THE
PRUDENTIAL
MEDLEY PROGRAM
[GRAPHIC OMITTED]
SEMI-ANNUAL REPORT TO
PARTICIPANTS
JUNE 30, 2000
[LOGO] PRUDENTIAL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
751 BROAD STREET
NEWARK, NJ 07102-3777
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NJ 07102-2992
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<TABLE>
<CAPTION>
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THE PRUDENTIAL MEDLEY PROGRAM
Average Annual Total Return as of June 30, 2000
Six One Five Ten Inception
Months(6) Year year year Date
--------- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
VCA-10 CAPITAL GROWTH ACCOUNT
Without Sales Charge(1) -0.41% -9.43% 12.48% 12.89% 8/82
With Maximum Sales Charge(2) -7.65% -15.67% 12.07% 12.80% 8/82
VCA-11 MONEY MARKET ACCOUNT(3)
Without Sales Charge(1) 2.64% 4.98% 4.79% 4.50% 8/82
With Maximum Sales Charge(2) -4.48% -1.13% 4.36% 4.43% 8/82
The current seven-day yield on
June 30, 2000 was 5.78%
VCA-24(4)
WITHOUT SALES CHARGE(1)
Diversified Bond Account 2.45% 3.01% 5.16% 6.97% 5/83
Government Income Account 4.04% 3.56% 5.01% 6.61% 5/89
Conservative Balanced Account 0.96% 3.14% 9.66% 9.23% 5/83
Flexible Managed Account 0.23% 0.99% 11.3% 10.79% 5/83
Stock Index Account(5) -0.91% 6.16% 22.48% 16.49% 10/87
Equity Account -5.85% -8.65% 13.23% 13.54% 5/83
Global Account -1.35% 32.78% 18.90% 12.63% 9/88
WITH MAXIMUM SALES CHARGE(2)
Diversified Bond Account -4.56% -3.01% 4.82% 6.96% 5/83
Government Income Account -2.96% -2.45% 4.68% 6.61% 5/89
Conservative Balanced Account -6.09% -2.90% 9.35% 9.21% 5/83
Flexible Managed Account -6.82% -5.06% 11.00% 10.77% 5/83
Stock Index Account(5) -7.97% 0.11% 22.27% 16.47% 10/87
Equity Account -13.01% -14.81% 12.89% 13.49% 5/83
Global Account -8.35% 26.77% 18.70% 12.63% 9/88
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These returns represent past performance. Investment return and principal value
will fluctuate so that units, upon redemption, may be worth more or less than
their original cost.
(1) The results shown are after the deduction of all expenses and contract
charges including investment management and administrative fees, but do not
include the effect of any deferred sales charges. All total returns are for
the periods indicated and are calculated based on changes in unit values.
Past performance cannot guarantee comparable future results. Source:
Prudential
(2) The results shown are calculated in the same manner as those shown above
and in addition reflect the deduction of the following maximum deferred
sales charges: "1 Year", 6%; "5 Year", 2%; and "10 Year or Since
Inception", 0%. The performance results also reflect the impact of the $30
annual contract fee under The MEDLEY Program. Past performance cannot
guarantee comparable future results.
(3) For current yields on the Money Market Account, please call 1-800-458-6333.
An investment in the Account is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. There can be
no assurance that the Account will be able to maintain a stable unit value.
It is possible to lose money by investing in the Account.
(4) The Prudential Variable Contract Account-24 (VCA-24) was first offered on
May 1, 1987 (Stock Index Account on May 2, 1988, Government Income and
Global Accounts on May 1, 1991). However, the underlying investment
portfolios existed under other Prudential programs before they became part
of The MEDLEY Program. For purposes of comparison, the returns have been
recalculated to reflect a hypothetical return as if they were part of The
MEDLEY Program from each portfolio's inception, using charges applicable to
The MEDLEY Program.
(5) Standard & Poor's, S&P, Standard & Poor's 500, and 500 are trademarks of
McGraw-Hill, Inc. and have been licensed for use by The Prudential
Insurance Company of America and its affiliates and subsidiaries. The
Account is not sponsored, endorsed, sold or promoted by S&P and S&P makes
no representation regarding the advisability of investing in the Account.
(6) Six month returns are not annualized.
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TABLE OF CONTENTS
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I Letter to Medley Participants ....................................... 3
Market Commentary ................................................... 4
II VCA-10 Capital Growth Account ....................................... 8
Financial Statements ................................................ 10
III VCA-11 Money Market Account ......................................... 17
Financial Statements ................................................ 19
IV The Prudential Series Fund, Inc. VCA-24 ............................. 26
Diversified Bond Portfolio .......................................... 27
Government Income Portfolio ......................................... 29
Conservative Balanced Portfolio ..................................... 31
Flexible Managed Portfolio........................................... 33
Stock Index Portfolio ............................................... 35
Equity Portfolio .................................................... 37
Global Portfolio..................................................... 39
V The Prudential Series Fund, Inc.
Financial Statements ................................................ A1
Schedule of Investments.............................................. B1
Notes to Financial Statements........................................ C1
Financial Highlights ................................................ D1
Report of Independent Accountants.................................... E1
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus for The MEDLEY Program.
The report is for the information of persons participating in The Prudential
Variable Contract Account-10 (VCA-10), The Prudential Variable Contract
Account-11 (VCA-11), and The Prudential Variable Contract Account-24 (VCA-24),
The MEDLEY Program. VCA-10, VCA-11 and VCA-24 are distributed by Prudential
Investment Management Services LLC, a subsidiary of The Prudential Insurance
Company of America. VCA-10, VCA-11 and VCA-24 are group annuity insurance
products issued by The Prudential Insurance Company of America, Newark, NJ.
This report includes the financial statements of the VCA-10, Capital Growth
Account; VCA-11, Money Market Account; and The Prudential Series Fund, Inc.
This report does not include separate account financials for the VCA-24
Subaccounts. If you would like separate account financial statements as of
December 31, 1999, please call the telephone number on the back of this report.
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LETTER TO CONTRACT OWNERS
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Six Months Ended June 30, 2000
CHAIRMAN
JOHN R. STRANGFELD
"The first six months of the new century were among the most tumultuous in
recent market history."
DEAR CONTRACT OWNER:
This Semiannual Report reviews the investment strategies and performance of the
portfolios in your variable life insurance or variable annuity contract
available through Prudential.
LOOKING BACK
The first six months of the new century were among the most tumultuous in recent
market history. The seemingly endless upward trajectory of new economy
stocks--those in the technology, media and telecommunications industries--came
to an abrupt halt in late March. Signs that inflation might be rising in the
U.S., continued interest rate hikes, and high stock valuations caused investors
to flee the technology-laden Nasdaq market in droves. A long-anticipated U.S.
market correction was underway, and its impact was felt across the global
marketplace.
MAINTAIN A LONG-TERM OUTLOOK
In summary, it was an eventful period in the financial markets--one that we
believe magnifies the value of several time-tested investment fundamentals.
First, maintaining a long-term outlook for your investments is vital. Market
fluctuations will occur, and reacting to short-term events is often ill-advised.
As a case in point, we've already seen a rebound in several sectors that
performed poorly during the second quarter of the year.
DIVERSIFICATION IS KEY
Second, the financial markets are a moving target. As such, many investors find
themselves buying at market highs when they gravitate to the
strongest-performing sectors. A more sound approach is to diversify your
portfolio across a wide variety of investments. And take special care to
rebalance your portfolio should your asset allocation strategy veer from its
original course.
RELY ON YOUR FINANCIAL PROFESSIONAL
Third, if you find yourself tempted to react to the latest market gyrations,
turn to your financial professional for guidance. He or she can review your
overall goals and determine if changes to your portfolio are necessary. This is
particularly important during periods of extreme market volatility.
Sincerely,
/s/ John R. Strangfeld
John R. Strangfeld
Chairman,
The Prudential Series Fund, Inc. July 17, 2000
3
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EQUITY COMMENTARY
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June 30, 2000
Turbulence and change in equity market
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Not only did the first half of 2000 include some of the most turbulent days in
U.S. stock market history, there were dramatic reversals of fortune at other
time scales as well--by quarter and by month. Many of these reversals canceled
each other out, so that by the end of June the S&P 500 had only a small net loss
and the Russell 2000 Index of small-cap stocks only a modest gain.
The main market stories over this period were the net correction (downward) of
extended telecommunications stocks and the see saw like rise of health care,
power utilities and energy stocks. The technology sector skyrocketed up,
corrected, then moved ahead again in a sharp June advance. Cyclical
stocks--basic materials (such as paper and forest products and metals), consumer
cyclicals (such as retail, autos and hotels), and capital goods (such as
engineering and construction)--had steep declines. These trends were global in
scope (except for capital goods, which had a moderately good local currency
return in Europe that translated into a marginally positive return for
dollar-based investors).
The result was a net advantage over the six months for growth over value
investing except among small caps, where the most speculative technology stocks
fell so much in March through May that they couldn't catch up in their June
surge. Small-cap (the Russell 2000 sectors) energy (excluding integrated oil
companies) and healthcare stocks had excellent catch-up returns of 52% and 36%,
respectively. Overall, midcap stocks had the best performance of any market
capitalization class, with midcap growth stocks the only equity market
capitalization range with strong returns.
Performance of Key Stock Market Indexes
Through June 30, 2000
[GRAPH]
S&P/ S&P/ Russel Russell MSCI MSCI MSCI
S&P BARRA BARRA 2000 2000 World Free Europe Japan
500 Value Growth Value Growth Index* Index* Index*
-0.43% -4.07% 2.63% 5.85% 1.23% -2.56% -3.08% -5.37%
Strong economic growth creates fears and opportunities
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This pattern was driven by rapid U.S. economic growth, which led the Federal
Reserve to continue to raise interest rates. Rising interest rates hurt the
stocks of rapidly growing companies whose value lies in their future earnings:
The present value of such future earnings is reduced in a rising interest rate
environment. Moreover, the fear that rising interest rates would cut off
economic growth hurt both growth and cyclical stocks. Moreover, a growing global
imbalance of supply and demand for oil created a turnaround in energy. Oil
service companies performed quite well. A shortage of electricity generating
capacity in the United States, as well as low inventories of the natural gas
that is burned by many new generation plants, strengthened the domestic utility
sector stocks overall, although some companies remained vulnerable to rising
fuel prices.
A global downturn
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Only the Nordic region provided moderately good returns, led by Sweden. Other
than that, the picture was generally bleak except for a few scattered individual
countries with good returns: Canada, France, Malaysia, Israel, Venezuela and the
Czech Republic.
*In U.S. currency.
Sources: Morgan Stanley Capital International, Standard & Poor's, Frank Russell
Company, and Prudential as of June 30, 2000. All indexes are unmanaged and
provide an indication of stock price movements. Past performance is not
indicative of future results. Investors cannot invest directly in an index.
Standard & Poor's 500 Index comprises 500 large, established, publicly traded
stocks. Morgan Stanley Capital International Europe Index comprises
approximately 620 European companies. Morgan Stanley Capital International
Europe, Australia, Far East Index is a weighted, unmanaged index of performance
that reflects stock price movements in Europe, Australasia, and the Far East.
S&P/Barra Value Index contains companies within the S&P 500 with lower
price-to-book ratios. S&P/Barra Growth Index contains companies within the S&P
500 with higher price-to-book ratios. Russell 2000 Value Index measures the
performance of those Russell 2000 companies with lower price-to-book ratios.
Russell 2000 Growth Index measures the performance of those Russell 2000
companies with higher price-to-book ratios. Morgan Stanley Capital International
World Free Index contains those companies in the MSCI World Index that reflect
actual buyable opportunities for the nondomestic investor by taking into account
local market restrictions on share ownership by foreigners. These indexes are
calculated in U.S. dollars, without dividends reinvested. Morgan Stanley Capital
International Japan Index measures the performance of Japan's stock market.
The views expressed are as of July 17, 2000, and are subject to change based on
market and other conditions.
IFS-200001-A050472
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EQUITY OUTLOOK
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June 30, 2000
Stocks are at a fair value
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Our models show that overall stock prices are at about fair value on the basis
of today's earnings growth and interest rates. That means the markets should be
able to sustain ordinary rates of equity return (not the historically abnormal
returns of recent years) as long as earnings continue to grow and if interest
rates stabilize. One good sign is that downward revisions of earnings estimates
are less common this year than usual. Value investors are benefiting from the
recent trends toward stocks that are more defensive than most, but that also
have good growth prospects--such as drugs and utilities. Growth investors are
focused on long-term structural changes in the economy: wireless and broadband
telecommunications and the growth of the Internet companies. They tend to avoid
companies whose earnings are tied to the business cycle.
Internationally, the European economic recovery is also creating opportunities.
Moreover, the signs that China is serious about opening its economy bode well
for the industrialized countries in northern Asia that can export there: Korea,
Japan, Hong Kong, and Taiwan.
Stock selection key
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The discrepancies in pricing between value and growth stocks are smaller than
previously, and stock selection is likely to become more important than sector
differences. Technology companies will find investment capital more expensive.
Companies with strong balance sheets, positive cash flows, or access to cash
should still be able to grow. In sectors dependent upon commodity prices, there
may be substantial differences between firms exposed to rising prices and those
whose supplies are locked in. Investment opportunities generally are likely to
be more scattered than in the sector-focused markets we have had recently.
NOTE: Past performance is not a guarantee of future results. There is no
assurance that any of the forecasts discussed will be attained.
Performance of U.S. Market Sectors Through June 30, 2000
Year to Date
<TABLE>
<CAPTION>
[GRAPH]
Capital Communication Basic Consumer Consumer
Technology Energy Goods Utilities Services Materials Cyclicals Healthcare Staples Financials Transportation
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.0% 4.7% -1.2% 15.3% -15.1% -24.8% -18.9% 23.7% -2.4% -0.5% 5.0%
</TABLE>
S&P 500 Index Sector Weightings
[GRAPH]
Technology 32.8%
Financials 12.7%
Healthcare 11.6%
Consumer Staples 10.3%
Consumer Cyclicals 7.4%
Capital Goods 8.0%
Communication Services 6.8%
Energy 5.4%
Basic Materials 1.9%
Utilities 2.5%
Transportation 0.6%
Source: Standard & Poor's as of June 30, 2000. The S&P 500 Index is an unmanaged
index of stocks that provides an indication of stock price movements. Past
performance is not indicative of future results. Investors cannot invest
directly in an index.
IFS-200001-A050472
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BOND COMMENTARY
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June 30, 2000
A good first half for U.S. Treasuries
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Prices of most U.S. Treasury securities climbed during the first half of 2000,
leaving prices of other U.S. fixed-income securities far behind. Favorable
technical factors and moderating economic growth sparked a rally primarily in
longer-term Treasuries.
Initially, though, Treasuries began 2000 on a weak note. The U.S. economy had
expanded rapidly in late 1999. Investors therefore feared the Federal Reserve
might repeatedly increase short-term interest rates to prevent the economy from
exceeding what the central bank believes to be its speed limit. In anticipation,
investors required higher bond yields, which forced bond prices lower.
However, the sell-off soon turned into a rally, at least for longer-term
Treasuries. The U.S. Treasury Department cut back issuance of its securities
because a growing federal budget surplus has reduced its borrowing needs. It
also commenced a program to buy back up to $30 billion of older, mostly
longer-term Treasuries by the end of 2000. Taken together, these two
developments set off a stampede to buy longer-term Treasuries.
The enthusiasm for longer-term Treasuries faded as it became clear the Fed's
quarter-point rate hikes in February and March would be followed by a half-point
increase in mid May. Some investors worried the Fed might prove too heavy handed
and trigger an economic downturn that would sap corporate earnings. Not
surprisingly, prices of investment-grade and high-yield U.S. corporate bonds got
hit even harder than Treasuries during this time. High-yield (junk) bonds also
suffered, because a growing number of companies failed to make interest and
principal payments on their junk bonds in May.
Not until reports began to show that the economy was gradually losing steam did
prices of U.S. fixed-income securities once again turn higher. Signs of
moderating economic growth might mean the Fed would soon be finished increasing
rates. Amid this change in market sentiment, prices in U.S. debt securities
markets gained in June. Nevertheless, among U.S. bond markets, the Treasury
market finished in first place for the six-month period, helped by the strong
performance of its longer-term securities earlier in the year.
But an even better first half for emerging market bonds
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Although Treasuries performed impressively, the top fixed-income market for the
first half of 2000 was emerging market bonds, based on Lehman Brothers indexes.
They returned a solid 7.59% as economic fundamentals in several developing
countries proved stronger than expected. Rising prices of oil, gas, and other
natural resources strengthened the economies of some developing nations that
export these commodities. Improving economic conditions in turn boosted their
foreign currency reserves. Moreover, some countries cut their financing costs by
swapping new bonds for older debt securities. These positive developments and
others attracted investors to emerging market bonds.
Among nations with developed economies, the government bond markets of
Australia, Canada and the United Kingdom posted attractive returns on a local
currency basis but lower returns when expressed in U.S. dollars. Their central
banks, which have repeatedly increased short-term rates to keep their respective
economies from overheating, are widely believed to be near the end of their
current tightening cycles.
Performance of Fixed-Income Market Indexes Through June 30, 2000
<TABLE>
<CAPTION>
Global U.S. Mortgage- Emerging U.S. Aggregate U.S. Corp. U.S. Corporate
(U.S. dollar) Index Backed Securities Markets U.S. Treasuries Index Invest. Grade U.S. Municipals High Yield
<S> <C> <C> <C> <C> <C> <C> <C>
-0.08% 3.67% 7.59% 5.37% 3.99% 2.68% 4.48% -1.21%
</TABLE>
Source: Lehman Brothers as of June 30, 2000. The Lehman Brothers indexes are
unmanaged indexes of bonds that provide an indication of bond price movements.
Past performance is not indicative of future results. Investors cannot invest
directly in an index.
IFS-200001-A050472
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BOND OUTLOOK 2000
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June 30, 2000
Current cycle of Fed rate hikes may be nearly over
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The commonly accepted wisdom holds that increases in short-term interest rates
hurt bonds. However, the Federal Reserve's unusually large half-point rate hike
in May 2000 might benefit U.S. fixed-income markets--at least in the long run.
This could prove true if the Fed's largest rate increase in more than five years
proves to be a signal that it has nearly completed its current round of
tightening monetary policy.
Since June 1999, the U.S. central bank has raised rates six times. The first
five were quarter-point rate hikes and the sixth was for half of a percentage
point. Taken together, these moves lifted the federal funds rate (the rate U.S.
banks charge each other for overnight loans) to 6.50%, its highest level since
January 1991.
While rates remained unchanged after its latest meeting in June 2000, the U.S.
central bank warned more rate hikes could follow, because it is not convinced
that recent indications of an economic slowdown will last. The implied yield on
federal funds futures contracts indicates the Fed is expected to raise
short-term rates by another quarter of a percentage point later this year.
We too believe the central bank's current series of rate hikes is just about
over. We expect inflation to taper off as U.S. economic activity continues to
moderate in coming months, lessening the need for further moves by the Fed.
We see good value in the U.S. high-yield bond market
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Historically, bond returns have been strong in the 12-month period following the
completion of a Fed tightening cycle. An examination of 12-month returns as
measured by the Lehman Aggregate Index shows U.S. bonds posted double-digit
returns after the end of each of the last six Fed tightening cycles. Although we
do not expect U.S. bond markets to perform as strongly this time around, we
nonetheless see room for improvement, particularly in the market for high-yield
(junk) corporate bonds.
Compared with the yield on 10-year U.S. Treasuries, junk bond yields earlier in
the year rose to their highest levels in nearly a decade. The huge difference in
yields partly reflects the scarcity value of Treasuries. The supply of
Treasuries is shrinking because growing federal budget surpluses have reduced
the government's need to borrow.
But the large gap in yields also occurred because volatile stock prices and an
increase in the junk bond default rate hurt demand for high-yield bonds.
Bond investors were more cautious about lending money to companies whose market
values were fluctuating wildly. Like stock investors, they were concerned about
the impact of a slowdown on corporate earnings. However, the economy is not
expected to slip into a recession, and investor cash flows into junk bond mutual
funds turned positive in the last two weeks of June. This may herald a change in
trend.
The trend had been downhill as net flows into bond mutual funds turned strongly
negative early in the year. Looking back, retail investors left bond funds in
droves in 1987 and 1994 before substantial bull markets began, according to data
by International Strategy and Investment (ISI) and Lehman Brothers. In the same
vein, an ISI survey showed institutional investors have not been this bearish on
bonds since the end of the 1994 and 1996 bear markets.
Investors that return to the junk bond market will find yields at very
attractive levels. Both the nominal yield and the real yield (yield minus the
inflation rate) have been at such high levels only once or twice in the past ten
years, based on data from Lehman Brothers.
Municipal bond yields are also attractive. Thirty-year insured munis rated AAA
are yielding roughly 97% as much as 30-year Treasury bonds. Although prices of
municipal bonds have already gained this year, we believe they will rise further
if a continued light supply of tax-exempt securities meets with strong demand
from investors.
Note: Past performance is not a guarantee of future results. There is no
assurance that any of the forecasts discussed will be attained.
IFS-200001-A050472
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VCA-10 Capital Growth Account
June 30, 2000
INVESTMENT GOAL
Long term growth of capital.
TYPES OF INVESTMENTS
Primarily stocks of a diversified group of major established companies in a
variety of industries.
INVESTMENT STYLE
This Account uses a "value" investment approach to companies that are
attractively priced relative to book value, earnings, discretionary cash flow,
sales and other measures of value.
[Chart]
1 The Account performance results are after the deduction of all expenses and
contract charges including investment management and administrative fees,
but do not include the effect of any sales charges. All total returns are
for the periods indicated and are calculated based on changes in unit
values. Past performance can-not guarantee comparable future results.
Source: Lipper.
Investment return and principal value of the Account will fluctuate
resulting in a value which may at any time, including the time of the
withdrawal of the cash value, be more or less than the total principal
investment made.
2 The S&P 500 is a capital-weighted index representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends but does not reflect the payment of
transaction costs and advisory fees associated with an investment in the
Account. The securities that comprise the S&P 500 may differ substantially
from the securities in the Account. The S&P 500 is not the only index that
may be used to characterize performance of this Account, and other indices
may portray different comparative performance. Investors cannot invest
directly in an index.
3 The Lipper Variable Insurance Products (VIP) Growth Average is calculated
by Lipper Analytical Services, Inc., and reflects the investment return of
certain portfolios underlying variable life and annuity products. These
returns are net of investment fees and fund expenses but not product
charges.
4 Six month returns are not annualized.
Performance Summary
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Average Annual Returns
Through June 30, 2000(4) Six Months 1-Year 3-Year 5-Year 10-Year
-------------------------- ---------- ------ ------ ------ -------
Capital Growth Account(1) -0.41 -9.43% 3.63% 12.48% 12.89%
S&P 500(2) -0.43 7.24% 19.67% 23.80% 17.79%
Lipper Multi-Cap Value
Funds Average(3) -0.47 -3.99% 7.78% 14.20% 12.90%
--------------------------------------------------------------------------------
VCA-10 Capital Growth Account inception date: 8/82.
During the first half of 2000, the restructuring
(see Strategy Session for details) of your Account progressed, bringing its
industry profile closer to that of the S&P 500. As a result, the Account was
able to provide a return in line with both the S&P 500 Index and the Lipper
Multi-Cap Value Fund Average, (-0.41%, -0.43%, and -0.47%, respectively) through
a very volatile market. Although technology stocks were still underrepresented
in the Account, the excellent returns on those it did hold more than compensated
for the underweighting. In addition, it had a strong focus on energy stocks,
which had excellent returns, on average. Its healthcare holdings also added
substantially to its performance. The Account's focus on industrial stocks was
considerably reduced, but its position was still somewhat overweighted compared
with the overall market, and these stocks lost ground.
Performance Review
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TECHNOLOGY AND TELECOMMUNICATIONS MIXED We were able to add to the Account's
technology holdings after these stocks had come down somewhat in price. Two of
our semiconductor companies, Micron Technology and National Semiconductor, had
excellent returns, helped by strong demand for computer chips. Hewlett-Packard
and Harris (a telecommunications equipment company) also contributed to our
strong technology performance. We fared less well in the software and services
group, including Unisys, Computer Associates International and Electronic Data
Systems. This sector underwent a sharp decline. So did the telecommunications
services sector, which corrected sharply from gains in 1999. Loral Space and
Communications (satellite wireless) and Alltel were among our worst performers.
WE FARED BEST IN ENERGY We also substantially increased our energy holdings at a
n advantageous time. We anticipated the tight oil and natural gas markets,
overweighting energy exploration and natural gas pipelines companies. These
energy-related firms--notably Devon Energy, Baker Hughes, Coastal, and
PECO--made substantial contributions to our return.
BASIC MATERIALS DROPPED Our paper companies and aluminum stocks had a strong
rally early in 1999, but they started to drop in price when the Federal Reserve
began to raise interest rates and continued to fall in 2000. The performance of
basic materials stocks is strongly linked to economic cycles, and investors
feared that rising interest rates would choke off economic growth. Our shares of
Georgia-Pacific, Mead, and Alcoa declined.
8
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Strategy Session
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WE ARE GIVING GREATER WEIGHT TO GROWTH POTENTIAL. During the fourth quarter of
1999, a new team of portfolio managers took over management of the Account. They
will continue to manage it in a value style, but they will give greater
consideration to a company's capacity for long-term earnings growth.
Nonetheless, they expect the Account to benefit when today's huge disparities in
measures of value move closer to historical levels. For example, the price to
earnings ratio (P/E) of stocks in the Standard and Poor's 500/ Barra Growth
Index on July 31 was 2.6 times that of those in the Barra Value Index, compared
with only 1.5 times five years ago. (The difference in P/E was 29.7 in 2000
versus 7.0 in 1995.
The Account will be kept much closer to the economic sector weights of the S&P
500 than it has been in the past. Moreover, it will tend to own
large-capitalization companies like those that make up the S&P 500. However,
within these limits, the account will favor stocks that the managers believe to
be underpriced for their capacity for earnings growth, their cash flow, and
their assets.
Outlook
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"We are changing the management style of the Account somewhat. It will still be
a value style, which has an excellent long-term history, but it will not be so
tightly focused on the price of a share. We will take into account a company's
historical earnings growth rate and its potential for further growth as well. As
the market swings from favoring one investment style to another, these changes
should reduce the volatility of the Account's return.
"The advantage that growth-style investing has had over the past few years has
been unprecedented. In 2000, many excellent growth stocks have had major
corrections (price declines), creating opportunities to build our growth
holdings at bargain prices."
PORTFOLIO COMPOSITION
Cash 0.67%
Utility 12.84%
Energy 10.48%
Consumer Cyclical 2.59%
Consumer Growth 23.44%
Technology 21.99%
Finance 16.11%
Industrial 11.88%
Source: Prudential. Holdings are subject to change.
TOP TEN HOLDINGS
Coastal Corp 2.7%
Eastman Kodak Co. 2.5%
Micron Tech Inc 2.4%
Baker Hughes 2.4%
Unitedhealth Group 2.3%
Royal Dutch 2.1%
Lockheed Martin Corp. 2.1%
Convergys Corp. 2.0%
Peco Energy Co. 2.0%
Mediaone Group Inc. 2.0%
Source: Prudential. Holdings are subject to change.
9
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS FOR VCA-10
INCOME AND CAPITAL CHANGES PER ACCUMULATION UNIT*
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE YEAR)
(UNAUDITED)
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
============================================================================================
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME $ .0552 $ .1232 $ .0956 $ .0757 $ .0657 $ .0609
EXPENSES
For investment management fee (.0083) (.0172) (.0177) (.0154) (.0118) (.0094)
For administrative expenses (.0250) (.0513) (.0530) (.0461) (.0354) (.0282)
--------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .0219 . 0547 .0249 .0142 .0185 .0233
CAPITAL CHANGES
Change in net realized gain
on investments .229 .2537 .8002 1.2761 .5085 .3850
Net change in unrealized
appreciation (depreciation)
on investments (.2795) (.2814) (1.0426) .3841 .5682 .4744
--------------------------------------------------------------------------------------------
Net Increase (Decrease) in Unit
Accumulation Value (.0279) .027 (0.2175) 1.6744 1.0952 .8827
Accumulation Unit Value
Beginning of period 6.8222 6.7952 7.0127 5.3383 4.2431 3.3604
--------------------------------------------------------------------------------------------
End of period $6.7943 $6.8222 $6.7952 $7.0127 $5.3383 $4.2431
--------------------------------------------------------------------------------------------
RATIO OF EXPENSES TO
AVERAGE NET ASSETS** 1.00%+ 1.00% 1.00% 1.00% 1.00% 1.00%
--------------------------------------------------------------------------------------------
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS** .65%+ .79% .36% .24% .39% .61%
--------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 35% 82% 49% 47% 52% 45%
Number of Units Outstanding
for Participants at end of
period (000's omitted) 54,482 63,330 80,431 83,261 91,532 81,817
--------------------------------------------------------------------------------------------
* Calculated by accumulating the actual per unit amounts daily.
** These calculations exclude Prudential's equity in VCA-10.
+ Annualized
The above table does not reflect the annual administration charge, which does
not affect the Accumulation Unit Value. This charge is made by reducing
Participants' Accumulation Accounts by a number of Accumulation Units equal in
value to the charge.
</TABLE>
See Notes to Financial Statements
10
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF VCA-10
STATEMENT OF NET ASSETS AS OF JUNE 30, 2000
(UNAUDITED)
COMMON STOCK VALUE COMMON STOCK VALUE
INVESTMENTS SHARES [NOTE 2A] INVESTMENTS SHARES [NOTE 2A]
--------------------------------------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AEROSPACE/DEFENSE - 2.1% ELECTRONICS - 8.2%
Lockheed Martin Corp. 310,900 $ 7,714,206 Harris Corp. 146,000 $ 4,781,500
--------------------------------------------------------------- Micron Technology, Inc. (a) 102,200 8,999,987
AUTOS & TRUCKS - 1.5% Motorola, Inc. 153,700 4,466,906
General Motors Corp. 65,260 3,789,159 National Semiconductor Corp. (a) 73,980 4,198,365
Tower Automotive, Inc. (a) 147,600 1,845,000 SCI Systems, Inc. (a) 93,000 3,644,438
-------- ----------- Tellabs, Inc. (a) 61,900 4,236,281
212,860 5,634,159 -------- -----------
--------------------------------------------------------------- 630,780 30,327,477
CHEMICALS - 3.8% ---------------------------------------------------------------
Agrium, Inc. 179,200 1,545,600 FINANCIAL SERVICES - 5.2%
Crompton Corp. 302,700 3,708,075 Chase Manhattan Corp. 93,600 4,311,450
Cytec Industries, Inc. (a) 136,100 3,359,969 Citigroup, Inc. 102,198 6,157,430
Praxair, Inc. 149,600 5,600,650 Federal Home Loan
-------- ----------- Mortgage Corp. 62,800 2,543,400
767,600 14,214,294 Washington Mutual, Inc. 215,800 6,231,225
--------------------------------------------------------------- -------- -----------
COMPUTER - 3.9% 474,398 19,243,505
Compaq Computer Corp. 266,500 6,812,406 ---------------------------------------------------------------
Hewlett-Packard Co. 32,500 4,058,438 FOODS/BEVERAGES - 2.6%
International Business Diageo PLC SA ADR 164,100 5,835,806
Machines Corp. 33,600 3,681,300 Sara Lee Corp. 195,100 3,767,869
-------- ----------- -------- -----------
332,600 14,552,144 359,200 9,603,675
--------------------------------------------------------------- ---------------------------------------------------------------
COMPUTER RELATED - 7.5% HEALTHCARE - 9.6%
3Com Corp. (a) 86,400 4,978,800 Abbott Laboratories 147,285 6,563,388
Computer Associates HCA-The Healthcare Corp. 201,300 6,114,487
International, Inc. 116,000 5,937,750 Tenet Healthcare Corp. (a) 266,800 7,203,600
Compuware Corp. (a) 226,100 2,345,788 UnitedHealth Group, Inc. 100,600 8,626,450
Electronic Data Systems Corp. 100,400 4,141,500 Wellpoint Health Networks,
Microsoft Corp. (a) 57,400 4,592,000 Inc. (a) 101,300 7,337,919
NCR Corp. (a) 84,800 3,301,900 -------- -----------
Unisys Corp. (a) 181,900 2,648,919 817,285 35,845,844
-------- ----------- ---------------------------------------------------------------
853,000 27,946,657 INSURANCE - 8.1%
--------------------------------------------------------------- Berkley (W.R.) Corp. 86,000 1,612,500
CONSUMER SERVICES - 3.1% Conseco, Inc. 288,200 2,809,950
Cendant Corp. (a) 294,400 4,121,600 Loews Corp. 101,400 6,084,000
Convergys Corp. (a) 142,500 7,392,187 Old Republic International Corp. 214,150 3,533,475
-------- ----------- Torchmark Corp. 238,400 5,885,500
436,900 11,513,787 Trenwick Group, Inc. 238,250 3,469,516
--------------------------------------------------------------- XL Capital Ltd. (Class `A' Stock) 124,314 6,728,495
DIVERSIFIED CONSUMER PRODUCTS - 4.7% -------- -----------
Eastman Kodak Co. 153,100 9,109,450 1,290,714 30,123,436
Philip Morris Companies, Inc. 181,100 4,810,469 ---------------------------------------------------------------
Procter & Gamble Co. 62,500 3,578,125 MACHINERY - 0.6%
-------- ----------- Applied Power, Inc.
396,700 17,498,044 (Class `A' Stock) 64,600 2,164,100
--------------------------------------------------------------- ---------------------------------------------------------------
DIVERSIFIED MANUFACTURING - 1.1% MEDIA - 2.0%
Honeywell International, Inc. 120,300 4,052,606 MediaOne Group, Inc. (a) 110,600 7,313,425
--------------------------------------------------------------- ---------------------------------------------------------------
ELECTRONIC PARTS DISTRIBUTION - 0.3% METALS - 2.8%
Avnet, Inc. 22,100 1,309,425 Alcoa, Inc. 176,600 5,121,400
--------------------------------------------------------------- Broken Hill Proprietary Co.,
Ltd. ADR 160,600 3,814,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF VCA-10
STATEMENT OF NET ASSETS AS OF JUNE 30, 2000
(UNAUDITED)
PRINCIPAL
COMMON STOCK VALUE AMOUNT VALUE
INVESTMENTS SHARES [NOTE 2A] (OOO) [NOTE 2A]
--------------------------------------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
METALS - (cont'd) SHORT-TERM INVESTMENT - 0.5%
The Carbide/Graphite REPURCHASE AGREEMENT
Group, Inc. (a) 351,400 $ 1,405,600 Bear, Stearns & Co., Inc., 6.53%
-------- ------------ dated 6/30/00, due 7/03/00 in the
688,600 10,341,250 amount of $1,992,083 (cost
--------------------------------------------------------------- $1,991,000), value of the
OFFICE EQUIPMENT & SUPPLIES - 1.3% collateral including accrued
Xerox Corp. 237,700 4,932,275 interest - $2,041,357 $1,991 $1,991,000
--------------------------------------------------------------- ---------------------------------------------------------------
OIL & GAS - 10.8% TOTAL INVESTMENTS - 100.0%
Coastal Corp. 166,600 10,141,775 (Cost $ 355,397,900) $371,732,142
Devon Energy Corp. 113,900 6,399,756 ---------------------------------------------------------------
Kerr-McGee Corp. 80,737 4,758,437 OTHER ASSETS, LESS LIABILITIES
Phillips Petroleum Co. 108,200 5,484,387 Cash 340
Royal Dutch Petroleum Co. 129,400 7,966,187 Dividends and Interest Receivable 583,852
Texaco, Inc. 103,100 5,490,075 Receivable for Investments Sold 3,838,613
-------- ----------- Payable for Pending Capital Transactions (1,356,257)
701,937 40,240,617 Payable for Investments Purchased ( 3,131,253)
--------------------------------------------------------------- ---------------------------------------------------------------
OIL & GAS SERVICES - 2.4% LIABILITIES IN EXCESS
Baker Hughes, Inc. 278,600 8,915,200 OF OTHER ASSETS - (64,705)
--------------------------------------------------------------- ---------------------------------------------------------------
PAPER PRODUCTS - 2.3% NET ASSETS - 100% $371,667,437
Georgia-Pacific Group 180,500 4,738,125 ---------------------------------------------------------------
Georgia-Pacific Corp. Net Assets, representing:
(Timber Group) 97,100 2,099,787 Equity of Participants
Mead Corp. 70,300 1,775,075 54,482,096 Accumulation Units at an
-------- ----------- Accumulation Unit Value of
347,900 8,612,987 $6.7943 370,166,886
--------------------------------------------------------------- Equity of Prudential Insurance
REGIONAL BANKS - 2.8% Company of America 1,500,551
Bank One Corp. 187,654 4,984,559 ------------
PNC Financial Services Group 119,400 5,596,875 $371,667,437
-------- ----------- ---------------------------------------------------------------
307,054 10,581,434 The following abbreviations are used in portfolio
--------------------------------------------------------------- descriptions:
RESTAURANTS - 1.5% ADR - American Depository Receipt
Darden Restaurants, Inc. 333,900 5,425,875 PLC - Public Limited Company
--------------------------------------------------------------- SA - Sociedad Anomie (Spanish Corporation)
Retail - 1.1% (a) Non-income producing security.
Sears, Roebuck & Co. 122,700 4,003,088
---------------------------------------------------------------
TELECOMMUNICATIONS - 7.3%
ALLTEL Corp. 93,878 5,814,569
GTE Corp. 86,000 5,353,500
Global Crossing, Ltd. (a) 47,500 1,249,844
Loral Space &
Communications, Ltd. (a) 367,000 2,546,063
SBC Communications, Inc. 135,800 5,873,350
Sprint Corp. (FON Group) 120,600 6,150,600
-------- -----------
850,778 26,987,926
---------------------------------------------------------------
UTILITY - ELECTRIC 2.9%
PECO Energy Co. 183,300 7,389,281
Southern Co. 139,600 3,254,425
-------- -----------
322,900 10,643,706
---------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS - 99.5%
(Cost: $ 353,406,900) $369,741,142
---------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
12
<PAGE>
FINANCIAL STATEMENTS OF VCA-10
STATEMENT OF NET ASSETS AS OF JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME [NOTE 2B]
Dividends (net of $26,753 foreign
withholding tax) $ 3,014,452
Interest 171,030
--------------------------------------------------------------------------------
TOTAL INCOME 3,185,482
--------------------------------------------------------------------------------
EXPENSES [NOTE 3]
Fees Charged to Participants for
Investment Management Fee 481,284
Fees Charged to Participants for
Administrative Expenses 1,443,370
--------------------------------------------------------------------------------
Total Expenses 1,924,654
--------------------------------------------------------------------------------
INVESTMENT INCOME -- NET 1,260,828
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS -- NET [NOTE 2B]
Realized Gain on Investments -- Net 13,283,289
Decrease in Unrealized Appreciation
on Investments -- Net (17,599,450)
--------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (4,316,161)
--------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ (3,055,333)
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
---------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Investment Income -- Net $ 1,260,828 $ 3,815,161
Realized Gain on Investments -- Net 13,283,289 21,727,366
Decrease In Unrealized Appreciation on
Investments -- Net (17,599,450) (23,170,828)
---------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (3,055,333) 2,371,699
---------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Purchase Payments and Transfers In 17,107,984 57,561,612
Withdrawals and Transfers Out (75,923,112) (174,198,348)
Annual Account Charges Deducted from
Participants' Accounts [Note 3b] (13,481) (89,020)
---------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS (58,828,609) (116,725,756)
---------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM SURPLUS TRANSFERS [NOTE 6] (225,800) (83,117)
---------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (62,109,742) (114,437,174)
NET ASSETS
Beginning of Period 433,777,179 548,214,353
---------------------------------------------------------------------------------------
End of Period $371,667,437 $ 433,777,179
=======================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-10 (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1: GENERAL
The Prudential Variable Contract Account-10 (VCA-10 or the Account) was
established on March 1, 1982 by The Prudential Insurance Company of
America (Prudential) under the laws of the State of New Jersey and is
registered as an open-end, diversified management investment company
under the Investment Company Act of 1940, as amended. VCA-10 has been
designed for use by employers (Contract-holders) in connection with
retirement arrangements made available to their employees
(Participants). The Account's investment objective is long-term growth
of capital. The Account's investments are composed primarily of common
stocks. Although variable annuity payments differ according to the
investment performance of the Account, they are not affected by
mortality or expense experience because Prudential assumes the expense
risk and the mortality risk under the contracts.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. SECURITIES VALUATION
EQUITY SECURITIES
Securities for which the primary market is on an exchange are generally
valued at the last sale price on such exchange as of the close of the
NYSE (which is currently 4:00 p.m. Eastern time) or, in the absence of
recorded sales, at the mean between the most recently quoted bid and
asked prices. Nasdaq National Market System equity securities are valued
at the last sale price or, if there was no sale on such day, at the mean
between the most recently quoted bid and asked prices. Other
over-the-counter equity securities are valued at the mean between the
most recently quoted bid and asked prices. Portfolio securities for
which market quotations are not readily available will be valued at fair
value as determined in good faith under the direction of the Account's
Committee.
FIXED INCOME SECURITIES
Fixed income securities will be valued utilizing an independent pricing
service to determine valuations for normal institutional size trading
units of securities. The pricing service considers such factors as
security prices, yields, maturities, call features, ratings and
developments relating to specific securities in arriving at securities
valuations. Convertible debt securities that are actively traded in the
over-the-counter market, including listed securities for which the
primary market is believed to be over-the-counter, are valued at the
mean between the most recently quoted bid and asked prices provided by
an independent pricing service.
SHORT-TERM INVESTMENTS
Short-term investments having maturities of sixty days or less are
valued at amortized cost, which approximates market value. Amortized
cost is computed using the cost on the date of purchase, adjusted for
constant accrual of discount or amortization of premium to maturity.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-10 (UNAUDITED)
--------------------------------------------------------------------------------
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Realized gains
and losses on sales of securities are calculated on the identified cost
basis. Dividend income is recorded on the exdividend date and interest
income is recorded on the accrual basis. Income and realized and
unrealized gains and losses are allocated to the Participants and
Prudential on a daily basis in proportion to their respective ownership
in VCA-10. Expenses are recorded on the accrual basis which may require
the use of certain estimates by management.
C. REPURCHASE AGREEMENTS
Repurchase agreements may be considered loans of money to the seller of
the underlying security. VCA-10 will not enter into repurchase
agreements unless the agreement is fully collateralized, i.e., the value
of the underlying collateral securities is, and during the entire term
of the agreement remains, at least equal to the amount of the `loan'
including accrued interest. VCA-10's custodian will take possession of
the collateral and will value it daily to assure that this condition is
met. In the event that a seller defaults on a repurchase agreement,
VCA-10 may incur a loss in the market value of the collateral as well as
disposition costs; and, if a party with whom VCA-10 had entered into a
repurchase agreement becomes insolvent, VCA-10's ability to realize on
the collateral may be limited or delayed and a loss may be incurred if
the collateral securing the repurchase agreement declines in value
during the insolvency proceedings.
D. TAXES
The operations of VCA-10 are part of, and are taxed with, the operations
of Prudential. Under the current provisions of the Internal Revenue
Code, Prudential does not expect to incur federal income taxes on
earnings of VCA-10 to the extent the earnings are credited under the
Contracts. As a result, the Unit Value of VCA-10 has not been reduced by
federal income taxes.
NOTE 3: CHARGES
A. Prudential acts as investment manager for VCA-10 under an agreement
for Investment Management Services. A daily charge, at an effective
annual rate of 1.00% of the current value of the Participant's
equity in VCA-10, is paid to Prudential. Three quarters of this
charge (0.75%) is for administrative expenses not provided by the
annual account charge, and one quarter (0.25%) is for investment
management services.
B. An annual account charge of not more than $30 is deducted from the
account of each Participant, if applicable, at the time of
withdrawal of the value of all of the Participant's accounts or at
the end of the accounting year by canceling Units. The charge will
first be made against a Participant's account under a fixed dollar
annuity companion contract or fixed rate option of the nonqualified
combination contract. If the Participant has no account under a
companion contract or the fixed rate option, or if the amount under
the companion contract or the fixed rate option is too small to pay
the charge, the charge will be made against the Participant's
account in VCA-11. If the Participant has no VCA-11 account, or if
the amount under that account is too small to pay the charge, the
charge will then be made against the Participant's VCA-10 account.
If the Participant has no VCA-10 account, or if it is too small to
pay the charge, the charge will then be made against any one or more
of the Participant's accounts in VCA-24.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF VCA-10 (UNAUDITED)
--------------------------------------------------------------------------------
C. For the six months ended June 30, 2000 and the year ended December
31, 1999, Prudential has advised the Account that they received
deferred sales charges of $7,677 and $10,420, respectively.
NOTE 4: PURCHASES AND SALES OF PORTFOLIO SECURITIES
For the six months ended June 30, 2000, the aggregate cost of purchases
and the proceeds from sales of securities, excluding short-term
investments, were $134,342,139 and $184,769,416, respectively.
NOTE 5: UNIT TRANSACTIONS
The number of Accumulation Units issued and redeemed for the six months
ended June 30, 2000 and the year ended December 31, 1999 are as follows:
2000 1999
------------------------------------------------------
Units issued 2,743,234 8,372,387
------------------------------------------------------
Units redeemed 11,590,719 26,439,756
------------------------------------------------------
NOTE 6: NET DECREASE IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The decrease in net assets resulting from surplus transfers represents
the net withdrawals from the equity of Prudential from VCA-10.
NOTE 7: RELATED PARTY TRANSACTIONS
For the six months ended June 30, 2000, Prudential Securities
Incorporated, wholly owned subsidiary of Prudential, earned $2,844 in
brokerage commissions from portfolio transactions executed on behalf of
VCA-10. During the six months ended June 30, 2000, Prudential has
advised the Account that it received $12,143 in loan origination fees.
NOTE 8: PARTICIPANT LOANS
Loans are considered to be withdrawals from the Account from which the
loan amount was deducted; however no deferred sales charge is imposed
upon them. The principal portion of any loan repayment, however, will be
treated as a contribution to the receiving Account for purposes of
calculating any deferred sales charge imposed upon any subsequent
withdrawal. If the Participant defaults on the loan, for example by
failing to make required payments, the outstanding balance of the loan
will be treated as a withdrawal for purposes of the deferred sales
charge. The deferred sales charge will be withdrawn from the same
Accumulation Accounts, and in the same proportions, as the loan amount
was withdrawn. If sufficient funds do not remain in those Accumulation
Accounts, the deferred sales charge will be withdrawn from the
Participant's other Accumulation Accounts as well.
Withdrawals, transfers and loans from VCA-10 are considered to be
withdrawals of contributions until all of the Participant's
contributions to the Account have been withdrawn, transferred or
borrowed. No deferred sales charge is imposed upon withdrawals of any
amount in excess of contributions.
For the six months ended June 30, 2000, $1,058,490 in participant loans
were withdrawn from VCA-10 and $822,170 of principal and interest was
repaid to VCA-10. For the year ended December 31, 1999, $2,395,948 in
participant loans was withdrawn from VCA-10 and $1,733,215 of principal
and interest was repaid to VCA-10. Loan repayments are invested in
Participant's account(s) as chosen by the Participant, which may not
necessarily be VCA-10. The initial loan proceeds which are being repaid
may not necessarily have originated solely from VCA-10.
16
<PAGE>
(This page left intentionally blank.)
<PAGE>
================================================================================
THE PRUDENTIAL MEDLEY PROGRAM
BOARD OF DIRECTORS
JOHN R.STRANGFELD W.SCOTT MCDONALD, JR., PH.D.
Chairman, Vice President,
The Prudential Series Fund, Inc. Kaludis Consulting Group
The Prudential Variable Contract
Accounts 10;11
SAUL K. FENSTER, PH.D. JOSEPH WEBER,PH.D.
President, Vice President,
New Jersey Institute of Technology Interclass (international
corporate learning)
================================================================================
The toll-free numbers shown below can be used to make transfers and
reallocations, review how your premiums are being allocated and receive current
investment option values in your contract. Unit values for each investment
option are available to all Contract Owners from the toll-free numbers. The
phone lines are open each business day during the hours shown. Please be sure to
have your contract number available when you call.
If you own a VARIABLE LIFE INSURANCE CONTRACT, please call the following
telephone number:
[phone]
(800)778-2255
8 A.M.- MIDNIGHT EASTERN TIME
If you own a VARIABLE ANNUITY CONTRACT, please call the following telephone
number:
[phone]
(800)458-6333
8 A.M.- 8 P.M.EASTERN TIME
================================================================================
STANDARD & POOR'S 500 INDEX comprises 500 large, established, publicly traded
stocks. MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX comprises
approximately 620 European companies. SALOMON BROTHERS EXTENDED MARKET INDEX
defines the small capitalization stock universe or remaining 20% of the
available capital of each country and includes the remaining 75% of the BMI
issues. The BMI measures the performance of the entire universe of
institutionally investable securities. MORGAN STANLEY CAPITAL INTERNATIONAL
EUROPE, AUSTRALIA, FAR EAST INDEX is a weighted, unmanaged index of performance
that reflects stock price movements in Europe, Australasia, and the Far East.
S&P/BARRA VALUE INDEX contains companies within the S&P 500 with lower
price-to-book ratios. S&P/BARRA GROWTH INDEX contains companies within the S&P
500 with higher price-to-book ratios. Russell 2000 Value Index measures the
performance of those Russell 2000 companies with lower price-to-book ratios.
RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000
companies with higher price-to-book ratios. MORGAN STANLEY CAPITAL INTERNATIONAL
WORLD FREE INDEX contains those companies in the MCSI WORLD INDEX that reflect
actual buyable opportunities for the non-domestic investor by taking into
account local market restrictions on share ownership by foreigners. These
indexes are calculated in U.S.dollars, without dividends reinvested. MORGAN
STANLEY CAPITAL INTERNATIONAL JAPAN INDEX measures the performance of Japan's
stock market.
<PAGE>
================================================================================
Whether providing insurance protection for home, family and business or
arranging to cover future education and retirement expenses, Prudential people
have always been able to deliver something more: personal service, quality,
attention to detail and the financial strength of The Rock(R). Since 1875,
Prudential has been helping individuals and families meet their financial needs.
================================================================================
In the past, Contract Owners who held several variable contracts at the same
address received multiple copies of annual and semi-annual reports. In an effort
to lessen waste and reduce your fund's expenses of postage and printing, we will
attempt to mail only one copy of this report for the contracts listed on the
cover, based on our current records for Contract Owners with the same last name
and same address. No action on your part is necessary. Upon request, we will
furnish you with additional reports. The toll-free numbers listed on the inside
back cover of this report should be used to request any additional copies. Proxy
material and tax information will continue to be sent to each account of record.
The Prudential Insurance Company of America ------------
30 Scranton Office Park PRSRT.STD.
Scranton, PA 18507-1789 U.S. POSTAGE
(800) 458-6333 PAID
SUMMIT NJ
Permit # 657
------------
UNION BUG Printed in the U.S.A. MD.RS.007.0700
M1095 on recycled paper. INST-20000915-A004795