AS FILED WITH THE SEC ON . REGISTRATION NO. 2-80897
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 23 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 28 [X]
(Check appropriate box or boxes)
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THE PRUDENTIAL INDIVIDUAL
VARIABLE
CONTRACT ACCOUNT
(Exact Name of Registrant)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Name of Depositor)
PRUDENTIAL PLAZA
NEWARK, NEW JERSEY 07102-3777
(800) 445-4571
(Address and telephone number of principal executive offices)
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THOMAS C. CASTANO
ASSISTANT SECRETARY
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
PRUDENTIAL PLAZA
NEWARK, NEW JERSEY 07102-3777
(Name and address of agent for service)
Copy to:
JEFFREY C. MARTIN
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036
Individual Variable Annuity Contracts--The Registrant has registered an
indefinite amount of securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Rule 24f-2 notice for fiscal year 1996 was filed on
February 28, 1997.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1997 pursuant to paragraph (b) of Rule 485
-----------
(date)
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
on ___________ pursuant to paragraph (a)(1) 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.
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<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495(a) UNDER THE 1933 ACT)
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<TABLE>
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N-4 ITEM NUMBER AND CAPTION LOCATION
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PART A
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1. Cover Page ............................... Cover Page
2. Definitions .............................. Definition of Special Terms Used in This Prospectus
3. Synopsis or Highlights ................... Brief Description of the Contract; Fee Table
4. Condensed Financial Information .......... Accumulation Unit Values
5. General Description of Registrant,
Depositor, and Portfolio Companies ....... General Information About The Prudential, The Prudential Individual
Variable Contract Account, and The Variable Investment Options
Available Under the Contracts; The Fixed-Rate Option
6. Deductions and Expenses .................. Brief Description of the Contract; Charges, Fees and Deductions;
Differences Under the WVA-83 Contract
7. General Description of Variable
Annuity Contracts ........................ Part A: Brief Description of the Contract; Allocation of Purchase
Payments; Transfers; Death Benefit; The Fixed-Rate Option; Differences
Under the WVA-83 Contract; Voting Rights; Ownership of the Contract;
State Regulation
Part B: Participation in Divisible Surplus
8. Annuity Period ........................... Part A: Brief Description of the Contract; Effecting an Annuity;
Differences Under the WVA-83 Contract
Part B: Item 22, Determination of Subaccount Unit Values and of the
Amount of Monthly Variable Annuity Payment
9. Death Benefit ............................ Death Benefit; Effecting an Annuity; Differences Under the WVA-83
Contract
10. Purchases and Contract Value ............. Brief Description of the Contract; The Prudential Insurance Company of
America; Requirements for Issuance of a Contract; Valuation of Contract
Owners' Contract Funds
11. Redemptions .............................. Brief Description of the Contract; Short-Term Cancellation Right or
"Free Look"; Withdrawals; Charges, Fees and Deductions; Differences
Under the WVA-83 Contract; Effecting an Annuity
12. Taxes .................................... Premium Taxes; Federal Tax Status
13. Legal Proceedings ........................ Litigation
14. Table of Contents of the Statement of
Additional Information ................... Additional Information
PART B
15. Cover Page ............................... Cover Page
16. Table of Contents ........................ Contents
17. General Information and History .......... Not Applicable
18. Services ................................. Experts
19. Purchase of Securities Being Offered ..... Part A: Brief Description of the Contract; Charges, Fees and Deductions;
Sale of the Contract and Sales Commissions
20. Underwriters ............................. Part A: Sale of the Contract and Sales Commissions
Part B: Principal Underwriter
21. Calculation of Performance Data .......... Financial Statements of The Prudential Individual Variable Contrac
Account
</TABLE>
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<TABLE>
N-4 ITEM NUMBER AND CAPTION LOCATION
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<S> <C>
22. Annuity Payments ...................... Part A: Valuation of Contract Owner's Contract Fund; Effecting an
Annuity; Differences Under the WVA-83 Contract
Part B: Determination of Subaccount Unit Values and of the Amount of
Monthly Variable Annuity Payment
23. Financial Statements .................. Financial Statements of The Prudential Individual Variable Contract
Account; Statutory Financial Statements of The Prudential Insurance
Company of America
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to thisRegistration Statement.
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
PROSPECTUS
MAY 1, 1997
INDIVIDUAL VARIABLE ANNUITY CONTRACTS OF
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
VARIABLE INVESTMENT PLAN
This prospectus describes Individual Variable Annuity Contracts (the "Contract")
issued by The Prudential Insurance Company of America ("Prudential"). These
Contracts provide for the accumulation of purchase payments and for the payment
of benefits, either in the form of a monthly annuity after retirement or in a
lump sum at retirement or at an earlier time. The Contract is purchased by
making an initial payment of $1,000 or more; subsequent payments must be $100 or
more. Your accumulated purchase payments will be allocated as you direct in one
or more of the following ways: 1) in one or more of thirteen subaccounts of The
Prudential Individual Variable Contract Account (the "Account"); 2) under a
FIXED-RATE OPTION; and 3) in a real estate investment option. The assets of each
subaccount of the Account will be invested in a corresponding Portfolio of The
Prudential Series Fund, Inc. (the "Series Fund"). The attached prospectus for
the Series Fund and its statement of additional information describe the
investment objectives of and the risks of investing in the thirteen portfolios
of the Series Fund currently available to Contract owners: the MONEY MARKET
PORTFOLIO, the DIVERSIFIED BOND PORTFOLIO, the GOVERNMENT INCOME PORTFOLIO, the
CONSERVATIVE BALANCED PORTFOLIO, the FLEXIBLE MANAGED PORTFOLIO, the HIGH YIELD
BOND PORTFOLIO, the STOCK INDEX PORTFOLIO, the EQUITY INCOME PORTFOLIO, the
EQUITY PORTFOLIO, the PRUDENTIAL JENNISON PORTFOLIO, the SMALL CAPITALIZATION
STOCK PORTFOLIO, the GLOBAL PORTFOLIO, and the NATURAL RESOURCES PORTFOLIO.
Other subaccounts and portfolios may be added in the future. Selection of the
real estate investment option involves allocation of part or all of your
purchase payments to THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT (the
"Real Property Account"), a separate account of Prudential that, through a
partnership, invests primarily in income-producing real property. The Real
Property Account is described in a prospectus that is attached to this one. This
prospectus describes the Contract generally and The Prudential Individual
Variable Contract Account.
---------------------------
This prospectus provides information a prospective investor should know before
investing. Additional information about the Contract has been filed with the
Securities and Exchange Commission in a statement of additional information,
dated May 1, 1997, which information is incorporated herein by reference, and is
available without charge upon written request to The Prudential Insurance
Company of America, Prudential Plaza, Newark, New Jersey, 07102-3777, or by
telephoning (800) 445-4571.
The Contents of the statement of additional information appear on page 28 of the
prospectus.
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PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ATTACHED TO
A CURRENT PROSPECTUS FOR THE PRUDENTIAL SERIES FUND, INC. AND A CURRENT
PROSPECTUS FOR THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT.
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
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 445-4571
VARIABLE INVESTMENT PLAN is a registered mark of Prudential.
VIP-1 Ed 5-97
Catalog #64696D2
<PAGE>
PROSPECTUS CONTENTS
PAGE
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS ................... 1
BRIEF DESCRIPTION OF THE CONTRACT ...................................... 2
THE PRUDENTIAL INDIVIDUAL VARIABLE ANNUITY CONTRACT .................. 2
CHARGES UNDER THE CONTRACTS .......................................... 3
TRANSFERS AMONG INVESTMENT OPTIONS ................................... 4
FREE LOOK ............................................................ 4
HOW TO CONTACT THE PRUDENTIAL ........................................ 4
FEE TABLE .............................................................. 5
EXAMPLES OF FEES AND EXPENSES ........................................ 6
ACCUMULATION UNIT VALUES ............................................... 8
GENERAL INFORMATION ABOUT THE PRUDENTIAL, THE PRUDENTIAL
INDIVIDUAL VARIABLE CONTRACT ACCOUNT, AND THE VARIABLE
INVESTMENT OPTIONS AVAILABLE
UNDER THE CONTRACT ................................................... 11
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ........................ 11
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT ................ 11
THE PRUDENTIAL SERIES FUND, INC. ................................... 11
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT ............. 12
DETAILED INFORMATION ABOUT THE CONTRACT ................................ 13
REQUIREMENTS FOR ISSUANCE OF A CONTRACT .............................. 13
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK" ........................ 13
ALLOCATION OF PURCHASE PAYMENTS ...................................... 13
ADDITIONAL AMOUNTS ................................................... 14
TRANSFERS ............................................................ 14
WITHDRAWALS .......................................................... 14
DEATH BENEFIT ........................................................ 15
VALUATION OF CONTRACT OWNER'S CONTRACT FUND .......................... 15
CHARGES, FEES, AND DEDUCTIONS .......................................... 16
1. PREMIUM TAXES ..................................................... 16
2. SALES CHARGES ON WITHDRAWALS ...................................... 16
3. RECAPTURE OF ADDITIONAL AMOUNTS ................................... 18
4. ANNUAL MAINTENANCE CHARGE ......................................... 18
5. CHARGE FOR ASSUMING MORTALITY AND EXPENSE RISKS ................... 18
6. EXPENSES INCURRED BY THE SERIES FUND .............................. 18
THE FIXED-RATE OPTION .................................................. 19
FEDERAL TAX STATUS ..................................................... 20
TAXES PAYABLE BY CONTRACT OWNERS ..................................... 20
WITHHOLDING .......................................................... 21
TAXES ON THE PRUDENTIAL .............................................. 21
EFFECTING AN ANNUITY ................................................... 22
ANNUITY OPTIONS UNDER THE VIP-86 CONTRACT ............................ 22
ANNUITY OPTIONS UNDER THE WVA-83 AND VIP-84 CONTRACTS ................ 23
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT ANNUITY PURCHASE RATES . 24
OTHER INFORMATION ...................................................... 24
VOTING RIGHTS ........................................................ 24
SALE OF THE CONTRACT AND SALES COMMISSIONS ........................... 25
OWNERSHIP OF THE CONTRACT ............................................ 25
REPORTS TO CONTRACT OWNERS ........................................... 25
PERFORMANCE INFORMATION .............................................. 25
SUBSTITUTION OF SERIES FUND SHARES ................................... 26
DIFFERENCES UNDER THE WVA-83 CONTRACT ................................ 26
STATE REGULATION ..................................................... 27
LITIGATION ........................................................... 27
ADDITIONAL INFORMATION ............................................... 27
DIRECTORS AND OFFICERS ................................................. 29
<PAGE>
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS
ADDITIONAL AMOUNT--On payments made during the first 3 Contract years, and
thereafter at Prudential's discretion, an additional 1% added to and invested
with the purchase payment. This Additional Amount or "bonus" will be recaptured
by Prudential if the payment is withdrawn within 8 Contract years after it is
made.
ANNUITANT--The person or persons designated by the Contract owner, upon whose
life or lives monthly annuity payments are based after an annuity is effected.
ANNUITY CONTRACT OR ANNUITY--A contract designed to provide an annuitant with an
income, which may be a lifetime income, beginning on the annuity date.
ANNUITY DATE--The date, specified in the Contract, when annuity payments are to
begin. BONUS See Additional Amount above.
CONTRACT ANNIVERSARY DATE--The same day and month as the Contract date in each
later year.
CONTRACT DATE--The date Prudential received the initial purchase payment and
certain required documentation.
CONTRACT FUND--The total value attributable to a specific Contract representing
the sum of all the amounts in the Variable Account (defined below), the Real
Property Account (defined below), and the fixed-rate option (defined below).
CONTRACT OWNER--A person who purchases an Individual Variable Annuity Contract
of the VARIABLE INVESTMENT PLAN(R) and makes the purchase payments. The Contract
may be owned by joint owners. An owner will usually also be an annuitant, but
need not be. An owner has all rights in the Contract before the annuity date,
including the right to make withdrawals or surrender the Contract, to designate
and change the beneficiaries who will receive the proceeds at the death of the
annuitant before the annuity date, to transfer funds among the variable
investment options and the fixed-rate option, and to designate a mode of
settlement for the annuitant on the annuity date.
CONTRACT YEAR--A year that starts on the Contract date or on a Contract
anniversary.
FIXED-RATE OPTION--An investment option under which Prudential credits interest
to the amount allocated at a rate periodically declared in advance by Prudential
but not less than 3%.
SUBACCOUNT--A division of the Account, the assets of which are invested in the
shares of the corresponding portfolio of the Series Fund.
SUBACCOUNT ANNUITY UNIT--When a Contract owner elects to convert his or her
Variable Account into monthly variable annuity payments, the number of
Subaccount Units (defined below) credited to him or her in each subaccount is
first reduced to take into account any applicable sales charge and any state
premium taxes that may be payable. The remaining Subaccount Units are then
converted into a number of Subaccount Annuity Units of equal aggregate value. As
with Subaccount Units, the value of each Subaccount Annuity Unit also changes
each day to reflect investment results and expenses of and deductions of charges
from the underlying Series Fund portfolio, after deduction of the daily
equivalent of the annual charge of up to 1.2% for assuming expense and mortality
risks. For further discussion, see page C1 of the statement of additional
information.
SUBACCOUNT UNIT--The Contract owner's Variable Account is credited with Units in
each subaccount in which he or she invests. The value of these Units changes
each day to reflect the investment results and expenses of and deductions of
charges from the Series Fund portfolios in which the assets of the subaccount
are invested, in much the same way that the share values of a mutual fund change
each day. The value of the Contract owner's Variable Account is the sum of the
value of Subaccount Units in each subaccount.
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT--(THE "ACCOUNT") A separate
account of Prudential registered as a unit investment trust under the Investment
Company Act of 1940.
THE PRUDENTIAL SERIES FUND, INC. (THE "SERIES FUND") A mutual fund with separate
portfolios, one or more of which may be chosen as an underlying investment for
the Contract.
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT--(THE "REAL PROPERTY
ACCOUNT") A separate account of Prudential which, through a partnership, invests
primarily in income-producing real property.
VALUATION PERIOD--The period of time from one determination of the value of the
amount invested in a subaccount to the next. Such determinations are made when
the net asset values of the Portfolios of the Series Fund are calculated, which
is generally at 4:15 p.m. New York City time on each day during which the New
York Stock Exchange is open.
VARIABLE ACCOUNT--The value attributable to a specific Contract representing
amounts in all the subaccounts.
VARIABLE INVESTMENT OPTIONS--The subaccounts and the Real Property Account.
1
<PAGE>
BRIEF DESCRIPTION OF THE CONTRACT
THE PRUDENTIAL INDIVIDUAL VARIABLE ANNUITY CONTRACT
The Prudential Individual Variable Annuity Contract (the "Contract") provides
one way there are many others of accumulating your savings, having them invested
in one or more securities portfolios with different investment objectives, and
withdrawing them (subject to any applicable withdrawal charges and taxes) when
you need them, preferably to supplement your monthly income after you retire but
at any earlier time if you wish. [The words "you" and "your" as used in this
prospectus refer to the owner of the Contract. See OWNERSHIP OF THE CONTRACT,
page 25. The word "we" refers to The Prudential Insurance Company of America
("Prudential").] For many persons, a variable annuity contract may offer
substantial advantages as a long-term financial planning device over alternative
forms of investment (other than alternative tax-favored investments such as
Individual Retirement Accounts), primarily due to the manner in which the
earnings on your accumulating funds are taxed. See FEDERAL TAX STATUS, page 20.
This prospectus describes three forms of the Contract. One form, which was first
offered in 1983, is called the WVA-83 Contract (persons holding this Contract
can identify it by the WVA-83 designation which appears in the lower left corner
of the Contract cover page). A second form, which is a revised edition of the
WVA-83 Contract, is called the VIP-84 Contract (persons holding this Contract
can identify it by the VIP-84 designation which appears in the lower left corner
of the Contract cover page). The third form, which is a revised edition of the
VIP-84 Contract, is called the VIP-86 Contract (except as described below,
persons holding this Contract can identify it by the VIP-86 designation which
appears in the lower left corner of the Contract cover page). In Texas, this
Contract bears a VIP-89 designation; however, it will be referred to as the
VIP-86 Contract throughout this prospectus. Currently, only the VIP-86 Contract
is offered inall jurisdictions.
The three forms of Contract are basically similar, but there are some
significant differences. This prospectus describes each of the Contracts and
explains, where appropriate, the respects in which they differ. Because the
differences between the first form, WVA-83, and the later two forms are somewhat
extensive, a special section, DIFFERENCES UNDER THE WVA-83 CONTRACT, is included
on page 26, to which reference will occasionally be made.
You may make purchase payments under your Contract at regular intervals or from
time to time as you have funds available. Your first payment must be at least
$1,000. Thereafter each payment must be $100 or more. See REQUIREMENTS FOR
ISSUANCE OF A CONTRACT, page 13.
Purchase payments are held in one or more subaccounts of The Prudential
Individual Variable Contract Account (the "Account") as you direct. You may also
choose to invest all or part of your purchase payments in The Prudential
Variable Contract Real Property Account (the "Real Property Account"), which,
through a partnership, invests primarily in income-producing real property. If a
Contract owner elects to invest a portion of his or her purchase payments in the
Real Property Account, the assets will be maintained in a subaccount of the Real
Property Account related to the Contract that provides the mechanism and
maintains the records whereby the various Contract charges are made. The
investment objectives of the Real Property Account and the partnership are
described briefly under THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
on page 12. Additionally, you may direct that all or part of your payment be
allocated to a FIXED-RATE OPTION providing for the addition of interest at a
guaranteed rate upon the amount so held. Initially, you must allocate at least
$300 to an investment plan option in which you choose to invest. Your subsequent
investments in that investment plan must be in amounts no less than $100 each.
Each variable subaccount is invested in a corresponding portfolio of The
Prudential Series Fund, Inc. (the "Series Fund"), a series mutual fund for which
Prudential is the investment advisor. The Series Fund currently has thirteen
portfolios available for investment by Contract owners. The MONEY MARKET
PORTFOLIO is invested in short-term debt obligations similar to those purchased
by money market funds; the DIVERSIFIED BOND PORTFOLIO is invested primarily in
high quality medium-term corporate and government debt securities; the
GOVERNMENT INCOME PORTFOLIO is invested 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; the CONSERVATIVE BALANCED PORTFOLIO is
invested in a mix of money market instruments, fixed income securities, and
common stocks, in proportions believed by the investment manager to be
appropriate for an investor who desires diversification of investment who
prefers a relatively lower risk of loss and a correspondingly reduced chance of
high appreciation; the FLEXIBLE MANAGED PORTFOLIO is invested in a mix of money
market instruments, fixed income securities, and common stocks, in proportions
believed by the investment manager to be appropriate for an investor desiring
diversification of investment who is willing to accept a relatively high level
of loss in an effort to achieve greater appreciation; the HIGH YIELD BOND
PORTFOLIO is invested primarily in high yield fixed income securities of medium
to lower quality, also known as high risk bonds; the STOCK INDEX PORTFOLIO is
invested in common stocks selected to duplicate the price and yield performance
of the Standard & Poor's 500 Composite Stock Price Index; the EQUITY INCOME
PORTFOLIO is invested primarily in common stocks and convertible securities that
provide favorable prospects for investment income returns above those of the
Standard & Poor's 500 Stock Index or the NYSE Composite Index; the EQUITY
PORTFOLIO is invested primarily in common stocks; the PRUDENTIAL JENNISON
PORTFOLIO is invested primarily in equity securities of established companies
with above-average growth prospects; the SMALL CAPITALIZATION STOCK PORTFOLIO is
invested primarily in equity securities of publicly-traded companies with small
market capitalization; the GLOBAL PORTFOLIO is invested primarily in common
stocks and common
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stock equivalents (such as convertible debt securities) of foreign and domestic
issuers; and the NATURAL RESOURCES PORTFOLIO is invested primarily in common
stocks and convertible securities of natural resource companies, and in
securities (typically debt securities or preferred stock) the terms of which are
related to the market value of a natural resource. Further information about the
Series Fund Portfolios can be found under THE PRUDENTIAL SERIES FUND, INC. on
page 11, and in the attached prospectus for the Series Fund.
You may place your entire payment in one subaccount, in the Real Property
Account or in the fixed-rate option, or divide it among any of the thirteen
subaccounts, the Real Property Account and the fixed-rate option, subject to the
applicable minimum requirements. You may transfer funds from one subaccount to
another, to the Real Property Account, and to the fixed-rate option. There are
limitations upon transfers from the fixed-rate option and to and from the Real
Property Account. See TRANSFERS, page 14. The amount credited to you in the
variable investment options will initially be equal to that part of your
purchase payment that you choose to invest in each option. Thereafter the value
of your holdings in the variable investment options, after deducting charges
payable under the Contract, will vary in accordance with investment results. See
VALUATION OF CONTRACT OWNER'S CONTRACT FUND, page 15, and page C1 of the
statement of additional information. The total value attributable to a specific
Contract representing amounts allocated to all subaccounts, the Real Property
Account, and the fixed-rate option is known as the "Contract fund". You will
receive confirmations of every purchase payment you make. You will also receive
annual statements showing the status of your Contract fund.
The Contracts described in this prospectus have an attractive feature. During
the first 3 Contract years, and in Contract years thereafter at Prudential's
discretion, Prudential will add an Additional Amount, as a bonus, of 1% to every
purchase payment. Prudential reserves the right to limit its payment of such
Additional Amounts under a particular Contract to $1,000 in each Contract year.
This Additional Amount will be allocated among the subaccounts, the Real
Property Account, and the fixed-rate option in the same proportions as the
purchase payment to which it is added. See ADDITIONAL AMOUNTS, page 14. During
the first 8 Contract years following a purchase payment, the bonus attributable
to any portion of that purchase payment that is withdrawn will be recaptured by
Prudential, unless such withdrawn purchase payment is used to effect an annuity
that is not subject to a sales charge or is subject to a reduced sales charge.
See SALES CHARGES ON WITHDRAWALS, page 16 and RECAPTURE OF ADDITIONAL AMOUNTS,
page 18.
If you need all or part of your money at any time, you may request a withdrawal.
The amount you request will be deducted from your Contract fund. See
WITHDRAWALS, page 14. As long as the Contract remains in effect, you may
withdraw the amount credited to you in a lump sum or use it to effect a monthly
annuity that will continue as long as the annuitant[s] you select live or for
some other period you select. Other than an annuity selected under the
Supplemental Life Annuity Option, WVA-83 and VIP-84 Contract owners may elect to
receive a variable annuity. If you elect a variable annuity option, annuity
payments will vary each month in accordance with the investment performance of
the subaccount[s] you have chosen. See page C1 of the statement of additional
information. If you elect a fixed-dollar annuity option, annuity payments will
be in monthly installments of guaranteed amounts. VIP-86 Contract owners may
only elect a fixed-dollar annuity option. A sales charge may be deducted from
the amount withdrawn. Withdrawals may be subject to tax and, in certain
circumstances, a tax penalty. This sales charge will be higher with respect to
withdrawals of purchase payments made in early years, soon after the purchase
payments are made. See SALES CHARGES ON WITHDRAWALS, page 16, TAXES PAYABLE BY
CONTRACT OWNERS, page 20, and EFFECTING AN ANNUITY, page 22.
CHARGES UNDER THE CONTRACTS
The charges made by Prudential are intended to compensate it for paying various
categories of expenses incurred in maintaining and operating the Account (up to
$30 annually, if applicable) and for assuming mortality and expense risks under
the Contracts (an annual rate of up to 1.2% of the assets held in the variable
investment options). In addition, there are other expenses incurred in
connection with the operation and management of the Series Fund, the most
significant of which is an investment management fee ranging from an annual rate
of 0.35% to 0.75% of the aggregate average daily net assets in each of the
portfolios. For more information regarding these charges, see CHARGES, FEES, AND
DEDUCTIONS, page 16. There is also a management fee and other expenses assessed
against the assets of the real property partnership. See THE PRUDENTIAL VARIABLE
CONTRACT REAL PROPERTY ACCOUNT, page 12.
A deferred sales charge is imposed to reimburse Prudential for distribution
expenses such as commissions paid to sales personnel, costs of advertising and
sales promotions, prospectus costs, and costs of sales administration. Many
mutual funds, other than no-load funds, make this charge by deducting a
percentage of the investor's purchase payment and investing only the remainder.
Under the Contracts described in this prospectus, each purchase payment you make
(after deduction of any applicable amount needed to pay taxes attributable to
premiums) is allocated to the subaccounts designated by you, to the Real
Property Account or to the fixed-rate option. In any Contract year you may make
withdrawals without charge of up to 10% of your Contract fund value on the date
of the first withdrawal in that Contract year. A sales charge may be deducted on
withdrawals above 10%. The charge is 8% (the maximum charge) of each purchase
payment withdrawn during the same Contract year that it was made. Thereafter the
charge decreases by 1% per Contract year. Purchase payments withdrawn 8 or more
Contract years after they were made are subject to no sales charge at all. See
SALES CHARGES ON WITHDRAWALS, page 16. Withdrawals may be subject to tax under
the Internal Revenue Code (the "Code"). See WITHDRAWALS, page 14, and TAXES
PAYABLE BY CONTRACT OWNERS, page 20.
On any Contract subject to a tax attributable to premiums, Prudential will
deduct the tax, as provided under applicable law, from the purchase payment when
received, or from the Contract fund at the time the annuity is effected. The
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deduction for taxes imposed on purchase payments will be lower, or not made at
all, if total purchase payments meet certain minimum amounts. See PREMIUM TAXES,
page 16.
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers may be made from one subaccount to another, to the Real Property
Account or to the fixed-rate option if the amount transferred is $300 or more
and any amount remaining to your credit in the subaccount after the transfer is
not less than $300. Also, you can transfer the total amount remaining in any
subaccount even if that amount is less than $300. Up to four transfers a year
between subaccounts, to the Real Property Account or to the fixed-rate option
may be made during the period before annuity payments begin. Currently, you may
make more than four such transfers per year without Prudential's consent.
Transfers from the fixed-rate option to the subaccounts are permitted only once
each Contract year, and there are other limitations on such transfers. See
TRANSFERS, page 14. Transfers to and from the Real Property Account are subject
to restrictions described in the accompanying prospectus for the Real Property
Account. WVA-83 Contract owners and VIP-84 Contract owners may convert their
Contract fund into either a variable (if available) or fixed-dollar annuity or
both. After variable annuity payments begin, the annuitant may make full or
partial transfers from any subaccount to one or more other subaccounts.
Prudential's consent is needed if (1) more than four transfers are made in a
year, or (2) for a partial transfer, either the number of Subaccount Annuity
Units to be transferred or the number to be retained, multiplied by the
corresponding Subaccount Annuity Unit Value on the effective date of the
transfer, is less than $20. Transfer requests may be in writing. Transfer
requests may also be made by telephone. A transfer will generally be made at the
end of the valuation period in which your proper written request or authorized
telephone request is received by Prudential. See TRANSFERS, page 14.
FREE LOOK
For a limited time, a Contract may be returned for a refund in accordance with
the terms of its "free-look" provision. SEE SHORT-TERM CANCELLATION RIGHT OR
"FREE LOOK", page 13.
HOW TO CONTACT PRUDENTIAL All
written requests and notices required by the Contracts, such as withdrawal or
transfer requests, and any questions or inquiries should be sent to your
designated Prudential Service Office.
This Brief Description of the Contract is intended to provide a broad overview
of the more significant featuresof the Contract. More detailed information will
be found in subsequent sections of this prospectus and in theContract document.
4
<PAGE>
<TABLE>
<CAPTION>
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
<S> <C>
Sales Load Imposed on Purchase Payments ..................... None (1% bonus added to payment up to a
maximum bonus of $1,000 per Contract year)
</TABLE>
<TABLE>
<CAPTION>
Maximum Deferred Sales Load:
MAXIMUM DEFERRED SALES CHARGE AS A
CONTRACT YEARS AFTER PAYMENT PERCENTAGE OF PURCHASE PAYMENT WITHDRAWN*
---------------------------- -----------------------------------------
<S> <C>
0 8% plus return of 1% bonus
1 year ................................ 7% plus return of 1% bonus
2 years ............................... 6% plus return of 1% bonus
3 years ............................... 5% plus return of 1% bonus
4 years ............................... 4% plus return of 1% bonus
5 years ............................... 3% plus return of 1% bonus
6 years ............................... 2% plus return of 1% bonus
7 years ............................... 1% plus return of 1% bonus
8 or more years ....................... 0%
</TABLE>
*The deferred sales load is not imposed on that portion of the withdrawals made
in any Contract year equal to the first 10% of the Contract fund. The deferred
sales load is not imposed in connection with the Critical Care Access feature
and may be reduced on the withdrawal of purchase payments made on or after the
annuitant's 81st birthday.
Annual Administrative Charge .......................................... None*
*If the Contract fund is less than $10,000, a $30 annual charge is assessed.
This $30 fee will not be charged if the Contract fund is less than $10,000 as a
result of a withdrawal due to confinement in a nursing home or hospital, or due
to a terminal illness.
SEPARATE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE CONTRACT FUND)
ALL SUBACCOUNTS
---------------
Total Separate Account
Annual Expenses (Mortality and Expense Risk Fee) .......... 1.20%
====
THE PRUDENTIAL SERIES FUND, INC. ANNUAL EXPENSES
(AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
HIGH
MONEY DIVERSIFIED GOVERNMENT CONSERVATIVE FLEXIBLE YIELD
MARKET BOND INCOME BALANCED MANAGED BOND
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Management
Fee .......................... .40% .40% .40% .55% .60% .55%
Other Expenses ................ .04% .05% .06% .04% .04% .08%
--- --- --- --- --- ---
Total Series Fund
Annual Expenses .............. .44% .45% .46% .59% .64% .63%
=== === === === === ===
SMALL
STOCK EQUITY PRUDENTIAL CAPITALIZATION NATURAL
INDEX INCOME EQUITY JENNISON STOCK GLOBAL RESOURCES
-----------------------------------------------------------------------------------------------
Investment Management
Fee .......................... .35% .40% .45% .60% .40% .75% .45%
Other Expenses ................ .05% .05% .05% .06% .16% .17% .07%
--- --- --- --- --- --- ---
Total Series Fund
Annual Expenses .............. .40% .45% .50% .66% .56% .92% .52%
=== === === === === === ===
</TABLE>
5
<PAGE>
The purpose of the foregoing tables is to assist the Contract owners in
understanding the expenses of The Prudential Individual Variable Contract
Account and The Prudential Series Fund, Inc. (the "Series Fund") that they bear,
directly or indirectly. See the sections on charges in this prospectus and the
attached prospectus for the Series Fund. The above tables do not include any
taxes attributable to premiums. Currently, there is no deduction for such taxes
at the time purchase payments are made, but in some states a deduction is made
when an annuity is effected.
Except for the Global Portfolio, Prudential reimburses a portfolio when its
ordinary operating expenses, excluding taxes, interest, and brokerage
commissions exceed 0.75% of the portfolio's average daily net assets. The
amounts listed for the portfolios under "Other Expenses" are based on amounts
incurred in the last fiscal year.
EXAMPLES OF FEES AND EXPENSES
The following examples, and those on page 7, illustrate the cumulative dollar
amount of all the above expenses that would be incurred on each $1,000
investment.
0 The examples assume a consistent 5% annual return on invested assets;
0 The examples do not take into consideration any taxes attributable to
premiums which may be payable at the time of annuitization or at the time
of purchase payments;
0 The amounts shown are overstated for Contract funds over $10,000 and
understated for Contract funds less than $10,000.
0 The examples assume that the operating expenses incurred in 1996 will
continue for a 10 year period, and that any caps applied to the expenses
will also continue.
For periods less than 10 years, the expenses shown in Table I, describe
applicable charges for the withdrawal of your entire Contract fund. THE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL
EXPENSES INCURRED IN ANY GIVEN YEAR MAY BE MORE OR LESS THAN THOSE SHOWN IN THE
EXAMPLES.
The following example shows how the Year 1 expenses shown in Table I were
calculated for the Flexible Managed Portfolio, for each $1,000 invested. This
assumes a withdrawal is made just prior to the end of the first year after
payment. The amount of the Annual Administrative Charge in this example is
calculated in a manner prescribed by the Securities and Exchange Commission.
<TABLE>
<CAPTION>
<S> <C> <C>
Initial Investment $1,000.00
Plus 1% bonus ($1,000 + $10) 1,010.00
5% Assumed Rate of Return ($1,010 x 1.05) 1,060.50
Average Value of Funds [($1,010 + $1,060.50)/2] 1,035.25
Annual Expenses (1.2 risk fees + 0.60 management fee + 0.03 expense) 1.83%
Annual Administrative Charge .94
Total Contract Expenses ($1,035.25 x 1.83%) + $0.94 19.89
Contingent Deferred Sales Charge computation for withdrawal of entire fund:
Net Contract fund ($1,060.50--$19.89) $1,040.61
10% Charge-free withdrawal 104.06
Initial investment 1,000.00*
Amount subject to withdrawal charge ($1,000--$104.06) 895.94
Surrender charge @ 8% 71.68
Plus Total Contract Expenses (as calculated above) 19.89
---------
TOTAL CHARGES $ 91.57
</TABLE>
*Note that in this example, Prudential would recapture the 1% bonus that had
been credited to the initial investment.
6
<PAGE>
<TABLE>
<CAPTION>
EXAMPLES
TABLE I
If you withdraw your entire Contract fund thereby surrendering your Contract
just prior to the end of the applicable time period, you would pay the following
cumulative expenses on each $1,000 invested, assuming 5% annual return on
assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO ...................................... $ 90 $110 $137 $241
DIVERSIFIED BOND PORTFOLIO .................................. $ 90 $111 $139 $245
GOVERNMENT INCOME PORTFOLIO ................................. $ 90 $112 $140 $247
CONSERVATIVE BALANCED PORTFOLIO ............................. $ 99 $140 $187 $346
FLEXIBLE MANAGED PORTFOLIO .................................. $ 97 $134 $176 $326
HIGH YIELD BOND PORTFOLIO ................................... $ 91 $116 $148 $269
STOCK INDEX PORTFOLIO ....................................... $ 91 $112 $141 $245
EQUITY INCOME PORTFOLIO ..................................... $ 88 $114 $142 $252
EQUITY PORTFOLIO ............................................ $ 95 $127 $165 $299
PRUDENTIAL JENNISON PORTFOLIO ............................... $ 91 $116 $148 $269
SMALL CAPITALIZATION STOCK PORTFOLIO ........................ $ 90 $112 $141 $252
GLOBAL PORTFOLIO ............................................ $ 95 $127 $168 $316
NATURAL RESOURCES PORTFOLIO ................................. $ 90 $113 $141 $251
</TABLE>
As an example, if the entire Contract fund is invested in the Flexible Managed
Portfolio, and you surrendered your Contract just prior to the end of 1 year,
you would pay $92 per $1,000 invested, reflecting all charges including the 8%
contingent deferred sales charge.
TABLE II
If you annuitize just before the end of the applicable time period, you would
pay the following cumulative expenses on each $1,000 invested, assuming 5%
annual return on assets:
(Note: The 1, 3, and 5 Year columns reflect the imposition of the
contingent deferred sales charge; however, some of the annuity options may
not be subject to this charge after year 3. Where this is the case, the
expenses shown in Table III below would be applicable. See page 16 under
the SALES CHARGES ON WITHDRAWALS section.)
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO ...................................... $ 90 $110 $137 $241
DIVERSIFIED BOND PORTFOLIO .................................. $ 90 $111 $139 $245
GOVERNMENT INCOME PORTFOLIO ................................. $ 90 $112 $140 $247
CONSERVATIVE BALANCED PORTFOLIO ............................. $ 99 $140 $187 $346
FLEXIBLE MANAGED PORTFOLIO .................................. $ 97 $134 $176 $326
HIGH YIELD BOND PORTFOLIO ................................... $ 91 $116 $148 $269
STOCK INDEX PORTFOLIO ....................................... $ 89 $112 $141 $245
EQUITY INCOME PORTFOLIO ..................................... $ 88 $114 $142 $252
EQUITY PORTFOLIO ............................................ $ 95 $127 $165 $299
PRUDENTIAL JENNISON PORTFOLIO ............................... $ 91 $116 $148 $269
SMALL CAPITALIZATION STOCK PORTFOLIO ........................ $ 90 $112 $141 $252
GLOBAL PORTFOLIO ............................................ $ 95 $127 $168 $316
NATURAL RESOURCES PORTFOLIO ................................. $ 90 $113 $141 $251
</TABLE>
TABLE III
If you do not withdraw any portion of your Contract fund as of the end of the
applicable time period, you would pay the following cumulative expenses on each
$1,000 invested, assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO ...................................... $ 18 $57 $102 $241
DIVERSIFIED BOND PORTFOLIO .................................. $ 18 $58 $104 $245
GOVERNMENT INCOME PORTFOLIO ................................. $ 18 $59 $105 $247
CONSERVATIVE BALANCED PORTFOLIO ............................. $ 28 $87 $152 $346
FLEXIBLE MANAGED PORTFOLIO .................................. $ 25 $80 $141 $326
HIGH YIELD BOND PORTFOLIO ................................... $ 20 $63 $113 $269
STOCK INDEX PORTFOLIO ....................................... $ 19 $59 $105 $245
EQUITY INCOME PORTFOLIO ..................................... $ 17 $60 $107 $252
EQUITY PORTFOLIO ............................................ $ 23 $74 $130 $299
PRUDENTIAL JENNISON PORTFOLIO ............................... $ 20 $63 $113 $269
SMALL CAPITALIZATION STOCK PORTFOLIO ........................ $ 19 $59 $106 $252
GLOBAL PORTFOLIO ............................................ $ 23 $74 $132 $316
NATURAL RESOURCES PORTFOLIO ................................. $ 19 $59 $106 $251
</TABLE>
Notice that in all 3 of the above tables, the level of cumulative charges is
identical for the 10 year column. This is because at that point there are no
contingent deferred sale charges taken by Prudential upon surrender or
annuitization. It may be helpful to consider the dollar amounts shown as
percentages of the amount invested ($1,000) over the period specified. In the
case of the Flexible Managed Portfolio, $229 at the end of 10 years equals
$22.90 per year, or approximately 2.3% of $1,000.
7
<PAGE>
<TABLE>
<CAPTION>
ACCUMULATION UNIT VALUES
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
(CONDENSED FINANCIAL INFORMATION)
SUBACCOUNTS
--------------------------------------------------------------------------------------------------------
MONEY MARKET
--------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period ......... $ 1.931 $ 1.847 $ 1.796 $ 1.766 $ 1.722 $ 1.641 $ 1.536 $ 1.423 $ 1.341 $ 1.274
2. Accumulation unit
value at end of
period ............ 2.008 1.931 1.847 1.796 1.766 1.722 1.641 1.536 1.423 1.341
3. Number of
accumulation
units outstanding
at end of period .. 20,966,170 21,383,688 19,719,686 21,196,310 25,559,750 27,651,809 28,665,736 21,867,895 20,062,883 15,655,197
<CAPTION>
DIVERSIFIED BOND
---------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period ......... $ 2.899 $ 2.430 $ 2.541 $ 2.335 $ 2.204 $ 1.916 $ 1.790 $ 1.596 $ 1.493 $ 1.507
2. Accumulation unit
value at end of
period ............ 2.990 2.899 2.430 2.541 2.335 2.204 1.916 1.790 1.596 1.493
3. Number of
accumulation
units outstanding
at end of period .. 17,983,051 17,350,482 19,297,770 22,228,674 19,270,816 15,157,524 13,436,702 14,674,397 16,270,961 14,659,724
<CAPTION>
GOVERNMENT INCOME
------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89*
TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period ......... $ 1.719 $ 1.456 $ 1.553 $ 1.397 $ 1.335 $ 1.164 $ 1.108 $ 1.000
2. Accumulation unit
value at end of
period ............ 1.736 1.719 1.456 1.553 1.397 1.335 1.164 1.108
3. Number of
accumulation
units outstanding
at end of period .. 32,103,624 36,188,716 42,950,931 51,712,560 31,196,202 5,114,032 1,876,055 523,730
CONSERVATIVE BALANCED
-------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at
beginning of
period ....... $ 3.077 $ 2.655 $ 2.713 $ 2.447 $ 2.316 $ 1.968 $ 1.892 $ 1.637 $ 1.503 $ 1.49
2. Accumulation
unit value at
end of
period ...... 3.424 3.077 2.655 2.713 2.447 2.316 1.968 1.892 1.637 1.503
3. Number of
accumulation
units
outstanding
at end of
period ...... 132,264,454 138,247,386 144,960,917 132,233,247 94,037,783 64,776,062 59,244,790 61,212,122 68,409,626 88,569,869
</TABLE>
*Commencement of Business
The financial statements of the Account are in the statement of additional
information.
8
<PAGE>
<TABLE>
<CAPTION>
ACCUMULATION UNIT VALUES
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
(CONDENSED FINANCIAL INFORMATION) (CONTINUED)
SUBACCOUNTS
---------------------------------------------------------------------------------------------------------
FLEXIBLE MANAGED
---------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
T0 TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period ......... $ 3.469 $ 2.828 $ 2.955 $ 2.587 $ 2.434 $ 1.963 $ 1.950 $ 1.621 $ 1.453 $ 1.498
2. Accumulation unit
value at end of
period ............ 3.895 3.469 2.828 2.955 2.587 2.434 1.963 1.950 1.621 1.453
3. Number of
accumulation
units outstanding
at end of period .. 80,196,501 80,116,280 86,950,166 82,697,681 67,080,104 57,549,789 59,624,634 64,761,817 72,695,150 98,423.867
<CAPTION>
HIGH YIELD BOND
---------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 02/23/87*
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period .......... $ 1.865 $ 1.605 $ 1.670 $ 1.417 $ 1.220 $ 0.887 $ 1.019 $ 1.052 $ 0.941 $ 1.000
2. Accumulation unit
value at end of
period ............. 2.053 1.865 1.605 1.670 1.417 1.220 0.887 1.019 1.052 0.941
3. Number of
accumulation
units outstanding
at end of period ... 16,519,861 15,869,142 15,675,021 14,204,249 8,951,297 5,593,083 5,320,712 8,625,344 6,337,850 3,432,822
<CAPTION>
STOCK INDEX
----------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 10/19/87*
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 10/19/87
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period .......... $ 2.401 $ 1.772 $ 1.776 $ 1.639 $ 1.548 $ 1.208 $ 1.268 $ 0.980 $ 0.859 $ 1.000
2. Accumulation unit
value at end of
period ............. 2.907 2.401 1.772 1.776 1.639 1.548 1.208 1.268 0.980 0.859
3. Number of
accumulation
units outstanding
at end of period ... 32,289,212 26,855,828 25,648,545 24,959,253 19,968,362 12,084,160 5,936,971 4,352,361 960,235 112,510
<CAPTION>
EQUITY INCOME
--------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 02/19/88*
TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period $ 2.530 $ 2.104 $ 2.099 $ 1.737 $ 1.596 $ 1.267 $ 1.332 $ 1.099 $ 1.000
2. Accumulation unit
value at end of
period 3.044 2.530 2.104 2.099 1.737 1.596 1.267 1.332 1.099
3. Number of
accumulation
units outstanding
at end of period 29,360,348 28,317,862 26,707,292 19,580,,278 8,359,974 3,601,671 2,596,033 1,812,915 438,001
</TABLE>
*Commencement of Business
The financial statements of the Account are in the statement of additional
information.
9
<PAGE>
<TABLE>
<CAPTION>
ACCUMULATION UNIT VALUES
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
(CONDENSED FINANCIAL INFORMATION) (CONTINUED)
SUBACCOUNTS
----------------------------------------------------------------------------------------------------------
EQUITY
----------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period ........ $ 4.850 $ 3.738 $ 3.681 $ 3.056 $ 2.709 $ 2.176 $ 2.323 $ 1.812 $ 1.567 $ 1.560
2. Accumulation unit
value at end of
period ........... 5.680 4.850 3.738 3.681 3.056 2.709 2.176 2.323 1.812 1.567
3. Number of
accumulation
units outstanding
at end of period . 50,992,740 48,356,691 44,189,146 39,039,555 29,987,497 25,189,460 23,155,951 24,216,949 26,268,202 35,615,496
<CAPTION>
PRUDENTIAL JENNISON
---------------------------------------------------------------------------------------------------------
01/01/96 05/01/95*
TO TO
12/31/96 12/31/95
-------- --------
<S> <C> <C>
1. Accumulation unit
value at beginning
of period .......... $ 1.245 $ 1.009
2. Accumulation unit
value at end of
period ............. 1.408 1.245
3. Number of
accumulation
units outstanding
at end of period ... 8,907,930 3,331,892
<CAPTION>
SMALL CAPITALIZATION STOCK
---------------------------------------------------------------------------------------------------------
01/01/96 05/01/95*
TO TO
12/31/96 12/31/95
-------- --------
<S> <C> <C>
1. Accumulation unit
value at beginning
of period .......... $ 1.190 $ 1.002
2. Accumulation unit
value at end of
period ............. 1.408 1.190
3. Number of
accumulation
units outstanding
at end of period ... 5,169,868 1,491,116
<CAPTION>
GLOBAL
--------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 05/01/89*
TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period ........... $ 1,533 $ 1.339 $ 1.425 $ 1.007 $ 1.056 $ 0.959 $ 1.115 $ 1.015
2. Accumulation unit
value at end of
period .............. 1.814 1.533 1.339 1.425 1.007 1.056 0.959 1.115
3. Number of
accumulation
units outstanding
at end of period .... 21,007,801 18,445,275 20,295,941 5,444,571 1,299,663 1,247,336 610,872 125,853
<CAPTION>
EQUITY INCOME
---------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 05/01/88*
TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation unit
value at beginning
of period .......... $ 2.196 $ 1.751 $ 1.851 $ 1.497 $ 1.412 $ 1.295 $ 1.391 $ 1.038 $ 1.000
2. Accumulation unit
value at end of
period ............. 2.840 2.196 1.751 1.851 1.497 1.412 1.295 1.391 1.038
3. Number of
accumulation
units outstanding
at end of period .... 10,476,240 8,792,973 8,870,868 5,634,046 3,079,123 3,120,415 3,256,246 1,098,505 280,510
</TABLE>
*Commencement of Business
The financial statements of the Account are in the statement of additional
information.
10
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GENERAL INFORMATION ABOUT PRUDENTIAL,
PRUDENTIAL INDIVIDUAL VARIABLE
CONTRACT ACCOUNT, AND THE VARIABLE OPTIONS AVAILABLE UNDER THE
CONTRACT
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
The Prudential Insurance Company of America ("Prudential") is a mutual insurance
company, founded in 1875 under the laws of the State of New Jersey. It is
licensed to sell life insurance and annuities in the District of Columbia, Guam,
and in all states. These Contracts are not offered in any state in which the
necessary approvals have not yetbeen obtained.
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 PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
The Prudential Individual Variable Contract Account (the "Account") was
established on October 12, 1982 under New Jersey law as a separate investment
account. The Account meets the definition of a "separate account" under the
federal securities laws. The Account holds assets that are segregated from all
of Prudential's other assets.
The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Prudential. Prudential is also the legal
owner of the assets in the Account. Prudential will at all times maintain assets
in the Account with a total market value at least equal to the reserve and other
liabilities relating to the variable benefits attributable to the Account. These
assets may not be charged with liabilities which arise from any other business
Prudential conducts. In addition to these assets, the Account's assets may
include funds contributed by Prudential to commence operation of the Account and
may include accumulations of the charges Prudential makes against the Account.
From time to time these additional assets will be transferred to Prudential's
general account. Before making any such transfer, Prudential will consider any
possible adverse impact the transfer might have on the Account.
The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any
supervision by the SEC of the management or investment policies or practices of
the Account. For state law purposes, the Account is treated as a part or
division of Prudential. There are currently thirteen subaccounts within the
Account, each of which invests in a single corresponding portfolio of the Series
Fund. Additional subaccounts may be added in the future. The Account's financial
statements appear in the statement of additional information.
THE PRUDENTIAL SERIES FUND, INC.
The Prudential Series Fund, Inc. (the "Series Fund") is registered under the
1940 Act as an open-end diversified management investment company. Its shares
are currently sold only to separate accounts of Prudential and certain other
insurers that offer variable life insurance and variable annuity contracts. The
Account will purchase and redeem shares from the Series Fund at net asset value.
Shares will be redeemed to the extent necessary for Prudential to provide
benefits under the Contract and to transfer assets from one subaccount to
another, as requested by Contract owners. Any dividend or capital gain
distribution received from a portfolio of the Series Fund will be reinvested
immediately at net asset value in shares of that portfolio and retained as
assets of the corresponding subaccount.
Prudential is the investment advisor for the assets of each of the portfolios of
the Series Fund. Prudential's principal business address is Prudential Plaza,
Newark, New Jersey 07102-3777. Prudential has a Service Agreement with its
wholly-owned subsidiary The Prudential Investment Corporation ("PIC"), which
provides that, subject to Prudential's supervision, PIC will furnish investment
advisory services in connection with the management of the Series Fund. In
addition, Prudential has entered into a Subadvisory Agreement with its
wholly-owned subsidiary Jennison Associates Capital Corp. ("Jennison"), under
which Jennison furnishes investment advisory services in connection with the
management of the Prudential Jennison Portfolio. Further detail is provided in
the prospectus and statement of additional information for the Series Fund.
Prudential, PIC, and Jennison are registered as investment advisors under the
Investment Advisers Act of 1940.
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As an investment advisor, Prudential charges the Series Fund a daily investment
management fee as compensation for its services. The following table shows the
investment management fee charged for each portfolio of the Series Fund
available for investment by Contract owners.
- --------------------------------------------------------------------------------
| ANNUAL INVESTMENT
| MANAGEMENT FEE AS
PORTFOLIO | A PERCENTAGE OF AVERAGE
| DAILY NET ASSETS
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO | 0.40%
DIVERSIFIED BOND PORTFOLIO | 0.40%
GOVERNMENT INCOME PORTFOLIO | 0.40%
CONSERVATIVE BALANCE PORTFOLIO | 0.55%
FLEXIBLE MANAGED PORTFOLIO | 0.60%
HIGH YIELD BOND PORTFOLIO | 0.55%
STOCK INDEX PORTFOLIO | 0.35%
EQUITY INDEX PORTFOLIO | 0.40%
EQUITY PORTFOLIO | 0.45%
PRUDENTIAL JENNISON PORTFOLIO | 0.60%
SMALL CAPITALIZATION STOCK PORTFOLIO | 0.40%
GLOBAL PORTFOLIO | 0.75%
NATURAL RESOURCES PORTFOLIO | 0.45%
- --------------------------------------------------------------------------------
It is conceivable that in the future it may become disadvantageous for both
variable life insurance and variable annuity contract separate accounts to
invest in the same underlying mutual fund. Although neither the companies which
invest in the Series Fund, nor the Series Fund currently foresees any such
disadvantage, the Series Fund's Board of Directors intends to monitor events in
order to identify any material conflict between variable life insurance and
variable annuity 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 Series Fund; or (4)
differences between voting instructions given by variable life insurance and
variable annuity contract owners.
A FULL DESCRIPTION OF THE SERIES FUND, ITS INVESTMENT OBJECTIVES, MANAGEMENT,
POLICIES, AND RESTRICTIONS, ITS EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN--INCLUDING ANY RISKS ASSOCIATED WITH INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO--AND ALL OTHER ASPECTS OF ITS OPERATION IS CONTAINED IN THE ATTACHED
PROSPECTUS FOR THE SERIES FUND AND IN ITS STATEMENT OF ADDITIONAL INFORMATION,
WHICH SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS. THERE IS NO ASSURANCE
THAT THE INVESTMENT OBJECTIVES WILL BE MET.
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
The Prudential Variable Contract Real Property Account (the "Real Property
Account") is a separate account of Prudential that, through a general
partnership formed by Prudential and two of its subsidiaries, invests primarily
in income-producing real property such as office buildings, shopping centers,
agricultural land, hotels, apartments or industrial properties. It also invests
in mortgage loans and other real estate-related investments, including
sale-leaseback transactions. The objectives of the Real Property Account and the
partnership are to preserve and protect capital, provide for compounding of
income as a result of reinvestment of cash flow from investments, and provide
for increases over time in the amount of such income through appreciation in the
value of assets.
The partnership has entered into an investment management agreement with
Prudential, under which Prudential selects the properties and other investments
held by the partnership. Prudential charges the partnership a daily fee for
investment management which amounts to 1.25% per year of the average daily gross
assets of the partnership.
A FULL DESCRIPTION OF THE REAL PROPERTY ACCOUNT, ITS MANAGEMENT, POLICIES, AND
RESTRICTIONS, ITS CHARGES AND EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN, THE PARTNERSHIP'S INVESTMENT OBJECTIVES, AND ALL OTHER ASPECTS OF THE
REAL PROPERTY ACCOUNT'S AND THE PARTNERSHIP'S OPERATIONS IS CONTAINED IN THE
ATTACHED PROSPECTUS FOR THE REAL PROPERTY ACCOUNT, WHICH SHOULD BE READ TOGETHER
WITH THIS PROSPECTUS BY ANY CONTRACT OWNER CONSIDERING THE REAL ESTATE
INVESTMENT OPTION. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE
MET.
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DETAILED INFORMATION ABOUT THE CONTRACT
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
The minimum initial purchase payment is $1,000 ($100, if under payroll
deduction). The Contract may generally be issued on proposed annuitants below
the age of 86. Before issuing any Contract, Prudential requires submission of
certain information. Following Prudential's review of the information and
approval of issuance of the Contract, a Contract will be issued that sets forth
precisely the owner's rights and the Company's obligations. The Contract owner
may thereafter make additional purchase payments of $100 or more per investment
option, but there is no obligation to do so. These additional purchase payments
may be made by check payable to the order of Prudential and mailed to your
designated Prudential Home Office accompanied by forms that will be provided for
this purpose. Prudential currently will not accept purchase payments on and
after the Contract anniversary next following the annuitant's 85th birthday, but
reserves the right to do so.
The Contract date will be the date Prudential received the initial purchase
payment and certain required documentation. The amount credited under the
Contract begins to vary on that date to reflect the investment results of the
investment option[s] and/or the interest rate declared for the fixed-rate option
as chosen by the applicant. If the issuance of the Contract is not approved,
because the current underwriting requirements are not met, the purchase payment
will promptly be returned. The Company reserves the right to change these
requirements on a non-discriminatory basis.
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"
Generally, a Contract may be returned for a refund within 10 days after it is
received by the Contract owner. Some states allow a longer period of time during
which a Contract may be returned for a refund. A refund can be requested by
mailing or delivering the Contract to the representative who sold it or to the
Prudential Home Office specified in the Contract. The Contract owner will then
receive a refund of all purchase payments made, plus or minus any change due to
investment experience in the value of the invested portion of the payments,
excluding any bonus paid on the purchase payments, calculated as if no charges
had been made against the Account or the Series Fund. However, if applicable law
so requires, the Contract owner who exercises his or her short-term cancellation
right will receive a refund of all purchase payments made, excluding any bonus
paid on the purchase payments, with no adjustment for investment experience.
ALLOCATION OF PURCHASE PAYMENTS
The Contract owner determines how the purchase payment will be allocated among
the subaccounts, the Real Property Account, and the fixed-rate option, by
specifying the desired allocation on the application form for a Contract. You
may change subsequent purchase payment allocations by providing us with proper
written instructions. You may also change subsequent purchase payment
allocations by telephoning your designated Prudential Home Office, provided the
Contract owner is enrolled to use the Telephone Transfer System. If, after you
have made one purchase payment, you send Prudential an additional purchase
payment without instructions about how the purchase payment should be allocated,
Prudential will allocate the purchase payment in the same proportions as the
most recent purchase payment you made.
Additionally, a feature called Dollar Cost Averaging ("DCA") is available to
Contract owners. If you wish, purchase payments allocated to the portion of the
Money Market subaccount used for this feature (the "DCA account"), and
designated dollar amounts will be transferred monthly from the DCA account to
other investment options available under the Contract, excluding the Money
Market subaccount and the fixed-rate option, but including the Real Property
Account. Automatic monthly transfers must be at least 3% of the amount allocated
to the DCA account (that is, if you designate $5,000 the minimum monthly
transfer is $150), with a minimum of $20 transferred into any one investment
option. These amounts are subject to change at Prudential's discretion. The
minimum transfer amount will only be recalculated if the amount designated for
transfer is increased.
When you establish DCA at issue, you must allocate to the DCA account the
greater of $2,000 or 10% of the initial purchase payment. When you establish DCA
after issue, you must allocate to the DCA account at least $2,000. These
minimums are subject to change at Prudential's discretion. After DCA has been
established and as long as the DCA account has a positive balance, you may
allocate or transfer amounts to the DCA account, subject to the limitations on
purchase payments and transfers generally. In addition, if you have already
established DCA, your purchase payment allocation instructions may include an
allocation of all or a portion of all your purchase payments to the DCA account.
Each automatic monthly transfer will take effect as of the end of the valuation
period on the Monthly date (i.e. the Contract date and the same date in each
subsequent month), provided the New York Stock Exchange ("NYSE") is open on that
date. If the NYSE is not open on the Monthly date, the transfer will take effect
as of the end of the valuation period on the next day that the NYSE is open. If
the Monthly date does not occur in a particular month (e.g., February 30), the
transfer will take effect as of the end of the valuation period on the last day
of that month that the NYSE is open. Automatic monthly
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<PAGE>
transfers will continue until the balance in the DCA account reaches zero, or
until the Contract owner gives notification of a change in allocation or
cancellation of the feature. If you have an outstanding payment allocation to
the DCA account, but your DCA option has previously been canceled, purchase
payments allocated to the DCA account will be allocated to the Money Market
subaccount. Currently, there is no charge for using the DCA feature.
ADDITIONAL AMOUNTS
During the first 3 Contract years, and in Contract years thereafter at
Prudential's discretion, Prudential will add an Additional Amount, as a bonus,
of 1% to every purchase payment that you make and allocate that Additional
Amount to the subaccounts, the Real Property Account, and the fixed-rate option
in the same manner as your purchase payment. Prudential reserves the right,
however, to limit its payment of such Additional Amounts to $1,000 in each
Contract year. This Additional Amount, or bonus, will work as follows. Suppose
you make an initial purchase payment of $2,000 to be allocated equally to the
Equity Subaccount and the fixed-rate option. Prudential will increase the
payment by 1%, or $20, and allocate $1,010 to both the Equity Subaccount and to
the fixed-rate option. Later in the year you send an additional purchase payment
of $600, but you fail to indicate how it should be applied. Prudential will
increase that amount by 1% or $6, and based on your most recent instruction,
will allocate $303 to both the Equity Subaccount and to the fixed-rate option.
The Additional Amount will not be subject to taxes attributable to premiums. It
will, however, be recaptured by Prudential in the event you make a withdrawal of
a purchase payment on which an Additional Amount was paid within 8 Contract
years after the payment, unless such withdrawn purchase payment is used to
effect an annuity that is not subject to a sales charge or is subject to a
reduced sales charge. See SALES CHARGES ON WITHDRAWALS, page 16, and RECAPTURE
OF ADDITIONAL AMOUNTS, page 18.
TRANSFERS
You may transfer the portions of your Contract fund allocated to any subaccount
to any of the other subaccounts, to the Real Property Account or to the
fixed-rate option without charge. Transfers must be $300 or more, or the amount
in the subaccount, if less, and must not cause the amount credited to you in any
subaccount to be less than $300, unless you transfer the entire amount in that
subaccount. You may transfer amounts by proper written notice to a Prudential
Home Office, or by telephone unless you ask that transfers by telephone not be
made.
Prudential has adopted procedures designed to ensure that requests by
telephone are genuine and will require appropriate identification for that
purpose. Prudential will not be liable for following telephone instructions that
it reasonably believes to be genuine. Prudential cannot guarantee that owners
will be able to get through to complete a telephone transfer during peak periods
such as periods of drastic economic or market change.
You may make up to four transfers per Contract year during the period before
annuity payments begin. Currently, you may make additional transfers without
Prudential's consent. After variable annuity payments begin, part or all of the
interest in a subaccount may be transferred to one or more other subaccounts.
The annuitant may then make up to four transfers per Contract year. Currently,
you may make additional transfers without Prudential's consent. Any partial
transfer will require Prudential's consent if either the number of Subaccount
Annuity Units to be transferred or the number to be retained, multiplied by the
corresponding Subaccount Annuity Unit Value on the effective date of the
transfer, is less than $20. Transfers among subaccounts will take effect as of
the end of the valuation period in which a proper transfer request is received
at a Prudential Home Office, except that if the request is received within 7
days of an annuity payment date, it will be made on the first business day after
the annuity payment date.
Transfers from the fixed-rate option to the variable investment options are
currently permitted once each Contract year during a 30-day period. Currently
that period begins on the Contract anniversary. Prudential reserves the right to
change the beginning date of the transfer period. The maximum amount which may
currently be transferred out of the fixed-rate option each year is the greater
of: (a) 25% of the amount in the fixed-rate option, and (b) $2,000. Transfer
requests received prior to the Contract anniversary will be effected on the
Contract anniversary. Transfer requests received within the 30-day period
beginning on the Contract anniversary will be effected as of the end of the
valuation period in which a proper transfer request is received at a Prudential
Home Office. These limits are subject to change in the future. Although it is
not Prudential's present practice to do so, we may in the future permit
transfers outside of the 30-day period referred to above and change the maximum
amount that may be transferred out of the fixed-rate option. Transfers to and
from the Real Property Account are subject to restrictions described in the
attached prospectus for the Real Property Account.
WITHDRAWALS
You may at any time withdraw all of your investment in the Contract fund.
However, Prudential's consent will be required for a partial withdrawal if the
amount requested is less than $300 or if it would reduce the amount credited
under the Contract to less than $300. Prudential will generally pay the amount
of any withdrawal within 7 days after it receives a properly completed
withdrawal request. The amount of your requested withdrawal, plus any applicable
sales charge and
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<PAGE>
any applicable recapture of additional amounts, will be deducted from your
Contract fund. Any tax withholding required by law will be deducted from the
amount of your requested withdrawal. Prudential may delay payment of any
withdrawal allocable to the subaccount[s] for a longer period if the disposal or
valuation of the Account's assets is not reasonably practicable because the New
York Stock Exchange is closed for other than a regular holiday or weekend,
trading is restricted by the SEC or the SEC declares that an emergency exists.
With respect to the amount of any withdrawal allocable to the fixed-rate option,
Prudential expects to pay the withdrawal promptly upon request. However,
Prudential has the right to delay payment of such withdrawal for up to 6 months
(or a shorter period if required by applicable law).
Prudential will pay interest of at least 3% a year if it delays such a payment
for 30 days or more (or a shorter period if required by applicable law).
Prudential also offers an Automated Withdrawal feature which enables Contract
owners to receive periodic withdrawals either monthly, quarterly, semi-annually
or annually. Withdrawals may be made from a designated investment option or
proportionally from all investment options. Withdrawals must be in a specified
amount rather than a percentage of the amount in the investment option.
Withdrawal charges may apply if the withdrawals in any Contract year exceed the
withdrawal-free amount.
A withdrawal will generally have federal income tax consequences, which could
include tax penalties. You should consult with a tax advisor before making a
withdrawal. See FEDERAL TAX STATUS, page 20.
DEATH BENEFIT
If one annuitant is named in the Contract (and under the WA-83 Contract, only
one annuitant may be named under the Contract. See item 2 under DIFFERENCES
UNDER THE WVA-83 CONTRACT, page 26) or if the annuitant is the last surviving
annuitant under the Contract, and such annuitant should die before any annuity
payments have been received under the Contract, a death benefit, calculated as
of the date due proof of death is received by Prudential, will be payable to the
beneficiary you designate. The beneficiary will have the right to elect to
receive this amount (without the imposition of any sales charge or any further
annual maintenance charge) in one sum, in periodic payments, in the form of a
lifetime annuity or in a combination of these ways. Payments will begin once
Prudential receives all information necessary to process the claim. Unless the
beneficiary has been irrevocably designated, you may change the beneficiary at
any time.
If the annuitant should die before reaching age 65 and before the annuity date,
the amount payable to the beneficiary will be at least equal to the total amount
of purchase payments you have made plus any bonus credited by Prudential
(reduced by any previous withdrawal[s] in the same proportion that such
withdrawal[s] reduced your Contract fund on the withdrawal date[s]), even if the
value of your Contract fund is less than this minimum amount. (Under the WVA-83
Contract, the minimum amount payable to the beneficiary is determined in a
different manner. See item 3 under DIFFERENCES UNDER THE WVA-83 CONTRACT, page
26.) If the value of your Contract fund is greater, however, that value will be
payable to the beneficiary. If the annuitant dies after the age of 65 but before
the annuity date, the death benefit payable to the beneficiary will be the value
of your Contract fund. If the annuitant dies after he or she has begun to
receive annuity payments, the death benefit, if any, will be determined by the
type[s] of annuity payment you have selected. See EFFECTING AN ANNUITY, page 22.
If two annuitants are named in the Contract (only one annuitant may be named
under the WVA-83 Contract and therefore this paragraph does not apply to that
Contract; see item 2 under DIFFERENCES UNDER THE WVA-83 Contract, page 26), and
one annuitant dies before age 65 and before the annuity date, while the other
annuitant is still living, a comparison will be made, on the date of due proof
of the death of the annuitant, between your Contract fund and the total amount
of purchase payments you have made plus any bonus credited by Prudential
(reduced by any previous withdrawal[s] in the same proportion that such
withdrawal[s] reduced your Contract fund on the withdrawal date[s]). If the
total amount of purchase payments plus any bonus so calculated is greater, the
difference will be credited to your Contract fund. You may withdraw your
Contract fund without charge within 30 days following the date of due proof of
the death of the annuitant.
VALUATION OF CONTRACT OWNER'S CONTRACT FUND
The value of your Contract fund is the sum of your interests in the variable
investment options and in the fixed-rate option. The value of your Variable
Account is the sum of your separate interests in each subaccount or the Real
Property Account. These values are measured in Units, for example, Money Market
Units, Diversified Bond Units or Flexible Managed Units. You are credited with
Units in each subaccount in which you invest. Every purchase payment you make is
converted into Units of the subaccount or subaccounts you have chosen by
dividing the amount of the purchase payment by the Unit Value for the subaccount
to which you have allocated that purchase payment. With regard to purchase
payments subsequent to the initial payment (described above), this is done as of
the end of the valuation period in which the payment is received at a Prudential
Home Office. The value of these Units changes each day to reflect the investment
results and expenses of and deductions of charges from the Series Fund
portfolios in which the assets of the subaccount are invested, in much the same
way that the share values of a mutual fund change each day. The manner in which
the computation is made is complicated and differs somewhat from how mutual fund
share values are determined. It is explained on page C1 of the statement of
additional information. The result is much the same, however. For example,
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the product of the number of Diversified Bond Units that are credited to your
Variable Account multiplied by the Diversified Bond Unit Value on any day is the
value of your exact proportionate share of the net assets of the Diversified
Bond Subaccount on that day, just as the number of shares you might hold in a
mutual fund multiplied by the value of a share represents the value of your
proportionate share of the net assets of the mutual fund.
There is, of course, no guarantee that the value of your Contract fund will
increase or that it will not fall below the amount of your total purchase
payments. However, Prudential guarantees a minimum interest rate of 3% a year on
that portion of the Contract fund allocated to the fixed-rate option. Excess
interest on payments allocated to the fixed-rate option may be credited in
addition to the 3% guaranteed interest rate. See THE FIXED-RATE OPTION, page .
The valuation of the portion of the Contract fund allocated to the Real Property
Account is described in the attached prospectus for the Real Property Account.
If applicable, on each Contract anniversary date before the Annuity date,
Prudential makes an annual maintenance charge of up to $30. See ANNUAL
MAINTENANCE CHARGE, page . If the Contract fund is allocated to more than one
investment option, the charge will be divided on a pro rata basis, according to
the value held in each subaccount, the Real Property Account, and/or the
fixed-rate option. This charge will also be made, as a deduction from the
proceeds of the withdrawal, if you withdraw your entire Contract fund during the
year, including a withdrawal to effect an annuity under your Contract. That
portion of the maintenance charge which is attributable to your Variable Account
will be assessed by reducing the number of Units credited to your Variable
Account.
CHARGES, FEES, AND DEDUCTIONS
1. PREMIUM TAXES. A charge may be deducted for taxes attributable to premiums.
For these purposes, "taxes attributable to premiums" shall include any state or
local premium taxes and, where approval has been obtained, any federal premium
taxes and any federal, state or local income, excise, business or any other type
of tax (or component thereof) measured by or based upon the amount of premium
received by Prudential. If Prudential pays a state or local tax at the time
purchase payments are made, the deduction will be made at that time based on the
applicable rate. Currently, no such deduction is made from purchase payments in
any state. In some states, however, Prudential pays a premium tax when an
annuity is effected. In those states, the tax will be deducted at that time. The
tax rates currently in effect in those states that impose a tax range from 1% to
5%. Prudential also reserves the right to deduct from each purchase payment a
charge up to a maximum of 0.3% for federal income taxes measured by premiums in
those states where approval has been obtained. Currently, no such charge is
being made in any state.
2. SALES CHARGES ON WITHDRAWALS. A deferred sales charge may be imposed on the
withdrawal of purchase payments. The charge compensates Prudential for paying
all of the expenses of selling and distributing the Contracts, including
commissions, preparation of sales literature, and other promotional activities.
Any amount that you withdraw may be treated for the purpose of determining sales
charges as a withdrawal of investment income, until you have withdrawn an amount
equal to your investment income. There is no sales charge on the withdrawal of
investment income. For the purpose of determining sales charges, further
withdrawals will be considered withdrawals of purchase payments. Purchase
payments are deemed to be withdrawn on a first-in, first-out basis (that is,
your first purchase payments will be the first withdrawn). The amount of any
sales charge will depend on the purchase payments withdrawn and the number of
Contract years that have elapsed since you made the particular purchase
payments. Your first Contract year begins on the date your initial purchase
payment is invested in the Contract fund (the Contract date). A subsequent
Contract year begins on each anniversary of the Contract date. (Under the WVA-83
Contract, purchase payments, rather than investment income, are deemed removed
first under a withdrawal. Generally, sales charges on withdrawals under the
VIP-84 Contract and the VIP-86 Contract as described in this section will be
less than under the WVA-83 Contract because investment income is deemed removed
before purchase payments, and investment income is not subject to sales charges.
However, due to the possibility of flexible purchase payments, multiple
withdrawals and a variable return, it is not possible to categorically state
that the VIP-84 Contract and the VIP-86 Contract result in lower charges. For a
more detailed description of sales charges on withdrawals under the WVA-83
Contract, see item 1 under DIFFERENCES UNDER THE WVA-83 CONTRACT, page 26.)
In each Contract year you may make withdrawals of purchase payments from your
Contract fund of up to 10% of the value of the Contract fund as of the date of
the first withdrawal in that Contract year, without incurring a sales charge.
This charge-free withdrawal amount does not accumulate from Contract year to
Contract year. If you withdraw all or part of a purchase payment before the end
of the Contract year during which it was made, the sales charge will be 8% of
the purchase payment that you withdraw, subject to the 10% free withdrawal
privilege. For example, suppose you make an initial purchase payment of $1,000.
Within the same Contract year you withdraw $450 and at the time of that
withdrawal the value of your Contract Fund has grown to $1,100 (due to the
credit of $10 for the 1% additional amount and $90 in investment earnings).
Since withdrawals are deemed for sales charge purposes to consist of investment
income first, the amount subject to a sales charge is $360 ($450 minus $90 of
investment income). However, 10% of the value of your Contract fund at the time
of the first withdrawal in the Contract year during which the withdrawal is made
may be withdrawn without charge. Ten percent of $1,100 is $110. Thus, the sales
charge, which generally is also withdrawn from the Contract fund, will be 8% of
$250 (the $360 purchase payment withdrawn minus $110), which is $20. (This
withdrawal would also involve a recapture of $3.60 of the 1% additional amount.
See Recapture of Additional Amounts, page .)
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In addition, Critical Care Access is available for Contracts issued on or after
February 1, 1985. Based on regulatory approval of the Waiver of Withdrawal
Charges endorsement, all or part of any withdrawal and maintenance charges
associated with a full or partial withdrawal, or any annuitization or withdrawal
charge due on the annuity date, will be waived following the receipt of due
proof that the annuitant or co-annuitant (if applicable) has been confined to an
eligible nursing home or hospital for a period of at least 3 months or a
physician has certified that the annuitant or co-annuitant (if applicable) has 6
months or less to live.
The sales charge imposed on the withdrawal of a purchase payment during the
Contract year beginning after the purchase payment was made is 7% and continues
to decrease by 1% per year in accordance with the following table:
<TABLE>
<CAPTION>
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FOR WITHDRAWALS OF PURCHASE THE SALES CHARGE WILL BE EQUAL TO
PAYMENTS DURING THE CONTRACT YEAR THE FOLLOWING PERCENTAGE OF THE
INDICATED PURCHASE PAYMENT WITHDRAWN (A)
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<S> <C>
Contract year in Which Payment Made 8%
First Contract Year Following Year in Which Payment Made 7%
Second Contract Year Following Year in Which Payment Made 6%
Third Contract Year Following Year in Which Payment Made 5%
Fourth Contract Year Following Year in Which Payment Made 4%
Fifth Contract Year Following Year in Which Payment Made 3%
Sixth Contract Year Following Year in Which Payment Made 2%
Seventh Contract Year Following Year in Which Payment Made 1%
Subsequent Contract Years No Charge
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(a) Subject to 10% free withdrawal described above.
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</TABLE>
For purchase payments on and after the annuitant's 81st birthday, the sales
charge percentages described in the above table for withdrawals of such purchase
payments will be subject to reduction based on reductions in costs for purposes
of complying with state non-forfeiture law.
Under the VIP-84 Contract and the VIP-86 Contract, withdrawals are
considered, for federal income tax purposes as well as for the purpose of
determining the amount of any sales charge, as having been made first from
investment income. (Under the WVA-83 Contract, withdrawals are also considered,
for federal income tax purposes, as having been made first from investment
income, even though Prudential treats them, for purposes of determining any
sales charge, as having been made first from purchase payments -- see item 1
under DIFFERENCES UNDER THE WVA-83 CONTRACT, page 26 and TAXES PAYABLE BY
CONTRACT OWNERS, page 20.)
Your withdrawal request must specify the source from which the withdrawal
is to be made. If you fail to specify, your withdrawal, subject to minimum
amount requirements, will be allocated among the variable investment options in
which you have an interest and the fixed-rate option, if a portion of your
Contract fund is held under that option, in the same proportions as the value of
your interest in the variable investment options and in the fixed-rate option
bears to the total value of your Contract fund. Your sales charge will be
determined without reference to the source of the withdrawal. The charge will be
determined by reference to the period that has elapsed since your earliest
purchase payment not yet withdrawn, even if that payment was not originally
invested in or has subsequently been transferred from the source from which the
withdrawal was made.
Under the VIP-86 Contract, an annuity may not be effected earlier than 3
years after the Contract date. If an annuity is effected 3 or more years after
the Contract date under the Supplemental Life Annuity Option (see ANNUITY
OPTIONS UNDER THE VIP-86 CONTRACT, page 22), there will be no sales charge
deducted. If an annuity is effected under one of the other annuity options under
the VIP-86 Contract, the sales charge will be determined as described in the
above table.
Under the VIP-84 Contract, if an annuity is effected at any time after the
Contract date under the Supplemental Life Annuity Option (see ANNUITY OPTIONS
UNDER THE WVA-83 AND VIP-84 CONTRACTS, page 23), there will be no sales charge
deducted. If an annuity is effected under one of the other annuity options under
the VIP-84 Contract less than 3 years after the Contract date, the sales charge
will be determined as described in the above table. However, if an annuity is
effected under one of such other annuity options (excluding the Annuity Certain
Option) 3 or more years after the Contract date, the sales charge will be 4%
less than each percentage shown in the above table (the sales charge applied to
a withdrawal to effect the Annuity Certain Option will be determined as
described in the above table).
Under the WVA-83 Contract, if an annuity is effected at any time after the
Contract date under the Supplemental Life Annuity Option (see ANNUITY OPTIONS
UNDER THE WVA-83 AND VIP-84 CONTRACTS, page 23), there will be no sales
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charge deducted. If an annuity is effected under one of the other annuity
options under the WVA-83 Contract less than 3 years after the Contract date, the
sales charge will be determined as described in the above table. However, if an
annuity is effected under one of such other annuity options (excluding the
Annuity Certain Option) 3 or more years after the Contract date, there will be
no sales charge deducted (the sales charge applied to a withdrawal to effect the
Annuity Certain Option will be determined as described in the above table).
An annuity is effected by applying the annuity purchase rates set forth in your
Contract to the amount credited to your Contract fund--less any applicable sales
charge, recapture of Additional Amounts (see RECAPTURE OF ADDITIONAL AMOUNTS,
below), premium tax (see PREMIUM TAXES, page ), and annual maintenance charge
(see ANNUAL MAINTENANCE CHARGE, below)--on the date the annuity is effected. The
amount of the annuity payments that you will receive monthly will depend upon
the form of the annuity you select and, for a variable annuity, upon the
investment performance of the subaccount or subaccounts in which the assets are
held. See EFFECTING AN ANNUITY, page 22.
3. RECAPTURE OF ADDITIONAL AMOUNTS. If you make a withdrawal which consists
partially or wholly of purchase payments, Prudential may recapture the
Additional Amounts that were credited to your Contract fund. If the duration
from the start of the Contract year in which a purchase payment was made to the
start of the Contract year of withdrawal is less than 8 years (except as
provided in the following paragraph, this includes withdrawals made for the
purpose of applying some or all of the Contract fund to effect an annuity),
Prudential will recapture the Additional Amounts originally credited upon the
portion of the purchase payments being withdrawn. If the duration from the start
of the Contract year of purchase payment to the start of the Contract year of
withdrawal is 8 years or more, the Additional Amounts credited will not be
recaptured. For example, suppose you make an initial purchase payment of $1,000
for which you are credited with a bonus of 1% or $10. In the second year you
make an additional payment of $2,400, and are credited with an additional bonus
of $24. In the fifth Contract year you request a partial withdrawal of $1,600.
On the date of the withdrawal, the value of your Contract fund is $3,900, which
includes $466 of earnings. Thus the requested withdrawal represents a withdrawal
of $1,134 of purchase payments. Because $1,134 of purchase payments is being
withdrawn and the duration from the start of the Contract years of these
purchase payments to the Contract year of withdrawal is less than 8 years, the
portion of the Additional Amounts recaptured will be $11.34 (1% of $1,134).
Prudential will not recapture Additional Amounts paid on any purchase payment[s]
withdrawn where surrender charges have been waived due to confinement in a
nursing home or hospital, or due to a terminal illness. See SALES CHARGES ON
WITHDRAWALS, page 16.
Prudential will not recapture Additional Amounts paid on any purchase payment[s]
withdrawn if such withdrawal is used to effect an annuity that is not subject to
a sales charge or is subject to a reduced sales charge. Such annuity must be
effected 1 or more years after the Contract date (3 or more years after the
Contract date under the VIP-86 Contract.) See SALES CHARGES ON WITHDRAWALS, page
16.
4. ANNUAL MAINTENANCE CHARGE. Currently, an annual maintenance charge of up to
$30 will be deducted if and only if the Contract fund is less than $10,000 on a
Contract anniversary or at the time a full withdrawal is effected. This charge
is intended to compensate Prudential for administering the Account, maintaining
records, and preparing and distributing annual reports and an annual statement
of your Contract fund. This $30 fee will not be charged if the Contract fund is
less than $10,000 as a result of a withdrawal due to confinement in a nursing
home or hospital, or due to a terminal illness, as applied under the Waiver of
Withdrawal Charges endorsement. See SALES CHARGES ON WITHDRAWALS, page . In
addition, this charge is not made after annuitization, and it may not be
increased by Prudential. See VALUATION OF CONTRACT OWNER'S CONTRACT FUND, page
15.
5. CHARGE FOR ASSUMING MORTALITY AND EXPENSE RISKS. A deduction is made daily
from each of the variable investment options at an annual rate of up to 1.2% of
the assets held in the variable investment options. This charge may not be
increased by Prudential. Of this amount, one-third, up to 0.4%, is for assuming
the risk that the charges made under the Contracts may not cover
inflation-increased expenses, and two-thirds, up to 0.8%, is for assuming
mortality risks. The mortality risk assumed by Prudential is the risk that
annuity payments under a selected annuity option (see EFFECTING AN ANNUITY, page
22) may continue for a longer period than anticipated under the life expectancy
tables and schedule of annuity rates in effect when the Contract was issued. The
charges for mortality and expense risks will continue throughout the period of
any variable annuity selected (including a variable annuity certain, even though
Prudential no longer bears any mortality risk under such a Contract). This
charge is not assessed against amounts allocated to the fixed-rate option or
after a fixed-dollar annuity is effected.
6. EXPENSES INCURRED BY THE SERIES FUND. The charges and expenses of the Series
Fund, net of reimbursements, are indirectly borne by the Contract owners.
Investment management fees for the available Series Fund portfolios are briefly
described under THE PRUDENTIAL SERIES FUND, INC. on page 11.
Further detail about management fees and other Series Fund expenses is provided
in the attached prospectus for the Series Fund and its statement of additional
information. Higher charges and expenses are incurred if the Real Property
Account is selected, as described in the prospectus for the Real Property
Account that is attached to this one.
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THE FIXED-RATE OPTION
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED-RATE
OPTION UNDER THE CONTRACT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND THE GENERAL ACCOUNT HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY, INTERESTS IN THE
FIXED-RATE OPTION ARE NOT SUBJECT TO THE PROVISIONS OF THESE ACTS, AND
PRUDENTIAL HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING TO THE
FIXED-RATE OPTION. DISCLOSURE REGARDING THE FIXED-RATE OPTION MAY, HOWEVER, BE
SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF FEDERAL SECURITIES LAWS
RELATING TO THE ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
As explained earlier, a Contract owner may elect to allocate, either initially
or by transfer, all or part of the amount credited under the Contract to a
fixed-rate option, and the amount so allocated or transferred becomes part of
Prudential's general assets. Sometimes this is referred to as Prudential's
general account, which consists of all assets owned by Prudential other than
those in the Account and in other separate accounts that have been or may be
established by Prudential. Subject to applicable law, Prudential has sole
discretion over the investment of the assets of the general account, and
Contract owners do not share in the investment experience of those assets.
Instead, Prudential guarantees that the part of the Contract fund allocated to
the fixed-rate option will accrue interest daily at an effective annual rate
that Prudential declares periodically, but not less than an effective annual
rate of 3%. Currently, declared interest rates remain in effect from the date
money is allocated to the fixed-rate option until the same date in the following
year. Thereafter, a new crediting rate will be declared each year, and will
remain in effect for at least the calendar year, so long as required by
applicable law. Prudential reserves the right to change this practice.
Prudential is not obligated to credit interest at a higher rate than 3%,
although in its sole discretion it may do so. Different crediting rates may be
declared for different portions of the Contract fund allocated to the fixed-rate
option. On request, a Contract owner will be advised of the interest rates that
currently apply to his or her Contract.
Transfers from the fixed-rate option are subject to strict limits. See
TRANSFERS, page 14.
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FEDERAL TAX STATUS
The following discussion is based on current law and interpretations which may
change. The 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
advisor should be consulted for complete information and advice. The following
rules do not generally apply to contributions after February 28, 1986 to annuity
contracts held by or for non-natural persons (e.g., corporations). Where a
Contract is held by a non-natural person, unless the Contract owner is a nominee
or agent for a natural person (or in other limited circumstances), the Contract
will generally not be treated as an annuity for tax purposes, and increases in
the value of the Contract will be subject to current tax.
The following discussion assumes that the Contract will be treated as an annuity
contract for Federal income tax purposes. Section 817(h) of the Internal Revenue
Code (the "Code") provides that the underlying investments for a variable
annuity must satisfy certain diversification requirements. For further detail on
diversification requirements, see DIVIDENDS, DISTRIBUTIONS, AND TAXES in the
attached prospectus for the Series Fund. Prudential believes the underlying
variable investment options for the Contract meet these diversification
requirements. In connection with the issuance of temporary regulations relating
to diversification requirements under Section 817(h), the Treasury Department
announced that such regulations do not provide guidance concerning the extent to
which Contract owners may direct their investments to particular divisions of a
separate account. Such guidance will be included in regulations or revenue
rulings under Section 817(d) relating to the definition of a variable contract.
Because of this uncertainty, Prudential reserves the right to make such changes
as it deems necessary to assure that the Contract continues to qualify as an
annuity for tax purposes. Any such changes will apply uniformly to affected
Contract owners and will be made with such notice to affected Contract owners as
is feasible under the circumstances.
Under current law, Prudential believes that the Contract will be treated as an
annuity for Federal income tax purposes and that the issuing insurance company,
Prudential, and not the Contract owner, will be treated as the owner of the
underlying investments for the Contract. Accordingly, no tax should be payable
by any Contract owner as a result of any increase in the value of the Contract
until money is received by him or her. It is important, however, to consider how
amounts that are received will be taxed.
TAXES PAYABLE BY CONTRACT OWNERS
The Code provides generally that amounts withdrawn by the Contract owner from
his or her Contract, before annuity payments begin, will be treated for tax
purposes as being first withdrawals of investment income, rather than as
withdrawals of purchase payments, until all investment income has been
withdrawn. To the extent the assignment is authorized by the Contract, the
assignment or pledge (or agreement to assign or pledge) any portion of the value
of the Contract for a loan will be treated as a withdrawal subject to this rule.
Amounts withdrawn before annuity payments begin which represent a distribution
of investment income will be taxable as ordinary income and may be subject to a
penalty tax. Amounts which represent a withdrawal of purchase payments will
ordinarily not be taxable as ordinary income or be subject to a penalty tax.
Where a Contract is issued in exchange for a contract containing purchase
payments made before August 14, 1982, favorable tax rules may apply to certain
withdrawals from the Contract. Consult a tax advisor for information regarding
these rules.
Different tax rules apply to receipt of annuity payments. A portion of each
annuity payment received under a Contract will be treated as a partial return of
purchase payments and will not be taxable. The remaining portion of the annuity
payment will be taxed as ordinary income. Exactly how an annuity payment is
divided into taxable and non-taxable portions depends upon 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. In the case of Contracts under which annuity
payments commence after 1986, annuity payments which are received after the
annuitant recovers the full amount of the purchase payments will be fully
includible in income. Should annuity payments cease on account of the death of
the annuitant before purchase payments have been fully recovered, the
annuitant, on his or her last tax return (or in certain cases the beneficiary),
is allowed a deduction for the unrecovered amount. A lump sum payment taken in
lieu of remaining annuity payments (as described in item 4 under ANNUITY OPTIONS
UNDER THE WVA-83 AND VIP-84 CONTRACTS, page 23) is not considered an annuity
payment for tax purposes. Any such lump sum payment distributed to an annuitant
would be taxable as ordinary income and may be subject to a penalty tax as
described above.
The Code further provides that any amount received under an annuity contract
which is included in income may be subject to a penalty tax. The amount of the
penalty is equal to 10% of that portion of the amount that is includible in
income. Some withdrawals will be exempt from the penalty. They include
withdrawals: (1) made on or after the Contract owner reaches age 591/2, (2) made
on or after the death of the Contract owner, (3) attributable to the Contract
owner becoming disabled, within the meaning of Code section 72(m)(7), (4) in the
form of level annuity payments, made not less frequently than annually under a
lifetime annuity, (5) allocable to investment in the contract before
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August 14, 1982, (6) under a qualified funding asset (defined by Code section
130(d)), or (7) under an immediate annuity contract (within the meaning of
section 72(u)(4)).
If the 10% penalty tax does not apply to a withdrawal by reason of the exception
for withdrawals in the form of a level annuity (clause (4) above), but the
series of payments is modified (other than by reason of death or disability),
either (a) before the end of the 5-year period beginning with the first payment
and after the Contract owner reaches age 591/2, or (b) before the Contract owner
attains age 591/2, the Contract owner's tax for the year of the modification
will be increased by the penalty tax that would have been imposed without the
exception, plus interest for the deferral period.
For Contracts issued after January 18, 1985, certain minimum distribution
requirements apply in the case where the owner dies. See EFFECTING AN ANNUITY,
page 22.
If you are the owner of a VIP-86 Contract, election of the interest payment
option is not considered as an annuity payment for tax purposes. Accordingly,
such election will cause investment income under the Contract to be taxable.
Generally, the same tax rules apply to amounts received by the beneficiary as
those set forth above with respect to the Contract owner. The election of an
annuity payment option may defer taxes otherwise payable upon the receipt of a
lump sum death benefit.
In addition, a transfer of the Contract to or the designation of a beneficiary
who is either 371/2 years younger than the Contract owner or a grandchild of the
Contract owner may have Generation Skipping Transfer tax consequences under
section 2601 of the Code.
Certain transfers of a contract for less than full consideration, such as a
gift, will trigger tax on the investment income in the Contract. This rule does
not apply to certain transfers between spouses or incident to divorce. See
OWNERSHIP OF THE CONTRACT, page .
WITHHOLDING
Unless you elect to the contrary, the portion of any amounts received under the
Contract that are attributable to investment income will be subject to
withholding to meet federal income tax obligations. The rate of withholding on
annuity payments will be determined on the basis of the withholding certificate
you may file with Prudential. If you do not file such a certificate, you will be
treated, for purposes of determining your withholding rate, as a married person
with three exemptions. The rate of withholding on all other payments made under
the Contract, such as amounts received upon withdrawals, will be 10%. Thus, if
you fail to elect that Prudential not do so, it will withhold from every
withdrawal or annuity payment the appropriate percentage of the amount of the
payment that constitutes investment income and hence is taxable. Prudential will
provide you with forms and instructions concerning your right to elect that no
amount be withheld from payments. If you elect not to have withholding made, you
are liable for payment of federal income taxes on the taxable portion of the
distribution. You may be subject to penalties under the estimated tax payment
rules if your withholding and estimated tax payments are not sufficient. If you
do not provide a social security number or other taxpayer identification number,
you will not be permitted to elect out of withholding. Special withholding rules
apply to nonresident aliens. Generally, there will be no withholding for taxes
until payments are actually received under the Contract.
TAXES ON PRUDENTIAL
Although the Account is registered as an investment company, it is not a
separate taxpayer for purposes of the Code. The earnings of the Account are
taxed as part of the operations of Prudential. No charge is being made currently
against the Account for company federal income taxes (excluding the charge for
taxes attributable to premiums). Prudential will review the question of a charge
to the Account for company federal income taxes periodically. Such a charge may
be made in future years for any federal income taxes that would be attributable
to the Contract.
Under current law, Prudential may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant
and they are not charged against the Contract or the Account. If there is a
material change in applicable state or local tax laws, the imposition of any
such taxes upon Prudential that are attributable to the Account may result in a
corresponding charge against the Account.
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EFFECTING AN ANNUITY
You may decide at any time to convert the amount of your Contract fund into a
fixed-dollar annuity payable to either one or two annuitant[s] named in the
Contract under one or more of the forms of annuity described. (The VIP-84
Contract and the VIP-86 Contract permit the naming of either one or two
annuitants. However, the WVA-83 Contract permits the naming of only one
annuitant. Therefore, anything in this section which refers to "two annuitants"
does not apply to the WVA-83 Contract. See item 2 under DIFFERENCES UNDER THE
WVA-83 CONTRACT, page 26.) If two anuitants are named in the Contract, you may
indicate how much of the amount you wish applied for each annuitant and under
which form[s] of annuity. Except for an annuity selected under the Supplemental
Life Annuity Option, WVA-83 and VIP-84 Contract owners may select a variable
annuity instead of or in addition to a fixed-dollar annuity. If such variable
annuity selection is made, amounts held under the Real Property Account and/or
fixed-rate option will be transferred to your Variable Account in accordance
with your instructions at the time your Contract fund is converted into an
annuity.
Unless Prudential consents to a later date, the latest date that you
can choose for converting your Contract fund into an annuity is the first day of
the calendar month coinciding with or otherwise next following the 90th birthday
of the annuitant or, if there are two annuitants named in the Contract, the 90th
birthday of the younger of the annuitants. Prudential will then make monthly
payments to the annuitant on the first day of each month for a period determined
by the form of annuity you select.
You must convert the entire value of your Contract fund to an annuity or to an
annuity and a cash withdrawal. If your Contract fund is not large enough to
produce an initial payment of $20 ($50 under VIP-86 Contracts), you will be paid
the amount of your Contract fund in a single sum. Annuity payments will not be
assignable by you or subject to the claims of creditors. The annuity is effected
on the first day of the month following receipt by Prudential of proper written
notice that you have elected to convert your Contract fund to an annuity or on
the first day of any subsequent month that you designate. The first monthly
annuity payment will be made on the date the annuity is effected.
The Contract includes schedules that are used to determine the amount of the
first monthly variable and/or fixed dollar annuity payment that will be provided
by the amount credited to your Contract fund (the VIP-86 Contract provides a
schedule only for a Life Annuity with 120 Payments Certain Option; however,
other forms of annuity are available under the Supplemental Life Annuity
Option.) The amount varies with the form of annuity selected. For life
annuities, it also varies with the age and sex of the annuitant (and contingent
annuitant, if the Joint and Survivor Annuity Option is chosen) and the date when
annuity payments begin. Also, if Prudential is offering more favorable rates
than is set forth in the table of rates in the Contract, then those will be
used. For a variable annuity, subsequent monthly payments will vary in
accordance with the investment results of the subaccount[s] you have selected.
Page C1 of the statement of additional information explains in more detail how
your Contract fund is converted into a variable annuity. For a fixed-dollar
annuity, subsequent monthly payments will always be at least equal to the first
monthly payment.
If the Contract owner dies before the entire interest in the Contract is
distributed, the value of the Contract must be distributed to the designated
beneficiary as follows, so that the Contract qualifies as an annuity under the
Internal Revenue Code. If the death occurs on or after the annuity date, the
remaining portion of the interest in the Contract must be distributed at least
as rapidly as under the method of distribution being used as of the date of
death. If the death occurs before the annuity date, the entire interest in the
Contract must be distributed within 5 years after the date of death. However, if
an annuity payment option is selected by the designated beneficiary and if the
annuity payments begin within 1 year of the owner's death, the value of the
Contract may be distributed over the beneficiary's life or over a specified
period not exceeding the beneficiary's life expectancy. The owner's designated
beneficiary is the person to whom ownership of the Contract passes by reason of
death, and must be a natural person. If the designated beneficiary is the
owner's spouse, these rules will not apply until death of the owner's spouse.
ANNUITY OPTIONS UNDER THE VIP-86 CONTRACT
If you are the owner of a VIP-86 Contract, you may select any of the annuity
options described below. Unlike the WVA-83 and VIP-84 Contracts, the VIP-86
Contract does not provide an option for a variable payout during the annuity or
payout period. All the annuity options under this Contract are fixed annuity
options under which the Contract owner's participation in the Account's and/or
Real Property Account's investment experience ceases when the annuity is
effected, and the amount of each monthly payment does not change.
The forms of annuity from which you may select are listed below. Under each,
annuity payments will be in monthly installments of a guaranteed amount. Unless
applicable law states otherwise, if you have not selected an annuity option to
take effect by the annuity date stated in your Contract (which will not be later
than the annuitant's 90th birthday) the interest payment option (see below) will
become effective then.
1. LIFE ANNUITY WITH 120 PAYMENTS CERTAIN. Payments will be made
to the annuitant monthly during his or her lifetime. If the annuitant dies
before the 120th monthly payment is due, monthly annuity payments do not
continue to the beneficiary you designate unless you so select. Instead, the
discounted value of the remaining unpaid installments,
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to and including the 120th monthly payment, is payable to the beneficiary in one
sum. In calculating the discounted value of the unpaid future payments,
Prudential will discount each such payment at the interest rate used to compute
the amount of the actual 120 payments. If the payments were based on the tables
of rates set forth in the Contract, the interest rate used is 3.5% a year.
2. INTEREST PAYMENT OPTION. You may choose to have Prudential hold a designated
amount for you at interest. Prudential will pay interest at an effective rate of
at least 3% a year, and it may pay a higher rate of interest.
3. SUPPLEMENTAL LIFE ANNUITY. You may choose to receive the proceeds of your
Contract fund in the form of payments like those of any annuity or life annuity
then regularly offered by Prudential or by Pruco Life Insurance Company that (1)
is based on United States Currency; (2) is bought by a single sum; (3) does not
provide for dividends; and (4) does not normally provide for deferral of the
first payment. Prudential currently offers a number of different annuity options
including joint and survivor annuities covering more than one person.
Under the Supplemental Life Annuity Option (Option 3 above), Prudential will
waive withdrawal charges that might be applicable under other annuity options.
Further, if you select Option 1 without a right of withdrawal, Prudential will
effect that option under the Supplemental Life Annuity Option if doing so
provides greater monthly payments.
ANNUITY OPTIONS UNDER THE WVA-83 AND VIP-84 CONTRACTS
If you own a WVA-83 Contract or a VIP-84 Contract, the following provisions of
this section apply to you. You have considerable flexibility in selecting an
annuity: (1) you may select either a fixed-dollar or variable annuity (a
variable annuity is not available under the Supplemental Life Annuity Option
described in item 5 below) or both; (2) you may select more than one annuity
option; (3) if you select a variable annuity, you may apply the value of your
Variable Account to only one or to two or more subaccounts, and not necessarily
the same subaccount distribution as you used before selecting an annuity; and
(4) if two annuitants are named in the VIP-84 Contract, you may select a
separate annuity or annuities for each annuitant. However, the initial minimum
monthly payment amount will be applicable to each payee, each annuity, and each
subaccount selected.
Except as provided in the Annuity Certain Option described in item 4 below, and
under certain forms of annuity available under the Supplemental Life Annuity
Option described in item 5 below, once annuity payments begin, the annuitant
cannot surrender the annuity benefit and receive a one-sum payment in lieu
thereof (such surrender and one-sum payment also may be under certain forms of
annuity available under the Supplemental Life Annuity Option described in item 5
below). However, as described under TRANSFERS on page 14, if a variable annuity
is selected, the annuitant may transfer the annuity funds between subaccounts up
to four times each Contract year. Additionally, an annuitant who is receiving a
variable annuity may convert all or a part of the variable annuity to a
fixed-dollar annuity, provided: (1) the fixed-dollar annuity is the same form of
annuity as the variable annuity and has the same certain or specified period as
remained under the variable annuity on the conversion date, (2) the present
value on the conversion date of the variable annuity, or portion of the variable
annuity to be converted, calculated in accordance with the Contract, must
produce a monthly payment of at least $20 under the fixed-dollar annuity, and
(3) if only a portion of the variable annuity is converted, the Subaccount
Annuity Units remaining in the unconverted portion must be sufficient to produce
a monthly payment on the conversion date of at least $20.
After annuity payments begin, conversion may not be made from a fixed-dollar
annuity to a variable annuity.
The forms of annuity from which you may select are listed below. Under each, (1)
variable annuity payments can be expected to vary from month to month according
to the investment experience of the portfolio or portfolios in which your
Variable Account is invested, or (2) fixed-dollar annuity payments will be in
monthly installments of a guaranteed amount. For the reason explained on page C1
of the statement of additional information, if the assets of the subaccount
which you have selected do not earn an investment return of 4.7% a year, the
amount of payments under a variable annuity will decrease; conversely, if the
assets of the subaccount(s) which you have selected earn an investment return of
more than 4.7% a year, variable annuity payments will increase. Unless
applicable law states otherwise, if you choose to convert your Variable Account
into an annuity but fail to select one or more of the annuity options, we will
provide a variable Life Annuity with 120 payments certain to the annuitant (if
two annuitants are named in the VIP-84 Contract and both are living, the
variable Life Annuity with 120 payments certain will be provided for the
annuitant identified as First Annuitant in the Contract).
1. LIFE ANNUITY. Payments will be made to the annuitant monthly during his or
her lifetime and will cease with the last monthly payment before his or her
death. Should the annuitant die within a few years after payments begin, total
payments received will probably be substantially less than the value of your
Variable Account when annuity payments first began, and as little as one payment
could be received under this form of annuity.
2. LIFE ANNUITY WITH 120 PAYMENTS CERTAIN. Payments will be made to the
annuitant monthly during his or her lifetime. If the annuitant dies before the
120th monthly payment is due, monthly annuity payments do not continue to the
beneficiary designated by the annuitant unless he or she so selects. Instead,
the discounted value of the remaining
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unpaid installments, to and including the 120th monthly payment, is payable to
the beneficiary in one sum. In calculating the discounted value of the unpaid
future payments, we will discount each such payment at an interest rate of 3.5%
a year. The monthly payments under this form of annuity will be slightly lower
than those payable under the life annuity described above.
3. JOINT AND SURVIVOR LIFE ANNUITY. Payments will be made to the annuitant
monthly during his or her lifetime and, if the contingent annuitant you
designate is living at the time of the annuitant's death, to that person until
his or her death. The monthly payments to your contingent annuitant will be
equal to those that would have been received by the annuitant if he or she had
survived unless a different amount is required by applicable law or regulation
or by the terms of a plan. Monthly payments under this form of annuity will be
less than the payments under either of the forms described above.
4. ANNUITY CERTAIN. Payments will be made to the annuitant monthly for a period
of 60, 120, 180 or 240 months. During this period, the annuitant may elect to
receive a lump sum payment in lieu of the remaining monthly payments or to
receive a partial lump sum payment with reduced monthly payments thereafter. Any
partial lump sum payment must be $300 or more. Also, the initial reduced monthly
payment must equal or exceed $20. If the annuitant dies during the
annuity-certain period, monthly payments will not continue to the beneficiary
you designate unless you so select. Instead, the beneficiary will receive a lump
sum payment. The amount of the lump sum payment (or partial lump sum payment) is
determined by discounting each remaining unpaid monthly payment (or the amount
by which each remaining monthly payment is reduced as a result of a partial lump
sum payment) at an interest rate of 3.5% a year. This will be paid to the
annuitant or the annuitant's beneficiary, whichever is applicable.
5. SUPPLEMENTAL LIFE ANNUITY. You may choose to receive the proceeds of your
Contract fund in the form of payments like those of any annuity or life annuity
then regularly offered by Prudential or by Pruco Life Insurance Company that (1)
is based on United States Currency; (2) is bought by a single sum; (3) does not
provide for dividends; and (4) does not normally provide for deferral of the
first payment.
Under the Supplemental Life Annuity Option (Option 5 above), Prudential will
waive withdrawal charges that might be applicable under Options 1-4. Further, if
you select Option 1, 2, 3 or 4 without a right of withdrawal, Prudential will
effect that option under the Supplemental Life Annuity Option if doing so
provides greater monthly payments.
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT ANNUITY PURCHASE RATES
It should be noted that while in general the Contract provides for sex-distinct
annuity purchase rates for life annuities, those rates are not applicable to
Contracts offered in states that have adopted regulations prohibiting
sex-distinct annuity purchase rates. Rather, blended unisex annuity purchase
rates for life annuities will be provided under all Contracts issued in those
states, whether the annuitant is male or female. Other things being equal, such
unisex annuity purchase rates will result in the same monthly annuity payments
for male and female annuitants.
OTHER INFORMATION
VOTING RIGHTS
As stated above, all of the assets held in the subaccounts of the Account will
be invested in shares of the corresponding portfolios of the Series Fund.
Prudential is the legal owner of those shares and as such has the right to vote
on any matter voted on at Series Fund shareholders meetings. However, Prudential
will, as required by law, vote the shares of the Series Fund at any regular and
special shareholders meetings in accordance with voting instructions received
from Contract owners. The Series Fund will not hold annual shareholders meetings
when not required to do so under Maryland law or the Investment Company Act of
1940. Series Fund shares for which no timely instructions from Contract owners
are received, and any shares attributable to general account investments of
Prudential will be voted in the same proportion as shares in the respective
portfolios for which instructions are received. Should the applicable federal
securities laws or regulations, or their current interpretation, change so as to
permit Prudential to vote shares of the Series Fund in its own right, it may
elect to do so.
Matters on which Contract owners may give voting instructions include the
following: (1) election of the Board of Directors of the Series Fund; (2)
ratification of the independent accountant of the Series Fund; (3) approval of
the investment advisory agreement for a portfolio of the Series Fund
corresponding to the Contract owner's selected subaccount[s]; (4) any change in
the fundamental investment policy of a portfolio corresponding to the Contract
owner's selected subaccount[s]; and (5) any other matter requiring a vote of the
shareholders of the Series Fund. With respect to approval of the investment
advisory agreement or any change in a portfolio's fundamental investment policy,
Contract owners participating in such portfolios will vote separately on the
matter.
The number of Series Fund shares for which instructions may be given by
a Contract owner is determined by dividing the portion of the value of the
Contract derived from participation in a subaccount, by the value of one share
in the
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corresponding portfolio of the Series Fund. The number of votes for which each
Contract owner may give Prudential instructions will be determined as of the
record date chosen by the Board of Directors of the Series Fund. Prudential will
furnish Contract owners with proper forms and proxies to enable them to give
these instructions. Prudential reserves the right to modify the manner in which
the weight to be given voting instructions is calculated where such a change is
necessary to comply with current federal regulations or interpretations of those
regulations. WVA-83 and VIP-84 Contract owners who elect to receive a variable
annuity option will continue to have voting rights during their payout period.
Their number of votes will be determined in the same manner as described above,
but will decrease throughout the payout period.
Contract owners also share with the owners of all Prudential contracts and
policies the right to vote in elections for members of the Board of Directors of
Prudential.
SALE OF THE CONTRACT AND SALES COMMISSIONS
Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
Prudential, acts as the principal underwriter of the Contract. Prusec, organized
in 1971 under New Jersey law, is registered as a broker and dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. Prusec's principal business address is 213 Washington
Street, Newark, NJ 07102-2992. The Contract is sold by registered
representatives of Prusec who are also authorized by state insurance departments
to do so. The Contract may also be sold through other broker-dealers authorized
by Prusec and applicable law to do so. Registered representatives of such other
broker-dealers may be paid on a different basis than described below.
Commissions of 3% to the selling representative and a 0.6% management override
will be paid on the first $2,000 of purchase payments per Contract and
commissions of 2.25% to the selling representative and a 0.4% management
override will be paid on all purchase payments thereafter. Such commissions will
be subject to reduction if Prudential accepts purchase payments on and after the
annuitant's 81st birthday. See REQUIREMENTS FOR ISSUANCE OF A CONTRACT, page 13.
Such commissions may not be payable, however, where a Contract owner has
surrendered an existing contract of Prudential or its subsidiaries to purchase
the Contract. Representatives who meet certain productivity, profitability, and
persistency standards with regard to the sale of the Contract will be eligible
for additional compensation.
Sales expenses in any year are not equal to the deduction for sales load in that
year. Prudential expects to recover its total sales expenses over the periods
the Contracts are in effect. To the extent that the sales charges are
insufficient to cover total sales expenses, the sales expenses will be recovered
from Prudential's surplus.
OWNERSHIP OF THE CONTRACT
Generally, the purchaser of a Contract is both the Contract owner and the person
entitled to receive an annuity and is entitled to exercise all the rights under
the Contract. Ownership of the Contract may, however, be transferred to another
person who need not be the person who is to receive annuity payments.
REPORTS TO CONTRACT OWNERS
Once each Contract year, Contract owners will be sent statements that provide
certain information pertinent to their own Contract. These statements detail
values and transactions made and specific Contract data that apply only to each
particular Contract. On request, a Contract owner will be sent a current
statement in a form similar to that of the annual statement described above, but
Prudential may limit the number of such requests or impose a reasonable charge
if such requests are made too frequently.
Contract owners will be sent annual and semi-annual reports of the Series Fund
showing the financial condition of the portfolios and the investments held in
each.
If a single individual or company invests in the Series 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 Series 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 the subaccounts may appear in advertising and
reports to current and prospective Contract owners. Performance information is
based on historical investment experience of those investment options and does
not indicate or represent future performance.
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.
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The Money Market Subaccount may advertise its current and effective yield.
Current yield reflects the income generated by an investment in the subaccount
over a specified seven-day period. Effective yield is calculated in a similar
manner except that income earned is assumed to be reinvested.
Reports or advertising may include comparative performance information,
including, but not limited to: comparisons to market indices; comparisons to
other investments; performance rankings; and data presented by analysts or
included in publications.
See "Performance Information" in the Statement of Additional Information for
recent performance information.
SUBSTITUTION OF SERIES FUND SHARES
Although Prudential believes it to be unlikely, it is possible that in the
judgment of its management, one or more of the portfolios of the Series Fund may
become unsuitable for investment by Contract owners because of investment policy
changes, tax law changes, or the unavailability of shares for investment. In
that event, Prudential may seek to substitute the shares of another portfolio or
of an entirely different mutual fund. Before this can be done, the approval of
the SEC, and possibly one or more state insurance departments, will be required.
Contract owners will be notified of such substitution.
DIFFERENCES UNDER THE WVA-83 CONTRACT
As stated in the section entitled THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT
ACCOUNT on page 11, the descriptions of The Prudential Individual Variable
Annuity Contract in the preceding sections of this prospectus and on page C1 of
the statement of additional information generally apply to the VIP-86 Contract,
the VIP-84 Contract and the WVA-83 Contract. Although differences among the
three forms of Contract have been described, additional differences between the
earlier WVA-83 Contract and the two later forms of the Contract are set forth
below.
1. SALES CHARGES ON WITHDRAWALS . . . Under the WVA-83 Contract, any amount that
you withdraw will be treated, for the purpose of determining the sales charge,
as a withdrawal of purchase payments, rather than investment income, until you
have withdrawn your aggregate purchase payments. There will be no sales charge
on amounts withdrawn after all purchase payments have been withdrawn. For sales
charge purposes, purchase payments are deemed to be withdrawn on a first-in,
first-out basis. The amount of the sales charge will depend on the amount
withdrawn and the number of Contract years that have elapsed since you made the
particular purchase payments deemed to be withdrawn. The 10% free withdrawal
privilege will be applied toward the total amount withdrawn. Withdrawals are
treated, for purposes of federal income taxation, as first from investment
income, even though Prudential treats them as being made from purchase payments.
2. NAMING OF ANNUITANT . . . Under the WVA-83 Contract, only one annuitant may
be named. There is no provision for naming two annuitants as is the case under
the VIP-84 Contract and the VIP-86 Contract. Wherever this prospectus mentions
"one or two annuitants", or "two annuitants", the term "two annuitants" does not
apply to the WVA-83 Contract, and anything which is contingent upon two
annuitants being named in the Contract does not apply to the WVA-83 Contract.
Therefore, any discussion in the preceding sections of this prospectus which
relates to two annuitants, such as the possibility of a death benefit credit
being added to your Variable Account due to the death of the first to die of the
two annuitants named in the Contract (as described in the third paragraph under
DEATH BENEFIT on page 15), will not apply to the WVA-83 Contract.
3. DETERMINATION OF MINIMUM AMOUNT PAYABLE TO A BENEFICIARY . . . Under the
WVA-83 Contract, the minimum amount payable to the beneficiary (due to the death
of the annuitant prior to age 65 and before the annuity date) will be equal to
the total amount of purchase payment you have made, less any withdrawals (i.e.,
there is no proportional reduction of the minimum amount as is the case under
the VIP-84 Contract and the VIP-86 Contract).
4. MODIFICATION OF SENTENCE ON PAGE C1 OF THE STATEMENT OF ADDITIONAL
INFORMATION . . . The second sentence in the next to last paragraph under
section B, Determination of the Amount of Monthly Variable Annuity Payment, as
it applies to the WVA-83 Contract, is modified to read: "For example, for a
person of 65 years of age who has selected a lifetime annuity with a guaranteed
minimum of 120 payments, the applicable schedules currently provide that 1000
Subaccount Annuity Units will result in the payment each month of an amount
equal to the value of 6.28 Subaccount Annuity Units."
5. DETERMINATION OF AMOUNT OF MONTHLY VARIABLE ANNUITY PAYMENTS . . . Under the
WVA-83 Contract, the amount of each monthly variable annuity payment made on the
first day of the month will be equal to the Subaccount Annuity Units (determined
as described on page C1 of the statement of additional information) multiplied
by the Subaccount Annuity Unit Value at the end of that day, if a business day,
or otherwise at the end of the last preceding business day.
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STATE REGULATION
Prudential is subject to regulation and supervision by the Department of
Insurance of the State of New Jersey, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business.
Prudential is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business to determine solvency and compliance with local
insurance laws and regulations.
In addition to the annual statements referred to above, Prudential is required
to file with New Jersey and other jurisdictions a separate statement with
respect to the operations of all its variable contract accounts, in a form
promulgated by the National Association of Insurance Commissioners.
LITIGATION
On October 28, 1996, the Company entered into a Stipulation of Settlement in a
multidistrict proceeding involving allegations of various claims relating to the
Company'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.
Pursuant to the Settlement, the Company has agreed to provide an alternative
dispute resolution process for class members who believe they were misled
concerning the sale or performance of their life insurance policies. The
Settlement also provides certain no-fault relief. The ultimate cost of the
Settlement will depend on a variety of factors, including the number of
policyowners who participate in the Settlement, the number of policyowners who
are afforded relief and the remediation option they select. The administrative
costs of implementing the Settlement are also subject to a number of complex
uncertainties. In light of the uncertainties attendant to these and other
factors, it is difficult at this time to estimate the ultimate cost of the
Settlement to the Company.
In addition, a number of actions have been filed against the Company by
policyowners who have excluded themselves from the settlement; the Company
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 the Company's activities. As of February 24, 1997, the Company 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.
Litigation is subject to many uncertainties, and given the complexity and scope
of these suits, their outcome cannot be predicted.
Accordingly, management is unable to make a meaningful estimate of the amount of
range of loss that could result from an unfavorable outcome of all pending
litigation. 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.
ADDITIONAL INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933 and the Investment Company Act of 1940, relating to the offering described
in this prospectus. This prospectus does not include all the information set
forth in the registration statement. Certain portions have been omitted pursuant
to the rules and regulations of the SEC. The omitted information may, however,
be obtained from the SEC's principal office in Washington, D.C., upon payment of
a prescribed fee.
Further information, including the statement of additional information prepared
by Prudential, may also be obtained from Prudential's office. The address and
telephone number are set forth on the cover of this prospectus.
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The Contents of the statement of additional information include:
OTHER INFORMATION CONCERNING THE ACCOUNT
A. EXPERTS
B. PRINCIPAL UNDERWRITER
C. PARTICIPATION IN DIVISIBLE SURPLUS
D. PERFORMANCE INFORMATION
E. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
STATUTORY FINANCIAL STATEMENTS OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
DETERMINATION OF SUBACCOUNT UNIT VALUES AND OF AMOUNT OF MONTHLY VARIABLE
ANNUITY PAYMENTS
A. SUBACCOUNT UNIT VALUES
B. DETERMINATION OF THE AMOUNT OF MONTHLY VARIABLE ANNUITY PAYMENT
28
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DIRECTORS AND OFFICERS OF PRUDENTIAL
The directors and certain officers of Prudential, listed with their principal
occupations during the past 5 years, are shown below.
DIRECTORS OF PRUDENTIAL
FRANKLIN E. AGNEW, Director. -- Business Consultant. Address: USX Tower, Suite
660, 600 Grant Street, Pittsburgh, PA 15219.
FREDERIC K. BECKER, Director. -- President of Wilentz, Goldman, and Spitzer (law
firm). Address: 90 Woodbridge Center Drive, Woodbridge, NJ 07095.
JAMES G. CULLEN, Director. -- Vice Chairman, Bell Atlantic Corporation since
1995; 1993 to 1995: President, Bell Atlantic Corporation; Prior to 1993:
President, New Jersey Bell. Address: 1310 North Court House Road, 11th floor,
Alexandria, VA 22201.
CAROLYNE K. DAVIS, Director. -- National and International Health Care Advisor,
Ernst & Young LLP. Address: 1225 Connecticut Avenue, NW, Washington, DC 20036.
ROGER A. ENRICO, Director. -- Vice Chairman and Chief Executive Officer, Pepsico
Inc. since 1996; Vice Chairman, Pepsico, Inc., from 1993 to 1996; Chairman and
Chief Executive Officer, Pepsi Co. Worldwide Food, from 1991 to 1993. Address:
14841 North Dallas Parkway, Dallas, TX 75240.
ALLAN D. GILMOUR, Director. -- Former Vice Chairman, Ford Motor Company.
Address: Prudential Plaza, Newark, NJ 07102-3777.
WILLIAM H. GRAY, III, Director. -- President and Chief Executive Officer, The
College Fund/UNCF. Address: 8260 Willow Oaks Corporate Drive, Fairfax, VA 22031.
JON F. HANSON, Director. -- Chairman, Hampshire Management Co. Address: 235
Moore Street, Suite 200, Hackensack, NJ 07601.
GLEN H. HINER, JR., Director. -- Chairman and Chief Executive Officer, Owens
Corning. Address: One Owens Corning Parkway, Toledo, OH 43659.
CONSTANCE J. HORNER, Director. -- Guest Scholar, The Brookings Institution since
1993; Assistant to the President and Director of Presidential Personnel, U.S.
Government, from 1991 to 1992. Address: 1775 Massachusetts Avenue, N.W.,
Washington, DC 20036-2188.
GAYNOR N. KELLEY, Director. --Former Chairman and Chief Executive Officer, The
Perkins Elmer Corporation. Address: 751 Broad Street, Newark, NJ 07102-3777.
BURTON G. MALKIEL, Director. -- Professor, Princeton University. Address:
Princeton University, 110 Fisher Hall, Prospect Avenue, Princeton, NJ
08544-1021.
ARTHUR F. RYAN, Chairman of the Board, President, and Chief Executive Officer.
- -- Chairman of the Board, President, and Chief Executive Officer, Prudential
since 1994; Prior to 1994, President and Chief Operating Officer, Chase
Manhattan Corporation. Address: 751 Broad Street, Newark NJ 07102-3777.
IDA F.S. SCHMERTZ, Director. -- Priincipal, Investment Strategies International
prior to 1994. Prior to 1994: Senior Vice President of Corporate Affairs,
American Express Company. Address: 90 Riverside Drive, New York, NY 10024.
CHARLES R. SITTER, Director. -- Retired President, Exxon Corporation. Address:
5959 Las Colinas Boulevard, Irving, TX 75039-2298.
DONALD L. STAHELI, Director. -- Chairman and Chief Executive Officer,
Continental Grain Company since 1994; Prior to 1994; Chairman, Continental Grain
Company. Address: 277 Park Avenue, New York, NY 10172.
RICHARD M. THOMSON, Director. -- Chairman of the Board and Chief Executive
Officer, The Toronto-Dominion Bank. Address: P.O. Box 1, Toronto-Dominion
Centre, Toronto, Ontario, M5K 1A2, Canada.
JAMES A. UNRUH, Director. -- Chairman and Chief Executive Officer, Unisys
Corporation. Address: P.O. Box 500, Blue Bell, PA 19424-0001.
P. ROY VAGELOS, M.D., Director. -- Former Chairman, and Chief Executive Officer,
Merck & Co., Inc. Address: One Crossroads Drive, Bedminster, NJ 07921.
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STANLEY C. VAN NESS, Director. -- Attorney, Picco Herbert Kennedy (law firm).
Address: One State Street Square, Suite 1000, Trenton, NJ 08607-1388.
PAUL A. VOLCKER, Director. -- Business Consultant since 1996; Prior to 1996:
Chairman, Wolfensohn & Co., Inc. Address: 599 Lexington Avenue, New York, NY
10022.
JOSEPH H. WILLIAMS, Director. -- Director, The Williams Companies since 1994;
Prior to 1994: Chairman and Chief Executive Officer, The Williams Companies.
Address: One Williams Center, Tulsa, OK 74172.
OTHER EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
MARTIN A. BERKOWITZ, Senior Vice President and Comptroller. -- Senior Vice
President and Chief Financial Officer of Prudential Investment Company since
1991.
SUSAN L. BLOUNT, Vice President and Secretary. -- Vice President and Secretary
of Prudential since 1995; Prior to 1995: Assistant General Counsel for
Prudential Residential Services Company.
C. EDWARD CHAPLIN, Vice President and Treasurer. -- Vice President and Treasurer
of Prudential since 1995; 1993 to 1995: Managing Director and Assistant
Treasurer of Prudential; 1992 to 1993: Vice President and Assistant Treasurer,
Banking and Cash Management for Prudential.
MARK B. GRIER, Chief Financial Officer. -- Chief Financial Officer of Prudential
since 1995; Prior to 1995: Executive Vice President and Head of Global Markets,
Chase Manhattan Corporation.
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O INDIVIDUAL VARIABLE ANNUITY CONTRACTS
O THE PRUDENTIAL SERIES FUND, INC.
=======================================
- -----------------------------------------=======================================
|-------------------|
| BULK |
| U.S.Postage |
| PAID |
| Jersey City, N.J. |
| Permit No. 60 |
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[LOGO]
The Prudential Insurance Company of America
Prudential Plaza
Newark, New Jersey 07102-3777
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
INDIVIDUAL VARIABLE ANNUITY CONTRACTS OF
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
The Individual Variable Annuity Contract (the "Contract") of The Prudential
Individual Variable Contract Account (the "Account") is a variable annuity
contract issued by The Prudential Insurance Company of America ("Prudential").
The Contract is purchased by making an initial purchase payment of $1,000 or
more; subsequent payments must be $100 or more.
This statement of additional information is not a prospectus and should be
read in conjunction with the Contract's prospectus, dated May 1, 1997, which is
available without charge upon written request to The Prudential Insurance
Company of America, Prudential Plaza Newark New Jersey 07102-3777, or by
telephoning (800) 445-4571.
THE PRUDENTIAL INSURANCE COMPANY
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 445-4571
VIP-1B Ed 5-97
Catalog # 64M0999
<PAGE>
CONTENTS
PAGE
----
OTHER INFORMATION CONCERNING THE ACCOUNT ................................. 1
A. EXPERTS ......................................................... 1
B. PRINCIPAL UNDERWRITER ........................................... 1
C. PARTICIPATION IN DIVISIBLE SURPLUS .............................. 1
D. PERFORMANCE INFORMATION ......................................... 1
E. FINANCIAL STATEMENTS ............................................ 5
FINANCIAL STATEMENTS OF THE PRUDENTIAL QUALIFIED INDIVIDUAL
VARIABLE CONTRACT ACCOUNT ............................................... A1
STATUTORY FINANCIAL STATEMENTS OF THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA .............................................................. B1
DETERMINATION OF SUBACCOUNT UNIT VALUES AND OF THE AMOUNT OF MONTHLY
VARIABLE ANNUITY PAYMENTS ............................................... C1
A. SUBACCOUNT UNIT VALUES .......................................... C1
B. DETERMINATION OF THE AMOUNT OF MONTHLY VARIABLE ANNUITY
PAYMENT ........................................................ C1
<PAGE>
OTHER INFORMATION CONCERNING THE ACCOUNT
A. EXPERTS
The financial statements included in this prospectus for the year ended December
31, 1996 have been audited by Price Waterhouse LLP, independent accountants, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. Price Waterhouse LLP's principal business address is 1177 Avenue of
the Americas, New York, New York 10036.
The financial statements included in this prospectus for years ended December
31, 1995 and December 31, 1994, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing. Deloitte & Touche LLP's principal business
address is Two Hilton Court, Parsippany, New Jersey 07054-0319.
On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Prudential. There have been no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of the accountant, would have caused them to make a reference
to the matter in their reports.
B. PRINCIPAL UNDERWRITER
Pruco Securities Corporation ("Prusec"), an indirectly wholly-owned subsidiary
of Prudential, performs all sales and distribution functions regarding the
Contracts and may be deemed to be the "principal underwriter" of the Account
under the Investment Company Act of 1940.
C. PARTICIPATION IN DIVISIBLE SURPLUS
A mutual life insurance company, such as Prudential, differs from a stock life
insurance company in that it has no stockholders who are the owners of the
enterprise. Every owner of a Prudential Contract participates in the divisible
surplus of Prudential, according to an annual determination of Prudential's
Board of Directors of the portion, if any, of the divisible surplus of the
entire company that is attributable to the class of contracts of which he or she
is an owner. Before annuity payments begin it is unlikely that any dividends
will be payable to the owners of the Contracts described in the prospectus
because the charges made by Prudential are not expected to exceed its actual
expenses in distributing and administering the Contracts. However, there may be
dividends payable during an annuity payout period.
D. PERFORMANCE INFORMATION
The tables that follow provide performance information for each subaccount
through December 31, 1996. The performance information is based on historical
experience and does not indicate or represent future performance.
AVERAGE ANNUAL TOTAL RETURN
Table 1 below shows the average annual rates of total return on hypothetical
investments of $1,000 for periods ended December 31, 1996 in each subaccount
other than the Money Market Subaccount. These figures assume withdrawal of the
investments at the end of the period other than to effect an annuity under the
Contract.
1
<PAGE>
<TABLE>
<CAPTION>
TABLE 1
AVERAGE ANNUAL TOTAL RETURN
FROM DATE
SUBACCOUNT
ONE YEAR FIVE YEARS TEN YEARS ESTABLISHED
DATE ENDED ENDED ENDED THROUGH
SUBACCOUNT ESTABLISHED 12/31/96 12/31/96 12/31/96 12/31/96
---------- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Diversified Bond ................................. 6/83 -3.43 5.60 6.86 8.25
Government Income ................................ 5/89 -5.59 4.68 N/A 7.15
Conservative Balanced ............................ 6/83 4.77 7.49 8.39 9.27
Flexible Managed ................................. 5/83 5.77 9.25 9.81 10.33
High Yield Bond .................................. 2/87 3.53 10.39 N/A 7.32
Stock Index ...................................... 10/87 14.66 12.87 N/A 14.83
Equity Income .................................... 2/88 13.83 13.24 N/A 13.21
Equity ........................................... 6/83 10.63 15.45 13.60 13.46
Prudential Jennison .............................. 5/95 6.54 N/A N/A 18.61
Small Capitalization Stock ....................... 5/95 11.88 N/A N/A 19.17
Global ........................................... 5/89 11.80 10.84 N/A 7.58
Natural Resources ................................ 5/88 22.92 14.47 N/A 12.75
</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)"-ERA. In the formula, P is a hypothetical
investment of $1,000; T is the average annual total return;" is the number of
years; and ERA is the withdrawal value at the end of the periods shown. These
figures assume deduction of the maximum deferred sales charge that may be
applicable to a particular period. The annual contract fee is included, however
it applies only if the Contract Fund is less than $10,000.
NON-STANDARD TOTAL RETURN
Table 2 below shows the average annual rates of return as in Table 1, but
assumes that the investments are not withdrawn at the end of the period or that
the Contract owner annuitizes at the end of the period.
<TABLE>
<CAPTION>
TABLE 2
AVERAGE ANNUAL TOTAL RETURN ASSUMING NO WITHDRAWAL
FROM DATE
SUBACCOUNT
ONE YEAR FIVE YEARS TEN YEARS ESTABLISHED
DATE ENDED ENDED ENDED THROUGH
SUBACCOUNT ESTABLISHED 12/31/96 12/31/96 12/31/96 12/31/96
------------ ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Diversified Bond ................................. 6/83 2.85 6.02 6.86 8.25
Government Income ................................ 5/89 .70 5.11 N/A 7.22
Conservative Balanced ............................ 6/83 10.99 7.87 8.39 9.27
Flexible Managed ................................. 5/83 11.99 9.60 9.81 10.33
High Yield Bond .................................. 2/87 9.76 10.72 N/A 7.32
Stock Index ...................................... 10/87 20.81 13.17 N/A 14.83
Equity Income .................................... 2/88 19.99 13.53 N/A 13.21
Equity ........................................... 6/83 16.81 15.72 13.60 13.46
Prudential Jennison .............................. 5/95 12.75 N/A N/A 21.80
Small Capitalization Stock ....................... 5/95 18.05 N/A N/A 22.34
Global ........................................... 5/89 17.97 11.17 N/A 7.65
Natural Resources ................................ 5/88 29.02 14.74 N/A 12.75
</TABLE>
2
<PAGE>
Table 3 shows the cumulative total return for the subaccounts, assuming no
withdrawal.
<TABLE>
<CAPTION>
TABLE 3
CUMULATIVE TOTAL RETURN ASSUMING NO WITHDRAWAL
FROM DATE
SUBACCOUNT
ONE YEAR FIVE YEARS TEN YEARS ESTABLISHED
DATE ENDED ENDED ENDED THROUGH
SUBACCOUNT ESTABLISHED 12/31/96 12/31/96 12/31/96 12/31/96
---------- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Diversified Bond ................................. 6/83 2.85 33.92 94.16 193.11
Government Income ................................ 5/89 0.70 28.31 N/A 70.65
Conservative Balanced ............................ 6/83 10.99 46.05 123.87 233.34
Flexible Managed ................................. 5/83 11.99 58.15 154.84 280.68
High Yield Bond .................................. 2/87 9.76 66.41 N/A 100.57
Stock Index ...................................... 10/87 20.81 85.63 N/A 257.07
Equity Income .................................... 2/88 19.99 88.62 N/A 200.42
Equity ........................................... 6/83 16.81 107.51 257.82 455.32
Prudential Jennison .............................. 5/95 12.75 N/A N/A 39.01
Small Capitalization Stock ....................... 5/95 18.05 N/A N/A 40.04
Global ........................................... 5/89 17.97 69.82 N/A 75.99
Natural Resources ................................ 5/88 29.02 98.91 N/A 182.91
</TABLE>
MONEY MARKET SUBACCOUNT YIELD
The "yield" and "effective yield" of the Money Market Subaccount for the seven
days ended December 31, 1996 were 3.6754%% and 3.7425%, respectively.
The yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one accumulation unit of the Money Market Subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Contract
owner accounts, and dividing the difference by the value of the subaccount at
the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7), with the resulting figure carried
to the nearest ten-thousandth of 1%.
The deduction referred to above consists of the 1% charge for mortality and
expense risks and the 0.20% charge for administration. It does not reflect the
deferred sales charge. It does reflect the annual contract fee, however it will
only be charged if the Contract Fund is less than $10,000.
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 the following formula: Effective Yield--((base period
return + 1) 365/7)--1.
The yields on amounts held in the Money Market Subaccount will fluctuate on a
daily basis. Therefore, the stated yields for any given period are not an
indication of future yields.
COMPARISONS
Reports or advertising may include comparative performance information,
including, but not limited to: (1) comparisons to market indices such as the Dow
Jones Industrial Average, the Standard & Poor's 500 Index, the Value Line
Composite Index, the Russell 2000 Index, the Morgan Stanley World Index, the
Lehman Brothers bond indices; (2) comparisons to other investments, such as
certificates of deposit; (3) performance rankings assigned by services such as
Morningstar, Inc. and Variable Annuity Research and Data Services (VARDS), and
Lipper Analytical Services, Inc.; (4) data presented by analysts such as Dow
Jones, A.M. Best, The Bank Rate Monitor National Index; and (5) data in
publications such as The Wall Street Journal, Times, Forbes, Barrons, Fortune,
Money Magazine, and Financial World.
E. FINANCIAL STATEMENTS The statutory financial statements of Prudential
included herein should be distinguished from the financial statements of the
Account, and should be considered only as bearing upon the ability of Prudential
to meet its obligations under the Contracts.
3
<PAGE>
DETERMINATION OF SUBACCOUNT UNIT VALUES AND
OF THE AMOUNT OF MONTHLY VARIABLE ANNUITY
PAYMENTS
A. SUBACCOUNT UNIT VALUES
The value for each Subaccount Unit is computed as of the end of each "valuation
period" as defined on page 1 of the prospectus (also referred to in this section
as business day).
On any given business day the value of Units in each subaccount will be
determined by multiplying the value of a Unit of that subaccount for the
preceding business day by the net investment factor for that subaccount for the
current business day. The net investment factor for any business day is
determined by dividing the value of the assets of the subaccount for that day by
the value of the assets of the subaccount for the preceding business day
(ignoring, for this purpose, changes resulting from new purchase payments and
withdrawals), and subtracting from the result the daily equivalent of the 1.2%
annual charge for expense risks and mortality risks. (See CHARGES, FEES, AND
DEDUCTIONS in the prospectus for the Account.) The value of the assets of a
subaccount is determined by multiplying the number of shares of the Series Fund
held by that subaccount by the net asset value of each share and adding the
value of dividends declared by the Series Fund but not yet paid.
B. DETERMINATION OF THE AMOUNT OF MONTHLY VARIABLE ANNUITY PAYMENT
When a Contract owner elects to convert his or her Variable Account into monthly
variable annuity payments (an option available under the WVA-83 Contract and the
VIP-84 Contract, but not under the VIP-86 Contract), the number of Units
credited to him or her in each subaccount is first reduced to take into account
any applicable sales charge and any state premium taxes that may be payable. The
remaining Subaccount Units are then converted into a number of Subaccount
Annuity Units of equal aggregate value. As with Subaccount Units, the value of
each Subaccount Annuity Unit also changes daily in accordance with the
investment results of the underlying Series Fund Portfolio, after deduction of
the daily equivalent of the 1.2% annual charge for assuming expense and
mortality risks.
Built into the value of Subaccount Annuity Units is an assumption that the value
of a subaccount will grow by 3.5% each year. The reason for making this
assumption is explained more fully below. Accordingly, the value of a Subaccount
Annuity Unit always increases by an amount that is somewhat less than the
increase would have been had this assumption not been made and decreases by an
amount that is somewhat greater than the decrease would have been had the
assumption not been made. If the value of the assets of a subaccount increases
from 1 day to the next at a rate equivalent to 4.7% per year (3.5% plus the
annual charge of 1.2%), the Subaccount Annuity Unit Value will not change. If
the increase is less than at a rate equivalent to 4.7% per year, the Subaccount
AnnuityUnit Value will decrease.
To determine the amount of each monthly variable annuity payment, the first step
is to refer to the Schedule of Annuity Rates set forth in the Contract, relating
to the form of annuity selected by the Contract owner. For example, for a man of
65 years of age who has selected a lifetime annuity with a guaranteed minimum of
120 payments, the applicable schedules currently provide that 1000 Subaccount
Annuity Units will result in the payment each month of an amount equal to the
value of 5.73 Subaccount Annuity Units. (Due to the fact that the Schedule of
Annuity Rates set forth in the WVA-83 Contract differs from that set forth in
the VIP-84 Contract, the preceding sentence, as it applies to the WVA-83
Contract, is modified. See item 4 under DIFFERENCES UNDER the WVA-83 CONTRACT in
the prospectus for the Account.) The amount of the first variable annuity
payment made on the first day of the month will be equal to that number of
Subaccount Annuity Units multiplied by the Subaccount Annuity Unit Value at the
end of that day, if a business day, or otherwise at the end of the last
preceding business day. The amount of each subsequent variable annuity payment
made on the first day of the month will be equal to the number of Subaccount
Annuity Units multiplied by the Subaccount Annuity Unit Value at the end of the
last business day which is at least 5 days before the date the annuity payment
is due. (Under the WVA-83 Contract, the amount of each variable annuity payment
made after the first payment is not determined as described in the preceding
sentence. See item 5 under DIFFERENCES UNDER THE WVA-83 CONTRACT in the
prospectus for the Account.)
As stated above, Subaccount Annuity Unit Values change in accordance with the
investment results of the subaccount but will not increase--and thus the amount
of each monthly variable payment will not increase--unless the assets in the
subaccount increase, after deducting the 1.2% annual charge, at a rate greater
than 3.5% per year. This compensates for the fact that the annuity rate
schedules have been constructed upon the assumption that there will be a 3.5%
annual increase in the value of each subaccount. Although a different
4
<PAGE>
assumption could have been made, namely that the subaccounts will not increase
in value, this would have resulted in smaller variable annuity payments
immediately after annuitization and larger payments in later years. This would
have been advantageous for annuitants who happen to live very long but
disadvantageous to those who happen to die earlier. The Prudential believes that
the 3.5% annual growth assumption is better for Contract owners, because it
produces a better balance between early and later variable annuity payments.
<TABLE>
<CAPTION>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS (STATUTORY BASIS)
- ------------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
1996 1995
-------- --------
(In Millions)
<S> <C> <C>
ASSETS
Bonds ............................................................................ $ 75,006 $ 77,494
Preferred stock .................................................................. 239 396
Common stock ..................................................................... 7,076 6,133
Mortgage loans on real estate .................................................... 17,039 20,280
Real estate ...................................................................... 2,094 2,488
Policy loans and premium notes ................................................... 6,023 6,208
Cash and short-term investments .................................................. 5,982 4,803
Other invested assets ............................................................ 2,591 3,304
-------- --------
TOTAL CASH AND INVESTED ASSETS ................................................... 116,050 121,106
Premiums due and deferred ........................................................ 1,925 1,917
Accrued investment income ........................................................ 1,640 1,688
Other assets ..................................................................... 1,208 1,120
Assets held in separate accounts ................................................. 57,797 53,903
-------- --------
TOTAL ASSETS ..................................................................... $178,620 $179,734
======== ========
LIABILITIES AND SURPLUS
LIABILITIES
Policy liabilities and insurance reserves:
Future policy benefits and claims ............................................ $ 87,582 $ 93,346
Unearned premiums ............................................................ 619 624
Policy dividends ............................................................. 1,878 1,893
Policyholder account balances ................................................ 7,968 7,966
Notes payable and other borrowings ............................................... 763 807
Asset valuation reserve .......................................................... 2,682 2,705
Federal income tax payable ....................................................... 729 1,278
Other liabilities ................................................................ 9,588 9,191
Liabilities related to separate accounts ......................................... 57,436 53,256
-------- --------
TOTAL LIABILITIES ................................................................ 169,245 171,066
-------- --------
CONTINGENCIES (NOTE 11)
SURPLUS
Capital notes .................................................................... 985 984
Special surplus fund ............................................................. 1,268 1,274
Unassigned surplus ............................................................... 7,122 6,410
-------- --------
TOTAL SURPLUS .................................................................... 9,375 8,668
-------- --------
TOTAL LIABILITIES AND SURPLUS .................................................... $178,620 $179,734
======== ========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
STATEMENTS OF OPERATIONS AND CHANGES IN SURPLUS (STATUTORY BASIS)
- ------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1996 1995 1994
(In Millions)
<S> <C> <C> <C>
REVENUE
Premiums and annuity considerations .................................... $ 20,674 $ 21,088 $ 23,612
Net investment income .................................................. 8,677 8,637 7,387
Other income ........................................................... 571 363 367
-------- -------- --------
TOTAL REVENUE .......................................................... 29,922 30,088 31,366
-------- -------- --------
BENEFITS AND EXPENSES
Death benefits ......................................................... 2,943 2,858 2,798
Annuity benefits ....................................................... 3,582 3,495 3,354
Disability benefits .................................................... 5,630 5,765 5,201
Other benefits ......................................................... 806 853 845
Surrender benefits and fund withdrawals ................................ 11,844 12,538 11,714
Net (decrease) increase in reserves .................................... (1,572) (2,178) 1,251
Commissions ............................................................ 477 535 610
Other expenses ......................................................... 2,690 2,650 3,727
-------- -------- --------
TOTAL BENEFITS AND EXPENSES ............................................ 26,400 26,516 29,500
-------- -------- --------
Operating income before dividends and income taxes ..................... 3,522 3,572 1,866
Dividends to policyholders ............................................. 2,526 2,464 2,290
-------- -------- --------
Operating income (loss) before income taxes ............................ 996 1,108 (424)
Income tax provision ................................................... 51 590 453
-------- -------- --------
INCOME (LOSS) FROM OPERATIONS .......................................... 945 518 (877)
NET REALIZED CAPITAL GAINS (LOSSES) .................................... 457 (183) (24)
-------- -------- --------
NET INCOME (LOSS) ..................................................... $ 1,402 $ 335 $ (901)
======== ======== ========
SURPLUS
SURPLUS, BEGINNING OF YEAR ............................................. 8,668 7,449 8,004
Net income (loss) ...................................................... 1,402 335 (901)
Change in net unrealized capital gains (losses) ........................ 191 661 (51)
Change in non-admitted assets .......................................... (206) 717 82
Change in asset valuation reserve ...................................... 11 (694) 653
Other changes, net ..................................................... (691) 200 (338)
-------- -------- --------
SURPLUS, END OF YEAR ................................................... $ 9,375 $ 8,668 $ 7,449
======== ======== ========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS
- 1 -
<PAGE>
<TABLE>
<CAPTION>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
STATEMENTS OF CASH FLOWS (STATUTORY BASIS)
- ------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1996 1995 1994
--------- --------- ---------
(In Millions)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums and annuity considerations ...................................... $ 20,669 $ 21,030 $ 23,635
Net investment income .................................................... 8,629 8,511 7,261
Other income received .................................................... 599 479 502
Separate account transfers ............................................... 1,183 1,002 (494)
Benefits and claims paid ................................................. (24,952) (25,524) (24,403)
Policyholders' dividends paid ............................................ (2,453) (2,393) (2,594)
Federal income taxes (paid) received ..................................... (230) (847) 179
Other operating expenses ................................................. (4,224) (3,738) (3,636)
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ...................... (779) (1,480) 450
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments sold, matured, or repaid
Bonds ............................................................... 119,195 93,178 80,668
Stocks .............................................................. 4,328 2,985 4,263
Mortgage loans on real estate ....................................... 3,140 4,997 4,205
Real estate ......................................................... 537 573 935
Net gains (losses) on cash and short-term investments ............... 13 (9) (5)
Miscellaneous proceeds .............................................. 2,128 3,707 2,671
Payments for investments acquired
Bonds ............................................................... (118,009) (101,018) (81,677)
Stocks .............................................................. (6,029) (2,199) (2,312)
Mortgage loans on real estate ....................................... (1,841) (2,810) (3,282)
Real estate ......................................................... (120) (425) (194)
Miscellaneous applications .......................................... (718) (1,213) (1,275)
Net (tax) benefit on capital gains and losses ............................ (622) 107 (275)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ...................... 2,002 (2,127) 3,722
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments of) proceeds from borrowed money ......................... (44) 123 1
Net proceeds from the issuance of capital notes .......................... 0 686 0
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES ..................... (44) 809 1
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS ............... 1,179 (2,798) 4,173
Cash and short-term investments, beginning of year ....................... 4,803 7,601 3,428
--------- --------- ---------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR ............................. $ 5,982 $ 4,803 $ 7,601
========= ========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest payments of $253 million, $144 million and $85 million were made during
1996, 1995 and 1994, respectively.
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS
- 2 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. ACCOUNTING POLICIES AND PRINCIPLES
A. Business and basis of presentation - The statutory financial
statements include the accounts of The Prudential Insurance Company of
America ("the Company"), a mutual life insurance company. The
activities of the Company include a broad range of financial services,
including life and health insurance, asset management, and investment
advisory services.
These financial statements were prepared on an unconsolidated
statutory basis of accounting, which differs from the 1995 and 1994
financial statements prepared for general distribution on a
consolidated statutory basis of accounting, both of which differ from
generally accepted accounting principles ("GAAP"). The financial
statements for 1995 and 1994 have been restated on an unconsolidated
statutory basis of accounting adopted in 1996 for purposes of general
distribution. Certain reclassifications have been made to the 1995 and
1994 financial statement amounts to conform to the 1996 presentation.
The Company, domiciled in the State of New Jersey, prepares its
statutory financial statements in accordance with accounting practices
prescribed or permitted by the New Jersey Department of Banking and
Insurance ("the Department"). Prescribed statutory accounting
practices include publications of the National Association of
Insurance Commissioners ("NAIC"), state laws, regulations, and general
administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The financial
statements are substantially the same as those included in the
Statutory Annual Statement except for certain reclassifications and
adjustments. These financial statements differ from those filed with
the Department in that changes to estimated income and premium taxes
applicable to prior periods, which are recorded as direct charges or
credits to surplus in the Annual Statement, have been included in the
"Income tax provision" and "Other expenses" in the Statements of
Operations and Changes in Surplus. This item has the net effect of
increasing (decreasing) net income by $396 million, ($143) million and
$6 million in 1996, 1995 and 1994, respectively.
Pursuant to the Financial Accounting Standards Board Interpretation
No. 40 "Applicability of Generally Accepted Accounting Principles to
Mutual Life Insurance and Other Enterprises," as amended, which is
effective for 1996 financial statements, statutory accounting
practices ("SAP") are no longer considered GAAP for mutual life
insurance companies. SAP differs from GAAP primarily as follows:
(a) the Commissioner's Reserve Valuation Method ("CRVM") is used for the
majority of individual insurance reserves under SAP, whereas for
individual insurance, policyholder liabilities are generally
established using the net level premium method under GAAP. Policy
assumptions used in the estimation of policyholder liabilities are
generally prescribed under SAP, but are based upon actual company
experience under GAAP;
(b) for investment-type contracts that do not contain mortality or
morbidity risk and universal life-type contracts, cash receipts are
recorded as premiums and reserves are established using prescribed
reserving methods under SAP. Under GAAP, premium from investment-type
and universal life-type contracts are generally recognized as
deposits. Revenues from these contracts represent amounts assessed
against policyholders and are reported in the period of assessment;
(c) policy acquisition costs are expensed when incurred under SAP rather
than being deferred and charged against earnings over the periods
covered by the related policies;
(d) deferred income taxes are not recorded for the tax effect of temporary
differences between book and tax basis of assets and liabilities under
SAP;
(e) certain "non-admitted assets" must be excluded under SAP through a
charge against surplus, e.g. fixed assets, prepaid pensions and
impaired investments;
(f) investments in the common stock of the Company's wholly-owned
subsidiaries are accounted for using the equity method under SAP
rather than consolidated;
(g) bonds are carried at amortized cost under SAP rather than categorized
as "held to maturity", "available for sale", or "trading". Under GAAP,
bonds classified as "available for sale" and "trading" are carried at
market value;
(h) certain reclassifications would be required with respect to the
balance sheet and statement of cash flows under SAP;
(i) the Asset Valuation Reserve ("AVR") and Interest Maintenance Reserve
("IMR") are required for life insurance companies under SAP.
The following is a summary of accounting practices permitted by the
state of New Jersey and reflected in these financial statements:
o Prescribed statutory accounting practices require Department
approval of each and every interest payment at the time of
payment in order to classify the Company's Capital Notes as a
component of surplus. Otherwise, such notes are required to be
classified as a liability. Interest payments on $300 million in
Capital Notes issued in 1993 are pre-approved by the Department,
and permitted to be classified in surplus.
o The Company sells synthetic guaranteed interest contracts
("GICs") containing minimum investment related guarantees on
qualified pension plan assets. The assets are owned by the
trustees of such plans, who invest the assets
- 3 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
under the terms of investment guidelines agreed to with the
Company. The investment related guarantees may include a minimum
rate of return on the underlying assets and/or a guarantee of
liquidity to meet plan cash flow requirements. The Company, with
the approval of the Department, reports both the plan liabilities
associated with the synthetic GICs and the trust assets
supporting this potential liability. In addition, the Company
files detailed schedules of trust assets and related statements
with the Department. Currently, prescribed statutory accounting
practices do not address accounting for synthetic GICs.
o The Company establishes guaranty fund liabilities for the
insolvencies of certain life insurance companies. The liabilities
are established net of estimated premium tax credits and federal
income tax. Prescribed statutory accounting practices do not
address the establishment of liabilities for guaranty fund
assessments.
B. Divestiture - On July 31, 1996, Prudential sold a substantial portion
of its Canadian Branch business to the London Life Insurance Company
("London Life"). The transaction was structured as an assumption
reinsurance transaction, whereby London Life assumed total liabilities
of the Canadian Branch equal to $3,146 million as well as a related
amount of total assets equal to $3,040 million. A net gain of $138
million was recorded for this transaction.
C. Use of estimates - The preparation of financial statements in
conformity with SAP 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 revenue and expenses
during the reported period. Actual results could differ from those
estimates.
D. Investments - Bonds, which consist of long-term bonds, are stated
primarily at amortized cost.
Preferred stock is generally valued at amortized cost.
Common Stock is carried at fair value. Investments in subsidiaries,
which are included in "Common stock", are accounted for using the
equity method. The subsidiaries' change in net assets, excluding
capital contributions and distributions, is included in "Net
investment income." The subsidiaries are engaged principally in the
businesses of life and health insurance, property and casualty
insurance, group health care, securities brokerage, asset management,
investment advisory services, retail banking and real estate and
brokerage.
Mortgage loans on real estate are stated primarily at unpaid principal
balances.
Real estate, except for real estate acquired in satisfaction of debt,
is carried at cost less accumulated straight-line depreciation,
encumbrances and permanent impairments in value. Properties acquired
in satisfaction of debt are valued at lower of depreciated cost or
fair value less disposition costs.
Policy loans and premium notes are stated at unpaid principal
balances.
Cash includes cash on hand, amounts due from banks and money market
instruments. Short term investments, including highly liquid debt
instruments purchased with an original maturity of twelve months or
less, are stated at amortized cost, which approximates fair value.
Other invested assets primarily include the Company's investment in
joint ventures and other forms of partnerships. These investments are
accounted for using the equity method where the Company has the
ability to exercise significant influence over the operating and
financial policies of the entity. The cost method is used for all
other assets.
Derivatives used in asset/liability risk management activities, which
support life and health insurance and annuity contracts, are recorded
at either fair value or statement value, depending upon the underlying
instrument, with unrealized gains and losses recorded in "Change in
net unrealized capital gains (losses)." Upon termination of
derivatives, the interest-related gains and losses are amortized
through the IMR.
E. Separate accounts - These assets and liabilities, reported at
estimated fair value, represent segregated funds invested for pension
and other clients. Investment risks associated with fair value changes
are generally borne by the clients, except to the extent of minimum
guarantees made by the Company with respect to certain accounts.
F. Revenue recognition of insurance income and related expenses - Life
premiums are recognized as income over the premium paying period of
the related policies. Annuity considerations are recognized as revenue
when received. Health premiums are earned ratably over the terms of
the related insurance and reinsurance contracts or policies. Expenses
incurred in connection with acquiring new insurance business,
including such acquisition costs as sales commissions, are charged to
operations as incurred.
- 4 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
G. Policyholder dividends - Substantially all of the policies issued by
the Company are participating. The amount of 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, and expense experience for
the year and judgment as to the appropriate level of statutory surplus
to be retained by the Company. Dividends declared by the Board of
Directors which have not been paid are included in "Policy dividends".
2. POLICY LIABILITIES AND INSURANCE RESERVES
A. For life insurance and annuities, future policy benefits and claims
include estimates of benefits and associated settlement expenses on
reported claims and those which are incurred but not reported.
Activity in the liability for unpaid claims and claim adjustment
expenses for accident and health business, which is included in
"Future policy benefits and claims", is as follows:
1996 1995 1994
------- ------- -------
(In Millions)
Balance at January 1 $ 2,636 $ 2,440 $ 2,416
Less reinsurance recoverables 15 23 15
------- ------- -------
Net balance at January 1 2,621 2,417 2,401
------- ------- -------
Incurred related to:
Current year 5,734 5,759 5,398
Prior years (87) 42 (87)
------- ------- -------
Total incurred 5,647 5,801 5,311
------- ------- -------
Paid related to:
Current year 4,135 4,028 3,856
Prior years 1,467 1,569 1,439
------- ------- -------
Total paid 5,602 5,597 5,295
------- ------- -------
Net balance at December 31 2,666 2,621 2,417
Plus reinsurance recoverables 10 15 23
------- ------- -------
Balance at December 31 $ 2,676 $ 2,636 $ 2,440
======= ======= =======
As a result of changes in reserve estimates for insured events of
prior years, the provision for claims and claim adjustment expenses
changed by ($87) million and $42 million in 1996 and 1995,
respectively, due to changes in claim cost trends and changed by ($87)
million in 1994 because of faster-than-expected shrinkage in the
indemnity health business.
B. Reserves for individual life insurance are calculated using various
methods, interest rates and mortality tables, which produce reserves
that meet the aggregate requirements of state laws and regulations.
Approximately 39% of individual life insurance reserves are determined
using the net level premium method, or by using the greater of the net
level premium reserve or the policy cash value. About 52% of
individual life insurance reserves are calculated according to CRVM
or methods which compare CRVM to policy cash values. The remaining
reserves include universal life reserves which are equal to the
greater of the policyholder account value less the unamortized expense
allowance and the policy cash value, or are for supplementary benefits
whose reserves are calculated using methods, interest rates and tables
appropriate for the benefit provided.
For group life insurance, about 56% of the reserves are associated
with extended death benefits. These reserves are primarily calculated
using modified group tables at various interest rates. The remainder
are unearned premium reserves (calculated using the 1960
Commissioner's Standard Group Table), reserves for group life fund
accumulations and other miscellaneous reserves.
Reserves for deferred individual annuity contracts are determined
using the Commissioner's Annuity Reserve Valuation Method. These
account for 72% of the individual annuity reserves. The remaining
reserves are equal to the present value of future payments with the
annuity mortality table and interest rates based on the date of issue
or maturity as appropriate.
Reserves for other deposit funds or other liabilities with life
contingencies reflect the contract deposit account or experience
accumulation for the contract and any purchased annuity reserves.
Accident and health reserves represent the present value of the future
potential payments, adjusted for contingencies and interest. The
remaining material reserves for active life reserves and unearned
premiums are valued using the preliminary term method, gross premium
valuation method, or a pro rata portion of gross premiums. Reserves
are also held for amounts not yet due on hospital benefits and other
coverages.
- 5 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The reserve for guaranteed interest contracts, deposit funds and other
liabilities without life contingencies equal either the present value
of future payments discounted at the guaranteed rate or the fund
value.
Policyholders, at their discretion, may withdraw funds from their
annuity policies. At December 31, 1996 and 1995, approximately 55% of
total annuity actuarial reserves and deposit liabilities of $92,536
million and $95,092 million, respectively, were not subject to
discretionary withdrawal.
3. INCOME TAXES
The Company and its domestic subsidiaries file a consolidated federal income
tax return. The Internal Revenue Code (the "Code") taxes the Company on its
operating income after dividends to policyholders. In calculating this tax,
the Code requires the capitalization and amortization of policy acquisition
expenses.
The Code also imposes an "equity tax" on mutual life insurance companies
which, in effect, imposes an additional amount of taxable income to the
Company. "Income tax provision" includes an estimate for the total equity tax
to be paid with respect to the year. Income from sources outside the United
States is taxed under applicable foreign statutes.
The Internal Revenue Service (the "Service") has completed an examination of
the consolidated federal income tax return through 1989. The Service is
examining 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.
4. INVESTED ASSETS
A. Bonds and stocks - The Company invests in both investment grade and
non-investment grade public and private bonds. The Securities
Valuation Office of the NAIC rates the bonds held by insurers for
regulatory purposes and classifies investments into six categories
ranging from highest quality bonds to those in or near default. The
lowest three NAIC categories represent primarily high-yield securities
and are defined by the NAIC as including any security with a public
agency rating equivalent to B+ or B1 or less. Securities in these
lowest three categories approximated 2.8% and 1.0%, of the Company's
bonds at December 31, 1996, 1995, respectively.
The following tables provide additional information relating to bonds
and preferred stock as of December 31:
<TABLE>
<CAPTION>
1996
-------------------------------------------------------
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
AMOUNT GAINS LOSSES VALUE
------- ------- ------ -------
Bonds (In Millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 9,504 $ 353 $ 74 $ 9,783
Obligations of U.S. states and their
political subdivisions 206 7 6 207
Foreign government bonds 2,420 133 11 2,542
Corporate securities 57,282 2,625 323 59,584
Mortgage-backed securities 5,594 131 15 5,710
------- ------- ------- -------
Total $75,006 $ 3,249 $ 429 $77,826
======= ======= ======= =======
Preferred Stock
Redeemable $ 142 $ 3 $ 6 $ 139
Non-redeemable 97 23 0 120
------- ------- ------- -------
Total $ 239 $ 26 $ 6 $ 259
======= ======= ======= =======
</TABLE>
- 6 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1995
--------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
AMOUNT GAINS LOSSES VALUE
------- ------- ------- -------
Bonds (In Millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $15,715 $ 1,392 $ 1 $17,106
Obligations of U.S. states and their
political subdivisions 214 22 1 235
Foreign government bonds 3,196 260 1 3,455
Corporate securities 54,411 4,609 97 58,923
Mortgage-backed securities 3,958 241 8 4,191
------- ------- ------- -------
Total $77,494 $ 6,524 $ 108 $83,910
======= ======= ======= =======
Preferred Stock
Redeemable $ 304 $ 16 $ 4 $ 316
Non-redeemable 92 2 0 94
------- ------- ------- -------
Total $ 396 $ 18 $ 4 $ 410
======= ======= ======= =======
</TABLE>
The carrying amount and estimated fair value of bonds at December 31,
1996, categorized by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers
may prepay obligations with or without call or prepayment penalties.
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
(In Millions)
Due in one year or less $ 1,999 $ 2,012
Due after one year through five years 19,125 19,445
Due after five years through ten years 19,406 20,081
Due after ten years 28,882 30,578
------- -------
69,412 72,116
------- -------
Mortgage-backed securities 5,594 5,710
------- -------
Total $75,006 $77,826
======= =======
Proceeds from the sale and maturity of bonds during 1996, 1995 and
1994 were $119,195 million, $93,178 million and $80,668 million,
respectively. Gross gains of $1,516 million, $1,913 million and $618
million and gross losses of $988 million, $782 million and $1,841
million were realized on such sales during 1996, 1995 and 1994,
respectively. Realized gains and losses are determined using the
specific identification method.
B. Mortgage loans on real estate - Mortgage loans on real estate at
December 31 are as follows:
1996 1995
------------------ ------------------
CARRYING PERCENT CARRYING PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
------ -------- ------ --------
(In Millions)
Commercial and agricultural loans:
In good standing $15,546 91.3% $17,649 87.0%
In good standing
with structured terms 809 4.7% 966 4.8%
Past due 90 days or more 229 1.3% 144 0.7%
In process of foreclosure 68 0.4% 157 0.8%
Residential loans 387 2.3% 1,364 6.7%
------- ----- ------- -----
Total $17,039 100.0% $20,280 100.0%
======= ===== ======= =====
At December 31, 1996, the Company's mortgage loans on real estate were
collateralized by the following property types: office buildings
(34%), retail stores (22%), residential properties (2%), apartment
complexes (18%), industrial buildings (11%), agricultural properties
(9%) and other commercial properties (4%). The maximum percentage of
any one loan to the value of collateral at the time of the loan,
exclusive of insured, guaranteed, purchase money mortgages or
mortgages supported by high credit leases is 80%. The mortgage loans
are geographically dispersed throughout the United States and
- 7 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Canada with the largest concentrations in California (26%) and New
York (8%). Included in these balances are mortgage loans with
affiliated joint ventures of $560 million and $653 million at December
31, 1996 and 1995, respectively.
C. Real estate - Real estate at December 31 was as follows:
1996 1995
------ ------
(In Millions)
Investment real estate $1,201 $1,484
Properties occupied by the Company 525 533
Properties acquired in
satisfaction of debt 368 471
------ ------
Total $2,094 $2,488
====== ======
Accumulated depreciation on real estate was $808 million and $853
million at December 31, 1996 and 1995, respectively.
D. Other invested assets - Other invested assets of $2,591 million and
and $3,304 million as of December 31, 1996 and 1995, respectively,
principally include the Company's net equity in joint ventures and
other forms of partnerships. The Company's share of net income from
other invested assets was $283 million, $240 million and $348 million
for 1996, 1995 and 1994, respectively.
E. Investment in subsidiaries - Included in "Common stock" is the
Company's investment in subsidiaries of $4,610 million and $4,328
million at December 31, 1996 and 1995, respectively. Included in "Net
investment income" for 1996, 1995 and 1994 is $370 million, $143
million and $(936) million, respectively, attributable to
undistributed income (loss) of subsidiaries.
In October 1995, the Company completed the sale of Prudential
Reinsurance Holdings, Inc., through an initial public offering of
common stock. As a result of the sale, an after-tax gain of $72
million was recorded in 1995.
In March 1995, the Company announced its intention to sell its
mortgage banking unit. On January 26, 1996, the Company entered into a
definitive agreement to sell substantially all the assets of
Prudential Home Mortgage Company, Inc. ("PHMC") and it also
liquidated certain mortgage-backed securities and extended warehouse
loans. In 1995, PHMC recorded an after-tax loss of $98 million which
includes operating gains and losses, asset write downs, and other
costs directly related to the sale. The Company continues to have
discussions with prospective buyers for the sale of the remaining
assets.
F. Net unrealized capital gains (losses) - Changes in net unrealized
capital gains (losses), which result principally from changes in the
differences between cost and carrying amounts of invested assets, were
$191 million and $661 million for the years ended December 31, 1996
and 1995, respectively, and are reflected in "Unassigned surplus."
G. Asset valuation reserve and interest maintenance reserve - These
reserves are required for life insurance companies under NAIC
requirements. The AVR is calculated based on a statutory formula and
is designed to mitigate the effect of valuation and credit-related
losses on unassigned surplus. The IMR captures realized capital gains
and losses, net of tax, resulting from changes in the general level of
interest rates. These gains and losses are amortized into net
investment income utilizing grouped amortization schedules over the
expected remaining life of the investments sold. At December 31, 1996,
AVR is comprised of 68% for bonds, stocks, and short-term investments;
17% for mortgage loans on real estate; and 15% for real estate and
other invested assets. The IMR balance at December 31, 1996 and 1995
was $1,365 million and $1,163 million, respectively, and is recorded
in "Other liabilities". During 1996, 1995 and 1994, $327 million, $766
million and ($910) million, respectively, of net realized capital
gains (losses) were deferred and $126 million, $82 million and $102
million, respectively, was amortized and included in income.
H. Restricted assets and special deposits - Assets in the amounts of $941
million and $5,072 million at December 31, 1996 and 1995,
respectively, were on deposit with governmental authorities or
trustees as required by law. Assets valued at $2,994 million and
$3,121 million at December 31, 1996 and 1995, respectively, were
maintained as compensating balances or pledged as collateral for bank
loans and other financing agreements. Letter stock or other securities
restricted as to sale amounted to $720 million in 1996 and $354
million in 1995.
I. Loan backed and structured securities - A retrospective method is
employed to recalculate the values of the loan backed and structured
securities holdings with the exception of interest only bonds. Each
acquisition lot was reviewed to recalculate the effective yield. The
recalculated effective yield was used to derive a book value as if the
new yield were applied at the time of acquisition. Outstanding
principal
- 8 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
factors from the time of acquisition to adjustment date were used to
calculate the prepayment history for all applicable securities.
Conditional prepayment rates, computed with life to date factor
histories and weighted average maturities, were used to affect the
calculation of projected payments for pass through, interest only and
principal only security types. Interest only bond adjustments are
developed on a prospective basis with adjustments made for permanent
impairments if needed.
J. Securities lending is a program whereby the Company loans securities
to third parties, primarily major brokerage firms. As of December 31,
1996 and 1995, the estimated fair values of loaned securities were
$6,362 million and $5,939 million respectively. Company and NAIC
policies require a minimum of 102% and 105% of the fair value of the
domestic and foreign loaned securities, respectively, to be separately
maintained as collateral for the loans. Cash collateral received is
invested in short-term investments. The offsetting collateral
liability as of December 31, 1996 and 1995 is $4,813 million and
$3,625 million, respectively. Non-cash collateral is not reflected in
the Statements of Admitted Assets, Liabilities and Surplus.
5. EMPLOYEE BENEFIT PLANS
A. Pension plans - The Company has several defined benefit pension plans,
which cover substantially all of its employees. Benefits are generally
based on career average earnings and credited length of service. The
Company's funding policy for U.S. plans is to contribute annually the
amount necessary to satisfy the Internal Revenue Service contribution
guidelines.
Employee pension benefit plan status is as follows:
1996 1995
------- -------
(In Millions)
Actuarial present value of benefit obligation:
Vested benefit obligation $(3,878) $(3,270)
======= =======
Accumulated benefit obligation $(4,174) $(3,572)
======= =======
Projected benefit obligation $(4,989) $(4,330)
Plan assets at fair value 7,326 6,688
------- -------
Plan assets in excess of projected
benefit obligation 2,337 2,358
Unrecognized transition amount (769) (904)
Unrecognized prior service cost 356 199
Unrecognized net gain (916) (753)
------- -------
Prepaid pension cost $ 1,008 $ 900
======= =======
Plan assets consist primarily of equity securities, bonds, real estate
and short-term investments, of which $5,668 million and $4,788 million
are included in separate account assets and liabilities at December
31, 1996 and 1995, respectively.
The components of the net periodic pension benefit for 1996, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Service cost $ 119 $ 110 $ 141
Interest cost 336 371 293
Actual return on assets (720) (1,249) 62
Net amortization and deferral 57 604 (633)
Net curtailment gains and special termination benefits 63 0 156
------ ------ ------
Net periodic pension benefit $ (145) $ (164) $ 19
====== ====== ======
</TABLE>
The net increase to surplus relating to the Company's pension plans is
$37 million, $30 million and $0 million in 1996, 1995 and 1994,
respectively, which considers the changes in the non-admitted prepaid
pension asset of $108 million, $134 million and ($19) million,
respectively.
The accounting assumptions used by the Company were:
AS OF SEPTEMBER 30,
------------------------
1996 1995 1994
------ ------ ------
Discount rate 7.75% 7.50% 8.50%
Rate of increase in compensation levels 4.50% 4.50% 5.50%
Expected long-term rate of return on assets 9.50% 9.00% 9.00%
The Company maintains non-qualified supplemental retirement plans
providing benefits that may not be paid from the Company's two
qualified plans since qualified plans have limits imposed by Section
415 and 401(a)(17) of the Code. One of these plans also provides
certain participants with a subsidized early retirement benefit.
- 9 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
B. Postretirement benefits - The Company provides certain life insurance
and health care benefits for its retired employees. Substantially all
of the Company's employees may become eligible to receive these
benefits if they retire after age 55 with at least 10 years of
service.
Postretirement benefits are accounted for in accordance with
prescribed NAIC policy. The Company has elected to amortize its
transition obligation over 20 years. During 1996, 1995 and 1994,
funding of its postretirement benefit obligations totaled $35 million,
$47 million and $31 million, respectively.
The postretirement benefit plan status is as follows:
SEPTEMBER 30,
------------------
1996 1995
---- ----
(In Millions)
Accumulated postretirement benefit obligation for:
Retirees $(1,418) $(1,465)
Fully eligible active plan participants (35) (103)
Plan assets at fair value 1,341 1,309
------- -------
Funded status (112) (259)
Unrecognized transition amount 355 378
Unrecognized net gain (177) (19)
------- -------
Prepaid postretirement benefit cost $ 66 $ 100
======= =======
Plan assets consist of group and individual variable life insurance
policies, group life and health contracts and short-term investments,
of which $1,003 million and $990 million are included in the separate
account assets and liabilities at December 31, 1996 and 1995,
respectively.
Net periodic postretirement benefit cost for 1996, 1995 and 1994
includes the following components:
1996 1995 1994
----- ----- -----
(In Millions)
Service cost $ 24 $ 30 $ 36
Interest cost 115 117 107
Actual return on plan assets (104) (144) (98)
Amortization of transition obligation 22 22 23
Other 12 49 52
----- ----- -----
Net periodic postretirement benefit cost $ 69 $ 74 $ 120
===== ===== =====
The net reduction to surplus relating to the Company's postretirement
benefit plans is $35 million, $46 million, and $30 million in 1996,
1995 and 1994, respectively, which considers the changes in the
prepaid postretirement benefit cost of $34 million, $28 million and
$90 million in 1996 , 1995 and 1994, respectively.
The assumptions used for the postretirement benefit plan were:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
---------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.75% 7.50% 8.50%
Expected long-term rate of return on plan assets 9.00% 8.00% 9.00%
Rate of increase in compensation levels 4.50% 4.50% 5.50%
Health care cost trend rates 8.50-12.50% 8.90-13.30% 9.10-13.90%
Ultimate health care cost trend rate at 2006 5.00% 5.00% 6.00%
</TABLE>
A 1% increase in health care cost trend rates would increase the
September 30, 1996 accumulated postretirement benefit obligation and
service/interest costs by $115 million and $12 million, respectively.
C. Postemployment benefits - The Company accrues for 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, 1996 and 1995 was $99 million and
$96 million, respectively.
- 10 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
6. NOTES PAYABLE AND OTHER BORROWINGS
Notes payable and other borrowings consisted of the following at December
31:
Short-term: 1996 1995
---- ----
(In Millions)
Notes payable to affiliate $ 99 $ 0
Current portion of long term
notes payable 11 128
---- ----
$110 $128
Long-Term: 1996 1995
---- ----
8.173% note due 2002 $249 $249
7.501% note due 1999 248 248
5.0819% note due 2004 56 66
12.00% note due 1999 0 16
Secured demand note
due 1998 100 100
---- ----
653 679
---- ----
Total principal repayments and accrued interest $763 $807
==== ====
Scheduled principal repayments as of December 31, 1996, are as
follows: $110 million in 1997, $100 million in 1998, $239 million in
1999, $0 in 2000, $0 in 2001 and $294 million thereafter.
7. SURPLUS
A. Capital notes - The Company issues Capital Notes that are subordinate
in right of payment to policy claims, prior claims and senior
indebtedness. A summary of the outstanding Capital Notes as of
December 31, 1996 is as follows:
PRINCIPAL CARRYING INTEREST MATURITY
ISSUE DATE (PAR) AMOUNT RATE DATE
- ---------- --------- -------- -------- --------
(In Millions)
April 28, 1993 $ 300 $ 299 6.875% April 15, 2003
July 1, 1995 350 340 8.300% July 1, 2025
July 1, 1995 250 246 7.650% July 1, 2007
July 15, 1995 100 100 8.100% July 15, 2015
------- -----
Total $ 1,000 $ 985
======= =====
B. Special surplus fund - In accordance with the requirements of various
states, a special surplus fund has been established for contingency
reserves of $1,268 million and $1,274 million as of December 31, 1996
and 1995, respectively.
C. Non-admitted assets - Non-admitted assets were $1,367 million and
$1,167 million as of December 31, 1996 and 1995, respectively.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values presented below have been determined using available
information and reasonable 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, the carrying value is a
reasonable estimate of fair value.)
Bonds and preferred stock - Fair values for bonds and preferred stock,
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 fair value of certain non-performing private placement
securities is based on amounts provided by state regulatory
authorities.
Common stock - Fair value of unaffiliated common stock is based on
quoted market prices, where available, or prices provided by state
regulatory authorities.
- 11 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Mortgage loans on real estate - The fair value of residential
mortgages is based on recent market trades or quotes, adjusted where
necessary for differences in risk characteristics. The fair value of
the commercial mortgage and agricultural loan portfolio is primarily
based upon the present value of the scheduled 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, fair value is based upon the value of the underlying
collateral.
Policy loans and premium notes - 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 future 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.
Investment-type insurance contract liabilities - Fair values for the
Company's investment-type insurance contract liabilities are estimated
using a discounted cash flow model, based on interest rates currently
being offered for similar contracts. Carrying amounts are included in
"Future policy benefits and claims."
Notes payable and other borrowings - The estimated fair value of notes
payable is derived using discount rates based on the borrowing rates
currently available to the Company for debt with similar terms and
remaining maturities.
The following table discloses the carrying amounts and estimated fair
values of the Company's financial instruments at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
(In Millions)
FINANCIAL ASSETS:
<S> <C> <C> <C> <C>
Bonds $75,006 $77,826 $77,494 $83,910
Preferred stock 239 259 396 410
Common stock * 2,466 2,466 1,805 1,805
Mortgage loans on real estate 17,039 17,364 20,280 20,839
Policy loans and premium notes 6,023 5,942 6,208 6,452
Short-term investments 5,817 5,817 4,633 4,633
Cash 165 165 170 170
Assets held in separate accounts 57,797 57,797 53,903 53,903
Derivative financial instruments 9 16 15 64
FINANCIAL LIABILITIES:
Investment-type insurance
contracts 30,194 30,328 34,799 35,720
Notes payable and other borrowings 763 794 807 829
Liabilities related to separate accounts 57,436 57,436 53,256 53,256
Derivative financial instruments 60 63 94 108
</TABLE>
* Excludes investments in subsidiaries of $4,610 million and $4,328 million
at December 31, 1996 and 1995, respectively.
- 12 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
9. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS
A. Derivative financial instruments - Derivatives include swaps,
forwards, futures, options and fixed-rate loan commitments subject to
market risk, all of which are used by the Company in the normal course
of business in activities other than trading. The Company does not
issue or hold derivatives for trading purposes. This classification is
based on management's intent at the time of contract inception and
throughout the life of the contract. The Company uses derivatives
primarily for asset/liability risk management and to reduce exposure
to interest rate, currency and other market risks. Of those
derivatives held at December 31,1996, 35% of the notional amounts
consisted of interest rate derivatives and 65% consisted of foreign
currency derivatives.
The tables below summarize the Company's outstanding positions on a
gross basis before netting pursuant to rights of offset, qualifying
master netting agreements with counterparties or collateral
arrangements at December 31:
<TABLE>
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENTS
1996 1995
---- ----
(In Millions)
CARRYING ESTIMATED CARRYING ESTIMATED
NOTIONAL AMOUNT FAIR VALUE NOTIONAL AMOUNT FAIR VALUE
-------- ------ ---------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Swaps:
Assets $ 159 $ 1 $ 6 $ 418 $ (1) $ 32
Liabilities 479 50 53 371 76 79
Forwards:
Assets 453 8 8 235 13 17
Liabilities 980 9 9 1,074 13 13
Futures:
Assets 0 0 0 683 5 5
Liabilities 399 1 1 864 5 7
Options:
Assets 175 0 0 195 0 0
Liabilities 0 0 0 3 0 0
Loan Commitments:
Assets 164 0 2 122 (2) 10
Liabilities 9 0 0 532 0 9
------ ------ ------ ------ ------ ------
Total:
Assets $ 951 $ 9 $ 16 $1,653 $ 15 $ 64
====== ====== ====== ====== ====== ======
Liabilities $1,867 $ 60 $ 63 $2,844 $ 94 $ 108
====== ====== ====== ====== ====== ======
</TABLE>
B. 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 and letters of credit. Commitments include variable rate
commitments to purchase and sell mortgage loans and the unfunded
portion of commitments to fund investments in private placement
securities. 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 notional amount of these instruments, which represents the
Company's maximum exposure to credit loss from other parties'
non-performance, was $785 million and $1,254 million at December 31,
1996 and 1995, respectively. Because many of these amounts expire
without being advanced in whole or in part, the notional amounts do
not represent future cash flows.
The estimated fair value of these instruments, which represents the
Company's current exposure to credit loss from other parties'
non-performance, was $8 million and $56 million at December 31, 1996
and 1995, respectively.
10. RELATED PARTY TRANSACTIONS
A. Service agreements - The Company has entered into service agreements
with various subsidiaries. Under these agreements, the Company
furnishes services of officers and employees and provides supplies,
use of equipment, office space, and makes payment to
- 13 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
third parties for general expenses, state and local taxes. The
agreements obligate the subsidiaries to reimburse the Company for the
approximate cost of providing such services. The amounts receivable
from subsidiaries, reported in "Other assets" at December 31, 1996 and
1995, were $490 million and $509 million, respectively. The
subsidiaries also furnish similar services to the Company in
connection with such agreements. The amount payable to subsidiaries,
reported in "Other liabilities" at December 31, 1996 was $87 million.
There was no outstanding balance at December 31, 1995.
Certain of the Company's group health care subsidiaries provide health
insurance to certain employees of the Company. Enrollment contract
costs reported in "Other expenses" were $126 million, $111 million and
$104 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company purchases corporate owned life insurance policies from one
of its life insurance subsidiaries for certain employees. The premium
charged for these policies reported in "Other expenses" was $3
million, $12 million and $12 million for the years ended December 31,
1996, 1995 and 1994, respectively. The cash value associated with
these policies was $118 million and $102 million at December 31,
1996 and 1995, respectively.
Certain of the Company's subsidiaries perform services for the Company
in connection with the Company's obligations under investment advisory
or subadvisory agreements. The costs incurred in connection with
performing such services, primarily reported in "Other expenses," were
$145 million, $327 million and $342 million for the years ended
December 31, 1996, 1995 and 1994, respectively. The Company also
provides these services to subsidiaries in connection with such
agreements. The investment advisory fees received from affiliates by
the Company, reported in "Other income" were $161 million, $92 million
and $110 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company borrows short-term funds from Prudential Funding
Corporation ("Funding"), a wholly owned subsidiary. The interest
expense for these borrowings was $131 million, $66 million and $21
million for the years ended December 31, 1996, 1995 and 1994,
respectively. The outstanding balance at December 31, 1996 was $99
million. There was no outstanding balance at December 31, 1995.
B. Net worth maintenance agreement - The Company has entered into a
support agreement with Funding under which it agrees to maintain
Funding's tangible net worth, including subordinated debt, at not less
than $1.00. As of December 31, 1996, the tangible net worth of Funding
was $44 million. Since the inception of the agreement, no support
payments have been required.
11. CONTINGENCIES
The Company is reviewing its obligations under certain managed care
arrangements for possible failure to comply with contractual and regulatory
requirements. It is the opinion of management that appropriate reserves
have been established in accordance with applicable accounting standards to
provide for appropriate reimbursements to customers.
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.
Twenty-six purported class actions and over 280 individual actions are
pending against the Company 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 these cases seek very 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
created 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. In it, the Task Force found that some sales of life
insurance policies made by the Company were improper. The report criticizes
the Company's training, oversight, discipline and compliance programs
related to insurance sales. Based on these findings, the Task Force
recommended, and the Company agreed to, a series of fines allocated to all
50 states and the District of Columbia amounting to a total of $35 million.
In addition, the Task Force recommended a remediation program pursuant to
which the Company would offer relief to policyowners who purchased 10.7
million whole life insurance policies in the United States from the Company
from 1982 through 1995. In subsequent negotiations with several states, the
Company agreed to pay additional amounts aggregating approximately $30
million by way of fine, reimbursement of investigation expenses and costs
associated with outreach to residents of Florida and California.
On October 28, 1996, the Company entered into a Stipulation of Settlement
with attorneys for the plaintiffs in the class actions consolidated in a
Multi-District Litigation involving alleged improprieties in connection
with the Company's sale of whole life
- 14 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
insurance policies from 1982 through 1995. Pursuant to the proposed
settlement, the Company has agreed to provide certain enhancements and
changes to the remediation program previously accepted by the Multi-State
Task Force, including some additional remedies. In addition, the Company
agreed that a minimum cost of $410 million (which was recorded in the
Statement of Operations and Changes in Surplus) would be incurred in
providing remedies to policyowners under the program, and agreed to certain
other payments and guarantees. Under the terms of the guarantees, the
Company has agreed that the average cost per remedy will not be less than
$2,364 for up to 330,000 claims remedied. For claims remedied in excess of
330,000, the Company has not guaranteed an average cost per remedy. The
Company has also agreed to provide additional compensation to be
distributed by formula that will range in an aggregate amount from $50
million to $300 million depending on the total number of claims remedied.
The Company cannot predict how many claims ultimately will be remedied. The
Company has also recorded in the Statement of Operations and Changes in
Surplus, its estimate of the minimum administrative costs related to the
remediation program. As of March 5, 1997, all 50 states and the District of
Columbia have directed the Company to offer a remediation plan based on the
program accepted by the Task Force and containing many of the enhancements
of the class action settlement.
Also on October 28, 1996, the U.S. District Court of the District of New
Jersey, in which the Multi-District Litigation is pending, conditionally
certified a class for settlement purposes and scheduled a hearing on the
fairness, reasonableness and adequacy of the proposed settlement. This
hearing was held on February 24, 1997. On March 7, 1997, the Court
rendered its decision approving the settlement. The owners of approximately
23,000 policies have taken steps to exclude themselves from the class
action and are not bound by the settlement.
To date, the Company has mailed packages to 8.5 million policyowners
eligible for the remediation program, informing policyowners in all 50
states and the District of Columbia of their rights under the program. The
deadline for electing to participate in the Alternative Dispute Resolution
Process ("ADR") or Basic Claim Relief is June 1, 1997. Policyowners who
believe that they were misled can file a claim through the ADR.
Policyowners who do not believe they were misled, or who do not wish to
file a claim under the ADR, may choose from several options available under
Basic Claim Relief, such as preferred rate premium loans, or the purchase
of enhanced annuities, mutual fund shares or life insurance policies.
It is not possible on any reliable basis to estimate how many policyowners
will participate in the settlement. The cost of the settlement is dependent
upon complex and varying factors, including the number of policyowners that
participate in the settlement, the relief options chosen and the ultimate
dollar value of the settlement. The administrative costs to the Company of
remediation of policyowner claims are also subject to a number of complex
uncertainties in addition to the unknown quantity and cost of policyowner
claims. In light of the uncertainties attendant to these and other factors,
management is unable to make a reasonable estimate of the ultimate cost of
the remediation program to the Company.
A purported class action was brought against the Company and certain
subsidiaries alleging common law fraud, negligent misrepresentation and
violations of the New Jersey RICO statute arising out of the plaintiffs'
purchase of certain subordinated mortgage pass-through securities and
seeking compensatory and punitive damages and injunctive relief. The
Company will deny the substantive allegations of the complaint in its
answer and will vigorously defend the suit. The case is at a preliminary
stage, and management is not now in a position to predict the outcome or
effect of the litigation.
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.
In 1993, Prudential Securities, Inc. ("PSI"), a subsidiary of Prudential,
entered into an agreement with the Securities and Exchange Commission, the
National Association of Securities Dealers, Inc., and state securities
commissions whereby PSI agreed to pay $330 million into a settlement fund
to pay eligible claims on certain limited partnership matters. Under this
agreement, if partnership matter claims exceed the established settlement
fund, PSI is obligated to pay such additional claims. The agreement also
required PSI to take measures to enhance the adequacy of its sales
practices compliance controls.
In October 1994, the United States Attorney for the Southern District of
New York (the "U.S. Attorney") filed a complaint against PSI in connection
with its sale of certain limited partnerships. Simultaneously, PSI entered
into an agreement to comply with certain conditions for a period of three
years, and to pay an additional $330 million into the settlement fund. At
the end of the three year period, assuming PSI has fully complied with the
terms of the agreement, the U.S. Attorney will institute no further action.
In the opinion of management, PSI is in compliance with all provisions of
the aforementioned agreements.
- 15 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The Company has entered into a reinsurance agreement with The Prudential
Life Insurance Company, Ltd., a wholly owned subsidiary, under which it has
agreed to reinsure certain individual life insurance policies through a
yearly renewable term contract. The reinsurance assumed premiums and
reserves for 1996 were $27 million and $17 million, respectively.
The Company as a result of the sale of Prudential Reinsurance Inc. (a PRUCO
Inc. subsidiary), agreed to guarantee up to $775 million of Gibraltar
Casualty Company (a Prudential subsidiary) obligations with respect to a
Stop Loss Agreement and PRUCO Inc.'s (a Prudential subsidiary) payment
obligations under an Indemnity Agreement, subject to maximum aggregate
payments of $400 million. The maximum aggregate payments under the
Prudential Guarantee of the Gibraltar Casualty Company obligations will be
reduced in certain circumstances to take account of payments made and
collateral provided in respect of the guaranteed obligations. The Stop Loss
Agreement is intended to mitigate the impact on Prudential Reinsurance Inc.
of adverse development of loss reserves, as of June 30, 1995, of up to $375
million of the first $400 million of adverse development. The Company has
recorded a loss reserve of $175 million as of December 31, 1996.
Gibraltar Casualty Company and other property and casualty insurance
subsidiaries receive 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 unpaid claim reserves
for these losses, management considered the available information and
established these reserves in accordance with applicable accounting
standards. 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.
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
contractholders 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.
******
- 16 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Policyholders of
The Prudential Insurance Company of America
We have audited the accompanying statement of admitted assets, liabilities and
surplus (statutory basis) of The Prudential Insurance Company of America as of
December 31, 1996, and the related statements of operations and changes in
surplus (statutory basis), and of cash flows (statutory basis) for the year then
ended. 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 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.
As described in Note 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the New Jersey Department
of Insurance, which practices differ from generally accepted accounting
principles. The effects on the financial statements of the variances between the
statutory basis of accounting and generally accepted accounting principles,
although not reasonably determinable, are presumed to be material.
In our opinion, because of the effects of the matters referred to in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of The Prudential Insurance Company of America at December
31, 1996, and the results of its operations and its cash flows for the year then
ended.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the admitted assets, liabilities and surplus of The
Prudential Insurance Company of America at December 31, 1996, and the results of
its operations and its cash flows for the year then ended, on the basis of
accounting described in Note 1.
/s/ PRICE WATERHOUSE, LLP
New York, New York
March 10, 1997
- 17 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
The Prudential Insurance Company of America
Newark, New Jersey
We have audited the accompanying statement of admitted assets, liabilities and
surplus--statutory basis of The Prudential Insurance Company of America as of
December 31, 1995, and the related statements of operations and changes in
surplus--statutory basis, and cash flows--statutory basis for each of the two
years in the period ended December 31, 1995. 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our report dated March 1, 1996, we expressed an opinion that the 1995 and
1994 financial statements, prepared using accounting practices prescribed and
permitted by the New Jersey Department of Insurance, presented fairly, in all
material respects, the financial position of The Prudential Insurance Company of
America as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles. As described in Note 1 to these financial statements,
pursuant to the pronouncements of the Financial Accounting Standards Board, the
1995 and 1994 financial statements of The Prudential Insurance Company of
America, prepared using accounting practices prescribed or permitted by
insurance regulators (statutory financial statements) are no longer considered
presentations in conformity with generally accepted accounting principles. The
effects on the financial statements of the differences between the statutory
basis of accounting and generally accepted accounting principles are material
and are also described in Note 1. Accordingly, our present opinion on the
presentation of the 1995 and 1994 financial statements in accordance with
generally accepted accounting principles, as presented herein, is different from
that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the third
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the admitted assets,
liabilities and surplus of the Company as of December 31, 1995, and its
operations, changes in surplus and its cash flows for each of the two years in
the period ended December 31, 1995.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the admitted assets, liabilities and surplus
of The Prudential Insurance Company of America as of December 31, 1995, and the
results of its operations, changes in surplus and its cash flows for each of the
two years in the period then ended, on the basis of accounting described in Note
1.
Also, as described in Note 1 to the financial statements, these financial
statements were prepared on an unconsolidated statutory basis of accounting,
which differs from the 1995 and 1994 financial statements prepared for general
distribution on a consolidated statutory basis of accounting, both of which
differ from generally accepted accounting principles. The financial statements
for 1995 and 1994 have been restated on an unconsolidated statutory basis of
accounting adopted in 1996 for purposes of general distribution. Further, these
financial statements differ from the previously issued unconsolidated statutory
financial statements because certain permitted financial statement presentation
practices are no longer being used.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 1, 1996, except for Note 1A,
as to which the date is March 10, 1997
- 18 -
5
<PAGE>
INDIVIDUAL VARIABLE CONTRACT ACCOUNT
VARIABLE ANNUITY CONTRACTS
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 445-4571
6
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) Financial Statements of The Prudential Individual Variable Contract
Account (Registrant) consisting of the Statements of Net Assets, as of
December 31, 1996; the Statements of Operations for the periods ended
December 31, 1996 and 1995; and the Notes relating thereto appear in
the statement of additional information (Part B of the Registration
Statement).
(2) Statutory Financial Statement of The Prudential Insurance Company of
America (Depositor) consisting of the Statements of Admitted Assets,
Liabilities and Surplus (Statutory Basis) as of December 31, 1996 and
1995; the Statements of Operations and Changes in Surplus (Statutory
Basis) and Statements of Cash Flows (Statutory Basis) for the years
ended December 31, 1996, 1995 and 1994; and the Notes relating thereto
appear in the statement of additional information (Part B of the
Registration Statement).
(b) Exhibits
(1) Resolution of the Board of Directors of The Prudential Insurance
Company of America establishing ThePrudential Individual Variable
Contract Account. (Note 2)
(2) Agreements for custody of securities and similar investments--Not
Applicable
(3) (a) Distribution Agreement between Pruco Securities Corporation
(Underwriter) and The PrudentialInsurance Company of
America (Depositor). (Note 3)
(b) Proposed form of Selected Broker Agreement between Pruco
Securities Corporation and brokers with respect to sale of the
Contracts. (Note 3)
(4) (a) Individual Variable Annuity Contract (Form WVA-83). (Note 3)
(b) Special Page One to the Contract (Form WVA-83) for N.Y. State
issues. (Note 3)
(c) Endorsement WVA2-83 to the Contract (Form WVA-83) for use in New
Jersey issues. (Note 4)
(d) Special Page Six WVA-83 to the Contract (Form WVA-83) for use in
Oklahoma issues. (Note 4)
(e) Special Page Six WVA-83 to the Contract (Form WVA-83) for use in
California issues. (Note 4)
(f) Endorsement WVA 3-83 to the Contract (Form WVA-83) for use in
Tennessee issues. (Note 5)
(g) Endorsement WVA 4-83 to the Contract (Form WVA-83 and VIP-84) for
use in Texas issues. (Note 5)
(h) Endorsement WVA 5-83 to the Contract (Form WVA-83) for use in
Texas and Pennsylvania issues. (Note 5)
(i) Endorsement WVA 6-83 to the Contract (Form WVA-83) for use in
California issues. (Note 5)
(j) Endorsement COMB 84889-83 to the Contract (Form WVA -83) for use
in the District of Columbia and in all states except New York.
(Note 5)
(k) Endorsement COMB 84890-83 to the Contract (Form WVA-83) for use
in the District of Columbia and in all states except New York.
(Note 5)
(l) Individual Variable Annuity Contract (Form VIP-84). (Note 7)
(m) Special Page One to the Contract (Form VIP-84) (Note 7)
(n) Special Page Nineteen to the Contract (Form VIP-84) for use in
N.Y. issues. (Note 6)
(o) Special Page Four to the Contract (Form VIP-84) for use in
Oklahoma issues. (Note 7)
(p) Special Page Seven to the Contract Form VIP-84) for use in
Oklahoma issues. (Note 7)
(q) Special Page Four to the Contract (Form VIP-84) for use in
California issues. (Note 7)
(r) Special Page Seven to the Contract (Form VIP-84) for use in
California issues. (Note 7)
(s) Endorsement VIP 3-84 to the Contract (Form VIP-84) for use in
California issues. (Note 6)
(t) Endorsement WVA 13-85 to the Contract (Form VIP-84) for use in
all the states so that the Contract meets Internal Revenue Code
Section 72(s) requirements for an annuity. (Note 8)
(u) Endorsement VIP 6-85 to the Contract (Form VIP-84) for use in all
the states so that the Contract meets Internal Revenue Code
Section 72(s) requirements for an annuity. (Note 8)
C-1
<PAGE>
(v) Individual Variable Annuity Contract (Form VIP-86). (Note 10)
(w) Individual Variable Annuity Contract (Form VIP-86) revised. (Note
11)
(x) Special Jacket VIP-86 MN to the VIP-86 Contract for use in
Minnesota issues. (Note 11)
(y) Special Jacket VIP-86 Y to the VIP-86 Contract for use in New
York issues. (Note 11)
(z) Special Contract Data Page 3 (VIP-86) (MIN) to the VIP-86
Contract for use in Minnesota issues. (Note 11)
(aa) Special Page 7 (VIP-86) Y to the VIP-86 Contract for use in New
York issues. (Note 11)
(bb) Special Page 7 (VIP-86) (OK) to the VIP-86 Contract for use in
Oklahoma issues. (Note 11)
(cc) Special Page 8 (VIP-86)(SC) to the VIP-86 Contract for use in
South Carolina issues. (Note 11)
(dd) Special Page 8 (VIP-86) (OK) to the VIP-86 Contract for use in
Oklahoma issues. (Note 11)
(ee) Special Page 11 (VIP-86) (WA) to the VIP-86 Contract for use in
Washington issue. (Note 11)
(ff) Special Page 11 (VIP-86) (SC) to the VIP-86 Contract for use in
South Carolina issues. (Note 11)
(gg) Special Page 11 (VIP-86) (Y) to the VIP-86 Contract for use in
New York issues. (Note 11)
(hh) Special Page 11 (VIP-86) (WI) to the VIP-86 Contract for use in
Wisconsin issues. (Note 11)
(ii) Special Page 12 (VIP-86) (SC) to the VIP-86 Contract for use in
South Carolina and Washington issues. (Note 11)
(jj) Special Page 12 (VIP-86) (Y) to the VIP-86 Contract for use in
New York issue. (Note 11)
(kk) Special Page 12 (VIP-86) (WI) to the VIP-86 Contract for use in
Wisconsin issues. (Note. 11)
(ll) Special Page 13 (VIP-86) (WI) to the VIP-86 Contract for use in
Wisconsin issues. (Note 11)
(mm) Special Page 14 (VIP-86) (WI) to the VIP-86 Contract for use in
Wisconsin issues. (Note 11)
(nn) Special Back Jacket Page 18 (VIP-86) (MN) to the VIP-86 Contract
for use in Minnesota issues. (Note 11)
(oo) Special Back Jacket Page 18 (VIP-86) (Y) to the VIP-86 Contract
for use in New York issues. (Note 11)
(pp) Special Jacket VIP-86-P to the VIP-86 Contract for use in
Pennsylvania issues. (Note 12)
(qq) Special Contract Data Page 3 (VIP-86) (MA) to the VIP-86 Contract
for use in Massachusetts issues. (Note 12)
(rr) Special Page 7 (VIP-86) (PA) to the VIP-86 Contract for use in
Pennsylvania issues. (Note 12)
(ss) Special Blank Page 13 (VIP-86) (MA) to the VIP-86 Contract for
use in Massachusetts issues. (Note 12)
(tt) Special Bank Page 17 VIP-86-P to the VIP-86 Contract for use in
Pennsylvania issues. (Note 12)
(uu) Special Back Jacket Page 18 VIP-86-P to the VIP-86 Contract for
use in Pennsylvania issues. (Note 12)
(vv) Endorsement VIP 501-86 to the VIP-86 Contract for use in all
states except Delaware, Georgia,Massachusetts, North Dakota, New
York, Oregon, Pennsylvania and Texas. (Note 12)
(ww) Endorsement COMB 84890-83 to the VIP-86 Contract for use in
Montana. (Note 12)
(xx) Endorsement Certification PLI 254-86 to the VIP-86 Contract for
use in Pennsylvania. (Note 12)
(yy) Endorsement PLI 288-88 to the VIP-86 Contract. (Note 14)
(zz) Waiver of Withdrawal Charges rider ORD 88753-92 to the VIP-86
Contract (at issue). (Note 16)
(aaa) Waiver of Withdrawal Charges rider ORD 88754-92 to the VIP-86
Contract (after issue). (Note 16)
(bbb) Spousal Continuance Rider ORD 89011-93 to the VIP contract (at
issue). (Note 17)
(ccc) Endorsement altering the Assignment provision ORD 83922-95 (Note
18)
(5) Application for Individual Variable Annuity Contract:
(a) Application Form VA 200 ED 07/83 for Individual Variable Annuity
Contract (Form WVA-83). (Note 5)
C-2
<PAGE>
(b Application Form VA 200 ED 5/84 for Individual Variable Annuity
Contract (Form VIP-84) for use byPrudential representatives.
(Note 7)
(c) Application Form VA 200B ED 5/84 for Individual Variable Annuity
Contract (Form VIP-84) for use by Prudential Securities account
executives. (Note 7)
(d) Revised Application Form VA 200 ED 5/84-Non-Qualified for
Individual Annuity Contract (Form VIP-84) for use by Prudential
representatives. (Note 8)
(e) Revised Application Form VA 200 Ed. 5/86-Non Qualified. (Note 9)
(f) Revised Application Form VA 200 Ed. 5/86-Non-Qualified (NY) for
use in New York. (Note 9)
(g) Revised Application Form VA 200 Ed. 9/86-Non-Qualified. (Note 10)
(h) Revised Application Form VA 200 Ed. 11/86-Non-Qualified. (Note
12)
(i) Application for VIP annuity contract ORD 87348-92. (Note 17)
(j) Supplement to the Application for a VIP contract ORD 87454-92.
(Note 17)
(6) (a) Charter of The Prudential Insurance Company of America, as
amended November 14, 1995. (Note 15)
(b) By-Laws of The Prudential Insurance Company of America, as
amended April 8, 1997. (Note 20)
(7) Contract of reinsurance in connection with variable annuity
contract--Not Applicable.
(8) Other material contracts performed in whole or part after the
date the registration statement is filed:
(a) Purchase Agreement between The Prudential Series Fund, Inc. and
The Prudential InsuranceCompany of America. (Note 3)
(9) Opinion of Counsel and consent to its use as to legality of the
securities being registered. (Note 21)
(10) (a) Written consent of Price Waterhouse, LLP, independent auditors.
(Note 1)
(10) (b) Written consent of Deloitte & Touche LLP, independent accountants
(Note 1)
(11) All financial statements omitted from item 23, Financial
Statements--Not Applicable.
(12) Agreements in consideration for providing initial capital between or
among Registrant, Depositor,Underwriter, or initial contract
owners--Not Applicable
(13) Schedule of Performance Computation. (Note 11)
(14) Powers of Attorney.
(a) F. Agnew, F. Becker, M. Berkowitz, J.Cullen, C. Davis, R. Enrico,
A. Gilmour, W. Gray, M. Grier,J. Hanson, C. Horner, B. Malkiel,
A. Ryan, C. Sitter, D. Staheli, R. Thomson, J. Unruh, P. Vagelos,
S. Van Ness, P. Volcker, J. Williams (Note 19)
(b) Glen H. Hiner (Note 20)
--------------
(Note 1) Filed herewith
(Note 2) Incorporated by reference to Registrant's Form N-8B-2, filed
December 15, 1982
(Note 3) Incorporated by reference to Pre-Effective Amendment No. 2 to
this Registration Statement, filed March 10, 1983.
(Note 4) Incorporated by reference to Pre-Effective Amendment No. 3 to
this Registration Statement, filed April 27, 1983.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 1
to this Registration Statement, filed December 8, 1983.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 2
to this Registration Statement, filed March 22, 1984.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 3
to this Registration Statement, filed April 27, 1984.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 4
to this Registration Statement, filed April 30, 1985.
C-3
<PAGE>
(Note 9) Incorporated by reference to Post-Effective Amendment No. 6
to this Registration Statement, filed April 30, 1986.
(Note 10) Incorporated by reference to Post-Effective amendment No. 7
to this Registration Statement, filed July 9, 1986.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 8
to this Registration Statement, filed October 23, 1986.
(Note 12) Incorporated by reference to Post-Effective Amendment No. 9
to this Registration Statement, filed April 27, 1987.
(Note 13) Incorporated by reference to Post-Effective Amendment No. 4
to Form S-6, Registration No. 33-20000, filed March 2, 1990,
on behalf of The Prudential Variable Appreciable Account.
(Note 14) Incorporated by reference to Post-Effective Amendment No. 12
to this Registration Statement filed March 6, 1989.
(Note 15) Incorporated by reference to Post-Effective Amendment No. 9
to Form S-1, RegistrationNo. 33-20083, filed April 9, 1997
on behalf of The Prudential Variable Contract Real Property
Account.
(Note 16) Incorporated by reference to Post-Effective Amendment No. 18
to this Registration Statement, filed April 28, 1993.
(Note 17) Incorporated by reference to Post-Effective Amendment No. 19
to Form S-6, RegistrationNo. 2-80897, filed April 28, 1994.
(Note 18) Incorporated by reference to Post-Effective Amendment No. 20
to Form S-6, RegistrationNo. 2-80897, filed February 27,
1995.
(Note 19) Incorporated by reference to Pre-Effective Amendment No. 1
to Form S-6, RegistrationNo. 333-01031, filed August 22,
1996, on behalf of The Prudential Variable Contract Account.
(Note 20) Incorporated by reference to Post-Effective Amendment No. 12
to Form N-4, Registration No. 33-25434, filed on or about
April 25, 1997, on behalf of The Prudential Individual
Variable Contract Account.
(Note 21) Incorporated by reference to Post-Effective Amendment No. 22
to this Registration Statement filed May 1, 1996 and to the
Rule 24f-2 filing for this Registration Statement for
fiscal year 1995 dated February 29, 1996.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Incorporated by reference to The Prudential Individual Variable Contract
Account prospectus under "Directors and Officers" contained in Part A of this
Registration Statement.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Prudential Insurance Company of America ("Prudential") is a mutual life
insurance company organizedunder the laws of New Jersey. The subsidiaries of
Prudential are listed on the Organization chart set forth on thefollowing pages.
Prudential may be deemed to control The Prudential Series Fund, Inc., a
Maryland corporation which is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, all the shares of
which are held by Prudential and the following separate accounts which are
registered as unit investment trusts under the Investment Company Act of 1940:
The Prudential Variable Appreciable Account, The Prudential Individual Variable
Contract Account (Registrant), The Prudential Qualified Individual Variable
Contract Account, The Prudential Variable Contract Account-24 (separate accounts
of Prudential); the Pruco Life PRUvider Variable Appreciable Account, the Pruco
Life Variable Universal Account, The Pruco Life Variable Insurance Account, the
Pruco Life Variable Appreciable Account, the Pruco Life Single Premium Variable
Life Account, the Pruco Life Flexible Premium Variable Annuity Account, the
Pruco Life Single Premium Variable Annuity Account (separate accounts of Pruco
Life Insurance Company ("Pruco Life"); the Pruco Life of New Jersey Variable
Insurance Account, the Pruco Life of New Jersey Variable Appreciable Account,
the Pruco Life of New Jersey Single Premium Variable Life Account, and the Pruco
Life of New Jersey Single Premium Variable Annuity Account (separate accounts of
Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey"). Pruco
Life, a corporation organized under the laws of Arizona, is a direct
wholly-owned
C-4
<PAGE>
subsidiary of Prudential. Pruco Life of New Jersey, a corporation organized
under the laws of New Jersey, is a direct wholly-owned subsidiary of Pruco Life,
and an indirect wholly-owned subsidiary of Prudential.
Prudential holds all of the shares of Prudential's Gibraltar Fund, a
Delaware corporation, in three of its separate accounts. Each of these separate
account is a unit investment trust registered under the Investment Company Act
of 1940. Prudential's Gibraltar Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940.
In addition, Prudential may also be deemed to be under common control with
The Prudential Variable Contract Account-2, The Prudential Variable Contract
Account-10, and The Prudential Variable Contract Account-11, separate accounts
of Prudential, all of which are registered as open-end, diversified, management
investment companies under the Investment Company Act of 1940.
The subsidiaries of Prudential and short descriptions of each are listed
under Item 25 of Post-Effective Amendment No. 32 to the Form N-IA Registration
Statement for The Prudential Series Fund, Inc., Registration No. 2-80896, filed
February 28, 1997, the text of which is hereby incorporated.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 25, 1997 there were 102,646 Contract owners of non-qualified
Contracts offered by the Registrant.
ITEM 28. INDEMNIFICATION
The Prudential Directors' and Officers' Liability and Corporation
Reimbursement Insurance program, purchased by Prudential from Aetna Casualty &
Surety Company, CNA Insurance Companies, Lloyds of London, Great American
Insurance Company, Reliance Insurance Company, Corporate Officers & Directors
Assurance Ltd., A.C.E. Insurance Company, Ltd., XL Insurance Company, Ltd., and
Zurich-American Insurance Company, provides reimbursement for "Loss" (as defined
in the policies) which the Company pays as indemnification to its directors or
officers resulting from any claim for any actual or alleged act, error,
misstatement, misleading statement, omission, or breach of duty by persons in
the discharge of their duties in their capacities as directors or officers of
Prudential, any of its subsidiaries, or certain investment companies affiliated
with Prudential. Coverage is also provided to the individual directors or
officers for such Loss, for which they shall not be indemnified. Loss
essentially is the legal liability on claims against a director or officer,
including adjudicated damages, settlements and reasonable and necessary legal
fees and expenses incurred in defense of adjudicatory proceedings and appeals
therefrom. Loss does not include punitive or exemplary damages or the multiplied
portion of any multiplied damage award, criminal or civil fines or penalties
imposed by law, taxes or wages, or matters which are uninsurable under the law
pursuant to which the policies are construed.
There are a number of exclusions from coverage. Among the matters excluded
are Losses arising as the result of(1) claims brought about or contributed to by
the criminal, dishonest or fraudulent acts or omissions or the willful violation
of any law by a director or officer, (2) claims based on or attributable to
directors or officers gaining personal profit or advantage to which they were
legally entitled, and (3) claims arising from actual or alleged performance of,
or failure to perform, services as, or in any capacity similar to, an investment
adviser, investment banker, underwriter, broker or dealer, as those terms are
defined in the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Advisers Act of 1940, the Investment Company Act of 1940, any rules
or regulations thereunder, or any similar federal, state or local statute, rule
or regulation.
The limit of coverage under the program for both individual and corporate
reimbursement coverage is $150,000,000. The retention for corporate
reimbursement coverage is $10,000,000 per loss.
The relevant provisions of New Jersey law permitting or requiring
indemnification, New Jersey being the state of organization of Prudential, can
be found in Section 14A:3-5 of the New Jersey Statutes Annotated. The text of
Prudential's by-law 26, which relates to indemnification of officers and
directors, is incorporated by reference to Exhibit 1.A(6)(b) of Post-Effective
Amendment No. 1 to Form S-6, Registration No. 33-61079, filed April 25, 1996, on
behalf of The Prudential Variable Appreciable Account.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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-5
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Pruco Securities Corporation also acts as principal underwriter for
the Pruco Life PRUvider Variable Appreciable Account, the Pruco Life
Variable Universal Account, the Pruco Life Variable Insurance Account,
the Pruco Life Variable Appreciable Account, the Pruco Life Single
Premium Variable Life Account, the Pruco Life Flexible Premium
Variable Annuity Account, the Pruco Life Single Premium Variable
Annuity Account, the Pruco Life of New Jersey Variable Insurance
Account, the Pruco Life Account, the Pruco Life of New Jersey Single
Premium Variable Annuity Account, The Prudential Variable Appreciable
Account, ThePrudential Qualified Individual Variable Contract Account,
the Prudential Annuity Plan Account, the Prudential Investment Plan
Account, the Prudential Annuity Plan Account-2, Prudential's Gibraltar
Fund, and The Prudential Series Fund, Inc.
(b) Incorporated by Reference to item 29(b) of Post-Effective No. 11 to
Form N-4, Registration No. 33-25434 filed April 25, 1996, on behalf of
The Prudential Individual Variable Contract Account.
(c) Not Applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books or other documents required to be maintained by Section
31(a) of the 1940 Act and the rules promulgated thereunder are maintained by the
Registrant through The Prudential Insurance Company of America, Prudential
Plaza, Newark, New Jersey 07102-3777.
ITEM 31. MANAGEMENT SERVICES
Summary of any contract not discussed in Part A or Part B of the
Registration Statement under which management-related services are provided to
the Registrant--Not applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes 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 for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertake to include either (1) 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
or (2) a postcard or similar written communication affixed too or
included in the prospectus that the applicant can remove to send for a
statement of additional information.
(c) Registrant undertakes to deliver any statement of additional
information and any financial statements required to be made available
under this Form promptly upon written or oral request.
(d) The Prudential Insurance Company of America ("Prudential") hereby
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.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that 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 include a
prospectus and has caused this Registration Statement to be signed on its behalf
by the undersigned thereunto duly authorized, and its seal hereunto affixed and
attested, all in the city of Newark and the State of New Jersey, on this
25th day of April, 1997.
SEAL THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
(Registrant)
BY: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Depositor)
Attest: /s/ THOMAS C. CASTANO By: /s/ ESTHER H. MILNES
----------------------------- ---------------------------------
THOMAS C. CASTANO ESTHER H. MILNES
ASSISTANT SECRETARY VICE PRESIDENT AND ACTUARY
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 23 to the Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE AND TITLE
- -------------------
/s/ * April 25, 1997
- -------------------------------------
ARTHUR F. RYAN
CHAIRMAN OF THE BOARD, PRESIDENT,
AND CHIEF EXECUTIVE OFFICER
/s/ * *By: /s/ THOMAS C. CASTANO
- ------------------------------------- -----------------------------
MARK B. GRIER THOMAS C. CASTANO
CHIEF FINANCIAL OFFICER (ATTORNEY-IN-FACT)
/s/ *
- -------------------------------------
FRANKLIN E. AGNEW
DIRECTOR
/s/ *
- -------------------------------------
FRANKLIN K. BECKER
DIRECTOR
/s/ *
- -------------------------------------
JAMES G. CULLEN
DIRECTOR
/s/ *
- -------------------------------------
CAROLYNE K. DAVIS
DIRECTOR
/s/ *
- -------------------------------------
ROGER A. ENRICO
DIRECTOR
C-7
<PAGE>
SIGNATURE AND TITLE
- -------------------
/s/ *
- -------------------------------------
ALLAN D. GILMOUR
DIRECTOR
/s/ * * By: /s/ THOMAS C. CASTANO
- ------------------------------------- -------------------------
WILLIAM H. GRAY, III THOMAS C. CASTANO
DIRECTOR (ATTORNEY-IN-FACT)
/s/ *
- -------------------------------------
JON F. HANSON
DIRECTOR
/s/ *
- -------------------------------------
GLEN H. HINER, JR.
DIRECTOR
/s/ *
- -------------------------------------
CONSTANCE J. HORNER
DIRECTOR
- -------------------------------------
GAYNOR N. KELLEY
DIRECTOR
/s/ *
- -------------------------------------
BURTON G. MALKIEL
DIRECTOR
- -------------------------------------
IDA F.S. SCHMERTZ
DIRECTOR
/s/ *
- -------------------------------------
CHARLES R. SITTER
DIRECTOR
/s/ *
- -------------------------------------
DONALD L. STAHELI
DIRECTOR
/s/ *
- -------------------------------------
RICHARD M. THOMSON
DIRECTOR
/s/ *
- -------------------------------------
JAMES A. UNRUH
DIRECTOR
C-8
<PAGE>
SIGNATURE AND TITLE
- -------------------
/s/ *
- -------------------------------------
ROY VAGELOS, M.D.
DIRECTOR
/s/ *
- -------------------------------------
STANLEY C. VAN NESS
DIRECTOR
/s/ *
- ------------------------------------- April 25, 1997
PAUL A. VOLCKER
DIRECTOR
/s/ * *By: /s/ THOMAS C. CASTANO
- ------------------------------------- -----------------------------
JOSEPH H. WILLIAMS THOMAS C. CASTANO
DIRECTOR (ATTORNEY-IN-FACT)
C-9
<PAGE>
<TABLE>
EXHIBIT INDEX
<S> <C>
(10)(a) WRITTEN CONSENT OF DELOITTE & TOUCHE, LLP, INDEPENDENT AUDITORS ........
(10)(b) WRITTEN CONSENT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS .......
(13) SCHEDULE OF PERFORMANCE COMPUTATIONS ...................................
</TABLE>
EXHIBIT (10)(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 23 to
Registration Statement No. 2-80897 on Form N-4 of The Prudential Individual
Variable Contract Account of The Prudential Insurance Company of America of our
report dated February 15, 1996, relating to the financial statements of The
Prudential Individual Variable Contract Account, and of our report dated March
1, 1996, except for Note 1A as to which the date is March 10, 1997, relating to
the statutory financial statements of The Prudential Insurance Company of
America in the Prospectus, which is a part of such Registration Statement, and
to the reference to us under the heading "Experts", also appearing in such
Statement of Additional Information.
/s/ DELOITTE & TOUCHE
Parsippany, New Jersey
April 25, 1997
C-16
EXHIBIT 99.(10)(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 23 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated
March 31, 1997, relating to the financial statements of Prudential
Individual Variable Contract Account, which appears 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 10,
1997, relating to the statutory financial statements of Prudential Insurance
Company of America, which appears in such Statement of Additional Information.
We also consent to the reference to us under the heading "Experts" in the
Statement of Additional Information.
PRICE WATERHOUSE, LLP
1177 Avenue of the Americas
New York, New York 10036
April 24, 1997
C-17
VIP/QVIP - MMKT SUBACCOUNT YIELD
MMKT
UNIT VALUE
Wed. 12/25/96 2.00678
Thur. 12/26/96 2.00700
Fri. 12/27/96 2.00765
Sat. 12/28/96 2.00765
Sun. 12/29/96 2.00765
Mon. 12/30/96 2.00787
Tue. 12/31/96 2.00831
--------------
YIELD 0.0704875% * (365/7) = 3.6754%
EFFECTIVE YIELD ( 1.000704875 ^(365/7))-1 = 3.7425%
STEP 1 2.00678
------- = 0.0002006980698
$9,999
$30.00
STEP 2 ------ = 0.082191780821918
365 x 7 days
-----------------
0.575342465753425
STEP 3 = 1*2 0.000115470122355
STEP 4 = 12/31 UV 2.00831
- 12/25 UV 2.00678
------------------
0.00153
STEP 5 = 4-3 0.0014145299
STEP 6 = 5/BOP UV 0.0014145299
--------------- = 0.00070487541
2.00678
STEP 7 = 6* (365/7) 0.036754
STEP 8 = 7*100 3.67542
<PAGE>
VIP/QVIP-MMKT SUBACCOUNT YIELD
MMKT
UNIT VALUE
Wed. 12/25/96 2.00678
Thur.12/26/96 2.00700
Fri. 12/27/96 2.00765
Sat. 12/28/96 2.00765
Sun. 12/29/96 2.00765
Mon. 12/30/96 2.00787
Tue. 12/31/96 2.00831
==========
<PAGE>
UVDATE COMPANY PRODUCT PORTFOLIO UNITVAL
- ------ ------- ------- --------- -------
961224 PRU VIP MMKT 2.00678
961226 PRU VIP MMKT 2.00700
961227 PRU VIP MMKT 2.00765
961230 PRU VIP MMKT 2.00787
961231 PRU VIP MMKT 2.00831
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
VIP/QVIP 31-Dec-96 SAPDU 1 TABLE 1
ASSUMING NO LOAD
1YR 5YR 10YR INCPT DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DIBOND 2.85% 6.02% 6.86% 6/83
GVTINC 0.70% 5.11% N/A 5/89
CONS 10.99% 7.87% 8.39% 6/83
FLXMGD 11.99% 9.60% 9.81% 5/83
HIYLD 9.76% 10.72% N/A 2/87
STIX 20.81% 13.17% N/A 10/87
EQINC 19.99% 13.53% N/A 2/88
EQUITY 16.81% 15.72% 13.60% 6/83
PRUJEN 12.75% N/A N/A 5/95
SMCAP 18.05% N/A N/A 5/95
GLOBAL 17.97% 11.17% N/A 5/89
NATR 29.02% 14.74% N/A 5/88
RPA 4.11% 3.72% N/A 5/88
TOTAL 175.81% 111.38% 38.66% 151.64%
- ----------------------------------------------------------------------------------------------------------------------------------
CHECK ABOVE 179.50% 114.22% 43.07% 156.70%
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
VIP/QVIP 31-Dec-96 SAPDU 1 TABLE 2
ASSUMING CHARGES
1YR 5YR 10YR INCPT DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DIBOND -3.43% 5.60% 6.86% 6/83
GVTINC -5.59% 4.68% N/A 5/89
CONS 4.77% 7.49% 8.39% 6/83
FLXMGD 5.77% 9.25% 9.81% 5/83
HIYLD 3.53% 10.39% N/A 2/87
STIX 14.66% 12.87% N/A 10/87
EQINC 13.83% 13.24% N/A 2/88
EQUITY 10.63% 15.45% 13.60% 6/83
PRUJEN 6.54% N/A N/A 5/95
SMCAP 11.88% N/A N/A 5/95
GLOBAL 11.80% 10.84% N/A 5/89
NATR 22.92% 14.47% N/A 5/88
RPA -2.16% 3.26% N/A 5/88
TOTAL 95.14% 107.54% 38.66% 145.14%
- ----------------------------------------------------------------------------------------------------------------------------------
CHECK ABOVE 92.56% 109.90% 43.07% 150.20%
</TABLE>
<TABLE>
<CAPTION>
VIP/QVIP 31-Dec-96 SAPDU 1 TABLE 3
ASSUMING NO LOAD - CUMULATIVE
1YR 5YR 10YR INCPT DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DIBOND 2.85% 33.92% 94.16% 6/83
GVTINC 0.70% 28.31% N/A 5/89
CONS 10.99% 46.05% 123.87% 6/83
FLXMGD 11.99% 58.15% 154.84% 5/83
HIYLD 9.76% 66.41% N/A 2/87
STIX 20.81% 85.63% N/A 10/87
EQINC 19.99% 88.62% N/A 2/88
EQUITY 16.81% 107.51% 257.82% 6/83
PRUJEN 12.75% N/A N/A 5/95
SMCAP 18.05% N/A N/A 5/95
GLOBAL 17.97% 69.82% N/A 5/89
NATR 29.02% 98.91% N/A 5/88
RPA 4.11% 20.02% N/A 5/88
TOTAL 175.81% 703.36% 630.69% 2160.53%
- ----------------------------------------------------------------------------------------------------------------------------------
CHECK ABOVE 92.56%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN 30/9999*1000 = $3.00
AVG POLICY SIZE 1000
VIP/QVIP DIBOND EQUITY FLXMGD CONS EQINC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 YR RATE OF RETURN
YEARS IN EXISTENCE 5.00 5.00 5.00 5.00 5.00
'91(OR INCEPT) TO '92 ROR 5.90% 12.81% 6.32% 5.67% 8.82%
'91 TO '92 ERV 1059.04 1128.06 1063.24 1056.74 1088.19
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'91 TO '92 ERV LESS ADMIN CHG 1056.04 1125.06 1060.24 1053.74 1085.19
'92(OR INCEPT) TO '93 ROR 8.83% 20.43% 14.21% 10.87% 20.84%
'92 TO '93 ERV 1149.31 1354.90 1210.92 1168.33 1311.33
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'92 TO '93 ERV LESS ADMIN CHG 1146.31 1351.90 1207.92 1165.33 1308.33
'93(OR INCEPT) TO '94 ROR -4.38% 1.56% -4.31% -2.14% 0.23%
'93 TO '94 ERV 1096.14 1372.99 1155.82 1140.38 1311.36
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'93 TO '94 ERV LESS ADMIN CHG 1093.14 1369.99 1152.82 1137.38 1308.36
'94(OR INCEPT) TO '95 ROR 19.31% 29.74% 22.66% 15.89% 20.26%
'94 TO '95 ERV 1304.18 1777.44 1414.08 1318.08 1573.49
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'94 TO '95 ERV LESS ADMIN CHG 1301.18 1774.44 1411.08 1315.08 1570.49
'95(OR INCEPT) TO '96 ROR 3.15% 17.11% 12.29% 11.29% 20.29%
'95 TO '96 ERV 1342.21 2078.07 1584.45 1463.53 1889.21
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'95 TO '96 ERV LESS ADMIN CHG 1339.21 2075.07 1581.45 1460.53 1886.21
ANNUALIZED ROR BEFORE LOAD 6.02% 15.72% 9.60% 7.87% 13.53%
AMT SUBJ TO LOAD IF + RETURN 866.08 792.49 841.85 853.95 811.38
AMT SUBJ TO LOAD IF - RETURN 1205.29 1867.56 1423.31 1314.47 1697.59
AMT SUBJ TO LOAD 866.08 792.49 841.85 853.95 811.38
5TH (OR INCEPTION) SALE CHARGE 3.00% 3.00% 3.00% 3.00% 3.00%
AMT OF LOAD 25.98 23.77 25.26 25.62 24.34
ERV LESS LOAD 1313.22 2051.29 1556.20 1434.91 1861.87
= = = = = =
ANN.5YR RET W/LOAD AND ADM CHG 5.60% 15.45% 9.25% 7.49% 13.24%
</TABLE>
<TABLE>
<CAPTION>
Date: 28-Apr-97
Filename: Z:\JOBS\97-12500\CONVERT\PQVIP496.WK4
RPA HIYLD NATR STIX GLOBAL
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 5.00 5.00 5.00 5.00 5.00
'91(OR INCEPT) TO '92 ROR -3.45% 16.14% 6.03% 5.85% -4.57%
'91 TO '92 ERV 965.53 1161.40 1060.25 1058.53 954.28
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'91 TO '92 ERV LESS ADMIN CHG 962.53 1158.40 1057.25 1055.53 951.28
'92(OR INCEPT) TO '93 ROR 4.84% 17.85% 23.67% 8.37% 41.45%
'92 TO '93 ERV 1009.09 1365.20 1307.53 1143.84 1345.55
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'92 TO '93 ERV LESS ADMIN CHG 1006.09 1362.20 1304.53 1140.83 1342.55
'93(OR INCEPT) TO '94 ROR 7.11% -3.88% -5.43% -0.19% -6.02%
'93 TO '94 ERV 1077.61 1309.41 1233.67 1138.66 1261.76
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'93 TO '94 ERV LESS ADMIN CHG 1074.61 1306.41 1230.67 1135.66 1258.76
'94(OR INCEPT) TO '95 ROR 7.52% 16.17% 25.42% 35.45% 14.51%
'94 TO '95 ERV 1155.41 1517.64 1543.51 1538.22 1441.42
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'94 TO '95 ERV LESS ADMIN CHG 1152.41 1514.64 1540.51 1535.22 1438.42
'95(OR INCEPT) TO '96 ROR 4.41% 10.06% 29.32% 21.11% 18.27%
'95 TO '96 ERV 1203.25 1667.08 1992.14 1859.30 1701.22
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
'95 TO '96 ERV LESS ADMIN CHG 1200.25 1664.08 1989.14 1856.30 1698.22
ANNUALIZED ROR BEFORE LOAD 3.72% 10.72% 14.74% 13.17% 11.17%
AMT SUBJ TO LOAD IF + RETURN 879.98 833.59 801.09 814.37 830.18
AMT SUBJ TO LOAD IF - RETURN 1080.22 1497.67 1790.23 1670.67 1528.40
AMT SUBJ TO LOAD 879.98 833.59 801.09 814.37 830.18
5TH (OR INCEPTION) SALE CHARGE 3.00% 3.00% 3.00% 3.00% 3.00%
AMT OF LOAD 26.40 25.01 24.03 24.43 24.91
ERV LESS LOAD 1173.85 1639.07 1965.11 1831.87 1673.32
= = = = = = =
ANN.5YR RET W/LOAD AND ADM CHG 3.26% 10.39% 14.47% 12.87% 10.84%
</TABLE>
GVTINC PRUJEN SMCAP
- --------------------------------------------------------------------------------
YEARS IN EXISTENCE 5.00 N/A N/A
'91(OR INCEPT) TO '92 ROR 4.58% N/A N/A
'91 TO '92 ERV 1045.85 N/A N/A
ANNUAL ADMIN CHARGE 3.00 N/A N/A
'91 TO '92 ERV LESS ADMIN CHG 1042.85 N/A N/A
'92(OR INCEPT) TO '93 ROR 11.23% N/A N/A
'92 TO '93 ERV 1159.93 N/A N/A
ANNUAL ADMIN CHARGE 3.00 N/A N/A
'92 TO '93 ERV LESS ADMIN CHG 1156.93 N/A N/A
'93(OR INCEPT) TO '94 ROR -6.29% N/A N/A
'93 TO '94 ERV 1084.11 N/A N/A
ANNUAL ADMIN CHARGE 3.00 N/A N/A
'93 TO '94 ERV LESS ADMIN CHG 1081.10 N/A N/A
'94(OR INCEPT) TO '95 ROR 18.06% N/A N/A
'94 TO '95 ERV 1276.37 N/A N/A
ANNUAL ADMIN CHARGE 3.00 N/A N/A
'94 TO '95 ERV LESS ADMIN CHG 1273.37 N/A N/A
'95(OR INCEPT) TO '96 ROR 1.00% N/A N/A
'95 TO '96 ERV 1286.15 N/A N/A
ANNUAL ADMIN CHARGE 3.00 N/A N/A
'95 TO '96 ERV LESS ADMIN CHG 1283.15 N/A N/A
ANNUALIZED ROR BEFORE LOAD 5.11% N/A N/A 114.22% W/OUT
AMT SUBJ TO LOAD IF + RETURN 871.69 N/A N/A
AMT SUBJ TO LOAD IF - RETURN 1154.83 N/A N/A
AMT SUBJ TO LOAD 871.69 N/A N/A
5TH (OR INCEPTION) SALE CHARGE 3.00% N/A N/A
AMT OF LOAD 26.15 N/A N/A
ERV LESS LOAD 1257.00 N/A N/A
= = = =
ANN.5YR RET W/LOAD AND ADM CHG 4.68% N/A N/A 109.90% WITH
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN
VIP/QVIP
10 YR RATE OF RETURN DIBOND EQUITY FLXMGD CONS EQINC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEARS IN EXISTENCE 10.00 10.00 10.00 10.00 8.87
'85 TO '86 ERV LESS ADMIN CHG 1,000.00 1,000.00 1,000.00 1,000.00 N/A
'86 TO '87 ROR -0.91% 0.45% -3.00% 0.32% N/A
'86 TO '87 ERV 990.92 1,004.50 970.01 1,003.24 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'86 TO '87 ERV LESS ADMIN CHG 987.92 1,001.50 967.01 1,000.24 N/A
'87 TO '88 ROR 6.91% 15.66% 11.50% 8.88% N/A
'87 TO '88 ERV 1,056.15 1,158.38 1,078.18 1,089.04 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'87 TO '88 ERV LESS ADMIN CHG 1,053.15 1,155.38 1,075.18 1,086.04 N/A
'88(OR INCEPT) TO '89 ROR 12.14% 28.20% 20.33% 15.61% N/A
'88 TO '89 ERV 1,181.02 1,481.16 1,293.77 1,255.51 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'88 TO '89 ERV LESS ADMIN CHG 1,178.02 1,478.16 1,290.77 1,252.51 N/A
'89(OR INCEPT) TO '90 ROR 7.03% -6.34% 0.69% 4.01% N/A
'89 TO '90 ERV 1,260.78 1,384.37 1,299.70 1,302.73 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'89 TO '90 ERV LESS ADMIN CHG 1,257.78 1,381.37 1,296.70 1,299.73 N/A
'90(OR INCEPT) TO '91 ROR 15.05% 24.51% 23.94% 17.66% N/A
'90 TO '91 ERV 1,447.14 1,720.00 1,607.16 1,529.26 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'90 TO '91 ERV LESS ADMIN CHG 1,444.14 1,717.00 1,604.16 1,526.26 N/A
'91(OR INCEPT) TO '92 ROR 5.90% 12.81% 6.32% 5.67% N/A
'91 TO '92 ERV 1,529.40 1,936.88 1,705.60 1,612.86 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'91 TO '92 ERV LESS ADMIN CHG 1,526.39 1,933.88 1,702.60 1,609.86 N/A
'92(OR INCEPT) TO '93 ROR 8.83% 20.43% 14.21% 10.87% N/A
'92 TO '93 ERV 1,661.22 2,328.95 1,944.59 1,784.93 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'92 TO '93 ERV LESS ADMIN CHG 1,658.22 2,325.95 1,941.59 1,781.93 N/A
'93(OR INCEPT) TO '94 ROR -4.38% 1.56% -4.31% -2.14% N/A
'93 TO '94 ERV 1,585.64 2,362.24 1,857.84 1,743.78 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'93 TO '94 ERV LESS ADMIN CHG 1,582.64 2,359.24 1,854.84 1,740.78 N/A
'94(OR INCEPT) TO '95 ROR 19.31% 29.74% 22.66% 15.89% N/A
'94 TO '95 ERV 1,888.18 3,060.90 2,275.20 2,017.34 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'94 TO '95 ERV LESS ADMIN CHG 1,885.18 3,057.90 2,272.20 2,014.34 N/A
'95(OR INCEPT) TO '96 ROR 3.15% 17.11% 12.29% 11.29% N/A
'95 TO '96 ERV 1,944.62 3,581.15 2,551.36 2,241.72 N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A
'95 TO '96 ERV LESS ADMIN CHG 1,941.62 3,578.15 2,548.36 2,238.72 N/A
ANNUALIZED ROR BEFORE LOAD 6.86% 13.60% 9.81% 8.39% N/A
AMT SUBJ TO LOAD IF + RETURN 805.84 642.18 745.16 776.13 N/A
AMT SUBJ TO LOAD IF - RETURN 1,747.46 3,220.34 2,293.53 2,014.85 N/A
AMT SUBJ TO LOAD 805.84 642.18 745.16 776.13 N/A
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% 0.00% 0.00% N/A
AMT OF LOAD 0.00 0.00 0.00 0.00 N/A
ERV LESS LOAD 1,941.62 3,578.15 2,548.36 2,238.72 N/A
= = = = = =
ANN.10YR RET W/LOAD AND ADM CHG 6.86% 13.60% 9.81% 8.39% N/A
</TABLE>
<TABLE>
<CAPTION>
Date: 28-Apr-97
Filename: Z:\JOBS\97-12500\CONVERT\PQVIP496.WK4
RPA HIYLD NATR STIX GLOBAL GVTINC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 8.67 9.85 8.67 9.20 7.67 7.67
'85 TO '86 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'86 TO '87 ROR N/A N/A N/A N/A N/A N/A
'86 TO '87 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'86 TO '87 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'87 TO '88 ROR N/A N/A N/A N/A N/A N/A
'87 TO '88 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'87 TO '88 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'88(OR INCEPT) TO '89 ROR N/A N/A N/A N/A N/A N/A
'88 TO '89 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'88 TO '89 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'89(OR INCEPT) TO '90 ROR N/A N/A N/A N/A N/A N/A
'89 TO '90 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'89 TO '90 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'90(OR INCEPT) TO '91 ROR N/A N/A N/A N/A N/A N/A
'90 TO '91 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'90 TO '91 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'91(OR INCEPT) TO '92 ROR N/A N/A N/A N/A N/A N/A
'91 TO '92 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'91 TO '92 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'92(OR INCEPT) TO '93 ROR N/A N/A N/A N/A N/A N/A
'92 TO '93 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'92 TO '93 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'93(OR INCEPT) TO '94 ROR N/A N/A N/A N/A N/A N/A
'93 TO '94 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'93 TO '94 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'94(OR INCEPT) TO '95 ROR N/A N/A N/A N/A N/A N/A
'94 TO '95 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'94 TO '95 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'95(OR INCEPT) TO '96 ROR N/A N/A N/A N/A N/A N/A
'95 TO '96 ERV N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A
'95 TO '96 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
ANNUALIZED ROR BEFORE LOAD N/A N/A N/A N/A N/A N/A
AMT SUBJ TO LOAD IF + RETURN N/A N/A N/A N/A N/A N/A
AMT SUBJ TO LOAD IF - RETURN N/A N/A N/A N/A N/A N/A
AMT SUBJ TO LOAD N/A N/A N/A N/A N/A N/A
10TH (OR INCEPTION) SALE CHARGE N/A N/A N/A N/A N/A N/A
AMT OF LOAD N/A N/A N/A N/A N/A N/A
ERV LESS LOAD N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
ANN.10YR RET W/LOAD AND ADM CHG N/A N/A N/A N/A N/A N/A
</TABLE>
PRUJEN SMCAP
- --------------------------------------------------------------------------------
YEARS IN EXISTENCE 1.67 1.67
'85 TO '86 ERV LESS ADMIN CHG N/A N/A
'86 TO '87 ROR N/A N/A
'86 TO '87 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'86 TO '87 ERV LESS ADMIN CHG N/A N/A
'87 TO '88 ROR N/A N/A
'87 TO '88 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'87 TO '88 ERV LESS ADMIN CHG N/A N/A
'88(OR INCEPT) TO '89 ROR N/A N/A
'88 TO '89 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'88 TO '89 ERV LESS ADMIN CHG N/A N/A
'89(OR INCEPT) TO '90 ROR N/A N/A
'89 TO '90 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'89 TO '90 ERV LESS ADMIN CHG N/A N/A
'90(OR INCEPT) TO '91 ROR N/A N/A
'90 TO '91 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'90 TO '91 ERV LESS ADMIN CHG N/A N/A
'91(OR INCEPT) TO '92 ROR N/A N/A
'91 TO '92 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'91 TO '92 ERV LESS ADMIN CHG N/A N/A
'92(OR INCEPT) TO '93 ROR N/A N/A
'92 TO '93 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'92 TO '93 ERV LESS ADMIN CHG N/A N/A
'93(OR INCEPT) TO '94 ROR N/A N/A
'93 TO '94 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'93 TO '94 ERV LESS ADMIN CHG N/A N/A
'94(OR INCEPT) TO '95 ROR N/A N/A
'94 TO '95 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'94 TO '95 ERV LESS ADMIN CHG N/A N/A
'95(OR INCEPT) TO '96 ROR N/A N/A
'95 TO '96 ERV N/A N/A
ANNUAL ADMIN CHARGE N/A N/A
'95 TO '96 ERV LESS ADMIN CHG N/A N/A
ANNUALIZED ROR BEFORE LOAD N/A N/A W/OUT 43.07%
AMT SUBJ TO LOAD IF + RETURN N/A N/A
AMT SUBJ TO LOAD IF - RETURN N/A N/A
AMT SUBJ TO LOAD N/A N/A
10TH (OR INCEPTION) SALE CHARGE N/A N/A
AMT OF LOAD N/A N/A
ERV LESS LOAD N/A N/A
- --------------------------------------------------------------------------------
ANN.10YR RET W/LOAD AND ADM CHG N/A N/A WITH 43.07%
<PAGE>
ANNUALIZED RATES OF RETURN
<TABLE>
<CAPTION>
VIP/QVIP
SINCE INCEPTION RATE OF RETURN DIBOND EQUITY FLXMGD CONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEARS IN EXISTENCE 13.57 13.57 13.60 13.58
INCEPT. TO '83 ROR 1.94% -2.08% -0.98% 1.31%
INCEPT. TO 'ERV 1019.43 979.20 990.17 1013.05
ANNUAL ADMIN CHARGE 1.69 1.71 1.79 1.74
INCEPT TO '83 ERV LESS ADMIN CHG 1017.74 977.49 988.38 1011.31
83 TO '84 ROR 11.86% 6.44% 6.53% 9.13%
INCEPT. TO '84 ERV 1138.40 1040.40 1052.87 1103.62
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
INCEPT. TO 84 ERV LESS ADMIN CHG 1135.40 1037.40 1049.87 1100.62
'84 TO '85 ROR 17.21% 31.28% 24.42% 19.64%
'84 TO '85 ERV 1330.85 1361.92 1306.28 1316.77
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'84 TO '85 ERV LESS ADMIN CHG 1327.85 1358.92 1303.28 1313.77
'85 TO '86 ROR 13.09% 13.73% 14.11% 12.81%
'85 TO '86 ERV 1501.68 1545.43 1487.12 1482.05
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'85 TO '86 ERV LESS ADMIN CHG 1498.68 1542.43 1484.12 1479.05
'86 TO '87 ROR -0.91% 0.45% -3.00% 0.32%
'86 TO '87 ERV 1485.07 1549.37 1439.61 1483.85
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'86 TO '87 ERV LESS ADMIN CHG 1482.07 1546.37 1436.61 1480.85
'87(OR INCEPT) TO '88 ROR 6.91% 15.66% 11.50% 8.88%
'87 TO '88 ERV 1584.43 1788.61 1601.77 1612.31
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'87 TO '88 ERV LESS ADMIN CHG 1581.43 1785.60 1598.77 1609.31
'88(OR INCEPT) TO '89 ROR 12.14% 28.20% 20.33% 15.61%
'88 TO '89 ERV 1773.44 2289.08 1923.80 1860.44
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'88 TO '89 ERV LESS ADMIN CHG 1770.44 2286.08 1920.80 1857.44
'89(OR INCEPT) TO 90 ROR 7.03% -6.34% 0.69% 4.01%
'89 TO '90 ERV 1894.82 2141.04 1934.10 1931.90
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'89 TO '90 ERV LESS ADMIN CHG 1,891.82 2,138.04 1,931.10 1,928.90
'90(OR INCEPT) TO '91 ROR 15.05% 24.51% 23.94% 17.66%
'90 TO '91 ERV 2,176.63 2,662.16 2,393.45 2,269.56
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'90 TO '91 ERV LESS ADMIN CHG 2,173.63 2,659.16 2,390.45 2,266.56
'91(OR INCEPT) TO '92 ROR 5.90% 12.81% 6.32% 5.67%
'91 TO '92 ERV 2,301.95 2,999.69 2,541.61 2,395.16
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'91 TO '92 ERV LESS ADMIN CHG 2,298.95 2,996.69 2,538.61 2,392.16
'92(OR INCEPT) TO '93 ROR 8.83% 20.43% 14.21% 10.87%
'92 TO '93 ERV 2,502.01 3,608.88 2,899.41 2,652.31
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'92 TO '93 ERV LESS ADMIN CHG 2,499.01 3,605.88 2,896.41 2,649.30
'93(OR INCEPT) TO '94 ROR -4.38% 1.56% -4.31% -2.14%
'93 TO '94 ERV 2,389.64 3,662.14 2,771.49 2,592.57
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'93 TO '94 ERV LESS ADMIN CHG 2,386.64 3,659.14 2,768.49 2,589.57
'94(OR INCEPT) TO '95 ROR 19.31% 29.74% 22.66% 15.89%
'94 TO '95 ERV 2,847.39 4,747.40 3,395.90 3,000.99
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'94 TO '95 ERV LESS ADMIN CHG 2,844.39 4,744.40 3,392.90 2,997.99
'95(OR INCEPT) TO '96 ROR 3.15% 17.11% 12.29% 11.29%
'95 TO '96 ERV 2,934.08 5,556.24 3,809.76 3,336.41
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'95 TO '96 ERV LESS ADMIN CHG 2,931.08 5,553.24 3,806.76 3,333.41
ANNUALIZED ROR BEFORE LOAD 8.25% 13.46% 10.33% 9.27%
AMT SUBJ TO LOAD IF + RETURN 706.89 444.68 619.32 666.66
AMT SUBJ TO LOAD IF - RETURN 2,637.97 4,997.91 3,426.08 3,000.07
AMT SUBJ TO LOAD 706.89 444.68 619.32 666.66
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% 0.00% 0.00%
AMT OF LOAD 0.00 0.00 0.00 0.00
ERV LESS LOAD 2,931.08 5,553.24 3,806.76 3,333.41
= = = = =
ANN. RET W/LOAD AND ADM CHG 8.25% 13.46% 10.33% 9.27%
</TABLE>
<PAGE>
Date: 28-Apr-97
Filename: Z:\JOBS\97-12500\CONVERT\PQVIP496.WK4
<TABLE>
<CAPTION>
EQINC RPA HIYLD NATR STIX
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8.87 8.67 9.85 8.67 9.20
YEARS IN EXISTENCE N/A N/A N/A N/A N/A
INCEPT. TO '83 ROR N/A N/A N/A N/A N/A
INCEPT. TO 'ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A
INCEPT TO '83 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A
83 TO '84 ROR N/A N/A N/A N/A N/A
INCEPT. TO '84 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A
INCEPT. TO 84 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A
'84 TO '85 ROR N/A N/A N/A N/A N/A
'84 TO '85 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A
'84 TO '85 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A
'85 TO '86 ROR N/A N/A N/A N/A N/A
'85 TO '86 ERV N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A
'85 TO '86 ERV LESS ADMIN CHG N/A N/A -5.87% N/A 7.10%
'86 TO '87 ROR N/A N/A 941.26 N/A 1070.96
'86 TO '87 ERV N/A N/A 2.56 N/A 0.60
ANNUAL ADMIN CHARGE N/A N/A 938.70 N/A 1070.36
'86 TO '87 ERV LESS ADMIN CHG 10.17% 4.34% 11.83% 5.10% 14.08%
'87(OR INCEPT) TO '88 ROR 1101.70 1043.39 1049.75 1051.03 1221.02
'87 TO '88 ERV 2.60 2.00 3.00 2.00 3.00
ANNUAL ADMIN CHARGE 1099.11 1041.39 1046.75 1049.03 1218.02
'87 TO '88 ERV LESS ADMIN CHG 21.21% 2.00% -3.20% 34.03% 29.38%
'88(OR INCEPT) TO '89 ROR 1332.25 1062.27 1013.20 1406.01 1575.88
'88 TO '89 ERV 3.00 3.00 3.00 3.00 3.00
ANNUAL ADMIN CHARGE 1329.25 1059.27 1010.20 1403.01 1572.88
'88 TO '89 ERV LESS ADMIN CHG -4.88% 4.38% -12.89% -6.88% -4.78%
'89(OR INCEPT) TO 90 ROR 1264.42 1105.69 879.97 1306.46 1497.63
'89 TO '90 ERV 3.00 3.00 3.00 3.00 3.00
ANNUAL ADMIN CHARGE 1,261.42 1,102.69 876.97 1,303.46 1,494.63
'89 TO '90 ERV LESS ADMIN CHG 26.00% -0.55% 37.53% 8.99% 28.18%
'90(OR INCEPT) TO '91 ROR 1,589.33 1,096.59 1,206.07 1,420.64 1,915.86
'90 TO '91 ERV 3.00 3.00 3.00 3.00 3.00
ANNUAL ADMIN CHARGE 1,586.33 1,093.58 1,203.07 1,417.64 1,912.86
'90 TO '91 ERV LESS ADMIN CHG 8.82% -3.45% 16.14% 6.03% 5.85%
'91(OR INCEPT) TO '92 ROR 1,726.22 1,055.89 1,397.24 1,503.05 2,024.83
'91 TO '92 ERV 3.00 3.00 3.00 3.00 3.00
ANNUAL ADMIN CHARGE 1,723.22 1,052.89 1,394.24 1,500.05 2,021.83
'91 TO '92 ERV LESS ADMIN CHG 20.84% 4.84% 17.85% 23.67% 8.37%
'92(OR INCEPT) TO '93 ROR 2,082.32 1,103.82 1,643.15 1,855.15 2,190.97
'92 TO '93 ERV 3.00 3.00 3.00 3.00 3.00
ANNUAL ADMIN CHARGE 2,079.32 1,100.82 1,640.15 1,852.15 2,187.97
'92 TO '93 ERV LESS ADMIN CHG 0.23% 7.11% -3.88% -5.43% -0.19%
'93(OR INCEPT) TO '94 ROR 2,084.13 1,179.08 1,576.59 1,751.55 2,183.80
'93 TO '94 ERV 3.00 3.00 3.00 3.00 3.00
ANNUAL ADMIN CHARGE 2,081.13 1,176.08 1,573.59 1,748.55 2,180.80
'93 TO '94 ERV LESS ADMIN CHG 20.26% 7.52% 16.17% 25.42% 35.45%
'94(OR INCEPT) TO '95 ROR 2,502.86 1,264.50 1,828.01 2,193.03 2,953.83
'94 TO '95 ERV 3.00 3.00 3.00 3.00 3.00
ANNUAL ADMIN CHARGE 2,499.86 1,261.50 1,825.01 2,190.03 2,950.83
'94 TO '95 ERV LESS ADMIN CHG 20.29% 4.41% 10.06% 29.32% 21.11%
'95(OR INCEPT) TO '96 ROR 3,007.20 1,317.15 2,008.69 2,832.09 3,573.74
'95 TO '96 ERV 3.00 3.00 3.00 3.00 3.00
ANNUAL ADMIN CHARGE 3,004.20 1,314.15 2,005.69 2,829.09 3,570.74
'95 TO '96 ERV LESS ADMIN CHG
13.21% 3.20% 7.32% 12.75% 14.83%
ANNUALIZED ROR BEFORE LOAD
699.58 868.58 799.43 717.09 642.93
AMT SUBJ TO LOAD IF + RETURN 2,703.78 1,182.74 1,805.12 2,546.18 3,213.67
AMT SUBJ TO LOAD IF - RETURN 699.58 868.58 799.43 717.09 642.93
AMT SUBJ TO LOAD 0.00% 0.00% 0.00% 0.00% 0.00%
10TH (OR INCEPTION) SALE CHARGE 0.00 0.00 0.00 0.00 0.00
AMT OF LOAD 3,004.20 1,314.15 2,005.69 2,829.09 3,570.74
ERV LESS LOAD 13.21% 3.20% 7.32% 12.75% 14.83%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANN. RET W/LOAD AND ADM CHG
<TABLE>
<CAPTION>
GLOBAL GVTINC PRUJEN SMCAP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEARS IN EXISTENCE 7.67 7.67 1.67 1.67
INCEPT. TO '83 ROR N/A N/A N/A N/A
INCEPT. TO 'ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
INCEPT TO '83 ERV LESS ADMIN CHG N/A N/A N/A N/A
83 TO '84 ROR N/A N/A N/A N/A
INCEPT. TO '84 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
INCEPT. TO 84 ERV LESS ADMIN CHG N/A N/A N/A N/A
'84 TO '85 ROR N/A N/A N/A N/A
'84 TO '85 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'84 TO '85 ERV LESS ADMIN CHG N/A N/A N/A N/A
'85 TO '86 ROR N/A N/A N/A N/A
'85 TO '86 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'85 TO '86 ERV LESS ADMIN CHG N/A N/A N/A N/A
'86 TO '87 ROR N/A N/A N/A N/A
'86 TO '87 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'86 TO '87 ERV LESS ADMIN CHG N/A N/A N/A N/A
'87(OR INCEPT) TO '88 ROR N/A N/A N/A N/A
'87 TO '88 ERV N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A
'87 TO '88 ERV LESS ADMIN CHG N/A N/A N/A N/A
'88(OR INCEPT) TO '89 ROR 10.23% 10.72% N/A N/A
'88 TO '89 ERV 1102.34 1107.18 N/A N/A
ANNUAL ADMIN CHARGE 2.01 2.01 N/A N/A
'88 TO '89 ERV LESS ADMIN CHG 1100.33 1105.18 N/A N/A
'89(OR INCEPT) TO 90 ROR -13.95% 5.06% N/A N/A
'89 TO '90 ERV 946.87 1161.06 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A
'89 TO '90 ERV LESS ADMIN CHG 943.87 1,158.06 N/A N/A
'90(OR INCEPT) TO '91 ROR 10.07% 14.73% N/A N/A
'90 TO '91 ERV 1,038.91 1,328.66 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A
'90 TO '91 ERV LESS ADMIN CHG 1,035.91 1,325.66 N/A N/A
'91(OR INCEPT) TO '92 ROR -4.57% 4.58% N/A N/A
'91 TO '92 ERV 988.55 1,386.44 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A
'91 TO '92 ERV LESS ADMIN CHG 985.55 1,383.44 N/A N/A
'92(OR INCEPT) TO '93 ROR 41.45% 11.23% N/A N/A
'92 TO '93 ERV 1,394.03 1,538.76 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A
'92 TO '93 ERV LESS ADMIN CHG 1,391.03 1,535.76 N/A N/A
'93(OR INCEPT) TO '94 ROR -6.02% -6.29% N/A N/A
'93 TO '94 ERV 1,307.32 1,439.09 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A
'93 TO '94 ERV LESS ADMIN CHG 1,304.32 1,436.09 N/A N/A
'94(OR INCEPT) TO '95 ROR 14.51% 18.06% 23.43% 18.78%
'94 TO '95 ERV 1,493.58 1,695.47 1234.32 1187.84
ANNUAL ADMIN CHARGE 3.00 3.00 2.01 2.01
'94 TO '95 ERV LESS ADMIN CHG 1,490.58 1,692.47 1,232.32 1,185.83
'95(OR INCEPT) TO '96 ROR 18.27% 1.00% 13.05% 18.35%
'95 TO '96 ERV 1,762.92 1,709.46 1,393.14 1,403.45
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00
'95 TO '96 ERV LESS ADMIN CHG 1,759.92 1,706.46 1,390.14 1,400.45
ANNUALIZED ROR BEFORE LOAD 7.65% 7.22% 21.80% 22.34 W/OUT 156.70%
AMT SUBJ TO LOAD IF + RETURN 824.01 829.35 860.99 859.96
AMT SUBJ TO LOAD IF - RETURN 1,583.93 1,535.81 1,251.13 1,260.40
AMT SUBJ TO LOAD 824.01 829.35 860.99 859.96
10TH (OR INCEPTION) SALE CHARGE 1.00% 1.00% 7.00% 7.00%
AMT OF LOAD 8.24 8.29 60.27 60.20
ERV LESS LOAD 1,751.68 1,698.16 1,329.87 1,340.25
= = = = =
ANN. RET W/LOAD AND ADM CHG 7.58% 7.15% 18.61% 19.17 150.20%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
VIP/QVIP 31-Dec-96 SAPDU 1 TABLE 3
ASSUMING NO LOAD CUMULATIVE
- ------------------------------------------------------------------------------------------------------------------------------------
A B C D E F G H
SINCE (A/1000)-1 (B/1000)-1 (C/1000)-1 (D/1000)-1
INCPT DATE 1YR 5YR 10YR% INCEPTION 1YR% 5YR% 10YR% SINCE INCPT.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DIBOND 6/83 1,028.53 1,339.21 1,941.62 2,931.08 2.85% 33.92% 94.16% 193.11%
GVTINC 5/89 1,007.04 1,283.15 N/A 1,706.46 0.70% 28.31% N/A 70.65%
CONS 6/83 1,109.88 1,460.53 2,238.72 3,333.41 10.99% 46.05% 123.87% 233.34%
FLXMGD 5/83 1,119.86 1,581.45 2,548.36 3,806.76 11.99% 58.15% 154.84% 280.68%
HIYLD 2/87 1,097.64 1,664.08 N/A 2,005.69 9.76% 66.41% N/A 100.57%
STIX 10/87 1,208.10 1,856.30 N/A 3,570.74 20.81% 85.63% N/A 257.07%
EQINC 2/88 1,199.95 1,886.21 N/A 3,004.20 19.99% 88.62% N/A 200.42%
EQUITY 6/83 1,168.12 2,075.07 3,578.15 5,553.24 16.81% 107.51% 257.82% 455.32%
PRUJEN 5/95 1,127.51 N/A N/A 1,390.14 12.75% N/A N/A 39.01%
SMCAP 5/95 1,180.51 N/A N/A 1,400.45 18.05% N/A N/A 40.04%
GLOBAL 5/89 1,179.70 1,698.22 N/A 1,759.92 17.97% 69.82% N/A 75.99%
NATR 5/88 1,290.17 1,989.14 N/A 2,829.09 29.02% 98.91% N/A 182.91%
RPA 5/88 1,041.11 1,200.25 N/A 1,314.15 4.11% 20.02% N/A 31.42%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN
AVG POLICY SIZE 1000 30/9999*1000 = $3.00 ANNUAL CHG
VIP/QVIP DIBOND EQUITY FLXMGD CONS EQINC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR % OF RETURN 3.15% 17.11% 12.29% 11.29% 20.29%
ERV(ENDING REDEEMABLE VALUE) 1031.53 1171.12 1122.86 1112.88 1202.95
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
ERV LESS ADMIN CHARGE 1028.53 1168.12 1119.86 1109.88 1199.95
ROR BEFORE LOAD 2.85% 16.81% 11.99% 10.99% 19.99%
AMT SUBJ TO LOAD IF + RETURN 897.15 883.19 888.01 889.01 880.01
AMT SUBJ TO LOAD IF - RETURN 925.68 1051.30 1007.88 998.89 1079.95
AMT SUBJ TO LOAD 897.15 883.19 888.01 889.01 880.01
1ST YEAR SALE CHARGE 7.00% 7.00% 7.00% 7.00% 7.00%
AMT OF LOAD 62.80 61.82 62.16 62.23 61.60
ERV LESS ADMIN CHG & LOAD 965.73 1106.29 1057.70 1047.65 1138.35
- ------------------------------------------------------------------------------------------------------------------------------------
RETURN W/SALES LOAD AND ADM CHG -3.43% 10.63% 5.77% 4.77% 13.83%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RPA HIYLD NATR STIX GLOBAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR % OF RETURN 4.41% 10.06% 29.32% 21.11% 18.27%
ERV(ENDING REDEEMABLE VALUE) 1044.11 1100.65 1293.17 1211.10 1182.71
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00
ERV LESS ADMIN CHARGE 1041.11 1097.64 1290.17 1208.10 1179.70
ROR BEFORE LOAD 4.11% 9.76% 29.02% 20.81% 17.97%
AMT SUBJ TO LOAD IF + RETURN 895.89 890.24 870.98 879.19 882.03
AMT SUBJ TO LOAD IF - RETURN 937.00 987.88 1161.15 1087.29 1061.73
AMT SUBJ TO LOAD 895.89 890.24 870.98 879.19 882.03
1ST YEAR SALE CHARGE 7.00% 7.00% 7.00% 7.00% 7.00%
AMT OF LOAD 62.71 62.32 60.97 61.54 61.74
ERV LESS ADMIN CHG & LOAD 978.40 1035.33 1229.20 1146.55 1117.96
- ------------------------------------------------------------------------------------------------------------------------------------
-2.16% 3.53% 22.92% 14.66% 11.80%
</TABLE>
<TABLE>
<CAPTION>
GVTINC PRUJEN SMCAP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR % OF RETURN 1.00% 13.05% 18.35%
ERV(ENDING REDEEMABLE VALUE) 1010.04 1130.51 1183.51
ANNUAL ADMIN CHARGE 3.00 3.00 3.00
ERV LESS ADMIN CHARGE 1007.04 1127.51 1180.51
ROR BEFORE LOAD 0.70% 12.75% 18.05% 179.50 % W/OUT
AMT SUBJ TO LOAD IF + RETURN 899.30 887.25 881.95
AMT SUBJ TO LOAD IF - RETURN 906.33 1014.76 1062.46
AMT SUBJ TO LOAD 899.30 887.25 881.95
1ST YEAR SALE CHARGE 7.00% 7.00% 7.00%
AMT OF LOAD 62.95 62.11 61.74
ERV LESS ADMIN CHG & LOAD 944.09 1065.40 1118.77
-5.59% 6.54% 11.88% 92.56% WITH
</TABLE>
C-18
