AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1999
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.25 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 30 [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)
751 BROAD STREET
NEWARK, NEW JERSEY 07102-3777
(888) PRU-2888
(Address and telephone number of principal executive offices)
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THOMAS C. CASTANO
ASSISTANT SECRETARY
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
751 BROAD STREET
NEWARK, NEW JERSEY 07102-3777
(Name and address of agent for service)
Copies to:
LEE D. AUGSBURGER CHRISTOPHER E. PALMER
ASSISTANT GENERAL COUNSEL SHEA & GARDNER
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA 1800 MASSACHUSETTS AVENUE, N.W.
751 BROAD STREET WASHINGTON, D.C. 20036
NEWARK, NEW JERSEY 07102-3777
It is proposed that this filing will become effective (check appropriate space)
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on April 30, 1999 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.
Title of Securities Being Registered:
Interests in Individual Variable Annuity Contracts
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<PAGE>
VARIABLE
INVESTMENT
PLAN
THIS PROSPECTUS DESCRIBES AN INDIVIDUAL VARIABLE ANNUITY CONTRACT OFFERED BY THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA.
The Variable Investment Plan offers a wide variety of investment choices,
including a fixed interest-rate option, a real estate variable investment option
and 13 variable investment options that invest in the following mutual fund
portfolios managed by Prudential:
CONSERVATIVE BALANCED
PORTFOLIO
DIVERSIFIED BOND PORTFOLIO
EQUITY INCOME PORTFOLIO
EQUITY PORTFOLIO
FLEXIBLE MANAGED PORTFOLIO
GLOBAL PORTFOLIO
GOVERNMENT INCOME PORTFOLIO
HIGH YIELD BOND PORTFOLIO
MONEY MARKET PORTFOLIO
NATURAL RESOURCES PORTFOLIO
PRUDENTIAL JENNISON PORTFOLIO
SMALL CAPITALIZATION STOCK PORTFOLIO
STOCK INDEX PORTFOLIO
MAY 1, 1999
Please read this prospectus before purchasing a Variable Investment Plan
contract and keep it for future reference. Current prospectuses for each of the
underlying mutual fund portfolios and the real estate investment option
accompany this prospectus. These prospectuses contain important information
about these investment options. Please read these prospectuses and keep them for
reference.
To learn more about the Variable Investment Plan, you can request a copy of the
Statement of Additional Information (SAI) dated May 1, 1999. The SAI has been
filed with the Securities and Exchange Commission (SEC) and is legally a part of
this prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains
the Variable Investment Plan SAI, material incorporated by reference, and other
information regarding registrants that file electronically with the SEC. The
Table of Contents of the SAI is on Page 21 of this prospectus. For a free copy
of the SAI, call us at: (888) PRU-2888 or write to us at:
The Prudential Insurance Company of America
751 Broad Street
Newark, New Jersey 07102-3777
Prudential Annuity Service Center
P.O. Box 14215
New Brunswick, New Jersey 08906
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS THE
SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL
OFFENSE TO STATE OTHERWISE.
INVESTMENT IN A VARIABLE ANNUITY IS SUBJECT TO RISK, INCLUDING THE POSSIBLE LOSS
OF YOUR MONEY. AN INVESTMENT IN THE VARIABLE INVESTMENT PLAN IS NOT A BANK
DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
[PRUDENTIAL LOGO]
<PAGE>
VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
TABLE OF CONTENTS
CAPTION PAGE
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GLOSSARY .............................. ii
SUMMARY ................................ 1
SUMMARY OF CONTRACT EXPENSES ........... 3
EXPENSE EXAMPLES ....................... 4
1. WHAT IS THE VARIABLE INVESTMENT
PLAN VARIABLE ANNUITY? ............ 8
Beneficiary.......................... 8
Death Benefit........................ 8
Short Term Cancellation Right or
"Free Look" ....................... 9
Other Contracts...................... 9
2. WHAT INVESTMENT OPTIONS
CAN I CHOOSE?........................ 9
Variable Investment Options ......... 9
Fixed Interest-Rate Option.......... 10
Transfers Among Options ............ 10
Dollar Cost Averaging .............. 10
Voting Rights ...................... 11
Substitution ....................... 11
Other Changes....................... 11
3. WHAT KIND OF PAYMENTS WILL I RECEIVE
DURING THE INCOME PHASE?
(ANNUITIZATION).................... 11
Payment Provisions ................. 11
Option 1: Life Annuity with 120
Payments (10 Years) Certain....... 12
Option 2: Interest Payment Option .. 12
Option 3: Other Annuity Options .... 12
4. WHAT IS THE 1% BONUS?............... 12
5. HOW CAN I PURCHASE A VARIABLE INVESTMENT
PLAN VARIABLE ANNUITY CONTRACT?... 12
Purchase Payments .................. 12
Allocation of Purchase Payments .... 12
Calculating Contract Value ......... 13
CAPTION PAGE
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6. WHAT ARE THE EXPENSES ASSOCIATED WITH
THE VARIABLE INVESTMENT PLAN
VARIABLE ANNUITY CONTRACT?.......... 13
Insurance Charges .................. 13
Annual Contract Fee................. 13
Withdrawal Charge .................. 14
Bonus Recapture..................... 14
Critical Care Access ............... 14
Premium Taxes ...................... 14
Company Taxes ...................... 14
7. HOW CAN I ACCESS MY MONEY? ......... 15
Automated Withdrawals .............. 15
Suspension of Payments or Transfers 15
8. WHAT ARE THE TAX CONSIDERATIONS
ASSOCIATED WITH THE VARIABLE INVESTMENT
PLAN VARIABLE ANNUITY CONTRACT?..... 15
Taxes Payable by You................ 16
Taxes on Annuity Payments........... 16
Penalty Taxes on Withdrawals and
Annuity Payments.................. 16
Taxes Payable by Beneficiaries...... 16
Withholding of Tax from
Distributions..................... 17
Annuity Qualification............... 17
Changes in the Contract............. 17
Additional Information.............. 17
Taxes Paid by Prudential............ 17
9. OTHER INFORMATION .................. 18
The Prudential Insurance Company
of America........................ 18
The Separate Account ............... 18
The Real Property Account........... 18
Sale of the Contract and Distributor 18
Assignment ......................... 19
Litigation.......................... 19
Year 2000 Compliance................ 20
Financial Statements................ 21
Statement of Additional Information. 21
Accumulation Unit Values ........... 22
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
GLOSSARY
We have tried to make this prospectus as easy to read and understand as
possible. By the nature of the contract, however, certain technical words or
terms are unavoidable. We have identified the following as some of these words
or terms.
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ACCUMULATION PHASE. The period that begins with the contract date (see below
definition) and ends when you start receiving income payments or earlier if the
contract is terminated through a full withdrawal or payment of a death benefit.
ANNUITANT. The person whose life determines how long the contract lasts and the
amount of income payments that will be paid.
ANNUITY DATE. The date when income payments are scheduled to begin.
BONUS. The additional 1% of your purchase payments that we add to the value of
your contract. This amount is based on the purchase payments you make during the
first three years you own the contract. Payment of the bonus amount may be
limited to $1,000 each contract year. This amount is referred to in your
contract as an "additional amount."
BENEFICIARY. The person(s) or entity you have chosen to receive a death benefit.
CASH VALUE. This is the total value of your contract amount minus any applicable
charges or fees.
CONTRACT DATE. The date we receive your initial purchase payment and all
necessary paperwork in good order in the Prudential Annuity Service Center.
Contract anniversaries are measured from the contract date. A contract year
begins on the contract date or on a contract anniversary.
CONTRACTOWNER, OWNER, OR YOU. The person entitled to the ownership rights under
the contract.
CONTRACT VALUE. The total value of the amounts in a contract allocated to
the variable investment options and the fixed interest rate option as of a
particular date. This amount is referred to in your contract as the
"contract fund."
DEATH BENEFIT. If the annuitant dies, the designated person(s), that is the
beneficiary, will receive the total value of the contract , reduced
proportionately by withdrawals, or, depending on the age of the annuitant, the
total amount invested in the contract, whichever is greater.
FIXED INTEREST-RATE OPTION. An investment option that offers a fixed-rate of
interest for a one year period.
INCOME OPTIONS. Options under the contract that define the frequency and
duration of income payments. In your contract, they are referred to as payout or
annuity options.
MUTUAL FUND INVESTMENT OPTION. When you choose a mutual fund investment option,
we purchase shares of the mutual fund portfolio associated with that option. We
hold these shares in the Separate Account. The division of the Separate Account
is referred to in your contract as a subaccount.
PURCHASE PAYMENTS. The amount of money you pay us to purchase the contract.
Generally, you may make additional purchase payments at any time during the
accumulation phase.
PRUDENTIAL ANNUITY SERVICE CENTER. P.O. Box 14215, New Brunswick, New Jersey,
08906. The phone number is 1-888-PRU-2888.
REAL PROPERTY ACCOUNT. One of your variable investment options. It is a separate
account established by Prudential to invest, through a partnership, in
income-producing real property.
SEPARATE ACCOUNT. Purchase payments allocated to the mutual fund investment
options are held by Prudential in a separate account called the Prudential
Individual Variable Contract Account. The separate account is set apart from all
of the general assets of Prudential.
TAX DEFERRAL. This is a way to increase your assets without currently being
taxed. You do not generally pay taxes on your contract earnings until you take
money out of your contract.
VARIABLE INVESTMENT OPTIONS. The mutual fund investment options and the Real
Property Account.
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<PAGE>
VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
SUMMARY
FOR A MORE COMPLETE DISCUSSION OF THE FOLLOWING TOPICS, SEE THE CORRESPONDING
SECTION IN THE PROSPECTUS.
1. WHAT IS THE VARIABLE INVESTMENT PLAN VARIABLE ANNUITY?
This variable annuity contract, offered by Prudential, is a contract
between you, as the owner, and us. The contract allows you to invest on a
tax-deferred basis in one or more of 13 mutual fund investment options which are
associated with portfolios of the Prudential Series Fund, Inc. ("Series Fund").
There is another variable investment option called the Variable Contract Real
Property Account ("Real Property Account") and there is also a fixed
interest-rate option. The contract is intended for retirement savings or other
long-term investment purposes and provides for a death benefit and guaranteed
income options.
The variable investment options are designed to offer the opportunity for a
better return than the fixed interest-rate account. However, this is NOT
guaranteed. It is possible, due to market changes, that your investments may
decrease in value.
The fixed interest-rate option offers an interest rate that is guaranteed
to be not less than 3.0% per year. While your money is in the fixed account,
both the interest amount that your money will earn and your principal amount is
guaranteed by us.
You can invest your money in any or all of the variable investment options
and the fixed interest-rate option. You are always allowed at least four
transfers each contract year among the mutual fund investment options, without a
charge. There are certain restrictions on transfers involving the fixed
interest-rate option and the Real Property Account.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
grow on a tax-deferred basis and are taxed as income when you make a withdrawal.
The income phase starts when you choose to begin receiving regular payments from
your contract. The amount of money you are able to accumulate in your contract
during the accumulation phase will help determine the amount of payments you
will receive during the income phase. Other factors will affect the amount of
your payments such as age and the payout option you selected.
FREE LOOK. If you change your mind about owning the Variable Investment
Plan contract, YOU MAY CANCEL YOUR CONTRACT WITHIN 10 DAYS AFTER RECEIVING IT
(or whatever time period is required in the state where the contract was
issued).
OTHER CONTRACTS. This prospectus describes the Variable Investment Plan
contract which is currently offered for sale. There are earlier versions of the
contract which are no longer being offered. These earlier versions have certain
different features that are referred to throughout this prospectus. Owners of
previously offered contracts can find further information in the Statement of
Additional Information.
2. WHAT INVESTMENT OPTIONS CAN I CHOOSE?
You can invest your money in any or all of the variable investment options
that are described in the prospectuses located at the end of this prospectus:
THE PRUDENTIAL SERIES FUND
The Prudential Series Fund, Inc. is a mutual fund made up of the following
portfolios. You may choose one or more of these portfolios as variable
investment options.
Conservative Balanced Portfolio
Diversified Bond Portfolio
Equity Income Portfolio
Equity Portfolio
Flexible Managed Portfolio
Global Portfolio
Government Income Portfolio
High Yield Bond Portfolio
Money Market Portfolio
Natural Resources Portfolio
Prudential Jennison Portfolio
Small Capitalization Stock Portfolio
Stock Index Portfolio
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<PAGE>
VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
The Real Property Account is a separate account established by Prudential
which, through a partnership, invests primarily in income-producing real
property.
Depending upon market conditions, you may earn or lose money in any of
these variable investment options. The value of your contract will fluctuate
depending upon the investment performance of the Series Fund portfolios and the
Real Property Account. Performance information for the variable investment
options is provided in the Accumulation Unit Values chart on page 22 and in the
Statement of Additional Information (SAI). Past performance is not a guarantee
of future results.
You can also put your money into the fixed interest-rate option.
3. WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION)
If you want to receive regular income from your annuity, you can choose one
of several options, including guaranteed payments for the annuitant's lifetime.
Once you begin receiving regular payments, you may not be able to change your
payment plan without receiving our prior consent.
4. WHAT IS THE 1% BONUS?
We will add to your account an additional 1% of your purchase payments
during the first three years of your contract. Payment of the bonus amount may
be limited to $1,000 each contract year. After three contract years the
additional 1% may be added at our discretion. Also, the 1% will be recaptured if
you make a withdrawal within eight contract years after the purchase payment.
5. HOW CAN I PURCHASE A VARIABLE INVESTMENT PLAN ANNUITY CONTRACT?
You can purchase this contract, under most circumstances, with a $1,000
initial purchase payment. You can add $100 or more at any time during the
accumulation phase of the contract. Your financial professional can help you
fill out the proper forms.
6. WHAT ARE THE EXPENSES ASSOCIATED WITH THE VARIABLE INVESTMENT PLAN
CONTRACT?
The contract has insurance features and investment features, and there are
costs related to each. Each year we deduct a $30 contract maintenance charge if
your contract value is less than $10,000 on the contract anniversary. For
insurance and administrative costs, we also deduct an annual charge of 1.20% of
the average daily value of all assets allocated to the variable investment
options. This charge is not assessed against amounts allocated to the fixed
interest-rate investment option.
There are a few states/jurisdictions that assess a premium tax when you
begin receiving regular income payments from your annuity. In those states, we
will charge your contract for the required premium tax charge which can
currently range up to 5%.
The mutual fund investment options also have their own expenses that apply
to your investment. These annual expenses currently range from 0.37% to 0.86% of
the average daily value of the mutual fund portfolio. The expenses of the Real
Property Account investment option are substantially higher. See the Real
Property Account prospectus located at the back of this prospectus for further
information.
7. HOW CAN I ACCESS MY MONEY?
You may take money out at any time during the accumulation phase. Each
contract year you may withdraw your earnings plus up to 10% of your contract
value (calculated as of the date of the first withdrawal made in that contract
year), without charge. Withdrawals in excess of earnings plus 10% of your
contract value may be subject to a withdrawal charge. This charge initially is
8% but decreases 1% each contract year, from the date that each purchase payment
was made. After the eighth contract year, there is no charge for a withdrawal
for that purchase payment. You may, however, be subject to income tax and a tax
penalty if you make an early withdrawal.
2
<PAGE>
VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
8. WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE VARIABLE INVESTMENT PLAN
CONTRACT?
Your earnings are not generally taxed until withdrawn. If you take money
out during the accumulation phase, earnings are withdrawn first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty on the earnings in addition to ordinary
taxation. A portion of the payments you receive during the income phase may be
considered partly a return of your original investment. As a result, that
portion of each payment is not taxable as income.
9. OTHER INFORMATION
This contract is issued by The Prudential Insurance Company of America and
sold by licensed representatives.
3
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
SUMMARY OF CONTRACT EXPENSES
The purpose of this summary is to help you to understand the costs you will
pay for the Variable Investment Plan variable annuity contract. This summary
includes the expenses of the mutual fund associated with the variable investment
options but does not include any charge for premium taxes that might be
applicable in your state. More detailed information can be found on page 13
under the section called, "What Are The Expenses Associated With The Variable
Investment Plan Variable Annuity?" For more detailed expense information about
the Series Fund and Real Property Account, please refer to the prospectuses
located at the back of this prospectus.
TRANSACTION EXPENSES CONTRACT YEARS AFTER PURCHASE PAYMENT
- ----------------------------- ------------------------------------------
WITHDRAWAL CHARGE: Year 0 ........ 8% plus return of 1% bonus
(see Note 1 below) Year 1 ........ 7% plus return of 1% bonus
Year 2 ........ 6% plus return of 1% bonus
Year 3 ........ 5% plus return of 1% bonus
Year 4 ........ 4% plus return of 1% bonus
Year 5 ........ 3% plus return of 1% bonus
Year 6 ........ 2% plus return of 1% bonus
Year 7......... 1% plus return of 1% bonus
After that .... 0%
ANNUAL CONTRACT FEE
AND FULL WITHDRAWAL FEE:.......................... $30.00
(See Note 2 below)
ANNUAL ACCOUNT EXPENSES
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As a percentage of the average account value in the variable
investment options.
MORTALITY AND EXPENSE RISK:....................... 1.20%
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Note 1: Withdrawal charges are imposed only on purchase payments. You may
withdraw earnings without a charge. In addition, during any contract
year you may withdraw up to 10% of the total contract value (calculated
as of the date of the first withdrawal made in that contract year)
without charge.
There is no withdrawal charge on any withdrawals made under the
Critical Care Access Option (see page 14). Surrender charges are also
waived when a death benefit is paid.
Note 2: This fee is only imposed if your contract value is less than $10,000 at
the time this fee is calculated.
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
SUMMARY OF CONTRACT EXPENSES
ANNUAL VARIABLE INVESTMENT OPTION EXPENSES
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As a percentage of each option's average daily net assets:
INVESTMENT OTHER TOTAL
MANAGEMENT FEE EXPENSES EXPENSES
- --------------------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND
Conservative Balanced Portfolio 0.55% 0.02% 0.57%
Diversified Bond Portfolio 0.40% 0.02% 0.42%
Equity Income Portfolio 0.40% 0.02% 0.42%
Equity Portfolio 0.45% 0.02% 0.47%
Flexible Managed Portfolio 0.60% 0.01% 0.61%
Global Portfolio 0.75% 0.11% 0.86%
Government Income Portfolio 0.40% 0.03% 0.43%
High Yield Bond Portfolio 0.55% 0.03% 0.58%
Money Market Portfolio 0.40% 0.01% 0.41%
Natural Resources Portfolio 0.45% 0.04% 0.49%
Prudential Jennison Portfolio 0.60% 0.03% 0.63%
Small Capitalization Stock Portfolio 0.40% 0.07% 0.47%
Stock Index Portfolio 0.35% 0.02% 0.37%
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5
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
EXPENSE EXAMPLES
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These examples will help you compare the fees and expenses of the different
variable investment options offered by the Variable Investment Plan. You can
also use the examples to compare the cost of the Variable Investment Plan with
other variable annuity contracts.
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EXAMPLE 1- IF YOU WITHDRAW YOUR ASSETS OR ANNUITIZE
Example 1 assumes that you invest $1,000 in the Variable Investment Plan and
that you allocate all of your assets to one of the variable investment options
and withdraw all your assets or annuitize at the end of the time period
indicated. (Certain annuity options will not be subject to withdrawal charges.
See "What Kind of Payments Will I Receive During The Income Phase?".) The
example also assumes that your investment has a 5% return each year and that the
option's operating expenses remain the same. Your actual costs may be higher or
lower, but based on these assumptions, your costs would be:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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THE PRUDENTIAL SERIES FUND
Conservative Balanced Portfolio $90 $ 99 $118 $212
Diversified Bond Portfolio $89 $ 94 $110 $196
Equity Income Portfolio $89 $ 94 $110 $196
Equity Portfolio $89 $ 96 $113 $201
Flexible Managed Portfolio $91 $100 $120 $217
Global Portfolio $93 $108 $133 $243
Government Income Portfolio $89 $ 95 $111 $197
High Yield Bond Portfolio $90 $ 99 $118 $213
Money Market Portfolio $89 $ 94 $110 $195
Natural Resources Portfolio $90 $ 96 $114 $204
Prudential Jennison Portfolio $91 $101 $121 $219
Small Capitalization Stock Portfolio $89 $ 96 $113 $201
Stock Index Portfolio $88 $ 93 $107 $190
- --------------------------------------------------------------------------------
Notes:
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The charges shown in the 10 year column are the same for Example 1 and Example
2. This is because after 8 years we no longer deduct withdrawal charges when you
make a withdrawal or when you begin the income phase of your contract.
6
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
EXAMPLE 2 - IF YOU DO NOT WITHDRAW YOUR ASSETS
Example 2 assumes that you invest $1,000 in the Variable Investment Plan and
allocate all of your assets to one of the variable investment options and DO NOT
WITHDRAW any of your assets at the end of the time period indicated. The example
also assumes that your investment has a 5% return each year and that the
option's operating expenses remain the same. Your actual costs may be higher or
lower, but based on these assumptions, your costs would be:
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND
Conservative Balanced Portfolio $18 $57 $ 98 $212
Diversified Bond Portfolio $17 $52 $ 90 $196
Equity Income Portfolio $17 $52 $ 90 $196
Equity Portfolio $17 $54 $ 93 $201
Flexible Managed Portfolio $19 $58 $100 $217
Global Portfolio $21 $66 $113 $243
Government Income Portfolio $17 $53 $ 91 $197
High Yield Bond Portfolio $18 $57 $ 98 $213
Money Market Portfolio $17 $52 $ 90 $195
Natural Resources Portfolio $18 $54 $ 94 $204
Prudential Jennison Portfolio $19 $59 $101 $219
Small Capitalization Stock Portfolio $17 $54 $ 93 $201
Stock Index Portfolio $16 $51 $ 87 $190
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These examples do not show past or future expenses. Actual expenses for a
particular year may be more or less than those shown in the examples.
- --------------------------------------------------------------------------------
Notes: (cont.) If your contract value is less than $10,000, on your contract
anniversary (and upon a surrender), we will deduct a $30 fee. The examples use
an average number as the amount of the annual contract fee. This amount was
calculated by taking the total annual contract fees collected in the preceding
calendar year and then dividing that number by the total assets allocated to the
variable investment options shown in the examples.
Based on this calculation the annual contract fee is included as an annual
charge of 0.02% of contract value. Your actual fees will vary based on the
amount of your contract and your specific allocation(s). A table of accumulation
unit values of interests for each variable investment option, appears under the
caption "Other Information" in this prospectus beginning on Page 18 Premium
taxes are not reflected in these examples. Premium taxes may apply depending on
the state where you live.
7
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
1. WHAT IS THE VARIABLE INVESTMENT PLAN VARIABLE ANNUITY?
The Variable Investment Plan Variable Annuity is a contract between you, the
owner, and us, the insurance company, The Prudential Insurance Company of
America (Prudential, We or Us).
Under our contract or agreement, in exchange for your payment to us, we promise
to pay you a guaranteed income stream. The earliest annuity date you can choose
is the date of your third contract anniversary. Your annuity is in the
accumulation phase until you decide to begin receiving annuity payments. The
date you begin receiving annuity payments is the annuity date. On the annuity
date, your contract switches to the income phase.
This annuity contract generally benefits from tax deferral. Tax deferral means
that you are generally not taxed on earnings or appreciation on the assets in
your contract until you withdraw money from your contract.
The Variable Investment Plan is a variable annuity contract. This means that
during the accumulation phase, you can allocate your assets among 14 variable
investment options as well as a guaranteed fixed interest-rate option. If you
select a variable investment option, the amount of money you are able to
accumulate in your contract during the accumulation phase depends upon the
investment performance of the variable investment option(s) you have selected.
Because the options fluctuate in value depending upon market conditions, your
assets can either increase or decrease in value. This is important, since the
amount of the annuity payments you receive during the income phase depends upon
the value of your contract at the time you begin receiving payments.
As mentioned above, the Variable Investment Plan also contains a guaranteed
fixed interest-rate option. This option offers an interest rate that is
guaranteed by us for one year and will always be at least 3% per year.
As the owner of the contract, you have all of the decision-making rights under
the contract. You will also be the annuitant unless you designate someone else
and we agree to that designation. The annuitant is the person who receives the
annuity payments when the income phase begins. The annuitant is also the person
whose life is used to determine how much the payments are and how long these
payments will continue. On and after the annuity date, the annuitant is the
owner and may not be changed. The beneficiary becomes the owner when a death
benefit is payable.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless you
change it at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before the annuitant or last surviving
annuitant dies. Your written request to change a beneficiary becomes effective
when we approve it.
DEATH BENEFIT
If the annuitant dies during the accumulation phase, we will, upon receiving
appropriate proof of death, pay a death benefit to the beneficiary designated by
the contractowner.
This is how the amount of the death benefit is calculated:
If the annuitant dies during the accumulation phase before age 65, the amount of
the death benefit will be the greater of (a) the current value of the contract
as of the date we receive appropriate proof of death, or (b) the total of all
purchase payments plus any bonus credited by Prudential, reduced proportionally
by withdrawals.
If the annuitant is age 65 or older, the amount of the death benefit will be the
current value of the contract as of the date we receive appropriate proof of
death.
Here is an example of how the death benefit is calculated:
Suppose a contractowner had made purchase payments and was credited a bonus
totaling $100,000 but, due to unfortunate investment results, the contract value
had decreased to $80,000. If the annuitant is younger than 65, the death benefit
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
would still be $100,000. This amount, however, is reduced proportionally when
you make a withdrawal from the contract. If the contractowner had withdrawn 50%
of the remaining $80,000, the death benefit would also be reduced by 50%. Since
the death benefit had been $100,000, it would now be $50,000. As stated above,
after age 65, the death benefit amount is simply the value of the contract.
Different rules may apply when co-annuitants are named. There are tax
requirements that apply to distributions made as a result of an annuitant's
death. See the Section 8, "What Are The Tax Considerations Associated with the
Variable Investment Plan Variable Annuity Contract?" and the Statement of
Additional Information for details.
If the annuitant dies during the income phase, the death benefit, if any, is
determined by the type of annuity payment option you select.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning the Variable Investment Plan, you may
cancel your contract within 10 days after receiving it (or whatever period is
required in the state where the contract was issued). You can request a refund
by returning the contract either to the representative who sold it to you, or to
the Prudential Annuity Service Center at the address shown on the first page of
this prospectus. You will receive, depending on applicable law:
o Your full purchase payment; or
o The amount your contract is worth as of the day we receive your request.
This amount may be more or less than your original payment.
OTHER CONTRACTS
This prospectus describes the Variable Investment Plan contract which is
currently being offered for sale. There are earlier versions of the contract
which are no longer offered. These earlier versions have some different features
which include differences in:
o payout options;
o sales charges on withdrawals; and
o naming of an annuitant.
If you are an owner of a contract that is no longer offered for sale, you can
find further information regarding contract differences throughout this
prospectus and in the Statement of Additional Information.
2. WHAT INVESTMENT OPTIONS CAN I CHOOSE?
The contract gives you the choice of allocating your purchase payments to any
one or more of the 14 variable investment options or a fixed interest-rate
option. The variable investment options are invested in accounts which are
managed by Prudential. There is a separate prospectus for the Prudential Series
Fund and for the Real Property Account provided with this prospectus. YOU SHOULD
READ THE PRUDENTIAL SERIES FUND AND/OR REAL PROPERTY ACCOUNT PROSPECTUS BEFORE
YOU DECIDE TO ALLOCATE YOUR ASSETS TO THESE VARIABLE INVESTMENT OPTIONS.
VARIABLE INVESTMENT OPTIONS
The Prudential Series Fund, Inc.
- --------------------------------
The Prudential Series Fund, Inc. is managed by Prudential through another
company it owns called The Prudential Investment Corporation. The Prudential
Investment Corporation manages each of the portfolios of the Prudential Series
Fund except the Prudential Jennison Portfolio. For this portfolio, Prudential
Investment Corporation oversees another company owned by Prudential called
Jennison Associates Capital Corp. which provides the day to day investment
advisory services.
Listed below are the Prudential Series Fund portfolios which are available as
variable investment options. Each portfolio has a different investment
objective.
o Conservative Balanced Portfolio
o Diversified Bond Portfolio
o Equity Income Portfolio
o Equity Portfolio
o Flexible Managed Portfolio
o Global Portfolio
o Government Income Portfolio
o High Yield Bond Portfolio
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
o Money Market Portfolio
o Natural Resources Portfolio
o Prudential Jennison Portfolio (domestic equity)
o Small Capitalization Stock Portfolio
o Stock Index Portfolio
The Prudential Variable Contract Real Property Account
- ------------------------------------------------------
The Real Property Account, 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 and other real
estate-related investments. The partnership is managed by Prudential.
FIXED INTEREST-RATE OPTION
We also offer a fixed interest-rate option. When you select this option, your
payment will earn interest at the established rate for a one-year period. This
rate will always be at least 3%. A new interest rate period is established every
time you allocate or transfer money into the fixed interest-rate option. You may
have money allocated in more than one interest rate period at the same time.
This could result in your money earning interest at different rates and each
interest-rate period maturing at a different time.
TRANSFERS AMONG OPTIONS
Up to four times each contract year, you can transfer money among the mutual
fund investment options and from the mutual fund investment options to the fixed
interest-rate option and the Real Property Account. We are not currently
enforcing this limit, however, we may do so in the future if it becomes
necessary due to excessive transfer activity. The minimum transfer amount is
$300. You will need to get our consent if you want to make a transfer that is
less than $300 or if making a transfer would reduce the value of the variable
interest option to less than $300. Your transfer request may be made by
telephone or in writing to the Prudential Annuity Service Center. We have
procedures in place to confirm that instructions received by telephone are
genuine. We will not be liable for following telephone instructions that we
reasonably believe to be genuine. Your transfer request will take effect at the
end of the business day on which it was received.
YOU CAN MAKE TRANSFERS OUT OF THE FIXED INTEREST-RATE AND THE REAL PROPERTY
ACCOUNT OPTIONS ONLY DURING THE 30-DAY PERIOD FOLLOWING YOUR CONTRACT
ANNIVERSARY DATE.
The maximum amount you may transfer from the fixed interest rate option is
limited to the greater of:
o 25% of the amount allocated to the fixed interest rate option, or
o $2,000.
The maximum amount you may transfer from the Real Property Account is limited to
the greater of:
o 50% of the amount allocated to the Real Property Account, or
o $10,000.
DOLLAR COST AVERAGING
The Dollar Cost Averaging (DCA) feature allows you to systematically transfer a
percentage amount out of the money market variable investment option and into
any other variable investment option(s). You can transfer money to more than one
variable investment option. The investment option used for the transfers is
designated as the DCA account. You may choose to have these automatic transfers
from the DCA account made monthly. By allocating amounts on a regular schedule
instead of allocating the total amount at one particular time, you may be less
susceptible to the impact of market fluctuations.
When you establish your DCA account with your first purchase payment, you must
allocate either $2,000 or 10% of your purchase payment, whichever is greater, to
your DCA account. If you establish your DCA account at a later time, a minimum
of $2,000 is required. Once your DCA account is opened, as long as it has a
positive balance, you may allocate or transfer amounts to the DCA account just
as you would with any other investment option.
Once established, your first transfer out of the account must be at least 3% of
your DCA account. The minimum amount you can transfer into any one investment
option is $20. Transfers will continue
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
automatically until the entire amount in your DCA account has been transferred
or until you tell us to discontinue the transfers. You can allocate subsequent
purchase payments to re-open the DCA account at any time.
Your transfers will be made on the last calendar day of each month, provided
that the New York Stock Exchange is open on that date. If the New York Stock
Exchange is not open on a particular transfer date, the transfer will take
effect on the next business day.
Any transfers you make because of Dollar Cost Averaging are not counted toward
the four transfers you are allowed each year. This feature is available only
during the contract accumulation phase.
VOTING RIGHTS
Prudential is the legal owner of the mutual fund shares associated with the
mutual fund investment options, however, we vote these shares according to
voting instructions we receive from contractowners. We will mail you a proxy
which is a form you need to complete and return to us to tell us how you wish us
to vote. When we receive those instructions, we will vote all of the shares we
own on your behalf in accordance with those instructions. We will vote the
shares for which we do not receive instructions, and the shares that we own
directly, in the same proportion as the shares for which instructions are
received. We may change the way your voting instructions are calculated if it is
required by federal regulation.
SUBSTITUTION
We may substitute one or more of the Series Fund portfolios used by the mutual
fund investment options. We may also cease to allow investments in existing
portfolios. We would do this only if events such as investment policy changes or
tax law changes make the portfolio unsuitable. We would not do this without the
approval of the Securities and Exchange Commission and necessary state insurance
department approvals. You will be given specific notice in advance of any
substitution we intend to make.
OTHER CHANGES
We may also make other changes to such things as the minimum amounts for
purchases, transfers, and withdrawals. However, before imposing such changes we
will give you at least 90 days notice.
3. WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE? (ANNUITIZATION)
PAYMENT PROVISIONS
Under the terms of the currently offered contract the annuitant can begin
receiving annuity payments any time after the third contract anniversary.
Annuity payments must begin no later than the contract anniversary that
coincides with or next follows the annuitant's 90th birthday (unless we agree to
another date). Different provisions and payment options apply to certain
previously offered contracts. See the discussion contained in the Statement of
Additional Information for further details.
You may choose among the annuity options described below at any time before the
annuity date. All of the annuity options under this contract are fixed annuity
options. This means that your participation in the variable investment options
ends on the annuity date. At any time before your annuity date, you may ask us
to change the annuity date specified in your contract to another date. This
other date must be after the third contract anniversary or the beginning of the
month following the date we receive your request, whichever is later.
As indicated above, when you decide to begin receiving annuity payments, your
participation in the variable investment options ends. The value of your
contract at that time, together with your choice of annuity option, will help
determine how much your income payments will be. You should be aware that
depending on how recently you made purchase payments, you may be subject to
withdrawal charges and the recapture of bonus payments when you annuitize. For
certain annuity options these withdrawal charges will be waived.
If you have not selected an annuity option by your annuity date, the Interest
Payment Option (Option 2, described below) will automatically be selected,
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
unless prohibited by applicable law. Application of contract value to Option 2
will generally be taxed as a surrender of the contract.
OPTION 1. LIFE ANNUITY WITH 120 PAYMENTS (10 YEARS) CERTAIN
Under this option, we will make annuity payments to the annuitant monthly,
quarterly, semiannually, or annually as long as the annuitant is alive. If the
annuitant dies before we have made 10 years worth of payments, we will pay the
beneficiary the present value of the remaining certain period annuity payments
in one lump sum unless the annuitant has specifically instructed that the
remaining monthly annuity payments continue to be paid to the beneficiary. The
present value of the remaining certain period annuity payments is calculated by
using the interest rate used to compute the amount of the original 120 payments.
The interest rate used will always be at least 3.5% a year.
OPTION 2. INTEREST PAYMENT OPTION
Under this option, you can choose to have us hold all or a portion of your
contract assets in order to accumulate interest. You can receive interest
payments on a monthly, quarterly, semiannual, or annual basis or you can allow
the interest to accrue on your contract assets. If you have not selected an
annuity option by the annuity date, this is the option we will automatically
select for you, unless prohibited by applicable law. Under this option, we will
pay you interest at an effective rate of at least 3% a year.
OPTION 3. OTHER ANNUITY OPTIONS
We currently offer a variety of other annuity options not described above. At
the time you choose to receive your annuity payments, we may make available to
you any of the annuity options that are offered at your annuity date.
These options are referred to in your contract as the supplemental life annuity
option. Under the supplemental life annuity option, we will waive withdrawal
charges that might be applicable under other annuity options. In addition, if
you select Option 1 without a right of withdrawal, we will effect that option
under the supplemental life annuity option, if doing so provides greater monthly
payments.
4. WHAT IS THE 1% BONUS?
During the first three contract years, we will add an additional 1% to every
purchase payment that you make. After that, we will add the 1% bonus at our
discretion. We may limit our payment of the bonus to $1,000 per contract year.
The bonus payment will be allocated to your contract based on the way your
purchase payment is allocated among the variable investment options and the
fixed interest-rate investment option.
The bonus amount will not be subject to the charge for premium taxes. We will,
however, take the bonus payments back if you make a withdrawal of a purchase
payment within eight contract years of the time that purchase payment was made.
The only exception would be if you annuitize your contract in a way that is not
subject to a sales charge or if you make a withdrawal under the Critical Care
Access Option.
5. HOW CAN I PURCHASE A VARIABLE INVESTMENT PLAN CONTRACT?
PURCHASE PAYMENTS
A purchase payment is the amount of money you give us to purchase the contract.
The minimum purchase payment is $1,000. You can make additional purchase
payments of at least $100 or more at any time during the accumulation phase. You
must get our prior approval for purchase payments of $2 million or more.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment among the
variable investment options and the fixed interest-rate option in whole
percentages from 10% to 100%. The initial allocation to any investment option
must be at least $300. The minimum subsequent allocation to a particular
investment option must be at least 10% of your purchase payment. When you make
additional purchase payments, they will be allocated in the same way as your
most recent purchase payment, unless you tell us otherwise.
We will credit these purchase payments to your contract as of the end of the
business day on which the payment is received. Our business day closes when the
New York Stock Exchange does, usually
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VARIABLE INVESTMENT PLAN VARIABLE ANNUITY
at 4:15 p.m. Eastern time. If, however, your first purchase payment is made and
we do not have enough information to establish your contract, we may need to
contact you to request the required information. If we are not able to get this
information within five business days, we will either return your purchase
payment to you or get your consent to continue holding it until we receive the
necessary information.
CALCULATING CONTRACT VALUE
The value of the variable portion of your contract will go up or down depending
on the investment performance of the variable investment option(s) you choose.
To determine the value of your contract, we use a unit of measure called an
accumulation unit. An accumulation unit works like a share of a mutual fund.
Every day we determine the value of an accumulation unit for each of the
variable investment options. We do this by:
1. Adding up the total amount of money allocated to a specific investment
option;
2. Subtracting from that amount insurance charges and any other charges
such as taxes; and
3. Dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited to your contract is determined
by dividing the amount of the purchase payment allocated to an investment option
by the unit price of the accumulation unit for that investment option. We
calculate the unit price for each investment option after the New York Stock
Exchange closes each day and then credit your contract. The value of the
accumulation units can increase, decrease, or remain the same from day to day.
The Accumulation Unit Values chart on page 22 of this prospectus gives you more
detailed information about the accumulation units of the mutual fund investment
options.
We cannot guarantee that the value of your contract will increase or that it
will not fall below the amount of your total purchase payments. However, we do
guarantee a minimum interest rate of 3% a year on that portion of the contract
allocated to the fixed interest-rate option.
6. WHAT ARE THE EXPENSES ASSOCIATED WITH THE VARIABLE INVESTMENT PLAN CONTRACT?
There are charges and other expenses associated with the contract that reduce
the return on your investment. These charges and expenses are described below.
These charges are not assessed against amounts allocated to the fixed
interest-rate option.
INSURANCE CHARGES
Each day, we make a deduction for insurance charges as follows:
The mortality risk charge is for assuming the risk that the annuitant(s) will
live longer than expected based on our life expectancy tables. When this
happens, we pay a greater number of annuity payments. The expense risk charge is
for assuming that the current charges will be insufficient in the future to
cover the cost of administering the contract.
The mortality and expense risk charge is equal, on an annual basis, to 1.20% of
the daily value of the contract invested in the variable investment options,
after expenses have been deducted. This charge is not assessed against amounts
allocated to the fixed interest-rate option.
If the charges under the contract are not sufficient, then we will bear the
loss. We do, however, expect to profit from this charge. The mortality and
expense risk charge cannot be increased. Any profits made from this charge may
be used by us to pay for the costs of distributing the contracts.
ANNUAL CONTRACT FEE
During the accumulation phase, if your contract value is less than $10,000 on
the contract anniversary date, we will deduct $30 per contract year. This annual
contract fee is used for administrative expenses and cannot be increased. The
$30 charge will be deducted proportionately from each of the investment options
that you have selected. This charge will also be deducted when you surrender
your contract if your contract value is less than $10,000 at that time.
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WITHDRAWAL CHARGE
During the accumulation phase you can make withdrawals from your contract. Your
withdrawal request will be processed as of the date it is received in good order
at the Prudential Annuity Service Center.
When you make a withdrawal, money will be taken first from your earnings. When
your earnings have been used up, then we will take the money from your purchase
payments. You will not have to pay any withdrawal charge when you withdraw your
earnings.
You will need to get our consent if you want to make a partial withdrawal that
is less than $300 or, if by making a partial withdrawal, your contract value
would be reduced to less than $300.
The withdrawal charge is for the payment of the expenses involved in selling and
distributing the contracts, including sales commissions, printing of
prospectuses, sales administration, preparation of sales literature and other
promotional activities.
Each contract year, you can withdraw earnings plus up to 10% of your total
contract value (calculated as of the date of the first withdrawal made in that
contract year), without paying a withdrawal charge. This amount is referred to
as the "charge-free" amount. During the first eight contract years following a
purchase payment, if your withdrawal is more than the charge-free amount, a
withdrawal charge will be applied. For this purpose, we treat purchase payments
as withdrawn on a first-in, first-out basis.
The table below shows the withdrawal charges that would apply based on the
number of contract years since the purchase payment was made.
Contract Years After Purchase Payment
0 ................ 8%
1 .... ........... 7%
2 ................ 6%
3 ................ 5%
4 ................ 4%
5 ................ 3%
6 ................ 2%
7 ................ 1%
After that........ 0%
BONUS RECAPTURE
The bonus amount will be deducted from your contract value if you withdraw a
purchase payment within eight contract years after the payment was made. This
includes withdrawals made for the purpose of annuitizing if withdrawal charges
would apply. If you make a withdrawal eight contract years or more after making
the purchase payment that was credited with the bonus, you can withdraw all or
part of your purchase payment and still retain the bonus amount.
CRITICAL CARE ACCESS
We will allow you to withdraw money from the contract and waive any withdrawal
and annual contract fee, if the annuitant or the last surviving co-annuitant (if
applicable) becomes confined to an eligible nursing home or hospital for a
period of at least three consecutive months. You would need to provide us with
proof of the confinement. If a physician has certified that the annuitant or
last surviving co-annuitant is terminally ill (has six months or less to live),
there will be no charge imposed for withdrawals. Critical Care Access is not
available in all states.
PREMIUM TAXES
Depending upon where you reside, it is possible that your annuity payments may
be subject to taxation by federal, state or municipal agencies. We are
responsible for the payment of these taxes and will make a deduction from the
value of the contract to pay for them. Even though some of these taxes are due
when the contract is issued and others are due when annuity payments begin, it
is our current practice not to deduct these taxes until annuity payments begin.
In the few states that impose a tax, the current rates range up to 5%. If, in
the future, we are charged for additional taxes that are based upon purchase
payments, that charge may be passed on to the contractowner.
COMPANY TAXES
We will pay the taxes on the earnings of the separate account. We are not
currently charging the separate account for company taxes. We will periodically
review the issue of charging the separate account for company taxes and may
impose such a charge in the future.
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7. HOW CAN I ACCESS MY MONEY?
You can access your money by:
o Making a withdrawal (either partial or complete); or
o Electing to receive annuity payments during the income phase.
When you make a complete withdrawal, you will receive the value of your contract
less any applicable charges and fees as of the day we receive your request at
the Prudential Annuity Service Center in a form acceptable to us.
Unless you tell us otherwise, any partial withdrawal will be made
proportionately from all of the variable investment options as well as the fixed
interest-rate option, depending on which options you have selected. You will
have to receive our consent to make a partial withdrawal if the amount is less
than $300 or if, as a result of the withdrawal, the value of your contract is
reduced to less than $300.
We will generally pay the withdrawal amount, less any required tax withholding,
within seven days after we receive a properly completed withdrawal request. We
will deduct applicable charges, if any, from the assets in your contract.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE. FOR A MORE COMPLETE EXPLANATION, SEE SECTION 8 OF THIS PROSPECTUS AND
THE TAX DISCUSSION IN THE STATEMENT OF ADDITIONAL INFORMATION.
AUTOMATED WITHDRAWALS
This contract offers an Automated Withdrawal feature. This feature enables you
to receive periodic withdrawals in monthly, quarterly, semiannual or annual
intervals. We will process your withdrawals of a specified dollar amount at the
end of the business day at the intervals you specify. We will continue at these
intervals until you tell us otherwise.
You can make withdrawals from any designated investment option or proportionally
from all investment options. Withdrawal charges may be deducted if the
withdrawals in any contract year are more than the charge-free amount. The
minimum automated withdrawal amount you can take is $300.
INCOME TAXES AND A 10% PENALTY TAX ON EARNINGS MAY APPLY TO AUTOMATED
WITHDRAWALS.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone payments made in connection with
withdrawals or transfers for any period when:
1. The New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. Trading on the New York Stock Exchange is restricted;
3. An emergency exists during which sales of shares of the mutual funds
are not reasonable or we cannot reasonably value the accumulation
units; or
4. The Securities and Exchange Commission, by order, so permits
suspension or postponement of payments for the protection of owners.
We expect to pay the amount of any withdrawal or transfer made from the
investment options promptly upon request. We are, however, permitted to
delay payment for up to six months on withdrawals from the fixed
interest-rate option. If we delay payment for more than 30 days, we will pay
you interest at an annualized rate of at least 3%.
8. WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE VARIABLE INVESTMENT
PLAN CONTRACT?
The following discussion covers annuity contracts owned by individuals. It does
not cover annuity contracts held under tax-favored retirement plans or contracts
held by other than individuals. The discussion is general in nature and
describes only federal income tax law (not state or other tax laws). It is based
on current law and interpretations which may change. It is not intended as tax
advice. You should consult a qualified tax adviser for complete information and
advice.
We believe the contract is an annuity contract for tax purposes. Accordingly, as
a general rule, you
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should not pay any tax until you receive money under the contract.
TAXES PAYABLE BY YOU
Generally, annuity contracts issued to you by the same company (and affiliates)
during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
Taxes on Withdrawals and Surrenders
o If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income,
rather than as return of purchase payments, until all gain has been
withdrawn.
o If you assign all or part of your contract as collateral for a loan, the
part assigned will be treated as a withdrawal. Also, if you elect the
interest payment option, you will be treated, for tax purposes as
surrendering your contract.
o If you transfer your contract for less than full consideration, such as by
gift, you will trigger tax on the gain in the contract. This rule does not
apply if you transfer the contract to your spouse or incident to divorce.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your purchase payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction is allowed for the unrecovered
amount.
A lump sum payment taken in lieu of remaining annuity payments 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.
PENALTY TAXES ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount you receive under your contract may be subject to a 10%
penalty tax. Amounts are not subject to this penalty tax if:
o the amount is paid on or after you reach age 59 1/2, or in the event of
your death;
o the amount received is attributable to your becoming disabled;
o the amount paid or received is in the form of level annuity payments not
less frequently than annually under a lifetime annuity; and
o the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
If you modify the lifetime annuity payment stream (other than as a result of
death or disability) before you reach age 59 1/2(or before the end of the
five-year period beginning with the first payment and ending after you reach age
59 1/2), your tax for the year of modification will be increased by the penalty
tax that would have been imposed without the exception, plus interest for the
deferral.
TAXES PAYABLE BY BENEFICIARIES
Generally, the same tax rules apply to amounts received by your beneficiary as
those stated above with respect to you. The election of an annuity payment
option instead of a lump sum death benefit may defer taxes. Certain minimum
distribution requirements apply upon your death, as discussed further below.
WITHHOLDING OF TAX FROM DISTRIBUTIONS
Taxable amounts distributed from your annuity contracts are subject to tax
withholding. You may generally elect not to have tax withheld from your
payments.
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ANNUITY QUALIFICATION
Diversification and Investor Control
In order to qualify for the tax rules applicable to annuity contracts described
above, the contract must be an annuity contract for tax purposes. This means
that the assets underlying the annuity contract must be diversified, according
to certain rules. For further information on diversification requirements, see
Dividends, Distributions and Taxes in the attached prospectus for the Series
Fund. It also means that Prudential, and not you as the contractowner, must have
sufficient control over the underlying assets to be treated as the owner of the
underlying assets for tax purposes. We believe these requirements will be met.
Required Distributions Upon Your Death
Upon your death (or the death of a joint owner, if earlier), certain
distributions must be made under the contract. The required distributions depend
on whether you die before you start taking annuity payments under the contract
or after you start taking annuity payments under the contract.
If you die 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 you die before the annuity date, the entire interest in the contract must be
distributed within five years after the date of death. However, if an annuity
payment option is selected by your designated beneficiary and if annuity
payments begin within 1 year of your death, the value of the contract may be
distributed over the beneficiary's life or a period not exceeding the
beneficiary's life expectancy. Your designated beneficiary is the person to whom
ownership of the contract passes by reason of death. Your beneficiary must be a
natural person.
If any portion of the contract is payable to (or for the benefit of) your
surviving spouse, such portion of the contract may be continued with your spouse
as the owner.
CHANGES IN THE CONTRACT
We reserve the right to make any changes we deem necessary to assure that the
contract qualifies as an annuity contract for tax purposes. Any such changes
will apply to all contractowners and you will be given notice to the extent
feasible under the circumstances.
ADDITIONAL INFORMATION
You should refer to the Statement of Additional Information if:
o The contract is held by a corporation or other entity instead of by an
individual or as agent for an individual.
o Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
o You wish additional information on withholding taxes.
o You are a nonresident alien.
o You transfer your contract to, or designate, a beneficiary who is either 37
1/2 years younger than you or a grandchild.
TAXES PAID BY PRUDENTIAL
Although the separate account is registered as an investment company, it is not
a separate taxpayer for purposes of the Code. The earnings of the separate
account are taxed as part of the operations of Prudential. No charge is
currently being made against the separate account for company federal income
taxes. We will periodically review the question of charging the separate account
for company federal income taxes. 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 certain states. At present, these taxes are not significant
and they are not charged against the contract or the separate account. If
there is a material change in applicable state or local tax laws, the taxes
paid by Prudential that are attributable to the separate account may result
in a corresponding charge against the separate account.
17
<PAGE>
9. OTHER INFORMATION
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 New Jersey. It is licensed to sell
life insurance and annuities in the District of Columbia, Guam, the U.S. Virgin
Islands and in all states. Prudential is subject to the insurance laws and
regulations of all states where it is licensed to do business.
Prudential is currently considering reorganizing itself into a publicly traded
stock company through a process known as "demutualization." On February 10,
1998, the company's Board of Directors authorized management to take the
preliminary steps necessary to allow the company to demutualize. On July 1,
1998, legislation was enacted in New Jersey that would permit this conversion to
occur and that specified the process for conversion. Demutualization is a
complex process involving development of a plan of reorganization, adoption of a
plan by the company's Board of Directors, a public hearing, voting by qualified
policyholders and regulatory approval. This process could take two or more years
to complete. Prudential's management and Board of Directors have not yet
determined to demutualize and it is possible that, after careful review,
Prudential could decide not to go public.
The plan of reorganization, which has not yet been developed an approved, would
provide the criteria for determining eligibility and the methodology for
allocating shares or other consideration to those who would be eligible.
Generally, the amount of shares or other consideration eligible customers would
receive would be based on a number of factors, including the types, amounts ,
and issue years of their policies. As a general rule, owners of
Prudential-issued insurance policies and annuity contracts would be eligible,
while mutual fund customers and customers of the company's subsidiaries, would
not be. It has not yet been determined whether any exceptions to that general
approach will be made with respect to policyholders and contractowners of
Prudential's subsidiaries.
THE SEPARATE ACCOUNT
We have established a separate account, the Prudential Individual Variable
Contract Account ("separate account"), to hold the assets that are associated
with the contracts. The separate account was established under New Jersey law on
October 12, 1982, and is registered with the U.S. Securities and Exchange
Commission under the Investment Company Act of 1940, as a unit investment trust,
which is a type of investment company. The assets of the separate account are
held in the name of Prudential and legally belong to us. These assets are kept
separate from all of our other assets and may not be charged with liabilities
arising out of any other business we may conduct. More detailed information
about Prudential, including its consolidated financial statements, is provided
in the Statement of Additional Information.
THE REAL PROPERTY ACCOUNT
The Prudential Variable Contract Real Property Account ("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,
hotel, apartments or industrial properties. It also invests in mortgage loans
and other real estate related investments.
A full description of the Real Property Account, its management, policies, and
restrictions, its charges and expenses, the investment risks, 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. Any
contractowner considering the real estate investment option should read the
attached prospectus for the Real Property Account, together with this
prospectus.
SALE OF THE CONTRACT AND DISTRIBUTOR
Currently, Pruco Securities Corporation ("Prusec") acts as the distributor of
the contracts. Prusec is a wholly-owned subsidiary of Prudential. Prudential
expects that at some time during 1999, Prusec's responsibilities as distributor
will be assigned to Prudential Investment Management Services LLC ("PIMS"). PIMS
is also a wholly-owned subsidiary
18
<PAGE>
of Prudential and is a limited liability corporation organized under Delaware
law in 1996. Both Prusec and PIMS are registered as broker-dealers under the
Securities Exchange Act of 1934 and are members of the National Association of
Securities Dealers, Inc.
Commissions for the sales of contracts are paid to Prudential financial
professionals and to other independent broker-dealers who sell the contracts.
Registered representatives of independent broker-dealers may be paid on a
different basis than those affiliated with Prusec. The maximum commission that
will be paid to the broker-dealer to cover both the individual representative's
commission and other distribution expenses will not be more than 6% of the
purchase payment.
ASSIGNMENT
You can assign the contract at any time during your lifetime. We will not be
bound by the assignment until we receive written notice. We will not be liable
for any payment or other action we take in accordance with the contract if that
action occurs before we receive notice of the assignment. Under certain
circumstances we must approve the assignment before it becomes effective. An
assignment, like any other change in ownership, may trigger a taxable event.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
LITIGATION
On October 28, 1996, Prudential entered into a Stipulation of Settlement in a
multidistrict proceeding involving allegations of various claims relating to
Prudential's life insurance sales practices. (In re Prudential Insurance Company
of America Sales Practices Litigation, D.N.J., MDL No. 1061, Master Docket No.
95-4704 (AMW)). On March 7, 1997, the United States District Court for the
District of New Jersey approved the Stipulation of Settlement as fair,
reasonable and adequate, and later issued a Final Order and Judgement in the
consolidated class actions before the court, 962 F. Supp. 450 (March 17, 1997,
as amended April 14, 1997). The Court's Final Order and Judgement approving the
class Settlement was appealed to the United States Court of Appeals for the
Third Circuit, which upheld the district court's approval of the Stipulation of
Settlement on July 23, 1998. The Supreme Court denied certiorari in January
1999, thereby making final the approval of the class action settlement.
Pursuant to the Settlement, Prudential agreed to provide and has been
implementing an Alternative Dispute Resolution ("ADR") process for class members
who believe they were misled concerning the sale or performance of their life
insurance Contracts. As of December 31, 1998, based on an analysis of claims
actually remedied, a sample of claims still to be remedied, and estimates of
additional liabilities associated with the ADR program, management estimated the
cost, before taxes, of remedying policyholder claims in the ADR process to be
approximately $2.56 billion. While management believes these to be reasonable
estimates based on available information, the ultimate amount of the total cost
of remedied policyholder claims and other related costs is dependent on complex
and varying factors, including the relief options still to be chosen by
claimants, the dollar value of those options, and the number and type of claims
that may successfully be appealed.
In addition, a number of actions have been filed against Prudential by
policyholders who have excluded themselves from the Settlement; Prudential
anticipates that additional suits may be filed by other policyholders.
Also, on July 9, 1996, a Multi-State Life Insurance Task Force comprised of
insurance regulators from 29 states and the District of Columbia, released a
report on Prudential's activities. As of February 24, 1997, Prudential had
entered into consent orders or agreements with all 50 states and the District of
Columbia to implement a remediation plan, whose terms closely parallel the
Settlement approved in the MDL proceeding, and agreed to a series of payments
allocated to all 50 states and the District of Columbia amounting to a total of
approximately $65 million. These agreements are now being implemented through
Prudential's implementation of the class Settlement.
19
<PAGE>
Prudential's litigation is subject to many uncertainties, and given the
complexity and scope, the outcomes cannot be predicted with precision. 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 the matters specifically discussed above.
Management believes, however, that the ultimate resolution of all such matters,
after consideration of applicable reserves, should not have a material adverse
effect on Prudential's financial position.
YEAR 2000 COMPLIANCE
The Year 2000 Issue
The services provided to you as a purchaser of the Variable Investment Plan
depend on the smooth functioning of numerous computer systems. Many computer
systems in use today are programmed to recognize only the last two digits of a
date as the year. As a result, any systems using this kind of programming can
not distinguish a date using "00" and may treat it as "1900" instead of "2000."
This problem may impact computer systems that store business information, but it
could also affect other equipment used in our business like telephone, fax
machines and elevators. If this problem is not corrected, the "Year 2000" issue
could affect the accuracy and integrity of business records. Prudential's
regular business operations could be interrupted as well as those of other
companies that deal with us.
In addition, the operations of the mutual fund associated with the Variable
Insurance Plan contract could experience problems resulting from the Year 2000
issue. Please refer to the mutual fund prospectus for information regarding
their approach to Year 2000 concerns. The following describes Prudential's
effort to address Year 2000 concerns.
To address this potential problem Prudential organized its Year 2000 efforts
around the following three areas:
o Business Systems - Computer programs directly used to support our business;
o Infrastructure - Computers and other business equipment like telephones and
fax machines; and
o Business Partners - Year 2000 readiness of essential business partners.
Business Systems. The business systems component includes a wide range of
computer programs that directly support Prudential's business operations
including systems for: insurance product processing, securities trading,
personnel record keeping and general accounting systems. All business systems
were analyzed to determine whether each computer program with a Year 2000
problem should be retired, replaced or renovated. The majority of this work has
been completed. A few remaining programs are currently being tested and
completion of this process is expected by June, 1999.
Infrastructure. As with business applications, we established a specific
methodology and process for addressing infrastructure issues. The infrastructure
effort includes mainframe computer system hardware and operating system
software, mid-range systems and servers, telecommunications equipment and
systems, buildings and facilities systems, personal computers, and vendor
hardware and software. Other than desktop systems, substantially all other
infrastructure systems have been tested. Presently, a small number of mid-range
computers and building and facility systems are still in the testing phase. We
expect to have the infrastructure process completed by June, 1999.
Business Partners. Prudential recognizes the importance of determining the Year
2000 readiness of external business relationships especially those that involve
electronic data transfer products and services, and products that impact our
essential business processes. Prudential first classified each business partner
as "highly critical" or "less critical" to our business, and then began to
develop risk assessment and contingency plans to address the potential that a
business partner could experience a Year 2000 failure. All highly critical
business partner relationships have been assessed and contingency planning is
completed. Risk assessment and contingency planning continues for less critical
business partners, and the target completion date for these relationships is
June, 1999.
20
<PAGE>
Prudential believes that the Business Application, Infrastructure and Business
Partners components of the Year 2000 project are substantially on schedule. A
small number of the projects may not meet their targeted completion date.
However, Prudential expects that these projects will be completed by September,
1999. If there are any delays, they should not have a significant impact on the
timing of the project as a whole.
The Cost of Year 2000 Readiness
Prudential is funding the Year 2000 program from internal operating budgets, and
estimates that its total costs to address the Year 2000 issue will total
approximately $220 million. Because these expenses were part of the operating
budget, they did not impact the management of the Variable Investment Plan.
During the course of the Year 2000 program, some optional computer projects have
been delayed, but these delays have not had any material effect on the Variable
Investment Plan.
Year 2000 Risks and Contingency Planning
Prudential believes that it is well positioned to lessen the impact of the Year
2000 problem. However, given the nature of this issue, we can not be 100%
certain that we are completely prepared, particularly because we cannot be
certain of Year 2000 readiness of third parties. As a result, we are unable to
determine at this time whether the consequences of Year 2000 failures may have a
material adverse effect on the results of Prudential's operations, liquidity or
financial condition. In the worst case, it is possible that a Year 2000
technology failure, whether internal or external, could have a material impact
on Prudential's results of operations, liquidity, or financial position. If
Prudential is unable to address the Year 2000 problem, we may have difficulty in
responding to your incoming phone calls, calculating your unit values or
processing withdrawals and purchase payments. It is also possible that the
mutual fund associated with the Variable Investment Plan will be unable to value
the securities, in turn creating difficulties in purchasing or selling shares of
the mutual fund and calculating corresponding unit asset values. The objective
of Prudential's Year 2000 program has been to reduce these risks as much as
possible.
Most of the operations of the Variable Investment Plan involve such a large
number of individual transactions that they can only be handled with the help of
computers. As a result, our current contingency plans include responses to the
failure of specific business programs or infrastructure components. However, our
contingency responses are now being reviewed and we expect to finalize them by
June, 1999 to ensure that they are workable under the special conditions of a
Year 2000 failure. Prudential believes that with the completion of its Year 2000
program as scheduled, the possibility of significant interruptions of normal
operations will be reduced.
FINANCIAL STATEMENTS
The consolidated financial statements of Prudential and Subsidiaries and the
financial statements of the separate account associated with the Variable
Investment Plan are included in the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
o Company
o Directors and OfficerS
o Further Information Regarding Previously Offered Variable Investment Plan
Contracts
o Distribution of the Contract
o Participation in Divisible Surplus
o Performance Information
o Legal Opinions
o Experts
o Federal Tax Status
o Financial Information
21
<PAGE>
ACCUMULATION UNIT VALUES
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
(Condensed Financial Information)
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------
Money Market
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 2.092 $ 2.008 $ 1.931 $ 1.847 $ 1.796 $ 1.766
2. Accumulation unit value at end of period.......... 2.179 2.092 2.008 1.931 1.847 1.796
3. Number of accumulation units outstanding at
end of period................................... 19,160,802 16,449,578 20,966,170 21,383,688 19,719,686 21,196,310
----------------------------------------------------------------------------
<CAPTION>
Diversified Bond
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 3.208 $ 2.990 $ 2.899 $ 2.430 $ 2.541 $ 2.335
2. Accumulation unit value at end of period.......... 3.397 3.208 2.990 2.899 2.430 2.541
3. Number of accumulation units outstanding at
end of period................................... 14,862,088 15,781,677 17,983,051 17,350,482 19,297,770 22,228,674
----------------------------------------------------------------------------
<CAPTION>
Government Income
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.881 $ 1.736 $ 1.719 $ 1.456 $ 1.553 $ 1.397
2. Accumulation unit value at end of period.......... 2.027 1.881 1.736 1.719 1.456 1.553
3. Number of accumulation units outstanding at
end of period................................... 24,947,937 26,590,965 32,103,624 36,188,716 42,950,931 51,712,560
----------------------------------------------------------------------------
<CAPTION>
Conservative Balanced
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 3.839 $ 3.424 $ 3.077 $ 2.655 $ 2.713 $ 2.447
2. Accumulation unit value at end of period.......... 4.238 3.839 3.424 3.077 2.655 2.713
3. Number of accumulation units outstanding at
end of period................................... 103,465,203 117,938,119 132,264,454 133,247,386 144,960,917 132,233,247
SUBACCOUNTS
---------------------------------------------------------------
Money Market
---------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
to to to to to
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.722 $ 1.641 $ 1.536 $ 1.423 $ 1.341
2. Accumulation unit value at end of period.......... 1.766 1.722 1.641 1.536 1.423
3. Number of accumulation units outstanding at
end of period................................... 25,559,750 27,651,809 28,665,736 21,867,895 20,062,883
---------------------------------------------------------------
<CAPTION>
Diversified Bond
---------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
to to to to to
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 2.204 $ 1.916 $ 1.790 $ 1.596 $ 1.493
2. Accumulation unit value at end of period.......... 2.335 2.204 1.916 1.790 1.596
3. Number of accumulation units outstanding at
end of period................................... 19,270,816 15,157,524 13,436,702 14,674,397 16,270,961
---------------------------------------------------------------
<CAPTION>
Government Income
--------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89
to to to to
12/31/92 12/31/91 12/31/90 12/31/89
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.335 $ 1.164 $ 1.108 $ 1.000
2. Accumulation unit value at end of period.......... 1.397 1.335 1.164 1.108
3. Number of accumulation units outstanding at
end of period................................... 31,196,202 5,114,032 1,876,055 523,730
--------------------------------------------------
<CAPTION>
Conservative Balanced
---------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
to to to to to
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 2.316 $ 1.968 $ 1.892 $ 1.637 $ 1.503
2. Accumulation unit value at end of period.......... 2.447 2.316 1.968 1.892 1.637
3. Number of accumulation units outstanding at
end of period................................... 94,037,783 64,776,062 59,244,790 61,212,122 68,409,626
* Commencement of Business
The financial statements of the Account are in the Statement of Additional Information.
</TABLE>
22
<PAGE>
ACCUMULATION UNIT VALUES
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
(Condensed Financial Information) (Continued)
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------
Flexible Managed
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 4.540 $ 3.895 $ 3.469 $ 2.828 $ 2.955 $ 2.587
2. Accumulation unit value at end of period.......... 4.944 4.540 3.895 3.469 2.828 2.955
3. Number of accumulation units outstanding at
end of period................................... 61,157,390 70,568,253 80,196,501 80,116,280 86,950,166 82,697,681
---------------------------------------------------------------------------
<CAPTION>
High Yield Bond
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 2.308 $ 2.053 $ 1.865 $ 1.605 $ 1.670 $ 1.417
2. Accumulation unit value at end of period.......... 2.227 2.308 2.053 1.865 1.605 1.670
3. Number of accumulation units outstanding at
end of period................................... 14,194,497 15,264,711 16,519,861 15,869,142 15,675,021 14,204,249
---------------------------------------------------------------------------
<CAPTION>
Stock Index
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 3.816 $ 2.907 $ 2.401 $ 1.772 $ 1.776 $ 1.639
2. Accumulation unit value at end of period.......... 4.842 3.816 2.907 2.401 1.772 1.776
3. Number of accumulation units outstanding at
end of period................................... 33,545,384 33,400,486 32,289,212 26,855,828 25,648,545 24,959,253
---------------------------------------------------------------------------
<CAPTION>
Equity Income
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 4.108 $ 3.044 $ 2.530 $ 2.104 $ 2.099 $ 1.737
2. Accumulation unit value at end of period.......... 3.963 4.108 3.044 2.530 2.104 2.099
3. Number of accumulation units outstanding at
end of period................................... 28,115,406 29,188,995 29,360,348 28,317,862 26,707,292 19,580,278
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------
Flexible Managed
---------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
to to to to to
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 2.434 $ 1.963 $ 1.950 $ 1.621 $ 1.453
2. Accumulation unit value at end of period.......... 2.587 2.434 1.963 1.950 1.621
3. Number of accumulation units outstanding at
end of period................................... 67,080,104 57,549,789 59,624,634 64,761,817 72,695,150
---------------------------------------------------------------
<CAPTION>
High Yield Bond
---------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
to to to to to
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.220 $ 0.887 $ 1.019 $ 1.052 $ 0.941
2. Accumulation unit value at end of period.......... 1.417 1.220 0.887 1.019 1.052
3. Number of accumulation units outstanding at
end of period................................... 8,951,297 5,593,083 5,320,712 8,625,344 6,337,850
---------------------------------------------------------------
<CAPTION>
Stock Index
---------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
to to to to to
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.548 $ 1.208 $ 1.268 $ 0.980 $ 0.859
2. Accumulation unit value at end of period.......... 1.639 1.548 1.208 1.268 0.980
3. Number of accumulation units outstanding at
end of period................................... 19,968,362 12,084,160 5,936,971 4,352,361 960,235
---------------------------------------------------------------
<CAPTION>
Equity Income
---------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89 02/01/88*
to to to to to
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.596 $ 1.267 $ 1.332 $ 1.099 $ 1.000
2. Accumulation unit value at end of period.......... 1.737 1.596 1.267 1.332 1.099
3. Number of accumulation units outstanding at
end of period................................... 8,359,974 3,601,671 2,596,033 1,812,915 438,001
* Commencement of Business
The financial statements of the Account are in the Statement of Additional Information.
</TABLE>
23
<PAGE>
ACCUMULATION UNIT VALUES
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
(Condensed Financial Information) (Continued)
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------
Equity
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 6.996 $ 5.680 $ 4.850 $ 3.738 $ 3.681 $ 3.056
2. Accumulation unit value at end of period.......... 7.559 6.996 5.680 4.850 3.738 3.681
3. Number of accumulation units outstanding at
end of period................................... 42,333,211 47,230,540 50,992,740 48,356,691 44,189,146 39,039,555
----------------------------------------------------------------------------
<CAPTION>
Prudential Jennison
--------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95*
to to to to
12/31/98 12/31/97 12/31/96 12/31/95
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.832 $ 1.408 $ 1.245 $ 1.009
2. Accumulation unit value at end of period.......... 2.489 1.832 1.408 1.245
3. Number of accumulation units outstanding at
end of period................................... 20,612,417 11,790,707 8,907,930 3,331,892
-------------------------------------------------
<CAPTION>
Small Capitalization Stock
--------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95*
to to to to
12/31/98 12/31/97 12/31/96 12/31/95
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.742 $ 1.408 $ 1.190 $ 1.002
2. Accumulation unit value at end of period.......... 1.708 1.742 1.408 1.190
3. Number of accumulation units outstanding at
end of period................................... 10,647,324 8,957,289 5,169,868 1,491,116
--------------------------------------------------
<CAPTION>
Global
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.917 $ 1.814 $ 1.533 $ 1.339 $ 1.425 $ 1.007
2. Accumulation unit value at end of period.......... 2.370 1.917 1.814 1.533 1.339 1.425
3. Number of accumulation units outstanding at
end of period................................... 16,442,502 19,189,192 21,007,801 18,445,275 20,295,941 5,444,571
----------------------------------------------------------------------------
<CAPTION>
Natural Resources
----------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
to to to to to to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 2.481 $ 2.840 $ 2.196 $ 1.751 $ 1.851 $ 1.497
2. Accumulation unit value at end of period.......... 2.032 2.481 2.840 2.196 1.751 1.851
3. Number of accumulation units outstanding at
end of period................................... 7,014.841 9,429,004 10,476,240 8,792,973 8,870,868 5,634,046
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------
Equity
---------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
to to to to to
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 2.709 $ 2.176 $ 2.323 $ 1.812 $ 1.567
2. Accumulation unit value at end of period.......... 3.056 2.709 2.176 2.323 1.812
3. Number of accumulation units outstanding at
end of period................................... 29,987,497 25,189,460 23,155,951 24,216,949 26,268,202
---------------------------------------------------------------
<CAPTION>
Global
--------------------------------------------------
01/01/92 01/01/91 01/01/90 05/01/89
to to to to
12/31/92 12/31/91 12/31/90 12/31/89
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.056 $ 0.959 $ 1.115 $ 1.015
2. Accumulation unit value at end of period.......... 1.007 1.056 0.959 1.115
3. Number of accumulation units outstanding at
end of period................................... 1,299,663 1,247,336 610,872 125,853
--------------------------------------------------------------
<CAPTION>
Natural Resources
--------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89 05/01/88*
to to to to to
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1. Accumulation unit value at beginning of period.... $ 1.412 $ 1.295 $ 1.391 $ 1.038 $ 1.000
2. Accumulation unit value at end of period.......... 1.497 1.412 1.295 1.391 1.038
3. Number of accumulation units outstanding at
end of period................................... 3,079,123 3,120,415 3,256,246 1,098,505 280,510
* Commencement of Business
The financial statements of the Account are in the Statement of Additional Information.
</TABLE>
24
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 199?9
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, 1999, which is
available without charge upon written request to The Prudential Insurance
Company of America, 751 Broad Street, Newark New Jersey 07102-3777, or by
telephoning (888) PRU - 2888.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
751 Broad Street
Newark, New Jersey 07102-3777
Telephone: (888) PRU- 2888
VIP-1B Ed 5-9 9
Catalog # 64M099
<PAGE>
CONTENTS
PAGE
----
OTHER INFORMATION CONCERNING THE ACCOUNT................................. 1
Company................................................................ 1
Directors and Officers................................................. 1
Further Information Regarding Previously Offered Variable
Investment Plan Contracts............................................ 4
Distribution of the Contract........................................... 6
Participation in Divisible Surplus..................................... 6
Performance Information................................................ 7
Comparative Performance Information.................................... 7
Experts................................................................ 9
Legal Opinions......................................................... 9
Federal Tax Status..................................................... 9
Financial Statements................................................... 10
FINANCIAL STATEMENTS OF THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT
ACCOUNT................................................................ A-1
CONSOLIDATED FINANCIAL STATEMENTS OF THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA AND SUBSIDIARIES............................................ B-1
DETERMINATION OFACCUMULATION UNIT VALUES AND OF THE AMOUNT OF MONTHLY
VARIABLE ANNUITY PAYMENTS.............................................. C-1
A. Accumulation Unit Values.......................................... C-1
B. Determination of the Amount of Monthly Variable Annuity Payment... C-1
<PAGE>
COMPANY
The Prudential Insurance Company of America ("Prudential") is a mutual insurance
company founded in 1875 under the laws of the state of New Jersey. Prudential is
licensed to sell life insurance and annuities in the District of Columbia, Guam
and in all states.
DIRECTORS
FRANKLIN E. AGNEW--Director since 1994 (current term expires April, 2000).
Member, Committee on Finance & Dividends; Member, Corporate Governance
Committee. Business consultant since 1986. Senior Vice President, H.J. Heinz
from 1971 to 1986. Mr. Agnew is also a director of Bausch & Lomb, Inc. and Erie
Plastics Corporation. Age 64. Address: 600 Grant Street, Suite 660, Pittsburgh,
PA 15219.
FREDERICK K. BECKER--Director since 1994 (current term expires April, 2005).
Member, Auditing Committee; Member, Corporate Governance Committee. President,
Wilentz Goldman and Spitzer, P.A. (law firm) since 1989, with firm since 1960.
Age 63. Address: 90 Woodbridge Center Drive, Woodbridge, NJ 07095.
GILBERT F. CASELLAS--Director since 1998 (current term expires April, 2003).
Member, Compensation Committee. President, The Swarthmore Group, Inc. since
1999. Partner, McConnell Valdes, LLP in 1998. Chairman, U.S. Equal Employment
Opportunity Commission from 1994 to 1998. Age 46. Address: 1646 West Chester
Pike, Suite 3, West Chester, PA 19382.
JAMES G. CULLEN--Director since 1994 (current term expires April, 2001). Member,
Compensation Committee; Member, Committee on Business Ethics. President & Chief
Operating Officer, Bell Atlantic Corporation, since 1998. President & Chief
Executive Officer, Telecom Group, Bell Atlantic Corporation, from 1997 to 1998.
Vice Chairman, Bell Atlantic Corporation from 1995 to 1997. President, Bell
Atlantic Corporation from 1993 to 1995. Mr. Cullen is also a director of Bell
Atlantic Corporation and Johnson & Johnson. Age 56. Address: 1310 North Court
House Road, 11th Floor, Alexandria, VA 22201.
CAROLYNE K. DAVIS--Director since 1989 (current term expires April, 2001).
Member, Committee on Business Ethics; Member, Compensation Committee.
Independent Health Care Advisor since 1997. National and International Health
Care Advisor, Ernst & Young, LLP from 1985 to 1997. Dr. Davis is also a director
of Beckman Coulter Instruments, Inc., Merck & Co., Inc., Minimed Incorporated,
and Beverley Enterprises. Age 67. Address: 751 Broad Street, 23rd Floor, Newark,
NJ 07102.
ROGER A. ENRICO--Director since 1994 (current term expires April, 2002). Member,
Committees on Nominations & Corporate Governance; Member, Compensation
Committee. Chairman and Chief Executive Officer, PepsiCo, Inc. since 1996. Mr.
Enrico originally joined PepsiCo, Inc. in 1971. Mr. Enrico is also a director of
A.H. Belo Corporation and Dayton Hudson Corporation. Age 54. Address: 700
Anderson Hill Road, Purchase, NY 10577.
ALLAN D. GILMOUR--Director since 1995 (current term expires April, 2003).
Member, Investment Committee; Member, Committee on Finance & Dividends. Retired
since 1995. Vice Chairman, Ford Motor Company, from 1993 to 1995. Mr. Gilmour
originally joined Ford in 1960. Mr. Gilmour is also a director of Whirlpool
Corporation, MeidiaOne Group, Inc., AP Automotive Systems, Inc., The Dow
Chemical Company and DTE Energy Company. Age 64. Address: 751 Broad Street, 23rd
Floor, Newark, NJ 07102.
WILLIAM H. GRAY, III--Director since 1991 (current term expires April, 2000).
Chairman, Committees on Nominations & Corporate Governance. Member, Executive
Committee; Member, Committee on Business Ethics. President and Chief Executive
Officer, The College Fund/UNCF since 1991. Mr. Gray served in Congress from 1979
to 1991. Mr. Gray is also a director of Chase Manhattan Corporation, Municipal
Bond Investors Assurance Corporation, Rockwell International Corporation,
Union-Pacific Corporation, Warner-Lambert Company, CBS Corporation, and
Electronic Data Systems. Age 57. Address: 8260 Willow Oaks Corp. Drive, Fairfax,
VA 22031-4511.
JON F. HANSON--Director since 1991 (current term expires April, 2003). Member,
Investment Committee; Member, Committee on Business Ethics. Chairman, Hampshire
Management Company since 1976. Mr. Hanson is also a director of James E. Hanson
Management Company, Neumann Distributors, Inc., Fleet Trust and Investment
Services Company, N.A., United Water Resources, Orange & Rockland Utilities,
Inc., and Consolidated Delivery and Logistics. Age 62. Address: 235 Moore
Street, Suite 200, Hackensack, NJ 07601.
GLEN H. HINER, JR.--Director since 1997 (current term expires April, 2001).
Member, Compensation Committee. Chairman and Chief Executive Officer, Owens
Corning since 1991. Senior Vice President and Group Executive,
1
<PAGE>
Plastics Group, General Electric Company from 1983 to 1991. Mr. Hiner is also a
director of Dana Corporation and Owens Corning. Age 64. Address: One Owens
Corning Parkway, Toledo, OH 43659.
CONSTANCE J. HORNER--Director since 1994 (current term expires April, 2002).
Member, Auditing Committee; Member, Committees on Nominations & Corporate
Governance. Guest Scholar, The Brookings Institution since 1993. Ms. Horner is
also a director of Foster Wheeler Corporation, Ingersoll-Rand Company, and
Pfizer, Inc. Age 56. Address: 1775 Massachusetts Ave., N.W. Washington, D.C.
20036-2188.
GAYNOR N. KELLEY--Director since 1997 (current term expires April, 2001).
Member, Auditing Committee. Retired since 1996. Chairman and Chief Executive
Officer, The Perkin Elmer Corporation from 1990 to 1996. Mr. Kelley is also a
director of Hercules Incorporated, and Alliant Techsystems. Age 67. Address:
751 Broad Street, 23rd Floor, Newark, NJ 07102-3777.
BURTON G. MALKIEL--Director since 1978 (current term expires April, 2002).
Chairman, Investment Committee; Member, Executive Committee; Member, Committee
on Finance & Dividends. Professor of Economics, Princeton University, since
1988. Dr. Malkiel is also a director of Banco Bilbao Vizcaya, Baker Fentress &
Company, The Jeffrey Company, The Southern New England Telecommunications
Company, and Vanguard Group, Inc. Age 66. Address: Princeton University, 110
Fisher Hall, Prospect Avenue, Princeton, NJ 08544-1021.
ARTHUR F. RYAN--Chairman of the Board, President and Chief Executive Officer of
Prudential since 1994. President and Chief Operating Officer, Chase Manhattan
Bank from 1990 to 1994, with Chase since 1972. Age 56. Address: 751 Broad
Street, Newark, NJ 07102.
IDA F.S. SCHMERTZ--Director since 1997 (current term expires April, 2004).
Member, Audit Committee. Principal, Investment Strategies International since
1994. Age 64. Address: 751 Broad Street, 23rd Floor, Newark, NJ 07102.
CHARLES R. SITTER--Director since 1995 (current term expires April, 2003).
Member, Committee on Finance & Dividend; Member, Investment Committee. Retired
since 1996. President, Exxon Corporation from 1993 to 1996. Mr. Sitter began his
career with Exxon in 1957. Age 68. Address: 5959 Las Colinas Boulevard, Irving,
TX 75039-2298.
DONALD L. STAHELI--Director since 1995 (current term expires April, 2003).
Member, Compensation Committee; Member, Auditing Committee. Retired since 1996.
Chairman and Chief Executive Officer, Continental Grain Company from 1994 to
1997. President and Chief Executive Officer, Continental Grain Company from 1988
to 1994. Mr. Staheli is also director of Bankers Trust Company, Conti-Financial
Corporation and Continental Grain Company. Age 67 Address: 39 Locust Street,
Suite 204, New Canaan, CT 06840.
RICHARD M. THOMSON--Director since 1976 (current term expires April, 2000).
Chairman, Executive Committee; Chairman, Compensation Committee. Retired since
1998. Chairman of the Board, The Toronto-Dominion Bank from 1997 to 1998.
Chairman and Chief Executive Officer from 1978 to 1997. Mr. Thomson is also a
director of CGC, Inc., INCO, Limited, S.C. Johnson & Son, Inc., The Thomson
Corporation, Canadian Occidental Petroleum, Ltd., The Toronto-Dominion Bank and
Ontario Hydro. Age 64. Address: P.O. Box 1, Toronto-Dominion Centre, Toronto,
Ontario, M5K 1A2, Canada.
JAMES A. UNRUH--Director since 1996 (current term expires April, 2000). Member,
Committees on Nominations & Corporate Governance; Member, Investment Committee.
Retired since 1997. Chairman and Chief Executive Officer, Unisys Corporation,
from 1990 to 1997. Mr. Unruh is also a director of Ameritech Corporation and
Moss Micro. Age 57. Address: 751 Broad Street, Newark, NJ 07102-3777
P. ROY VAGELOS, M.D.--Director since 1989 (current term expires April, 2001).
Chairman, Auditing Committee; Member, Executive Committee; Member, Committees on
Nominations & Corporate Governance. Chairman, Regeneron Pharmaceuticals since
1995. Chairman, Advanced Medicines, Inc. since 1997. Chairman, Chief Executive
Officer and President, Merck & Co., Inc. from 1986 to 1995, Dr. Vagelos
originally joined Merck in 1975 Dr. Vagelos is also a director of The Estee
Lauder Companies, Inc. and PepsiCo., Inc. Age 69. Address: One Crossroads Drive,
Building A, 3rd Floor, Bedminster, NJ 07921.
STANLEY C. VAN NESS--Director since 1990 (current term expires April, 2002).
Chairman, Committee on Business Ethics; Member, Executive Committee; Member,
Auditing Committee. Partner, Herbert, Van Ness, Cayci & Goodell (law firm)
since 1998. Counselor at Law, Picco Herbert Kennedy (law firm) from 1990 to
1998. Mr. Van Ness is also a director of Jersey Central Power & Light
Company. Age 64. Address: 22 Chambers Street, Princeton, NJ 08542.
PAUL A. VOLCKER--Director since 1988 (current term expires April, 2000).
Chairman, Committee on Finance & Dividends; Member, Executive Committee; Member,
Committee on Nominations & Corporate Governance. Consultant since 1997.
Chairman, Wolfensohn & Co., Inc. 1988 to 1996 Chairman, James D. Wolfensohn,
Inc. 1988 to 1996. Chief Executive Officer, James D. Wolfensohn, Inc. from 1995
to 1996. Mr. Volcker is also a director Nestle, S.A.,
2
<PAGE>
and Bankers Trust New York Corporation as well as a Director of the Board of
Overseers of TIAA-CREF. Age 71, Address: 610 Fifth Avenue, Suite 420, New York,
NY 10020.
JOSEPH H. WILLIAMS--Director since 1994 (current term expires April, 2002).
Member, Committee on Finance & Dividends; Member, Investment Committee.
Director, The Williams Companies since 1979. Chairman & Chief Executive Officer,
The Williams Companies from 1979 to 1993. Mr. Williams is also a director of The
Orvis Company, MTC Investors, LLC., and AEA Investors, Inc. Age 65. Address: One
Williams Center, Tulsa, OK 74102.
PRINCIPAL OFFICERS
ARTHUR F. RYAN--Chairman of the Board, President and Chief Executive Officer
since 1994; prior to 1994, President and Chief Operating Officer, Chase
Manhattan Corporation. Age 56.
E. MICHAEL CAULFIELD--Executive Vice President, Financial Management since 1998;
Chief Executive Officer, Prudential Investments from 1995 to 1998; Chief
Executive Officer, Money Management Group in 1995; prior to 1995, President,
Prudential Preferred Financial Services. Age 52.
MICHELE S. DARLING--Executive Vice President, Human Resources since 1997;
prior to 1997, Executive Vice President, Canadian Imperial Bank of Commerce.
Age 45.
ROBERT C. GOLDEN--Executive Vice President, Operations and Systems since 1997;
prior to 1997, Executive Vice President, Prudential Securities,. Age 53.
MARK B. GRIER--Executive Vice President, Corporate Governance, since 1998;
Executive Vice President, Financial Management from 1997 to 1998; Chief
Financial Officer from 1995 to 1997; prior to 1995, Executive Vice President,
Chase Manhattan Corporation. Age 46.
JEAN D. HAMILTON--Executive Vice President, Institutional, since 1998;
President, Diversified Group since 1995 to 1998; prior to 1995, President,
Prudential Capital Group. Age 52.
RODGER A. LAWSON--Executive Vice President, International Investments & Global
Marketing, since 1998; Executive Vice President, Marketing and Planning from
1996 to 1998; President and CEO, Van Eck Global, from 1994 to 1996; prior to
1994, President and CEO, Global Private Banking, Bankers Trust Company. Age 52.
KIYOFUMI SAKAGUCHI--Executive Vice President, International Insurance, since
1998; President, International Insurance Group from 1995 to 1998; prior to 1995,
Chairman and CEO, The Prudential Life Insurance Co., Ltd. Age 56.
JOHN V. SCICUTELLA--Executive Vice President, Individual Financial Services,
since 1998; Chief Executive Officer, Individual Insurance Group from 1997 to
1998; Executive Vice President Operations and Systems from 1995 to 1997; prior
to 1995, Executive Vice President, Chase Manhattan Corporation. Age 49.
JOHN R. STRANGFELD--Executive Vice President, Global Asset Management, since
1998; Chief Executive Officer, Private Asset Management Group (PAMG) from 1996
to 1998; President, PAMG, from 1994 to 1996; prior to 1994, Senior Managing
Director. Age 45.
JAMES J. AVERY, JR.--Senior Vice President & Chief Actuary, Individual Insurance
Group since 1997; President Prudential Select from 1996 to 1997; prior to 1995,
Executive Vice President and Chief Operating Officer, Prudential Select. Age 47.
MARTIN A. BERKOWITZ--Senior Vice President, Financial Management, since 1998;
Senior Vice President and Comptroller from 1995 to 1998; prior to 1995, Senior
Vice President and CFO, Prudential Investment Corporation. Age 50.
WILLIAM M. BETHKE--Senior Vice President and Chief Investment Officer since
1997; prior to 1997, President, Capital Management Group. Age 51.
ANNE E. BOSSI--Senior Vice President, Institutional, since 1998; President,
Group Life & Disability 1997 to 1998; President, Group Life Insurance 1995 to
1997; prior to 1995, President, Northeastern Group Operations. Age 47
RICHARD J. CARBONE--Senior Vice President and Chief Financial Officer since
1997. Controller, Salomon Brothers from 1995 to 1997; prior to 1995, Controller,
Bankers Trust. Age 51.
THOMAS J. CARROLL-- Senior Vice President and Chief Auditor since 1999. Managing
Director, Bankers Trust Company from 1996 to 1998; prior to 1996, Global Chief
Auditor and Managing Director, Credit Suisse First Boston. Age 57.
3
<PAGE>
THOMAS W. CRAWFORD--Senior Vice President, Individual Financial Services, since
1998; President and Chief Executive Officer, Prudential Property & Casualty
Company from 1996 to 1998; Vice President, Prudential Property & Casualty
Company in 1996; prior to 1996, President & CEO, Southern Heritage Insurance
Company. Age 55.
WILLIAM D. FRIEL--Senior Vice President and Chief Information Officer since
1996; prior to 1996, Chief Executive Officer, Prudential Service Company. Age
60.
MICHAEL J. HINES--Senior Vice President, Marketing and Communications, since
1999; 1996 to 1998 Vice President, Marketing and Communications. Age 47.
RONALD P. JOELSON--Senior Vice President, Financial Management, since 1999.
Senior Vice President, Guaranteed Products from 1996 to 1999; Vice President,
Guaranteed Investments during 1996; prior to 1996, Managing Director, Retirement
Services. Age 40.
IRA J. KLEINMAN--Senior Vice President, International Insurance, since 1997;
prior to 1997, Chief Marketing & Product Development Officer. Age 51.
KATHLEEN KRALL--Senior Vice President, Individual Financial Services, since
1999; Vice President, Individual Financial Services from 1996 to 1999; Vice
President, Operations and Systems from 1995 to 1996; prior to 1995 Vice
President, Chase Manhattan Bank. Age 41.
JOYCE R. LEIBOWITZ--Senior Vice President, Management Internal Controls, since
1999; Vice President, Management Internal Controls from 1995 to 1999; prior to
1995 Integrated Control Officer. Age 51.
JOHN M. LIFTIN--Senior Vice President and General Counsel since 1998;
Self-employed from 1997 to 1998; prior to 1997 Senior Vice President and General
Counsel, Kidder & Peabody Group, Inc. Age 55.
NEIL A. MCGUINNESS--Senior Vice President, Individual Financial Services, since
1996; Director, Putnam Investments, in 1996; prior to 1996, President, Fidelity
Investment Employer Services Company. Age 52.
PRISCILLA A. MYERS--Senior Vice President, Demutualization, since 1998; Senior
Vice President and Auditor from 1995 to 1998; prior to 1995, Vice President and
Auditor. Age 48.
I. EDWARD PRICE--Senior Vice Presiden, Individual Financial Services, since
1996; Senior Vice President and Actuary from 1995 to 1996; prior to 1995, Chief
Executive Officer, Prudential International Insurance. Age 56.
ROBERT J. SULLIVAN--Senior Vice President, Individual Financial Services, since
1997; prior to 1997, Managing Director, Fidelity Investments. Age 60.
SUSAN J. BLOUNT--Vice President and Secretary since 1995; prior to 1995,
Assistant General Counsel. Age 41.
C. EDWARD CHAPLIN--Vice President and Treasurer since 1995; prior to 1995,
Managing Director and Assistant Treasurer. Age 41.
ANTHONY S. PISZEL--Vice President and Controller since 1998; Vice President,
Enterprise Financial Management from 1997 to 1998; prior to 1997, Chief
Financial Officer, Individual Insurance Group. Age 44.
FURTHER INFORMATION REGARDING PREVIOUSLY OFFERED
INDIVIDUAL VARIABLE INVESTMENT CONTRACTS
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 instead of
regular annuity payments. (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, 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
4
<PAGE>
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 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
C-1 of this 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 (10 years) 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 (10 years) 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 end 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 (10 YEARS) 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 chooses to do so.
Instead, the discounted value of the remaining 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
offered at your annuity date. 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.
DIFFERENCES UNDER THE WVA-83 CONTRACT
The descriptions of The Prudential Individual Variable Annuity Contract in the
prospectus generally apply to the VIP-86 contract (currently offered for sale),
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,
5
<PAGE>
for the purpose of determining the sales charge, as a withdrawal of
purchase payments, rather than investment income, until you have
withdrawn your total 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 depends upon two annuitants being named in the contract
does not apply to the WVA-83 contract. Therefore, any discussion in
the 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 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 C-1 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 1,000 Annuity Units will
result in the payment each month of an amount equal to the value of
6.28 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
Annuity Units (determined as described on page C-1 of the statement of
additional information) multiplied by the Annuity Unit Value at the
end of that day, if a business day, or otherwise at the end of the
last preceding business day.
DISTRIBUTION OF THE CONTRACT
Currently, Pruco Securities Corporation ("Prusec"), a wholly-owned subsidiary of
Prudential which was organized in 1971 under New Jersey law, acts as the
distributor of the contract. Prudential expects that sometime during 1999,
Prusec's responsibilities as distributor will be assigned to Prudential
Investment Management Services LLC ("PIMS"). PIMS, is also a wholly-owned
subsidiary of Prudential and is a limited liability corporation organized under
Delaware law in 1996. PIMS will act as principal underwriter under substantially
the same terms as Prusec currently does. Both Prusec and PIMS are registered as
broker-dealers under the Securities Exchange Act of 1934 and are members of the
National Association of Securities Dealer, Inc. The principal business address
of both Prusec and PIMS is 751 Broad Street, Newark, New Jersey 07102-3777.
The contract is currently sold by registered representatives of the distributor
and may also be sold through other broker-dealers authorized by the distributor.
This includes broker-dealers otherwise unaffiliated with Prudential. Registered
representatives of such other unaffiliated broker-dealers may be paid on a
different basis than registered representatives of the distributor or
broker-dealers affiliated with Prudential. The maximum commission that will be
paid to a broker-dealer to cover both the individual representative's commission
and other distribution expenses will not exceed 6% of the purchase payment. In
addition, trail commissions based on the size of the contract fund may be paid.
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 the annuity income period.
6
<PAGE>
PERFORMANCE INFORMATION
The tables that follow provide performance information for each subaccount
through December 31, 1998. 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, 1998 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.
TABLE 1
AVERAGE ANNUAL TOTAL RETURN
FROM DATE
SUBACCOUNT
ONE YEAR FIVE YEARS TEN YEARS ESTABLISHED
DATE ENDED ENDED ENDED THROUGH
SUBACCOUNT ESTABLISHED 12/31/98 12/31/98 12/31/98 12/31/98
------------ ----------- -------- -------- -------- --------
DIVERSIFIED BOND............. 6/83 -0.67 5.28 7.63 8.02
GOVERNMENT INCOME............ 5/89 1.23 4.76 N/A 7.36
CONSERVATIVE BALANCED........ 6/83 3.87 8.70 9.78 9.51
FLEXIBLE MANAGED............. 5/83 2.38 10.24 11.61 10.62
HIGH YIELD BOND.............. 2/87 -9.88 5.23 7.55 6.75
STOCK INDEX.................. 10/87 20.48 21.79 17.14 17.24
EQUITY INCOME................ 2/88 -9.90 13.01 13.50 13.36
EQUITY....................... 6/83 1.50 14.97 15.18 13.70
PRUDENTIAL JENNISON.......... 5/95 29.49 N/A N/A 27.25
SMALL CAPITALIZATION STOCK... 5/95 -8.40 N/A N/A 14.80
GLOBAL....................... 5/89 17.16 10.09 N/A 8.96
NATURAL RESOURCES............ 5/88 -23.53 1.11 6.76 6.81
REAL PROPERTY ACCOUNT........ 5/88 1.54 6.75 4.08 4.23
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; P 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 at the time the
withdrawal is made.
7
<PAGE>
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 contractowner annuitizes at the end of the period.
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 12/31/98 12/31/98 12/31/98 12/31/98
---------- ----------- ------ --------- -------- ----------
DIVERSIFIED BOND............. 6/83 5.59 5.70 7.63 8.02
GOVERNMENT INCOME............ 5/89 7.48 5.19 N/A 7.36
CONSERVATIVE BALANCED........ 6/83 10.10 9.06 9.78 9.51
FLEXIBLE MANAGED............. 5/83 8.61 10.58 11.61 10.62
HIGH YIELD BOND.............. 2/87 -3.82 5.65 7.55 6.75
STOCK INDEX.................. 10/87 26.59 21.98 17.14 17.24
EQUITY INCOME................ 2/88 -3.84 13.31 13.50 13.36
EQUITY....................... 6/83 7.74 15.24 15.18 13.70
PRUDENTIAL JENNISON.......... 5/95 35.54 N/A N/A 27.68
SMALL CAPITALIZATION STOCK... 5/95 -2.24 N/A N/A 15.42
GLOBAL....................... 5/89 23.30 10.43 N/A 8.96
NATURAL RESOURCES............ 5/88 -18.39 1.62 6.76 6.81
REAL PROPERTY ACCOUNT........ 5/88 7.79 7.14 4.08 4.23
TABLE 3 shows the cumulative total return for the subaccounts, assuming no
withdrawal.
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 12/31/98 12/31/98 12/31/98 12/31/98
------------ ----------- -------- -------- -------- -----------
DIVERSIFIED BOND............. 6/83 5.59 31.96 108.64 232.35
GOVERNMENT INCOME............ 5/89 7.48 28.77 N/A 98.69
CONSERVATIVE BALANCED........ 6/83 10.10 54.30 154.16 311.91
FLEXIBLE MANAGED............. 5/83 8.61 65.36 199.96 382.66
HIGH YIELD BOND.............. 2/87 -3.82 31.64 107.10 116.99
STOCK INDEX.................. 10/87 26.59 170.10 386.37 494.06
EQUITY INCOME................ 2/88 -3.84 86.79 254.83 290.57
EQUITY....................... 6/83 7.74 103.27 310.77 638.43
PRUDENTIAL JENNISON.......... 5/95 35.54 N/A N/A 145.07
SMALL CAPITALIZATION STOCK... 5/95 -2.24 N/A N/A 69.26
GLOBAL....................... 5/89 23.30 64.25 N/A 129.28
NATURAL RESOURCES............ 5/88 -18.39 8.37 92.31 101.91
REAL PROPERTY ACCOUNT........ 5/88 7.79 41.17 49.24 55.58
8
<PAGE>
MONEY MARKET SUBACCOUNT YIELD
The "yield" and "effective yield" of the Money Market Subaccount for the seven
days ended December 31, 1998 were 3.62% and 3.68%, 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.
EXPERTS
The consolidated financial statements of Prudential and Subsidiaries as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998 and the financial statements of the Account as of December 31,
1998 and for each of the two years in the period then ended included in this
Statement of Additional Information have been so included in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
PricewaterhouseCoopers LLP's principal business address is 1177 Avenue of the
Americas, New York, New York 10036.
LEGAL OPINIONS
Shea & Gardner of Washington, D.C., has provided advice on certain matters
relating to the federal securities laws in connection with the contract.
FEDERAL TAX STATUS
OTHER TAX RULES
o ENTITY OWNERS
Where a contract is held by a non-natural person (e.g. a corporation), other
than as an agent or nominee for a natural person (or, in other limited
circumstances), the contract will not be taxed as an annuity and increases in
the value of the contract will be subject to tax.
o PURCHASE PAYMENTS MADE BEFORE AUGUST 14, 1982
If your contract was 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. Generally, withdrawals are treated as a recovery
of your investment in the contract first until purchase payments made before
August 14, 1982 are withdrawn. Moreover, any income allocable to purchase
payments made before August 14, 1982, is not subject to the 10% penalty tax.
9
<PAGE>
o WITHHOLDING OF TAX FROM DISTRIBUTIONS
Taxable amounts distributed from annuity contracts are subject to tax
withholding. You may generally elect not to have tax withheld from your
payments. The rate of withholding on annuity payments will be determined on the
basis of the withholding certificate you file with Prudential. Absent these
elections, Prudential will withhold the tax amounts required by the applicable
tax regulations. 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.
o NONRESIDENT ALIENS
Special tax withholding rules apply to nonresident aliens.
o TRANSFERS TO YOUNGER PERSONS
If you transfer your contract to a person either 37 1/2 years younger than you,
or a grandchild, or designate such a younger person as a beneficiary, there may
be Generation Skipping Transfer tax consequences.
PLEASE CONSULT A QUALIFIED TAX ADVISER FOR COMPLETE INFORMATION AND ADVICE.
FINANCIAL STATEMENTS
The consolidated financial statements of Prudential and its subsidiaries
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.
10
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1998
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------------- --------------- -------------- ------------
ASSETS
<S> <C> <C> <C> <C> <C>
Investments in The Prudential Series Fund, Inc.
Portfolios, at net asset value [Note 3]......... $ 264,386,519 $ 217,559,213 $1,308,196,413 $ 835,286,675 $1,401,110,158
Receivable from The Prudential Insurance
Company of America [Note 2]..................... 59,949 398,933 0 92,513 100,702
------------- ------------- -------------- ------------- --------------
Net Assets........................................ $ 264,446,468 $ 217,958,146 $1,308,196,413 $ 835,379,188 $1,401,210,860
============= ============= ============== ============= ==============
NET ASSETS, representing
Equity of contract owners......................... $ 264,386,519 $ 217,559,213 $1,308,196,413 $ 835,286,675 $1,401,110,158
Equity of annuitants.............................. 59,949 398,933 0 92,513 100,702
------------- ------------- -------------- ------------- --------------
$ 264,446,468 $ 217,958,146 $1,308,196,413 $ 835,379,188 $1,401,210,860
============= ============= ============== ============= ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 THROUGH A15
A1
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
HIGH SMALL
YIELD STOCK EQUITY NATURAL GOVERNMENT PRUDENTIAL CAPITALIZATION
BOND INDEX INCOME RESOURCES GLOBAL INCOME JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------- -------------------------------- ---------------- ---------------- -------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 175,152,635 $ 670,007,466 $ 759,646,463 $ 64,446,192 $ 258,096,650 $ 220,516,883 $ 248,378,960 $ 104,084,411
0 0 0 0 0 0 0 0
- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 175,152,635 $ 670,007,466 $ 759,646,463 $ 64,446,192 $ 258,096,650 $ 220,516,883 $ 248,378,960 $ 104,084,411
=============== =============== =============== =============== =============== =============== =============== ===============
$ 175,152,635 $ 670,007,466 $ 759,646,463 $ 64,446,192 $ 258,096,650 $ 220,516,883 $ 248,378,960 $ 104,084,411
0 0 0 0 0 0 0 0
- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
$ 175,152,635 $ 670,007,466 $ 759,646,463 $ 64,446,192 $ 258,096,650 $ 220,516,883 $ 248,378,960 $ 104,084,411
=============== =============== =============== =============== =============== =============== =============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 THROUGH A15
A2
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
STATEMENTS OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE
MARKET BOND EQUITY MANAGED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ---------------- --------------- ---------------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Dividend income.................................. $ 13,378,160 $ 13,636,053 $ 25,364,009 $ 27,994,933
--------------- --------------- -------------- ---------------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk and for
administration [Note 5A]....................... 3,035,427 2,674,427 16,895,452 10,444,475
--------------- --------------- -------------- ---------------
NET INVESTMENT INCOME (LOSS)........................ 10,342,733 10,961,626 8,468,557 17,550,458
--------------- --------------- -------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............. 0 822,234 144,827,411 86,035,269
Realized gain (loss) on shares redeemed.......... 0 678,365 84,956,911 11,115,417
Net change in unrealized gain (loss) on
investments...................................... 0 231,661 (127,608,808) (39,636,425)
--------------- --------------- -------------- ---------------
NET GAIN (LOSS) ON INVESTMENTS...................... 0 1,732,260 102,175,514 57,514,261
--------------- --------------- -------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........................ $ 10,342,733 $ 12,693,886 $ 110,644,071 $ 75,064,719
=============== =============== ============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 THROUGH A15
A3
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (Continued)
- ---------------------------------------------------------------------------------------------------------------------------
CONSERVATIVE HIGH YIELD STOCK EQUITY NATURAL GOVERNMENT
BALANCE BOND INDEX INCOME RESOURCES GLOBAL INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 60,878,422 $ 18,728,616 $ 7,599,066 $ 22,763,060 $ 725,661 $ 3,418,085 $ 12,940,655
- ---------------- ---------------- --------------- --------------- --------------- --------------- ----------------
17,384,686 2,408,966 7,457,465 10,618,744 1,050,694 3,077,836 2,720,861
- ---------------- ---------------- --------------- --------------- --------------- --------------- ----------------
43,493,736 16,319,650 141,601 12,144,316 (325,033) 340,249 10,219,794
- ---------------- ---------------- --------------- --------------- --------------- --------------- ----------------
83,734,628 0 10,418,287 48,729,087 5,030,198 10,854,082 0
12,851,707 (790,210) 43,780,963 38,248,407 (6,039,489) 14,764,669 1,650,896
4,365,369 (22,198,255) 92,626,185 (129,699,817) (14,947,592) 28,186,381 5,136,878
- ---------------- ---------------- --------------- --------------- --------------- --------------- ----------------
100,951,704 (22,988,465) 146,825,435 (42,722,323) (15,956,883) 53,805,132 6,787,774
- ---------------- ---------------- --------------- --------------- --------------- --------------- ----------------
$ 144,445,440 $ (6,668,815) $ 146,967,036 $ (30,578,007) $ (16,281,916) $ 54,145,381 $ 17,007,568
================ ================ =============== =============== =============== =============== ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 THROUGH A15
A4
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
STATEMENTS OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
SUBACCOUNTS (Continued)
-----------------------------------
SMALL
PRUDENTIAL CAPITALIZATION
JENNISON STOCK
PORTFOLIO PORTFOLIO
--------------- ---------------
INVESTMENT INCOME
<S> <C> <C>
Dividend income.................................. $ 395,247 $ 592,644
--------------- ---------------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk and for
administration [Note 5A]....................... 2,178,805 1,213,628
--------------- ---------------
NET INVESTMENT INCOME (LOSS)........................ (1,783,558) (620,984)
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............. 3,660,421 6,391,614
Realized gain (loss) on shares redeemed.......... 4,398,979 1,486,431
Net change in unrealized gain (loss) on
investments...................................... 51,294,609 (9,797,860)
--------------- ---------------
NET GAIN (LOSS) ON INVESTMENTS...................... 59,354,009 (1,919,815)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........................ $ 57,570,451 $ (2,540,799)
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 THROUGH A15
A5
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
------------- -------------- ------------- ------------- -------------- -----------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss)............ $ 10,342,733 $ 11,865,194 $ 10,961,626 $ 14,111,056 $ 8,468,557 $ 15,468,973
Capital gains distributions received.... 0 0 822,234 2,678,457 144,827,411 78,732,943
Realized gain (loss) on shares redeemed. 0 0 678,365 871,425 84,956,911 45,936,231
Net change in unrealized gain (loss) on
investments........................... 0 0 231,661 (1,421,119) (127,608,808) 151,756,418
------------ ------------ ------------ ------------ -------------- -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.............................. 10,342,733 11,865,194 12,693,886 16,239,819 110,644,071 291,894,565
------------ ------------ ------------ ------------ -------------- -------------
ANNUITY PAYMENTS AND
OTHER OPERATING TRANSFERS
Contract Owner Net Payments............. 19,047,075 23,961,225 7,493,461 9,215,129 29,716,539 53,296,559
Annuity Payments........................ (11,427) (11,354) (75,573) (73,070) 0 0
Surrenders, Withdrawals and Death
Benefits................................ (85,288,504) (96,558,513) (39,747,715) (37,912,055) (227,791,649) (173,999,157)
Net Transfers From (To) Other
Subaccounts or Fixed Rate Options...... 74,158,657 (2,913,426) 9,831,958 (3,901,996) (50,984,299) (14,985,846)
Administrative and Other Charges........ (21,437) (23,125) (31,385) (34,758) (219,027) (223,209)
------------ ------------ ------------ ------------ -------------- -------------
TOTAL ANNUITY PAYMENTS AND
OTHER OPERATING
TRANSFERS............................... 7,884,364 (75,545,193) (22,529,254) (32,706,750) (249,278,436) (135,911,653)
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE ACCOUNT
[Note 7]................................ (4,079,634) 1,260,361 6,836 13,417 (2,479,523) (431,506)
------------ ------------ ----------- ------------ -------------- -------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS.................................. 14,147,463 (62,419,638) (9,828,532) (16,453,514) (141,113,888) 155,551,406
NET ASSETS
Beginning of year....................... 250,299,005 312,718,643 227,786,678 244,240,192 1,449,310,301 1,293,758,895
----------- ------------ ----------- ----------- -------------- -------------
End of year............................. $264,446,468 $250,299,005 $217,958,146 $227,786,678 $1,308,196,413 $1,449,310,301
============ ============ ============ ============ ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 THROUGH A15
A6
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (Continued)
- ----------------------------------------------------------------------------------------------------
HIGH
FLEXIBLE CONSERVATIVE YIELD
MANAGED BALANCED BOND
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
- ---------------- --------------- --------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 17,550,458 $ 16,324,558 $ 43,493,736 $ 51,542,837 $ 16,319,650 $ 16,941,410
86,035,269 136,601,647 83,734,628 162,961,825 0 0
11,115,417 17,694,945 12,851,707 18,586,761 (790,210) 1,058,521
(39,636,425) (31,167,938) 4,365,369 (59,829,935) (22,198,255) 6,571,445
- ---------------- -------------- --------------- ---------------- --------------- ---------------
75,064,719 139,453,212 144,445,440 173,261,488 (6,668,815) 24,571,376
- ---------------- -------------- --------------- ---------------- --------------- ---------------
22,415,245 32,937,745 30,313,954 46,263,316 8,252,011 8,018,507
(15,788) (14,586) (15,705) (14,685) 0 0
(142,521,722) (116,462,620) (240,337,372) (184,353,244) (35,428,319) (37,249,666)
(21,663,353) (13,383,947) (28,841,738) (20,694,955) 2,319,159 3,740,393
(228,301) (246,027) (245,663) (271,715) (18,595) (17,877)
- ---------------- -------------- --------------- ---------------- --------------- ---------------
(142,013,919) (97,169,435) (239,126,524) (159,071,283) (24,875,744) (25,508,643)
(3,918,738) 1,952,643 (7,786,414) (643,118) (13,424) (334,358)
- ---------------- -------------- --------------- ---------------- --------------- ---------------
(70,867,938) 44,236,420 (102,467,498) 13,547,087 (31,557,983) (1,271,625)
906,247,126 862,010,706 1,503,678,358 1,490,131,271 206,710,618 207,982,243
- ---------------- -------------- --------------- ---------------- --------------- ---------------
$ 835,379,188 $ 906,247,126 $ 1,401,210,860 $ 1,503,678,358 $ 175,152,635 $ 206,710,618
================ =============== =============== ================ =============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 THROUGH A15
A7
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------------
STOCK EQUITY NATURAL
INDEX INCOME RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ------------- ------------- ------------ ------------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) .......... $ 141,601 $ 1,652,929 $ 12,144,316 $ 11,675,572 $ (325,033) $ (1,015,429)
Capital gains distributions received .. 10,418,287 16,305,306 48,729,087 83,667,610 5,030,198 15,057,641
Realized gain (loss) on shares redeemed 43,780,963 18,694,963 38,248,407 22,177,266 (6,039,489) 4,265,854
Net change in unrealized gain (loss) on
investments ......................... 92,626,185 103,662,327 (129,699,817) 131,284,129 (14,947,592) (35,259,336)
------------ ------------ ------------- ------------- ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ............................ 146,967,036 140,315,525 (30,578,007) 248,804,577 (16,281,916) (16,951,270)
------------ ------------ ------------- ------------- ------------ ------------
ANNUITY PAYMENTS AND
OTHER OPERATING TRANSFERS
Contract Owner Net Payments ........... 24,500,709 35,558,028 22,166,099 26,582,983 1,759,006 8,653,651
Annuity Payments ...................... 0 0 0 0 0 0
Surrenders, Withdrawals and Death
Benefits .............................. (99,445,039) (65,696,647) (135,728,883) (102,914,098) (13,931,910) (15,898,839)
Net Transfers From (To) Other
Subaccounts or Fixed Rate Options .... 15,244,688 33,627,406 (18,894,051) 15,917,238 (20,293,516) (16,980,836)
Administrative and Other Charges ...... (84,556) (68,653) (63,403) (54,504) (17,384) (19,749)
------------ ------------ ------------- ------------- ------------ ------------
TOTAL ANNUITY PAYMENTS
AND OTHER OPERATING
TRANSFERS ............................. (59,784,198) 3,420,134 (132,520,238) (60,468,381) (32,483,804) (24,245,773)
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE ACCOUNT
[Note 7] .............................. (1,476,693) (116,556) (1,335,878) (186,017) (1,056,129) 647,536
------------ ------------ ------------- ------------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS
ASSETS ................................ 85,706,145 143,619,103 (164,434,123) 188,150,179 (49,821,849) (40,549,507)
NET ASSETS
Beginning of year ..................... 584,301,321 440,682,218 924,080,586 735,930,407 114,268,041 154,817,548
------------ ------------ ------------- ------------- ------------ ------------
End of year ........................... $670,007,466 $584,301,321 $ 759,646,463 $ 924,080,586 $ 64,446,192 $114,268,041
============ ============ ============= ============= ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 THROUGH A15
A8
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL
GOVERNMENT PRUDENTIAL CAPITALIZATION
GLOBAL INCOME JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997 1998 1997
- ----------------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 340,249 $ (44,200) $ 10,219,794 $ 12,649,525 $ (1,783,558) $ (1,117,419) $ (620,984) $ (420,865)
10,854,082 12,621,909 0 0 3,660,421 8,029,556 6,391,614 7,179,462
14,764,669 10,753,188 1,650,896 89,927 4,398,979 2,207,647 1,486,431 1,680,689
28,186,381 (7,387,766) 5,136,878 6,283,807 51,294,609 19,900,327 (9,797,860) 7,162,308
- ------------- ------------ ------------- ------------- ------------- ------------- ------------- -------------
54,145,381 15,943,131 17,007,568 19,023,259 57,570,451 29,020,111 (2,540,799) 15,601,594
- ------------- ------------ ------------- ------------- ------------- ------------- ------------- -------------
5,063,342 10,541,214 3,666,532 3,313,349 17,246,201 16,187,510 7,596,842 12,922,869
0 0 0 0 0 0 0 0
(35,899,207) (38,550,162) (43,974,647) (34,966,016) (17,922,398) (12,794,870) (11,810,054) (9,070,271)
(24,753,353) (5,350,918) 9,701,933 (20,974,599) 49,190,893 21,291,056 5,267,396 30,727,791
(26,535) (25,663) (29,963) (35,332) (28,692) (15,211) (16,231) (7,912)
- ------------- ------------ ------------- ------------- ------------- ------------- ------------- -------------
(55,615,753) (33,385,529) (30,636,145) (52,662,598) 48,486,004 24,668,485 1,037,953 34,572,477
(2,097,364) 1,851,079 (557,286) (4,594,249) (235,861) (1,042,725) (327,169) (542,063)
- ------------- ------------ ------------- ------------- ------------- ------------- ------------- -------------
(3,567,736) (15,591,319) (14,185,863) (38,233,588) (105,820,594) (52,645,871) (1,830,015) (49,632,008)
261,664,386 277,255,705 234,702,746 272,936,334 142,558,366 89,912,495 105,914,426 56,282,418
- ------------- ------------ ------------- ------------- ------------- ------------- ------------- -------------
$ 258,096,650 $ 261,664,386 $ 220,516,883 $ 234,702,746 $ 248,378,960 $ 142,558,366 $ 104,084,411 $ 105,914,426
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A10 THROUGH A15
A9
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
THE PRUDENTIAL INDIVIDUAL VARIABLE CONTRACT ACCOUNT
December 31, 1998
NOTE 1: GENERAL
The Prudential Individual Variable Contract Account (the "Account")
of The Prudential Insurance Company of America ("Prudential") was
established on October 12, 1982 by a resolution of Prudential's Board
of Directors, in conformity with insurance laws of the State of New
Jersey. The assets of the Account are segregated from Prudential's
other assets. Proceeds from the purchases of The Prudential Variable
Investment Plan ("VIP") and The Prudential Discovery Plus ("PDISCO+")
variable annuity contracts are invested in the Account.
The Account is registered under the Investment Company Act of 1940,
as amended, as a unit investment trust. The account is a funding
vehicle for individual variable annuity contracts. There are thirteen
subaccounts within the Account, each of which invests only in a
corresponding portfolio of The Prudential Series Fund, Inc. (the
"Series Fund"). The Series Fund is a diversified open-end management
investment company, and is managed by The Prudential.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of
the financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts
and disclosures. Actual results could differ from those estimates.
Investments--The investments in shares of the Series Fund are stated
at the net asset value of the respective portfolio.
Security Transactions--Realized gains and losses on security
transactions are reported on an average cost basis. Purchase and sale
transactions are recorded as of the trade date of the security being
purchased or sold.
Distributions Received--Dividend and capital gain distributions
received are reinvested in additional shares of the Series Fund and
are recorded on the ex-dividend date.
Equity of Annuitants--Equity of annuitants is the reserve for
currently payable contracts and is computed using the following: the
1983 A Mortality Table, the investment results of annuitants'
subaccounts, an assumed investment result of 3.5% and various
valuation interest rates ranging from 6.5% to 11%, depending on the
contract's year of issue.
Receivable from The Prudential Insurance Company of America--The
receivable represents amounts due from Prudential to fund annuitant
reserves.
A10
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC.
PORTFOLIOS
The net asset value per share (rounded) for each portfolio of the
Series Fund, the number of shares of each portfolio held by the
subaccounts and the aggregate cost of investments in such shares at
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Number of shares: 26,438,652 19,668,734 44,140,946 50,437,702 92,908,365
Net asset value per share (rounded): $ 10.00 $ 11.06 $ 29.64 $ 16.56 $ 15.08
Cost: $ 264,386,519 $ 215,768,974 $ 1,024,421,049 $ 831,763,261 $ 1,369,421,288
<CAPTION>
PORTFOLIOS (CONTINUED)
------------------------------------------------------------------------------------
HIGH
YIELD STOCK EQUITY NATURAL
BOND INDEX INCOME RESOURCES GLOBAL
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Number of shares: 24,300,092 17,753,245 37,920,664 5,377,929 12,199,177
Net asset value per share (rounded): $ 7.21 $ 37.74 $ 20.03 $ 11.98 $ 21.16
Cost: $ 193,627,678 $ 325,075,842 $ 625,170,351 $ 87,693,418 $ 182,723,887
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------
SMALL
GOVERNMENT PRUDENTIAL CAPITALIZATION
INCOME JENNISON STOCK
--------------- --------------- ---------------
<S> <C> <C> <C>
Number of shares: 18,576,710 10,389,443 7,075,461
Net asset value per share (rounded): $ 11.87 $ 23.91 $ 14.71
Cost: $ 210,345,749 $ 168,227,879 $ 100,955,405
</TABLE>
A11
<PAGE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding contract owner units, unit values and total value of
contract owner equity at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding (VIP)... 19,160,802 14,862,088 42,333,211 61,157,390 103,465,203
Unit Value (VIP)......................... $ 2.17869 $ 3.39660 $ 7.55872 $ 4.94447 $ 4.23790
------------ ------------ -------------- ------------ --------------
Contract Owner Equity (VIP).............. $ 41,745,447 $ 50,480,570 $ 319,984,891 $302,390,879 $ 438,475,186
------------ ------------ -------------- ------------ --------------
Contract Owner Units Outstanding (PDISCO+) 102,190,340 49,189,967 130,737,945 107,776,121 227,149,053
Unit Value (PDISCO+)..................... $ 2.17869 $ 3.39660 $ 7.55872 $ 4.94447 $ 4.23790
------------ ------------ -------------- ------------ --------------
Contract Owner Equity (PDISCO+).......... $222,641,072 $167,078,643 $ 988,211,522 $532,895,796 $ 962,634,972
------------ ------------ -------------- ------------ --------------
Total Contract Owner Equity.............. $264,386,519 $217,559,213 $1,308,196,413 $835,286,675 $1,401,110,158
============ ============ ============== ============ ==============
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------
High Yield Stock Equity Natural
Bond Index Income Resources Global
Portfolio Portfolio Portfolio Portfolio Portfolio
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding (VIP).. 14,194,497 33,545,384 28,115,406 7,014,841 16,442,502
Unit Value (VIP)........................ $ 2.22674 $ 4.84237 $ 3.96281 $ 2.03196 $ 2.36959
------------- ------------ ------------ ----------- ------------
Contract Owner Equity (VIP)............. $ 31,607,455 $162,439,163 $111,416,013 $14,253,876 $ 38,961,990
------------- ------------ ------------ ----------- ------------
Contract Owner Units Outstanding (PDISCO+) 64,464,275 104,818,158 163,578,483 24,701,429 92,477,880
Unit Value (PDISCO+).................... $ 2.22674 $ 4.84237 $ 3.96281 $ 2.03196 $ 2.36959
------------- ------------ ------------ ----------- ------------
Contract Owner Equity (PDISCO+)......... $143,545,180 $507,568,303 $648,230,450 $50,192,316 $219,134,660
------------- ------------ ------------ ----------- ------------
Total Contract Owner Equity............. $175,152,635 $670,007,466 $759,646,463 $64,446,192 $258,096,650
============ ============ ============ =========== ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------
Small
Government Prudential Capitalization
Income Jennison Stock
Portfolio Portfolio Portfolio
------------------------------------------------
<S> <C> <C> <C>
Contract Owner Units Outstanding (VIP).. 24,947,937 20,612,417 10,647,324
Unit Value (VIP)........................ $ 2.02736 $ 2.48856 $ 1.70776
------------ ------------ ------------
Contract Owner Equity (VIP)............. $ 50,578,449 $ 51,295,237 $ 18,183,074
------------ ------------ ------------
Contract Owner Units Outstanding
(PDISCO+) 83,822,525 79,195,890 50,300,591
Unit Value (PDISCO+).................... $ 2.02736 $ 2.48856 $ 1.70776
------------ ------------ ------------
Contract Owner Equity (PDISCO+)......... $169,938,434 $197,083,723 $ 85,901,337
------------ ------------ ------------
Total Contract Owner Equity............. $220,516,883 $248,378,960 $104,084,411
============ ============ ============
</TABLE>
A12
<PAGE>
NOTE 5: CHARGES AND EXPENSES
A. Mortality Risk, Expense Risk and Administrative Charges
The mortality risk and expense risk charges, at effective annual
rates of 0.8% and 0.4%, respectively (for a total of 1.2% per
year), are applied daily against the net assets representing
equity of VIP contract owners and annuitants held in each
subaccount. Mortality risk is that annuitants may live longer than
estimated and expense risk is that the cost of issuing and
administering the policies may exceed related charges by
Prudential.
The mortality risk, expense risk and administrative charges at
effective annual rates of 0.7%, 0.3% and 0.2%, respectively (for a
total of 1.2% per year), are applied daily against the net assets
representing equity of PDISCO+ contract owners held in each
subaccount. Administrative charges include costs associated with
issuing the contract, establishing and maintaining records, and
providing reports to contract owners.
B. Deferred Sales Charge
A deferred sales charge is imposed upon the withdrawals of certain
purchase payments to compensate Prudential for sales and other
marketing expenses. The amount of any sales charge will depend on
the amount withdrawn and the number of contract years that have
elapsed since the contract owner or annuitant made the purchase
payments deemed to be withdrawn. No sales charge is made against
the withdrawal of investment income. A reduced sales charge is
imposed in connection with the withdrawal of a purchase payment to
effect an annuity if three or more contract years have elapsed
since the contract date, unless the annuity effected is an annuity
certain. No sales charge is imposed upon death benefit payments or
upon transfers made between subaccounts.
C. Annual Maintenance Charge
An annual maintenance charge of $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,
including a withdrawal to effect an annuity. The charge is made by
reducing accumulation units credited to a contract owner's
account.
NOTE 6: TAXES
Prudential is taxed as a "life insurance company" as defined by the
Internal Revenue Code and the results of operations of the Account
form a part of Prudential's consolidated federal tax return. Under
current federal law, no federal income taxes are payable by the
Account. As such, no provision for tax liability has been recorded in
these financial statements.
A13
<PAGE>
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN THE ACCOUNT
The increase (decrease) in net assets retained in the account
represents the net contributions (withdrawals) of Prudential to
(from) the Account. Effective October 13, 1998 Prudential no longer
maintains a position in the Account. Previously, Prudential
maintained a position in the Account for liquidity purposes including
unit purchases and redemptions, fund share transactions and expense
processing.
NOTE 8: UNIT ACTIVITY
Transactions in units (including transfers among subaccounts) for the
years ended December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
-----------------------------------------------------------------------------------------------------
MONEY MARKET DIVERSIFIED BOND EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 162,020,025 172,221,299 14,301,983 8,561,111 14,968,731 25,456,661
Contract Owner
Redemptions: (158,372,017) (209,069,288) (21,127,390) (19,161,507) (48,934,246) (46,279,932)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------------------------------
FLEXIBLE MANAGED CONSERVATIVE BALANCED HIGH YIELD BOND
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 9,450,947 14,758,268 17,543,869 25,306,626 23,750,625 32,362,388
Contract Owner
Redemptions: (39,382,429) (37,195,798) (76,785,137) (68,458,695) (34,650,846) (43,990,813)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------------------------------
STOCK INDEX EQUITY INCOME NATURAL RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 27,342,157 42,552,393 23,428,982 27,819,691 3,558,351 12,847,677
Contract Owner
Redemptions: (41,806,266) (41,080,235) (56,512,147) (44,765,652) (17,442,303) (21,611,690)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------------------------------
GLOBAL GOVERNMENT INCOME PRUDENTIAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 22,539,970 48,281,857 19,860,202 7,504,633 54,234,114 40,667,682
Contract Owner
Redemptions: (49,189,366) (65,322,630) (35,648,299) (37,417,577) (32,139,539) (26,227,876)
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------
SMALL CAPITALIZATION STOCK
PORTFOLIO
----------------------------------
1998 1997
----------------------------------
<S> <C> <C>
Contract Owner
Contributions: 33,038,958 59,912,349
Contract Owner
Redemptions: (32,730,568) (38,855,387)
</TABLE>
A14
<PAGE>
NOTE 9: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of
investments in the Series Fund for the year ended December 31, 1998
were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------------------
Money Diversified Flexible Conservative
Market Bond Equity Managed Balanced
-------------- --------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Purchases........................... $ 127,604,290 $ 16,713,425 $ 8,553,429 $ 2,117,228 $ 1,701,485
Sales............................... $ (126,894,941) $ (41,591,607) $ (277,206,842) $ (158,586,873) $ (266,099,812)
<CAPTION>
PORTFOLIOS (CONTINUED)
---------------------------------------------------------------------------------
High Yield Stock Equity Natural
Bond Index Income Resources Global
-------------- -------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Purchases........................... $ 19,310,659 $ 23,010,668 $ 8,624,608 $ 785,582 $ 4,508,243
Sales............................... $ (46,608,792) $ (91,729,024) $ (153,099,467) $ (35,376,210) $ (65,299,197)
<CAPTION>
PORTFOLIOS (CONTINUED)
-------------------------------------------------
Small
Government Prudential Capitalization
Income Jennison Stock
-------------- -------------- ----------------
<S> <C> <C> <C>
Purchases........................... $ 7,186,717 $ 66,225,607 $ 23,799,554
Sales............................... $ (41,101,010) $ (20,154,268) $ (24,302,397)
</TABLE>
A15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of the
Prudential Individual Variable Contract Account
and the Board of Directors of
The Prudential Insurance Company of America
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets present fairly, in all
material respects, the financial position of the subaccounts (Money Market
Portfolio, Diversified Bond Portfolio, Equity Portfolio, Flexible Managed
Portfolio, Conservative Balanced Portfolio, High Yield Bond Portfolio, Stock
Index Portfolio, Equity Income Portfolio, Natural Resources Portfolio, Global
Portfolio, Government Income Portfolio, Prudential Jennison Portfolio and Small
Capitalization Stock Portfolio) of the Prudential Individual Variable Contract
Account at December 31, 1998, the results of each of their operations for the
year then ended and the changes in each of their net assets for each of the two
years in the period then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of The Prudential
Insurance Company of America's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of fund shares owned at December 31, 1998,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 19, 1999
A16
<PAGE>
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
CONSOLIDATED FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT ACCOUNTANTS
DECEMBER 31, 1998 AND 1997
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Policyholders of
The Prudential Insurance Company of America
In our opinion, the accompanying consolidated statements of financial position
and the related consolidated statements of operations, of changes in equity and
of cash flows present fairly, in all material respects, the financial position
of The Prudential Insurance Company of America and its subsidiaries at December
31, 1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 26, 1999
2
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 1998 AND 1997 (IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
ASSETS
Fixed maturities:
Available for sale, at fair value (amortized cost, 1998: $76,997; 1997: $71,496) $ 80,158 $ 75,270
Held to maturity, at amortized cost (fair value, 1998: $17,906; 1997: $19,894) 16,848 18,700
Trading account assets, at fair value 8,888 6,347
Equity securities, available for sale, at fair value (cost, 1998: $2,583; 1997: $2,376) 2,759 2,810
Mortgage loans on real estate 16,495 16,004
Investment real estate 801 1,519
Policy loans 7,476 7,034
Securities purchased under agreements to resell 10,252 8,661
Cash collateral for borrowed securities 5,622 5,047
Other long-term investments 2,658 2,489
Short-term investments 9,781 12,106
--------- ---------
Total investments 161,738 155,987
Cash 1,943 1,859
Accrued investment income 1,795 1,909
Broker-dealer related receivables 10,142 8,442
Deferred policy acquisition costs 6,462 6,083
Other assets 15,721 11,452
Separate Account assets 81,621 73,839
--------- ---------
TOTAL ASSETS $ 279,422 $ 259,571
========= =========
LIABILITIES AND EQUITY
LIABILITIES
Future policy benefits $ 69,129 $ 67,367
Policyholders' account balances 30,974 33,246
Unpaid claims and claim adjustment expenses 3,860 4,864
Policyholders' dividends 1,444 1,269
Securities sold under agreements to repurchase 21,486 12,347
Cash collateral for loaned securities 7,132 14,117
Income taxes payable 785 500
Broker-dealer related payables 6,530 3,338
Securities sold but not yet purchased 5,771 3,648
Other liabilities 16,169 14,659
Short-term debt 10,082 6,774
Long-term debt 4,734 4,273
Separate Account liabilities 80,931 73,451
--------- ---------
Total liabilities 259,027 239,853
--------- ---------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 16)
EQUITY
Accumulated other comprehensive income 1,232 1,661
Retained earnings 19,163 18,057
--------- ---------
Total equity 20,395 19,718
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 279,422 $ 259,571
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums $ 9,024 $ 9,005 $ 9,999
Policy charges and fee income 1,462 1,434 1,490
Net investment income 9,520 9,456 9,461
Realized investment gains, net 2,630 2,168 1,128
Commissions and other income 4,451 4,481 4,512
-------- -------- --------
Total revenues 27,087 26,544 26,590
-------- -------- --------
BENEFITS AND EXPENSES
Policyholders' benefits 9,976 10,076 11,094
Interest credited to policyholders' account balances 1,806 2,044 2,251
Dividends to policyholders 2,478 2,422 2,339
General and administrative expenses 9,720 8,992 8,956
Sales practices remedies 510 1,640 410
-------- -------- --------
Total benefits and expenses 24,490 25,174 25,050
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2,597 1,370 1,540
-------- -------- --------
Income taxes
Current 1,185 101 556
Deferred (215) 306 (376)
-------- -------- --------
970 407 180
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS 1,627 963 1,360
-------- -------- --------
DISCONTINUED OPERATIONS
Loss from Healthcare operations, net of taxes (298) (353) (282)
Loss on disposal of Healthcare operations, net of taxes (223) -- --
-------- -------- --------
Net loss from discontinued operations (521) (353) (282)
-------- -------- --------
NET INCOME $ 1,106 $ 610 $ 1,078
======== ======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED OTHER COMPREHENSIVE INCOME
------------------------------------------------------
FOREIGN NET TOTAL
CURRENCY UNREALIZED PENSION ACCUMULATED OTHER
TRANSLATION INVESTMENT LIABILITY COMPREHENSIVE RETAINED TOTAL
ADJUSTMENTS GAINS ADJUSTMENT INCOME EARNINGS EQUITY
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $ (24) $ 2,397 $ -- $ 2,373 $ 16,369 $ 18,742
Comprehensive income (loss):
Net income 1,078 1,078
Other comprehensive income (loss), net of tax:
Change in foreign currency translation
adjustments (32) (32) (32)
Change in net unrealized investment gains (1,261) (1,261) (1,261)
Additional pension liability adjustment (4) (4) (4)
--------
Other comprehensive income (loss) (1,297)
--------
Total comprehensive income (loss) (219)
-----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 (56) 1,136 (4) 1,076 17,447 18,523
Comprehensive income:
Net income 610 610
Other comprehensive income (loss), net of tax:
Change in foreign currency translation
adjustments (29) (29) (29)
Change in net unrealized investment gains 616 616 616
Additional pension liability adjustment (2) (2) (2)
--------
Other comprehensive income 585
--------
Total comprehensive income 1,195
-----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 (85) 1,752 (6) 1,661 18,057 19,718
Comprehensive income:
Net income 1,106 1,106
Other comprehensive income, net of tax:
Change in foreign currency translation
adjustments 54 54 54
Change in net unrealized investment gains (480) (480) (480)
Additional pension liability adjustment (3) (3) (3)
--------
Other comprehensive income (429)
--------
Total comprehensive income 677
-----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ (31) $ 1,272 $ (9) $ 1,232 $ 19,163 $ 20,395
=============================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,106 $ 610 $ 1,078
Adjustments to reconcile net income to
net cash provided by operating activities:
Realized investment gains, net (2,660) (2,209) (1,138)
Policy charges and fee income (135) (258) (208)
Interest credited to policyholders' account balances 1,806 2,044 2,251
Depreciation and amortization 305 258 266
Loss (gain) on disposal of businesses 223 -- (116)
Change in:
Deferred policy acquisition costs (165) (142) (122)
Future policy benefits and other insurance liabilities 584 2,762 2,471
Securities purchased under agreements to resell (1,591) (3,314) (217)
Trading account assets (2,540) (1,825) (433)
Income taxes receivable/payable 594 (1,391) (937)
Cash collateral for borrowed securities (575) (2,631) (332)
Cash collateral for securities loaned (net) (6,985) 5,668 2,891
Broker-dealer related receivables/payables 1,495 (672) (607)
Securities sold but not yet purchased 2,122 1,633 251
Securities sold under agreements to repurchase 9,139 4,844 (490)
Other, net (5,168) 4,142 (1,334)
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES (2,445) 9,519 3,274
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities, available for sale 123,151 123,550 123,368
Fixed maturities, held to maturity 4,466 4,042 4,268
Equity securities, available for sale 2,792 2,572 2,162
Mortgage loans on real estate 4,839 4,299 5,731
Investment real estate 1,364 1,842 615
Other long-term investments 1,848 5,081 3,203
Disposal of businesses -- -- 52
Payments for the purchase of:
Fixed maturities, available for sale (126,742) (129,854) (125,093)
Fixed maturities, held to maturity (2,244) (2,317) (2,844)
Equity securities, available for sale (2,547) (2,461) (2,384)
Mortgage loans on real estate (4,885) (3,363) (1,906)
Investment real estate (31) (241) (142)
Other long-term investments (1,415) (4,148) (2,060)
Short-term investments (net) 2,145 (2,848) (1,915)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES 2,741 (3,846) 3,055
--------- --------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account deposits 6,955 5,020 2,676
Policyholders' account withdrawals (11,111) (9,873) (8,099)
Net increase in short-term debt 2,422 305 583
Proceeds from the issuance of long-term debt 1,940 324 93
Repayments of long-term debt (418) (464) (1,306)
-------- -------- --------
CASH FLOWS USED IN FINANCING ACTIVITIES (212) (4,688) (6,053)
-------- -------- --------
NET INCREASE IN CASH 84 985 276
CASH, BEGINNING OF YEAR 1,859 874 598
-------- -------- --------
CASH, END OF YEAR $ 1,943 $ 1,859 $ 874
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 163 $ 968 $ 793
-------- -------- --------
Interest paid $ 864 $ 708 $ 595
-------- -------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BUSINESS
The Prudential Insurance Company of America and its subsidiaries
(collectively, "the Company") provide financial services throughout the
United States and several locations worldwide. The Company's businesses
provide a full range of insurance, investment, securities brokerage and
other financial products and services to both retail consumers and
institutions. Principal products and services provided include life
insurance, property and casualty insurance, annuities, mutual funds,
pension and retirement related investments and administration, asset
management, and securities brokerage.
DEMUTUALIZATION
On February 10, 1998, the Company's Board of Directors authorized
management to take the preliminary steps necessary to allow the Company to
demutualize and become a publicly traded stock company. On July 1, 1998,
legislation was enacted in New Jersey that would permit this conversion to
occur and that specified the process for conversion. Demutualization is a
complex process involving development of a plan of reorganization, adoption
of a plan by the Company's Board of Directors, a public hearing, voting by
qualified voters and regulatory approval. There can be no assurance that
the Company will demutualize or, if it does so, when demutualization will
occur.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of The
Prudential Insurance Company of America, a mutual life insurance company,
and its consolidated subsidiaries, and those partnerships and joint
ventures in which the Company has a controlling interest. The consolidated
financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). All significant intercompany
balances and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the period. Actual results could
differ from those estimates.
INVESTMENTS
FIXED MATURITIES classified as "available for sale" are carried at
estimated fair value. Fixed maturities that the Company has both the
positive intent and ability to hold to maturity are stated at amortized
cost and classified as "held to maturity." The amortized cost of fixed
maturities are written down to estimated fair value when a decline in value
is considered to be other than temporary. Unrealized gains and losses on
fixed maturities "available for sale," net of income tax, the effect on
deferred policy acquisition costs and participating annuity contracts that
would result from the realization of unrealized gains and losses, are
included in a separate component of equity, "Accumulated other
comprehensive income."
TRADING ACCOUNT ASSETS AND SECURITIES SOLD BUT NOT YET PURCHASED are
carried at estimated fair value. Realized and unrealized gains and losses
on trading account assets and securities sold but not yet purchased are
included in "Commissions and other income."
EQUITY SECURITIES, available for sale, are comprised of common and
non-redeemable preferred stock and are carried at estimated fair value. The
associated unrealized gains and losses, net of income tax, and the effects
on deferred policy acquisition costs and participating annuity contracts
that would result from the realization of unrealized gains and losses are
included in a separate component of equity, "Accumulated other
comprehensive income."
8
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MORTGAGE LOANS ON REAL ESTATE are stated primarily at unpaid principal
balances, net of unamortized discounts and allowance for losses. The
allowance for losses is based upon a loan specific review and, for
performing loans collectively evaluated, a portfolio review. The loan
specific review includes consideration of expected future cash flows
relative to outstanding balances. The portfolio review includes
consideration of the composition of the loan portfolio, current economic
conditions, past results, current trends, the estimated aggregate value of
the underlying collateral, and other relevant environmental factors.
Impaired loans are identified by management as loans in which a probability
exists that all amounts due according to the contractual terms of the loan
agreement will not be collected. Impaired loans, identified in management's
specific review of probable loan losses, are measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate, or the fair value of the collateral if the loan is
collateral dependent.
Interest received on impaired loans, including loans that were previously
modified in a troubled debt restructuring, is either applied against the
principal or reported as revenue, according to management's judgment as to
the collectibility of principal. Management discontinues the accrual of
interest on impaired loans after the loans are 90 days delinquent as to
principal or interest, or earlier when management has serious doubts about
collectibility. When a loan is recognized as impaired, any accrued but
unpaid interest previously recorded on such loan is reversed against
interest income of the current period. Generally, a loan is restored to
accrual status only after all delinquent interest and principal are brought
current and, in the case of loans where interest has been interrupted for a
substantial period, a regular payment performance has been established.
INVESTMENT REAL ESTATE to be disposed of is carried at the lower of
depreciated cost or fair value less selling costs and is not depreciated
once classified as such. Real estate which the Company has the intent to
hold for the production of income, is carried at depreciated cost less any
write-downs to fair value for impairment losses and is reviewed for
impairment whenever events or circumstances indicate the carrying value may
not be recoverable. In reviewing recoverability, an impairment loss is
recognized for an other than temporary decline in value to the extent the
reduction in carrying values of investment real estate exceeds estimated
undiscounted future cash flows. Charges relating to real estate to be
disposed of and impairments of real estate held for investment are included
in "Realized investment gains, net." Depreciation on real estate is
computed using the straight-line method over the estimated lives of the
properties.
POLICY LOANS are carried at unpaid principal balances.
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE are treated as financing arrangements and are
carried at the amounts at which the securities will be subsequently resold
or reacquired, including accrued interest, as specified in the respective
agreements. The Company's policy is to take possession of securities
purchased under agreements to resell. The market value of securities to be
repurchased or resold is monitored, and additional collateral is requested,
where appropriate, to protect against credit exposure.
SECURITIES BORROWED AND SECURITIES LOANED are treated as financing
arrangements and are recorded at the amount of cash advanced or received.
With respect to securities loaned, the Company obtains collateral in an
amount equal to 102% and 105% of the fair value of the domestic and foreign
securities, respectively. The Company monitors the market value of
securities borrowed and loaned on a daily basis with additional collateral
obtained as necessary. Non-cash collateral received is not reflected in the
consolidated statements of financial position because the debtor typically
has the right to redeem the collateral on short notice. Substantially all
of the Company's securities borrowed contracts are with other brokers and
dealers, commercial banks and institutional clients. Substantially all of
the Company's securities loaned are with large brokerage firms.
9
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities repurchase and resale agreements and securities borrowed and
loaned transactions are used to generate net investment income and
facilitate trading activity. These instruments are short-term in nature
(usually 30 days or less) and are collateralized principally by U.S.
Government and mortgage-backed securities. The carrying amounts of these
instruments approximate fair value because of the relatively short period
of time between the origination of the instruments and their expected
realization.
OTHER LONG-TERM INVESTMENTS primarily represent the Company's investments
in joint ventures and partnerships in which the Company does not have
control and derivatives held for purposes other than trading. Joint venture
and partnership investments are recorded using the equity method of
accounting, reduced for other than temporary declines in value.
SHORT-TERM INVESTMENTS, including highly liquid debt instruments purchased
with an original maturity of twelve months or less, are carried at
amortized cost, which approximates fair value.
REALIZED INVESTMENT GAINS, NET are computed using the specific
identification method. Costs of fixed maturities and equity securities are
adjusted for impairments considered to be other than temporary. Allowances
for losses on mortgage loans on real estate are netted against asset
categories to which they apply and provisions for losses on investments are
included in "Realized investment gains, net." Decreases in the lower of
depreciated cost or fair value less selling costs of investment real estate
held for sale are recorded in "Realized investment gains, net."
CASH
Cash includes cash on hand, amounts due from banks, and money market
instruments.
DEFERRED POLICY ACQUISITION COSTS
The costs which vary with and that are related primarily to the production
of new insurance business are deferred to the extent such costs are deemed
recoverable from future profits. Such costs include certain commissions,
costs of policy issuance and underwriting, and certain variable field
office expenses. Deferred policy acquisition costs are subject to
recoverability testing at the time of policy issue and loss recognition
testing at the end of each accounting period. Deferred policy acquisition
costs, for certain products, are adjusted for the impact of unrealized
gains or losses on investments as if these gains or losses had been
realized, with corresponding credits or charges included in "Accumulated
other comprehensive income."
For participating life insurance, deferred policy acquisition costs are
amortized over the expected life of the contracts (up to 45 years) in
proportion to estimated gross margins based on historical and anticipated
future experience, which is updated periodically. The effect of changes in
estimated gross margins is reflected in earnings in the period they are
revised. Policy acquisition costs related to interest-sensitive products
and certain investment-type products are deferred and amortized over the
expected life of the contracts (periods ranging from 15 to 30 years) in
proportion to estimated gross profits arising principally from investment
results, mortality and expense margins and surrender charges based on
historical and anticipated future experience, updated periodically. The
effect of revisions to estimated gross profits on unamortized deferred
acquisition costs is reflected in earnings in the period such estimated
gross profits are revised. The average rate of assumed investment yield in
estimating expected gross margins was 9.97%, 9.39%, and 8.39% for 1998,
1997 and 1996, respectively. Deferred policy acquisition costs related to
non-participatory term insurance are amortized over the expected life of
the contracts in proportion to the premium income.
For property and casualty contracts, deferred policy acquisition costs are
amortized over the period in which related premiums are earned. Future
investment income is considered in determining the recoverability of
deferred policy acquisition costs.
10
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For disability insurance, group life insurance and most group annuities,
acquisition costs are expensed as incurred.
POLICYHOLDERS' DIVIDENDS
The amount of the dividends to be paid to policyholders is determined
annually by the Company's Board of Directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity, persistency and expense experience for the year and judgment as
to the appropriate level of statutory surplus to be retained by the
Company.
SEPARATE ACCOUNT ASSETS AND LIABILITIES
Separate Account assets and liabilities are reported at estimated fair
value and represent segregated funds which are invested for certain
policyholders, pension fund and other customers. The assets consist of
common stocks, fixed maturities, real estate related securities, real
estate mortgage loans and short term investments. The assets of each
account are legally segregated and are not subject to claims that arise out
of any other business of the Company. Investment risks associated with
market value changes are generally borne by the customers, except to the
extent of minimum guarantees made by the Company with respect to certain
accounts. The investment income and gains or losses for separate accounts
generally accrue to the policyholders and are not included in the
Consolidated Statements of Operations. Mortality, policy administration and
surrender charges on the accounts are included in "Policy charges and fee
income."
OTHER ASSETS AND OTHER LIABILITIES
Other assets consist primarily of prepaid benefit costs, reinsurance
recoverables, certain restricted assets, trade receivables and property and
equipment. Property and equipment are stated at cost less accumulated
depreciation. Depreciation is determined using the straight-line method
over the estimated useful lives of the related assets which generally range
from 3 to 40 years. Other liabilities consist primarily of trade payables
and reserves for sales practice remediation costs.
INSURANCE REVENUE AND EXPENSE RECOGNITION
Premiums from participating insurance policies are recognized when due.
Benefits are recorded as an expense when they are incurred. A liability for
future policy benefits is recorded using the net level premium method.
Premiums from non-participating group annuities with life contingencies are
recognized when due. For single premium immediate annuities and structured
settlements, premiums are recognized when due with any excess profit
deferred and recognized in a constant relationship to insurance in-force
or, for annuities, the amount of expected future benefit payments.
Amounts received as payment for interest sensitive investment contracts,
deferred annuities and participating group annuities are reported as
deposits to "Policyholders' account balances." Revenues from these
contracts are reflected in "Policy charges and fee income" and consist
primarily of fees assessed during the period against the policyholders'
account balances for mortality charges, policy administration charges,
surrender charges and interest earned from the investment of these account
balances. Benefits and expenses for these products include claims in excess
of related account balances, expenses of contract administration, interest
credited and amortization of deferred policy acquisition costs.
For disability insurance, group life insurance, and property and casualty
insurance, premiums are recognized over the period to which the premiums
relate in proportion to the amount of insurance protection provided. Claim
and claim adjustment expenses are recognized when incurred.
11
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Premiums, benefits and expenses are stated net of reinsurance ceded to
other companies. Estimated reinsurance receivables and the cost of
reinsurance are recognized over the life of the reinsured policies using
assumptions consistent with those used to account for the underlying
policies.
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Assets and liabilities of foreign operations and subsidiaries reported in
other than U.S. dollars are translated at the exchange rate in effect at
the end of the period. Revenues, benefits and other expenses are translated
at the average rate prevailing during the period. The effects of
translating the Statements of Financial Position of non-U.S. entities with
functional currencies other than the U.S. dollar are recorded, net of
related hedge gains and losses and income taxes, as "Other comprehensive
income," a separate component of equity.
COMMISSIONS AND OTHER INCOME
Commissions and other income principally includes securities and
commodities commission revenues, asset management fees, investment banking
revenue and realized and unrealized gains from trading activities of the
Company's broker-dealer subsidiary.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives are financial instruments whose values are derived from
interest rates, foreign exchange rates, various financial indices, or the
value of securities or commodities. Derivative financial instruments can be
exchange-traded or contracted in the over-the-counter market and those used
by the Company include swaps, futures, forwards and options contracts. The
Company uses derivative financial instruments to hedge market risk from
changes in interest rates or foreign currency exchange rates, and to alter
interest rate or currency exposures arising from mismatches between assets
and liabilities. Additionally, derivatives are used in the broker-dealer
business and in a limited-purpose subsidiary for trading purposes.
To qualify as a hedge, derivatives must be designated as hedges for
existing assets, liabilities, firm commitments, or anticipated transactions
which are identified and probable to occur, and effective in reducing the
market risk to which the Company is exposed. The effectiveness of the
derivatives are evaluated at the inception of the hedge and throughout the
hedge period.
DERIVATIVES HELD FOR TRADING PURPOSES are used in the Company's securities
broker-dealer business and in a limited-purpose subsidiary to meet the
needs of its customers by structuring transactions that allow customers to
manage their exposure to interest rates, foreign exchange rates, indices or
prices of securities and commodities. Trading derivative positions are
valued daily, generally by obtaining quoted market prices or through the
use of pricing models. Values are affected by changes in interest rates,
currency exchange rates, credit spreads, market volatility and liquidity.
The Company monitors these exposures through the use of various analytical
techniques.
Derivatives held for trading are recorded at fair value in "Trading account
assets," "Other liabilities" or "Receivables from/Payables to broker-dealer
clients" in the Consolidated Statements of Financial Position, and realized
and unrealized changes in fair value are included in "Commissions and other
income" of the Consolidated Statements of Operations in the periods in
which the changes occur. Cash flows from trading derivatives are reported
in the operating activities section of the Consolidated Statements of Cash
Flows.
DERIVATIVES HELD FOR PURPOSES OTHER THAN TRADING are primarily used to
hedge or reduce exposure to interest rate and foreign currency risks
associated with assets held or expected to be purchased or sold, and
liabilities incurred or expected to be incurred. Additionally, other than
trading derivatives are used to change the characteristics of the Company's
asset/liability mix consistent with the Company's risk management
activities.
12
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
See Note 14 for a discussion of the accounting treatment of derivatives
that qualify as hedges. If the Company's use of other than trading
derivatives does not meet the criteria to apply hedge accounting, the
derivatives are recorded at fair value in "Other long-term investments" or
"Other liabilities" in the Consolidated Statements of Financial Position,
and changes in their fair value are recognized in earnings in "Realized
investment gains, net" without considering changes in the hedged assets or
liabilities. Cash flows from other than trading derivative assets and
liabilities are reported in the investing activities section in the
Consolidated Statements of Cash Flows.
INCOME TAXES
The Company and its domestic subsidiaries file a consolidated federal
income tax return. The Internal Revenue Code (the "Code") limits the amount
of non-life insurance losses that may offset life insurance company taxable
income. The Code also imposes an "equity tax" on mutual life insurance
companies which, in effect, imputes an additional tax to the Company based
on a formula that calculates the difference between stock and mutual life
insurance companies' earnings. Income taxes include an estimate for changes
in the total equity tax to be paid for current and prior years.
Subsidiaries operating outside the United States are taxed under applicable
foreign statutes.
Deferred income taxes are generally recognized, based on enacted rates,
when assets and liabilities have different values for financial statement
and tax reporting purposes. A valuation allowance is recorded to reduce a
deferred tax asset to that portion that is expected to be realized.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("FASB") issued the
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("SFAS 125"). The statement provides accounting and reporting
standards for transfers and servicing of financial assets and
extinguishments of liabilities and provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. SFAS 125 became effective January 1, 1997 and
was applied prospectively. Subsequent to June 1996, FASB issued SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of SFAS 125"
("SFAS 127"). SFAS 127 delayed the implementation of SFAS 125 for one year
for certain provisions, including repurchase agreements, dollar rolls,
securities lending and similar transactions. The Company adopted the
delayed provisions of SFAS 125 in 1998. The adoption of SFAS 125 did not
have a material impact on the Company's results of operations or financial
position.
During 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income," which was issued by the FASB in June 1997. This statement defines
comprehensive income and establishes standards for reporting and displaying
comprehensive income and its components in financial statements. The
statement requires that the Company classify items of other comprehensive
income by their nature and display the accumulated balance of other
comprehensive income separately from retained earnings in the equity
section of the Statements of Financial Position. Application of this
statement did not change recognition or measurement of net income and,
therefore, did not affect the Company's financial position or results of
operations.
During 1998, the Company adopted SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which was issued by the
FASB in February 1998. This statement standardizes the disclosure
requirements for pensions and other postretirement benefits, requires
additional information on changes in the benefit obligations and fair
values of plan assets and eliminates certain disclosures. This statement is
limited to changes in reporting and presentation and does not change
recognition or measurement of pension or other postretirement benefit
plans. Therefore, its adoption did not affect the Company's financial
position or results of operations.
13
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On January 1, 1998, the Company adopted the American Institute of Certified
Public Accountants ("AICPA") Statement of Position 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments" ("SOP
97-3"). This statement provides guidance for determining when an insurance
company or other enterprise should recognize a liability for guaranty-fund
assessments as well as guidance for measuring the liability. The adoption
of SOP 97-3 did not have a material effect on the Company's financial
condition or results of operations. In June 1998, the FASB issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" which
requires that companies recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair
value. SFAS No. 133 provides, if certain conditions are met, that a
derivative may be specifically designated as (1) a hedge of the exposure to
changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment (fair value hedge), (2) a hedge of the
exposure to variable cash flows of a forecasted transaction (cash flow
hedge), or (3) a hedge of the foreign currency exposure of a net investment
in a foreign operation, an unrecognized firm commitment, an
available-for-sale security or a foreign-currency-denominated forecasted
transaction (foreign currency hedge).
SFAS No. 133 does not apply to most traditional insurance contracts.
However, certain hybrid contracts that contain features which can affect
settlement amounts similarly to derivatives may require separate accounting
for the "host contract" and the underlying "embedded derivative"
provisions. The latter provisions would be accounted for as derivatives as
specified by the statement.
Under SFAS No. 133, the accounting for changes in fair value of a
derivative depends on its intended use and designation. For a fair value
hedge, the gain or loss is recognized in earnings in the period of change
together with the offsetting loss or gain on the hedged item. For a cash
flow hedge, the effective portion of the derivative's gain or loss is
initially reported as a component of other comprehensive income and
subsequently reclassified into earnings when the forecasted transaction
affects earnings. For a foreign currency hedge, the gain or loss is
reported in other comprehensive income as part of the foreign currency
translation adjustment. For all other derivatives not designated as hedging
instruments, the gain or loss is recognized in earnings in the period of
change. The Company is required to adopt this Statement no later than
January 1, 2000 and is currently assessing the effect of the new standard.
In October 1998, the AICPA issued Statement of Position 98-7, "Deposit
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not
Transfer Insurance Risk," ("SOP 98-7"). This statement provides guidance on
how to account for insurance and reinsurance contracts that do not transfer
insurance risk. SOP 98-7 is effective for fiscal years beginning after June
15, 1999. The adoption of this statement is not expected to have a material
effect on the Company's financial position or results of operations.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform to current
year presentation.
14
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. DISCONTINUED OPERATIONS
In December 1998, the Company entered into a definitive agreement to sell
its HealthCare business to Aetna Inc. ("Aetna"). Included in this
transaction are the Company's managed medical care, point of service,
preferred provider organization and indemnity health lines, dental
business, as well as the Company's Administrative Services Only ("ASO")
businesses. The transaction was approved by the boards of directors of both
companies and is expected to be completed in the second quarter of 1999,
subject to review by federal antitrust authorities and approval by state
regulators, and other customary closing conditions. Proceeds from the sale
will consist of $500 million of cash and $500 million of Aetna three year
senior notes.
Loss from operations of discontinued businesses for 1998 includes results
through December 31, 1998 (the measurement date). The Statements of
Operations for 1997 and 1996 have been restated to conform with the 1998
presentation. Amounts within the footnotes have been adjusted, where noted,
to eliminate the impact of discontinued operations and to be consistent
with the presentation in the Consolidated Statements of Operations. The
following table presents the results of operations and the loss on the
disposal of the Company's HealthCare business, determined as of the
measurement date, which are included in "Discontinued Operations" in the
Consolidated Statements of Operations. Amounts for 1997 and 1996 include
revenues and expenses relating to a contract with the American Association
of Retired Persons for healthcare and similar coverages which was
terminated effective December 31, 1997.
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(In Millions)
<S> <C> <C> <C>
Revenues $ 7,461 $ 10,305 $ 9,187
Policyholder benefits (6,064) (8,484) (7,711)
General and administrative expenses (1,822) (2,364) (1,921)
--------- --------- ---------
Loss before income taxes (425) (543) (445)
Income tax benefit 127 190 163
--------- --------- ---------
Loss from operations (298) (353) (282)
Loss on disposal, net of tax benefit of $131 (223) - -
--------- --------- ---------
Loss from discontinued operations, net of taxes $ (521) $ (353) $ (282)
========= ========= =========
</TABLE>
The loss on disposal includes anticipated operating losses to be incurred
by the HealthCare business subsequent to the measurement date through the
expected date of the sale, as well as estimates of other costs the Company
will incur in connection with the disposition of the HealthCare business.
Actual amounts may differ from these estimates. These include costs
attributable to facilities closure and systems terminations, severance,
payments to Aetna related to the ASO business, and estimated payments in
connection with an agreement covering the fully insured medical and dental
business. The latter agreement provides for payments either to or from
Aetna in the event that medical loss ratios (i.e., incurred medical expense
divided by earned premiums) for covered businesses are either less
favorable or more favorable than levels specified in the agreement for the
years 1999 and 2000. The loss on disposition was reduced by the estimated
impact of expected modifications of certain pension and other
postretirement benefit plans in which employees of the HealthCare business
participate. This amount includes curtailment gains and the cost of
termination benefits. (See Note 9.)
15
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. DISCONTINUED OPERATIONS (CONTINUED)
The following table presents the assets and liabilities pertaining to the
Company's HealthCare business at December 31, 1998 which are included in
the Company's Consolidated Statements of Financial Position.
(In Millions)
Cash and investments $ 1,652
Other assets 1,030
-------
Total assets 2,682
Future policy benefits 1,241
Other liabilities 1,105
-------
Total liabilities 2,346
-------
Net assets $ 336
=======
4. INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES
The following tables provide additional information relating to fixed
maturities and equity securities (excluding trading account assets) as of
December 31:
<TABLE>
<CAPTION>
1998
-------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
(In Millions)
<S> <C> <C> <C> <C>
FIXED MATURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 5,761 $ 580 $ 9 $ 6,332
Obligations of U.S. states and
their political subdivisions 2,672 204 1 2,875
Foreign government bonds 3,156 253 52 3,357
Corporate securities 57,373 2,545 553 59,365
Mortgage-backed securities 7,935 208 14 8,129
Other fixed maturities 100 - - 100
-----------------------------------------------------------
Total fixed maturities available for sale $ 76,997 $ 3,790 $ 629 $ 80,158
===========================================================
EQUITY SECURITIES AVAILABLE FOR SALE $ 2,583 $ 472 $ 296 $ 2,759
===========================================================
</TABLE>
16
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
1998
------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FIXED MATURITIES HELD TO MATURITY (In Millions)
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 5 $ - $ - $ 5
Obligations of U.S. states and
their political subdivisions 62 2 1 63
Foreign government bonds 31 4 - 35
Corporate securities 16,699 1,096 49 17,746
Mortgage-backed securities 1 - - 1
Other fixed maturities 50 6 - 56
------------------------------------------------------------
Total fixed maturities held to maturity $ 16,848 $ 1,108 $ 50 $ 17,906
============================================================
<CAPTION>
1997
-------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
FIXED MATURITIES AVAILABLE FOR SALE (In Millions)
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 9,071 $ 671 $ - $ 9,742
Obligations of U.S. states and
their political subdivisions 1,529 152 - 1,681
Foreign government bonds 3,177 218 17 3,378
Corporate securities 50,043 2,611 144 52,510
Mortgage-backed securities 7,576 288 5 7,859
Other fixed maturities 100 - - 100
-----------------------------------------------------------
Total fixed maturities available for sale $ 71,496 $ 3,940 $ 166 $ 75,270
===========================================================
EQUITY SECURITIES AVAILABLE FOR SALE $ 2,376 $ 680 $ 246 $ 2,810
===========================================================
</TABLE>
17
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ----------- ----------
(In Millions)
<S> <C> <C> <C> <C>
FIXED MATURITIES HELD TO MATURITY
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 88 $ - $ - $ 88
Obligations of U.S. states and
their political subdivisions 152 4 1 155
Foreign government bonds 33 5 - 38
Corporate securities 18,282 1,212 34 19,460
Mortgage-backed securities 1 - - 1
Other fixed maturities 144 8 - 152
------------------------------------------------------------
Total fixed maturities held to maturity $ 18,700 $ 1,229 $ 35 $ 19,894
============================================================
</TABLE>
18
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
The amortized cost and estimated fair value of fixed maturities by
contractual maturities at December 31, 1998, is shown below:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------- -----------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
------------ -------------- ----------- ----------
(In Millions) (In Millions)
<S> <C> <C> <C> <C>
Due in one year or less $ 2,638 $ 2,644 $ 730 $ 736
Due after one year through five years 17,551 17,874 4,326 4,465
Due after five years through ten years 19,523 19,976 6,783 7,162
Due after ten years 29,350 31,535 5,008 5,542
Mortgage-backed securities 7,935 8,129 1 1
--------- ---------- -------- --------
Total $ 76,997 $ 80,158 $ 16,848 $ 17,906
========= ========== ======== ========
</TABLE>
Actual maturities may differ from contractual maturities because issuers
may have the right to call or prepay obligations.
Proceeds from the repayment of held to maturity fixed maturities during
1998, 1997 and 1996 were $4,466 million, $4,042 million and $4,268 million,
respectively. Gross gains of $135 million, $62 million and $78 million, and
gross losses of $2 million, $1 million and $7 million, were realized on
prepayment of held to maturity fixed maturities during 1998, 1997 and 1996,
respectively.
Proceeds from the sale of available for sale fixed maturities during 1998,
1997 and 1996 were $119,096 million, $120,604 million and $121,910 million,
respectively. Proceeds from the maturity of available for sale fixed
maturities during 1998, 1997 and 1996 were $ 4,055 million, $2,946 million
and $1,458 million, respectively. Gross gains of $1,765 million, $1,310
million and $1,562 million and gross losses of $443 million, $639 million
and $1,026 million were realized on sales and prepayments of available for
sale fixed maturities during 1998, 1997 and 1996, respectively.
Writedowns for impairments of fixed maturities which were deemed to be
other than temporary were $96 million, $13 million and $54 million for the
years 1998, 1997 and 1996, respectively.
During the years ended December 31, 1998 and December 31, 1997, certain
securities classified as held to maturity were transferred to the available
for sale portfolio. These actions were taken as a result of a significant
deterioration in credit worthiness. The aggregate amortized cost of the
securities transferred was $73 million and $27 million, respectively with
gross unrealized investment losses of $.4 million and gross unrealized
investment gains of $.6 million included during the years ended December
31, 1998 and 1997, respectively, in "Accumulated other comprehensive
income" at the time of the transfer.
19
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
MORTGAGE LOANS ON REAL ESTATE
The Company's mortgage loans were collateralized by the following property
types at December 31:
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
(IN MILLIONS) OF TOTAL (IN MILLIONS) OF TOTAL
------------- ---------- ------------- ----------
1998 1997
------------------------ -------------------------
Office buildings $ 4,267 25.2% $ 4,692 28.5%
Retail stores 3,021 17.9% 3,078 18.7%
Residential properties 716 4.2% 891 5.4%
Apartment complexes 4,362 25.8% 3,551 21.6%
Industrial buildings 1,989 11.8% 1,958 11.9%
Agricultural properties 1,936 11.4% 1,666 10.1%
Other 631 3.7% 618 3.8%
-------- ----- -------- -----
Subtotal 16,922 100.0% 16,454 100.0%
===== =====
Allowance for losses (427) (450)
-------- --------
Net carrying value $ 16,495 $ 16,004
======== ========
The mortgage loans are geographically dispersed throughout the United
States and Canada with the largest concentrations in California (23.8%)
and New York (9.5%) at December 31, 1998. Included in the above balances
are mortgage loans receivable from affiliated joint ventures of $87 million
and $225 million at December 31, 1998 and 1997, respectively.
Activity in the allowance for losses for all mortgage loans, for the years
ended December 31, is summarized as follows:
1998 1997 1996
----- ----- -----
(In Millions)
Allowance for losses, beginning of year $ 450 $ 515 $ 862
Additions charged to operations - - -
Release of allowance for losses - (41) (247)
Charge-offs, net of recoveries (23) (24) (100)
----- ----- -----
Allowance for losses, end of year $ 427 $ 450 $ 515
===== ===== =====
The $41 million and $247 million reductions of the mortgage loan allowance
for losses in 1997 and 1996, respectively, are primarily attributable to
the improved economic climate, changes in the nature and mix of borrowers
and underlying collateral and a significant decrease in impaired loans.
20
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
Impaired mortgage loans identified in management's specific review of
probable loan losses and related allowance for losses at December 31, are
as follows:
1998 1997
------- -------
(In Millions)
Impaired mortgage loans with allowance for losses $ 149 $ 330
Impaired mortgage loans with no allowance for losses 924 1,303
Allowance for losses (45) (97)
------- -------
Net carrying value of impaired mortgage loans $ 1,028 $ 1,536
======= =======
Impaired mortgage loans with no provision for losses are loans where the
fair value of the collateral or the net present value of the expected
future cash flows related to the loan equals or exceeds the recorded
investment. The average recorded investment in impaired loans before
allowance for losses was $1,329 million, $2,102 million and $2,842 million
during 1998, 1997 and 1996, respectively. Net investment income recognized
on these loans totaled $94 million, $140 million and $265 million for the
years ended December 31, 1998, 1997 and 1996, respectively.
INVESTMENT REAL ESTATE
The Company's "Investment real estate" of $801 million and $1,519 million
at December 31, 1998 and 1997, respectively, is held through direct
ownership. Of the Company's real estate, $675 million and $1,490 million
consists of commercial and agricultural assets held for disposal at
December 31, 1998 and 1997, respectively. Impairment losses aggregated $8
million, $40 million and $38 million for the years ended December 31, 1998,
1997 and 1996, respectively, and are included in "Realized investment
gains, net."
RESTRICTED ASSETS AND SPECIAL DEPOSITS
Assets of $3,135 million and $2,783 million at December 31, 1998 and 1997,
respectively, were on deposit with governmental authorities or trustees as
required by certain insurance laws. Additionally, assets valued at $3,727
million and $2,352 million at December 31, 1998 and 1997, respectively,
were held in voluntary trusts. Of this amount, $3,131 million and $1,801
million at December 31, 1998 and 1997, respectively, related to the
multi-state policyholder settlement as described in Note 16. The remainder
relates to trusts established to fund guaranteed dividends to certain
policyholders. The terms of these trusts provide that the assets are to be
used for payment of the designated settlement and dividend benefits, as the
case may be. Assets valued at $403 million and $632 million at December 31,
1998 and 1997, respectively, were maintained as compensating balances,
which do not legally restrict the use of the funds, or pledged as
collateral for bank loans and other financing agreements. Restricted cash
and securities of $2,366 million and $1,835 million at December 31, 1998
and 1997, respectively, were included in the consolidated financial
statements in "Other assets." The restricted cash represents funds
deposited by clients and funds accruing to clients as a result of trades or
contracts.
OTHER LONG-TERM INVESTMENTS
The Company's "Other long-term investments" of $2,658 million and $2,489
million as of December 31, 1998 and 1997, respectively, are comprised of
$1,007 million and $1,498 million in real estate related interests and
$1,651 million and $991 million of non-real estate related interests. The
Company's share of net income from such entities was $285 million, $411
million and $245 million for 1998, 1997 and 1996, respectively, and is
reported in "Net investment income."
21
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
INVESTMENT INCOME AND INVESTMENT GAINS AND LOSSES
NET INVESTMENT INCOME arose from the following sources for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In Millions)
<S> <C> <C> <C>
Fixed maturities - available for sale $ 5,366 $ 5,074 $ 4,871
Fixed maturities - held to maturity 1,406 1,622 1,793
Trading account assets 677 504 444
Equity securities - available for sale 54 52 81
Mortgage loans on real estate 1,525 1,555 1,690
Investment real estate 230 565 685
Policy loans 410 396 384
Securities purchased under agreements to resell 18 15 11
Receivables from broker-dealer clients 836 706 579
Short-term investments 725 697 702
Other investment income 415 520 559
-------- -------- --------
Gross investment income 11,662 11,706 11,799
Less investment expenses (2,035) (2,038) (2,130)
-------- -------- --------
Subtotal 9,627 9,668 9,669
Less amount relating to discontinued operations (107) (212) (208)
-------- -------- --------
Net investment income $ 9,520 $ 9,456 $ 9,461
======== ======== ========
</TABLE>
REALIZED INVESTMENT GAINS, NET, for the years ended December 31, were from
the following sources:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In Millions)
<S> <C> <C> <C>
Fixed maturities $ 1,381 $ 684 $ 513
Mortgage loans on real estate 22 68 248
Investment real estate 642 700 76
Equity securities - available for sale 427 363 267
Other 188 394 34
-------- -------- --------
Subtotal 2,660 2,209 1,138
Less amounts related to discontinued operations (30) (41) (10)
-------- -------- --------
Realized investment gains, net $ 2,630 $ 2,168 $ 1,128
======== ======== ========
</TABLE>
Based on the carrying value, assets categorized as "non-income producing"
for the year ended December 31, 1998 included in fixed maturities available
for sale, mortgage loans on real estate and other long term investments
totaled $1 million, $23 million and $13 million, respectively.
22
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS (CONTINUED)
NET UNREALIZED INVESTMENT GAINS
Net unrealized investment gains on securities available for sale are
included in the Consolidated Statements of Financial Position as a
component of "Accumulated other comprehensive income." Changes in these
amounts include reclassification adjustments to avoid double-counting in
"Comprehensive income," items that are included as part of "Net income" for
a period that also had been part of "Other comprehensive income" in earlier
periods. The amounts for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(In Millions)
<S> <C> <C> <C>
Net unrealized investment gains, beginning of year $ 1,752 $ 1,136 $ 2,397
Changes in net unrealized investment gains attributable to:
Investments:
Net unrealized investment gains (losses) on investments arising
during the period 522 1,706 (1,281)
Reclassification adjustment for gains included in net income (1,087) (631) (471)
------- ------- -------
Change in net unrealized investment gains, net of adjustments (565) 1,075 (1,752)
Impact of net unrealized investment gains on:
Future policy benefits 23 (360) 318
Deferred policy acquisition costs 62 (99) 173
------- ------- -------
Change in net unrealized investment gains (480) 616 (1,261)
------- ------- -------
Net unrealized investment gains, end of year $ 1,272 $ 1,752 $ 1,136
======= ======= =======
</TABLE>
Unrealized gains (losses) on investments arising during the periods
reported in the above table are net of income tax expense (benefit) of $282
million, $961 million and $(647) million for the years ended December 31,
1998, 1997 and 1996, respectively.
Reclassification adjustments reported in the above table for the years
ended December 31, 1998, 1997 and 1996 are net of income tax expense of
$588 million, $355 million and $238 million, respectively.
The future policy benefits reported in the above table are net of income
tax expense (benefit) of $15 million, $(203) million and $161 million for
the years ended December 31, 1998, 1997 and 1996, respectively.
Deferred policy acquisition costs in the above tables for the years ended
December 31, 1998, 1997 and 1996 are net of income tax expense (benefit) of
$36 million, $(55) million and $88 million, respectively.
23
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. DEFERRED POLICY ACQUISITION COSTS
The balances of and changes in deferred policy acquisition costs as of and
for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(In Millions)
<S> <C> <C> <C>
Balance, beginning of year $ 6,083 $ 6,095 $ 5,892
Capitalization of commissions, sales and issue expenses 1,313 1,409 1,260
Amortization (1,139) (1,176) (1,261)
Change in unrealized investment gains 77 (154) 261
Foreign currency translation 128 (91) (57)
------- ------- -------
Balance, end of year $ 6,462 $ 6,083 $ 6,095
======= ======= =======
</TABLE>
6. POLICYHOLDERS' LIABILITIES
FUTURE POLICY BENEFITS at December 31, are as follows:
1998 1997
------- -------
(In Millions)
Life insurance $48,927 $46,765
Annuities 15,360 15,469
Other contract liabilities 4,842 5,133
------- -------
Future policy benefits $69,129 $67,367
======= =======
Life insurance liabilities include reserves for death and endowment policy
benefits, terminal dividends, premium deficiency reserves, and certain
health benefits. Annuity liabilities include reserves for immediate
annuities and non-participating group annuities. Other contract liabilities
primarily consist of unearned premium and benefit reserves for group health
products.
24
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. POLICYHOLDERS' LIABILITIES (CONTINUED)
The following table highlights the key assumptions generally utilized in
calculating these reserves:
<TABLE>
<CAPTION>
PRODUCT MORTALITY INTEREST RATE ESTIMATION METHOD
- --------------------------- ------------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Life insurance Generally rates 2.5% to 7.5% Net level premium
guaranteed in calculating based on non-forfeiture
cash surrender values interest rate
Individual immediate 1983 Individual 3.5% to 11.25% Present value of
annuities Annuity Mortality expected future payments
Table with certain based on historical
modifications experience
Group annuities in 1950 Group 3.75% to 17.35% Present value of
payout status Annuity Mortality expected future
Table with certain payments
modifications based on historical
experience
Other contract liabilities - 5.3% to 7.0% Present value of
expected future
payments
based on historical
experience
</TABLE>
For the above categories, premium deficiency reserves are established, if
necessary, when the liability for future policy benefits plus the present
value of expected future gross premiums are insufficient to provide for
expected future policy benefits and expenses and to recover any unamortized
acquisition costs. A premium deficiency reserve has been recorded for the
group single premium annuity business, which consists of limited-payment,
long duration, traditional and non-participating annuities. A liability of
$1,780 million and $1,645 million is included in "Future policy benefits"
with respect to this deficiency for the years ended December 31, 1998 and
1997, respectively.
POLICYHOLDERS' ACCOUNT BALANCES at December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(In Millions)
<S> <C> <C>
Individual annuities $ 4,997 $ 5,695
Group annuities and guaranteed investment contracts 16,770 19,053
Interest-sensitive life contracts 3,566 3,258
Dividend accumulations and other 5,641 5,240
------- --------
Policyholders' account balances $30,974 $ 33,246
======= ========
</TABLE>
Policyholders' account balances for interest-sensitive life and
investment-type contracts represent an accumulation of gross premium
payments plus credited interest less withdrawals, expenses and mortality
charges.
25
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. POLICYHOLDERS' LIABILITIES (Continued)
Certain contract provisions that determine the policyholder account
balances are as follows:
<TABLE>
<CAPTION>
WITHDRAWAL/
PRODUCT INTEREST RATE SURRENDER CHARGES
--------------------------------- ------------- -----------------------------------
<S> <C> <C>
Individual annuities 3.0% to 6.6% 0% to 8% for up to 8 years
Group annuities 5.0% to 13.4% Contractually limited or subject
to market value adjustment
Guaranteed investment contracts 3.9% to 15.4% Subject to market value withdrawal
payout status provisions for any funds withdrawn
other than for benefit responsive
and contractual payments
Interest-sensitive life contracts 4.0% to 6.5% Various up to 10 years
Dividend accumulations and other 3.0% to 4.5% --
</TABLE>
26
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. POLICYHOLDERS' LIABILITIES (Continued)
Unpaid Claims and Claim Adjustment Expenses. The following table provides
a reconciliation of the activity in the liability for unpaid claims and
claim adjustment expenses for property and casualty and accident and
health insurance at December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- -------------------------- -----------------------
ACCIDENT PROPERTY ACCIDENT PROPERTY ACCIDENT PROPERTY
AND HEALTH AND CASUALTY AND HEALTH AND CASUALTY AND HEALTH AND CASUALTY
---------- ------------ ---------- ------------ ---------- -------------
(In Millions)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 $ 1,908 $ 2,956 $ 1,990 $ 3,076 $ 2,033 $ 3,053
Less reinsurance recoverables 810 535 10 553 15 557
------- ------- ------- ------- ------- -------
Net balance at January 1 1,098 2,421 1,980 2,523 2,018 2,496
------- ------- ------- ------- ------- -------
Incurred related to:
Current year 6,127 1,354 8,348 1,525 8,391 1,760
Prior years 7 (194) 102 (91) (66) (25)
------- ------- ------- ------- ------- -------
Total incurred 6,134 1,160 8,450 1,434 8,325 1,735
------- ------- ------- ------- ------- -------
Paid related to:
Current year 5,289 717 6,676 739 6,589 908
Prior years 851 681 1,854 797 1,774 800
------- ------- ------- ------- ------- -------
Total paid 6,140 1,398 8,530 1,536 8,363 1,708
------- ------- ------- ------- ------- -------
Net balance at December 31 1,092 2,183 1,900 2,421 1,980 2,523
Plus reinsurance recoverables 52 533 8 535 10 553
------- ------- ------- ------- ------- -------
Balance at December 31 $ 1,144 $ 2,716 $ 1,908 $ 2,956 $ 1,990 $ 3,076
======= ======= ======= ======= ======= =======
</TABLE>
The Accident and Health balance at December 31 includes amounts
attributable to the Company's discontinued HealthCare business: 1998 -
$1,082; 1997 - $1,757 and 1996 - $1,750.
In 1998 and 1997, the changes in provision for claims and claim adjustment
expenses for property and casualty related to prior years are primarily
driven by lower than anticipated losses for the Voluntary Auto line of
business.
The changes in provision for claims and claim adjustment expense for
accident and health related to prior years are primarily due to such
factors as changes in claim cost trends and an accelerated decline in the
indemnity health business.
The unpaid claims and claim adjustment expenses presented above consist of
unpaid claim liabilities which include estimates for liabilities
associated with reported claims and for incurred but not reported claims
based, in part, on the Company's experience. Changes in the estimated cost
to settle unpaid claims are charged or credited to the Consolidated
Statement of Operations periodically as the estimates are revised.
Accident and health unpaid claims liabilities for 1998, 1997 and 1996
included above are discounted using interest rates ranging from 3.0%
to 6.0%.
27
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. REINSURANCE
The Company participates in reinsurance in order to provide greater
diversification of business, provide additional capacity for future growth
and limit the maximum net loss potential arising from large risks. Life
reinsurance is accomplished through various plans of reinsurance,
primarily yearly renewable term and coinsurance. Property-casualty
reinsurance is placed on both a pro-rata and excess of loss basis.
Reinsurance ceded arrangements do not discharge the Company or the
insurance subsidiaries as the primary insurer. Ceded balances would
represent a liability to the Company in the event the reinsurers were
unable to meet their obligations to the Company under the terms of the
reinsurance agreements. The Company periodically reviews the financial
condition of its reinsurers and amounts recoverable therefrom, recording
an allowance when necessary for uncollectible reinsurance.
Reinsurance amounts included in the Consolidated Statements of Operations,
excluding HealthCare, for the years ended December 31, were as follows:
1998 1997 1996
------- ------ -------
(In Millions)
Direct Premiums $9,615 $9,679 $10,690
Reinsurance Assumed 65 42 13
Reinsurance Ceded (656) (716) (704)
------ ------ -------
Premiums $9,024 $9,005 $ 9,999
====== ====== =======
Policyholders' benefits ceded $ 519 $ 530 $ 571
====== ====== =======
Reinsurance recoverables, included in "Other assets" in the Company's
Consolidated Statements of Financial Position, at December 31, were as
follows:
1998 1997
------ ------
(In Millions)
Life insurance $ 620 $ 685
Property-casualty 564 554
Other reinsurance 92 65
------ ------
$1,276 $1,304
====== ======
28
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
8. SHORT-TERM AND LONG-TERM DEBT
Debt consists of the following at December 31:
SHORT-TERM DEBT
1998 1997
------- ------
(In Millions)
Commercial paper $ 7,057 $4,268
Notes payable 2,164 2,151
Current portion of long-term debt 861 355
------- ------
Total short-term debt $10,082 $6,774
======= ======
The weighted average interest rate on outstanding short-term debt was
approximately 5.4% and 6.0% at December 31, 1998 and 1997, respectively.
The Company issues commercial paper primarily to manage operating cash flows and
existing commitments, meet working capital needs and take advantage of current
investment opportunities. Commercial paper borrowings are supported by various
lines of credit.
LONG-TERM DEBT
<TABLE>
<CAPTION>
DESCRIPTION MATURITY DATES RATE 1998 1997
- ----------- -------------- ---- ----- ----
(In Millions)
<S> <C> <C> <C> <C>
Floating rate notes ("FRN") 1999 - 2005 4.04-14.00%(a) $ 729 $ 324
Long term notes 1999 - 2023 5.5% - 12% 1,318 910
Zero coupon notes 1999 8.6% (b) 364 334
Canadian dollar notes - 7.0% - 9.125% - 117
Japanese yen notes 1999 - 2000 0.5% - 4.6% 160 178
Swiss francs notes - 3.875% - 120
Canadian dollar FRN 2003 5.25%-5.89% 96 96
Surplus notes 2003 - 2025 6.875% - 8.3% 987 986
Senior notes 1999 - 2006 6.375% 393 -
Commercial paper backed by long-term
credit agreements 1,500 1,500
Other notes payable 1999 - 2017 4% - 7.5% 48 63
------- -------
Subtotal 5,595 4,628
Less: current portion of long-term debt (861) (355)
------- -------
Total long-term debt $ 4,734 $ 4,273
======= =======
</TABLE>
(a) The Company issued an S&P 500 index linked note of $29 million in September
of 1997. The interest rate on the note is based on the appreciation of the
S&P 500 index, with a contractual cap of 14%. At December 31, 1998, this
rate was 14%. Excluding this note, floating rate note interest rates were
between 4.04% - 5.50%.
(b) The rate shown for zero coupon notes represents a level yield to maturity.
29
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. SHORT-TERM AND LONG-TERM DEBT (CONTINUED)
Payment of interest and principal on the surplus notes issued after 1993,
of which $686 million were outstanding at December 31, 1998, may be made
only with the prior approval of the Commissioner of Insurance of the State
of New Jersey.
In order to modify exposure to interest rate and currency exchange rate
movements, the Company utilizes derivative instruments, primarily interest
rate swaps, in conjunction with some of its debt issues. The effect of
these derivative instruments is included in the calculation of the
interest expense on the associated debt, and as a result, the effective
interest rates on the debt may differ from the rates reflected in the
tables above. Floating rates are determined by formulas and may be subject
to certain minimum or maximum rates.
Scheduled principal repayments of long-term debt as of December 31, 1998,
are as follows: $862 million in 1999, $560 million in 2000, $327 million
in 2001, $1,816 million in 2002, $458 million in 2003 and $1,575 million
thereafter.
At December 31, 1998, the Company had $9,853 million in lines of credit
from numerous financial institutions of which $8,330 million were unused.
These lines of credit generally have terms ranging from one to five years.
Interest expense for short-term and long-term debt is $920 million,
$743 million and $618 million for the years ended December 31, 1998, 1997
and 1996, respectively.
9. EMPLOYEE BENEFIT PLANS
PENSION AND OTHER POSTRETIREMENT PLANS
The Company has funded non-contributory defined benefit pension plans
which cover substantially all of its employees. The Company also has
several non-funded non-contributory defined benefit plans covering
certain executives. Benefits are generally based on career average
earnings and credited length of service. The Company's funding policy is
to contribute annually an amount necessary to satisfy the Internal
Revenue Service contribution guidelines.
The Company provides certain life insurance and health care benefits
("Other postretirement benefits") for its retired employees, their
beneficiaries and covered dependents. The healthcare plan is
contributory; the life insurance plan is non-contributory. Substantially
all of the Company's employees may become eligible to receive benefits if
they retire after age 55 with at least 10 years of service or under
certain circumstances after age 50 with at least 20 years of continuous
service. These benefits are funded as considered necessary by Company
management.
The Company has elected to amortize its transition obligation for other
postretirement benefits over 20 years.
30
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
Prepaid and accrued benefit costs are included in "Other assets" and
"Other liabilities", respectively, in the Company's Consolidated
Statements of Financial Position. The status of these plans as of
September 30, adjusted for fourth quarter activity, is summarized below:
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
---------------------- ------------------------
1998 1997 1998 1997
-------- ------- ------- -------
(In Millions) (In Millions)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at the beginning of period $(5,557) $(5,148) $(2,128) $(2,002)
Service cost (159) (127) (35) (38)
Interest cost (397) (376) (142) (149)
Plan participants' contributions - - ( 6) (4)
Amendments (58) - - 31
Actuarial losses (600) (334) (31) (84)
Transfer to third party - 32 - -
Contractual termination benefits (30) (63) - -
Benefits paid 485 460 128 117
Foreign currency changes 7 (1) 1 1
------- ------- ------- -------
Benefit obligation at end of period $(6,309) $(5,557) $(2,213) $(2,128)
======= ======= ======= =======
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of period $ 8,489 $ 7,306 $ 1,354 $ 1,313
Actual return on plan assets 445 1,693 146 120
Transfer to third party (4) (32) - -
Contribution from pension plan - - 31 25
Employer contributions 25 16 13 9
Plan participants' contributions - - 6 4
Withdrawal under IRS Section 420 (36) (35) - -
Benefits paid (485) (460) (128) (117)
Foreign currency changes (7) 1 - -
------- ------- ------- -------
Fair value of plan assets at end of period $ 8,427 $ 8,489 $ 1,422 $ 1,354
======= ======= ======= =======
FUNDED STATUS:
Funded status at end of period $ 2,118 $ 2,932 $ (791) $ (774)
Unrecognized transition (asset) liability (554) (661) 660 707
Unrecognized prior service cost 335 327 - -
Unrecognized actuarial net gain (813) (1,644) (353) (364)
Effects of 4th quarter activity (9) (63) 2 33
------- ------- ------- -------
Net amount recognized $ 1,077 $ 891 $ (482) $ (398)
======= ======= ======= =======
AMOUNTS RECOGNIZED IN THE STATEMENTS OF FINANCIAL
POSITION CONSIST OF:
Prepaid benefit cost $ 1,348 $ 1,150 $ - $ -
Accrued benefit liability (287) (270) (482) (398)
Intangible asset 7 5 - -
Accumulated other comprehensive income 9 6 - -
-------- -------- -------- ---------
Net amount recognized $ 1,077 $ 891 $ (482) $ (398)
======== ======== ======== =========
</TABLE>
31
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plan with accumulated benefit
obligations in excess of plan assets were $384 million, $284 million and
$0, respectively, as of September 30, 1998 and $319 million, $226 million
and $ 0, respectively, as of September 30, 1997.
The effects of fourth quarter activity are summarized as follows:
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
---------------------- -----------------------
1998 1997 1998 1997
------ ------- ------ ------
(In Millions)
<S> <C> <C> <C> <C>
Effect of IRS Section 420 transfer $ - $ (36) $ - $ -
Contractual termination benefits (14) (30) - -
Contribution from pension plan - - - 31
Employer contributions 5 3 2 2
----- ------- ------ ------
Effects of 4th quarter activity $ (9) $ (63) $ 2 $ 33
====== ======= ====== ======
</TABLE>
Pension plan assets consist primarily of equity securities, bonds, real estate
and short-term investments, of which $5,926 million and $6,022 million are
included in Separate Account assets and liabilities at September 30, 1998 and
1997, respectively.
Other postretirement plan assets consist of group and individual variable life
insurance policies, group life and health contracts, common stocks, U.S.
government securities and short-term investments. Plan assets include $1,018
million and $1,044 million of Company insurance policies and contracts at
September 30, 1998 and 1997, respectively.
Effective December 31, 1996, The Prudential Securities Incorporated Cash Balance
Plan (the "PSI Plan") was merged into The Retirement System for United States
Employees and Special Agents of The Prudential Insurance Company of America (the
"Prudential Plan"). The name of the merged plan is The Prudential Merged
Retirement Plan ("Merged Retirement Plan"). All of the assets of the Merged
Retirement Plan are available to pay benefits to participants and their
beneficiaries who are covered by the Merged Retirement Plan. The merger of the
plans had no effect on the December 31, 1996 results of operations.
During 1996, the Prudential Plan was amended to provide cost of living
adjustments for retirees. The effect of this plan amendment increased benefit
obligations and unrecognized prior service cost by $170 million at September 30,
1996. In addition, the Prudential Plan was amended to provide contractual
termination benefits to certain plan participants who were notified between
September 15, 1996 and December 31, 1998 that their employment had been
terminated. Costs related to these amendments are reflected below in contractual
termination benefits.
32
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic benefit cost included in "General and administrative expenses"
in the Company's Consolidated Statements of Operations for the years ended
December 31, includes the following components:
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
----------------------------------- ------------------------------------
1998 1997 1996 1998 1997 1996
----------------------------------- ------------------------------------
(In Millions)
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFITS COSTS:
Service cost $ 159 $ 127 $ 140 $ 35 $ 38 $ 45
Interest cost 397 376 354 142 149 157
Expected return on plan assets (674) (617) (594) (119) (87) (93)
Amortization of transition amount (106) (106) (107) 47 50 53
Amortization of prior service cost 45 42 26 - - -
Amortization of actuarial net (gain) loss 1 - - (13) (13) (3)
Curtailment gain (loss) 5 - - - - (9)
Contractual termination benefits 14 30 63 - - -
------- ------- ------- ------- ------- ------
Net periodic (benefit) cost $ (159) $ (148) $ (118) $ 92 $ 137 $ 150
======= ======= ======= ======= ======= ======
</TABLE>
The assumptions at September 30, used by the Company to calculate the benefit
obligations as of that date and to determine the benefit cost in the subsequent
year are as follows:
<TABLE>
<CAPTION>
OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------------------ ----------------------------------------
1998 1997 1996 1998 1997 1996
------------------------------ ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED-AVERAGE ASSUMPTIONS:
Discount rate 6.50% 7.25% 7.75% 6.50% 7.25% 7.75%
Rate of increase in compensation levels 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Expected return on plan assets 9.50% 9.50% 9.50% 9.00% 9.00% 9.00%
Health care cost trend rates - - - 7.80-11.00% 8.20-11.80% 8.50-12.50%
Ultimate health care cost trend rate
after gradual decrease until 2006 - - - 5.00% 5.00% 5.00%
</TABLE>
33
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one-percentage point
increase and decrease in assumed health care cost trend rates would have
the following effects:
OTHER
POSTRETIREMENT BENEFITS
-----------------------
1998
------
(In Millions)
ONE PERCENTAGE POINT INCREASE
Effect on total service and interest costs $ 24
Effect on postretirement benefit obligation (226)
ONE PERCENTAGE POINT DECREASE
Effect on total service and interest costs $ (19)
Effect on postretirement benefit obligation 187
POSTEMPLOYMENT BENEFITS
The Company accrues postemployment benefits primarily for life and health
benefits provided to former or inactive employees who are not retirees. The
net accumulated liability for these benefits at December 31, 1998 and 1997
was $135 million and $144 million, respectively, and is included in "Other
liabilities."
OTHER EMPLOYEE BENEFITS
The Company sponsors voluntary savings plans for employees (401(k) plans).
The plans provide for salary reduction contributions by employees and
matching contributions by the Company of up to 3% of annual salary,
resulting in $54 million, $63 million and $57 million of expenses included in
"General and administrative expenses" for 1998, 1997 and 1996, respectively.
DISCONTINUED OPERATIONS
In connection with the disposal of the Company's HealthCare business, as more
fully discussed in Note 3, the loss on disposal was reduced by an estimated
curtailment gain of $30 million.
34
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. INCOME TAXES
The components of income tax expense for the years ended December 31, were
as follows:
1998 1997 1996
------ ------ ------
(In Millions)
Current tax expense (benefit):
U.S. $ 983 $ (14) $ 400
State and local 54 51 108
Foreign 148 64 48
------ ------ ------
Total $1,185 $ 101 $ 556
====== ====== ======
Deferred tax expense (benefit):
U.S. $ (193) $ 269 $ (428)
State and local (6) 4 (2)
Foreign (16) 33 54
------ ------ ------
Total $ (215) $ 306 $ (376)
====== ====== ======
Total income tax expense $ 970 $ 407 $ 180
====== ====== ======
The Company's income tax expense for the years ended December 31, differs from
the amount computed by applying the expected federal income tax rate of 35% to
income from continuing operations before income taxes for the following reasons:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(In Millions)
<S> <C> <C> <C>
Expected federal income tax expense $ 908 $ 480 $ 539
Equity tax (benefit) 75 (65) (365)
State and local income taxes 31 37 69
Tax-exempt interest and dividend received deduction (46) (67) (67)
Other
2 22 4
------ ------ ------
Total income tax expense $ 970 $ 407 $ 180
====== ====== ======
</TABLE>
35
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. INCOME TAXES (CONTINUED)
Deferred tax assets and liabilities at December 31, resulted from the items
listed in the following table:
1998 1997
------- -------
(In Millions)
Deferred tax assets
Insurance reserves $ 1,584 $ 1,482
Policyholder dividends 265 250
Net operating loss carryforwards 260 80
Litigation related reserves 104 178
Employee benefits 63 42
Other 134 287
------- -------
Deferred tax assets before valuation allowance 2,410 2,319
Valuation allowance (13) (18)
------- -------
Deferred tax assets after valuation allowance 2,397 2,301
------- -------
Deferred tax liabilities
Investments 1,414 1,867
Deferred policy acquisition costs 1,436 1,525
Depreciation 64 36
------- -------
Deferred tax liabilities 2,914 3,428
------- -------
Net deferred tax liability $ 517 $ 1,127
======= =======
Management believes that based on its historical pattern of taxable income, the
Company will produce sufficient income in the future to realize its deferred tax
asset after valuation allowance. Adjustments to the valuation allowance will be
made if there is a change in management's assessment of the amount of the
deferred tax asset that is realizable. At December 31, 1998 and 1997,
respectively, the Company had federal life net operating loss carryforwards of
$540 million and $1,200 million, which expire by 2012. At December 31, 1998 and
1997, respectively, the Company had state non-life operating loss carryforwards
for tax purposes approximating $1,059 million and $800 million, which expire by
2018.
The Internal Revenue Service (the "Service") has completed all examinations of
the consolidated federal income tax returns through 1989. The Service has
examined the years 1990 through 1992. Discussions are being held with the
Service with respect to proposed adjustments. Management, however, believes
there are adequate defenses against, or sufficient reserves to provide for such
adjustments. The Service has begun their examination of the years 1993 through
1995.
36
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. STATUTORY EQUITY AND INCOME
Applicable insurance department regulations require that the Company
prepare statutory financial statements in accordance with statutory
accounting practices prescribed or permitted by the New Jersey Department
of Banking and Insurance. Statutory accounting practices primarily differ
from GAAP by charging policy acquisition costs to expense as incurred,
establishing future policy benefits reserves using different actuarial
assumptions, not providing for deferred taxes, and valuing securities on a
different basis. The Company's statutory net income, as filed with the New
Jersey Department of Banking and Insurance was $1,247 million, $1,471
million and $1,402 million for the years 1998, 1997 and 1996,
respectively. Statutory capital and surplus, as filed, at December 31,
1998 and 1997 was $8,536 million and $9,242 million, respectively.
12. OPERATING LEASES
The Company and its subsidiaries occupy leased office space in many
locations under various long-term leases and have entered into numerous
leases covering the long-term use of computers and other equipment. At
December 31, 1998, future minimum lease payments under non-cancelable
operating leases are estimated as follows:
(In Millions)
1999 $ 295
2000 263
2001 231
2002 198
2003 157
Remaining years after 2003 753
-------
Total $ 1,897
=======
Amounts presented in the table above include operating leases relating to
the Company's HealthCare business. See Note 3 for a discussion of the
pending sale of this business. Amounts applicable to the HealthCare
business are $65 million in 1999, $58 million in 2000, $52 million in
2001, $45 million in 2002, $34 million in 2003 and $89 million thereafter.
Rental expense incurred for the years ended December 31, 1998, 1997 and
1996 was approximately $320 million, $352 million and $343 million,
respectively.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values presented below have been determined using
available information and valuation methodologies. Considerable judgment
is applied in interpreting data to develop the estimates of fair value.
Accordingly, such estimates presented may not be realized in a current
market exchange. The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair values.
The following methods and assumptions were used in calculating the
estimated fair values (for all other financial instruments presented in
the table, the carrying value approximates estimated fair value).
37
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
FIXED MATURITIES AND EQUITY SECURITIES
Estimated fair values for fixed maturities and equity securities, other
than private placement securities, are based on quoted market prices or
estimates from independent pricing services. Fair values for private
placement securities are estimated using a discounted cash flow model
which considers the current market spreads between the U.S. Treasury yield
curve and corporate bond yield curve, adjusted for the type of issue, its
current credit quality and its remaining average life. The fair value of
certain non-performing private placement securities is based on amounts
estimated by management.
MORTGAGE LOANS ON REAL ESTATE
The estimated fair value of the mortgage loan portfolio is primarily based
upon the present value of the scheduled future cash flows discounted at
the appropriate U.S. Treasury rate, adjusted for the current market spread
for a similar quality mortgage. For certain non-performing loans, the
estimated fair value is based upon the present value of expected future
cash flows discounted at the appropriate U.S. Treasury rate adjusted for
current market spread for a similar quality mortgage.
POLICY LOANS
The estimated fair value of policy loans is calculated using a discounted
cash flow model based upon current U.S. Treasury rates and historical loan
repayments.
DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of swap agreements is estimated based on the present value
of future cash flows under the agreements discounted at the applicable
zero coupon U.S. Treasury rate and swap spread. The fair value of
forwards, futures and options is estimated based on market quotes for a
transaction with similar terms. The estimated fair value of loan
commitments is derived by comparing the contractual stream of fees with
such fee streams adjusted to reflect current market rates that would be
applicable to instruments of similar type, maturity, and credit standing.
POLICYHOLDERS' ACCOUNT BALANCES
Estimated fair values of policyholders' account balances are derived by
using discounted projected cash flows, based on interest rates being
offered for similar contracts, with maturities consistent with those
remaining for the contracts being valued. For interest sensitive life
contracts, fair value approximates carrying value.
DEBT
The estimated fair value of short-term and long-term debt is derived by
using discount rates based on the borrowing rates currently available to
the Company for debt with similar terms and remaining maturities.
38
<PAGE>
- -------------------------------------------------------------------------------
13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following table discloses the carrying amounts and estimated fair
values of the Company's financial instruments at December 31:
<TABLE>
<CAPTION>
1998 1997
----------------------- ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
(In Millions)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Other than trading:
Fixed maturities:
Available for sale $ 80,158 $ 80,158 $ 75,270 $ 75,270
Held to maturity 16,848 17,906 18,700 19,894
Equity securities 2,759 2,759 2,810 2,810
Mortgage loans on real estate 16,495 17,265 16,004 16,703
Policy loans 7,476 8,037 7,034 7,201
Securities purchased under agreements to resell 1,737 1,737 - -
Short-term investments 9,781 9,781 12,106 12,106
Cash 1,943 1,943 1,859 1,859
Restricted Assets 2,366 2,366 1,835 1,835
Separate Account assets 81,621 81,621 73,839 73,839
Derivative financial instruments 132 135 93 92
Trading:
Trading account assets $ 8,888 $ 8,888 $ 6,347 $ 6,347
Broker-dealer related receivables 10,142 10,142 8,442 8,442
Derivative financial instruments 765 765 910 910
Securities purchased under agreements to resell 8,515 8,515 8,661 8,661
Cash collateral for borrowed securities 5,622 5,622 5,047 5,047
FINANCIAL LIABILITIES:
Other than trading:
Policyholders' account balances $ 30,974 $ 31,940 $ 33,246 $ 34,201
Securities sold under agreements to repurchase 7,085 7,085 85 85
Cash collateral for loaned securities 2,450 2,450 9,647 9,647
Short-term and long-term debt 14,816 15,084 11,047 11,131
Securities sold but not yet purchased 2,215 2,215 - -
Separate Account liabilities 80,931 80,931 73,451 73,451
Derivative financial instruments 390 391 100 99
Trading:
Broker-dealer related payables $ 6,530 $ 6,530 $ 3,338 $ 3,338
Derivative financial instruments 725 725 1,019 1,019
Securities sold under agreements to repurchase 14,401 14,401 12,262 12,262
Cash collateral for loaned securities 4,682 4,682 4,470 4,470
Securities sold but not yet purchased 3,556 3,556 3,648 3,648
</TABLE>
39
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS
INTEREST RATE SWAPS
The Company uses interest rate swaps to reduce market risks from changes in
interest rates and to alter interest rate exposures arising from mismatches
between assets and liabilities. Under interest rates swaps, the Company
agrees with other parties to exchange, at specified intervals the difference
between fixed-rate and floating-rate interest amounts calculated by
reference to an agreed notional principal amount. Generally, no cash is
exchanged at the outset of the contract and no principal payments are made
by either party. Cash is paid or received based on the terms of the swap.
These transactions are entered into pursuant to master agreements that
provide for a single net payment to be made by one counterparty at each due
date. 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.
If swap agreements meet the criteria for hedge accounting, net interest
receipts or payments are accrued and recognized over the life of the swap
agreements as an adjustment to interest income or expense of the hedged
item. Any unrealized gains or losses are not recognized until the hedged
item is sold or matures. Gains or losses on early termination of interest
rate swaps are deferred and amortized over the remaining period originally
covered by the swaps. If the criteria for hedge accounting are not met, the
swap agreements are accounted for at market value with changes in fair value
reported in current period earnings.
FUTURES AND OPTIONS
The Company uses exchange-traded Treasury futures and options to reduce
market risks from changes in interest rates, to alter mismatches between the
duration of assets in a portfolio and the duration of liabilities supported
by those assets, and to hedge against changes in the value of securities it
owns or anticipates acquiring. The Company enters into exchange-traded
futures and options with regulated futures commissions merchants who are
members of a trading exchange. The fair value of futures and options is
based on market quotes for transactions with similar terms.
Under exchange-traded futures, the Company agrees to purchase a specified
number of contracts with other parties and to post variation margin on a
daily basis in an amount equal to the difference in the daily market values
of those contracts. Futures are typically used to hedge duration mismatches
between assets and liabilities by replicating Treasury performance. Treasury
futures move substantially in value as interest rates change and can be used
to either modify or hedge existing interest rate risk. This strategy
protects against the risk that cash flow requirements may necessitate
liquidation of investments at unfavorable prices resulting from increases in
interest rates. This strategy can be a more cost effective way of
temporarily reducing the Company's exposure to a market decline than selling
fixed income securities and purchasing a similar portfolio when such a
decline is believed to be over.
If futures meet hedge accounting criteria, changes in their fair value are
deferred and recognized as an adjustment to the carrying value of the hedged
item. Deferred gains or losses from the hedges for interest-bearing
financial instruments are amortized as a yield adjustment over the remaining
lives of the hedged item. Futures that do not qualify as hedges are carried
at fair value with changes in value reported in current period earnings. The
gains and losses associated with anticipatory transactions are not material.
40
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (CONTINUED)
When the Company anticipates a significant decline in the stock market
which will correspondingly affect its diversified portfolio, it may
purchase put index options where the basket of securities in the index is
appropriate to provide a hedge against a decrease in the value of the
equity portfolio or a portion thereof. This strategy effects an orderly
sale of hedged securities. When the Company has large cash flows which it
has allocated for investment in equity securities, it may purchase call
index options as a temporary hedge against an increase in the price of the
securities it intends to purchase. This hedge permits such investment
transactions to be executed with the least possible adverse market impact.
Option premium paid or received is reported as an asset or liability and
amortized into income over the life of the option. If options meet the
criteria for hedge accounting, changes in their fair value are deferred
and recognized as an adjustment to the hedged item. Deferred gains or
losses from the hedges for interest-bearing financial instruments are
recognized as an adjustment to interest income or expense of the hedged
item. If the options do not meet the criteria for hedge accounting, they
are fair valued, with changes in fair value reported in current period
earnings.
CURRENCY DERIVATIVES
The Company uses currency derivatives, including exchange-traded currency
futures and options, currency forwards and currency swaps to reduce market
risks from changes in currency values of investments denominated in
foreign currencies that the Company either holds or intends to acquire and
to alter the currency exposures arising from mismatches between such
foreign currencies and the U.S. Dollar.
Under currency forwards, the Company agrees with other parties upon
delivery of a specified amount of specified currency at a specified future
date. Typically, the price is agreed upon at the time of the contract and
payment for such a contract is made at the specified future date. Under
currency swaps, the Company agrees with other parties to exchange, at
specified intervals, the difference between one currency and another at a
forward exchange rate and calculated by reference to an agreed principal
amount. Generally, the principal amount of each currency is exchanged at
the beginning and termination of the currency swap by each party. These
transactions are entered into pursuant to master agreements that provide
for a single net payment to be made by one counterparty for payments made
in the same currency at each due date.
If currency derivatives are effective as hedges of foreign currency
translation and transaction exposures, gains or losses are recorded in
"Accumulated other comprehensive income." If currency derivatives do not
meet hedge accounting criteria, gains or losses from those derivatives are
recognized in current period earnings.
The tables below summarize the Company's outstanding positions by
derivative instrument types as of December 31, 1998 and 1997. The amounts
presented are classified as either trading or other than trading, based on
management's intent at the time of contract inception and throughout the
life of the contract. The table includes the estimated fair values of
outstanding derivative positions only and does not include the changes in
fair values of associated financial and non-financial assets and
liabilities, which generally offset derivative notional amounts. The fair
value amounts presented also do not reflect the netting of amounts
pursuant to right of setoff, qualifying master netting agreements with
counterparties or collateral arrangements.
41
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
DECEMBER 31, 1998
(In Millions)
<TABLE>
<CAPTION>
TRADING OTHER THAN TRADING TOTAL
------------------------- ------------------------- -------------------------
ESTIMATED ESTIMATED ESTIMATED
NOTIONAL FAIR VALUE NOTIONAL FAIR VALUE NOTIONAL FAIR VALUE
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Swaps:
Assets $ 4,564 $ 309 $ 2,200 $ 96 $ 6,764 $ 405
Liabilities 4,734 274 3,065 349 7,799 623
Forwards:
Assets 45,651 282 1,004 14 46,655 296
Liabilities 39,153 280 2,039 37 41,192 317
Futures:
Assets 3,272 61 1,786 23 5,058 84
Liabilities 4,371 47 531 5 4,902 52
Options:
Assets 8,310 113 130 2 8,440 115
Liabilities 6,388 124 213 - 6,601 124
-------- -------- -------- ------- -------- --------
Total:
Assets $ 61,797 $ 765 $ 5,120 $ 135 $ 66,917 $ 900
======== ======== ======== ======= ======== ========
Liabilities $ 54,646 $ 725 $ 5,848 $ 391 $ 60,494 $ 1,116
======== ======== ======== ======= ======== ========
</TABLE>
42
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
14. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
DECEMBER 31, 1997
(In Millions)
<TABLE>
<CAPTION>
TRADING OTHER THAN TRADING TOTAL
-------------------------- ------------------------- --------------------------
ESTIMATED ESTIMATED ESTIMATED
NOTIONAL FAIR VALUE NOTIONAL FAIR VALUE NOTIONAL FAIR VALUE
-------- ----------- -------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Swaps:
Assets $ 5,798 $ 316 $ 1,446 $ 67 $ 7,244 $ 383
Liabilities 5,439 418 1,197 70 6,636 488
Forwards:
Assets 29,947 438 1,171 25 31,118 463
Liabilities 29,985 461 687 8 30,672 469
Futures:
Assets 4,103 51 46 - 4,149 51
Liabilities 3,064 50 3,320 21 6,384 71
Options:
Assets 6,893 105 239 - 7,132 105
Liabilities 3,946 90 224 - 4,170 90
------- ------- ------- ------ ------- -------
Total:
Assets $46,741 $ 910 $ 2,902 $ 92 $49,643 $ 1,002
======= ======= ======= ====== ======= =======
Liabilities $42,434 $ 1,019 $ 5,428 $ 99 $47,862 $ 1,118
======= ======= ======= ====== ======= =======
</TABLE>
CREDIT RISK
The current credit exposure of the Company's derivative contracts is limited to
the fair value at the reporting date. Credit risk is managed by entering into
transactions with creditworthy counterparties and obtaining collateral where
appropriate and customary. The Company also attempts to minimize its exposure to
credit risk through the use of various credit monitoring techniques. At December
31, 1998 and 1997 approximately 97% and 95%, respectively, of the net credit
exposure for the Company from derivative contracts is with investment-grade
counterparties.
Net trading revenues for the years ended December 31, 1998, 1997 and 1996
relating to forwards, futures and swaps were $67 million, $(5) million and $(13)
million; $59 million, $37 million and $(13) million; and $42 million, $32
million and $(11) million, respectively. Net trading revenues for options were
not material. Average fair values for trading derivatives in an asset position
during the years ended December 31, 1998 and 1997 were $1,165 million and $1,015
million, respectively, and for derivatives in a liability position were $1,140
million and $1,166 million, respectively. Of those derivatives held for trading
purposes at December 31, 1998, 63% of the notional amount consisted of interest
rate derivatives, 32% consisted of foreign currency derivatives, and 5%
consisted of equity and commodity derivatives. Of those derivatives held for
purposes other than trading at December 31, 1998, 60% of notional consisted of
interest rate derivatives, 31% consisted of foreign currency derivatives, and 9%
consisted of equity and commodity derivatives.
43
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (CONTINUED)
OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS
During the normal course of its business, the Company utilizes financial
instruments with off-balance sheet credit risk such as commitments,
financial guarantees, loans sold with recourse and letters of credit.
Commitments include commitments to purchase and sell mortgage loans, the
underfunded portion of commitments to fund investments in private placement
securities, and unused credit card and home equity lines. In connection
with the Company's commercial banking business, loan commitments for credit
cards and home equity lines of credit include agreements to lend up to
specified limits to customers. It is anticipated that commitment amounts
will only be partially drawn down based on overall customer usage patterns,
and, therefore, do not necessarily represent future cash requirements. The
Company evaluates each credit decision on such commitments at least
annually and has the ability to cancel or suspend such lines at its option.
The total available lines of credit card and home equity commitments were
$3.0 billion of which $2.2 billion remains available at December 31, 1998.
Also in connection with the Company's investment banking activities, the
Company enters into agreements with mortgage originators and others to
provide financing on both a secured and unsecured basis. Aggregate
financing commitments on a secured basis approximate $6.1 billion of which
$3.3 billion remains available at December 31, 1998. Unsecured commitments
approximate $65.0 million, the majority of which is outstanding at December
31, 1998.
Other commitments substantially include commitments to purchase and sell
mortgage loans and the underfunded portion of commitments to fund
investments in private placement securities. These mortgage loans and
private commitments were $2.5 billion of which $1.8 billion remain
available at December 31, 1998. Additionally, mortgage loans sold with
recourse were $0.5 billion at December 31, 1998.
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. At December 31,
1998 these were immaterial.
15. DIVESTITURE
On July 31, 1996, the Company sold a substantial portion of its Canadian
Branch business to the London Life Insurance Company ("London Life"). This
transaction was structured as a reinsurance transaction whereby London Life
assumed total liabilities of the Canadian Branch equal to $3,291 million as
well as a related amount of assets equal to $3,205 million. This transfer
resulted in a reduction of policy liabilities of $3,257 million and a
corresponding reduction in invested assets. The Company recognized an
after-tax gain in 1996 of $116 million as a result of this transaction,
recorded in "Realized investment gains, net."
16. CONTINGENCIES AND LITIGATION
STOP-LOSS REINSURANCE AGREEMENT
In connection with the sale in 1995 of its wholly-owned subsidiary
Prudential Reinsurance Company ("Pru Re"), the Company's subsidiary,
Gibraltar Casualty Insurance Company ("Gibraltar") entered into a stop-loss
reinsurance agreement with Pru Re whereby Gibraltar has reinsured up to
$375 million of the first $400 million of aggregate adverse loss
development on reserves recorded by Pru Re at June 30, 1995. The Company
has guaranteed
44
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
16. CONTINGENCIES AND LITIGATION (CONTINUED)
Gibraltar's obligations arising under the stop-loss agreement subject to a
limit of $375 million. Through December 31, 1998, Gibraltar has incurred
$375 million in losses under the stop-loss agreement, including $90 million
in 1998. Gibraltar has paid $197 million to Pru Re under the stop-loss
agreement.
ENVIRONMENTAL AND ASBESTOS-RELATED CLAIMS
Certain of the Company's subsidiaries received claims under expired
contracts which assert alleged injuries and/or damages relating to or
resulting from toxic torts, toxic waste and other hazardous substances. The
liabilities for such claims cannot be estimated by traditional reserving
techniques. As a result of judicial decisions and legislative actions, the
coverage afforded under these contracts may be expanded beyond their
original terms. Extensive litigation between insurers and insureds over
these issues continues and the outcome is not predictable. In establishing
the liability for unpaid claims for these losses, management considered the
available information. However, given the expansion of coverage and
liability by the courts and legislatures in the past, and potential for
other unfavorable trends in the future, the ultimate cost of these claims
could increase from the levels currently established.
MANAGED CARE REIMBURSEMENT
The Company has reviewed its obligations under certain managed care
arrangements for possible failure to comply with contractual and regulatory
requirements. It is the opinion of management that adequate reserves have
been established to provide for appropriate reimbursements to customers.
REINSURANCE AND PARTICIPATION AGREEMENT
The Company and a number of other insurers ("the Consortium") entered into
a Reinsurance and Participation Agreement (the "Agreement") with MBL Life
Assurance Corporation ("MBLLAC") and others, under which the Company and
the other insurers agreed to reinsure certain payments to be made to
contract holders by MBLLAC in connection with the plan of rehabilitation of
Mutual Benefit Life Insurance Company. Under the agreement, the Consortium,
subject to certain terms and conditions, will indemnify MBLLAC for the
ultimate net loss sustained by MBLLAC on each contract subject to the
Agreement. The ultimate net loss represents the amount by which the
aggregate required payments exceed the fair market value of the assets
supporting the covered contracts at the time such payments are due. The
Company's share of any net loss is 30.55%. The Company has determined that
it does not expect to make any payments to MBLLAC under the agreement. The
Company concluded this after testing a wide range of potentially adverse
scenarios during the rehabilitation period for MBLLAC. In November 1998,
the Rehabilitation Court approved the sale of MBLLAC's individual life
insurance and individual group annuity business to affiliates of SunAmerica
Inc. Upon the end of the rehabilitation period, expected during 1999, the
agreement will terminate.
LITIGATION
Various lawsuits against the Company have arisen in the course of the
Company's business. In certain of these matters, large and/or indeterminate
amounts are sought.
Two putative class actions and approximately 320 individual actions were
pending against the Company in the United States as of January 31, 1999
brought on behalf of those persons who purchased life insurance policies
allegedly because of deceptive sales practices engaged in by the Company
and its insurance agents in violation of state and federal laws. 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 substantial
damages while others seek unspecified compensatory, punitive and treble
damages. The Company intends to defend these cases vigorously.
45
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
16. CONTINGENCIES AND LITIGATION (CONTINUED)
A Multi-State Life Insurance Task Force (the "Task Force"), comprised of
insurance regulators from 29 states and the District of Columbia, was
formed in April 1995 to conduct a review of sales and marketing practices
throughout the life insurance industry. The Company was the initial focus
of the Task Force examination. On July 9, 1996, the Task Force released its
report on the Company's activities. The Task Force found that some sales of
life insurance policies by the Company had been improper and that the
Company's efforts to prevent such practices were not sufficiently
effective. Based on the findings, the Task Force recommended, and the
Company agreed to, various changes to its sales and business practices
controls, and a series of fines allocated to all 50 states and the District
of Columbia. In addition, the Task Force recommended a remediation program
pursuant to which the Company would offer relief to the policyowners who
were misled when they purchased permanent life insurance policies in the
United States from 1982 to 1995.
On October 28, 1996, the Company entered into a Stipulation of Settlement
with attorneys for the plaintiffs in the consolidated class action lawsuit
pending in a Multi-District Litigation proceeding in the U.S. District
Court for the District of New Jersey. The class action suit involved
alleged improprieties in connection with the Company's sale, servicing and
operation of permanent life insurance policies from 1982 through 1995.
Pursuant to the settlement, the Company agreed to provide certain
enhancements and changes to the remediation program previously accepted by
the Task Force, including some additional remedies. In addition, the
Company agreed that it would incur a minimum cost of $410 million in
providing remedies to policyowners under the program and, in specified
circumstances, agreed to make certain other payments and guarantees. Under
the terms of the settlement, the Company agreed to a minimum average cost
per remedy of $2,364 for up to 330,000 claims remedied and also agreed to
provide additional compensation to be determined by formula that will range
in aggregate amount from $50 million to $300 million depending on the total
number of claims remedied. At the end of the remediation program's claim
evaluation process, the Court will determine how the additional
compensation will be distributed.
The terms of the remediation program described above were enhanced again in
February 1997 pursuant to agreements reached with several states that had
not previously accepted the terms of the program. These changes were
incorporated as amendments to the above-described Stipulation of Settlement
and related settlement documents, and the amended Stipulation of Settlement
was approved as fair to class members by the U.S. District Court in March
1997. By that point in time, the Company had entered into agreements with
all 50 states and the District of Columbia pursuant to which each
jurisdiction had accepted the remediation plan and the Company had agreed
to pay approximately $65 million in fines, penalties and related payments.
The decision of the U.S. District Court to certify a class in the
above-described litigation for settlement purposes only and to approve the
class action settlement as described in the amended Stipulation of
Settlement was affirmed by the U.S. Court of Appeals for the Third Circuit
in July 1998 although the issue of class counsel's fees was sent back to
the U.S. District Court for review. The Supreme Court denied certiorari in
January 1999, thereby making final the approval of the class action
settlement.
While the approval of the class action settlement is now final, the Company
remains subject to oversight and review by insurance regulators and other
regulatory authorities with respect to its sales practices and the conduct
of the remediation program. The releases granted by the state insurance
regulators pursuant to the individual state settlement agreements do not
become final until the remediation program has been completed without any
material changes to which those regulators have not agreed. The U.S.
District Court has also retained jurisdiction as to all matters relating to
the administration, consummation, enforcement and interpretation of the
class action settlement.
Pursuant to the state agreements and the amended Stipulation of Settlement,
as approved by the U.S. District Court, the Company initiated its
remediation program in 1997. The Company mailed packages and provided broad
class notice to the owners of approximately 10.7 million policies eligible
to participate in the remediation program in
46
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
16. CONTINGENCIES AND LITIGATION (CONTINUED)
October 1996, informing them of their rights. Owners of approximately
21,800 policies elected to be excluded from the class action settlement. Of
those eligible to participate in the settlement, policyowners who believed
they were misled were invited to file a claim through an Alternative
Dispute Resolution ("ADR") process. The ADR process was established to
enable the Company to discharge its liability to the affected policyowners.
Policyowners who did not wish to file a claim in the ADR process were
permitted to choose from options available under Basic Claim Relief, such
as preferred rate premium loans, or annuities, mutual fund shares or life
insurance policies that the Company will enhance.
In January 1997 the U.S. District Court sanctioned and fined the Company
$1 million for failure to properly implement procedures for its employees
to retain documents in violation of the Courts' order that required the
parties to preserve all documents relevant to the class action and
remediation program. The Court ordered the Company to implement a document
retention policy and directed that an independent expert be engaged to
investigate the extent of document destruction and its impact on the
remediation program.
In response to the class notices, the owners of approximately 503,000
policies indicated an interest in a Basic Claim Relief remedy. Management
believes that costs associated with providing Basic Claim Relief will not
be material to the Company's financial position or results of operations.
The owners of approximately 1.16 million policies responded to the class
notices by indicating an intent to file an ADR claim. All policyholders
who responded were provided an ADR claim form for completion and
submission. The ADR process generally requires that individual claim forms
and files be reviewed by the Company and by one or more independent claim
evaluators. Approximately 649,000 claim forms were completed and returned
and approximately 591,000 decision letters had been mailed to claimants as
of January 31, 1999. In many instances, claimants have the right to
"appeal" the Company's decision to an independent reviewer. Management
believes that the bulk of such appeals will be resolved in 1999.
In 1996, the Company recorded in its Consolidated Statement of Operations
the cost of $410 million as a guaranteed minimum remediation expense
pursuant to the settlement agreement. Management had no better information
available at that time upon which to make a reasonable estimate of losses
associated with the settlement. In 1997, based on additional information
derived from claim sampling techniques, the terms of the settlement and
the number of claim forms received, management increased the estimated
liability for the cost of remedying policyholder claims in the ADR process
by $1.64 billion before taxes to approximately $2.05 billion before taxes,
of which $1.80 billion was funded in a settlement trust. Management
expressly noted that additional cost items were anticipated that could not
be fully evaluated at that time.
In 1998, based on estimates derived from an analysis of claims actually
remedied (including interest), a sample of claims still to be remedied, an
estimate of additional liability associated with the results of the
investigation by the independent expert regarding the impact of document
destruction on the ADR program, and an estimate of additional liabilities
associated with a claimant's right to "appeal" the Company's decision,
management increased the estimated liability for the cost of ADR remedies
by $.51 billion before taxes to a total of $2.56 billion before taxes, all
of which has been funded in a settlement trust as discussed in Note 4. The
Company has also recorded from 1996 through 1998 additional charges to
reflect ongoing administrative costs related to the ADR program,
regulatory fines, penalties and related payments, litigation costs and
settlements, and other fees and expenses associated with the resolution of
sales practices issues. While management believes the foregoing provisions
are reasonable estimates based on information currently available, the
ultimate amount of the total cost of remedied policyholder claims and
other related costs is dependent on complex and varying factors, including
the relief options still to be chosen by claimants, the dollar value of
those options, and the number and type of claims that may successfully be
appealed.
47
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
16. CONTINGENCIES AND LITIGATION (CONTINUED)
The Company's litigation is subject to many uncertainties, and given the
complexity and scope, the outcomes cannot be predicted with precision. 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 the matters specifically discussed
above. Management believes, however, that the ultimate resolution of all
such matters, after consideration of applicable reserves, should not have a
material adverse effect on the Company's financial position.
******
48
<PAGE>
DETERMINATION OF ACCUMULATION UNIT VALUES AND
OF THE AMOUNT OF MONTHLY VARIABLE ANNUITY
PAYMENTS
A. ACCUMULATION UNIT VALUES
The value for each accumulation unit is computed as of the end of each valuation
period, also referred to in this section as business day.
On any given business day the value of accumulation 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. 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 contractowner 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 accumulation
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 accumulation units are then converted into a number of
annuity units of equal total value. As with accumulation units, the value of
each 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 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 an 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 one day to the next at a
rate equivalent to 4.7% per year (3.5% plus the annual charge of 1.2%), the
annuity unit value will not change. If the increase is less than at a rate
equivalent to 4.7% per year, the annuity unit 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 contractowner. 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 annuity units
will result in the payment each month of an amount equal to the value of 5.73
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 this Statement of Additional
Information.) The amount of the first variable annuity payment made on the first
day of the month will be equal to that number of annuity units multiplied by the
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 annuity units multiplied by the 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 this
Statement of Additional Information.)
As stated above, the annuity unit values change in accordance with the
investment results of the subaccount but will not increase ??the amount of each
monthly variable payment 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 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.
Prudential believes that the 3.5% annual growth assumption is better for
contractowners, because it produces a better balance between early and later
variable annuity payments.
C-1
<PAGE>
INDIVIDUAL VARIABLE CONTRACT ACCOUNT
VARIABLE ANNUITY CONTRACTS
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
751 BROAD STREET
NEWARK, NEW JERSEY 07102-3777
TELEPHONE: (888) PRU - 2888
<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,
1998; the Statements of Operations for the year ended December 31, 1998;
the Statements of Changes in Net Assets for the years ended December 31,
1998 and December 31, 1997; and the Notes relating thereto appear in the
Statement of Additional Information (Part B of the Registration Statement).
(2) Consolidated Financial Statements of The Prudential Insurance Company of
America (Depositor) and Subsidiaries, consisting of the Consolidated
Statements of Financial Position as of December 31, 1998 and 1997; the
Consolidated Statements of Operations, Consolidated Statements of Changes
in Equity and Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 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 The Prudential Individual Variable Contract Account.
(Note 6)
(2) Agreements for custody of securities and similar investments--Not
Applicable
(3) (a) Distribution Agreement between Pruco Securities Corporation
(Underwriter) and The Prudential Insurance Company of America
(Depositor). (Note 6)
(b) Proposed form of Selected Broker Agreement between Pruco Securities
Corporation and brokers with respect to sale of the Contracts.
(Note 6)
(4) (a) Individual Variable Annuity Contract (Form WVA-83). (Note 1)
(b) Special Page One to the Contract (Form WVA-83) for N.Y. State
issues. (Note 1)
(c) Endorsement WVA2-83 to the Contract (Form WVA-83) for use in New
Jersey issues. (Note 1)
(d) Special Page Six WVA-83 to the Contract (Form WVA-83) for use in
Oklahoma issues. (Note 1)
(e) Special Page Six WVA-83 to the Contract (Form WVA-83) for use in
California issues. (Note 1)
(f) Endorsement WVA 3-83 to the Contract (Form WVA-83) for use in
Tennessee issues. (Note 1)
(g) Endorsement WVA 4-83 to the Contract (Form WVA-83 and VIP-84) for
use in Texas issues. (Note 1)
(h) Endorsement WVA 5-83 to the Contract (Form WVA-83) for use in Texas
and Pennsylvania issues. (Note 1)
(i) Endorsement WVA 6-83 to the Contract (Form WVA-83) for use in
California issues. (Note 1)
(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 1)
(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 1)
(l) Individual Variable Annuity Contract (Form VIP-84). (Note 1)
(m) Special Page One to the Contract (Form VIP-84) (Note 1)
(n) Special Page Nineteen to the Contract (Form VIP-84) for use in N.Y.
issues. (Note 1)
(o) Special Page Four to the Contract (Form VIP-84) for use in Oklahoma
issues. (Note 1)
(p) Special Page Seven to the Contract Form VIP-84) for use in Oklahoma
issues. (Note 1)
(q) Special Page Four to the Contract (Form VIP-84) for use in
California issues. (Note 1)
(r) Special Page Seven to the Contract (Form VIP-84) for use in
California issues. (Note 1)
(s) Endorsement VIP 3-84 to the Contract (Form VIP-84) for use in
California issues. (Note 1)
(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 1)
(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 1)
C-1
<PAGE>
(v) Individual Variable Annuity Contract (Form VIP-86). (Note1)
(w) Individual Variable Annuity Contract (Form VIP-86) revised. (Note 6)
(x) Special Jacket VIP-86 MN to the VIP-86 Contract for use in Minnesota
issues. (Note 1)
(y) Special Jacket VIP-86 Y to the VIP-86 Contract for use in New York
issues. (Note 1)
(z) Special Contract Data Page 3 (VIP-86) (MIN) to the VIP-86 Contract
for use in Minnesota issues. (Note 1)
(aa) Special Page 7 (VIP-86) Y to the VIP-86 Contract for use in New York
issues. (Note 1)
(bb) Special Page 7 (VIP-86) (OK) to the VIP-86 Contract for use in
Oklahoma issues. (Note 1)
(cc) Special Page 8 (VIP-86)(SC) to the VIP-86 Contract for use in South
Carolina issues. (Note 1)
(dd) Special Page 8 (VIP-86) (OK) to the VIP-86 Contract for use in
Oklahoma issues. (Note 1)
(ee) Special Page 11 (VIP-86) (WA) to the VIP-86 Contract for use in
Washington issue. (Note 1)
(ff) Special Page 11 (VIP-86) (SC) to the VIP-86 Contract for use in
South Carolina issues. (Note 1)
(gg) Special Page 11 (VIP-86) (Y) to the VIP-86 Contract for use in New
York issues. (Note 1)
(hh) Special Page 11 (VIP-86) (WI) to the VIP-86 Contract for use in
Wisconsin issues. (Note 1)
(ii) Special Page 12 (VIP-86) (SC) to the VIP-86 Contract for use in
South Carolina and Washington issues. (Note 1)
(jj) Special Page 12 (VIP-86) (Y) to the VIP-86 Contract for use in New
York issue. (Note 1)
(kk) Special Page 12 (VIP-86) (WI) to the VIP-86 Contract for use in
Wisconsin issues. (Note 1)
(ll) Special Page 13 (VIP-86) (WI) to the VIP-86 Contract for use in
Wisconsin issues. (Note 1)
(mm) Special Page 14 (VIP-86) (WI) to the VIP-86 Contract for use in
Wisconsin issues. (Note 1)
(nn) Special Back Jacket Page 18 (VIP-86) (MN) to the VIP-86 Contract for
use in Minnesota issues. (Note 1)
(oo) Special Back Jacket Page 18 (VIP-86) (Y) to the VIP-86 Contract for
use in New York issues. (Note 1)
(pp) Special Jacket VIP-86-P to the VIP-86 Contract for use in
Pennsylvania issues. (Note 1)
(qq) Special Contract Data Page 3 (VIP-86) (MA) to the VIP-86 Contract
for use in Massachusetts issues. (Note 1)
(rr) Special Page 7 (VIP-86) (PA) to the VIP-86 Contract for use in
Pennsylvania issues. (Note 1)
(ss) Special Blank Page 13 (VIP-86) (MA) to the VIP-86 Contract for use
in Massachusetts issues. (Note 1)
(tt) Special Bank Page 17 VIP-86-P to the VIP-86 Contract for use in
Pennsylvania issues. (Note 1)
(uu) Special Back Jacket Page 18 VIP-86-P to the VIP-86 Contract for use
in Pennsylvania issues. (Note 1)
(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 1)
(ww) Endorsement COMB 84890-83 to the VIP-86 Contract for use in Montana.
(Note 1)
(xx) Endorsement Certification PLI 254-86 to the VIP-86 Contract for use
in Pennsylvania. (Note 1)
(yy) Endorsement PLI 288-88 to the VIP-86 Contract. (Note 1)
(zz) Waiver of Withdrawal Charges rider ORD 88753-92 to the VIP-86
Contract (at issue). (Note 1)
(aaa) Waiver of Withdrawal Charges rider ORD 88754-92 to the VIP-86
Contract (after issue). (Note 1)
(bbb) Spousal Continuance Rider ORD 89011-93 to the VIP contract (at
issue). (Note 2)
(ccc) Endorsement altering the Assignment provision ORD 83922-95. (Note 3)
(5) Application for Individual Variable Annuity Contract:
(a) Application Form VA 200 ED 07/83 for Individual Variable Annuity
Contract (Form WVA-83). (Note 1)
(b) Application Form VA 200 ED 5/84 for Individual Variable Annuity
Contract (Form VIP-84) for use by Prudential representatives.
(Note 1)
(c) Application Form VA 200B ED 5/84 for Individual Variable Annuity
Contract (Form VIP-84) for use by Prudential Securities account
executives. (Note 1)
C-2
<PAGE>
(d) Revised Application Form VA 200 ED 5/84-Non-Qualified for Individual
Annuity Contract (Form VIP-84) for use by Prudential
representatives. (Note 1)
(e) Revised Application Form VA 200 Ed. 5/86-Non-Qualified. (Note 1)
(f) Revised Application Form VA 200 Ed. 5/86-Non-Qualified (NY) for use
in New York. (Note 1)
(g) Revised Application Form VA 200 Ed. 9/86-Non-Qualified. (Note 1)
(h) Revised Application Form VA 200 Ed. 11/86-Non-Qualified. (Note 1)
(i) Application for VIP annuity contract ORD 87348-92. (Note 2)
(j) Supplement to the Application for a VIP contract ORD 87454-92.
(Note 2)
(6) (a) Charter of The Prudential Insurance Company of America, as amended
November 14, 1995. (Note 8)
(b) By-Laws of The Prudential Insurance Company of America, as amended
May. 12, 1998 (Note 5)
(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 Insurance Company of America. (Note 1)
(9) Opinion of Counsel and consent to its use as to legality of the securities
being registered. (Note 1)
(10) Written consent of PricewaterhouseCoopers 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 Computations. (Note 1)
(14) Powers of Attorney.
(a) F. Agnew, F. Becker, M. Berkowitz, R. Carbone, J. Cullen, C. Davis,
R. Enrico, A. Gilmour, W. Gray, J. Hanson, G. Hiner, C. G. Kelley,
Horner, B. Malkiel, A. Ryan, I. Schmertz, C. Sitter, D. Staheli, R.
Thomson, J. Unruh, P. Vagelos, S. Van Ness, P. Volcker, J. Williams.
(Note 4)
(b) A. Piszel. (Note 7)
- ----------
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post-Effective Amendment No. 19 to Form
S-6, Registration No. 2-80897, filed April 28, 1994.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 20 to Form
S-6, Registration No. 2-80897, filed February 27, 1995.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 10 to Form
S-1, Registration No. 33-20083, filed April 9, 1998, on behalf of The
Prudential Variable Contract Real Property Account.
(Note 5) Incorporated by reference to Form S-6, Registration No. 333-64957,
filed on September 30, 1998, on behalf of The Prudential Variable
Appreciable Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 24 to Form
N-4, Registration No. 2-80897, filed on April 24, 1998, on behalf of
The Prudential Individual Variable Contract Account.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 4 for Form
N-4, Registration No. 333-23271, filed February 23, 1999, on behalf of
The Prudential Discovery Select Group Variable Contract Account.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 9 to Form
S-1, Registration No. 33-20083, filed April 9, 1997 on behalf of the
Prudential Variable Contract Real Property Account.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Incorporated by reference to The Prudential Individual Variable Contract Account
statement of additional information under "Directors and Officers" which is
located in Part B of this Registration Statement.
C-3
<PAGE>
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 organized under the laws of New Jersey.
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, an insurance company organized under the laws of Arizona, is a direct
wholly-owned subsidiary of Prudential. Pruco Life of New Jersey, an insurance
company 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 .34 to the Form N-IA Registration
Statement for The Prudential Series Fund, Inc., Registration No. 2-80896, filed
on or about April 24, 1998, the text of which is hereby incorporated.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 29, 1999 there were 91,656 contractowners of non-qualified contracts
offered by the Registrant.
ITEM 28. INDEMNIFICATION
The Registrant, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.
New Jersey, being the state of organization of Prudential Insurance Company of
America ("Prudential"), permits entities organized under its jurisdiction to
indemnify directors and officers with certain limitations. The relevant
provisions of New Jersey law permitting indemnification can be found in Section
14A:3-5 of the New Jersey Statutes Annotated. The text of Prudential's By-law
27, which relates to indemnification of officers and directors, is incorporated
by reference to Exhibit (8)(ii) of Post-Effective Amendment No. 12 to Form N-4,
Registration No. 33-25434, filed April 30, 1997, on behalf of the Prudential
Individual Variable Contract 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.
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
C-4
<PAGE>
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, The Prudential 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. 13 to Form
N-4, Registration No. 33-25434 filed April 24, 1998, 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, 751 Broad
Street, 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-5
<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 23rd
day of April, 1999
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. 25 to the Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE AND TITLE
-------------------
/s/ * April 23, 1999
-----------------------------------------
ARTHUR F. RYAN
CHAIRMAN OF THE BOARD, PRESIDENT,
AND CHIEF EXECUTIVE OFFICER
/s/ *
----------------------------------------
ANTHONY S. PISZEL
VICE PRESIDENT AND CONTROLLER
(CHIEF ACCOUNTING OFFICER)
/s/ * *By: /s/ THOMAS C. CASTANO
---------------------------------------- ---------------------
RICHARD J. CARBONE THOMAS C. CASTANO
SENIOR VICE PRESIDENT AND PRINCIPAL (ATTORNEY-IN-FACT)
FINANCIAL OFFICER
/s/ *
----------------------------------------
FRANKLIN E. AGNEW
DIRECTOR
/s/ *
----------------------------------------
FRANKLIN K. BECKER
DIRECTOR
/s/ *
----------------------------------------
JAMES G. CULLEN
DIRECTOR
/s/ *
----------------------------------------
CAROLYNE K. DAVIS
DIRECTOR
C-6
<PAGE>
SIGNATURE AND TITLE
-------------------
/s/ *
----------------------------------------
ROGER A. ENRICO
DIRECTOR
/s/ *
----------------------------------------
ALLAN D. GILMOUR
DIRECTOR April 23, 1999
/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
/s/ *
----------------------------------------
GAYNOR N. KELLEY
DIRECTOR
/s/ *
----------------------------------------
BURTON G. MALKIEL
DIRECTOR
/s/ *
----------------------------------------
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-7
<PAGE>
SIGNATURE AND TITLE
-------------------
/s/ * April 23, 1999
----------------------------------------
ROY VAGELOS, M.D.
DIRECTOR
/s/ *
----------------------------------------
STANLEY C. VAN NESS
DIRECTOR
/s/ *
----------------------------------------
PAUL A. VOLCKER
DIRECTOR
/s/ * *By: /s/ THOMAS C. CASTANO
---------------------------------------- ----------------------
JOSEPH H. WILLIAMS THOMAS C. CASTANO
DIRECTOR (ATTORNEY-IN-FACT)
C-8
<PAGE>
EXHIBIT INDEX
(4)(a) through (aaa)
Individual Variable Annuity Contract (Form WVA-83) with
Endorsements and Special Pages
(5)(a) through (h)
Application for Individual Variable Annuity Contracts (all Forms)
(8)(a) Purchase Agreement between The Prudential Series Fund, Inc. and The
Prudential Insurance Company of America
(9) Opinion of Counsel and consent to its use as to legality of the
securities being registered
(10) Written consent of PricewaterhouseCoopers LLP, independent
accountants
(13) Schedule of Performance Computations
The Prudential Insurance Company of America
Corporate Office
Newark, New Jersey
Annuitant Contract Number
Annuity Date Contract Date
Agency
We will make monthly payments starting on the annuity date we show in the window
of this page. We make this promise subject to all the provisions of this
contract.
Please read this contract with care. A guide to its contents is on the last
page. A summary is on page 2. If there is ever a question about it, or there is
a claim, just see one of our representatives or get in touch with one
of our offices.
The benefits, payments and values under this contract are on a variable basis.
They will reflect the investment experience of the separate account to which the
contract is related; they are subject to change both up and down and are not
guaranteed as to dollar amount except as provided under the Death of Annuitant
and Settlement Provisions for the Beneficiary sections.
Right to Cancel Contract.--Not later than ten days after you get this contract,
you may return it to us. All you have to do is take it or mail it to one of our
offices or to the agent who sold it to you. We will cancel the contract and
promptly give you its net asset value on the date your request is received,
without redemption charge.
The provisions on this and the following pages of this contract comprise the
entire contract. The contract was signed for Prudential on the contract date,
which is the date of issue.
Signed for Prudential.
/s/Isabelle L. Kirchner /s/ [ILLEGIBLE]
-------------------- ----------------------
Secretary President
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on annuity date. Payment as stated upon death before annuity
date. Purchase payments payable during Annuitant's lifetime until annuity date.
<PAGE>
CONTRACT SUMMARY
We offer this summary to help you understand this contract. We do not intend
that it change any of the provisions of the contract.
This is a contract to provide income to begin on the annuity date. If on the
annuity date the Annuitant is entitled to payment and no other settlement has
been chosen, we will make monthly payments to the Annuitant for as long as he or
she lives, with 120 payments assured. But if the contract value available to
provide the payment is less than $2000 or the amount of the initial payment
would be less than $20, we will, instead, pay the cash value in one sum. We
describe other options we offer on pages 9 and 10.
Purchase payments may be made at any time until the annuity date. There are no
scheduled amounts or due dates. We explain this on page 6. The purchase payments
will be allocated as you direct to one or more of the subaccounts of The
Prudential Individual Variable Contract Account, a variable contract account of
Prudential, created under New Jersey law and registered as a unit investment
trust under the Investment Company Act of 1940. Assets of these subaccounts are
invested in shares of corresponding Portfolios of The Prudential Series Fund,
Inc. For example, assets of the Bond Subaccount are invested in shares of the
Bond Portfolio. Assets of the Money Market Subaccount are invested in shares of
the Money Market Portfolio, etc. Your interests in subaccounts are recorded in
the terms of full or fractional units of the selected subaccount(s).
On the annuity date, if an annuity option takes effect, your subaccount units
are converted to subaccount annuity units. These units will be used to provide
an annuity under the Variable Payout Provisions. We explain this on pages 9 and
10. The dollar value of the subaccount units and the amount of the annuity
payments will vary in accord with the investment results of the subaccounts.
We describe below the amount payable, if any, at the death of the Annuitant.
Proceeds which may arise from the Annuitant's death before the annuity date may
be paid to the beneficiary in cash; or they may be applied by the beneficiary
for a variable payout option. We describe the available choices under Settlement
Provisions for the Beneficiary on page 13.
You and we may agree on a change in the ownership of this contract. Also, unless
we endorse it to say otherwise, the contract gives you these rights, among
others:
o You may change the beneficiary under it.
o You may surrender it for its cash value.
o You may make withdrawals.
o You may transfer shares from one subaccount to another.
DEATH OF ANNUITANT
We will pay the beneficiary the proceeds promptly if we receive due proof that
the Annuitant died before the annuity date.
If the Annuitant dies before his or her 65th birthday, proceeds will be greater
of (a)the sum of all the purchase payments paid to us, minus any withdrawals
made, or (b) the amount of your variable account(which we define on page 4) as
of the date we receive due proof of death. If the Annuitant dies on or after his
or her 65th birthday, the proceeds will be your variable account as of the date
we receive due proof of death.
If the Annuitant dies on or after the annuity date, the settlement then in
effect will govern whether and to whom we will make any payment(s).
<PAGE>
CONTRACT DATA
ANNUITANT'S SEX AND ISSUE AGE M-35
DATE OF BIRTH MAR. 15, 1947
ANNUITANT JOHN DOE XXX XXX XXX CONTRACT NUMBER
ANNUITY DATE JUL. 1, 2012 JUL.1,1982 CONTRACT DATE
R-NK 1
BENEFICIARY CLASS 1 MARY DOE, WIFE
CLASS 2 ROBERT DOE, SON
ALLOCATION OF INITIAL PURCHASE PAYMENT
SUBACCOUNTS
BOND XX%
MONEY MARKET XX%
COMMON STOCK XX%
AGGRESSIVELY MANAGED FLEXIBLE XX%
CONSERVATIVELY MANAGED FLEXIBLE XX%
THE MAINTENANCE CHARGE IS $30.00 ANNUALLY. WE EXPLAIN THIS ON PAGE 7.
SERVICE OFFICE - PLEASE DIRECT ANY COMMUNICATIONS ABOUT THIS CONTRACT TO:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, P.O. BOX 2925, PHOENIX, ARIZONA
85062
<PAGE>
GENERAL PROVISIONS
Definitions--We define here some of the words and phrases used all through this
contract. We explain others, not defined here, in other parts of the text.
Accumulation Period.--The period of time between the Contract Date and the
Annuity Date.
Anniversary or Contract Anniversary.--The same day and month as the Contract
Date in each later year.
Example: If the contract date is March 9, 1983, the first Anniversary is March
9, 1984. The second is March 9, 1985, and so on.
Annuitant.--The person whose name is in the window of the first page. He or she
need not be the owner.
Annuity Date.--The date the first annuity payment is due.
Business Day.--A day on which the New York Stock Exchange is open for business.
Cash Value.--Variable Account less any withdrawal charges that apply.
Contract Year.--A year which starts on the Contract Date or on an anniversary.
Example: If the contract date is March 9, 1983, the first Contract Year starts
then and ends on March 8, 1984. The second starts on March 9, 1984 and ends on
March 1, 1985, and so on.
Issue Date.--The Contract Date.
The Prudential Individual Variable Contract Account (the Account).--A separate
account of Prudential registered as unit investment trust under the Investment
Company Act of 1940.
The Prudential Series Fund, Inc. (the Fund).--A mutual fund with separate
portfolios one or more of which you may choose as the underlying investment for
your contract. The fund was established by Prudential. It is registered under
the Investment Company Act of 1940, as amended, as an open-end diversified
management investment company.
Service Office.--The Prudential office designated by it to service contracts
such as this. Its mailing address is the address shown on the Contract Data
page, unless Prudential specifies another address by notice to you.
Subaccount.--A division of the Account the assets of which are invested in the
shares of a corresponding portfolio of the Fund.
Subaccount Annuity Unit.--A measure used to find the amount of a variable
annuity monthly payment.
Subaccount Annuity Unit Value.--The monthly income produced by one Subaccount
Annuity Unit.
Subaccount Unit.--A measure used to find the value of your interest in a
subaccount during the accumulation period.
Subaccount Unit Value.--The dollar value of one Subaccount Unit of a specified
subaccount.
Variable Account.--Your Variable Account for any business day is found by
multiplying your number of Units in each subaccount by the Subaccount Unit Value
at the end of that business day and then adding the results.
We, Our and Us.--Prudential.
You and Your.--The owner of the contract.
Contract Modifications.--Only a Prudential officer may agree to modify this
contract, and then only in writing.
Change of Annuity Date.--Not later than the present annuity date, you may ask us
to change that date to another date. We must have your request in writing at our
Service Office and in a form which meets our needs. You must send the contract
to us to be endorsed. We will change the date to the one you ask for in your
request. But, unless we consent, it may not be before the first of the next
month after the date we receive your request. And it may not be after the first
of the next month after the Annuitant's 75th birthday. Further, unless we
consent, you may not make more than one change in the annuity date.
Ownership and Control.--Unless we endorse this contract to say otherwise: (1)
the owner of the contract is the Annuitant; and (2) while the Annuitant is
living the owner alone is entitled to (a) any contract benefit and value, and
(b) the exercise of any right and privilege granted by the contract or by us.
We will mail to the owner, at least once in each Contract Year after the first,
a statement with respect to all subaccounts in which the owner has an interest.
The statement will be as of a date not more than two months before the date of
mailing. It will show the number of Units credited and the value per Unit. We
will also send the owner a statement of the investments of the portfolios of the
Fund, the underlying investment mediums for this contract.
Currency.--Any money we pay, or which is paid to us, must be in United States
currency. Any amount we owe will be payable at our Service Office.
Misstatement of Age or Sex.--If The Annuitant's or any contingent annuitant's
stated date of birth or sex or both are not correct, we will change each benefit
and the amount of each annuity payment to that which the purchase payment would
have bought for the correct date of birth and sex. Also, we will adjust the
amount of any payments we have already made. Here is how we will do it: (1) We
will deduct any overpayments, with interest at 5% a year, from any payment(s)
due then or later. (2) We will add any underpayments, with interest at 5% a
year, to the next payment we make after we receive proof of the correct date of
birth and sex.
(Continued on Next Page)
Page 4 (WVA-83)
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GENERAL PROVISIONS (Continued)
Incontestability.--We will not contest this contract except for non-payment of
the purchase payment due on the contract date.
Proof of Survival or Death.--Before we make a payment, we have the right to
require proof of the life or death of any person whose life or death determines
whether or to whom we must make the payment.
Assignment.--We will not be deemed to know of an assignment unless we receive
it, or a copy of it, at our Service Office. We are not obliged to see that an
assignment is valid or sufficient. If the Annuitant is living on the annuity
date and an assignment is in effect on that date, we have the right to pay the
cash value in one sum.
Asset Charges.--We will apply a Mortality Risk Charge and an Expense Risk Charge
daily at effective annual rates of 0.8% and 0.4%. respectively, on the value of
the net assets of each subaccount attributable to Subaccount Units and
Subaccount Annuity Units credited to contracts like this one. We guarantee that
the expense and mortality results of the Account will not adversely affect the
dollar amounts of values, benefits or payments under this contract.
Changes by Prudential.--We reserve the right, upon 90 days' notice to you, to:
(1) change the minimum amount requirements specified for purchases, withdrawals
and transfers in the Variable Accumulation Provisions:
(2) refuse to accept any request for purchase;
(3) increase the amount of the Annual Maintenance Charge (see page 7);
(4) change the number of Subaccount Units credited, change or discontinue
subaccounts, change to a different variable contract account, or substitute fund
shares in the account (see page 8).
Voting Rights:
Fund.--We will send you a notice of any meeting at which Fund shares which
comprise the assets of a subaccount may be voted. We will provide a voting
instruction form for the number of Fund shares representing the proportional
interest of the Annuitant. The instruction form may be signed and returned to
us. If for any meeting there are Fund shares for which we have not received
voting instructions, this is what we will do. We will vote Fund shares on each
matter in the same proportion as we vote the Fund shares held in the subaccount
for which we did receive instructions.
Prudential.--We are a mutual life insurance company. Our principal office is in
Newark, New Jersey, and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each year for
four year terms), two of our officers, and six public directors named by New
Jersey's Chief Justice.
The election is held on the first Tuesday in April from 10:00 A.M. to 2:00 P.M.
in our office at the Secretary's address shown here. After this contract has
been in force for one year, you may vote either in person or by mail. We will
send you a ballot if you ask for one. Just write to our Secretary at Prudential
Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By
law, your request must show your name, address, contract number and date of
birth. If you are an individual, you must be at least 18 years old to vote.
Participation (Dividends).--This contract is eligible to participate in the
divisible surplus of Prudential. We do not expect that any dividends will be
payable during the accumulation period. While any annuity settlement is in
effect, the contract will share in our surplus to the extent and in the way we
decide.
Page 5 (WVA-83)
<PAGE>
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing and
in a form which meets our needs. It will take effect only when we file it at our
Service Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if the Annuitant is not living
when we file the request. Unless otherwise stated, we will make payment to the
beneficiary only if the Annuitant dies before the annuity date. Any
beneficiary's interest is subject to the rights of any assignee of whom we know.
When a beneficiary is designated, any relationship shown is to the Annuitant,
unless otherwise stated. To show priority, we may use numbered classes, so that
the class with first priority is called class 1, the class with next priority is
called class 2, and so on. When we use numbered classes, these statements apply
to beneficiaries unless the form states otherwise:
1. One who survives the Annuitant will have the right to be paid only if no one
in a prior class survives the Annuitant.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the Annuitant.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the Annuitant, we will pay in one sum to the Annuitant's
estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. If the Annuitant dies before the annuity date, we owe Jane
the proceeds if she is living at the Annuitant's death We owe Paul and John the
proceeds if they are living then but Jane is not. But if only one of them is
living, we owe him the proceeds. If none of them is living, we owe the
Annuitant's estate.
Before we make a payment, we have the right to decide what proof we need of the
identity, age or any other facts about any persons designated as beneficiaries.
If beneficiaries are not designated by name and we make payment(s) based on that
proof, we will not have to make the payment(s) again.
VARIABLE ACCUMULATION PROVISIONS
Purchase Payments.--An initial purchase payment of at least $1000 is payable on
the contract date. Further purchase payments may be made at any time while the
Annuitant is living and before the annuity date. The amount of each payment
after the first must be at least $100. We reserve the right to establish a
maximum amount.
The initial purchase payment will be allocated to the subaccounts in accord with
your instructions. The minimum amount of a first allocation to a subaccount is
$300; the minimum for subsequent allocations is $100. If, after you have made at
least one purchase, we receive a purchase payment without instructions, we will
allocate it in the same proportions as the most recent purchase payment you
made.
Example 1: On the Contract Date you make a $1500 purchase and allocate $500 to
each of Subaccounts A, B and C. Later in the year you send us a $900 purchase
payment, but you don't tell us how it is to be applied. Based on the most recent
purchase, the one made on the Contract Date, we would make a $300 purchase for
each of Subaccounts A, B and C.
Example 2: If in the example above your second purchase payment had been $200
instead of $900, we would not have been able to make the purchase since there
was not enough money to make a minimum purchase of $100 for each of the 3
subaccounts. In this case we would contact you to find out how the purchase
payment is to be applied. The purchase would be made when we receive your
instructions at our Service Office.
Crediting of Subaccount Units.--This contract will be credited with the number
of Subaccount Units which results from dividing (1) the amount of any purchase
payment allocated to a subaccount by (2) that subaccount's Unit Value for the
Business Day the purchase is made. The first purchase payment will be credited
on the first Business Day which is the later of: (a) the Contract Date, (b) the
date the purchase payment is received at the Service Office, or (c) the date we
approve the request for the contract, or on a later date if you request and we
agree. For any purchase payment after the first, the shares will be credited on
the first Business Day not earlier than the day we receive it at our Service
Office or on a later day if you request and we agree.
Subaccount Unit Value.--The Unit Value for a subaccount for any Business Day is
found by multiplying that subaccount's Net Investment Factor for that day by its
Unit Value for the last preceding Business Day. A subaccount's Net Investment
Factor for any Business Day equals (1) 1.00 plus the rate of net investment
income earned, after provision for taxes, for the period from the end of the
last preceding Business Day to the end of the current Business Day; plus (2) the
rate of asset value changes in the subaccount during the same period, minus (3)
the rates of the Mortality Risk Charge and the Expense Risk Charge (which we
describe on Page 5) for the number
(Continued on Next Page)
Page 6 (WVA-83)
<PAGE>
VARIABLE ACCUMULATION PROVISIONS (Continued)
of calendar days involved. The Unit Value for a subaccount and therefore the
total value of shares of a subaccount credited to you at any time and the number
of Subaccount Units provided by a given purchase payment will vary. They will
increase or decrease in accord with the investment results of the subaccounts.
The value of each Subaccount Unit was set at $1.00 on he date the first purchase
payment was applied to that account.
Annual Maintenance Charge.--On each contract anniversary before the annuity date
or at the time of total withdrawal we will deduct a maintenance charge from your
variable account. The amount of the charge is shown on page 3 of this contract.
If on any contract anniversary there are Subaccount Units credited to this
contract in more than one subaccount, we will divide the charge among the
subaccounts on a pro-rata basis, according to the proportionate value of each
subaccount. We will liquidate enough of your Subaccount Units or fractions of a
Subaccount Unit to pay this charge.
Withdrawals.--On or before the annuity date you may be able to make withdrawals
from your variable account. To make a withdrawal you must ask us in writing in a
form which meets our needs. If you ask for a partial withdrawal, we will
liquidate as many full and fractional Subaccount Units as may be needed to
provide the amount asked for and any charges that apply. You must tell us the
amount and the subaccount from which it is to be withdrawn. Our consent is
needed for a partial withdrawal if (1) the amount to be withdrawn is less than
$300; or (2) it would reduce the value of your units in a subaccount to less
than $300.
If you ask for a total withdrawal you must send the contract to us. We will
liquidate all the subaccount units credited to the contract. After deducting the
Annual Maintenance Charge and the sales charges, if any, we will pay the
balance. Any amount withdrawn will be paid within seven calendar days after the
date we receive your request at our Service Office.
Withdrawal Charges (Deferred Contingent Sales Charges).--Although no sales
charges are deducted from your purchase payments when they are made, your
purchase payments may be subject to a sales charge upon withdrawal. Earnings are
not subject to sales charges.
In each contract year, any amount(s) withdrawn which do not in total exceed 10%
of your variable account, valued as of the date of the first withdrawal in that
year, will not incur a sales charge. A sales charge may be imposed on amounts
withdrawn in excess of this 10% limitation.
The amount of any sales charge imposed on the withdrawal of a purchase payment
varies with the number of contract years that have elapsed since the purchase
payment was made. Purchase payments are considered to be withdrawn on a
first-in, first-out basis. Withdrawals are considered to consist of purchase
payments until an amount equal to your aggregate purchase payments has been
withdrawn.
When you make a withdrawal, the rate of sales charge applied against any
purchase payments or portion of a purchase payment that is subject to a charge
is determined in accordance with the following:
If the contract year of purchase payment is the same as the contract year of
withdrawal, the rate is 8%.
If the duration from the start of the contract
year of purchase payment to the start of the The charge
contract year of withdrawal is... rate is...
One year .............................................7%
Two years ............................................6%
Three years ..........................................5%
Four years ...........................................4%
Five years ...........................................3%
Six years ............................................2%
Seven years...........................................1%
Eight years or more...................................0%
In determining the amount of sales charge, if any, we will consider that any
purchase payment withdrawn is the first purchase payment made which has not
previously been withdrawn. This is so, even if that purchase payment was to a
different subaccount than that from which withdrawal is being made or if the
shares being withdrawn are no longer subject to a withdrawal charge. Depending
on the amount of the withdrawal, one or more sales charge rates may be used if
the withdrawal is of purchase payments made in more than one contract year.
Example.--
Year Transaction
- ---- -----------
Contract year one --Payment of $500 in the Money
Market Subaccount
Contract year two --Payment of $400 in the Bond
Subaccount
Contract year four --Payment of $800 in the Common
Stock Subaccount
In contract year four the contractholder requests a partial withdrawal of $600
from his Common Stock subaccount. The value of his variable account is $2,000 on
the date of withdrawal. This means that $200 (10%) may be withdrawn without a
sales charge. A sales charge is required on the remaining $400 being withdrawn.
(Continued on Next Page)
Page 7 (WVA-83)
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VARIABLE ACCUMULATION PROVISIONS (continued)
To determine the sales charge we assume that $500 of the amount being withdrawn
is the payment made to the Money Market Subaccount in contract year one. The
remaining $100 being withdrawn is assumed to be a part of the $400 payment made
to the Bond Subaccount in contract year two.
Of the first $500 payment we have seen that $200 (10% of $2000) may be withdrawn
without sales charge. A 5% sales charge is due on the withdrawal of the other
$300 of the payment (5% X $300=$15). The $100 portion being withdrawn from the
second payment requires a 6% sales charge (6% X $100=$6) Thus the total sales
charge for withdrawing $600 in year four is $21.
Transfers.--You may transfer all or part of your interest in a subaccount to one
or more of the other subaccounts. To make a transfer you must ask us in writing
in a form which meets our needs. You must tell us the amount to be transferred
and the names of the subaccounts involved. Our consent is needed for the
transfer if (1) the amount to be transferred is less than the smaller of $300
and your interest in the subaccount, (2) the value of any of your Units
remaining in the subaccount after the transfer would be less than $300, or (3)
four or more transfers of Subaccount Units have been made under your contract in
the current Contract Year. The transfer will be made on the first Business Day
after we receive your request.
To make the transfer this is what we will do. First, we will liquidate, without
charge, the number of your Units in the subaccount from which the transfer is to
be made to provide the amount requested. Then, we will use that amount to
purchase Units in the subaccount to which the transfer is to be made. The result
will be that, while the contract value will not change the total number of
Subaccount Units credited to this contract may increase or decrease depending on
the Subaccount Unit Values. The original purchase date of record used to
determine the rate of charge for any future withdrawal is not changed as a
result of a transfer.
Example.--You ask that we transfer $600 from Subaccount A to Subaccount B. The
Subaccount A Unit Value is $10 on the date of the transfer. We would liquidate
60 shares in Subaccount A to provide the $600. The share value in Subaccount B
on the date of the transfer is $5. The $600 will buy 120 shares in Subaccount B.
If the Unit Value were $20, the $600 would buy only 30 Units. While the number
of Units may have changed on the date of transfer, their value remained the
same, $600.
Changing the Number of Subaccount Units Credited.--We have the right to change
the number of Subaccount Units if we deem the Subaccount Unit Value to be either
so large or so small as to not be in your best interest, or ours. If we make
such a change, the amount of the Variable Account will not change.
Substitution of Shares.--Shares of another registered, open-end investment
company may be substituted for the shares held in the account or any subaccount
or to be purchased by future purchase payments or transfers if (1) shares in the
subaccount are no longer available for purchase or (2) in our judgment further
investment in such shares is no longer appropriate for the subaccount.
Page 8 (WVA-83)
<PAGE>
VARIABLE PAYOUT PROVISIONS
Choosing an Option.--You may be able to have the amount of your variable account
on the Annuity Date paid to the Annuitant as an annuity under one of the options
we describe below. But, for any annuity settlement, we may first deduct from
that amount any charge for state premium taxes. And under some conditions we may
also deduct an Annuitization Charge as described on page 9. An Annuitization
Charge may be deducted if the Annuity Date is within three years of the Contract
Date, or if the form of annuity chosen is Option D.
Conditions.--Your right to make this choice is subject to all these conditions:
(1) You must ask for the option in writing and in a form which meets our needs,
(2) You must send the contract to us to be endorsed. (3) You must give us proof
of the date of birth of the Annuitant and of any contingent annuitant. (4) We
must have your request, the contract and the proof(s) of the date(s) of birth
before the Annuity Date.
Your choice of an option will take effect on the Annuity Date but only if: (1)
the Annuitant is living on that date: (2) the contingent annuitant, if any, is
living on that date; (3) the first payment under the option will be at least
$20; (4) the amount applied to provide the option is at least $2000, and (5) you
do not void the choice by making a later choice before the Annuity Date.
When No Option Chosen.--If no choice of Option A, C or D, which we describe
below, takes effect on the annuity date, settlement under Option B will become
effective. But the conditions described in the preceding paragraph will apply.
And we have the right to require proof of the date of birth of the Annuitant
before we make payment.
Options Described.--The first payment under these options is due on the annuity
date.
Option A (Life Annuity).--We will make monthly payments for as long as the
Annuitant lives. They will end with the last one due before the Annuitant's
death,
Option B (Life Annuity, 10-Year Minimum Period).--We will make monthly payments
for as long as the Annuitant lives, with 120 monthly payments assured. Unless
otherwise stated, if the Annuitant dies before the 120th payment is payable, we
will pay the residue in one sum to the Annuitant's designated beneficiary or
estate. We will compute the residue as of the first Business Day on or after the
date the Annuitant died. We will adjust the amount for the change in the
Subaccount Annuity Unit Value between that Business Day and the first Business
Day on or after which we receive at our Service Office the items we need for
settlement. But if the annuitant dies after the due date of the last payment
certain, no further payments will be due.
(Option C (Joint and Survivor Life Annuity).--We will make monthly payments for
as long as the Annuitant or the contingent annuitant lives. Unless otherwise
stated, we will make them to the Annuitant while he or she is living. After the
Annuitant dies, we will make them to the contingent annuitant if he or she is
living. The payments will end with the last one due before the death of the
second to die of the Annuitant and the contingent annuitant.
Option D (Annuity for Specified Period).--We will make monthly payments for the
period you elect. The period may be 5, 10, 15 or 20 years. It may be a different
number of years if you request it and we agree. Unless otherwise stated, if the
Annuitant dies when one or more payments remain unpaid in the period elected, we
will pay the residue in one sum to the Annuitant's designated beneficiary or
estate. We will compute the residue as of the first Business Day on or after the
date the Annuitant died. We will adjust the amount for the change in the
Subaccount Annuity Unit Value between that Business Day and the first Business
Day on or after which we receive at our Service Office the items we need for
settlement.
Residue Described.--For Option B, residue on any Business Day means the then
present value of such of the 120 payments as may remain unpaid. Residue does not
include the value of any payments which may become due after the 120th payment.
For Option D, residue on any Business Day means the then present value of any
unpaid payments for the specified period of the annuity.
For Options B and D, for the purpose of computing the present value, we assume
that the Annuity Unit Value for the Business Day as of which the calculation is
made will not change after that date. We will compute residue at an effective
interest rate of 3 1/2% a year.
Annuitization Charge.--If the Annuity Date is less than three years after the
Contract Date, or if the annuity option chosen is Option D, an Annuitization
Charge may be deducted from your Variable Account on the last Business Day on or
before the Annuity Date. The amount of the charge will be the same as the
Withdrawal Charge that would have applied if a total withdrawal had been made on
the Annuity Date. We explain how that charge is computed under Withdrawal
Charges on page 7.
Determination of Amount of Annuity.--Your Variable Account on the last Business
Day on or before the Annuity Date will be reduced by any Annuitization Charge
and any premium taxes that may apply. The balance will be used to determine the
first monthly annuity payment based on the option chosen and in accord with the
annuity settlement tables.
(Continued on Next Page)
Page 9 (WVA-83)
<PAGE>
VARIABLE PAYOUT PROVISIONS (Continued)
The number of your Annuity Units in each subaccount is found by dividing the
amount of the first monthly annuity payment attributable to your investment in
that subaccount by the Subaccount Annuity Unit Value on the last Business Day on
or preceding the Annuity Date. After that the number of Annuity Units for each
subaccount will remain fixed unless a transfer is made as we describe below. The
dollar amount of annuity payments will change from month to month to reflect the
investment experience of the subaccounts involved. The actual amount of any
annuity payments after the first will be determined by multiplying the number of
Annuity Units in each subaccount by the Annuity Unit Value for that subaccount
at the end of the Business Day on which the annuity payment is due or, if that
day is not a Business Day, at the end of the last preceding Business Day, and
then adding the resulting values.
Example.--The Contract Value is $ 10,000. Of that amount. $3,000 is in
Subaccount A and $7,000 is in Subaccount B. The annuity option is B and the
Annuitant is a man age 65 on the Annuity Date. The first annuity payment equals
$62.80 ($6.28 per $1000 of Contract Value).
Subaccount A provides $18.84 of that payment and Subaccount B provides $43.96.
To find the number of Annuity Units for each Subaccount we divide each of these
amounts by the respective Annuity Unit Value for the subaccount on the Annuity
Date.
For this example assume that the Annuity Unit Value is $3 for Subaccount A, and
$2 for Subaccount B. Dividing these into the respective annuity payments
provides the number of Annuity Units for each subaccount ($ 18.84 / $3 = 6.28
Units for Subaccount A, and $43.96 / $2 = 21.98 Units for Subaccount B). To find
the amount of each subsequent annuity payment we multiply the number of your
Annuity Units in each subaccount by the Annuity Unit Value for that subaccount
and add the results.
Subaccount Annuity Unit Value.--The value of an Annuity Unit for each subaccount
was set at $1.00 on the date the first purchase payment was applied to that
account. The value for any subsequent Business Day is determined by multiplying
the subaccount's Net Investment Factor for that day by its Annuity Share Value
for the last preceding Business Day.
The Net Investment Factor for each subaccount for any Business Day equals (a)
1.00 plus the rate of net investment income earned by the subaccount, after
providing for taxes, for the period from the end of the last preceding Business
Day to the end of the current Business Day, plus the rate of asset value changes
in the subaccount during the same period, minus the rate of the Asset Charge
(which we explain on page 5) for the number of calendar days involved, divided
by (b) 1.00 plus the interest rate for the number of days involved, at the
effective annual rate assumed in the calculation of the annuity rates. (See page
11)
Transfers During the Annuity Period.--During the annuity period the person who
has the right to receive variable annuity payments may choose to have the
payments reflect the investment results of different subaccounts. The annuity
units from one subaccount may be transferred to another subaccount subject to
these conditions: (1) only one transfer may be made in each Contract Year
without our consent. (2) All the shares in a subaccount must be transferred.
The transfer will be made effective for the first Business Day after the date we
receive the request for transfer except that if the request is received within
seven days before an annuity payment date, it will be made effective on the
first Business Day after the annuity payment date. To find the number of units
added to the subaccount(s) this is what we do. We multiply the number of Annuity
Units in the subaccount from which the transfer is to be made by the Annuity
Unit Value of that subaccount. We divide the result by the Annuity Unit Value
for the subaccount to which the transfer is being made. The result is the number
of Annuity Units to be transferred to the subaccount.
Example--The Annuity Units in Subaccount A are to be transferred to Subaccount
B. There are 1000 Annuity Units in Subaccount A and the Annuity Unit Value for
that subaccount is $2.00 on the date of transfer. We multiply the number of
Annuity Units (1000) by the Annuity Unit Value ($2.00) and arrive at the figure
$2000. The number of Units to be added to Subaccount B is found by dividing this
figure by the Annuity Unit Value for Subaccount B. The Annuity Unit Value for
Subaccount B is $1.00. In this case the number of Units added to Subaccount B
would be 2000 ($2000 / $1.00). If the Annuity Unit Value of Subaccount B were
$4.00, only 500 Units would have been added ($2000 / $4.00).
We may stop, suspend or modify the transfer provisions. If we do, we will give
you 30 days' notice.
Page 10(WVA-83)
<PAGE>
ANNUITY SETTLEMENT TABLES
Amounts Payable.--If the annuity date is a contract anniversary, for Options A,
B and C we will use the tables below to compute the amount of the first monthly
payment. The amounts we show for Options A and B are based on the Annuitant's
sex and age last birthday on the annuity date. The amounts we show for Option C
are based on both the Annuitant's and the contingent annuitant's sex and age
last birthday on the annuity date.
If the annuity date is not a contract anniversary, for each completed quarter
year after the most recent anniversary we will adjust the amounts.
When we computed the amounts we show in the tables we adjusted the 1971
Individual Annuity Mortality Table to an age last birthday basis, less one year;
we used an interest rate of 3 1/2% a year. For combinations of ages which we do
not show, we will compute the first monthly payment on the same basis. We will
let you know the amounts if you ask for them. Settlements under Options A, B and
C will share in our surplus to the extent and in the way we decide.
We computed the amounts of the first monthly payments we show in Table D using
an interest rate of 3 1/2%. Those amounts are not based on the age or sex of the
annuitant.
Other forms of annuity may be provided, subject to Prudential's consent, or as
may be required by any applicable law or regulation.
TABLE A
Amount of first monthly payment under Option A for each
$1,000 applied on the annuity date.
- --------------------------------------------------------------------------------
AGE MALE FEMALE AGE MALE FEMALE
- --------------------------------------------------------------------------------
41 $4.12 $3.84 61 $5.98 $5.34
42 4.18 3.88 62 6.14 5.46
43 4.23 3.93 63 6.30 5.60
44 4.30 3.98 64 6.48 5.74
45 4.36 4.03 65 6.67 5.90
46 4.43 4.08 66 6.88 6.07
47 4.51 4.13 67 7.10 6.26
48 4.58 4.19 68 7.33 6.46
49 4.66 4.25 69 7.58 6.68
50 4.74 4.32 70 7.86 6.92
51 4.83 4.39 71 8.15 7.18
52 4.92 4.46 72 8.47 7.46
53 5.02 4.54 73 8.81 7.77
54 5.12 4.62 74 9.17 8.10
55 5.22 4.71 75 9.57 8.47
56 5.33 4.80 76 10.00 8.86
57 5.45 4.89 77 10.47 9.30
58 5.57 5.00 78 10.97 9.77
59 5.70 5.10 79 11.52 10.29
60 5.84 5.22 80 12.11 10.85
- --------------------------------------------------------------------------------
TABLE B
Amount of first monthly payment under Option B for each
$1,000 applied on the annuity date.
- --------------------------------------------------------------------------------
AGE MALE FEMALE AGE MALE FEMALE
- --------------------------------------------------------------------------------
41 $4.10 $3.83 61 $5.74 $5.23
42 4.15 3.87 62 5.87 5.34
43 4.21 3.92 63 6.00 5.46
44 4.27 3.96 64 6.13 5.59
45 4.33 4.01 65 6.28 5.73
46 4.39 4.06 66 6.43 5.87
47 4.46 4.12 67 6.58 6.02
48 4.53 4.17 68 6.74 6.19
49 4.60 4.23 69 6.91 6.36
50 4.67 4.30 70 7.08 6.53
51 4.75 4.36 71 7.26 6.72
52 4.83 4.43 72 7.43 6.92
53 4.92 4.50 73 7.61 7.12
54 5.00 4.58 74 7.80 7.32
55 5.10 4.66 75 7.89 7.53
56 5.19 4.74 76 8.16 7.74
57 5.29 4.83 77 8.33 7.95
58 5.40 4.92 78 8.52 8.15
59 5.51 5.02 79 8.68 8.35
60 5.62 5.12 80 8.85 8.54
- --------------------------------------------------------------------------------
(Continued on Next Page)
Page 11 (WVA-83)
<PAGE>
ANNUITY SETTLEMENT TABLES (Continued}
TABLE C Amount of first monthly payment under Option C for each $1000 applied on
the annuity date.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FEMALE MALE AGE
- ------------------------------------------------------------------------------------------------------------------------------
AGE 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.39 $4.42 $4.44 $4.46 $4.47 $4.49 $4.51 $4.52 $4.54 $4.55 $4.57 $4.58 $4.59 $4.60 $4.61
56 4.45 4.47 4.49 4.52 4.54 4.56 4.57 4.59 4.61 4.62 4.64 4.65 4.67 4.68 4.69
57 4.50 4.53 4.55 4.58 4.60 4.62 4.64 4.66 4.68 4.70 4.71 4.73 4.74 4.76 4.77
58 4.55 4.58 4.61 4.64 4.66 4.69 4.71 4.73 4.75 4.77 4.79 4.81 4.83 4.84 4.86
59 4.61 4.64 4.67 4.70 4.73 4.76 4.78 4.81 4.83 4.85 4.87 4.89 4.91 4.93 4.94
60 4.66 4.70 4.73 4.76 4.79 4.82 4.85 4.88 4.91 4.93 4.96 4.98 5.00 5.02 5.04
61 4.72 4.75 4.79 4.86 4.83 4.90 4.93 4.96 4.99 5.02 5.04 5.07 5.09 5.11 5.13
62 4.77 4.81 4.85 4.89 4.93 4.97 5.00 5.04 5.07 5.10 5.13 5.16 5.19 5.21 5.23
63 4.82 4.87 4.91 4.96 5.00 5.04 5.08 5.12 5.16 5.19 5.22 5.26 5.29 5.31 5.34
64 4.88 4.93 4.98 5.02 5.07 5.11 5.16 5.20 5.24 5.28 5.32 5.35 5.39 5.42 5.45
65 4.93 4.98 5.04 5.09 5.14 5.19 5.24 5.29 5.33 5.38 5.42 5.46 5.50 5.53 5.57
66 4.98 5.04 5.10 5.15 5.21 5.27 5.32 5.37 5.42 5.47 5.52 5.56 5.61 5.65 5.69
67 5.04 5.10 5.16 5.22 5.28 5.34 5.40 5.46 5.51 5.57 5.62 5.67 5.72 5.77 5.81
68 5.09 5.15 5.22 5.29 5.35 5.42 5.48 5.55 5.61 5.67 5.73 5.78 5.84 5.89 5.94
69 5.14 5.21 5.28 5.35 5.42 5.49 5.56 5.63 5.70 5.77 5.84 5.90 5.96 6.02 6.08
70 5.19 5.26 5.34 5.42 5.49 5.57 5.65 5.72 5.80 5.87 5.94 6.02 6.08 6.15 6.22
71 5.24 5.32 5.40 5.48 5.56 5.64 5.73 5.81 5.89 5.97 6.13 6.21 6.29 6.21 6.36
72 5.28 5.37 5.45 5.54 5.63 5.72 5.81 5.90 5.99 6.08 6.16 6.25 6.34 6.42 6.50
73 5.33 5.42 5.51 5.60 5.69 5.79 5.88 5.98 6.08 6.18 6.27 6.37 6.46 6.56 6.65
74 5.37 5.46 5.56 5.65 5.75 5.86 5.96 6.06 6.17 6.27 6.38 6.49 6.59 6.70 6.80
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE D
Amount of first monthly payment under Option D for each $1,000 applied on the
annuity date.
---------------------------
NUMBER MONTHLY
OF YEARS PAYMENT
---------------------------
5 $18.12
10 9.83
15 7.10
20 5.75
---------------------------
Page 12 (WVA-83)
<PAGE>
SETTLEMENT PROVISIONS FOR THE BENEFICIARY
Payee Defined.--In these provisions the word Payee means a beneficiary or a
contingent payee who has a right to receive a settlement under the contract.
Choosing an Option.--A Payee may choose an option for all or part of any
proceeds, residue or the then present value of any unpaid payments which become
payable to him or her in one sum. We explain residue under Residue Described.
In some cases a Payee will need our consent to choose an option. We describe
these cases under Conditions.
Options Described.--Here are the options we offer. We may also consent to other
arrangements.
Option 1 (Payments for a Fixed Period).--We will make monthly payments for the
period the Payee selects. The period may be 5, 10, 15 or 20 years.
Option 2 (Life Income, 10-Year Minimum Period).--We will make monthly payments
for as long as the person on whose life the settlement is based lives, with 120
monthly payments assured. We must have proof of the date of birth of that
person. The settlement will share in our surplus to the extent and in the way we
decide.
Determination of Amount of Payment Under Option 1 or 2.--Monthly payments are
determined as described in the Determination of Amount of Annuity provision,
except that no premium tax or annuitization charge will be deducted from the
amount payable. The applicable rates for Option 1 will be the same as rates
shown in the Option D Table and for Option 2, the same as rates shown in the
Option B Table.
First Payment Due Date.--Unless a later date is requested when the option is
chosen, the first payment will be due on the first day of the earliest calendar
month on or after the Service Office has received the request for the settlement
and due proof of the Annuitant's death and such claim forms and other evidence
as may be satisfactory to us.
Residue Described.--For Option 1, residue on any Business Day means the then
present value of any unpaid payments for the balance of the fixed payment
period.
For Option 2, it means the then present value of such of the 120 payments as may
remain unpaid. Residue does not include the value of any payments which may
become due after the 120th payment.
For Options 1 and 2, for the purpose of computing the present value, we assume
that the Annuity Unit Value for the Business Day as of which the calculation is
made will not change after that date. We will compute residue at an effective
interest rate of 3 1/2% a year.
Conditions.--Our permission is needed for an option to be used for any person
under any of these conditions:
1. The person is not a natural person who will be paid in his or her own right.
2. The person will be paid as assignee.
3. The first payment to the person under the option would be less than $20.
Death of Payee.--If a Payee under an option dies and if no other distribution is
shown, we will pay any residue under that option in one sum to the Payee's
estate.
Page 13 (WVA-83)
<PAGE>
ENDORSEMENTS
(Only we can endorse this contract.)
Page 14 (WVA-83)
<PAGE>
GUIDE TO CONTENTS
Page
Contract Summary.............................................2
Death of Annuitant...........................................2
General Provisions...........................................4
Definitions: Contract Modifications;
Change of Annuity Date;
Ownership and Control;
Currency; Misstatement of Age
or Sex; Incontestability;
Proof of Survival or Death;
Assignment; Asset Charges;
Changes by Prudential;
Voting Rights
Beneficiary .................................................6
Variable Accumulation Provisions.............................6
Purchase Payments; Crediting
of Subaccount Units; Subaccount Unit Value;
Annual Maintenance Charge;
Withdrawals;
Withdrawal Charges; Transfers;
Changing the Number of Subaccount
Units Credited; Substitution of Shares
Variable Payout Provisions ..................................9
Choosing an Option; Conditions;
When No Option Chosen;
Options Described; Residue
Described; Annuitization
Charge; Determination of Amount
of Annuity; Subaccount Annuity Unit Value;
Transfers During the Annuity Period
Annuity Settlement Tables
Settlement Provisions for the Beneficiary...................13
Page 15
Variable Annuity Contract with Flexible Purchase Payments--Monthty annuity
payments starting on annuity date. Payment as stated upon death before annuity
date. Purchase payments payable during Annuitant's lifetime until annuity date.
WVA-83
The Prudential Insurance Company of America
Corporate Office
Newark, New Jersey
Annuitant Contract Number
Annuity Date Contract Date
Agency
We will make monthly payments starting on the annuity date we show in the window
of this page. We make this promise subject to all the provisions of this
contract.
Please read this contract with care. A guide to its contents is on the last
page. A summary is on page 2. If there is ever a question about it, or there is
a claim, just see one of our representatives or get in touch with one of our
offices.
The benefits, payments and values under this contract are on a variable basis.
They will reflect the investment experience of the separate account to which the
contract is related; they are subject to change both up and down and are not
guaranteed as to dollar amount except as provided under the Death of Annuitant
and Settlement Provisions for the Beneficiary sections.
The assets of the separate account, The Prudential Individual Variable Contract
Account, would have to earn an investment return of 4.7% per annum in order that
the dollar amount of annuity payments made under the Variable Payout Provisions
of this contract will not decrease. A Mortality Risk Charge and an Expense Risk
Charge are applied daily at effective annual rates of 0.8% and 0.4%,
respectively (for a total of 1.2% per year), against the net assets of The
Prudential Individual Variable Contract Account attributable to Subaccount Units
and Subaccount Annuity Units under this contract.
Right to Cancel Contract. --Not later than ten days after you get this contract,
you may return it to us. All you have to do is take it or mail it to one of our
offices or to the agent who sold it to you. We will cancel the contract and
promptly give you its net asset value on the date your request is received,
without redemption charge.
The provisions on this and the following pages of this contract comprise the
entire contract. The contract was signed for Prudential on the contract date,
which is the date of issue.
Signed for Prudential.
/s/ Isabelle Kirchner /s/ ILLEGIBLE
------------------------- -------------------------
Secretary President
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on annuity date. Payment as stated upon death before annuity
date. Purchase payments payable during Annuitant's lifetime until annuity date.
WVA-83 (N.Y.)
ENDORSEMENT
(Only we can endorse this contract)
EXHIBIT (4)(c)
ALTERATION OF TEXT
The second paragraph of the section "Determination of Amount of Annuity" in the
Variable Payout Provisions is amended as of the issue date to read as follows:
The number of your Annuity Units in each subaccount is found by dividing the
amount of the first monthly annuity payment attributable to your investment in
that subaccount by the Subaccount Annuity Unit Value on the last Business Day on
or preceding the Annuity Date. After that the number of annuity Units for each
subaccount will remain fixed unless a transfer is made as we describe below.
The dollar amount of annuity payments will vary from month to month and may
increase or decrease to reflect the investment experience of the subaccounts
involved. The actual amount of any annuity payments after the first will be
determined by multiplying the number of Annuity Units in each subaccount by the
Annuity Unit Value for that subaccount at the end of the Business Day on which
the annuity payment is due or, if that day is not a Business Day, at the end of
the last preceding Business Day, and then adding the resulting values.
The Prudential Insurance Company of America
By /s/ Isabelle L. Kirchner
Secretary
WVA2 83
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing and
in a form which meets our needs. It will take effect only when we file it at our
Service Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if the Annuitant is not living
when we file the request. Unless otherwise stated, we will make payment to the
beneficiary only if the Annuitant dies before the annuity date. Any
beneficiary's interest is subject to the rights of any assignee of whom we know.
When a beneficiary is designated, any relationship shown to the Annuitant,
unless otherwise stated. To show priority, we may use numbered classes, so that
the class with first priority is called class 1, the class with next priority is
called class 2, and so on. When we use numbered classes, these statements apply
to beneficiaries less the form states otherwise:
1. One who survives the Annuitant will have the right to be paid only if no one
in a prior class survives the Annuitant.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the Annuitant.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the Annuitant, we will pay in one sum to the Annuitant's
estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. If the Annuitant dies before the annuity date, we owe Jane
the proceeds if she is living at the Annuitant's death. We owe Paul and John the
proceeds if they are living then but Jane is not. But if only one of them is
living, we owe him the proceeds. If none of them is living, we owe the
Annuitant's estate.
VARIABLE ACCUMULATION PROVISIONS
Purchase Payments.--An initial purchase payment of at least $1000 is payable on
the contract date. Further purchase payments may be made at any time while the
annuitant is living and before the annuity date. The amount of each payment
after the first must be at least [ILLEGIBLE]00. We reserve the right to
establish a maximum amount.
The initial purchase payment will be allocated to the subaccounts in accord with
your instructions. The minimum amount of a first allocation to a subaccount is
[ILLEGIBLE]00; the minimum for subsequent allocations is $100. If, after you
have made at least one purchase, we receive a purchase payment without
instructions, we will allocate it the same proportions as the most recent
purchase payment you made.
Example 1: On the Contract Date you make a $1500 purchase and allocate $500 to
each of Subaccounts A, B and C. Later in the year you send us a $900 purchase
payment, but you don't tell us how it is to be applied. [ILLEGIBLE] on the most
recent purchase, the one made on the Contract Date, we would make a $300
purchase for each Subaccounts A, B and C.
Example 2: If in the example above your second purchase payment had been $200
instead of $900, we would not have been able to make the purchase since there
was not enough money to make a minimum purchase of $100 for each of the 3
subaccounts. In this case we would contact to find out how the purchase payment
is to be applied. The purchase would be made when we receive your instructions
at our Service Office.
Crediting of Subaccount Units.--This contract will be credited with the number
of Subaccount Units which results from dividing (1) the amount of any purchase
payment allocated to a subaccount by (2) that subaccount's Unit Value for the
Business Day the purchase is made. The first purchase payment will be credited
on the first Business Day which is the later of: (a) the Contract Date, (b) the
date the purchase payment is received at the Service Office, or (c) the date we
approve the request for the contract, or on a later date if you request and we
agree. For any purchase payment after the first, the shares will be credited on
the first Business Day not earlier than the day we receive it at our Service
Office or on a later day if you request and we agree.
Subaccount Unit Value.--The Unit Value for a subaccount for any Business Day is
found by multiplying that subaccount's Net Investment Factor for that day by its
Unit Value for the last preceding Business Day. A subaccount's Net Investment
Factor for any Business Day equals (1) 1.00 plus the rate of net investment
income earned, after provision for taxes, for the period from the end of the
last preceding Business Day to the end of the current Business Day; plus (2) the
rate of asset value changes in the subaccount during the same period, minus {3)
the rates of the Mortality Risk Charge and the Expense Risk Charge (which we
describe on Page 5) for the number
(Continued on Next Page)
Page 6 (WVA-83) (OKLA)
Exhibit (4)(e)
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing. It
will take effect only when we receive it at our Service Office. Then any
previous beneficiary's interest will end as of the date of the request. It will
end then even if the Annuitant is not living when we receive the request. We
may, upon receiving the request require you to submit the contract for
endorsement, but this action will not affect the effective date of the
beneficiary designation. Unless otherwise stated, we will make payment to the
beneficiary only if the Annuitant dies before the annuity date. Any
beneficiary's interest is subject to the rights of any assignee of whom we know.
When a beneficiary is designated, any relationship shown is to the Annuitant,
unless otherwise stated. To show priority, we may use numbered classes, so that
the class with first priority is called class 1, the class with next priority is
called class 2, and so on. When we use numbered classes, these statements apply
to beneficiaries unless the form states otherwise;
1. One who survives the Annuitant will have the right to be paid only if no one
in a prior class survives the Annuitant.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the Annuitant.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the Annuitant, we will pay in one sum to the Annuitant's
estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. If the Annuitant dies before the annuity date, we owe Jane
the proceeds if she is living at the Annuitant's death. We owe Paul and John the
proceeds if they are living then but Jane is not. But if only one of them is
living, we owe him the proceeds. If none of them is living, we owe the
Annuitant's estate.
Before we make a payment, we have the right to decide what proof we need of the
identity, age or any other facts about any persons designated as beneficiaries.
If beneficiaries are not designated by name and we make payment(s) based on that
proof, we will not have to make the payment(s) again.
VARIABLE ACCUMULATION PROVISIONS
Purchase Payments.--An initial purchase payment of at east $1000 is payable on
the contract date. Further purchase payments may be made at any time while the
Annuitant is living and before the annuity date. The amount of each payment
after the first must be at least $100. We reserve the right to establish a
maximum amount.
The initial purchase payment will be allocated to the subaccounts in accord with
your instructions. The minimum amount of a first allocation to a subaccount is
$300; the minimum for subsequent allocations is $100. If, after you have made at
least one purchase, we receive a purchase payment without instructions, we will
allocate it in the same proportions as the most recent purchase payment you
made.
Example 1: On the Contract Date you make a $1500 purchase and allocate $500 to
each of Subaccounts A, B and C. Later in the year you send us a $900 purchase
payment, but you don't tell us how it is to be applied. Based on the most recent
purchase, the one made on the Contract Date, we would make a $300 purchase for
each of Subaccounts A, B and C.
Example 2: If in the example above your second purchase payment had been $200
instead of $900, we would not have been able to make the purchase since there
was not enough money to make a minimum purchase of $100 for each of the 3
subaccounts. In this case we would contact you to find out how the purchase
payment is to be applied. The purchase would be made when we receive your
instructions at our Service Office.
Crediting of Subaccount Units.--This contract will be credited with the number
of Subaccount Units which results from dividing (1) the amount of any purchase
payment allocated to a subaccount by {2) that subaccount's Unit Value for the
Business Day the purchase is made. The first purchase payment will be credited
on the first Business Day which is the later of: (a) the Contract Date, {b) the
date the purchase payment is received at the Service Office, or (c) the date we
approve the request for the contract, or on a later date if you request and we
agree. For any purchase payment after the first, the shares will be credited on
the first Business Day not earlier than the day we receive it at our Service
Office or on a later day if you request and we agree.
Subaccount Unit Value.--The Unit Value for a subaccount for any Business Day is
found by multiplying that subaccount's Net Investment Factor for that day by its
Unit Value for the last preceding Business Day. A subaccount's Net Investment
Factor for any Business Day equals (1) 1.00 plus the rate of net investment
income earned, after provision for taxes, for the period from the end of the
last preceding Business Day to the end of the current Business Day plus (2) the
rate of asset value changes in the subaccount during the same period, minus (3)
the rates of the Mortality Risk Charge and the Expense Risk Charge (which we
describe on Page 5) for the number
(Continued on Next Page)
Page 6 (WVA--83) (CAL.)
WVA3-83
ENDORSEMENT
(Only we can endorse this contract)
EXHIBIT (4)(f)
ALTERATION OF TEXT
The paragraph titled "Changes by Prudential" under the provision of this
contract titled "GENERAL PROVISIONS" is replaced at issue by the following:
Changes by Prudential.-- We reserve the right, upon 90 days' notice to you, to:
(1) change the minimum amount requirements specified for purchases, withdrawals
and transfers in the Variable Accumulation Provisions;
(2) refuse to accept any request for purchase;
(3) increase the amount of the Annual Maintenance Charge (see page 7),
provided, however, that any such increase will be made effective only after
it has been submitted and approved by the Tennessee Department of
Insurance;
(4) change the number of Subaccount Units credited, change or discontinue
subaccounts, change to a different variable contract account, or substitute
fund shares in the account (see page 8).
The Prudential Insurance Company of America
By /s/ Isabelle L. Kirchner
Secretary
WVA3-83
Prudential
The Prudential Insurance Company of America
TEXAS VARIABLE
ANNUITY ENDORSEMENT
The Variable Annuity Contract was modified prior to its execution by
addition of the following:
1. This Variable Annuity Contract is issued subject to the laws and
regulations of the State of Texas, including the application of such laws and
rules and requirements to the Contract and to the interpretation of its
provisions, and is amended to conform therewith.
2. Prudential may effect the transfer of assets between Prudential's
Individual Variable Contract Account and other accounts for the purpose of
making adjustments necessitated by this Contract, including adjustment for any
surplus or deficit which may arise in Prudential's Individual Variable Contract
Account by virtue of mortality experience or required by governmental
authorities having jurisdiction over Prudential. Such adjustments shall be made
by cash transfer only, except as is authorized or required by regulatory
authority.
3. Prudential's Individual Variable Contract Account is divisible for
various purposes in respect of regulation and compliance with law, including
divisibility as it is applicable to any functions arising from the provisions of
the Contract or provisions of law and regulation.
4. The Variable Annuity Contract is subject to endorsement from time to
time as may be necessary to comply with valid and appropriate rules and
regulations adopted by regulatory authorities, or as a court of final
jurisdiction shall determine, and is executed subject to that condition.
5. The Variable Annuity Contract is issued subject to the laws of the state
where the Annuitant resides at the time of the making of the Contract and is
subject also to the rules and regulations of the state administrative agency
responsible for variable annuity regulation in such state, including the
application of such laws and rules and requirements to the Contract and to the
interpretation of its provisions; except, however, in the circumstance and only
to the extent the application of this provision to any person or circumstance is
expressly contrary to and excluded by superior law or valid statute having and
determined to have supremacy in the circumstance.
6. Prudential guarantees that the actual expense and actual mortality will
not adversely affect the dollar amounts of variable annuity benefits or other
contractual payments or value; and Prudential will transfer such amounts of
general corporate funds into Prudential's Individual Variable Contract Account
as are necessary to carry out this guarantee. However, no transfer shall be
made, and Prudential does not obligate itself to make any transfer which would
result in an impairment of the statutory reserves of Prudential, and this
guarantee is accordingly limited.
7. The variable annuity benefits of the Variable Annuity Contract are
funded solely from the assets of Prudential's Individual Variable Contract
Account and except to the extent of such limited expense and mortality
guarantees, shall have no claim against any other assets of Prudential.
8. The monthly annuity for ages not shown in the Annuity Settlement Tables
will be provided by Prudential upon request.
9. Variations in the values or cost of Subaccount Units or Subaccount
Annuity Units or the amount of payments applied to Prudential's Individual
Variable Contract Account are or will be made to effect requirements of law or
regulation.
10. Prudential will mail to the Annuitant such reports and information
periodically as the law and regulation of appropriate jurisdictions shall
require (irrespective of any provision of this Contract which may be contrary to
such law or regulation).
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By /s/ Isabelle Kirchner
Secretary
ENDORSEMENT
(Only we can endorse this contract)
The paragraph titled "Changes by Prudential" on page 5, under the provision of
this contract titled "GENERAL PROVISIONS", is amended as of the Contract Date to
provide that Prudential does not reserve the right to increase the amount of the
Annual Maintenance Charge. The Charge will never be greater than the amount
shown on page 3.
The Prudential Insurance Company of America
By /s/ Isabelle Kirchner
Secretary
ENDORSEMENT
(Only we can endorse this contract.)
ALTERATION OF TEXT
The Definitions section of the General Provisions on page 4 is amended as of the
Contract Date to add the following definitions:
Proof of Death (as required under Death of Annuitant on page 2). -- Any of the
following: (1) a copy of a certified official certificate of death; (2) a
statement by the attending physician, or an abstract of the record of the
hospital where the Annuitant died, certifying to the Annuitant's death; (3) a
copy of a decree by a court of competent jurisdiction as to a finding of death;
or (4) any other proof of death acceptable to Prudential.
The Subaccount Unit Value section of the Variable Accumulation Provisions on
pages 6 and 7 is amended as of the Contract Date to further define as follows
two items which help determine the Net Investment Factor for any Business Day:
The rate of net investment income earned for any Business Day is the rate of any
dividends declared by the corresponding Portfolio of The Prudential Series Fund,
Inc., but not yet paid to the subaccount.
The rate of asset value changes in the subaccount for any Business Day is the
rate 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
(not considering changes resulting from new purchase payments and withdrawals)
and subtracting 1.0 from the result.
The Prudential Insurance Company of America
By /s/ Isabelle L. Kirchner
Secretary
ENDORSEMENT
(Only we can endorse this contract.)
This endorsement is attached to and made a part of this contract on the contract
date:
Any reference, in any provision of this contract, to the sex of any person will
be ignored except for the purpose of identification. For any participating
settlement payable for the lifetime of one or more payees, the female rates we
show in the contract will apply to both male and female payee.
This form was approved by the New York State Insurance Department under an
accelerated procedure to help employers in complying with the United States
Supreme Court decision in Arizona vs. Norris. The Department has reserved the
right to require changes in this form to comply with the New York law and
regulations that apply.
The Prudential Insurance Company of America
By /s/ Isabelle Kirchner
Secretary
EXHIBIT (4)(K)
ENDORSEMENT
(Only we can endorse this contract.)
This endorsement is attached to and made a part of this contract on the contract
date:
Any reference, in any provision of this contract, to the sex of any person will
be ignored except for the purpose of identification. For any participating
settlement payable for the lifetime of one or more payees, the female rates we
show in the contract will apply to both male and female payees.
The Prudential Insurance Company of America
By /s/ Isabelle L. Kirchner
Secretary
[ILLEGIBLE] Printed in U.S.A.
Annuitant(s) Contract Number
Annuity Date Contract Date
Agency
We will make monthly payments starting on the Annuity Date we show in the window
of this page. We make this promise subject to all the provisions of this
contract.
Please read this contract with care. A guide to its contents is on the last
page. A summary is on page 2. If there is ever a question about it, or there is
a claim, just see one of our representatives or get in touch with one of our
offices.
Except with respect to any fixed-dollar payout which you may elect, the
benefits, payments and values under this contract are on a variable basis. They
will reflect the investment experience of the separate account to which the
contract is related; they are subject to change both up end down and are not
guaranteed as to dollar amount except as provided under the Death of Annuitant
and Settlement Provisions for the Beneficiary sections.
Right to Cancel Contract.--Not later than ten days after you get this contract,
you may return it to us. All you have to do is take it or mail it to one of our
offices or to the agent who sold it to you. We will cancel the contract and
promptly give you its net asset value on the date your request is received,
without redemption charge.
The provisions on this and the following pages of this contract comprise the
entire contract. The contract was signed for Prudential on the contract date,
which is the date of issue.
Signed for Prudential.
/s/ Isabella L. Kirchner
Secretary
/s/ [illegible]
President
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date.
<PAGE>
CONTRACT SUMMARY
We offer this summary to help you understand this contract. We do not intend
that it change any of the provisions of the contract.
This is a contract to provide variable or fixed-dollar income, or both, to
begin on the Annuity Date. We will make payment on the Annuity Date to the
Annuitant named on page 3, (the first Annuitant named there if two Annuitants
are named,) if he or she is then living and entitled to payment. But if two
Annuitants are named on page 3 and the first Annuitant is not living on the
Annuity Date, or if you ask us to do so, we will make payment to the
Co-Annuitant named on page 3 if he or she is then living. If an annuity option
of Type A, B or C is chosen (see Payout Provisions) the income payments will be
based on the age and sex of the Annuitant who is receiving payment. If, on the
Annuity Date, no other settlement has been chosen, we will make variable monthly
payments under Type B, with 120 payments assured. But if the amount of the
initial payment would be less than $20, we will, instead, pay the cash value in
one sum. We describe other options we offer on page 12.
Purchase payments may be made at any time until the Annuity Date. There are no
scheduled amounts or due dates. We explain this on page 9. The purchase payments
will be reduced by any state premium taxes we are required to deduct, and the
balance will be allocated as you direct to one or more of the subaccounts of The
Prudential Individual Variable Contract Account, a variable contract account of
Prudential, created under New Jersey law and registered as a unit investment
trust under the Investment Company Act of 1940. Assets of these subaccounts are
invested in shares of corresponding Portfolios of The Prudential Series Fund,
Inc. For example, assets of the Bond Subaccount are invested in shares of the
Bond Portfolio. Assets of the Money Market Subaccount are invested in shares of
the Money Market Portfolio, etc. Your interests in subaccounts are recorded in
terms of full or fractional units of the selected subaccount(s).
On the Annuity Date, if a variable annuity option takes effect, the number
of your subaccount units that are needed to provide the option are converted to
subaccount annuity units. These units will be used to provide a variable annuity
under the Payout Provisions. We explain this on pages 12, 13, 14 and 15. The
dollar value of the subaccount units and the amount of the annuity payments will
vary in second with the investment results of the subaccounts. If a fixed
annuity option takes effect, your subaccount units will be used to provide an
income which will be fixed in amount thereafter, as we explain on page 13.
We describe on page 6 the amount payable, if any, at the death of an Annuitant.
Proceeds which may arise from an Annuitant's death before the Annuity Date may
be used to increase the value of the contract if shore is a surviving Annuitant.
Otherwise, they may be paid to the beneficiary in cash; or they may be applied
by the beneficiary for a payout option. We describe the available choices under
Settlement Provisions for the Beneficiary on page 8.
You and we may agree on a change in the ownership of this contract. Also, unless
we endorse it to say otherwise, the contract gives you these rights, among
others:
o You may change the beneficiary under it.
o You may surrender it for its cash value.
o You may make withdrawals.
o You may transfer shares from one subaccount to another.
o You may delete one Annuitant if two are named.
<PAGE>
CONTRACT DATA
Annuitant(s) JOHN DOE/MARY DOE XX XXX XXX CONTRACT NUMBER
Annuity Date JULY 1, 2012 JULY 1, 1984 CONTRACT DATE
AGENCY R-NK 1
FIRST ANNUITANT:
NAME JOHN DOE
SEX AND ISSUE AGE M-35
DATE OF BIRTH 3-15-49
CO-ANNUITANT:
NAME MARY DOE
SEX AND ISSUE AGE F-32
DATE OF BIRTH 10-1-52
BENEFICIARY: CLASS 1-ROBERT DOE
SON OF ANNUITANTS
CLASS 2-BARBARA SMITH
SISTER OF CO-ANNUITANT
ALLOCATION OF INITIAL PURCHASE PAYMENT
SUBACCOUNTS
BOND XX%
MONEY MARKET XX%
COMMON STOCK XX%
AGGRESSIVELY MANAGED FLEXIBLE XX%
CONSERVATIVELY MANAGED FLEXIBLE XX%
THE MAINTENANCE CHARGE IS $30.00 ANNUALLY. WE EXPLAIN THIS ON PAGE 9.
SERVICE OFFICE - PLEASE DIRECT ANY COMMUNICATION ABOUT THIS CONTRACT TO:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, P.O. BOX 2925, PHOENIX,
ARIZONA 85062
<PAGE>
GENERAL PROVISIONS
Definitions.--We define here some of the words and phrases used all through this
contract. We explain others, not defined here, in other parts of the text.
Accumulation Period.--The period of time between the Contract Date and the
Annuity Date.
Anniversary or Contract Anniversary.--The same day and month as the Contract
Date in each later year.
Example: If the contract date is March 9, 1983, the first anniversary is March
9, 1984. The second is March 9, 1985, and so on.
Annuitant(s).--The person or persons named in the window of the first page. If
more than one person is so named, one of the two is named on Page 3 as First
Annuitant, the other as Co-Annuitant. And, in this case the Beneficiary
Provisions of the Contract will be based on the death of the last survivor of
the persons so named. The owner need not be an Annuitant.
Annuity Date.--The date the first annuity payment is due.
Business Day.--A day on which the New York Stock Exchange is open for business.
Cash Value.--Variable Account less any withdrawal charges that apply.
Contingent Annuitant.--A person to whom monthly payments under a Joint and
Survivor Life Annuity will continue for life if he or she is living after the
death of the Annuitant under that Annuity. You will name the Contingent
Annuitant for any Joint and Survivor Life Annuity you may choose. The Contingent
Annuitant you choose may also be named in the contract as an Annuitant, but need
not be.
Contract Year.--A year which starts on the Contract Date or on an
anniversary.
Example: If the contract date is March 9, 1983, the first Contract Year starts
then and ends on March 8, 1984. The second starts on March 9, 1984 and ends on
March 8, 1985, and so on.
Earnings.--The excess, if any, of (1) variable account plus any amounts
previously withdrawn from the variable account, over (2) total purchase
payments to date.
Issue Data.--The Contract Date.
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 Fund).-- A mutual fund with separate
portfolios one or more of which you may choose as the underlying investment for
your contract. The fund was established by Prudential. It is registered under
the Investment Company Act of 1940, as amended, as an open-end diversified
management investment company.
Service Office.--The Prudential office designated by it to service contracts
such as this. Its mailing address is the address shown on the Contract Data
page, unless Prudential specifies another address by notice to you.
Subaccount.--A division of the Account the assets of which are invested in the
shares of a corresponding portfolio of the Fund.
Subaccount Annuity Unit.--A measure used to find the amount of a variable
annuity monthly payment.
Subaccount Annuity Unit Value.--The monthly income produced by one Subaccount
Annuity Unit of a specified subaccount.
Subaccount Unit.--A measure used to find the value of your interest in a
subaccount during the accumulation parted.
Subaccount Unit Value.--The dollar value of one Subaccount Unit of a specified
subaccount.
Variable Account.--During the Accumulation Period, your Variable Account for any
business day is found by multiplying your number of Subaccount Units in each
subaccount by the Subaccount Unit Value at the end of that business day and then
adding the results.
We, Our and Us.--Prudential.
You and Your.--The owner of the contract.
Contract Modifications.--Only a Prudential officer may agree to modify this
contract, and then only in writing.
Change of Annuity Date.--Not later than the present Annuity Data, you may ask us
to change that date to another date. We must have your request in writing at our
Service Office and in a form which meets our needs. You must send the contract
to us to be endorsed. We will change the date to the one you ask for in your
request. But, unless we consent, it may not be before the first of the next
month after the data we receive your request. Also, unless we consent, it may
not be after the first of the next month after the 75th birthday of the
Annuitant, or, if there are two Annuitants the 75th birthday of the younger of
the Annuitants. Further, unless we consent, you may not make more than one
change in the Annuity Date.
Removal of an Annuitant.--If two Annuitants are named, we will remove one from
the contract upon: (1) receipt of your written request to remove that Annuitant;
or (2) receipt of due proof that that Annuitant has died. A death benefit may be
payable on death of Annuitant (see Death of Annuitant on page 6).
(Continued on Next Page)
<PAGE>
GENERAL PROVISIONS (Continued)
Ownership and Control.--Unless we endorse this contract to say otherwise: (1)
the owner of the contract is [ILLEGIBLE] Annuitant (the First Annuitant, if two
are named); while any Annuitant is living the owner alone is entitled (a) any
contract benefit and value, and (b) the exercise any right and privilege granted
by the contract or by us; and (3) if two annuitants are named and the First
Annuitant dies while the Co-Annuitant is living, the Co-Annuitant will become
the Owner.
We will mail to the owner, at least once in each Contract Year after the first,
a statement with respect to all subaccounts in which the owner has an interest.
The statement will be as of a date not more than two months before the date of
mailing. It will show the number of units credited and the value per Unit. We
will also send the owner a statement of the investments of the portfolios of the
Fund, the underlying investment medium for this contract
Currency.--Any money we pay or which is paid to us, must be in United States
currency. Any amount we owe will be payable at our Service Office.
Misstatement of Age or Sex.--If any Annuitant's or any Contingent Annuitant's
stated date of birth or sex or both are not correct, we will change each benefit
and the amount of each annuity payment to that which the purchase payment would
have bought for the correct date of birth and sex. Also, we will adjust the
amount of any payments we have already made. Here is how we will do it: (1) We
will deduct any overpayments, with interest at 5% a year, from any payment(s)
due than or later. (2) We will add any underpayments, with interest at 5% a
year, to the next payment we make after we receive proof of the correct date of
birth and sex.
Incontestability.--We will not contest this contract except for non-payment of
the purchase payment due on the contract date.
Proof of Survival or Death.--Before we make a payment, we have the right to
require proof of the life or death of any person whose life or death determines
whether or to whom we must make the payment.
Assignment.--We will not be deemed to know of an assignment unless we receive
it, or a copy of it, at our Service Office. We are not obliged to see that an
assignment is valid or sufficient. If any Annuitant is living on the Annuity
Date and an assignment is in effect on that date, we have the right to pay the
cash value in one sum.
Asset Charges.--We will apply a Mortality Risk Charge and an Expense Risk Charge
daily at effective annual rates of 0.8% and 0.4%, respectively, on the value of
the net assets of each subaccount attributable to Subaccount Units and
Subaccount Annuity Units credited to contracts like this one. We guarantee that
the expense and mortality results of the Account will not adversely affect the
dollar amounts of values, benefits or payments under this contract.
Changes by Prudential.--We reserve the right, upon 90 days' notice to you, to:
(1) change the minimum amount requirements specified for purchases, withdrawals
and transfers in the Variable Accumulation Provisions;
(2) refuse to accept any request for purchase;
(3) change the number of Subaccount Units credited, change or discontinue
subaccounts, change to a different variable contract account, or substitute fund
shares in the account (sea page 11);
(4) change any or all terms and provisions of Annuity Settlement Tables on pages
16 and 17, but only with respect to any portion of an annuity settlement
deriving from purchase payments made on or after the effective date of the
change;
(5) make any changes required by law.
Voting Rights:
Fund.--We will send you a notice of any meeting at which Fund shares which
comprise the assets of a subaccount may be voted. We will provide a voting
instruction form for the number of Fund shares representing the proportional
interest of the Annuitant(s). The instruction form may be signed and returned to
us. If for any meeting there are Fund shares for which we have not received
voting instructions, this is what we will do. We will vote Fund shares on each
matter in the same proportion as we vote the Fund shares held in the subaccount
for which we did receive instructions.
Prudential.--We are a mutual life insurance company. Our principal office is in
Newark, New Jersey and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each year for
four year terms), two of our officers, and are public directors named by New
Jersey's Chief Justice.
{Continued on Next Page)
<PAGE>
GENERAL PROVISIONS (Continued)
The election is held on the first Tuesday in April from 10:00 A.M. to 2:00 P.M.
in our office at the Secretary's address shown here. After this contract has
been in force for one year, you may vote either in person or by mail. We will
send you a ballot if you ask for one. Just write to our Secretary at Prudential
Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By
law, your request must show your name, address, contract number and date of
birth. If you are an individual, you must be at least 18 years old to vote.
Participation (Dividends).--This contract is eligible to participate in the
divisible surplus of Prudential. We do not expect that any dividends will be
payable during the accumulation period. While any annuity settlement is in
effect, the contract will share in our surplus to the extent and in the way we
decide.
DEATH OF ANNUITANT
Sole Annuitant.--If we receive proof that an Annuitant who was the last
surviving or only Annuitant named in the contract died before the Annuity Date,
we will pay the beneficiary the proceeds promptly.
If the Annuitant dies before his or her 65th birthday, the proceeds will be the
greater of (a) the minimum proceeds, which we define below, or (b) your variable
account (which we define on page 4) as of the date we receive due proof of
death. Minimum proceeds if no withdrawals have been made is the sum of all of
the purchase payments paid to us. Any withdrawal reduces minimum proceeds on the
date of the withdrawal in the same proportion that it reduces your variable
account on that date. Purchase payments made after a withdrawal increase minimum
proceeds by the amounts of the purchase payments.
Example: Assume total purchase payments of $10,000 and a subsequent withdrawal
of $3,000 made when your variable account amounts to $12,000. The variable
account is reduced by one-fourth ($3,000/$12,000); therefore minimum proceeds,
which was $10,000, is also reduced by one-fourth, to $7,500. A subsequent
purchase of $5,000 would increase minimum proceeds to $12,500.
If the Annuitant dies on or after his or her 65th birthday, the proceeds will be
your variable account as of the date we receive due proof of death.
If the Annuitant dies on or after the Annuity Date, the settlement then in
effect will govern whether and to whom we will make any payment(s).
Multiple Annuitants.--If two Annuitants are named in the contract and we receive
due proof that one of them died before his or her 65th birthday and before the
Annuity Date, here is what we will do. We will compare minimum proceeds,
determined as described above for death of a sole Annuitant, with the amount of
your variable account. If minimum proceeds is greater than the amount of your
variable account, we will credit the difference to your variable account as a
death benefit. The death benefit, if any, will be distributed among the
subaccount in the same proportions that your variable account was distributed
among subaccounts before the crediting of the death benefit.
No death benefit is payable if that Annuitant died before the Annuity Date and
either: (1) the Annuitant had reached his or her 65th birthday on or before the
date of his or her death; or (2) the amount of your variable account on the date
we received due proof of the Annuitant's death was greater than or equal to
minimum proceeds determined as described above.
If that Annuitant's death occurs before his or her 65th birthday, you may
withdraw all of your variable account, within 30 days following the date we
receive due proof of the Annuitant's death, without paying any sales charge that
might otherwise be required for a withdrawal (see Withdrawal Charges on page
10).
When only one of the Annuitants named in the contract survives, the above
provisions for Sole Annuitant will apply to that surviving Annuitant.
Where two Annuitants named in the contract have died and there is no sufficient
evidence that they have died otherwise than simultaneously, the proceeds of the
contract will be distributed as if the First Annuitant had survived the
Co-Annuitant.
<PAGE>
SETTLEMENT PROVISIONS FOR THE BENEFICIARY
[ILLEGIBLE] Defined.--In these provisions the word Payee [ILLEGIBLE] a
beneficiary or a contingent payee who has a right [ILLEGIBLE] receive a
settlement under the contract.
[ILLEGIBLE] an Option.--A Payee may choose an option for part of any proceeds,
residue or the then present of any unpaid payments which become payable to her
in one sum. We explain residue under Residue described on page 12.
[ILLEGIBLE] some cases a Payee will need our consent to choose an [ILLEGIBLE].
We describe these cases under Conditions.
[ILLEGIBLE] the same annuity options to the Payee that we [ILLEGIBLE] to an
Annuitant. And we determine monthly payments for the Payee in the same way we do
for an [ILLEGIBLE], except that we do not deduct any premium tax annuitization
charge from the amount payable to the [ILLEGIBLE] (See Options Described, Amount
of Fixed-Dollar [ILLEGIBLE] and Determination of the Amount of a Variable
[ILLEGIBLE] on pages 12 and 13.) If an annuity of Type A, B is selected, we must
have proof of the date of birth of [ILLEGIBLE] person on whose life the
settlement is based.
First Payment Due Date.--Unless a later date is requested when the option is
chosen, the first payment will be due on the first day of the earliest calendar
month on or after the day the Service Office has received the request for the
settlement and due proof of the Annuitant's death and such claim forms and other
evidence as may be satisfactory to us.
Conditions.--Our permission is needed for an option to be used for any person
under any of these conditions:
1. The person is not a natural person who will be paid in his or her own right.
2. The parson will be paid as assignee.
3. The first payment to the person under the option would be less than $20.
Death of Payee.--If a Payee under an option dies and if no other distribution is
shown, we will pay any residue under that option in one sum to the Payee's
estate.
ENDORSEMENTS
(Only we can endorse this contract.)
<PAGE>
BENEFICIARY
Before the Annuity Date, a death benefit may be payable to a beneficiary only on
death of an Annuitant who was the last surviving Annuitant under the contract.
You may designate or change a beneficiary. Your request must be in writing and
in a form which meets our needs. It will take effect only when we file it at our
Service Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if no Annuitant is living when we
file the request. Unless otherwise stated, we will make payment to the
beneficiary only if the last surviving Annuitant dies before the Annuity Date.
Any beneficiary's interest is subject to the rights of any assignee of whom we
know.
To show priority, we may use numbered classes, so that the class with first
priority is called class 1, the class with next priority is called class 2, and
so on. When we use numbered classes, these statements apply to beneficiaries
unless the form states otherwise: (In these statements and in the Example that
follows them, the term Annuitant refers, where two Annuitants are named, to the
last surviving Annuitant.)
1. One who survives the last surviving Annuitant will have the right to be paid
only if no one in a prior class survives that Annuitant.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the last surviving Annuitant.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the last surviving Annuitant, we will pay in one sum to the
last surviving Annuitant's estate.
Example: Suppose the class 1 beneficiary is Jane and the Class 2 beneficiaries
are Paul and John. If the last surviving Annuitant dies before the Annuity Date,
we owe Jane the proceeds if she is living at the Annuitant's death. We owe Paul
and John the proceeds if they are living then but Jane is not. But if only one
of them is living, we owe him the proceeds. If none of them is living, we owe
the last surviving Annuitant's estate.
Each Annuitant for whom you select a Type B or Type D annuity may designate, and
may subsequently change the designation of, a beneficiary to receive any residue
that may become payable under the annuity on death of the Annuitant after the
Annuity Date but before the end of the annuity's minimum or specified period.
(See Options Described and Residue Described on page 12.)
Before we make a payment, we have the right to decide what proof we need of the
identity, age or any other facts about any persons designated as beneficiaries.
If beneficiaries are not designated by name and we make payment(s) based on that
proof, we will not have to make the payment(s) again.
ENDORSEMENTS
{Only we can endorse this contract.)
<PAGE>
VARIABLE ACCUMULATION PROVISIONS
Purchase Payments.--An initial purchase payment of at least $1000 is payable on
the Contract Date. Further purchase payments may be made at any time while an
Annuitant is living and before the annuity date. The amount of each payment
after the first must be at least $100. We reserve the right to establish a
maximum amount.
The initial purchase payment, reduced by any state premium taxes we may be
required to deduct, will be allocated to the subaccounts in accord with your
instructions. The minimum amount of a first allocation to a subaccount is $300;
the minimum for subsequent allocations is $100. If, after you have made at least
one purchase we receive a purchase payment without instructions, we will make
any required deduction for state premium taxes and allocate the balance in the
same proportions as the most recent purchase payment you made.
Example 1: On the Contract Date you make a $1500 purchase and allocate $500 to
each of Subaccounts A, B and C. Later in the year you send us a $900 purchase
payment, but you don't tell us how it is to be applied. Based on the most recent
purchase, the one made on the Contract Date, we would make a $300 purchase for
each of Subaccounts A, B and C.
Example 2: If in the example above your second purchase payment had bean $200
instead of $900, we would not have been able to make the purchase since there
was not enough money to make a minimum purchase of $100 for each of the 3
Subaccounts. In this case we would contact you to find out how the purchase
payment is to be applied. The purchase would be made when we receive your
instructions at our Service Office.
Crediting of Subaccount Units.--This contract will be credited with the number
of Subaccount Units which results from dividing (1) the amount of any purchase
payment allocated to a subaccount by (2} that subaccount's Unit Value for the
Business Day the purchase is made. The first purchase payment will be credited
on the first Business Day which is the later of: (a) the Contract Date, (b) the
date the purchase payment is received at the Service Office, or (c) the date we
approve the request for the contract, or on a later date if you request and we
agree. For any purchase payment after the first, the shares will be credited on
the first Business Day not earlier than the day we receive it at our Service
Office or on a later day if you request and we agree.
Subaccount Unit Value.--The Unit Value for a subaccount for any Business Day is
found by multiplying that subaccount's Net Investment Factor for that day by its
Unit Value for the last preceding Business Day. A Subaccount's Net Investment
Factor for any Business Day equals (1) 1.00 plus the rate of net investment
income earned, after provision for taxes, for the period from the end of the
last preceding Business Day to the end of the current Business Day; plus (2) the
rate of asset value changes in the subaccount during the same period, minus (3)
the rates of the Mortality Risk Charge and the Expense Risk Charge (which we
describe on Page 5) for the number of calendar days involved. The Unit Value for
a subaccount and therefore the total value of shares of a subaccount credited to
you at any time and the number of Subaccount Units provided by a given purchase
payment will vary. They will increase or decrease in accord with the investment
results of the subaccount.
The value of each Subaccount Unit was set at $1.00 on the date the first
deposits were made in the Account by Prudential.
Annual Maintenance Charge.--On each contract anniversary before the annuity date
or at the time of total withdrawal we will deduct a maintenance charge from your
variable account. The amount of the charge is shown on page 3 of this contract.
If on any contract anniversary there are Subaccount Units credited to this
contract in more than one subaccount, we will divide the charge among the
subaccounts on a pro-rata basis, according to the proportionate value of each
subaccount. We will liquidate enough of your Subaccount Units or fractions of a
Subaccount Unit to pay this charge.
Withdrawals.--On or before the Annuity Date you may be able to make withdrawals
from your variable account. To make a withdrawal you must ask us in writing in a
form which meets our needs. If you ask for a partial withdrawal, we will
liquidate as many full and fractional Subaccount Units as may be needed to
provide the amount asked for and any charges that apply. You must tell us the
amount and the subaccount from which it is to be withdrawn. Our consent is
needed for a partial withdrawal if (1) the amount to be withdrawn is less than
$300; or (2) it would reduce the value of your units in a subaccount to less
than $300.
If you ask for a total withdrawal you must send the contract to us. We will
liquidate all the subaccount units credited to the contract. After deducting the
Annual Maintenance Charge and the sales charges, if any, we will pay the
balance. Any amount withdrawn will be paid within seven calendar days after the
date we receive your request at our Service Office.
{Continued on Next Page)
<PAGE>
VARIABLE ACCUMULATION PROVISIONS (Continued)
Withdrawal Charges (Deferred Contingent Sales Charges).--Although no sales
charges are deducted from your purchase payments when they are made, your
purchase payments may be subject to a sales charge upon withdrawal. Earnings,
defined on page 4, are not subject to sales charges. Withdrawals are considered
to consist of earnings, if any, first, then of purchase payments on a first-in,
first-out basis.
In each contract year, any purchase payments withdrawn which do not in total
exceed 10% of your variable account, valued as of the date of the first
withdrawal in that year, will not incur a sales charge. A sales charge may be
imposed on purchase payments withdrawn in excess of this 10% limitation.
The amount of any sales charge imposed on the withdrawal of a purchase payment
varies with the number of contract years that have elapsed since the purchase
payment was made.
When you make a withdrawal, the rate of sales charge applied against any
purchase payments or portion of a purchase payment that is subject to a charge
is determined in accordance with the following:
If the contract year of purchase payment is the same as the contract year of
withdrawal, the rate is 8%.
If the duration from the start of the contract
year of purchase payment to the start of the The charge
contract year of withdrawal is.... rate is...
One year .............................................7%
Two years ............................................6%
Three years .........................................5%
Four years ...........................................4%
Five years ...........................................3%
Six years ............................................2%
Seven years ..........................................1%
Eight years or more...................................0%
In determining the amount of sales charge, if any, we will consider that any
purchase payment withdrawn is the first purchase payment made which has not
previously been withdrawn. This is so, even if that purchase payment was to a
different subaccount than that from which withdrawal is being made or if the
shares being withdrawn are no longer subject to a withdrawal charge. Depending
on the amount of the withdrawal, one or more sales charge rates may be used if
the withdrawal is of purchase payments made in more than one contract year.
Example.--
Year Transaction
- ---- -----------
Contract year one -- Payment of $300 in the Money
Market Subaccount
Contract year two -- Payment of $900 in the Bond
Subaccount
Contract year three -- Payment of $800 in the Common
Stock Subaccount
In contract year five the contractholder requests a partial withdrawal of $900
from his Common Stock subaccount which has grown to $1200. The total value of
his variable account on the date of withdrawal is $2500. $500 more than the
total purchase payments made to date. Thus for purposes of determining sales
charges, the $900 withdrawal is considered to consist of $500 of earnings and
$400 of purchase payments. The $500 of earnings and $250 of purchase payments
(10% of the variable account) may be withdrawn without sales charge. A sales
charge is required on the remaining $150 of purchase payment being withdrawn.
To determine the sales charge we assume that $300 of purchase payment being
withdrawn is the payment made to the Money Market Subaccount in contract year
one. The remaining $100 of purchase payment being withdrawn is assumed to be a
part of the $900 payment made to the Bond Subaccount in contract year two.
Of the first $300 purchase payment we have seen that $250 (10% of $2500) may be
withdrawn without sales charge. A 4% sales charge is due on the withdrawal of
the other $50 of the payment, (4% X $50 = $2). The $100 portion being withdrawn
from the second payment requires a 5% sales charge (5% X $100 = $5). Thus the
total sales charge for withdrawing $900 in year five is $7.
Transfers.--You may transfer all or part of your interest in a subaccount to one
or more of the other subaccounts. To make a transfer you must ask us in writing
in a form which meets our needs. You must tell us the amount to be transferred
and the names of the subaccounts involved. Our consent is needed for the
transfer if (1) the amount to be transferred is less than the smaller of $300
and your interest in the subaccount, (2) the value of any of your Units
remaining in the subaccount after the transfer would be less than $300 or (3)
four or more transfers of Subaccount Units have been made under your contract in
the current Contract Year. The transfer will be made on the first Business day
after we receive your request.
To make the transfer this is what we will do. First, we will liquidate, without
charge, the number of you Units in the subaccount from which the transfer is to
be made to provide the amount requested. Then we will use that
(Continued on Next Page)
<PAGE>
VARIABLE ACCUMULATION PROVISIONS (Continued)
amount to purchase Units in the subaccount to which the transfer is to be made.
The result will be that, while the contract value will not change, the total
number of Subaccount Units credited to this contract may increase or decrease
depending on the Subaccount Unit Values. The original purchase date of record
used to determine the rate of charge for any future withdrawal is not changed as
a result of a transfer.
Example.--You ask that we transfer $600 from Subaccount A to Subaccount B. The
Subaccount A Unit Value is $10 on the date of the transfer. We would liquidate
60 shares in Subaccount A to provide the $600. The share value in Subaccount B
on the date of the transfer is $5. The $600 will buy 120 shares in Subaccount B.
If the Unit Value were $20, the $600 would buy only 30 Units. While the number
of Units may have changed on the date of transfer, their value remained the
same, $600.
Changing the Number of Subaccount Units Credited.--We have the right to change
the number of Subaccount Units if we deem the Subaccount Unit Value to be either
so large or so small as to not be in your best interest, or ours. If we make
such a change, the amount of the Variable Account will not change.
Substitution of Shares.--Shares of another registered, open-end investment
company may be substituted for the shares held in the account or any subaccount
or to be purchased by future purchase payments or transfers if (1) shares in the
subaccount are no longer available for purchase or (2) in our judgment further
investment in such shares is no longer appropriate for the subaccount.
ENDORSEMENTS
(Only we can endorse this contract.)
<PAGE>
Choosing an Option.--You may be able to have the amount of your variable account
on the Annuity Date paid to the Annuitant(s) under one or more of the annuity
options we describe below. If two Annuitants are named in the contract, and both
are living, you may choose to have payments made to either or both. It you wish
payments to be made to both, you will tell us how much of the amount you wish
applied for each Annuitant and under which option(s). But, for any annuity
settlement, we may first deduct from your variable account any charge for state
premium taxes. And under some conditions we may also deduct an Annuitization
Charge as described under that heading on page 13.
Conditions.--With respect to each option you select, your right to make the
choice is subject to all these conditions: (1) You must ask for the option in
writing and in a form which meets our needs. (2) You must send the contract to
us to be endorsed. (3) For Type A, B or C you must give us proof of the date of
birth of the Annuitant who is receiving payment and of any Contingent Annuitant.
(4) We must have your request, the contract and the proof(s) of the date(s) of
birth before the Annuity Date.
Your choice of an option will take effect on the Annuity Date but only if: (1)
the Annuitant on whose life the annuity is to be paid is living on that date;
(2) the Contingent Annuitant, if any, is living on that date; (3) the first
payment under the option to each payee will be at least $20; and (4) you do not
void the choice by making a later choice before the Annuity Date.
When No Option Chosen.--If no choice of a variable or fixed-dollar annuity of
Type A, C or D, or of a fixed-dollar annuity of Type B, which types we describe
below, takes effect on the Annuity Date, settlement under a variable annuity of
Type B will become effective on the life of the Annuitant. If two Annuitants are
named in the Contract and both are living, settlement will be made on the life
of the First Annuitant, as named on page 3. But the conditions described in the
preceding paragraph will apply. And we have the right to require proof of the
date of birth of that Annuitant before we make payment.
Options Described.--Variable annuities and fixed-dollar annuities of the
following types may be chosen. The first payment under these options is due on
the Annuity Date.
Type A (Life Annuity).--We will make monthly payments for as long as the
Annuitant lives. They will end with the last one due before the Annuitant's
death.
Type B (Life Annuity, 10-Year Minimum Period).--We will make monthly payments
for as long as the Annuitant lives, with 120 monthly payments assured. Unless
otherwise stated, if the Annuitant dies before the 120th payment is payable, we
will pay the residue in one sum to the Annuitant's designated beneficiary or
estate. We will compute the residue as of the first Business Day on or after the
date the Annuitant died. If the annuity is a variable annuity, we will adjust
the amount for the change in the Subaccount Annuity Unit Value between that
Business Day and the first Business Day on or after which we receive at our
Service Office the items we need for settlement. But if the Annuitant dies after
the due date of the last payment certain, no further payments will be due.
Type C (Joint and Survivor Life Annuity).--We will make monthly payments for as
long as the Annuitant or the Contingent Annuitant lives. Unless otherwise
stated, we will make them to the Annuitant while he or she is living. After the
Annuitant dies, we will make them to the Contingent Annuitant if he or she is
living. The payments will end with the last one due before the death of the
second to die of the Annuitant and the Contingent Annuitant.
Type D (Annuity for Specified Period).--We will make monthly payments for the
period you elect. The period may be 5, 10, 15 or 20 years. It may be a different
number of years if you request it and we agree. Unless otherwise stated, if the
Annuitant dies when one or more payments remain unpaid in the period elected, we
will pay the residue in one sum to the Annuitant's designated beneficiary or
estate. We will compute the residue as of the first Business Day on or after the
date the Annuitant died. If the annuity is a variable annuity, we will adjust
the amount for the change in the Subaccount Annuity Unit Value between that
Business Day and the first Business Day on or after which we receive at our
Service Office the items we need for settlement.
Residue Described.--For Type B, residue on any Business Day means the then
present value of such of the 120 payments as may remain unpaid. Residue does not
include the value of any payments which may become due after the 120th payment.
For Type D, residue on any Business Day means the then present value of any
unpaid payments for the specified period of the annuity.
For variable annuities of Types B and D, for the purpose of computing the
present value, we assume that the Annuity Unit Value for the Business Day as of
which the calculation is made will not change after that date. We compute
residue at an effective interest rate of 3 1/2% a year.
(Continued on Next Page)
<PAGE>
PAYOUT PROVISIONS (Continued)
[ILLEGIBLE] of Withdrawal.--Unless otherwise stated when a [ILLEGIBLE] D Annuity
is chosen, all, or any part not less than [ILLEGIBLE] of the residue may be
withdrawn. If the initial [ILLEGIBLE] monthly payment after a withdrawal would
be less [ILLEGIBLE] $20, we have a right to pay the residue in one sum.
Annuitization Charge.--We may deduct an Annuitization charge from your variable
account on the last Business Day on or before the Annuity Date.
[ILLEGIBLE] determine the Annuitization Charge the same way we would determine
the charge for a total withdrawal made [ILLEGIBLE] the Annuity Date. (This
calculation is described on page [ILLEGIBLE] However, as described below, a
special schedule of [ILLEGIBLE] charge rates applies for certain annuitizations.
Annuitization charge rate schedules A and B are shown below. Schedule A is the
same schedule we use in calculating charges on withdrawals. In calculating
annuitization charges: we apply Schedule A rates if either (1) an annuity of
Type A, B or C is effected less than three years after the Contract Date, or (2)
an annuity Type D is effected at any time; we apply Schedule B rates if an
annuity of Type A, B or C is effected three years or more after the Contract
Date.
Annuitization
Charge Rate Schedules
---------------------
Duration* A B
- --------- --- ---
0 8% 4%
1 7 3
2 6 2
3 5 1
4 4 0
5 3 0
6 2 0
7 1 0
8 or more 0 0
*Duration is determined for each purchase payment included in the amount used to
provide an annuity. Duration is measured in years from start of Contract Year of
purchase to start of Contract Year of annuitization.
Tabular Monthly Annuity.--Your Variable Account on the test Business Day on or
before the Annuity Date will be reduced by any Annuitization Charge and any
premium taxes that may apply. The balance will be used to determine the Tabular
Monthly Annuity(ies) (first monthly annuity payment(s)) based on the type(s) of
annuity chosen and in accord with the annuity settlement tables.
Amount of Fixed-Dollar Annuity.--The amount of each monthly payment will be at
least equal to the Tabular Monthly Annuity. But if we are offering greater
monthly incomes for fixed-dollar annuities on the Annuity Date, the amount of
each monthly payment will be greater than the Tabular Monthly Annuity.
Determination of the Amount of a Variable Annuity.-- The number of your Annuity
Units in each subaccount is found by dividing the amount of the Tabular Monthly
Annuity attributable to your investment in that subaccount by the Subaccount
Annuity Unit Value on the last Business Day on or preceding the Annuity Date.
After that the number of Annuity Units for each subaccount will remain fixed
unless a transfer is made as we describe below. The dollar amount of annuity
payments will change from month to month and may increase or decrease to reflect
the investment experience of the subaccounts involved. The actual amount of any
annuity payments after the first will be determined by multiplying the number of
Annuity Units in each subaccount by the Annuity Unit Value for that subaccount
at the end of the Business Day on which the annuity payment is due or, if that
day is not a Business Day, at the end of the last preceding Business Day, and
then adding the resulting values.
Example.--The Contract Value is $10,000. Of that amount, $3000 is in Subaccount
A and $7000 is in Subaccount B. The annuity Type is B and the Annuitant is a man
age 65 on the Annuity Date. The first annuity payment equals $57.30 ($5.73 per
$1000 of Contract Value). (The rate per $1000 may change as provided under
Changes by Prudential on page 5, but only for any portion of Contract Value
arising from purchases made after the date of change.)
Subaccount A provides $17.19 of that payment, and Subaccount B provides $40.11.
To find the number of Annuity Units for each Subaccount we divide each of these
amounts by the respective Annuity Unit Value for the subaccount on the Annuity
Date.
For this example assume that the Annuity Unit Value is $3 for Subaccount A, and
$2 for Subaccount B. Dividing these into the respective annuity payments
provides the number of Annuity Units for each subaccount ($17.19/$3 = 5.730
Units for Subaccount A, and $40.11/$2 = 20.055 Units for Subaccount B). To find
the amount of each subsequent annuity payment we multiply the number of your
Annuity Units in each subaccount by the Annuity Unit Value for that subaccount
and add the results.
Subaccount Annuity Unit Value.--The value of an Annuity Unit for each subaccount
was set at $1.00 on the date the first deposits were made in the Account by
Prudential. The value for any subsequent Business Day is
(Continued on Next Page)
<PAGE>
PAYOUT PROVISIONS (Continued)
determined by multiplying the subaccount's Net Investment Factor for that day by
its Annuity Share Value for the last preceding Business Day.
The Net Investment Factor for each subaccount for any Business Day equals (a)
1.00 plus the rate of net investment income earned by the subaccount, after
providing for taxes, for the period from the end of the last preceding Business
Day to the end of the current Business Day, plus the rate of asset value changes
in the subaccount during the same period, minus the rate of the Asset Charge
(which we explain on page 5) for the number of calendar days involved, divided
by (b) 1.00 plus the interest rate for the number of days involved, at the
effective annual rate assumed in the calculation of the annuity rates. (See page
16)
Transfers During the Annuity Period.--During the annuity period the person who
has the right to receive variable annuity payments may choose to have the
payments reflect the investment results of different subaccounts. Part or all of
the Annuity Units from any subaccount may be transferred to one or more other
subaccounts. Our consent is needed it: (1) four or more transfers of Subaccount
Annuity Units have been made under your contract in the current Contract Year,
or (2) for any partial transfers, 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 transfer effective date, by less than $20.
The transfer will be made effective for the first Business Day after the date we
receive the request for transfer except that if the request is received within
seven days before an annuity payment date, it will be made effective on the
first Business Day after the annuity payment date. To find the number of units
added to the subaccount(s) this is what we do. We multiply the number of Annuity
Units in the subaccount from which the transfer is to be made by the Annuity
Unit Value of that subaccount. We divide the result by the Annuity Unit Value
for the subaccount to which the transfer is being made. The result is the number
of Annuity Units to be transferred to the subaccount.
Example--The Annuity Units in Subaccount A are to be transferred to Subaccount
B. There are 1000 Annuity Units in Subaccount A and the Annuity Unit Value for
that subaccount is $2.00 on the data of transfer. We multiply the number of
Annuity Units (1000) by the Annuity Unit Value ($2.00) and arrive at the figure
$2000. The number of Units to be added to Subaccount B is found by dividing this
figure by the Annuity Unit Value for Subaccount B. The Annuity Unit Value for
Subaccount B is $1.00. In this case the number of Units added to Subaccount B
would be 2000 ($2000 / $1.00). If the Annuity Unit Value of Subaccount B were
$4.00, only 500 Units would have been added ($2000/$4.00).
We may stop, suspend or modify the transfer provisions. If we do, we will give
you 30 days' notice.
Conversion of Variable Annuity to Fixed-Dollar Annuity During the Annuity
Period.--The person who has the right to receive variable annuity payments may
ask us, during the annuity period, to convert all or part of a variable annuity
to a fixed-dollar annuity. We must have the request in writing at our Service
Office and in a form which meets our needs. We will make the conversion
requested subject to the conditions given below. The effective date of the
conversion will be the first of the next month after the date we receive the
request, unless a different date is requested and we consent.
Conversion is subject to these conditions: (1) the fixed-dollar annuity must be
of the same type as the variable annuity and have remaining on the conversion
date the same number of minimum or specified payments as remained under the
variable annuity on that date; (2) the present value on the conversion data of
the variable annuity, or portion of variable annuity, to be converted must be
sufficient to produce a monthly income of at least $20 under the fixed-dollar
annuity; (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 of at least $20 on the conversion date for each
subaccount in which annuity units remain after the transfer.
For the purpose of computing present value of the variable annuity, or portion
of it, being converted, we assume that the Annuity Unit Value(s) for the
Business Day as of which the calculation is made will not change after that
date. We will compute present value taking into account the remaining minimum or
specified payment period, if any, using the same interest rate(s), and, for
annuities of Types A, B and C, the same mortality tables), that were used to
determine the Tabular Monthly Annuity on the Annuity Date. (See Annuity
Settlement Tables on page 16.) If more than one Annuity Settlement Table was
used in determining the Tabular Monthly Annuity on the Annuity Date,
corresponding rate bases will be used in determining the present value of the
variable annuity being converted. The proportion of future monthly payments
discounted on a particular basis will be equal to the proportion of the
(Continued on Next Page)
<PAGE>
PAYOUT PROVISIONS (Continued]
Tabular Monthly Annuity that was determined on that basis.
We will apply the present value so computed to provide a fixed-dollar annuity on
the life of the Annuitant. Monthly payments under the fixed-dollar annuity will
be determined in accord with provisions of Annuity Settlement Tables that
applied to fixed-dollar annuity settlements under this contract on the Annuity
Date, and will take into account the number of minimum or specified payments, if
any, to be made.
Conversions may not be made from fixed-dollar annuities to variable annuities.
ENDORSEMENTS
(Only we can endorse this contract)
Printed in U.S.A.
<PAGE>
ANNUITY SETTLEMENT TABLES
Amounts Payable.--If the Annuity Date is a contract anniversary, for Annuity
Types A, B and C we will use the tables below to compute the amount of the
Tabular Monthly Annuity. The amounts we show for Types A and B are based on the
Annuitant's sex and age last birthday on the Annuity Date. The amounts we show
for Type C are based on both the Annuitant's and the contingent annuitant's sex
and age last birthday on the Annuity Date.
If the Annuity Date is not a contract anniversary, for each completed quarter
year after the most recent anniversary we will adjust the amounts.
When we compute the amounts we show in the tables, we adjusted the 1983 Table A
to an age last birthday basis, less three years; we used an interest rate of 3
1/2% a year. For combinations of ages which we do not show, we will compute the
Tabular Monthly Annuity on the same basis, except that if the age is over 80,
the rate for age 80 will be used. We will let you know the amounts if you ask
for them. Settlements under Annuity Type A, B and C will share in our surplus to
the extent and in the way we decide.
We computed the amounts of the Tabular Monthly Annuity we show in Table D using
an interest rate of 3 1/2%. Those amounts are not based on the age or sex of the
Annuitant.
Other forms of annuity may be provided, subject to Prudential's consent, or as
may be required by any applicable law or regulation.
TABLE A
Amount of Tabular Monthly Annuity under Annuity Type A
for each $1000 applied on the Annuity Date.
- --------------------------------------------------------------------------------
AGE MALE FEMALE AGE MALE FEMALE
================================================================================
41 $3.89 $3.68 61 $5.38 $4.85
42 3.94 3.71 62 5.50 4.95
43 3.98 3.75 63 5.64 5.06
44 4.03 3.79 64 5.79 5.17
45 4.08 3.83 65 5.94 5.29
46 4.14 3.87 66 6.11 5.42
47 4.19 3.91 67 6.29 5.56
48 4.25 3.96 68 6.48 5.71
49 4.32 4.00 69 6.69 5.87
50 4.38 4.06 70 6.90 6.04
51 4.45 4.11 71 7.14 6.22
52 4.52 4.17 72 7.39 6.42
53 4.60 4.23 73 7.66 6.64
54 4.68 4.29 74 7.94 6.87
55 4.76 4.36 75 8.25 7.12
56 4.85 4.43 76 8.58 7.39
57 4.94 4.50 77 8.93 7.69
58 5.04 4.58 78 9.30 8.01
59 5.15 4.67 79 9.71 8.36
60 5.26 4.75 80 10.14 8.73
and over
- --------------------------------------------------------------------------------
TABLE B
Amount of Tabular Monthly Annuity under Annuity Type B
for each $1000 applied on the Annuity Date.
- --------------------------------------------------------------------------------
AGE MALE FEMALE AGE MALE FEMALE
================================================================================
41 $3.88 $3.67 61 $5.25 $4.79
42 3.92 3.70 62 5.36 4.89
43 3.97 3.74 63 5.48 4.98
44 4.01 3.78 64 5.60 5.09
45 4.06 3.82 65 5.73 5.20
46 4.12 3.86 66 5.87 5.31
47 4.17 3.90 67 6.01 5.43
48 4.23 3.94 68 6.15 5.56
49 4.28 3.99 69 6.30 5.70
50 4.35 4.04 70 6.46 5.84
51 4.41 4.09 71 6.62 5.99
52 4.48 4.15 72 6.79 6.15
53 4.55 4.21 73 6.96 6.31
54 4.62 4.27 74 7.13 6.49
55 4.70 4.33 75 7.30 6.67
56 4.78 4.40 76 7.48 6.85
57 4.86 4.47 77 7.66 7.04
58 4.95 4.54 78 7.83 7.24
59 5.05 4.62 79 8.00 7.44
60 5.15 4.71 80 8.17 7.64
and over
- --------------------------------------------------------------------------------
(Continued on Next Page)
<PAGE>
ANNUITY SETTLEMENT TABLES (Continued)
TABLE C
Amount of Tabular Monthly, Annuity under Annuity Type C for each
$1000 applied on the Annuity Date.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
FEMALE MALE AGE
- -------------------------------------------------------------------------------------------------------------------------------
AGE 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.11 $4.13 $4.14 $4.16 $4.17 $4.19 $4.20 $4.21 $4.22 $4.23 $4.24 $4.25 $4.26 $4.27 $4.28
56 4.15 4.17 4.19 4.20 4.22 4.24 4.25 4.26 4.28 4.29 4.30 4.31 4.32 4.33 4.34
57 4.19 4.21 4.23 4.25 4.27 4.29 4.30 4.32 4.33 4.35 4.36 4.37 4.38 4.39 4.40
58 4.23 4.26 4.28 4.30 4.32 4.34 4.36 4.37 4.39 4.41 4.42 4.43 4.45 4.46 4.47
59 4.28 4.30 4.33 4.35 4.37 4.39 4.41 4.43 4.45 4.47 4.48 4.50 4.51 4.53 4.54
60 4.32 4.35 4.37 4.40 4.42 4.45 4.47 4.49 4.51 4.53 4.55 4.57 4.58 4.60 4.61
61 4.36 4.39 4.42 4.45 4.48 4.50 4.53 4.55 4.57 4.60 4.62 4.63 4.65 4.67 4.69
62 4.40 4.44 4.47 4.50 4.53 4.56 4.59 4.61 4.64 4.66 4.68 4.71 4.73 4.75 4.76
63 4.45 4.48 4.52 4.55 4.58 4.62 4.65 4.68 4.70 4.73 4.76 4.78 4.80 4.82 4.84
64 4.49 4.53 4.57 4.60 4.64 4.67 4.71 4.74 4.77 4.80 4.83 4.86 4.88 4.91 4.93
65 4.53 4.57 4.61 4.65 4.69 4.73 4.77 4.80 4.84 4.87 4.90 4.93 4.96 4.99 5.02
66 4.57 4.62 4.66 4.70 4.75 4.79 4.83 4.87 4.91 4.95 4.98 5.01 5.05 5.08 5.11
67 4.61 4.66 4.71 4.76 4.80 4.85 4.89 4.94 4.98 5.02 5.06 5.10 5.13 5.17 5.20
68 4.65 4.70 4.76 4.81 4.86 4.91 4.96 5.00 5.05 5.09 5.14 5.18 5.22 5.26 5.30
69 4.69 4.75 4.80 4.86 4.91 4.96 5.02 5.07 5.12 5.17 5.22 5.27 5.31 5.35 5.39
70 4.73 4.79 4.85 4.90 4.96 5.02 5.08 5.14 5.19 5.25 5.30 5.35 5.40 5.45 5.49
71 4.77 4.83 4.89 4.95 5.02 5.08 5.14 5.20 5.26 5.32 5.38 5.44 5.49 5.55 5.60
72 4.80 4.87 4.93 5.00 5.07 5.13 5.20 5.27 5.33 5.40 5.46 5.53 5.59 5.65 5.70
73 4.84 4.90 4.97 5.04 5.12 5.19 5.26 5.33 5.40 5.48 5.55 5.62 5.68 5.75 5.81
74 4.87 4.94 5.01 5.09 5.16 5.24 5.32 5.40 5.47 5.55 5.63 5.70 5.78 5.85 5.92
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE D
Amount of Tabular Monthly Annuity under Annuity Type
for each $1000 applied on the Annuity Date.
----------------------------------
NUMBER MONTHLY
OF YEARS PAYMENT
----------------------------------
5 $18.12
10 9.83
15 7.10
20 5.75
----------------------------------
<PAGE>
ENDORSEMENTS
(Only we can endorse this contract.)
<PAGE>
GUIDE TO CONTENTS
Page
Contract Summary ......................................................... 2
General Provisions ....................................................... 4
Definitions; Contract Modifications;
Change of Annuity Date; Removal of
an Annuitant; Ownership and Control;
Currency; Misstatement of Age
or Sex; Incontestability;
Proof of Survival or Death;
Assignment; Asset Charges;
Changes by Prudential;
Voting Rights; Participation
Death of Annuitant ....................................................... 6
Beneficiary .............................................................. 7
Settlement Provisions for the Beneficiary ................................ 8
Variable Accumulation Provisions ......................................... 9
Purchase Payments; Crediting
of Subaccount Units; Subaccount Unit Value;
Annual Maintenance Charge; Withdrawals;
Withdrawal Charges; Transfers
Changing the Number of Subaccount
Units Credited; Substitution of Shares
Payout Provisions ........................................................12
Choosing an Option; Conditions
When No Option Chosen;
Options Described; Residue
Described; Right of Withdrawal;
Annuitization Charge; Tabular Monthly
Annuity; Amount of Fixed-Dollar Annuity;
Determination of Amount of Variable
Annuity; Subaccount Annuity Unit Value;
Transfers During the Annuity Period;
Conversion of Variable Annuity to
Fixed-Dollar Annuity During the
Annuity Period
Annuity Settlement Tables ................................................16
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date.
EXHIBIT (4)(M)
The Prudential Insurance Company of America
Corporate Office
Newark, New Jersey
Annuitant(s) Contract Number
Annuity Date Contract Date
Agency
We will make monthly payments starting on the Annuity Date we show in the window
of this page. We make this promise subject to all the provisions of this
contract.
Please read this contract with care. A guide to its contents is on the last
page. A summary is on page 2. If there is ever a question about it, or there is
a claim, just see one of our representatives or get in touch with one of our
offices.
Except with respect to any fixed-dollar payout which you may elect, the
benefits, payments and values under this contract are on a variable basis. They
will reflect the investment experience of the separate account to which the
contract is related; they are subject to change both up and down and are not
guaranteed as to dollar amount except as provided under the Death of Annuitant
and Settlement Provisions for the Beneficiary sections.
The assets of the separate account, The Prudential Individual Variable Contract
Account, would have to earn an investment return of 4.7% per annum in order that
the dollar amount of annuity payments made under the Variable Payout Provisions
of this contract will not decrease. A Mortality Risk charge and an Expense Risk
charge are applied daily at effective annual rates of 0.8% and 0.4%.
respectively (for a total of 1.2% per year), against the assets of The
Prudential Individual Variable Contract Account attributable to Subaccount Units
and Subaccount Annuity Units under this contract.
Right to Cancel Contract--Not later than ten days after you get this contract,
you may return it to us. All you have to do is take it or mail it to one of our
offices or to the agent who sold it to you. We will cancel the contract and
promptly give you its net asset value on the date you return it, without
redemption charge.
The provisions on this and the following pages of this contract comprise the
entire contract. The contract was signed for Prudential on the contract date,
which is the date of issue.
Signed for Prudential.
Secretary President
Variable Annuity Contract with Flexible Purchase Payments--MonthlY annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date.
VIP--84 (N.Y.)
GUIDE TO CONTENTS
Page
Contract Summary .................................2
General Provisions ...............................4
Definitions; Contract Modifications:
Change of Annuity Date; Removal of
an Annuitant: Ownership and Control;
Currency. Misstatement of Age
or Sex; Incontestability:
Proof of Survival or Death;
Assignment; Asset Charges;
Changes by Prudential;
Voting Rights; Participation
Death of Annuitant ...............................6
Beneficiary ......................................7
Settlement Provisions for the Beneficiary ........8
Variable Accumulation Provisions .................9
Purchase Payments; Crediting
of Subaccount Units; Subaccount Unit Value;
Annual Maintenance Charge; Withdrawals;
Withdrawal Charges; Transfers;
Changing the Number of Subaccount
Units Credited; Substitution of Shares
Payout Provisions ...............................12
Choosing an Option; Conditions;
When No Option Chosen;
Options Described; Residue
Described; Right of Withdrawal:
Annuitization Charge; Tabular Monthly
Annuity; Amount of Fixed-Dollar Annuity;
Determination of Amount of Variable
Annuity, Subaccount Annuity Unit Value;
Transfers During the Annuity Period;
Conversion of Variable Annuity to
Fixed-Dollar Annuity During the
Annuity Period
Annuity Settlement Tables .......................16
Page 19
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date.
VIP -- 84 (N.Y.)
GENERAL PROVISIONS
Definitions.--We define here some of the words and phrases used all through this
contract. We explain others, not defined here, in other parts of the text.
Accumulation Period.--The period of time between the Contract Date and the
Annuity Date.
Anniversary or Contract Anniversary.--The same day and month as the Contract
Date in each later year.
Example: If the contract date is March 9, 1983, the first anniversary is March
9, 1984. The second is March 9, 1985, and so on.
Annuitant(s).--The person or persons named in the window of the first page. If
more than one person is so named, one of the two is named on Page 3 as First
Annuitant, the other as Co-Annuitant. And, in this case the Beneficiary
Provisions of the Contract will be based on the death of the last survivor of
the persons so named. The owner need not be an Annuitant.
Annuity Date.--The date the first annuity payment is due.
Business Day.--A day on which the New York Stock Exchange is open for business.
Cash Value.--Variable Account less any withdrawal charges that apply.
Contingent Annuitant.--A person to whom monthly payments under a Joint and
Survivor Life Annuity will continue for life if he or she is living after the
death of the Annuitant under that Annuity. You will name the Contingent
Annuitant for any Joint and Survivor Life Annuity you may choose. The
Contingent Annuitant you choose may also be named in the contract as an
Annuitant, but need not be.
Contract Year--A year which starts on the Contract Date or on an anniversary.
Example: If the contract date is March 9, 1983. the first Contract Year starts
then and ends on March 8, 1984. The second starts on March 9, 1984 and ends on
March 8, 1985, and so on.
Earnings.--The excess, if any, of (1) variable account plus any amounts
previously withdrawn from the variable account, over (2) total purchase payments
to date.
Issue Date.--The Contract Date.
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 Fund).--A mutual fund with separate
portfolios one or more of which you may choose as the underlying investment for
your contract. The Fund was established by Prudential. It is registered under
the Investment Company Act of 1940, as amended, as an open-end diversified
management investment company.
Service Office.--The Prudential office designated by it to service contracts
such as this. Its mailing address is the address shown on the Contract Data
page, unless Prudential specifies another address by notice to you.
Subaccount.--A division of the Account the assets of which are invested in the
shares of a corresponding portfolio of the Fund.
Subaccount Annuity Unit.--A measure used to find the amount of a variable
annuity monthly payment.
Subaccount Annuity Unit Value.--The monthly income produced by one Subaccount
Annuity Unit of a specified subaccount.
Subaccount Unit.--A measure used to find the value of your interest in a
subaccount during the accumulation period.
Subaccount Unit Value.--The dollar value of one Subaccount Unit of a specified
subaccount.
Variable Account.--During the Accumulation Period, your Variable Account for any
business day is found by multiplying your number of Subaccount Units in each
subaccount by the Subaccount Unit Value at the end of that business day and then
adding the results.
We, Our and Us.--Prudential.
You and Your.--The owner of the contract.
Contract Modifications.--Only a Prudential officer may agree to modify this
contract, and then only in writing.
Change of Annuity Date.--Not later than the present Annuity Date, you may ask us
to change that date to another date. We must have your request in writing at our
Service Office and in a form which meets our needs. You must send the contract
to us to be endorsed. We will change the date to the one you ask for in your
request. But, unless we consent, it may not be before the first of the next
month after the date we receive your request. Also, unless we consent, it may
not be after the first of the next month after the 75th birthday of the
Annuitant, or, if there are two Annuitants the 75th birthday of the younger of
the Annuitants. Further, unless we consent, you may not make more than one
change in the Annuity Date.
Removal of an Annuitant.--If two Annuitants are named we will remove one from
the contract upon: (1) receipt of your written request to remove that Annuitant;
or (2) receipt of due proof that that Annuitant has died. A death benefit may be
payable on death of an Annuitant (see Death of Annuitant on page 6).
(Continued on Next Page 6).
Page 4 (VIP--84) (OKLA)
BENEFICIARY
A death benefit may be payable to a beneficiary only on death of an Annuitant
who was the last surviving Annuitant under the contract.
You may designate or change a beneficiary. Your request must be in writing and
in a form which meets our needs. It will take effect only when we file it at our
Service Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if no Annuitant is living when we
file the request. Unless otherwise stated, we will make payment to the
beneficiary only if the last surviving Annuitant dies before the Annuity Date.
Any beneficiary's interest is subject to the rights of any assignee of whom we
know.
To show priority, we may use numbered classes, so that the class with first
priority is called class 1, the class with next priority is called class 2, and
so on. When we use numbered classes, these statements apply to beneficiaries
unless the form states otherwise: (in these statements and in the Example that
follows them, the term Annuitant refers, where two Annuitants are named, to the
last surviving Annuitant.)
1. One who survives the last surviving Annuitant will have the right to be paid
only if no one in a prior class survives that Annuitant.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the last surviving Annuitant.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the last surviving Annuitant, we will pay in one sum to the
last surviving Annuitant's estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. If the last surviving Annuitant dies before the Annuity Date,
we owe Jane the proceeds if she is living at the Annuitant's death. We owe Paul
and John the proceeds if they are living then but Jane is not. But if only one
of them is living, we owe him the proceeds. If none of them is living, we owe
the last surviving Annuitant's estate.
ENDORSEMENTS
(Only we can endorse this contract.)
Page 7 (VIP--84) (OKLA)
GENERAL PROVISIONS
Definitions.--We define here some of the words and phrases used all through this
contract. We explain others, not defined here, in other parts of the text.
Accumulation Period.--The period of time between the Contract Date and the
Annuity Date.
Anniversary or Contract Anniversary.--The same day and month as the Contract
Date in each later year.
Example: If the contract date is March 9, 1983, the first anniversary is March
9, 1984. The second is March 9, 1985, and so on.
Annuitant(s).--The person or persons named in the window of the first page. If
more than one person is so named, one of the two is named on Page 3 as First
Annuitant, the other as Co-Annuitant. And, in this case the Beneficiary
Provisions of the Contract will be based on the death of the last survivor of
the persons so named. The owner need not be an Annuitant.
Annuity Date.--The date the first annuity payment is due.
Business Day.--A day on which the New York Stock Exchange is open for business.
Cash Value.--Variable Account less any withdrawal charges that apply.
Contingent Annuitant.--A person to whom monthly payments under a Joint and
Survivor Life Annuity will continue for life if he or she is living after the
death of the Annuitant under that Annuity. You will name the Contingent
Annuitant for any Joint and Survivor Life Annuity you may choose. The
Contingent Annuitant you choose may also be named in the contract as an
Annuitant, but need not be.
Contract Year--A year which starts on the Contract Date or on an anniversary.
Example: If the contract date is March 9, 1983, the first Contract Year starts
then and ends on March 8, 1984. The second starts on March 9, 1984 and ends on
March 8, 1985, and so on.
Earnings.--The excess, if any, of (1) variable account plus any amounts
previously withdrawn from the variable account, over (2) total purchase payments
to date.
Issue Date.--The Contract Date.
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 Fund).--A mutual fund with separate
portfolios one or more of which you may choose as the underlying investment for
your contract. The Fund was established by Prudential. It is registered under
the Investment Company Act of 1940, as amended, as an open-end diversified
management investment company.
Service Office.--The Prudential office designated by it to service contracts
such as this. Its mailing address is the address shown on the Contract Data
page. unless Prudential specifies another address by notice to you.
Subaccount.--A division of the Account the assets of which are invested in the
shares of a corresponding portfolio of the Fund.
Subaccount Annuity Unit.--A measure used to find the amount of a variable
annuity monthly payment.
Subaccount Annuity Unit Value.--The monthly income produced by one Subaccount
Annuity Unit of a specified subaccount.
Subaccount Unit.--A measure used to find the value of your interest in a
subaccount during the accumulation period.
Subaccount Unit Value.--The dollar value of one Subaccount Unit of a specified
subaccount.
Variable Account.--During the Accumulation Period, your Variable Account for any
business day is found by multiplying your number of Subaccount Units in each
subaccount by the Subaccount Unit Value at the end of that business day and then
adding the results.
We, Our and Us.--Prudential.
You and Your.--The owner of the contract.
Contract Modifications.--Only a Prudential officer may agree to modify this
contract, and then only in writing.
Change of Annuity Date.--Not later than the present Annuity Date, you may ask us
to change that date to another date. We must have your request in writing at our
Service Office and in a form which meets our needs. You must send the contract
to us to be endorsed. We will change the date to the one you ask for in your
request. But, unless we consent, it may not be before the first of the next
month after the date we receive your request. Also, unless we consent, it may
not be after the first of the next month after the 75th birthday of the
Annuitant, or, if there are two Annuitants the 75th birthday of the younger of
the Annuitants. Further, unless we consent, you may not make more than one
change in the Annuity Date.
Removal of an Annuitant.--If two Annuitants are named we will remove one from
the contract upon: (1) receipt of your written request to remove that Annuitant;
or (2) receipt of due proof that that Annuitant has died. A death benefit may be
payable on death of an Annuitant (see Death of Annuitant on page 6).
(Continued on Next Page 6)
Page 4 (VIP--84) (CAL.)
BENEFICIARY
A death benefit may be payable to a beneficiary only on death of an Annuitant
who was the last surviving Annuitant under the contract.
You may designate or change a beneficiary. Your request must be in writing. It
will take effect only when we file it at our Service Office. Then any previous
beneficiary's interest will end as of the date of the request. It will end then
even if no Annuitant is living when we receive the request. We may, upon
receiving the request require you to submit the contract for endorsement, but
this action will not affect the effective date of the beneficiary designation.
Unless otherwise stated, we will make payment to the beneficiary only if the
last surviving Annuitant dies before the Annuity Date. Any beneficiary's
interest is subject to the rights of any assignee of whom we know.
To show priority, we may use numbered classes, so that the class with first
priority is called class 1, the class with next priority is called class 2, and
so on. When we use numbered classes, these statements apply to beneficiaries
unless the form states otherwise: (in these statements and in the Example that
follows them, the term Annuitant refers, where two Annuitants are named, to the
last surviving Annuitant.)
1. One who survives the last surviving Annuitant will have the right to be paid
only if no one in a prior class survives that Annuitant.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the last surviving Annuitant.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the last surviving Annuitant, we will pay in one sum to the
last surviving Annuitant's estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. If the last surviving Annuitant dies before the Annuity Date,
we owe Jane the proceeds if she is living at the Annuitant's death. We owe Paul
and John the proceeds if they are living then but Jane is not. But if only one
of them is living, we owe him the proceeds. If none of them is living, we owe
the last surviving Annuitant's estate.
Before we make a payment, we have the right to decide what proof we need of the
identity, age or any other facts about any persons designated as beneficiaries.
If beneficiaries are not designated by name and we make payment(s) based on that
proof, we will not have to make the payment(s) again.
ENDORSEMENTS
(Only we can endorse this contract.)
EXHIBIT (4)(S)
ENDORSEMENT
(Only we can endorse this contract.)
ALTERATION OF TEXT
The Definitions section of the General Provisions on page 4 is amended as of the
Contract Date to add the following definitions:
Proof of Death (as required under Death of Annuitant on page 6).--Any of the
following: (1) a copy of a certified official certificate of death; (2) a
statement by the attending physician, or an abstract of the record of the
hospital where the Annuitant died, certifying to the Annuitant's death; (3) a
copy of a decree by a court of competent jurisdiction as to a finding of death;
or (4) any other proof of death acceptable to Prudential.
The Subaccount Unit Value section of the Variable Accumulation Provisions on
page 9 is amended as of the Contract Date to further define as follows two items
which help determine the Net Investment Factor for any Business Day:
The rate of net investment income earned for any Business Day is the rate of any
dividends declared by the corresponding Portfolio of The Prudential Series Fund
Inc., but not yet paid to the subaccount.
The rate of asset value changes in the subaccount for any Business Day is the
rate 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
(not considering changes resulting from new purchase payments and withdrawals)
and subtracting 1.0 from the result.
By /s/ Isabelle L. Kirchner
----------------------
Secretary
VIP 3--84 Printed in U.S.A.
Prudential The Prudential
Insurance Company
of America
Annuitant Contract No.
- --------------------------------------------------------------------------------
LIMITATION PROVISIONS
So that this contract may meet the requirements of an annuity within the meaning
of Section 72(s) of the Internal Revenue Code of 1954, as amended, (the Code),
this contract is amended at issue to provide:
1. All of the annuity settlement options described for individual beneficiaries
or contingent payees in the contract will be available to a beneficiary entitled
to settlement at the death of an owner-annuitant only if the beneficiary or
contingent payee is the owner-annuitant's spouse.
For an individual beneficiary or contingent payee who is someone other than the
spouse, the choice may be Option 1 (Installment for a Fixed Period) or Option 2
(Life Income), but only if the certain for the option chosen does not exceed, on
the date payments are to begin, the life expectancy of the payee as we determine
for persons of the same age and sex.
Also, if the beneficiary or contingent payee is someone other than the spouse,
payments must start within one year after the Annuitant's death.
2. If death proceeds become payable to a beneficiary or contingent payee who is
not a natural person, we will pay the proceeds promptly. An annuity settlement
may not be chosen for such a beneficiary or contingent payee, except that if the
death giving rise to the payment of death proceeds occurs before the annuity
date, we may consent to a Option 1 if requested for the beneficiary, provided
the period selected does not end more than five years after the date of death.
3. If the owner or any joint owner of this contract dies before the Annuity Date
and a designated Annuitant survives, the contract may be continued under its
terms by the new owner(s). In that event, any gain in the contract at the time
of death will be reported as income to the new owner.
A change might be needed later to conform this contract to the requirements of
the Code, regulations or published rulings. If so, we have the right to make the
change(s) without a signed request and to provide a form of amendment to the
contract.
Endorsed by attachment on the Contract Date
for the Company,
By
/s/ Isabelle L. Kirchner
Secretary
WVA 13 -- 85
The Prudential
[LOGO] Insurance Company
of America
Annuitant Contract No.
- ------------------------------------- -----------------------------------------
LIMITATION PROVISIONS
So that this contract may meet the requirements of an annuity within the meaning
of Section 72(s) of the Internal Revenue Code of 1954, as amended, (the Code),
this contract is amended at issue to provide:
1. All of the annuity settlement options described for individual beneficiaries
in the contract will be available to a beneficiary entitled to settlement at the
death of an owner-annuitant only if the beneficiary is the owner-annuitant's
spouse.
For an individual beneficiary who is someone other than the spouse, the choice
may be made from among variable and fixed-dollar annuities of Type A (Life
Annuity), Type B (Life Annuity, 10 Year Minimum Period) and Type D (Annuity for
a Specified Period), but only if the certain or specified period for any Type B
or Type D annuity chosen does not exceed, on the date payments are to begin, the
life expectancy of the payee as we determine for persons of the same age and
sex.
Also, if the beneficiary is someone other than the spouse, payments to the
beneficiary must start within one year after the Annuitant's death.
2. If death proceeds become payable to a beneficiary who is not a natural
person, we will pay the proceeds promptly. An annuity settlement may not be
chosen for such a beneficiary, except that if the death giving rise to the
payment of death proceeds occurs before the annuity date, we may consent to a
Type D annuity, if requested for the beneficiary, provided the period selected
does not end more than five years after the date of death.
3. If the owner or any joint owner of this contract dies before the Annuity Date
and a designated Annuitant survives, the contract may be continued under its
terms by the new owner(s). In that event, any gain in the contract at the time
of death will be reported as income to the new owner.
A change might be needed later to conform this contract to the requirements of
the Code, regulations or published rulings. If so, we have the right to make the
change(s) without a signed request and to provide a form of amendment to the
contract.
Endorsed by attachment on the Contract Date
The Prudential Insurance Company of America
By
/s/ Isabelle L. Kirchner
Secretary
Prudential The Prudential Insurance Company of America
---------- Corporate Office
Newark, New Jersey
================================================================================
Annuitant(s) Contract Number
Annuity Date Contract Date
Agency
================================================================================
We will make monthly annuity payments starting on the Annuity Date we show in
the window of this page. We make this promise subject to all the provisions of
this contract.
Please read this contract with care. A guide to its contents is on the last page
before the back cover. A summary is on page 5. If there is ever a question about
it, or if there is a claim, just see one of our representatives or get in touch
with one of our offices.
Benefits and values under this contract may be on a variable basis. Amounts
directed into one or more of the variable subaccounts will reflect the
investment experience of those subaccounts. They are subject to change both up
and down and are not guaranteed as to dollar amount except as provided under the
Death of Annuitant and Payout Provisions Sections.
RIGHT TO CANCEL.-- You may cancel this contract by delivering or mailing a
written notice or sending a telegram to The Prudential Insurance Company of
America, Prudential Plaza, Newark, New Jersey 07101 and by returning the
contract before midnight of the tenth day after the date you receive the
contract. Notice given by mail and return of the contract by mail are effective
on being postmarked, properly addressed and postage prepaid. The insurer must
return an amount equal to the sum of the difference between the purchase payment
and the invested premium amount plus the Contract Fund less the net asset value
of any amount we add to the contract fund (see page 8) on the date your request
is received, within ten days after it receives notice of cancellation and the
returned contract.
The provisions on this and the following pages of this contract comprise the
entire contract. The contract was signed for Prudential on the contract date,
which is the date of issue.
Signed for Prudential.
/s/ ISABELLE L. KIRCHNER /s/ [ILLEGIBLE]
Secretary President
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date. Cash values reflect investment results.
VIP--86 - MN
The Prudential Insurance Company of America
Corporate Office
Newark, New Jersey
Annuitant(s) Contract Number
Annuity Date Contract Date
Agency
We will make monthly annuity payments starting on the Annuity Date we show in
the window of this page. We make this promise subject to all the provisions of
this contract.
Please read carefully this contract with care. A guide to its contents is on the
last page before the back cover. A summary is on page 5. If there is ever a
question about it, or if there is a claim, just see one of our representatives
or get in touch with one of our offices.
Benefits and values under this contract may be on a variable basis. Amounts
directed into one or more of the variable subaccounts will reflect the
investment experience of those subaccounts. They are subject to change both up
and down and are not guaranteed as to dollar amount except as provided under the
Death of Annuitant and Payout Provisions sections.
Right to Cancel Contract.--Not later than ten days after you get this contract,
you may return it to us. All you have to do is take it or mail it to one of our
offices or to the agent who sold it to you. We will cancel the contract and
promptly give you its net asset value, less the net asset value of any amount we
add to the contract fund (see page 8) determined as of the date your request is
received, without redemption charge.
The provisions on this and the following pages of this contract comprise the
entire contract. The contract was signed for Prudential on the contract date,
which is the date of issue.
Signed for Prudential.
Secretary President
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date. Cash value reflect investment results.
VIP--86
<PAGE>
ENDORSEMENTS
(Only we can endorse this contract.)
Page 2 (VIP--86)
<PAGE>
CONTRACT SUMMARY
We offer this summary to help you understand this contract. We do not intend
that it change any of the provisions of the contract.
Beginning on the Annuity Date we will use your contract fund to provide an
income, as we explain on page 13, to the Annuitant named on page 3 (the First
Annuitant named there if two annuitants are named) if he or she is then living
and entitled to payment. But if two annuitants are named on page 3 and (1) the
First Annuitant is not living on the Annuity Date or (2) both annuitants are
living and you ask us to do so, we will make payment to the Co-Annuitant named
on page 3 if he or she is then living. If, on the Annuity Date, no other
settlement has been chosen, we will make monthly payments under the Interest
Payment Option. But if the amount of the initial payment would be less than $50,
the Company reserves the right to, instead, pay the cash value in one sum. We
describe the other options we offer on page 13.
Purchase payments may be made at any time until the Annuity Date. There are no
scheduled amounts or due dates. We explain this on page 8. The purchase
payments, minus any deductions for state and/or local premium taxes, will be
allocated to you direct to one or more of the subaccounts of The Prudential
Individual Variable Contract Account and/or the fixed account. Additional
amounts may also be credited to your contract fund as we describe on page 8.
We describe on page 10 the amount payable, if any, at the death of an annuitant.
If there are two annuitants and one annuitant dies before the Annuity Date, here
is what we will do. We will use any excess of minimum proceeds (the sum of all
purchase payments minus any withdrawals made) over the contract fund to increase
the value of the contract for the surviving annuitant. Otherwise, it may be paid
to the beneficiary in cash; or it may be applied by the beneficiary to either of
the payment options we offer an annuitant under this contract.
You and we may agree on a change in the ownership of this contract. Also, unless
we endorse it to say otherwise, the contract gives you these rights, among
others:
o You may change the beneficiary(ies) under it.
o You may surrender it for its cash value.
o You may make withdrawals.
o You may transfer amounts among the subaccounts and the fixed account.
o You may remove one annuitant if two are named.
Page 5 (VIP--86)
<PAGE>
GENERAL PROVISIONS
Definitions.--We define here some of the words and phrases used all through this
contract. We explain others, not defined here, in other parts of the text.
We, Our and Us.-- Prudential.
You and Your.--The owner of the contract.
Annuitant(s).--The person or persons named on the first page. If more than one
person is so named, one of the two is named on Page 3 as First Annuitant, the
other as Co-Annuitant. And, in this case, the Beneficiary Provisions of the
Contract will be based on the death of the last survivor of the persons so
named. The owner need not be an annuitant.
Payee.--A beneficiary who has a right to receive a settlement under this
contract.
SEC.--The Securities and Exchange Commission.
PIVCA.--The Prudential Individual Variable Contract Account.
Contract Date.--The date we receive the purchase payment at our Service Office.
We show the Contract Date on page 3.
Issue Date.--The Contract Date.
Annuity Date.--The date the first annuity payment is due. We show the Annuity
Date on page 3.
Anniversary or Contract Anniversary.--The same day and month as the Contract
Date in each later year.
Example: If the contract date is June 10, 1986, the first anniversary is June
10, 1987. The second is June 10, 1988 and so on.
Contract Year.--A year which starts on the Contract Date or on an Anniversary.
Example: If the contract date is June 10, 1986, the first Contract Year starts
then and ends on June 9, 1987. The second starts on June 10, 1987 and ends on
June 9, 1988.
Attained Age.--An annuitant's attained age at any time is his or her issue age
plus the length of time since the contract date. You will find the issue age(s)
on page 3.
Earnings.--The excess, if any, of (1) the contract fund plus any amounts
previously withdrawn, over (2) total purchase payments to date plus any
additional amounts credited by the Company as a result of such purchase
payments.
Service Office.--The office designated by Prudential to service contracts such
as this. Its mailing address is the address shown on the Contract Data page,
unless Prudential specifies another address by notice to you.
Annual Report.--Once each contract year after the first and before the Annuity
Date we will send you a report. It will snow (1) the amount of the contract
fund; (2) the investment amount in each subaccount; (3) the amount in the fixed
account; (4) interest credited during the year; and (5) the interest rate that
will be credited until further notice to the amount in the fixed account. The
report will include any other data that may be currently required where this
contract is delivered. You may ask for a report like this at any time. But,
except for the report we send you once a year, we have the right to charge a fee
for each report.
Contract Modifications.--Only a Prudential officer may agree to modify this
contract, and then only in writing.
Change of Annuity Date.--Not later than the present Annuity Date, you may ask us
to change that date to another date. We must have your request in writing at our
Service Office and in a form which meets our needs. You must send the contract
to us to be endorsed if we ask you to do so. We will change the date to the one
you ask for in your request. But, unless we consent, it may not be before the
later of (1) the third contract anniversary and (2) the first of the next month
after the date we receive your request. Also, unless we consent, it may not be
after the first of the next month after the 80th birthday of the younger of the
annuitants. Further, unless we consent, you may not make more than one change in
the Annuity Date.
Removal of an Annuitant.--If a First Annuitant and a Co-Annuitant are named, we
will remove one from the contract upon: (1) receipt of your written request to
remove that annuitant; or (2) receipt of due proof that the Annuitant has died.
Ownership and Control.--Unless we endorse this contract to say otherwise: (1)
the owner of the contract is the Annuitant (the First Annuitant, if two are
named); (2) while any annuitant is living the owner alone is entitled to (a) any
contract benefit and value, and (b) the exercise of any right and privilege
granted by the contract or by us; and (3) if two annuitants are named and the
First Annuitant dies while the Co-Annuitant is living, the Co-Annuitant will
become the Owner.
Currency.--Any money we pay, or which is paid to us, must be in United States
currency. Any amount we owe will be payable at our Service Office.
(Continued on Next Page)
Page 6 (VIP--86)
<PAGE>
GENERAL PROVISIONS (Continued)
Misstatement of Age or Sex.--If any annuitant's stated date of birth or sex or
both are not correct, we will change each benefit and the amount of each annuity
payment to that which the purchase payment would have bought for the correct
date of birth and sex. Also, we will adjust the amount of any payments we have
already made. Here is how we will do it: (1) We will deduct any overpayments,
with interest at 5% a year, from any payment(s) due then or later. (2) We will
add any underpayments, with interest at 5% a year, to the next payment we make
after we receive proof of the correct date of birth and sex.
Incontestability.--We will not contest this contract except for non-payment of
the purchase payment due on the contract date.
Proof of Survival or Death.--Before we make a payment, we have the right to
require proof of the life or death of any person whose life or death determines
whether or to whom we must make the payment.
Assignment.--We will not be deemed to know of an assignment unless we receive
it, or a copy of it, at our Service Office. We are not obliged to see that an
assignment is valid or sufficient. If any annuitant is living on the Annuity
Date and an assignment is in effect on that date, we have the right to pay the
cash value in one sum. This contract may not be assigned to another insurance
company without our consent.
Changes by Prudential.--We reserve the right, upon 90 days notice to you to:
(1) change the minimum amount requirements specified for purchases, withdrawals
and transfers in the Contract Fund and Contract Value Options Provision;
(2) refuse to accept any request for purchase:
(3) add, change or discontinue subaccounts, change to or add a different
variable contract account, or substitute fund shares in the account (see page
9):
(4) change any or all terms and provisions of the Annuity Settlement Table on
page 15, but only with respect to any portion of an annuity settlement deriving
from purchase payments made on or after the effective date of the change and
earnings on those purchase payments; and
(5) make any changes required by law.
Voting Rights:
Fund.--We will send you a notice of any meeting at which Fund shares which
comprise the assets of a subaccount may be voted. We will provide a voting
instruction form for the number of Fund shares representing your proportional
interest. The instruction form may be signed and returned to us. If for any
meeting there are Fund shares for which we have not received voting
instructions, this is what we will do. We will vote Fund shares on each matter
in the same proportion as we vote the Fund shares held in the subaccount for
which we did receive instructions.
Prudential.--We are a mutual life insurance company. Our principal office is in
Newark, New Jersey, and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each Year for
four Year terms}, two of our officers, and six public directors named by New
Jersey's Chief Justice.
The election is held on the first Tuesday in April from 10:00 a.m. to 2:00 p.m.
in our office at the Secretary's address shown here. After this contract has
been in force for one year, you may vote either in person or by mail. We will
send you a ballot if you ask for one. Just write to our secretary at Prudential
Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By
law, your request must show Your name, address, contract number and date of
birth. If you are an individual, you must be at least 18 years old to vote.
Participation (Dividends).--This contract is eligible to participate in the
divisible surplus of Prudential. We do not expect that any dividends will be
payable on or before the Annuity Date. While any annuity settlement is in
effect, the contract will share in our surplus to the extent and in the way we
decide.
Page 7 (VIP--86)
<PAGE>
PURCHASE PAYMENTS
Purchase Payments.--An initial purchase payment of at least $1,000 is payable on
the Contract Date. Further purchase payments may be made at any time while an
annuitant is living and before the Annuity Date. The amount of each payment
after the first must be at least $100. We reserve the right to establish a
maximum amount.
The initial purchase payment, minus any deductions for state and/or local
premium taxes, will be allocated to the subaccounts and/or to the fixed account
as you instruct. The minimum amount of a first allocation to a subaccount and/or
to the fixed account is $300; the minimum for subsequent allocations is $100
unless we consent to a smaller amount. If, after you have made at least one
purchase, we receive a purchase payment without instructions, we will make any
deductions for state and/or local premium taxes and allocate the balance in the
same proportions as the most recent purchase payment you made.
Additional Amounts.--During the first three contract years, and in contract
years thereafter at the discretion of the Company, we will credit an additional
1% to the amount of every purchase payment you make, The Company reserves the
right to limit such additional amounts to $1,000 in each contract year.
This additional amount will not be subject to state and/or local premium taxes.
The amount will be allocated to the subaccounts and/or to the fixed account in
the same proportions as the corresponding purchase payment.
Example 1: On the Contract Date you make a $1,500 purchase to be allocated
equally to subaccounts A, B, and C. We will increase that amount by 1%, or $15,
and allocate $505 to each of Subaccounts A, B, and C. Later in the year you send
us a $900 purchase payment, but you don't tell us how it is to be applied. We
will increase that amount by 1% or $9 and, based on the most recent purchase,
the one made on the Contract Date, we would make a $303 purchase for each of
Subaccounts A, B, and C.
Example 2: If in the example above your second purchase payment had been $200
instead of $900, we would have the right not to make the purchase without first
contacting you to find out how the purchase payment is to be applied. This is
because the $200 purchase payment was not enough to make a minimum purchase of
$100 for each of the three subaccounts. The purchase would be made when we
receive your instructions at our Service Office.
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing and
in a form which meets our needs. It ill take effect only when we file it at our
Service Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if no annuitant is living when we
file the request. Unless otherwise stated, we will make payment to the
beneficiary only if the last surviving or sole annuitant dies before the Annuity
Date. Any beneficiary's interest is subject to the rights of any assignee of
whom we know.
When a beneficiary is designated, any relationship shown is to the Annuitant
(First Annuitant if two annuitants are named on page 3) unless otherwise stated.
To show priority, we may use numbered classes, so that the class with first
priority is called class 1, the class with next priority is called class 2, and
so on. When we use numbered classes, these statements apply to beneficiaries
unless the form states otherwise: (In these provisions and in the Example, the
term annuitant refers, where two annuitants are named, to the last surviving
annuitant.)
1. One who survives the annuitant will have the right to be paid only if no one
in a prior class survives the annuitant.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the annuitant.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the annuitant, we will pay in one sum to the annuitant's
estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. If the annuitant dies before the Annuity Date, we owe Jane
the proceeds if she is living at the annuitant's death. We owe Paul and John the
proceeds if they are living then but Jane is not. But if only one of them is
living, we owe him the proceeds. If none of them is living, we owe the
annuitant's estate.
Before we make a payment, we have the right to decide what proof we need of the
identity, age or any other facts about any persons designated as beneficiaries.
If beneficiaries are not designated by name and we make payment(s) based on that
proof, we will not have to make the payment(s) again.
Page 8 (VIP--86)
<PAGE>
SEPARATE ACCOUNT
The Account.--The word Account, where we use it in this contract without
qualification, means the Prudential Individual Variable Contract Account (PIVCA)
and any other separate accounts that we establish. PIVCA is a unit investment
trust registered with the SEC under the Investment Company Act of 1940. It is
also subject to the laws of New Jersey. We own the assets of the Account; we
keep them separate from the assets of our general investment account. We
established the Account to support variable annuity contracts.
Subaccounts.--The PIVCA has several subaccounts. We list them on the Contract
Data page(s). You determine, using percentages, how the invested purchase amount
will be allocated among the subaccounts and/or to the fixed account. You may
choose to allocate nothing to a particular subaccount. But any allocation you
make must be at least 10%; you may not choose a fractional percent.
Example: You may choose a percentage of 0, or 100, or 10, 11, 12, and so on, up
to 90. But you may not choose a percentage of 1 through 9, or 91 through 99, or
any percent that is not a whole number.
The Fund.--The word fund, where we use it in this contract without
qualification, means the fund we identify in the Contract Data pages. The fund
is registered with the SEC under the Investment Company Act of 1940 as an
open-end diversified management investment company. The fund has several
portfolios; there is a portfolio that corresponds to each of the subaccounts of
the PIVCA. We list these portfolios in the Contract Data pages.
Account Investments.--We use the assets of the PIVCA to buy shares in the fund.
Each subaccount is invested in a corresponding specific portfolio. Income and
realized and unrealized gains and losses from assets in each subaccount are
credited to, or charged against, the subaccount. This is without regard to
income, gains, or losses in our other investment accounts.
We will determine the value of the assets in the PIVCA at the end of each
business day. When we use the term business day, we mean a day when the New York
Stock Exchange is open for trading. We might need to know the value of an asset
on a day that is not a business day or on which trading in that asset does not
take place. In this case, we will use the value of that asset as of the end of
the last prior business day on which trading took place.
Example: If we need to know the value of an asset on a Sunday, we will normally
use the value of the asset as of the end of business on Friday.
We will always keep assets in the Account with a total value at least equal to
the amount of the investment amounts under contracts like this one. (See page
11.) To the extent those assets do not exceed this amount, we use them only to
support those contracts; we do not use those assets to support any other
business we conduct. We may use any excess over this amount in any way we
choose.
Change in Investment Policy.--A portfolio of the fund might make a material
change in its investment policy. In that case, we will send you a notice of the
change.
Change of Fund.--A portfolio might, in our judgment, become unsuitable for
investment by a subaccount. This might happen because of a change in investment
policy, or a change in the laws or regulations, or because the shares are no
longer available for investment, or for some other reason. If that occurs, we
have the right to substitute another portfolio of the fund, or to invest in a
fund other than the one we show on the Contract Data page(s). But we would first
seek approval from the SEC and, where required, the insurance regulator where
this contract is delivered.
FIXED ACCOUNT
The Fixed Account.--In addition to the subaccounts described above, there is a
fixed account to which you may direct all or part of your invested purchase
amount(s). The fixed account is funded by the general account of Prudential. The
fixed account is credited with interest as described under Guaranteed Interest
on page 12 and Excess Interest on page 12.
Fixed Account Options.--We may have more than one fixed account option. We list
the fixed account option(s) in the Contract Data pages.
Page 9 (VIP--86)
<PAGE>
TRANSFERS
Transfers Among Subaccounts and into the Fixed Account---You may transfer
amounts among subaccounts of PIVCA and into the fixed account as often as four
times in a contract year. In addition, the entire amount in all subaccounts may
be transferred to the fixed account at any time. If we establish new separate
accounts, transfers into or out of these separate accounts will be allowed only
with our consent. To make a transfer, you must notify us in writing in a form
that meets our needs. The transfer will take effect on the date we receive your
notice at our Service Office.
Transfers Among Fixed Account Options and into the Subaccounts.--You may
transfer amounts among the available Fixed Account Options and into the
subaccounts only with our consent.
DEATH OF AN ANNUITANT
Sole Annuitant.--If we receive proof that an annuitant, who was the last
surviving or only annuitant named in the contract, died before the Annuity Date,
we will pay the beneficiary the proceeds promptly.
If the Annuitant dies before his or her 65th birthday, the proceeds will be the
greater of (a) minimum proceeds, which we define below, and (b) the contract
fund (which we define on page 11) as of the date we receive due proof of death.
Minimum proceeds if no withdrawals have been made is the sum of all of the
purchase payments paid to us plus any additional percentage amounts of purchase
payments we credit. Any withdrawal reduces minimum proceeds on the date of the
withdrawal in the same proportion that it reduces your contract fund on that
date. Purchase payments made after a withdrawal increase minimum proceeds by the
amount of the purchase payments plus any additional percentage amounts of
purchase payments we credit.
Example: Assume a total of purchase payments and additional amounts of $10,000
and a subsequent withdrawal of $3,000 made when your contract fund amounts to
$12,000. The contract fund is reduced by one-fourth ($3,000/$12,000); therefore
minimum proceeds, which was $10,000, is also reduced by one-fourth, to $7,500. A
subsequent purchase of $5,000 with an additional amount credited of $50 would
increase minimum proceeds to $12,550.
If the Annuitant dies on or after his or her 65th birthday, the proceeds will be
the contract fund as of the date we receive due proof of death.
If the Annuitant dies on or after the Annuity Date, the settlement then in
effect will govern whether and to whom we will make any payment(s).
Multiple Annuitants.--If two annuitants are named in the contract and we receive
due proof that one of them died before his or her 65th birthday and before the
Annuity Date, here is what we will do. We will compare minimum proceeds,
determined as described above for death of a sole annuitant, with the amount of
your contract fund. If minimum proceeds is greater than the amount of the
contract fund, we will credit the difference to the contract fund as a death
benefit. The death benefit, if any, will be distributed among the subaccounts
and/or the fixed account in the same proportions as the contract fund was
distributed before the crediting of the death benefit.
No death benefit is payable if the Annuitant who died did so before the Annuity
Date and either: (1) the Annuitant had reached his or her 65th birthday on or
before the date of his or her death; or (2) the amount of the contract fund on
the date we received due proof of the Annuitant's death was greater than or
equal to minimum proceeds determined as described above.
The surviving annuitant may withdraw all of the contract fund, within 30 days
following the date we receive due proof of the first annuitant's death, without
paying any sales charge that might otherwise be required for a withdrawal (see
Withdrawal Charges on page 11).
When only one of the annuitants named in the contract survives, the above
provisions for Sole Annuitant will apply to that surviving annuitant.
Where two annuitants named in the contract have died and there is not sufficient
evidence that they have died otherwise than simultaneously, the proceeds of the
contract will be distributed as if the First Annuitant had survived the
Co-Annuitant.
Page 10 (VIP--86)
<PAGE>
CONTRACT FUND AND CONTRACT VALUE OPTIONS
Before the annuity date, you may be able to make withdrawals from the contract
fund and you may surrender this contract for its cash value.
Contract Fund.--On the contract date the contract fund is equal to the invested
purchase amount (see below) minus any of the charges described in items (f)
through (h) below which may have been due on that date. On any day after that
the contract fund is equal to what it was on the previous day, plus these items:
(a) any increase due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated (we explain investment amount below);
(b) guaranteed interest at 3% on that portion of the contract fund that is
in the fixed account;
(c) any excess interest on that portion of the contract fund that is in
the fixed account (see page 12); and
(d) any invested purchase amount resulting from additional purchase
payments
minus these items:
(e) any decrease due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated;
(f) a charge against the investment amount at a rate of up to .00326816% a
day (1.20% a year) for mortality and expense risks that we assume;
(g) any annual maintenance charge that we deduct (see page 12); and
(h) any amount charged against the contract fund for Federal or State
income taxes.
Invested Purchase Amount.--This is the portion of the purchase payments that we
add to the contract fund. It is equal to the purchase payments, plus any
additional amounts we have credited, minus any applicable deduction for state
and/or local premium taxes.
Investment Amount.--The investment amount for this contract is the amount we use
to compute the investment results. The investment amount is allocated among the
subaccounts. The amount of the investment amount and its allocation to
subaccounts depend on (1) how you choose to allocate the invested purchase
amount; (2) whether or not you transfer amounts among subaccounts; (3) the
investment performance of the subaccounts to which amounts are allocated or
transferred; and (4) whether or not you make any withdrawals. The account,
subaccounts, and account investments are described on page 9.
The investment amount at any time is equal to the contract fund, minus the
portion of the contract fund that is in the fixed account.
Cash Value.--The cash value of the contract at any time is the contract fund,
minus any withdrawal charges that apply. See Withdrawal Charges below for the
period of time during which there may be a withdrawal charge.
Withdrawal Charges (Deferred Contingent Sales Charges).--Although no sales
charges are deducted from your purchase payments when they are made, your
purchase payments may be subject to a sales charge upon withdrawal or upon
surrender of this contract for its cash value. Earnings, defined on page 6, are
not subject to sales charges. Withdrawals are considered to consist of earnings,
if any, first, then of purchase payments on a first-in, first-out basis.
In each contract year, any purchase payments withdrawn which do not in total
exceed 10% of your contract fund valued as of the date of the first withdrawal
in that year, will not incur a sales charge. A sales charge may be imposed on
purchase payments withdrawn in excess of this 10% limitation.
The amount of any sales charge imposed on the withdrawal of a purchase payment
varies with the number of contract years that have elapsed since the purchase
payment was made.
When you make a withdrawal, the rate of sales charge applied against any
purchase payments or portion of a purchase payment that is subject to a charge
is determined in accord with the following:
If the contract year of purchase payment is the same as the contract year of
withdrawal, the rate is 8%.
If the duration from the start of the contract
year of purchase payment to the start of the The
contract year of withdrawal is... rate is...
One year ............................................................... 7%
Two years .............................................................. 6%
Three years ............................................................ 5%
Four years ............................................................. 4%
Five years ............................................................. 3%
Six years .............................................................. 2%
Seven years ............................................................ 1%
Eight years or more .................................................... 0%
In determining the amount of sales charge, if any, we will consider that any
purchase payment withdrawn is the first purchase payment made which has not
previously been withdrawn. This is so even if that purchase payment was
(Continued on Next Page)
Page 11 (VIP--86)
<PAGE>
CONTRACT FUND AND CONTRACT VALUE OPTIONS (Continued)
allocated to a different subaccount (and/or the fixed account) than that from
which withdrawal is being made or of the amount being withdrawn is no longer
subject to a withdrawal charge. Depending on the amount of the withdrawal one or
more sales charge rates may be used if the withdrawal is of purchase payments
made in more than one contract year.
Recapture of Additional Amount.--When you make a withdrawal which consists
partially or fully of purchase payments, we may recapture additional amounts
(see page 8) which we credited to your contract fund. If the duration from the
start of the contract year of purchase payment to the start of the contract year
of withdrawal is less than eight years, we will recapture the exact amount of
any additional amounts credited as a result of such purchase payments. If the
duration from the start of the contract year of purchase payment to the start of
the contract year of withdrawal is eight years or more, we will not recapture
any additional amounts credited as a result of such purchase payments.
Example.--
Year Transaction
- ---- -----------
Contract year one --Payment of $1,000 (plus crediting of $10 additional)
in Subaccount A
Contract year two --Payment of $900 (plus crediting of $9 additional)
in Subaccount B
Contract year three --Payment of $1,500 (plus crediting of $15 additional)
in Subaccount C
In contract year five the contractholder requests a partial withdrawal of $1,600
from Subaccount C which has grown to $1,900. The amount of the contract fund on
the date of withdrawal is $3,900, $466 more than the total of the purchase
payments made to date plus the additional amounts credited to date. Thus, for
purposes of determining sales charges, the $1,600 withdrawal is considered to
consist of $466 of earnings and $1,134 of purchase payments. The $466 of
earnings and $390 of purchase payments (10% of the contract fund) may be
withdrawn without sales charge. A sales charge is required on the remaining $744
of purchase payment being withdrawn.
To determine the sales charge we assume that $l,000 of purchase payment being
withdrawn is the payment made to Subaccount A in contract year one. The
remaining $134 of purchase payment being withdrawn is assumed to be a part of
the $900 payment made to Subaccount B in Contract year two.
Of the first $1,000 purchase payment we have seen that $390 (10% of $3,900) may
be withdrawn without sales charge. A 4% sales charge is due on the withdrawal of
the other $610 of the payment (4% x $610 = $24.40). The $134 portion being
withdrawn from the second payment requires a 5% sales charge (5% x $134 =
$6.70). Thus the total sales charge for withdrawing $l,600 in year five is
$31.10.
In addition, since $1,134 of purchase payments is being withdrawn and the
durations from the start of the contract years of these purchase payments to the
contract year of withdrawal is less than eight years, we will recapture
additional amounts equal to $11.34 (1% of $1,134).
Annual Maintenance Charge.--On each contract anniversary before the Annuity Date
or at the time of total withdrawal we will deduct a maintenance charge from your
contract fund. The maximum amount we will deduct is shown on page 3 of this
contract. If on any contract anniversary the contract fund is allocated to more
than one subaccount and/or to the fixed account, we will divide the charge on a
pro-rata basis, according to the value of each subaccount and/or the fixed
account.
Conditions for Withdrawal or Surrender.--Our consent is needed for a withdrawal
if (1) its amount is less than $300; (2) it would reduce the contract fund to
less than $300; or (3) a withdrawal was made earlier in the same contract year.
To make a withdrawal or to surrender this contract for its cash value, you must
ask us in writing in a form that meets our needs. Also, to surrender the
contract, you must send it to us. Unless we consent, any amount withdrawn will
be taken from the subaccounts and/or the fixed account in proportion to the
amount in each as of the date of the withdrawal. After deducting the Annual
Maintenance Charge and the sales charges, and recaptures of Additional Amounts,
if any, we will pay the balance.
Guaranteed Interest.--The guaranteed interest rate credited on that portion of
the contract fund in the fixed account is an effective rate of 3% a year.
Excess Interest.--Excess interest on that portion of the contract fund in the
fixed account may be credited in addition to the 3% guaranteed interest rate.
The rate of any excess interest is not guaranteed. It will be determined from
time to time and will continue thereafter until a new rate is determined. We may
use different rates of excess interest for different portions of the contract
fund that are in the fixed account.
Page 12 (VIP--86)
<PAGE>
PAYOUT PROVISIONS
Choosing an Option.--You may have the amount of your contract fund on the
Annuity Date paid to the Annuitant(s) under one of the options we describe
below. If two annuitants are named in the contract, and both are living, you may
choose to have payments made to either. But, for any annuity settlement, we may
first deduct from your contract fund any charge for state and/or local premium
taxes. We offer the same annuity options to the Payee that we offer to an
annuitant. And we determine monthly payments for the payee in the same way we do
for an annuitant.
Conditions.--With respect to the option(s) you select, your right to make the
choice is subject to all these conditions: (1) You must ask for the option in
writing and in a form which meets our needs. (2) You must send the contract to
us to be endorsed. (3) If we require it, you must give us proof of the date of
birth of the person on whose age an annuity payment is based. (4) We must have
your request, the contract and any required proof(s) of the date(s) of birth
before the Annuity Date.
Your choice of an option will take effect on the Annuity Date but only if: (1)
the person on whose life the annuity is to be based is living on that date; (2)
the first payment under the option will be at least $50; and (3) you do not
avoid the choice by making a later choice before the Annuity Date.
If two annuitants are named in the Contract and both are living, settlement will
be made on the life of the First Annuitant, as named on page 3.
When No Option Chosen.--If no choice takes effect on the Annuity Date,
settlement under the Interest Payment Option will become effective.
Options Described.--When we use the word annuitant in the following paragraphs
we mean the annuitant for whom the annuity described was chosen and who is to
receive settlement under the annuity.
For an annuitant, the first payment under these options is due on the Annuity
Date.
For a Payee, unless a later date is requested, the first payment will be due on
the first day of the earliest calendar month on or after the day the Service
Office has received the request for the settlement and duo proof of the
annuitant's death and such claim forms and other evidence as may be satisfactory
to us.
Here are the options we offer. We may also consent to other arrangements.
Life Income Option.--You may choose monthly payments for as long as the
annuitant lives, with 120 monthly payments certain.
Interest Payment Option.--We will hold an amount at interest. We will pay
interest at an effective rate of at least 3% a year ($30.00 annually, $14.89
semi-annually, $7.42 quarterly or $2.47 monthly per $1,000). We may pay more
interest.
Supplemental Life Annuity Option.--You may choose to receive the proceeds of
this contract in the form of payments like those of any annuity or life annuity
we then regularly issue 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. For purposes of this option
only, the words we, our and us include our subsidiary company, Pruco Life
Insurance Company, which has agreed to make settlements under this option.
The proceeds of this contract might be subject to a withdrawal charge if paid as
a lump sum. If so, we will apply that charge pro-rata to any portion of the
proceeds not placed under this option. For the amount placed under this option
on any date, any annuity payment will be at least 100% of what we would pay
under the chosen kind of annuity with its first payment due on its contract
date. The phrase regularly issue does not include contracts that are used to
qualify for special federal income tax treatment as a retirement plan unless
this contract has been issued as part of such a plan. At least one of the
persons on whose life this option is based must be a Payee. This option cannot
be chosen more than 30 days before the due date of the first payment. On
request, we will quote the payment that would apply for any amount placed under
the option at that time.
Residue Described.--For the Life Income Option and the Supplemental Life Annuity
Option, residue on any date means the then present value of any unpaid payments
certain. It does not include the value of any payment that may become due after
the certain period. For the Life Income Option, we will compute it at an
effective interest rate of 3 1/2% a year. But we will use the interest rate we
used to compute the actual Life Income Option payments if they were not based on
the table in this contract. For the Supplemental Life Annuity Option, we will
use the interest rate we would use for the chosen kind of annuity with the same
provisions as to withdrawal.
Page 13 (VIP--86)
<PAGE>
PAYOUT PROVISIONS (Continued)
For the Interest Payment Option, residue on any date means any unpaid balance
with interest to that date.
Withdrawal of Residue.--Unless otherwise stated when the option is chosen: (1)
under the Life Income Option and the Supplemental Life Annuity Option the
residue may be withdrawn; and (2) under the Interest Payment Option all, or any
part not less than $100, of the residue may be withdrawn. If the Interest
Payment Option residue is reduced to less than $1,000, we have the right to pay
it in one sum. Under the Life Income Option and the Supplemental Life Annuity
Option, withdrawal of the residue will not affect any payments that may become
due after the certain period; the value of those payments cannot be withdrawn.
Instead, the payments will start again if they were based on the life of a
person who lives past the certain period.
ENDORSEMENTS
(Only we can endorse this contract.)
Page 14 (VIP--86)
<PAGE>
ANNUITY SETTLEMENT TABLE
Amounts Payable.--If the Annuity Date is a contract anniversary, for the Life
Income Option we will use the table below to compute the amount of the annuity
payment. The amounts we show are based on the Annuitant's sex and age last
birthday on the Annuity Date.
If the Annuity Date is not a contract anniversary, for each completed quarter
year after the most recent anniversary we will adjust the amounts.
When we computed the amounts we show in the tables, we adjusted the 1983 Table a
to an age last birthday basis, less three years; we used an interest rate of 3
1/2% a year. If the age is over 80, the rate for age 80 will be used. We will
let you know the amounts if you ask for them. Settlements under the Life Income
Option will share in our surplus to the extent and in the way we decide.
Other forms of annuity may be provided, subject to Prudential's consent, or as
may be required by any applicable law or regulation.
Amount of Annuity Payment under the Life Income Option
for each S1,000 applied on the Annuity Date
- --------------------------------------------------------------------------------
AGE MALE FEMALE AGE MALE FEMALE
================================================================================
41 $3.88 $3.67 61 $5.25 $4.79
42 3.92 3.70 62 5.36 4.89
43 3.97 3.74 63 5.48 4.98
44 4.01 3.78 64 5.60 5.09
45 4.06 3.82 65 5.73 5.20
46 4.12 3.86 66 5.87 5.31
47 4.17 3.90 67 6.01 5.43
48 4.23 3.94 68 6.15 5.56
49 4.28 3.99 69 6.30 5.70
50 4.35 4.04 70 6.46 5.84
51 4.41 4.09 71 6.62 5.99
52 4.48 4.15 72 6.79 6.15
53 4.55 4.21 73 6.96 6.31
54 4.62 4.27 74 7.13 6.49
55 4.70 4.33 75 7.30 6.67
56 4.78 4.40 76 7.48 6.85
57 4.86 4.47 77 7.66 7.04
58 4.95 4.54 78 7.83 7.24
59 5.05 4.62 79 8.00 7.44
60 5.15 4.71 80 8.17 7.64
- --------------------------------------------------------------------------------
ENDORSEMENTS
(Only we can endorse this contract)
Page 15 (VIP--86)
<PAGE>
GUIDE TO CONTENTS
Page
Contract Data ................................................................3
Contract Summary..............................................................5
General Provisions ...........................................................6
Definitions; Annual Report; Contract
Modifications; Change of Annuity Date;
Removal of an Annuitant;
Ownership and Control;
Currency; Misstatement of Age or Sex:
Incontestability; Proof of Survival or Death;
Assignment Changes by Prudential;
Voting Rights
Purchase Payments ............................................................8
Additional Amounts
Beneficiary...............................................................3 & 8
Separate Account .............................................................8
The Account; Subaccounts; The Fund; Account
Investments; Change in
Investment Policy; Change of Fund
Fixed Account ................................................................9
The Fixed Account; Fixed Account Options
Death of Annuitant ..........................................................10
Transfers ...................................................................10
Transfers among Subaccounts and into
the Fixed Account; Transfers Among Fixed
Account Options and into the Subaccounts
Contract Fund and Contract Value Options ...............................11 & 12
Contract Fund; Invested Purchase Amount;
Investment Amount; Cash Value;
Withdrawal Charges (Deferred Contingent Sales
Charges); Recapture of Additional Amount;
Annual Maintenance Charge; Conditions
for Withdrawal or Surrender; Guaranteed
Interest; Excess Interest
Payout Provisions ...........................................................13
Choosing an Option; Conditions;
When No Option Chosen; Options Described;
Life Income Option; Interest Payment Option;
Supplemental Life Annuity Option;
Residue Described; Withdrawal of Residue
Annuity Settlement Table.....................................................15
Page 16 (VIP--86)
<PAGE>
Page 17 (VIP--86)
<PAGE>
Page 18
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date. Cash values reflect investment results.
VIP--86
Prudential The Prudential Insurance Company of America
---------- Corporate Office
Newark, New Jersey
================================================================================
Annuitant(s) Contract Number
Annuity Date Contract Date
Agency
================================================================================
We will make monthly annuity payments starting on the Annuity Date we show in
the window of this page. We make this promise subject to all the provisions of
this contract.
Please read this contract with care. A guide to its contents is on the last page
before the back cover. A summary is on page 5. If there is ever a question about
it, or if there is a claim, just see one of our representatives or get in touch
with one of our offices.
Benefits and values under this contract may be on a variable basis. Amounts
directed into one or more of the variable subaccounts will reflect the
investment experience of those subaccounts. They are subject to change both up
and down and are not guaranteed as to dollar amount except as provided under the
Death of Annuitant and Payout Provisions sections.
Right to Cancel Contract.-- Not later than ten days after you get this contract,
you may return it to us. All you have to do is take it or mail it to one of our
offices or to the agent who sold it to you. We will cancel the contract and
promptly give you its net asset value, less the net asset value of any amount we
add to the contract fund (see page 8) determined as of the date you return it,
without redemption charge.
The provisions on this and the following pages of this contract comprise the
entire contract. The contract was signed for Prudential on the contract date,
which is the date of issue.
Signed for Prudential.
/s/ ISABELLE L. KIRCHNER /s/ [ILLEGIBLE]
Secretary President
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date. Cash values reflect investment results.
VIP--86 - Y
CONTRACT DATA
ANNUITANT(S) JOHN DOE XX XXX XXX CONTRACT NUMBER
MARY DOE
ANNUITY DATE JULY 25, 2016 JULY 25, 1986 CONTRACT DATE
AGENCY R-NK 1
FIRST ANNUITANT:
NAME JOHN DOE
SEX AND ISSUE AGE M-35
DATE OF BIRTH 6/10/ 51
CO-ANNUITANT:
NAME MARY DOE
SEX AND ISSUE AGE F-32
DATE OF BIRTH 10/1/54
BENEFICIARY: CLASS 1-ROBERT DOE
SON OF ANNUITANTS
CLASS 2-BARBARA SMITH
SISTER CO-ANNUITANT
ALLOCATION OF INITIAL PURCHASE PAYMENT
BOND 20%
MONEY MARKET 20%
COMMON STOCK 20%
AGGRESSIVELY MANAGED FLEXIBLE 10%
CONSERVATIVELY MANAGED FLEXIBLE 10%
FIXED ACCOUNT 20%
YOUR PURCHASE PAYMENTS MAY BE SUBJECT TO A SALES CHARGE OF UP TO 8% UPON
WITHDRAWAL OR UPON SURRENDER OF THIS CONTRACT FOR ITS CASH VALUE, AS DESCRIBED
ON PAGES 11 AND 12.
THE MAINTENANCE CHARGE IS UP TO $30.00 ANNUALLY. WE EXPLAIN THIS ON PAGE 12.
SERVICE OFFICE - PLEASE DIRECT ANY COMMUNICATION ABOUT THIS CONTRACT TO: THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, P.O. BOX 2925, PHOENIX, ARIZONA 85062.
***** NOTICE *****
THIS IS A LEGAL CONTRACT BETWEEN YOU AND PRUDENTIAL. READ YOUR CONTRACT
CAREFULLY.
GENERAL PROVISIONS (Continued)
Misstatement of Age or Sex.--If any annuitant's stated date of birth or sex or
both are not correct, we will change each benefit and the amount of each annuity
payment to that which the purchase payment would have bought for the correct
date of birth and sex. Also, we will adjust the amount of any payments we have
already made. Here is how we will do it: (1) We will deduct any overpayments,
with interest at 5% a year, from any payment(s) due then or later. (2) We will
add any underpayments, with interest at 5% a year, to the next payment we make
after we receive proof of the correct date of birth and sex.
Incontestability.--We will not contest this contract except for non-payment of
the purchase payment due on the contract date.
Proof of Survival or Death.--Before we make a payment, we have the right to
require proof of the life or death of any person whose life or death determines
whether or to whom we must make the payment.
Assignment.--We will not be deemed to know of an assignment unless we receive
it, or a copy of it, at our Service Office. We are, not obliged to see that an
assignment is valid or sufficient. If any annuitant is living on the Annuity
Date and an assignment is in effect on that date, we have the right to pay the
cash value in one sum. This contract may not be assigned to another insurance
company without our consent.
Changes by Prudential.--We reserve the right, upon 90 days notice to you to:
(1) change the minimum amount requirements specified for purchases, withdrawals
and transfers in the Contract Fund and Contract Value Options Provision:
(2) refuse to accept any request for purchase:
(3) add, change or discontinue subaccounts, change to or add a different
variable contract account, or substitute fund shares in the account (see page
9);
(4) change any or all terms and provisions of the Annuity Settlement Table on
page 15, but only with respect to any portion of an annuity settlement deriving
from purchase payments made on or after the effective date of the change and
earnings on those purchase payments; and
(5) make any changes required by law.
Minimum Legal Values.--The cash values and annuity benefit values in this
contract are at least as large as those set by law where it is delivered. Where
required, we have given the insurance regulator a detailed statement of how we
compute values and benefits.
Voting Rights:
Fund.--We will send you a notice of any meeting at which Fund shares which
comprise the assets of a subaccount may be voted. We will provide a voting
instruction form for the number of Fund shares representing your proportional
interest. The instruction form may be signed and returned to us. If for any
meeting there are Fund shares for which we have not received voting
instructions, this is what we will do. We will vote Fund shares on each matter
in the same proportion as we vote the Fund shares held in the subaccount for
which we did receive instructions.
Prudential.--We are a mutual life insurance company. Our principal office is in
Newark, New Jersey, and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each year for
four year terms), two of our officers, and six public directors named by New
Jersey's Chief Justice.
The election is held on the first Tuesday in April from 10:00 a.m. to 2:00 p.m.
in our office at the Secretary's address shown here. After this contract has
been in force for one year, you may vote either in person or by mail. We will
send you a ballot if you ask for one. Just write to our Secretary at Prudential
Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By
law, your request must show your name, address, contract number and date of
birth. If you are an individual, you must be at least 18 years old to vote.
Participation (Dividends).--This contract is eligible to participate in the
divisible surplus of Prudential. We do not expect that any dividends will be
payable on or before the Annuity Date. While any annuity settlement is in
effect, the contract will share in our surplus to the extent and in the way we
decide.
Page 7 (VIP-86) Y
GENERAL PROVISIONS (Continued)
Misstatement of Age or Sex.--If any annuitant's stated date of birth or sex or
both are not correct, we will change each benefit and the amount of each annuity
payment to that which the purchase payment would have bought for the correct
date of birth and sex. Also, we will adjust the amount of any payments we have
already made. Here is how we will do it: (1) We will deduct any overpayments,
with interest at 5% a year, from any payment(s) due then or later. (2) We will
add any underpayments, with interest at 5% a year, to the next payment we make
after we receive proof of the correct date of birth and sex.
Incontestability.--We will not contest this contract except for non-payment of
the purchase payment due on the contract date.
Proof of Survival or Death.--Before we make a payment, we have the right to
require proof of the life or death of any person whose life or death determines
whether or to whom we must make the payment.
Assignment.--We will not be deemed to know of an assignment unless we receive
it, or a copy of it, at our Service Office. We are not obliged to see that an
assignment is valid or sufficient. If any annuitant is living on the Annuity
Date and an assignment is in effect on that date, we have the right to pay the
cash value in one sum. This contract may not be assigned to another insurance
company without our consent.
Changes by Prudential.--We reserve the right upon 90 days notice to you to:
(1) change the minimum amount requirements specified for purchases, withdrawals
and transfers in the Contract Fund and Contract Value Options Provision;
(2) refuse to accept any request for purchase;
(3) add, change or discontinue subaccounts, change to or add a different
variable contract account, or substitute fund shares in the account (see page
9);
(4) change any or all terms and provisions of the Annuity Settlement Table on
page 15, but only with respect to any portion of an annuity settlement deriving
from purchase payments made on or after the effective date of the change and
earnings on those purchase payments; and
(5) make any changes required by law.
Voting Rights:
Fund.--We will send you a notice of any meeting at which Fund shares which
comprise the assets of a subaccount may be voted. We will provide a voting
instruction form for the number of Fund shares representing your proportional
interest. The instruction form may be signed and returned to us. If for any
meeting there are Fund shares for which we have not received voting
instructions, this is what we will do. We will vote Fund shares on each matter
in the same proportion as we vote the Fund shares held In the subaccount for
which we did receive instructions.
Prudential.--We are a mutual life insurance company. Our principal office is in
Newark, New Jersey, and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each year for
four year terms), two of our officers, and six public directors named by New
Jersey's Chief Justice.
The election is held on the first Tuesday in April from 10:00 a.m. to 2:00 p.m.
in our office at the Secretary's address shown here. After this contract has
been in force for one year, you may vote either in person or by mail. We will
send you a ballot if you ask for one. Just write to our Secretary at Prudential
Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By
law, your request must show your name, address, contract number and date of
birth. If you are an individual, you must be at least 18 years old to vote.
Participation (Dividends).--This contract is eligible to participate in the
divisible surplus of Prudential. We do not expect that any dividends will be
payable on or before the Annuity Date. While any annuity settlement is in
effect, the contract will share in our surplus to the extent and in the way we
decide.
Page 7 (VIP--86) (OK)
GENERAL PROVISIONS (Continued)
Misstatement of Age or Sex.--If any annuitant's stated date of birth or sex or
both are not correct, we will change each benefit and the amount of each annuity
payment to that which the purchase payment would have bought for the correct
date of birth and sex. Also, we will adjust the amount of any payments we have
already made. Here is how we will do it: (1) We will deduct any overpayments,
with interest at 5% a year, from any payment(s) due then or later. (2) We will
add any underpayments, with interest at 5% a year, to the next payment we make
after we receive proof of the correct date of birth and sex.
Incontestability.--This contract will be incontestable after its contract date.
Proof of Survival or Death.--Before we make a payment, we have the right to
require proof of the life or death of any person whose life or death determines
whether or to whom we must make the payment.
Assignment.--We will not be deemed to know of an assignment unless we receive
it, or a copy of it, at our Service Office. We are not obliged to see that an
assignment is valid or sufficient. If any annuitant is living on the Annuity
Date and an assignment is in effect on that date, we have the right to pay the
cash value in one sum. This contract may not be assigned to another insurance
company without our consent.
Changes by Prudential.--We reserve the right, upon 90 days notice to you, to:
(1) add, change, or discontinue subaccounts, change to or add a different
variable contract account, or substitute fund shares in the account (see page
9); and
(2) make any changes required by law.
Voting Rights:
Fund.--We will send you a notice of any meeting at which Fund shares which
comprise the assets of a subaccount may be voted. We will provide a voting
instruction form for the number of Fund shares representing your proportional
interest. The instruction form may be signed and returned to us. If for any
meeting there are Fund shares for which we have not received voting
instructions, this is what we will do. We will vote Fund shares on each matter
in the same proportion as we vote the Fund shares held in the subaccount for
which we did receive instructions.
Prudential.--We are a mutual life insurance company. Our principal office is in
Newark, New Jersey, and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each year for
four year terms), two of our officers, and six public directors named by New
Jersey's Chief Justice.
The election is held on the first Tuesday in April from 10:00 a.m. to 2:00 p.m.
in our office at the Secretary's address shown here. After this contract has
been in force for one Year, you may vote either in person or by mail. We will
send you a ballot if you ask for one. Just write to our Secretary at Prudential
Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By
law your request must show your name, address, contract number and date of
birth. If you are an individual, You must be at least 18 years old to vote.
Participation (Dividends).--This contract is eligible to participate in the
divisible surplus of Prudential. We do not expect that any dividends will be
payable on or before the Annuity Date. While any annuity settlement is in
effect, the contract will share in our surplus to the extent and in the way we
decide.
Page 7 (VIP--86) (S.C.)
PURCHASE PAYMENTS
Purchase Payments.--An initial purchase payment of at least $1,000 is payable on
the Contract Date. Further purchase payments may be made at any time while an
annuitant is living and before the Annuity Date. The amount of each payment
after the first must be at least $100. We reserve the right to establish a
maximum amount.
The initial purchase payment, minus any deduction for state and/or local premium
taxes, will be allocated to the subaccounts and/or to the fixed account as you
instruct. The minimum amount of a first allocation to a subaccount and/or to the
fixed account is $300: the minimum for subsequent allocations is $100 unless we
consent to a smaller amount. If, after you have made at least one purchase, we
receive a purchase payment without instructions, we will make any deduction for
state and/or local premium taxes and allocate the balance in the same
proportions as the most recent purchase payment you made.
Additional Amounts.--During the first three contract years, and in contract
years thereafter at the discretion of the Company, we will credit an additional
1% to the amount of every purchase payment you make. The Company reserves the
right to limit such additional amounts to $1,000 in each contract year.
This additional amount will not be subject to state and/or local premium taxes.
The amount will be allocated to the subaccounts and/or to the fixed account in
the same proportions as the corresponding purchase payment.
Example 1 On the Contract Date you make a $1,500 purchase to be allocated
equally to subaccounts A, B, and C. We will increase that amount by 1% or $15.
and allocate $505 to each of Subaccounts A, B, and C. Later in the year you send
us a $900 purchase payment, but you don't tell us how it is to be applied. We
will increase that amount by 1% or $9 and, based on the most recent purchase,
the one made on the Contract Date, we would make a $303 purchase for each of
Subaccounts A, B, and C.
Example 2: If in the example above your second purchase payment had been $200
instead of $900, we would have the right not to make the purchase without first
contacting you to find out how the purchase payment is to be applied. This is
because the $200 purchase payment was not enough to make a minimum purchase of
$100 for each of the three subaccounts. The purchase would be made when we
receive your instructions at our Service Office.
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing and
in a form which meats our needs. It will take effect only when we file it at our
Service Office: this will be after you sand the contract to us to be endorsed,
if we ask you to do so. Than any previous beneficiary's interest will and as of
the date of the request. It will end than even if no annuitant is living when we
file the request. Unless otherwise stated, we will make payment to the
beneficiary only if the last surviving or sole annuitant dies before the Annuity
Date. Any beneficiary's Interest is subject to the rights of any assignee of
whom we know.
When a beneficiary is designated, any relationship shown is to the Annuitant
{First Annuitant if two annuitants are named on page 3} unless otherwise stated.
To show priority, we may use numbered classes, so that the class with first
priority is called class 1, the class with next priority is called class 2, and
so on. When we use numbered classes, these statements apply to beneficiaries
unless the form states otherwise: (In these provisions and in the Example the
term annuitant refers, where two annuitants are named, to the last surviving
annuitant.)
1. One who survives the annuitant will have the right to be paid only if no one
in a prior class survives the annuitant.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the annuitant.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the annuitant, we will pay in one sum to the annuitant's
estate.
Example: Suppose the class I beneficiary is Jane and the class 2 beneficiaries
are Paul and John. If the annuitant dies before the Annuity Date, we owe Jane
the proceeds if she is living at the annuitant's death. We owe Paul and John the
proceeds if they are living then but Jane is not. But if only one of them is
living, we owe him the proceeds. If none of them is living, we owe the
annuitant's estate.
Page 8 (VIP--86) (OK)
CONTRACT FUND AND CONTRACT VALUE OPTIONS
Before the annuity date, you may be able to make withdrawals from the contract
fund and you may surrender this contract for its cash value.
Contract Fund.--On the contract date the contract fund is equal to the invested
purchase amount (see below) minus any of the charges described in items (f)
through (i) below which may have been due on that date. On any day after that
the contract fund is equal to what it was on the previous day, plus these items:
(a) any increase due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated (we explain investment amount below);
(b) guaranteed interest at 3% on that portion of the contract fund that is
in the fixed account;
(c) any excess interest on that portion of the contract fund that is in
the fixed account (see page 12); and
(d) any invested purchase amount resulting from additional purchase
payments
minus these items:
(e) any decrease due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated;
(f) a charge against the investment amount at a rate of up to .00326816% a
day (1.20% a year) for mortality and expense risks that we assume;
(g} any annual maintenance charge that we deduct (see page 12);
(h) any amount charged against the contract fund for Federal or State
income taxes; and
(i) any withdrawals, withdrawal charges, and recapture of additional
amounts.
Invested Purchase Amount.--This is the portion of the purchase payments that we
add to the contract fund. It is equal to the purchase payments, plus any
additional amounts we have credited, minus any applicable deduction for state
and/or local premium taxes.
Investment Amount.--The investment amount for this contract is the amount we use
to compute the investment results. The investment amount is allocated among the
subaccounts. The amount of the investment amount and its allocation to
subaccounts depend on (1) how you choose to allocate the invested purchase
amount; (2) whether or not you transfer amounts among subaccounts; (3) the
investment performance of the subaccounts to which amounts are allocated or
transferred; and (4) whether or not you make any withdrawals. The account,
subaccounts, and account investments are described on page 9.
The investment amount at any time is equal to the contract fund, minus the
portion of the contract fund that is in the fixed account.
Cash Value.--The cash value of the contract at any time is the contract fund,
minus any withdrawal charges that apply, minus any Additional Amount which is
subject to recapture. See Withdrawal Charges below for the period of time during
which there may be a withdrawal charge.
Withdrawal Charges (Deferred Contingent Sales Charges).--Although no sales
charges are deducted from your purchase payments when they are made, your
purchase payments may be subject to a sales charge upon withdrawal or upon
surrender of this contract for its cash value. Earnings, defined on page 6, are
not subject to sales charges. Withdrawals are considered to consist of earnings,
if any, first, then of purchase payments on a first-in, first-out basis.
In each contract year, any purchase payments withdrawn which do not in total
exceed 10% of your contract fund valued as of the date of the first withdrawal
in that year, will not incur a sales charge. A sales charge may be imposed on
purchase payments withdrawn in excess of this 10% limitation.
The amount of any sales charge imposed on the withdrawal of a purchase payment
varies with the number of contract years that have elapsed since the purchase
payment was made.
When you make a withdrawal, the rate of sales charge applied against any
purchase payments or portion of a purchase payment that is subject to a charge
is determined in accord with the following:
If the contract year of purchase payment is the same as the contract year of
withdrawal, the rate is 8%.
If the duration from the start of the contract
year of purchase payment to the start of the The
contract year of withdrawal is... rate is...
One year ............................................................. 7%
Two years ............................................................ 6%
Three years .......................................................... 5%
Four years ........................................................... 4%
Five years ........................................................... 3%
Six years ............................................................ 2%
Seven years .......................................................... 1%
Eight years or more .................................................. 0%
In determining the amount of sales charge, if any, we will consider that any
purchase payment withdrawn is the first purchase payment made which has not
previously been withdrawn. This is so even if that purchase payment was
(Continued on Next Page)
Page 11 (VIP--86) (WA)
CONTRACT FUND AND CONTRACT VALUE OPTIONS
Before the annuity date, you may be able to make withdrawals from the contract
fund and you may surrender this contract for its cash value.
Contract Fund.--On the contract data the contract fund equal to the invested
purchase amount (see below) minus any of the charges described in items (f)
through (i) below which may have been due on that date. On any day after that
the contract fund is equal to what it was on the previous day, plus these items:
(a) any increase due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated (we explain investment amount below);
(b) guaranteed interest at 3% on that portion of the contract fund that is
in the fixed account;
(c) any excess interest on that portion of the contract fund that is in
the fixed account (see Page 12); and
(d) any invested purchase amount resulting from additional purchase
payments
minus these Items:
(e) any decrease due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated;
(f) a charge against the investment amount at a rate of up to .00326816% a
day (1.20% a year) for mortality and expense risks that we assume;
(g) any annual maintenance charge that we deduct (see page 12);
(h) any amount charged against the contract fund for Federal or State
income taxes; and
(i) any withdrawals, withdrawal charges, and recapture of additional
amounts.
Invested Purchase Amount.--This is the portion of the purchase payments that we
add to the contract fund. It is equal to the purchase payments, plus any
additional amounts we have credited, minus any applicable deduction for state
and/or local premium taxes.
Investment Amount.--The investment amount for this contract is the amount we use
to compute the investment results. The investment amount is allocated among the
subaccounts. The amount of the investment amount and its allocation to
subaccounts depend on (1) how you choose to allocate the invested purchase
amount; (2) whether or not you transfer amounts among subaccounts; (3) the
investment performance of the subaccounts to which amounts are allocated or
transferred; and (4) whether or not you make any withdrawals. The account,
subaccounts, and account investments are described on Page 9.
The investment amount at any time is equal to the contract fund, minus the
portion of the contract fund that is in the fixed account.
Cash Value.--The cash value of the contract at any time is the contract fund,
minus any withdrawal charges that apply, minus any Additional Amount which is
subject to recapture. See Withdrawal Charges below for the period of time during
which there may be a withdrawal charge. The portion of any surrender value that
comes from the fixed account will not be less than the minimum required by
statute where this contract is delivered.
Withdrawal Charges (Deferred Contingent Sales Charges).--Purchase payments may
be subject to a sales charge upon withdrawal or upon surrender of this contract
for its cash value. Earnings, defined on page 6, are not subject to sales
charges. Withdrawals are considered to consist of earnings, if any, first, then
of purchase payments on a first-in, first-out basis.
In each contract year, any purchase payments withdrawn which do not in total
exceed 10% of your contract fund valued as of the date of the first withdrawal
in that year will not incur a sales charge. A sales charge may be imposed on
purchase payments withdrawn in excess of this 10% limitation.
When you make a withdrawal, the rate of sales charge applied against any
purchase payments or portion of a purchase payment that is subject to a charge
is 8% if the contract year of purchase payment is the same as the contract year
of withdrawal, otherwise as follows:
Duration from start of contract year of
payment to the start of the contract year of
withdrawal is... Rate
One Year ................................................................... 7%
Two Years................................................................... 6%
Three Years ................................................................ 5%
Four Years ................................................................. 4%
Five years ................................................................. 3%
Six years .................................................................. 2%
Seven Years................................................................. 1%
Eight Years or more......................................................... 0%
We will consider that any purchase payment withdrawn is the first purchase
payment made which has not previously been withdrawn, even if that purchase
payment was
(Continued on Next Page)
Page 11 (VIP--86) (S.C.)
CONTRACT FUND AND CONTRACT VALUE OPTIONS
Before the annuity date, you may be able to make withdrawals from the contract
fund and you may surrender this contract for its cash value.
Contract Fund.--On the contract date the contract fund is equal to the invested
purchase amount (see below) minus any of the charges described in items (f)
through (i) below which may have been due on that date. On any day after that
the contract fund is equal to what it was on the previous day, plus these items:
(a) any increase due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated (we explain investment amount below):
(b) guaranteed interest at 3% on that portion of the contract fund that is
in the fixed account;
(c) any excess interest on that portion of the contract fund that is in
the fixed account (see page 12); and
(d) any invested purchase amount resulting from additional purchase
payments
minus these items:
(e) any decrease due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated;
(f) a charge against the investment amount at a rate of up to .00326816% a
day (1.20% a year) for mortality and expense risks that we assume;
(g) any annual maintenance charge that we deduct (see page 12):
(h) any amount charged against the contract fund for Federal or State
income taxes; and
(i) any withdrawals, withdrawal charges, and recapture of additional
amounts.
Invested Purchase Amount.--This is the portion of the purchase payments that we
add to the contract fund. It is equal to the purchase payments, plus any
additional amounts we have credited, minus any applicable deduction for state
and/or local premium taxes.
Investment Amount.--The investment amount for this contract is the amount we use
to compute the investment results. The investment amount is allocated among the
subaccounts. The amount of the investment amount and its allocation to
subaccounts depend on (1) how you choose to allocate the invested purchase
amount; (2) whether or not you transfer amounts among subaccounts; (3) the
investment performance of the subaccounts to which amounts are allocated or
transferred; and (4) whether or not you make any withdrawals. The account
subaccounts and accounts investments are described on page 9.
The investment amount at any time is equal to the contract fund, minus the
portion of the contract fund that is in the fixed account.
Cash Value.--The cash value of the contract at any time is the contract fund,
minus any withdrawal charges that apply, minus any Additional Amount which is
subject to recapture. See Withdrawal Charges below for the period of time during
which there may be a withdrawal charge.
Withdrawal Charges (Deferred Contingent Sales Charges).--Although no sales
charges are deducted from your purchase payments when they are made, your
purchase payments may be subject to a sales charge upon withdrawal or upon
surrender of this contract for its cash value. Earnings, defined on page 6, are
not subject to sales charges. Withdrawals are considered to consist of earnings,
if any, first, then of purchase payments on a first-in, first-out basis.
In each contract year, any purchase payments withdrawn which do not in total
exceed 10% of your contract fund valued as of the date of the first withdrawal
in that year, will not incur a sales charge. A sales charge may be imposed on
purchase payments withdrawn in excess of this 10% limitation.
The amount of any sales charge imposed on the withdrawal of a purchase payment
varies with the number of contract years that have elapsed since the purchase
payment was made.
When you make a withdrawal, the rate of sales charge applied against any
purchase payments or portion of a purchase payment that is subject to a charge
is determined in accord with the following:
If the contract year of purchase payment is the same as the contract year of
withdrawal, the rate is 8%.
If the duration from the start of the contract
year of purchase payment to the start of the The
contract year of withdrawal is... rate is
One year ................................................................. 7%
Two years ................................................................ 6%
Three years .............................................................. 5%
Four years ............................................................... 4%
Five years................................................................ 3%
Six years ................................................................ 2%
Seven years .............................................................. 1%
Eight years or more ...................................................... 0%
In determining the amount of sales charge, if any, we will consider that any
purchase payment withdrawn is the first purchase payment made which has not
previously been withdrawn. This is so even if that purchase payment was
(Continued on Next Page)
Page 11 (VIP--86) Y
CONTRACT FUND AND CONTRACT VALUE OPTIONS
Before the annuity date, you may be able to make withdrawals from the contract
fund and you may surrender this contract for its cash value.
Contract Fund.-- On the contract date the contract fund is equal to the invested
purchase amount (see below) minus any of the charges described in items (f)
through (i) below which may have been due on that date. On any day after that
the contract fund is equal to what it was on the previous day, plus these items:
(a) any increase due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated (we explain investment amount below);
(b) guaranteed interest at 3% on that portion of the contract fund that is
in the fixed account;
{c) any excess interest on that portion of the contract fund that is in
the fixed account (see page 12); and
{d) any invested purchase amount resulting from additional purchase
payments
minus these items:
(e} any decrease due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated;
(f) a charge against the investment amount at a rate of up to .00326816% a
day (1.20% a year) for mortality and expense risks that we assume;
(g) any annual maintenance charge that we deduct (see page 12);
(h) any amount charged against the contract fund for Federal or State
income taxes; and
(i) any withdrawals, withdrawal charges and recapture of additional
amounts.
Invested Purchase Amount.--This is the portion of the purchase payments that we
add to the contract fund. It is equal to the purchase payments, plus any
additional amounts we have credited, minus any applicable deduction for state
and/or local premium taxes.
Investment Amount.--The investment amount for this contract is the amount we use
to compute the investment results. The investment amount is allocated among the
subaccounts. The amount of the investment amount and its allocation to
subaccounts depend on (1) how you choose to allocate the invested purchase
amount; (2) whether or not you transfer amounts among subaccounts; (3) the
investment performance of the subaccounts to which amounts are allocated or
transferred; and (4) whether or not you make any withdrawals. The account,
subaccounts, and account investments are described on page 9.
The investment amount at any time is equal to the contract fund, minus the
portion of the contract fund that is in the fixed account.
Cash Value.--The cash value of the contract at any time is the contract fund
minus any withdrawal charges that apply, minus any Additional Amount which is
subject to recapture. See Withdrawal Charges below for the period of time during
which there may be a withdrawal charge.
We will usually pay any cash value or withdrawal promptly. But we have the right
to postpone paying it for up to six months. If we do so for more than 30 days we
will pay interest at the rate of at least 3% a year.
Withdrawal Charges (Deferred Contingent Sales Charges).--Although no sales
charges are deducted from your purchase payments when they are made, your
purchase payments may be subject to a sales charge upon withdrawal or upon
surrender of this contract for its cash value. Earnings, defined on page 6, are
not subject to sales charges. Withdrawals are considered to consist of earnings,
if any, first, then of purchase payments on a first-in, first-out basis.
In each contract year, any purchase payments withdrawn which do not in total
exceed 10% of your contract fund valued as of the date of the first withdrawal
in that year, will not incur a sales charge. A sales charge may be imposed on
purchase payments withdrawn in excess of this 10% limitation.
The amount of any sales charge imposed on the withdrawal of a purchase payment
varies with the number of contract years that have elapsed since the purchase
payment was made.
When you make a withdrawal, the rate of sales charge applied against any
purchase payments or portion of a purchase payment that is subject to a charge
is determined in accord with the following:
If the contract year of purchase payment is the same as the contract year of
withdrawal, the rate is 8%.
If the duration from the start of the contract
year of purchase payment to the start of the The
contract year of withdrawal is... rate is...
One year ........................................................ 7%
Two years ....................................................... 6%
Three years ..................................................... 5%
Four years ...................................................... 4%
Five years ...................................................... 3%
Six years ....................................................... 2%
Seven years ..................................................... 1%
Eight years or more ............................................. 0%
In determining the amount of sales charge, if any, we will consider that any
purchase payment withdrawn is the first purchase payment made which has not
previously been withdrawn. This is so even if that purchase payment was
{Continued on Next Page}
Page 11 (VIP--86) (WI)
CONTRACT FUND AND CONTRACT VALUE OPTIONS (Continued)
allocated to a different subaccount (and/or the fixed account) than that from
which withdrawal is being made or if the amount being withdrawn is no longer
subject to a withdrawal charge. One or more sales charge rates may be used if
the withdrawal is of purchase payments made in more than one contract year.
Recapture of Additional Amount.--When you make a withdrawal which consists
partially or fully of purchase payments, we may recapture additional amounts
(see page 8) which we credited to your contract fund. If the duration from the
start of the contract year of purchase payment to the start of the contract year
of withdrawal is less than eight years, we will recapture the exact amount of
any additional amounts credited as a result of such purchase payments. If the
duration from the start of the contract year of purchase payment to the start of
the contract year of withdrawal is eight years or more, we will not recapture
any additional amounts credited as a result of such purchase payments.
Example.--
Year Transaction
- ---- -----------
Contract year one --Payment of $1,000 (plus crediting
of $10 additional) in Subaccount A
Contract year two --Payment of $900 (plus crediting of
$9 additional) in Subaccount B
Contract year three --Payment of $1,500 (plus crediting
of $15 additional) in Subaccount C.
In contract year five the contractholder requests a partial withdrawal of $1,600
from Subaccount C which has grown to $1,900. The amount of the contract fund on
the date of withdrawal is $3,900, $466 more than the total of the purchase
payments made to date plus the additional amounts credited to date. Thus, for
purposes of determining sales charges, the $1,600 withdrawal is considered to
consist of $466 of earnings and $1,134 of purchase payments. The $466 of
earnings and $390 of purchase payments (10% of the contract fund) may be
withdrawn without sales charge. A sales charge is required on the remaining $744
of purchase payment being withdrawn.
To determine the sales charge we assume that $1,000 of purchase payment being
withdrawn is the payment made to Subaccount A in contract year one. The
remaining $134 of purchase payment being withdrawn is assumed to be a part of
the $900 payment made to Subaccount B in contract year two.
Of the first $1,000 purchase payment we have seen that $390 (10% of $3,900) may
be withdrawn without sales charge. A 4% sales charge is due on the withdrawal of
the other $610 of the payment (4% x $610 = $24.40). The $134 portion being
withdrawn from the second payment requires a 5% sales charge (5% x $134 =
$6.70). Thus the total sales charge for withdrawing $1,600 in year five is
$31.10.
In addition, since $1,134 of purchase payments is being withdrawn and the
durations from the start of the contract years of these purchase payments to the
contract year of withdrawal is less than eight years, we will recapture
additional amounts equal to $11.34 (1% of $1,134).
Annual Maintenance Charge.--On each contract anniversary before the Annuity Date
or at the time of total withdrawal we will deduct a maintenance charge from your
contract fund. The maximum amount we will deduct is shown on page 3 of this
contract. If on any contract anniversary the contract fund is allocated to more
than one subaccount and/or to the fixed account, we will divide the charge on a
pro-rata basis, according to the value of each subaccount and/or the fixed
account. If no portion of a premium has been allocated to the fixed account in
the prior contract year, the portion of the charge taken from the fixed account
will not be more than the amount of excess interest credited during the year.
Conditions for Withdrawal or Surrender.--Our consent is needed for a withdrawal
if (1) its amount is less than $300; (2) it would reduce the contract fund to
less thin $300; or (3) a withdrawal was made earlier in the same contract year.
Also, we have the right to defer paying the portion of any withdrawal or
surrender that comes from the fixed account for up to six months. If we do so
for more than thirty days, we will pay interest at 3% a year.
To make a withdrawal or to surrender this contract for its cash value, you must
ask us in writing in a form that meets our needs. Also, to surrender the
contract, you must send it to us. Unless we consent, any amount withdrawn will
be taken from the subaccounts and/or the fixed account in proportion to the
amount in each as of the date of the withdrawal. After deducting the Annual
Maintenance Charge and the sales charges, and recaptures of Additional Amounts,
if any, we will pay the balance.
Guaranteed Interest.--The guaranteed interest rate credited on that portion of
the contract fund in the fixed account is an effective rate of 3% a year.
Excess Interest.--Excess interest on that portion of the contract fund in the
fixed account may be credited in addition to the 3% guaranteed interest rate.
The rate of any excess interest is not guaranteed. It will be determined from
time to time and will continue thereafter until a new rate is determined. We may
use different rates of excess interest for different portions of the contract
fund that are in the fixed account.
Page 12 (VIP--86) (S.C.)
CONTRACT FUND AND CONTRACT VALUE OPTIONS (Continued)
allocated to a different subaccount (and/or the fixed account) than that from
which withdrawal is being made or if the amount being withdrawn is no longer
subject to a withdrawal charge. Depending on the amount of the withdrawal, one
or more sales charge rates may be used if the withdrawal is of purchase payments
made in more than one contract Year.
Recapture of Additional Amount.--When you make a withdrawal which consists
partially or fully of purchase payments, we may recapture additional amounts
(see page 8) which we credited to your contract fund. If the duration from the
start of the contract year of purchase payment to the start of the contract year
of withdrawal is less than eight years, we will recapture the exact amount of
any additional amounts credited as a result of such purchase payments. If the
duration from the start of the contract year of purchase payment to the start of
the contract year of withdrawal is eight years or more, we will not recapture
any additional amounts credited as a result of such purchase payments.
Example.--
Year Transaction
- ---- -----------
Contract year one -- Payment of $1,000 (plus crediting of $10 additional) in
Subaccount A
Contract year two -- Payment of $900 (plus crediting of $9 additional) in
Subaccount B
Contract year three -- Payment of $1,500 (plus crediting of $15 additional) in
Subaccount C.
In contract year five the contractholder requests a partial withdrawal of $1,600
from Subaccount C which has grown to $1,900. The amount of the contract fund on
the date of withdrawal is $3,900, $466 more than the total of the purchase
payments made to date plus the additional amounts credited to date. Thus, for
purposes of determining sales charges, the $1,600 withdrawal is considered to
consist of $466 of earnings and $1,134 of purchase payments. The $466 of
earnings and $390 of purchase payments (10% of the contract fund) may be
withdrawn without sales charge. A sales charge is required on the remaining $744
of purchase payment being withdrawn.
To determine the sales charge we assume that $1,000 of purchase payment being
withdrawn is the payment made to Subaccount A in contract year one. The
remaining $134 of purchase payment being withdrawn is assumed to be a part of
the $900 payment made to Subaccount B in contract year two.
Of the first $1,000 purchase payment we have seen that $390 (10% of $3,900) may
be withdrawn without sales charge. A 4% sales charge is due on the withdrawal of
the other $610 of the payment (4% x $610 = $24.40). The $134 portion being
withdrawn from the second payment requires a 5% sales charge (5% x $134 =
$6.70). Thus the total sales charge for withdrawing $1,600 in year five is
$31.10).
In addition, since $1,134 of purchase payments is being withdrawn and the
durations from the start of the contract years of these purchase payments to the
contract year of withdrawal is less than eight years, we will recapture
additional amounts equal to $11.34 (1% of $1,134).
Annual Maintenance Charge.--On each contract anniversary before the Annuity Date
or at the time of total withdrawal we will deduct a maintenance charge from your
contract fund. The maximum amount we will deduct is shown on page 3 of this
contract. If on any contract anniversary the contract fund is allocated to more
than one subaccount and/or to the fixed account, we will divide the charge on a
pro-rata basis, according to the value of each subaccount and/or the fixed
account.
Conditions for Withdrawal or Surrender.--Our consent is needed for a withdrawal
if (1) its amount is less than $300; (2) it would reduce the contract fund to
less than $300; or (3) a withdrawal was made earlier in the same contract year.
To make a withdrawal or to surrender this contract for its cash value, you must
ask us in writing in a form that meets our needs. Also, to surrender the
contract, you must send it to us. Unless we consent, any amount withdrawn will
be taken from the subaccounts and/or the fixed account in proportion to the
amount in each as of the date of the withdrawal. After deducting the Annual
Maintenance Charge and the sales charges, and recaptures of Additional Amounts,
if any, we will pay the balance.
We reserve the right to postpone paying any cash value or withdrawal from the
fixed account for up to six months. If we do so for more than 10 days, we will
pay interest at the rate of at least 3% a year.
Guaranteed Interest.--The guaranteed Interest rate credited on that portion of
the contract fund in the fixed account is an effective rate of 3% a year.
Excess Interest.--Excess interest on that portion of the contract fund in the
fixed account may be credited in addition to the 3% guaranteed interest rate.
The rate of any excess interest is not guaranteed. It will be determined from
time to time and will continue thereafter until a new rate is determined. We may
use different rates of excess interest for different portions of the contract
fund that are in the fixed account.
CONTRACT FUND AND CONTRACT VALUE OPTIONS (Continued)
allocated to a different subaccount (and/or the fixed account) than that from
which withdrawal is being made or if the amount being withdrawn is no longer
subject to a withdrawal charge. Depending on the amount of the withdrawal, one
or more sales charge rates may be used if the withdrawal is of purchase payments
made in more than one contract year.
Recapture of Additional Amount.--When you make a withdrawal which consists
partially or fully of purchase payments, we may recapture additional amounts
(see page 8) which we credited to your contract fund. If the duration from the
start of the contract year of purchase payment to the start of the contract year
of withdrawal is less than eight years, we will recapture the exact amount of
any additional amounts credited as a result of such purchase payments. If the
duration from the start of the contract year of purchase payment to the start of
the contract year of withdrawal is eight years or more, we will not recapture
any additional amounts credited as a result of such purchase payments.
Example.--
Year Transaction
- ---- -----------
Contract year one --Payment of $1,000 {plus crediting
of $10 additional) in Subaccount
A
Contract year two --Payment of $900 (plus crediting of
$9 additional) in Subaccount B
Contract year three --Payment of $1,500 (plus crediting
of $15 additional) in Subaccount
C.
In contract year five the contractholder requests a partial withdrawal of $1,600
from Subaccount C which has grown to $1,900. The amount of the contract fund on
the date of withdrawal is $3,900, $466 more than the total of the purchase
payments made to date plus the additional amounts credited to date. Thus, for
purposes of determining sales charges, the $1,600 withdrawal is considered to
consist of $466 of earnings and $1,134 of purchase payments. The $466 of
earnings and $390 of purchase payments (10% of the contract fund) may be
withdrawn without sales charge. A sales charge is required on the remaining $744
of purchase payment being withdrawn.
To determine the sales charge we assume that $1,000 of purchase payment being
withdrawn is the payment made to Subaccount A in contract year one. The
remaining $134 of purchase payment being withdrawn is assumed to be a part of
the $900 payment made to Subaccount B in contract year two.
Of the first $1,000 purchase payment we have seen that $390 (10% of $3,900) may
be withdrawn without sales charge. A 4% sales charge is due on the withdrawal of
the other $610 of the payment (4% x $610 = $24.40). The $134 portion being
withdrawn from the second payment requires a 5% sales charge (5% x $134 =
$6.70). Thus the total sales charge for withdrawing $1,600 in year five is
$31.10.
In addition, since $1,134 of purchase payments is being withdrawn and the
durations from the start of the contract years of these purchase payments to the
contract year of withdrawal is less than eight years, we will recapture
additional amounts equal to $11.34 (1% of $1,134).
Annual Maintenance Charge.--On each contract anniversary before the Annuity Date
or at the time of total withdrawal we will deduct a maintenance charge from your
contract fund. The maximum amount we will deduct is shown on page 3 of this
contract. If on any contract anniversary the contract fund is allocated to more
than one subaccount and/or to the fixed account, we will divide the charge on a
pro-rata basis, according to the value of each subaccount and/or the fixed
account.
Conditions for Withdrawal or Surrender.--Our consent is needed for a withdrawal
if (1) its amount is less than $300; (2) it would reduce the contract fund to
less than $300; or (3) a withdrawal was made earlier in the same contract year.
To make a withdrawal or to surrender this contract for its cash value, you must
ask us in writing in a form that meets our needs. Also, to surrender the
contract, you must send it to us. Unless we consent, any amount withdrawn will
be taken from the subaccount and/or the fixed account in proportion to the
amount in each as of the date of the withdrawal. After deducting the Annual
Maintenance Charge and the sales charges, and recaptures of Additional Amounts,
if any, we will pay the balance.
Guaranteed Interest.--The guaranteed interest rate credited on that portion of
the contract fund in the fixed account is an effective rate of 3% a year.
Excess Interest.--Excess interest on that portion of the contract fund in the
fixed account may be credited in addition to the 3% guaranteed interest rate.
The rate of any excess interest is not guaranteed. It will be determined from
time to time and will continue thereafter until a new rate is determined. We may
use different rates of excess interest for different portions of the contract
fund that are in the fixed account.
Page 12 (VIP--86) (W1)
PAYOUT PROVISIONS
Choosing an Option.--You may have the amount of your contract fund on the
Annuity Date paid to the Annuitant(s) under one of the options we describe
below. If two annuitants are named in the contract, and both are living, you may
choose to have payments made to either. But, for any annuity settlement, we will
first deduct from your contract kind any charge for state and/or local premium
taxes, any recapture of additional amounts, and any withdrawal charges. We offer
the same annuity options to the Payee that we offer to an annuitant. And we
determine monthly payments for the Payee in the same way we do for an annuitant.
Conditional--With respect to the option(s) you select, your right to make the
choice is subject to all these conditions: (1) You must ask for the option in
writing and in a form which meets our needs. (2) You must send the contract to
us to be endorsed. (3) If we require it, you must give us proof of the date of
birth of the person on whose age an annuity payment is based. (4) We must have
your request, the contract and any required proof(s) of the date(s) of birth
before the Annuity Date.
Your choice of an option will take affect on the Annuity Date but only if: (1)
the person on whose life the annuity is to be based is living on that date; (2)
the first payment under the option will be at least $50; and (3) you do not void
the choice by making a later choice before the Annuity Date.
It two annuitants are named in the Contract and both are living, settlement will
be made on the life of the First Annuitant, as named on page 3.
When No Option Chosen.--If no choice takes effect on the Annuity Date,
settlement under the Interest Payment Option will become effective.
Options Described.--When we use the word annuitant in the following paragraphs
we mean the annuitant for whom the annuity described was chosen and who is to
receive settlement under the annuity.
For an annuitant, the first payment under these options is due on the Annuity
Date.
For a Payee, unless a later date is requested, the first payment will be due on
the first day of the earliest calendar month on or after the day the Service
Office has received the request for the settlement and due proof of the
annuitant's death and such claim forms and other evidence as may be satisfactory
to us.
Here are the options we offer. We may also consent to other arrangements.
Life Income Option.--You may choose monthly payments for as long as the
annuitant lives, with 120 monthly payments certain.
Interest Payment Option.--We will hold an amount at interest. We will pay
interest at an effective rate of at least 3% a year ($30.00 annually, $14.89
semi-annually, $7.42 quarterly or $2.47 monthly per $1,000). We may pay more
interest.
Supplemental Life Annuity Option.--You may choose to receive the proceeds of
this contract in the form of payments like those of any annuity or life annuity
we then regularly issue 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. For purposes of this option
only, the words we, our and us include our subsidiary company, Pruco Life
Insurance Company, which has agreed to make settlements under this option.
The proceeds of this contract might be subject to a withdrawal charge it paid as
a lump sum. If so, we will apply that charge pro-rata to any portion of the
proceeds not placed under this option. For the amount placed under this option
on any case, any annuity payment will be at least 100% of what we would pay
under the chosen kind of annuity with its first payment due on its contract
date. The phrase regularly issue does not include contracts that are used to
quality for special federal income tax treatment as a retirement plan unless
this contract has been issued as part of such a plan. At least one of the
persons on whose life this option is based must be a Payee. This option cannot
be chosen more than 30 days before the due date of the first payment. On
request, we will quote the payment that would apply for any amount placed under
the option at that time.
Residue Described.--For the Life Income Option and the Supplemental Life Annuity
Option, residue on any date means the then present value of any unpaid payments
certain. It does not include the value of any payment that may become due after
the certain period. For the Life Income Option, we will compute it at an
effective interest rate of 3 1/2% a year. But we will use the interest rate we
used to compute the actual Life Income Option payments it they were not based on
the table in this contract. For the Supplemental Life Annuity Option, we will
use the interest rate we would use for the chosen kind of annuity with the same
provisions as to withdrawal.
Page 13 (VIP--36) (WI)
PAYOUT PROVISIONS (Continued)
For the Interest Payment Option, residue on any date means any unpaid balance
with interest to that date.
Withdrawal of Residue.--Unless otherwise stated when the option is chosen: (1)
under the Life Income Option and the Supplemental Life Annuity Option the
residue may be withdrawn; and (2) under the Interest Payment Option all, or any
part not less than $100, of the residue may be withdrawn. If the Interest
Payment Option residue is reduced to less than $1,000, we have the right to pay
it in one sum. Under the Life Income Option and the Supplemental Life Annuity
Option, withdrawal of the residue will not affect any payments that may become
due after the certain period; the value of those payments cannot be withdrawn.
Instead, the payments will start again if they were based on the life of a
person who lives past the certain period.
Recapture of Additional Amounts.--Before we make payments under any of the above
options, we will reduce the contract fund by the recapture of additional amounts
in the same way as we would if you had surrendered the contract for its cash
value (see page 12).
Withdrawal Charges--Before we make payments, under either the Life Income Option
or the Interest Payment Option, we will also reduce the contract fund by a
withdrawal charge in the same way as we would if you had surrendered the
contract for its cash value (see page 11).
ENDORSEMENTS
(Only we can endorse this contract.)
BASIS OF COMPUTATION
Minimum Legal Values.--The cash values and annuity benefit values in this
contract are at least as large as those set by law where it is delivered. Where
required, we have given the insurance regulator a detailed statement of how we
compute values and benefits.
The Prudential Insurance Company of America,
SPECIMEN
By /s/ [ILLEGIBLE]
Secretary
PLI 173--85 (WI)
Page 18
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date. Cash values reflect investment results.
VIP--86 - MN
Page 18
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date. Cash values reflect investment results.
VIP--86 - Y
Prudential The Prudential insurance Company of America
Corporate Office
Newark, New Jersey
Annuitant(s) Contract Number
Annuity Date Contract Date
Agency
We will make monthly annuity payments starting on the Annuity Date we show in
the window of this page. We make this promise subject to all the provisions of
this contract.
Please read this contract with care. A guide to its contents is on the last page
before the back cover. A summary is on page 5. If there is ever a question about
it, or if there is a claim, just see one of our representatives or get in touch
with one of our offices.
Benefits and values under this contract may be on a variable basis. Amounts
directed into one or more of the variable subaccounts will reflect the
investment experience of those subaccounts. They are subject to change both up
and down and are not guaranteed as to dollar amount except as provided under the
Death of Annuitant and Payout Provisions sections.
Right to Cancel Contract.--Not later than ten days after you get this contract,
you may return it to us. All you have to do is take it or mail it to one of our
offices or to the agent who sold it to you. We will cancel the contract and
promptly give you its contract fund, less any portion of the contract fund that
resulted from additional amounts we have added (see page 8) determined as of the
date your request is received.
The provisions on this and the following pages of this contract comprise the
entire contract. The contract was signed for Prudential on the contract date,
which is the date of issue.
Signed for Prudential.
SPECIMEN
/s/ Isabelle Kirchner /s/ ILLEGIBLE
-------------------------- -------------------------
Secretary President
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date. Cash value reflect investment results.
VIP--86 -- P
CONTRACT DATA
ANNUITANT (S) JOHN DOE XX XXX XXX CONTRACT NUMBER
MARY DOE
ANNUITY DATE JULY 25, 2016 JULY 25, 1986 CONTRACT DATE
AGENCY R-NK 1
FIRST ANNUITANT:
NAME JOHN DOE
SEX AND ISSUE AGE M- 35
DATE OF BIRTH 6/10/51
CO-ANNUITANT:
NAME MARY DOE
SEX AND ISSUE AGE F-32
DATE OF BIRTH 10/1/54
BENEFICIARY: CLASS 1 -ROBERT DOE
SON OF ANNUITANTS
CLASS 2 -BARBARA SMITH
SISTER OF CO-ANNUITANT
LIST OF CONTRACT MINIMUMS
THE MIMIMUM INITIAL PURCHASE PAYMENT IS $1,000.
THE MIMIMUM SUSEQUENT PURCHASE PAYMENT IS $500.
ALLOCATION OF INITIAL PURCHASE PAYMENT
BOND 20%
MONEY MARKET 20%
COMMON STOCK 20%
AGGRESSIVELY MANAGED FLEXIBLE 10%
CONSERVATIVELY MANAGED FLEXIBLE 10%
FIXED ACCOUNT 20%
THE MAINTENANCE CHARGE IS UP TO $30.00 ANNUALLY. WE EXPLAIN THIS ON PAGE 12.
SERVICE OFFICE - PLEASE DIRECT ANY COMMUNICATION ABOUT THIS CONTRACT TO: THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, P.O. BOX 2925, PHOENIX, ARIZONA 85062.
Page 3(VIP-86)(MA)
GENERAL PROVISIONS (Continued)
Misstatement of Age or Sex.--If any annuitant's stated date of birth or sex or
both are not correct, we will change each benefit and the amount of each annuity
payment to that which the purchase payment would have bought for the correct
date of birth and sex. Also, we will adjust the amount of any payments we have
already made. Here is how we will do it: (1) We will deduct any overpayments,
with interest at 5% a year, from any payment(s) due then or later. (2) We will
add any underpayments, with interest at 5% a year, to the next payment we make
after we receive proof of the correct date of birth and sex.
Incontestability.--We will not contest this contract except for non-payment of
the purchase payment due on the contract date.
Proof of Survival or Death.--Before we make a payment, we have the right to
require proof of the life or death of any person whose life or death determines
whether or to whom we must make the payment.
Assignment.--We will not be deemed to know of an assignment unless we receive
it, or a copy of it, at our Service Office. We are not obliged to see that an
assignment is valid or sufficient. It any annuitant is living on the Annuity
Date and an assignment is in effect on that date, we have the right to pay the
cash value in one sum. This contract may not be assigned to another insurance
company without our consent.
Changes by Prudential.--We reserve the right, upon 90 days notice to you to:
(1) change the minimum amount requirements specified for purchases, withdrawals
and transfers in the Contract Fund and Contract Value Options Provision;
(2) refuse to accept any request for purchase;
(3) add, change or discontinue subaccounts, change to or add a different
variable contract account, or substitute fund shares in the account (see page
9);
(4) make any changes required by law.
Voting Rights:
Fund.--We will send you a notice of any meeting at which Fund shares which
comprise the assets of a subaccount may be voted. We will provide a voting
instruction form for the number of Fund shares representing your proportional
interest. The instruction form may be signed and returned to us. If for any
meeting there are Fund shares for which we have not received voting
instructions, this is what we will do. We will vote Fund shares on each matter
in the same proportion as we vote the Fund shares held in the subaccount for
which we did receive instructions.
Prudential.--We are a mutual life insurance company. Our principal office is in
Newark, New Jersey, and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each year for
four year terms), two of our officers, and six public directors named by New
Jersey's Chief Justice.
The election is held on the first Tuesday in April from 10:00 a.m. to 2:00 p.m.
in our office at the Secretary's address shown here. After this contract has
been in force for one year, you may vote either in person or by mail. We will
send you a ballot if you ask for one. Just write to our Secretary at Prudential
Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By
law, your request must show your name, address, contract number and date of
birth. If you are an individual, you must be at least 18 years old to vote.
Participation (Dividends).--This contract is eligible to participate in the
divisible surplus of Prudential. We do not expect that any dividends will be
payable on or before the Annuity Date. While any annuity settlement is in
effect, the contract will share in our surplus to the extent and in the way we
decide.
Page 7 (VIP--86)(PA)
Exhibit (4)(ss)
PAYOUT PROVISIONS
Choosing an Option.--You may have the amount of your contract fund on the
Annuity Date paid to the Annuitant(s) under one of the options we describe
below. If two annuitants are named in the contract, and both are living, you may
choose to have payments made to either. But, for any annuity settlement, we will
first deduct from your contract fund any charge for state and/or local premium
taxes any recapture of additional amounts, and any withdrawal charges. We offer
the same annuity options to the Payee that we offer to an annuitant. And we
determine monthly payments for the Payee in the same way we do for an annuitant.
Conditions.--With respect to the option(s) you select, your right to make the
choice is subject to all these conditions: (1) You must ask for the option in
writing and in a form which meets our needs. (2) You must send the contract to
us to be endorsed. (3) If we require it, you must give us proof of the date of
birth of the person on whose age an annuity payment is based. (4) We must have
your request, the contract and any required proof(s) of the date(s) of birth
before the Annuity Date.
Your choice of an option will take effect on the Annuity Date but only if: (1)
the person on whose life the annuity is to be based is living on that date; (2)
the first payment under the option will be at least $20; and (3) you do not void
the choice by making a later choice before the Annuity Date.
If two annuitants are named in the Contract and both are living, settlement will
be made on the life of the First Annuitant, as named on page 3.
When No Option Chosen.--If no choice takes effect on the Annuity Date,
settlement under the interest Payment Option will become effective.
Options Described.--When we use the word annuitant in the following paragraphs
we mean the annuitant for whom the annuity described was chosen and who is to
receive settlement under the annuity.
For an annuitant, the first payment under these options is due on the Annuity
Date.
For a Payee, unless a later date is requested, the first payment will be due on
the first day of the earliest calendar month on or after the day the Service
Office has received the request for the settlement and due proof of the
annuitant's death and such claim forms and other evidence as may be satisfactory
to us.
Here are the options we offer. We may also consent to other arrangements.
Life Income Option.--You may choose monthly paymemts for as long as the
annuitant lives, with 120 monthly payments certain.
Interest Payment Option.--We will hold an amount at interest. We will pay
interest at an effective rate of at least 3% a year ($30.00 annually, $14.89
semi-annually, $7.42 quarterly or $2.47 monthly per $1,000). We may pay more
interest.
Supplemental Life Annuity Option.--You may choose to receive the proceeds of
this contract in the form of payments like those of any annuity or life annuity
we then regularly issue 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. For purposes of this option
only, the words we, our and us include our subsidiary company, Pruco Life
Insurance Company, which has agreed to make settlements under this option.
The proceeds of this contract might be subject to a withdrawal charge if paid as
a lump sum. It so, we will apply that charge pro-rata to any portion of the
proceeds not placed under this option. For the amount placed under this option
on any date, any annuity payment will be at least 100% of what we would pay
under the chosen kind of annuity with its first payment due on its contract
date. The phrase regularly issue does not include contracts that are used to
qualify for special federal income tax treatment as a retirement plan unless
this contract has been issued as part of such a plan. At least one of the
persons on whose life this option is based must be a Payee. This option cannot
be chosen more than 30 days before the due date of the first payment. On
request, we will quote the payment that would apply for any amount placed under
the option at that time.
Residue Described.--For the Life Income Option and the Supplemental Life Annuity
Option, residue on any date means the then present value of any unpaid payments
certain. It does not include the value of any payment that may become due after
the certain period. For the Life Income Option, we will compute it at an
effective interest rate of 3 1/2% a year. But we will use the interest rate we
used to compute the actual Life Income Option payments if they were not based on
the table in this contract. For the Supplemental Life Annuity Option, we will
use the interest rate we would use for the chosen kind of annuity with the same
provisions as to withdrawal.
Page 13 (VIP--86) (MA)
Page 17 (VIP--86) - P
Page 18
Variable Annuity Contract with Flexible Purchase Payments--Monthly annuity
payments starting on Annuity Date. Payment as stated upon death before Annuity
Date. Purchase payments payable during lifetime(s) of annuitant(s) until Annuity
Date. Cash values reflect investment results.
VIP--86 - P
PRUDENTIAL The Prudential
Insurance Company
of America
Insured Rider for Policy No.
John Doe XX XXX XXX
- ------------------------------------------ ------------------------------------
This contract is amended to include the following additional provisions.
FIXED ACCOUNT
The Fixed Account.--If you choose, you may allocate all or part of your purchase
payment to the fixed account. The fixed account is funded by the general account
of Prudential and is credited with interest as described under Guaranteed
Interest and Excess Interest below. Amounts in the fixed account will not be
part of your vulnerable account.
Fixed Account Options.--We may have more than one fixed account option.
Guaranteed Interest.--We will credit interest to the amount in the fixed account
at a rate of .00809863% a day, which is equivalent to an effective rate of 3% a
year.
Excess Interest.--We may credit interest in addition to the guaranteed interest
on the amount in the fixed account. The rate of any excess interest will be
determined from time to time and will continue thereafter until a new rate is
determined. We may use different rates of excess interest for different portions
of the amount in the fixed account. We may from time to time guarantee rates of
excess interest on some portions of the amount in the fixed account.
Effect on Withdrawals.--We have the right to defer for up to six months paying
the portion of the proceeds arising from a withdrawal from this contract that is
to come from the fixed account. If we do so for more than 30 days we will pay
interest at the rate of 3% a year.
TRANSFERS
Transfers Among Subaccounts and into the Fixed Account.--You may transfer
amounts among the subaccounts of the Prudential Individual Variable Contract
Account and into the fixed account as often as four times in a contract year.
To make a transfer, you must notify us in writing in a form that meets our need.
The transfer will take effect on the data we receive your notice at our Service
Office.
If we establish new separate accounts, transfers into or out of these separate
accounts will be allowed only with our consent.
Transfers Among Fixed Account Options and into the Subaccounts.--You may
transfer amounts among the available Fixed Account Options and into the
subaccounts only with our consent.
ADDITIONAL SEPARATE ACCOUNTS
We may establish additional separate accounts to support variable life insurance
and annuity contracts. Any additional separate accounts may have several
subaccounts. We list any subaccounts in the Contract Data pages.
Any additional separate account will:
1. be registered with the SEC if required;
2. have assets that are kept separate from the assets of our general account;
and
3. have assets which, together with the assets of any other separate accounts,
will have a total value at least equal to the amount of the variable
account under contracts like this one.
Transfers into or out of any additional separate accounts will be allowed only
with our consent.
We have the right to defer paying the portion of the proceeds arising from a
cash surrender of this contract that is to come from any additional separate
accounts registered under the Investment Company Act of 1940; if (1) the New
York Stock Exchange is closed; or (2) the SEC requires that trading be
restricted or declares an emergency. We have the right to postpone for up to six
months paying you the
(Continued on Next Page)
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VIP 501 - 86
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<PAGE>
(Continued from Preceding Page)
portion of the proceeds arising from a cash surrender of this contract that is
to come from any other additional separate account If we do so for more than 30
days we will pay interest at the rate of 3% a year.
We have the right to defer making the portion of any loan that is to come from
any additional separate account registered under the Investment Company Act of
1940; if (1) the New York Stock Exchange is closed; or (2) the SEC requires that
trading be restricted or declares an emergency. We have the right to defer for
up to six months making the portion of any loan that is to come from any other
additional separate account, unless it will be used to pay premiums on this or
other contracts with us.
CHARGES
All charges specified in this contract are the maximum charges we may make. We
may make lesser charges. Any such lesser charges will apply to all contracts
like this one issued at the same age and sex as this one and in force for the
same length of time as this one.
ADDITIONAL AMOUNTS
Beginning no later than July 1, 1987 and continuing until June 30, 1990, and
thereafter at our discretion, we will credit an additional 1% to the amount of
every purchase payment you make.
We reserve the right to limit such additional amounts to $1,000 in each contract
year.
Such additional amounts will not be subject to any deductions for state or local
premium taxes. They will be allocated to the subaccounts or to the fixed account
in the same proportions as the corresponding purchase payment.
Example: On May 1, 1987 you make a $1,000 purchase to be allocated equally to
subaccounts A and B. We will increase that amount by 1%. or $10, and allocate
$505 to each of subaccounts A and B. Later in the year you send us a $600
purchase payment, but you don't tell us how it is to be supplied. We will
increase that amount by 1% or $6 and, based on the most recent purchase, we
would make a $303 purchase for each of subaccounts A and B.
These additional amounts will become part of your Variable Account.
We may recapture additional amounts in the following situations:
1. If you return the contract to us under the Right to Cancel provision.
2. If you (a) make a withdrawal which consists partially or fully of purchase
payments; (b) surrender the contract for its cash value; or (c) select a Payout
Provision, and if the duration from the start of the contract year of purchase
payment to the start of the contract year of withdrawal, surrender or payout is
less than eight years.
If the duration from the start of the contract year of purchase payment to the
start of the contract year of withdrawal, surrender or payout is eight years or
more, we will not recapture any additional amounts credited as a result of such
purchase payments.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America,
By [SPECIMEN]
Secretary
Date September 8, 1986 Attest M. Smith
- -----------------------------------------------
- ------------
VIP 501 - 86
- ------------
ENDORSEMENT
(Only we can endorse this contract.)
This endorsement is attached to and made a part of this contract on the contract
date:
Any reference, in any provision of this contract, to the sex of any person will
be ignored except for the purpose of identification. For any participating
settlement payable for the lifetime of one or more payees, the female rates we
show in the contract will apply to both male and female payees.
The Prudential Insurance Company of America
By /s/ Isabelle Kirchner
Secretary
ENDORSEMENTS
(Only we can endorse this contract.)
Right to Buy a New Contract.-Some provisions of this form refer to the right of
an individual. subject to certain conditions to obtain a new contract of
insurance from Pruco Life Insurance Company. Pruco Life has agreed to this
arrangement as shown by the following Certification.
CERTIFICATION
Pruco Life Insurance Company is aware that some provisions of this Prudential
Insurance Company of America form provide an individual the right, subject to
certain conditions, to obtain a new contract of insurance from Pruco. We certify
that if any such individual wishes to exercise that right Pruco will make
available to that individual the contract described in this form.
Signed for Pruco Life Insurance Company.
/s/ [ILLEGIBLE]
SPECIMEN
President
/s/ [ILLEGIBLE]
SPECIMEN
Vice President
If Pruco Life Insurance Company is not engaged in the insurance business at the
time an individual wishes to exercise this right to buy a new contract, The
Prudential will make available to that individual a contract that it currently
issues.
This endorsement attached to the contract on the Contract Date By
By
/s/ Isabelle L. Kirchner
SPECIMEN
Secretary
- -----------
PLI 254--86
- -----------
EXHIBIT (4)(yy)
ENDORSEMENTS
(Only we can endorse this contract.)
OPTION TO EXCHANGE ANNUITANT{S)
Premium.--We grant this option in consideration of payment now of an extra
single premium of $XXX.XX.
Right to Exchange.--You may exchange the annuitant of this contract for a new
annuitant. If more than one annuitant is named on the first page, this right,
and all the conditions that follow, will apply to all annuitants.
Exchange Date.--The phrase exchange date means the date you choose in your
request for the exchange. It may not be more than 31 days after the date of your
request.
Conditions.--Your right to make this exchange is subject to all these
conditions:
1. On the exchange date the new annuitant must have reached his or her 18th
birthday but must not have reached his or her 75th birthday.
2. You must ask for the exchange in a form that meets our needs.
3. The new annuitant must complete an application form.
4. We must have your request, your application and your contract at our Home
Office within the 31 day period ending on the exchange date.
The exchange will take effect on the exchange date if both the present annuitant
and the new annuitant are living on that date. At that time all rights under the
contract will end for the present annuitant.
The Prudential Insurance Company of America,
By /s/ ISABELLE L. KIRCHNER
Secretary
SPECIMEN
PLI 288--88
WAIVER OF WITHDRAWAL CHARGES
Subject to all the provisions of this rider and
of the rest of the contract, we will waive part
or all of (1) any withdrawal and maintenance
charges otherwise associated with a full or
partial withdrawal, or (2) any annuitization or
withdrawal charge due on the annuity date, if an
annuitant is (a) terminally ill, or (b) confined
to an eligible nursing home or hospital
continuously for three months while this contract
is in force. This waiver applies only to any
purchase payment(s) made one year or more prior
to your request(s) for withdrawal, or the annuity
date.
Terminal Illness Option You may use this option if you give us evidence
that satisfies us that an Annuitants life
expectancy is six months or less. Part of that
evidence must be a certification by a licensed
physician.
Nursing You may use this option if an Annuitant is
Home/Hospital Option confined to an eligible nursing home and/or
hospital starting any time after the contract
date, and has been confined there continuously
for at least three months.
Eligible Nursing Home An eligible nursing home is an institution or
special nursing unit of a hospital which meets at
least one of the following recuirements:
1. it is Medicare approved as a provider of
skilled nursing care services; or
2. it is licensed as a skilled nursing home or as
an intermediate care facility by the state in
which it is located; or
3. it meets all of the requirements listed below:
(a) it is licensed as a nursing home by the
state in which it is located;
(b) its main function is to provide skilled,
intermediate, or custodial nursing care;
(c) it is engaged in providing continuous room
and board accommodations to 3 or more
persons;
(d) it is under the supervision of a registered
nurse (RN) or licensed practical nurse
(LPN);
(e) it maintains a daily medical record of each
patient; and
(f) it maintains control and records for all
medications dispensed.
Institutions which primarily provide residential
facilities are not eligible nursing homes.
Eligible Hospital An eligible hospital is an institution that meets
either of these reauirements:
1. It is accredited as a hospital under the
Hospital Accreditation Program of the Joint
Commission on Accreditation of Healthcare
Organizations.
2. It is legally operated, has 24 hour a day
supervision by a staff of doctors, has 24 hour
a day nursing service by registered graduate
nurses, and complies with (a) or (b):
(a) It mainly provides general inpatient
medical care and treatment of sick and
injured persons by the use of medical,
diagnostic and major surgical facilities.
All such facilities are in it or under its
control.
(b) It mainly provides specialized inpatient
medical care and treatment of sick or
injured persons by the use of medical and
diagnostic facilities (including x-ray and
laboratory). All such facilities are in it,
under its control, or available to it under
a written agreement with a hospital (as
defined above) or with a specialized
provider of these facilities.
An eligible hospital is not an institution, or
part of one, which: (a) furnishes mainly homelike
or custodial care. or training in the routines of
daily living; or (b) is mainly a school.
- ------------
0RD 88753-92
- ------------
<PAGE>
Conditions Your right to be paid under one of these
conditions is subject to the following
conditions:
1. You must choose the option in writing in a
form that meets our needs.
2. The contract must not be assigned.
3. You must give us any facts we need to satisfy
us that an Annuitant qualifies for one of the
options described above.
Rider attached to and made a part of this
contract on the Contract Date
The Prudential Insurance Company of America,
By [ILLEGIBLE]
-----------------------
Secretary
- ------------
0RD 88753-92
- ------------
The Prudential [LOGO]
Annuitant Contract No.
John Doe xx xxx xxx
- -------------------------------------------------------------- ---------------
================================================================================
WAIVER OF WITHDRAWAL CHARGES
Subject to all the provisions of this rider and
of the rest of the contract, we will waive part
or all of (1) any withdrawal and maintenance
charges otherwise associated with a full or
partial withdrawal, or (2) any annuitization or
withdrawal charge due on the annuity date, if an
annuitant is (a) terminally ill, or (b) confined
to an eligible nursing home or hospital
continuously for three months while this
contract is in force. This waiver applies only
to any purchase payment(s) made one year or more
prior to your request(s) for withdrawal, or the
annuity date.
Terminal Illness Option You may use this option if you give us evidence
that satisfies us that an Annuitant's life
expectancy is six months or less. Part of that
evidence must be a certification by a licensed
physician.
Nursing You may use this option if an Annuitant is
Home/Hospital Option confined to an eligible nursing home and/or
hospital starting any time after the contract
date, and has been confined there continuously
for at least three months.
Eligible Nursing Home An eligible nursing home is an institution or
special nursing unit of a hospital which meets at
least one of the following requirements:
1. it is Medicare approved as a provider of
skilled nursing care services; or
2. it is licensed as a skilled nursing home or as
an intermediate care facility by the state in
which it is located; or
3. it meets all of the requirements listed below:
(a) it is licensed as a nursing home by the
state in which it is located;
(b) its main function is to provide skilled,
intermediate, or custodial nursing care;
(c) it is engaged in providing continuous room
and board accommodations to 3 or more
persons;
(d) it is under the supervision of a registered
nurse (RN) or licensed practical nurse
(LPN);
(e) it maintains a daily medical record of each
patient; and
(f) it maintains control and records for all
medications dispensed.
Institutions which primarily provide residential
facilities are not eligible nursing homes.
Eligible Hospital An eligible hospital is an institution that meets
either of these requirements:
1. It is accredited as a hospital under the
Hospital Accreditation Program of the Joint
Commission on Accreditation of Healthcare
Organizations.
2. It is legally operated, has 24 hour a day
supervision by a staff of doctors, has 24 hour
a day nursing service by registered graduate
nurses, and complies with (a) or (b):
- ------------
ORD 88754-92
- ------------
<PAGE>
(a) It mainly provides general inpatient
medical care and treatment of sick and
injured persons by the use of medical,
diagnostic and major surgical facilities.
All such facilities are in it or under its
control.
(b) It mainly provides specialized inpatient
medical care and treatment of sick or
injured persons by the use of medical and
diagnostic facilities (including x-ray and
laboratory). All such facilities are in it,
under its control, or available to it under
a written agreement with a hospital (as
defined above) or with a specialized
provider of these facilities.
An eligible hospital is not an institution, or
part of one, which: (a) furnishes mainly homelike
or custodial care, or training in the routines of
daily living; or (b) is mainly a school.
Conditions Your right to be paid under one of these options
is subject to the following conditions:
1. You must choose the option in writing in a
form that meets our needs.
2. The contract must not be assigned.
3. You must give us any facts we need to satisfy
us that an Annuitant qualifies for one of the
options described above.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America,
By /s/ [ILLEGIBLE]
-------------------------------------------
Secretary
Effective Date Nov. 18, 1992 Attest M. Smith
- ------------
ORD 88754-92
- ------------
PRUDENTIAL No.
- ---------- -----------------------
APPLICATION FOR
VARIABLE ANNUITY CONTRACT
IN
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
Please make check payable to Prudential and mail the check and application to:
The Prudential Insurance Company of America, P.O. Box 2925. Phoenix, AZ 85062
- --------------------------------------------------------------------------------
DESIGNATED ANNUITANT (Please Print)
Name____________________________________________________________________________
Address _________________________ City _________ State____________ Zip__________
Date of Birth _______ ______ ______ Sex [_] Male [_] Female Soc Sec #___ __ ____
Month Day Year
- --------------------------------------------------------------------------------
CONTRACT OWNER (if different from the Designated Annuitant)
Name____________________________________________________________________________
Address _____________________________ City ___________ State _____ Zip _________
Soc Sec# or Tax ID#___ __ ____
- --------------------------------------------------------------------------------
BENEFICIARY DESIGNATION
Primary __________________________ Contingent___________________________________
Relationship Date of Relationship Date of
to Annuitant _________ Birth _____ to Annuitant _________ Birth _______
- --------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT (minimum $1000):
$_____________________________________
(Make checks payable to Prudential)
- --------------------------------------------------------------------------------
INVESTMENT SELECTION--Select one or more subaccount(s);
($300 minimum for each subaccount selected):
%
ALLOCATION
[_] Bond ______ %
[_] Money Market ______ %
[_] Common Stock ______ %
[_] Aggressively Managed Flexible ______ %
[_] Conservatively Managed Flexible ______ %
[_] Other ______ %
TOTAL INVESTED 100%
=======
Any future purchases will be allocated in the same percentage(s) as above unless
specific instructions to change the allocations are submitted.
- --------------------------------------------------------------------------------
6. ANNUITY COMMENCEMENT DATE
Annuity payments to begin
on the first day of __________ ___________
Month Year
(Cannot be later than the month following the annuiuant's 75th birthday)
- --------------------------------------------------------------------------------
7. Will the annuity applied for replace any existing annuity or life
insurance?
[_] Yes [_] No If yes, please furnish details:
- --------------------------------------------------------------------------------
8. REMARKS OR SPECIAL REQUESTS
<PAGE>
Supplementary Information
- --------------------------------------------------------------------------------
NOTE: If unable to obtain an answer to D, E, and F, print "NR" (no response)
immediately following the question and estimate the answer to the extent
possible.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO THE PURCHASER (To be Completed by Registered
Representative)
A. Occupation*________________________________________________________________
*If in the securities business, record the name and address of the employer
here:
________________________________________________________________________________
B. Marital Status ____________________________________________________________
C. Number of Dependents ______________________________________________________
D. Estimated Family Income____________________________________________________
E. Estimated Amount of Family Investments and Savings_________________________
F. Amount of Insurance on Purchaser's Life____________________________________
G. Source of Investment_______________________________________________________
H. Do you have, from any source, facts that the proposed Purchaser may replace
or change any current insurance or annuity in any company? [_] Yes [_] No
If Yes, please furnish details.
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT OF PURCHASER
To the best of my knowledge and belief, my answers to the questions on this
application are correct and true I also understand that the Company reserves the
right to reject any application or purchase payment. If this application is
declined, there shall be no liability on the part of the Company and any
purchase payments submitted shall be returned.
I understand that annuity payments and surrender values are based upon the
investment experience of a separate account and are variable and are not
guaranteed as to a fixed dollar amount.
Receipt of a current prospectus for a variable annuity contract of Prudential's
Variable Investment Plan and a current prospectus for Prudential Series Fund,
Inc. is hereby acknowledged.
Istatel
SIGNED AT:________________________________ __________________________________
(State) (Date)
SIGNATURE(S)______________________________ __________________________________
(Designated Annuitant) (Owner, if applicable)
WITNESS___________________________________
(Registered Representative)
- --------------------------------------------------------------------------------
Be Completed by Registered Representative (Prudential)
________________________________________________________________________________
NAME AND TITLE -- Please Print
________________________________________________________________________________
CQNTRACT NO. OFFICE CODE RHO
______________________________________________(___)_____________________________
OFFICE PHONE NO.
- --------------------------------------------------------------------------------
To be Completed by Registered Representative (Prudential-Bache)
________________________________________________________________________________
NAME -- Please Print
________________________________________________________________________________
A.E. CONTRACT NO. OFFICE CODE
___________________________________________________(____)_______________________
BRANCH OFFICE PHONE NO.
PRUDENTIAL No.
- ---------- -----------------------
APPLICATION FOR
VARIABLE ANNUITY CONTRACT
IN
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
Please make check payable to Prudential and mail the check and application to:
The Prudential Insurance Company of America, P.O. Box 2925. Phoenix, AZ 85062
- --------------------------------------------------------------------------------
1. DESIGNATED ANNUITANT (Please Print)
Name____________________________________________________________________________
Address _________________________ City _________ State____________ Zip__________
Date of Birth _______ ______ ______ Sex [_] Male [_] Female Soc Sec #___ __ ____
Month Day Year
- --------------------------------------------------------------------------------
1A.CO-ANNUITANT (Please Print)
Name___________________________________ Relationship to Annuitant_______________
Address _____________________________ City ___________ State _____ Zip _________
Date of Birth _______ ______ ______ Sex [_] Male [_] Female Soc Sec #___ __ ____
Month Day Year
- --------------------------------------------------------------------------------
2. CONTRACT OWNER (if different from the Designated Annuitant)
Name______________________________________________Soc Sec# or Tax ID#___ __ ____
Address _____________________________ City ___________ State _____ Zip _________
- --------------------------------------------------------------------------------
3. BENEFICIARY DESiGNATION
Primary __________________________
Relationship to |_| Annuitant Date of
|_| Co-Annuitant___________ Birth _______
Contingent_____________________________
Relationship to |_| Annuitant Date of
_ |_| Co-Annuitant___________ Birth _______
- --------------------------------------------------------------------------------
4. INITIAL PURCHASE PAYMENT (minimum $1000):
$_____________________________________
(Make checks payable to Prudential)
- --------------------------------------------------------------------------------
5. INVESTMENT SELECTION--Select one or more subaccount(s);
($300 minimum for each subaccount selected):
[_] Bond (001) ______ %
[_] Money Market (002) ______ %
[_] Common Stock (003) ______ %
[_] Aggressively Managed Flexible (004) ______ %
[_] Conservatively Managed Flexible (005) ______ %
[_] Other ______ %
TOTAL INVESTED 100%
=======
Any future purchases will be allocated in the same percentage(s) as above unless
specific instructions to change the allocations are submitted.
- --------------------------------------------------------------------------------
6. ANNUITY COMMENCEMENT DATE
Annuity payments to begin
on the first day of __________ ___________
Month Year
- --------------------------------------------------------------------------------
7. Will the annuity applied for replace any existing annuity or life
insurance?
[_] Yes [_] No If yes, please furnish details:
- --------------------------------------------------------------------------------
8. REMARKS OR SPECIAL REQUESTS
<PAGE>
Supplementary Information
- --------------------------------------------------------------------------------
NOTE: If unable to obtain an answer to D, E, and F, print "NR" (no response)
immediately following the question and estimate the answer to the extent
possible.
- --------------------------------------------------------------------------------
1. INFORMATION RELATING TO THE PURCHASER (To be Completed by Registered
Representative)
A. Occupation*________________________________________________________________
*If in the securities business, record the name and address of the employer
here:
________________________________________________________________________________
B. Marital Status ____________________________________________________________
C. Number of Dependents ______________________________________________________
D. Estimated Family Income____________________________________________________
E. Estimated Amount of Family Investments and Savings_________________________
F. Amount of Insurance Inforce on Purchaser's Life____________________________
G. Source of Funds for this Investment________________________________________
H. Do you have, from any source, facts that the proposed Purchaser may replace
or change any current insurance or annuity in any company? [_] Yes [_] No
If Yes, please furnish details.
- --------------------------------------------------------------------------------
2. ACKNOWLEDGMENT OF PURCHASER
To the best of my knowledge and belief, my answers to the questions on this
application are correct and true. I also understand that the Company reserves
the right to reject any application or purchase payment. If this application is
declined, there shall be no liability on the part of the Company and any
purchase payments submitted shall be returned.
I understand that annuity payments and surrender values are based upon the
investment experience of a separate account and are variable and are not
guaranteed as to a fixed dollar amount.
Receipt of a current prospectus for a variable annuity contract of Prudential's
Variable Investment Plan and a current prospectus for Prudential Series Fund,
Inc. is hereby acknowledged.
SIGNED AT:________________________________ __________________________________
(State) (Date)
SIGNATURE(S)______________________________ __________________________________
(Designated Annuitant) (Co-Annuitant, if applicable)
______________________________ WITNESS__________________________
(Owner, if applicable) (Registered Representative)
- --------------------------------------------------------------------------------
To be Completed by Registered Representative
- --------------------------------------------------------------------------------
Region Office Code Office Detached Office
- --------------------------------------------------------------------------------
NAME -- Please Print CONTRACT NO. Title
Issue to
- --------------------------------------------------------------------------------
__% Credit to OFF. CODE
- --------------------------------------------------------------------------------
PHONE NO. ( )
- --------------------------------------------------------------------------------
To be Completed by Prudential-Bache Account Executive
- --------------------------------------------------------------------------------
NAME-Please Print A.E. Contract No. OFFICE CODE
( )
- --------------------------------------------------------------------------------
BRANCH OFFICE (Address) PHONE NUMBER
- --------------------------------------------------------------------------------
[LOGO]Prudential
No.
APPLICATION FOR
VARIABLE ANNUITY CONTRACT IN
PRUDENTIAL'S VARIABLE INVESTMENT PLAN SERIES
Please make check payable to Prudential and mail the check and application to:
The Prudential Insurance Company of America, P.O. Box 2925, Phoenix, AZ 85062
- --------------------------------------------------------------------------------
1. DESIGNATED ANNUITANT (Please Print)
Name____________________________________________________________________________
Address_________________________________City________________ State_____Zip______
Date of Birth _____ ___ ____ Sex [ ] Male [ ] Female Soc Sec #____ ___ _____
Month Day Year
- --------------------------------------------------------------------------------
1a. CO-ANNUITANT (Please Print)
Name____________________________________Relationship to Annuitant_______________
Address_________________________________City________________ State_____Zip______
Date of Birth _____ ___ ____ Sex [ ] Male [ ] Female Soc Sec #____ ___ _____
Month Day Year
- --------------------------------------------------------------------------------
2. CONTRACT OWNER (if different from the Designated Annuitant)
Name_________________________________________ Soc Sec # or Tax ID #____ ___ ____
Address_________________________________City________________ State_____Zip______
- --------------------------------------------------------------------------------
3. BENEFICIARY DESIGNATION (MUST specify relationship to Annuitant or
Co-Annuitant)
Primary________________________________ Contingent______________________________
Relationship to Relationship to
[ ] Annuitant Date of [ ] Annuitant Date of
[ ] Co-Annuitant________Birth_________ [ ] Co-Annuitant________Birth________
- --------------------------------------------------------------------------------
4. INITIAL PURCHASE PAYMENT (minimum $1000):
$________________________________________________
(Make checks payable to Prudential)
- --------------------------------------------------------------------------------
5. INVESTMENT SELECTION - Select one or more subaccount(s):
($300 minimum for each subaccount selected)
[ ] Bond (001) ______%
[ ] Money Market (002) ______%
[ ] Common Stock (003) ______%
[ ] Aggressively Managed Flexible (004) ______%
[ ] Conservatively Managed Flexible (005) ______%
TOTAL INVESTED 100%
=======
Any future purchase will be allocated in the same percentage(s) as above
unless specific instructions to change the allocations are submitted
- --------------------------------------------------------------------------------
6. ANNUITY COMMENCEMENT DATE
Annuity payments to begin on the first day of ______________ _____________
Month Year
- --------------------------------------------------------------------------------
7. Will the annuity applied for replace any existing annuity or life
insurance?
[ ] Yes [ ] No If yes, please furnish details:
- --------------------------------------------------------------------------------
8. REMARKS OR SPECIAL REQUESTS
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT OF PURCHASER
To the best of my knowledge and belief, my answers to the questions on this
application are correct and true. I also understand that the Company reserves
the right to reject any application or purchase payment. If this application is
declined, there shall be no liability on the part of the Company and any
purchase payments submitted shall be returned.
I understand that annuity payments and surrender values are based upon the
investment experience of a separate account and are variable and are not
guaranteed as to a fixed dollar amount.
Receipt of a current prospectus for a variable annuity contract of Prudential's
Variable Investment Plan and a current prospectus for Prudential Series Fund,
Inc. is hereby acknowledged.
SIGNED AT:___________________________________ _________________________________
(State) (Date)
SIGNATURE(S):________________________________ _________________________________
(Designated Annuitant) (Co-Annuitant, if applicable)
_____________________________ WITNESS:_____________________________
(Owner, if applicable) (Registered Representative)
200B Ed 05/84-Non-Qualified
[LOGO]Prudential
--------------------------------
No.
APPLICATION FOR
VARIABLE ANNUITY CONTRACT
IN
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
Please make check payable to Prudential and mail the check and application to:
The Prudential Insurance Company of America, P.O. Box 2925, Phoenix, AZ 85062.
================================================================================
1. DESIGNATED ANNUITANT (Please Print)
Name ______________________________________________________________________
Address ______________________ City ____________ State ______ Zip _________
Date of Birth _____ ___ ____ Age __ Sex [ ] Male [ ]Female
Month Day Year
Soc Sec # ________ _____ ________
================================================================================
1a. CO-ANNUITANT (Please Print)
Name ______________________________ Relationship to Annuitant _____________
Address ______________________ City ____________ State ______ Zip _________
Date of Birth _____ ___ ____ Age __ Sex [ ] Male [ ]Female
Month Day Year
Soc Sec # ________ _____ ________
================================================================================
2. CONTRACT OWNER (if different from the Designated Annuitant)
Soc Sec # or
Name __________________________ Tax ID # _____ ___ _____
Address ______________________ City ____________ State ______ Zip _________
================================================================================
3. BENEFICIARY DESIGNATION (MUST specify relationship to Annuitant or
Co-Annuitant)
Primary ____________________________ Contingent ___________________________
Relationship to [ ] Annuitant Date of
[ ] Co-Annuitant __________ Birth __________
Relationship to [ ] Annuitant Date of
[ ] Co-Annuitant _________ Birth __________
================================================================================
4. INITIAL PURCHASE PAYMENT (minimum $1000):
$__________________________________________
(Make checks payable to Prudential)
================================================================================
5. INVESTMENT SELECTION-Select one or more subaccount(s)
($300 minimum for each subaccount selected):
[ ] Bond(001) ___%
[ ] Money Market(002) ___%
[ ] Common Stock(003) ___%
[ ] Aggressively Managed Flexible(004) ___%
[ ] Conservatively Managed Flexible(005) ___%
TOTAL INVESTED 100%
====
Any future purchases will be allocated in the percentage(s) as above unless
specific instructions to change the allocations are submitted.
================================================================================
6. ANNUITY COMMENCEMENT DATE
Annuity payments to begin
on the first day of ___________ ________
(Month) (Year)
================================================================================
7. Will the annuity applied for replace any existing annuity or life
insurance? [ ]Yes [ ]No If yes, please furnish details.
Name of Insured ___________________________________________________________
Insurance Company _________________________________________________________
Policy Number(s) __________________________________________________________
================================================================================
8. REMARKS OR SPECIAL REQUESTS
================================================================================
VA 200 Ed 5/84 - Non-Qualified
<PAGE>
Supplementary Information
================================================================================
NOTE: If unable to obtain an answer to D, E, and F, print "NR" (no response)
immediately following the question and estimate the answer to the extent
possible.
================================================================================
1. INFORMATION RELATING TO THE PURCHASER (To be Completed by Registered
Representative)
A. Occupation* __________________________________________________________
*If in the securities business,
record the name and address of the employer here:
______________________________________________________________________
B. Marital Status _______________________________________________________
C. Number of Dependents _________________________________________________
D. Estimated Family Income ______________________________________________
E. Estimated Amount of Family Investments and Savings ___________________
F. Amount of Insurance on Purchaser's Life ______________________________
G. Source of Investment _________________________________________________
H. Do you have, from any source, facts that the proposed Purchaser may
replace or change any current insurance or annuity in any company?
[ ]Yes [ ]No If Yes, please furnish details.
Name of Insured ______________________________________________________
Insurance Company ____________________________________________________
Policy Number(s) _____________________________________________________
================================================================================
2. ACKNOWLEDGMENT OF PURCHASER
To the best of my knowledge and belief, my answers to the questions on this
application are correct and true. I also understand that the Company
reserves the right to reject any application or purchase payment. If this
application is declined, there shall be no liability on the part of the
Company and any purchase payments submitted shall be returned.
I understand that annuity payments under certain payout options and
surrender values are based on the Investment experience of a separate
account and are variable and are not guaranteed as to a fixed dollar
amount.
Receipt of a current prospectus for a variable annuity contract in
Prudential's Variable Investment Plan and a current prospectus for the
Prudential Series Fund, Inc. is hereby acknowledged.
SIGNED AT: ________________________________ ________________________________
(State) (Date)
SIGNATURE(S): _____________________________ ________________________________
(Designated Annuitant) (Co-Annuitant, if applicable)
_____________________________ WITNESS ________________________
(Owner, if applicable) (Registered
Representative)
================================================================================
To be Completed by Registered Representative
- --------------------------------------------------------------------------------
Region Office Code Office Detached Office
- --------------------------------------------------------------------------------
NAME-Please Print CONTRACT NO. Title
Issue to
- --------------------------------------------------------------------------------
Off. Code
% Credit to
- --------------------------------------------------------------------------------
Phone ( )
- --------------------------------------------------------------------------------
[LOGO] Prudential No.
------------------------------
APPLICATION FOR
VARIABLE ANNUITY CONTRACT
IN
PRUDENTIAL'S VARIABLE INVESTMENT PLAN SERIES
Please make check payable to Prudential and mail the check and application to:
The Prudential Insurance Company of America, P.O. Box 2925, Phoenix, AZ 85062.
================================================================================
1. DESIGNATED ANNUITANT (Please Print)
Name ______________________________________________________________________
Address ______________________ City ____________ State ______ Zip _________
Date of Birth _____ ___ ____ Age __ Sex [ ] Male [ ]Female
Month Day Year
Soc Sec # ________ _____ ________
================================================================================
1a. CO-ANNUITANT (Please Print)
Name ______________________________ Relationship to Annuitant _____________
Address ______________________ City ____________ State ______ Zip _________
Date of Birth _____ ___ ____ Age __ Sex [ ] Male [ ]Female
Month Day Year
Soc Sec # ________ _____ ________
================================================================================
2. CONTRACT OWNER (if different from the Proposed Annuitant)
Relationship to Soc Sec # or
Name __________________________ Annuitant __________ Tax ID # _____ ___ _____
Address ______________________ City ____________ State ______ Zip _________
================================================================================
3. BENEFICIARY DESIGNATION (MUST specify relationship to Annuitant or
Co-Annuitant)
Primary_______________________ Contingent _______________________
Relationship to [ ] Annuitant Date of
[ ] Co-Annuitant __________ Birth __________
Relationship to [ ] Annuitant Date of
[ ] Co-Annuitant _________ Birth __________
================================================================================
4. INITIAL PURCHASE PAYMENT (minimum $1000):
$__________________________________________
(Make checks payable to Prudential)
================================================================================
5. INVESTMENT SELECTION-Select one or more subaccount(s): ($300 minimum for
each subaccount selected):
(All % allocations must be expressed in whole numbers)
[ ] Bond ___%
[ ] Money Market ___%
[ ] Common Stock ___%
[ ] Aggressively Managed Flexible ___%
[ ] Conservatively Managed Flexible ___%
[ ] Other ___%
TOTAL INVESTED 100%
====
Any future purchases will be allocated in the same percentage(s) as above
unless specific instructions to change the allocations are submitted.
================================================================================
6. ANNUITY COMMENCEMENT DATE
Annuity payments to begin
on the first day of ___________ ________
(Month) (Year)
(Cannot be later than the month following the annuitant's 75th birthday)
================================================================================
7. Will the annuity applied for replace any existing annuity or life
insurance? [ ]Yes [ ]No If yes, please furnish details.
Name of Insured ___________________________________________________________
Insurance Company _________________________________________________________
Policy Number(s) __________________________________________________________
================================================================================
8. REMARKS OR SPECIAL REQUESTS
[ ] Check here if Statement of Additional Information desired.
================================================================================
VA 200 Ed 5 86 -- Non-Qualified
<PAGE>
Supplementary Information
================================================================================
NOTE: If unable to obtain an answer to D, E, and F, print "NR" (no response)
immediately following the question and estimate the answer to the extent
possible.
================================================================================
1. INFORMATION RELATING TO THE PURCHASER (To be Completed by Registered
Representative)
A. Occupation* __________________________________________________________
*If in the securities business,
record the name and address of the employer here:
______________________________________________________________________
B. Marital Status _______________________________________________________
C. Number of Dependents _________________________________________________
D. Estimated Family Income ______________________________________________
E. Estimated Amount of Family Investments and Savings ___________________
F. Amount of Insurance on Purchaser's Life ______________________________
G. Source of Investment _________________________________________________
H. Do you have, from any source, facts that the proposed Purchaser may
replace or change any current insurance or annuity in any company?
[ ]Yes [ ]No If Yes, please furnish details
================================================================================
2. ACKNOWLEDGMENT OF PURCHASER
To the best of my knowledge and belief, my answers to the questions on this
application are correct and true. I also understand that the Company
reserves the right to reject any application or purchase payment. If this
application is declined, there shall be no liability on the part of the
Company and any purchase payments submitted shall be returned.
If this application is for a Variable Investment Plan, I understand that;
(1) payments and values are based on the investment experience of a
separate account; and, (2) they may vary and are not guaranteed as to fixed
dollar amount. I have received the current prospectus for (1) a variable
annuity contract of Prudential's Variable Investment Plan; and, (2) The
Prudential Series Fund, Inc. (Check here if a Statement of Additional
Information is desired. [ ]
I understand that annuity payments and surrender values are based upon the
investment experience of a separate account and are variable and are not
guaranteed as to a fixed dollar amount.
Receipt of a current prospectus for a variable annuity contract of
Prudential's Variable Investment Plan and a current prospectus for
Prudential Series Fund, Inc. is hereby acknowledged.
SIGNED AT: ________________________________ ________________________________
(State) (Date)
SIGNATURE(S): _____________________________ ________________________________
(Designated Annuitant) (Owner, if applicable)
WITNESS: __________________________________
(Registered Representative)
================================================================================
To be Completed by Registered To be Completed by Registered
Registered Representative Representative
(Prudential) (Prudential-Bach)
________________________________________ ___________________________________
NAME AND TITLE -- Please Print NAME -- Please Print
________________________________________ ___________________________________
CONTRACT NO. OFFICE CODE RHO A.E. CONTRACT NO. OFFICE CODE
_______________________(____)___________ __________________(____)___________
OFFICE PHONE NO. BRANCH OFFICE PHONE NO.
================================================================================
Prudential
--------------------------------
No.
APPLICATION FOR
VARIABLE ANNUITY CONTRACT
IN
PRUDENTIAL'S VARIABLE INVESTMENT PLAN
Please make check payable to Prudential and mail the check and application to:
The Prudential Insurance Company of America, P.O. Box 2925, Pheonix, AZ 85062.
================================================================================
1. DESIGNATED ANNUITANT (Please Print)
Name ______________________________________________________________________
Address ______________________ City ____________ State ______ Zip _________
Date of Birth _____ ___ ____ Age __ Sex [ ] Male [ ]Female
Month Day Year
Soc Sec # ________ _____ ________
================================================================================
2. CONTRACT OWNER (if different from the Designated Annuitant)
Relationship to
Name ___________________________ Annuitant ________________________________
Address ______________________ City ____________ State ______ Zip _________
Soc Sec # or Tax ID # ________ ________ ________
================================================================================
3. BENEFICIARY DESIGNATION
Primary(Class 1) ___________________ Contingent(Class 2) __________________
Date of
Relationship to Annuitant _____________________ Birth __________
Date of
Relationship to Annuitant _____________________ Birth __________
================================================================================
4. INITIAL PURCHASE PAYMENT (minimum $1000):
$__________________________________________
(Make checks payable to Prudential)
================================================================================
5. INVESTMENT SELECTION -- Select one or more subaccount(s):
($300 minimum for each subaccount selected):
%
ALLOCATION
[ ] Bond ___%
[ ] Money Market ___%
[ ] Common Stock ___%
[ ] Aggressively Managed Flexible ___%
[ ] Conservatively Managed Flexible ___%
[ ] Other ___%
TOTAL INVESTED 100%
====
Any future purchases will be allocated in the percentage(s) as above unless
specific instructions to change the allocations are submitted.
================================================================================
6. ANNUITY COMMENCEMENT DATE
Annuity payments to begin
on the first day of ___________ ________
(Month) (Year)
(Cannot be later than the month following the annuitant's 75th birthday)
================================================================================
7. Will the annuity applied for replace any existing annuity or life
insurance? []Yes []No If yes, please furnish details.
Name of Insured ___________________________________________________________
Insurance Company _________________________________________________________
Policy Number(s) __________________________________________________________
================================================================================
8. REMARKS OR SPECIAL REQUESTS
[ ] Check here if Statement of Additional Information desired
================================================================================
200 Ed 05 86 -- Non-Qualified (NY)
<PAGE>
Supplementary Information
================================================================================
NOTE: If unable to obtain an answer to D, E, F, print "NR" (no response)
immediately following the question and estimate the answer to the extent
possible.
================================================================================
1. INFORMATION RELATING TO THE PURCHASER (To be Completed by Registered
Representative)
A. Occupation* __________________________________________________________
*If in the securities business,
record the name and address of the employer here:
______________________________________________________________________
B. Marital Status _______________________________________________________
C. Number of Dependents _________________________________________________
D. Estimated Family Income ______________________________________________
E. Estimated Amount of Family Investments and Savings ___________________
F. Amount of Insurance on Purchaser's Life ______________________________
G. Source of Investment _________________________________________________
H. Do you have, from any source, facts that the proposed Purchaser may
replace or change any current insurance or annuity in any company?
[ ]Yes [ ]No If Yes, please furnish details
================================================================================
2. ACKNOWLEDGMENT OF PURCHASER
To the best of my knowledge and belief, my answers to the questions on this
application are correct and true. I also understand that the Company
reserves the right to reject any application or purchase payment. If this
application is declined, there shall be no liability on the part of the
Company and any purchase payments submitted shall be returned.
I understand that annuity payments and surrender values are based upon the
investment experience of a seperate account and are variable and are not
guaranteed as to fixed dollar amount.
Receipt of a current prospectus for a variable annuity contract of
Prudential's Variable Investment Plan and a current prospectus for
Prudential Series Fund, Inc. is hereby acknowledged.
SIGNED AT: ________________________________ ________________________________
(State) (Date)
SIGNATURE(S): _____________________________ ________________________________
(Designated Annuitant) (Owner, if applicable)
WITNESS: __________________________________
(Registered Representative)
================================================================================
To be Completed by Registered To be Completed by Registered
Represntative (Prudential) Representative (Prudential-Bache)
________________________________________ ___________________________________
NAME AND TITLE -- Please Print NAME -- Please Print
________________________________________ ___________________________________
CONTRACT NO. OFFICE CODE RHO A.E. CONTRACT NO. OFFICE CODE
_______________________(____)___________ __________________(____)___________
OFFICE PHONE NO. BRANCH OFFICE PHONE NO.
================================================================================
--------------------------------
No.
APPLICATION FOR AN ANNUITY CONTRACT
[ ] PRUDENTIAL'S VARIABLE INVESTMENT PLAN SERIES or
[ ] PRUDENTIAL'S FIXED INTEREST PLAN SERIES
Please make check payable to Prudential and mail the check and application to:
The Prudential Insurance Company of America, P.O. Box 2925, Phoenix, AZ 85062.
================================================================================
1. PROPOSED ANNUITANT (Please Print)
Name ______________________________________________________________________
Address ______________________ City ____________ State ______ Zip _________
Date of Birth _____ ___ ____ Age __ Sex [ ] Male [ ]Female
Month Day Year
Soc Sec # ________ _____ ________
================================================================================
1a. PROPOSED CO-ANNUITANT (Please Print)
Name ______________________________ Relationship to Annuitant _____________
Address ______________________ City ____________ State ______ Zip _________
Date of Birth _____ ___ ____ Age __ Sex [ ] Male [ ]Female
Month Day Year
Soc Sec # ________ _____ ________
================================================================================
2. CONTRACT OWNER (if different from the Proposed Annuitant)
Relationship to Soc Sec # or
Name __________________________ Annuitant __________ Tax ID # _____ ___ _____
Address ______________________ City ____________ State ______ Zip _________
================================================================================
3. BENEFICIARY DESIGNATION (MUST specify relationship to Annuitant or
Co-Annuitant)
Primary(Class 1) ___________________ Contingent(Class 2) __________________
Relationship to [ ] Annuitant Date of
[ ] Co-Annuitant __________ Birth __________
Relationship to [ ] Annuitant Date of
[ ] Co-Annuitant _________ Birth __________
================================================================================
4. INITIAL PURCHASE PAYMENT (minimum $1000):
$__________________________________________
(Make checks payable to Prudential)
================================================================================
5. INVESTMENT SELECTION-Complete only if you are applying for a Variable
Investment Plan
Select one or more: ($300 minimum for each subaccount selected):
(All % allocations must be expressed in whole numbers)
[ ] Bond ___%
[ ] Money Market ___%
[ ] Common Stock ___%
[ ] Aggressively Managed Flexible ___%
[ ] Conservatively Managed Flexible ___%
[ ] Other ___%
TOTAL INVESTED 100%
====
Any future purchases will be allocated in the percentage(s) as above unless
specific instructions to change the allocations are submitted.
================================================================================
6. ANNUITY COMMENCEMENT DATE
Annuity payments to begin
on the first day of ___________ ________
(Month) (Year)
(Cannot be later than the month following the annuitant's 80th birthday)
================================================================================
7. Will the annuity applied for replace any existing annuity or life
insurance? []Yes []No If yes, please furnish details.
Name of Insured ___________________________________________________________
Insurance Company _________________________________________________________
Policy Number(s) __________________________________________________________
================================================================================
8. REMARKS OR SPECIAL REQUESTS
================================================================================
<PAGE>
Supplementary Information
================================================================================
NOTE: If unable to obtain an answer to D, E, F, print "NR" (no response)
immediately following the question and estimate the answer to the extent
possible.
================================================================================
1. INFORMATION RELATING TO THE PURCHASER (To be Completed by Registered
Representative)
A. Occupation* __________________________________________________________
*If in the securities business,
record the name and address of the employer here:
______________________________________________________________________
B. Marital Status _______________________________________________________
C. Number of Dependents _________________________________________________
D. Estimated Family Income ______________________________________________
E. Estimated Amount of Family Investments and Savings ___________________
F. Amount of Insurance on Purchaser's Life ______________________________
G. Source of Investment _________________________________________________
H. Do you have, from any source, facts that the proposed Purchaser may
replace or change any current insurance or annuity in any company?
[ ]Yes [ ]No If Yes, please furnish details
================================================================================
2. ACKNOWLEDGMENT OF PURCHASER
To the best of my knowledge and belief, my answers to the questions on this
application are correct and true. I also understand that the Company
reserves the right to reject any application or purchase payment. If this
application is declined, there shall be no liability on the part of the
Company and any purchase payments submitted shall be returned.
If this application is for a Variable Investment Plan, I understand that;
(1) payments and values are based on the investment experience of a
separate account; and, (2) they may vary and are not guaranteed as to fixed
dollar amount. I have received the current prospectus for (1) a variable
annuity contract of Prudential's Variable Investment Plan; and, (2) The
Prudential Series Fund, Inc. (Check here if a Statement of Additional
Information is desired. [ ]
SIGNED AT: ________________________________ ________________________________
(State) (Date)
SIGNATURE(S): _____________________________ ________________________________
(Proposed Annuitant) (Owner, if applicable)
WITNESS: __________________________________
(Writing Agent or Representative)
================================================================================
To be Completed by Writing Agent or To be Completed by Registered
Registered Representative Representative
(Pruco Securities)
________________________________________ ___________________________________
NAME AND TITLE -- Please Print NAME -- Please Print
________________________________________ ___________________________________
CONTRACT NO. OFFICE CODE RHO CONTRACT NO. OFFICE CODE
_______________________(____)___________ __________________(____)___________
OFFICE PHONE NO. BRANCH OFFICE PHONE NO.
================================================================================
VA 200 Ed 9/86 -- Non-Qualified
<TABLE>
<CAPTION>
No. _________________________
APPLICATION FOR AN ANNUITY CONTRACT
[_]PRUDENTIAL'S VARIABLE INVESTMENT PLAN SERIES or
[_]PRUDENTIAL'S FIXED INTEREST PLAN SERIES
Please make check payable to Prudential and mail the check and application to:
The Prudential Insurance Company of America, P.O. Box 2925, Phoenix, AZ 85062.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1a. Proposed Annuitant's name (Please Print) 1b. Date of Birth 2. Sex 3. Social Security No.
Mo. Day Yr. M F
[_] [_] / /
- ------------------------------------------------------------------------------------------------------------------------------------
4. Proposed Annuitant's home address
No. ______ Street ______________________ City ________________ State _______ Zip ___________
====================================================================================================================================
5a. Name of Employer 5b. Employer Soc Sec # 5c. Name of any Trustee or Administrator
(not applicable to individual IRAs) or Tax ID# (if different from Employer)
====================================================================================================================================
5d. Address for Communications and Billing:
If mail is to be sent to [_] Employer [_] Trustee or Administrator, please furnish:
No. ______ Street ______________________ City ________________ State _______ Zip ___________
====================================================================================================================================
6. Under what type of Qualified Plan or Program is the 9. BILLING SCHEDULE (not applicable to individual IRAs)
contract being applied for? (CHECK ONE) [_] Single Purchase Payment
[_] IRA - Individual Retirement Annuity [_] Periodic Purchase Payment Amount $__________
[_] IRA - SEPP (Plan Name) _________________________ To paid [_] Annually [_] Semi-Annually
___________________________________________________ [_] Quarterly [_] Monthly
[_] HR-10/Keogh-Self Employed Plan (name)* _________ Beginning
[_] Corporate plan (name)* _________________________ --------------- ------------------
___________________________________________________ Month Day
[_] Tax Deferred Annuity (Public School) =======================================================
[_] Tax Deferred Annuity (Non-Profit Organization)
*Please attach appropriate adoption agreement or 10. ANNUITY COMMENCEMENT DATE
Determination Letter where applicable.
============================================================================ Annuity payments to begin
7. AMOUNT PAID WITH APPLICATION? $ _____ [_] None on the first day of
For IRA Only: Is this amount a rollover from a qualified ---------- ------------
plan? [_] Yes [_] No (if yes, attach Form Ord 81953A) Month Year
Calendar year(s) for which payment is to be applied ======================================================
(if for more than one year is stated, specify amount for each year) 11. BENEFICIARY DESIGNATION
use remarks section, if necessary.
Primary (Class 1)_________________________________
============================================================================ Relationship to Date of
Annuitant______________ Birth __________________
8. INVESTMENT SELECTION-Complete only if you are applying Contingent (Class 2)______________________________
for a variable annuity contract of Prudential's Variable Investment Relationship to Date of
Plan Series Annuitant______________ Birth __________________
Select one or more: (All % allocations must be expressed in whole =======================================================
numbers) 12. Will the annuity applied for replace any existing
[_] Bond ____ % annuity or life insurance? [_] Yes [_] No If yes,
[_] Money Market ____ % please furnish details:
[_] Common Stock ____ %
[_] Aggressively Managed Flexible ____ % Name of Insured ___________________________________
[_] Conservatively Managed Flexible ____ %
[_] Fixed Account ____ % Insurance Company _________________________________
[_] Other _____________________________ ____ %
Policy Number(s) __________________________________
TOTAL INVESTED 100% =======================================================
==== 13. REMARKS OR SPECIAL REQUESTS
Any future purchases will be allocated in the same
percentage(s) as above unless specific instructions
to change the allocations are submitted.
- ------------------------------------------------------------------------------------------------------------------------------------
VAQ 201 Ed 11/86-Pension V.A.
</TABLE>
<PAGE>
Supplementary Information
================================================================================
NOTE: If unable to obtain an answer to D, E, and F, print "NR" (no response)
immediately following the question and estimate the answer to the
extent possible.
================================================================================
1. COMPLETE THE FOLLOWING INFORMATION REGARDING THE PURCHASER (To be Completed
by writing Agent or Registered Representative)
A. Occupation* __________________________________________________________
*If in the securities business, record the name and address of the employer
here:
_____________________________________________________________________________
B. Marital Status ______________________ C. Number of Dependents_________
D. Estimated Family Income_______________________________________________
E. Estimated Amount of Family Investments and Savings ___________________
F. Amount of Insurance on Purchaser's Life ______________________________
G. Source of Investment _________________________________________________
H. Do you have, from any source, facts that the proposed Purchaser may
replace or change any current insurance or annuity in any company?
[_] Yes [_] No If Yes, please furnish details.
================================================================================
2. COMPLETE IN THE CASE OF A SALE TO A PENSION OR PROFIT SHARING PLAN OR SEPP
IRA
(To Be Completed by writing agent or Registered Representative)
The writing agent or Registered Representative recommending the sale of
this contract is affiliated with Prudential as a
____ District Agent _____ Salaried Employee
____ Special Agent _____ Broker
____ Representative under the standard contract, part-time special agent's
contract, part-time special agent's contract for full-time agents
retired under the Company's Plan, or an agent emeritus contact.
================================================================================
3. ACKNOWLEDGMENT OF PURCHASER
OWNERSHIP: Unless otherwise asked for above, the owner of the contract will be
as required by the applicable retirement plan. If there is no such plan, the
owner will be (1) the applicant if other than the proposed Annuitant, or else
(2) the proposed Annuitant. In either case, any limitations required by the
retirement plan or program will be part of in the contract.
If this application is for a variable annuity contract of Prudential's Variable
Investment Plan Series, I understand that: (1) payments and values are based on
the investment experience of a separate account; and, (2) they may vary and are
not guaranteed as to fixed dollar amount. I have received the current prospectus
for (1) a variable annuity contract of Prudential's Variable Investment Plan
Series; (2) The PrudentiaL Series, Inc.; and, if applying for an IRA, the IRA
disclosure material.
I have read the Section in the prospectus titled "ERISA Disclosure" and conclude
that the representative recommending these contracts and I do not have a
proscribed relationship. Check here if a Statement of Additional Information is
desired.[_]
<TABLE>
<S> <C>
Application made at: Signature of Proposed Annuitant
STATE ____________________________ __________________________________________________________________
Signature of Purchaser (if other than proposed Annuitant)
DATE ____________________________ __________________________________________________________________
(If applicant is a firm or corporation, show that company's name)
WITNESS: _________________________
(Writing Agent or Representative) By_______________________________________________________________
(Signature and title of officer signing for that Company)
==========================================================================================================
To be Completed by Writing Agent or Registered To be Completed by Registered Representative
Representative (Pruco Securities)
______________________________________________ ___________________________________________________
NAME AND TITLE--Please Print NAME--Please Print
______________________________________________ ___________________________________________________
CONTRACT NO. OFFICE CODE RHO CONTRACT NO. OFFICE CODE
______________________________________________ ___________________________________________________
OFFICE BRANCH OFFICE
( ) ( )
______________________________________________ ___________________________________________________
PHONE NO. PHONE NO.
==========================================================================================================
</TABLE>
VAQ 201 Ed 11/86-Pension V.A.
PURCHASE AGREEMENT
This agreement is made on the 4th day of March, 1983, between The
Prudential Insurance Company of America, a New Jersey corporation
("Prudential"), on its own behalf and on behalf of The Prudential Individual
Variable Contract Account The Prudential Qualified Individual Variable Account
("Variable Annuity Accounts"), and The Prudential Series Fund, Inc. a Maryland
corporation (the "Series Fund").
1. The Variable Annuity Accounts are accounts established and maintained by
Prudential under New Jersey law as separate investment accounts for the purpose
of holding and investing payments, made under variable annuity contracts
("Contracts") issued by Prudential, as provided in such Contracts. Such amounts
will be held in one or more of five subaccounts of either of the Variable
Annuity Accounts, as directed by the respective contractholders. The Variable
Annuity Accounts are registered as unit investment trusts under the Investment
Company Act of 194O.
2. The Series Fund is registered as an open-end management company
organized as a series fund under the Investment Company Act of 1940. The Series
Fund will be comprised intially of five Portfolios: a Money Market Portfolio, a
Common Stock Portfolio, a Bond Portfolio, a Conservatively Managed Flexible
Portfolio, and an Aggressively Managed Flexible Portfolio.
<PAGE>
-2-
3. Prudential will invest the assets held in each subaccount of the
Variable Annuity Accounts in shares of the corresponding Portfolio described
above.
NOW, THEREFORE, Prudential and the Series Fund hereby agree as follows:
1. The Series Fund agrees to sell shares in each of its Portfolios to the
corresponding subaccount of each of the Variable Annuity Accounts at net asset
value. Orders for such shares shall be made by wire, hand delivery of written
orders or telephone directed to the transfer agent designated by the Series
Fund. Payment for such shares shall be made by wire transfer of federal funds to
the Custodian designated by the Series Fund within five business days after the
placing of the corresponding orders.
2. Redemption of Series Fund shares shall be requested by wire, hand
delivery of written requests or telephone directed to the said transfer agent
and payment therefor shall be made by wire transfer of federal funds within five
business days after the request for redemption is received.
3. On each day in which the net asset value of the shares of any Portfolio
in the Series Fund is determined, the Series Fund shall provide Prudential with
the net asset value of such shares by 5:30 p.m. New York City time or at such
later time as shall be agreed to by the parties.
<PAGE>
-3-
4. This Agreement shall remain in effect until terminated by the mutual
written consent of the parties hereto.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
BY /s/ John J. Marcus
--------------------------------------
John J. Marcus
Senior Vice President
THE PRUDENTIAL SERIES FUND, INC.
BY /s/ Martin D. Vogt
--------------------------------------
Martin D. Vogt
President
EXHIBIT 9
______________, 1999
The Prudential Insurance Company of America
751 Broad Street
Newark, New Jersey 07102-3777
Gentlemen:
In my capacity as Chief Counsel, Variable Products, Law Department of The
Prudential Insurance Company of America, I have reviewed the establishment of
The Prudential Individual Variable Contract Account (the "Account") on October
12, 1982, by the Board of Directors of The Prudential Insurance Company of
America ("Prudential") as a separate account for assets applicable to certain
variable annuity contracts, pursuant to the provisions of Section 17B:28-7 of
the Revised Statutes of New Jersey. I was responsible for oversight of the
preparation and review of the Registration Statement on Form N-4, as amended,
filed by Prudential with the Securities and Exchange Commission (Registration
No. 33-25434 and Registration No. 2-80897) under the Securities Act of 1933 and
the Investment Company Act of 1940 for the registration of certain variable
annuity contracts issued with respect to the Account.
I am of the following opinion:
(1) Prudential was duly organized under the laws of New Jersey and is a
validly existing corporation.
(2) The Account has been duly created and is validly existing as a
separate account pursuant to the aforesaid provisions of New Jersey
law.
(3) The portion of the assets held in the Account equal to the reserve
and other liabilities for variable benefits under the qualified
variable annuity contracts is not chargeable with liabilities
arising out of any other business Prudential may conduct.
(4) The qualified variable annuity contracts are legal and binding
obligations of Prudential in accordance with their terms.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as I judged to be necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
Clifford E. Kirsch, Esq.
1
EXHIBIT 10
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 25 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated March
19, 1999, relating to the financial statements of the 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 the Registration Statement of our report dated February 26,
1999, relating to the consolidated financial statements of The Prudential
Insurance Company of America and its subsidiaries, 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.
/s/PricewaterhouseCoopers LLP
- -----------------------------
New York, New York
April 23, 1999
1
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN 30/9999*1000 = $3.00 Date: 13-Apr-99
AVG POLICY SIZE 1000
VIP/QVIP MMKT DIBOND EQUITY FLXMGD CONS EQINC RPA HIYLD
- ------------------------------------------------------------------------------------------------------------------------------------
5 YR RATE OF RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00
1000.00 1000.00 1000.00 1000.00 1000.00 1000.00 1000.00 1000.00
93(OR INCEPT) TO '94 ROR 2.82% -4.38% 1.56% -4.31% -2.14% 0.23% 7.11% -3.88%
93 TO '94 ERV 1028.16 956.23 1015.60 956.87 978.59 1002.32 1071.09 961.25
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
93 TO '94 ERV LESS ADMIN CHG 1025.16 953.23 1012.60 953.87 975.59 999.32 1068.09 958.25
94(OR INCEPT) TO '95 ROR 4.57% 19.31% 29.74% 22.66% 15.89% 20.26% 7.52% 16.17%
94 TO '95 ERV 1072.00 1137.26 1313.76 1170.04 1130.58 1201.82 1148.40 1113.18
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
94 TO '95 ERV LESS ADMIN CHG 1069.00 1134.26 1310.76 1167.04 1127.58 1198.82 1145.40 1110.18
95(OR INCEPT) TO '96 ROR 3.99% 3.15% 17.11% 12.29% 11.29% 20.29% 4.41% 10.06%
95 TO '96 ERV 1111.62 1170.02 1535.05 1310.42 1254.86 1442.12 1195.93 1221.92
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
95 TO '96 ERV LESS ADMIN CHG 1108.62 1167.02 1532.05 1307.42 1251.86 1439.12 1192.93 1218.92
96(OR INCEPT) TO '97 ROR 4.17% 7.28% 23.18% 16.56% 12.10% 34.99% 9.97% 12.44%
96 TO '97 ERV 1154.84 1252.00 1887.18 1523.97 1403.37 1942.64 1311.81 1370.55
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
96 TO '97 ERV LESS ADMIN CHG 1151.84 1249.00 1884.18 1520.97 1400.37 1939.64 1308.81 1367.55
97(OR INCEPT) TO '98 ROR 4.14% 5.89% 8.04% 8.91% 10.40% -3.54% 8.09% -3.52%
97 TO '98 ERV 1199.55 1322.57 2035.70 1656.56 1546.00 1870.90 1414.69 1319.39
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
97 TO '98 ERV LESS ADMIN CHG 1196.55 1319.57 2032.70 1653.56 1543.00 1867.90 1411.69 1316.39
ANNUALIZED ROR BEFORE LOAD 3.65% 5.70% 15.24% 10.58% 9.06% 13.31% 7.14% 5.65%
AMT SUBJ TO LOAD IF + RETURN 880.34 868.04 796.73 834.64 845.70 813.21 858.83 868.36
AMT SUBJ TO LOAD IF - RETURN 1076.90 1187.61 1829.43 1488.21 1388.70 1681.11 1270.52 1184.75
AMT SUBJ TO LOAD 880.34 868.04 796.73 834.64 845.70 813.21 858.83 868.36
5TH (OR INCEPTION) SALE CHARGE 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
AMT OF LOAD 26.41 26.04 23.90 25.04 25.37 24.40 25.76 26.05
ERV LESS LOAD 1170.14 1293.53 2008.80 1628.53 1517.63 1843.50 1385.92 1290.34
- ------------------------------------------------------------------------------------------------------------------------------------
ANN.5YR RET W/LOAD AND ADM CHG 3.19% 5.28% 14.97% 10.24% 8.70% 13.01% 6.75% 5.23%
<CAPTION>
VIP/QVIP NATR STIX GLOBAL GVTINC PRUJEN SMCAP
- -----------------------------------------------------------------------------------------------------------------
5 YR RATE OF RETURN
<S> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 5.00 5.00 5.00 5.00 N/A N/A
1000.00 1000.00 1000.00 1000.00 N/A N/A
93(OR INCEPT) TO '94 ROR -5.43% -0.19% -6.02% -6.29% N/A N/A
93 TO '94 ERV 945.69 998.10 939.82 937.05 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
93 TO '94 ERV LESS ADMIN CHG 942.69 995.10 936.82 934.05 N/A N/A
94(OR INCEPT) TO '95 ROR 25.42% 35.45% 14.51% 18.06% N/A N/A
94 TO '95 ERV 1182.32 1347.83 1072.76 1102.76 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
94 TO '95 ERV LESS ADMIN CHG 1179.32 1344.83 1069.76 1099.76 N/A N/A
95(OR INCEPT) TO '96 ROR 29.32% 21.11% 18.27% 1.00% N/A N/A
95 TO '96 ERV 1525.06 1628.72 1265.21 1110.79 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
95 TO '96 ERV LESS ADMIN CHG 1522.06 1625.72 1262.21 1107.79 N/A N/A
96(OR INCEPT) TO '97 ROR -12.64% 31.26% 5.71% 8.37% N/A N/A
96 TO '97 ERV 1329.70 2133.89 1334.31 1200.50 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
96 TO '97 ERV LESS ADMIN CHG 1326.70 2130.89 1331.31 1197.50 N/A N/A
97(OR INCEPT) TO '98 ROR -18.09% 26.89% 23.60% 7.78% N/A N/A
97 TO '98 ERV 1086.75 2703.98 1645.49 1290.68 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
97 TO '98 ERV LESS ADMIN CHG 1083.75 2700.98 1642.49 1287.68 N/A N/A
ANNUALIZED ROR BEFORE LOAD 1.62% 21.98% 10.43% 5.19% N/A N/A 1.09571 W/OUT
AMT SUBJ TO LOAD IF + RETURN 891.63 729.90 835.75 871.23 N/A N/A
AMT SUBJ TO LOAD IF - RETURN 975.37 2430.88 1478.24 1158.91 N/A N/A
AMT SUBJ TO LOAD 891.63 729.90 835.75 871.23 N/A N/A
5TH (OR INCEPTION) SALE CHARGE 3.00% 3.00% 3.00% 3.00% N/A N/A
AMT OF LOAD 26.75 21.90 25.07 26.14 N/A N/A
ERV LESS LOAD 1057.00 2679.08 1617.42 1261.54 N/A N/A
- -----------------------------------------------------------------------------------------------------------------
ANN.5YR RET W/LOAD AND ADM CHG 1.11% 21.79% 10.09% 4.76% N/A N/A 105.13% WITH
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNIT VALUES FOR THE LAST DAY OF EVERY QUARTER SINCE INCEPTION FOR THE PRU VIP/QVIP PRODUCTS
PRU VIP/QVIP MMKT DIBOND EQUITY FLXMGD CONS EQINC RPA HIYLD
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION DATE 02-Jun-83 08-Jun-83 06-Jun-83 27-May-83 02-Jun-83 19-Feb-88 02-May-88 23-Feb-87
WHOLE YEARS SINCE
INCEPTION 15.00 15.00 15.00 15.00 15.00 10.00 10.00 11.00
INCEPTION
UNIT VALUE 1.00018 0.99692 1.00243 1.00055 1.00433 0.99731 1.00345 0.99968
30-Jun-83 1.00530 1.00272 1.02693 1.01753 1.01314 N/A N/A N/A
30-Sep-83 1.02378 1.00281 0.99493 1.00086 1.01412 N/A N/A N/A
31-Dec-83 1.04235 1.01629 0.98158 0.99072 1.01744 N/A N/A N/A
1984 31-Mar-84 1.06224 1.02641 0.94082 0.95477 1.01202 N/A N/A N/A
30-Jun-84 1.08491 1.01686 0.94069 0.94290 1.01601 N/A N/A N/A
30-Sep-84 1.11094 1.07968 1.02073 1.01900 1.06862 N/A N/A N/A
31-Dec-84 1.13500 1.13678 1.04475 1.05536 1.11031 N/A N/A N/A
1985 31-Mar-85 1.15381 1.15086 1.13787 1.11869 1.15299 N/A N/A N/A
30-Jun-85 1.17327 1.23024 1.21202 1.19396 1.22381 N/A N/A N/A
30-Sep-85 1.19150 1.25129 1.15091 1.16127 1.21222 N/A N/A N/A
31-Dec-85 1.21015 1.33247 1.37157 1.31311 1.32837 N/A N/A N/A
1986 31-Mar-86 1.22814 1.40367 1.57422 1.50095 1.46075 N/A N/A N/A
30-Jun-86 1.24479 1.42443 1.61918 1.52792 1.48853 N/A N/A N/A
30-Sep-86 1.26020 1.45293 1.49957 1.43418 1.45031 N/A N/A N/A
31-Dec-86 1.27393 1.50690 1.55982 1.49834 1.49851 N/A N/A N/A
1987 31-Mar-87 1.28845 1.52078 1.89171 1.67720 1.61707 N/A N/A 1.01388
30-Jun-87 1.30457 1.48402 1.95230 1.67787 1.62673 N/A N/A 1.00209
30-Sep-87 1.32190 1.42835 2.05180 1.71478 1.65695 N/A N/A 0.97156
31-Dec-87 1.34087 1.49322 1.56684 1.45340 1.50337 N/A N/A 0.94096
1988 31-Mar-88 1.35917 1.54477 1.71753 1.54476 1.57127 1.00283 N/A 1.00277
30-Jun-88 1.37746 1.55993 1.82741 1.60152 1.61545 1.06131 1.00567 1.01443
30-Sep-88 1.39893 1.58964 1.76701 1.59446 1.61699 1.07484 1.06071 1.03300
31-Dec-88 1.42268 1.59635 1.81228 1.62049 1.63683 1.09874 1.04699 1.05227
1989 31-Mar-89 1.44979 1.60677 1.91512 1.67575 1.68042 1.15617 1.00801 1.06878
30-Jun-89 1.47974 1.72914 2.07947 1.80804 1.76639 1.25045 1.03733 1.09308
30-Sep-89 1.50774 1.73731 2.27225 1.89836 1.83900 1.32945 1.04684 1.06706
31-Dec-89 1.53581 1.79017 2.32328 1.94994 1.89226 1.33181 1.06798 1.01855
1990 31-Mar-90 1.56157 1.76305 2.26411 1.89201 1.87649 1.27764 1.07731 0.97265
30-Jun-90 1.58799 1.81856 2.31918 1.97655 1.94414 1.31537 1.09102 1.02401
30-Sep-90 1.61429 1.83157 1.95179 1.82538 1.88034 1.17152 1.10563 0.92218
31-Dec-90 1.64133 1.91594 2.17588 1.96344 1.96812 1.26685 1.11478 0.88724
1991 31-Mar-91 1.66497 1.96084 2.58450 2.12974 2.09088 1.40599 1.10959 1.02526
28-Jun-91 1.68544 1.99025 2.60830 2.12168 2.11635 1.43223 1.11762 1.10641
30-Sep-91 1.70425 2.09827 2.60343 2.25339 2.19644 1.50276 1.11776 1.16647
31-Dec-91 1.72182 2.20438 2.70927 2.43353 2.31570 1.59617 1.10861 1.22019
1992 31-Mar-92 1.73586 2.16912 2.85556 2.34998 2.29284 1.57543 1.09354 1.30324
30-Jun-92 1.74730 2.25069 2.87122 2.36693 2.32268 1.60774 1.05510 1.34331
30-Sep-92 1.75701 2.33922 2.89727 2.47154 2.37266 1.67452 1.06000 1.39449
31-Dec-92 1.76575 2.33452 3.05622 2.58742 2.44709 1.73693 1.07040 1.41713
1993 31-Mar-93 1.77362 2.42875 3.32862 2.72488 2.56017 1.92882 1.07877 1.49992
30-Jun-93 1.78090 2.48888 3.42357 2.80169 2.62331 1.99606 1.09458 1.56897
30-Sep-93 1.78846 2.56012 3.54449 2.94155 2.70625 2.06034 1.11619 1.58829
31-Dec-93 1.79633 2.54072 3.68057 2.95516 2.71321 2.09889 1.12217 1.67012
1994 31-Mar-94 1.80430 2.46157 3.57550 2.80289 2.63248 2.05769 1.12660 1.66214
30-Jun-94 1.81484 2.42965 3.58857 2.77774 2.63448 2.06517 1.14052 1.64217
30-Sep-94 1.82928 2.43504 3.78210 2.86672 2.68727 2.18204 1.15929 1.63973
30-Dec-94 1.84692 2.42952 3.73800 2.82770 2.65511 2.10375 1.20195 1.60540
1995 31-Mar-95 1.86773 2.52991 4.05731 2.95141 2.76933 2.22908 1.20958 1.68499
30-Jun-95 1.88943 2.70702 4.33227 3.15285 2.89912 2.38653 1.23749 1.74803
30-Sep-95 1.91033 2.76447 4.70277 3.34246 2.99686 2.51048 1.27929 1.79379
31-Dec-95 1.93131 2.89855 4.84971 3.46853 3.07694 2.53006 1.29232 1.86497
1996 31-Mar-96 1.95034 2.83333 5.09322 3.54782 3.17730 2.67539 1.31111 1.92154
30-Jun-96 1.96919 2.83716 5.17367 3.62417 3.21302 2.69254 1.32409 1.94263
30-Sep-96 1.98847 2.89272 5.23847 3.72708 3.25693 2.75868 1.33385 2.02568
31-Dec-96 2.00831 2.98995 5.67957 3.89468 3.42427 3.04353 1.34933 2.05267
1997 31-Mar-97 2.02785 2.97297 5.74831 3.85675 3.41989 3.05903 1.37463 2.05429
30-Jun-97 2.04847 3.09448 6.39521 4.26399 3.66957 3.55431 1.40169 2.16052
30-Sep-97 2.06983 3.19572 7.10653 4.61139 3.86452 4.10719 1.45336 2.28379
31-Dec-97 2.09203 3.20766 6.99611 4.53976 3.83869 4.10841 1.48380 2.30802
1998 31-Mar-98 2.11355 3.25776 7.83953 4.90872 4.06859 4.56104 1.50171 2.41722
30-Jun-98 2.13528 3.33047 7.82240 4.94566 4.12224 4.48870 1.52455 2.41376
30-Sep-98 2.15736 3.40084 6.64350 4.51187 3.97944 3.66324 1.55612 2.17797
31-Dec-98 2.17869 3.39660 7.55872 4.94447 4.23790 3.96281 1.60383 2.22674
<CAPTION>
Date: 13-Apr-99
UNIT VALUES FOR THE LAST DAY OF EVERY QUARTER SINCE INCEPTION FOR THE PRU VIP/QVIP PRODUCTS
PRU VIP/QVIP NATR STIX GLOBAL GVTINC PRUJEN SMCAP TOTAL
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCEPTION DATE 02-May-88 19-Oct-87 01-May-89 01-May-89 01-May-95 01-May-95
WHOLE YEARS SINCE
INCEPTION 10.00 11.00 9.00 9.00 3.00 3.00
INCEPTION
UNIT VALUE 0.98753 0.80241 1.01099 1.00062 1.00870 1.00160 13.81670
30-Jun-83 N/A N/A N/A N/A N/A N/A 5.06563
30-Sep-83 N/A N/A N/A N/A N/A N/A 5.03651
31-Dec-83 N/A N/A N/A N/A N/A N/A 5.04839
1984 31-Mar-84 N/A N/A N/A N/A N/A N/A 4.99628
30-Jun-84 N/A N/A N/A N/A N/A N/A 5.00136
30-Sep-84 N/A N/A N/A N/A N/A N/A 5.29897
31-Dec-84 N/A N/A N/A N/A N/A N/A 5.48221
1985 31-Mar-85 N/A N/A N/A N/A N/A N/A 5.71422
30-Jun-85 N/A N/A N/A N/A N/A N/A 6.03329
30-Sep-85 N/A N/A N/A N/A N/A N/A 5.96718
31-Dec-85 N/A N/A N/A N/A N/A N/A 6.55566
1986 31-Mar-86 N/A N/A N/A N/A N/A N/A 7.16773
30-Jun-86 N/A N/A N/A N/A N/A N/A 7.30484
30-Sep-86 N/A N/A N/A N/A N/A N/A 7.09719
31-Dec-86 N/A N/A N/A N/A N/A N/A 7.33751
1987 31-Mar-87 N/A N/A N/A N/A N/A N/A 9.00908
30-Jun-87 N/A N/A N/A N/A N/A N/A 9.04758
30-Sep-87 N/A N/A N/A N/A N/A N/A 9.14533
31-Dec-87 N/A 0.85935 N/A N/A N/A N/A 9.15801
1988 31-Mar-88 N/A 0.90033 N/A N/A N/A N/A 10.64343
30-Jun-88 1.03564 0.95325 N/A N/A N/A N/A 13.05207
30-Sep-88 0.99000 0.95374 N/A N/A N/A N/A 13.07932
31-Dec-88 1.03792 0.98031 N/A N/A N/A N/A 13.30486
1989 31-Mar-89 1.14595 1.04491 N/A N/A N/A N/A 13.75167
30-Jun-89 1.20265 1.13189 0.98864 1.07011 N/A N/A 16.63693
30-Sep-89 1.30914 1.24716 1.08647 1.07178 N/A N/A 17.41256
31-Dec-89 1.39112 1.26833 1.11445 1.10787 N/A N/A 17.79157
1990 31-Mar-90 1.36906 1.22524 1.02194 1.07736 N/A N/A 17.37843
30-Jun-90 1.34845 1.29438 1.06702 1.11388 N/A N/A 17.90055
30-Sep-90 1.32540 1.11345 0.92869 1.09998 N/A N/A 16.77022
31-Dec-90 1.29539 1.20765 0.95902 1.16389 N/A N/A 17.55953
1991 31-Mar-91 1.35148 1.37708 1.00150 1.17717 N/A N/A 18.87900
28-Jun-91 1.38324 1.36795 0.99418 1.18160 N/A N/A 19.10525
30-Sep-91 1.43378 1.43459 1.04325 1.25997 N/A N/A 19.81436
31-Dec-91 1.41184 1.54800 1.05559 1.33535 N/A N/A 20.66045
1992 31-Mar-92 1.42913 1.50315 1.00468 1.28604 N/A N/A 20.59857
30-Jun-92 1.50681 1.52522 1.05137 1.33707 N/A N/A 20.98544
30-Sep-92 1.54098 1.56677 0.99736 1.40185 N/A N/A 21.47367
31-Dec-92 1.49691 1.63861 1.00733 1.39657 N/A N/A 21.95488
1993 31-Mar-93 1.65960 1.70368 1.09493 1.46481 N/A N/A 23.24657
30-Jun-93 1.81109 1.70478 1.13849 1.51447 N/A N/A 23.94679
30-Sep-93 1.81080 1.74178 1.27875 1.57474 N/A N/A 24.71176
31-Dec-93 1.85126 1.77569 1.42483 1.55337 N/A N/A 25.18232
1994 31-Mar-94 1.79392 1.70182 1.36480 1.48787 N/A N/A 24.47158
30-Jun-94 1.79521 1.70292 1.36149 1.45766 N/A N/A 24.41042
30-Sep-94 1.98188 1.77910 1.41950 1.45439 N/A N/A 25.21634
30-Dec-94 1.75071 1.77231 1.33909 1.45559 N/A N/A 24.72605
1995 31-Mar-95 1.91776 1.93725 1.32967 1.52275 N/A N/A 26.00677
30-Jun-95 2.01860 2.11369 1.45705 1.62031 1.12504 1.06572 29.75315
30-Sep-95 2.10210 2.27331 1.56772 1.64504 1.22835 1.18958 31.30655
31-Dec-95 2.19574 2.40054 1.53340 1.71849 1.24506 1.18974 32.19536
1996 31-Mar-96 2.52219 2.52124 1.62629 1.66881 1.28628 1.24683 33.38169
30-Jun-96 2.60714 2.62380 1.68061 1.66687 1.33056 1.30382 33.98927
30-Sep-96 2.64028 2.69421 1.71720 1.69021 1.35656 1.34006 34.66040
31-Dec-96 2.83947 2.90729 1.81356 1.73574 1.40755 1.40807 36.55399
1997 31-Mar-97 2.74960 2.97296 1.79889 1.71698 1.37160 1.32916 36.45291
30-Jun-97 2.78093 3.47745 2.02810 1.77095 1.63692 1.56100 39.84359
30-Sep-97 3.17386 3.72370 2.10160 1.82623 1.88408 1.80011 43.20191
31-Dec-97 2.48061 3.81606 1.91715 1.88100 1.83193 1.74162 42.24285
1998 31-Mar-98 2.67357 4.33108 2.19992 1.89997 2.09735 1.92781 45.79782
30-Jun-98 2.34689 4.45663 2.27472 1.94367 2.19916 1.83288 45.83701
30-Sep-98 2.12709 3.99966 1.94559 2.03999 1.92797 1.45069 41.58133
31-Dec-98 2.03196 4.84237 2.36959 2.02736 2.48856 1.70776 45.57736
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Date: 13-Apr-99
UNIT VALUES FOR THE LAST DAY OF EVERY QUARTER SINCE INCEPTION FOR THE PRU VIP/QVIP PRODUCTS
PRU VIP/QVIP MMKT DIBOND EQUITY FLXMGD CONS EQINC RPA HIYLD
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION DATE 02-Jun-83 08-Jun-83 06-Jun-83 27-May-83 02-Jun-83 19-Feb-88 02-May-88 23-Feb-87
WHOLE YEARS SINCE
INCEPTION 15.00 15.00 15.00 15.00 15.00 10.00 10.00 11.00
INCEPTION UNIT VALUE 1.00018 0.99692 1.00243 1.00055 1.00433 0.99731 1.00345 0.99968
31-Dec-97 2.09203 3.20766 6.99611 4.53976 3.83869 4.10841 1.48380 2.30802
31-Dec-83 1.04235 1.01629 0.98158 0.99072 1.01744 N/A N/A N/A
31-Dec-84 1.13500 1.13678 1.04475 1.05536 1.11031 N/A N/A N/A
31-Dec-85 1.21015 1.33247 1.37157 1.31311 1.32837 N/A N/A N/A
31-Dec-86 1.27393 1.50690 1.55982 1.49834 1.49851 N/A N/A N/A
31-Dec-87 1.34087 1.49322 1.56684 1.45340 1.50337 N/A N/A 0.94096
31-Dec-88 1.42268 1.59635 1.81228 1.62049 1.63683 1.09874 1.04699 1.05227
31-Dec-89 1.53581 1.79017 2.32328 1.94994 1.89226 1.33181 1.06798 1.01855
31-Dec-90 1.64133 1.91594 2.17588 1.96344 1.96812 1.26685 1.11478 0.88724
31-Dec-91 1.72182 2.20438 2.70927 2.43353 2.31570 1.59617 1.10861 1.22019
31-Dec-92 1.76575 2.33452 3.05622 2.58742 2.44709 1.73693 1.07040 1.41713
31-Dec-93 1.79633 2.54072 3.68057 2.95516 2.71321 2.09889 1.12217 1.67012
30-Dec-94 1.84692 2.42952 3.73800 2.82770 2.65511 2.10375 1.20195 1.60540
31-Dec-95 1.93131 2.89855 4.84971 3.46853 3.07694 2.53006 1.29232 1.86497
31-Dec-96 2.00831 2.98995 5.67957 3.89468 3.42427 3.04353 1.34933 2.05267
31-Dec-97 2.09203 3.20766 6.99611 4.53976 3.83869 4.10841 1.48380 2.30802
31-Dec-98 2.17869 3.39660 7.55872 4.94447 4.23790 3.96281 1.60383 2.22674
<CAPTION>
UNIT VALUES FOR THE LAST DAY OF EVERY QUARTER SINCE INCEPTION FOR THE PRU VIP/QVIP PRODUCTS
PRU VIP/QVIP NATR STIX GLOBAL GVTINC PRUJEN SMCAP Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCEPTION DATE 02-May-88 19-Oct-87 01-May-89 01-May-89 01-May-95 01-May-95
WHOLE YEARS SINCE
INCEPTION 10.00 11.00 9.00 9.00 3.00 3.00
INCEPTION UNIT VALUE 0.98753 0.80241 1.01099 1.00062 1.00870 1.00160 13.81670
31-Dec-97 2.48061 3.81606 1.91715 1.88100 1.83193 1.74162 42.24285
31-Dec-83 N/A N/A N/A N/A N/A N/A 5.04839
31-Dec-84 N/A N/A N/A N/A N/A N/A 5.48221
31-Dec-85 N/A N/A N/A N/A N/A N/A 6.55566
31-Dec-86 N/A N/A N/A N/A N/A N/A 7.33751
31-Dec-87 N/A 0.85935 N/A N/A N/A N/A 9.15801
31-Dec-88 1.03792 0.98031 N/A N/A N/A N/A 13.30486
31-Dec-89 1.39112 1.26833 1.11445 1.10787 N/A N/A 17.79157
31-Dec-90 1.29539 1.20765 0.95902 1.16389 N/A N/A 17.55953
31-Dec-91 1.41184 1.54800 1.05559 1.33535 N/A N/A 20.66045
31-Dec-92 1.49691 1.63861 1.00733 1.39657 N/A N/A 21.95488
31-Dec-93 1.85126 1.77569 1.42483 1.55337 N/A N/A 25.18232
30-Dec-94 1.75071 1.77231 1.33909 1.45559 N/A N/A 24.72605
31-Dec-95 2.19574 2.40054 1.53340 1.71849 1.24506 1.18974 32.19536
31-Dec-96 2.83947 2.90729 1.81356 1.73574 1.40755 1.40807 36.55399
31-Dec-97 2.48061 3.81606 1.91715 1.88100 1.83193 1.74162 42.24285
31-Dec-98 2.03196 4.84237 2.36959 2.02736 2.48856 1.70776 45.57736
PREPARED BY:
REVIEWED BY:
APPROVED BY:
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN Date: 13-Apr-99
SINCE INCEPTION RATE OF RETURN
VIP/QVIP MMKT DIBOND EQUITY FLXMGD CONS EQINC RPA HIYLD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 15.58 15.56 15.57 15.60 15.58 10.86 10.66 11.85
INCEPT. TO '83 ROR 4.22% 1.94% -2.08% -0.98% 1.31% N/A N/A N/A
INCEPT. TO '83 ERV 1042.17 1019.43 979.20 990.17 1013.05 N/A N/A N/A
ANNUAL ADMIN CHARGE 1.74 1.69 1.71 1.79 1.74 N/A N/A N/A
INCEPT TO '83 ERV LESS ADMIN CHG 1040.42 1017.74 977.49 988.38 1011.31 N/A N/A N/A
83 (OR INCEPT) TO '84 ROR 8.89% 11.86% 6.44% 6.53% 9.13% N/A N/A N/A
INCEPT. TO '84 ERV 1132.90 1138.40 1040.40 1052.87 1103.62 N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 N/A N/A N/A
INCEPT. TO 84 ERV LESS ADMIN CHG 1129.89 1135.40 1037.40 1049.87 1100.62 N/A N/A N/A
'84 TO '85 ROR 6.62% 17.21% 31.28% 24.42% 19.64% N/A N/A N/A
'84 TO '85 ERV 1204.71 1330.85 1361.92 1306.28 1316.77 N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 N/A N/A N/A
'84 TO '85 ERV LESS ADMIN CHG 1201.71 1327.85 1358.92 1303.28 1313.77 N/A N/A N/A
'85 TO '86 ROR 5.27% 13.09% 13.73% 14.11% 12.81% N/A N/A N/A
'85 TO '86 ERV 1265.04 1501.68 1545.43 1487.12 1482.05 N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 N/A N/A N/A
'85 TO '86 ERV LESS ADMIN CHG 1262.04 1498.68 1542.43 1484.12 1479.05 N/A N/A N/A
'86 TO '87 ROR 5.25% -0.91% 0.45% -3.00% 0.32% N/A N/A -5.87%
'86 TO '87 ERV 1328.36 1485.07 1549.37 1439.61 1483.85 N/A N/A 941.26
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 N/A N/A 2.56
'86 TO '87 ERV LESS ADMIN CHG 1325.36 1482.07 1546.37 1436.61 1480.85 N/A N/A 938.70
'87(OR INCEPT) TO '88 ROR 6.10% 6.91% 15.66% 11.50% 8.88% 10.17% 4.34% 11.83%
'87 TO '88 ERV 1406.22 1584.43 1788.61 1601.77 1612.31 1101.70 1043.39 1049.75
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 2.60 2.00 3.00
'87 TO '88 ERV LESS ADMIN CHG 1403.22 1581.43 1785.60 1598.77 1609.31 1099.11 1041.39 1046.75
'88(OR INCEPT) TO '89 ROR 7.95% 12.14% 28.20% 20.33% 15.61% 21.21% 2.00% -3.20%
'88 TO '89 ERV 1514.81 1773.44 2289.08 1923.80 1860.44 1332.25 1062.27 1013.20
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
'88 TO '89 ERV LESS ADMIN CHG 1511.81 1770.44 2286.08 1920.80 1857.44 1329.25 1059.27 1010.20
'89(OR INCEPT) TO 90 ROR 6.87% 7.03% -6.34% 0.69% 4.01% -4.88% 4.38% -12.89%
'89 TO '90 ERV 1615.68 1894.82 2141.04 1934.10 1931.90 1264.42 1105.69 879.97
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
'89 TO '90 ERV LESS ADMIN CHG 1612.68 1891.82 2138.04 1931.10 1928.90 1261.42 1102.69 876.97
'90(OR INCEPT) TO '91 ROR 4.90% 15.05% 24.51% 23.94% 17.66% 26.00% -0.55% 37.53%
'90 TO '91 ERV 1691.76 2176.63 2662.16 2393.45 2269.56 1589.33 1096.59 1206.07
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
'90 TO '91 ERV LESS ADMIN CHG 1,688.76 2,173.63 2,659.16 2,390.45 2,266.56 1,586.33 1,093.58 1,203.07
'91(OR INCEPT) TO '92 ROR 2.55% 5.90% 12.81% 6.32% 5.67% 8.82% -3.45% 16.14%
'91 TO '92 ERV 1,731.85 2,301.95 2,999.69 2,541.61 2,395.16 1,726.22 1,055.89 1,397.24
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
'91 TO '92 ERV LESS ADMIN CHG 1,728.85 2,298.95 2,996.69 2,538.61 2,392.16 1,723.22 1,052.89 1,394.24
'92(OR INCEPT) TO '93 ROR 1.73% 8.83% 20.43% 14.21% 10.87% 20.84% 4.84% 17.85%
'92 TO '93 ERV 1,758.79 2,502.01 3,608.88 2,899.41 2,652.31 2,082.32 1,103.82 1,643.15
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
'92 TO '93 ERV LESS ADMIN CHG 1,755.79 2,499.01 3,605.88 2,896.41 2,649.30 2,079.32 1,100.82 1,640.15
'93(OR INCEPT) TO '94 ROR 2.82% -4.38% 1.56% -4.31% -2.14% 0.23% 7.11% -3.88%
'93 TO '94 ERV 1,805.24 2,389.64 3,662.14 2,771.49 2,592.57 2,084.13 1,179.08 1,576.59
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
'93 TO '94 ERV LESS ADMIN CHG 1,802.24 2,386.64 3,659.14 2,768.49 2,589.57 2,081.13 1,176.08 1,573.59
'94(OR INCEPT) TO '95 ROR 4.57% 19.31% 29.74% 22.66% 15.89% 20.26% 7.52% 16.17%
'94 TO '95 ERV 1,884.58 2,847.39 4,747.40 3,395.90 3,000.99 2,502.86 1,264.50 1,828.01
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
'94 TO '95 ERV LESS ADMIN CHG 1,881.58 2,844.39 4,744.40 3,392.90 2,997.99 2,499.86 1,261.50 1,825.01
'95(OR INCEPT) TO '96 ROR 3.99% 3.15% 17.11% 12.29% 11.29% 20.29% 4.41% 10.06%
'95 TO '96 ERV 1,956.60 2,934.08 5,556.24 3,809.76 3,336.41 3,007.20 1,317.15 2,008.69
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
'95 TO '96 ERV LESS ADMIN CHG 1,953.60 2,931.08 5,553.24 3,806.76 3,333.41 3,004.20 1,314.15 2,005.69
96(OR INCEPT) TO '97 ROR 4.17% 7.28% 23.18% 16.56% 12.10% 34.99% 9.97% 12.44%
96 TO '97 ERV 2,035.04 3,144.50 6,840.49 4,437.27 3,736.83 4,055.32 1,445.12 2,255.20
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
96 TO '97 ERV LESS ADMIN CHG 2,032.04 3,141.50 6,837.49 4,434.27 3,733.83 4,052.32 1,442.12 2,252.20
97(OR INCEPT) TO '98 ROR 4.14% 5.89% 8.04% 8.91% 10.40% -3.54% 8.09% -3.52%
97 TO '98 ERV 2,116.21 3,326.54 7,387.35 4,829.58 4,122.14 3,908.71 1,558.77 2,172.88
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
97 TO '98 ERV LESS ADMIN CHG 2,113.21 3,323.54 7,384.35 4,826.58 4,119.14 3,905.71 1,555.77 2,169.88
ANNUALIZED ROR BEFORE LOAD 4.92% 8.02% 13.70% 10.62% 9.51% 13.36% 4.23% 6.75%
AMT SUBJ TO LOAD IF + RETURN 788.68 667.65 261.57 517.34 588.09 609.43 844.42 783.01
AMT SUBJ TO LOAD IF - RETURN 1,901.89 2,991.19 6,645.91 4,343.92 3,707.22 3,515.14 1,400.20 1,952.89
AMT SUBJ TO LOAD 788.68 667.65 261.57 517.34 588.09 609.43 844.42 783.01
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AMT OF LOAD 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
ERV LESS LOAD 2,113.21 3,323.54 7,384.35 4,826.58 4,119.14 3,905.71 1,555.77 2,169.88
- ------------------------------------------------------------------------------------------------------------------------------------
ANN. RET W/LOAD AND ADM CHG 4.92% 8.02% 13.70% 10.62% 9.51% 13.36% 4.23% 6.75%
<CAPTION>
VIP/QVIP NATR STIX GLOBAL GVTINC PRUJEN SMCAP
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 10.66 11.20 9.67 9.67 3.67 3.67
INCEPT. TO '83 ROR N/A N/A N/A N/A N/A N/A
INCEPT. TO '83 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
INCEPT TO '83 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
83 (OR INCEPT) TO '84 ROR N/A N/A N/A N/A N/A N/A
INCEPT. TO '84 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
INCEPT. TO 84 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'84 TO '85 ROR N/A N/A N/A N/A N/A N/A
'84 TO '85 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
'84 TO '85 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A
'85 TO '86 ROR N/A N/A N/A N/A N/A N/A
'85 TO '86 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
'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 7.10% N/A N/A N/A N/A
'86 TO '87 ERV N/A 1070.96 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A 0.60 N/A N/A N/A N/A
'86 TO '87 ERV LESS ADMIN CHG N/A 1070.36 N/A N/A N/A N/A
'87(OR INCEPT) TO '88 ROR 5.10% 14.08% N/A N/A N/A N/A
'87 TO '88 ERV 1051.03 1221.02 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 2.00 3.00 N/A N/A N/A N/A
'87 TO '88 ERV LESS ADMIN CHG 1049.03 1218.02 N/A N/A N/A N/A
'88(OR INCEPT) TO '89 ROR 34.03% 29.38% 10.23% 10.72% N/A N/A
'88 TO '89 ERV 1406.01 1575.88 1102.34 1107.18 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 2.01 2.01 N/A N/A
'88 TO '89 ERV LESS ADMIN CHG 1403.01 1572.88 1100.33 1105.18 N/A N/A
'89(OR INCEPT) TO 90 ROR -6.88% -4.78% -13.95% 5.06% N/A N/A
'89 TO '90 ERV 1306.46 1497.63 946.87 1161.06 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
'89 TO '90 ERV LESS ADMIN CHG 1303.46 1494.63 943.87 1158.06 N/A N/A
'90(OR INCEPT) TO '91 ROR 8.99% 28.18% 10.07% 14.73% N/A N/A
'90 TO '91 ERV 1420.64 1915.86 1038.91 1328.66 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
'90 TO '91 ERV LESS ADMIN CHG 1,417.64 1,912.86 1,035.91 1,325.66 N/A N/A
'91(OR INCEPT) TO '92 ROR 6.03% 5.85% -4.57% 4.58% N/A N/A
'91 TO '92 ERV 1,503.05 2,024.83 988.55 1,386.44 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
'91 TO '92 ERV LESS ADMIN CHG 1,500.05 2,021.83 985.55 1,383.44 N/A N/A
'92(OR INCEPT) TO '93 ROR 23.67% 8.37% 41.45% 11.23% N/A N/A
'92 TO '93 ERV 1,855.15 2,190.97 1,394.03 1,538.76 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
'92 TO '93 ERV LESS ADMIN CHG 1,852.15 2,187.97 1,391.03 1,535.76 N/A N/A
'93(OR INCEPT) TO '94 ROR -5.43% -0.19% -6.02% -6.29% N/A N/A
'93 TO '94 ERV 1,751.55 2,183.80 1,307.32 1,439.09 N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 N/A N/A
'93 TO '94 ERV LESS ADMIN CHG 1,748.55 2,180.80 1,304.32 1,436.09 N/A N/A
'94(OR INCEPT) TO '95 ROR 25.42% 35.45% 14.51% 18.06% 23.43% 18.78%
'94 TO '95 ERV 2,193.03 2,953.83 1,493.58 1,695.47 1,234.32 1,187.84
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 2.01 2.01
'94 TO '95 ERV LESS ADMIN CHG 2,190.03 2,950.83 1,490.58 1,692.47 1,232.32 1,185.83
'95(OR INCEPT) TO '96 ROR 29.32% 21.11% 18.27% 1.00% 13.05% 18.35%
'95 TO '96 ERV 2,832.09 3,573.74 1,762.92 1,709.46 1,393.14 1,403.45
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00
'95 TO '96 ERV LESS ADMIN CHG 2,829.09 3,570.74 1,759.92 1,706.46 1,390.14 1,400.45
96(OR INCEPT) TO '97 ROR -12.64% 31.26% 5.71% 8.37% 30.15% 23.69%
96 TO '97 ERV 2,471.54 4,686.90 1,860.45 1,849.27 1,809.27 1,732.19
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00
96 TO '97 ERV LESS ADMIN CHG 2,468.54 4,683.90 1,857.45 1,846.27 1,806.27 1,729.19
97(OR INCEPT) TO '98 ROR -18.09% 26.89% 23.60% 7.78% 35.84% -1.94%
97 TO '98 ERV 2,022.07 5,943.61 2,295.80 1,989.92 2,453.71 1,695.57
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00
97 TO '98 ERV LESS ADMIN CHG 2,019.07 5,940.61 2,292.80 1,986.92 2,450.71 1,692.57
ANNUALIZED ROR BEFORE LOAD 6.81% 17.24% 8.96% 7.36% 27.68% 15.42% W/OUT 154.60%
AMT SUBJ TO LOAD IF + RETURN 798.09 405.94 770.72 801.31 754.93 830.74
AMT SUBJ TO LOAD IF - RETURN 1,817.16 5,346.55 2,063.52 1,788.23 2,205.64 1,523.31
AMT SUBJ TO LOAD 798.09 405.94 770.72 801.31 754.93 830.74
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% 0.00% 0.00% 4.00% 4.00%
AMT OF LOAD 0.00 0.00 0.00 0.00 30.20 33.23
ERV LESS LOAD 2,019.07 5,940.61 2,292.80 1,986.92 2,420.51 1,659.34
- -----------------------------------------------------------------------------------------------------------------
ANN. RET W/LOAD AND ADM CHG 6.81% 17.24% 8.96% 7.36% 27.25% 14.80% WITH 153.55%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN Date: 13-Apr-99
10 YR RATE OF RETURN
VIP/QVIP MMKT DIBOND EQUITY FLXMGD CONS EQINC RPA HIYLD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00
1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00
88 TO '89 ROR 7.95% 12.14% 28.20% 20.33% 15.61% 21.21% 2.00% -3.20%
88 TO '89 ERV 1,079.52 1,121.41 1,281.97 1,203.30 1,156.05 1,212.12 1,020.05 967.95
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
88 TO '89 ERV LESS ADMIN CHG 1,076.52 1,118.41 1,278.96 1,200.30 1,153.05 1,209.12 1,017.05 964.95
89 (OR INCEPT) TO '90 ROR 6.87% 7.03% -6.34% 0.69% 4.01% -4.88% 4.38% -12.89%
89 TO '90 ERV 1,150.48 1,196.99 1,197.82 1,208.61 1,199.28 1,150.15 1,061.62 840.55
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
89 TO '90 ERV LESS ADMIN CHG 1,147.48 1,193.99 1,194.82 1,205.61 1,196.28 1,147.15 1,058.62 837.55
90 (OR INCEPT) TO '91 ROR 4.90% 15.05% 24.51% 23.94% 17.66% 26.00% -0.55% 37.53%
90 TO '91 ERV 1,203.75 1,373.74 1,487.72 1,494.26 1,407.54 1,445.35 1,052.76 1,151.86
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
90 TO '91 ERV LESS ADMIN CHG 1,200.75 1,370.74 1,484.72 1,491.26 1,404.54 1,442.35 1,049.76 1,148.86
91 (OR INCEPT) TO '92 ROR 2.55% 5.90% 12.81% 6.32% 5.67% 8.82% -3.45% 16.14%
91 TO '92 ERV 1,231.39 1,451.67 1,674.85 1,585.56 1,484.24 1,569.55 1,013.57 1,334.28
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
91 TO '92 ERV LESS ADMIN CHG 1,228.39 1,448.66 1,671.85 1,582.56 1,481.24 1,566.55 1,010.57 1,331.28
92 (OR INCEPT) TO '93 ROR 1.73% 8.83% 20.43% 14.21% 10.87% 20.84% 4.84% 17.85%
92 TO '93 ERV 1,249.66 1,576.62 2,013.39 1,807.49 1,642.32 1,893.00 1,059.45 1,568.95
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
92 TO '93 ERV LESS ADMIN CHG 1,246.66 1,573.62 2,010.39 1,804.49 1,639.32 1,890.00 1,056.45 1,565.95
93 (OR INCEPT) TO '94 ROR 2.82% -4.38% 1.56% -4.31% -2.14% 0.23% 7.11% -3.88%
93 TO '94 ERV 1,281.77 1,504.75 2,041.76 1,726.66 1,604.22 1,894.38 1,131.56 1,505.27
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
93 TO '94 ERV LESS ADMIN CHG 1,278.77 1,501.75 2,038.76 1,723.66 1,601.22 1,891.38 1,128.56 1,502.27
94 (OR INCEPT) TO '95 ROR 4.57% 19.31% 29.74% 22.66% 15.89% 20.26% 7.52% 16.17%
94 TO '95 ERV 1,337.20 1,791.67 2,645.10 2,114.28 1,855.61 2,274.65 1,213.41 1,745.16
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
94 TO '95 ERV LESS ADMIN CHG 1,334.20 1,788.67 2,642.10 2,111.28 1,852.61 2,271.65 1,210.41 1,742.16
95 (OR INCEPT) TO '96 ROR 3.99% 3.15% 17.11% 12.29% 11.29% 20.29% 4.41% 10.06%
95 TO '96 ERV 1,387.40 1,845.07 3,094.20 2,370.68 2,061.73 2,732.68 1,263.81 1,917.50
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
95 TO '96 ERV LESS ADMIN CHG 1,384.40 1,842.07 3,091.20 2,367.68 2,058.73 2,729.68 1,260.81 1,914.50
96 (OR INCEPT) TO '97 ROR 4.17% 7.28% 23.18% 16.56% 12.10% 34.99% 9.97% 12.44%
96 TO '97 ERV 1,442.11 1,976.20 3,807.75 2,759.84 2,307.89 3,684.74 1,386.45 2,152.66
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
96 TO '97 ERV LESS ADMIN CHG 1,439.11 1,973.20 3,804.75 2,756.84 2,304.89 3,681.74 1,383.45 2,149.66
97 (OR INCEPT) TO '98 ROR 4.14% 5.89% 8.04% 8.91% 10.40% -3.54% 8.09% -3.52%
97 TO '98 ERV 1,498.72 2,089.42 4,110.72 3,002.61 2,544.59 3,551.26 1,495.37 2,073.96
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
97 TO '98 ERV LESS ADMIN CHG 1,495.72 2,086.42 4,107.72 2,999.61 2,541.59 3,548.26 1,492.37 2,070.96
ANNUALIZED ROR BEFORE LOAD 4.11% 7.63% 15.18% 11.61% 9.78% 13.50% 4.08% 7.55%
AMT SUBJ TO LOAD IF + RETURN 850.43 791.36 589.23 700.04 745.84 645.17 850.76 792.90
AMT SUBJ TO LOAD IF - RETURN 1,346.15 1,877.78 3,696.95 2,699.65 2,287.43 3,193.44 1,343.13 1,863.86
AMT SUBJ TO LOAD 850.43 791.36 589.23 700.04 745.84 645.17 850.76 792.90
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
AMT OF LOAD 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
ERV LESS LOAD 1,495.72 2,086.42 4,107.72 2,999.61 2,541.59 3,548.26 1,492.37 2,070.96
- ------------------------------------------------------------------------------------------------------------------------------------
ANN.10YR RET W/LOAD AND ADM CHG 4.11% 7.63% 15.18% 11.61% 9.78% 13.50% 4.08% 7.55%
AMT SUBJ TO LOAD IF + RETURN 850.43 791.36 589.23 700.04 745.84 645.17 650.76 792.90
AMT SUBJ TO LOAD IF - RETURN 1,346.15 1,877.78 3,695.95 2,699.65 2,287.43 3,193.44 1,343.13 1,663.86
<CAPTION>
VIP/QVIP NATR STIX GLOBAL GVTINC PRUJEN SMCAP
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 10.00 10.00 9.67 9.67 3.67 3.67
1,000.00 1,000.00 N/A N/A N/A N/A
88 TO '89 ROR 34.03% 29.38% N/A N/A N/A N/A
88 TO '89 ERV 1,340.30 1,293.81 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
88 TO '89 ERV LESS ADMIN CHG 1,337.30 1,290.80 N/A N/A N/A N/A
89 (OR INCEPT) TO '90 ROR -6.88% -4.78% N/A N/A N/A N/A
89 TO '90 ERV 1,245.27 1,229.05 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
89 TO '90 ERV LESS ADMIN CHG 1,242.27 1,226.05 N/A N/A N/A N/A
90 (OR INCEPT) TO '91 ROR 8.99% 28.18% N/A N/A N/A N/A
90 TO '91 ERV 1,353.94 1,571.58 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
90 TO '91 ERV LESS ADMIN CHG 1,350.94 1,568.58 N/A N/A N/A N/A
91 (OR INCEPT) TO '92 ROR 6.03% 5.85% N/A N/A N/A N/A
91 TO '92 ERV 1,432.34 1,660.40 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
91 TO '92 ERV LESS ADMIN CHG 1,429.34 1,657.40 N/A N/A N/A N/A
92 (OR INCEPT) TO '93 ROR 23.67% 8.37% N/A N/A N/A N/A
92 TO '93 ERV 1,767.70 1,796.05 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
92 TO '93 ERV LESS ADMIN CHG 1,764.70 1,793.05 N/A N/A N/A N/A
93 (OR INCEPT) TO '94 ROR -5.43% -0.19% N/A N/A N/A N/A
93 TO '94 ERV 1,668.85 1,789.64 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
93 TO '94 ERV LESS ADMIN CHG 1,665.85 1,786.64 N/A N/A N/A N/A
94 (OR INCEPT) TO '95 ROR 25.42% 35.45% N/A N/A N/A N/A
94 TO '95 ERV 2,089.31 2,419.95 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
94 TO '95 ERV LESS ADMIN CHG 2,086.31 2,416.95 N/A N/A N/A N/A
95 (OR INCEPT) TO '96 ROR 29.32% 21.11% N/A N/A N/A N/A
95 TO '96 ERV 2,697.96 2,927.16 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
95 TO '96 ERV LESS ADMIN CHG 2,694.96 2,924.16 N/A N/A N/A N/A
96 (OR INCEPT) TO '97 ROR -12.64% 31.26% N/A N/A N/A N/A
96 TO '97 ERV 2,354.36 3,838.20 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
96 TO '97 ERV LESS ADMIN CHG 2,351.36 3,835.20 N/A N/A N/A N/A
97 (OR INCEPT) TO '98 ROR -18.09% 26.89% N/A N/A N/A N/A
97 TO '98 ERV 1,926.09 4,866.66 N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 3.00 3.00 N/A N/A N/A N/A
97 TO '98 ERV LESS ADMIN CHG 1,923.09 4,863.66 N/A N/A N/A N/A
ANNUALIZED ROR BEFORE LOAD 6.76% 17.14% N/A N/A N/A N/A W/OUT 97.34%
AMT SUBJ TO LOAD IF + RETURN 807.69 513.63 N/A N/A N/A N/A
AMT SUBJ TO LOAD IF - RETURN 1,730.78 4,377.29 N/A N/A N/A N/A
AMT SUBJ TO LOAD 807.69 513.63 N/A N/A N/A N/A
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% N/A N/A N/A N/A
AMT OF LOAD 0.00 0.00 N/A N/A N/A N/A
ERV LESS LOAD 1,923.09 4,863.66 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
ANN.10YR RET W/LOAD AND ADM CHG 6.76% 17.14% N/A N/A N/A N/A WITH 97.34%
AMT SUBJ TO LOAD IF + RETURN 807.69 513.63 N/A N/A N/A N/A
AMT SUBJ TO LOAD IF - RETURN 1,730.78 4,377.29 N/A N/A N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN QUARTER =======> 4 13-Apr-99
AVG POLICY SIZE 1000 30/9999*1000 = $3.00 ANNUAL CHG Quarter Charge 3.00000
VIP/QVIP MMKT DIBOND EQUITY FLXMGD CONS EQINC RPA HIYLD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YTD % OF RETURN 4.14% 5.89% 8.04% 8.91% 10.40% -3.54% 8.09% -3.52%
ERV(ENDING REDEEMABLE VALUE) 1041.42 1058.90 1080.42 1089.15 1104.00 964.56 1080.89 964.78
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
ERV LESS ADMIN CHARGE 1038.42 1055.90 1077.42 1086.15 1101.00 961.56 1077.89 961.78
ROR BEFORE LOAD 3.84% 5.59% 7.74% 8.61% 10.10% -3.84% 7.79% -3.82%
AMT SUBJ TO LOAD IF + RETURN 896.16 894.41 892.26 891.39 889.90 903.84 892.21 903.82
AMT SUBJ TO LOAD IF - RETURN 934.58 950.31 969.68 977.53 990.90 865.40 970.10 865.61
AMT SUBJ TO LOAD 896.16 894.41 892.26 891.39 889.90 865.40 892.21 865.61
1ST YEAR SALE CHARGE 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
AMT OF LOAD 62.73 62.61 62.46 62.40 62.29 60.58 62.45 60.59
ERV LESS ADMIN CHG & LOAD 975.69 993.29 1014.96 1023.75 1038.70 900.98 1015.44 901.19
- ------------------------------------------------------------------------------------------------------------------------------------
RETURN W/SALES LOAD AND ADM CHG -2.43% -0.67% 1.50% 2.38% 3.87% -9.90% 1.54% -9.88%
<CAPTION>
VIP/QVIP NATR STIX GLOBAL GVTINC PRUJEN SMCAP
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
YTD % OF RETURN -18.09% 26.89% 23.60% 7.78% 35.84% -1.94%
ERV(ENDING REDEEMABLE VALUE) 819.14 1268.94 1236.00 1077.81 1358.44 980.56
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00
ERV LESS ADMIN CHARGE 816.14 1265.94 1233.00 1074.81 1355.44 977.56
ROR BEFORE LOAD -18.39% 26.59% 23.30% 7.48% 35.54% -2.24% 108.30% W/OUT
AMT SUBJ TO LOAD IF + RETURN 918.39 873.41 876.70 892.52 864.46 902.24
AMT SUBJ TO LOAD IF - RETURN 734.52 1139.35 1109.70 967.33 1219.89 879.80
AMT SUBJ TO LOAD 734.52 873.41 876.70 892.52 864.46 879.80
1ST YEAR SALE CHARGE 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
AMT OF LOAD 51.42 61.14 61.37 62.48 60.51 61.59
ERV LESS ADMIN CHG & LOAD 764.72 1204.81 1171.63 1012.33 1294.92 915.97
- --------------------------------------------------------------------------------------------------------------------
RETURN W/SALES LOAD AND ADM CHG -23.53% 20.48% 17.16% 1.23% 29.49% -8.40% 22.84% WITH
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN Date: 13-Apr-99
AVG POLICY SIZE 1000 30/9999*1000 = $3.00 ANNUAL CHG
VIP/QVIP MMKT DIBOND EQUITY FLXMGD CONS EQINC RPA HIYLD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR % OF RETURN 4.14% 5.89% 8.04% 8.91% 10.40% -3.54% 8.09% -3.52%
ERV(ENDING REDEEMABLE VALUE) 1041.42 1058.90 1080.42 1089.15 1104.00 964.56 1080.89 964.78
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
ERV LESS ADMIN CHARGE 1038.42 1055.90 1077.42 1086.15 1101.00 961.56 1077.89 961.78
ROR BEFORE LOAD 3.84% 5.59% 7.74% 8.61% 10.10% -3.84% 7.79% -3.82%
AMT SUBJ TO LOAD IF + RETURN 896.16 894.41 892.26 891.39 889.90 903.84 892.21 903.82
AMT SUBJ TO LOAD IF - RETURN 934.58 950.31 969.68 977.53 990.90 865.40 970.10 865.61
AMT SUBJ TO LOAD 896.16 894.41 892.26 891.39 889.90 865.40 892.21 865.61
1ST YEAR SALE CHARGE 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
AMT OF LOAD 62.73 62.61 62.46 62.40 62.29 60.58 62.45 60.59
ERV LESS ADMIN CHG & LOAD 975.69 993.29 1014.96 1023.75 1038.70 900.98 1015.44 901.19
- ------------------------------------------------------------------------------------------------------------------------------------
RETURN W/SALES LOAD AND ADM CHG -2.43% -0.67% 1.50% 2.38% 3.87% -9.90% 1.54% -9.88%
<CAPTION>
VIP/QVIP NATR STIX GLOBAL GVTINC PRUJEN SMCAP
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR % OF RETURN -18.09% 26.89% 23.60% 7.78% 35.84% -1.94%
ERV(ENDING REDEEMABLE VALUE) 819.14 1268.94 1236.00 1077.81 1358.44 980.56
ANNUAL ADMIN CHARGE 3.00 3.00 3.00 3.00 3.00 3.00
ERV LESS ADMIN CHARGE 816.14 1265.94 1233.00 1074.81 1355.44 977.56
ROR BEFORE LOAD -18.39% 26.59% 23.30% 7.48% 35.54% -2.24% 108.30% W/OUT
AMT SUBJ TO LOAD IF + RETURN 918.39 873.41 876.70 892.52 864.46 902.24
AMT SUBJ TO LOAD IF - RETURN 734.52 1139.35 1109.70 967.33 1219.89 879.80
AMT SUBJ TO LOAD 734.52 873.41 876.70 892.52 864.46 879.80
1ST YEAR SALE CHARGE 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
AMT OF LOAD 51.42 61.14 61.37 62.48 60.51 61.59
ERV LESS ADMIN CHG & LOAD 764.72 1204.81 1171.63 1012.33 1294.92 915.97
- -------------------------------------------------------------------------------------------------------------------
RETURN W/SALES LOAD AND ADM CHG -23.53% 20.48% 17.16% 1.23% 29.49% -8.40% 22.84% WITH
</TABLE>
