Financial Statements of the Discovery
Accounts
Statements of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
Subaccounts
Prudential Prudential
Prudential Prudential Prudential Prudential
Prudential
Series Series
Series Series Series Series
Series
Fund Fund
Fund Fund Fund Fund
Fund
Money Diversified
Government Conservative Flexible High Yield
Stock
Market Bond
Income Balanced Managed Bond
Index
<S> <C> <C>
<C> <C> <C> <C>
<C>
Investment in Shares at
Net Asset Value [Note 2] $8,033 $5,475
$620 $5,673 $43,165 $20,277
$19,464
Net Receivable (Payable)
for Pending Capital
Transactions 192 (3)
- -- (11) (108) (13)
50
Net Assets $8,225 $5,472
$620 $5,662 $43,057 $20,264
$19,514
Net Assets Representing:
Equity of Participants $8,218 $5,459
$620 $5,648 $42,825 $20,251
$19,450
Equity of The Prudential
Insurance Company of
America 7 13
- -- 14 232 13
64
$8,225 $5,472
$620 $5,662 $43,057 $20,264
$19,514
</TABLE>
<TABLE>
<CAPTION>
Subaccounts
Prudential
Series Prudential
Prudential Prudential AIM V.I.
Fund Series
Series Series Growth
Equity Fund
Fund Fund and AIM V.I.
Janus Aspen
Income Equity
Jennison Global Income Value
Growth
<S> <C> <C>
<C> <C> <C> <C>
<C>
Investment in Shares at
NetAsset Value [Note 2] $12,314 $29,376
$30,801 $14,111 $11,032 $17,277
$4,618
Receivable from The
Prudential Insurance
Company of America -- 33
- -- -- -- --
- --
Net Receivable (Payable)
for Pending Capital
Transactions (14) 18
4 -- (5) -- -
- -
Net Assets $12,300 $29,427
$30,805 $14,111 $11,027 $17,277
$4,618
Net Assets Representing:
Equity of Participants $12,268 $ 29,427
$30,707 $14,101 $10,978 $17,191
$4,584
Equity of The Prudential
Insurance Company of
America 32 --
98 10 49 86 34
$12,300 $29,427
$30,805 $14,111 $11,027 $17,277
$4,618
</TABLE>
See Notes to
Financial Statements
1
<PAGE>
Financial Statements of the
Discovery Accounts
Statements of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
Subaccounts
OCC OCC T. Rowe T. Rowe Warburg
Janus Aspen MFS
Accumulation Accumulation Price Price
Pincus
International Emerging MFS
Trust Trust Equity International Post-
Venture
Growth Growth Research
Managed Small Cap Income Stock
Capital
<S> <C> <C> <C>
<C> <C> <C> <C> <C>
Investment in Shares
at Net Asset Value
[Note 2] $8,905 $4,698 $7,550
$21,682 $28,372 $18,017 $1,912 $49
Receivable from The
Prudential Insurance
Company of America -- -- --
- -- -- -- 19 --
Net Receivable
(Payable)
for Pending Capital
Transactions -- -- 8
(10) -- 18 -- --
Net Assets $8,905 $4,698 $7,558
$21,672 $28,372 $18,035 $1,931 $49
Net Assets Representing:
Equity of Participants $8,890 $4,683 $7,538
$21,640 $28,372 $17,951 $1,931 $49
Equity of The
PrudentialInsurance
Company of America 15 15 20
32 -- 84 -- --
$8,905 $4,698 $7,558
$21,672 $28,372 $18,035 $1,931 $49
</TABLE>
2
<PAGE>
Financial Statements of
Discovery Accounts
Statements of Operations
for the period July 31, 1997*
through December 31,1997
<TABLE>
<CAPTION>
Subaccounts
Prudential Prudential
Prudential Prudential Prudential Prudential
Prudential
Series Series
Series Series Series Series
Series
Fund Fund
Fund Fund Fund Fund Fund
Money Diversified
Government Conservative Flexible High Yield
Stock
Market Bond
Income Balanced Managed Bond
Index
<S> <C> <C> <C>
<C> <C> <C> <C>
Investment Income
Ordinary Dividend
Distributions $63 $19
$10 $68 $286 $85 $27
Expense [Note 3]
Fees Charged to
Participants for
Administrative Purposes
and Mortality
and Expense Risk 12 3
1 11 50 9 12
Net Investment Income 51 16
9 57 236 76 15
Net Realized and Unrealized
Gains/(Losses) on Investments
Capital Gains Distributions
Received -- 7 -
- - 593 5,693 -- 224
Net Realized Gain/(loss)
on Investments -- (1) -
- - -- -- -- --
Net Increase/(Decrease)
in Unrealized Appreciation
on Investments -- (11)
(2) (720) (6,341) (36) (79)
Net gain/(loss) on
Investments -- (5)
(2) (127) (648) (36) 145
Net Increase (Decrease)
in Net Assets Resulting
From Operations $98,06$51 $11
$7 ($70) ($412) $40 $160
</TABLE>
*Commencement of Operations
See Notes to Financial
Statements
2
<PAGE>
Fiancial Statements of the Discovery
Accounts
Statements of Operations
for the period July 31, 1997*
through December 31,1997
Subaccounts
Prudential Prudential
Prudential Prudential
Series Series Series
Series AIM V.I.
Fund Fund Fund
Fund Growth AIM V.I. Janus Aspen
Equity Income Equity Jennison
Global and Income Value Growth
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C> <C> <C> <C>
Investment Income
Ordinary Dividend
Distributions $38 $112 $13
$100 $6 $153 $12
Expense [Note 3]
Fees Charged to
Participants for
Administrative
Purposes and
Mortality and
Expense Risk 9 22 41
15 10 29 4
Net Investment Income 29 90 (28)
85 (4) 124 8
Net Realized and Unrealized
Gains/(Losses) on Investments
Capital Gains
Distributions Received 654 962 1,908
766 946 9 --
Net Realized Gain/(loss)
on Investments (2) (409) (641)
(295) -- -- --
Net Increase/(Decrease)
in Unrealized
Appreciation on
Investments (574) (672) (1,674)
(697) (62) (1,017) (34)
Net gain/(loss) on
Investments 78 (119) (407)
(226) (53) (548) (34)
Net Increase (Decrease)
in Net Assets Resulting
From Operations $107 ($29) ($435)
($141) ($57) ($424) ($26)
<CAPTION>
Subaccounts
OCC OCC T. Rowe T. Rowe
Warburg
Janus Aspen
Accumulation Accumulation Price Price
Pincus
International MFS MFS
Trust Trust Equity International
Post-Venture
Growth Emerging Research
Managed Small Cap Income Stock
Capital
</TABLE>
[CAPTION]
[S] [C] [C] [C]
[C] [C] [C] [C] [C]
Investment Income
Ordinary Dividend
Distributions $10 -- --
- -- -- $112 $18 -
- -
Expense [Note 3]
Fees Charged to
Participants
for Administrative
Purposes and
Mortality Expense Risk 10 5 13
11 17 30 1 -
- -
Net Investment Income -- (5) (13)
(11) (17) 82 17
- --
Net Realized and
UnrealizedGains/
(Losses) on
Investments
Capital Gains
Distributions Received -- -- --
- -- -- 478 25 -
- -
Net Realized Gain/(loss)
on Investments -- (2) --
- -- (106) -- (5) -
- -
Net Increase/(Decrease)
in Unrealized Appreciation
on Investments 99 (14) (129)
(46) 491 12 (34)
2
Net gain/(loss) on
Investments 99 (16) (129)
(46) 385 490 (14)
2
Net Increase in Net
Assets Resulting
From Operations $99 ($21) ($142)
($57) $368 $572 $3
$2
*Commencement of Operations
See Notes to Financial Statements
3
<PAGE>
Financial Statements of the Discovery Accounts
Statements of Changes in Net Assets
for the period July 31, 1997*
through December 31,1997
<TABLE>
<CAPTION>
Subaccounts
Prudential Prudential
Prudential Prudential Prudential Prudential
Prudential
Series Series
Series Series Series Series
Series
Fund Fund
Fund Fund Fund Fund Fund
Money Diversified
Government Conservative Flexible High Yield
Stock
Market Bond
Income Balanced Managed Bond
Index
<S> <C> <C> <C>
<C> <C> <C> <C>
Net Increase in Net Assets
Resulting From Operations $51 $11
$7 ($70) ($412) $40 $160
Accumulation Unit
Transactions
Purchase Payments and
Transfers In [Note 7&8] 8,212 5,474
613 5,755 43,587 20,242 19,364
Withdrawals and
Transfers Out
[Note 7&8] -- -- -
- - -- -- -- --
Annual Account Charges
Deducted From
Participants'
Accumulation Accounts
[Note 4] (38) (13) -
- - (23) (118) (18) (10)
Net Increase In Net
Assets Resulting From
Accumulation Unit
Transactions 8,174 5,461
613 5,732 43,469 20,224 19,354
Total Increase/
(Decrease) in Net
Assets 8,225 5,472
620 5,662 43,057 20,264 19,514
Net Assets Beginning
of Period -- -- -
- - -- -- -- --
End of Period $8,225 $5,472
$620 $5,662 $43,057 $20,264
$19,514
Subaccounts
Prudential Prudential
Prudential Prudential
Series Series Series
Series AIM V.I.
Fund Fund Fund
Fund Growth AIM V.I. Janus Aspen
Equity Income Equity Jennison
Global and Income Value Growth
<S> <C> <C> <C>
<C> <C> <C> <C>
Net Increase in Net
Assets
Resulting From
Operations $107 ($29) ($435)
($141) ($57) ($424) ($26)
Accumulation Unit
Transactions
Purchase Payments
and Transfers In
[Note 7&8] 12,239 33,778 35,484
17,037 11,089 17,701 4,652
Withdrawals and
Transfers Out
[Note 7&8] -- (4,287) (4,225)
(2,785) -- -- --
Annual Account
Charges Deducted
From Participants'
Accumulation Accounts
[Note 4] (46) (35) (19)
- -- (5) -- (8)
Net Increase In Net
Assets Resulting From
Accumulation Unit
Transactions 12,193 29,456 31,240
14,252 11,084 17,701 4,644
Total Increase/
(Decrease) in
Net Assets 12,300 29,427 30,805
14,111 11,027 17,277 4,618
Net Assets Beginning
of Period -- -- --
- -- -- -- --
End of Period $12,300 $29,427 $30,805
$14,111 $11,027 $17,277 $4,618
</TABLE>
*Commencement of Operations
See Notes to Financial
Statements
4
<PAGE>
Financial Statements of the Discovery
Accounts
Statements of Changes in Net Assets
for the period July 31, 1997*
through December 31,1997
<TABLE>
<CAPTION>
Subaccounts
OCC OCC T. Rowe T. Rowe Warburg
Janus Aspen MFS
Accumulation Accumulation Price Price
Pincus
International Emerging MFS
Trust Trust Equity International Post-
Venture
Growth Growth Research
Managed Small Cap Income Stock
Capital
<S> <C> <C> <C>
<C> <C> <C> <C> <C>
Net Increase in
Net Assets Resulting
From Operation $99 ($21) ($142)
($57) $368 $572 $3 $2
Accumulation Unit
Transactions
Purchase Payments
and Transfers In
[Note 7+8] 8,806 4,719 7,711
21,752 30,800 17,463 1,928 47
Withdrawals and
Transfers Out
[Note 7+8] -- -- --
- -- (2,796) -- -- --
Annual Account
Charges Deducted
From Participants'
Accumulation
Accounts [Note 4] -- -- (11)
(23) -- -- -- --
Net Increase In
Net Assets
Resulting From
Accumulation Unit
Transactions 8,806 4,719 7,700
21,729 28,004 17,463 1,928 47
Total Increase/
(Decrease) in
Net Assets 8,905 4,698 7,558
21,672 28,372 18,035 1,931 49
Net Assets
Beginning of
Period -- -- --
- -- -- -- -- --
End of Period $8,905 $4,698 $7,558
$21,672 $28,372 $18,035 $1,931
$49
</TABLE>
*Commencement of Operations
See Notes to Financial
Statements
5
<PAGE>
Notes to Financial Statements of the
Discovery Account
NOTE 1: General
The Prudential Discovery Select Group Variable
Contract Account (the
"Discovery Account") was established on February 11,
1997 by The
Prudential Insurance Company of America (Prudential
or Company) and
commenced operations on July 31, 1997 under the laws
of the State of
New Jersey and meets the definition of a "separate
account" under
federal securities laws. The Discovery Account is
registered with the
Securities and Exchange Commission ("SEC") under the
Investment Company
Act of 1940 ("1940 Act") as a unit investment trust,
which is a type of
investment company.
The Discovery Account is used in connection with
retirement
arrangements that qualify for federal tax benefits
under Sections 401,
403(b), 408 or 457 of the Internal Revenue Code of
1986 (the "Code")
and with nonquailified annuity arrangements. The
Contracts are group
annuity contracts and generally are issued to
employers
(Contractholders) who make contributions under them
on behalf of their
employees. A person for whom contributions have been
made and to whom
they remain credited under a Contract is a
"Participant."
The Discovery Account is comprised of 22
Subaccounts. The assets of
each Subaccount are invested in a corresponding Fund
listed as follows:
THE PRUDENTIAL SERIES FUND, INC. MFS VARIABLE
INSURANCE TRUST
Money Market Portfolio Emerging Growth
Series
Diversified Bond Portfolio Research Series
Government Income Portfolio OCC ACCUMULATION
TRUST
Conservative Balanced Portfolio Managed Portfolio
Flexible Managed Portfolio Small Cap Portfolio
High Yield Bond Portfolio T. ROWE PRICE
Stock Index Portfolio T. Rowe Price Equity
Series, Inc.,
Equity Income Portfolio Equity Income
Portfolio
Equity Portfolio T. Rowe Price
International Series, Inc.
Prudential Jennison Portfolio International Stock
Portfolio
Global Portfolio WARBURG PINCUS TRUST
AIM VARIABLE INSURANCE Post-Venture Capital
Portfolio
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
JANUS ASPEN SERIES
Growth Portfolio
International Growth Portfolio
All contractual and other obligations arising under
contracts
participating in the Discovery Account are general
corporate
obligations of Prudential, although Participants'
payments from the
Account will depend upon the investment experience
of the Account.
Significant Accounting Policies
Investments--The investments in shares of the Funds
are stated at the
net asset value of the respective portfolio.
Security Transactions--Realized gains and losses on
security
transactions are reported on an average cost basis.
Purchase and sale
transactions are recorded as of the trade date of
the security being
purchased or sold.
Distributions Received--Dividend and capital gain
distributions
received are invested in additional shares of the
Funds and are
recorded on ex-dividend date.
NOTE 2: Investment Information
The number of shares of each portfolio of the Fund,
the Net Asset
Value (NAV) per share for each portfolio held by the
Subaccounts of
the Discovery Account, and the aggregate cost of
investments in such
shares as of December 31, 1997 were as follows:
6
<PAGE>
Notes to Financial Statements of the
Discovery Account
<TABLE>
<CAPTION>
<S> C> <C> <C>
<C> <C>
Prudential Prudential Prudential
Prudential Prudential
Series Series Series
Series Series
Fund Fund Fund
Fund Fund
Money Diversified Government
Conservative Flexible
Market Bond Income
Balanced Managed
Number of Shares 803 497 54
379 2,498
NAV per Share $10 $11.02 $11.52
$14.97 $17.28
Cost at 12-31-97 $8,033 $5,486 $622
$6,393 $49,506
<CAPTION>
Prudential Prudential Prudential
Series Series Series
Prudential Prudential
Fund Fund Fund
Series Series
High Yield Stock Equity
Fund Fund
Bond Index Income
Equity Jennison
<S> <C> <C> <C>
<C> <C>
Number of Shares 2,490 644 550
946 1,737
NAV per Share $8.14 $30.22 $22.39
$31.07 $17.73
Cost at 12-31-97 $20,313 $19,543 $12,888
$30,048 $32,475
<CAPTION>
Prudential
Series AIM V.I.
Janus Aspen MFS
Fund Growth and AIM V.I.
Janus Aspen International Emerging
Global Income Value
Growth Growth Growth
<S> <C> <C> <C>
<C> <C> <C>
Number of Shares 787 585 829
250 482 291
NAV per Share $17.92 $18.87 $20.83
$18.48 $18.48 $16.13
Cost at 12-31-97 $14,808 $11,094 $18,294
$4,652 $8,806 $4,712
<CAPTION>
OCC OCC
T. Rowe T. Rowe
Accumulation Accumulation
Price Price Warburg Pincus
MFS Trust Trust
Equity International Post-Venture
Research Managed Small Cap
Income Stock Capital
<S> <C> <C> <C>
<C> <C> <C>
Number of Shares 478 512 1,076
969 150 4
NAV per Share $15.80 $42.38 $26.37
$18.59 $12.74 $11.06
Cost at 12-31-97 $7,679 $21,728 $27,881
$18,005 $1,946 $47
</TABLE>
NOTE 3: Expenses
A daily charge at an effective annual rate of 0.85%
of the average
participant account value of each Subaccount of the
Discovery Account
is paid to Prudential for administrative expenses
not provided by the
annual account charge. A daily charge at an
effective annual rate of
0.15% of the average participant account value of
each Subaccount of
the Discovery Account is paid to Prudential for
assuming mortality and
expense risks under the Contracts.
NOTE 4: Annual Account Charge
An additional administrative charge of up to $15,
the annual account
charge, is paid to Prudential on or about the last
day of each
calendar year and at the time of a full withdrawal.
The annual account
charge will be prorated for new Participants on a
monthly basis for
their first year of participation. The charge will
first be made
against the Participant Account Value under the
guaranteed interest
account (if available). If the Participant is not
invested in the
guaranteed interest account, or if the Participant
does not have enough
money in such an option to pay the charge, the
charge will then be made
against any one or of more the Subaccounts in which
the Participant is
invested.
NOTE 5: Withdrawal Charge
A withdrawal charge is imposed upon the withdrawal
of certain purchase
payments to compensate Prudential for sales and
other marketing
expenses. The maximum withdrawal charge is 5% on
contributions
withdrawn during the first year of participation.
The withdrawal
charge declines by 1% in each subsequent year until
it is 0% after the
fifth year. No withdrawal charge is imposed upon
contributions
withdrawn for any reason after five years of
participation in a
Program. In addition, no withdrawal charge is
imposed upon
contributions withdrawn to purchase an annuity under
a Contract, to
provide a death benefit, pursuant to a systematic
withdrawal plan, to
provide a minimum distribution payment, or in cases
of financial
hardship or disability retirement as determined
pursuant to provisions
of the employer's retirement arrangement. Further,
for all plans other
than IRAs, no withdrawal charge is imposed upon
contributions withdrawn
due to resignation or retirement by the Participant
or termination of
the Participant by the Contract-holder.
7
<PAGE>
NOTE 6: Taxes
The Discovery Account is not considered a separate
taxpayer for
purposes of the Internal Revenue Code. As
distinguished from most other
registered investment companies -- which are
separate taxpayers -- the
earnings of the Subaccounts invested in the Funds
are taxed as part of
the income of Prudential. As a result, the unit
value of the
Subaccounts has not been reduced by federal income
taxes.
NOTE 7: Unit Transactions
The number of units issued and redeemed during the
year ended December
31, 1997 was as follows:
1997
<TABLE>
<CAPTION>
Prudential Prudential
Prudential Prudential Prudential Prudential
Prudential
Series Series Series
Series Series Series Series
Fund Fund Fund
Fund Fund Fund Fund
Money Diversified
Government Conservative Flexible High Yield
Stock
Market Bond Income
Balanced Managed Bond Index
<S> <C> <C> <C>
<C> <C> <C> <C>
Units issued 819 543 60
565 4,297 1,954 1,891
Units redeemed 4 1 --
2 11 2 1
<CAPTION>
Prudential Prudential Prudential
Prudential
Series Series Series
Series AIM V.I.
Fund Fund Fund
Fund Growth and AIM V.I. Janus Aspen
Equity Income Equity Jennison
Global Income Value Growth
<S> <C> <C> <C>
<C> <C> <C> <C>
Units issued 1,175 3,332 3,548
1,890 1,123 1,738 462
Units redeemed 4 425 437
314 1 -- --
<CAPTION>
OCC
OCC T. Rowe
Janus Aspen NFS
Accumulation Accumulation T. Rowe Price
Warburg Pincus
International Emerging MFS
Trust Trust Price International
Post-Venture
Growth Growth Research
Managed Small Cap Equity Income Stock
Capital
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Units issued 942 470 780
2,137 3058 1,704 216
5
Units redeemed -- -- 1
2 277 -- -- --
</TABLE>
NOTE 8: Participant Loans
The minimum loan amount is as specified in the
Contract, or if not
specified, as determined by Prudential. The maximum
loan amount is the
lesser of (a) $50,000, reduced by the highest
outstanding balance of
loans during the one year period immediately
preceding the date of the
loan or (b) 50% of the value of the Participant's
vested interest under
a Contract. In the loan application, the
Contractholder (or in certain
cases, the Participant) designates the Subaccount(s)
from which the
loan amount is deducted. To repay the loan, the
Participant makes
periodic payments of interest plus a portion of the
principal. Those
payments are invested in the Subaccounts chosen by
the Participant. The
Participant may specify the Subaccounts from which
he may borrow and
into which repayments may be invested. If the
Participant does not
specify the Subaccounts from which the loan amount
is deducted, the
loan amount will be deducted from the participant
account value in
subaccounts.
The maximum loan amount referred to above is imposed
by federal tax
law. That limit, however, applies to all loans from
any qualified plan
of the employer. Since Prudential cannot monitor a
Participant's loan
activity relating to other plans offered to
Participants, it is the
Participant's responsibility to do so. Provided that
a Participant
adheres to these limitations, the loan will not be
treated as a taxable
distribution. If, however, the Participant defaults
on the loan by, for
example, failing to make required payments, the
defaulted loan amount
(as described in loan disclosure information
provided to a borrowing
Participant) will be treated as a taxable
distribution and Prudential
will send the appropriate tax information to the
Participant and the
Internal Revenue Service.
8
<PAGE>
Prudential charges a loan application fee of up to
$75, which is
deducted from the Participant Account at the time
the loan is
initiated. Prudential also charges up to $25 per
year as a loan
maintenance fee for record keepping and other
administrative services
provided in connection with the loan. This charge is
guaranteed not to
increase during the term of any loan and is not
greater than the
average expected cost of the services required to
maintain the loan.
The annualized loan maintenance charge will be
prorated based on the
number of full months that the loan is outstanding
and is generally
deducted quarterly. The loan maintenance charge will
first be made
against the Participant Account Value under the
guaranteed interest
account (if available). If the Participant is not
invested in the
guaranteed interest account, of if the Participant
does not have enough
money in such an option to pay the charge, the
charge will then be made
against any one or more of the Subaccounts in which
the Participant is
invested. For the period ended December 31, 1997 the
amount of
participant loans that was withdrawn from the
Subaccounts is follows:
1997
<TABLE>
<CAPTION>
Prudential Prudential
Prudential Prudential Prudential Prudential
Prudential
Series Series Series
Series Series Series Series
Fund Fund Fund
Fund Fund Fund Fund
Money Diversified
Government Conservative Flexible High Yield
Stock
Market Bond Income
Balanced Managed Bond Index
<S> <C> <C> <C>
<C> <C> <C> <C>
Loans -- -- --
- -- -- -- --
Repayments -- -- --
- -- -- -- --
<CAPTION>
Prudential Prudential Prudential
Prudential
Series Series Series
Series AIM V.I.
Fund Fund Fund
Fund Growth and AIM V.I. Janus Aspen
Equity Income Equity Jennison
Global Income Value Growth
<S> <C> <C> <C>
<C> <C> <C> <C>
Loans -- 4,171 4,225
2,785 -- -- --
Repayments -- -- --
- -- -- -- --
<CAPTION>
OCC
OCC T. Rowe
Janus Aspen NFS
Accumulation Accumulation T. Rowe Price
Warburg Pincus
International Emerging MFS
Trust Trust Price International
Post-Venture
Growth Growth Research
Managed Small Cap Equity Income Stock
Capital
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Loans -- -- -- -
- - 2,796 -- --
- --
Repayments -- -- -- -
- - -- -- --
- --
</TABLE>
9
<PAGE>
Notes to Financial Statements of Discovery Account
Note 10: Condensed Financial Information
Accumulation Unit Values for Discovery Account
<TABLE>
<CAPTION>
<S> <C> <S>
Prudential Series Fund Prudential
Series Fund
Money Market 07/31/97* Stock Index
07/31/97
to
to
12/31/97
12/31/97
Beginning of period (rounded) $10.00 Beginning of
period (rounded) $10.00
End of period (rounded) $10.08 End of
period (rounded) $10.29
Accumulation Units
Outstanding at end of period 815 Outstanding
at end of period 1,890
Prudential Series Fund 07/31/97 Prudential
Series Fund
Diversified Bond to Equity Income
07/31/97
12/31/97
to
12/31/97
Beginning of period (rounded) $10.00 Beginning of
period (rounded) $10.00
End of period (rounded) $10.07 End of period
(rounded) $10.48
Accumulation Units
Outstanding at end of period 542 Outstanding
at end of period 1,171
Prudential Series Fund Prudential
Series Fund
Government Income 07/31/97 Equity
07/31/97
to
to
12/31/97
12/31/97
Beginning of year (rounded) $10.00 Beginning of
year (rounded) $10.00
End of period (rounded) $10.27 End of period
(rounded) $10.12
Accumulation Units Accumulation
Units
Outstanding at end of period 60 Outstanding
at end of period 2,907
Prudential Series Fund Prudential
Series Fund
Conservative Balanced 07/31/97 Jennison
07/31/97
to
to
12/31/97
12/31/97
Beginning of year (rounded) $10.00 Beginning of
year (rounded) $10.00
End of year (rounded) $10.03 End of period
(rounded) $9.87
Accumulation Units Accumulation
Units
Outstanding at end of year 563 Outstanding
at end of period 3,111
Prudential Series Fund Prudential
Series Fund
Flexible Managed 07/31/97 Global
07/31/97
to
to
12/31/97
12/31/97
Beginning of period (rounded) $10.00 Beginning of
period (rounded) $10.00
End of period (rounded) $9.99 End of period
(rounded) $8.95
Accumulation Units Accumulation
Units
Outstanding at end of period 4,286 Outstanding
at end of period 1,952
Prudential Series Fund AIM V.I.
High Yield Bond 07/31/97 Growth and
Income 07/31/97
to
to
12/31/97
12/31/97
Beginning of period (rounded) $10.00 Beginning of
period (rounded) $10.00
End of period (rounded) $10.37 End of period
(rounded) $9.79
Accumulation Units Accumulation
Units
Outstanding at end of period 1,952 Outstanding
at end of period 1,122
</TABLE>
*Commencement of Operations
10
<PAGE>
Notes to Financial Statements of Discovery Account
Note 10 (cont'd): Condensed Financial Information
Accumulation Unit Values for the Discovery Account
<TABLE>
<CAPTION>
<S> <C> <S>
AIM V.I. OCC
Accumulation Trust
Value 07/31/97 Managed
07/31/97
to
to
12/31/97
12/31/97
Beginning of period (rounded) $10.00 Beginning of
period (rounded) $10.00
End of period (rounded)$9.89 End of period
(rounded) $10.13
Accumulation Units
Outstanding at end of period 1,738 Outstanding
at end of year 2,135
Janus Aspen Growth OCC
Accumulation Trust
07/31/97 Small Cap
07/31/97
to
to
12/31/97
12/31/97
Beginning of period (rounded) $10.00 Beginning of
period (rounded) $10.00
End of period (rounded) $9.92 End of year
(rounded) $10.20
Accumulation Units Accumulation
Units
Outstanding at end of period 462 Outstanding
at end of year 2,781
Janus Aspen T. Rowe Price
International Growth 07/31/97 Equity Income
07/31/97
to
to
12/31/97
12/31/97
Beginning of year (rounded) $10.00 Beginning of
year (rounded) $10.00
End of year (rounded) $9.44 End of year
(rounded) $10.54
Accumulation Units Accumulation
Units
Outstanding at end of year 942 Outstanding
at end of year 1,704
MFS T. Rowe Price
Emerging Growth 07/31/97 International
Stock 07/31/97
to
to
12/31/97
12/31/97
Beginning of year (rounded) $10.00 Beginning of
year (rounded) $10.00
End of year (rounded) $9.95 End of year
(rounded) $8.92
Accumulation Units Accumulation
Units
Outstanding at end of year 470 Outstanding
at end of year 216
MFS Warburg
Pincus
Research 07/31/97 Post-Venture
Capital 07/31/97
to
to
12/31/97
12/31/97
Beginning of year (rounded) $10.00 Beginning of
year (rounded) $10.00
End of year (rounded) $9.67 End of year
(rounded) $10.08
Accumulation Units
Outstanding at end of year 779 Outstanding
at end of year 5
*Commencement of Operations
11
<PAGE>
Report of Independent Accountants
To the Contract Holders of
The Prudential Discovery Select Group Variable Contract
Account
and the Board of Directors of
The Prudential Insurance Company of America
In our opinion, the accompanying statements of net assets
and the related
statements of operations and of changes in net assets
present fairly, in all
material respects, the financial position of Prudential
Series Fund Money
Market Subaccount, Prudential Series Fund Diversified Bond
Subaccount,
Prudential Series Fund Government Income Subaccount,
Prudential Series Fund
Conservative Balanced Subaccount, Prudential Series Fund
Flexible Managed
Subaccount, Prudential Series Fund High Yield Bond
Subaccount, Prudential
Series Fund Stock Index Subaccount, Prudential Series Fund
Equity Income
Subaccount, Prudential Series Fund Equity Subaccount,
Prudential Series Fund
Jennison Subaccount, Prudential Series Fund Global
Subaccount, AIM V.I. Growth
and Income Subaccount, AIM V.I. Value Subaccount, Janus
Aspen Growth
Subaccount, Janus Aspen International Growth Subaccount, MFS
Emerging Growth
Subaccount, MFS Research Subaccount, OCC Accumulation Trust
Managed Subaccount,
OCC Accumulation Trust Small Cap Subaccount, T. Rowe Price
Equity Income
Subaccount, T. Rowe Price International Stock Subaccount and
Warburg Pincus
Post-Venture Capital Subaccount (separately managed
portfolios of The
Prudential Discovery Select Group Variable Contract Account;
the "Account") at
December 31, 1997, and the results of each of their
operations and the changes
in each of their net assets for the period July 31, 1997
(commencement of
operations) through December 31, 1997, in conformity with
generally accepted
accounting principles. These financial statements are the
responsibility of the
Account's management; our responsibility is to express an
opinion on these
financial statements based on our audits. We conducted our
audits of these
financial statements in accordance with generally accepted
auditing standards
which require that we plan and perform the audit to obtain
reasonable assurance
about whether the financial statements are free of material
misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles
used and significant estimates made by management, and
evaluating the overall
financial statement presentation. We believe that our
audits, which included
confirmation of fund shares owned at December 31, 1997 with
the transfer agent,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 26, 1998
</TABLE>
