ages, and this increased charge will be
reflected in the Cash Surrender Value and Death Benefit under a
Certificate.

The actual cost of insurance rates, which are specified in the Certificate,
have been set by Prudential based on its expectations as to future
experience in mortality and total expenses. These rates may be adjusted
periodically, based on a number of factors including the number of
Certificates in force, the number of Certificates surrendered or becoming
Portable, and the actual and anticipated mortality and expense experience
of the group. However, Prudential will not change the cost of insurance
rates before December 31, 2001, unless the number of Covered Persons
(including both the Group Contract and other supplemental insurance
coverages obtained by J.P. Morgan from Prudential) decreases by 10% or
more. Any change in the cost of insurance rates will apply to all persons
of the same age, rate class, and group. Certificates continued on a
Portable basis may be considered a separate group. See PARTICIPANTS WHO ARE
NO LONGER ELIGIBLE GROUP MEMBERS, page 21. The cost of insurance rate
applicable to a Participant may not, however, be greater than the
guaranteed cost of insurance rate set forth in his or her Certificate. That
guaranteed rate will be no higher than a rate based upon 100% of the 1980
Commissioner's Standard Ordinary Mortality Table, Male, Age Last Birthday
(also known as the "1980 CSO Table"). The current cost of insurance charges
are lower than 100% of the 1980 CSO Table.

2. Administrative Charge. Prudential currently assesses a monthly
administrative charge of $2. This charge is intended to pay for maintaining
records and communicating with J.P. Morgan and with Participants.
Prudential may increase this charge in the future, but it is guaranteed not
to exceed $6 per month.

3. Other Taxes. Prudential reserves the right to assess a charge to cover
federal, state or local taxes (other than "taxes attributable to premiums"
described above) that are imposed upon the operations of the Separate
Account. Currently, Prudential does not impose such a charge.

DAILY DEDUCTION FROM THE SUBACCOUNTS OF THE SEPARATE ACCOUNT. Each day a charge
is deducted from the assets of each of the Subaccounts in an amount currently
equal to an effective annual rate of 0.45%. The charge is guaranteed not to
exceed an effective annual rate of 0.90%. This charge is intended to compensate
Prudential for assuming the mortality and expense risks of the insurance
provided through the Group Contract. The mortality risk assumed is that Covered
Persons may live for shorter periods of time than Prudential estimated when it
determined the mortality charge. The expense risk assumed is that expenses
incurred in issuing and administering the insurance will be greater than
Prudential estimated in fixing its administrative charges. Prudential will
realize a profit from this risk charge to the extent it is not needed to provide
benefits and pay expenses under the Certificates. This charge is not assessed on
amounts allocated to the Fixed Account.

TRANSACTION CHARGES. For every transfer after the twelfth in a single
Certificate Year, Prudential will assess a $20 charge. This charge will not
increase in the future. Charges for other transactions are described in this
prospectus in the section dealing with that particular transaction.

DIRECT BILLING CHARGE. Participants who are no longer Eligible Group Members but
who continue coverage on a Portable basis will be assessed a direct billing
charge of $3 per bill (which the Participant may receive quarterly,
semi-annually, or annually, at the Participant's option).

EXPENSES INCURRED BY THE FUNDS. The charges and expenses of the Funds are
indirectly borne by the Participants. Details about management fees and other
underlying fund expenses are provided in THE FUNDS, page 8, and in the
prospectuses for the available Funds and the related statements of additional
information.

CASH SURRENDER VALUE

The Cash Surrender Value of the Certificate is equal to the Participant's
Certificate Fund, reduced by any Certificate Debt and outstanding charges. The
Certificate Fund on any day equals the sum of the amounts in the Subaccounts,
the amount invested in the Fixed Account, and the Loan Account. See LOANS, page
20. The Cash Surrender Value will change daily, reflecting the Net Premiums
paid, withdrawals made, the increases or decreases in the value of the Fund
shares in which the assets of the Subaccounts have been invested, interest
credited on any amounts allocated to the Fixed Account and on the Loan Account,
interest accrued

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<PAGE>

on any loan, and by the daily asset charge for mortality and expense risks
assessed against the variable investment options. The Cash Surrender Value will
also reflect monthly charges. Upon request, Prudential (or Prudential's
designee) will inform a Participant as to the Cash Surrender Value of his or her
Certificate. There is no guaranteed minimum Cash Surrender Value and it is
possible for the Cash Surrender Value of a Certificate to decline to zero.

The tables on pages 6 and 7 of this prospectus illustrate approximately what the
Cash Surrender Values would be for selected Certificates with the specified
premium payments (assuming uniform hypothetical investment results in the
selected Subaccount portfolios).

FULL SURRENDERS

A Participant may surrender his or her Certificate for its Cash Surrender Value
at any time. All insurance will end at that time. Prudential will pay the Cash
Surrender Value calculated as of the end of the Valuation Period during which
Prudential (or Prudential's designee) receives the Participant's request on a
form approved by Prudential, and the proceeds will be paid as described in WHEN
PROCEEDS ARE PAID, page 26. Prudential does not currently impose a charge for a
surrender. Prudential reserves the right to impose such a charge in the future;
that charge will not exceed the lesser of $20 or 2% of the amount received upon
surrender. A surrender may have tax consequences. See TAX TREATMENT OF
CERTIFICATE BENEFITS, page 23.

ELECTION OF PAID-UP INSURANCE

At any time, a Participant may elect to exchange his or her existing Group
Variable Universal Life insurance coverage for fixed paid-up insurance on the
life of the Covered Person with all or part of the Cash Surrender Value. The
minimum amount of Cash Surrender Value that a Participant can transfer in such
an exchange is $1,000.

The paid-up insurance amount cannot be more than can be exchanged using the
Certificate's Cash Surrender Value or more than the Death Benefit under the
Certificate at the time the exchange is made. Once the exchange is made,
Prudential may reduce any future amount of coverage for which the Participant is
eligible under the Group Contract.

An exchange is effective as of the end of the Valuation Period during which
Prudential (or its designee) receives the Participant's request on a form
approved by Prudential. Once an exchange occurs, all coverages provided by the
Certificate will end, including additional insurance benefits, if any.

An exchange may result in the paid-up insurance becoming a Modified Endowment
Contract. See TAX TREATMENT OF CERTIFICATE BENEFITS, page 23.

Any amounts not used in an exchange will be withdrawn from the Certificate Fund
as of the end of the Valuation Period when the exchange was effective, and the
proceeds will be paid as described in WHEN PROCEEDS ARE PAID, page 26. A
withdrawal of a portion of the Cash Surrender Value of a Certificate may have
tax consequences. See TAX TREATMENT OF CERTIFICATE BENEFITS, page 23.

PARTIAL WITHDRAWALS

A Participant may withdraw a portion of the Cash Surrender Value of his or her
Certificate during the lifetime of the Covered Person and while the Certificate
is not in default. When a partial withdrawal is made, an amount equal to the
withdrawal will be taken out of each of the Participant's investment options on
a pro-rata basis unless the Participant selects specific investment options. The
partial withdrawal will be effected as of the end of the Valuation Period during
which Prudential receives the Participant's request on a form approved by
Prudential. Prudential will pay the proceeds as described in WHEN PROCEEDS ARE
PAID, page 26. Prudential reserves the right to deduct from the amount withdrawn
a transaction charge, which, with respect to each partial withdrawal, will not
exceed the lesser of $20 or 2% of the amount withdrawn. A withdrawal of a
portion of the Cash Surrender Value of a Certificate may have tax consequences.
See TAX TREATMENT OF CERTIFICATE BENEFITS, page 23.

The minimum amount of any partial withdrawal is $200. The maximum amount of any
partial withdrawal is the amount that would reduce the Certificate Fund (less
any Certificate Debt and outstanding charges) to an amount equal to the next
month's charges. Any partial withdrawal greater than that amount will not be
permitted because it would cause the Certificate to default. Upon request,
Prudential (or Prudential's designee) will inform a Certificate owner how much
Cash Surrender Value may be withdrawn.

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<PAGE>

An amount withdrawn may not be repaid except as a premium payment subject to
applicable charges.

LOANS

A Participant may borrow up to the Loan Value of the Certificate from
Prudential. The Loan Value of a Certificate at any time is determined by
multiplying the Certificate Fund by 90% (or higher where required by state law)
and then subtracting any existing loan with accrued interest, outstanding
charges, and the amount of the next month's charges. The minimum amount that may
be borrowed at any one time is $200. A loan will not be permitted if Certificate
Debt exceeds the Loan Value. Loan proceeds will be paid as described in WHEN
PROCEEDS ARE PAID, page 26.

Interest charged on any loan will accrue daily at an annual rate determined each
year by Prudential, which generally will be no greater than 1% more than the
Fixed Account crediting rate. Interest payments on any loan are due at the end
of each Certificate Year. If interest is not paid when due, it will be added to
the principal amount of the loan. Prudential will notify a Participant 31 days
before the interest on the loan becomes due.

When a loan is made, an amount equal to the loan will be taken out of each of
the Participant's investment options on a pro-rata basis unless the Participant
selects specific investment options. At the same time, a Loan Account will be
started for the Participant and will be credited with an amount equal to the
loan. Prudential will credit interest to the amount in the Loan Account at an
annual rate determined by Prudential. This crediting rate will generally be
equal to the Fixed Account crediting rate and will be no less than the interest
rate charged on the loan minus 1%.

A Participant may repay a part or all of the loan at any time. Loans may be
repaid by payment or by withdrawing amounts from the Certificate Fund.
Participants should designate whether a payment is intended as a premium payment
or as a loan repayment. If no such designation is made, the payment will be
treated as a loan repayment. If a loan is repaid by using the Certificate Fund,
Prudential will treat such repayment as a partial withdrawal from the
Certificate Fund. A partial withdrawal from the Certificate Fund may have tax
consequences. See TAX TREATMENT OF CERTIFICATE BENEFITS, page 23. A loan
repayment will be applied first against any unpaid loan interest with any
remaining amount used to reduce the principal amount of the loan.

A Participant's Loan Account plus accrued interest ("Certificate Debt") may not
exceed the value of the Certificate Fund. If the Certificate Debt equals or
exceeds this amount the Certificate will go into default. See LAPSE page 20.

If Certificate Debt is still outstanding when the Certificate is surrendered or
allowed to lapse, the borrowed amount may become taxable. In addition, loans
from Modified Endowment Contracts may be treated for tax purposes as
distributions of income. See TAX TREATMENT OF CERTIFICATE BENEFITS, page 23.

Should a Death Benefit become payable while a loan is outstanding, or should the
Certificate be surrendered while a loan is outstanding, any proceeds otherwise
payable will be reduced to reflect the amount of the loan and any accrued
interest.

A loan will have a permanent effect on a Certificate's Cash Surrender Value and
may have a permanent effect on the Death Benefit. This is because the investment
results of the selected investment options will apply only to the amount
remaining in those investment options after the loan amount is transferred to
the Loan Account. The longer the loan is outstanding, the greater the effect is
likely to be. The effect could be favorable or unfavorable. If investment
results are greater than the rate being credited upon the amount of the loan
while the loan is outstanding, Cash Surrender Values will not be as high as they
would have been if no loan had been made.

LAPSE

In general, a Certificate will remain in force so long as the balance in the
Certificate Fund less Certificate Debt and outstanding charges is sufficient to
pay monthly Certificate Fund charges when due. When these monthly charges are
due depends upon whether the Participant generally pays premiums by automatic
payroll deduction. See CHARGES AND EXPENSES, page 17. If the balance in the
Certificate Fund less Certificate Debt and outstanding charges is not sufficient
to pay the monthly charges when due, the Participant's insurance is in default
and will lapse if a grace period expires without a sufficient payment being
made. A Certificate that lapses with Certificate Debt may result in tax
consequences. See TAX TREATMENT OF CERTIFICATE BENEFITS, page 23.

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<PAGE>

Prudential will send a notice to a Participant in default at the last known
address on file with Prudential (or with Prudential's designee) specifying the
amount of premium required to keep the Certificate in force and the date the
payment is due. The grace period expires on the later of 61 days from the date
of default or 30 days from the date notice was mailed. If Prudential (or
Prudential's designee) does not receive the required premium payment within the
grace period, the Participant's insurance will lapse and have no remaining
value.

If the Covered Person dies during the grace period, the Death Benefit will be
reduced by any past due monthly Certificate Fund charges and any Certificate
Debt.

TERMINATION OF THE GROUP CONTRACT

J.P. Morgan may decide to terminate the Group Contract with Prudential. In
addition, Prudential may terminate the Group Contract if the aggregate Face
Amount of all Certificates and/or the number of Certificates issued under the
Group Contract falls below the minimum permissible levels established by
Prudential, or J.P. Morgan fails to timely remit premiums to Prudential. The
party terminating participation in the Group Contract must provide ninety days
written notice to the other party, as well as to all Participants, before
terminating participation in the Group Contract.

Prudential may terminate a Group Contract for any reason effective on the date
of any Contract Anniversary provided it has notified J.P. Morgan at least 31
days in advance.

Termination of participation in the Group Contract means that J.P. Morgan will
no longer remit premiums to Prudential under the Group Contract and that no new
Certificates will be issued under the Group Contract. The effects on
Participants of termination of J.P. Morgan's participation in the Group Contract
are described in OPTIONS ON TERMINATION OF COVERAGE, page 21. The options
available to Participants from Prudential may depend on what other insurance
options are available to them. The Participant should refer to the Group
Contract and Certificate for further details on termination of coverage.

PARTICIPANTS WHO ARE NO LONGER ELIGIBLE GROUP MEMBERS (OR SPOUSES
OF ELIGIBLE GROUP MEMBERS)

If a Participant ceases to be an Eligible Group Member (or the spouse of an
Eligible Group Member), the Participant may elect to continue insurance coverage
on a Portable basis. This Portable option is generally available only to
Participants who have held a Certificate for at least a year or who obtained the
Certificate during the initial enrollment period. Within 61 days after the
Participant is no longer an Eligible Group Member (or the spouse of an Eligible
Group Member), Prudential will notify the Participant that Prudential will begin
mailing periodic premium reminders directly to the Participant, who will remit
premium payments directly to Prudential (or Prudential's designee) or authorize
Prudential to receive payment using electronic funds transfers. The Participant
may elect to receive these premium reminders quarterly, semi-annually, or
annually. The notice will also explain charges and expenses applicable to
Portable Certificates. See CHARGES AND EXPENSES, page 17. These charges and
expenses will be the same as for Eligible Group Members (or the spouse of an
Eligible Group Member) until at least December 31, 2001 (except that Prudential
will charge a $3 fee per periodic premium reminder). Prudential will track the
experience of Participants continuing on a Portable basis separately, and after
that date may change the charges and expenses. Those charges will not exceed the
maximum charges and expenses described in this prospectus.

OPTIONS ON TERMINATION OF COVERAGE

Insurance coverage obtained through the Group Contract will terminate for a
Participant (i) when the Group Contract itself terminates, (ii) on the last day
of the month in which the Participant ceases to be an Eligible Group Member (or
the spouse of an Eligible Group Member) and does not elect to continue on a
Portable basis, or (iii) if a Certificate lapses. See TERMINATION OF THE GROUP
CONTRACT, page 21, PARTICIPANTS WHO ARE NO LONGER ELIGIBLE GROUP MEMBERS, page
21, and LAPSE, page 20.

If the Group Contract were to terminate, the effect on individual Participants
would depend on whether J.P. Morgan replaced the Group Contract with another
life insurance contract that provided for accumulation of cash value. If J.P.
Morgan did enter into such a contract, Certificates would be terminated and the
Cash Surrender Value of each such Certificate generally would be directly
transferred to the new contract unless the Participant elected to receive the
Cash Surrender Value of the Certificate. The new contract might not cover
persons holding Portable Certificates, in which case those persons would have
the options listed below. If J.P. Morgan did not enter into a new life insurance
contract that provided for accumulation of cash value, Participants would also
have the three options listed below.

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<PAGE>

Participants who are no longer Eligible Group Members (or the spouse of an
Eligible Group Member) would have the following three options in addition to, if
eligible, electing to continue insurance coverage on a Portable basis.

CONVERSION. A Participant may elect to convert the Certificate to an individual
life insurance policy without showing evidence of insurability. If a Participant
elects this option, he or she must apply for the individual contract and pay the
first premium within 31 days after the coverage under the Group Contract ends.
The Participant may select any form of individual life insurance (other than
term insurance) that Prudential normally makes available to insureds who are the
same age and requesting the same amount of insurance. Premiums will be based on
the form and amount of insurance elected by the Participant, as well as the
Covered Person's risk class and age.

If the insurance is ending because the Participant is no longer eligible to
participate in the Group Contract, the amount of insurance under the individual
policy cannot be more than the Face Amount of the Certificate under the Group
Contract. If the insurance is ending because the Group Contract is terminating,
the amount of individual insurance may, depending on applicable state law, be
limited to the lesser of (1) $10,000 or (2) the Face Amount of the Certificate
under the Group Contract less the amount of any group insurance for which the
Participant becomes eligible for in the next 45 days.

If a Covered Person dies within 31 days after the insurance ends under the Group
Contract, and the Participant had the right to convert to an individual policy,
a Death Benefit equal to the amount of individual insurance on the Covered
Person the Participant could have purchased upon conversion will be payable by
Prudential.

PAID-UP INSURANCE. The Participant may elect to purchase fixed paid-up insurance
on the Covered Person with the Cash Surrender Value of the Certificate. The
Participant must have at least $1,000 of Cash Surrender Value for this option to
be available. The insurance amount will depend on the Cash Surrender Value on
the date of termination and the age of the Covered Person but cannot exceed the
Death Benefit immediately before the paid-up purchase. The Participant may elect
this option within 61 days of the date on which the Certificate coverage would
end. The election is effective as of the end of the Valuation Period during
which Prudential (or its designee) receives the Participant's request on a form
approved by Prudential. Acquisition of reduced paid-up insurance may result in
that insurance becoming a Modified Endowment Contract. See TAX TREATMENT OF
CERTIFICATE BENEFITS, page 23.

PAYMENT OF CASH SURRENDER VALUE. The Participant may receive the Cash Surrender
Value by surrendering the Certificate and making a proper request on a form
approved by Prudential.

A Participant who does not choose any of the above options within 61 days of the
date on which Certificate coverage would end will be provided with Paid-Up
Insurance, if his or her Certificate has at least $1,000 of Cash Surrender Value
and, if not, will be paid the Cash Surrender Value.

REINSTATEMENT

Except as indicated in the next sentence, a lapsed Certificate may be reinstated
at any time within 3 years after the end of the grace period and before the
Participant reaches the maximum age at which a Certificate may be held. A lapsed
Certificate may not be reinstated if the Group Contract is terminated and the
Participant would not have been permitted to retain the Certificate on a
portable basis. To reinstate coverage, a Participant must submit the following
items to Prudential (or Prudential's designee): (1) a written request for
reinstatement; (2) evidence of insurability satisfactory to Prudential; and (3)
a premium payment (less any applicable charges) that is at least equal to the
monthly Certificate Fund charges for the grace period plus the monthly
Certificate Fund charges for two months. See CHARGES AND EXPENSES, page 17.

The reinstatement is effective on the first Semi-Monthly Deduction Day (or
Monthly Deduction Day, if the Participant does not generally pay premiums by
automatic payroll deduction) following the date Prudential approves the request.
The terms of the original Certificate will apply to the reinstated Certificate.
A reinstated Certificate is subject to a new two year incontestability period
and a new suicide exclusion period. See INCONTESTABILITY and SUICIDE EXCLUSION,
page 26. If the Certificate lapses, the Participant will be required to pay off
any outstanding Certificate Debt, and will not be permitted to continue the loan
under any reinstated Certificate.

No transaction charge is currently imposed in connection with a reinstatement,
although Prudential reserves the right to impose such a transaction charge in
the future.

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<PAGE>

TAX TREATMENT OF CERTIFICATE BENEFITS

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

TREATMENT AS LIFE INSURANCE AND INVESTOR CONTROL. The Certificate will be
treated as "life insurance," as long as it satisfies certain definitional tests
set forth in section 7702 of the Internal Revenue Code (the "Code") and as long
as the underlying investments for the Certificate satisfy diversification
requirements under section 817(h) of the Code. For further detail on
diversification requirements, see the applicable Fund prospectuses.

Prudential believes that it has taken adequate steps under the Code and existing
regulations under it to cause the Certificates to be treated as life insurance
for tax purposes. This means that: (1) except as noted below, the Participant
should not be taxed on any part of the Certificate Fund, including additions
attributable to interest, dividends, or appreciation; and (2) the Death Benefit
should be excludable from the gross income of the beneficiary under section
101(a) of the Code.

Although Prudential believes the Certificate should qualify as "life insurance"
for federal tax purposes, there are uncertainties. Section 7702 of the Code
which defines life insurance for tax purposes gives the Secretary of the
Treasury authority to prescribe regulations to carry out the purposes of the
Section. In this regard, proposed regulations governing mortality charges were
issued in 1991 and proposed regulations under Sections 101, 7702 and 7702A
governing the treatment of life insurance policies that provide accelerated
death benefits were issued in 1992. None of these proposed regulations have yet
been finalized. Additional regulations under Section 7702 may also be
promulgated in the future.

Moreover, IRS regulations issued to date do not provide guidance concerning the
extent to which Participants may direct their investments to the particular
available Subaccounts of a Separate Account without causing the Participants
instead of Prudential to be considered the owners of the underlying assets. Such
guidance will be included in regulations or revenue rulings under Section 817(d)
relating to the definition of a variable contract. The ownership rights under
the Certificate are similar to, but different in certain respects from, those
addressed by the IRS in Rulings in which it was determined that contract owners
were not owners of separate account assets. For example, a Contractholder may
select the investment strategies, Participants have the choice of more Funds,
including Funds with similar broad investment strategies and different
investment managers, and Participants may be able to reallocate amounts between
available Subaccounts more frequently than in such Rulings. While Prudential
believes it will be considered the owner of the Separate Account assets, these
differences could result in the Participant being considered the owner of the
assets.

Prudential intends to comply with final regulations issued under Sections 7702
and 817. Therefore, because of this uncertainty, it reserves the right to make
such changes as it deems necessary to assure that the Group Contract continues
to qualify as variable life insurance for tax purposes. Any such changes will
apply uniformly to affected Participants and will be made only after advance
written notice to the Contractholder.

PRE-DEATH DISTRIBUTIONS. The taxation of pre-death distributions depends on
whether the Certificate is classified as a Modified Endowment Contract. The
following discussion first deals with distributions under Certificates not so
classified, and then with Modified Endowment Contracts.

1. A surrender or lapse of the Certificate may have tax consequences. Under
surrender, the Participant will not be taxed on the Cash Surrender Value
except for the amount, if any, that exceeds the gross premiums paid less
the untaxed portion of any prior withdrawals. The amount of any unpaid
Certificate Debt will, upon surrender or lapse, be added to the Cash
Surrender Value and treated, for this purpose, as if it had been received.
Any loss incurred upon surrender is generally not deductible.

A withdrawal generally is not taxable unless it exceeds total premiums paid
to the date of withdrawal less the untaxed portion of any prior
withdrawals. However, under certain limited circumstances, in the first 15
Certificate Years all or a portion of a withdrawal may be taxable if the
Certificate Fund exceeds the total premiums paid less the untaxed portions
of any prior withdrawals, even if total withdrawals do not exceed total
premiums paid to date.

Extra premiums for additional insurance benefits generally do not count in
computing gross premiums paid, which in turn determines the extent to which
a withdrawal might be taxed.

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Loans received under the Certificate will ordinarily be treated as
indebtedness of the Participant and will not be considered to be
distributions subject to tax. However, if a loan is still outstanding when
the Certificate is surrendered or allowed to lapse, the outstanding
Certificate Debt will be taxable at that time to the extent the Cash
Surrender Value exceeds gross premiums paid less the untaxed portion of any
prior withdrawals.

2. Some of the above rules are changed if the Certificate is classified as a
Modified Endowment Contract under Section 7702A of the Code. It is possible
for the Certificate to be classified as a Modified Endowment Contract under
certain circumstances, including: premiums in excess of the seven pay
premiums allowed under Section 7702A are paid or a decrease in the Death
Benefit or a removal of certain additional insurance benefits. Moreover,
the addition of certain additional insurance benefits (or an increase in
the Death Benefit) after the Certificate Date may have an impact on the
Certificate's status as a Modified Endowment Contract. Participants
contemplating any of these steps should first consult a qualified tax
adviser and their Prudential representative.

If the Certificate is classified as a Modified Endowment Contract, then
pre-death distributions, including loans, assignments and pledges are
includible in income to the extent that the Certificate Fund exceeds the
gross premiums paid for the Certificate increased by the amount of any
loans previously includible in income and reduced by any untaxed amounts
previously received other than the amount of any loans excludible from
income. These rules may also apply to pre-death distributions, including
loans, made during the two year period prior to the Certificate becoming a
Modified Endowment Contract.

In addition, pre-death distributions from such Certificates (including full
surrenders) will be subject to a penalty of 10 percent of the amount
includible in income unless the amount is distributed on or after age
59 1/2, on account of the taxpayer's disability or as a life annuity. It is
presently unclear how the penalty tax provisions apply to contracts owned
by non-natural persons such as trusts.

Under certain circumstances, multiple Modified Endowment Contracts issued
to the same Participant during any calendar year will be treated as a
single contract for purposes of applying the above rules.

TREATMENT AS GROUP TERM LIFE INSURANCE. Section 79 of the Code and the
regulations thereunder provide for the treatment of certain life insurance as
group term life insurance ("GTLI"). In most cases, employee-pay-all coverage
under the Group Contract will not qualify as GTLI or be deemed to be part of an
employer GTLI plan, and the Certificate will be treated the same as any
individually purchased life insurance policy for tax purposes. However,
depending on the structure of the arrangement under which the Group Contract is
held, including other insurance plans offered by or through the employer, a
portion of the coverage under the Group Contract may qualify as group term life
insurance and, in addition, covered employees may be taxable on certain
increases in cash values under an IRS-prescribed formula.

WITHHOLDING. The taxable portion of any amounts received under the Certificate
will be subject to withholding to meet federal income tax obligations, if the
Participant fails to elect that no taxes be withheld. Prudential will provide
the Participant with forms and instructions concerning the right to elect that
no taxes be withheld from the taxable portion of any payment. All recipients may
be subject to penalties under the estimated tax payment rules if withholding and
estimated tax payments are not sufficient. Participants who do not provide a
social security number or other taxpayer identification number will not be
permitted to elect out of withholding. Special withholding rules apply to
payments to non-resident aliens.

OTHER TAX CONSIDERATIONS. Transfer of the Certificate to a new owner or
assignment of the Certificate may have gift, estate and income tax consequences
depending on the circumstances. In the case of a transfer of the Certificate for
valuable consideration, the Death Benefit may be subject to federal income taxes
under Section 101(a)(2) of the Code. In addition, a transfer of the Certificate
to, or the designation of, a beneficiary who is either 37 1/2 years younger than
the Participant or a grandchild of the Participant may have Generation Skipping
Transfer tax consequences under Section 2601 of the Code.

In certain circumstances, deductions for interest paid or accrued on Certificate
Debt or on other loans that are incurred or continued to purchase or carry the
Certificate may be denied under Sections 163 of the Code as personal interest or
under Section 264 of the Code. Participants should consult a qualified tax
adviser regarding the application of these provisions to their circumstances.

The individual situation of each Participant or beneficiary will determine the
federal estate taxes and the state and local estate, inheritance and other taxes
due if the Participant or insured dies.

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The earnings of the Separate Account are taxed as part of the operations of
Prudential. Accordingly, the Separate Account does not intend to qualify as a
regulated investment company under the Code.

ERISA CONSIDERATIONS

DEFINITION OF AN EMPLOYEE BENEFIT PLAN. An "employee benefit plan" is defined
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
to include two broad categories of arrangements that are established by certain
entities (employers or unions) to cover employees - "pension" plans or "welfare"
plans.

A "pension plan" under ERISA includes any program that provides retirement
income to employees, or results in a deferral of income by employees for periods
extending to the termination of covered employment or beyond. For these
purposes, the term "pension plan" includes, but is not limited to, retirement
plans qualified under Section 401(a) of the Code (for example, a "Section 401(k)
plan"), as well as other arrangements which, by their operation, are intended to
provide retirement income or deferrals beyond termination of employment. The
decision to invest plan assets in a Group Contract would be subject to these
rules. Any plan fiduciary which proposes to cause a plan to acquire a Group
Contract should consult with its counsel with respect to the potential
consequences under ERISA and the Code of the plan's acquisition and ownership of
such Contract.

A "welfare plan" under ERISA includes a program established or maintained for
the purposes of providing to employees, among other things, medical, accident,
disability, death, vacation, and unemployment benefits.

Regulations issued by the United States Department of Labor ("Labor") clarify
when specific plans, programs or other arrangements will not be either pension
or welfare plans (and thus not considered "employee benefit plans" for purposes
of ERISA). Among other exceptions, "group" or "group-type insurance programs"
offered by an insurer to employees of an employer will not be a "plan" where:
(i) no contributions are made by the employer for the coverage; (ii)
participation in the program is completely voluntary for employees; (iii) the
"sole" function of the employer with respect to the program is, without
endorsing the arrangement, to permit the insurer to publicize the program, to
collect premiums through payroll deductions and to remit them to the insurer;
and (iv) the employer does not receive any consideration in connection with the
program, other than reasonable compensation (excluding any profit) for
administrative services actually provided in connection with payroll deductions.

Whether or not a particular group insurance arrangement satisfies these
conditions is a question of fact depending on the particular circumstances.
Counsel and other competent advisers should be consulted to determine whether,
under the facts of the particular case, a particular Group Contract might be
treated as an "employee benefit plan" (either a pension or a welfare plan)
subject to the requirements of ERISA.

FIDUCIARY/PROHIBITED TRANSACTION REQUIREMENTS UNDER ERISA. If applicable, ERISA
and Section 4975 of the Code impose certain restrictions on employee benefit
plans subject to ERISA and/or subject to the requirements of Section 4975 of the
Code, and on persons who are (1) "parties in interest" (as defined under ERISA)
or "disqualified persons" (as defined under the Code) (collectively, "parties in
interest") and (2) "fiduciaries" with respect to such plans. These restrictions
may, in particular, prohibit certain transactions in connection with a Group
Contract, absent a statutory or administrative exemption. Counsel and other
competent advisers should be consulted to determine the application of ERISA
under these circumstances.

For example, administrative exemptions issued by Labor under ERISA permit
transactions (including the sale of insurance contracts like the Group Contract)
between insurance agents and employee benefit plans. To be able to rely upon
such exemptions, certain information must be disclosed to the plan fiduciary
approving such purchase on behalf of the plan. The information that must be
disclosed includes: (1) the relationship between the agent and the insurer; (2)
a description of any charges, fees, discounts, penalties or adjustments that may
be imposed in connection with the purchase, holding, exchange or termination of
the Group Contract; and (3) the commissions received by the agent. Information
about any applicable charges, fees, discounts, penalties or adjustments may be
found under CHARGES AND EXPENSES, commencing on page 17, and under PROCEDURES,
page 12. Information about sales representatives and commissions may be found
under SALE OF THE CONTRACT AND SALES COMMISSIONS, on page 28.

Execution of a Group Contract by a Contractholder and an enrollment form by a
Participant will be deemed to be an acknowledgment of receipt of this
information and approval of transactions under the Group Contract.

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<PAGE>

WHEN PROCEEDS ARE PAID

Prudential will generally pay any Death Benefit, Cash Surrender Value, partial
withdrawal or loan proceeds supported by the Separate Account within 7 days
after receipt at the Prudential office specified in the applicable form of all
the documents required for such a payment. Other than the Death Benefit, which
is determined as of the date of death, the amount will be determined as of the
end of the Valuation Period in which the necessary documents are received in
good order. However, Prudential may delay payment of proceeds from the
Subaccount(s) and the variable portion of the Death Benefit due under a
Participant's insurance if the disposal or valuation of the Separate Account's
assets is not reasonably practicable because the New York Stock Exchange is
closed for other than a regular holiday or weekend, trading is restricted by the
SEC, or the SEC declares that an emergency exists.

With respect to the amount of any Cash Surrender Value allocated to the Fixed
Account, and with respect to a Certificate in force as paid-up insurance,
Prudential expects to pay the Cash Surrender Value promptly upon request.
However, Prudential has the right to delay payment of such Cash Surrender Value
for up to six months (or a shorter period if required by applicable law).
Prudential will pay interest at the current Fixed Account rate, under the Group
Contract, if it delays such a payment for more than 30 days (or a shorter period
if required by applicable law).

BENEFICIARY

The Participant has the right to designate and name a beneficiary to receive
Death Benefits under the Certificate. The Participant must designate a
beneficiary on a form approved by Prudential. A Participant may change the
beneficiary at any time without the consent of the present beneficiary in
accordance with the terms of the Group Contract. If there is more than one
beneficiary at the death of the Covered Person, each will receive equal payments
unless otherwise specified by the Participant.

INCONTESTABILITY

After a Participant's Certificate has been in force during a Covered Person's
lifetime for two years or, with respect to any change in the Certificate that
requires Prudential's approval and could increase its liability, after the
change has been in effect during the Covered Person's lifetime for two years
from the effective date of the change, Prudential will not contest its liability
under the Certificate in accordance with its terms.

MISSTATEMENT OF AGE

If a Covered Person's stated age is incorrect in the Certificate, Prudential
will adjust the Death Benefit payable, as required by law, to reflect the
correct age.

SUICIDE EXCLUSION

If a Covered Person, whether sane or insane, dies by suicide within two years
from the effective date of the Certificate, Prudential will pay no more under
the Certificate than the sum of the contributions paid less any Certificate
Debt, outstanding charges, and partial withdrawals.

If a Covered Person, whether sane or insane, dies by suicide within two years
from the effective date of an increase in the Face Amount of insurance that was
requested after issue and required approval, Prudential will pay, with respect
to the amount of the increase, no more than the sum of the monthly charges
attributable to the increase.

ASSIGNMENT

A Participant may assign the insurance coverage and all rights, benefits or
privileges that he or she has under a Certificate. Prudential will be bound by
an assignment of insurance or the rights, benefits or privileges under the
insurance only if: (1) it is in writing; (2) it is signed by the Participant;
and (3) Prudential receives a copy of the assignment at the Prudential office
specified in the Certificate or at the address of Prudential's designee.
Prudential is not responsible for determining the validity or legality of any
assignment. References in this prospectus to rights that a Participant may
exercise shall include exercise of such rights by any person to whom the
Participant has validly assigned such rights. Assignment of a Certificate that
is a Modified Endowment Contract could have adverse federal income tax
consequences. See TAX TREATMENT OF CERTIFICATE BENEFITS, page 23.

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VOTING RIGHTS

As explained previously, all of the assets held in the Subaccounts of the
Separate Account will be invested in shares of the corresponding portfolios of
the Funds. Prudential is the legal owner of those shares and as such has the
right to vote on any matter voted on at any shareholders meetings of the Funds.
However, Prudential will, as required by law, vote the shares of the Funds at
any regular and special shareholders meetings the Funds hold in accordance with
voting instructions received from Participants. A Fund may not hold annual
shareholders meetings when not required to do so under the laws of the state of
its incorporation or the 1940 Act. Fund shares for which no timely instructions
from Participants are received, and any shares attributable to general account
investments of Prudential, will be voted in the same proportion as shares in the
respective portfolios for which instructions are received. Should the applicable
federal securities laws or regulations, or their current interpretation, change
so as to permit Prudential to vote shares of the Funds in its own right, it may
elect to do so.

Generally, a Participant may give voting instructions on matters that would be
changes in fundamental policies and any matter requiring a vote of the
shareholders of the Funds. With respect to approval of the investment advisory
agreement or any change in a portfolio's fundamental investment policy,
Participants participating in such portfolios will vote separately by portfolio
on the matter, pursuant to the requirements of Rule 18f-2 under the 1940 Act.

The number of Fund shares for which instructions may be given by a Participant
is determined by dividing the portion of the value of the Certificate Fund
derived from participation in a Subaccount, by the value of one share in the
corresponding portfolio of the applicable Fund. The number of votes for which
each Participant may give Prudential instructions will be determined as of the
record date chosen by the Board of the applicable Fund. Prudential will furnish
Participants with proper forms and proxies to enable them to give these
instructions. Prudential reserves the right to modify the manner in which the
weight to be given voting instructions is calculated where such a change is
necessary to comply with current federal regulations or interpretations of those
regulations.

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

SUBSTITUTION OF FUND SHARES

Although Prudential believes it to be unlikely, it is possible that in the
judgment of its management, one or more of the available portfolios of the Funds
may become unsuitable for investment by Participants. This may occur because of
investment policy changes, tax law changes or considerations, the unavailability
of shares for investment or at the discretion of Prudential. In that event,
Prudential may seek to substitute the shares of another portfolio or of an
entirely different mutual fund. Before this can be done, the approval of the
SEC, and possibly one or more state insurance departments, will be required.
Prudential will notify J.P. Morgan and Participants of any such substitution.

ACCELERATED DEATH BENEFIT

A Participant may obtain an accelerated death benefit that allows the
Participant to elect to receive an accelerated payment of part of the
Certificate's Death Benefit if the Covered Person is terminally ill with a life
expectancy of 12 months or less. When satisfactory evidence is provided,
Prudential will provide to the Participant the accelerated payment, which may be
received in a lump sum, of the portion of the Death Benefit selected by the
Participant as an accelerated death benefit. The maximum part of the Death
Benefit that may be accelerated in this manner is the lesser of 50% of the full
Death Benefit or $50,000. Prudential may assess an accelerated payment fee of up
to $350 in connection with a Participant's exercise of the accelerated death
benefit.

No benefit will be payable if the Participant is required to elect it in order
to meet the claims of creditors or to obtain a government benefit. Unless
required by law, a Participant who has elected to receive an

27
<PAGE>

accelerated death benefit can no longer request an increase in the Face Amount
of his or her Certificate, and the amount of future premium payments he or she
can make will be limited.

Electing to use the accelerated death benefit could have adverse consequences
for a Participant. The Health Insurance Portability and Accountability Act of
1996 excludes from income, effective January 1, 1997, the accelerated death
benefit if the insured is (1) terminally ill or (2) chronically ill (although
the exclusion in the latter case may be limited). Receipt of an accelerated
death benefit payment may also affect a Participant's eligibility for certain
government benefits or entitlements.

REPORTS

Four times each Certificate Year, Participants will be sent statements that
provide certain information pertinent to their own insurance. These statements
detail values and transactions made and specific insurance data that apply only
to each Participant. On request, a Participant will be sent a current statement
in a form similar to that of the quarterly statement described above, but
Prudential may limit the number of such requests or impose a reasonable
transaction charge not to exceed $20 for an additional report.

J.P. Morgan and each Participant will also be sent an annual and semi-annual
report listing the securities held in each available portfolio of the Funds, as
required by the 1940 Act. Records with respect to the Separate Account are kept
in accordance with the 1940 Act.

If a Participant invests in the Series Fund through more than one variable
insurance contract, then the Participant will receive only one copy of each
annual and semi-annual report issued by the Series Fund. The Participant may
obtain additional copies of any such report, however, upon request by calling
the telephone number listed on the inside cover page of this prospectus.

SALE OF THE CONTRACT AND SALES COMMISSIONS

Prudential Investment Management Services LLC ("PIMS"), a direct wholly-owned
subsidiary of Prudential, acts as the principal underwriter of the Group
Contract and Certificates. PIMS, organized in 1996 under Delaware law, is
registered as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. PIMS's principal
business address is 751 Broad Street, Newark, New Jersey 07102. PIMS also acts
as principal underwriter with respect to the securities of other Prudential
investment companies. The Group Contract and Certificates are sold by registered
representatives of PIMS who are also authorized by state insurance departments
to do so. The Group Contract and Certificates may also be sold through other
broker-dealers authorized by PIMS and applicable law to do so. Registered
representatives of such other broker-dealers may be paid on a different basis
than described below. The maximum commission that will be paid to the
representative upon the purchase of the Contract is 15% of the premium payment
received, and the amount paid to the broker-dealer to cover both the individual
representative's commission and other distribution expenses will not exceed 15%
of the premium payment. The representative may be required to return all of the
first year commission if the Group Contract is not continued through the first
year. Sales representatives who meet certain productivity, profitability, and
persistency standards with regard to the sale of the Group Contract will be
eligible for additional bonus compensation payable by Prudential. PIMS will
generally receive a commission of no more than 15% of the premium payment. The
commission and distribution percentages will depend on factors such as the size
of the group involved and the amount of sales and administrative effort required
in connection with the particular Group Contract and will not exceed in the
aggregate 15% of the premium payment.

The distribution agreement between PIMS and Prudential will terminate
automatically upon its assignment within the meaning of such term in the 1940
Act. The agreement, however, may be transferred by PIMS without the prior
written consent of Prudential under the circumstances set forth in Rule 2a-6
under the 1940 Act. The agreement may be terminated at any time by either party
upon 60 days written notice to the other party.

RATINGS AND ADVERTISEMENTS

Prudential is rated by independent financial rating services, including Moody's,
Standard & Poors, Duff & Phelps and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength of claims-paying ability of
Prudential. They are not intended to rate the investment experience or financial
strength of the Separate Account. Prudential may advertise these ratings from
time to time. Furthermore, Prudential may

28
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include in advertisements comparisons of currently taxable and tax-deferred
investment programs, based on selected tax brackets, or discussions of
alternative investment vehicles and general economic conditions.

STATE REGULATION

Prudential is subject to regulation and supervision by the Department of
Insurance of the State of New Jersey, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business. The
Group Contract is subject to the insurance laws and regulations of the State of
Delaware. Prudential reserves the right to change the Group Contract and
Certificate to comply with applicable state insurance laws and interpretations
thereof.

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

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

EXPERTS

The financial statements included in this prospectus for the years ended
December 31, 1997 and December 31, 1996 have been audited by
PricewaterhouseCoopers LLP, independent accountants, as stated in their report
appearing herein, and are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
PricewaterhouseCoopers LLP's principal business address is 1177 Avenue of the
Americas, New York, New York 10036.

The financial statements included in this prospectus for the year ended December
31, 1995 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. Deloitte & Touche LLP's principal business address is Two Hilton
Court, Parsippany, New Jersey 07054-0319.

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

Actuarial matters included in this prospectus have been examined by Stuart L.
Liebeskind, FSA, MAAA, Vice President and Actuary of Prudential.

LITIGATION

On October 28, 1996, Prudential entered into a Stipulation of Settlement in a
multidistrict proceeding involving allegations of various claims relating to
Prudential's life insurance sales practices. (In re Prudential Insurance Company
of America Sales Practices Litigation, D.N.J., MDL No. 1061, Master Docket No.
95-4704 (AMW)). On March 7, 1997, the United States District Court for the
District of New Jersey approved the Stipulation of Settlement as fair,
reasonable and adequate, and later issued a Final Order and Judgement in the
consolidated class actions before the court, 962 F. Supp. 450 (March 17, 1997,
as amended April 14, 1997). The Court's Final Order and Judgement approving the
class Settlement was appealed to the United States Court of Appeals for the
Third Circuit, which upheld the District Court's approval of the Stipulation of
Settlement on July 23, 1998. As of the date of this prospectus, no further
appeal has been taken.

Pursuant to the Settlement, Prudential agreed to provide and has begun to
implement an Alternative Dispute Resolution ("ADR") process for class members
who believe they were misled concerning the sale or performance of their life
insurance policies. Management now has information which allows for computation
of a reasonable estimate of losses associated with ADR claims. Based on this
information, management estimated the cost of remedying policyholder claims in
the ADR process before taxes to be approximately $2.05 billion. While management
believes these to be reasonable estimates based on information currently
available, the ultimate amount of the total cost of remedied policyholder claims
is dependent on complex and varying factors, including actual claims by eligible
policyholders, the relief options chosen and the dollar value of those options.
There are also additional elements of the ADR process which cannot be fully
evaluated at this time (e.g., claims which may be successfully appealed) which
could increase this estimate.

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<PAGE>

In addition, a number of actions have been filed against Prudential by
policyholders who have excluded themselves from the Settlement; Prudential
anticipates that additional suits may be filed by other policyholders.

Also, on July 9, 1996, a Multi-State Life Insurance Task Force comprised of
insurance regulators from 29 states and the District of Columbia, released a
report on Prudential's activities. As of February 24, 1997, Prudential had
entered into consent orders or agreements with all 50 states and the District of
Columbia to implement a remediation plan, whose terms closely parallel the
Settlement approved in the MDL proceeding, and agreed to a series of payments
allocated to all 50 states and the District of Columbia amounting to a total of
approximately $65 million. These agreements are now being implemented through
Prudential's implementation of the class Settlement.

Accordingly, management is unable to make a meaningful estimate of the amount or
range of loss that could result from an unfavorable outcome of all pending
litigation and regulatory inquiries. It is possible that the results of
operations or the cash flow of Prudential, in particular quarterly or annual
periods, could be materially affected by an ultimate unfavorable outcome of
certain pending litigation and regulatory matters. Management believes, however,
that the ultimate outcome of all pending litigation and regulatory matters
referred to above should not have a material adverse effect on Prudential's
financial position, after consideration of applicable reserves.

YEAR 2000 COMPLIANCE

The benefits and services provided to Contractholders and Participants by
Prudential and PIMS depend on the smooth functioning of their respective
computer systems. The year 2000, however, holds the potential for a significant
disruption in the operation of these systems. Many computer programs cannot
distinguish the year 2000 from the year 1900 because of the way in which dates
are encoded. Left uncorrected, the year "00" could cause systems to perform date
comparisons and calculations incorrectly that in turn could compromise the
integrity of business records and lead to serious interruption of business
processes.

Prudential, PIMS's ultimate corporate parent, identified this issue as a
critical priority in 1995 and has established quality assurance procedures
including a certification process to monitor and evaluate enterprise-wide
conversion and upgrading of systems for "Year 2000" compliance. Prudential has
also initiated an analysis of potential exposure that could result from the
failure of major service providers such as suppliers, custodians and brokers, to
achieve Year 2000 compliance. Prudential expects to complete its adaptation,
testing and certification of software for Year 2000 compliance by December 31,
1998. During 1999, Prudential plans to conduct additional internal testing, to
participate in securities industry-wide test efforts and to complete major
service provider analysis and contingency planning.

The expenses of Prudential's Year 2000 compliance are allocated across its
various businesses, including those businesses not engaged in providing services
to Contractholders and Participants. Accordingly, while the expense is
substantial in the aggregate, it is not expected to have a material impact on
Prudential's abilities to meet its contractual commitments to Contractholders
and Participants.

Prudential believes that it is well positioned to achieve the necessary
modifications and mitigate Year 2000 risks. However, if such efforts are not
completed on a timely basis, the Year 2000 issue could have a material adverse
impact on Prudential's operations, those of its subsidiary and affiliate
companies and/or the Separate Account. Moreover, there can be no assurance that
the measures taken by Prudential's external service providers will be sufficient
to avoid any material adverse impact on Prudential's operations or those of its
subsidiary and affiliate companies.

ADDITIONAL INFORMATION

A registration statement has been filed with the SEC under the Securities Act of
1933, relating to the offering described in this prospectus. This prospectus
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 principal
office in Washington, D.C., upon payment of a prescribed fee.

Further information may also be obtained from Prudential's office. The address
and telephone number are set forth on the inside cover page (page i) of this
prospectus.

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DEFINITIONS OF SPECIAL TERMS
USED IN THIS PROSPECTUS

ANNUAL BASE SALARY -- An Eligible Group Member's basic annual rate of pay
including before-tax contributions for Flex Comp benefits and 401K
contributions. An Eligible Group Member's Annual Base Salary does not include
overtime, profit sharing awards, bonuses, long term disability benefits, or any
other form of extra compensation.

BASIC EMPLOYEE GROUP TERM LIFE INSURANCE -- Term life insurance automatically
purchased by J.P. Morgan & Co. Incorporated for each eligible employee. The
benefits available under the Group Variable Universal Life Insurance Contract
described in this prospectus are in addition to any benefits available under
Basic Employee Group Term Life Insurance coverage.

ATTAINED AGE -- A person's age as of the first day of the month following the
person's birthday.

CASH SURRENDER VALUE -- The amount payable to the Participant upon surrender of
the Certificate. The Cash Surrender Value is equal to the Participant's
Certificate Fund on the date of surrender, less any Certificate Debt,
outstanding charges, and any applicable transactional charge.

CERTIFICATE -- A document issued to a Participant under the Group Contract,
setting forth or summarizing the Participant's rights and benefits.

CERTIFICATE ANNIVERSARY -- The same date each year as the Certificate Date.

CERTIFICATE DATE -- The effective date of coverage under a Certificate.

CERTIFICATE DEBT -- The principal amount of any outstanding loans to the
Participant under his or her Certificate plus any interest accrued thereon.

CERTIFICATE FUND -- The total amount credited to a Participant under his or her
Certificate. On any date it is equal to the sum of the amounts under that
Certificate allocated to: (1) the Subaccounts, (2) the Fixed Account, and (3)
the Loan Account.

CERTIFICATE YEAR -- The year from the Certificate Date to the first Certificate
Anniversary or from one Certificate Anniversary to the next.

CONTRACT ANNIVERSARY -- January 1 of each year.

CONTRACT DATE -- January 1, 1999, the date as of which the Group Contract is
issued.

CONTRACTHOLDER -- J.P. Morgan & Co. Incorporated.

COVERED PERSON -- The person whose life is insured under the Group Contract. The
Covered Person is generally the same as the Participant.

DEATH BENEFIT -- The amount payable upon the death of the Covered Person (before
the deduction of any Certificate Debt or any outstanding charges).

ELIGIBLE GROUP MEMBERS -- All full-time or regular part-time employees of J.P.
Morgan, its subsidiaries, and its affiliated companies (on U.S. payroll)
scheduled to work 20 or more hours weekly. Subsidiaries and affiliated companies
include all companies that J.P. Morgan has requested be included in the Group
Contract, provided that Prudential has granted the request. An Eligible Group
Member and his or her spouse may each separately apply for insurance coverage
under the Group Contract for himself or herself.

FACE AMOUNT -- The amount of life insurance in a Participant's Certificate. The
Face Amount will be the minimum Death Benefit as long as the Participant's
Certificate remains in force.

FIXED ACCOUNT -- An investment option under which Prudential guarantees that
interest will be added to the amount deposited at a rate declared periodically
in advance of the effective date of the new rate.

FUNDS -- The Prudential Series Fund, J.P. Morgan Series Trust II, and American
Century Variable Portfolios, Inc. portfolios in which the Separate Account
invests.

GROUP CONTRACT -- The Group Variable Universal Life Insurance Contract issued to
J.P. Morgan & Co. Incorporated.

GUIDELINE ANNUAL PREMIUM -- A level annual premium that would be payable
throughout the duration of a Certificate to fund the future benefits if the
Certificate were a fixed premium contract, based on certain assumptions set
forth in a rule of the SEC. Upon request, Prudential will advise a Participant
of the guideline annual premium under the Certificate.

ISSUE AGE -- The Covered Person's Attained Age on the date that the insurance on
that Covered Person goes into effect.

LOAN ACCOUNT -- An account within Prudential's general account to which is
transferred from the Separate Account and/or the Fixed Account an amount equal
to the amount of any loan.

LOAN VALUE -- The amount that a Participant may borrow at any given time under
his or her Certificate. The Loan Value at any time is determined by

31
<PAGE>

multiplying the Certificate Fund by 90% (or higher where required by state law)
and then subtracting any existing loan with accrued interest, outstanding
charges, and the amount of the next month's charges.

MONTHLY DEDUCTION DAY -- For Participants who do not pay premiums by automatic
payroll deduction, the first Business Day of the month. For these Participants,
Prudential will deduct the full monthly Certificate Fund charges on this Monthly
Deduction Day. Participants who are Eligible Group Members (or their spouses)
and who generally pay premiums by automatic payroll deduction instead have their
monthly Certificate Fund charges deducted on the two Semi-Monthly Deduction
Days.

NET PREMIUM -- A Participant's premium payment minus any charges for taxes
attributable to premiums and any processing fee. Net Premiums are the amounts
available for allocation to the Separate Account and/or the Fixed Account.

PARTICIPANT -- An Eligible Group Member or spouse who obtains insurance under
the Group Contract on himself or herself and is eligible to exercise the rights
described in the Certificate. The Participant is generally the same as the
Covered Person. However, references to rights that a Participant may exercise
under a Certificate shall include exercise of such rights by any person to whom
the Participant has validly assigned such rights.

PORTABLE -- A status that may occur when a Participant is no longer an Eligible
Group Member or spouse of an Eligible Group Member under the Group Contract but
continues to hold the Certificate. Cost of insurance rates and charges may
increase under a Portable
Certificate.

SEMI-MONTHLY DEDUCTION DAY -- For Participants who are Eligible Group Members
(or their spouses) and who generally pay premiums by automatic payroll
deduction, the two days each month that Prudential deducts monthly charges from
the Participant's Certificate Fund. The Semi-Monthly Deduction Days will
coincide with the two days that Prudential credits automatic payroll deduction
premium payments it receives from J.P. Morgan, which Prudential anticipates will
occur around the middle and end of each month. Participants will have half of
the monthly charges deducted on the first Semi-Monthly Deduction Day and the
remaining half deducted on the second Semi-Monthly Deduction Day. Participants
who do not generally pay premiums by automatic payroll deduction have a single
Monthly Deduction Day when Prudential will deduct the full monthly Certificate
Fund charges.

SEPARATE ACCOUNT -- Prudential Variable Contract Account GI--2, a separate
investment account registered as a unit investment trust under the Investment
Company Act of 1940 and established by Prudential to receive and invest the Net
Premiums paid under the Certificates.

SERIES FUND -- The Prudential Series Fund, Inc., a mutual fund with separate
portfolios, five of which may be used as an underlying investment for the Group
Contract.

SUBACCOUNT -- A division of the Separate Account, the assets of which are
invested in the shares of the corresponding Fund.

VALUATION DATE -- Each day on which the value of the amount invested in a
Subaccount is determined, which is generally each day that the New York Stock
Exchange is open for trading.

VALUATION PERIOD -- The period of time from one determination of the value of
the amount invested in a Subaccount to the next. Such determinations are made as
of the end of each Valuation Period, which occurs at 4:15 p.m. Eastern time on
each Valuation Date.

32
<PAGE>

DIRECTORS AND OFFICERS OF PRUDENTIAL

DIRECTORS OF PRUDENTIAL

FRANKLIN E. AGNEW - Director since 1994 (current term expires April, 2000).
Member, Committee on Dividends; Member, Finance Committee; Member Corporate
Governance Committee. Business consultant since 1987. Senior Vice President,
H.J. Heinz from 1971 to 1986. Mr. Agnew is also a director of Bausch & Lomb,
Inc. John Wiley & Sons, Inc. and Erie Plastics Corporation. Age 63. Address: 600
Grant Street, Suite 660, Pittsburgh, PA 15219.

FREDERICK K. BECKER - Director since 1994 (current term expires April, 1999).
Member, Auditing Committee, Member, Committee on Business Ethics; Member,
Corporate Governance Committee. President, Wilentz Goldman and Spitzer, P.A.
(law firm) since 1989, with firm since 1960. Age 62. Address: 90 Woodbridge
Center Drive, Woodbridge, NJ 07095.

GILBERT F. CASELLAS - Director since 1998 (current term expires April, 2002).
Partner, McConnell Valdes, LLP since 1998. Chairman, U.S. Equal Employment
Opportunity Commission from 1994 to 1998. General Counsel, Department of Air
Force from 1993 to 1994. Mr. Casellas is also a director of the American
Arbitration Association and the Puerto Rican Legal Defense & Education Fund. Age
46. Address: 1717 Pennsylvania Avenue, NW, Suite 625, Washington, DC 20006.

JAMES G. CULLEN - Director since 1994 (current term expires April, 2001).
Member, Compensation Committee; Member, Committee on Business Ethics. President
& Chief Executive Officer, Telecom Group, Bell Atlantic Corporation, since 1997.
Vice Chairman, Bell Atlantic Corporation from 1995 to 1997. President, Bell
Atlantic Corporation from 1993 to 1995. Mr. Cullen is also a director of Bell
Atlantic Corporation and Johnson & Johnson. Age 55. Address: 1310 North Court
House Road, 11th Floor, Alexandria, VA 22201.

CAROLYNE K. DAVIS - Director since 1989 (current term expires April, 2001).
Member, Finance Committee; Member Committee on Business Ethics; Member,
Compensation Committee. Independent Health Care Advisor. National and
International Health Care Advisor, Ernst & Young, LLP from 1985 to 1997. Dr.
Davis is also a director of Beckman Instruments, Inc., Merck & Co., Inc.,
Science Applications International Corporation, Minimed Incorporated, and
Beverley Enterprises. Age 65. Address: 751 Broad Street, 23rd Floor, Newark, NJ
07102.

ROGER A. ENRICO - Director since 1994 (current term expires April, 2002).
Member, Committees on Nominations & Corporate Governance; Member, Compensation
Committee. Chairman and Chief Executive Officer, PepsiCo, Inc. since 1996.
Originally with PepsiCo, Inc. since 1971. Mr. Enrico is also a director of A.M.
Belo Corporation and Dayton Hudson Corporation. Age 53. Address: 700 Anderson
Hill Road, Purchase, NY 10577.

ALLAN D. GILMOUR - Director since 1995 (current term expires April, 1999).
Member, Finance Committee; Member, Committee on Dividends. Retired since 1995.
Vice Chairman, Ford Motor Company, from 1993 to 1995. Mr. Gilmour originally
joined Ford in 1960. Mr. Gilmour is also a director of A.P. Automotive Systems,
Inc., Whirlpool Corporation, USWest, Inc., The Dow Chemical Company and DTE
Energy Company. Age 63. Address: 751 Broad Street, 23rd Floor, Newark, NJ 07102.

WILLIAM H. GRAY, III - Director since 1991 (current term expires April, 2000).
Member, Executive Committee; Member, Finance Committee; Chairman, Committees on
Nominations & Corporate Governance. President and Chief Executive Officer, The
College Fund/UNCF since 1991. Mr. Gray served in Congress from 1979 to 1991. Mr.
Gray is also a director of Chase Manhattan Corporation, Municipal Bond Investors
Assurance Corporation, Rockwell International Corporation, Union Pacific
Corporation, Warner-Lambert Company, Westinghouse Electric Corporation, and
Electronic Data Systems. Age 56. Address: 8260 Willow Oaks Corp. Drive, Fairfax,
VA 22031-4511.

JON F. HANSON - Director since 1991 (current term expires April, 2003). Member,
Finance Committee; Member, Committee on Dividends. Chairman, Hampshire
Management Company since 1976. Mr. Hanson is also a director of United Water
Resources, Orange & Rockland Utilities, Inc., Consolidated Delivery and
Logistics, and Fleet Trust and Investments Services Company, N.A. Age 61.
Address: 235 Moore Street, Suite 200, Hackensack, NJ 07601.

GLEN H. HINER, JR. - Director since 1997. (current term expires April, 2001).
Member, Compensation Committee. Chairman and Chief Executive Officer, Owens
Corning since 1991. Senior Vice President and

33
<PAGE>

Group Executive, Plastics Group, General Electric Company from 1983 to 1991. Mr.
Hiner is also a director of Dana Corporation. Age 64. Address: One Owens Corning
Parkway, Toledo, OH 43659.

CONSTANCE J. HORNER - Director since 1994 (current term expires April, 2002).
Member, Auditing Committee; Member, Committees on Nominations & Corporate
Governance. Guest Scholar, The Brookings Institution since 1993. Ms. Horner is
also a director of Foster Wheeler Corporation, Ingersoll-Rand Company, and
Pfizer, Inc. Age 55. Address: 1775 Massachusetts Ave., N.W. Washington, D.C.
20036-2188.

GAYNOR N. KELLEY - Director since 1997 (current term expires April, 2001).
Member, Auditing Committee. Retired since 1996. Former Chairman and Chief
Executive Officer, The Perkins Elmer Corporation from 1990 to 1996. Mr. Kelley
is also a director of Hercules Incorporated, and Alliant Techsystems. Age 66.
Address: 751 Broad Street, 23rd Floor, Newark, NJ 07102-3777.

BURTON G. MALKIEL - Director since 1978 (current term expires April, 2002).
Chairman, Finance Committee; Member, Executive Committee; Member, Committee on
Dividends. Professor of Economics, Princeton University, since 1988. Dr. Malkiel
is also a director of Banco Bilbao Vizcaya, Baker Fentress & Company, The
Jeffrey Company, The Southern New England Telecommunications Company, and
Vanguard Group, Inc. Age 65. Address: Princeton University, 110 Fisher Hall,
Prospect Avenue, Princeton, NJ 08544-1021.

ARTHUR F. RYAN - Chairman of the Board, President and Chief Executive Officer of
Prudential since 1994. President and Chief Operating Officer, Chase Manhattan
Corp. from 1990 to 1994, with Chase since 1972. Age 55. Address: 751 Broad
Street, Newark, NJ 07102.

IDA F.S. SCHMERTZ - Director since 1997 (current term expires April, 2004).
Member, Finance Committee. Principal, Investment Strategies International since
1994. Age 63. Address: 751 Broad Street, 23rd Floor, Newark, NJ 07102.

CHARLES R. SITTER - Director since 1995 (current term expires April, 1999).
Member, Finance Committee; Member, Committee on Dividends. Retired since 1996.
President, Exxon Corporation from 1993 to 1996. Mr. Sitter began his career with
Exxon in 1957. Age 67. Address: 5959 Las Colinas Boulevard, Irving, TX
75039-2298.

DONALD L. STAHELI - Director since 1995 (current term expires April, 1999).
Member, Compensation Committee; Member, Auditing Committee. Retired since 1997.
Chairman and Chief Executive Officer, Continental Grain Company from 1994 to
1997. President and Chief Executive Officer, Continental Grain Company from 1988
to 1994. Mr. Staheli is also director of Bankers Trust Company, Bankers Trust
New York Corporation, and Fresenius AG-Conti Financial Corporation. Age 66.
Address: 39 Locust Street, Suite 204, New Canaan, CT 06840.

RICHARD M. THOMSON - Director since 1976 (current term expires April, 2000).
Chairman, Executive Committee; Chairman, Compensation Committee; Member,
Committee on Nominations & Corporate Governance. Chairman of the Board, The
Toronto-Dominion Bank since 1997. Chairman and Chief Executive Officer from 1978
to 1997. Mr. Thomson is also a director of CGC, Inc., INCO, Limited, S.C.
Johnson & Son, Inc., The Thomson Corporation, and Canadian Occidental Petroleum,
Ltd. Age 64. Address: P.O. Box 1, Toronto-Dominion Centre, Toronto, Ontario, M5K
1A2, Canada.

JAMES A. UNRUH - Director since 1996 (current term expires April, 2000). Member,
Compensation Committee. Retired since 1997. Chairman and Chief Executive
Officer, Unisys Corporation, from 1990 to 1997. Mr. Unruh is also a director of
Ameritech Corporation. Age 55. Address: Two Bala Plaza, Suite 300, Bala Cynwyd,
PA 19004.

P. ROY VAGELOS, M.D. - Director since 1989 (current term expires April, 2001).
Chairman, Auditing Committee; Member, Executive Committee; Member, Committees on
Nominations & Corporate Governance. Chairman, Regeneron Pharmaceuticals since
1995. Chairman and Chief Executive Officer, Merck & Co., Inc. from 1986 to 1994.
Dr. Vagelos is also a director of The Estee Lauder Companies, Inc., PepsiCo.,
Inc., and Regeneron Pharmaceuticals, Inc. Age 68. Address: One Crossroads Drive,
Building A, 3rd Floor, Bedminster, NJ 07921.

STANLEY C. VAN NESS - Director since 1990 (current term expires April, 2002).
Chairman, Committee on Business Ethics; Member, Executive Committee; Member,
Auditing Committee. Counselor at Law, Picco Herbert Kennedy (law firm) from
1990. Mr. Van Ness is also a director of Jersey Central Power & Light Company.
Age 63. Address: 22 Chambers Street, Princeton, NJ 08542.

34
<PAGE>

PAUL A. VOLCKER - Director since 1988 (current term expires April, 2000).
Chairman, Committee on Dividends; Member, Executive Committee; Member, Committee
on Nominations & Corporate Governance. Consultant since 1996. Chairman, James D.
Wolfensohn, Inc. from 1988 to 1996. Chief Executive Officer, James D.
Wolfensohn, Inc. from 1995 to 1996. Mr. Volcker is also a public member of the
Board of Governors of the American Stock Exchange, a member of the Board of
Overseers of TIAA-CREF, and a director of Nestle, S.A., UAL Corporation, and
Bankers Trust New York Corporation. Age 70, Address: 610 Fifth Avenue, Suite
420, New York, NY 10020.

JOSEPH H. WILLIAMS - Director since 1994 (current term expires April, 2002).
Member, Committee on Dividends; Member, Auditing Committee. Director, The
Williams Companies since 1971. Chairman & Chief Executive Officer, The Williams
Companies from 1979 to 1993. Mr. Williams is also a director of Flint
Industries, The Orvis Company, and MTC Investors, LLC. Age 64. Address: One
Williams Center, Tulsa, OK 74172.

PRINCIPAL OFFICERS OF PRUDENTIAL

ARTHUR F. RYAN - Chairman, President and Chief Executive Officer since 1994;
prior to 1994, President and Chief Operating Officer, Chase Manhattan
Corporation, New York, NY. Age 55.

E. MICHAEL CAULFIELD - Chief Executive Officer, Prudential Investments since
1996; Chief Executive Officer, Money Management Group from 1995 to 1996; prior
to 1995, President, Prudential Preferred Financial Services.
Age 51.

MICHELE S. DARLING - Executive Vice President Human Resources since 1997; prior
to 1997, Executive Vice President, Canadian Imperial Bank of Commerce, Toronto,
Canada. Age 44.

ROBERT C. GOLDEN - Executive Vice President Corporate Operations and Systems
since 1997; prior to 1997, Executive Vice President, Prudential Securities, New
York, NY. Age 51.

MARK B. GRIER - Executive Vice President, Financial Management since 1997; Chief
Financial Officer from 1995 to 1997; prior to 1995, Executive Vice President,
Chase Manhattan Corporation, New York, NY. Age 44.

RODGER A. LAWSON - Executive Vice President, Marketing and Planning since 1996;
President and CEO, Van Eck Global, New York, NY, from 1994 to 1996; prior to
1994, President and CEO, Global Private Banking, Bankers Trust Company, New
York, NY. Age 50.

KIYOFUMI SAKAGUCHI - President, International Insurance Group since 1995; prior
to 1995, Chairman and CEO, The Prudential Life Insurance Co., Ltd., Japan. Age
55.

JOHN V. SCICUTELLA - Chief Executive Officer, Individual Insurance Group since
1997; Executive Vice President Operations and Systems from 1995 to 1997; prior
to 1995, Executive Vice President, Chase Manhattan Corporation. Age 48.

JOHN R. STRANGFELD - Chief Executive Officer, Private Asset Management Group
(PAMG) since 1998; President, PAMG, from 1996 to 1998; prior to 1996, Senior
Managing Director. Age 44.

R. BROCK ARMSTRONG - Senior Vice President, Individual Insurance Development
since 1997; prior to 1997, Executive Vice President, London Life Insurance
Company, London, Canada. Age 50.

JAMES J. AVERY, JR. - Senior Vice President & Chief Actuary since 1997;
President Prudential Select from 1995 to 1997; prior to 1995, Chief Financial
Officer, Prudential Select. Age 46.

MARTIN A. BERKOWITZ - Senior Vice President and Comptroller since 1995; prior to
1995, Senior Vice President and CFO, Prudential Investment Corporation. Age 48.

WILLIAM M. BETHKE - Chief Investment Officer since 1997; prior to 1997, Senior
Vice President. Age 50.

RICHARD J. CARBONE - Senior Vice President and Chief Financial Officer since
1997. Controller, Salomon Brothers, New York, NY, from 1995 to 1997; prior to
1995, Controller, Bankers Trust, New York, NY. Age 50.

LEO J. CORBETT - Senior Vice President, Individual Insurance Marketing since
1997; prior to 1997, Managing Director, Lehman Brothers, New York, NY. Age 49.

THOMAS W. CRAWFORD - President and Chief Executive Officer, Prudential Property
and Casualty Company since 1996; prior to 1996, President and Chief Executive
Officer, Southern Heritage Insurance Company, Tucker, GA. Age 55.

35
<PAGE>

MARK R. FETTING - President, Prudential Retirement Services since 1996; prior to
1996, President, Prudential Defined Contribution Services. Age 43.

WILLIAM D. FRIEL - Senior Vice President and Chief Information Officer since
1993. Age 59.

JONATHAN M. GREENE - President, Investment Management, Prudential Investments
since 1996; prior to 1996, Vice President, T. Rowe Price, Baltimore, MD. Age 54.

JEAN D. HAMILTON - President, Diversified Group since 1995; prior to 1995,
President, Prudential Capital Group. Age 51.

RONALD P. JOELSON - Senior Vice President, Guaranteed Products since 1997;
President, Prudential Investments Guaranteed Products from 1996 to 1998; prior
to 1996, Managing Director, Enterprise Planning Unit. Age 40.

IRA J. KLEINMAN - Executive Vice President, International Insurance Group, since
1997; prior to 1997, Senior Vice President. Age 51.

NEIL A. MCGUINNESS - Senior Vice President, Marketing, Prudential Investments,
since 1996; prior to 1996, Managing Director, Putnam Investments, Boston, MA.
Age 51.

PRISCILLA A. MYERS - Senior Vice President, Audit, Compliance and Investigation
since 1995. Vice President and Auditor from 1989 to 1995. Age 48.

RICHARD O. PAINTER - President, Prudential Insurance & Financial Services since
1995; prior to 1995, Senior Vice President, New York Life, New York, NY. Age 50.

I. EDWARD PRICE - Senior Vice President and Actuary since 1995; prior to 1995,
Chief Executive Officer, Prudential International Insurance. Age 55.

BRIAN M. STORMS - President, Mutual Funds and Annuities, Prudential Investments
since 1996; prior to 1996, Managing Director, Fidelity Investments, Boston. Age
43.

ROBERT J. SULLIVAN - Senior Vice President, Sales, Prudential Investments since
1997; prior to 1997, Managing Director, Fidelity Investments, Boston. Age 59.

SUSAN J. BLOUNT - Vice President and Secretary since 1995; prior to 1995,
Assistant General Counsel. Age 40.

C. EDWARD CHAPLIN - Vice President and Treasurer since 1995; prior to 1995,
Managing Director and Assistant Treasurer. Age 41.

Prudential officers are elected annually.

36
<PAGE>

FINANCIAL STATEMENTS

The consolidated financial statements of Prudential and subsidiaries included
herein should be distinguished from financial statements of the Separate
Account, and should be considered only as bearing upon the ability of Prudential
to meet its obligations under the Certificates.

Financial statements of the Separate Account are not included in this Prospectus
because the Separate Account had not yet commenced operations as of December 31,
1997.

37
<PAGE>

PRUDENTIAL
COMPANY FINANCIALS MODULE

REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------

March 5, 1998

To the Board of Directors and Policyholders of
The Prudential Insurance Company of America

In our opinion, the accompanying consolidated statements of financial position
and the related consolidated statements of operations, of changes in equity and
of cash flows present fairly, in all material respects, the financial position
of The Prudential Insurance Company of America and its subsidiaries at December
31, 1997 and 1996, and the results of their operations and their cash flows for
the years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

Price Waterhouse LLP

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
The Prudential Insurance Company of America
Newark, New Jersey

We have audited the accompanying consolidated statements of operations, changes
in equity, and cash flows of The Prudential Insurance Company of America and
subsidiaries for the year ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated statements of operations, changes in equity,
and cash flows present fairly, in all material respects, the results of
operations and cash flows of The Prudential Insurance Company of America and
subsidiaries for the year ended December 31, 1995 in conformity with generally
accepted accounting principles.

Deloitte & Touche LLP
June 4, 1997

<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 1997 AND 1996 (IN MILLIONS)

1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Fixed maturities:
Available for sale, at fair value (amortized cost, 1997: $71,496; 1996: $64,545) .......... $ 75,270 $ 66,553
Held to maturity, at amortized cost (fair value, 1997: $19,894; 1996: $21,362) ............ 18,700 20,403
Trading account assets, at fair value........................................................ 6,044 4,219
Equity securities, available for sale, at fair value (cost, 1997: $2,376; 1996: $2,103) ..... 2,810 2,622
Mortgage loans on real estate ............................................................... 16,004 17,097
Investment real estate ...................................................................... 1,519 2,586
Policy loans ................................................................................ 6,827 6,692
Securities purchased under agreements to resell ............................................. 8,661 5,347
Cash collateral for borrowed securities ..................................................... 5,047 2,416
Short-term investments ...................................................................... 12,106 9,294
Other long-term investments ................................................................. 3,360 2,995
----------- -----------
Total investments ......................................................................... 156,348 140,224

Cash ........................................................................................ 3,636 2,091
Deferred policy acquisition costs ........................................................... 5,994 6,291
Accrued investment income ................................................................... 1,909 1,828
Receivables from broker-dealer clients ...................................................... 6,273 5,281
Other assets ................................................................................ 11,276 9,990
Separate Account assets ..................................................................... 74,046 63,358
----------- -----------
TOTAL ASSETS .................................................................................. $ 259,482 $ 229,063
=========== ===========

LIABILITIES AND EQUITY

LIABILITIES
Future policy benefits ...................................................................... $ 65,581 $ 63,955
Policyholders' account balances ............................................................. 32,941 36,009
Other policyholders' liabilities ............................................................ 6,659 6,043
Policyholders' dividends .................................................................... 1,269 714
Securities sold under agreements to repurchase .............................................. 12,347 7,503
Cash collateral for loaned securities ....................................................... 14,117 8,449
Short-term debt ............................................................................. 6,774 6,562
Long-term debt .............................................................................. 4,273 3,760
Income taxes payable ........................................................................ 500 1,544
Payables to broker-dealer clients ........................................................... 3,338 3,018
Securities sold but not yet purchased ....................................................... 3,533 1,900
Other liabilities ........................................................................... 14,774 8,238
Separate Account liabilities ................................................................ 73,658 62,845
----------- -----------
TOTAL LIABILITIES ......................................................................... 239,764 210,540
=========== ===========

COMMITMENTS AND CONTINGENCIES (SEE NOTES 12, 13 AND 14)

EQUITY
Retained earnings ........................................................................... 18,051 17,443
Net unrealized investment gains ............................................................. 1,752 1,136
Foreign currency translation adjustments .................................................... (85) (56)
----------- -----------
TOTAL EQUITY .............................................................................. 19,718 18,523
----------- -----------
TOTAL LIABILITIES AND EQUITY .................................................................. $ 259,482 $ 229,063
=========== ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN MILLIONS)

1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
REVENUES
Premiums .................................................................... $ 18,534 $ 18,962 $ 19,783
Policy charges and fee income ............................................... 1,828 1,912 1,824
Net investment income ....................................................... 9,863 9,742 10,178
Realized investment gains, net .............................................. 2,187 1,138 1,503
Commissions and other income ................................................ 4,661 4,521 3,952
------------ ----------- -----------
Total revenues ............................................................ 37,073 36,275 37,240
------------ ----------- -----------

BENEFITS AND EXPENSES
Policyholders' benefits ..................................................... 18,208 19,306 19,470
Interest credited to policyholders' account balances ........................ 2,043 2,251 2,739
Dividends to policyholders .................................................. 2,429 2,339 2,317
General and administrative expenses ......................................... 11,926 10,875 10,345
Sales practice remediation costs ............................................ 1,640 410 --
------------ ----------- -----------
Total benefits and expenses ............................................... 36,246 35,181 34,871
------------ ----------- -----------

INCOME FROM OPERATIONS BEFORE INCOME TAXES .................................... 827 1,094 2,369
------------ ----------- -----------
Income taxes
Current ................................................................... (46) 406 1,293
Deferred .................................................................. 263 (390) (167)
------------ ----------- -----------
217 16 1,126
------------ ----------- -----------

NET INCOME .................................................................... $ 610 $ 1,078 $ 1,243
============ =========== ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN MILLIONS)

FOREIGN NET
CURRENCY UNREALIZED
RETAINED TRANSLATION INVESTMENT TOTAL
EARNINGS ADJUSTMENTS GAINS EQUITY
--------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 ........................ $ 15,126 $ (42) $ 16 $ 15,100
Net income .................................... 1,243 -- -- 1,243
Change in foreign currency translation
adjustments ................................. -- 18 -- 18
Change in net unrealized investment gains ..... -- -- 2,381 2,381
--------- --------- --------- ---------

BALANCE, DECEMBER 31, 1995 ...................... 16,369 (24) 2,397 18,742
Net income .................................... 1,078 -- -- 1,078
Change in foreign currency translation
adjustments ................................. -- (32) -- (32)
Change in net unrealized investment gains ..... -- -- (1,261) (1,261)
Additional pension liability adjustment ....... (4) -- -- (4)
--------- --------- --------- ---------

BALANCE, DECEMBER 31, 1996 ...................... 17,443 (56) 1,136 18,523
Net income .................................... 610 -- -- 610
Change in foreign currency translation
adjustments ................................. -- (29) -- (29)
Change in net unrealized investment gains ..... -- -- 616 616
Additional pension liability adjustment ....... (2) -- -- (2)
--------- --------- --------- ---------
BALANCE, DECEMBER 31, 1997 ...................... $ 18,051 $ (85) $ 1,752 $ 19,718
========= ========= ========= =========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN MILLIONS)

1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................................... $ 610 $ 1,078 $ 1,243
Adjustments to reconcile net income to
net cash provided by operating activities:
Realized investment gains, net ............................... (2,187) (1,138) (1,503)
Policy charges and fee income ................................ (258) (208) (201)
Interest credited to policyholders' account balances ......... 2,043 2,128 2,616
Depreciation and amortization ................................ 258 266 398
Other, net ................................................... 4,681 (1,180) (2,628)
Loss (gain) on divestitures .................................. -- (116) 297
Change in:
Deferred policy acquisition costs .......................... 143 (122) (214)
Policy liabilities and insurance reserves .................. 2,477 2,471 2,382
Securities purchased under agreements to resell ............ (3,314) (217) 461
Trading account assets ..................................... (1,825) (433) 2,579
Income taxes receivable/payable ............................ (1,391) (937) 194
Cash collateral for borrowed securities .................... (2,631) (332) 25
Broker-dealer client receivables/payables .................. (672) (607) (420)
Securities sold but not yet purchased ...................... 1,633 251 (225)
Securities sold under agreements to repurchase ............. 4,844 (490) (712)
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES ...................... $ 4,411 $ 414 $ 4,292
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities, available for sale .......................... $ 123,550 $ 123,368 $ 97,084
Fixed maturities, held to maturity ............................ 4,042 4,268 3,767
Equity securities, available for sale ......................... 2,572 2,162 2,370
Mortgage loans on real estate ................................. 4,299 5,731 5,553
Investment real estate ........................................ 1,842 615 435
Other long-term investments ................................... 5,081 3,203 3,385
Divestitures .................................................. -- 52 790
Payments for the purchase of:
Fixed maturities, available for sale .......................... (129,854) (125,093) (101,197)
Fixed maturities, held to maturity ............................ (2,317) (2,844) (6,803)
Equity securities, available for sale ......................... (2,461) (2,384) (1,391)
Mortgage loans on real estate ................................. (3,363) (1,906) (3,015)
Investment real estate ........................................ (241) (142) (387)
Other long-term investments ................................... (4,148) (2,060) (1,849)
Cash collateral for securities loaned (net) .................... 5,668 2,891 3,471
Short-term investments (net) ................................... (2,848) (1,915) 2,793
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES ...................... $ 1,822 $ 5,946 $ 5,006
--------- --------- ---------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN MILLIONS)

1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account deposits ................................ $ 5,020 $ 2,799 $ 2,724
Policyholders' account withdrawals ............................. (9,873) (8,099) (9,164)
Net increase(decrease) in short-term debt ...................... 305 583 (3,077)
Proceeds from the issuance of long-term debt ................... 324 93 763
Repayments of long-term debt ................................... (464) (1,306) (30)
--------- --------- ---------

CASH FLOWS USED IN FINANCING ACTIVITIES ................... (4,688) (5,930) (8,784)
--------- --------- ---------

NET INCREASE IN CASH ............................................. 1,545 430 514

CASH, BEGINNING OF YEAR .......................................... 2,091 1,661 1,147
--------- --------- ---------

CASH, END OF YEAR ................................................ $ 3,636 $ 2,091 $ 1,661
========= ========= =========

SUPPLEMENTAL CASH FLOW INFORMATION:

Income taxes paid ................................................ $ 968 $ 793 $ 430
--------- --------- ---------

Interest paid .................................................... $ 1,243 $ 1,404 $ 1,413
--------- --------- ---------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

The Prudential Insurance Company of America and its subsidiaries
(collectively, "the Company") provide insurance and financial services
throughout the United States and many locations worldwide. Principal
products and services provided include life and health insurance, annuities,
pension and retirement related investments and administration, managed
healthcare, property and casualty insurance, securities brokerage, asset
management, investment advisory services and real estate brokerage.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Prudential
Insurance Company of America, a mutual life insurance company, and its
subsidiaries, and those partnerships and joint ventures in which the Company
has a controlling interest. The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP"). All significant intercompany balances and transactions have been
eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the period. Actual results could differ from
those estimates.

INVESTMENTS

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

TRADING ACCOUNT ASSETS are carried at estimated fair value.

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

MORTGAGE LOANS ON REAL ESTATE are stated primarily at unpaid principal
balances, net of unamortized discounts and allowance for losses on impaired
loans. Impaired loans are identified by management as loans in which a
probability exists that all amounts due according to the contractual terms
of the loan agreement will not be collected. Impaired loans are measured
based on the present value of expected future cash flows, discounted at the
loan's effective interest rate or the fair value of the collateral, if the
loan is collateral dependent. The Company's periodic evaluation of the
adequacy of the allowance for losses is based on a number of factors,
including past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to
repay, the estimated value of the underlying collateral, composition of the
loan portfolio, current economic conditions and other relevant factors.
This evaluation is inherently subjective as it requires estimating the
amounts and timing of future cash flows expected to be received on impaired
loans.

Interest received on impaired loans, including loans that were previously
modified in a troubled debt restructuring, is either applied against the
principal or reported as revenue, according to management's judgment as to
the collectibility of principal. Management discontinues the accrual of
interest on impaired loans after the loans are 90 days delinquent as to
principal or interest or earlier when management has serious doubts about
collectibility. When a loan is recognized as

8
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

impaired, any accrued but unpaid interest previously recorded on such loan
is reversed against interest income of the current period. Generally, a loan
is restored to accrual status only after all delinquent interest and
principal are brought current and, in the case of loans where interest has
been interrupted for a substantial period, a regular payment performance has
been established.

INVESTMENT REAL ESTATE, which the Company has the intent to hold for the
production of income, is carried at depreciated cost less any write-downs to
fair value for impairment losses. Depreciation on real estate is computed
using the straight-line method over the estimated lives of the properties.
Real estate to be disposed of is carried at the lower of depreciated cost or
fair value less selling costs and is not depreciated once classified as
such.

POLICY LOANS are carried at unpaid principal balances.

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE are carried at the amounts at which the securities
will be subsequently resold or reacquired, including accrued interest, as
specified in the respective agreements. The Company's policy is to take
possession of securities purchased under agreements to resell. The market
value of securities to be repurchased is monitored, and additional
collateral is requested, where appropriate, to protect against credit
exposure.

SECURITIES BORROWED AND SECURITIES LOANED are recorded at the amount of cash
advanced or received. With respect to securities loaned, the Company obtains
collateral in an amount equal to 102% and 105% of the fair value of the
domestic and foreign securities, respectively. The Company monitors the
market value of securities borrowed and loaned on a daily basis with
additional collateral obtained as necessary. Non-cash collateral received is
not reflected in the Consolidated Statements of Financial Position.
Substantially, all the Company's securities borrowed contracts are with
other brokers and dealers, commercial banks and institutional clients.
Substantially, all of the Company's securities loaned are with large
brokerage firms.

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

SHORT-TERM INVESTMENTS, including highly liquid debt instruments purchased
with an original maturity of twelve months or less, are carried at amortized
cost, which approximates fair value.

OTHER LONG-TERM INVESTMENTS primarily represent the Company's investments
in joint ventures and partnerships in which the Company does not have
control and derivatives held for purposes other than trading. Joint venture
and partnership investments are recorded using the equity method of
accounting, reduced for other than temporary declines in value.

REALIZED INVESTMENT GAINS, NET are computed using the specific
identification method. Costs of fixed maturities and equity securities are
adjusted for impairments considered to be other than temporary. Allowances
for losses on mortgage loans on real estate are netted against asset
categories to which they apply and provisions for losses on investments are
included in "Realized investment gains, net." Unrealized gains and losses on
trading account assets are included in "Commissions and other income."

CASH

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

DEFERRED POLICY ACQUISITION COSTS

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

9
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

For life insurance, deferred policy acquisition costs are amortized over the
expected life of the contracts (up to 45 years) in proportion to estimated
gross margins based on historical and anticipated future experience, which
is updated periodically. The effect of changes in estimated gross margins is
reflected in earnings in the period they are revised. Policy acquisition
costs related to interest-sensitive products and certain investment-type
products are deferred and amortized over the expected life of the contracts
(periods ranging from 15 to 30 years) in proportion to estimated gross
profits arising principally from investment results, mortality and expense
margins and surrender charges based on historical and anticipated future
experience, updated periodically. The effect of revisions to estimated gross
profits on unamortized deferred acquisition costs is reflected in earnings
in the period such estimated gross profits are revised.

For property and casualty contracts, deferred policy acquisition costs are
amortized over the period in which related premiums are earned. Future
investment income is considered in determining the recoverability of
deferred policy acquisition costs.

For disability insurance, health insurance, group life insurance and most
group annuities, acquisition costs are expensed as incurred.

POLICYHOLDERS' DIVIDENDS

The amount of the dividends to be paid to policyholders is determined
annually by the Company's Board of Directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity, persistency and expense experience for the year and judgment as
to the appropriate level of statutory surplus to be retained by the Company.

SEPARATE ACCOUNT ASSETS AND LIABILITIES

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

INSURANCE REVENUE AND EXPENSE RECOGNITION

Premiums from participating insurance policies are generally recognized when
due. Benefits are recorded as an expense when they are incurred. A liability
for future policy benefits is recorded using the net level premium method.

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

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

For disability insurance, group life insurance, health insurance and
property and casualty insurance, premiums are recognized over the period to
which the premiums relate in proportion to the amount of insurance
protection provided. Claim and claim adjustment expenses are recognized when
incurred.

10
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS

Assets and liabilities of foreign operations and subsidiaries reported in
other than U.S. dollars are translated at the exchange rate in effect at the
end of the period. Revenues, benefits and other expenses are translated at
the average rate prevailing during the period. Translation adjustments
arising from the use of differing exchange rates from period to period are
charged or credited directly to equity. The cumulative effect of changes in
foreign exchange rates are included in "Foreign currency translation
adjustments."

COMMISSIONS AND OTHER INCOME

Commissions and other income principally includes securities and
commodities, commission revenues, asset management fees, investment banking
revenue and realized and unrealized gains on trading account assets of the
Company's broker-dealer subsidiary.

DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives include swaps, forwards, futures, options and loan commitments
subject to market risk, all of which are used by the Company in both trading
and other than trading activities. Income and expenses related to
derivatives used to hedge are recorded on the accrual basis as an adjustment
to the carrying amount or to the yield of the related assets or liabilities
over the periods covered by the derivative contracts. Gains and losses
relating to early terminations of interest rate swaps used to hedge are
deferred and amortized over the remaining period originally covered by the
swap. Gains and losses relating to derivatives used to hedge the risks
associated with anticipated transactions are deferred and utilized to adjust
the basis of the transaction once it has closed. If it is determined that
the transaction will not close, such gains and losses are included in
"Realized investment gains, net."

DERIVATIVES HELD FOR TRADING PURPOSES are used in the Company's securities
broker-dealer business and in a limited-purpose swap subsidiary to meet the
risk management needs of its customers by structuring transactions that
allow customers to manage their exposure to interest rates, foreign exchange
rates, indices or prices of securities and commodities and when possible,
matched trading positions are established to minimize risk to the Company.
Derivatives used for trading purposes are recorded at fair value as of the
reporting date. Realized and unrealized changes in fair values are included
in "Commissions and other income" in the period in which the changes occur.

DERIVATIVES HELD FOR PURPOSES OTHER THAN TRADING are primarily used to hedge
or reduce exposure to interest rate and foreign currency risks associated
with assets held or expected to be purchased or sold, and liabilities
incurred or expected to be incurred. Additionally, other than trading
derivatives are used to change the characteristics of the Company's
asset/liability mix consistent with the Company's risk management
activities.

INCOME TAXES

The Company and its domestic subsidiaries file a consolidated federal income
tax return. The Internal Revenue Code (the "Code") limits the amount of
non-life insurance losses that may offset life insurance company taxable
income. The Code also imposes an "equity tax" on mutual life insurance
companies which, in effect, imputes an additional tax to the Company based
on a formula that calculates the difference between stock and mutual
insurance companies' earnings. Income taxes include an estimate for changes
in the total equity tax to be paid for current and prior years. Subsidiaries
operating outside the United States are taxed under applicable foreign
statutes.

Deferred income taxes are generally recognized, based on enacted rates, when
assets and liabilities have different values for financial statement and tax
reporting purposes. A valuation allowance is recorded to reduce a deferred
tax asset to that portion which management believes is more likely than not
to be realized.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1996, the Financial Accounting Standards Board ("FASB") issued the
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("SFAS

11
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

125"). The statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities and provides consistent standards for distinguishing transfers
of financial assets that are sales from transfers that are secured
borrowings. SFAS 125 became effective January 1, 1997 and is to be applied
prospectively. Subsequent to June 1996, FASB issued SFAS No. 127 "Deferral
of the Effective Date of Certain Provisions of SFAS 125" ("SFAS 127"). SFAS
127 delays the implementation of SFAS 125 for one year for certain
provisions, including repurchase agreements, dollar rolls, securities
lending and similar transactions. The Company will delay implementation
with respect to those affected provisions. Adoption of SFAS 125 has not and
will not have a material impact on the Company's results of operations,
financial condition and liquidity.

In June of 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for years beginning after December 15, 1997. This
statement defines comprehensive income as "the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources, excluding investments by owners and
distributions to owners" and establishes standards for reporting and
displaying comprehensive income and its components in financial statements.
The statement requires that the Company classify items of other
comprehensive income by their nature and display the accumulated balance of
other comprehensive income separately from retained earnings in the equity
section of the Statement of Financial Position. In addition,
reclassification of financial statements for earlier periods must be
provided for comparative purposes.

RECLASSIFICATIONS

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

12
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INVESTMENTS

FIXED MATURITIES AND EQUITY SECURITIES

The following tables provide additional information relating to fixed
maturities and equity securities (excluding trading account assets) as of
December 31:

1997
------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
-------------- -------------- -------------- ------------
FIXED MATURITIES AVAILABLE FOR SALE (IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies......... $ 9,755 $ 783 $ -- $ 10,538

Obligations of U.S. states and
their political subdivisions..................... 1,375 93 -- 1,468

Foreign government bonds............................ 3,177 218 17 3,378

Corporate securities................................ 49,997 2,601 144 52,454

Mortgage-backed securities.......................... 6,828 210 5 7,033

Other fixed maturities.............................. 364 35 -- 399
-------------- -------------- -------------- ------------
Total fixed maturities available for sale........... $ 71,496 $ 3,940 $ 166 $ 75,270
============== ============== ============== ============
EQUITY SECURITIES AVAILABLE FOR SALE................ $ 2,376 $ 680 $ 246 $ 2,810
============== ============== ============== ============

1997
------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
-------------- -------------- -------------- ------------
FIXED MATURITIES HELD TO MATURITY (IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies......... $ 88 $ - $ - $ 88

Obligations of U.S. states and
their political subdivisions...................... 152 4 1 155

Foreign government bonds............................ 33 5 - 38

Corporate securities................................ 18,282 1,212 34 19,460

Mortgage-backed securities.......................... 1 - - 1

Other fixed maturities.............................. 144 8 - 152
-------------- -------------- -------------- ------------
Total fixed maturities held to maturity............. $ 18,700 $ 1,229 $ 35 $ 19,894
============== ============== ============== ============
</TABLE>

13
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INVESTMENTS (CONTINUED)

1996
-------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------------- -------------- -------------- ------------
FIXED MATURITIES AVAILABLE FOR SALE (IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies......... $ 10,618 $ 361 $ 77 $ 10,902

Obligations of U.S. states and
their political subdivisions...................... 1,104 29 2 1,131

Foreign government bonds............................ 2,814 137 12 2,939

Corporate securities................................ 43,593 1,737 284 45,046

Mortgage-backed securities.......................... 6,377 140 21 6,496

Other fixed maturities.............................. 39 1 1 39
--------------- -------------- -------------- ------------

Total fixed maturities available for sale........... $ 64,545 $ 2,405 $ 397 $ 66,553
=============== ============== ============== ============

EQUITY SECURITIES AVAILABLE FOR SALE................ $ 2,103 $ 659 $ 140 $ 2,622
=============== ============== ============== ============

<CAPTION>
1996
-------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------------- -------------- -------------- ------------
FIXED MATURITIES HELD TO MATURITY (IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies......... $ 309 $ 3 $ 6 $ 306

Obligations of U.S. states and
their political subdivisions...................... 7 -- -- 7

Foreign government bonds............................ 162 11 -- 173

Corporate securities................................ 19,886 1,033 82 20,837

Mortgage-backed securities.......................... 26 -- -- 26

Other fixed maturities.............................. 13 -- -- 13
--------------- -------------- -------------- ------------
Total fixed maturities held to maturity............. $ 20,403 $ 1,047 $ 88 $ 21,362
=============== ============== ============== ============
</TABLE>

14
<PAGE>

INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INVESTMENTS (CONTINUED)

The amortized cost and estimated fair value of fixed maturities by
contractual maturities at December 31, 1997, is shown below:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
-------------------------------- ------------------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
-------------- -------------- -------------- ------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Due in one year or less....................... $ 1,991 $ 2,011 $ 686 $ 695
Due after one year through five years......... 18,916 19,226 4,496 4,659
Due after five years through ten years........ 16,776 17,494 7,161 7,551
Due after ten years........................... 26,985 29,506 6,356 6,988

Mortgage-backed securities.................... 6,828 7,033 1 1
-------------- -------------- -------------- ------------
Total......................................... $ 71,496 $ 75,270 $ 18,700 $ 19,894
============== ============== ============== ============
</TABLE>

Actual maturities may differ from contractual maturities because issuers have
the right to call or prepay obligations

Proceeds from the repayment of held to maturity fixed maturities during 1997,
1996 and 1995 were $4,042 million, $4,268 million, and $3,767 million,
respectively. Gross gains of $62 million, $78 million, and $27 million, and
gross losses of $1 million, $7 million, and $0.2 million were realized on
prepayment of held to maturity fixed maturities during 1997, 1996 and 1995,
respectively.

Proceeds from the sale of available for sale fixed maturities during 1997,
1996 and 1995 were $120,604 million, $121,910 million and $96,134 million,
respectively. Proceeds from the maturity of available for sale fixed
maturities during 1997, 1996 and 1995 were $2,946 million, $1,458 million,
and $950 million, respectively. Gross gains of $1,310 million, $1,562
million, and $2,052 million and gross losses of $639 million, $1,026 million,
and $941 million were realized on sales and prepayments of available for sale
fixed maturities during 1997, 1996 and 1995, respectively.

Write downs for impairments of fixed maturities which were deemed to be other
than temporary were $13 million, $54 million and $100 million for the years
1997, 1996 and 1995, respectively.

During the year ended December 31, 1997, there were no securities classified
as held to maturity that were sold and two securities so classified were
transferred to the available for sale portfolio. These actions were taken as
a result of a significant deterioration in credit worthiness. The aggregate
amortized cost of the securities transferred was $26 million with gross
unrealized investment gains of $0.5 million charged to "Net unrealized
investment gains."

During the year ended December 31, 1996, one security classified as held to
maturity was sold and two securities so classified were transferred to the
available for sale portfolio. These actions were taken as a result of a
significant deterioration in credit worthiness. The amortized cost of the
security sold was $35 million with a related realized investment loss of $0.7
million; the aggregate amortized cost of the securities transferred was $26
million with gross unrealized investment losses of $6 million charged to "Net
unrealized investment gains."

15
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INVESTMENTS (CONTINUED)

MORTGAGE LOANS ON REAL ESTATE

The Company's mortgage loans were collateralized by the following property
types at December 31:
<TABLE>
<CAPTION>
1997 1996
--------------------------------- --------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Office buildings............................... $ 4,692 28.5% $ 6,056 34.4%
Retail stores.................................. 3,078 18.7% 3,676 20.9%
Residential properties......................... 891 5.4% 961 5.4%
Apartment complexes............................ 3,551 21.6% 2,954 16.8%
Industrial buildings........................... 1,958 11.9% 1,807 10.3%
Agricultural properties........................ 1,666 10.1% 1,550 8.8%
Other.......................................... 618 3.8% 608 3.4%
--------------- --------- -------------- ------
Subtotal 16,454 100.0% 17,612 100.0%
========= ======
Allowance for losses........................... (450) (515)
--------------- --------------
Net carrying value............................. $ 16,004 $ 17,097
=============== ==============
</TABLE>

The mortgage loans are geographically dispersed throughout the United
States and Canada with the largest concentrations in California (25.3%) and
New York (8.3%) at December 31, 1997. Included in the above balances are
mortgage loans receivable from affiliated joint ventures of $225 million
and $461 million at December 31, 1997 and 1996, respectively.

Activity in the allowance for losses for all mortgage loans, for the years
ended December 31, is summarized as follows:
<TABLE>
<CAPTION>

1997 1996 1995
---------------- ---------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C>
Allowance for losses, beginning of year.............. $ 515 $ 862 $ 1,004
Additions charged to operations...................... 19 9 6
Release of allowance for losses...................... (60) (256) (32)
Charge-offs, net of recoveries....................... (24) (100) (116)
--------------- ---------------- ---------------
Allowance for losses, end of year.................... $ 450 $ 515 $ 862
================ ================ ===============
</TABLE>

The $60 million, $256 million and $32 million reduction of the mortgage
loan allowance for losses in 1997, 1996 and 1995, respectively, is
primarily attributable to the improved economic climate, changes in the
nature and mix of borrowers and underlying collateral and a significant
decrease in impaired loans consistent with a general decrease in the
mortgage loan portfolio due to prepayments, sales and foreclosures.

16
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INVESTMENTS (CONTINUED)

Impaired mortgage loans and related allowance for losses at December 31,
are as follows:
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with allowance for losses ............. $ 330 $ 941
Impaired mortgage loans with no allowance for losses .......... 1,303 1,491
Allowance for losses .......................................... (97) (189)
----------------- ------------------
Net carrying value of impaired mortgage loans ................. $ 1,536 $ 2,243
================= ==================
</TABLE>

Impaired mortgage loans with no provision for losses are loans where the
fair value of the collateral or the net present value of the expected
future cash flows related to the loan equals or exceeds the recorded
investment. The average recorded investment in impaired loans before
allowance for losses was $2,102 million, $2,842 million and $4,146 million
during 1997, 1996 and 1995, respectively. Net investment income recognized
on these loans totaled $140 million, $265 million and $415 million for the
years ended December 31, 1997, 1996 and 1995, respectively.

INVESTMENT REAL ESTATE

The Company's "investment real estate" of $1,519 million and $2,586 million
at December 31, 1997 and 1996, respectively, is held through direct
ownership. Of the Company's real estate, $1,490 million and $406 million
consists of commercial and agricultural assets held for disposal at
December 31, 1997 and 1996, respectively. Impairment losses and the
valuation allowances aggregated $40 million, $38 million and $124 million
for the years ended December 31, 1997, 1996 and 1995, respectively, and are
included in "Realized investment gains, net."

RESTRICTED ASSETS AND SPECIAL DEPOSITS

Assets of $2,783 million and $2,453 million at December 31, 1997 and 1996,
respectively, were on deposit with governmental authorities or trustees as
required by certain insurance laws. Additionally, assets valued at $2,352
million at December 31, 1997, were held in voluntary trusts. Of this
amount, $1,801 million related to the multi-state policyholder settlement
as described in Note 14. The remainder relates to trusts established to
fund guaranteed dividends to certain policyholders. The terms of these
trusts provide that the assets are to be used for payment of the designated
settlement and dividend benefits, as the case may be. Assets valued at $741
million and $3,414 million at December 31, 1997 and 1996, respectively,
were maintained as compensating balances or pledged as collateral for bank
loans and other financing agreements. Restricted cash and securities of
$1,835 million and $1,614 million at December 31, 1997, and 1996,
respectively, were included in the consolidated financial statements. The
restricted cash represents funds deposited by clients and funds accruing to
clients as a result of trades or contracts.

OTHER LONG-TERM INVESTMENTS

The Company's "Other long-term investments" of $3,360 million and $2,995
million as of December 31, 1997 and 1996, respectively, are composed of
$1,349 million and $832 million in real estate related interests and $2,011
million and $2,163 million of non-real estate related interests, including
a $149 million net investment in a leveraged lease entered into in 1997.
The Company's share of net income from such entities was $411 million, $245
million, and $326 million for 1997, 1996, and 1995, respectively, and is
reported in "Net investment income."

17
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INVESTMENTS (CONTINUED)

INVESTMENT INCOME AND INVESTMENT GAINS AND LOSSES

NET INVESTMENT INCOME arose from the following sources for the years ended
December 31:

1997 1996 1995
-------------- -------------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities-available for sale........................ $ 5,074 $ 4,871 $ 4,774
Fixed maturities-held to maturity.......................... 1,622 1,793 1,717
Trading account assets..................................... 504 444 588
Equity securities-available for sale ...................... 52 81 57
Mortgage loans on real estate.............................. 1,555 1,690 2,075
Real estate ............................................... 565 685 742
Policy loans............................................... 396 384 392
Securities purchased under agreements to resell............ 15 11 19
Receivables from broker-dealer clients..................... 706 579 678
Short-term investments..................................... 697 536 590
Other investment income.................................... 573 725 983
-------------- -------------- -------------
Gross investment income.................................... 11,759 11,799 12,615
Less investment expenses................................... (1,896) (2,057) (2,437)
-------------- -------------- -------------
Net investment income...................................... $ 9,863 $ 9,742 $ 10,178
============== ============== =============
</TABLE>

REALIZED INVESTMENT GAINS, NET, including changes in allowances for losses
and charges for other than temporary reductions in value, for the years
ended December 31, were from the following sources:

1997 1996 1995
-------------- -------------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities....................................... $ 684 $ 513 $ 1,180
Mortgage loans on real estate ......................... 68 248 67
Investment real estate ................................ 700 76 (19)
Equity securities-available for sale .................. 363 267 400
Other gains (losses)................................... 372 34 (125)
-------------- -------------- -----------

Realized investment gains, net......................... $ 2,187 $ 1,138 $ 1,503
============== ============== ===========
</TABLE>

NET UNREALIZED INVESTMENT GAINS on securities available for sale are
included in the consolidated statement of financial position as a component
of equity, net of tax. Changes in these amounts for the years ended
December 31, are as follows:

1997 1996
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Balance, beginning of year................................. $ 1,136 $ 2,397
Changes in unrealized investment
gains(losses) attributable to:
Fixed maturities ....................................... 1,766 (2,892)
Equity securities....................................... (85) 254
Participating group annuity contracts................... (564) 479
Deferred policy acquisition costs....................... (154) 261
Deferred federal income taxes........................... (347) 637
----------------- -----------------
Sub-total............................................... 616 (1,261)
----------------- -----------------
Balance, end of year....................................... $ 1,752 $ 1,136
================= =================
</TABLE>

18
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INVESTMENTS (CONTINUED)

Based on the carrying value, assets categorized as "non-income producing"
for the year ended December 31, 1997 included in fixed maturities available
for sale, mortgage loans on real estate and other long term investments
totaled $26 million, $93 million and $7 million, respectively.

4. DEFERRED POLICY ACQUISITION COSTS

The balances of and changes in deferred policy acquisition costs as of and
for the years ended December 31, are as follows:

1997 1996 1995
-------------- -------------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year ............................ $ 6,291 $ 6,088 $ 6,403
Capitalization of commissions, sales and issue expenses 1,049 931 919
Amortization and other adjustments..................... (1,192) (989) (783)
Change in unrealized investment gains ................. (154) 261 (451)
-------------- -------------- -----------
Balance, end of year .................................. $ 5,994 $ 6,291 $ 6,088
============== ============== ===========
</TABLE>

5. FUTURE POLICY BENEFITS AND OTHER POLICYHOLDERS' LIABILITIES

FUTURE POLICY BENEFITS at December 31 are as follows:

1997 1996
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Life insurance ............................................ $ 46,712 $ 44,118
Annuities ................................................. 15,469 14,828
Other contract liabilities ................................ 3,400 5,009
----------------- -----------------
Future policy benefits .................................... $ 65,581 $ 63,955
================= =================
</TABLE>

Life insurance liabilities include reserves for death and endowment policy
benefits, terminal dividends, premium deficiency reserves and certain health
benefits. Annuity liabilities include reserves for immediate annuities and
non-participating group annuities. Other contract liabilities primarily consist
of unearned premium and benefit reserves for group health products.

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

<TABLE>
<CAPTION>
PRODUCT MORTALITY INTEREST RATE ESTIMATION METHOD
- ------------------------- ------------------------ --------------- ------------------------
<S> <C> <C> <C>
Life insurance Generally rates 2.5% to 7.5% Net level premium
guaranteed in calculating based on non-forfeiture
cash surrender values interest rate

Individual immediate 1983 Individual 3.25% to 11.25% Present value of
annuities Annuity Mortality expected future payments
Table with certain based on historical
modifications experience

Group annuities in 1950 Group 3.75% to 17.35% Present value of
payout status Annuity Mortality expected future payments
Table with certain based on historical
modifications experience

Other contract liabilities -- 6.0% to 7.0% Present value of
expected future payments
based on historical
experience
</TABLE>

19
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. FUTURE POLICY BENEFITS AND OTHER POLICYHOLDERS' LIABILITIES (CONTINUED)

For the above categories, premium deficiency reserves are established, if
necessary, when the liability for future policy benefits plus the present
value of expected future gross premiums are insufficient to provide for
expected future policy benefits and expenses. A premium deficiency reserve
has been recorded for the group single premium annuity business, which
consists of limited-payment, long duration, traditional non-participating
annuities. A liability of $1,645 million and $1,320 million is included in
"Future policy benefits" with respect to this deficiency for the years
ended December 31, 1997 and 1996, respectively.

POLICYHOLDERS' ACCOUNT BALANCES at December 31, are as follows:

1997 1996
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Individual annuities........................................ $ 5,695 $ 6,408
Group annuities & guaranteed investment contracts........... 19,053 21,706
Interest-sensitive life contracts........................... 3,160 2,888
Dividend accumulations...................................... 5,033 5,007
--------- ---------
Policyholders' account balances............................. $ 32,941 $ 36,009
========= =========
</TABLE>

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

Certain contract provisions that determine the policyholder account
balances are as follows:
<TABLE>
<CAPTION>

WITHDRAWAL/
PRODUCT INTEREST RATE SURRENDER CHARGES
----------------------------------- ------------------------ -------------------------------------
<S> <C> <C>
Individual annuities 3.1% to 6.6% 0% to 8% for up to 8 years

Group annuities 5.0% to 12.7% Contractually limited or subject to
market value adjustments

Guaranteed investment contracts 3.9% to 14.34% Subject to market value withdrawal
provisions for any funds withdrawn
other than for benefit responsive and
contractual payments

Interest sensitive life contracts 4.0% to 6.5% Various up to 10 years

Dividend accumulations 3.0% to 4.0%
</TABLE>

20
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. FUTURE POLICY BENEFITS AND OTHER POLICYHOLDERS' LIABILITIES (CONTINUED)

OTHER POLICYHOLDERS' LIABILITIES. The following table provides a
reconciliation of the activity in the liability for unpaid claims and claim
adjustment expense for property and casualty and accident and health
insurance, which is included in "Other policyholder's liabilities" at
December 31:
<TABLE>
<CAPTION>

1997 1996 1995
---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Balance at January 1......................................... $ 6,043 $ 5,933 $ 7,983
Less reinsurance recoverables.............................. 563 572 865
---------- ---------- ----------

Net balance at January 1..................................... 5,480 5,361 7,118
---------- ---------- ----------

Incurred related to:
Current year............................................... 10,691 10,281 10,534
Prior years................................................ 11 (91) 141
---------- ---------- ----------

Total incurred............................................... 10,702 10,190 10,675
---------- ---------- ----------

Paid related to:
Current year............................................... 7,415 7,497 7,116
Prior years................................................ 2,651 2,574 2,800
---------- ---------- ----------

Total paid................................................... 10,066 10,071 9,916
---------- ---------- ----------
Less Reinsurance
Segment.................................................... -- -- 2,516
---------- ---------- ----------

Net balance at December 31................................... 6,116 5,480 5,361
Plus reinsurance recoverables.............................. 543 563 572
---------- ---------- ----------

Balance at December 31....................................... $ 6,659 $ 6,043 $ 5,933
========== ========== ==========
</TABLE>

The changes in provision for claims and claim adjustment expenses related
to prior years of $11 million, $(91) million and $141 million in 1997, 1996
and 1995, respectively, are due to such factors as changes in claim cost
trends in healthcare, an accelerated decline in indemnity health business,
and lower than anticipated property and casualty unpaid claims and claim
adjustment expenses.

The other policyholders' liabilities presented above consist primarily of
unpaid claim liabilities which include estimates for liabilities associated
with reported claims and for incurred but not reported claims based, in
part, on the Company's experience. Changes in the estimated cost to settle
unpaid claims are charged or credited to the statement of operations
periodically as the estimates are revised. Accident and health unpaid
claims liabilities for 1997 and 1996 included above are discounted using
interest rates ranging from 6.0% to 7.5%.

21
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. SHORT-TERM AND LONG-TERM DEBT

Debt consists of the following at December 31:

SHORT-TERM DEBT

<TABLE>
<CAPTION>
1997 1996
-------------- --------------
(IN MILLIONS)
<S> <C> <C>
Commercial paper.......................................... $ 4,268 $ 4,511
Notes payable............................................. 2,151 1,614
Current portion of long-term debt......................... 355 437
-------------- --------------

Total short-term debt................................ $ 6,774 $ 6,562
============== ==============
</TABLE>

The weighted average interest rate on outstanding short-term debt was
approximately 6.0% and 5.6% at December 31, 1997 and 1996, respectively.

The Company issues commercial paper primarily to manage operating cash
flows and existing commitments, meet working capital needs and take
advantage of current investment opportunities. Commercial paper borrowings
are supported by various lines of credit.

LONG-TERM DEBT
<TABLE>
<CAPTION>

DESCRIPTION MATURITY DATES RATE 1997 1996
------------------------------------ ----------------- -------------- --------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Floating rate notes ("FRN") 1998 6.5% $ 40 $ 128
Long term notes 1998 - 2023 4% - 12% 1,194 1,023
Zero coupon notes 1998 - 1999 8.6% (a) 334 365
Australian dollar notes 1997 9% -- 55
Canadian dollar notes 1997 - 1998 7.0% - 9.125% 117 320
Japanese yen notes 1998 - 2000 0.5% - 4.6% 178 90
Swiss francs notes 1998 3.875% 120 103
Canadian dollar FRN 2003 5.89% 96 96
Surplus notes 2003 - 2025 6.875% - 8.3% 986 985
Commercial paper backed by long-term
credit agreements 1,500 1,000
Other notes payable 1998 - 2017 4% - 7.5% 63 32
---------- ----------
Sub-total............................................................................. 4,628 4,197
Less: current portion of long-term debt............................................ (355) (437)
---------- ----------
Total long-term debt.................................................................. $ 4,273 $ 3,760
========== ==========
</TABLE>

(a) The rate shown for zero coupon notes, which do not bear interest,
represents a level yield to maturity.

Payment of interest and principal on the surplus notes of $686 million
issued after 1993 may be made only with the prior approval of the
Commissioner of Insurance of the State of New Jersey.

In order to modify exposure to interest rate and currency exchange rate
movements, the Company utilizes derivative instruments, primarily interest
rate swaps, in conjunction with some of its debt issues. The effect of
these derivative instruments is included in the calculation of the interest
expense on the associated debt, and as a result, the effective interest
rates on the debt may differ from the rates reflected in the tables above.
Floating rates are determined by formulas and may be subject to certain
minimum or maximum rates.

Scheduled principal repayments of long-term debt as of December 31, 1997,
are as follows: $357 million in 1998, $808 million in 1999, $260 million in
2000, $32 million in 2001, $1,814 million in 2002 and $1,379 million
thereafter.

At December 31, 1997, the Company had $8,257 million in lines of credit
from numerous financial institutions of which $5,160 million were unused.
These lines of credit generally have terms ranging from 1 to 5 years.

22
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. EMPLOYEE BENEFIT PLANS

PENSION PLANS

The Company has one funded non-contributory defined benefit pension plan,
which covers substantially all of its employees. The Company also has
several non-contributory non-funded defined benefit plans covering certain
executives. Benefits are generally based on career average earnings and
credited length of service. The Company's funding policy is to contribute
annually an amount necessary to satisfy the Internal Revenue Service
contribution guidelines.

Prepaid and accrued pension costs are included in "Other assets" and "Other
liabilities," respectively, in the Company's consolidated statements of
financial position. The status of these plans as of September 30, adjusted
for fourth quarter activity related to funding activity and contractual
termination benefits is summarized below:

1997 1996
--------------------------------- --------------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
--------------- -------------- -------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligation:
Vested benefit obligation.............. $ (4,129) $ (205) $ (3,826) $ (180)
============ ============ =========== =============

Accumulated benefit obligation......... $ (4,434) $ (226) $ (4,121) $ (198)
============ ============ =========== =============

Projected benefit obligation............. $ (5,238) $ (319) $ (4,873) $ (274)

Plan assets at fair value................ 8,489 -- 7,306 --
------------ ------------ ----------- -------------
Plan assets in excess of (less than)
projected benefit obligation........... 3,251 (319) 2,433 (274)
Unrecognized transition amount........... (662) 1 (769) 1
Unrecognized prior service cost.......... 317 10 356 11
Unrecognized net (gain) loss............. (1,689) 45 (916) 16
Additional minimum liability............. -- (11) -- (10)
Effect of fourth quarter activity........ (67) 4 (98) 4
------------ ------------ ----------- -------------
Prepaid (accrued) pension cost
at December 31......................... $ 1,150 $ (270) $ 1,006 $ (252)
============ ============ =========== =============
</TABLE>

Plan assets consist primarily of equity securities, bonds, real estate and
short-term investments, of which $6,022 million and $5,668 million are
included in Separate Account assets and liabilities at December 31, 1997
and 1996, respectively.

Effective December 31, 1996, The Prudential Securities Incorporated Cash
Balance Plan (the "PSI Plan") was merged into The Retirement System for
United States Employees and Special Agents of The Prudential Insurance
Company of America (the "Prudential Plan"). The name of the merged plan is
The Prudential Merged Retirement Plan ("Merged Retirement Plan"). All of
the assets of the Merged Retirement Plan are available to pay benefits to
participants and their beneficiaries who are covered by the Merged
Retirement Plan. The merger of the plans had no effect on the December 31,
1996 consolidated financial position or results of operations.

During 1996, the Prudential Plan was amended to provide cost of living
adjustments for retirees. The effect of this plan amendment increased
benefit obligations and unrecognized prior service cost by $170 million at
September 30, 1996. In addition, the Prudential Plan was amended to provide
contractual termination benefits to certain plan participants who were
notified between September 15, 1996 and December 31, 1997 that their
employment had been terminated. During 1997, the Prudential Retirement Plan
Document, a component of the Merged Retirement Plan was amended to extend
the contractual termination benefits to December 31, 1998. Costs related to
these amendments are reflected below in contractual termination benefits.

23
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. EMPLOYEE BENEFIT PLANS (CONTINUED)

Net periodic pension income included in "General and administrative
expenses" in the Company's consolidated statement of operations for the
years ended December 31, 1997, 1996 and 1995 include the following
components:

1997 1996 1995
-------------- ------------- --------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost-benefits earned during the year......... $ 127 $ 140 $ 133
Interest cost on projected benefit obligation........ 376 354 392
Actual return on plan assets......................... (1,693) (748) (1,288)
Net amortization and deferral........................ 1,012 73 629
Contractual termination benefits..................... 30 63 --
-------------- ------------- --------------
Net periodic pension income.......................... $ (148) $ (118) $ (134)
============== ============= ==============
</TABLE>

The assumptions at September 30 used by the Company are to calculate the
projected benefit obligations as of that date and determine the pension
expense for the following fiscal year:

1997 1996 1995
-------------- ------------- --------------

<S> <C> <C> <C>
Discount rate.......................................... 7.25% 7.75% 7.50%

Rate of increase in compensation levels................ 4.50% 4.50% 4.50%

Expected long-term rate of return on plan assets....... 9.50% 9.50% 9.00%
</TABLE>