PRUDENTIAL VARIABLE CONTRACT ACCOUNT 11, 485BPOS, 1998-04-29

PRUDENTIAL VARIABLE CONTRACT ACCOUNT 11
485BPOS, 1998-04-29

Previous: TCA CABLE TV INC, S-3, 1998-04-29

Next: PRUDENTIAL VARIABLE CONTRACT ACCOUNT 10, 485BPOS, 1998-04-29

<PAGE> 1
Registration No. 2-76581

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------

Form N-3

REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933

POST-EFFECTIVE AMENDMENT NO. 31

and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 33

---------

THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT-11
(Exact Name of Registrant)

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Name of Insurance Company)

751 Broad Street
Newark, New Jersey 07102-3777
(973) 802-8781
(Address and telephone number of Insurance Company's
principal executive offices)

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

CAREN CUNNINGHAM
Assistant General Counsel
Prudential Mutual Fund Management LLC
100 Mulberry Street
Gateway Three
9th Floor
Newark, NJ 07102
(Name and address of agent for service)

Copy to:
Christopher E. Palmer, Esq.
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, DC 20036

-----------

For the purpose of Amending the Registration Statement.
Fiscal year ending December 31, 1995

It is proposed that this filing will become effective (Check appropriate space):

___ immediately upon filing pursuant to paragraph (b) of Rule 485

[X] on April 30, 1998 pursuant to paragraph (b) of Rule 485
--------------
(date)

___ 60 days after filing pursuant to paragraph (a)(i) of Rule 485

___ on ___________ pursuant to paragraph (a)(i) of the Rule 485
- --- (date)

___ 75 days after filing pursuant to paragraph (a)(ii) of Rule 485

___ on ___________ pursuant to paragraph (a)(ii) of Rule 485
(date)

If appropriate, check the following box:

___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE> 2

CROSS REFERENCE SHEET

Pursuant to Rule 495(a) under the Securities Act of 1933 indicating the location
in the Prospectus and Statement of Additional Information called for by the
Items of Parts A and B of Form N-3.

<TABLE>
<CAPTION>
Heading in Prospectus or Statement
Item Number and Caption of Additional Information
----------------------- ----------------------------------
<S> <C>
1. Cover Page............................................... Cover Page
2. Definitions.............................................. Definition of Special Terms Used in this Prospectus
3. Synopsis or Highlights................................... Summary
4. Condensed Financial Information.......................... Condensed Financial Information
5. General Description of Registrant
and Insurance Company.................................... Prudential; The Accounts; Investment Practices
6. Management............................................... Management
7. Deductions and Expenses.................................. Fee Tables; Charges; The Contracts, Exchange Offer
8. General Description of Variable Annuity Contracts........ Summary; Contacting Prudential; The Contracts, The Accumulation
Period; Changes in the Contracts; Voting Rights
9. Annuity Period........................................... The Contracts, The Annuity Period
10. Death Benefit............................................ The Contracts, Death Benefits
11. Purchases and Contract Value............................. Prudential; Investment Practices, Determination of Asset
Value; The Contracts, The Accumulation Period
12. Redemptions.............................................. The Contracts, Withdrawal (Redemption) of Contributions,
Systematic Withdrawal Plan, Texas Optional Retirement Program
13. Taxes.................................................... Federal Tax Status
14. Legal Proceedings........................................ Legal Proceedings
15. Table of Contents of the
Statement of Additional Information...................... Table of Contents-Statement of Additional Information
16. Cover Page............................................... Cover Page
17. Table of Contents........................................ Table of Contents
18. General Information and History.......................... Not Applicable
19. Investment Objectives and Policies....................... Investment Management and Administration of VCA-10, VCA-11 and
VCA-24
20. Management............................................... The VCA-10 and VCA-11 Committees
21. Investment Advisory and Other Services................... Investment Management and Administration of VCA-10, VCA-11 and
VCA-24
22. Brokerage Allocation..................................... Investment Management and Administration of the Accounts,
Portfolio Brokerage and Related Practices
23. Purchase and Pricing of Securities Being Offered......... Not Applicable
24. Underwriters............................................. Investment Management and Administration of the Accounts; Sale
of the Contracts
25. Calculation of Performance Data.......................... Performance Information
26. Annuity Payments......................................... Not Applicable
27. Financial Statements..................................... Financial Statements of VCA-10; Financial Statements of VCA-11;
Financial Statements of VCA-24; Consolidated Financial
Statements of The Prudential Insurance Company of America and
Subsidiaries
</TABLE>

<PAGE> 3

PART A

INFORMATION REQUIRED IN PROSPECTUS

<PAGE> 4

PROSPECTUS
May 1, 1998

THE MEDLEYSM PROGRAM
GROUP VARIABLE ANNUITY CONTRACTS
issued through

THE PRUDENTIAL
VARIABLE CONTRACT ACCOUNT-10
THE PRUDENTIAL
VARIABLE CONTRACT ACCOUNT-11

THE PRUDENTIAL
VARIABLE CONTRACT ACCOUNT-24
- --------------------------------------------------------------------------------

These Contracts are designed for use 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, as amended (the "Internal Revenue Code") and
with non-qualified annuity arrangements. Contributions made on behalf of
Participants may be invested in The Prudential Variable Contract Account-10, The
Prudential Variable Contract Account-11 or one or more of the seven Subaccounts
of The Prudential Variable Contract Account-24.

The Prudential Variable Contract Account-10 will invest primarily in equity
securities of major, established corporations that are selected with the
objective of long-term growth of capital.

The Prudential Variable Contract Account-11 will invest in money market
instruments selected with the objective of obtaining as high a level of current
income as is consistent with the preservation of capital and liquidity. An
investment in The Prudential Variable Contract Account-11 is neither insured nor
guaranteed by the U.S. Government.

Each of the Subaccounts of The Prudential Variable Contract Account-24 will
invest in the corresponding portfolio of The Prudential Series Fund, Inc. (the
"Fund"). The accompanying Prospectus for the Fund describes the investment
objectives of the seven Portfolios currently available to Participants: the
Diversified Bond Portfolio, the Government Income Portfolio, the Conservative
Balanced Portfolio, the Flexible Managed Portfolio, the Stock Index Portfolio,
the Equity Portfolio and the Global Portfolio.

This Prospectus provides information a prospective investor should know before
investing. Additional information about the Contracts has been filed with the
Securities and Exchange Commission in a Statement of Additional Information,
dated May 1, 1998, which information is incorporated herein by reference and is
available without charge upon written or oral request directed to the address or
telephone number shown below. The Table of Contents of the Statement of
Additional Information appears on page 37 of this Prospectus.

PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT 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
c/o Prudential Investments
30 Scranton Office Park
Scranton, PA 18507-1789
Telephone 1-800-458-6333

================================================================================

[PRUDENTIAL LOGO]
<PAGE> 5

CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
DEFINITION OF SPECIAL TERMS USED IN THIS PROSPECTUS......... 1
FEE TABLES.................................................. 2
SUMMARY..................................................... 4
CONDENSED FINANCIAL INFORMATION-VCA-10...................... 7
CONDENSED FINANCIAL INFORMATION-VCA-11...................... 8
CONDENSED FINANCIAL INFORMATION-VCA-24...................... 9
INTRODUCTION................................................ 10
PRUDENTIAL.................................................. 10
THE ACCOUNTS................................................ 10
THE FUND.................................................... 10
INVESTMENT PRACTICES........................................ 11
VCA-10's investment objective........................... 11
VCA-10's investment policies............................ 11
Financial Futures Contracts............................. 11
Options................................................. 12
Real estate-related securities.......................... 12
Repurchase agreements................................... 12
Reverse repurchase agreements and dollar roll
transactions.......................................... 12
When-issued and delayed delivery securities............. 13
Short sales against the box............................. 13
Other investment techniques............................. 13
VCA-11's investment objective........................... 13
VCA-11's investment policies............................ 13
Determination of asset value............................ 16
MANAGEMENT.................................................. 16
CHARGES..................................................... 17
Deferred Sales Charge................................... 17
Limitations on Sales Charges............................ 17
Annual Account Charge................................... 18
Charge for Administrative Expenses and Investment
Management Services................................... 18
Modification of Charges................................. 19
THE CONTRACTS............................................... 19
The Accumulation Period................................. 19
1. Contributions; Crediting Units; Enrollment
Forms; Deduction for Administrative
Expenses.................................. 19
2. Valuation of a Participant's Account...... 20
3. The Unit Value............................ 21
4. Withdrawal (Redemption) of
Contributions............................. 21
5. Systematic Withdrawal Plan................ 22
6. Texas Optional Retirement Program......... 23
7. Death Benefits............................ 23
8. Discontinuance of Contributions........... 24
9. Transfer Payments......................... 25
10. Requests by Telephone and Other Electronic
Means........................................... 26
11. Exchange Offer into MEDLEY from VCA-2..... 26
12. Exchange Offer with the PMF Funds......... 26
13. Exchange into Discovery Select(SM) Group
Retirement Annuity.............................. 27
14. Loans..................................... 27
15. Modified Procedures....................... 28
The Annuity Period...................................... 28
1. Electing the Annuity Date and the Form of
Annuity................................... 28
2. Available Forms of Annuity................ 29
3. Purchasing the Annuity.................... 29
Assignment.............................................. 30
Changes in the Contracts................................ 30
Reports................................................. 30
Performance Information................................. 30
Participation in divisible surplus...................... 31
FEDERAL TAX STATUS.......................................... 31
VOTING RIGHTS............................................... 33
OTHER CONTRACTS ON A VARIABLE BASIS......................... 34
STATE REGULATION............................................ 34
LEGAL PROCEEDINGS........................................... 35
YEAR 2000................................................... 36
ADDITIONAL INFORMATION...................................... 36
TABLE OF CONTENTS--STATEMENT OF ADDITIONAL INFORMATION...... 37
APPENDIX.................................................... 38
</TABLE>

NOTE: ALL MASCULINE REFERENCES IN THIS PROSPECTUS ARE INTENDED TO INCLUDE THE
FEMININE GENDER.
THE SINGULAR CONTEXT ALSO INCLUDES THE PLURAL AND VICE VERSA WHERE
NECESSARY.
<PAGE> 6

DEFINITION OF SPECIAL TERMS USED IN THIS PROSPECTUS

ACCUMULATION ACCOUNT--An account established for each Participant to record the
amount credited to the Participant under a Contract. Separate accounts are
maintained for each investment option.

ACCUMULATION PERIOD--The period, prior to the effecting of an annuity, during
which the amount credited to a Participant may vary with the investment
performance of VCA-10, VCA-11, any Subaccount of VCA-24, or the rate credited
under the companion contract, as selected.

COMPANION CONTRACT--A fixed-dollar group annuity contract issued by Prudential
under which contributions may be made for Participants in the MEDLEY Program.

CONTRACT-HOLDER--The employer, association or trust to which Prudential has
issued a Contract.

CONTRACTS--The group variable annuity contracts described in this Prospectus and
offered for use in connection with retirement arrangements that qualify for
federal tax benefits under Sections 401, 403(b), 408 or 457 of the Internal
Revenue Code and with non-qualified annuity arrangements.

FUND--The Prudential Series Fund, Inc., a mutual fund with separate portfolios,
seven of which correspond to the seven Subaccounts of VCA-24.

MEDLEY PROGRAM--The contracts chosen by a Contract-holder from those described
in this Prospectus and any Companion Contract(s) comprise the Contract-holder's
MEDLEY Program. It is sometimes referred to in this Prospectus as the "Program."
MEDLEY is a registered service mark of Prudential.

NON-QUALIFIED COMBINATION CONTRACT--A group variable annuity contract issued in
connection with non-qualified arrangements that permits Participants within a
single Contract to direct contributions to VCA-10, VCA-11, VCA-24 or a general
account fixed rate option of Prudential. Separate Accumulation Accounts are
maintained for amounts credited to the Participant under each investment option
in this Contract.

PARTICIPANT--A person for whom contributions have been made and to whom amounts
invested under a Contract or Companion Contract remain credited.

PRUDENTIAL--The Prudential Insurance Company of America.

QUALIFIED COMBINATION CONTRACT--A group variable annuity contract issued in
connection with qualified arrangements that permits Participants within a single
Contract to direct contributions to VCA-10, VCA-11, VCA-24 or a general account
fixed rate option of Prudential. Separate Accumulation Accounts are maintained
for amounts credited to the Participant under each investment option in this
Contract.

SUBACCOUNT--A division of VCA-24, the assets of which are invested in shares of
the corresponding portfolio of the Fund. VCA-24 currently has seven Subaccounts:
Diversified Bond Subaccount, Government Income Subaccount, Conservative Balanced
Subaccount, Flexible Managed Subaccount, Stock Index Subaccount, Equity
Subaccount, and Global Subaccount.

UNIT AND UNIT VALUE--A Participant is credited with Units in each of VCA-10,
VCA-11, and the Subaccounts of VCA-24 in which he invests. The value of these
Units changes each day to reflect the investment results of, and deductions of
charges from, VCA-10, VCA-11 and the Subaccounts of VCA-24, and the expenses of
the Fund's portfolios in which the assets of the Subaccounts are invested. The
number of Units credited to a Participant in VCA-10, VCA-11 or any Subaccount of
VCA-24 is determined by dividing the amount of the contribution made on his
behalf to that Account or Subaccount by the applicable Unit Value for the
business day on which the contribution is received at the address shown on the
cover of this Prospectus.

VARIABLE CONTRACT ACCOUNT-10--A separate account of Prudential registered under
the Investment Company Act of 1940, as amended, as an open-end, diversified
management investment company, invested primarily in equity securities of major,
established corporations that are selected with the objective of long-term
growth of capital.

VARIABLE CONTRACT ACCOUNT-11--A separate account of Prudential registered under
the Investment Company Act of 1940, as amended, as an open-end, diversified,
management investment company, invested in money market instruments selected
with the objective of realizing as high a level of current income as is
consistent with the preservation of capital and liquidity.

VARIABLE CONTRACT ACCOUNT-24--A separate account of Prudential registered under
the Investment Company Act of 1940, as amended, as a unit investment trust,
invested through its Subaccounts in shares of the Fund's corresponding
portfolios.

1
<PAGE> 7

The purpose of the tables on this page and on the following page is to assist
the Participant in understanding the various charges that a Participant in
VCA-10, VCA-11 or VCA-24 will bear, whether directly or indirectly. For more
complete descriptions of the various charges, see "Charges" page 17 of this
Prospectus.

FEE TABLES--VCA-10 AND VCA-11

PARTICIPANT TRANSACTION EXPENSES

Sales Load Imposed on Purchases.............................................None
Deferred Sales Load (as a percentage of contributions withdrawn):

<TABLE>
<CAPTION>
MAXIMUM DEFERRED SALES CHARGE AS A
YEARS OF PROGRAM PARTICIPATION PERCENTAGE OF CONTRIBUTIONS WITHDRAWN*
------------------------------ --------------------------------------
<S> <C>
0-1 year............................. 7%
1-2 years............................ 6%
2-3 years............................ 5%
3-4 years............................ 4%
4-5 years............................ 3%
5-6 years............................ 2%
6-7 years............................ 1%
After 7 years........................ 0%
</TABLE>

Maximum Annual Contract Fee................................................$30**

ANNUAL ACCOUNT EXPENSES
(as a percentage of average net assets)

<TABLE>
<CAPTION>
VCA-10 VCA-11
------ ------
<S> <C> <C>
Investment Management Fee................................... .25% .25%
Administrative Fee.......................................... .75% .75%
----- -----
Total Annual Expenses.................................. 1.00% 1.00%
===== =====
</TABLE>

EXAMPLES

<TABLE>
<CAPTION>
A. You would pay the following expenses on each $1000
invested assuming (1) a 5% annual return and (2)
redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
--- --- --- ----
<S> <C> <C> <C> <C>
VCA-10........................................ $80 $82 $86 $125
VCA-11........................................ 81 83 87 127
B. You would pay the following expenses on the same
investment assuming (1) a 5% annual return and (2)
no redemption or you annuitize at the end of the
period:
VCA-10........................................ $10 $32 $56 $125
VCA-11........................................ 11 33 57 127
</TABLE>

The above examples are based on data for each Account's fiscal year ended
December 31, 1997. The examples should not be considered a representation of
past or future expenses. Actual expenses may be greater or less than those
shown.

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

* The deferred sales charge may be reduced under certain contracts. See
Modification of Charges, page 19.

** The annual contract fee is reflected in the above example upon the assumption
that it is deducted from each of the available investment options, including
the Companion Contract and fixed rate option, in the same proportions as the
aggregate annual contract fees are deducted from each option. The actual
expenses paid by each Participant will vary depending upon the total amount
credited to that Participant and how that amount is allocated. For the way in
which this fee is deducted, see Annual Account Charge on page 18.

2
<PAGE> 8

FEE TABLE--VCA-24

PARTICIPANT TRANSACTION EXPENSES

Sales Load Imposed on Purchases.............................................None
Deferred Sales Load (as a percentage of contributions withdrawn):

Maximum Annual Contract Fee................................................$30**

ANNUAL SEPARATE ACCOUNT EXPENSES
(as a percentage of average account value)

Administrative Fee.........................................................0.75%

ANNUAL PRUDENTIAL SERIES FUND PORTFOLIO EXPENSES
(as a percentage of each Portfolio's average net assets)

<TABLE>
<CAPTION>
DIVERSIFIED GOVERNMENT CONSERVATIVE FLEXIBLE STOCK
BOND INCOME BALANCED MANAGED INDEX EQUITY GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Management Fee........ .40% .40% .55% .60% .35% .45% .75%
Other Expenses................... .03% .04% .01% .02% .02% .01% .10%
---- ---- ---- ---- ---- ---- ----
Total Annual Prudential Series
Fund Portfolio Expenses..... .43% .44% .56% .62% .37% .46% .85%
==== ==== ==== ==== ==== ==== ====
</TABLE>

EXAMPLES

<TABLE>
<S> <C> <C> <C> <C>
A. You would pay the following expenses on each $1000
invested assuming (1) 5% annual return and (2)
redemption at the end of each time period: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Diversified Bond.............................. $82 $ 87 $ 95 $143
Government Income............................. 82 88 95 144
Conservative Balanced......................... 83 92 102 158
Flexible Managed.............................. 84 93 105 165
Stock Index................................... 81 86 92 136
Equity........................................ 82 88 96 147
Global........................................ 86 100 117 190
B. You would pay the following expenses on the same
investment, assuming (1) a 5% annual return and
(2) no redemption or you annuitize at the end of
the period:
Diversified Bond.............................. 12 37 65 143
Government Income............................. 12 38 65 144
Conservative Balanced......................... 13 42 72 158
Flexible Managed.............................. 14 43 75 165
Stock Index................................... 11 36 62 136
Equity........................................ 12 38 66 147
Global........................................ 16 50 87 190
</TABLE>

The above examples are based on data for the fiscal year ended December 31,
1997. The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.

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

* The deferred sales charge may be reduced under certain Contracts. See
Modification of Charges, page 19.

3
<PAGE> 9

SUMMARY

Three Group Variable Annuity Contracts (the "Contracts") are described in this
Prospectus. They are offered by The Prudential Insurance Company of America
("Prudential") for use in connection with retirement arrangements that qualify
for federal tax benefits under Sections 401, 403(b), 408 or 457 of the Internal
Revenue Code and with non-qualified retirement arrangements. One of the
Contracts provides for the investment of contributions in The Prudential
Variable Contract Account-10 ("VCA-10"). Another provides for the investment of
contributions in The Prudential Variable Contract Account-11 ("VCA-11"). The
third provides for the investment of contributions in one or more Subaccounts of
The Prudential Variable Contract Account-24 ("VCA-24"). VCA-10, VCA-11 and
VCA-24 (collectively, the "Accounts") are separate accounts of Prudential.
VCA-10 and VCA-11 are registered as open-end, diversified, management investment
companies, and VCA-24 is registered as a unit investment trust, under the
Investment Company Act of 1940, as amended. The fourth is a qualified Contract
that provides for investment of contributions in the Accounts and a fixed rate
option provided by Prudential (the "Qualified Combination Contract"). The fifth
is a non-qualified Contract that provides for investment of contributions in the
Accounts and a fixed rate option provided by Prudential (the "Non-Qualified
Combination Contract").

The Contracts generally are issued to employers ("Contract-holders") 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." Contributions also may be made for Participants under a
companion fixed-dollar contract ("Companion Contract"). Those contracts that a
Contract-holder chooses from among the Contracts described in this Prospectus,
along with the Companion Contract, if any, make up the Contract-holder's MEDLEY
Program ("Program").

What follows is a summary of information about the Contracts and about VCA-10,
VCA-11 and VCA-24. More detailed information may be found in the referenced
portions of this Prospectus, as well as in the Statement of Additional
Information.

INTERESTS OF PARTICIPANTS
IN VCA-10, VCA-11 AND THE SUBACCOUNTS OF VCA-24

If the Program made available to a Participant includes all the variable
investment options described in this Prospectus, the Participant may choose to
have contributions made on his behalf invested in any one or more of VCA-10,
VCA-11 and the Subaccounts of VCA-24. The Participant may from time to time
change how those contributions are allocated, usually by notifying Prudential at
the address shown on the cover of this Prospectus. An Accumulation Account will
be established in the name of the Participant in each of VCA-10, VCA-11 and the
Subaccounts of VCA-24 in which the Participant invests. The value of a
Participant's Accumulation Account, expressed in Units of the Account or
Subaccount in which the investment is made, will vary with the investment
results of that Account or Subaccount. See "The Accumulation Period," pages
19-28.

INVESTMENT OBJECTIVES OF THE ACCOUNTS

VCA-11 will invest in money market instruments payable in U.S. dollars selected
with the objective of realizing as high a level of current income as is
consistent with the preservation of capital and liquidity. See "VCA-11's
investment objective and investment policies," page 13.

Each Subaccount of VCA-24 will invest in the corresponding portfolio of the Fund
(each, a "Fund Portfolio"). The Diversified Bond Subaccount invests in the
Diversified Bond Portfolio, the Government Income Subaccount in the Government
Income Portfolio, the Conservative Balanced Subaccount in the Conservative
Balanced Portfolio, the Flexible Managed Subaccount in the Flexible Managed
Portfolio, the Stock Index Subaccount in the Stock Index Portfolio, the Equity
Subaccount in the Equity Portfolio, and the Global Subaccount in the Global
Portfolio. Additional Subaccounts and Fund Portfolios may be available in the
future. The investment objectives of each of these seven Fund Portfolios (see
"The Investment Objectives of the Fund Portfolios," page 15) and other
information concerning the management and operation of the Fund are contained in
the accompanying Fund Prospectus and the Fund's Statement of Additional
Information.

4
<PAGE> 10

There is no assurance that the investment objective of VCA-10, VCA-11 or any
Fund Portfolio will be attained. Nor is there any guarantee that the amount
available to a Participant will equal or exceed the total contributions made on
his behalf. The value of the investments held in VCA-10, VCA-11 and in each Fund
Portfolio may fluctuate daily and is subject to the risks of both changing
economic conditions and the selection of investments necessary to meet the
Account's or Portfolio's investment objective.

INVESTMENT MANAGER AND PRINCIPAL UNDERWRITER

Prudential is the investment manager of VCA-10, VCA-11, and the Fund, and
Prudential Investment Management Services LLC ("PIMS"), a direct wholly-owned
subsidiary of Prudential, is the principal underwriter of the Contracts pursuant
to agreements between PIMS, Prudential, and each of VCA-10 and VCA-11
(collectively, the "Distribution Agreements"). See "The Prudential," page 10,
"Management," page 16, "The Fund," page 10, and the accompanying Fund
prospectus.

Prudential is currently considering reorganizing itself into a stock company.
This form of reorganization, known as demutualization, is a complex process that
may take a year or more to complete. No plan of demutualization has been adopted
yet by Prudential's Board of Directors. Adoption of a plan of demutualization
would occur only after enactment of appropriate legislation in New Jersey and
would have to be approved by Prudential 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.

INVESTMENT REQUIREMENTS

Contributions to the Program made on behalf of a Participant may be made through
payroll deduction arrangements or similar agreements with the Contract-holder.
Any other contribution to the Program must be at least $500, except for
contributions to an Individual Retirement Annuity for a non-working spouse under
Section 408 of the Code (or working spouse who elects to be treated as a
non-working spouse), which must be at least $250. All contributions may be
divided among the Contracts and Companion Contract(s) that comprise the
Contract-holder's Program. See "The Accumulation Period," pages 19-28. Checks
should be made payable to Prudential.

CHARGES

No sales charge is deducted from any contribution when made. However, a deferred
sales charge to cover sales expenses may be assessed when a contribution is
withdrawn from VCA-10, VCA-11 or any Subaccount of VCA-24. The deferred sales
charge is imposed only upon contributions withdrawn by a Participant during the
first 7 years of his participation in a Program. The maximum deferred sales
charge of seven percent (7%) applies to contributions withdrawn during the first
year that a Participant is in a Program. The charge is lower for contributions
withdrawn in subsequent years. Withdrawals are deemed to be made up of
contributions until all of a Participant's contributions to the Account have
been withdrawn. No deferred sales 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 deferred sales charge is imposed upon contributions
withdrawn due to resignation or retirement by the Participant or termination of
the Participant by the Contract-holder. Transfers of contributions among the
Accounts, the Subaccounts, the fixed rate option and the Companion Contract(s)
are treated as withdrawals of contributions from the Account, Subaccount, fixed
rate option or Companion Contract from which the transfer is made, but no
deferred sales charge is imposed upon them. They are, however, treated as
contributions to the Account, Subaccount, fixed rate option or Companion
Contract to which the transfer is made for the purpose of determining the sales
charge, if any, upon subsequent withdrawals from that Account, Subaccount, fixed
rate option or Companion Contract. See "Deferred Sales Charge," page 17, for
further explanation and illustration.

An annual account charge may be made against each Participant's Accumulation
Accounts under a Program. This charge will not exceed $30 for any calendar year
and may be divided among the Participant's Accumulation Accounts. See "Annual
Account Charge," page 18.

Prudential intends to decrease the deferred sales or annual account charges, or
both, applicable to a particular Contract if sales and administrative expenses
associated with that Contract are expected to be lower, or if fewer

5
<PAGE> 11

sales or administrative services are expected to be required in connection with
the Contract. See "Modification of Charges," page 19.

Prudential makes a daily charge equal to an effective annual rate of 1.00% of
the net value of the assets in VCA-10 and VCA-11. This charge is made up of
0.25% ( 1/4 of 1%) for investment management and 0.75% ( 3/4 of 1%) for
administrative expenses. Prudential makes a daily charge for administrative
expenses equal to an effective annual rate of 0.75% of the net asset value of
each Subaccount of VCA-24. See "Charge for Administrative Expenses and
Investment Management Services," page 18.

A daily charge against assets for investment management with respect to each
Fund Portfolio in which a Subaccount invests is made separately at an effective
annual rate of 0.35% (35/100 of 1%) of the net asset value of the Fund's Stock
Index Portfolio, 0.40% (40/100 of 1%) of the net asset value of the Fund's
Diversified Bond Portfolio and Government Income Portfolio, 0.45% (45/100 of 1%)
of the net asset value of the Fund's Equity Portfolio, 0.55% (55/100 of 1%) of
the net asset value of the Conservative Balanced Portfolio, 0.60% (60/100 of 1%)
of the net asset value of the Flexible Managed Portfolio, and 0.75% (75/100 of
1%) of the net asset value of the Global Portfolio. The Fund's Portfolios also
bear the costs of Portfolio transactions, legal and accounting expenses,
shareholder services, and custodial and transfer agency fees. Further detail is
provided in the accompanying prospectus for the Fund and in its Statement of
Additional Information.

The deferred sales charge, the annual account charge, and the charges against
assets for administrative expenses may be changed by Prudential. See "Changes in
the Contracts," page 30.

WITHDRAWALS AND TRANSFERS

Unless restricted by the retirement arrangement under which he is covered, or by
the withdrawal restrictions imposed by federal tax law on tax-deferred annuity
contracts subject to Section 403(b) of the Internal Revenue Code and on
interests in deferred compensation plans under Section 457 of the Internal
Revenue Code, a Participant may withdraw, at any time, all or a part of his
Accumulation Account in VCA-10, VCA-11 or any Subaccount of VCA-24. See
"Withdrawal (Redemption) of Contributions," pages 21-22. Withdrawals may be
subject to tax under the Internal Revenue Code, including, under certain
circumstances, a 10% penalty tax on premature withdrawals. See "Federal Tax
Status," pages 31-33. In addition, all or a part of a Participant's Accumulation
Account may be transferred among Accounts, Subaccounts, fixed rate option and
Companion Contract without charge or tax liability. Prudential may limit the
frequency of transfers and may under certain Contracts prohibit or restrict
transfers from the Companion Contract or fixed rate option into non-equity
investment options that are defined in the Contract(s) as "competing" with the
Companion Contract or the fixed rate option with respect to investment
characteristics. See "Transfer Payments," page 25.

CONTACTING PRUDENTIAL

All written requests, notices, and transfer requests required by the Contracts
(other than withdrawal requests and death benefit claims), should be sent to
Prudential at the address shown on the cover of this Prospectus. Any written
inquiries also should be sent to Prudential at that address. A Participant may
effect the telephone transactions that are permitted by his Program by calling
Prudential at 1-800-458-6333. A Participant may effect other electronic
transactions that are permitted by his program through WWW.Prudential.Com or as
instructed after calling Prudential at 1-800-458-6333. All written withdrawal
requests or death benefit claims relating to a Participant's interest in VCA-10,
VCA-11 and VCA-24 must be sent to Prudential by one of the following three
means: (1) by U.S. mail to: Prudential Investments, P.O. Box 5410, Scranton,
Pennsylvania 18505-5410; (2) delivery service other than the U.S. mail (e.g.,
Federal Express, etc.) sent to our office at the following address: Prudential
Investments, 30 Scranton Office Park, Scranton, Pennsylvania 18507-1789; or (3)
fax to Prudential Investments, Attention: Client Payments at (717) 340-4328. A
withdrawal request or death benefit claim will be deemed received in good order
by Prudential as of the end of the valuation period within which all the
properly completed forms and other information required by Prudential to pay
such a request or claim (e.g., due proof of death) are received as specified
above. Receipt of a withdrawal request or death benefit Claim in good order is
required by Prudential to process the transaction in the manner explained on
pages 21-24 of this Prospectus. Under certain Contracts, the Contract-holder or
a third party acting on their behalf provides record-keeping services that would
otherwise be performed by Prudential. See "Modified Procedures," page 28.

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
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
6
<PAGE> 12

CONDENSED FINANCIAL INFORMATION

INCOME AND CAPITAL CHANGES PER VCA-10 UNIT*

(For a Unit outstanding throughout the year)

The following condensed financial information for the two-year period ended
December 31, 1997 has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon appears in VCA-10's Annual Report
dated December 31, 1997. The condensed financial information for each of the
years prior to and including the period ended December 31, 1995 has been audited
by other independent auditors, whose report thereon was also unqualified. The
information set out below should be read in conjunction with the financial
statements and related notes that also appear in VCA-10's Annual Report which is
included in the Statement of Additional Information.

<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------------
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income................. $ .0757 $ .0657 $ .0609 $ .0563 $ .0855 $ .0551
- ----------------------------------------------------------------------------------------------------------------------
Expenses
For investment management fee... .0154 .0118 .0094 .0083 .0077 .0064
For administrative expenses not
covered by the annual
account charge................ .0461 .0354 .0282 .0251 .0230 .0192
- ----------------------------------------------------------------------------------------------------------------------
Net investment income............. .0142 .0185 .0233 .0229 .0548 .0295
- ----------------------------------------------------------------------------------------------------------------------
Capital Changes
Net realized gain (loss) on
investments................... 1.2761 .5085 .3850 .1947 .2763 .2884
Net unrealized appreciation
(depreciation) of
investments................... .3841 .5682 .4744 (.2148) .2599 (.0823)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Unit
Value........................... 1.6744 1.0952 .8827 .0028 .5910 .2356
- ----------------------------------------------------------------------------------------------------------------------
Unit Value
Beginning of year............... 5.3383 4.2431 3.3604 3.3576 2.7666 2.5310
End of year..................... $7.0127 $5.3383 $4.2431 $3.3604 $3.3576 $2.7666
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets**........................ 1.000% .9975% .9901% .9965% .9955% .9936%
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets.............. .240% .392% .6133% .6791% 1.7775% 1.1431%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate........... 47% 52% 45% 32% 45% 65%
- ----------------------------------------------------------------------------------------------------------------------
Number of Units outstanding for
Participants at end of year (000
omitted)........................ 83,261 91,532 81,817 79,189 73,569 62,592
Average commission rate paid per
share........................... $ .0531 $ .0538 N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------

<CAPTION>
YEAR ENDED
--------------------------------------------------
12/31/91 12/31/90 12/31/89 12/31/88
- ---------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income................. $ .0538 $ .0718 $ .0650 $ .0593
- -----------------------------------------------------------------------------------------------
Expenses
For investment management fee... .0056 .0048 .0047 .0038
For administrative expenses not
covered by the annual
account charge................ .0169 .0144 .0141 .0115
- ---------------------------------------------------------------------------------------------------------
Net investment income............. .0313 .0526 .0462 .0440
- -------------------------------------------------------------------------------------------------------------------
Capital Changes
Net realized gain (loss) on
investments................... .1096 .0791 .1451 (.3251)
Net unrealized appreciation
(depreciation) of
investments................... .4478 (.2054) .2167 .5511
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Unit
Value........................... .5887 (.0737) .4080 .2700
- ----------------------------------------------------------------------------------------------------------------------
Unit Value
Beginning of year............... 1.9423 2.0160 1.6080 1.3380
End of year..................... $2.5310 $1.9423 $2.0160 $1.6080
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets**........................ .9929% .9977% 1.0068% 1.0009%
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets.............. 1.3779% 2.7403% 2.4684% 2.8773%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate........... 72% 106% 64% 97%
- ----------------------------------------------------------------------------------------------------------------------
Number of Units outstanding for
Participants at end of year (000
omitted)........................ 58,699 55,621 53,748 52,894
Average commission rate paid per
share........................... N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

* Calculation by accumulating the actual per Unit amounts daily.

** These calculations exclude Prudential's equity in VCA-10.

The above table does not reflect the annual account charge, which does not
affect the Unit Value of VCA-10. This charge is made by reducing Participants'
accounts by a number of Units equal in value to the charge.

7
<PAGE> 13

CONDENSED FINANCIAL INFORMATION

INCOME AND CAPITAL CHANGES PER VCA-11 UNIT*

(For a Unit outstanding throughout the year)

The following condensed financial information for the two-year period ended
December 31, 1997 has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon appears in VCA-11's Annual Report
dated December 31, 1997. The condensed financial information for each of the
years prior to and including the period ended December 31, 1995 has been audited
by other independent auditors, whose report thereon was also unqualified. The
information set out below should be read in conjunction with the financial
statements and related notes that appear in VCA-11's Annual Report which is
included in the Statement of Additional Information.

<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------------
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income................. $ .1353 $ .1281 $ .1313 $ .0912 $ .0682 $ .0812
- ----------------------------------------------------------------------------------------------------------------------
Expenses
For investment management fee... .0059 .0056 .0054 .0052 .0050 .0049
For administrative expenses not
covered by the annual account
charge........................ .0178 .0170 .0160 .0154 .0150 .0147
- ----------------------------------------------------------------------------------------------------------------------
Net investment income............. .1116 .1055 .1099 .0706 .0482 .0616
- ----------------------------------------------------------------------------------------------------------------------
Capital Changes
Net realized gain (loss) on
investments................... -- -- -- -- -- --
Net unrealized appreciation
(depreciation) of
investments................... -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Unit
Value........................... .1116 .1055 .1099 .0706 .0482 .0616
- ----------------------------------------------------------------------------------------------------------------------
Unit Value
Beginning of year............... 2.3210 2.2155 2.1056 2.0350 1.9868 1.9252
End of year..................... $2.4326 $2.3210 $2.2155 $2.1056 $2.0350 $1.9868
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets**........................ .9800% .9832% .9912% .9966% .9942% .9999%
- ----------------------------------------------------------------------------------------------------------------------
Average ratio for the year of net
investment income to net
assets.......................... 4.73% 4.5731% 5.0835% 3.4176% 2.3997% 3.1433%
- ----------------------------------------------------------------------------------------------------------------------
Number of Units outstanding for
Participants at end of year (000
omitted)........................ 35,757 38,315 34,136 35,448 29,421 27,518
- ----------------------------------------------------------------------------------------------------------------------

<CAPTION>
YEAR ENDED
--------------------------------------------------
12/31/91 12/31/90 12/31/89 12/31/88
- ---------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income................. $ .1215 $ .1464 $ .1536 $ .1158
- -----------------------------------------------------------------------------------------------
Expenses
For investment management fee... .0047 .0044 .0040 .0038
For administrative expenses not
covered by the annual account
charge........................ .0142 .0131 .0122 .0113
- ---------------------------------------------------------------------------------------------------------
Net investment income............. .1026 .1289 .1374 .1007
- -------------------------------------------------------------------------------------------------------------------
Capital Changes
Net realized gain (loss) on
investments................... -- -- -- --
Net unrealized appreciation
(depreciation) of
investments................... -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Unit
Value........................... .1026 .1289 .1374 .1007
- ----------------------------------------------------------------------------------------------------------------------
Unit Value
Beginning of year............... 1.8226 1.6937 1.5563 1.4556
End of year..................... $1.9252 $1.8226 $1.6937 $1.5563
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net
assets**........................ 1.0048% .9972% .9988% .9996%
- ----------------------------------------------------------------------------------------------------------------------
Average ratio for the year of net
investment income to net
assets.......................... 5.4667% 7.3333% 8.4557% 6.6989%
- ----------------------------------------------------------------------------------------------------------------------
Number of Units outstanding for
Participants at end of year (000
omitted)........................ 26,400 25,174 23,777 21,278
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

* Calculation by accumulating the actual per Unit amounts daily.

** These calculations exclude Prudential's equity in VCA-11.

The above table does not reflect the annual account charge, which does not
affect the Unit Value of VCA-11. This charge is made by reducing Participants'
accounts by a number of Units equal in value to the charge.

8
<PAGE> 14

CONDENSED FINANCIAL INFORMATION

ACCUMULATION UNIT VALUE INFORMATION PER VCA-24

<TABLE>
<CAPTION>
SUBACCOUNTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------

<CAPTION>
EQUITY
-----------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period (rounded).... $3.1487 $2.6769 $2.0541 $2.0136 $1.6646 $1.4690 $1.1745 $1.2484
End of period (rounded).......... $3.8962 $3.1487 $2.6769 $2.0541 $2.0136 $1.6646 $1.4690 $1.1745
Accumulation Units Outstanding at
end of period (000 omitted).... 141,162 132,455 118,394 99,323 79,985 51,639 35,657 21,964
SUBACCOUNTS
- ---------------------------------------------------------------------------------------------------------------------
DIVERSIFIED BOND
-----------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
------- ------- ------- ------- ------- ------- ------- -------
Beginning of period (rounded).... $2.0789 $2.0065 $1.6746 $1.7435 $1.5950 $1.4992 $1.2973 $1.2075
End of period (rounded).......... $2.2404 $2.0789 $2.0065 $1.6746 $1.7435 $1.5950 $1.4992 $1.2973
Accumulation Units Outstanding at
end of period (000 omitted).... 19,114 20,280 16,898 14,575 14,481 10,103 7,928 5,824
SUBACCOUNTS
- ---------------------------------------------------------------------------------------------------------------------
FLEXIBLE MANAGED
-----------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
------- ------- ------- ------- ------- ------- ------- -------
Beginning of period (rounded).... $2.4854 $2.2038 $1.7886 $1.8609 $1.6223 $1.5189 $1.2201 $1.2056
End of period (rounded).......... $2.9103 $2.4854 $2.2038 $1.7886 $1.8609 $1.6223 $1.5189 $1.2201
Accumulation Units Outstanding at
end of period (000 omitted).... 64,184 59,681 51,419 44,729 36,035 23,410 16,859 12,229
SUBACCOUNTS
- ---------------------------------------------------------------------------------------------------------------------
CONSERVATIVE BALANCED
-----------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
------- ------- ------- ------- ------- ------- ------- -------
Beginning of period (rounded).... $2.2364 $1.9993 $1.7175 $1.7473 $1.5691 $1.4781 $1.2508 $1.1971
End of period (rounded).......... $2.5165 $2.2364 $1.9993 $1.7175 $1.7473 $1.5691 $1.4781 $1.2508
Accumulation Units Outstanding at
end of period (000 omitted).... 51,297 50,029 46,873 43,594 36,932 24,223 16,385 11,857
SUBACCOUNTS
- ---------------------------------------------------------------------------------------------------------------------
STOCK INDEX
-----------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
------- ------- ------- ------- ------- ------- ------- -------
Beginning of period (rounded).... $3.3302 $2.7378 $2.0123 $2.0072 $1.8440 $1.7342 $1.3469 $1.4086
End of period (rounded).......... $4.3910 $3.3302 $2.7378 $2.0123 $2.0072 $1.8440 $1.7342 $1.3469
Accumulation Units Outstanding at
end of period (000 omitted).... 85,941 80,572 51,701 40,522 32,178 20,554 10,724 4,232
SUBACCOUNTS
- -----------------------------------------------------------------------------------
GLOBAL
-------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
------- ------- ------- ------- ------- -------
Beginning of period (rounded).... $1.7836 $1.4975 $1.3020 $1.3791 $0.9707 $1.0127
End of period (rounded).......... $1.8815 $1.7836 $1.4975 $1.3020 $1.3791 $0.9707
Accumulation Units Outstanding at
end of period (000 omitted).... 37,576 33,505 24,439 21,739 12,368 3,180
SUBACCOUNTS
- --------------------------------------------------------------------------------------------
GOVERNMENT INCOME
---------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91
TO TO TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
------- ------- ------- ------- ------- ------- -------
Beginning of period (rounded).... $1.4943 $1.4730 $1.2421 $1.3196 $1.1811 $1.1242 $1.0000
End of period (rounded).......... $1.6267 $1.4943 $1.4730 $1.2421 $1.3196 $1.1811 $1.1242
Accumulation Units Outstanding at
end of period (000 omitted).... 17,033 17,697 17,289 16,140 15,556 9,269 6,641

<CAPTION>
<S> <C> <C> <C>
- ---------------------------------
01/01/89 01/01/88
TO TO
12/31/89 12/31/88
------- -------
Beginning of period (rounded).... $0.9697 $0.8344
End of period (rounded).......... $1.2484 $0.9697
Accumulation Units Outstanding at
end of period (000 omitted).... 17,703 14,576
- ---------------------------------
01/01/89 01/01/88
TO TO
12/31/89 12/31/88
------- -------
Beginning of period (rounded).... $1.0720 $0.9977
End of period (rounded).......... $1.2075 $1.0720
Accumulation Units Outstanding at
end of period (000 omitted).... 4,122 2,344
- ---------------------------------
01/01/89 01/01/88
TO TO
12/31/89 12/31/88
------- -------
Beginning of period (rounded).... $0.9976 $0.8909
End of period (rounded).......... $1.2056 $0.9976
Accumulation Units Outstanding at
end of period (000 omitted).... 10,015 7,850
- ---------------------------------
01/01/89 01/01/88
TO TO
12/31/89 12/31/88
------- -------
Beginning of period (rounded).... $1.0310 $0.9387
End of period (rounded).......... $1.1971 $1.0310
Accumulation Units Outstanding at
end of period (000 omitted).... 10,273 8,444
- ---------------------------------
01/01/89 05/02/88
TO TO
12/31/89 12/31/88
------- -------
Beginning of period (rounded).... $1.0843 $1.0000
End of period (rounded).......... $1.4086 $1.0843
Accumulation Units Outstanding at
end of period (000 omitted).... 1,285 189
- ---------------------------------
Beginning of period (rounded)....
End of period (rounded)..........
Accumulation Units Outstanding at
end of period (000 omitted)....
- ---------------------------------
Beginning of period (rounded)....
End of period (rounded)..........
Accumulation Units Outstanding at
end of period (000 omitted)....
</TABLE>

9
<PAGE> 15

INTRODUCTION

The Contracts described in this Prospectus are offered for use in connection
with various retirement arrangements entitled to federal income tax benefits.
These are (a) individual retirement annuities ("IRAs") subject to Section 408 of
the Internal Revenue Code, (b) tax-deferred annuities subject to Section 403(b)
of the Internal Revenue Code, for use by public schools and certain tax-exempt
organizations, (c) eligible deferred compensation plans subject to Section 457
of the Internal Revenue Code, (d) pension and profit sharing plans qualified
under Section 401 of the Internal Revenue Code including those plans that are
established by self-employed individuals for themselves and their employees, and
(e) certain non-qualified annuity arrangements. A summary of the tax benefits
available to persons participating in these arrangements and their beneficiaries
is provided under "Federal Tax Status," pages 31-33.

When the Program made available to a Participant includes all variable
investment options, the Participant may have contributions made on his behalf
invested in one or more of VCA-10, VCA-11, and the Subaccounts of VCA-24. Some
Programs, however, may offer only some of the variable investment options, and
accordingly a Participant in those Programs may only have contributions made on
their behalf to the available Accounts and Subaccounts. An Accumulation Account
will be established for a Participant in each Account or Subaccount in which he
invests. The value of a Participant's Accumulation Account in VCA-10, VCA-11 or
any particular Subaccount of VCA-24 will vary with the investment results in
VCA-10, VCA-11 or any particular Subaccount of VCA-24, respectively. A
Participant may elect to have the value of his Accumulation Accounts distributed
to him in one sum, applied to the purchase of a fixed-dollar annuity, or both.
The Contracts do not provide for annuity payments that vary with the investment
results of VCA-10, VCA-11 or any Subaccount of VCA-24.

PRUDENTIAL

Prudential is a mutual life insurance company incorporated in 1873 under the
laws of the State of New Jersey. Its corporate office is located at 751 Broad
Street, Newark, New Jersey 07102-3777. It has been investing for pension funds
since 1928.

Prudential serves as the investment manager for VCA-10, VCA-11, and the Fund and
is registered as an investment adviser under the Investment Advisers Act of
1940. PIMS performs certain sales and distribution functions regarding the
Contracts pursuant to agreements between PIMS, Prudential, and each of VCA-10
and VCA-11 (collectively, the "Distribution Agreements") and may be deemed to be
the Contracts' "principal underwriter" under the Investment Company Act of 1940
(the "1940 Act"). PIMS is registered as a broker-dealer under the Securities
Exchange Act of 1934.

Prudential is responsible for the administrative and recordkeeping functions of
VCA-10, VCA-11, VCA-24 and the Fund. Prudential's financial statements appear in
the Statement of Additional Information and should be considered only as bearing
upon Prudential's ability to meet its obligations under the Contracts.

THE ACCOUNTS

Prudential established VCA-10 and VCA-11 on March 1, 1982, and VCA-24 on April
29, 1987, under the insurance laws of the State of New Jersey. Each Account
meets the definition of a "separate account" under the federal securities laws.
The assets in the Accounts are the property of Prudential, but are legally
segregated from all other assets of Prudential and may not be charged with
liabilities arising out of any of Prudential's other business. All income, gains
and losses, whether or not realized, from assets allocated to the Accounts are
credited to or charged against the Accounts without regard to other income,
gains, or losses of Prudential. The assets in the Accounts will always be equal
or greater in value than Prudential's liabilities under the Contracts. The
fixed-dollar annuities available under the Contracts are not funded through the
Accounts. The obligations arising under the Contracts are general corporate
obligations of Prudential.

VCA-10, VCA-11 and the Fund are registered as open-end, diversified, management
investment companies, and VCA-24 as a unit investment trust, with the Securities
and Exchange Commission (the "Commission") under the 1940 Act. This registration
does not involve supervision by the Commission of Prudential or of the
management or investment practices of the Accounts or the Fund.

THE FUND

The Fund is registered under the 1940 Act as an open-end, diversified,
management investment company. Seven of the Portfolios of the Fund are available
for the investment of contributions made under the Contracts funded through
VCA-24. Investments in a Portfolio are made by purchasing shares of the series
of Fund capital stock representing interests in that Portfolio. Shares in the
Fund are currently sold at their net asset value to separate accounts
established by Prudential and certain other insurers that offer variable life
insurance contracts and variable annuity contracts.

10
<PAGE> 16

As noted, shares of the Fund are sold to both variable life and variable annuity
separate accounts. It is conceivable that in the future it may become
disadvantageous for both variable life and variable annuity contract separate
accounts to invest in the same underlying fund. Although Prudential, Pruco Life
Insurance Company, Pruco Life Insurance Company of New Jersey, and the Fund do
not currently foresee any such disadvantage, the Fund's Board of Directors
intends to monitor events in order to identify any material conflict between
variable annuity contract owners and variable life contract owners and to
determine what action, if any, should be taken in response thereto. Material
conflicts could result from such things as: (1) changes in state insurance law;
(2) changes in federal income tax law; (3) changes in the investment management
of any Portfolio of the Fund; or (4) differences between voting instructions
given by variable annuity contract owners and Participants and those given by
variable life insurance contract owners.

INVESTMENT PRACTICES

A Participant should review the investment objectives and policies described
below for VCA-10, VCA-11 and each Fund Portfolio corresponding to each
Subaccount of VCA-24 before deciding how to have his contributions invested.
VCA-10, VCA-11 and the Fund Portfolios have for the most part different
investment objectives and policies. These differences will affect the return on
a Participant's investment and the market and financial risks to which that
investment will be exposed. There is no guarantee that the objectives of VCA-10,
VCA-11 or any Fund Portfolio will be met.

VCA-10'S INVESTMENT OBJECTIVE

VCA-10's investment objective is long-term growth of capital. VCA-10 will seek
to achieve this objective by investing primarily in equity securities of major,
established corporations. Current income, if any, is incidental to this
objective. This objective is a fundamental investment policy and may not be
changed without the approval of a majority vote (as defined in the 1940 Act) of
VCA-10 Participants. Certain additional investment restrictions applicable to
VCA-10 are set forth in the Statement of Additional information.

VCA-10'S INVESTMENT POLICIES

The investment policies of VCA-10 set forth below are adopted in an effort to
achieve the investment objective and are not fundamental. Therefore, these
investment policies may be changed by the VCA-10 Committee without the approval
of VCA-10 Participants.

In attempting to achieve its objective, VCA-10 will invest in common stocks,
preferred stocks, warrants, convertible bonds or other equity related securities
issued by companies which, in the opinion of VCA-10's investment adviser, are
believed to be in sound financial condition and have prospects for price
appreciation greater than broadly based stock indices. Under normal market
conditions, VCA-10 may also invest up to 20% of its assets in investment grade
short-term, intermediate term, or long-term debt instruments. At times when
economic conditions or general levels of common stock prices are such that the
investment adviser deems it prudent to adopt a defensive position by reducing or
curtailing investments in equities, a larger proportion than usual of VCA-10's
assets may be invested in such debt instruments.

VCA-10 may also invest in American Depository Receipts (ADRs) which are U.S.
dollar-denominated certificates issued by a United States bank or trust company
and represent the right to receive securities of a foreign issuer deposited in a
domestic bank or foreign branch of a United States bank and traded on a United
States exchange or in an over-the-counter market. Investment in ADRs has certain
advantages over direct investment in the underlying foreign securities because
they are easily transferable, have readily available market quotations, and the
foreign issuers are usually subject to comparable auditing, accounting and
financial reporting standards as domestic issuers. Nevertheless, as foreign
securities, ADRs involve certain risks which should be considered fully by
investors. These risks include political or economic instability in the country
of the issuer, the difficulty or predicting international trade patterns, and
the fact that there may be less publicly available information about a foreign
company than about a domestic company.

DESCRIPTION OF VCA-10'S INVESTMENT TECHNIQUES

VCA-10 may use some of the following investment techniques designed to meet
VCA-10's objective.

Financial futures contracts. To the extent permitted by applicable regulations,
VCA-10 may purchase and sell financial futures contracts, including stock index
futures contracts, futures contracts on interest-bearing securities (such as
U.S. Treasury bonds and notes) or rate indices, and futures contracts on foreign
currencies or groups of foreign currencies. VCA-10 will use futures contracts
solely for the purpose of hedging the Account's positions with respect to
securities, interest rates, and foreign securities.

A financial futures contract generally provides for the future sale by one party
and purchase by the other party of a specified amount of a particular financial
instrument or currency at a specified price on a designated date. A stock index
futures contract is an agreement in which the seller of the contract agrees to
deliver to the buyer an amount of cash equal to a

11
<PAGE> 17

specific dollar amount times the difference between the value of a specific
stock index at the close of the last trading day of the contract and the price
at which the agreement is made. No physical delivery of the underlying stocks in
the index is made.

Further information about futures contracts, including risks and investment
techniques, is provided in the Statement of Additional Information.

Options. VCA-10 may purchase and sell (i.e., write) put and call options on
equity securities, debt securities, securities indices, foreign currencies, and
financial futures contracts. An option gives the owner the right to buy or sell
securities at a predetermined exercise price for a given period of time.
Currently, the 1940 Act is interpreted to require that any options written by
investment companies, such as VCA-10, be "covered," which can be done in a
variety of ways, such as placing in a segregated account certain securities or
cash designed to "cover" VCA-10's obligation under the written option.
Additional explanation about techniques VCA-10 will use in connection with
options is provided in the Statement of Additional Information.

Although options will be primarily used to reduce fluctuations in the value of
VCA-10's investments (i.e., hedge) or to generate additional income, they do
involve certain risks. The investment manager may not correctly anticipate
movements in the relevant markets, thus causing losses on VCA-10's options
positions. VCA-10's use of options is subject to other special risks,
information about which is provided in the Statement of Additional Information.

Real estate-related securities. VCA-10 may invest in securities secured by real
estate or shares of real estate investment trusts that are listed on a stock
exchange or reported on the National Association of Securities Dealers, Inc.
automated quotation system ("NASDAQ"). Such securities may be sensitive to
factors such as real estate values and property taxes, interest rates, cash flow
of underlying real estate assets, overbuilding, and the management skill and
creditworthiness of the issuer. They may also be affected by tax and regulatory
requirements, such as those relating to the environment.

Repurchase agreements. When VCA-10 purchases certain money market securities,
it may on occasion enter into a repurchase agreement with the seller wherein the
seller and VCA-10 agree at the time of sale to a repurchase of the security at a
mutually agreed upon time and price. The period of maturity is usually quite
short, possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed-upon market rate of interest effective for the period of time the
Account's money is invested in the security, and is not related to the coupon
rate of the purchased security. Repurchase agreements may be considered loans of
money to the seller of the underlying security, which are collateralized by the
securities underlying the repurchase agreement. VCA-10 will not enter into
repurchase agreements unless the agreement is "fully collateralized," i.e., the
value of the 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
will take possession of the securities underlying the agreement and will value
them daily to assure that this condition is met. The VCA-10 Committee has
adopted standards for the parties with whom it will enter into repurchase
agreements which it believes are reasonably designed to assure that such a party
presents no serious risk of becoming involved in bankruptcy or insolvency
proceedings within the time frame contemplated by the repurchase agreement. 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 has 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.

VCA-10 will not enter into repurchase agreements with Prudential or its
affiliates, including Prudential Securities Incorporated, as the seller. This
will not affect VCA-10's ability to maximize its opportunities to engage in
repurchase agreements. Provided that all necessary regulatory approvals are
obtained, the Accounts may participate in a joint repurchase account with other
investment companies managed by Prudential or its affiliates.

Reverse repurchase agreements and dollar roll transactions. VCA-10 may enter
into reverse repurchase agreements and dollar roll transactions. Reverse
repurchase agreements involve the sale of securities held by VCA-10 with an
agreement by the Account to repurchase the same securities at an agreed upon
price and date. During the reverse repurchase period, VCA-10 often continues to
receive principal and interest payments on the sold securities. The terms of
each agreement reflect a rate of interest for use of the funds for the period,
and thus these agreements have some of the characteristics of borrowing by
VCA-10.

Dollar rolls involve sales by VCA-10 of securities for delivery in the current
month with a simultaneous contract to repurchase substantially similar
securities (same type and coupon) from the same party at an agreed upon price
and date. During the roll period, VCA-10 forgoes principal and interest paid on
the securities. VCA-10 is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop") as

12
<PAGE> 18

well as by the interest earned on the cash proceeds of the initial sale. A
"covered roll" is a specific type of dollar roll for which there is an
offsetting cash position or a cash equivalent security position which matures on
or before the forward settlement date of the dollar roll transaction. VCA-10
will establish a segregated account with its custodian in which it will maintain
cash, U.S. Government securities or other liquid unencumbered assets equal in
value to its obligations in respect of reverse repurchase agreements and dollar
rolls.

Reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities retained by VCA-10 may decline below the price of the
securities VCA-10 has sold but is obligated to repurchase under the agreement.
In the event the buyer of securities under a reverse repurchase agreement or
dollar roll files for bankruptcy or becomes insolvent, VCA-10's use of the
proceeds of the agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce VCA-10's obligation to
repurchase the securities.

When-issued or delayed delivery securities. VCA-10 may, from time to time and
in the ordinary course of business, purchase or sell securities on a when-issued
or delayed delivery basis, that is, delivery and payment can take place a month
or more after the date of the transaction. VCA-10 will make commitments for such
when-issued or delayed delivery transactions only with the intention of
acquiring the securities. The Account's custodian will maintain in a separate
account portfolio securities having a value equal to or greater than any such
commitments. If VCA-10 were to dispose of the right to acquire a security it
could, as with the disposition of any security, incur a gain or loss due to
market fluctuations.

Short sales against the box. VCA-10 may make short sales of securities or
maintain a short position, provided that at all times when a short position is
open, VCA-10 owns an equal amount of the securities sold short or securities
convertible into or exchangeable, with or without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the
securities sold short (a "short sale against the box"); provided, that if
further consideration is required in connection with the conversion or exchange,
cash, U.S. Government securities or other liquid unencumbered assets in an
amount equal to such consideration must be put in a segregated account.

Other investment techniques. To the extent permitted by applicable regulations,
VCA-10 may also use forward foreign currency exchange contracts and interest
rate swaps. VCA-10 may also lend its portfolio securities from time to time.
Information about these investment techniques, including certain risks
associated with their use, is provided in the Statement of Additional
Information.

VCA-11'S INVESTMENT OBJECTIVE

The investment objective of VCA-11 is to seek as high a level of current income
as is consistent with the preservation of capital and liquidity. This objective
is a fundamental investment policy and may not be changed without the approval
of a majority vote of persons having voting rights in respect of the Account.
Certain investment restrictions are applicable; they are set forth in the
Statement of Additional Information.

VCA-11'S INVESTMENT POLICIES

The investment policies of VCA-11 set forth below are adopted in an effort to
achieve the investment objectives and are not fundamental. Therefore, the
investment policies of VCA-11 may be changed by the VCA-11 Committee without
participant approval.

VCA-11 seeks to achieve its objective by investing in the following money market
instruments payable in U.S. dollars:

1. U.S. Treasury Bills and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. See "Appendix."

2. Obligations (including certificates of deposit and bankers' acceptances) of
any commercial bank, savings bank and savings and loan association
organized under the laws of the United States or any state thereof and any
commercial bank organized under the laws of any foreign nation, provided
that such bank or association has, at the time of the Account's investment,
total assets of at least $1 billion or the equivalent. The term
"certificates of deposit" includes both Eurodollar certificates of deposit,
for which there is generally a market, and Eurodollar time deposits, for
which there is generally not a market. "Eurodollars" are dollars deposited
in foreign banks and foreign branches of United States banks outside the
United States.

An investment in Eurodollar instruments and in instruments of foreign
issuers generally involves risks that are different in some respects from
an investment in debt obligations of domestic issuers, including future
political and economic developments that might adversely affect the payment
of principal and interest on such instruments. In addition, there may be
less publicly available information about a foreign issuer than about a
domestic issuer, and such foreign issuers may not be subject to the same
accounting, auditing and financial standards and requirements as domestic
issuers. Finally, in the event of default,
13
<PAGE> 19

judgments against a foreign issuer might be difficult to obtain or enforce. See
"Appendix."

3. Commercial paper, variable amount demand master notes, funding agreements,
bills, notes and other obligations issued by a U.S. or foreign company, a
foreign government, its political subdivisions, agencies or
instrumentalities, maturing in 397 days or less (as measured in accordance
with Commission rules), denominated in U.S. dollars, and, at the date of
investment, present minimal credit risk and are "eligible securities," as
determined by VCA-11's investment manager under the supervision of the
Committee members. "Eligible security" currently means a security rated (1)
in one of the two highest rating categories by at least two nationally
recognized statistical rating organizations ("NRSROs") assigning a rating
to the security or issuer, (2) if only one NRSRO assigned a rating, in one
of the two highest rating categories of that NRSRO, or (3) if unrated, of
comparable quality as determined by the VCA-11's investment manager.

VCA-11 also may purchase instruments of the types described above together
with the right to resell the instruments at an agreed-upon price or yield
within a specified period prior to the maturity date of the instruments.
Such a right to resell is commonly known as a "put" or "guarantee" and the
aggregate price that VCA-11 pays for instruments with a put or guarantee
may be higher than the price that otherwise would be paid for the
instruments. The eligibility of these instruments will be determined in
accordance with Commission rules.

4. Commercial paper, variable amount demand master notes or other obligations
which are guaranteed or supported by a letter of credit issued by a bank,
provided such bank (including a foreign bank) meets the requirements set
forth in paragraph (2) above. Commercial paper, variable amount demand
master notes or other fixed income obligations which are guaranteed or
insured by an insurance company or other non-bank entity, provided such
insurance company or other non-bank entity represents a credit of high
quality, as determined by the Account's Portfolio Manager under the
supervision of the VCA-11 Committee.

5. "Floating rate" and "variable rate" obligations, the interest rates on
which fluctuate generally with changes in market interest rates.
Investments in floating rate or variable rate securities normally will
involve securities which provide that the rate of interest is set as a
spread to a designated base rate, such as rates on Treasury bills, and, in
some cases, that the purchaser can demand payment of the obligation at
specified intervals or after a specified notice period (in each case
generally less than 397 days) at par plus accrued interest, which amount
may be more or less than the amount paid for them. Variable rate securities
provide for a specified periodic adjustment in the interest rate, while
floating rate securities have an interest rate which changes whenever there
is a change in the designated base interest rate.

DESCRIPTION OF VCA-11'S INVESTMENT TECHNIQUES

Repurchase agreements. When VCA-11 purchases money market securities of the
types described above, it may on occasion enter into a repurchase agreement with
the seller wherein the seller and VCA-11 agree at the time of sale to a
repurchase of the security at a mutually agreed upon time and price. Repurchase
agreements are described in more detail under "Description of VCA-10's
Investment Techniques," pages 12-13. VCA-11's use of repurchase agreements is
subject to the same standards as those described for VCA-10.

Illiquid securities. VCA-11 will not invest more than 10% of its net assets in
illiquid securities (including repurchase agreements and non-negotiable time
deposits maturing in more than seven days). Securities that have legal or
contractual restrictions on resale but have a readily available market are not
deemed illiquid for purposes of this limitation. The investment adviser will
monitor the liquidity of such restricted securities subject to the supervision
of the VCA-11 Committee. In reaching liquidity decisions, the investment adviser
will consider, among other things, the following factors: (1) the frequency of
trades and quotes for the security; (2) the number of dealers wishing to
purchase or sell the security and the number of other potential purchasers; (3)
dealer undertakings to make a market in the security and (4) the nature of the
security and the nature of the market place trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfers). Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.

Other investment techniques. VCA-11 may purchase or sell securities on a
when-issued or delayed delivery basis. This technique is described under
"Description of VCA-10's Investment Techniques," page 13. In addition, as
explained in greater detail in the Statement of Additional Information, VCA-11
may lend its portfolio securities.

Commission standards. The VCA-11 Committee has adopted the following additional
policies to conform to the Commission's standards applicable to all money market
funds, including VCA-11: (1) VCA-11 will only purchase securities that are
United States dollar-de-

14
<PAGE> 20

nominated "eligible securities" that the VCA-11 Committee has determined present
minimal credit risks; (2) VCA-11 will not invest more than 5% of its assets in
the securities of any one issuer (except U.S. Government obligations); however,
the Account may exceed the 5% limit with respect to the "first tier" securities
(see "Appendix"), of one issuer at a time, for up to three business days after
the purchase is made; (3) VCA-11 will not invest more than 5% of its total
assets in "second tier" securities (see "Appendix") nor more than the greater of
one million dollars and 1% of its assets in the "second tier" securities of any
one issuer; (4) If a "first tier" security held by VCA-11 ceases to be so
classified, the investment manager will reassess promptly whether the security
presents minimal credit risks and shall cause the Account to take such action as
it determines is in the best interests of VCA-11 and its Participants; (5) In
the event of a default with respect to a security held by VCA-11, or if a
security held in the Account ceases to be an "eligible security," or if it has
been determined that a security owned by VCA-11 no longer presents minimal
credit risks, VCA-11 will sell the security as soon as practicable unless the
Committee makes a specific finding that such action would not be in the best
interest of the Account; and (6) VCA-11's dollar-weighted average portfolio
maturity will be no more than 90 days, and the Account will not acquire any
instrument with a remaining maturity greater than 397 calendar days (determined
in accordance with Commission rules). The VCA-11 Committee has adopted written
procedures delegating to the investment manager under certain guidelines the
responsibility to make the above-described determinations, including certain
credit quality determinations. The VCA-11 Committee may revise these procedures
from time to time, for example to incorporate revisions to Commission rules.

THE INVESTMENT OBJECTIVES OF THE FUND PORTFOLIOS

The investment objectives of the seven Fund Portfolios currently available for
investment through VCA-24 under the Contracts are:

Diversified Bond Portfolio. A high level of income over the longer term while
providing reasonable safety of capital through investment primarily in readily
marketable intermediate and long-term fixed income securities that provide
attractive yields but do not involve substantial risk of loss of capital through
default.

Government Income Portfolio. A high level of income over the longer term
consistent with the preservation of capital through investment primarily in U.S.
Government securities, including intermediate and long-term U.S. Treasury
securities and debt obligations issued by agencies of or instrumentalities
established, sponsored or guaranteed by the U.S. Government. At least 65% of the
total assets of the portfolio will be invested in U.S. Government securities.

Conservative Balanced Portfolio. Achievement of a favorable total investment
return consistent with a portfolio having a conservatively 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 prefers a relatively lower risk of loss than
that associated with the Flexible Managed Portfolio while recognizing that this
reduces the chances of greater appreciation.

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 risk of loss in an effort
to achieve greater appreciation.

Stock Index Portfolio. Achievement of investment results that correspond to the
price and yield performance of publicly traded common stocks in the aggregate by
following a policy of attempting to duplicate the price and yield performance of
the Standard & Poor's 500 Composite Stock Price Index.

Equity Portfolio. Capital appreciation through investment primarily in common
stocks of companies, including major established corporations as well as smaller
capitalization companies, that appear to offer attractive prospects of price
appreciation that is superior to broadly-based stock indices. 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.

The investment policies, restrictions and risks associated with each of these
seven Fund Portfolios are described in the accompanying Prospectus for the Fund.
Certain restrictions are set forth in the Fund's Statement of Additional
Information.

The Conservative Balanced, Flexible Managed and Equity Portfolios may invest in
below investment grade fixed incomed securities. Medium to lower rated and
comparable non-rated securities tend to offer higher yields than higher rated
securities with the same maturities because the historical financial condition
of the issuers of such securities may not have been as strong as that of other
issuers. Since medium to lower rated securities generally involve greater risks
of loss of income and principal than higher rated securities, investors should
consider carefully the relative risks associated with investments in high
yield/high risk se-

15
<PAGE> 21

curities which carry medium to lower ratings and in comparable non-rated
securities. Investors should understand that such securities are not generally
meant for short-term investing. See the Fund's Prospectus and Statement of
Additional Information for a discussion of the risks associated with investing
in fixed income securities rated below investment grade.

DETERMINATION OF ASSET VALUE

The Unit Value for VCA-10 will be determined once daily as of 4:15 p.m. Eastern
time on each day that the New York Stock Exchange ("NYSE") is open for trading.
NASDAQ National Market System equity securities and securities for which the
primary market is on an exchange are generally valued at the last sale price on
such system or exchange or, in the absence of recorded sales, at the mean
between the last quoted bid and asked prices on that day or at the bid price on
such day in the absence of an asked price. Other over-the-counter equity
securities are valued by an independent pricing agent or principal market maker.

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 last reported bid and asked prices provided by a
principal market maker.

Short-term investments having maturities of sixty days or less are valued at
amortized cost which, with accrued interest, 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.

Options on stock and stock indices traded on national securities exchanges are
valued at the last sale price on such exchange on the day of valuation, or if
there was no sale on that day, at the mean between the most recently quoted bid
and asked prices on such exchange.

Futures contracts and options thereon are valued at the last sale price at the
close of the applicable commodities exchange or board of trade or, if there was
no sale on the applicable commodities exchange or board of trade on such day, at
the mean between the most recently quoted bid and asked prices on such exchange
or board of trade.

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
VCA-10 Committee.

The Unit Value for VCA-11 will be determined once daily as of 4:15 p.m. Eastern
time on each day that the NYSE is open for trading. With the exception of U.S.
Government securities held subject to repurchase agreements that may have
maturity dates in excess of one year from the date of delivery of the repurchase
agreement, securities held in VCA-11 consist primarily of debt obligations with
a remaining maturity of less than thirteen months. These securities will be
valued at amortized cost. If the net asset value of VCA-11 fluctuates by as much
as three-tenths of one percent because of the use of the amortized cost method
as opposed to the mark-to-market valuation, then the VCA-11 Committee will be
promptly notified so that corrective action may be taken to avoid the dilution
of the interests of Participants in investment companies. This corrective action
may entail selling portfolio instruments prior to maturity, redeeming shares in
kind or using market value. In determining the market value for securities held
in VCA-11, where the primary market for a security is an exchange, the market
quotations are obtained from that exchange. Securities which are not listed on
an exchange and for which market quotations are readily available are valued at
the market price as obtained from one or more of the major market makers. Other
investments and assets are valued at fair value as determined in good faith
under the direction of the Committee. Prudential supervises and retains
responsibility for such appraisals under the direction of the VCA-11 Committee.

The proceeds from sales of VCA-11's assets generally will vary inversely to
changes in interest rates. If interest rates increase after a security is
purchased, the security, if sold, may return less than its cost.

The procedures for computing the net asset value of Fund shares are described in
the accompanying Fund Prospectus.

MANAGEMENT

The operations of VCA-10 and VCA-11 are conducted under the general supervision
of their respective Committees and in accordance with their respective Rules and
Regulations. The members of each Committee are elected for indefinite terms by
the Participants in that Account and by any other persons who may have voting
rights in respect of the Account. See "Voting Rights," page 33. A majority of
the Committee members are not "interested persons" of Prudential or of the
Accounts, as defined in the 1940 Act. Information about the Fund's Board of
Directors is provided in the accompanying Prospectus of the Fund and its
Statement of Additional Information.

16
<PAGE> 22

Prudential serves as the investment manager of VCA-10, VCA-11 and the Fund under
separate investment management agreements with each of them. Subject to
Prudential's supervision, all of the investment management services provided by
Prudential are furnished by its wholly-owned subsidiary, The Prudential
Investment Corporation ("PIC"). Prudential continues to have responsibility for
all investment advisory services under its investment management agreements with
VCA-10, VCA-11 and the Fund. Pursuant to a service agreement between Prudential
and PIC, Prudential reimburses PIC for its costs and expenses. PIC is registered
as an investment adviser under the Investment Advisers Act of 1940.

An affiliated broker may be employed to execute brokerage transactions on behalf
of VCA-10, VCA-11 and the Fund, as long as the commissions are reasonable and
fair compared to the commissions received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time. VCA-10, VCA-11 and the
Fund may not engage in any transactions in which Prudential or its affiliates,
including Prudential Securities Incorporated, act as principal, including
over-the-counter purchases and negotiated trades in which such a party acts as a
principal. For a more complete description see the section "Portfolio Brokerage
and Related Practices" in the Statement of Additional Information.

Prudential is also responsible for administrative and recordkeeping functions
for VCA-10 and VCA-11 and pays the expenses associated with them. Information
about the administrative, recordkeeping and other expenses of the Fund appears
in the accompanying Fund prospectus, and in the Fund's Statement of Additional
Information.

CHARGES

No deduction is made from contributions to VCA-10, VCA-11 or any Subaccount of
VCA-24 at the time they are made. Accordingly, one hundred percent (100%) of
those contributions is invested in the Program. Certain charges, described
below, are imposed upon withdrawal of all or part of the contributions made on
behalf of Participants, or upon each Participant's Accumulation Account in the
Program.

Deferred Sales Charge

PIMS performs certain sales and distribution functions regarding the Contracts.
In consideration for these services, a deferred sales charge which is designed
to cover expenses relating to sales of the Contracts, including commissions, may
be imposed upon contributions withdrawn by a Participant. To the extent the
deferred sales charge does not repay these expenses, the difference will be made
up from Prudential's surplus held in its general account. The amount of the
deferred sales charge imposed upon any withdrawal depends upon the number of
years of a Participant's participation in a MEDLEY Program, the year in which
the withdrawal is made, and the kind of retirement arrangement that covers the
Participant.

Participation in a Program begins upon the date when the first contribution on
behalf of the Participant under a Contract described in this Prospectus, a
Companion Contract, the fixed rate option, mutual fund, or other investment
options made available by Prudential along with enrollment information in a form
satisfactory to Prudential, is received by Prudential in good order. Such
participation ends on the date when all of the Participant's Accumulation
Accounts under the Program are cancelled. In the event of such cancellation,
Prudential reserves the right to consider the Participant to be participating in
the Program for a limited time (currently about one year) for the purposes of
calculating any deferred sales charge on the withdrawal of any future
contributions.

The chart below describes the maximum amount of the deferred sales charge.

<TABLE>
<CAPTION>
DEFERRED SALES
CHARGE, AS A
YEARS OF PERCENTAGE OF
PROGRAM CONTRIBUTIONS
PARTICIPATION WITHDRAWN
------------- --------------
<S> <C>
up to 1 year................... 7%
1 year up to 2 years........... 6%
2 years up to 3 years.......... 5%
3 years up to 4 years.......... 4%
4 years up to 5 years.......... 3%
5 years up to 6 years.......... 2%
6 years up to 7 years.......... 1%
7 years and after.............. 0%
</TABLE>

Although some Contracts may provide for higher sales charges, Prudential has
determined to limit sales charges on all Contracts to the above schedule. If a
Participant makes a withdrawal on an anniversary date of his Program
participation, any applicable deferred sales charge will be based on the longer
period of Program participation.

The proceeds received by a Participant upon any partial or full withdrawal will
be reduced by the amount of any deferred sales charge.

Lower deferred sales charges may be imposed under certain Contracts. See
"Modification of Charges," page 19.

Limitations on Sales Charges

No deferred sales charge is imposed upon contributions withdrawn to purchase an
annuity under a Con-

17
<PAGE> 23

tract, 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 deferred
sales charge is imposed upon contributions withdrawn due to resignation or
retirement by the Participant or termination of the Participant by the
Contract-holder. In addition, no deferred sales charge is imposed upon
contributions withdrawn for any reason after seven years of participation in a
Program.

Contributions transferred among VCA-10, VCA-11, the Subaccounts of VCA-24, a
Companion Contract, and the fixed rate option of a Combination Contract are
considered to be withdrawals from the Account or Subaccount from which the
transfer is made, but no deferred sales charge is imposed upon them. They will,
however, be considered as contributions to the receiving Account or Subaccount
for purposes of calculating any deferred sales charge imposed upon their
subsequent withdrawal from it.

Loans are considered to be withdrawals from the Account or Subaccount from which
the loan amount was deducted but are not considered a withdrawal from the
Program. Therefore, 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 or Subaccount for purposes of calculating any deferred sales
charge imposed upon any subsequent withdrawal. If the Participant defaults on
the loan by, for example, 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, VCA-11 and each Subaccount of
VCA-24 are considered to be withdrawals of contributions until all of the
Participant's contributions to the Account or Subaccount have been withdrawn,
transferred or borrowed. No deferred sales charge is imposed upon withdrawals of
any amount in excess of contributions.

Annual Account Charge

An annual account charge for recordkeeping and other administrative services is
deducted from each Participant's Accumulation Account in the Program. This
annual account charge is payable to Prudential and is made on the last business
day of each calendar year as long as the Participant still has an Accumulation
Account under the Program. The annual account charge will be pro rated for new
Participants for the first year of their participation, based on the number of
full months remaining in the calendar year after the first contribution is
received. If all of the Participant's Accumulation Accounts are cancelled before
the end of the year, the charge will be made on the date the last Accumulation
Account is cancelled (and the charge will not be pro rated if this occurs during
the year in which the first contribution is made to such Account). The annual
account charge will not be made, however, upon the cancellation of a
Participant's Accumulation Account to purchase an annuity under a Contract if
the annuity becomes effective on January 1 of any year. After a cancellation,
the Participant may again participate in the Program only as a new Participant
and will be subject to a new annual account charge. Also, the annual account
charge will not be made if the Participant's employer has chosen to pay the
charge.

The aggregate annual account charge with respect to a Participant's Accumulation
Accounts will not be greater than $30. The charge will first be made against a
Participant's Accumulation Account under a fixed-dollar Companion Contract or
fixed rate option of a Combination Contract. If the Participant has no
Accumulation Account under a Companion Contract or the fixed rate option, or if
that Accumulation Account is too small to pay the charge, the charge will be
made against the Participant's Accumulation Account in VCA-11. If the
Participant has no VCA-11 Accumulation Account, or if that Account is too small
to pay the charge, the charge will then be made against the Participant's VCA-10
Accumulation Account. If the Participant has no VCA-10 Accumulation 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 Accumulation Accounts in VCA-24.

The cash positions of VCA-10, VCA-11 and the Subaccounts of VCA-24 are expected
to be sufficient to cover such part of the charge that is collected from them.
Accordingly, that collection should have no adverse financial effect on any
Account or Subaccount.

Charge for Administrative Expenses and
Investment Management Services

A daily charge is made which is equal to an effective annual rate of 1.00% of
the net asset value of VCA-10 and VCA-11. Three quarters of this charge (0.75%)
is for administrative expenses not covered by the annual account charge, and one
quarter (0.25%) is for investment management. A daily charge is also made which
is equal to an effective annual rate of 0.75% of the net

18
<PAGE> 24

asset value of each Subaccount of VCA-24. All of this charge is for
administrative expenses not covered by the annual account charge. These charges
are payable to Prudential and are reflected in the computation of the value of
the Units in each Account and Subaccount. See "The Unit Value," page 20. It
should be noted that because the administrative charge of 0.75% is a charge
based on a percentage of assets in an Account, there is no necessary
relationship between this administrative charge and the amount of expenses
attributable to a particular Contract or Participant.

Prudential makes daily charges for providing investment management of the Fund
Portfolios at the following effective annual rates: 0.35% of the average daily
net assets of the Stock Index Portfolio, 0.40% of the average daily net assets
of the Diversified Bond Portfolio and Government Income Portfolio, 0.45% of the
average daily net assets of the Equity Portfolio, 0.55% of the average daily net
assets of the Conservative Balanced Portfolio, 0.60% of the average daily net
assets of the Flexible Managed Portfolio and 0.75% of the average daily net
assets of the Global Portfolio. Other expenses incurred by the Fund include
costs of Portfolio transactions, legal and accounting expenses, and the fees of
the Fund's custodian and transfer agent. Further detail is provided in the
accompanying Prospectus for the Fund and its Statement of Additional
Information.

Modification of Charges

Prudential may impose deferred sales charges and annual account charges lower
than those described above with respect to Participants under certain Contracts.
These lower charges will reflect Prudential's anticipation that lower sales or
administrative costs will be incurred, or less sales or administrative services
will be performed, with respect to such Contracts due to economies arising from
(1) the utilization of mass enrollment procedures or (2) the performance of
recordkeeping or sales functions, which Prudential would otherwise be required
to perform, by the Contract-holder, an employee organization, or by a third
party on their behalf or (3) an accumulated surplus of charges over expenses
under a particular Contract. Generally, the deferred sales charge is lowered or
waived depending on the amount of local service the Contract-holder requires. In
addition, the deferred sales charge may be lowered if required by state law. The
exact amount of the deferred sales charge and annual account charge applicable
to Participants under any given Contract will be stated in the Contract.

Prudential may change the deferred sales charge, the annual account charge and
the charge of 0.75% for administrative expenses. See "Changes in the Contracts,"
page 30.

THE CONTRACTS

Prudential generally issues the Contracts to employers whose employees may
become Participants. Under an IRA, a Participant's spouse may also become a
Participant. Sometimes a Contract is issued to an association that represents
employers of employees who become Participants, sometimes to an association
whose members become Participants and sometimes to a trustee of a trust with
participating employers whose employees become Participants. Even though an
employer, an association or a trustee is the Contract-holder, the Contract
normally provides that Participants shall have the rights and interests under
them that are described in this Prospectus. But this is not always true. For
example, prior to 1996, Section 457 of the Internal Revenue Code required that a
Contract issued in connection with a plan under that Section provide that all
rights under the Contract are owned by the employer to whom, or on whose behalf,
the Contract is issued. The Section also required that the Contract provide that
all amounts are payable to the employer and that the employee has no rights or
interests under the Contract, including any right or interest in the
Accumulation Account established in his name except as provided in the plan. In
1996, however, Congress amended Section 457 to require that all plan assets be
held for the exclusive benefit of Participants and their beneficiaries. For
plans existing on the date of enactment in 1996, that new requirement need not
be implemented until January 1, 1999. Thus, Participants under 457 Contracts
should consult their employer's plan to determine what rights they have under
their particular plan. Certain Contracts issued in connection with non-qualified
arrangements may place all rights and interests in the employer, not the
employee.

Also, a particular plan, even if it is not a deferred compensation plan, may
limit a Participant's exercise of certain rights under a Contract. Participants
should check the provisions of their employer's plan or any agreements with the
employer to see if there are any such limitations and, if so, what they are.
Prudential may issue the Non-Qualified Combination Contract to cover individuals
who are not associated with a single employer or other organization.

THE ACCUMULATION PERIOD

1. Contributions; Crediting Units; Enrollment Forms; Deduction for
Administrative Expenses.

Contributions to a Program ordinarily will be made periodically pursuant to
a payroll deduction or similar agreement between the Participant and his
employer. Any contributions to an IRA must be in an amount of no less than
$500, except for contributions to an IRA for a non-working spouse (or
working spouse who elects to be treated as a

19
<PAGE> 25

non-working spouse), which are limited to $250 per year.

A Participant designates what portion of the contributions made on his
behalf should be invested in VCA-10, VCA-11 and in any Subaccount of VCA-24
(if all three Accounts are part of his employer's Program) or under a fixed
rate option or Companion Contract, if any. The Participant may change this
designation usually by notifying Prudential at the address shown on the
cover page of this Prospectus. Under certain Contracts, an entity other
than Prudential keeps certain records, and Participants under those
Contracts must contact the record-keeper. See "Modified Procedures," page
28.

The full amount (100%) of each contribution designated for investment in
VCA-10, VCA-11 or any Subaccount of VCA-24 is credited to an Accumulation
Account maintained for the Participant in that Account or Subaccount. An
Accumulation Account in VCA-10 consists of VCA-10 Units; an Accumulation
Account in VCA-11 consists of VCA-11 Units; an Accumulation Account in a
Subaccount of VCA-24 consists of Units of that Subaccount. The number of
Units credited to a Participant in an Account or Subaccount is determined
by dividing the amount of the contribution made on his behalf to that
Account or Subaccount by the Account's or Subaccount's Unit Value for the
business day on which the contribution is received at the address shown on
the cover page of this Prospectus. A business day is a day on which the
NYSE is open for trading.

The initial contribution made for a Participant will be invested in VCA-10,
VCA-11, or a Subaccount of VCA-24 no later than two business days after it
is received by Prudential and identified as being for investment in VCA-10,
VCA-11, or a Subaccount of VCA-24, if it is preceded or accompanied by
satisfactory enrollment information (i.e., good order). If the
Contract-holder submits an initial contribution on behalf of one or more
new Participants that is not preceded or accompanied by satisfactory
enrollment information, then Prudential will allocate such contribution to
a money market option upon receipt, and also will send a notice to the
Contract-holder that requests allocation information for each such
Participant. If the Contract-holder purchases only contracts that are
within the MEDLEY Program, or purchases such contracts together with either
a group variable annuity contract issued through The Prudential Variable
Contract Account-2 or unaffiliated mutual funds, then contributions that
are not preceded or accompanied by satisfactory enrollment information will
be invested in the VCA-11 money market option. If the Contract-holder
purchases contracts that are within the MEDLEY Program as well as shares of
a money market fund, then contributions that are not preceded or
accompanied by satisfactory enrollment information will be invested in the
money market fund. If the necessary enrollment information is not received
in response to its initial notice to the Contract-holder, Prudential will
deliver up to three additional notices to the Contract-holder at monthly
intervals that request such allocation information. After 105 days have
passed from the time that Units of VCA-11 (or, as the case may be, shares
of the money market fund) were purchased on behalf of Participants who
failed to provide the necessary enrollment information, Prudential will
redeem the relevant VCA-11 Units (or shares of the money market fund) and
pay the proceeds (including earnings thereon) to the Contract-holder. Any
proceeds paid to the Contract-holder under this procedure may be considered
a prohibited and taxable reversion to the Contract-holder under current
provisions of the Internal Revenue Code. Similarly, returning proceeds may
cause the Contract-holder to violate a requirement under the Employee
Retirement Income Security Act of 1974, as amended, to hold all plan assets
in trust. Both problems may be avoided if the Contract-holder arranges to
have the proceeds paid into a qualified trust or annuity contract.

The number of VCA-10 Units, VCA-11 Units or Units of a particular
Subaccount of VCA-24 credited to a Participant will not be affected by any
subsequent change in the value of those Units, but the dollar value of a
Unit will vary from business day to business day depending upon the
investment experience of the Account or Subaccount. The number of Units
credited to a Participant in an Account or Subaccount will be reduced as
the result of the annual account charge. That charge will be made by
cancelling the number of Units that is equal to the amount of the charge
(see "Annual Account Charge," page 18) divided by the Unit Value for the
business day on which the charge is made.

2. Valuation of a Participant's Account

The value of a Participant's Accumulation Account in VCA-10, VCA-11 or in a
Subaccount of VCA-24 on any particular day is determined by multiplying the
total number of Units then to the Participant's credit in the Account or
Subaccount by the Account's or Subaccount's Unit Value on that day.

20
<PAGE> 26

3. The Unit Value

On November 4, 1982, the date of the first Participant contribution to
VCA-10, the Unit Value for VCA-10 was set at $1.00. On November 8, 1982,
the date of the first Participant contribution to VCA-11, the Unit Value
for VCA-11 was set at $1.00. The Unit Value for each Subaccount of VCA-24
was set at $1.00 on the date of commencement of operations of that
Subaccount.

The Unit Value will be determined each business day by multiplying the
previous day's Unit Value by the gross change factor for the current
business day and reducing this amount by the daily equivalent of the
applicable investment management and administrative fees. The gross change
factor for VCA-10 and VCA-11 is determined by dividing the current day's
net assets, ignoring changes resulting from new purchase payments and
withdrawals, by the previous day's net assets. The gross change factor for
each Subaccount of VCA-24 is determined by dividing the current day's net
asset value per share of the applicable Portfolio of the Fund by the
previous day's net value per share.

4. Withdrawal (Redemption) of Contributions.

The Internal Revenue Code imposes restrictions on withdrawals from
tax-deferred annuities subject to Section 403(b) of the Internal Revenue
Code. Pursuant to Section 403(b)(11) of the Internal Revenue Code, amounts
attributable to a Participant's salary reduction contributions (including
the earnings thereon) that are made under a tax-deferred annuity after
December 31, 1988 can only be withdrawn (redeemed) when the Participant
attains age 59 1/2, separates from service with his employer, dies or
becomes disabled (within the meaning of Section 72(m)(7) of the Internal
Revenue Code). However, the Internal Revenue Code permits the withdrawal at
any time of amounts attributable to tax-deferred annuity salary reduction
contributions (excluding the earnings thereon) that are made after December
31, 1988, in the case of a hardship. If the retirement arrangement under
which a Participant is covered contains a financial hardship provision,
withdrawals can be made in the event of the hardship.

Furthermore, subject to any restrictions upon withdrawals contained in the
tax-deferred annuity arrangement under which a Participant is covered, a
Participant can withdraw at any time all or part of his interest in his
Accumulation Account(s) as of December 31, 1988. Amounts earned after
December 31, 1988 on the December 31, 1988 balance in a Participant's
Accumulation Account(s) attributable to salary reduction contributions are,
however, subject to the Section 403(b)(11) withdrawal restrictions
discussed above.

Subject to any conditions or limitations regarding transfers contained in
the tax-deferred annuity arrangement under which a Participant is covered,
a Participant can continue to make transfers of all or part of his interest
in his Accumulation Account(s) among the available investment options
offered by the Prudential and can transfer directly all or part of his
interest in his Accumulation Account(s) to a Section 403(b) tax-deferred
annuity contract of another insurance company or to a mutual fund custodial
account under Section 403(b)(7). See "Transfer Payments," page 25.

Unless restricted by the tax-deferred annuity arrangement under which he is
covered, a Participant may withdraw at any time all or part of his interest
in his Accumulation Account(s) that is attributable to employer
contributions or after-tax Participant contributions, if any.

With respect to retirement arrangements other than tax-deferred annuities
subject to Section 403(b) of the Internal Revenue Code (e.g., Code Section
457 plans) a Participant's right to withdraw at any time all or part of his
interest in VCA-10, VCA-11 or any Subaccount of VCA-24 may be restricted by
the retirement arrangement under which he is covered. For example, Code
Section 457 plans typically permit withdrawals only upon attainment of age
70 1/2, separation from service, or for unforeseeable emergencies.

Withdrawal requests should be submitted to Prudential in the manner set out
in the Summary section of this Prospectus or, if required by the Contract,
another entity providing record-keeping services. See "Modified
Procedures," page 28. Under certain Contracts, the amount withdrawn from an
Account or Subaccount as a minimum distribution payment must be at least
$250 or, if less, equal to the full value of the Participant's interest in
the Account or Subaccount. The amount withdrawn will be reduced by any
deferred sales charge that may apply. See "Deferred Sales Charge," page 17.
If a Participant withdraws the value of all of his Accumulation Accounts
under a Program, the full annual account charge will be deducted at that
time that would otherwise have been deducted at the end of the calendar
year and those Accumulation Accounts will be cancelled. The resulting
amount will be paid within seven days after the request for the withdrawal
has been received in a manner prescribed by Prudential, except as deferment
of

21
<PAGE> 27

such payment may be permitted under the provisions of the 1940 Act in
effect from time to time. Currently, deferment is permissible only when the
NYSE is closed or trading is restricted, when an emergency exists as a
result of which disposal of the securities held in the Account or
Subaccount involved is not reasonably practicable or it is not reasonably
practicable to determine fairly the value of the Account's or Subaccount's
assets, or when the Commission has provided for such deferment for the
protection of Participants. As of the day a withdrawal request is received
by Prudential, the Participant's Accumulation Account in VCA-10, VCA-11 or
any Subaccount of VCA-24, as the case may be, will be reduced by the lesser
of the number of Units obtained by dividing the amount of the Participant's
withdrawal request by the Unit Value for that day, or the number of Units
remaining in the Accumulation Account.

Under certain types of retirement arrangements, the Retirement Equity Act
of 1984 requires that in the case of a married Participant, certain
withdrawal requests include the consent of the Participant's spouse. This
consent must contain the signatures of the Participant and spouse and must
be notarized or witnessed by an authorized plan representative.

Under certain Contracts, withdrawals may be made to pay expenses of the
plan.

Prudential may process a withdrawal from a Participant's Accumulation
Account if Prudential determines that the Participant's contributions
exceed the amount permitted by the Internal Revenue Code.

A withdrawal will generally have federal income tax consequences, which can
include tax penalties. See "Federal Tax Status," pages 31-33.

5. Systematic Withdrawal Plan

If permitted by the Internal Revenue Code and the retirement arrangement
under which a Participant is covered, and subject to the restrictions and
limitations set forth below, a Participant may arrange for systematic
withdrawals to be made from his Accumulation Account(s). A Participant may
arrange for systematic withdrawals only if, at the time he elects to have
such an arrangement, the sum of the balance(s) in his Accumulation
Account(s) is at least $5,000. A Participant who has not reached age
59 1/2, however, may not elect a systematic withdrawal arrangement unless
he has first separated from service with his employer. In addition, the
$5,000 minimum balance does not apply to systematic withdrawals made for
the purpose of satisfying minimum distribution rules.

Federal income tax provisions applicable to the retirement arrangement
under which a Participant is covered may significantly affect the
availability of systematic withdrawals, how they may be made, and the
consequences of making them. Withdrawals by Participants are generally
taxable and Participants who have not reached age 59 1/2 may incur
substantial tax penalties. Withdrawals made after a Participant has
attained age 70 1/2 (or, in the case of Participants in Section 403(b)
annuity plans and certain governmental or church plans who retire after age
70 1/2, after the Participant has retired) and by beneficiaries must
satisfy certain minimum distribution rules. See "Federal Tax Status," pages
31-33.

Systematic withdrawals may be arranged only pursuant to an election on a
form approved by Prudential. Under certain types of retirement
arrangements, an election to arrange for systematic withdrawals by a
married Participant must be consented to in writing by the Participant's
spouse, with signatures notarized or witnessed by an authorized plan
representative. The election must specify that the systematic withdrawals
shall be made on a monthly, quarterly, semi-annual, or annual basis.

All systematic withdrawals shall be effected as of the day of the month
specified by the Contract-holder, or, if such day is not a business day,
then on the next succeeding business day. Systematic withdrawals shall
continue until the Participant has withdrawn all of the balances in his
Accumulation Account(s) or has instructed Prudential in writing to
terminate his systematic withdrawal arrangement. The Participant may elect
to make systematic withdrawals in equal dollar amounts, or over a specified
period of time (at least three years). Where the Participant elects to make
systematic withdrawals over a specified period of time, the amount of each
withdrawal -- which will vary, reflecting investment experience during the
withdrawal period -- will be equal to the sum of the balances then in the
Participant's Accumulation Account(s) divided by the number of systematic
withdrawals remaining to be made during the withdrawal period.

Systematic withdrawals shall be taken first out of the Participant's
Accumulation Account, if any, in the Companion Contract or the fixed rate
option until that Accumulation Account is exhausted. Thereafter, systematic
withdrawals will be taken in order from the Participant's Accumulation
Account(s) (until each is exhausted), in VCA-11, VCA-10, the VCA-24 Equity
Subaccount, the

22
<PAGE> 28

VCA-24 Diversified Bond Subaccount, the VCA-24 Conservative Balanced Subaccount,
the VCA-24 Flexible Managed Subaccount, the VCA-24 Stock Index Subaccount, the
VCA-24 Government Income Subaccount, and the VCA-24 Global Subaccount. (Special
exceptions may be made at the discretion of Prudential.)

A Participant may change the frequency, amount or duration of his
systematic withdrawals by submitting a form to Prudential that Prudential
will provide to him upon request. A Participant may make such a change only
once during each calendar year.

A Participant may at any time instruct Prudential to terminate the
Participant's systematic withdrawal arrangement, and no systematic
withdrawals will be made for him after Prudential has received his
instruction. A Participant who chooses to stop making systematic
withdrawals may not again make them until the next calendar year and may be
subject to federal tax consequences as a result thereof.

An arrangement to make systematic withdrawals will not affect any of the
Participant's other rights under the Contracts, including the right to make
withdrawals (redemptions) described on page 21 of this Prospectus, the
right to make transfers described on page 25, and the right to purchase a
fixed dollar annuity described on page 29.

No deferred sales charge is imposed upon systematic withdrawals made
pursuant to an arrangement elected as described above; provided, however,
that Prudential reserves the right to apply a deferred sales charge on
systematic withdrawals where payments are made for less than three years.
Furthermore, a Participant who is receiving systematic withdrawals and is
over the age of 59 1/2 may make one additional, non-systematic, withdrawal
during each calendar year in an amount that does not exceed 10% of the sum
of the balances in his Accumulation Account(s) and no deferred sales charge
shall be imposed upon such withdrawal. This additional withdrawal may be
made from any of the Participant's Accumulation Account(s), as the
Participant may elect. Different procedures may apply for Contracts under
which an entity other than Prudential provides record-keeping services. See
"Modified Procedures," page 28.

6. Texas Optional Retirement Program

Special rules apply with respect to Contracts covering persons
participating in the Texas Optional Retirement Program ("Texas Program") in
order to comply with the provisions of Texas law relating to the Texas
Program.

Under the terms of the Texas Program, Texas will contribute an amount
somewhat larger than a Participant's contribution. Texas' contributions
will be credited to the Participant's individual Accumulation Accounts.
Until the Participant begins his second year of participation in the Texas
Program, Prudential will have the right to withdraw the value of the Units
purchased for his account with Texas' contributions. If the Participant
does not commence his second year of Texas Program participation, the value
of those Units representing Texas' contribution will be withdrawn and
returned to the State.

Withdrawal benefits of Contracts issued under the Texas Program are
available only in the event of a Participant's death, retirement or
termination of employment in all institutions of higher education.
Participants will not, therefore, be entitled to exercise the right of
withdrawal in order to receive in cash the values credited to them under
the Contract unless one of the foregoing conditions has been satisfied. The
value of a Participant's interests under the Contract may, however, be
transferred to another Prudential contract or contracts of other carriers
approved under the Texas Program during the period of the Participant's
Texas Program participation.

7. Death Benefits

Upon receipt by Prudential of due proof of a Participant's death and a
claim and payment election submitted on a form approved by Prudential, a
death benefit made up of the balance in the Participant's Accumulation
Accounts (after deduction of the annual account charge and calculated,
insofar as Accumulation Accounts in VCA-10, VCA-11 and the Subaccounts of
VCA-24 are concerned, as the product of the Unit Value for the business day
on which Prudential receives due proof of the Participant's death and other
necessary forms multiplied by the number of Units then credited to the
Participant's Accumulation Account) will be payable to his designated
beneficiary. The appropriate address to which a death benefit claim should
be sent is set out in the Summary section of this Prospectus. For certain
Contracts a death benefit claim should be sent to a designated
record-keeper rather than Prudential. See "Modified Procedures," page .

The death benefit will be paid in one sum as if it were a single
withdrawal, as systematic withdrawals, as an annuity, or a combination of
the three, as the Participant may have directed subject to the minimum
distribution rules of Code Section 401(a)(9) as described below under
23
<PAGE> 29

"Federal Tax Status." If the Participant has not so directed, the
beneficiary may, within any time limit prescribed by or for the retirement
arrangement that covered the Participant, elect:

a. to receive a one-sum cash payment;

b. to have a fixed-dollar annuity purchased under the Contract on a
specified date, using the same annuity purchase rate basis that would
have applied if the Participant's account were being used to purchase an
annuity for the Participant;

c. to receive regular payments in accordance with the systematic withdrawal
plan; or

d. a combination of all or any two of (a), (b), and (c).

Unless restricted by the retirement arrangement under which the Participant
is covered, or unless the Participant has elected otherwise, if within one
year after the Participant's death the beneficiary elects to use at one
time the entire balance in any one or more of the Participant's
Accumulation Accounts to receive a one-sum cash payment, Prudential will
add to the death benefit, if necessary, so that with respect to each
Accumulation Account from which such cash payment is made, the total made
available to the beneficiary will not be less than the contributions to
such Accumulation Account minus any withdrawals or transfers affecting such
Accumulation Account and minus the annual account charge, if any. Certain
Contracts may provide a higher amount.

Under certain types of retirement arrangements, the Retirement Equity Act
of 1984 requires that in the case of a married Participant, a death benefit
be payable to the Participant's spouse in the form of a "qualified
pre-retirement survivor annuity." A "qualified pre-retirement survivor
annuity" is an annuity for the lifetime of the Participant's spouse in an
amount which can be purchased with no less than 50% of the balance in the
Participant's account as of his date of death. Under the Retirement Equity
Act, the spouse of a Participant in a retirement arrangement which is
subject to these rules may consent to waive the pre-retirement survivor
annuity benefit. Such consent must acknowledge the effect of waiving the
coverage, contain the signatures of the Participant and spouse and must be
notarized or witnessed by an authorized plan representative. Unless the
spouse of a Participant in a Plan which is subject to these requirements
properly consents to the waiver of the benefit, 50% of the balance in all
of the Participant's Accumulation Accounts will be paid to such spouse even
if the designated beneficiary is someone other than the spouse. Under these
circumstances, the remaining 50% would be paid to Participant's designated
beneficiary.

Unless the retirement arrangement that covered the Participant provides
otherwise, a beneficiary who elects to have a fixed-dollar annuity
purchased for himself may choose from among the available forms of annuity.
See "Available Forms of Annuity," page 29. The beneficiary may elect to
purchase an annuity immediately or at a future date. If an election
includes systematic withdrawals, the beneficiary will have the right to
terminate such withdrawals and receive the remaining balance in the
Participant's Accumulation Accounts in cash (or effect an annuity with it),
or to change the frequency, size or duration of such withdrawals, subject
to the minimum distribution rules. (See "Federal Tax Status" on pages
31-33). If the beneficiary fails to make any election within any time limit
prescribed by or for the retirement arrangement that covered the
Participant, within seven days after the expiration of that time limit, a
one-sum cash payment will be made to the beneficiary, after deduction of
the annual account charge. A specific contract may provide that an annuity
is payable to the beneficiary if the beneficiary fails to make an election.

Until a death benefit is paid that results in reducing to zero the balance
in all of the Participant's Accumulation Accounts under a Program, those
Accounts will be maintained for the beneficiary in the same manner as they
had been for the Participant, except (i) the beneficiary may make no
contributions (ii) no loans may be taken and (iii) no deferred sales charge
will be imposed upon withdrawals.

8. Discontinuance of Contributions

Contributions on behalf of all Participants under a Contract or for all
Participants of an employer covered under a Contract may be discontinued
upon notice by the Contract-holder to Prudential. Contributions under the
Contract will also be discontinued for all Participants covered by a
retirement arrangement that is terminated.

On at least 60 days' advance notice to the Contract-holder, Prudential may
elect not to accept any new Participant, or not to accept further
contributions for existing Participants, under a Contract. (Some Contracts
require 90 days' advance notice.)

The discontinuance of contributions on a Participant's behalf does not
otherwise affect his rights under the Contracts. He may make withdrawals
from his Accumulation Account--for transfer, for the purchase of an annuity
or for any other purpose--just as if contributions were still being
24
<PAGE> 30

made for him. However, if contributions under a Program are not made for a
Participant for a specified period of time (24 months in certain states, 36
months in others) and the total value of his Accumulation Accounts is at or
below a specified amount ($1,000 in certain states, $2,000 in others),
Prudential may elect to cancel those Accumulation Accounts unless
prohibited by the retirement arrangement, and pay the Participant their
value (less the annual account charge) as of the date of cancellation.

9. Transfer Payments

a. Unless restricted by the retirement arrangement under which a
Participant is covered, upon the receipt by Prudential of a duly
completed written transfer request form or properly authorized telephone
or internet transfer request, all or a portion of the Participant's
Accumulation Account in VCA-10, VCA-11, or in any Subaccount of VCA-24
will be transferred to another Account or Subaccount, fixed rate option
or to a Companion Contract that covers him. There is no minimum transfer
amount. As of the day the transfer request is received, the
Participant's Accumulation Account in the Account or Subaccount from
which the transfer is made will be reduced by the number of Units
obtained by dividing the amount to be transferred by the Unit Value for
that day. If the transfer is made to another Account or Subaccount as of
the same day, the number of Units credited to the Participant in that
Account or Subaccount will be increased by means of a similar
calculation. Prudential reserves the right to limit the frequency of
these transfers. All transfers are subject to the terms and conditions
set forth in this Prospectus and in the Contract(s) covering a
Participant. For example, many Contracts may preclude transfers from the
Companion Contract or fixed rate option into non-equity investment
options that are defined in the Contract as "competing" with the general
account options in investment characteristics. If such transfers are
precluded, the Contract will further require that amounts transferred
from the Companion Contract or fixed rate option into non-competing
investment options such as a stock fund may not for 90 days thereafter
be transferred into a "competing" option.

Different procedures may apply for Contracts under which an entity other
than Prudential provides record-keeping services. See "Modified
Procedures," page 28. Although there is presently no charge for
transfers, Prudential reserves the right to impose such charges in the
future.

b. A Contract may include a provision that, upon discontinuance of
contributions for all Participants under the Contract or for all
Participants of an employer covered under a Contract (see
"Discontinuance of Contributions," above), the Contract-holder may
request Prudential to make transfer payments from VCA-10, VCA-11 or any
Subaccount of VCA-24 to a designated alternate funding agency. If the
Contract is used in connection with certain non-qualified annuity
arrangements, certain tax-deferred annuities subject to Section 403(b)
of the Internal Revenue Code, or with IRAs, Prudential will promptly
notify each Participant and each beneficiary of a deceased Participant
for whom an Accumulation Account remains in force under the Contract-
holder's Program that such a request has been received. Within thirty
days of receipt of such notice, each recipient may elect in writing on a
form approved by Prudential to have his Account in VCA-10, VCA-11 or any
Subaccount of VCA-24, transferred to the alternate funding agency. If he
does not so elect, his Accounts will continue in force under the
Contract. The Accumulation Account of any Participant or beneficiary who
does so elect will be cancelled as of a "transfer date," which is the
business day specified in the Contract-holder's request or 90 days after
Prudential receives the request, whichever is later. The product of the
Units in the Participant's Accumulation Accounts immediately prior to
cancellation and the appropriate Unit Value on the transfer date, less
the applicable deferred sales and annual account charges, will be
transferred to the designated funding agency in cash, securities held in
VCA-10 and VCA-11, or both.

c. Contributions may be discontinued for all Participants under a Contract
or for all Participants of an employer covered under the Contract used
in connection with a deferred compensation plan subject to Section 457
of the Internal Revenue Code due to certain circumstances, such as a
change in any law or regulation, which would have an adverse effect on
Prudential in fulfilling the terms of the Contract. If contributions are
so discontinued, Prudential may initiate transfer payments from VCA-10,
VCA-11 or any Subaccount of VCA-24 to an alternate funding agency. The
transfer would be made as described in paragraph (b) above.

25
<PAGE> 31

Under certain types of retirement arrangements, the Retirement Equity
Act of 1984 requires that in the case of a married Participant, certain
requests for transfer payments (other than those described in paragraph
(a) above) must include the consent of the Participant and spouse and
must be notarized or witnessed by an authorized plan representative.

10. Requests by Telephone and other Electronic Means

Certain Programs may allow Participants to effect transfers and other
Account transactions by telephone, telecopy, or other electronic means,
such as the Internet. If the Program offers telephone or other electronic
privileges, each Program Participant will automatically receive such
privileges unless he declines those privileges on a form that will be
approved and communicated by the Contract-holder or Prudential. For the
Participant's protection and to prevent unauthorized exchanges, telephone
calls or other communications will be recorded and the Participant will be
asked to provide his personal identification number or other identifying
information. A confirmation of a transfer normally will be sent to the
Participant. Neither the Accounts nor their agents will be liable for any
loss, liability or cost which results from acting upon instructions
reasonably believed to be genuine under the foregoing procedures. Telephone
and other electronic privileges are available only if the Contract-holder
has so elected and only in states where these privileges may legally be
offered. The safeguards discussed above that are employed by VCA-10, VCA-11
and VCA-24 are designed to minimize unauthorized exercise of these
privileges. During times of extraordinary economic or market changes,
electronic instructions may be difficult to implement.

11. Exchange Offer Into MEDLEY from VCA-2

Certain Participants in The Prudential Variable Contract Account-2
("VCA-2") may be offered an opportunity to exchange their interests in
VCA-2 for interests in VCA-10, VCA-11 or the Subaccounts of VCA-24.

Participants in plans of VCA-2 Contract-holders that accept this exchange
offer have the option of exchanging their interests in VCA-2 for interests
in VCA-10 and VCA-11 or any of the Subaccounts of VCA-24. In such an
exchange, any years of participation credited to those VCA-2 Participants
under VCA-2 contracts will be counted as years of MEDLEY Program
participation. In addition, no deferred sales charge will be applied to
withdrawals from VCA-10, VCA-11 or the Subaccounts of VCA-24 until a
Participant has withdrawn an amount of contributions equal to the amount
transferred from VCA-2.

12. Exchange Offer with the PMF Funds

Prudential may offer certain open-end management investment
companies--generally referred to as mutual funds--as an alternative
investment vehicle for existing MEDLEY Contract-holders. These funds are
managed by Prudential Investments Fund Management LLC, an indirect
wholly-owned subsidiary of Prudential (collectively, the "PMF Funds"). If
the Contract-holder elects to make one or more of the PMF Funds available
to its Participants, Participants will be given the opportunity to direct
new contributions to those PMF Funds.

Prudential may permit Participants to exchange any or all amounts in their
current variable investment accounts (under VCA-10, VCA-11 or VCA-24) for
shares of the PMF Funds without the imposition of the deferred sales charge
that may otherwise be applicable to withdrawals from those accounts under
the MEDLEY Program (a "MEDLEY-to-PMF Exchange"). In addition, Prudential
may permit Participants to exchange any or all amounts in their PMF Fund
accounts to VCA-10, VCA-11 or VCA-24 (a "PMF-to-MEDLEY Exchange"). No sales
charge or other transaction charge is imposed at the time of a
MEDLEY-to-PMF Exchange or a PMF-to-MEDLEY Exchange. No deferred sales load
will be imposed on the subsequent withdrawal of interests in VCA-10, VCA-11
or VCA-24 acquired in a PMF-to-MEDLEY Exchange.

Prudential will determine the time periods for which any exchange offer
will be available. Prudential may, for example, establish fixed periods of
time for exchanges under a particular Contract (an "open window").
Prudential will advise each Contract-holder of the timing of their
particular open window, but all such open windows will be for at least 60
days. Furthermore, any open-ended exchange offer will not be terminated
without 60 days' prior notice to the Contract-holder. If a Participant does
not elect to exchange Units of VCA-10, VCA-11 or VCA-24 for PMF Funds
shares during an open window, the Participant may subsequently transfer
from VCA-10, VCA-11 or VCA-24 to PMF Funds only amounts that are not
subject to the deferred sales charge. This exchange offer is subject to
termination and its terms are subject to change.

If a Participant exchanges all the MEDLEY Program accounts for shares of
PMF Funds, the annual account charge, which is assessed at the

26
<PAGE> 32

end of each calendar year, may be deducted from the Participant's PMF Fund
account(s).

Before deciding whether to exchange any or all of their existing MEDLEY
accounts for shares of any PMF Fund, Participants should carefully read the
relevant PMF Fund prospectus. Participants should understand that the PMF
Funds are registered management investment companies (i.e., mutual funds)
offered directly to qualified plans, certain institutional investors and
others. They are not funding vehicles for variable annuity contracts. Thus,
Participants investing in the PMF Funds will not have the features of an
annuity contract, such as a minimum death benefit or certain
annuity-related provisions, as they do under the MEDLEY Program.

In Prudential's opinion, there should be no adverse tax consequences if a
Participant in a qualified retirement arrangement, in a deferred
compensation plan under Section 457 or in an individual retirement annuity
under Section 408 of the Internal Revenue Code elects to exchange amounts
in the Participant's current MEDLEY account(s) for shares of PMF Funds or
vice versa.

Furthermore, for 403(b) plans, MEDLEY-to-PMF Exchanges will be effected
from a 403(b) annuity contract (Tax Deferred Annuity funds under the MEDLEY
Program) to a Section 403(b)(7) custodial account (Tax Deferred Annuity
funds under the PMF Funds) so that such transactions will not constitute
taxable distributions. Conversely, PMF-to-MEDLEY Exchanges will be effected
from a 403(b)(7) custodial account to a 403(b) annuity contract so that
such transactions will not constitute taxable distributions. However,
403(b) Participants should be aware that the Internal Revenue Code may
impose more restrictive rules on early withdrawals from Section 403(b)(7)
custodial accounts under the PMF Funds than under the MEDLEY Program.

Prudential does not intend to extend this exchange offer out of MEDLEY to
Participants under any Non-Qualified Combination Contract issued to a plan
covering employees that share a common employer or are otherwise
associated. Any MEDLEY Contract that is held under a non-qualified
arrangement is subject to taxation as an annuity Contract. Any permitted
exchange of amounts under such MEDLEY Contract to shares of PMF Funds may
be treated for tax purposes as a taxable withdrawal up to the amount of the
investment income earned in the MEDLEY Contract. In addition, the exchange
may constitute a premature withdrawal that is subject to a 10 percent tax
penalty of the amount exchanged which is includable in income (i.e., the
investment earnings exchanged). However, if the owner of the MEDLEY
Contract is not a natural person and the investment income on the Contract
is currently taxable each year to such owner, there will be no added tax
incurred if such an owner decides to exchange funds from the MEDLEY
Contract to shares of PMF Funds.

Contract-holders and Participants are encouraged to consult a qualified tax
advisor for complete tax information and advice.

13. Exchange into Discovery SelectSM Group Retirement Annuity

Certain MEDLEY Participants may be offered an opportunity to exchange their
interests in MEDLEY for interest in Discovery SelectSM Group Retirement
Annuity, which offers twenty-two variable investment options, each of which
is called a subaccount and which is invested in one of twenty-two mutual
funds. The mutual funds available for investment through the Discovery
SelectSM Group Retirement Annuity are described in that annuity's
prospectus and include both Prudential and non-Prudential funds.

No charge will be assessed on an exchange from MEDLEY, however, the
Participant will become subject to the charges applicable under the
Discovery SelectSM Group Retirement Annuity. Any years of participation
credited to those Participants under a MEDLEY contract will be counted as
years of Discovery SelectSM Group Retirement Annuity participation for
purposes of calculating the accumulation period and any applicable
contingent deferred sales charges.

A copy of the Discovery SelectSM Group Retirement Annuity prospectus and
statement of additional information may be obtained at no cost by calling
1-800-458-6333.

14. Loans

The loans described in this Section are generally available to Participants
in 401(a) plans and 403(b) programs. Loans may also be available to
Participants in 457 plans. The interest rate and other terms and conditions
of the loan may vary from program to program. For plans that are subject to
ERISA it is the responsibility of the program trustee or fiduciary to
ensure that the interest rate and other terms and conditions of the loan
comply with all program qualification requirements including the ERISA
regulations. In addition to the loans described in this section,
Participants in 403(b) programs may also be able to obtain loans under
their Companion Contract and should consult their employer or Prudential.
27
<PAGE> 33

The loans described in this section, which involve the variable investment
options, work as follows. The minimum loan amount is as specified in the
Participant's Program, 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 in his or her Accumulation Accounts. In the loan
application, the Contract-holder (or in certain cases, the Participant)
designates the Accumulation Account(s) from which the loan amount is
deducted. Borrowing, therefore, reduces a Participant's Accumulation
Accounts. To repay the loan, the Participant makes periodic payments of
interest plus a portion of principal. Those payments are invested in the
Accounts or Subaccounts chosen by the Participant. The Participant's
Program may specify the Accumulation Accounts from which he may borrow and
into which repayments may be invested.

The maximum loan amount referred to above is imposed by federal tax law.
That limit, however, applies to all loans from any qualified retirement
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. For information as to how the deferred sales charge
applies to loans, see "Deferred Sales Charge," page 17.

Prudential charges a loan application fee of up to $75, which is deducted
from a Participant's Accumulation Accounts at the time the loan is
initiated. Prudential will not accept a personal check as payment of the
loan application fee. Prudential also charges up to $25 per year as a loan
maintenance fee for recordkeeping and other administrative services
provided in connection with the loan. This charge is guaranteed not to
increase during the term of any loan. This 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 Accumulation Account
from which this charge is deducted is determined in the same manner as with
the annual account charge. See "Annual Account Charge," page 18.

15. Modified Procedures

Under certain Contracts, the Contract-holder or a third party acting on
their behalf provides record-keeping services that would otherwise be
performed by Prudential. Such Contracts may require procedures somewhat
different than those set forth in this Prospectus. For example, such
Contracts may require that contribution allocation requests, withdrawal
requests, and/or transfer requests be directed to the Contract's record-
keeper rather than Prudential. The record-keeper is the Contract-holder's
agent, not Prudential's agent. Accordingly, transactions will be processed
and priced as of the end of the valuation period in which Prudential
receives appropriate instructions and/or funds from the record-keeper. Any
such different procedures will be set forth in the Contract.

These contracts may have modified deferred sales charges and annual account
charges. See "Modification of Charges," page 19.

THE ANNUITY PERIOD

1. Electing the Annuity Date and the Form of Annuity

Subject to the restrictions on withdrawals from tax-deferred annuities
subject to Section 403(b) of the Internal Revenue Code, (see "Withdrawal
(Redemption) of Contributions," page 21), and subject to the provisions of
the retirement arrangement that covers him, a Participant may elect at any
time to have all or a part of his interest in VCA-10, VCA-11 or any
Subaccount of VCA-24 used to purchase a fixed-dollar annuity under the
Contracts. The Contracts do not provide for annuities that vary with the
investment results of VCA-10, VCA-11 or any Subaccount of VCA-24.

Withdrawals from VCA-10, VCA-11 or any Subaccount of VCA-24 that are used
to purchase a fixed-dollar annuity under the Contracts become part of
Prudential's general account, which supports insurance and annuity
obligations. Similarly, amounts allocated to the Companion Contract or the
fixed rate option under a Combination Contract become part of Prudential's
general account. Because of exemptive and exclusionary provisions,
interests in the general account have not been registered under the
Securities Act of 1933 ("1933 Act") nor is the general account registered
as an investment company under the 1940 Act. Accordingly, neither the
general account nor any interests therein are generally subject to the
provisions of the 1933 or 1940 Acts
28
<PAGE> 34

and we have been advised that the staff of the Commission has not reviewed
the disclosures in this Prospectus which relate to the fixed-dollar annuity
that may be purchased under the Contracts. Disclosures regarding the
fixed-dollar annuity and the general account, however, may be subject to
certain generally applicable provisions of the federal securities laws
relating to the accuracy and completeness of statements made in
prospectuses.

In electing to have an annuity purchased, the Participant may select from
the forms of annuity described below, unless the retirement arrangement
covering him provides otherwise. The annuity is purchased on the first day
of the month following receipt by Prudential of proper written notice on a
form approved by Prudential that the Participant has elected to have an
annuity purchased, or on the first day of any subsequent month that the
Participant designates. The first monthly annuity payment generally will be
made within one month of the date on which the annuity is purchased.

Under certain types of retirement arrangements, the Retirement Equity Act
of 1984 requires that in the case of a married Participant, certain
elections of payouts which are not qualified joint and survivor annuities
must include the consent and signatures of the Participant and spouse and
must be notarized or witnessed by an authorized plan representative. A
"qualified joint and survivor annuity" is an annuity for the Participant's
lifetime with at least 50% of the amount payable to the Participant
continued after his death to his spouse, if then living.

If the dollar amount of the first monthly annuity payment is less than the
minimum amount specified in the Contract, Prudential may, at its option and
in lieu of making any annuity payment whatsoever, pay the person who would
receive the annuity a one-sum cash payment in the amount that would
otherwise have been applied to purchase the annuity.

Once annuity payments begin, the annuitant cannot surrender his annuity
benefit and receive a one-sum payment in lieu thereof.

2. Available Forms of Annuity

Option 1--Life annuity with payments certain. This is an immediate annuity
payable monthly during the lifetime of the annuitant with the guarantee
that if, at the death of the annuitant, payments have been made for less
than the period-certain (which may be 60, 120, 180 or 240 months, as
selected by the annuitant), they will be continued during the remainder of
the selected period to his beneficiary.

Option 2--Annuity-certain. This is an immediate annuity payable monthly for
a period-certain which may be 60, 120, 180 or 240 months, as selected by
the annuitant. If the annuitant dies during the period-certain, payments in
the same amount the annuitant was receiving will be continued to his
beneficiary, but no further payments are payable after the end of the
period-certain.

Option 3--Joint and survivor annuity with payments certain. This is an
immediate annuity payable monthly during the lifetime of the annuitant with
payments continued after his death to his contingent annuitant, if
surviving, for the latter's lifetime. Until the selected number of payments
certain have been paid, payments made to the contingent annuitant after the
annuitant's death are the same as those the annuitant was receiving.
Thereafter, the payments continued to the contingent annuitant will be a
percentage of the monthly amount paid to the annuitant such as 33%, 50%,
66% or 100% as selected by the annuitant (the amounts of each payment made
to the annuitant will be lower as the percentage he selects to be paid to
the contingent annuitant is higher). If both the annuitant and the
contingent annuitant die during the period-certain (which may be 60, 120,
180 or 240 months, as selected by the annuitant), payments will be
continued during the remainder of the period-certain to the properly
designated beneficiary.

Other forms of annuity may be available under the Contracts. The retirement
arrangement under which the Participant is covered may restrict the forms
of annuity that a Participant may elect.

If the dollar amount of the first monthly payment to a beneficiary is less
than the minimum amount specified in the Contract, or if the beneficiary is
other than a natural person receiving payments in his own right, Prudential
may elect to pay the commuted value of the unpaid payments-certain in one
sum.

3. Purchasing the Annuity

No deferred sales charge is deducted from contributions withdrawn to
purchase an annuity. If, as a result of a withdrawal to purchase an
annuity, all of the Participant's Accumulation Accounts under the Program
are reduced to zero, the full annual account charge is deducted, unless the
annuity becomes effective on January 1 of any year. The resulting amount,
less any applicable taxes on annuity considerations, is applied to the
appropriate annuity purchase rate determined in accordance with the
schedule in the Contract at

29
<PAGE> 35

the time the annuity is purchased. However, Prudential may determine
monthly payments from schedules of annuity purchase rates providing for
larger payments than the rates shown in the Contract.

The schedule of annuity purchase rates in a Contract is guaranteed by
Prudential for ten years from the date the Contract is issued. If at any
time after a Contract has been in effect for ten years, the schedule of
annuity purchase rates is modified, the modification is also guaranteed for
ten years. A change in the schedule of annuity purchase rates used for an
annuity-certain with 180 payments or less, as described in Option 2, will
apply only to amounts added to a Participant's Accumulation Account after
the date of change. A change in any other schedule will apply to all
amounts in a Participant's Accumulation Account.

ASSIGNMENT

Unless contrary to applicable law, the right to any payment under the Contract
is neither assignable nor subject to the claim of any creditor.

CHANGES IN THE CONTRACTS

Some Contracts provide that after it has been in effect for two years Prudential
may change the annual account charge and the table of deferred sales charges.
Any change in the table of deferred sales charges generally will apply only to
the withdrawal of those contributions made on or after the date the change takes
effect. For this purpose, contributions shall be deemed to be withdrawn on a
first-in, first-out basis.

Some Contracts also provide that after it has been in effect for five years
Prudential may change the deduction from assets of VCA-10, VCA-11 or any
Subaccount of VCA-24 for administrative expenses, the terms and conditions under
which a deferred sales charge is made, the minimum amount of any contribution to
VCA-10, VCA-11 or any Subaccount of VCA-24 that is made other than on a regular,
periodic basis and the terms and amount of any transfer or withdrawal, provided,
however, that any such change must be permissible under the provisions of the
1940 Act. The changes described in this paragraph will apply to all amounts in
Participants' Accumulation Accounts, whether credited before or after the change
is made.

The changes discussed in the preceding two paragraphs may not become effective
earlier than 90 days after notice of them has been sent to the Contract-holder
and to each person to whom the change applies who has an Accumulation Account
under the Contract, other than persons covered by a Contract used in connection
with deferred compensation plans under Section 457 of the Internal Revenue Code
and persons covered by a Contract used in connection with non-qualified annuity
arrangements.

Some Contracts permit the periodic revision of annuity purchase rates. The
Contracts permit Prudential to change the Contract if Prudential deems it
appropriate to conform to the requirements of any law or regulation.

A Contract may be changed at any time by agreement between Prudential and the
Contract-holder; however, no change may be made that adversely affects rights
with respect to annuities purchased before the effective date of the change,
unless the consent of each affected annuitant is obtained.

Prudential reserves the right to substitute the shares of any other registered
investment company for the shares of the Fund held in any of the Subaccounts of
VCA-24. Current law requires approval by the Commission and notification to the
holders of the Contracts of any such substitution. Prudential also reserves the
right to operate VCA-24 as a different form of registered investment company or
as an unregistered entity, to transfer the Contracts to a different separate
account, or to discontinue any of the Subaccounts of the Account, all to the
extent permitted by applicable law. Prudential may also amend any Contract to
the extent necessary to comply with any applicable law or regulation.

REPORTS

Participants will be sent, at least annually, reports showing as of a specified
date the number of Units credited to them in VCA-10, VCA-11 and in the
Subaccounts of VCA-24. Participants will also be sent semi-annual reports
showing the financial condition of the Accounts.

If a single individual or company invests in the Fund through more than one
variable insurance contract, then the individual or company will receive only
one copy of each annual and semi-annual report issued by the Fund. However, if
such individual or company wishes to receive multiple copies of any such report,
a request may be made by calling the toll-free telephone number listed on the
cover page of this Prospectus.

PERFORMANCE INFORMATION

Performance information for VCA-10, VCA-11, and the Subaccounts of VCA-24 may
appear in advertising and reports to current and prospective Contract-holders
and Participants. Performance information is based on historical investment
experience of those investment options and does not indicate or represent future
performance.

30
<PAGE> 36

Total returns are based on the overall dollar or percentage change in value of a
hypothetical investment. Total return quotations reflect changes in unit values
and the deduction of applicable charges.

A cumulative total return reflects performance over a stated period of time. An
average annual total return reflects the hypothetical annually compounded return
that would have produced the same cumulative total return if the performance had
been constant over the entire period.

VCA-11 may also advertise its current and effective yield. Current yield
reflects the income generated by an investment in VCA-11 over a specified
seven-day period. Effective yield is calculated in a similar manner except that
income earned is assumed to be reinvested.

Comparative performance information may from time to time be included in reports
or advertising, including, but not limited to, data from Morningstar, Inc.,
Lipper Analytical Services, Inc., the Standard & Poor's 500 Composite Price
Index, Lehman Brothers indices and other commonly used indices or industry
publications.

See "Performance Information" in the Statement of Additional Information for
recent performance information.

PARTICIPATION IN DIVISIBLE SURPLUS

A mutual life insurance company differs from a stock life insurance company in
that it has no stockholders who are the owners of the enterprise. Accordingly, a
Contract-holder of Prudential participates in the divisible surplus of
Prudential, according to the annual determination of Prudential's Board of
Directors as to the portion, if any, of the divisible surplus which has accrued
on the Contract. In the case of the Contracts described in this Prospectus, any
surplus determined to be payable as a dividend is credited to Participants. No
assurance can be given as to the amount of divisible surplus, if any, that will
be available for distribution under these Contracts in the future. There were no
payments of divisible surplus made under the Contracts in 1995. In 1996,
payments of divisible surplus were made accordingly: VCA-10 $980,047, VCA-11
$89,828 and VCA-24 $789,747. In 1997, payments of divisible surplus were made
accordingly: VCA-10 $32,895, VCA-11 $0 and VCA-24 $614,058.

FEDERAL TAX STATUS

The following discussion is general in nature. It is not intended as tax advice.
Nor does it consider any applicable state or other tax laws. A qualified tax
adviser should be consulted for complete information and advice.

Taxes on Prudential. The Accounts are not considered separate taxpayers for
purposes of the Internal Revenue Code. As distinguished from most other
registered investment companies--which are separate taxpayers--the earnings of
the Accounts (and Subaccounts) are taxed as part of the income of Prudential. No
charge is being made currently to the Accounts or the Subaccounts for company
federal income taxes. Prudential will review periodically the question of a
charge to the Account or Subaccounts for company federal income taxes
attributable to the Contracts. Such a charge may be made in future years for any
federal income taxes attributable to the Contracts.

In general, a death benefit consisting of amounts paid to a Participant's
beneficiary is includable in the Participant's estate for federal estate tax
purposes.

Qualified Retirement Arrangements Using the Contracts. The Contracts may be
used in connection with qualified pension and profit sharing plans, plans
established by self-employed persons ("Keogh plans"), simplified employee
pension plans ("SEPs"), individual retirement plan accounts ("IRAs"), and
retirement programs for certain persons known as Section 403(b) annuity plans.

The provisions of the Internal Revenue Code that apply to the retirement
arrangements that may be funded by the Contracts are complex and Participants
are advised to consult a qualified tax adviser. In general, however, assuming
that the requirements and limitations of the provisions of the Internal Revenue
Code applicable to the particular type of plan are adhered to by Participants
and employers, contributions made under a retirement arrangement funded by a
Contract are deductible (or not includible in income) up to certain amounts each
year. Further, under the retirement programs with which the Contracts may be
used, Federal income tax currently is not imposed upon the investment income and
realized gains earned by the Accounts and Subaccounts in which the contributions
have been invested until a distribution or withdrawal is received. When a
distribution or withdrawal is received, either as a lump sum, an annuity or as
regular payments in accordance with a systematic withdrawal arrangement, all or
a portion of the distribution or withdrawal is normally taxable as ordinary
income. Currently, the tax on lump sum distributions may, in some cases, be
limited by a special 5-year or 10-year income-averaging rule, but the 5-year
averaging rule will not be available for tax years beginning after 1999. The
effect of Federal income taxation depends largely upon the type of retirement
plan and a generalized description, beyond that given here, is not particularly
useful. Careful review of the provisions of the Internal Revenue Code applicable
to the particular type of plan is necessary.

31
<PAGE> 37

As noted above, withdrawals or distributions are taxable. Furthermore, premature
distributions or withdrawals may be subject to a penalty tax. Participants
contemplating a withdrawal should consult a qualified tax adviser. In addition,
Federal tax laws impose restrictions on withdrawals from Section 403(b)
annuities. See "Withdrawal (Redemption) of Contributions," page 21.
Distributions are subject to certain minimum distribution requirements.

The Contracts may be used in connection with deferred compensation plans that
meet the requirements of Section 457 of the Internal Revenue Code. The tax rules
for such plans involve, among other things, limitations on contributions and
minimum distribution requirements. Tax-exempt organizations or governmental
employers considering the use of the Contracts to fund or otherwise provide
deferred compensation to their employees should consult with a qualified tax
adviser concerning the applicability of Section 457 to their plans as well as
the specific requirements. Reference is also made to the discussion below of
Section 72(u) of the Internal Revenue Code which may be applicable in certain
circumstances.

Distributions from qualified retirement plans to a Participant who is not a 5%
owner, from deferred compensation plans that meet the requirements of Section
457 of the Internal Revenue Code, from governmental and church plans, and from
Section 403(b) annuity plans that are attributable to benefits accruing after
December 31, 1986 must begin by April 1 of the calendar year following the later
of (i) the calendar year in which the Participant attains age 70 1/2 or (ii) the
calendar year in which the Participant retires. Distributions from qualified
retirement plans to a 5% owner and from IRAs must begin by April 1 of the
calendar year following the year in which the Participant attains age 70 1/2.

Distributions to beneficiaries are also subject to minimum distribution rules.
If a Participant dies before his entire interest in his Accumulation Account(s)
has been distributed, his remaining interest must be distributed at least as
rapidly as under the method of distribution being used as of the date of death.
If the Participant dies before distributions have begun (or are treated as
having begun) the entire interest in his Accumulation Accounts must be
distributed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death. Alternatively, if there is a designated beneficiary,
the designated beneficiary may elect to receive payments beginning no later than
December 31 of the calendar year immediately following the year in which the
Participant dies and continuing for the beneficiary's life or a period not
exceeding the beneficiary's life expectancy (except that with respect to
distributions from a deferred compensation plan subject to Section 457 of the
Internal Revenue Code, such period cannot exceed 15 years). Special rules apply
to the spouse of a deceased Participant.

In addition to the above rules, with respect to a deferred compensation plan
subject to Section 457 of the Internal Revenue Code, any distribution that is
payable over a period of more than one year can only be made in substantially
non-increasing amounts no less frequently than annually.

An excise tax applies to Participants or beneficiaries who fail to take the
minimum distribution in any calendar year.

Non-qualified Arrangements Using the Contracts. The Contracts constitute
variable annuity contracts. Accordingly, no tax should be payable by a Holder as
a result of any increase in the value of his share of the investment income and
realized gain earned by the Account or Subaccount in which his accumulated
premium payments are held. Generally, amounts are taxed when received, either as
an annuity or as a withdrawal before the annuity starting date. For these
purposes, loans against the Contracts or the pledging of the Contracts are
treated as withdrawals.

Amounts withdrawn before the annuity starting date are treated for tax purposes
first as being withdrawals of investment income, rather than withdrawals of
premium payments, until all investment income earned by a Holder's Account or
Subaccount has been withdrawn. Thus, a Holder will be taxed on the amount he
withdraws before he starts receiving annuity payments to the extent that the
cash value of his Contract, unreduced by the withdrawal charge, exceeds his
premium payments.

In addition to the ordinary income tax, the Internal Revenue Code further
provides that premature withdrawals that are includible in income will be
subject to a penalty tax. The amount of the penalty is 10 percent of the amount
withdrawn that is includable in income. Some withdrawals will be exempt from the
penalty. These include withdrawals (1) made on or after the date on which the
Holder reaches age 59 1/2, (2) made on or after the death of the Participant,
(3) attributable to the Holder becoming disabled (as defined in Code Section
72(m)), (4) in the form of level annuity payments under a lifetime annuity, or
(5) in the form of substantially equal periodic payments (made at least
annually) for the life expectancy of the Holder or the joint life expectancies
of the Participant and his designated beneficiary.

Different tax rules apply to the receipt of annuity payments or regular payments
in accordance with a systematic withdrawal arrangement by a Holder after the
annuity starting date. A portion of each payment he receives under a Contract
will be treated as a partial return of his post-tax premium payments, if any,
and

32
<PAGE> 38

will not be taxable. The remaining portion of the payment will be taxed as
ordinary income. Exactly how each payment is divided into taxable and nontaxable
portions depends upon (i) the period over which annuity payments are expected to
be received, which in turn is governed by the form of annuity selected and,
where a lifetime annuity is chosen, by the life expectancy of the annuitant,
payee or, in the case of a joint and survivor life annuity, payees, or (ii)
whether you elect to have regular payments made in accordance with a systematic
withdrawal plan over a fixed period of time or in fixed dollar amounts. Once a
Holder has recovered all his premium payments, the balance of the annuity
payments will be fully taxable.

Certain minimum distribution requirements apply in the case where the Holder
dies before the entire interest in his annuity has been distributed. Further,
certain transfers of an annuity for less than full compensation (e.g., certain
gifts), will trigger tax on the gain in the Contract.

Contracts Held by Persons Other than Individuals. Special rules under Section
72(u) of the Internal Revenue Code apply to the Contracts if held by a person
who is not a natural person and if not covered by one of several exceptions.
Under these rules, if a Contract is held by a corporation, partnership, trust or
similar nonnatural person, the income on the Contract each year is treated as
ordinary income received or accrued that year by the owner of the Contract.
Income on the Contract is the excess of the sum of the net surrender value of
the Contract at the end of the taxable year plus any amounts distributed for all
years over the aggregate amount of premiums paid under the Contract and amounts
received under the Contract that have been included in income. Exceptions to
these rules include Contracts: held by a nonnatural person as an agent for a
natural person; acquired by an estate by reason of the death of the decedent;
held under a qualified pension or profit sharing plan, a Section 403(b) annuity
plan or individual retirement plan (see discussion above) or contracts which
provide for immediate annuities.

Withholding. Generally, under a nonqualified annuity arrangement, or individual
retirement account or individual retirement annuity, unless a Participant elects
to the contrary, any amounts that are received under his Contract that
Prudential reasonably believes are includable in gross income tax for tax
purposes will be subject to withholding to meet Federal income tax obligations.
In the absence of an election by a Participant that Prudential should not do so,
it will withhold from every withdrawal or annuity payment the appropriate
percentage of the amount of the payment that Prudential reasonably believes is
subject to withholding. In addition, certain distributions from qualified plans
under Section 401 or Section 403(b) of the Internal Revenue Code, which are not
directly rolled over or transferred to another eligible qualified plan, are
subject to a mandatory 20% withholding for federal income tax. The 20%
withholding requirement does not apply to: (a) distributions for the life or
life expectancy of the participant, or joint and last survivor expectancy of the
participant and a designated beneficiary; or (b) distributions for a specified
period of ten years or more; or (c) distributions which are required as minimum
distributions. Accordingly, a Participant would be well-advised to check the
Contract-holder's retirement arrangement and consult with appropriate tax
advisers regarding the current state of the law before making a withdrawal.
Prudential will provide forms and instructions concerning withholding. However,
amounts that are received under a Contract used in connection with a plan that
is subject to Section 457 of the Internal Revenue Code are treated as wages for
Federal income tax purposes and are, thus, subject to general withholding
requirements.

VOTING RIGHTS

Except for Participants and beneficiaries under certain Contracts used in
connection with certain non-qualified annuity arrangements and deferred
compensation plans established under Section 457 of the Internal Revenue Code,
each person who has an Accumulation Account in VCA-10 or VCA-11, as the case may
be, has the right to vote at meetings of Participants in that Account, and
Prudential will vote the shares of the Fund that it holds in any Subaccount of
VCA-24 in the manner directed by persons who have Accumulation Accounts in that
Subaccount. If the Participants under a Contract issued in connection with a 457
plan do not have voting rights, then the Contract-holder will have the voting
rights.

Persons having voting rights with respect to VCA-10 and VCA-11 are entitled to
vote in connection with the election of the members of an Account's Committee.
Committee members are not elected annually. All Committee members elected by
persons having voting rights are elected for indefinite terms. Vacancies may be
filled by a majority vote of all the remaining Committee members, provided that
immediately after filling any such vacancy, at least two-thirds of the members
then holding office shall have been elected by persons having voting rights.
Members elected by a Committee, rather than by persons having voting rights,
only hold their positions until the next meeting of persons having voting rights
in respect to such Account. At that next meeting, persons with voting rights
fill the vacancy by electing a member for an indefinite term.

33
<PAGE> 39

In addition, persons having VCA-10 and VCA-11 voting rights are entitled to vote
in connection with:

a. any amendments of the investment management agreement between Prudential
and the Account and any such new agreements negotiated by the Committee;

b. any changes in the fundamental investment policies of the Account; and

c. any other matter requiring a vote of VCA-10 and VCA-11 Participants.

Instructions to Prudential for the voting of Fund shares will involve the
following matters: (1) election of the Board of Directors of the Fund; (2)
ratification of the independent accountant for the Fund; (3) approval of the
investment advisory agreement for the Fund; (4) any change in the fundamental
investment policy of a Portfolio in which assets of a Subaccount of VCA-24 are
invested; and (5) any other matter requiring a vote of the shareholders of the
Fund. With respect to approval of the investment advisory agreement or any
change in a Portfolio's fundamental investment policy, Participants with
Accumulation Accounts in a Subaccount the assets of which are invested in such
Portfolio will vote with other holders of shares in such Portfolio on the
matter, pursuant to the requirements of Rule 18f-2 under the 1940 Act.

The number of votes which a person may cast at meetings of Participants in
VCA-10 or VCA-11 is equal to the number of dollars in the Account and fractions
thereof credited to him, or, in the case of holders of Contracts used in
connection with deferred compensation plans under Section 457 of the Internal
Revenue Code where the Contract-holder has the voting rights, the number of
dollars and fractions thereof that are credited to the Participants under that
Contract, as of the record date.

Prudential is entitled to vote the number of votes and fractions thereof equal
to the number of dollars and fractions thereof of its own funds invested in
either VCA-10 or VCA-11 as of the record date. Prudential will cast its votes in
the same proportions as all other votes represented at the meeting, in person or
by proxy.

Meetings of Participants are not required to be held annually. The Rules and
Regulations of both VCA-10 and VCA-11 provide that meetings of persons having
voting rights may be called by a majority of the Committee. An Account's
Committee is required to call a meeting of persons having voting rights in the
event that at any time less than a majority of the members of such Committee
holding office at that time were elected by persons having voting rights. Such
meeting must be held within 60 days unless the Commission by order extends such
period. In addition, the Committee is required to call meetings of persons with
voting rights in order to submit for a vote matters on which such persons are
entitled to vote (as listed above).

For the purpose of determining the persons having voting rights in respect of an
Account who are entitled to notice of and to vote at such meetings, the
Committee may fix, in advance, a record date which shall not be more than 70 nor
less than 10 days before the date of the meeting.

Votes may be cast either in person or by proxy. Persons entitled to vote will
receive all proxy materials.

Each person having an Accumulation Account in a Subaccount of VCA-24 may give
voting instructions to Prudential equal to the number of Fund shares represented
by the Subaccount Units in his Accumulation Account. Prudential will vote the
shares of the Fund that are attributable to assets of its own that it maintains
in the Subaccount, or to any shares as to which it has not received
instructions, in the same manner and proportion as the shares for which it has
received instructions.

The number of votes for which each person may give Prudential instructions will
be determined as of the record date for Fund shareholders chosen by the Board of
Directors of the Fund. Prudential will furnish Participants with proper forms
and proxies to enable them to give it these instructions.

As defined by the 1940 Act and as referred to elsewhere in this Prospectus, a
majority vote of persons having voting rights in respect of VCA-10, VCA-11 or
the Fund means (a) 67% or more of the votes of such persons present at a meeting
if more than 50% of all votes entitled to be cast are held by persons present in
person or represented by proxy at such meeting, or (b) more than 50% of all
votes entitled to be cast, whichever is less.

OTHER CONTRACTS ON A
VARIABLE BASIS

In addition to the Contracts, Prudential currently issues other forms of
contracts on a variable basis. At present, contributions under such other
contracts are not held in VCA-10, VCA-11 or any Subaccount of VCA-24 but are
held in other separate accounts.

STATE REGULATION

Prudential is subject to regulation by the Department of Banking and Insurance
of the State of New Jersey as well as by the insurance departments of all the
other states and jurisdictions in which it does business. Prudential must file
an annual statement in a form promulgated by the National Association of Insur-

34
<PAGE> 40

ance Commissioners. This annual statement is reviewed and analyzed by the New
Jersey Department, which makes an independent computation of Prudential's legal
reserve liabilities and statutory apportionments under its outstanding
contracts. New Jersey law requires a quinquennial examination of Prudential to
be made. Examination involves extensive audit including, but not limited to, an
inventory check of assets, sampling techniques to check the performance by
Prudential of its contracts and an examination of the manner in which divisible
surplus has been apportioned and distributed to policyholders and
contract-holders. This regulation does not involve any supervision or control
over the investment policies of either Account or over the selection of
investments for them, except for verification of the compliance of Prudential's
investment portfolio with New Jersey law. See "Investment restrictions imposed
by state law," in the Statement of Additional Information.

The laws of New Jersey also contain special provisions which relate to the
issuance and regulation of contracts on a variable basis. These laws set forth a
number of mandatory provisions which must be included in contracts on a variable
basis and prohibit such contracts from containing other specified provisions. No
variable contract may be issued for delivery in New Jersey prior to the written
acknowledgement by the Department of Banking and Insurance of its filing. The
Department may initially disapprove or subsequently withdraw approval of any
contract if it contains provisions which are "unjust, unfair, inequitable,
ambiguous, misleading, likely to result in misrepresentation or contrary to
law." Approval can also be withheld or withdrawn if sales are solicited by
communications which involve misleading or inadequate descriptions of the
provisions of the contract.

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

LEGAL PROCEEDINGS

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 Judgment 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 Judgment approving the
class Settlement has been appealed to the United States Court of Appeals for the
Third Circuit, which held a hearing on January 26, 1998. The Court has not yet
issued a ruling on the appeal.

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.

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

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 inquires. It is possible that

35
<PAGE> 41

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

The services provided to the Contract owners by Prudential, PIMS and PIC 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 and PIC identified this issue as a critical priority in 1995
and have 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 contract owners. Accordingly, while the expense is substantial in the
aggregate, it is not expected to have a material impact on the ability of
Prudential, PIMS and PIC to meet their contractual commitments to Contract
owners.

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 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

This Prospectus does not contain all the information set forth in the
registration statement, certain portions of which have been omitted pursuant to
the rules and regulations of the Commission. The omitted information may be
obtained from the Commission's principal office in Washington, D.C. upon payment
of the fees prescribed by the Commission.

Participants may also receive further information about the Contracts at the
address and phone number set forth on the cover page of this Prospectus.

36
<PAGE> 42

ADDITIONAL INFORMATION

Registration statements under the Securities Act of 1933 have been filed with
the Commission with respect to the Contracts. This Prospectus does not contain
all the information set forth in the registration statements, certain portions
of which have been omitted pursuant to the rules and regulations of the
Commission. The omitted information may be obtained from the Commission's
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission.

For further information, you may also contact Prudential's office, the address
and telephone number of which are set forth on the cover of this Prospectus.

A copy of the Statement of Additional Information prepared by Prudential, which
provides more detailed information about the Contracts, may be obtained without
charge by calling Prudential at the number set forth on the cover of this
Prospectus. The Statement includes:

TABLE OF CONTENTS--STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT MANAGEMENT AND ADMINISTRATION OF VCA-10, VCA-11
AND VCA-24................................................ 2
Fundamental Investment restrictions adopted by VCA-10 and
VCA-11................................................. 3
Investment restrictions imposed by state law.............. 4
Loans of portfolio securities............................. 10
Portfolio turnover rate................................... 10
Portfolio brokerage and related practices................. 11
Custody of securities..................................... 12
PERFORMANCE INFORMATION..................................... 13
THE VCA-10 AND VCA-11 COMMITTEES............................ 15
Remuneration of Members of the Committees and Certain
Affiliated Persons..................................... 15
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA--DIRECTORS...... 16
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA--PRINCIPAL
OFFICERS.................................................. 18
SALE OF THE CONTRACTS....................................... 20
EXPERTS..................................................... 20
FINANCIAL STATEMENTS OF VCA-10.............................. 21
FINANCIAL STATEMENTS OF VCA-11.............................. 30
FINANCIAL STATEMENTS OF VCA-24.............................. 37
CONSOLIDATED FINANCIAL STATEMENTS OF THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES............. B-1
</TABLE>

37
<PAGE> 43

APPENDIX

Some of the terms used in this Prospectus to describe the investment objective
and policies of VCA-11 are further explained below.

The term "money market" refers to the marketplace composed of the financial
institutions which handle the purchase and sale of liquid, short-term,
high-grade debt instruments. The money market is not a single entity, but
consists of numerous separate markets, each of which deals in a different type
of short-term debt instrument. These include U.S. government obligations,
commercial paper, certificates of deposit and bankers' acceptances, which are
generally referred to as money market instruments.

"U.S. Government obligations" are debt securities (including bills, certificates
of indebtedness, notes, and bonds) issued by the U.S. Treasury or issued by an
agency or instrumentality of the U.S. government which is established under the
authority of an act of Congress. Such agencies or instrumentalities include, but
are not limited to, the Federal National Mortgage Association, the Federal Farm
Credit Bank, and the Federal Home Loan Bank. Although all obligations of
agencies and instrumentalities are not direct obligations of the U.S. Treasury,
payment of the interest and principal on these obligations is generally backed
directly or indirectly by the U.S. government. This support can range from the
backing of the full faith and credit of the United States, to U.S. Treasury
guarantees, or to the backing solely of the issuing instrumentality itself.

"Bank obligations" include (1) "Certificates of deposit" which are certificates
evidencing the indebtedness of a commercial bank to repay funds deposited with
it for a definite period of time (usually from 14 days to one year); (2)
"Bankers' acceptances" which are credit instruments evidencing the obligation of
a bank to pay a draft which has been drawn on it by a customer. These
instruments reflect the obligation both of the bank and of the drawer to pay the
face amount of the instrument upon maturity; and (3) "Time deposits" which are
non-negotiable deposits in a bank for a fixed period of time.

"Commercial paper" consists of short-term (usually from 1 to 270 days) unsecured
promissory notes issued to finance current operations. Commercial paper ratings
are as follows:

A Prime rating is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated Prime are further referred to
by use of numbers 1, 2 and 3 to denote relative strength within this highest
classification. Among the factors considered by Moody's in assigning ratings are
the following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management of
obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.

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

"Other corporate obligations" are bonds and notes, loan participations and other
debt obligations created by corporations, banks and other business
organizations, including business trusts. Corporate bond ratings are as follows:

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

Bonds rated AA by S&P are judged by S&P to be high-grade obligations and, in the
majority of instances, to differ only in small degree from issues rated AAA.
Bonds rated AAA are considered by S&P to be highest grade obligations and
possess the ultimate degree of protection as to principal and interest. As with
AAA bonds, prices of AA bonds move with the long-term money market.

38
<PAGE> 44

A "first tier" security is either (i) an "eligible security" that is rated, or
has been issued by an issuer that is rated with respect to comparable
securities, in the highest rating category for such securities or issuers by two
NRSROs (or by only one NRSRO if it is the only NRSRO that has rated such
security or issuer), or (ii) is an unrated short-term security of comparable
quality as determined by the investment manager under the supervision of the
VCA-11 Committee.

A "second tier" security is any "eligible security" other than a "first tier"
security.

39
<PAGE> 45

(This page intentionally left blank)

40
<PAGE> 46

<S> <C>
The Prudential Insurance Company of America BULK RATE
c/o Prudential Investments U.S. POSTAGE
30 Scranton Office Park PAID
Scranton, Pennsylvania 18507-1789 PERMIT No. 941
ADDRESS SERVICE REQUESTED CHICAGO, IL
-------------------------
</TABLE>

MD.PU.001.498 ED. 5/98

<PAGE> 47

YOU MUST DETACH BEFORE MAILING

Please send me the "Statement of Additional Information"
describing The Prudential's Group Variable Contracts.

Name --------------------------------------------------------------------------
Address -----------------------------------------------------------------------
City
-----------------------------------------------------------------------------

<TABLE>
<S> <C>
State
------------------------- Zip Code
--------------------------
</TABLE>

PLEASE PRINT--will be used as mailing label!

A "Statement of Additional
Information" about the
Contracts has been filed with
the Securities and Exchange
Commission. A copy of this
Statement is available
without charge.
To receive additional
information about the

MEDLEY Program fill in

your name and address on
this card, tear it off, affix the
proper postage, and mail it
to us.
<PAGE> 48

Please
place
correct
postage
here

Prudential Investments

c/o Prudential Retirement Services

30 Scranton Office Park

Scranton, Pennsylvania 18507-1789

Attention: Retirement Services Marketing
<PAGE> 49

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998

THE MEDLEYSM PROGRAM
GROUP VARIABLE CONTRACTS
issued through

THE PRUDENTIAL
VARIABLE CONTRACT ACCOUNT-10
THE PRUDENTIAL
VARIABLE CONTRACT ACCOUNT-11

THE PRUDENTIAL
VARIABLE CONTRACT ACCOUNT-24

These Contracts are designed for use 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, as amended, and with non-qualified annuity
arrangements. Contributions made on behalf of Participants may be invested in
The Prudential Variable Contract Account-10, a separate account primarily
invested in common stocks, in The Prudential Variable Contract Account-11, a
separate account invested in money market instruments, or in one or more of the
seven Subaccounts of The Prudential Variable Contract Account-24. Each
Subaccount is invested in a corresponding Portfolio of The Prudential Series
Fund, Inc.
------------------------

This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus, dated May 1, 1998, which is available
without charge upon written request to The Prudential Insurance Company of
America, c/o Prudential Investments, 30 Scranton Office Park, Scranton, PA
18507-1789, or by telephoning 1-800-458-6333.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT MANAGEMENT AND ADMINISTRATION OF VCA-10, VCA-11
AND VCA-24................................................ 2
Fundamental Investment restrictions adopted by VCA-10
and VCA-11............................................ 3
Investment restrictions imposed by state law........... 4
Loans of portfolio securities.......................... 10
Portfolio turnover rate................................ 10
Portfolio brokerage and related practices.............. 11
Custody of securities.................................. 12
PERFORMANCE INFORMATION..................................... 13
THE VCA-10 AND VCA-11 COMMITTEES............................ 15
Remuneration of Members of the Committees and Certain
Affiliated Persons.................................... 15
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA--DIRECTORS...... 16
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA--PRINCIPAL
OFFICERS.................................................. 18
SALE OF THE CONTRACTS....................................... 20
EXPERTS..................................................... 20
FINANCIAL STATEMENTS OF VCA-10.............................. 21
FINANCIAL STATEMENTS OF VCA-11.............................. 30
FINANCIAL STATEMENTS OF VCA-24.............................. 37
CONSOLIDATED FINANCIAL STATEMENTS OF THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES............. B-1
</TABLE>

The Prudential Insurance Company of America
c/o Prudential Investments
30 Scranton Office Park
Scranton, PA 18507-1789
Telephone 1-800-458-6333

================================================================================

[PRUDENTIAL LOGO]
<PAGE> 50

INVESTMENT MANAGEMENT
AND ADMINISTRATION OF
VCA-10, VCA-11 AND VCA-24

Prudential acts as investment manager for The Prudential Variable Contract
Account-10 ("VCA-10") and The Prudential Variable Contract Account-11 ("VCA-11")
under separate investment management agreements with each of them. Each
Account's assets are invested and reinvested in accordance with its investment
objective and policies, subject to the general supervision and authorization of
the Account's Committee.

The assets of each Subaccount of VCA-24 are invested in a corresponding
portfolio of The Prudential Series Fund, Inc. (the "Fund"). The Prospectus and
the Statement of Additional Information of the Fund describe the investment
management and administration of the Fund and its various portfolios.

Subject to Prudential's supervision, all of the investment management services
provided by Prudential are furnished by its wholly-owned subsidiary, The
Prudential Investment Corporation ("PIC"), pursuant to the service agreement
between Prudential and PIC (the "Service Agreement") which provides that
Prudential will reimburse PIC for its costs and expenses. PIC is registered as
an investment adviser under the Investment Advisers Act of 1940.

Prudential continues to have responsibility for all investment advisory services
under its management or subadvisory agreements with respect to its clients.
Prudential's investment management agreement with each of VCA-10 and VCA-11 was
most recently renewed by unanimous vote of the Committees on May 19, 1997 and by
the Participants in each Account on September 8, 1983. The Service Agreement was
submitted to and approved by Participants in VCA-10 and VCA-11 on November 4,
1985 and its annual continuation was most recently approved by unanimous vote of
the VCA-10 and VCA-11 Committees on May 19, 1997. Each Account's investment
management agreement and the Service Agreement will continue in effect as long
as approved at least once a year by a majority of the non-interested members of
the Account's Committee and either by a majority of each entire Committee or by
a majority vote of persons entitled to vote in respect of the Account. An
Account's investment management agreement will terminate automatically in the
event of assignment, and may be terminated without penalty on 60 days' notice by
the Account's Committee or by the majority vote of persons having voting rights
in respect of the Account, or on 90 days' notice by Prudential.

The Service Agreement will continue in effect as to each Account for a period of
more than two years from its execution only so long as such continuance is
specifically approved at least annually in the same manner as the Agreements for
Investment Management Services between Prudential and the Accounts. The Service
Agreement may be terminated by either party upon not less than thirty days'
prior written notice to the other party, will terminate automatically in the
event of its assignment and will terminate automatically as to an Account in the
event of the assignment or termination of the Agreement for Investment
Management Services between Prudential and the Account. Prudential is not
relieved of its responsibility for all investment advisory services under the
Agreement for Investment Management Services between Prudential and the
Accounts. The Service Agreement provides for Prudential to reimburse PIC for its
costs and expenses incurred in furnishing investment advisory services. For the
meaning of a majority vote of persons having voting rights with respect to an
Account, see "Voting Rights," page 33 of the Prospectus.

Prudential is responsible for the administrative and recordkeeping functions of
VCA-10, VCA-11 and VCA-24 and pays the expenses associated with them. These
functions include enrolling Participants, receiving and allocating
contributions, maintaining Participants' Accumulation Accounts, preparing and
distributing confirmations, statements, and reports. The administrative and
recordkeeping expenses borne by Prudential include salaries, rent, postage,
telephone, travel, legal, actuarial and accounting fees, office equipment,
stationery and maintenance of computer and other systems.

A daily charge is made which is equal to an effective annual rate of 1.00% of
the net value of the assets in VCA-10 and VCA-11. Three quarters of this charge
(0.75%) is for administrative expenses not covered by the annual account charge,
and one quarter (0.25%) is for investment management. During 1997, 1996 and,
1995, Prudential received $5,388,303, $4,121,607, and $3,023,169, respectively,
from VCA-10 and $892,983, $804,528, and $746,306, respectively, from VCA-11 for
administrative expenses and for providing management services.

A daily charge is made which is equal to an effective annual rate of 0.75% of
the net value of the assets in each Subaccount of VCA-24. All of this charge is
for administrative expenses not covered by the annual account charge. During
1997, 1996 and, 1995, Prudential received $9,369,395, $6,866,521 and,
$4,741,003, respectively, in daily charges for VCA-24.

Prior to May 1, 1997, an annual account charge for administrative expenses of
not greater than $20 was assessed against a Participant's Accumulation Account.
As of May 1, 1997, this charge was increased to not greater than $30. During
1997, 1996 and, 1995, Prudential collected $125,689, $81,929, and $78,996

2
<PAGE> 51

respectively, from VCA-10 and $58,601, $40,724, and $40,200, respectively, from
VCA-11 in annual account charges. During 1997, 1996, and 1995, Prudential
collected $294,865, $143,977, and $147,713, respectively, in annual account
charges from VCA-24.

A deferred sales charge is also imposed on certain withdrawals from the Accounts
and Subaccounts. The deferred sales charges imposed on withdrawals from VCA-10
during 1997, 1996, and 1995, were $18,599, $13,057, and $146,870, respectively.
The deferred sales charges imposed on VCA-11 withdrawals during 1997, 1996, and
1995, were $8,370, $8,659, and $17,399, respectively. During 1997, 1996, and
1995, the deferred sales charges imposed on withdrawals from VCA-24 were
$93,520, $98,456, and $151,147, respectively.

FUNDAMENTAL INVESTMENT RESTRICTIONS ADOPTED BY VCA-10

In addition to the investment objective described in the prospectus, the
following investment restrictions are fundamental investment policies of VCA-10
and may not be changed without the approval of a majority vote of persons having
voting rights in respect of the Account.

Concentration in Particular Industries. VCA-10 will not purchase any security
(other than obligations of the U.S. Government, its agencies or
instrumentalities) if as a result: (i) with respect to 75% of VCA-10's total
assets, more than 5% of VCA-10's total assets (determined at the time of
investment) would then be invested in securities of a single issuer, or (ii) 25%
or more of VCA-10's total assets (determined at the time of the investment)
would be invested in a single industry.

Investments in Real Estate-Related Securities. No purchase of or investment in
real estate will be made for the account of VCA-10 except that VCA-10 may buy
and sell securities that are secured by real estate or shares of real estate
investment trusts listed on stock exchanges or reported on the National
Association of Securities Dealers, Inc. automated quotation system ("NASDAQ").

Investments in Financial Futures. No commodities or commodity contracts will be
purchased or sold for the account of VCA-10 except that VCA-10 may purchase and
sell financial futures contracts and related options.

Loans. VCA-10 will not lend money, except that loans of up to 10% of the value
of VCA-10's total assets may be made through the purchase of privately placed
bonds, debentures, notes, and other evidences of indebtedness of a character
customarily acquired by institutional investors that may or may not be
convertible into stock or accompanied by warrants or rights to acquire stock.
Repurchase agreements and the purchase of publicly traded debt obligations are
not considered to be "loans" for this purpose and may be entered into or
purchased by VCA-10 in accordance with its investment objectives and policies.

Borrowing. VCA-10 will not issue senior securities, borrow money or pledge its
assets, except that VCA-10 may borrow from banks up to 33 1/3 percent of the
value of its total assets (calculated when the loan is made) for temporary,
extraordinary or emergency purposes, for the clearance of transactions or for
investment purposes. VCA-10 may pledge up to 33 1/3 percent of the value of its
total assets to secure such borrowing. For purposes of this restriction, the
purchase or sale of securities on a when-issued or delayed delivery basis,
forward foreign currency exchange contracts and collateral arrangements relating
thereto, and collateral arrangements with respect to interest rate swap
transactions, reverse repurchase agreements, dollar roll transactions, options,
futures contracts, and options thereon are not deemed to be a pledge of assets
or the issuance of a senior security.

Margin. VCA-10 will not purchase securities on margin (but VCA-10 may obtain
such short-term credits as may be necessary for the clearance of transactions);
provided that the deposit or payment by VCA-10 of initial or maintenance margin
in connection with futures or options is not considered the purchase of a
security on margin.

Underwriting of Securities. VCA-10 will not underwrite the securities of other
issuers, except where VCA-10 may be deemed to be an underwriter for purposes of
certain federal securities laws in connection with the disposition of portfolio
securities and with loans that VCA-10 is permitted to make.

Control or Management of Other Companies. No securities of any company will be
acquired for VCA-10 for the purpose of exercising control or management thereof.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS ADOPTED BY VCA-10

The VCA-10 Committee has also adopted the following additional investment
restrictions as non-fundamental operating policies. The Committee can change
these restrictions without the approval of the persons having voting rights in
respect of VCA-10.

Investments in Other Investment Companies. Except as part of a merger,
consolidation, acquisition or reorganization, VCA-10 will not invest in the
securities of other investment companies in excess of the limits stipulated by
the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.

Short Sales. VCA-10 will not make short sales of securities or maintain a short
position, except that
3
<PAGE> 52

VCA-10 may make short sales against the box. Collateral arrangements entered
into with respect to options, futures contracts, forward contracts and interest
rate swap agreements are not deemed to be short sales.

Restricted Securities. No more than 15% of the value of the net assets held in
VCA-10 will be invested in securities (including repurchase agreements and
non-negotiable time deposits maturing in more than seven days) that are subject
to legal or contractual restrictions on resale or for which no readily available
market exists.

FUNDAMENTAL INVESTMENT RESTRICTIONS ADOPTED BY VCA-11

In addition to the investment objective described in the prospectus, the
following investment restrictions are fundamental investment policies of VCA-11
and may not be changed without the approval of a majority vote of persons having
voting rights in respect of the Account.

Concentration in Particular Industries. VCA-11 will not purchase any security
(other than obligations of the U.S. Government, its agencies or
instrumentalities) if as a result: (i) with respect to 75% of VCA-11's total
assets, more than 5% of VCA-11's total assets (determined at the time of
investment) would then be invested in securities of a single issuer, or (ii) 25%
or more of VCA-11's total assets (determined at the time of the investment)
would be invested in a single industry. Notwithstanding this restriction, there
is no limitation with respect to money market instruments of domestic banks,
U.S. branches of foreign banks that are subject to the same regulations as U.S.
banks, and foreign branches of domestic banks (provided that the domestic bank
is unconditionally liable in the event of the failure of the foreign branch to
make payment on its instruments for any reason).

Investments in Real Estate-Related Securities. No purchase of or investment in
real estate will be made for the account of VCA-11.

Investments in Financial Futures. No commodities or commodity contracts will be
purchased or sold for the account of VCA-11.

Loans. VCA-11 will not lend money, except that it may purchase debt obligations
in accordance with its investment objective and policies and may engage in
repurchase agreements.

Borrowing. VCA-11 will not issue senior securities, borrow money or pledge its
assets, except that VCA-11 may borrow from banks up to 33 1/3 percent of the
value of its total assets (calculated when the loan is made) for temporary,
extraordinary or emergency purposes, for the clearance of transactions or for
investment purposes. VCA-11 may pledge up to 33 1/3 percent of the value of its
total assets to secure such borrowing. For purposes of this restriction, the
purchase or sale of securities on a when-issued or delayed delivery basis is not
deemed to be a pledge of assets or the issuance of a senior security.

Margin. VCA-11 will not purchase securities on margin (but VCA-11 may obtain
such short-term credits as may be necessary for the clearance of transactions).

Underwriting of Securities. VCA-11 will not underwrite the securities of other
issuers, except where VCA-11 may be deemed to be an underwriter for purposes of
certain federal securities laws in connection with the disposition of portfolio
securities and with loans that VCA-11 is permitted to make.

Control or Management of Other Companies. No securities of any company will be
acquired for VCA-11 for the purpose of exercising control or management thereof.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS ADOPTED BY VCA-11

The VCA-11 Committee has also adopted the following additional investment
restrictions as non-fundamental operating policies. The Committee can change
these restrictions without the approval of the persons having voting rights in
respect of VCA-11.

Investments in Other Investment Companies. Except as part of a merger,
consolidation, acquisition or reorganization, VCA-11 will not invest in the
securities of other investment companies in excess of the limits stipulated by
the Investment Company Act of 1940 as amended, and the rules and regulations
thereunder.

Short Sales. VCA-11 will not make short sales of securities or maintain a short
position.

Restricted Securities. No more than 10% of the value of the net assets held in
VCA-11 will be invested in illiquid securities (including repurchase agreements
and non-negotiable time deposits maturing in more than seven days). Securities
that have legal or contractual restrictions on resale but have a readily
available market are not deemed illiquid for purposes of this limitation.

INVESTMENT RESTRICTIONS IMPOSED BY STATE LAW

In addition to the investment objectives, policies and restrictions that they
have adopted, VCA-10 and VCA-11 must limit their investments to those authorized
for variable contract accounts of life insurance companies by the laws of the
State of New Jersey. In the event of future amendments of the applicable New
Jersey statutes, each Account will comply, without the approval of Participants
or others having voting rights in respect of the Account, with the statutory
requirements as so modified. The pertinent provisions of New

4
<PAGE> 53

Jersey law as they currently read are, in summary form, as follows:

1. An account may not purchase any evidence of indebtedness issued, assumed or
guaranteed by any institution created or existing under the laws of the
U.S., any U.S. state or territory, District of Columbia, Puerto Rico,
Canada or any Canadian province, if such evidence of indebtedness is in
default as to interest. "Institution" includes any corporation, joint stock
association, business trust, business joint venture, business partnership,
savings and loan association, credit union or other mutual savings
institution.

2. The stock of a corporation may not be purchased unless (i) the corporation
has paid a cash dividend on the class of stock during each of the past five
years preceding the time of purchase, or (ii) during the five-year period
the corporation had aggregate earnings available for dividends on such
class of stock sufficient to pay average dividends of 4% per annum computed
upon the par value of such stock, or upon stated value if the stock has no
par value. This limitation does not apply to any class of stock which is
preferred as to dividends over a class of stock whose purchase is not
prohibited.

3. Any common stock purchased must be (i) listed or admitted to trading on a
securities exchange in the United States or Canada; or (ii) included in the
National Association of Securities Dealers' national price listings of
"over-the-counter" securities; or (iii) determined by the Commissioner of
Insurance of New Jersey to be publicly held and traded and as to which
market quotations are available.

4. Any security of a corporation may not be purchased if after the purchase
more than 10% of the market value of the assets of an Account would be
invested in the securities of such corporation.

The currently applicable requirements of New Jersey law impose substantial
limitations on the ability of VCA-10 to invest in the stock of companies whose
securities are not publicly traded or who have not recorded a five-year history
of dividend payments or earnings sufficient to support such payments. This means
that the Account will not generally invest in the stock of newly organized
corporations. Nonetheless, an investment not otherwise eligible under paragraph
1 or 2 above may be made if, after giving effect to the investment, the total
cost of all such non-eligible investments does not exceed 5% of the aggregate
market value of the assets of the Account.

Investment limitations may also arise under the insurance laws and regulations
of other states where the Contracts are sold. Although compliance with the
requirements of New Jersey law set forth above will ordinarily result in
compliance with any applicable laws of other states, under some circumstances
the laws of other states could impose additional restrictions on the portfolios
of the Accounts.

ADDITIONAL INFORMATION ABOUT FINANCIAL FUTURES CONTRACTS

As described in the prospectus, VCA-10 may engage in certain transactions
involving financial futures contracts. This additional information on those
instruments should be read in conjunction with the prospectus.

VCA-10 will only enter into futures contracts that are standardized and traded
on a U.S. exchange or board of trade. When a financial futures contract is
entered into, each party deposits with a broker or in a segregated custodial
account approximately 5% of the contract amount, called the "initial margin."
Subsequent payments to and from the broker, called the "variation margin," are
made on a daily basis as the underlying security, index, or rate fluctuates,
making the long and short positions in the futures contracts more or less
valuable, a process known as "marking to the market."

There are several risks associated with the use of futures contracts for hedging
purposes. While VCA-10's hedging transactions may protect it against adverse
movements in the general level of interest rates or other economic conditions,
such transactions could also preclude VCA-10 from the opportunity to benefit
from favorable movements in the level of interest rates or other economic
conditions. There can be no guarantee that there will be correlation between
price movements in the hedging vehicle and in the securities or other assets
being hedged. An incorrect correlation could result in a loss on both the hedged
assets and the hedging vehicle so that VCA-10's return might have been better if
hedging had not been attempted. The degree of imperfection of correlation
depends on circumstances such as variations in speculative market demand for
futures and futures options, including technical influences in futures trading
and futures options, and differences between the financial instruments being
hedged and the instruments underlying the standard contracts available for
trading in such respects as interest rate levels, maturities, and
creditworthiness of issuers. A decision as to whether, when, and how to hedge
involves the exercise of skill and judgment and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected market
trends.

There can be no assurance that a liquid market will exist at a time when VCA-10
seeks to close out a futures contract or a futures option position. Most futures
exchanges and boards of trade limit the amount
5
<PAGE> 54

of fluctuation permitted in futures contract prices during a single day; once
the daily limit has been reached on a particular contract, no trades may be made
that day at a price beyond that limit. In addition, certain of these instruments
are relatively new and without a significant trading history. As a result, there
is no assurance that an active secondary market will develop or continue to
exist. The daily limit governs only price movements during a particular trading
day and therefore does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example, futures prices
have occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of positions
and subjecting some holders of futures contracts to substantial losses. Lack of
a liquid market for any reason may prevent VCA-10 from liquidating an
unfavorable position and VCA-10 would remain obligated to meet margin
requirements and continue to incur losses until the position is closed.

ADDITIONAL INFORMATION ABOUT OPTIONS

As described in the prospectus, VCA-10 may engage in certain transactions
involving options. This additional information on those instruments should be
read in conjunction with the prospectus.

In addition to those described in the prospectus, options have other risks,
primarily related to liquidity. A position in an exchange-traded option may be
closed out only on an exchange, board of trade or other trading facility which
provides a secondary market for an option of the same series. Although VCA-10
will generally purchase or write only those exchange-traded options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option, or
at any particular time, and for some options no secondary market on an exchange
or otherwise may exist. In such event it might not be possible to effect closing
transactions in particular options, with the result that VCA-10 would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of underlying securities acquired through the exercise of call
options or upon the purchase of underlying securities for the exercise of put
options. If VCA-10 as a covered call option writer is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise.

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

The purchase and sale of over-the-counter ("OTC") options will also be subject
to certain risks. Unlike exchange-traded options, OTC options generally do not
have a continuous liquid market. Consequently, VCA-10 will generally be able to
realize the value of an OTC option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when VCA-10 writes an OTC
option, it generally will be able to close out the OTC option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which VCA-10 originally wrote the OTC option. There can be no assurance that
VCA-10 will be able to liquidate an OTC option at a favorable price at any time
prior to expiration. In the event of insolvency of the other party, VCA-10 may
be unable to liquidate an OTC option.

Options on Equity Securities. VCA-10 may purchase and write (i.e., sell) put
and call options on equity securities that are traded on U.S. securities
exchanges, are listed on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), or that result from privately negotiated
transactions with broker-dealers ("OTC options"). A call option is a short-term
contract pursuant to which the purchaser or holder, in return for a premium
paid, has the right to buy the security underlying the option at a specified
exercise price at any time during the term of the option. The writer of the call
option, who receives the premium, has the obligation, upon exercise of the
option, to deliver the underlying security against payment of the exercise
price. A put option is a similar contract which gives the purchaser or holder,
in return for a premium, the right to sell the underlying

6
<PAGE> 55

security at a specified price during the term of the option. The writer of the
put, who receives the premium, has the obligation to buy the underlying security
at the exercise price upon exercise by the holder of the put.

VCA-10 will write only "covered" options on stocks. A call option is covered if:
(1) VCA-10 owns the security underlying the option; or (2) VCA-10 has an
absolute and immediate right to acquire that security without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities it holds; or
(3) VCA-10 holds on a share-for-share basis a call on the same security as the
call written where the exercise price of the call held is equal to or less than
the exercise price of the call written or greater than the exercise price of the
call written if the difference is maintained by VCA-10 in cash, U.S. government
securities or other liquid unencumbered assets in a segregated account with its
custodian. A put option is covered if: (1) VCA-10 deposits and maintains with
its custodian in a segregated account cash, U.S. Government securities or other
liquid unencumbered assets having a value equal to or greater than the exercise
price of the option; or (2) VCA-10 holds on a share-for-share basis a put on the
same security as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written or less than the
exercise price if the difference is maintained by VCA-10 in cash, U.S.
government securities or other liquid unencumbered assets in a segregated
account with its custodian.

VCA-10 may also purchase "protective puts" (i.e., put options acquired for the
purpose of protecting VCA-10 security from a decline in market value). The loss
to VCA-10 is limited to the premium paid for, and transaction costs in
connection with, the put plus the initial excess, if any, of the market price of
the underlying security over the exercise price. However, if the market price of
the security underlying the put rises, the profit VCA-10 realizes on the sale of
the security will be reduced by the premium paid for the put option less any
amount (net of transaction costs) for which the put may be sold.

VCA-10 may also purchase putable and callable equity securities, which are
securities coupled with a put or call option provided by the issuer.

VCA-10 may purchase call options for hedging or investment purposes. VCA-10 does
not intend to invest more than 5% of its net assets at any one time in the
purchase of call options on stocks.

If the writer of an exchange-traded option wishes to terminate the obligation,
he or she may effect a "closing purchase transaction" by buying an option of the
same series as the option previously written. Similarly, the holder of an option
may liquidate his or her position by exercise of the option or by effecting a
"closing sale transaction" by selling an option of the same series as the option
previously purchased. There is no guarantee that closing purchase or closing
sale transactions can be effected.

Options on Debt Securities. VCA-10 may purchase and write exchange-traded and
OTC put and call options on debt securities. Options on debt securities are
similar to options on stock, except that the option holder has the right to take
or make delivery of a debt security, rather than stock.

VCA-10 will write only "covered" options. Options on debt securities are covered
in the same manner as options on stocks, discussed above, except that, in the
case of call options on U.S. Treasury Bills, VCA-10 might own U.S. Treasury
Bills of a different series from those underlying the call option, but with a
principal amount and value corresponding to the option contract amount and a
maturity date no later than that of the securities deliverable under the call
option.

VCA-10 may also write straddles (i.e., a combination of a call and a put written
on the same security at the same strike price where the same issue of the
security is considered as the cover for both the put and the call). In such
cases, VCA-10 will also segregate or deposit for the benefit of VCA-10's broker
cash or liquid unencumbered assets equivalent to the amount, if any, by which
the put is "in the money." It is contemplated that VCA-10's use of straddles
will be limited to 5% of VCA-10's net assets (meaning that the securities used
for cover or segregated as described above will not exceed 5% of VCA-10's net
assets at the time the straddle is written).

VCA-10 may purchase "protective puts" in an effort to protect the value of a
security that it owns against a substantial decline in market value. Protective
puts on debt securities operate in the same manner as protective puts on equity
securities, described above. VCA-10 may wish to protect certain securities
against a decline in market value at a time when put options on those particular
securities are not available for purchase. VCA-10 may therefore purchase a put
option on securities it does not hold. While changes in the value of the put
should generally offset changes in the value of the securities being hedged, the
correlation between the two values may not be as close in these transactions as
in transactions in which VCA-10 purchases a put option on an underlying security
it owns.

VCA-10 may also purchase call options on debt securities for hedging or
investment purposes. VCA-10 does not intend to invest more than 5% of its net
assets at any one time in the purchase of call options on debt securities.

7
<PAGE> 56

VCA-10 may also purchase putable and callable debt securities, which are
securities coupled with a put or call option provided by the issuer.

VCA-10 may enter into closing purchase or sale transactions in a manner similar
to that discussed above in connection with options on equity securities.

Options on Stock Indices. VCA-10 may purchase and sell put and call options on
stock indices traded on national securities exchanges, listed on NASDAQ or that
result from privately negotiated transactions with broker-dealers. Options on
stock indices are similar to options on stock except that, rather than the right
to take or make delivery of stock at a specified price, an option on a stock
index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the stock index upon which the option is
based is greater than in the case of a call, or less than, in the case of a put,
the strike price of the option. This amount of cash is equal to such difference
between the closing price of the index and the strike price of the option times
a specified multiple (the "multiplier"). If the option is exercised, the writer
is obligated, in return for the premium received, to make delivery of this
amount. Unlike stock options, all settlements are in cash, and gain or loss
depends on price movements in the stock market generally (or in a particular
industry or segment of the market) rather than price movements in individual
stocks.

VCA-10 will write only "covered" options on stock indices. A call option is
covered if VCA-10 follows the segregation requirements set forth in this
paragraph. When VCA-10 writes a call option on a broadly based stock market
index, it will segregate or put into escrow with its custodian or pledge to a
broker as collateral for the option, cash, U.S. government securities or other
liquid unencumbered assets, or "qualified securities" (defined below) with a
market value at the time the option is written of not less than 100% of the
current index value times the multiplier times the number of contracts. A
"qualified security" is an equity security which is listed on a national
securities exchange or listed on NASDAQ against which VCA-10 has not written a
stock call option and which has not been hedged by VCA-10 by the sale of stock
index futures. When VCA-10 writes a call option on an industry or market segment
index, it will segregate or put into escrow with its custodian or pledge to a
broker as collateral for the option, cash, U.S. government securities or other
liquid unencumbered assets, or at least five qualified securities, all of which
are stocks of issuers in such industry or market segment, with a market value at
the time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts. Such stocks will include
stocks which represent at least 50% of the weighting of the industry or market
segment index and will represent at least 50% of VCA-10's holdings in that
industry or market segment. No individual security will represent more than 15%
of the amount so segregated, pledged or escrowed in the case of broadly based
stock market stock options or 25% of such amount in the case of industry or
market segment index options. If at the close of business on any day the market
value of such qualified securities so segregated, escrowed, or pledged falls
below 100% of the current index value times the multiplier times the number of
contracts, VCA-10 will so segregate, escrow, or pledge an amount in cash, U.S.
government securities, or other liquid unencumbered assets equal in value to the
difference. In addition, when VCA-10 writes a call on an index which is
in-the-money at the time the call is written, it will segregate with its
custodian or pledge to the broker as collateral, cash or U.S. government or
other liquid unencumbered assets equal in value to the amount by which the call
is in-the-money times the multiplier times the number of contracts. Any amount
segregated pursuant to the foregoing sentence may be applied to VCA-10's
obligation to segregate additional amounts in the event that the market value of
the qualified securities falls below 100% of the current index value times the
multiplier times the number of contracts.

A call option is also covered if VCA-10 holds a call on the same index as the
call written where the strike price of the call held is equal to or less than
the strike price of the call written or greater than the strike price of the
call written if the difference is maintained by VCA-10 in cash, U.S. government
securities or other liquid unencumbered assets in a segregated account with its
custodian.

A put option is covered if: (1) VCA-10 holds in a segregated account cash, U.S.
government securities or other liquid unencumbered assets of a value equal to
the strike price times the multiplier times the number of contracts; or (2)
VCA-10 holds a put on the same index as the put written where the strike price
of the put held is equal to or greater than the strike price of the put written
or less than the strike price of the put written if the difference is maintained
by VCA-10 in cash, U.S. government securities or other liquid unencumbered
assets in a segregated account with its custodian.

VCA-10 may purchase put and call options on stock indices for hedging or
investment purposes. VCA-10 does not intend to invest more than 5% of its net
assets at any one time in the purchase of puts and calls on stock indices.
VCA-10 may effect closing sale and purchase transactions involving options on
stock indices, as described above in connection with stock options.

The distinctive characteristics of options on stock indices create certain risks
that are not present with stock

8
<PAGE> 57

options. Index prices may be distorted if trading of certain stocks included in
the index is interrupted. Trading in the index options also may be interrupted
in certain circumstances, such as if trading were halted in a substantial number
of stocks included in the index. If this occurred, VCA-10 would not be able to
close out options which it had purchased or written and, if restrictions on
exercise were imposed, might be unable to exercise an option it holds, which
could result in substantial losses to VCA-10. Price movements in VCA-10's equity
security holdings probably will not correlate precisely with movements in the
level of the index and, therefore, in writing a call on a stock index VCA-10
bears the risk that the price of the securities held by VCA-10 may not increase
as much as the index. In such event, VCA-10 would bear a loss on the call which
is not completely offset by movement in the price of VCA-10's equity securities.
It is also possible that the index may rise when VCA-10's securities do not rise
in value. If this occurred, VCA-10 would experience a loss on the call which is
not offset by an increase in the value of its securities holdings and might also
experience a loss in its securities holdings. In addition, when VCA-10 has
written a call, there is also a risk that the market may decline between the
time VCA-10 has a call exercised against it, at a price which is fixed as of the
closing level of the index on the date of exercise, and the time VCA-10 is able
to sell stocks in its portfolio. As with stock options, VCA-10 will not learn
that an index option has been exercised until the day following the exercise
date but, unlike a call on stock where VCA-10 would be able to deliver the
underlying securities in settlement, VCA-10 may have to sell part of its stock
portfolio in order to make settlement in cash, and the price of such stocks
might decline before they can be sold. This timing risk makes certain strategies
involving more than one option substantially more risky with options in stock
indices than with stock options.

There are also certain special risks involved in purchasing put and call options
on stock indices. If VCA-10 holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that the
level of the underlying index may change before closing. If such a change causes
the exercise option to fall out of-the-money, VCA-10 will be required to pay the
difference between the closing index value and the strike price of the option
(times the applicable multiplier) to the assigned writer. Although VCA-10 may be
able to minimize the risk by withholding exercise instructions until just before
the daily cutoff time or by selling rather than exercising an option when the
index level is close to the exercise price, it may not be possible to eliminate
this risk entirely because the cutoff times for index options may be earlier
than those fixed for other types of options and may occur before definitive
closing index values are announced.

Options on Foreign Currencies. VCA-10 may purchase and write put and call
options on foreign currencies traded on U.S. or foreign securities exchanges or
boards of trade. Options on foreign currencies are similar to options on stock,
except that the option holder has the right to take or make delivery of a
specified amount of foreign currency, rather than stock. VCA-10's successful use
of options on foreign currencies depends upon the investment manager's ability
to predict the direction of the currency exchange markets and political
conditions, which requires different skills and techniques than predicting
changes in the securities markets generally. In addition, the correlation
between movements in the price of options and the price of currencies being
hedged is imperfect.

Options on Futures Contracts. VCA-10 may enter into certain transactions
involving options on futures contracts. VCA-10 will utilize these types of
options for the same purpose that it uses the underlying futures contract. An
option on a futures contract gives the purchaser or holder the right, but not
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
price at any time during the option exercise period. The writer of the option is
required upon exercise to assume an offsetting futures position (a short
position if the option is a call and long position if the option is a put). Upon
exercise of the option, the assumption of offsetting futures positions by the
writer and holder of the option will be accomplished by delivery of the
accumulated balance in the writer's futures margin account which represents the
amount by which the market price of the futures contract, at exercise, exceeds,
in the case of a call, or is less than, in the case of a put, the exercise price
of the option on the futures contract. As an alternative to exercise, the holder
or writer of an option may terminate a position by selling or purchasing an
option of the same series. There is no guarantee that such closing transactions
can be effected. VCA-10 intends to utilize options on futures contracts for the
same purposes that it uses the underlying futures contracts.

Options on futures contracts are subject to risks similar to those described
above with respect to options on securities, options on stock indices, and
futures contracts. These risks include the risk that the investment manager may
not correctly predict changes in the market, the risk of imperfect correlation
between the option and the securities being hedged, and the risk that there
might not be a liquid secondary market for the option. There is also the risk of
imperfect correlation between the option and the underlying futures contract. If
there were no liquid secondary market for a particular option on a futures
contract, VCA-10 might

9
<PAGE> 58

have to exercise an option it held in order to realize any profit and might
continue to be obligated under an option it had written until the option expired
or was exercised. If VCA-10 were unable to close out an option it had written on
a futures contract, it would continue to be required to maintain initial margin
and make variation margin payments with respect to the option position until the
option expired or was exercised against VCA-10.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

A forward foreign currency exchange contract is a contract obligating one party
to purchase and the other party to sell one currency for another currency at a
future date and price. When investing in foreign securities, VCA-10 may enter
into such contracts in anticipation of or to protect itself against fluctuations
in currency exchange rates.

VCA-10 generally will not enter into a forward contract with a term of greater
than 1 year. At the maturity of a forward contract, VCA-10 may either sell the
security and make delivery of the foreign currency or it may retain the security
and terminate its contractual obligation to deliver the foreign currency by
purchasing an "offsetting" contract with the same currency trader obligating it
to purchase, on the same maturity date, the same amount of the foreign currency.

VCA-10's successful use of forward contracts depends upon the investment
manager's ability to predict the direction of currency exchange markets and
political conditions, which requires different skills and techniques than
predicting changes in the securities markets generally.

INTEREST RATE SWAP TRANSACTIONS

VCA-10 may enter into interest rate swap transactions. Interest rate swaps, in
their most basic form, involve the exchange by one party with another party of
their respective commitments to pay or receive interest. For example, VCA-10
might exchange its right to receive certain floating rate payments in exchange
for another party's right to receive fixed rate payments. Interest rate swaps
can take a variety of other forms, such as agreements to pay the net differences
between two different indices or rates, even if the parties do not own the
underlying instruments. Despite their differences in form, the function of
interest rate swaps is generally the same--to increase or decrease exposure to
long-or short-term interest rates. For example, VCA-10 may enter into a swap
transaction to preserve a return or spread on a particular investment or a
portion of its portfolio or to protect against any increase in the price of
securities the Account anticipates purchasing at a later date. VCA-10 will
maintain appropriate liquid assets in a segregated custodial account to cover
its obligations under swap agreements.

The use of swap agreements is subject to certain risks. As with options and
futures, if the investment manager's prediction of interest rate movements is
incorrect, VCA-10's total return will be less than if the Account had not used
swaps. In addition, if the counterparty's creditworthiness declines, the value
of the swap would likely decline. Moreover, there is no guarantee that VCA-10
could eliminate its exposure under an outstanding swap agreement by entering
into an offsetting swap agreement with the same or another party.

LOANS OF PORTFOLIO SECURITIES

VCA-10 and VCA-11 may from time to time lend their portfolio securities to
broker-dealers, qualified banks and certain institutional investors, provided
that such loans are made pursuant to written agreements and are continuously
secured by collateral in the form of cash, U.S. Government securities or
irrevocable standby letters of credit in an amount equal to at least the market
value at all times of the loaned securities. During the time portfolio
securities are on loan, VCA-10 and VCA-11 will continue to receive the interest
and dividends, or amounts equivalent thereto, on the loaned securities while
receiving a fee from the borrower or earning interest on the investment of the
cash collateral. The right to terminate the loan will be given to either party
subject to appropriate notice. Upon termination of the loan, the borrower will
return to the lender securities identical to the loaned securities. VCA-10 will
not have the right to vote securities on loan, but would terminate the loan and
regain the right to vote if that were considered important with respect to the
investment. The primary risk in lending securities is that the borrower may
become insolvent on a day on which the loaned security is rapidly advancing in
price. In such event, if the borrower fails to return the loaned securities, the
existing collateral might be insufficient to purchase back the full amount of
stock loaned, and the borrower would be unable to furnish additional collateral.
The borrower would be liable for any shortage, but VCA-10 and VCA-11 would be
unsecured creditors with respect to such shortage and might not be able to
recover all or any of it. However, this risk may be minimized by a careful
selection of borrowers and securities to be lent.

VCA-10 and VCA-11 will not lend their portfolio securities to borrowers
affiliated with Prudential, including Prudential Securities Incorporated. This
will not affect the Accounts' ability to maximize their securities lending
opportunities.

PORTFOLIO TURNOVER RATE

VCA-10 has no fixed policy with respect to portfolio turnover, which is an index
determined by dividing the lesser of the purchases and sales of portfolio
securi-
10
<PAGE> 59

ties during the year by the monthly average of the aggregate value of the
portfolio securities owned during the year. VCA-10 seeks long term capital
growth rather than short term trading profits. However, during any period when
changing economic or market conditions are anticipated, successful management
requires an aggressive response to such changes which may result in portfolio
shifts that may significantly increase the rate of portfolio turnover. Higher
portfolio turnover involves correspondingly greater brokerage commissions and
other transaction costs, which are borne directly by VCA-10. It is not
anticipated that under normal circumstances the annual portfolio turnover rate
would exceed 100%. During 1997 and 1996 the total portfolio turnover rate for
VCA-10 was 47% and 52%, respectively.

PORTFOLIO BROKERAGE AND RELATED PRACTICES

Prudential is responsible for decisions to buy and sell securities for VCA-10
and VCA-11, the selection of brokers and dealers to effect the transactions and
the negotiation of brokerage commissions, if any. Transactions on a stock
exchange in equity securities for VCA-10 will be executed primarily through
brokers who will receive a commission paid by the Account. Fixed income
securities, as well as securities traded in the over-the-counter market, on the
other hand, will not normally incur any brokerage commissions. These securities
are generally traded on a "net" basis with dealers acting as principals for
their own accounts without a stated commission, although the price of the
security usually includes a profit to the dealer. In underwritten offerings,
securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain of these securities may be
purchased directly from an issuer, in which case neither commissions nor
discounts are paid.

In placing orders for portfolio transactions of the Accounts, primary
consideration is given to obtaining the most favorable price and best execution.
An attempt is made to effect each transaction at a price and commission, if any,
that provide the most favorable total cost or proceeds reasonably attainable in
the circumstances. However, a higher spread or commission than is otherwise
necessary for a particular transaction may be paid if to do so appears to
further the goal of obtaining the best execution available.

In connection with any securities transaction that involves a commission
payment, the commission is negotiated with the broker on the basis of the
quality and quantity of execution services that the broker provides, in light of
generally prevailing commission rates. Periodically, Prudential and PIC review
the allocation among brokers of orders for equity securities and the commissions
that were paid.

When selecting a broker or dealer in connection with a transaction for either
Account, consideration is given to whether the broker or dealer has furnished
Prudential or PIC with certain services that brokerage houses customarily supply
to institutional investors, provided this does not jeopardize the objective of
obtaining the best price and execution.

These services include statistical and economic data and research reports on
particular companies and industries. Prudential and PIC use these services in
connection with all of their investment activities, and some of the data or
services obtained in connection with the execution of transactions for an
Account may be used in managing other investment accounts. Conversely, brokers
and dealers furnishing such services may be selected for the execution of
transactions of such other accounts, while the data and services may be used in
providing investment management for one or both of the Accounts. Although
Prudential's present policy is not to permit higher spreads or commissions to be
paid on transactions for the Accounts in order to secure research and
statistical services from brokers or dealers, Prudential might in the future
authorize the payment of higher commissions (but not of higher spreads), with
the prior concurrence of an Account's Committee, if it is determined that the
higher commissions are necessary in order to secure desired research and are
reasonable in relation to all the services that the broker provides.

When investment opportunities arise that may be appropriate for more than one
entity for which Prudential serves as investment manager or adviser, one entity
will not be favored over another and allocations of investments among them will
be made in an impartial manner believed to be equitable to each entity involved.
The allocations will be based on each entity's investment objectives and its
current cash and investment positions. Because the various entities for which
Prudential acts as investment manager or adviser have different investment
objectives and positions, from time to time a particular security may be
purchased for one or more such entities while at the same time such securities
may be sold for another.

An affiliated broker may be employed to execute brokerage transactions on behalf
of the Accounts as long as the commissions are reasonable and fair compared to
the commissions received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time. During 1997, 1996, and
1995, the total dollar amount of commissions paid by VCA-10 to an affiliated
broker, Prudential Securities Incorporated, was $27,462 or 3.3%, $12,687 or
2.3%, and $-0-, respectively. For 1997 and

11
<PAGE> 60

1996 Prudential Securities effected 3.1% and 2.1% respectively, of the
transactions involving the payment of commissions on an aggregate dollar basis.
The Accounts may not engage in any transactions in which Prudential or its
affiliates, including Prudential Securities Incorporated, acts as principal,
including over-the-counter purchases and negotiated trades in which such a party
acts as a principal.

Prudential or PIC may enter into business transactions with brokers or dealers
for purposes other than the execution of portfolio securities transactions for
accounts Prudential manages. These other transactions will not affect the
selection of brokers or dealers in connection with portfolio transactions for
the Accounts.

During 1997, 1996, and 1995, $828,324, $548,304, and $429,704, respectively, was
paid to various brokers in connection with securities transactions for VCA-10.
Of this amount, approximately 62.1%, 78.6%, and 77.6%, respectively, was
allocated to brokers who provided research and statistical services to
Prudential.

CUSTODY OF SECURITIES

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is custodian of the assets of VCA-10 and VCA-11 and maintains certain
books and records in connection therewith.

12
<PAGE> 61

PERFORMANCE INFORMATION

The tables below provide performance information for each variable investment
option through December 31, 1997. The performance information is based on
historical experience and does not indicate or represent future performance.

ANNUAL AVERAGE TOTAL RETURN

Table 1 below shows the average annual rates of total return on hypothetical
investments of $1,000 for periods ended December 31, 1997 in VCA-10, VCA-11 and
the following subaccounts of VCA-24: Diversified Bond, Government Income,
Conservative Balanced, Flexible Managed, Stock Index, Equity and Global. These
figures assume withdrawal of the investments at the end of the period other than
to effect an annuity under the Contract. VCA-24 has been in existence since May
1, 1987. However, the applicable underlying Portfolios of the Fund existed as
funding vehicles for other Prudential products prior to that date. For
performance information purposes, the returns calculated below for periods prior
to inclusion in the MEDLEY Program reflect a hypothetical return as if those
portfolios were part of the MEDLEY Program at that time, using charges
applicable to the MEDLEY Program.

TABLE 1

AVERAGE ANNUAL TOTAL RETURN ASSUMING WITHDRAWAL

<TABLE>
<CAPTION>
FROM DATE PORTFOLIO
ESTABLISHED THROUGH
ONE YEAR FIVE YEARS TEN YEARS 12/31/97 IF PORTFOLIO
DATE ENDED ENDED ENDED NOT IN EXISTENCE
ESTABLISHED 12/31/97 12/31/97 12/31/97 FOR TEN YEARS
----------- -------- ---------- --------- ---------------------
<S> <C> <C> <C> <C> <C>
VCA-10.................................... 8/25/82 25.22% 20.17% 17.97% --
VCA-11.................................... 8/25/82 (1.25) 3.73 5.23 --
VCA-24:
Diversified Bond..................... 5/13/83 1.76 6.71 8.41 --
Government Income.................... 5/1/89 2.86 6.30 -- 8.02%
Conservative Balanced................ 5/13/83 6.57 9.60 10.34 --
Flexible Managed..................... 5/13/83 11.05 12.12 12.54 --
Stock Index.......................... 10/19/87 25.82 18.72 16.58 --
Equity............................... 5/13/83 17.61 18.26 16.62 --
Global............................... 9/19/88 (0.24) 13.91 -- 9.10
</TABLE>

The average annual rates of total return shown above are computed by finding the
average annual compounded rates of return over the periods shown that would
equate the initial amount invested to the withdrawal value, in accordance with
the following formula: P(1+T)n = ERV. In the formula, P is a hypothetical
investment or contribution of $1,000; T is the average annual total return; n is
the number of years; and ERV is the withdrawal value at the end of the periods
shown. The annual account charge is prorated among the investment options
available under MEDLEY, including the Companion Contract, in the same
proportions as the aggregate annual contract fees are deducted from each option.
These figures assume deduction of the maximum deferred sales charge that may be
applicable to a particular period.

13
<PAGE> 62

NON-STANDARD TOTAL RETURN

Table 2 below shows the average annual rates of return as in Table 1, but
assumes that the contributions or investments are not withdrawn at the end of
the period or that the Participant annuitizes at the end of the period.

TABLE 2

AVERAGE ANNUAL TOTAL RETURN ASSUMING NO WITHDRAWAL

<TABLE>
<CAPTION>
FROM DATE PORTFOLIO
ESTABLISHED THROUGH
ONE YEAR FIVE YEARS TEN YEARS 12/31/97 IF PORTFOLIO
DATE ENDED ENDED ENDED NOT IN EXISTENCE
ESTABLISHED 12/31/97 12/31/97 12/31/97 FOR TEN YEARS
----------- -------- ---------- --------- ---------------------
<S> <C> <C> <C> <C> <C>
VCA-10.................................... 8/25/82 31.37% 20.43% 18.00% --
VCA-11.................................... 8/25/82 4.81 4.13 5.27 --
VCA-24:
Diversified Bond..................... 5/13/83 7.77 7.03 8.42 --
Government Income.................... 5/1/89 8.86 6.61 -- 8.02%
Conservative Balanced................ 5/13/83 12.61 9.90 10.36 --
Flexible Managed..................... 5/13/83 17.09 12.39 12.56 --
Stock Index.......................... 10/19/87 31.85 18.94 16.59 --
Equity............................... 5/13/83 23.74 18.53 16.65 --
Global............................... 9/19/88 5.77 14.14 -- 9.11
</TABLE>

Table 3 shows the cumulative total return for the above investment options,
assuming no withdrawal.

TABLE 3

CUMULATIVE TOTAL RETURN ASSUMING NO WITHDRAWAL

<TABLE>
<CAPTION>
FROM DATE PORTFOLIO
ESTABLISHED THROUGH
ONE YEAR FIVE YEARS TEN YEARS 12/31/97 IF PORTFOLIO
DATE ENDED ENDED ENDED NOT IN EXISTENCE
ESTABLISHED 12/31/97 12/31/97 12/31/97 FOR TEN YEARS
----------- -------- ---------- --------- ---------------------
<S> <C> <C> <C> <C> <C>
VCA-10.................................... 8/25/82 31.37% 153.48% 424.10% --
VCA-11.................................... 8/25/82 4.81 22.44 67.12 --
VCA-24:
Diversified Bond..................... 5/13/83 7.77 40.47 124.56 --
Government Income.................... 5/1/89 8.86 37.73 -- 95.27%
Conservative Balanced................ 5/13/83 12.61 60.38 168.09 --
Flexible Managed..................... 5/13/83 17.09 79.40 226.68 --
Stock Index.......................... 10/19/87 31.85 138.12 364.53 --
Equity............................... 5/13/83 23.74 134.05 366.94 --
Global............................... 9/19/88 5.77 93.83 -- 124.67
</TABLE>

VCA-11 YIELD

The yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance of
one accumulation unit of VCA-11 at the beginning of the period, subtracting a
prorated portion of the annual account charge as explained above, and dividing
the difference by the value of the account at the beginning of the base period,
and then multiplying the base period by (365/7), with the resulting figure
carried to the nearest hundred of 1%.

The yield reflects the deduction of the 1% charge for administrative expenses
and investment management, but does not reflect the deferred sales charge.

The effective yield is obtained by taking the base period return, adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result, according to following formula:

Effective Yield = [(base period return + 1)365/7]-1.

The yields on amount held in VCA-11 will fluctuate on a daily basis. Therefore,
the stated yields for any given period are not an indication of future yields.

14
<PAGE> 63

THE VCA-10 AND VCA-11 COMMITTEES

VCA-10 is managed by The Prudential Variable Contract Account-10 Committee
("VCA-10 Committee"). VCA-11 is managed by The Prudential Variable Contract
Account-11 Committee ("VCA-11 Committee"). The members of each Committee are
elected by the persons having voting rights in respect of each Account. The
affairs of each Account are conducted in accordance with the Rules and
Regulations of the Account. The members of each Account's Committee, the
Account's Secretary and the principal occupation of each during the past five
years are shown below.

VCA-10 AND VCA-11 COMMITTEES

MENDEL A. MELZER, CFA*, 37, Chairman of the Board--Chief Investment Officer of
Prudential Investments since 1996; 1995 to 1996: Chief Financial Officer of the
Money Management Group of Prudential; 1993 to 1995: Senior Vice President and
Chief Financial Officer of Prudential Preferred Financial Services; Prior to
1993: Managing Director, The Prudential Investment Corporation. Address: 751
Broad Street, Newark, New Jersey 07102.

JONATHAN M. GREENE*, 54, President and Member of the Committee--President of
Investment Management (since 3/96), Prudential Investments. Vice President and
Portfolio Manager, T. Rowe Price Associates, Inc. from 6/74 to 3/96. Address:
751 Broad Street, Newark, NJ 07102.

SAUL K. FENSTER, 65, Director--President of New Jersey Institute of Technology.
Address: 323 Martin Luther King Boulevard, Newark, New Jersey 07102.

W. SCOTT MCDONALD, JR., 61, Director--Vice President, Kaludis Consulting Group
since 1997; 1995 to 1996: Principal, Scott McDonald & Associates; Prior to 1995:
Executive Vice President of Fairleigh Dickinson University. Address: 9 Zamrok
Way, Morristown, New Jersey 07960.

JOSEPH WEBER, 74, Director--Vice President, Interclass (international corporate
learning). Address: 37 Beachmont Terrace, North Caldwell, New Jersey 07006.

* These Members of the VCA-10 and VCA-11 Committees are interested persons of
Prudential, its affiliates or the Accounts, as defined in the Investment Company
Act of 1940 (the "1940 Act"). Certain actions of each Committee, including the
annual continuance of the Agreement for Investment Management Services between
each Account and Prudential, must be approved by a majority of the Members of
the Committee who are not interested persons of Prudential, its affiliates or
the Account. Messrs. Melzer and Greene, Members of the Committee, are interested
persons of Prudential, as that term is defined in the 1940 Act, because they are
officers of Prudential, the investment manager of both Accounts. Messrs.
Fenster, McDonald, and Weber are not interested persons of Prudential, its
affiliates, or either Account. However, Mr. Fenster is President of the New
Jersey Institute of Technology. Prudential has issued a group annuity contract
to the Institute and provides group life and group health insurance to its
employees.

OFFICERS WHO ARE NOT DIRECTORS

CAREN A. CUNNINGHAM, Secretary--Assistant General Counsel of Prudential Mutual
Fund Management, Inc. since 1997; 1994 to 1997: Vice President and Associate
General Counsel of Smith Barney Mutual Fund Management Inc.; 1992 to 1994:
Assistant Vice President and Counsel, The Boston Company. Address: Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102.

GRACE C. TORRES, Treasurer and Principal Financial and Accounting Officer--First
Vice President of PIFM since 1996; 1994 to 1996: First Vice President of
Prudential Securities Inc.; Prior to 1994: Vice President of Bankers Trust
Corporation. Address: Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102.

STEPHEN M. UNGERMAN, Assistant Treasurer--Vice President and Tax Director of
Prudential Investments since 1996; 1993 to 1996: First Vice President of
Prudential Mutual Fund Management, Inc. Address: Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102.

REMUNERATION OF MEMBERS OF THE COMMITTEES AND CERTAIN AFFILIATED PERSONS

No member of the Committee of either VCA-10 or VCA-11 nor any other person
(other than Prudential) receives remuneration from an Account. Prudential pays
certain of the expenses relating to the operation of VCA-10 and VCA-11,
including all compensation paid to members of each Committee, its Chairman, its
Secretary and Assistant Secretaries. No member of either Account's Committee,
its Chairman, its Secretary or Assistant Secretaries who is also an officer,
Director or employee of Prudential or an affiliate of Prudential is entitled to
any fee for his services as a member or officer of the Committee.

15
<PAGE> 64

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

DIRECTORS

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.

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 and 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 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 and 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, The Chase Manhattan
Bank, Lotus Development 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., and Consolidated Delivery and
Logistics. 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 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 and Corporate
Governance. Guest Scholar, The Brookings Institution since 1993. Ms. Horner is
also a director of Foster Wheeler Corporation, Ingersoll-Rand Corporation, 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

16
<PAGE> 65

1996. Mr. Kelley is also a director of Hercules Incorporated, Arrow Electronics,
Inc., 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 and 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 and Bankers Trust
New York 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 and 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 and Corporate Governance. Chairman, Regeneron Pharmaceuticals since
1995. Chairman and Chief Executive Officer, Merck and Co., Inc. from 1986 to
1994. Dr. Vagelos is also a director of The Estee Lauder Companies, Inc. and
PepsiCo., 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 and Light Company.
Age 63. Address: 22 Chambers Street, Princeton, NJ 08542.

PAUL A. VOLCKER, Director since 1988 (current term expires April, 2000).
Chairman, Committee on Dividends; Member, Executive Committee; Member, Committee
on Nominations and 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 and 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.

17
<PAGE> 66

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

PRINCIPAL OFFICERS

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.

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, Executive Vice President, 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 and 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.

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 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.

18
<PAGE> 67

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.

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

19
<PAGE> 68

SALE OF THE CONTRACTS

Prudential offers the Contracts on a continuous basis through Corporate Office,
regional home office and group sales office employees in those states in which
the Contracts may be lawfully sold. It may also offer the Contracts through
licensed insurance brokers and agents, or through appropriately registered
direct or indirect subsidiary(ies) of Prudential, provided clearances to do so
are obtained in any jurisdiction where such clearances may be necessary. During
1997, 1996 and 1995, Prudential received $18,599, $13,057, and $146,870,
respectively, as deferred sales charges from VCA-10. $860,025, $479,212, and
$305,297, respectively, were credited to other broker-dealers for the same
periods in connection with sales of the contracts. During 1997, 1996 and 1995,
Prudential received $8,370, $8,659, and $17,399, respectively, from VCA-11 as
deferred sales charges and credited $154,536, $112,654 and $64,646,
respectively, to other broker-dealers in connection with sales of the contracts.
During 1997, 1996 and 1995, Prudential received $93,520, $98,458 and $151,147
from VCA-24 as deferred sales charges and credited $2,473,844, $1,965,736 and
$1,128,432, respectively, to other broker-dealers in connection with sales of
the contracts.

EXPERTS

The financial statements for VCA-10, VCA-11 and VCA-24 included in this
Statement of Additional Information and the condensed financial information for
VCA-10, VCA-11 and VCA-24 in the prospectus for the fiscal years 1996 and 1997
have been audited by Price Waterhouse LLP, independent accountants, as stated in
their reports appearing herein. The financial statements have been included in
reliance upon the reports of such firms given upon their authority as experts in
accounting and auditing. Price Waterhouse LLP's principal business address is
1177 Avenue of the Americas, New York, New York 10036.

Financial Statements for VCA-10, VCA-11, VCA-24 and Prudential, all as of
December 31, 1997, are included in this Statement of Additional Information,
beginning at page 21.

20
<PAGE> 69

FINANCIAL HIGHLIGHTS OF VCA-10

INCOME AND CAPITAL CHANGES PER ACCUMULATION UNIT*

(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE YEAR)

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------YEAR-ENDED-DECEMBER-31,---------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME.................................... $ .0757 $ .0657 $ .0609 $ .0563 $ .0855
- -----------------------------------------------------------------------------------------------------------
EXPENSES
For investment management fee...................... .0154 .0118 .0094 .0083 .0077
For administrative expenses........................ .0461 .0354 .0282 .0251 .0230
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME................................ .0142 .0185 .0233 .0229 .0548
- -----------------------------------------------------------------------------------------------------------
CAPITAL CHANGES
Net realized gain on investments................... 1.2761 .5085 .3850 .1947 .2763
Net unrealized appreciation (depreciation) of
investments..................................... .3841 .5682 .4744 (.2148) .2599
- -----------------------------------------------------------------------------------------------------------
NET INCREASE IN UNIT ACCUMULATION VALUE 1.6744 1.0952 .8827 .0028 .5910
- -----------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE
Beginning of year.................................. 5.3383 4.2431 3.3604 3.3576 2.7666
- -----------------------------------------------------------------------------------------------------------
End of year........................................ $7.0127 $5.3383 $4.2431 $3.3604 $3.3576
- -----------------------------------------------------------------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS** 1.00% 1.00% 1.00% 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS**........................................... .24% .39% .61% .68% 1.78%
- -----------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE.............................. 47% 52% 45% 32% 45%
- -----------------------------------------------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID PER SHARE............... $ .0531 $ .0538 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------
NUMBER OF UNITS OUTSTANDING
for Participants at end of year (000's omitted).... 83,261 91,532 81,817 79,189 73,569
- -----------------------------------------------------------------------------------------------------------
</TABLE>

* Calculated by accumulating the actual per unit amounts daily.

** These calculations exclude Prudential's equity in VCA-10.

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.

SEE NOTES TO FINANCIAL STATEMENTS

21
<PAGE> 70

FINANCIAL STATEMENTS OF VCA-10

STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1997

<TABLE>
<CAPTION>
COMMON STOCK VALUE
INVESTMENTS SHARES [NOTE 2A]
<S> <C> <C>
- -------------------------------------------------------

<CAPTION>
<S> <C> <C>
AEROSPACE/DEFENSE--2.7%
Doncasters PLC-ADR+ (United
Kingdom).................. 136,400 $ 2,881,450
Gen Corp.................... 265,000 6,625,000
Litton Industries, Inc.+.... 89,300 5,134,750
Primex Technologies, Inc.... 44,700 1,508,625
------------
16,149,825
- -------------------------------------------------------
AUTOS & TRUCKS--2.1%
Borg-Warner Automotive,
Inc....................... 142,500 7,410,000
Lear Corp.+................. 60,400 2,869,000
Tower Automotive, Inc.+..... 59,200 2,490,100
------------
12,769,100
- -------------------------------------------------------
CHEMICALS--7.4%
Agrium, Inc................. 443,100 5,400,281
BOC Group PLC-ADR (United
Kingdom).................. 101,500 3,343,156
Chemfirst, Inc.+............ 155,100 4,381,575
Cytec Industries, Inc.+..... 89,500 4,200,906
Dow Chemical................ 41,300 4,191,950
Imperial Chemical
Industries-ADR (United
Kingdom).................. 51,800 3,363,763
Mississippi Chemical
Corp...................... 314,586 5,741,195
Olin Corp................... 95,000 4,453,125
Solutia, Inc................ 130,100 3,472,044
Spartech Corp............... 135,000 2,041,875
Union Carbide............... 71,600 3,074,325
------------
43,664,195
- -------------------------------------------------------
COMPUTER RELATED--0.3%
Digital Equipment+.......... 44,600 1,650,200
- -------------------------------------------------------
CONSUMER SERVICES--4.0%
Archer-Daniels-Midland
Co........................ 79,460 1,723,289
Darden Restaurants.......... 522,000 6,525,000
Hilton Hotels Corp.+........ 93,000 2,766,750
Ogden Corp.................. 118,200 3,331,762
RFS Hotel Investors,
Inc.+..................... 151,200 3,014,550
360 Communications Co.+..... 136,500 2,755,594
Whitman Corp................ 136,500 3,557,531
------------
23,674,476
- -------------------------------------------------------
CONTAINERS AND PACKAGING--2.6%
ACX Technologies, Inc.+..... 93,700 2,289,794
Aptargroup, Inc............. 67,000 3,718,500
Alltrista Corp.+............ 170,200 4,829,425
U.S. Can Corp.+............. 264,200 4,458,375
------------
15,296,094
- -------------------------------------------------------
ELECTRICAL EQUIPMENT--0.6%
Belden, Inc................. 97,100 $ 3,422,775
- -------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- -------------------------------------------------------
COMMON STOCK VALUE
INVESTMENTS SHARES [NOTE 2A]
<S> <C> <C>
ELECTRONICS--3.5%
Anixter International+...... 143,000 $ 2,359,500
Dallas Semiconductor
Corp...................... 129,200 5,264,900
Marshall Industries+........ 162,700 4,881,000
Methode Electronics, Inc.... 122,000 1,982,500
Pioneer Standard
Electronics............... 390,800 5,959,700
------------
20,447,600
- -------------------------------------------------------
ENGINEERING & CONSTRUCTION--4.4%
American Standard Cos.+..... 83,600 3,202,925
Apogee Enterprises, Inc.+... 38,500 457,187
Cameron Ashley Building
Products+................. 127,400 2,133,950
Giant Cement Holding,
Inc.+..................... 261,500 6,047,188
Gradall Industries, Inc.+... 243,200 4,012,800
Texas Industries, Inc....... 218,000 9,810,000
------------
25,664,050
- -------------------------------------------------------
EXPLORATION & PRODUCTION--4.4%
Cabot Oil & Gas Corp........ 150,800 2,931,175
Comstock Resources, Inc.+... 167,000 1,993,563
Occidental Petroleum
Corp...................... 166,900 4,892,256
Oryx Energy Co.+............ 241,100 6,148,050
Pioneer Natural Resources
Co........................ 185,100 5,356,331
Seagull Energy Corp.+....... 32,900 678,562
Vintage Petroleum, Inc...... 193,800 3,682,200
------------
25,682,137
- -------------------------------------------------------
FINANCIAL SERVICES--3.9%
Beneficial Corp............. 102,500 8,520,312
Financial Security Assurance
Holdings Corp............. 134,900 6,508,925
Morgan Stanley Dean Witter
Discover & Co............. 9,700 573,512
Travelers Group, Inc........ 130,899 7,052,184
------------
22,654,933
- -------------------------------------------------------
HEALTHCARE--2.1%
Columbia HCA Healthcare
Corp...................... 106,100 3,143,213
Mallinckrodt, Inc........... 75,700 2,876,600
Tenet Healthcare+........... 189,800 6,287,125
Wellpoint Health
Networks+................. 5,100 215,475
------------
12,522,413
- -------------------------------------------------------
HOUSING RELATED--2.0%
Furniture Brands
International, Inc.+...... 234,300 4,803,150
Owens Corning Fiberglass
Corp...................... 89,300 3,047,363
Triangle Pacific Corp.+..... 110,200 3,733,025
------------
11,583,538
- -------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

22
<PAGE> 71

FINANCIAL STATEMENTS OF VCA-10

STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1997--CONTINUED

<TABLE>
<CAPTION>
COMMON STOCK VALUE
INVESTMENTS SHARES [NOTE 2A]
<S> <C> <C>
- -------------------------------------------------------

<CAPTION>
<S> <C> <C>
INSURANCE--8.3%
Allied Group, Inc........... 163,950 $ 4,693,069
Lincoln National Corp....... 37,100 2,898,437
Loews Corp.................. 29,000 3,077,625
MMI Companies, Inc.......... 230,820 5,799,342
NAC Re Corp................. 191,800 9,362,238
Reinsurance Group of
America................... 121,950 5,190,497
Safeco Corp.+............... 62,900 3,066,375
Trenwick Group, Inc......... 180,150 6,778,144
W.R. Berkley Corp........... 181,500 7,963,312
------------
48,829,039
- -------------------------------------------------------
LEISURE--1.3%
Servico, Inc.+.............. 234,400 3,955,500
Sonic Corp.+................ 129,200 3,633,750
------------
7,589,250
- -------------------------------------------------------
MACHINERY--5.5%
Allied Products Corp........ 247,500 5,940,000
Applied Power Co. (Class "A"
Stock).................... 81,800 5,644,200
Columbus McKinnon Corp...... 151,600 3,676,300
Denison International PLC-
ADR+ (United Kingdom)..... 98,800 1,704,300
Hardinge, Inc............... 131,400 4,894,650
Harnischfeger Industries.... 200,600 7,083,688
Ingersoll-Rand Co.+......... 83,600 3,385,800
------------
32,328,938
- -------------------------------------------------------
MEDIA--8.9%
Century Communications Corp.
(Class "A" Stock)......... 697,700 6,802,575
Comcast Corp. (Class "A"
Stock).................... 128,000 4,080,000
Comcast Corp. (Class "A"
Stock) Special............ 207,295 6,542,748
Cox Communication, Inc.
(Class "A" Stock)+........ 108,213 4,335,283
Harcourt General, Inc....... 83,100 4,549,725
Tele-Communications, Inc.
Liberty Media Group
(Series A)+............... 165,500 5,999,375
Time Warner, Inc............ 87,800 5,443,600
U.S. West Media Group+...... 351,700 10,155,338
Viacom, Inc. (Class "B"
Stock)+................... 105,800 4,384,088
------------
52,292,732
- -------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- -------------------------------------------------------
COMMON STOCK VALUE
INVESTMENTS SHARES [NOTE 2A]
<S> <C> <C>
METALS--3.9%
The Carbide/Graphite
Group+.................... 326,500 $ 11,019,375
Cleveland-Cliffs, Inc.+..... 65,000 2,977,812
Reliance Steel & Aluminum... 140,000 4,165,000
Ucar International, Inc.+... 115,800 4,624,763
------------
22,786,950
- -------------------------------------------------------
MISCELLANEOUS-INDUSTRIAL--11.1%
Clarcor, Inc................ 148,300 4,393,388
Coltec Industries, Inc.+.... 209,600 4,860,100
Crane Co.................... 99,400 4,311,475
Flowserve Corp.............. 166,491 4,651,342
Global Industrial
Technologies, Inc.+....... 343,300 5,814,644
Harsco Corp................. 80,400 3,467,250
Idex Corp................... 79,500 2,772,563
Mark IV Industries, Inc..... 215,110 4,705,531
Pentair, Inc................ 89,600 3,220,000
PPG Industries, Inc......... 83,800 4,787,075
Regal Beloit Corp........... 128,700 3,804,694
United Dominion
Industries................ 290,300 7,348,219
Varian Associates, Inc...... 61,700 3,119,706
Wolverine Tube, Inc.+....... 252,900 7,839,900
------------
65,095,887
- -------------------------------------------------------
PAPER PRODUCTS--1.3%
Boise Cascade Corp.......... 77,800 2,353,450
Georgia Pacific Corp. (GP
Group)+................... 5,000 303,750
Georgia Pacific Corp.
(Timber Group)+........... 5,000 113,437
International Paper Co...... 66,300 2,859,187
Louisiana-Pacific Corp...... 110,000 2,090,000
------------
7,719,824
- -------------------------------------------------------
RAILROADS--3.7%
Burlington Northern Santa
Fe........................ 80,000 7,435,000
Greenbrier Companies,
Inc....................... 170,100 2,944,856
Illinois Central Corp....... 133,000 4,530,312
Union Pacific Corp.......... 46,400 2,897,100
Varlen Corp................. 151,578 3,716,026
------------
21,523,294
- -------------------------------------------------------
REGIONAL BANKS--3.4%
Banc One Corp............... 51,500 2,797,094
First Chicago NBD Corp...... 62,772 5,241,462
First Commerce Corp......... 4,700 316,075
Norwest Corp................ 224,000 8,652,000
PNC Bank Corp............... 51,000 2,910,187
------------
19,916,818
- -------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

23
<PAGE> 72

FINANCIAL STATEMENTS OF VCA-10

STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1997--CONTINUED

<TABLE>
<CAPTION>
COMMON STOCK VALUE
INVESTMENTS SHARES [NOTE 2A]
<S> <C> <C>
- -------------------------------------------------------

<CAPTION>
<S> <C> <C>
RETAIL--3.8%
BJ's Wholesale Club,
Inc.+..................... 99,900 $ 3,134,362
Food Lion, Inc. (Class "A"
Stock).................... 291,300 2,457,844
Food Lion, Inc. (Class "B"
Stock).................... 97,300 802,725
Haverty Furniture, Inc...... 475,000 6,412,500
Limited, Inc................ 155,700 3,970,350
Officemax, Inc.+............ 152,100 2,167,425
Toys 'R' Us+................ 113,000 3,552,437
------------
22,497,643
- -------------------------------------------------------
SPECIALTY CHEMICALS--3.4%
Cambrex Corp................ 104,600 4,811,600
Ferro Corp.................. 180,450 4,387,191
French Fragrances, Inc.+.... 300,000 2,737,500
Great Lakes Chemical Corp... 59,600 2,674,550
Lilly Industries, Inc....... 68,700 1,416,937
OM Group, Inc............... 110,000 4,028,750
------------
20,056,528
- -------------------------------------------------------
TRUCKING/SHIPPING--0.8%
Interpool, Inc.............. 146,200 2,165,588
Pittston Burlington Group... 91,500 2,401,875
------------
4,567,463
- -------------------------------------------------------
TOTAL COMMON STOCKS INVESTMENTS--95.4%
(Cost: $411,629,035)...... $560,385,702
- -------------------------------------------------------
PRINCIPAL VALUE
SHORT-TERM INVESTMENT--4.5% AMOUNT [NOTE 2A]
- -------------------------------------------------------
Repurchase Agreement
J.P. Morgan Securities,
Inc., 5.74%
12/31/97-01/02/98, Amount
Due- $26,165,341
(collateralized by
$26,748,475 U.S. Treasury
Bonds, 11.625%, Due
11/15/02) (Cost
$26,157,000).............. $26,157 $ 26,157,000
- -------------------------------------------------------
TOTAL INVESTMENTS--99.9%
(Cost $437,786,035)....... $586,542,702
- -------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES
Cash................................... 987
Dividends and Interest Receivable...... 531,541
Receivable for Investments Sold........ 3,090,108
Payable for Pending Capital
Transaction.......................... (890,928)
Payable for Investments Purchased...... (2,032,164)
- -------------------------------------------------------
TOTAL OTHER ASSETS
LESS LIABILITIES--0.1%................. 699,544
- -------------------------------------------------------
NET ASSETS--100%............ $587,242,246
- -------------------------------------------------------
NET ASSETS, REPRESENTING:
Equity of Participants
83,261,331 Accumulation
Units at an Accumulation
Unit Value of $7.0127..... $583,886,236
Equity of Prudential
Insurance Company of
America................... 3,356,010
- -------------------------------------------------------
$587,242,246
- -------------------------------------------------------
</TABLE>

The following abbreviations are used in portfolio descriptions:

<TABLE>
<S> <C> <C>
ADR -- American Depository Receipts
PLC -- Public Limited Company
+ Non-income Producing.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

24
<PAGE> 73

FINANCIAL STATEMENTS OF VCA-10

STATEMENT OF OPERATIONS

<CAPTION>
<S> <C>
INVESTMENT INCOME [NOTE 2B]
Dividends................................................. $ 5,466,987
Interest.................................................. 1,209,153
- -------------------------------------------------------------------------------
TOTAL INCOME................................................ 6,676,140
EXPENSES [NOTE 3]
Fees Charged to Participants for Investment Management
Fee.................................................... 1,347,076
Fees Charged to Participants for Administrative
Expenses............................................... 4,041,227
- -------------------------------------------------------------------------------
TOTAL EXPENSES.............................................. 5,388,303
INVESTMENT INCOME--NET...................................... 1,287,837
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--NET [NOTE 2B]
Realized Gain on Investments--Net......................... 112,053,314
Increase in Unrealized Appreciation on Investments--Net... 33,896,685
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS..................................... 145,949,999
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $147,237,836
- -------------------------------------------------------------------------------
</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS

<CAPTION>
<S> <C> <C>
OPERATIONS
Investment Income--Net.................................... $ 1,287,837 $ 1,676,477
Realized Gain on Investments--Net......................... 112,053,314 44,992,957
Increase In Unrealized Appreciation on Investments--Net... 33,896,685 51,253,048
- ---------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ 147,237,836 97,922,482
- ---------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Purchase Payments and Transfers In........................ 130,555,810 99,698,241
Withdrawals and Transfers Out............................. (181,876,818) (54,131,908)
Annual Account Charges Deducted from Participants'
Accounts [Note 3b]..................................... (125,689) (81,929)
Deferred Sales Charge [Note 3c]........................... (18,599) (13,057)
- ---------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
CAPITAL TRANSACTIONS...................................... (51,465,296) 45,471,347
- ---------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM SURPLUS
TRANSFERS [NOTE 6]........................................ (32,895) (980,047)
- ---------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS................................ 95,739,645 142,413,782
NET ASSETS
Beginning of Year......................................... 491,502,601 349,088,819
- ---------------------------------------------------------------------------------------------------
End of Year............................................... $587,242,246 $491,502,601
- ---------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

25
<PAGE> 74

NOTES TO FINANCIAL STATEMENTS OF VCA-10

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

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). Its investments are composed primarily of
common stocks. All contractual and other obligations arising under
contracts participating in VCA-10 are general corporate obligations
of Prudential, although Participants' payments from the Account will
depend upon the investment experience of the Account.

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 exchanges 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.

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 ex-
dividend 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.

26
<PAGE> 75

NOTES TO FINANCIAL STATEMENTS OF VCA-10--(CONTINUED)

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

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.

C. A deferred sales charge is imposed upon that portion of certain
withdrawals which represents a return of contributions. The
charge is designed to compensate Prudential for sales and other
marketing expenses. The maximum deferred sales charge is 7% on
contributions withdrawn from an account during the first year of
participation. After the first year of participation, the maximum
deferred sales charge declines by 1% in each subsequent year
until it reaches 0% after seven years. No deferred sales charge
is imposed upon contributions withdrawn for any reason after
seven years of participation in the Program. In addition, no
deferred sales 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 deferred sales charge is imposed upon contributions
withdrawn due to resignation or retirement by the Participant or
termination of the Participant by the Contract-holder.
Contributions transferred among VCA-10, VCA-11, the Subaccounts
of VCA-24, a companion contract, and the fixed rate option of the
nonqualified combination contract are considered to be
withdrawals from the Account or Subaccount from which the
transfer is made, but no deferred sales charge is imposed upon
them. They will however, be considered as contributions to the
receiving Account or Subaccount for purposes of calculating any
deferred sales charge imposed upon their subsequent withdrawal
from it.

NOTE 4: PURCHASES AND SALES OF PORTFOLIO SECURITIES
For the year ended December 31, 1997, the aggregate cost of
purchases and the proceeds from sales of securities, excluding
short-term investments, were $254,241,763 and $294,770,635
respectively.

27
<PAGE> 76

NOTES TO FINANCIAL STATEMENTS OF VCA-10--(CONTINUED)

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

NOTE 5: UNIT TRANSACTIONS
The number of Accumulation Units issued and redeemed for the year
ended December 31, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------
<S> <C> <C>
Units issued........................ 22,249,667 21,434,824
- ---------------------------------------------------------------
Units redeemed...................... 30,520,771 11,719,339
- ---------------------------------------------------------------
</TABLE>

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 year ended December 31, 1997, Prudential Securities
Incorporated, an indirect, wholly owned subsidiary of Prudential,
earned $27,462 in brokerage commissions from portfolio transactions
executed on behalf of VCA-10. During the year ended December 31,
1997, Prudential has advised the Account that it received $18,189 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 year ended December 31, 1997, $2,202,462 in participant
loans were withdrawn from VCA-10 and $1,507,302 of principal and
interest was repaid to VCA-10. For the year ended December 31, 1996,
$1,531,937 in participant loans was withdrawn from VCA-10 and
$327,958 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.

28
<PAGE> 77

REPORT OF INDEPENDENT ACCOUNTANTS

To the Committee and Participants

of The Prudential Variable Contract Account-10

of The Prudential Insurance Company of America

In our opinion, the accompanying statement of net assets, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Prudential Variable Contract Account -- 10 of The Prudential Insurance
Company of America (the "Account") at December 31, 1997, the results of its
operations for the year then ended and the changes in its net assets and the
financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the 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 securities at
December 31, 1997 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
The financial highlights for each of the three years in the period ended
December 31, 1995 were audited by other independent accountants whose report
thereon dated February 15, 1996 expressed an unqualified opinion on those
financial highlights.

Price Waterhouse LLP

New York, New York

February 18, 1998

29
<PAGE> 78

FINANCIAL HIGHLIGHTS FOR VCA-11

INCOME AND CAPITAL CHANGES ACCUMULATION PER UNIT*
(FOR A UNIT OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------

<CAPTION>
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME.................................... $ .1353 $ .1281 $ .1313 $ .0912 $ .0682
- ------------------------------------------------------------------------------------------------------
EXPENSES
For investment management fee...................... .0059 .0056 .0054 .0052 .0050
For administrative expenses not covered by the
annual account charge........................... .0178 .0170 .0160 .0154 .0150
- ------------------------------------------------------------------------------------------------------
NET INCREASE IN UNIT VALUE........................... .1116 .1055 .1099 .0706 .0482
- ------------------------------------------------------------------------------------------------------
UNIT VALUE
Beginning of year.................................. 2.3210 2.2155 2.1056 2.0350 1.9868
- ------------------------------------------------------------------------------------------------------
End of year........................................ $2.4326 $2.3210 $2.2155 $2.1056 $2.0350
- ------------------------------------------------------------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS**............ .98% .98% .99% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS**....................................... 4.73% 4.57% 5.08% 3.42% 2.40%
- ------------------------------------------------------------------------------------------------------
NUMBER OF UNITS OUTSTANDING
For Participants at end of year (000's omitted).... 35,757 38,315 34,136 35,448 29,421
- ------------------------------------------------------------------------------------------------------
</TABLE>

* Calculated by accumulating the actual per unit amounts daily.

** These calculations exclude Prudential's equity in VCA-11.

SEE NOTES TO FINANCIAL STATEMENTS

30
<PAGE> 79

FINANCIAL STATEMENTS OF VCA-11

STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1997

<TABLE>
<CAPTION>
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER--38.3%
American Home Products Corp.,
5.78% Due 2/26/98.......... $ 851,000 $ 843,212
Aon Corp., 5.79%
Due 3/30/98................ 1,100,000 1,078,947
Associates Corp. of North
America., 5.87%
Due 1/23/98................ 3,000,000 2,980,923
Barton Capital Corp., 5.95%
Due 2/9/98................. 1,000,000 993,390
Corestates Capital Corp.,
5.93% Due 8/28/98#......... 1,000,000 1,000,000
Duke Capital Corp., 5.90%
Due 1/23/98................ 1,000,000 992,953
General Signal Corp., 5.80%
Due 1/26/98................ 420,000 418,241
Johnson Controls, 5.90%
Due 2/27/98................ 1,000,000 989,019
Liquid Asset Backed
Securities Trust Series,
5.97%#
Due 12/22/98............... 1,000,000 1,000,000
Mont Blanc Capital Corp,
5.88% Due 1/28/98.......... 1,000,000 992,160
Morgan Stanley Dean Witter
Discover & Co., 6.07%
Due 11/16/98#.............. 2,000,000 2,000,000
Old Line Funding Corp., 5.88%
Due 1/30/98................ 1,000,000 991,351
Safeco Corp, 5.70%
Due 1/23/98................ 3,000,000 2,963,425
Short Term Card Account
Trust, 6.00%# Due
1/15/98.................... 4,000,000 4,000,000
Short Term Repackaged Asset
Trust, 6.00%#
Due 12/15/98............... 1,000,000 1,000,000
Smith Barney Shearson Inc.,
5.62% Due 1/21/98.......... 2,000,000 1,975,959
SMM Trust Notes, 6.00%#
Due 12/14/98............... 2,000,000 2,000,000
Special Purpose Account
Receivable Coop Corp.,
5.82% Due 2/27/98.......... 2,000,000 1,975,103
Strategic Money Market Trust,
5.91%# Due 12/16/98........ 1,000,000 1,000,000
Travelers Property Casualty
Co., 6.15% Due 1/20/98..... 1,000,000 995,217
WCP Funding, Inc., 5.80%
Due 2/2/98................. 1,000,000 989,367
Bank of Montreal, 5.68%
Due 2/17/98................ 3,000,000 2,957,872
----------- -----------
34,137,139
- ----------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
<S> <C> <C>
OTHER CORPORATE DEBT--U.S.--31.9%
(MEDIUM TERM NOTES, CORPORATE BONDS)
American General Finance,
7.25% Corporate Bond,
Due 3/1/98................. $ 3,000,000 $ 3,006,849
Associates Corp. of North
America, 8.38% Corporate
Bond, Due 1/15/98.......... 500,000 500,501
Associates Corp. of North
America, 8.80% Corporate
Bond, Due 8/1/98........... 470,000 477,350
BellSouth Telecommunications
Inc. 9.25% Corporate Bond,
Due 1/15/98................ 150,000 150,187
Beneficial Corp., 9.13%
Medium Term Note,
Due 2/15/98................ 2,000,000 2,007,016
Beneficial Corp., 9.13%
Corporate Bond,
Due 2/15/98................ 765,000 768,009
Ford Motor Credit, 5.85%
Due 3/26/98................ 500,000 499,755
Ford Motor Credit, 9.00% Due
3/25/98.................... 525,000 528,726
General Electric Capital
Corp., 13.50% Medium Term
Note, Due 1/20/98.......... 4,000,000 4,015,068
General Motors Acceptance
Corp., 7.30% Medium Term
Note, Due 2/2/98........... 440,000 440,485
General Motors Acceptance
Corp., 6.90% Medium Term
Note, Due 2/19/98.......... 515,000 515,637
General Motors Acceptance
Corp., 5.86% Medium Term
Note, Due 2/23/98.......... 1,250,000 1,249,922
General Motors Acceptance
Corp., 6.25% Medium Term
Note, Due 5/15/98.......... 2,600,000 2,599,687
Goldman Sachs Group LP 6.00%
Medium Term Note, Due
12/17/98#.................. 3,800,000 3,800,000
Household Finance Corp. 5.90%
Medium Term Note, Due
1/13/98#................... 1,250,000 1,250,069
Merrill Lynch & Co., 9.00%
Corporate Bond,
Due 5/1/98................. 1,000,000 1,008,896
Merrill Lynch & Co., 5.96%
Medium Term Note,
Due 10/8/98#............... 3,000,000 2,999,774
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

31
<PAGE> 80

FINANCIAL STATEMENTS OF VCA-11

STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1997--(CONTINUED)

<TABLE>
<CAPTION>
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
- ----------------------------------------------------------
<S> <C> <C>
OTHER CORPORATE DEBT--U.S.--CONTINUED
Morgan Stanley Dean Witter
Discover & Co., 6.34%
Medium Term Note,
Due 3/9/98#................ $ 550,000 $ 550,338
NBD Bank 5.00% Bank Note, Due
1/30/98.................... 1,000,000 999,168
NationBank Corp., 6.63%
Corporate Bond,
Due 1/15/98................ 100,000 100,028
Pitney Bowes Credit Corp.,
6.25% Corporate Bond,
Due 6/1/98................. 1,000,000 1,000,925
----------- -----------
28,468,390
- ----------------------------------------------------------
OTHER BANK RELATED INSTRUMENTS--U.S.--6.1%
(BANK NOTES)
American Express Centurion
Bank, 5.57% Bank Note,
Due 8/21/98#............... 1,500,000 1,500,942
5.94% Bank Note,
Due 3/3/98#.............. 1,000,000 1,000,026
FCC National Bank, 5.85% Bank
Note, Due 7/2/98#.......... 975,000 974,622
US Bank, NA., 5.86% Bank
Note, Due 12/4/98#......... 2,000,000 1,999,091
----------- -----------
5,474,681
- ----------------------------------------------------------
CERTIFICATES OF DEPOSIT -- FOREIGN-- 5.4%
Canadian Imperial Bank of
Commerce,
Due 6/29/98, 5.95%......... 300,000 299,901
Due 10/6/98, 5.79%......... 2,500,000 2,496,949
Royal Bank of Canada, 6.16%
Due 4/15/98................ 2,000,000 2,000,276
----------- -----------
4,797,126
- ----------------------------------------------------------
COMMERCIAL PAPER--YANKEE--2.2%
ING America Insurance
Holdings Inc., 5.74%
Due 4/3/98................. 1,000,000 985,012
Svenska Handelsbanken, Inc.,
5.72% Due 3/16/98.......... 1,000,000 985,700
----------- -----------
1,970,712
- ----------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------
SHORT-TERM PRINCIPAL
INVESTMENTS [NOTE 2] AMOUNT VALUE
<S> <C> <C>
CERTIFICATE OF DEPOSIT--YANKEE--13.5%
Abbey National Treasury
Services, 5.81%
Due 3/3/98................. $ 2,000,000 $ 2,000,000
Credit Agricole Indosuez,
5.95% Due 10/21/98......... 1,000,000 999,617
ING Bank, 5.81% Due 3/5/98... 2,000,000 1,999,917
Landesbank Hessen --
Thuringren Giroz, 5.94%
Due 6/19/98................ 1,000,000 999,735
Morgan Guaranty Trust Co.,
5.79% Due 3/16/98.......... 1,000,000 1,000,053
National Westminster Bank
PLC., 5.80% Due 1/7/98..... 1,000,000 1,000,003
Societe Generale, 5.77%
Due 1/9/98................. 2,000,000 1,999,985
Swiss Bank Corp., 5.77% Due
1/30/98.................... 2,000,000 1,999,752
----------- -----------
11,999,062
- ----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS--97.4%
(Cost: $86,847,110)........ 86,847,110
- ----------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES
Cash....................................... 463
Receivable for Pending Capital
Transaction.............................. 1,096,094
Interest Receivable........................ 1,227,046
- ----------------------------------------------------------
TOTAL OTHER ASSETS, LESS
LIABILITIES--2.6%.......................... 2,323,603
- ----------------------------------------------------------
NET ASSETS--(100%)......................... 89,170,713
- ----------------------------------------------------------
NET ASSETS, REPRESENTING:
Equity of Participants
35,756,915 Accumulation
Units at an Accumulation
Unit Value of $2.4326...... 86,981,127
Equity of Prudential
Insurance Company of
America.................... 2,189,586
- ----------------------------------------------------------
$89,170,713
- ----------------------------------------------------------
</TABLE>

# Indicates a variable rate security. Rate shown is rate in effect at December
31, 1997.

SEE NOTES TO FINANCIAL STATEMENTS

32
<PAGE> 81

FINANCIAL STATEMENTS OF VCA-11

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
<S> <C>
- -------------------------------------------------------------------------------
INVESTMENT INCOME [NOTE 2]
Interest.................................................. $5,208,873
- -------------------------------------------------------------------------------
EXPENSES [NOTE 3]
Fees Charged to Participants for Investment Management
Services............................................... 223,246
Fees Charged to Participants for Administrative
Expenses............................................... 669,737
- -------------------------------------------------------------------------------
TOTAL EXPENSES.............................................. 892,983
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME AND NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................. $4,315,890
- -------------------------------------------------------------------------------
</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 DECEMBER 31, 1996
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 4,315,890 $ 3,872,593
- ---------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Purchase Payments and Transfers In [Note 6 and 7]......... 151,277,326 97,217,613
Withdrawals and Transfers Out [Note 6 and 7].............. (157,195,054) (87,648,372)
Annual Account Charges Deducted from Participants'
Accounts [Note 4]...................................... (58,601) (40,724)
Deferred Sales Charge [Note 5]............................ (8,370) (8,659)
- ---------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM CAPITAL
TRANSACTIONS.............................................. (5,984,699) 9,519,858
- ---------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
[NOTE 8].................................................. -- (89,828)
- ---------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS................................ (1,668,809) 13,302,623
NET ASSETS
Beginning of Year......................................... 90,839,522 77,536,899
- ---------------------------------------------------------------------------------------------------
End of Year............................................... $ 89,170,713 $ 90,839,522
- ---------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

33
<PAGE> 82

NOTES TO FINANCIAL STATEMENTS OF VCA-11

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

NOTE 1: GENERAL
The Prudential Variable Contract Account-11 (VCA-11 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-11
has been designed for use by employers (Contract-holders) in making
retirement arrangements on behalf of their employees (Participants).
Its investments are primarily composed of short-term securities. All
contractual and other obligations arising under contracts
participating in VCA-11 (the "Contracts") are general corporate
obligations of Prudential, although Participants' payments from the
Account will depend upon the investment experience of the Account.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. VALUATION OF SHORT-TERM INVESTMENTS
Pursuant to an exemptive order from the Securities and Exchange
Commission, securities having a remaining maturity of one year 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 accretion of discount or amortization of
premium to maturity. The rate displayed is the effective yield from
the date of purchase to the date of maturity.

B. INCOME RECOGNITION
Security transactions are recorded on trade date. Interest income is
accrued daily. Income on investments is allocated to the
Participants and Prudential on a daily basis in proportion to their
respective equities in VCA-11. Expenses are recorded on the accrual
basis which may require the use of certain estimates by management.

C. TAXES
The operations of VCA-11 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-11 to the extent the earnings are
credited under the contracts. As a result, the Unit Value of VCA-11
has not been reduced by federal income taxes.

NOTE 3: EXPENSES
Prudential acts as investment manager for VCA-11 under an agreement
for Investment Management Services. A daily charge, at an effective
annual rate of 1.00% of the current value of the Participants'
equity in VCA-11, 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.

NOTE 4: ANNUAL ACCOUNT CHARGE
An annual account charge of not more than $30 annually 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.

NOTE 5: DEFERRED SALES CHARGE
A deferred sales charge is imposed upon that portion of certain
withdrawals which represents a return of contributions. The charge
is designed to compensate Prudential for sales and other marketing
expenses. The maximum deferred sales charge is 7% on contributions
withdrawn from an account during the first year of participation.
After the first year of participation, the maximum deferred sales
charge declines by 1% in each subsequent year until it reaches 0%
after seven

34
<PAGE> 83

NOTES TO FINANCIAL STATEMENTS OF VCA-11--(CONTINUED)

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

years. No deferred sales charge is imposed upon contributions
withdrawn for any reason after seven years of participation in the
Program. In addition, no deferred sales 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 deferred sales charge is imposed upon
contributions withdrawn due to resignation or retirement by the
Participant or termination of the Participant by the
Contract-holder. Contributions transferred among VCA-10, VCA-11, the
Subaccounts of VCA-24, a companion contract, and the fixed rate
option of the nonqualified combination contract are considered to be
withdrawals from the Account or Subaccount from which the transfer
is made, but no deferred sales charge is imposed upon them. They
will, however, be considered as contributions to the receiving
Account or Subaccount for purposes of calculating any deferred sales
charge imposed upon their subsequent withdrawal from it.

NOTE 6: UNIT TRANSACTIONS
The number of Units issued and redeemed for the years ended December
31, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
- ---------------------------------------------------------------
Units issued........................ 63,669,685 42,970,959
- ---------------------------------------------------------------
Units redeemed...................... 66,228,235 38,791,430
- ---------------------------------------------------------------
</TABLE>

NOTE 7: PARTICIPANT LOANS
Loans are considered to be withdrawals from the Account from which
the loan amount was deducted, though they are not considered a
withdrawal from the Program. Therefore, 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-11 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 year ended December 31, 1997, $553,894 in participant loans
was withdrawn from VCA-11 and $330,318 of principal and interest was
repaid to VCA-11. For the year ended December 31, 1996, $648,000 in
participant loans were withdrawn from VCA-11 and $105,290 of
principal and interest was repaid. Loan repayments are invested in
Participant's account(s) as chosen by the Participant, which may not
necessarily be VCA-11. The initial loan proceeds which are being
repaid may not necessarily have originated solely from VCA-11.
During the year ended December 31, 1997, Prudential has advised the
Account that it received $5,456 in loan origination fees.

NOTE 8: NET DECREASE IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The decrease in net assets from surplus for the year ended December
31, 1996 represents the net withdrawals from the Equity of
Prudential to VCA-11.

35
<PAGE> 84

REPORT OF INDEPENDENT ACCOUNTANTS

To the Committee and Participants

of The Prudential Variable Contract Account-11

of The Prudential Insurance Company of America

In our opinion, the accompanying statement of net assets, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Prudential Variable Contract Account-11 of The Prudential Insurance Company
of America (the "Account") at December 31, 1997, the results of its operations
for the year then ended and the changes in its net assets and the financial
highlights for each of the two years in the period then ended, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the 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 securities at December 31, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above. The financial highlights for each of the three years in the
period ended December 31, 1995 were audited by other independent accountants
whose report thereon dated February 15, 1996 expressed an unqualified opinion on
those financial highlights.

PRICE WATERHOUSE LLP

New York, New York

February 18, 1998

36
<PAGE> 85

FINANCIAL STATEMENTS OF VCA-24

STATEMENTS OF NET ASSETS

DECEMBER 31, 1997

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------SUBACCOUNTS--------------------------------------------
DIVERSIFIED FLEXIBLE CONSERVATIVE GOVERNMENT
EQUITY BOND MANAGED BALANCED STOCK INDEX GLOBAL INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment in Shares of The
Prudential Series Fund,
Inc. Portfolios at Net
Asset Value [Note 2]...... $550,114,101 $43,042,926 $187,112,224 $129,204,878 $376,834,345 $71,546,428 $27,983,073
Receivable for Pending
Capital Transactions...... 796,244 107,678 346,945 327,471 608,232 (637,853) 86,485
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS.................. $550,910,345 $43,150,604 $187,459,169 $129,532,349 $377,442,577 $70,908,575 $28,069,558
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS REPRESENTING:
Equity of Participants.... $549,996,263 $42,824,536 $186,796,529 $129,089,519 $377,366,205 $70,700,120 $27,709,085
Equity of The Prudential
Insurance Company of
America................. 914,082 326,068 662,640 442,830 76,372 208,455 360,473
- ---------------------------------------------------------------------------------------------------------------------------------
$550,910,345 $43,150,604 $187,459,169 $129,532,349 $377,442,577 $70,908,575 $28,069,558
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

STATEMENTS OF OPERATIONS

DECEMBER 31, 1997

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------SUBACCOUNTS------------------------------------------
DIVERSIFIED FLEXIBLE CONSERVATIVE GOVERNMENT
EQUITY BOND MANAGED BALANCED STOCK INDEX GLOBAL INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Ordinary Dividend
Distributions............... $ 11,498,123 $3,021,853 $ 5,183,020 $ 5,715,818 $4,912,091 $ 870,194 $1,697,694
Expense [Note 3] Fees Charged
to Participants for
Administrative Purposes..... 3,667,562 312,664 1,261,127 913,637 2,492,751 530,927 190,627
- ---------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME........... 7,830,561 2,709,189 3,921,893 4,802,181 2,419,240 339,267 1,507,067
- ---------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAINS/(LOSSES) ON INVESTMENTS
Capital Gains Distributions
Received.................... 29,253,459 497,453 27,843,079 13,853,234 10,420,525 3,395,526 --
Net Realized Gain/(loss) on
Investments................. 8,178,090 406,767 867,972 891,507 29,340,589 4,752,834 68,047
Net Increase/(Decrease) in
Unrealized Appreciation on
Investments................. 56,904,165 (487,274) (6,558,751) (5,133,944) 48,403,737 (4,891,363) 619,218
- ---------------------------------------------------------------------------------------------------------------------------------
NET GAIN/(LOSS) ON
INVESTMENTS................... 94,335,714 (416,946) 22,152,300 9,610,797 88,164,851 3,256,995 687,265
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $102,166,275 $3,126,135 $26,074,193 $14,412,978 $90,584,091 $3,596,262 $2,194,332
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

37
<PAGE> 86

FINANCIAL STATEMENTS OF VCA-24

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
- --------------------------------- ------------
DIVERSIFIED FLEXIBLE
EQUITY BOND MANAGED
--------------------------- --------------------------- ---------------------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
FOR THE YEAR ENDED 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $102,166,275 $ 60,358,664 $ 3,126,135 $ 1,546,819 $ 26,074,193 $ 15,969,834
- ------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT TRANSACTIONS
Purchase Payments and
Transfers In [Note]......... 121,805,148 107,762,703 18,584,881 16,922,821 41,634,688 35,973,030
Withdrawals and Transfers Out
[Note 8].................... (91,090,400) (67,865,025) (21,015,014) (10,193,617) (29,141,883) (16,883,257)
Annual Account Charges
Deducted From Participants'
Accumulation Accounts [Note
4].......................... (117,988) (72,051) (10,410) (6,607) (43,728) (22,032)
Deferred Sales Charges [Note
5].......................... (23,487) (41,536) (4,947) (1,904) (16,791) (13,233)
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM ACCUMULATION
UNIT TRANSACTIONS............. 30,573,273 39,784,091 (2,445,490) 6,720,693 12,432,286 19,054,508
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE/ (DECREASE) IN NET
ASSETS FROM SURPLUS TRANSFERS
[NOTE 9]...................... 466,278 38,568 (428) 82,046 197,552 49,378
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE/ (DECREASE) IN
NET ASSETS.................... 133,205,826 100,181,323 680,217 8,349,558 38,704,031 35,073,720
NET ASSETS
Beginning of Year............. 417,704,519 317,523,196 42,470,387 34,120,829 148,755,108 113,681,388
- ------------------------------------------------------------------------------------------------------------------------
End of Year................... $550,910,345 $417,704,519 $ 43,150,604 $ 42,470,387 $187,459,169 $148,755,108
- ------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ------------------------------- ------------
CONSERVATIVE
BALANCED
---------------------------
DEC. 31, DEC. 31,
FOR THE YEAR ENDED 1997 1996
- -------------------------------
<S> <C> <C>
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ 14,412,978 11,596,557
- -------------------------------
ACCUMULATION UNIT TRANSACTIONS
Purchase Payments and
Transfers In [Note]......... 25,368,814 23,331,996
Withdrawals and Transfers Out
[Note 8].................... (22,504,515) (16,708,605)
Annual Account Charges
Deducted From Participants'
Accumulation Accounts [Note
4].......................... (40,348) (22,848)
Deferred Sales Charges [Note
5].......................... (16,349) (18,558)
- -------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM ACCUMULATION
UNIT TRANSACTIONS............. 2,807,602 6,581,985
- -------------------------------
NET INCREASE/ (DECREASE) IN NET
ASSETS FROM SURPLUS TRANSFERS
[NOTE 9]...................... (18,742) 105,299
- -------------------------------
TOTAL INCREASE/ (DECREASE) IN
NET ASSETS.................... 7,201,838 18,283,841
NET ASSETS
Beginning of Year............. 112,330,511 94,046,670
- -------------------------------
End of Year................... $129,532,349 $112,330,511
- -------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

38
<PAGE> 87

FINANCIAL STATEMENTS OF VCA-24

STATEMENTS OF CHANGES IN NET ASSETS--(CONTINUED)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------SUBACCOUNTS-----------------------------------------
STOCK GOVERNMENT
INDEX GLOBAL INCOME
----------------------------- ----------------------------- -----------------------------
FOR THE YEAR ENDED DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....... $ 90,584,091 $ 40,738,078 $ 3,596,262 $ 8,503,25 $ 2,194,332 $ 382,850
- ---------------------------------------------------------------------------------------------------------------------------------
ACCUMULATION UNIT TRANSACTIONS
Purchase Payments and Transfers
In [Note 728]................. 181,212,650 115,280,494 49,069,899 33,765,226 6,782,174 6,801,398
Withdrawals and Transfers Out
[Note 728].................... (162,976,223) (29,386,854) (41,635,174) (19,175,405) (7,674,707) (6,189,358)
Annual Account Charges Deducted
From Participants'
Accumulation Accounts [Note
4]............................ (68,031) (16,784) (8,545) (1,664) (5,815) (1,991)
Deferred Sales Charges [Note
5]............................ (21,400) (11,937) (7,118) (7,142) (3,428) (4,146)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM ACCUMULATION UNIT
TRANSACTIONS.................... 18,176,996 85,864,919 7,419,062 14,581,015 (895,961) 605,903
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET
ASSETS FROM SURPLUS TRANSFERS
[NOTE 9]........................ (45,282) 284,992 20,298 143,785 (5,618) 85,679
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE/(DECREASE) IN NET
ASSETS.......................... 108,715,805 126,887,989 11,035,622 23,228,051 1,292,753 1,074,432
NET ASSETS
Beginning of Year............... $268,726,772 141,838,783 59,872,953 36,644,902 26,776,805 25,702,373
- ---------------------------------------------------------------------------------------------------------------------------------
End of Year..................... $377,442,577 $268,726,772 $70,908,575 $59,872,953 $28,069,558 $26,776,805
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

39
<PAGE> 88

NOTES TO FINANCIAL STATEMENTS OF VCA-24

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

NOTE 1: GENERAL
The Prudential Variable Contract Account-24 (VCA-24 or the Account)
was established on April 29, 1987 by The Prudential Insurance
Company of America (Prudential) under the laws of the State of New
Jersey and is registered as a unit investment trust under the
Investment Company Act of 1940, as amended. VCA-24 has been designed
for use by employers (Contract-holders) in making retirement
arrangements on behalf of their employees (Participants).

The Account is comprised of seven Subaccounts. Each of the
Subaccounts invests in a corresponding portfolio of The Prudential
Series Fund, Inc. ("the Fund"). The Equity Subaccount invests in the
Equity Portfolio, the Diversified Bond Subaccount in the Diversified
Bond Portfolio, the Flexible Managed Subaccount in the Flexible
Managed Portfolio, the Conservative Balanced Subaccount in the
Conservative Balanced Portfolio, the Stock Index Subaccount in the
Stock Index Portfolio, the Global Subaccount in the Global
Portfolio, and the Government Income Subaccount in the Government
Income Portfolio. All contractual and other obligations arising
under contracts participating in VCA-24 (the "Contracts") 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 Series Fund are stated
at the net asset value of the respective portfolio.

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

Distributions Received--Dividend and capital gain distributions
received are reinvested in additional shares of the Series Fund and
are recorded on 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
VCA-24, and the aggregate cost of investments in such shares as of
December 31, 1997 are as follows:

<TABLE>
<CAPTION>
DIVERSIFIED FLEXIBLE CONSERVATIVE STOCK
EQUITY BOND MANAGED BALANCED INDEX GLOBAL
<S> <C> <C> <C> <C> <C> <C>
Number of Shares..... 17,706,154 3,905,236 10,828,072 8,630,794 12,469,882 3,991,771
NAV per Share........ $ 31.07 $ 11.02 $ 17.28 $ 14.97 $ 30.22 $ 17.92
Cost at 12-31-97..... $412,513,044 $42,460,616 $183,605,437 $127,337,216 $257,857,835 $64,720,667

<CAPTION>
GOVERNMENT
INCOME
<S> <C>
Number of Shares..... 2,428,483
NAV per Share........ $ 11.52
Cost at 12-31-97..... $27,074,860
</TABLE>

NOTE 3: EXPENSES
A daily charge at an effective annual rate of 0.75% of the Net Asset
Value of each Subaccount of VCA-24 is paid to Prudential for
administrative expenses not provided by the annual account charge.

NOTE 4: ANNUAL ACCOUNT CHARGE
An annual account charge 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 non-qualified combination
contract. If the Participant has no account under a fixed contract,
or if the amount under a fixed contract 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. The annual account charge will not
exceed $30 and is paid to Prudential.

40
<PAGE> 89

NOTES TO FINANCIAL STATEMENTS OF VCA-24--(CONTINUED)

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

NOTE 5: DEFERRED SALES CHARGE
A deferred sales charge is imposed upon the withdrawal of certain
purchase payments to compensate Prudential for sales and other
marketing expenses. The maximum deferred sales charge is 7% on
contributions withdrawn during the first year of participation.
After the first year of participation, the maximum deferred sales
charge declines by 1% in each subsequent year until it reaches 0%
after seven years. No deferred sales charge is imposed upon
contributions withdrawn for any reason after seven years of
participation in a Program. In addition, no deferred sales 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 deferred sales charge is
imposed upon contributions withdrawn due to resignation or
retirement by the Participant or termination of the Participant by
the Contract-holder. Contributions transferred among VCA-10, VCA-11,
the Subaccounts of VCA-24, the companion contract, and the fixed
rate option of the non-qualified combination contract are considered
to be withdrawals from the Account or Subaccount from which the
transfer is made, but no deferred sales charge is imposed upon them.
They will, however, be considered as contributions to the receiving
Account or Subaccount for purposes of calculating any deferred sales
charge imposed upon their subsequent withdrawal.

NOTE 6: TAXES
The operations of VCA-24 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-24 to the extent the earnings are
credited under the Contracts. As a result, the Unit Value of VCA-24
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 is as follows:

1997

<TABLE>
<CAPTION>
DIVERSIFIED FLEXIBLE CONSERVATIVE STOCK
EQUITY BOND MANAGED BALANCED INDEX GLOBAL
<S> <C> <C> <C> <C> <C> <C>
Units issued......... 34,271,390 8,670,060 15,321,216 10,666,326 47,348,967 25,888,774
Units redeemed....... 25,563,791 9,835,849 10,818,000 9,398,610 41,979,915 21,818,089

<CAPTION>
GOVERNMENT
INCOME
<S> <C>
Units issued......... 4,382,451
Units redeemed....... 5,046,046
</TABLE>

The number of units issued and redeemed during the year ended
December 31, 1995 is as follows:

1996

<TABLE>
<CAPTION>
DIVERSIFIED FLEXIBLE CONSERVATIVE STOCK
EQUITY BOND MANAGED BALANCED INDEX
<S> <C> <C> <C> <C> <C>
Units issued......... 38,166,239 8,526,394 15,805,415 11,333,358 38,820,747
Units redeemed....... 24,107,858 5,157,724 7,545,387 8,176,690 9,951,304

<CAPTION>
GOVERNMENT
GLOBAL INCOME
<S> <C> <C>
Units issued......... 20,934,314 4,744,681
Units redeemed....... 11,868,491 4,337,932
</TABLE>

NOTE 8: PARTICIPANT LOANS
Loans are considered to be withdrawals from the Subaccount 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 Subaccount for purposes of calculating any deferred sales
charge imposed upon any subsequent withdrawal. If the Participant
defaults on the loan by, for example, 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 each Subaccount of VCA-24 are
considered to be withdrawals of contributions until all of the
Participant's contributions to the Subaccount have been with-

41
<PAGE> 90

NOTES TO FINANCIAL STATEMENTS OF VCA-24--(CONTINUED)

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

drawn, transferred or borrowed. No deferred sales charge is imposed
upon withdrawals of any amount in excess of contributions.

For the year ended December 31, 1997, the amount of participant
loans that was withdrawn from the Subaccounts and the amount of
principal and interest that was repaid to the Subaccounts is as
follows:

1997

<TABLE>
<CAPTION>
DIVERSIFIED FLEXIBLE CONSERVATIVE STOCK
EQUITY BOND MANAGED BALANCED INDEX GLOBAL
<S> <C> <C> <C> <C> <C> <C>
Loans $2,257,704 $341,223 $1,199,224 $621,979 $1,840,620 $517,512
Repayments $1,331,530 $206,579 $ 677,861 $397,144 $1,105,869 $315,438

<CAPTION>
GOVERNMENT
INCOME
<S> <C>
Loans $224,852
Repayments $ 76,945
</TABLE>

For the year ended December 31, 1996, the amount of participant
loans that was withdrawn from the Subaccounts and the amount of
principal that was repaid to the Subaccounts was as follows:

1996

<TABLE>
<CAPTION>
DIVERSIFIED FLEXIBLE CONSERVATIVE STOCK
EQUITY BOND MANAGED BALANCED INDEX GLOBAL
<S> <C> <C> <C> <C> <C> <C>
Loans $1,610,377 $281,245 $1,024,086 $525,796 $907,097 $385,925
Repayments $ 984,613 $106,832 $ 462,771 $235,430 $503,734 $195,908

<CAPTION>
GOVERNMENT
INCOME
<S> <C>
Loans $133,569
Repayments $ 49,505
</TABLE>

Loan repayments are invested in Participant's account(s) as chosen
by the Participant, which may not necessarily be the Subaccount from
which the loan amount was deducted. The initial loan proceeds which
are being repaid may not necessarily have originated solely from the
Subaccounts of VCA-24.

NOTE 9: NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM SURPLUS
TRANSFERS
The increase (decrease) in net assets resulting from surplus
transfers represents the net contributions to the Equity of
Prudential to VCA-24. The decrease in net assets resulting from
surplus transfers represents the net withdrawals from the Equity of
Prudential from VCA-24.

NOTE 10: CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES FOR VCA-24 UNIT

EQUITY

<TABLE>
<CAPTION>
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Beginning of year (rounded)............................ $3.1487 $2.6769 $2.0541 $2.0136 $1.6646
End of year (rounded).................................. $3.8962 $3.1487 $2.6769 $2.0541 $2.0136
Accumulation Units Outstanding at end of year (000
omitted)............................................... 141,162 132,455 118,394 99,323 79,985
</TABLE>

DIVERSIFIED BOND

<TABLE>
<CAPTION>
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Beginning of year (rounded)............................ $2.0789 $2.0065 $1.6746 $1.7435 $1.5950
End of year (rounded).................................. $2.2404 $2.0789 $2.0065 $1.6746 $1.7435
Accumulation Units Outstanding at end of year (000
omitted)............................................... 19,114 20,280 16,898 14,575 14,481
</TABLE>

42
<PAGE> 91

NOTES TO FINANCIAL STATEMENTS OF VCA-24--(CONTINUED)

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

FLEXIBLE MANAGED

<TABLE>
<CAPTION>
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Beginning of year (rounded)............................ $2.4854 $2.2038 $1.7886 $1.8609 $1.6223
End of year (rounded).................................. $2.9103 $2.4854 $2.2038 $1.7886 $1.8609
Accumulation Units Outstanding at end of year (000
omitted)............................................... 64,184 59,681 51,419 44,729 36,035
</TABLE>

CONSERVATIVE BALANCED

<TABLE>
<CAPTION>
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Beginning of year (rounded)............................ $2.2364 $1.9993 $1.7175 $1.7473 $1.5691
End of year (rounded).................................. $2.5165 $2.2364 $1.9993 $1.7175 $1.7473
Accumulation Units Outstanding at end of year (000
omitted)............................................... 51,297 50,029 46,873 43,594 36,932
</TABLE>

STOCK INDEX

<TABLE>
<CAPTION>
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Beginning of year (rounded)............................ $3.3302 $2.7378 $2.0123 $2.0072 $1.8440
End of year (rounded).................................. $4.3910 $3.3302 $2.7378 $2.0123 $2.0072
Accumulation Units Outstanding at end of year (000
omitted)............................................... 85,941 80,572 51,701 40,522 32,178
</TABLE>

GLOBAL

<TABLE>
<CAPTION>
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Beginning of year (rounded)............................ $1.7836 $1.4975 $1.3020 $1.3791 $0.9707
End of year (rounded).................................. $1.8815 $1.7836 $1.4975 $1.3020 $1.3791
Accumulation Units Outstanding at end of year (000
omitted)............................................... 37,576 33,505 24,439 21,739 12,368
</TABLE>

GOVERNMENT INCOME

<TABLE>
<CAPTION>
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Beginning of year (rounded)............................ $1.4943 $1.4730 $1.2421 $1.3196 $1.1811
End of year (rounded).................................. $1.6267 $1.4943 $1.4730 $1.2421 $1.3196
Accumulation Units Outstanding at end of year (000
omitted)............................................... 17,033 17,697 17,289 16,140 15,556
</TABLE>

43
<PAGE> 92

REPORT OF INDEPENDENT ACCOUNTANTS

To the Contract Holders

of The Prudential Variable Contract Account-24

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 the Equity Subaccount, the
Diversified Bond Subaccount, the Flexible Managed Subaccount, the Conservative
Balanced Subaccount, the Stock Index Subaccount, the Global Subaccount and the
Government Income Subaccount (separately managed portfolios of The Prudential
Variable Contract Account -- 24 of The Prudential Insurance Company of America;
the "Account") at December 31, 1997, the results of each of their operations for
the year then ended and the changes in each of their net assets for each of the
two years in the period then ended, 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 shares owned in The Prudential Series Fund, Inc. 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 18, 1998

44
<PAGE> 93

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>

OTHER POSTRETIREMENT BENEFITS

The Company provides certain life insurance and health care benefits for
its retired employees, their beneficiaries and covered dependents.
Substantially all of the Company's employees may become eligible to receive
benefits if they retire after age 55 with at least 10 years of service, or
under circumstances after age 50 with at least 20 years of continuous
service.

The Company has elected to amortize its transition obligation over 20
years. Post-retirement benefits are funded as considered necessary by
Company management. The Company's funding of its postretirement benefit
obligations totaled $43 million, $38 million and $94 million in 1997, 1996
and 1995, respectively.

In 1995 the Company modified the restrictions on certain post-retirement
plan assets to allow these assets to be used for benefits related to both
active and retired employees. Formerly, these benefits were available only
for retired employees. In connection with this modification, the Company
transferred $120 million from one of these plans in 1995. Of the $120
million transferred, $45 million went to Union Post-Retirement Benefits and
$75 million went to Union Medical Benefits.

24
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. EMPLOYEE BENEFIT PLANS (CONTINUED)

The status of the plan at September 30, adjusted for assets transferred to
the plan in the fourth quarter, is provided below. Accrued post-retirement
benefit costs are included in "Other liabilities" in the Company's
consolidated statement of financial position.
<TABLE>
<CAPTION>

1997 1996
---------- ----------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees.......................................................... $ (1,516) $ (1,423)
Fully eligible active plan participants........................... (36) (35)
Other active plan participants.................................... (576) (544)
--------- ---------
Total APBO..................................................... (2,128) (2,002)
Plan assets at fair value............................................ 1,354 1,313
--------- ---------
Funded status........................................................ (774) (689)
Unrecognized transition amount....................................... 707 787
Unrecognized net gain ............................................... (364) (428)
Effects of fourth quarter activity................................... 33 28
--------- ---------
Accrued postretirement benefit cost at December 31................... $ (398) $ (302)
========= =========
</TABLE>

Plan assets with respect to this coverage consist of group and individual
variable life insurance policies, group life and health contracts, common
stocks, U.S. government securities and short-term investments. Plan assets
include $1,044 million and $1,003 million of Company insurance policies and
contracts at December 31, 1997 and 1996, respectively.

Net periodic postretirement benefit cost included in "General and
administrative expenses" for the years ended December 31, 1997, 1996 and
1995 includes the following components:

1997 1996 1995
---------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost.............................................. $ 38 $ 45 $ 44
Interest cost............................................. 149 157 169
Actual return on plan assets.............................. (120) (105) (144)
Net amortization and deferral............................. 70 53 111
----------- ----------- -----------
Net periodic postretirement benefit cost.................. $ 137 $ 150 $ 180
=========== =========== ===========
</TABLE>

The following assumptions at September 30 are used to calculate the APBO as
of that date and determine postretirement benefit 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................... 4.5% 4.5% 4.5%
Expected long-term rate of return on plan assets.......... 9.0% 9.0% 8.0%
Health care cost trend rates.............................. 8.2-11.8% 8.5-12.5% 8.9-13.3%
Ultimate health care cost trend rate after gradual
decrease until 2006....................................... 5.0% 5.0% 5.0%

</TABLE>

25
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. EMPLOYEE BENEFIT PLANS (CONTINUED)

The effect of a 1% increase in health care cost trend rates for each future
year on the following costs at December 31, are as follows:

1997 1996 1995
---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation............ $ (218) $ (207) $ (217)
Service and interest costs............................... 24 25 27
</TABLE>

POSTEMPLOYMENT BENEFITS

The Company accrues postemployment benefits primarily for life and health
benefits provided to former or inactive employees who are not retirees. The
net accumulated liability for these benefits at December 31, 1997 and 1996
was $144 million and $156 million, respectively, and is included in "Other
liabilities."

OTHER EMPLOYEE BENEFITS

The Company sponsors voluntary savings plans for employees (401(k) plans).
The plans provide for salary reduction contributions by employees and
matching contributions by the Company of up to three percent of annual
salary, resulting in $63 million, $57 million, and $61 million of expenses
included in "General and administrative expenses" for 1997, 1996 and 1995,
respectively.

8. INCOME TAXES

The components of income tax expense for the years ended December 31, were
as follows:

1997 1996 1995
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Current tax expense (benefit):
U.S...................................................... $ (158) $ 255 $ 1,189
State and Iocal.......................................... 48 103 38
Foreign.................................................. 64 48 66
--------- --------- ---------
Total.................................................... $ (46) $ 406 $ 1,293
========= ========= =========

Deferred tax expense (benefit):
U.S...................................................... $ 227 $ (442) $ (166)
State and Iocal.......................................... 3 (2) (10)
Foreign.................................................. 33 54 9
--------- --------- ---------
Total.................................................... $ 263 $ (390) $ (167)
========= ========= =========

Total income tax expense................................. $ 217 $ 16 $ 1,126
========= ========= =========
</TABLE>

26
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. INCOME TAXES (CONTINUED)

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

1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Expected federal income tax expense.......................... $ 290 $ 382 $ 829
Equity tax................................................... (91) (365) 163
State and local income taxes................................. 51 100 28
Tax-exempt interest and dividend received deduction.......... (67) (50) (77)
Other........................................................ 34 (51) 183
-------- -------- --------
Total income tax expense..................................... $ 217 $ 16 $ 1,126
======== ======== ========
</TABLE>

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

1997 1996
------- --------
(IN MILLIONS)
<S> <C> <C>
Deferred tax assets
Insurance reserves.......................................... $ 1,482 $ 1,316
Policyholder dividends...................................... 250 257
Net operating loss carryforwards............................ 80 268
Depreciation................................................ -- 44
Litigation related reserves................................. 178 297
Employee benefits........................................... 42 10
Other....................................................... 360 329
-------- --------
Deferred tax assets before valuation allowance.............. 2,392 2,521
Valuation allowance......................................... (18) (36)
-------- --------
Deferred tax assets after valuation allowance............... 2,374 2,485
-------- --------
Deferred tax liabilities
Investments................................................. 1,867 1,183
Deferred acquisition costs.................................. 1,525 1,707
Depreciation................................................ 36 --
Other....................................................... 73 110
-------- --------
Deferred tax liabilities.................................... 3,501 3,000
-------- --------
Net deferred tax liability.................................... $ 1,127 $ 515
======== ========
</TABLE>

The Company's income taxes payable of $500 million and $1,544 million
includes a $627 million current income tax receivable at December 31, 1997
and a $1,029 million current income taxes payable at December 31, 1996.

27
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. INCOME TAXES (CONTINUED)

Management believes that based on its historical pattern of taxable income,
the Company will produce sufficient income in the future to realize its net
deferred tax asset after valuation allowance. Adjustments to the valuation
allowance will be made if there is a change in management's assessment of
the amount of the deferred tax asset that is realizable. At December 31,
1997, the Company had state non-life operating loss carryforwards for tax
purposes approximating $800 million.

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

9. EQUITY

RECONCILIATION OF STATUTORY SURPLUS AND NET INCOME

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

1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
STATUTORY NET INCOME........................................... $ 1,471 $ 1,402 $ 478
Adjustments to reconcile to net income on a GAAP basis:
Insurance revenues and expenses.............................. 12 (478) (496)
Income taxes................................................. 601 439 (596)
Valuation of investments..................................... (62) 121 --
Realized investment gains.................................... 702 327 1,562
Litigation and other reserves................................ (1,975) (906) --
Other, net................................................... (139) 173 295
-------- -------- --------
GAAP NET INCOME................................................ $ 610 $ 1,078 $ 1,243
======== ======== ========
</TABLE>

1997 1996
-------- --------
(IN MILLIONS)
<S> <C> <C>
STATUTORY SURPLUS.............................................. $ 9,242 $ 9,375
Adjustments to reconcile to equity on a GAAP basis:
Deferred policy acquisition costs............................ 5,994 6,291
Valuation of investments..................................... 8,067 5,624
Future policy benefits and policyholder account balances..... (2,906) (1,976)
Non-admitted assets.......................................... 1,643 1,285
Income taxes................................................. (1,070) (654)
Surplus notes................................................ (986) (985)
Other, net................................................... (266) (437)
-------- --------
GAAP EQUITY.................................................... $ 19,718 $ 18,523
======== ========

</TABLE>

28
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. EQUITY (CONTINUED)

The New York State Insurance Department ("Department") recognizes only
statutory accounting for determining and reporting the financial condition
of an insurance company, for determining its solvency under the New York
Insurance Law and for determining whether its financial condition warrants
the payment of a dividend to its policyholders. No consideration is given
by the Department to financial statements prepared in accordance with GAAP
in making such determinations.

10. OPERATING LEASES

The Company and its subsidiaries occupy leased office space in many
locations under various long-term leases and have entered into numerous
leases covering the long-term use of computers and other equipment. At
December 31, 1997, future minimum lease payments under non-cancelable
operating leases are estimated as follows:

(IN MILLIONS)

1998........................................ $ 313

1999........................................ 277

2000........................................ 230

2001........................................ 201

2002........................................ 171

Remaining years after 2002.................. 833
-----------

Total....................................... $ 2,025
===========

Rental expense incurred for the years ended December 31, 1997 and 1996 was
approximately $352 million and $343 million, respectively.

11. DIVESTITURES

In October 1995, the Company completed the sale of its reinsurance segment,
Prudential Reinsurance Holdings, Inc., through an initial public offering
of common stock. As a result of the sale, an after-tax loss of $297 million
was recorded in 1995.

On January 26, 1996, the Company entered into a definitive agreement to
sell substantially all the assets of Prudential Home Mortgage Company, Inc.
It has also liquidated certain mortgage-backed securities and extended
warehouse losses, asset write downs, and other costs directly related to
the planned sale. The Company recorded an after-tax loss in 1995 of $98
million which includes operating gains and losses, asset write downs and
other costs directly related with the planned sale. The net assets of the
mortgage banking segment at December 31, 1995 was $78 million, comprised of
$4,293 million in assets and $4,215 million in liabilities.

On July 31, 1996, the Company sold a substantial portion of its Canadian
Branch business to the London Life Insurance Company ("London Life"). This
transaction was structured as a reinsurance transaction whereby London Life
assumed total liabilities of the Canadian Branch equal to $3,291 million as
well as a related amount of assets equal to $3,205 million. This transfer
resulted in a reduction of policy liabilities of $3,257 million and a
corresponding reduction in invested assets. The Company recognized an
after-tax gain in 1996 of $116 million as a result of this transaction,
recorded in "Realized investment gains, net."

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values presented below have been determined using available
information and valuation methodologies. Considerable judgment is applied
in interpreting data to develop the estimates of fair value. Accordingly,
such estimates presented may not be realized in a current market exchange.
The use of different market assumptions and/or estimation methodologies
could have a material effect on the estimated fair values. The following
methods and assumptions were used in calculating the fair values (for all
other financial instruments presented in the table, the carrying value
approximates fair value).

29
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

FIXED MATURITIES AND EQUITY SECURITIES

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

MORTGAGE LOANS ON REAL ESTATE

The fair value of the mortgage loan portfolio is primarily based upon the
present value of the scheduled future cash flows discounted at the
appropriate U.S. Treasury rate, adjusted for the current market spread for
a similar quality mortgage. For certain non-performing and other loans, the
fair value is based upon the present value of expected future cash flows
discounted at the appropriate U.S. Treasury rate adjusted for current
market spread for a similar quality mortgage.

POLICY LOANS

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

DERIVATIVE FINANCIAL INSTRUMENTS

The fair value of swap agreements is estimated based on the present value
of future cash flows under the agreements discounted at the applicable zero
coupon U.S. Treasury rate and swap spread. The fair value of forwards,
futures and options is estimated based on market quotes for a transaction
with similar terms. The fair value of loan commitments is derived by
comparing the contractual stream of fees with such fee streams adjusted to
reflect current market rates that would be applicable to instruments of
similar type, maturity, and credit standing.

POLICYHOLDERS' ACCOUNT BALANCES

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

DEBT

The estimated fair value of short-term and long-term debt is derived by
using discount rates based on the borrowing rates currently available to
the Company for debt with similar terms and remaining maturities.

30
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
1997 1996
-------------------------- ------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ----------- ------------ --------------
FINANCIAL ASSETS: (IN MILLIONS)
<S> <C> <C> <C> <C>
Other than trading:
- -------------------
Fixed maturities:
Available for sale....................... $ 75,270 $ 75,270 $ 66,553 $ 66,553
Held to maturity......................... 18,700 19,894 20,403 21,362
Equity securities........................... 2,810 2,810 2,622 2,622
Mortgage loans on real estate............... 16,004 17,153 17,097 17,963
Policy loans................................ 6,827 6,994 6,692 6,613
Securities purchased under
agreements to resell .................... 8,661 8,661 5,347 5,347
Cash collateral for borrowed securities..... 5,047 5,047 2,416 2,416
Short-term investments...................... 12,106 12,106 9,294 9,294
Cash ....................................... 3,636 3,636 2,091 2,091
Separate Accounts assets.................... 74,046 74,046 63,358 63,358
Derivative financial instruments............ 24 35 16 32

Trading:
- --------
Trading account assets...................... 6,044 6,044 4,219 4,219
Receivables from broker-dealer clients...... 6,273 6,273 5,281 5,281
Derivative financial instruments............ 979 979 904 904

FINANCIAL LIABILITIES:

Other than trading:
- -------------------
Policyholders' account balances............. 32,941 33,896 36,009 37,080
Securities sold under
agreements to repurchase................. 12,347 12,347 7,503 7,503
Cash collateral for loaned securities....... 14,117 14,117 8,449 8,449
Short-term and long-term debt............... 11,047 11,020 10,322 10,350
Securities sold but not yet purchased....... 3,533 3,533 1,900 1,900
Separate Accounts liabilities............... 73,658 73,658 62,845 62,845
Derivative financial instruments............ 32 47 32 45

Trading:
- --------
Payables to broker-dealer clients........... 3,338 3,338 3,018 3,018
Derivative financial instruments ........... 1,088 1,088 1,120 1,120
</TABLE>

31
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

DERIVATIVE FINANCIAL INSTRUMENTS

The tables below summarize the Company's outstanding positions by
derivative instrument types as of December 31, 1997 and 1996. The amounts
presented are classified as either trading or other than trading, based on
management's intent at the time of contract inception and throughout the
life of the contract. The table includes the estimated fair values of
outstanding derivative positions only and does not include the changes in
fair values of associated financial and non-financial assets and
liabilities, which generally offset derivative notional amounts. The fair
value amounts presented also do not reflect the netting of amounts pursuant
to right of setoff, qualifying master netting agreements with
counterparties or collateral arrangements.

DERIVATIVE FINANCIAL INSTRUMENTS
DECEMBER 31, 1997
(IN MILLIONS)

<TABLE>
<CAPTION>
TRADING OTHER THAN TRADING TOTAL
------------------------ ----------------------- ------------------------------------
ESTIMATED ESTIMATED CARRYING ESTIMATED
NOTIONAL FAIR VALUE NOTIONAL FAIR VALUE NOTIONAL AMOUNT FAIR VALUE
----------- ----------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Assets.............. $ 7,759 $ 394 $ 61 $ -- $ 7,820 $ 395 $ 394
Liabilities......... 6,754 489 13 3 6,767 493 491

Forwards:
Assets.............. 29,511 429 1,031 23 30,542 452 452
Liabilities......... 29,894 459 647 7 30,541 466 466

Futures:
Assets.............. 4,103 51 46 -- 4,149 51 51
Liabilities......... 3,064 50 3,320 21 6,384 71 71

Options:
Assets.............. 6,893 105 239 -- 7,132 105 105
Liabilities......... 4,165 90 5 -- 4,170 90 90

Loan Commitments:
Assets.............. -- -- 317 12 317 -- 12
Liabilities......... -- -- 524 16 524 -- 16
----------- ----------- ---------- ----------- ----------- ---------- -----------

Total:
Assets.............. $ 48,266 $ 979 $ 1,694 $ 35 $ 49,960 $ 1,003 $ 1,014
=========== =========== ========== =========== =========== ========== ===========

Liabilities......... $ 43,877 $ 1,088 $ 4,509 $ 47 $ 48,386 $ 1,120 $ 1,134
=========== =========== ========== =========== =========== ========== ===========
</TABLE>

32
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (CONTINUED)

DERIVATIVE FINANCIAL INSTRUMENTS
DECEMBER 31, 1997
(IN MILLIONS)

<TABLE>
<CAPTION>
TRADING OTHER THAN TRADING TOTAL
------------------------ ----------------------- ------------------------------------
ESTIMATED ESTIMATED CARRYING ESTIMATED
NOTIONAL FAIR VALUE NOTIONAL FAIR VALUE NOTIONAL AMOUNT FAIR VALUE
----------- ----------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Assets.............. $ 8,080 $ 481 $ 398 $ 10 $ 8,478 $ 481 $ 491
Liabilities......... 8,316 756 139 17 8,455 771 773

Forwards:
Assets.............. 24,275 367 489 13 24,764 376 380
Liabilities......... 20,103 308 920 10 21,023 318 318

Futures:
Assets.............. 2,299 24 3 -- 2,302 24 24
Liabilities......... 2,573 30 1,087 6 3,660 36 36

Options:
Assets.............. 2,981 32 2,083 7 5,064 39 39
Liabilities......... 2,653 26 437 12 3,090 27 38

Loan Commitments:
Assets.............. -- -- 163 2 163 -- 2
Liabilities......... -- -- 445 -- 445 -- --
----------- ----------- ---------- ----------- ----------- ---------- -----------

Total:
Assets.............. $ 37,635 $ 904 $ 3,136 $ 32 $ 40,771 $ 920 $ 936
=========== =========== ========== =========== =========== ========== ===========

Liabilities......... $ 33,645 $ 1,120 $ 3,028 $ 45 $ 36,673 $ 1,152 $ 1,165
=========== =========== ========== =========== =========== ========== ===========
</TABLE>

CREDIT RISK

The current credit exposure of the Company's derivative contracts is
limited to the fair value at the reporting date. Credit risk is managed by
entering into transactions with creditworthy counterparties and obtaining
collateral where appropriate and customary. The Company also attempts to
minimize its exposure to credit risk through the use of various credit
monitoring techniques. Approximately 95% of the net credit exposure for the
Company from derivative contracts is with investment-grade counterparties.

Net trading revenues for the years ended December 31, 1997, 1996 and 1995
relating to forwards, futures and swaps were $54 million, $37 million, $(8)
million; $42 million, $32 million, $(11) million; and $110 million, $42
million, $3 million respectively. Net trading revenues for options were not
material. Average fair values for trading derivatives in an asset position
during the years ended December 31, 1997 and 1996 were $1,015 million and
$881 million, respectively, and for derivatives in a liability position
were $1,166 million and $1,038 million, respectively. Of those derivatives
held for trading purposes at December 31, 1997, 52% of the notional amount
consisted of interest rate derivatives, 40% consisted of foreign currency
derivatives, and 8% consisted of equity and commodity derivatives. Of those
derivatives held for purposes other than trading at December 31, 1997, 72%
of notional consisted of interest rate derivatives and 28% consisted of
foreign currency derivatives.

33
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (CONTINUED)

OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS

During the normal course of its business, the Company utilizes financial
instruments with off-balance sheet credit risk such as commitments,
financial guarantees, loans sold with recourse and letters of credit.
Commitments include commitments to purchase and sell mortgage loans, the
unfunded portion of commitments to fund investments in private placement
securities, and unused credit card and home equity lines. The Company also
provides financial guarantees incidental to other transactions and letters
of credit that guarantee the performance of customers to third parties.
These credit-related financial instruments have off-balance sheet credit
risk because only their origination fees, if any, and accruals for probable
losses, if any, are recognized until the obligation under the instrument is
fulfilled or expires. These instruments can extend for several years and
expirations are not concentrated in any period. The Company seeks to
control credit risk associated with these instruments by limiting credit,
maintaining collateral where customary and appropriate, and performing
other monitoring procedures.

The fair value of asset positions in these instruments, which represents
the Company's current exposure to credit loss from other parties'
non-performance, was $1,014 million and $936 million at December 31, 1997
and 1996, respectively.

14. CONTINGENCIES AND LITIGATION

FINANCIAL GUARANTEE AGREEMENT

In connection with the sale in 1995 of its wholly-owned subsidiary
Prudential Reinsurance Company ("Pru Re"), the Company's subsidiary,
Gibraltar Casualty Insurance Company ("Gibraltar") entered into a stop-loss
reinsurance agreement with Pru Re whereby Gibraltar has reinsured up to
$375 million of the first $400 million of aggregate adverse loss
development on reserves recorded by Pru Re at June 30, 1995. Gibraltar also
has entered into several quota share reinsurance arrangements with Pru Re
whereby certain medical malpractice, direct insurance and casualty
reinsurance pool risks previously underwritten by Pru Re prior to June 30,
1995 were ceded to Gibraltar. The Company has guaranteed Gibraltar's
obligations arising under each of these contracts subject to a limit of
$375 million for the stop-loss agreement and $400 million for the other
agreements. Through December 31, 1997, Gibraltar has incurred $285 million
in losses under the stop-loss agreement, including $45 million in 1997.
Gibraltar has paid $165 million to Pru Re under the stop-loss agreement.
The Company has not been required to fund losses arising under the other
arrangements.

ENVIRONMENTAL AND ASBESTOS-RELATED CLAIMS

Certain of the Company's subsidiaries received claims under expired
contracts which assert alleged injuries and/or damages relating to or
resulting from toxic torts, toxic waste and other hazardous substances. The
liabilities for such claims cannot be estimated by traditional reserving
techniques. As a result of judicial decisions and legislative actions, the
coverage afforded under these contracts may be expanded beyond their
original terms. Extensive litigation between insurers and insureds over
these issues continues and the outcome is not predictable. In establishing
the liability for unpaid claims for these losses, management considered the
available information. However, given the expansion of coverage and
liability by the courts and legislatures in the past, and potential for
other unfavorable trends in the future, the ultimate cost of these claims
could increase from the levels currently established.

MANAGED CARE REIMBURSEMENT

In 1997, the Company continued to review its obligations under certain
managed care arrangements for possible failure to comply with contractual
and regulatory requirements. The estimated cost to the Company for these
reimbursements increased by $115 million in 1997, bringing the total
provision to $265 million. As of December 31, 1997, $163 million has been
paid or credited to customers. It is the opinion of management that the
remaining reserves of $102 million at December 31, 1997 represent a
reasonable estimate of remaining reimbursements to customers and other
related costs.

LITIGATION

Various lawsuits against the Company have arisen in the course of the
Company's business. In certain of these matters, large and/or indeterminate
amounts are sought.

Three putative class actions and approximately 677 individual actions were
pending against the Company in the United States as of January 31, 1998
brought on behalf of those persons who purchased life insurance policies
allegedly because of deceptive sales practices engaged in by the Company
and its insurance agents in violation of state and federal laws. The
Company anticipates additional suits may be filed by individuals who opted
out of the class action settlement described below. The sales practices
alleged to have occurred are contrary to Company policy. Some of

34
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. CONTINGENCIES AND LITIGATION (CONTINUED)

these cases seek substantial damages while others seek unspecified
compensatory, punitive and treble damages. The Company intends to defend
these cases vigorously.

A Multi-State Life Insurance Task Force (the "Task Force"), comprised of
insurance regulators from 29 states and the District of Columbia, was
formed in April 1995 to conduct a review of sales and marketing practices
throughout the life insurance industry. As the largest life insurance
company in the United States, the Company was the initial focus of the Task
Force examination. On July 9, 1996, the Task Force released its report on
the Company's activities. The Task Force found that some sales of life
insurance policies by the Company had been improper. Based on the findings,
the Task Force recommended, and the Company agreed to, a series of fines
allocated to all 50 states and the District of Columbia. In addition, the
Task Force recommended a remediation program pursuant to which the Company
would offer relief to the policyowners who were misled when they purchased
permanent life insurance policies in the United States from 1982 to 1995.

On October 28, 1996, the Company entered into a Stipulation of Settlement
with attorneys for the plaintiffs in the consolidated class action lawsuit
pending in a Multi-District Litigation proceeding in the federal court in
New Jersey. The class action suit involved alleged improprieties in
connection with the Company's sale, servicing and operation of permanent
life insurance policies from 1982 through 1995. Pursuant to the settlement,
the Company agreed to provide certain enhancements and changes to the
remediation program previously accepted by the Task Force, including some
additional remedies. In addition, the Company agreed that it would incur a
minimum cost of $410 million in providing remedies to policyowners under
the program and, in specified circumstances, agreed to make certain other
payments and guarantees. Under the terms of the settlement, the Company
agreed to a minimum average cost per remedy of $2,364 for up to 330,000
claims remedied and also agreed to provide additional compensation to be
determined by formula that will range in aggregate amount from $50 million
to $300 million depending on the total number of claims remedied. At the
end of the remediation program's claim evaluation process, the Court will
determine how the additional compensation will be distributed.

The terms of the remediation program described above were enhanced again in
February 1997 pursuant to agreements reached with several states that had
not previously accepted the terms of the program. These changes were
incorporated as amendments to the above-described Stipulation of Settlement
and related settlement documents, and the amended Stipulation of Settlement
was approved as fair to class members by the United States District Court
for the District of New Jersey in March 1997. By that point in time, the
Company had entered into agreements with all 50 states and the District of
Columbia pursuant to which each jurisdiction had accepted the remediation
plan and the Company had agreed to pay approximately $65 million in fines,
penalties and related payments.

The decision of the U.S. District Court to certify a class in the
above-described litigation for settlement purposes only and to approve the
class action settlement as described in the amended Stipulation of
Settlement is presently on appeal to the U.S. Court of Appeals for the
Third Circuit. The appellants claim that the District Court erred in
certifying a class and in finding that the terms of the settlement are fair
to the class.

Pursuant to the state agreements and the amended Stipulation of Settlement,
as approved by the U.S. District Court, the Company initiated its
remediation program in 1997. The Company mailed packages and provided broad
class notice to the owners of approximately 10.7 million policies eligible
to participate in the remediation program, informing them of their rights.
Owners of approximately 21,800 policies elected to be excluded from the
class action settlement. Of those eligible to participate in the
settlement, policyowners who believed they were misled were invited to file
a claim through an Alternative Dispute Resolution ("ADR") process. The ADR
process was established to enable the company to discharge its liability to
the affected policyowners. Policyowners who did not wish to file a claim in
the ADR process were permitted to choose from options available under Basic
Claim Relief, such as preferred rate premium loans, or annuities, mutual
fund shares or life insurance policies that the Company will enhance.

The owners of approximately 1.16 million policies responded to these
notices by indicating an intent to file an ADR claim. All policyholders who
responded were provided an ADR claim form for completion and submission.
Approximately 635,000 claim forms were completed and returned as of January
31, 1998. Management does not believe the number of ADR claims that will be
completed and returned will increase significantly. In addition, the owners
of approximately 510,000 policies indicated an interest in a Basic Claim
Relief remedy. The ADR process requires that individual claim files be
reviewed by one or more independent claim evaluators. Management does not
believe costs associated with providing Basic Claim Relief will be material
to the Company's financial position or results of operations.

35
<PAGE>

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. CONTINGENCIES AND LITIGATION (CONTINUED)

In 1996, the Company recorded in its Statement of Operations, the minimum
cost of $410 million as agreed to in the settlement. Management had no
better information available at that time upon which to make a reasonable
estimate of losses. Management now has additional information which allows
for computation of a reasonable estimate of losses associated with ADR
claims. Based on this additional information, in 1997, management had
increased the estimated liability for the cost of remedying policyholder
claims in the ADR process by $1.64 billion before taxes to approximately
$2.05 billion before taxes of which $1.80 billion has been funded in a
settlement trust as described in Note 3. While management believes these
are 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.

Litigation is subject to many uncertainties, and given the complexity and
scope of these suits, their outcome cannot be predicted. It is also not
possible to predict the likely results of any regulatory inquiries or their
effect on litigation which might be initiated in response to widespread
media coverage of these matters. 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 the regulatory
inquiries. It is possible that the results of operations or the cash flow
of the Company, 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 the Company's
financial position, after consideration of applicable reserves.

The Company and a number of other insurers ("the Consortium") entered into
a Reinsurance and Participation Agreement (the "Agreement") with MBL Life
Assurance Corporation ("MBLLAC") and others, under which the Company and
the other insurers agreed to reinsure certain payments to be made to
contract holders by MBLLAC in connection with the plan of rehabilitation of
Mutual Benefit Life Insurance Company. Under the agreement, the Consortium,
subject to certain terms and conditions, will indemnify MBLLAC for the
ultimate net loss sustained by MBLLAC on each contract subject to the
Agreement. The ultimate net loss represents the amount by which the
aggregate required payments exceed the fair market value of the assets
supporting the covered contracts at the time such payments are due. The
Company's share of any net loss is 30.55%. The Company has determined that
it does not expect to make any payments to MBLLAC under the agreement. The
Company concluded this after testing a wide range of potentially adverse
scenarios during the rehabilitation period for MBLLAC.

15. SUBSEQUENT EVENTS

On February 10, 1998, the Company's Board of Directors authorized
management to take the preliminary steps necessary to allow the Company to
demutualize and become a publicly-traded company. The Company has begun
discussions with the New Jersey Department of Banking and Insurance,
leaders in the New Jersey State Legislature, as well as other key
regulatory agencies around the country. The New Jersey State Legislature
must first pass a law permitting demutualization. The New Jersey Department
of Banking and Insurance, the Company's Board and a majority of
participating policyholders must ultimately approve the Company's plan for
demutualization.

* * * * *

<PAGE> 94

PART C

<PAGE> 95

Item 28. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

(1) Financial Statements of The Prudential Variable Contract Account-11
(Registrant) consisting of the Statement of Net Assets, as of December 31,
1997; the Statement of Operations for the period ended December 31, 1997;
the Statements of Changes in Net Assets for the periods ended December 31,
1997 and 1996; the Notes relating thereto appear in the statement of
additional information (Part B of the Registration Statement).

(2) Financial Statements of The Prudential Insurance Company of America (Depositor)
consisting of the Statements of Financial Position as of December 31, 1997 and
1996; the Statements of Operations and Changes in Surplus and Asset Valuation
Reserve and the Statements of Cash Flows for the years ended December 31, 1997
and 1996 and the Notes relating thereto appear in the Statement of Additional
Information (Part B of the Registration Statement).

<S> <C> <C>
(b) Exhibits

(1) Resolution of the Board of Directors of Incorporated by reference to
The Prudential Insurance Company Exhibit (1) to post effective
of America establishing The amendment No. 28 to the Registration
Prudential Variable Contract Statement of The Prudential Variable
Account-11 Contract Account-10, Registration
No. 2-76580, filed February 22, 1997

(2) Rules and Regulations of The Incorporated by reference to
Prudential Variable Contract Exhibit (2) to Post-Effective
Account-11 Amendment No. 15 to this
Registration Statement, filed
April 28, 1989
(To be filed via EDGAR)

(3) Custodian Agreement with Investors Filed herewith
Fiduciary Trust Company

(4) Investment Management Agreement Incorporated by reference to
between Prudential and The Exhibit (5) to this Registration
Prudential Variable Contract Statement, filed March 19, 1982
Account-11 (To be filed via EDGAR)

(i) Amendment No. 1 to Investment Incorporated by reference to
Management Agreement between Exhibit (5)(i) to Post-Effective
Prudential and The Prudential Amendment No. 4 to this
Variable Contract Account-11 Registration Statement, filed
March 27, 1985
(To be filed via EDGAR)

(5) Agreement Relating to the Sale of Incorporated by reference to
Certain Contracts on a Variable Exhibit (6) to this Registration
Basis between Prudential and The Statement, filed March 19, 1982
Prudential Variable Contract (To be filed via EDGAR)
Account-11

</TABLE>

C-1

<PAGE> 96

(i) Agreement for the Sale of VCA-11 Incorporated by reference to
Contracts between Prudential, The Exhibit (5)(i) to Post-Effective
Prudential Variable Contract Amendment No. 23 to this
Account-11 and Prudential Asset Registration Statement, filed
Management Company Securities April 27, 1993
Corporation (To be filed via EDGAR)

(ii) Agreement for the Sale of Incorporated by reference to
VCA-11 Contracts between Exhibit (5) (ii) to Post-Effective
Prudential, The Prudential Variable Amendment No. 23 to this
Contract Account-11 and Prudential Registration Statement, filed
Retirement Services, Inc. April 27, 1993
(To be filed via EDGAR)

(iii) Agreement for the Sale of Incorporated by reference to Exhibit
VCA-11 Contracts between 5(iii) to Post-Effective Amendment
Prudential, The Prudential Variable No. 29 to this Registration Statement,
Contract Account-11 and Prudential filed May 1, 1997.
Investment Management Services LLC.

(6) (i)(a) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-1000 for Exhibit (6)(i)(a) to Post-Effective
individual retirement annuities Amendment No. 9 to this
Registration Statement, filed
April 24, 1987
(To be filed via EDGAR)

(i)(b) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-1000 for Exhibit (6)(i)(b) to Post-Effective
individual retirement annuity Amendment No. 8 to this
contracts issued after May 1, 1987 Registration Statement, filed
April 1, 1987
(To be filed via EDGAR)

(i)(c) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-1000 for Exhibit (6)(i)(c) to Post-Effective
individual retirement annuity Amendment No. 11 to this
contracts issued after May 1, 1988 Registration Statement, filed
April 8, 1988
(To be filed via EDGAR)

(i)(d) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-1000 for Exhibit (6)(i)(d) to Post-Effective
individual retirement annuity Amendment No. 17 to this
contracts issued after May 1, 1990 Registration Statement, filed
April 30, 1990
(To be filed via EDGAR)

(i)(e) Specimen Copy of Group Incorporated by reference to
Annuity Amendment Form GAA-7793 Exhibit (6)(i)(e) to Post-Effective
for individual retirement annuity Amendment No. 17 to this
contracts issued before May 1, 1990 Registration Statement, filed
April 30, 1990
(To be filed via EDGAR)

(ii)(a) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-120-82 Exhibit (6)(ii)(a) to Post Effective
for tax-deferred annuities with Amendment No. 9 to this
modifications for certain tax changes Registration Statement, filed
and the exchange offer April 24, 1987
(To be filed via EDGAR)

C-2
</TABLE>

<PAGE> 97

(ii)(b) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-120-87 Exhibit (6)(ii)(b) to Post-Effective
for tax-deferred annuity contracts Amendment No. 8 to this
issued after May 1, 1987 Registration Statement, filed
April 1, 1987
(To be filed via EDGAR)

(ii)(c) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-120-87 Exhibit (6)(ii)(c) to Post-Effective
for tax-deferred annuity contracts Amendment No. 11 to this
issued after May 1, 1988 Registration Statement, filed
April 8, 1988
(To be filed via EDGAR)

(ii)(d) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-120-87 Exhibit (6)(ii)(d) to Post-Effective
for tax-deferred annuity contracts Amendment No. 17 to this
issued after May 1, 1990 Registration Statement, filed
April 30, 1990
(To be filed via EDGAR)

(ii)(e) Specimen Copy of Group Incorporated by reference to
Annuity Amendment Form GAA-7764 Exhibit (G)(ii)(e) to Post-Effective
for tax-deferred annuity contracts Amendment No. 17 to this
issued before May 1, 1990 Registration Statement, filed
April 30, 1990
(To be filed via EDGAR)

(iii)(a) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-1010 for Exhibit (6)(iii) (a) to Post-Effective
deferred compensation plans Amendment No. 9 to this
Registration Statement, filed
April 24, 1987
(To be filed via EDGAR)

(iii)(b) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-1010 for Exhibit (6)(iii)(b) to Post-Effective
deferred compensation plan Amendment No. 8 to this
contracts issued after May 1, 1987 Registration Statement, filed
April 1, 1987
(To be filed via EDGAR)

(iii)(c) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-1010 for Exhibit (6)(iii)(c) to Post-Effective
deferred compensation plan Amendment No. 11 to this
contracts issued after May 1, 1988 Registration Statement, filed
April 8, 1988
(To be filed via EDGAR)

(iii)(d) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-1010 for Exhibit (6)(iii)(d) to Post-Effective
deferred compensation plan Amendment No. 17 to this
contracts issued after May 1, 1990 Registration Statement, filed
April 30, 1990
(To be filed via EDGAR)

</TABLE>

C-3
<PAGE> 98

(iii)(e) Specimen Copy of Group Incorporated by reference to
Annuity Amendment Form GAA-7792 Exhibit (6)(iii)(e) to Post-Effective
for deferred compensation plan Amendment No. 17 to this
contracts issued before May 1, 1990 Registration Statement, filed
April 30, 1990
(To be filed via EDGAR)

(iii)(f) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form Exhibit 99.1 to Post-Effective
GAA-7900-DefComp for deferred Amendment No. 27 to the
compensation plan contracts issued Registration Statement of The
before May 1, 1996 Prudential Variable Contract
Account-10, Registration Statement
No. 2-76580, filed April 29, 1996.

(iii)(g) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form Exhibit 99.11 to Post-Effective
GAA-7900-DefComp-1 for deferred Amendment No. 27 to the
compensation plan contracts issued Registration Statement of The
before May 1, 1996 Prudential Variable Contract
Account-10, Registration Statement
No. 2-76580, filed April 29, 1996.

(iii)(h) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form Exhibit 99.12 to Post-Effective
GAA-7900-Secular for deferred Amendment No. 27 to the
compensation plan contracts issued Registration Statement of The
before May 1, 1996 Prudential Variable Contract
Account-10, Registration Statement
No. 2-76580, filed April 29, 1996.

(iii)(i) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form Exhibit 99.13 to Post-Effective
GAA-7900-Secular-1 for deferred Amendment No. 27 to the
compensation plan contracts issued Registration Statement of The
before May 1, 1996 Prudential Variable Contract
Account-10, Registration Statement
No. 2-76580, filed April 29, 1996.

(iv) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-110-82 Exhibit (6)(iv) to Post-Effective
for Keogh Plans Amendment No. 8 to this
Registration Statement, filed
April 1, 1987
(To be filed via EDGAR)

(v) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-7454 for Exhibit (4)(v) to Post-Effective
Participants governed by the Texas Amendment No. 5 to this
Optional Retirement Program Registration Statement, filed
April 30, 1985
(To be filed via EDGAR)

(a) Modifications for certain tax Incorporated by reference to
changes Exhibit (6)(v)(a) to Post-Effective
Amendment No. 8 to this
Registration Statement, filed
April 1, 1987
(To be filed via EDGAR)
</TABLE>

C-4
<PAGE> 99

<TABLE>
<CAPTION>
<S> <C>
(v) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-7454 for Exhibit (4)(v) to Post-Effective
Participants governed by the Texas Amendment No. 5 to this
Optional Retirement Program Registration Statement, filed
April 30, 1985
(To be filed via EDGAR)

(a) Modifications for certain tax Incorporated by reference to
changes Exhibit (6)(v)(a) to Post-Effective
Amendment No. 8 to this
Registration Statement, filed
April 1, 1987
(To be filed via EDGAR)

(vi) Specimen Copy of Group Incorporated by reference to
Annuity Contract Form GVA-1010 for Exhibit (6)(vi) to Post-Effective
non-qualified deferred compensation Amendment No. 11 to this
plans Registration Statement, filed
April 8, 1988
(To be filed via EDGAR)

(7) Application and Enrollment Forms as Incorporated by reference to
revised for use after May 1, 1991 Exhibit (7) to Post-Effective
Amendment No. 19 to this
Registration Statement, filed
April 29, 1991
(To be filed via EDGAR)

(8) (i) Copy of the Charter of Prudential Incorporated by reference to
as amended to and including Post-Effective Amendment No. 9 to
November 14, 1995 Form S-1, Registration No. 33-20083,
filed April 9, 1997 on behalf of
The Prudential Variable Contract
Real Property Account.

(ii) Copy of the By-Laws of Incorporated by reference to
Prudential, as amended to and Post-Effective Amendment No. 12 for
including April 8, 1997 Form N-4, Registration No. 33-25434,
filed April 30, 1997 on behalf of
The Prudential Individual Variable
Contract Account.

(11) (i) Service Agreement between Incorporated by reference to
Prudential and The Prudential Exhibit (10)(i) to Post-Effective
Investment Corporation Amendment No. 4 to this
Registration Statement, filed
March 27, 1985
(To be filed via EDGAR)

(ii) Service Agreement between Incorporated by reference to
Prudential and The Prudential Asset Exhibit (10)(ii) to Post-Effective
Management Company, Inc. Amendment No. 4 to this
Registration Statement, filed
March 27, 1985
(To be filed via EDGAR)

(13) (i) Consent of independent public Filed herewith
accountants

(ii) Powers of Attorney

(a) Members of the Registrant's Filed herewith
Committee:

S. Fenster,
S. McDonald,
J. Weber
</TABLE>

C-5
<PAGE> 100

(b) Directors and Officers of Incorporated by reference to Post-Effective
Prudential Amendment No. 10 to Form S-1, Registration
No. 33-20083, filed April 9, 1998 on behalf of
The Prudential Variable Contract Real Property
Account.

(16) Calculation of Performance Data Appears under heading "Performance"
in the Statement of Additional
Information (Part B of this Registration
Statement).

(17) Financial Data Schedule Filed herein.

</TABLE>

C-6
<PAGE> 101

Item 29. DIRECTORS AND OFFICERS OF PRUDENTIAL

Information about Prudential's Directors and Executive Officers appears under
the heading "Directors and Officers of Prudential" in the Statement of
Additional Information (Part B of this Registration Statement).

Item 30. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant is a separate account of The Prudential Insurance Company of America,
a mutual life insurance company organized under the laws of the State of New
Jersey. The subsidiaries of Prudential and short descriptions of each are listed
under Item 25 to Post-Effective Amendment No. 34 to the Form N-1A Registration
Statement for The Prudential Series Fund, Inc., Registration No. 2-80896, filed
April 24, 1998, the text of which is hereby incorporated.

In addition to the subsidiaries shown on the Organization Chart, Prudential
holds all of the voting securities of Prudential's Gibraltar Fund, Inc., a
Maryland corporation, in three of its separate accounts. Prudential also holds
directly and in three of its other separate accounts, and in The Prudential
Variable Contract Account-24, shares of The Prudential Series Fund, Inc., a
Maryland corporation. The balance of the shares are held in separate accounts of
Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey,
wholly-owned subsidiaries of Prudential. All of the separate accounts referred
to above are unit investment trusts registered under the Investment Company Act
of 1940. Prudential's Gibraltar Fund, Inc., and The Prudential Series Fund, Inc.
are registered as open-end, diversified management investment companies under
the Investment Company Act of 1940. The shares of these investment companies are
voted in accordance with the instructions of persons having interests in the
unit investment trusts, and Prudential, Pruco Life Insurance Company and Pruco
Life Insurance Company of New Jersey vote the shares they hold directly in the
same manner that they vote the shares that they hold in their separate accounts.

Registrant may also be deemed to be under common control with The Prudential
Variable Contract Account-2 and The Prudential Variable Contract Account-10,
separate accounts of Prudential registered as open-end, diversified management
investment companies under the Investment Company Act of 1940, and with the
Prudential Variable Contract Account-24, a separate account of Prudential
registered as a unit investment trust.

The Prudential is a mutual insurance company. The financial statements have been
prepared in conformity with generally accepted accounting principles, which
include statutory accounting practices prescribed or permitted by state
regulatory authorities for insurance companies.

C-7

<PAGE> 102

Item 31. NUMBER OF CONTRACTOWNERS

As of March 31, 1998, the number of contractowners of qualified contracts
offered by Registrant was 494, and the number of contractowners of non-qualified
contracts offered by Registrant was 6.

Item 32. INDEMNIFICATION

The Registrant, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.

New Jersey, being the state of organization of The Prudential Insurance Company
of America ("Prudential"), permits entities organized under its jurisdiction to
indemnify directors and officers with certain limitations. The relevant
provisions of New Jersey law permitting indemnification can be found in Section
14A:3-5 of the New Jersey Statutes Annotated. The text of Prudential's By-law
27, which relates to indemnification of officers and directors, is incorporated
by reference to Exhibit (8)(ii) of Post-Effective Amendment No. 26 to Form N-3,
Registration No. 2-76580, filed May 1, 1995, on behalf of The Prudential
Variable Contract Account-10.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the Act) may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

C-8

<PAGE> 103
Item 33. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Prudential does have other business of a substantial nature besides activities
relating to the assets of the registrant. Prudential is involved in insurance,
reinsurance, securities, pension services, real estate and banking.

The Prudential Investment Corporation (PIC) is an investment unit of Prudential
and is actively engaged in the business of giving investment advice. The
officers and directors of Prudential and PIC who are engaged directly or
indirectly in activities relating to the registrant have no other business,
profession, vocation, or employment of a substantial nature, and have not had
such other connections during the past two years.

The business and other connections, including principal business address, of
Prudential's Directors are listed under "Directors and Officers of Prudential"
in the Statement of Additional Information (Part B of this Registration
Statement).

Item 34. PRINCIPAL UNDERWRITER

(a) Prudential Investment Management Services LLC, a direct
wholly-owned subsidiary of Prudential, acts as the principal
underwriter for The Prudential Variable Contract Account-2, the
Prudential Variable Contract Account-10, The Prudential Variable
Contract Account-24, and for the Registrant, all (except for The
Prudential Variable Contract Account-24) registered as open-end
management investment companies under the Investment Company Act of
1940.

(b) (1) (2) (3)
<S> <C> <C>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
*Unless otherwise ------------------------- ------------------------
noted, Principal Business
Address will be:
751 Broad Street
Newark, New Jersey 07102
--------------------------

Odubekun, Francis Asst. Chief Operating Officer None

Ascherl, Mary Stewart Asst. Secretary None

Cavanaugh, Mary L. Asst. Secretary None

Williamson, Michael G. Chief Financial Officer & Comptroller None
30 Scranton Office Park
Scranton, PA 18507

Fetting, Mark Raymond Executive Vice President None
100 Mulberry St.
Gateway Three
Newark, NJ 07102

Greene, Jonathan Michael Executive Vice President President

Hamilton, Jean Diana Executive Vice President None

Joelson, Ronald Paul Executive Vice President None
71 Hanover Road
Florham Park, New Jersey 07932

Storms, Brian Marshall Executive Vice President None
100 Mulberry St.
Gateway Three
Newark, NJ 07102

Strangfeld, Jr., John R. Executive Vice President None
8 Campus Drive
Arbor Circle South
Parsippany, NJ 07054

Caulfield, Edward Michael President None

Wallner, Scott S. Secretary & Chief Legal Officer None

Bossi, Anne Elizabeth Senior Vice President None
290 W. Mt. Pleasant Avenue
Livingston, NJ 07039

Hiller, Jeffrey Senior Vice President None

Mosse, Mario Alberto Senior Vice President & Chief
Operating Officer None

Chaplin, Charles Edward Treasurer None

McGuire, Carl L. Vice President None
30 Scranton Office Park
Scranton, PA 18507

Moos, Robert William Vice President None
213 Washington Street
Newark, NJ 07102

</TABLE>

(c) Reference is made to the Section entitled "Charges" of the
prospectus (Part A of this Registration Statement), "Investment
Management and Administration of VCA-10, VCA-11 and VCA-24" on
page 2 of the Statement of Additional Information (Part B of this
Registration Statement).

C-9
<PAGE> 104

Item 35. LOCATION OF ACCOUNTS AND RECORDS

The names and addresses of the persons who maintain physical possession of the
accounts, books and documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder are:

The Prudential Insurance Company of America
and The Prudential Investment Corporation
751 Broad Street
Newark, New Jersey 07102-3777

The Prudential Insurance Company of America
and The Prudential Investment Corporation
Gateway Three Building and Gateway Four Building
100 Mulberry Street
Newark, New Jersey 07102

The Prudential Insurance Company of America
and The Prudential Investment Corporation
56 North Livingston Avenue
Roseland, New Jersey 07068

The Prudential Insurance Company of America
c/o Prudential Defined Contribution Services
30 Scranton Office Park
Scranton, Pennsylvania 18507-1789

Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105

Item 36. MANAGEMENT SERVICES

Not Applicable

Item 37. UNDERTAKINGS

The Prudential Insurance Company of America ("Prudential") represents that the
fees and charges deducted under the contract, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by Prudential.

Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section. Registrant also undertakes (1) to file a post-effective
amendment to this registration statement as frequently as is necessary to ensure
that the audited financial statements in the registration statement are never
more than 16 months old as long as payment under the contracts may be accepted;
(2) to affix to the prospectus a postcard that the applicant can remove to send
for a Statement of Additional Information or to include as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information; and (3) to
deliver any Statement of Additional Information promptly upon written or oral
request.

Restrictions on withdrawal under Section 403(b) Contracts are imposed in
reliance upon, and in compliance with, a no-action letter issued by the Chief of
the Office of Insurance Products and Legal Compliance of the Securities and
Exchange Commission to the American Council of Life Insurance on November 28,
1988.

REPRESENTATION PURSUANT TO RULE 6c-7

Registrant represents that it is relying upon Rule 6c-7 under the Investment
Company Act of 1940 in connection with the sale of its group variable contracts
to participants in the Texas Optional Retirement Program. Registrant also
represents that it has complied with the provisions of paragraphs (a) - (d) of
the Rule.

C-10

<PAGE> 105

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant has caused this Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Newark, and State of New Jersey, on the 28th day of April, 1998, and
certifies this Amendment is filed solely for one or more of the purposes
specified in Rule 485(b)(1) under the Securities Act of 1933 and that no
material event requiring disclosure in the prospectus, other than one listed in
Rule 485(b)(1), has occurred since the effective date of the most recent
Post-Effective Amendment to the Registration Statement which included a
prospectus.

THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT-11

By: /s/ MENDEL A. MELZER
----------------------------
Mendel A. Melzer
Chairman

C-11
<PAGE> 106

SIGNATURES

As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

MENDEL A. MELZER Member and Chairman, The )
- ---------------------------- Prudential Variable Contract )
Mendel A. Melzer Account-11 Committee )

GRACE TORRES Principal Accounting Officer )
- ---------------------------- )
Grace Torres )

*W. SCOTT McDONALD, JR. Member, The Prudential ) April 28, 1998
- ---------------------------- Variable Contract )
W. Scott McDonald, Jr. Account-11 Committee )

JONATHAN GREENE Member, The Prudential )
- ---------------------------- Variable Contract )
Jonathan Greene Account-11 Committee )

*JOSEPH WEBER Member, The Prudential )
- ---------------------------- Variable Contract )
Joseph Weber Account-11 Committee )

*SAUL K. FENSTER Member, The Prudential )
- ---------------------------- Variable Contract )
Saul K. Fenster Account-11 Committee )

*By: /s/ CAREN CUNNINGHAM
-------------------------------
Caren Cunningham
(Attorney-in-Fact)

C-12

<PAGE> 107

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, The Prudential Insurance Company of America has caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Newark, and State of New Jersey, on
the 28th day of April, 1998.

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By: /s/ MENDEL A. MELZER
--------------------------
Mendel A. Melzer
Vice President

As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed below by the following Directors and
Officers of The Prudential Insurance Company of America in the capacities and on
the date indicated.

Signature Title Date
- --------- ----- ----
*ARTHUR F. RYAN Chairman of the Board, )
- ---------------------------- President and Chief ) April 28, 1998
Arthur F. Ryan Executive Officer )

*By: /s/ CAREN CUNNINGHAM
------------------------------
Caren Cunningham
(Attorney-in-Fact)

C-13

Signature Title Date
- --------- ----- ----
<S> <C> <C>
*FRANKLIN E. AGNEW )
- ---------------------------- Director )
Franklin E. Agnew )

*FREDERIC K. BECKER )
- ---------------------------- Director )
Frederic K. Becker )

*MARTIN A. BERKOWITZ Senior Vice President )
- ---------------------------- and Comptroller )
Martin A. Berkowitz )

*RICHARD J. CARBONE )
- ---------------------------- Chief Financial Officer )
Richard J. Carbone )

*JAMES G. CULLEN )
- ---------------------------- Director )
James G. Cullen )

*CAROLYNE K. DAVIS )
- ---------------------------- Director ) April 28, 1998
Carolyne K. Davis )

*ROGER A. ENRICO )
- ---------------------------- Director )
Roger A. Enrico )

*ALLAN D. GILMOUR )
- ---------------------------- Director )
Allan D. Gilmour )

*WILLIAM H. GRAY, III )
- ---------------------------- Director )
William H. Gray, III )

*JON F. HANSON )
- ---------------------------- Director )
Jon F. Hanson )

*GLEN H. HINER, JR. )
- ---------------------------- Director )
Glen H. Hiner, Jr. )

*CONSTANCE J. HORNER )
- ---------------------------- Director )
Constance J. Horner )

*GAYNOR KELLY )
- ---------------------------- Director )
Gaynor Kelly )

*BURTON G. MALKIEL )
- ---------------------------- Director )
Burton G. Malkiel )

*IDA F.S. SCHMERTZ )
- ---------------------------- Director )
Ida F.S. Schmertz )

</TABLE>

*By: /s/ CAREN CUNNINGHAM
---------------------------------
Caren Cunningham
(Attorney-in-Fact)

C-14

<PAGE> 109

Signature Title Date
- --------- ----- ----

*CHARLES R. SITTER )
- ---------------------------- Director )
Charles R. Sitter )

*DONALD L. STAHELI )
- ---------------------------- Director )
Donald L. Staheli )

*RICHARD M. THOMSON )
- ---------------------------- Director )
Richard M. Thomson )

*JAMES A. UNRUH )
- --------------------------- Director )
James A. Unruh )

*P. ROY VAGELOS, M.D. )
- ---------------------------- Director ) April 28, 1998
P. Roy Vagelos, M.D. )

*STANLEY C. VAN NESS )
- ---------------------------- Director )
Stanley C. Van Ness )

*PAUL A. VOLCKER )
- ---------------------------- Director )
Paul A. Volcker )

*JOSEPH H. WILLIAMS )
- ---------------------------- Director )
Joseph H. Williams )

*By: /s/ CAREN CUNNINGHAM
------------------------------
Caren Cunningham
(Attorney-in-Fact)

C-15

<PAGE> 110

Exhibit Index
-------------

Ex-99.3 Custodian Agreement with
Investors Fiduciary Trust Company C - 17

Ex-99.13(i)(a) Consent of Price Waterhouse LLP,
independent accountants C - 18

Ex-99.13(i)(b) Consent of Deloitte & Touche LLP C - 19
independent auditors.

Ex-99.13(ii)(a) Powers of Attorneys
for Committee Members C - 20

Ex-99.17 Financial Data Schedule C - 23

C-16

<PAGE> 1
Exhibit 3

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
CUSTODY AGREEMENT

THIS CUSTODY AGREEMENT ("Agreement"), dated as of September 16, 1996 is
entered into by and between INVESTORS FIDUCIARY TRUST COMPANY, a Missouri trust
company, having its trust office located at 127 West 10th Street, Kansas City,
Missouri 64105 ("Custodian"), and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a
New Jersey corporation, having its principal office and place of business at
Prudential Plaza, Newark, New Jersey 07102 ("Client").

WHEREAS, Client desires to arrange for the custody of certain assets
belonging to separate accounts (each a "Separate Account" and collectively, the
"Separate Accounts") established and maintained by Client, which Separate
Accounts are registered as management investment companies with the Securities
and Exchange Commission, with Custodian, and Custodian desires to provide such
custodial services, on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual agreements contained
herein, Custodian and Client agree as follows:

1. DEFINITIONS. The following terms, as used herein, shall have the
following meanings:

1.1. "Authorized Instruction" means a written, oral or
electronic communication accepted by Custodian in good faith that has been
transmitted subject to, and in accordance with, the Security Procedures or by
such other method as may be acceptable to, and approved in writing by, each of
Custodian and Client.

1.2. "Authorized Persons" means those persons who have been
designated and duly authorized by Client pursuant to all necessary corporate or
other action (which designation and authorization shall be evidenced by
appropriate documentation delivered to Custodian, upon which Custodian may
conclusively rely) to act on behalf of Client in connection with this Agreement
and the transactions contemplated hereby. A person so designated shall continue
to be an Authorized Person hereunder until such time as Client has delivered to
Custodian written notice of the revocation and termination of the authority of
such person to act for Client hereunder.

1.3. "Cash Account" has the meaning given at Section 5 of this
Agreement.

1.4. "Securities Account" has the meaning given at Section 3
of this Agreement.

1.5. "Security Procedure" means, for any specified method of

C-17

<PAGE> 2
communication, a procedure approved in writing by Custodian and Client for the
purpose of (i) verifying that an Authorized Instruction given pursuant to such
method of communication is that of Client, and/or (ii) detecting error in the
transmission or content of such Authorized Instruction.

1.6. "Securities Depository" means any of the securities
depositories or clearing systems listed at Schedule 1.6 hereto, as amended from
time to time in accordance with Sections 4.3.2 and 15 hereof.

1.7. "Security" means any share, stock, bond, debenture, note,
certificate of indebtedness, warrant, option or other security or other non-cash
investment property (whether represented by a certificate or by a book-entry on
the records of the issuer or other entity responsible for recording such
book-entries) that is from time to time held for the account of Client, directly
or indirectly, through a Securities Depository or by Custodian pursuant to this
Agreement.

2. REPRESENTATIONS, WARRANTIES AND COVENANTS

2.1. AUTHORITY. Client and Custodian each represent and
warrant to the other, as of the date hereof and continuing through termination
of this Agreement, that the execution, delivery and performance by them of this
Agreement (i) are within their respective corporate, trust and other
constitutive powers; (ii) have been duly authorized by all necessary corporate,
trust and other actions required by their respective constitutive documents;
(iii) require no action by or in respect of, or filing with, any governmental
body, agency or official; and (iv) do not contravene or constitute a default
under (a) any provision of applicable law or regulation, (b) their respective
constitutive documents, or (c) any agreement, judgment, injunction, order,
decree or other instrument by which they or their respective properties or
operations are bound.

2.2. TRANSFERS. As of the date hereof and continuing through
termination of this Agreement, Custodian represents and warrants to Client that
Custodian shall hold, maintain and, as applicable, transfer all Securities in
the possession, custody or control of Custodian hereunder free and clear of any
proprietary or equitable interest of Custodian, except as otherwise agreed in
writing by Custodian and Client.

2.3. MARGIN. As of the date hereof and continuing through
termination of this Agreement, Client represents to Custodian that Client will
not incur any credit, advance or overdraft, with respect to any Cash Account (as
hereinafter defined) to purchase or carry any margin stock, as defined in
Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R.
Chapter II, as amended.

2.4. CUSTODIAN FINANCIAL CONDITION. Custodian hereby
represents and warrants to Client that Custodian has, at the date hereof, a net
worth of not less than $20,000,000. During the term hereof, Custodian shall (i)
regularly furnish Client with true,

2
<PAGE> 3
correct and complete copies of Custodian's quarterly and annual financial
statements, when and as rendered, and (ii) provide Client with such other
interim financial statements and information pertaining to Custodian's then
current financial condition as reasonably may be requested by Client from time
to time for the purpose of confirming Custodian's continued solvency, net worth
and qualification to act hereunder.

3. SECURITIES ACCOUNTS.

3.1. ESTABLISHMENT OF THE SECURITIES ACCOUNTS Client hereby
establishes with Custodian a securities account for each Separate Account
identified at Schedule 3.1 hereto ( each a "Securities Account" and
collectively, the "Securities Accounts") in the manner and on the terms
specified herein.

3.2. OWNERSHIP AND IDENTIFICATION. All Securities held
directly or indirectly in the Securities Accounts shall be held by Custodian for
the exclusive account and benefit of Client, and beneficial ownership of the
Securities shall at all. times remain vested in Client. The books and records of
Custodian shall so identify the Securities and the Securities Accounts.
Custodian shall cause Client's interest in the Securities to be evidenced by a
credit to the Securities Accounts on the books of Custodian. Custodian shall
segregate on its books and records any securities which are held by it for
Custodian's own account from those securities (including the Securities) held by
it for the account of others. Notwithstanding anything stated in Section 8 of
this Agreement to the contrary, Custodian shall not be responsible for the tide,
validity or genuineness of any Securities or evidence of the title receive by
it.

3.3. RIGHT TO WITHDRAW. Client shall at all times, and from
time to time, have the continuing, unqualified and unlimited right to withdraw
all or any portion of the Securities from the Securities Accounts immediately
upon demand, provided however, that any Securities designated in writing by
Client as being required to meet the deposit requirements of those insurance
regulatory authorities having jurisdiction (each, a "Regulatory Authority")
shall, to the extent required by law, be deemed held by Custodian under and
subject to the control of such Regulatory Authority, and shall not be withdrawn,
or otherwise disposed of, by or at the direction of Client without the prior
written approval of such Regulatory Authority, in a form reasonably acceptable
to Custodian.

4. TERMS OF CUSTODY.

4.1. AUTHORITY TO HOLD SECURITIES Subject to the terms and
conditions of this Agreement, Client hereby authorizes Custodian to hold
Securities received, from time to time, for the account of Client. Custodian may
hold the Securities directly or indirectly through Securities Depositories and
Sub-Custodians qualifying under Section 1.6 and this Section 4.

4.2. DIRECTLY HELD SECURITIES. Certificated Securities held
hereunder may be

3
<PAGE> 4
registered in the name of Custodian or a Sub-custodian (as defined below) and
shall be maintained and held in vaults of Custodian's sub-custodian, State
Street Bank and Trust Company ("State Street"), located in Boston,
Massachusetts, or State Street's agent, Chemical Bank, located in New York, New
York or, in the case of certificated securities to be held outside the United
States, of the applicable foreign Sub-Custodian listed in Schedule 4.4.1

4.3. SECURITIES DEPOSITORIES. Entities qualified to act as
Securities Depositories hereunder shall be limited to the following: (I) a
depository that provides for long-term immobilization of securities, or a
clearing corporation that is also a depository, in each case approved by, or
registered with, the Securities and Exchange Commission ("SEC") pursuant to
Section 17A of the Securities Exchange Act of 1934, as amended; (ii) with
respect to Treasury bill and securities, a Federal Reserve Bank utilizing a
book-entry system pursuant to Subpart 0 of Treasury Circular No.300 (or the
book-entry regulations of Federal agencies in substantially the same form), 31
C.F.R Part 306 and Subpart B of 31 C.F.R. Part 350; (iii) an "eligible foreign
custodian" that is a securities depository ("Foreign Depository") under Rule
17f-5(c)(2) promulgated under the Investment Company Act of 1940 (generally, an
"SEC Rule"); (iv) as applicable, such other entities (each, an "Other Entity")
which Client determines are approved to act as a qualified depository by the
Regulatory Authorities, provided that any such Other Entity located in the
United States has been registered with, or approved by, the SEC.

4.3.1. SCHEDULE 1.6 DEPOSITORIES. Client and
Custodian herewith stipulate and agree that the entities listed at Schedule 1.6
are qualified to act as Securities Depositories under this Section 4.3.

4.3.2. ADDITIONAL DEPOSITORIES. If Custodian wishes
to engage a Securities Depository hereunder and such Securities Depository is
not listed at Schedule 1.6 (each, an "Additional Depository"), the engagement of
such Additional Depository shall be subject to, and shall require, Client's
prior written approval. Upon such approval, the Additional Depository shall be
listed by amendment to Schedule 1.6, in accordance with Section 15 hereof.

4.3.3. FOREIGN DEPOSITORIES. With respect to Foreign
Depositories, Custodian shall continuously monitor the eligibility of the
Foreign Depositories and if, at any time, Custodian determines that any Foreign
Depository no longer satisfies the requirements of SEC Rule 17F-5(c)(2)~
Custodian shall promptly provide written notice to Client and will act upon
Authorized Instructions.

4.3.4. OWNERSHIP AND IDENTIFICATION. Custodian shall
require each Securities Depository to identify Securities held by the Securities
Depository as being held for the account of Custodian for its customers to the
extent permitted by the rules and procedures of such Securities Depository.

4
<PAGE> 5
4.3.5 NO COMMINGLING. Securities held by Custodian in
accounts with Securities Depositories hereunder shall not be commingled with
securities or other assets held by such Security Depository for the beneficial
account and interest of Custodian.

4.3.6. SECURITIES DEPOSITORY LIENS. Custodian hereby
represents, warrants and covenants that it will permit a Securities Depository
to hold Securities hereunder, only if, and continuing for so long as (i) the
Securities are not subject to any right, charge, security interest, lien or
claim of any kind in favor of the Securities Depository or its creditors,
including a receiver, trustee in bankruptcy or similar authority, other than for
final settlement of Securities Transactions and (ii) beneficial ownership of the
Securities is freely transferable without the payment of money or value, in
either case other than for safe custody or administration.

4.3.7. AGENCY. A Securities Depository engaged under
this Section 4.3 shall at all times be deemed the agent of Custodian.
Custodian's deposit of Securities with a Securities Depository shall not relieve
Custodian of any of Custodian's duties, obligations. responsibilities or
liabilities under this Agreement except as provided in Section 8.1.

4.4. SUB-CUSTODIANS.To the extent permitted by law, Custodian
is authorized to engage State Street as a Sub-custodian hereunder as well as
additional sub-custodians (which may be sub-custodians of State Street) to hold
Securities and cash necessary to effect Securities transactions in any
jurisdiction where a Security is required or otherwise directed by Client to be
held if Custodian does not have facilities for the deposit of Securities in such
jurisdiction (each, a "Sub~Custodian"), and to permit such Sub-Custodians to use
Securities Depositories in accordance with Section 4.3 hereof, as necessary for
such purpose. Sub-Custodians engaged to hold foreign securities, cash and cash
equivalents in accordance with SEC Rule 17f-5(a) shall be limited to "eligible
foreign custodian" under SEC Rule 17f-5(c)(2) (each a "Foreign Sub-Custodian").

4.4.1. APPROVAL REQUIRED. Sub-Custodians engaged by
Custodian under this Section 4.4 shall be subject to, and shall require the
prior written approval of, Client. All Sub-Custodians approved at the time of
this Agreement's execution shall be listed in Schedule 4.4.1.

4.4.2. OWNERSHIP AND IDENTIFICATION. All Securities
held by a Sub-Custodian hereunder shall be identified (I) on Custodian's books,
as belonging to Client and located at the Sub-custodian, and (ii) on the
Sub-Custodian's books, as belonging to Custodian or State Street, as applicable,
for the account and beneficial interest of Custodian's customers or State
Street's customers, as applicable.

4.4.3. COMMINGLED ACCOUNTS. Custodian may permit a
Sub-Custodian to commingle the Securities of Client with Securities of other
sub-custodial accounts held by the Sub-Custodian for the account of Custodian
and other customers of the Sub-Custodian; provided however, that under no
circumstances shall any such sub-custodial account

5
<PAGE> 6
commingle Securities of Client with securities or other assets beneficially
owned by Custodian or such Sub-custodian.

4.4.4. AGENCY. A Sub-Custodian engaged under this
Section 4.4 shall at all times be deemed the agent of Custodian. Custodian's
engagement of a Sub-Custodian shall not relieve Custodian of any of Custodian~s
duties, obligations, responsibilities or liabilities under this Agreement except
as provided in Section S. 1. Upon request of Client, Custodian shall be willing
to contract with Sub-Custodians designated by Client and reasonable acceptable
to Custodian ("Special Purpose Sub-Custodian") for purposes of (I) effecting
third-party repurchase transactions with banks, brokers, dealers, or other
entities through the use of a common custodian or subcustodian, or (ii)
providing depository and clearing agency services with respect to certain
variable rate demand note Securities, or (iii) for other reasonable purposes
specified by Client.

4.4.5. FOREIGN SUB-CUSTODIANS. With respect to
Foreign Sub-Custodians, Custodian shall continuously monitor the eligibility of
the Foreign Sub-Custodian and if, at any time, Custodian determines that any
Foreign Sub-Custodian no longer satisfies the requirements of SEC Rule
17f-5(c)(2), Custodian shall promptly provide written notice to Client and will
act upon Authorized Instructions.

4.5. USE OF NOMINEES: Custodian, a Securities Depository
and/or a Sub-Custodian acting hereunder may register Securities in the names of
their respective nominees. Client shall have the right to approve use of a
nominee hereunder, which approval shall not be withheld unreasonably. Use of a
nominee shall require that either (i) Custodian provide Client with an affidavit
from an officer of Custodian describing the legal structure of the nominee, and
identifying the nominee's officers, directors or partners, as applicable
("Nominee Affidavit") or (ii) that the parties hereto specify any nominees'
legal structure in Schedule 4.5 to this Agreement. Custodian shall follow the
instructions of Client with respect to any required filing of a Nominee
Affidavit with the Regulatory Authorities. Client agrees to hold Custodian, any
Sub-Custodian, any Securities Depository and their respective approved nominees
harmless from any liability incurred solely by virtue of being shareholder of
record of any Securities.

4.5.1. STREET NAME. Client may direct Custodian to
maintain or cause a Sub-Custodian to maintain Securities in so-called "street
name"; provided, however, that notwithstanding anything herein to the contrary,
Custodian and any such Sub-custodian shall be obligated only to utilize best
efforts to timely collect income due to Client on such Securities and to nod
Client of relevant corporate actions, including, without limitation, pendency of
calls, maturities, and tender and exchange offers.

4.6. FUNGIBILITY. Securities held by Custodian hereunder,
directly or indirectly through a Securities Depository, may be treated as
fungible with other identical securities of the same issue pursuant to the
provisions of the Uniform Commercial Code of the State of New York (or other
applicable laws).

6
<PAGE> 7
4.7. NO HYPOTHECATION. Except as provided in Section 6.8,
Custodian shall have no power to deliver, assign, pledge, lend, hypothecate or
otherwise dispose of any Security to any person or entity, except pursuant to an
Authorized Instruction

4.8. NO RELEASE OR DISCHARGE. Except as expressly provided
herein~, no~e of the terms or conditions contained in this Section 4 or in
Sections 8 and 9 hereof shall be construed. operate or be effective to limit,
release or discharge in any manner Custodian's duties, obligations,
responsibilities and liabilities to Client in connection with Custodian's direct
or indirect holding of Securities hereunder, whether in definitive or book-entry
form.

5. CASH ACCOUNTS. Client hereby authorized and instructs Custodian, as
an agent of Client, to establish and deposit accounts with State Street to be
used in connection with transactions relating to the Securities (the "Cash
Accounts"). The Cash Accounts shall be custodial accounts under this Agreement,
and shall be subject to all the terms, conditions and other provisions of this
Agreement.

5.1. OWNERSHIP AND IDENTIFICATION. All cash held in the Cash
Accounts shall be held by Custodian for the benefit of Client and the books and
records of Custodian shall so identify the Cash Accounts.

6. INSTRUCTIONS BY CLIENT

6.1. IN GENERAL. Client shall give Authorized Instructions
with respect to cash and Securities only to Custodian. If Custodian, in the
exercise of the standard of care described in Section 8.1 below, is uncertain as
to the appropriate action to be taken in any circumstances, upon Custodian's
request, Client shall give Custodian Authorized Instructions as to the action to
be taken. Securities held by a Securities Depository shall be subject only to
the instructions of Custodian or the applicable Sub-Custodian.

6.2. BINDING EFFECT. Custodian shall promptly follow and
comply with, and shall instruct all Sub-Custodians and Securities Depositories
holding Securities hereunder to promptly follow and comply with, all lawful
Authorized Instructions given by Client under and in accordance with this
Agreement. Custodian shall not be required to follow or comply with, nor shall
Custodian be required to instruct a Sub-custodian or Securities Depository to
follow or comply with, any Authorized Instruction (i) that would violate any
applicable law, decree, regulation or order of any government, Regulatory
Authority or other governmental body or agency (including any court or
tribunal), or that otherwise would be contrary to any term, condition or
provision of this Agreement; or (ii) that could make Custodian, any
Sub-Custodian or Securities Depository, or the nominee of any of them, liable
for the payment of money on its own account, unless Client, as a prerequisite to
the taking of such action, provides Custodian and any applicable Sub-Custodians
and Securities Depositories an Indemnity in an amount and form satisfactory to
it or them.

6.3. DELIVERY OF SECURITIES. Securities shall be transferred,
exchanged or

7
<PAGE> 8
delivered by Custodian, to the extent sufficient Securities are actually held in
the Securities Accounts and available for delivery, only (i) as specified by an
Authorized Instruction; (ii) in exchange for, or upon conversion into, other
Securities or cash pursuant to a plan of merger, consolidation, reorganization,
recapitalization or readjustment; (iii) upon conversion of Securities pursuant
to their terms into other Securities~s; or (iv) upon termination of this
Agreement.

6.4. CONTRACTUAL SETTLEMENTS. Subject to the provisions of
Section 9' Custodian shall settle all purchases and sales of Securities
hereunder (i) in accordance with Customer's Authorized Instructions, and (ii) on
an "actual settlement" or "good on delivery" basis.

6.5. REPORTING OF CERTAIN MATTERS. Custodian shall promptly
deliver to Client upon receipt all written information (including, without
limitation, pendency of calls and maturities of Securities and expirations of
rights in connection therewith, calls for voting or the exercise of rights or
other specific action intended to be transmitted to holders of the Securities,
proxy statements, proxy forms, prospectuses and other corporate reports)
received from issuers of, or otherwise in respect of, the Securities held under
this Agreement. With respect to tender or exchange offers, Custodian shall
promptly deliver to Client upon receipt all written information received from
issuers of the Securities whose tender or exchange is sought and from the party
(or the party's agents) making the tender or exchange offer. If Client desires
to take action with respect to any tender offer, exchange off~r or other similar
transaction, Client will so instruct Custodian (I) as to Securities held in the
United States, one (1) day prior to the date on which such action is due; and
(ii) as to Securities held outside the United States, two (2) day prior to the
day by which Custodian must provide instructions to a~y Sub-Custodian; provided,
however, that in the event special requirements applicable to any such
transaction require earlier delivery of instructions from Client, Custodian
shall notify Client thereof and Client shall provide instructions to Custodian
in sufficient time to provide Custodian a reasonable time to act thereon.

6.6. SECURITIES MATTERS. Unless and until Custodian receives
an Authorized Instruction to the contrary, Custodian shall hold, administer and
manage the Securities in accordance with this Section 6.6.

6.6.1. DIVIDENDS AND DISTRIBUTIONS. Except as Set
forth in Schedule 6.6.1 hereto, Custodian shall credit to Client's account all
dividends, interest and other payments made under, and all stock dividends,
rights and other similar distributions made, issued or received with respect to,
the Securities on the date that such payments, dividends or distributions are
due, regardless of whether such payments, dividends or distributions have been
received by Custodian on such date. If such dividends, payments or distributions
subsequently are not received, Custodian shall track the non-receipt and make
whatever reasonable claim may be necessary to enforce collection; provided,
however that if any such dividend, payment or distribution is not received
within a reasonable time, upon prior written notice to Client, Custodian may
reverse the credit made to Client's account; and provided

8
<PAGE> 9
further, however, that nothing herein shall obligate Custodian to initiate or
appear and participate in any legal action or bankruptcy or other insolvency
proceeding necessary to enforce any claim.

6.6.2. PRESENTATION FOR PAYMENT. Custodian shall
present for payment all coupons and other income items held by Custodian which
call for payment upon presentation, all maturing Securities and those called for
redemption, and deposit cash received upon such payments in the applicable Cash
Account; provided, however, that in the case of Securities which are called for
redemption or otherwise become payable prior to their stated maturity, Custodian
shall be considered to have acted timely hereunder if Custodian presents die
same for payment promptly upon obtaining actual knowledge thereof or when
Custodian, in the exercise of the standard of care described by Section 8.1,
should have obtained knowledge thereof.

6.6.3. OWNERSHIP CERTIFICATES. Custodian shall
execute in the name of Client such ownership and other certificates as may be
required to obtain payment or exercise rights in respect of the Securities;
provided, however, that Custodian shall not be authorized to exercise voting
rights held in respect of the Securities other than as directed in writing by
Client.

6.6.4. VOTING OF THE SECURITIES. Custodian shall,
Upon receipt of Authorized Instructions from Client, execute and deliver, or
cause its Sub-custodians, Securities Depositories, or its or their nominees (as
applicable).. to execute and deliver such proxies or other authorizations as may
be required to vote the Securities in accordance with such Authorized
Instructions. Except as permitted by such Authorized Instructions, neither
Custodian nor any of its Sub-Custodians, Securities Depositories, or its or
their nominees (as applicable) shall exercise any power to vote the Securities,
or execute any proxy, power of attorney, or other similar instrument voting any
of such Securities, or give any consent, approval, or waiver with respect
thereto, or take any other similar action.

6.6.5. MAIL TO CLIENT. Custodian shall accept and
open all mail directed to Client in care of Custodian, and shall promptly
forward all such materials to Client.

6.6.6. DISCLOSURES TO ISSUERS. Except as otherwise
required by applicable law, Custodian shall not disclose Client's name, address
and Securities position to the issuers of the Securities when and as such
issuers request.

6.6.7. WITHHOLDING TAXES. As part of the custodial
services rendered hereunder, Custodian shall investigate and advise Client with
respect to available means and methods for the elimination at source, or for the
reclaim, of withholding taxes assessed in connection with the transactions
contemplated hereby. Custodian shall, from time to time, make such filings with
the governmental authorities as may be required to eliminate or secure the
refund of such withholding taxes upon receipt from Client, in completed form, of
all

9
<PAGE> 10
forms, documents, instruments, proofs and supporting information required to be
filled in connection therewith. In performing its duties under this section.
unless otherwise informed by Client, Custodian shall be entitled to apply
categorical treatment of Client according to the nationality of Client, the
particulars of its organization and other relevant details supplied by Client.
Client shalt inform Custodian in writing of any change in the organization,
domicile or other relevant fact concerning tax treatment of Client and if Client
is or becomes the beneficiary of any special ruling or treatment not applicable
to the general nationality and category of entity of which Client is a part
under general laws and treaty provisions.

6.6.8. ROUTINE MATTERS. Custodian will, or will
instruct its Sub-Custodians, Securities Depositories or its or their nominees,
as applicable, to attend to all routine and mechanical matters in connection
with the sale, exchange, substitution, purchase, transfer of other dealings with
Securities, except as otherwise expressly provided in this Agreement or as
directed by Client from time to time in Authorized Instructions.

6.7. PARTIAL OFFERS. If Custodian, whether by nominee or
otherwise, holds Securities that are commingled and fungible with securities of
the same issue belonging to others (such that the specific Securities held for
the account of Client are not identifiable), and an offer of partial redemption,
partial payment or other action affecting less than all of such securities is
received (collectively, "Partial Offer"), Custodian shall select the securities
eligible to participate in the Partial Offer on any fair, equitable and
non-discriminatory basis that it customarily uses to make such selections. If
such fungible Securities are held by a Securities Depository or Sub-Custodian
and a Partial Offer is received, any method of selection customarily used by the
Securities Depository or Sub-Custodian, as applicable, shall be acceptable to
select the securities eligible to participate in such Partial Offer; provided
however, that Custodian shall use its best efforts to cause such selection to be
made on a fair, equitable and non-discriminatory basis.

6.8 PAYMENTS. Custodian shall make payments only to the extent
that sufficient cash is available in the applicable Cash Account or otherwise,
and only (i) as specified in an Authorized Instruction, or (ii) upon the
termination of this Agreement. Custodian or State Street may make payments, from
time to time, on behalf of Client when sufficient cash is not available in the
applicable Cash Account, but shall have no obligation to make such payments. Any
such credit, advance or overdraft shall be repaid by Client on Custodian's
demand together with the overdraft charge specified in Schedule 10 from the
date advanced until the date ~ As security for any advance made by Custodian or
State Street to pay for Securities purchased by Client pursuant to an Authorized
Instruction, Client hereby grants Custodian and State Street a lien on and
security interest in all Securities at any time held from the account of Client9
including without limitation all Securities acquired with the amount advanced.
Should Client fail to promptly repay the advance and related overdraft charges,
Custodian and State Street, as applicable, shall be entitled to utilize
available cash and to dispose of Securities pursuant to applicable law to the
extent necessary to obtain reimbursement of the amount advanced and related
overdraft charges. Custodian shall promptly notify Client of the amount of any
such overdraft and of the amount of cash and

10
<PAGE> 11
any Securities of any such overdraft and of the amount of cash and any
Securities debited from the Securities Accounts to repay any such advance and
related overdraft charges.

7. REPORTING.

7.1. STATEMENTS. Custodian shall mail, or cause to be mailed,
or transmit electronically to Client, or with Client's permission, make
available to Client electronically, on not less than a monthly basis, statements
of the Securities Accounts and Cash Accounts. The statements shall list the
Securities and the cash balances of the accounts. Custodian shall promptly
correct any errors or omissions in such statements of which it becomes aware and
shall furnish Client with prompt notice of the correction.

7.2. NEW JERSEY REPORT. Custodian shall periodically file a
report with respect to the Securities held by it under this Agreement as
required, and in the form prescribed, by Section 11:19-2.4 of the New 3ersey
Administrative Code.

7.3. ACCESS TO RECORDS. Upon demand, Custodian shall allow
Client, Client's advisors, accountants, counsel and other authorized
representatives, and the Regulatory Authorities such access to the records of
Custodian relating to the securities Accounts, the Cash Accounts and the
transactions contemplated hereby as may be required under the circumstances.
Custodian shall cooperate with all such requests and records inspections on a
best efforts basis but shall be reimbursed by Client for all reasonable expenses
and employee time invested in any such inspection outside of normal and routine
periodic reviews.

7.4. ACCOUNTING CONTROL SYSTEM REPORTS. Custodian shall
provide Client with any report concerning the inter~l accounting control systems
of a Securities Depository holding Securities hereunder to which Custodian has
access and with annual reports on Custodian's own systems of internal accounting
control.

7.5. OTHER INFORMATION. Custodian shall maintain records
sufficient to verify the related information reported m Client's annual and
quarterly statutory financial statements as filed with the State of New Jersey
and the National Association of Insurance Commissioners. Custodian further
agrees (i) to provide, on request, affidavits in the forms shown at Schedule 7.5
hereto as required by Circular letter 1977-2 of The New York State Insurance
Department (Attachments B, C and D thereto) or in such other substantially
equivalent forms as may be reasonably acceptable to Client and the New York
State Insurance Department in order for such securities to be recognized as
admitted assets for statutory reporting purposes; (ii) to provide similar
affidavits required by the Regulatory Authorities of other jurisdictions; and
(iii) to provide such additional reporting information to Client regarding the
Securities and the transactions contemplated hereby as may be requested from
time to time by Client.

8. CUSTODIAN RESPONSIBILITIES AND INDEMNIFICATION.

11
<PAGE> 12
8.1. STANDARD OF CARE. Custodian shall exercise the standard
of care that a professional custodian engaged in the banking or trust company
industry and having professional expertise in financial and securities
processing transactions and custody functions would observe with respect to the
subject matter of this Agreement. Custodian shall be liable to Client for losses
of Securities or other property in the Securities Accounts and the Cash Accounts
which result from (i) breach of this Agreement, or (ii) the negligence or
willful misconduct of Custodian and any Securities Depository or Sub-Custodian
acting hereunder or any of their respective officers, employees, agents or
nominees except that Custodian shall be responsible to Client for any loss9
damage or expense suffered or incurred by Client resulting from the actions or
omissions of any Securities Depository or Special Purpose Sub-Custodian only to
the same extent such entity is responsible to Custodian. Client shall be
entitled to review and participate in the negotiation of contracts with
Sub-Custodians. Custodian shall pursue, or cause its Sub-custodian to pursue,
available rights and remedies against any Securities Depository or Special
Purpose Sub-custodian responsible for any loss, damage or expense suffered or
incurred by Client with all reasonable business efforts. Client shall be
subrogated to such rights and remedies, to the extent allowable under applicable
law, at Client's option. Notwithstanding the foregoing, Custodian shall be
strictly liable for any loss of Securities resulting from fire, robbery,
burglary, theft or other disappearance.

8.2. REPLACEMENTS. In the event of loss of, or damage to, a
Security held hereunder, for which Custodian is responsible under the terms
hereof, Custodian, on demand by Client, will promptly replace such lost or
damaged Security with securities identical in kind and quality, together with
all rights and privileges pertaining thereto. If Custodian is unable to replace
the Security, Custodian shall pay Client a cash amount equal to the fair market
value of the Security as of the date of the discovery of the loss or damage.

8.3. INSURANCE. Custodian represents, warrants and covenants
that it has in force at the date hereof, and shall maintain in force during the
lull term of this Agreement, insurance with respect to the Securities covering
such risks and in such amounts as Custodian maintains with respect to securities
held for its own account and for the account of other customers.

8.4. INDEMNIFICATION OF CLIENT. Custodian shall indemnity,
defend and hold Client harmless of, from and against any loss, damage, claim,
demand or liability, including, without limitation, reasonable costs and
attorneys' fees (collectively, "Losses"), incurred by Client to the extent
resulting from (i) Custodian's breach of this Agreement, (ii) Custodian's
negligence or (iii) Custodian's willful misconduct. Custodian's obligation to
indemnify Client hereunder is conditioned upon Custodian's receipt from Client
of (a) prompt written notice of the claim or matter in respect of which
indemnity is sought; provided, however, that failure or delay in giving such
notice shall not relieve Custodian of its obligations hereunder except to the
extent Custodian is prejudiced thereby; ~) cooperation of Client, on a best
efforts basis, in the defense and settlement of any matter involving a third
party claim; and (c) Client's tender to Custodian of the right to control,
defend and settle, in Custodian's

12
<PAGE> 13
sole discretion, any matter involving a third party claim. Under no
circumstances shall Custodian be liable to Client for indirect, special or
consequential damages, irrespective of whether or not Custodian was apprised of
the likelihood of such damages

8.5. RELIANCE BY CUSTODIAN. Notwithstanding anything in this
Agreement to the contrary, but provided that Custodian has otherwise exercised
the standard of care described in Section 8.1:

(a) Custodian may conclusively assume that any procedure agreed upon,
approved or directed by Client, its accountants or other advisors does not
conflict with or violate any requirements of its articles of incorporation,
bylaws, any prospectus, any applicable law, rule or regulation of the type
4escribed in Section 8.6~), or any order, decree or agreement by which Client
may be bound;

b) Custodian shall rely upon Client to notify Custodian of any statutes,
rules, regulations, requirements or policies which relate to Client, and of any
changes therein, which may materially impact Custodian's performance of its
responsibilities hereunder or its related operational policies and procedures in
a manner different from United States domiciled insurance companies in general;

(c) Custodian may conclusively rely upon the advice, opinion and statements
of the Authorized Persons, and Client's accountants, auditors and counsel;

(d) Custodian may conclusively rely upon any advice, notice, request,
consent, certificate or other document or instrument reasonable believed by it
to be genuine and to be signed by the proper party or parties; and

(e) Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations hereunder, or any entity for which it is
responsible hereunder, arising out of or caused, directly or indirectly, by
circumstances beyond the affected entity's reasonable control, including,
without limitation, governmental or exchange action, statute, ordinance, ruling,
regulation or direction; war, strike, riot, emergency, civil disturbances,
terrorism, vandalism, explosions, labor disputes, freezes, floods, tornados,
telecommunications system failures, revolutions or insurrections. Custodian
agrees to implement and maintain reasonable back-up and disaster recovery
procedures and plans designed to mimic any loss of data or service interruption
by all reasonable practicable steps.

9. LIMITATIONS TO CUSTODIAN DUTIES.

9.1. PAYMENT AND DELIVERY INSTRUCTIONS. Client stipulates and
acknowledges that in some securities markets, securities deliveries and payments
may not be, or are not customarily, made simultaneously. Accordingly, Client
agrees that, notwithstanding the giving of Authorized Instructions to deliver
Securities against payment or to pay for

13
<PAGE> 14
Securities against delivery, Custodian may make or accept payment for, or may
deliver, Securities in such form, at such time and in such manner as shall be in
accordance with the customs prevailing in the relevant market or among
professional custodians engaged in the banking or trust company industry and
having professional expertise in financial and securities processing
transactions and custody services.

9.2. REVERSALS. Client stipulates and acknowledges that in
some securities markets, and under certain cash clearing systems, deliveries of
securities and cash may be reversed under certain circumstances. Accordingly,
Client agrees that credits of Securities to the Securities Accounts and cash to
the Cash Accounts will be provisional and subject to reversal if, in accordance
with local practice in the market, the delivery of the Security or cash giving
rise to the credit is reversed.

10. FEES. As compensation for the services rendered hereunder, Client
shall pay Custodian a fee calculated in accordance with Schedule 10 hereto.

11. NO LIENS. Except as provided in Section 6.8, no charge or lien
against any Cash Account or Securities Account shall be permitted for any
reason, including, but not limited to, due and unpaid Custodian fees under
Section 10 or any other expense or loss incurred by Custodian in performing
hereunder, unless Client has first approved such charge or lien by Authorized
Instruction.

12. INDEMNIFICATION OF CUSTODIAN. Client shall indemnify, defend and
hold Custodian harmless of, from and against any Losses incurred by Custodian to
the extent resulting from (i) Client's breach of this Agreement, (ii) the
invalidity of any communication that Custodian believes in good faith and in
accordance with the standard of care required by Section 8.1 hereof to have been
an Authorized Instruction or a properly executed and genuine document, (iii) any
action taken or omitted to be taken, in accordance with standard of care
required by Section 8.1 hereof, by Custodian in reliance on an Authorized
Instruction or other document or information provided to it by Client, (iv)
Client's negligence, or (v) Client's willful misconduct. Client's obligation to
indemnify Custodian hereunder is conditioned upon Client's receipt from
Custodian of (a) prompt written notice of the claim or matter in respect of
which indemnity is sought; provided, however that failure or delay in giving
such notice shall not relieve Client of its obligations hereunder except to the
extent Client is prejudiced thereby; ~) cooperation of Custodian, on a best
efforts basis, in the

14
<PAGE> 15
defense and settlement of any matter involving a third-party claim; (c)
Custodian's tender to Client of the right to control, defend and settle, in
Client's sole discretion, any matter involving a third-party claim. Under no
circumstances shall Client be liable to Custodian for indirect, special or
consequential damages, irrespective of whether or not Client was apprised of the
likelihood of such damages.

13. TERMINATION. This Agreement may be terminated by either party upon
the giving of not less than sixty (60) days prior written notice. This Agreement
may be terminated immediately for cause. Terminations "for cause" shall be
limited to (i) material breach, (ii) fraud, (iii) gross negligence, (iv)
insolvency, and (v) the commencement of bankruptcy proceedings against a patty.
Upon termination of this Agreement, Client shall, by Authorized Instruction,
notify Custodian of the name of the person or entity to whom all Securities and
cash shall be delivered or paid. Custodian shall promptly deliver all Securities
and cash, along with all records not otherwise in the possession of Client
pertaining thereto (including, but not limited to, those records pertaining to
Securities held in book-entry' form, by Federal Reserve banks or retained by the
issuer) to the person or entity so specified. Regardless of whether the
termination is initiated by Client or Custodian, Custodian's responsibilities
under this Agreement shall continue until a successor custodian's appointment
becomes effective and all Securities and cash have been transferred.

14.NOTICES. Except as otherwise specified herein, any notice or other
communication to Custodian is to be addressed to it at 127 West Tenth Street,
Kansas City, Missouri 64105 Attention: Custody Department or to such other
address as may be specified by Custodian from time to time. Any notice or other
communication to Client shall be addressed to it at 2 Gateway Center, Newark,
New Jersey 07102, Attention: 3ames Quinn or to such other address as may be
specified by Client from time to time. Notices given hereunder shall be
effective upon receipt.

15. AMENDMENTS AND WAIVERS. An amendment or waiver of any term of this
Agreement shall be effective only if in writing and signed by the patty to be
bound. The waiver by either party of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach.

16. SUCCESSORS AND ASSIGNS. This Agreement shall bind the successors
and permitted assigns of the parties. Neither party may assign any of its rights
or obligations under this Agreement without the prior written consent of the
other.

17. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to its
conflicts of law rules.

18. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall constitute an original, and all of which taken
together shall comprise one and the same instrument.

15
<PAGE> 16
19. HEADINGS. The section headings used herein are for reference only
and shall not affect the interpretation of any provision of this Agreement.

20. INTEGRATION. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes any
and all prior agreements and understandings, oral or written, relating thereto.

21. CONFIDENTIALITY. The parties shall not disclose to any other party,
but shall keep confidential, the terms and conditions of this Agreement and any
amendment hereof, except to the extent required by an or regulatory authorities.

22. SECURITY PROCEDURES. Client acknowledges that it has been fully
informed of the risks associated with the various methods of communication for
transmitting Authorized Instructions to Custodian. Custodian has recommended
that Client transmit Authorized Instructions to Custodian using one or more
specified methods of communication and has recommended a type of Security
Procedure for each such method. Client hereby agrees that the Security
Procedures selected by it shall be deemed commercially reasonable even if such
Security Procedures offer less protection than those recommended by Custodian.
If Client elects to transmit Authorized Instructions to Custodian by a method of
communication for which no Security Procedure has been agreed, Client agrees to
be bound by any such Authorized Instruction that Custodian believes in good
faith to have been given by an Authorized Person. Client shall (i) not disclose,
or permit any Authorized Person to disclose, except on a "need to know" basis,
any aspects of any Security Procedure, (ii) notify Custodian immediately if the
confidentiality of any Security Procedure is compromised and (iii) act to
prevent the Security Procedures from being further compromised. Client and
Custodian have entered into a separate agreement concerning Authorized
Instructions which constitute "payment orders" under Article 4A of the Uniform
Commercial Code (the Article 4A Agreement"). With respect to such Authorized
Instructions, this Agreement and the Article 4A Agreement shall be construed
cumulatively, but in the event of any conflict or inconsistency between them,
the terms of the Article 4A Agreement shall control. With respect to Authorized
Instructions communicated orally to Custodian, (i) Custodian shall be entitled
to rely thereon if Custodian reasonable believes they are communicated by an
Authorized Person, (ii) Custodian may in its discretion tape record the
communication, (iii) Client shall confirm the same through a written or
electronic Authorized Instruction by no later than the next business day, and
(iv) Custodian shall not be responsible hereunder for actions taken or omitted
reasonably and in good faith based on any oral communication prior to receipt of
and a reasonable time to act on the written or electronic confirming Authorized
Instruction.

23. SEVERABILITY. In the event any of the terms or provisions of this
Agreement shall~ be held to be unenforceable, the remaining terms and provisions
shall be unimpaired

16
<PAGE> 17
and the unenforceable term or provision shall be replaced by such enforceable
term or provision as comes closest to the intention underlying the unenforceable
term or provision.

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.

INVESTORS FIDUCIARY TRUST THE PRUDENTIAL INSURANCE
COMPANY COMPANY OF AMERICA

By: /s/ Allen Strain By: /s/ James J. Quinn
---------------------------- ----------------------------
Title: EVP Title: Vice President & Ass't Treasurer
----------------------------

17
<PAGE> 18

SCHEDULE 1.6

Securities Depositories

Country Central Depository

United States Depository Trust Company

Participants Trust Company

Federal Reserve Bank

<PAGE> 19

SCHEDULE 3.1

Securities Accounts

Variable Contract Account -2 ("VCA-2") - YF1A

Variable Contract Account -10 ("VCA-10") - YFlE

Variable Contract Account -11 ("VCA-11") - YC1A

<PAGE> 20

SCHEDULE 4.4.1

Sub-Custodians

Country Subcustodian

United States State Street Bank and Trust

Chase Manhattan Bank (F/K/A Chemical Bank)
(Physical)

<PAGE> 21

SCHEDULE 4.5

LIST OF NOMINEES

Except where otherwise noted, each Nominee is a domestic corporation wholly
owned by the local Subcustodian.

Australia Westpac Custodian Nominees Ltd.
Austria None
Belgium None
Denmark None
Finland None
France None
Germany None
Hong Kong Horsford Nominees Ltd. (physical)/HKSCC Nominees Ltd. for
CCASS (depository)(1)
Ireland Bank of Ireland Nominees Ltd.
Italy None
Japan None
Malaysia Cartaban (M) Nominees Sdn Berhad.
Netherlands None
New Zealand ANZ Nominees Ltd.
Norway None
Singapore DBS Nominees Pty Ltd.
Spain None
Sweden Skandinaviska Enskilda Banken, as nominee(2)
Switzerland None
United Kingdom State Street London Nominees Ltd.
United States CEDE & Co.(Depository Trust Co. securities), a New York
limited purpose trust company MBSCC & Co. (Participants
Trust Co. securities), a New York limited purpose trust
company
IFTCO (domestic certificated Securities), a Missouri general
partnership composed of officers of the Custodian

Note: In countries where "None" is listed, securities are held through a central
securities depository that does not employ nominees. In such countries,
securities are registered in the name of the beneficial owner (Switzerland only)
or securities are held in bearer form.

(1)H.K. Corporation is owned by the central depository in Hong Kong.

(2)Subcustodian bank (Swedish Banking Corporation) with designation as
nominee

<PAGE> 22

FOREIGN INCOME AVAILABILITY SCHEDULE 6.6.1
STATE STREET BANK SUB-CUSTODIAN

Income will be credited contractually on pay day in the markets noted with
Contractual Income Policy. The markets noted with Actual income policy will be
credited income when it is received.

<TABLE>
<CAPTION>
MARKET INCOME POLICY MARKET INCOME POLICY MARKET INCOME POLICY
<S> <C> <C> <C> <C> <C>
Argentina Actual India Actual South Africa Actual

Australia Contractual Indonesia Actual South Korea Actual

Austria Contractual Ireland Actual Spain Contractual

Bangladesh Actual Israel Actual Sri Lanka Actual

Belgium Contractual Italy Contractual Swaziland Actual

* Bolivia Actual Ivory Coast Actual Sweden Contractual

Botswana Actual Japan Contractual Switzerland Contractual

Brazil Actual * Jamaica Actual Taiwan Actual

Canada Contractual Jordan Actual Thailand Actual

Chile Actual Kenya Actual * Trinidad & Actual
Tobago

China Actual Malaysia Actual * Tunisia Actual

Colombia Actual Mauritius Actual Turkey Actual

Cyprus Actual Mexico Actual United Kingdom Contractual

Czech Republic Actual Morocco Actual United States See Attached

Denmark Contractual Namibia Actual Uruguay Actual

Ecuador Actual Netherlands Contractual Venezuela Actual

Egypt Actual New Zealand Contractual Zambia Actual

** Euroclear Contractual/Actual Norway Contractual Zimbabwe Actual

Euro Cds Actual Pakistan Actual

Finland Contractual Peru Actual

France Contractual Philippines Actual

Germany Contractual Poland Actual

Ghana Actual Portugal Contractual

Greece Actual * Russia Actual

Hong Kong Contractual Singapore Contractual

Hungary Actual Slovak Republic Actual
</TABLE>

* Market is not 17F-5 eligible
** For Euroclear, contractual income paid only in markets listed with
Income Policy of Contractual.

<PAGE> 23

United States
Income Availability Schedule 6.6.1

<TABLE>
<CAPTION>
INCOME TYPE DTC FED PTC PHYSICAL
<S> <C> <C> <C> <C>
Dividends Contractual N/A N/A Actual

Fixed Rate Interest Contractual Contractual N/A Actual

Variable Rate Interest Contractual Contractual N/A Actual

GNMA I N/A N/A Contractual PD+l N/A

GNMA II N/A N/A Contractual PD *** N/A

Mortgags Actual Contractual Contractual Actual

Maturities Actual Contractual N/A Actual

</TABLE>

Exceptions to the above Contractual Income Policy include securities that are:

- Involved in a trade whose settlement either failed, or is pending
over the record date, (excluding the United States),

- On loan under a self directed securities lending program other than
IFTC's own vendor tending program,

- Known to be in a condition of default, or suspected to present a risk of
default or payment delay;

- In the asset categories, without limitation, of Private Placements,
Derivatives, Options, Futures, CMOs, and Zero Coupon Bonds

- Securities whose amount of income and redemption cannot be calculated
in advance of payable date, or determined in advance of actual collection,
examples include ADRs;

- Payments received as the result of a corporate action, not limited
to, bond calls, mandatory or optional puts, and tender offers.

*** For GNMA II securities, if the 19th day of the month is a business day,
Payable/Distribution Date is the next business day. If the 19th is not a
business day, but the 20th is a business day, Payable/Distribution date is
the first business day after the 20th if both the 19th and 20th are not
business days, Payable/Distribution will be the next business day
thereafter.

<PAGE> 24

SCREDULE 7.5

AFFIDAVIT FORMS

ATTACHMENT B

CUSTODIAN AFFIDAVIT

(For use by a custodian bank where securities entrusted to its care and have not
been re-deposited elsewhere.)

STATE OF

S.S.:

COUNTY OF

___________________, being duly sworn deposes and says that he is of
___________, a banking Corporation organized under and pursuant to the laws of
the _____________ with the principal place of business at _____________
(hereinafter called the "bank");

That his duties involve supervision of activities of the bank as custodian and
records relating thereto;

That the bank is custodian for certain securities of _____________ having a
place of business at _______________ (hereinafter called the "insurance
company") pursuant to an agreement between the bank and the insurance company;

That the schedule attached hereto is a true and complete statement of securities
(other than those caused to be deposited with The Depository Trust Company or
the Federal Reserve Bank of New York under the Federal Reserve book entry
procedure) which were in the custody of the bank for the account of the
insurance company as of the close of business on __________; that, unless
otherwise indicated on the schedule1 the next maturing and all subsequent
coupons were then either attached to coupon bonds or in the process of
collection; and that, unless otherwise shown on the schedule, all such
securities were in bearer form or in registered form in the name of the
insurance company or its nominee or a nominee of the bank, or were in the
process of being registered in such form;

That the bank as custodian has the responsibility for the safekeeping of such
securities as that responsibility is specifically set forth in the agreement
between the bank as custodian and the insurance company; and

That, to the best of his knowledge and belief; unless otherwise shown on the
schedule, said securities were the property of said insurance company and were
free of all liens, claims or encumbrances whatsoever.

Subscribed and Sworn to
before me this _______ day of ______________(L.S.)

<PAGE> 25

SCHEDULE 7.5
AFFIDAVIT FORMS

ATTACHMENT C

CUSTODIAN AFFIDAVIT

(For use in instances where a custodian bank maintains securities on deposit
with the Depository Trust Company.)

STATE OF

S.S.:

COUNTY OF

being duly sworn deposes and says that he is __________
of the __________ a banking corporation organized under and pursuant to the laws
of the _____________ with its principal p1 ace of business at _____________
(hereinafter called the "bank");

That his duties involve supervision of activities of the bank as custodian and
records re1ating thereto;

That the bank is custodian for certain securities of ______________ with a place
of business at _________ (hereinafter called the "insurance company") pursuant
to an agreement between the bank and the insurance company'.

That the bank has caused certain of such securities to be deposited with The
Depository Trust Company, 55 Water Street, New York (hereinafter called
"DTC"); and that the schedule attached hereto is a true and complete statement
of the securities of the insurance company of which the bank was custodian as of
the close of business on . and which were so deposited with DTC at such date;

That the bank as custodian has the responsibility for the safekeeping of such
Securities whether IN the possession of the BANK OR deposited with DTC as that
responsibility is specifically set forth in the agreement between the bank as
custodian and the insurance company; and

That, to the best of his knowledge and belief, unless otherwise shown on the
schedule, said securities were the property of said insurance company and were
free of all liens, claims or encumbrances whatsoever.

Subscribed and sworn to
before me this _____________ day of _______(L.S.)

<PAGE> 26

SCHEDULE 7.5
AFFIDAVIT FORMS

ATTACHMENT D

CUSTODIAN AFFIDAVIT

(For use wbere ownership is evidenced by book entry at Federal Reserve Bank of
New York.)

STATE OF

S.S.:

COUNTY OF

being duly sworn deposes and says that he is __________
of the __________ A banking corporation organized under and pursuant to the laws
of the ____________ with the principal place of business at ____________
hereinafter called the "bank");

That his duties involve the supervision of activities of the bank as custodian
and records relating thereto;

That the bank is custodian for certain Securities of_____________ with a place
of business at (hereinafter called the "insurance company") pursuant to an
agreement between the bank and the insurance company;

That it has caused certain of such securities to be credited to its book-entry
account with the Federal Reserve Bank of New York under the Federal Reserve book
entry procedure; and that the schedule attached hereto is a true and complete
statement of the securities of the insurance company of which the bank was
custodian as of the close of business on ____________ which were in a 'General'1
book-entry account maintained in the name of the bank on the books and records
of the Federal Reserve Bank of New York at such date;

That the bank has the same responsibility for the safekeeping of such securities
whether in the possession of the bank or in said "General" book-entry account as
that responsibility is specifically set forth in the agreement between the bank
as custodian and the insurance company; and

That~ to the best of his knowledge and belief, unless otherwise shown on the
schedule, said securities were the property of said insurance company and were
free of all liens, claims or encumbrances whatsoever.

Subscribed and sworn to before me this _______ day of _______________ (L.S.)

<PAGE> 1

Exhibit 13(i)(a)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 31 to the registration
statement on Form N-3 of The Prudential Variable Contract Account-11 (the
"Registration Statement") of our reports dated February 18, 1998, relating to
the financial statements and financial highlights of The Prudential Variable
Contract Account-10, The Prudential Variable Contract Account-11 and The
Prudential Variable Contract Account-24, which appear in such Statement of
Additional Information.

We also consent to the use in the Statement of Additional Information
constituting part of this Registration Statement of our report dated March 5,
1998, relating to the consolidated financial statements of The Prudential
Insurance Company of America, which appears in such Statement of Additional
Information.

We also consent to the references to us under the headings "Condensed Financial
Information" in the Prospectus and "Experts" in the Statement of Additional
Information.

/s/ PRICE WATERHOUSE LLP

New York, New York

April 24, 1998

C-18

<PAGE> 1

Exhibit 13(i)(b)

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Post-Effective Amendment No. 31 to Registration
Statement No. 2-76581 on Form N-3 of The Prudential Variable Contract
Account-11 of The Prudential Insurance Company of America of our report dated
June 4, 1997 relating to the consolidated financial statements of The
Prudential Insurance Company of America and subsidiaries in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the reference to us under the heading "Experts", also appearing in the
Statement of Additional Information.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey
April 24, 1998

C-19

<PAGE> 1

POWER OF ATTORNEY

Know all men by these presents:

That I, Joseph Weber, Member of the Committee of The Prudential
Variable Contract Account-11, do hereby make, constitute and appoint as my true
and lawful attorneys in fact Caren Cunningham and Grace Torres, together or
separately for me and in my name, place and stead to sign registration
statements on the appropriate forms prescribed by the Securities and Exchange
Commission for the registration under the Investment Company Act of 1940 and the
Securities Act of 1933, as applicable, and any and all amendments thereto that
may be filed with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March,
1998.

/s/ Joseph Weber
----------------
Joseph Weber

State of New Jersey )
) SS
County of Essex )

On this 11th day of March, 1998, before me personally appeared Joseph
Weber, to me known and known to me to be the person mentioned and described in
and who executed the foregoing instrument and duly acknowledged to me that he
executed same.

/s/ Floyd Hoelscher
-------------------
Floyd Hoelscher, Notary Public

C-20
<PAGE> 2
POWER OF ATTORNEY

Know all men by these presents:

That I, W. Scott McDonald, Jr., Member of the Committee of The
Prudential Variable Contract Account-11, do hereby make, constitute and appoint
as my true and lawful attorneys in fact Caren Cunningham and Grace Torres,
together or separately for me and in my name, place and stead to sign
registration statements on the appropriate forms prescribed by the Securities
and Exchange Commission for the registration under the Investment Company Act of
1940 and the Securities Act of 1933, as applicable, and any and all amendments
thereto that may be filed with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March,
1998.

/s/ W. Scott McDonald, Jr.
--------------------------
W. Scott McDonald, Jr.

State of New Jersey )
) SS
County of Essex )

On this 11th day of March, 1998, before me personally appeared W. Scott
McDonald, Jr., to me known and known to me to be the person mentioned and
described in and who executed the foregoing instrument and duly acknowledged to
me that he executed same.

/s/ Floyd Hoelscher
-------------------
Floyd Hoelscher, Notary Public

C-21
<PAGE> 3
POWER OF ATTORNEY

Know all men by these presents:

That I, Saul Fenster, Member of the Committee of The Prudential
Variable Contract Account-11 do hereby make, constitute and appoint as my true
and lawful attorneys in fact Caren Cunningham and Grace Torres, together or
separately for me and in my name, place and stead to sign registration
statements on the appropriate forms prescribed by the Securities and Exchange
Commission for the registration under the Investment Company Act of 1940 and the
Securities Act of 1933, as applicable, and any and all amendments thereto that
may be filed with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March,
1998.

/s/ Saul Fenster
----------------
Saul Fenster

State of New Jersey )
) SS
County of Essex )

On this 11th day of March, 1998, before me personally appeared Saul
Fenster, to me known and known to me to be the person mentioned and described in
and who executed the foregoing instrument and duly acknowledged to me that he
executed same.

/s/ Floyd Hoelscher
-------------------
Floyd Hoelscher, Notary Public

C-22

<ARTICLE> 6
<CIK> 0000701275
<NAME> THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT-11
<SERIES>
<NUMBER> 001
<NAME>THE PRUDENTIAL VARIABLE CONTRACT ACCOUNT-11

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 86,847,110
<INVESTMENTS-AT-VALUE> 86,847,110
<RECEIVABLES> 2,323,140
<ASSETS-OTHER> 463
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 89,170,713
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,170,713
<SHARES-COMMON-STOCK> 35,757,000
<SHARES-COMMON-PRIOR> 38,315,000
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 89,170,713
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,208,873
<OTHER-INCOME> 0
<EXPENSES-NET> 892,983
<NET-INVESTMENT-INCOME> 4,315,890
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,315,890
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 151,277,326
<NUMBER-OF-SHARES-REDEEMED> (157,195,054)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,668,809)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 223,246
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 892,983
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 2.32
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.43
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>