Financial Highlights for 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
12
<PAGE>
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>
Aerospace/Defense -- 2.7
Doncasters PLC - ADR(D)
(United Kingdom) 136,400
$2,881,450
Gen Corp. 265,000
6,625,000
Litton Industries, Inc.(D) 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.(D) 60,400
2,869,000
Tower Automotive, Inc.(D) 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.(D) 155,100
4,381,575
Cytec Industries, Inc.(D) 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(D) 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.(D) 93,000
2,766,750
Ogden Corp. 118,200
3,331,762
RFS Hotel Investors, Inc.(D) 151,200
3,014,550
360 Communications Co.(D) 136,500
2,755,594
Whitman Corp. 136,500
3,557,531
23,674,476
Containers and Packaging -- 2.6%
ACX Technologies, Inc.(D) 93,700
2,289,794
Aptargroup, Inc. 67,000
3,718,500
Alltrista Corp.(D) 170,200
4,829,425
U.S. Can Corp.(D) 264,200
4,458,375
15,296,094
Electrical Equipment -- 0.6%
Belden, Inc. 97,100
$3,422,775
Electronics -- 3.5%
Anixter International(D) 143,000
2,359,500
Dallas Semiconductor Corp. 129,200
5,264,900
Marshall Industries(D) 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.(D) 83,600
3,202,925
Apogee Enterprises, Inc.(D) 38,500
457,187
Cameron Ashley Building Products(D) 127,400
2,133,950
Giant Cement Holding, Inc.(D) 261,500
6,047,188
Gradall Industries, Inc.(D) 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.(D) 167,000
1,993,563
Occidental Petroleum Corp. 166,900
4,892,256
Oryx Energy Co.(D) 241,100
6,148,050
Pioneer Natural Resources Co. 185,100
5,356,331
Seagull Energy Corp.(D) 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(D) 189,800
6,287,125
Wellpoint Health Networks(D) 5,100
215,475
12,522,413
</TABLE>
See Notes to Financial
Statements
13
<PAGE>
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>
Housing Related -- 2.0%
Furniture Brands International,
Inc.(D) 234,300
$4,803,150
Owens Corning Fiberglass Corp. 89,300
3,047,363
Triangle Pacific Corp.(D) 110,200
3,733,025
11,583,538
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.(D) 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.(D) 234,400
3,955,500
Sonic Corp.(D) 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(D)
(United Kingdom) 98,800
1,704,300
Hardinge, Inc. 131,400
4,894,650
Harnischfeger Industries 200,600
7,083,688
Ingersoll - Rand Co.(D) 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)(D) 108,213
4,335,283
Harcourt General, Inc. 83,100
4,549,725
Tele-Communications, Inc.
Liberty Media Group (Series A)(D) 165,500
5,999,375
Time Warner, Inc. 87,800
5,443,600
U.S. West Media Group(D) 351,700
10,155,338
Viacom, Inc.
(Class "B" Stock)(D) 105,800
4,384,088
52,292,732
Metals -- 3.9%
The Carbide/Graphite Group(D) 326,500
$11,019,375
Cleveland - Cliffs, Inc.(D) 65,000
2,977,812
Reliance Steel & Aluminum 140,000
4,165,000
Ucar International, Inc.(D) 115,800
4,624,763
22,786,950
Miscellaneous-Industrial -- 11.1%
Clarcor, Inc. 148,300
4,393,388
Coltec Industries, Inc.(D) 209,600
4,860,100
Crane Co. 99,400
4,311,475
Flowserve Corp. 166,491
4,651,342
Global Industrial
Technologies, Inc.(D) 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.(D) 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)(D) 5,000
303,750
Georgia Pacific Corp.
(Timber Group)(D) 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
</TABLE>
See Notes to Financial
Statements
14
<PAGE>
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>
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
Retail -- 3.8%
BJ's Wholesale Club, Inc.(D) 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.(D) 152,100
2,167,425
Toys 'R' Us(D) 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.(D) 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
Short-Term Investment -- 4.5% Principal
Amount
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>
See Notes to Financial
Statements
15
<PAGE>
Financial Statements of VCA-
10
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
December 31,1997
<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
<TABLE>
<CAPTION>
Year Ended December
31, 1997 December 31, 1996
<S> <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
16
<PAGE>
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.
17
<PAGE>
Notes to Financial Statements of VCA-10
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.
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.
18
<PAGE>
Notes to Financial Statements of VCA-10
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 $20 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.
19
<PAGE>
Notes to Financial Statements of VCA-10
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.
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.
20
<PAGE>
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
21
<PAGE>
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,
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.
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.
See Notes to Financial
Statements
31
<PAGE>
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
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
</TABLE>
See Notes to Financial
Statements
32
<PAGE>
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>
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
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, 5.95%
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
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
33
<PAGE>
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
Statements of Changes in
Net Assets
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
34
<PAGE>
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.
35
<PAGE>
Notes to Financial Statements of VCA-11
NOTE 4: Annual Account Charge
An annual account charge of not more than
$20 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
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>
36
<PAGE>
Notes to Financial Statements of VCA-11
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.
37
<PAGE>
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
38
<PAGE>
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
40
<PAGE>
Financial Statements of
VCA-24
Statements of Changes in
Net Assets
<TABLE>
<CAPTION>
Subaccounts
Diversified Flexible
Conservative
Equity
Bond Managed
Balanced
<S> <C> <C>
<C> <C> <C> <C>
<C> <C>
For The Year
Ended Dec. 31, Dec. 31,
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Dec. 31, Dec. 31,
1997 1996
1997 1996 1997 1996
1997 1996
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 $14,412,978 11,596,557
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 25,368,814 23,331,996
Withdrawals and
Transfers Out
[Note 8] (91,090,400) (67,865,025)
(21,015,014) (10,193,617) (29,141,883)
(16,883,257) (22,504,515)(16,708,605)
Annual Account
Charges Deducted
From Participants'
Accumulation
Accounts [Note 4] (117,988) (72,051)
(10,410) (6,607) (43,728)
(22,032) (40,348) (22,848)
Deferred Sales
Charges [Note 5] (23,487) (41,536)
(4,947) (1,904) (16,791) (13,233)
(16,349) (18,558)
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 2,807,602 6,581,985
Net Increase/
(Decrease) in
Net Assets
From Surplus
Transfers [Note 9]
466,278 38,568
(428) 82,046 197,552 49,378
(18,742) 105,299
Total Increase/
(Decrease) in
Net Assets 133,205,826 100,181,323
680,217 8,349,558 38,704,031 35,073,720
7,201,838 18,283,841
Net Assets
Beginning of Year 417,704,519 317,523,196
42,470,387 34,120,829 148,755,108
113,681,388 112,330,511 94,046,670
End of Year $550,910,345 $417,704,519
$43,150,604 $42,470,387 $187,459,169
$148,755,108 $129,532,349$112,330,511
</TALE>
See Notes to
Financial Statements
41
<PAGE>
Financial Statements
of VCA-24
Statements of Changes in
Net Assets (Continued)
</TABLE>
<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
42
<PAGE>
Statements 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
Government
Equity Bond
Managed Balanced Index Global
Income
<S> <C> <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 2,428,483
NAV per Share $ 31.07 $ 11.02 $
17.28 $ 14.97 $ 30.22 $ 17.92
$ 11.52
Cost at 12-31-97 $412,513,044 $ 42,460,616 $
183,605,437 $127,337,216 $257,857,835
$64,720,667 $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 $20 and
is paid to Prudential.
43
<PAGE>
Notes to Financial Statements of VCA-24
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:
<TABLE>
<CAPTION>
1997
Diversified
Flexible Conservative Stock
Government
Equity Bond
Managed Balanced Index Global
Income
<S> <C> <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 4,382,451
Units redeemed 25,563,791 9,835,849
10,818,000 9,398,610 41,979,915
21,818,089 5,046,046
</TABLE>
The number of units issued and redeemed
during the year ended December
31, 1995 is as follows:
<TABLE>
<CAPTION>
1996
Diversified
Flexible Conservative Stock
Government
Equity Bond
Managed Balanced Index Global
Income
<S> <C> <C> <C>
<C> <C> <C> <C>
Units issued 38,166,239 8,526,394
15,805,415 11,333,358 38,820,747
20,934,314 4,744,681
Units redeemed 24,107,858 5,157,724
7,545,387 8,176,690 9,951,304 11,868,491
4,337,932
</TABLE>
44
<PAGE>
Notes to Financial Statements of VCA-24
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 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, 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:
<TABLE>
<CAPTION>
1997
Diversified
Flexible Conservative Stock
Government
Equity Bond
Managed Balanced Index Global
Income
<S> <C> <C> <C>
<C> <C> <C> <C>
Loans $2,257,704 $341,223
$1,199,224 $621,979 $1,840,620 $517,512
$224,852
Repayments $1,331,530 $206,579 $
677,861 $397,144 $1,105,869 $315,438
$ 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:
<TABLE>
<CAPTION>
1996
Diversified
Flexible Conservative Stock
Government
Equity Bond
Managed Balanced Index Global
Income
<S> <C> <C> <C>
<C> <C> <C> <C>
Loans $1,610,377 $281,245
$1,024,086 $525,796 $907,097
$385,925 $133,569
Repayments $ 984,613 $106,832 $
462,771 $235,430 $503,734 $195,908
$ 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.
45
<PAGE>
Notes to Financial Statements of VCA-24
Note 10: Condensed Financial Information
Accumulation Unit Values for VCA-24 Unit
<TABLE>
<CAPTION>
Equity 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
Diversified Bond 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
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
Flexible Managed 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
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
Conservative Balanced 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
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
Stock Index 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
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
Global 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
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
Government Income 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
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>
46
<PAGE>
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
