AS FILED WITH THE SEC ON ______________. REGISTRATION NO. 2-89780
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 25
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
----------
PRUCO LIFE OF NEW JERSEY
VARIABLE APPRECIABLE ACCOUNT
(Exact Name of Trust)
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(Name of Depositor)
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 437-4016, EXT. 46
(Address and telephone number of principal executive offices)
THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(Name and address of agent for service)
Copy to:
JEFFREY C. MARTIN
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036
----------
Variable Appreciable Life Insurance Contracts--The Registrant has registered an
indefinite amount of securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Rule 24f-2 notice for fiscal year 1995 was filed on
February 29, 1996.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on May 1, 1996 pursuant to paragraph (b) of Rule 485
(date)
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on _________________ pursuant to paragraph (a) of Rule 485
(date)
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY FORM N-B-2)
N-B-2 ITEM NUMBER LOCATION
- ----------------- --------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Sale of the Contracts and Sales Commissions
5. Pruco Life of New Jersey Variable Appreciable Account
6. Pruco Life of New Jersey Variable Appreciable Account
7. Not Applicable
8. Not Applicable
9. Litigation
10. Brief Description of the Contract; Short-Term
Cancellation Right, or "Free Look"; Contract Forms;
Transfers; How a Contract's Cash Surrender Value Will
Vary; How a Contract's Death Benefit Will Vary;
Surrender of a Contract; Withdrawal of Excess Cash
Surrender Value; When Proceeds are Paid; Contract
Loans; Lapse and Reinstatement; Options on Lapse;
Right to Exchange a Contract for a Fixed-Benefit
Insurance Policy; Contracts Issued in Connection With
Tax-Qualified Pension Plans; The Fixed-Rate Option;
Voting Rights; Substitution of Series Fund Shares;
Increases in Face Amount; Decreases in Face Amount
11. Brief Description of the Contract; Pruco Life of New
Jersey Variable Appreciable Account
12. Cover Page; Brief Description of the Contract; The
Prudential Series Fund, Inc.; Sale of the Contract and
Sales Commissions
13. Brief Description of the Contract; The Prudential
Series Fund, Inc.; Premiums; Allocation of Premiums;
Charges and Expenses; Reduction of Charges for
Concurrent Sales to Several Individuals; Sale of the
Contract and Sales Commissions
14. Brief Description of the Contract; Detailed Information
for Prospective Contract Owners
15. Brief Description of the Contract; Premiums; Allocation
of Premiums; Transfers; The Fixed Rate Option
16. Brief Description of the Contract; Detailed Information
for Prospective Contract Owners
17. Surrender of a Contract; Withdrawal of Excess Cash
Surrender Value; When Proceeds are Paid
18. Pruco Life of New Jersey Variable Appreciable Account;
How a Contract's Cash Surrender Value Will Vary
19. Reports to Contract Owners
20. Not Applicable
<PAGE>
N-B-2 ITEM NUMBER LOCATION
- ----------------- --------
21. Contract Loans
22. Not Applicable
23. Not Applicable
24. Other General Contract Provisions; The Prudential
Series Fund, Inc.
25. Pruco Life Insurance Company of New Jersey
26. Brief Description of the Contract; The Prudential
Series Fund, Inc.; Charges and Expenses
27. Pruco Life Insurance Company of New Jersey; The
Prudential Series Fund, Inc.
28. Pruco Life Insurance Company of New Jersey; Directors
and Officers
29. Pruco Life Insurance Company of New Jersey
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Pruco Life Insurance Company of New Jersey
36. Not Applicable
37. Not Applicable
38. Sale of the Contract and Sales Commissions
39. Sale of the Contract and Sales Commissions
40. Not Applicable
41. Sale of the Contract and Sales Commissions
42. Not Applicable
43. Not Applicable
44. Brief Description of the Contract; The Prudential
Series Fund, Inc.; How a Contract's Cash Surrender
Value Will Vary; How a Contract's Death Benefit Will
Vary
45. Not Applicable
46. Brief Description of the Contract; Pruco Life of New
Jersey Variable Appreciable Account; The Prudential
Series Fund, Inc.
47. Pruco Life of New Jersey Variable Appreciable Account
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Not Applicable
52. Substitution of Series Fund Shares
<PAGE>
N-B-2 ITEM NUMBER LOCATION
- ----------------- --------
53. Tax Treatment of Contract Benefits
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements; Financial Statements of Pruco
Life of New Jersey Variable Appreciable Account;
Financial Statements of Pruco Life Insurance Company
of New Jersey
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
PROSPECTUS
May 1, 1996
PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY
VARIABLE APPRECIABLE ACCOUNT
Variable
APPRECIABLE
LIFE(R) -----------
INSURANCE CONTRACTS
This prospectus describes certain variable life insurance contracts issued by
Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey"), a stock
life insurance company that is an indirect wholly-owned subsidiary of The
Prudential Insurance Company of America ("The Prudential"). Pruco Life of New
Jersey calls these contracts its VARIABLE APPRECIABLE LIFE(R) Insurance
Contracts* (the "Contract"). As of May 1, 1992, these Contracts are no longer
available for sale. These Contracts provide whole-life insurance protection.
That is, they provide lifetime insurance coverage, as long as scheduled premiums
are paid or charges are provided for by favorable investment experience. They
also generally provide a cash surrender value for the owner if the Contract is
terminated during the insured's lifetime. A purchaser may choose one form of
this Contract which provides a death benefit that remains fixed in the amount
initially selected (unless it is increased by Pruco Life of New Jersey to ensure
that the Contract maintains its status as life insurance under the Internal
Revenue Code) or a second form which provides a death benefit that varies daily
with the investment performance of the subaccounts of the Pruco Life of New
Jersey Variable Appreciable Account (the "Account") to which the owner allocates
the invested portion of the premiums. Even under the second form of Contract,
however, investment performance cannot cause the death benefit to be less than a
guaranteed minimum amount (the face amount specified in the Contract). The cash
surrender value of a Contract generally increases with the payment of each
premium, and it also varies daily with investment performance. The cash
surrender value also decreases to reflect the imposition of charges. There is no
guaranteed minimum cash surrender value.
A portion of a Contract's premiums and the earnings on those premiums will be
held in one or more of the following ways. They can be invested in one or more
of the thirteen current subaccounts of the Account. They can be allocated to a
FIXED-RATE OPTION. Or, they can be invested in the Pruco Life of New Jersey
Variable Contract Real Property Account (the "REAL PROPERTY ACCOUNT") which is
described in a prospectus that is attached to this one. If one or more of the
subaccounts is chosen, the assets of each subaccount will be invested in a
corresponding portfolio of The Prudential Series Fund, Inc. (the "Series Fund").
The attached prospectus for the Series Fund and its statement of additional
information describe the investment objectives of and the risks of investing in
the thirteen portfolios of the Series Fund currently available to Contract
owners: the MONEY MARKET PORTFOLIO, the DIVERSIFIED BOND PORTFOLIO, the
GOVERNMENT INCOME PORTFOLIO, the CONSERVATIVE BALANCED PORTFOLIO, the FLEXIBLE
MANAGED PORTFOLIO, the HIGH YIELD BOND PORTFOLIO, the STOCK INDEX PORTFOLIO, the
EQUITY INCOME PORTFOLIO, the EQUITY PORTFOLIO, the PRUDENTIAL JENNISON
PORTFOLIO, the SMALL CAPITALIZATION STOCK PORTFOLIO, the GLOBAL PORTFOLIO, and
the NATURAL RESOURCES PORTFOLIO. Other subaccounts and portfolios may be added
in the future. Interest is credited daily upon any portion of the premium
payment allocated to the fixed-rate option at rates periodically declared by
Pruco Life of New Jersey in its sole discretion but never less than 4%. This
prospectus generally describes only the portion of the contract involving the
Pruco Life of New Jersey Variable Appreciable Account.
REPLACING EXISTING LIFE INSURANCE WITH A CONTRACT DESCRIBED IN THIS PROSPECTUS
MAY NOT BE TO YOUR ADVANTAGE. IF YOU CURRENTLY OWN A LIFE INSURANCE CONTRACT,
THE BENEFITS AND COSTS OF PURCHASING ADDITIONAL INSURANCE UNDER THE EXISTING
POLICY SHOULD BE COMPARED WITH THE BENEFITS AND COSTS OF PURCHASING THE CONTRACT
DESCRIBED IN THIS PROSPECTUS. IN MAKING THIS COMPARISON, YOU SHOULD CONSULT WITH
A QUALIFIED TAX ADVISOR.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ATTACHED TO
A CURRENT PROSPECTUS FOR THE PRUDENTIAL SERIES FUND, INC. AND A CURRENT
PROSPECTUS FOR THE PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY
ACCOUNT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 437-4016, Ext. 46
*APPRECIABLE LIFE is a registered mark of The Prudential.
VAL-2 Ed 5-96
Catalog #64696FY
<PAGE>
PROSPECTUS CONTENTS
Page
BRIEF DESCRIPTION OF THE CONTRACT.......................................... 1
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY, PRUCO
LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT, AND THE VARIABLE
INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT......................... 4
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY.............................. 4
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT................... 4
THE PRUDENTIAL SERIES FUND, INC......................................... 4
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT........ 5
WHICH INVESTMENT OPTION SHOULD BE SELECTED.............................. 6
DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS....................... 6
REQUIREMENTS FOR ISSUANCE OF A CONTRACT................................. 6
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"............................ 6
CONTRACT FORMS.......................................................... 7
PREMIUMS ............................................................... 8
CONTRACT DATE........................................................... 9
ALLOCATION OF PREMIUMS.................................................. 10
TRANSFERS............................................................... 10
CHARGES AND EXPENSES.................................................... 11
REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS........ 14
HOW A CONTRACT'S CASH SURRENDER VALUE WILL VARY......................... 15
HOW A CONTRACT'S DEATH BENEFIT WILL VARY................................ 15
WHEN A CONTRACT BECOMES PAID-UP......................................... 16
FLEXIBILITY AS TO PAYMENT OF PREMIUMS................................... 17
SURRENDER OF A CONTRACT................................................. 17
WITHDRAWAL OF EXCESS CASH SURRENDER VALUE............................... 17
INCREASES IN FACE AMOUNT................................................ 18
DECREASES IN FACE AMOUNT................................................ 19
LAPSE AND REINSTATEMENT................................................. 20
WHEN PROCEEDS ARE PAID.................................................. 20
LIVING NEEDS BENEFIT.................................................... 21
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED
PREMIUMS ............................................................. 21
CONTRACT LOANS ......................................................... 23
REPORTS TO CONTRACT OWNERS.............................................. 24
OPTIONS ON LAPSE........................................................ 24
RIGHT TO EXCHANGE A CONTRACT FOR A FIXED-BENEFIT INSURANCE POLICY....... 25
SALE OF THE CONTRACT AND SALES COMMISSIONS.............................. 25
TAX TREATMENT OF CONTRACT BENEFITS...................................... 25
WITHHOLDING............................................................. 27
CONTRACTS ISSUED IN CONNECTION WITH TAX-QUALIFIED PENSION PLANS......... 27
THE FIXED-RATE OPTION................................................... 27
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS..... 28
OTHER GENERAL CONTRACT PROVISIONS....................................... 28
RIDERS ............................................................... 29
VOTING RIGHTS........................................................... 29
SUBSTITUTION OF SERIES FUND SHARES...................................... 30
STATE REGULATION........................................................ 30
EXPERTS ............................................................... 30
LITIGATION.............................................................. 30
ADDITIONAL INFORMATION.................................................. 30
FINANCIAL STATEMENTS.................................................... 30
DIRECTORS AND OFFICERS..................................................... 31
<PAGE>
Page
FINANCIAL STATEMENTS OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE
ACCOUNT.................................................................. A1
FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY......... B1
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR THE
SERIES FUND, AND THE PROSPECTUS FOR THE REAL PROPERTY ACCOUNT.
<PAGE>
BRIEF DESCRIPTION OF THE CONTRACT
The Variable APPRECIABLE LIFE Insurance Contracts (the "Contract") described in
this prospectus are in many respects similar to conventional "fixed-benefit"
whole-life insurance. Like conventional whole-life insurance, the Contracts
provide a guaranteed death benefit for the insured's lifetime if scheduled
premiums are paid; due to the pooling of mortality risks, this death benefit is
many times the scheduled annual premium. The Contracts also have similarities to
what have become generally known as "universal life" insurance policies. Like
universal life insurance policies, the Contracts permit an owner considerable
flexibility in paying premiums and adjusting the face amount of insurance. To a
significant extent the Contracts provide features and choices for the Contract
owner that differ from those provided by either of those types of life insurance
policies. As of May 1, 1992, these Contracts are no longer available for sale.
The Contracts are first and foremost life insurance. They provide insurance
protection for the entire lifetime of the insured. But the Contracts also have
significant and useful investment features. The Contract owner decides in which
investment option[s] the amounts held under the Contract--derived from the
payment of premiums and the earnings thereon--will be invested, and the cash
surrender value of the Contract will increase with favorable investment
experience and decrease with unfavorable investment experience. The cash
surrender value of a Contract also reflects the imposition of the various
Contract charges. The Contract owner will be able, from time to time, to
reallocate and transfer amounts invested under the Contract among the various
subaccounts, the fixed-rate option, and the Real Property Account.
The owner may choose either of two Contract Forms. Under Contract Form A, the
death benefit remains fixed in amount (unless the Contract becomes paid-up or,
under a newer version of the Contract that first began to be sold in most
jurisdictions in September of 1986, unless the death benefit is increased to
ensure that the Contract continues to satisfy the Internal Revenue Code's
definition of life insurance) and only the cash surrender value will vary with
investment experience. Under Contract Form B, both the death benefit and the
cash surrender value will vary with investment experience, but the death benefit
will never be less than the face amount regardless of investment experience.
There is no minimum cash surrender value under either form of the Contract.
(Throughout this prospectus, unless we specifically state otherwise, all
descriptions of and references to the "Contract" apply to both old and new Form
A and Form B Contracts.)
There is a special feature applicable to Contracts issued on insureds who are 14
years of age or less. Under such Contracts, the face amount increases to 150% of
the initial face amount on the first Contract anniversary after the insured
reaches the age of 21, provided the Contract is not then in default. This new
face amount becomes the new guaranteed minimum death benefit. In addition, in
those states where it is approved, a Contract owner may have the right under
certain conditions to increase or decrease the face amount of insurance. In the
case of an increase in face amount, one of the conditions is the provision of
evidence of insurability satisfactory to Pruco Life Insurance Company of New
Jersey ("Pruco Life of New Jersey"). See INCREASES IN FACE AMOUNT, page 18 and
DECREASES IN FACE AMOUNT, page 19.
One significant feature of the Contract is the flexibility it provides the
Contract owner with respect to the payment of premiums. Each Contract has a
scheduled premium payable annually, semi-annually, quarterly or monthly. But the
Contract owner is generally permitted, within very broad limits, to pay greater
than scheduled premiums and the net portion of such payments will promptly be
invested in the manner previously selected by the owner. Cash surrender values
will generally be increased whenever premiums are paid; and unless earlier
unfavorable investment experience must first be offset, the amount payable upon
death under Contract Form B will also generally be increased by the payment of
premiums. Subsequent values under the Contract will increase or decrease with
subsequent investment experience to reflect the amounts invested under the
Contract.
As long as scheduled premiums are paid on or before the due dates (or within a
61-day grace period after the scheduled due date) and missed premiums are made
up later with interest, the Contract will not lapse, even if investment
experience is unfavorable. Thus, the payment of scheduled premiums guarantees
insurance protection at least equal to the face amount of the Contract.
However, the failure to pay a minimum scheduled premium will not necessarily
result in lapse of the Contract. If the net investment experience of the
selected subaccounts has been greater than the 4% assumed net rate of return
used by Pruco Life of New Jersey's actuaries in designing this Contract, with a
consequent increase in the amount invested under the Contract, and the Contract
owner then fails to pay premiums when due, Pruco Life of New Jersey will use the
"excess" amount to pay the charges due under the Contract and thus keep the
Contract in force. See LAPSE AND REINSTATEMENT, page 20. In this case, so long
as the excess amount is sufficient, the Contract will not lapse despite the
owner's failure to pay scheduled premiums.
1
<PAGE>
The amount of the scheduled premium, for a specific face amount of insurance,
depends upon the insured's sex, age at issue, and risk classification. The
scheduled premium cannot be increased until the Contract anniversary after the
insured's 65th birthday or, if later, 10 years from the date the Contract is
issued. A new, higher scheduled premium, called the "second premium amount," is
payable after this period. The second premium amount will be stated in each
Contract. It is calculated on the assumptions that only scheduled premiums have
been paid, and they have been paid when due, that maximum mortality charges
(covering the cost of insurance for the period in question) and expense charges
have been deducted, and that the net investment return upon the amount invested
under the Contract has been equal to the 4% assumed net rate of return. If the
amount invested under the Contract is higher than would be the case if the above
conservative assumptions are borne out by experience, which currently appears to
be a reasonable expectation, premiums after the insured's 65th birthday (or at
10 years after the issue date, if later) will be lower than the second premium
amount stated in the Contract (and may or may not be higher than the initial
scheduled premium).
In some cases the payment of greater than scheduled premiums or favorable
investment experience may result in the Contract becoming paid-up so that no
further premium payments will be necessary. If this happens, Pruco Life of New
Jersey may refuse to accept any further premium payments. If a Contract becomes
paid-up, the death benefit then in force becomes the guaranteed minimum death
benefit; apart from this guarantee, the death benefit and the cash surrender
value of the paid-up Contract will thereafter vary daily to reflect the
investment experience of amounts invested under the Contract. Contracts sold
beginning in September of 1986 in jurisdictions where all necessary approvals
have been obtained will no longer become paid-up. Instead, the death benefit
will be increased so that it is always at least as great as the Contract fund
divided by the net single premium for the insured's attained age at such time.
See HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page 15. The term "Contract fund"
refers generally to the amount invested under the Contract and is defined under
CHARGES AND EXPENSES on page 11. The term "net single premium," the factor which
determines how much the death benefit will increase for a given increase in the
Contract fund, is defined and illustrated under item 2 of HOW A CONTRACT'S DEATH
BENEFIT WILL VARY ON PAGE 15. Whenever the death benefit is determined in this
way, Pruco Life of New Jersey reserves the right to refuse to accept further
premium payments, although in practice the payment of the lesser of 2 years'
scheduled premiums or the average of all premiums paid over the last 5 years
will generally be allowed.
There are circumstances, such as the payment of premiums substantially in excess
of scheduled premiums, under which the Contract may become a Modified Endowment
Contract under federal tax law. If it does, loans and other pre-death
distributions are includible in gross income on an income-first basis. A 10%
penalty tax may be imposed on income distributed before the insured attains age
59 1/2. Prospective purchasers and Contract owners are advised to consult a
qualified tax advisor before taking steps that may affect whether the Contract
becomes a Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS,
page 25.
The owner of a Contract chooses the investment subaccount[s] of Pruco Life of
New Jersey's Variable Appreciable Account (the "Account") in which the assets
related to the Contract will be held. At present there are thirteen subaccounts.
Each is currently invested in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"), a series mutual fund to which The Prudential
Insurance Company of America ("The Prudential") acts as investment advisor. The
MONEY MARKET PORTFOLIO is invested in short-term debt obligations similar to
those purchased by money market funds; the DIVERSIFIED BOND PORTFOLIO (formerly
the Bond Portfolio) is invested primarily in high quality medium-term corporate
and government debt securities; the GOVERNMENT INCOME PORTFOLIO (formerly the
Government Securities Portfolio) is invested primarily in U.S. Government
securities including intermediate and long-term U.S. Treasury securities and
debt obligations issued by agencies of or instrumentalities established,
sponsored or guaranteed by the U.S. Government; the CONSERVATIVE BALANCED
PORTFOLIO (formerly the Conservatively Managed Flexible Portfolio) is invested
in a mix of money market instruments, fixed income securities, and common
stocks, in proportions believed by the investment manager to be appropriate for
an investor who desires diversification of investment who prefers a relatively
lower risk of loss and a correspondingly reduced chance of high appreciation;
the FLEXIBLE MANAGED PORTFOLIO (formerly the Aggressively Managed Flexible
Portfolio) is invested in a mix of money market instruments, fixed income
securities, and common stocks, in proportions believed by the investment manager
to be appropriate for an investor desiring diversification of investment who is
willing to accept a relatively high level of loss in an effort to achieve
greater appreciation; the HIGH YIELD BOND PORTFOLIO is invested primarily in
high yield fixed income securities of medium to lower quality, also known as
high risk bonds; the STOCK INDEX PORTFOLIO is invested in common stocks selected
to duplicate the price and yield performance of the Standard & Poor's 500
Composite Stock Price Index; the EQUITY INCOME PORTFOLIO (formerly the High
Dividend Stock Portfolio) is invested primarily in common stocks and convertible
securities that provide favorable prospects for investment income returns above
those of the Standard & Poor's 500 Stock Index or the NYSE Composite Index; the
EQUITY PORTFOLIO (formerly the Common Stock Portfolio) is invested primarily in
common stocks; the PRUDENTIAL JENNISON PORTFOLIO (formerly the Growth Stock
Portfolio) is invested primarily in equity securities of established companies
with above-average prospects; the SMALL CAPITALIZATION STOCK PORTFOLIO is
invested primarily in equity securities of publicly-traded companies with small
market capitalization; the GLOBAL PORTFOLIO (formerly the Global Equity
Portfolio)
2
<PAGE>
is invested in common stocks and common stock equivalents (such as convertible
debt securities) of foreign and domestic issuers; the NATURAL RESOURCES
PORTFOLIO is invested primarily in common stocks and convertible securities of
natural resource companies, and in securities (typically debt securities or
preferred stock) the terms of which are related to the market value of a natural
resource. Further information about the Series Fund portfolios can be found
under THE PRUDENTIAL SERIES FUND, INC. on page 4.
The Contract owner may also choose to invest part of his or her net premiums in
the Pruco Life of New Jersey Variable Contract Real Property Account (the "Real
Property Account"), which, through a partnership, invests primarily in
income-producing real property. If a Contract owner elects to invest a portion
of his or her net premiums in the Real Property Account, the assets will be
maintained in a subaccount of the Real Property Account related to the Contract
that provides the mechanism and maintains the records whereby the various
Contract charges are made. The investment objectives of the Real Property
Account and the partnership are described briefly under PRUCO LIFE OF NEW JERSEY
VARIABLE CONTRACT REAL PROPERTY ACCOUNT on page 5.
Because the assets that relate to the Contract are invested in these ways, the
Contract offers an opportunity for the cash surrender value to appreciate more
rapidly than it would under comparable fixed-benefit whole-life insurance. But
the owner must accept the risk that if investment performance of the chosen
option[s] is unfavorable the cash surrender value may not appreciate as rapidly
and, indeed, may decrease in value. Contract owners who prefer at any time to
accept a periodically declared fixed rate of return and avoid this risk may
choose a fixed-rate option. See THE FIXED-RATE OPTION, page 27.
Pruco Life of New Jersey deducts certain charges from each premium payment and
from the amounts held in the designated investment options. In addition, Pruco
Life of New Jersey makes certain additional charges if a Contract lapses or is
surrendered during the first 10 Contract years. All these charges, which are
largely designed to cover insurance costs and sales and administrative expenses,
are fully described under CHARGES AND EXPENSES on page 11. In brief, and subject
to that fuller description, the following charges may be made: (1) $2 is
deducted from each premium payment to cover premium collection and processing
costs; (2) a sales charge is deducted from each premium received in an amount up
to 5% of the portion of the premium remaining after the $2 processing charge has
been deducted (on a non-guaranteed basis, this charge is waived for premiums
paid after total premiums paid under the Contract exceed 5 years of scheduled
premiums on an annual basis); in addition, if the Contract lapses or is
surrendered during the first 10 years, a deferred sales charge is assessed; the
maximum deferred sales charge is 25% of the first year's scheduled premium and
5% of the scheduled premiums for the next 4 Contract years; beginning in the
eighth month of year 6 this charge is reduced monthly until it disappears after
year 10; (3) a premium tax charge (equal to 2.5% of the premium remaining after
the $2 processing charge has been deducted) is deducted from each premium
payment; (4) each month, the Contract fund is reduced by an administrative
charge of $2.50 per Contract and up to $0.02 per $1,000 of face amount of
insurance; (5) each month, the Contract fund is reduced by a guaranteed minimum
death benefit risk charge of not more than $0.01 per $1,000 of face amount of
insurance; (6) each month, a charge for anticipated mortality is deducted, with
the maximum charge based on the 1980 Commissioners Standard Ordinary Mortality
Table ("1980 CSO Table"); (7) a daily charge equivalent to an annual rate of
0.6% is deducted from the assets of the subaccounts for mortality and expense
risks; (8) if a Contract lapses or is surrendered during the first 10 years, a
contingent deferred administrative charge is assessed; during the first 5 years,
this charge equals $5 per $1,000 of face amount, and it begins to decline
monthly after the fifth Contract year, so that it disappears on the tenth
Contract anniversary; (9) an administrative processing charge equal to the
lesser of $15 or 2% of the amount withdrawn will be made in connection with each
withdrawal of excess cash surrender value; (10) if the Contract includes riders,
a monthly deduction from the Contract fund will be made for charges applicable
to those riders; and (11) certain fees and expenses are deducted from the assets
of the Series Fund and Real Property Account. Because of these charges, and in
particular because of the significant charges deducted upon early surrender or
lapse, prospective purchasers should purchase a Contract only if they intend and
have the financial capability to keep it in force for a substantial period.
For a limited time, a Contract may be returned for a refund in accordance with
the terms of its "free look" provision. See SHORT-TERM CANCELLATION RIGHT OR
"FREE LOOK," page 6.
This Summary is intended to provide only a brief overview of the more
significant aspects of the Contract. Further detail is provided in this
prospectus and in the Contract document. That document, together with the
application attached to it, constitutes the entire agreement between the owner
and Pruco Life of New Jersey and should be retained.
3
<PAGE>
GENERAL INFORMATION ABOUT PRUCO LIFE
INSURANCE COMPANY OF NEW JERSEY, PRUCO
LIFE OF NEW JERSEY VARIABLE APPRECIABLE
ACCOUNT, AND THE VARIABLE INVESTMENT
OPTIONS AVAILABLE UNDER THE CONTRACT
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey") is a
stock life insurance company, organized in 1982 under the laws of the State of
New Jersey. It is licensed to sell life insurance and annuities only in the
States of New Jersey and New York.
Pruco Life of New Jersey is a wholly-owned subsidiary of Pruco Life Insurance
Company, which in turn is a wholly-owned subsidiary of The Prudential, a mutual
insurance company founded in 1875 under the laws of the State of New Jersey. As
of December 31, 1995, it has invested $127 million in Pruco Life of New Jersey
through its subsidiary Pruco Life Insurance Company in connection with Pruco
Life of New Jersey's organization and operation. The Prudential intends from
time to time to make additional capital contributions to Pruco Life of New
Jersey as needed to enable it to meet its reserve requirements and expenses in
connection with its business. However, The Prudential is under no obligation to
make such contributions and its assets do not back the benefits payable under
the Contract. Pruco Life of New Jersey's financial statements begin on page B1
and should be considered only as bearing upon Pruco Life of New Jersey's ability
to meet its obligations under the Contracts.
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
The Pruco Life of New Jersey Variable Appreciable Account (the "Account") was
established on January 13, 1984 under New Jersey law as a separate investment
account. The Account meets the definition of a "separate account" under the
federal securities laws. The Account holds assets that are segregated from all
of Pruco Life of New Jersey's other assets.
The obligations to Contract owners and beneficiaries arising under the Contracts
are general corporate obligations of Pruco Life of New Jersey. Pruco Life of New
Jersey is also the legal owner of the assets in the Account. Pruco Life of New
Jersey will at all times maintain assets in the Account with a total market
value at least equal to the reserve and other liabilities relating to the
variable benefits attributable to the Account. These assets may not be charged
with liabilities which arise from any other business Pruco Life of New Jersey
conducts. In addition to these assets, the Account's assets may include funds
contributed by Pruco Life of New Jersey to commence operation of the Account and
may include accumulations of the charges Pruco Life of New Jersey makes against
the Account. From time to time these additional assets will be transferred to
Pruco Life of New Jersey's general account. Before making any such transfer,
Pruco Life of New Jersey will consider any possible adverse impact the transfer
might have on the Account.
The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any
supervision by the SEC of the management or investment policies or practices of
the Account. For state law purposes, the Account is treated as a part or
division of Pruco Life of New Jersey. There are currently thirteen subaccounts
within the Account, each of which invests only in a single corresponding
portfolio of the Series Fund. Additional subaccounts may be added in the future.
The Account's financial statements begin on page A1.
THE PRUDENTIAL SERIES FUND, INC.
The Prudential Series Fund, Inc. (the "Series Fund") is registered under the
1940 Act as an open-end diversified management investment company. Its shares
are currently sold only to separate accounts of The Prudential and certain other
insurers that offer variable life insurance and variable annuity contracts. On
October 31, 1986, the Pruco Life Series Fund, Inc., an open-end diversified
management investment company which sold its shares only to separate accounts of
Pruco Life of New Jersey and Pruco Life Insurance Company, was merged into the
Series Fund. Prior to that date, the Account invested only in shares of Pruco
Life Series Fund, Inc. The Account will purchase and redeem shares from the
Series Fund at net asset value. Shares will be redeemed to the extent necessary
for Pruco Life of New Jersey to provide benefits under the Contracts and to
transfer assets from one subaccount to another, as requested by Contract owners.
Any dividend or capital gain distribution received from a portfolio of the
Series Fund will be reinvested immediately at net asset value in shares of that
portfolio and retained as assets of the corresponding subaccount.
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The Prudential is the investment advisor for the assets of each of the
portfolios of the Series Fund. The Prudential's principal business address is
Prudential Plaza, Newark, New Jersey 07102-3777. The Prudential has a Service
Agreement with its wholly-owned subsidiary The Prudential Investment Corporation
("PIC"), which provides that, subject to The Prudential's supervision, PIC will
furnish investment advisory services in connection with the management of the
Series Fund. In addition, The Prudential has entered into a Subadvisory
Agreement with its wholly-owned subsidiary Jennison Associates Capital
Corporation ("Jennison"), under which Jennison furnishes investment advisory
services in connection with the management of the Prudential Jennison Portfolio.
Further detail is provided in the prospectus and statement of additional
information for the Series Fund. The Prudential, PIC, and Jennison are
registered as investment advisors under the Investment Advisers Act of 1940.
As an investment advisor, The Prudential charges the Series Fund a daily
investment management fee as compensation for its services. The following table
shows the investment management fee charged for each portfolio of the Series
Fund available for investment by Contract owners.
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ANNUAL INVESTMENT
PORTFOLIO MANAGEMENT FEE AS
A PERCENTAGE OF AVERAGE
DAILY NET ASSETS
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO 0.40%
DIVERSIFIED BOND PORTFOLIO 0.40%
GOVERNMENT INCOME PORTFOLIO 0.40%
CONSERVATIVE BALANCED PORTFOLIO 0.55%
FLEXIBLE MANAGED PORTFOLIO 0.60%
HIGH YIELD BOND PORTFOLIO 0.55%
STOCK INDEX PORTFOLIO 0.35%
EQUITY INCOME PORTFOLIO 0.40%
EQUITY PORTFOLIO 0.45%
PRUDENTIAL JENNISON PORTFOLIO 0.60%
SMALL CAPITALIZATION STOCK PORTFOLIO 0.40%
GLOBAL PORTFOLIO 0.75%
NATURAL RESOURCES PORTFOLIO 0.45%
- --------------------------------------------------------------------------------
Some investment management fees and expenses charged to the Series Fund may be
higher than those that were previously charged to the Pruco Life Series Fund,
Inc. (0.4%), in which the Account previously invested. For the Money Market,
Diversified Bond, Equity, Conservative Balanced, and Flexible Managed
Portfolios, Pruco Life of New Jersey will make daily adjustments that will
offset the effect on Contract owners of any higher investment management fees
and expenses charged against the Series Fund. No such offset will be made with
respect to the remaining portfolios, which had no counterparts in the Pruco Life
Series Fund, Inc.
It is conceivable that in the future it may become disadvantageous for both
variable life insurance and variable annuity contract separate accounts to
invest in the same underlying mutual fund. Although neither the companies which
invest in the Series Fund, nor the Series Fund currently foresees any such
disadvantage, the Series Fund's Board of Directors intends to monitor events in
order to identify any material conflict between variable life insurance and
variable annuity contract owners and to determine what action, if any, should be
taken in response thereto. Material conflicts could result from such things as:
(1) changes in state insurance law; (2) changes in federal income tax law; (3)
changes in the investment management of any portfolio of the Series Fund; or (4)
differences between voting instructions given by variable life insurance and
variable annuity contract owners.
A FULL DESCRIPTION OF THE SERIES FUND, ITS INVESTMENT OBJECTIVES, MANAGEMENT,
POLICIES, AND RESTRICTIONS, ITS EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN--INCLUDING ANY RISKS ASSOCIATED WITH INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO, AND ALL OTHER ASPECTS OF ITS OPERATION IS CONTAINED IN THE ATTACHED
PROSPECTUS FOR THE SERIES FUND AND IN ITS STATEMENT OF ADDITIONAL INFORMATION,
WHICH SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS. THERE IS NO ASSURANCE
THAT THE INVESTMENT OBJECTIVES WILL BE MET.
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
The Pruco Life of New Jersey Variable Contract Real Property Account (the "Real
Property Account") is a separate account of Pruco Life of New Jersey that,
through a general partnership formed by The Prudential and two of its
subsidiaries, invests primarily in income-producing real property such as office
buildings, shopping centers, agricultural land, hotels, apartments or industrial
properties. It also invests in mortgage loans and other real estate-related
investments, including sale-leaseback transactions. The objectives of the Real
Property Account and the partnership are to preserve and protect capital,
provide for compounding of income as a result of reinvestment
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of cash flow from investments, and provide for increases over time in the amount
of such income through appreciation in the value of assets.
The partnership has entered into an investment management agreement with The
Prudential, under which The Prudential selects the properties and other
investments held by the partnership. The Prudential charges the partnership a
daily fee for investment management which amounts to 1.25% per year of the
average daily gross assets of the partnership.
A FULL DESCRIPTION OF THE REAL PROPERTY ACCOUNT, ITS MANAGEMENT POLICIES, AND
RESTRICTIONS, ITS CHARGES AND EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN, THE PARTNERSHIP'S INVESTMENT OBJECTIVES, AND ALL OTHER ASPECTS OF THE
REAL PROPERTY ACCOUNT'S AND THE PARTNERSHIP'S OPERATIONS IS CONTAINED IN THE
ATTACHED PROSPECTUS FOR THE REAL PROPERTY ACCOUNT, WHICH SHOULD BE READ TOGETHER
WITH THIS PROSPECTUS BY ANY CONTRACT OWNER CONSIDERING THE REAL ESTATE
INVESTMENT OPTION. THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE
MET.
WHICH INVESTMENT OPTION SHOULD BE SELECTED
A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. Contract owners have a large
number of options as to how the amounts credited to their Contracts will be
invested. Historically, for investments held over relatively long periods, the
investment performance of common stocks has generally been superior to that of
short or long-term debt securities, even though common stocks have been subject
to much more dramatic changes in value over short periods of time. Accordingly,
the Stock Index, Equity Income, Equity, Prudential Jennison, Small
Capitalization Stock, Global, or Natural Resources Portfolios may be desirable
options for Contract owners who are willing to accept such volatility in their
Contract values. Each of these equity portfolios involves somewhat different
investment risks, policies, and programs.
Some Contract owners may prefer the somewhat greater protection against loss of
principal (and reduced chance of high total return) provided by the Government
Income or Diversified Bond Portfolios, while others, who desire even greater
safety of principal, may prefer the Money Market Portfolio or the fixed-rate
option, recognizing that the level of short-term rates may change rather
rapidly. Contract owners not interested in common stocks but willing to take
risks and seeking the possibility of a high total return may prefer the High
Yield Bond Portfolio, recognizing that with higher yielding, lower quality bonds
the risks are greater. Some Contract owners may wish to divide their funds among
two or more of the portfolios. Some may wish to obtain diversification by
relying on The Prudential's judgment for an appropriate asset mix by choosing
one of the Balanced Portfolios. The Real Property Account permits a Contract
owner to diversify his or her investment under the Contract to include an
interest in a pool of income-producing real property, and real estate is often
considered to be a hedge against inflation.
Each Contract owner must make his or her own choice that takes into account how
willing he or she is to accept investment risks, the manner in which his or her
other assets are invested, and his or her own predictions about what investment
results are likely to be in the future. The Prudential recommends against
frequent transfers among the several options as experience generally indicates
that "market timing" investing, particularly by non-professional investors, is
likely to prove unsuccessful.
DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
As of May 1, 1992, these Contracts are no longer available for sale. Generally,
the minimum initial guaranteed death benefit that can be applied for is $60,000,
however higher minimums apply to insureds over the age of 75. Insureds 14 years
of age or less may apply for a minimum initial guaranteed death benefit of
$40,000. The Contract may generally be issued on insureds below the age of 81.
Before issuing any Contract, Pruco Life of New Jersey requires evidence of
insurability which may include a medical examination. Non-smokers who meet
preferred underwriting requirements are offered the most favorable premium rate.
A higher premium is charged if an extra mortality risk is involved. Certain
classes of Contracts, for example a Contract issued in connection with a
tax-qualified pension plan, may be issued on a "guaranteed issue" basis and may
have a lower minimum initial death benefit than a Contract which is individually
underwritten. These are the current underwriting requirements. The Company
reserves the right to change them on a non-discriminatory basis.
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"
Generally, a Contract may be returned for a refund within 10 days after it is
received by the Contract owner, within 45 days after Part I of the application
for insurance is signed or within 10 days after Pruco Life of New Jersey mails
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or delivers a Notice of Withdrawal Right, whichever is latest. Some states allow
a longer period of time during which a Contract may be returned for a refund. A
refund can be requested by mailing or delivering the Contract to the
representative who sold it or to the Pruco Life of New Jersey Home Office
specified in the Contract. A Contract returned according to this provision shall
be deemed void from the beginning. The Contract owner will then receive a refund
of all premium payments made, plus or minus any change due to investment
experience in the value of the invested portion of the premiums, calculated as
if no charges had been made against the Account or the Series Fund. However, if
applicable law so requires, the Contract owner who exercises his or her
short-term cancellation right will receive a refund of all premium payments
made, with no adjustment for investment experience.
CONTRACT FORMS
A purchaser may select either of two forms of the Contract. The scheduled
premium for the Contract will be the same for a given insured, regardless of
which Contract Form is chosen. Contract Form A has a death benefit equal to the
initial face amount of insurance. The death benefit of a Form A Contract does
not vary with the investment performance of the subaccount[s] selected by the
owner, unless the Contract becomes paid-up or, under a revised version of the
Contract, unless the death benefit is increased to ensure that the Contract
meets the Internal Revenue Code's definition of life insurance. See HOW A
CONTRACT'S DEATH BENEFIT WILL VARY, page 15. Favorable investment results on the
assets related to the Contract and greater than scheduled premiums will
generally result in increases in the cash surrender value. See HOW A CONTRACT'S
CASH SURRENDER VALUE WILL VARY, page 15.
Contract Form B also has an initial face amount of insurance but favorable
investment performance and greater than scheduled premiums generally result in
an increase in the death benefit and, over time, in a lesser increase in the
cash surrender value than under the Form A Contract. See HOW A CONTRACT'S CASH
SURRENDER VALUE WILL VARY, page 15 and HOW A CONTRACT'S DEATH BENEFIT WILL VARY,
page 15. Unfavorable investment performance will result in decreases in the
death benefit (but never below the face amount stated in the Contract) and in
the cash surrender value.
Both Form A and Form B Contracts covering insureds of 14 years of age or less
contain a special provision providing that the face amount of insurance will
automatically be increased, on the Contract anniversary after the insured's 21st
birthday, to 150% of the initial face amount, so long as the Contract is not
then in default. The death benefit will also usually increase, at the same time,
by the same dollar amount. In certain circumstances, however, it may increase by
a smaller amount. See WHEN A CONTRACT BECOMES PAID-UP, page 16 and HOW A
CONTRACT'S DEATH BENEFIT WILL VARY, page 15. This increase in death benefit will
also generally increase the net amount at risk under the Contract, thus
increasing the mortality charge deducted each month from amounts invested under
the Contract. See item 6 under CHARGES AND EXPENSES, page 11. The automatic
increase in the face amount of insurance may affect future premium payments if
the Contract owner wants to avoid the Contract being classified as a Modified
Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 25. A Contract
owner should consult his or her own tax advisor and Pruco Life of New Jersey
representative before making unscheduled premium payments.
Purchasers should select the Contract Form that best meets their needs and
objectives. All whole-life insurance provides both protection for beneficiaries
in the event of early death and the opportunity to accumulate savings for
possible use in later years--for such things as college tuition or supplementary
retirement income--when the need for insurance protection may be reduced. Pruco
Life of New Jersey's Variable APPRECIABLE LIFE Contract provides more flexible
investment opportunities than do more conventional life insurance policies
because it permits the owner to decide how the assets held under the Contract
will be invested, because it permits considerable flexibility in determining the
amount and timing of premium payments, because it permits adjustment of the face
amount of insurance (subject, in the case of an increase, to evidence of
insurability), and because favorable investment returns result in an increase in
Contract values. Purchasers who prefer to have favorable investment results and
greater than scheduled premiums emerge partly in the form of an increased death
benefit should choose Contract Form B. Purchasers who are satisfied with the
amount of their insurance coverage and wish to have favorable investment results
and additional premiums reflected to the maximum extent in increasing cash
surrender values should choose Contract Form A. See HOW A CONTRACT'S CASH
SURRENDER VALUE WILL VARY, page 15.
In choosing a Contract Form, purchasers should also consider whether they intend
to use the withdrawal feature. Purchasers of Form A Contracts should note that a
withdrawal may result in a portion of the surrender charge being deducted from
the Contract fund. Furthermore, a purchaser of a minimum face amount Form A
Contract cannot make withdrawals. Purchasers of Form B Contracts will not incur
a surrender charge for a withdrawal and are not restricted if they purchase a
minimum size Contract. See WITHDRAWAL OF EXCESS CASH SURRENDER VALUE, page 17.
Under the original versions of these Contracts, there are other distinctions
between the Contract Forms that may influence a purchaser's selection. Thus,
Contract Form A will become paid-up more rapidly than a comparable Form
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B Contract. But owners of Form A Contracts should be aware that since premium
payments and favorable investment experience do not increase the death benefit
unless the Contract has become paid-up, the beneficiary will not benefit from
the possibility that the Contract will have a large cash surrender value at the
time of the insured's death.
Under a revised version of the Contract that was made available beginning in
September of 1986 in jurisdictions where it is approved, the Contract will never
become paid-up. Instead, the death benefit under these revised Contracts is
always at least as great as the Contract fund divided by the net single premium.
See HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page 15. Thus instead of becoming
paid-up, the Contract's death benefit will always be large enough to meet the
Internal Revenue Code's definition of life insurance. Whenever the death benefit
is determined in this way, Pruco Life of New Jersey reserves the right to refuse
to accept further premium payments, although in practice the payment of at least
scheduled premiums will be allowed.
PREMIUMS
Scheduled premiums on the Contract are payable during the insured's lifetime on
an annual, semi-annual, quarterly or monthly basis on due dates set forth in the
Contract. If paid more often than annually, the aggregate annual premium will be
higher to compensate Pruco Life of New Jersey both for the additional processing
costs (see item 1 under CHARGES AND EXPENSES, page 11) and for the loss of
interest (computed generally at an annual rate of 8%) incurred because premiums
are paid throughout rather than at the beginning of each Contract year. The
premium amount depends on the Contract's initial death benefit and the insured's
age at issue, sex (except where unisex rates apply), and risk classification.
Contract owners who pay premiums other than on a monthly basis will be notified,
about 3 weeks before each due date, that a premium is due. Contract owners who
pay premiums monthly will receive each year a book with twelve coupons that will
serve as a reminder. With Pruco Life of New Jersey's consent, an owner may
change the frequency of premium payments.
A Contract owner may elect to have monthly premiums paid automatically under the
"Pru-Matic Premium Plan" by pre-authorized transfers from a bank checking
account. Currently, Contract owners selecting the Pru-Matic Premium Plan on
Contracts issued after June 1, 1987 will have reduced current monthly expense
charges. See item 4 under CHARGES AND EXPENSES, page 11. Some Contract owners
may also be eligible to have monthly premiums paid by pre-authorized deductions
from an employer's payroll.
Each Contract sets forth two premium amounts. The initial premium amount is
payable on the Contract date (the date the Contract is issued, as noted in each
individual Contract) and on each subsequent due date until the Contract's
anniversary immediately following the insured's 65th birthday (or until the
Contract's tenth anniversary, if that is later). The second and higher premium
amount set forth in the Contract is payable on and after that anniversary (the
"premium change date"). However, if the amount invested under the Contract, net
of any excess premiums, is higher than it would have been had only scheduled
premiums been paid, had maximum contractual charges been deducted, and had only
an average net rate of return of 4% been earned, then the second premium amount
will be lower than the maximum amount stated in the Contract. Indeed, under the
original versions of these Contracts, if investment experience has been
favorable enough, the Contract may become paid-up before or by the premium
change date. Pruco Life of New Jersey reserves the right not to accept any
further premium payments on a paid-up Contract. Contract owners will be told
what the amount of the second premium will be.
Pruco Life of New Jersey designed the Contracts to include a premium change
date, with scheduled premiums potentially increasing after that date to a second
premium amount, in order to provide Contract owners with both the flexibility to
pay lower initial scheduled premiums and a guarantee of lifetime insurance
coverage if all scheduled premiums are paid. The tables on pages T1 through T4
show how the second premium amount compares with the first premium amount under
Contracts and for different hypothetical investment results.
The following table shows, for two face amounts, representative initial
preferred rating and standard rating annual premium amounts under either Form A
or Form B Contracts issued on insureds who are not substandard risks:
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$60,000 FACE AMOUNT $100,000 FACE AMOUNT
------------------------ --------------------------
PREFERRED STANDARD PREFERRED STANDARD
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MALE, AGE $ 554.80 $ 669.40 $ 902.00 $1,093.00
35
AT ISSUE
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FEMALE, $ 698.80 $ 787.60 $1,142.00 $1,290.00
AGE 45
AT ISSUE
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MALE, AGE $1,556.20 $1,832.20 $2,571.00 $3,031.00
55
AT ISSUE
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The following table compares annual and monthly premiums for insureds who are in
the preferred rating class. Note that in these examples the sum of 12 monthly
premiums for a particular Contract is approximately 105% to 109% of the annual
premium for that Contract.
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$60,000 FACE AMOUNT $100,000 FACE AMOUNT
------------------------ --------------------------
MONTHLY ANNUAL MONTHLY ANNUAL
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MALE, AGE $ 50.00 $ 554.80 $ 80.00 $ 902.00
35
AT ISSUE
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FEMALE, $ 62.60 $ 698.80 $101.00 $1,142.00
AGE 45
AT ISSUE
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MALE, AGE $136.40 $1,556.20 $224.00 $2,571.00
55
AT ISSUE
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If a Contract owner wishes, he or she may select a higher contemplated premium
than the scheduled premium. Pruco Life of New Jersey will bill the owner for the
chosen premium. In general, the regular payment of higher premiums will result
in higher cash surrender values and, at least under Form B, in higher death
benefits. Under the original versions of the Contracts, such payments may also
provide a means of obtaining a paid-up Contract earlier than if only scheduled
premiums are paid.
The payment of premiums substantially in excess of scheduled premiums may cause
the Contract to be classified as a Modified Endowment Contract for federal tax
purposes. See TAX TREATMENT OF CONTRACT BENEFITS, page 25.
CONTRACT DATE
When the first premium payment is paid with the application for a Contract, the
Contract date will ordinarily be the later of the date of the application or the
date of any medical examination. In most cases no medical examination will be
necessary. If the first premium is not paid with the application, the Contract
date will ordinarily be 2 or 3 days after the application is approved by Pruco
Life of New Jersey so that it will coincide with or be shortly prior to the date
on which the first premium is paid. However, Pruco Life of New Jersey will under
certain circumstances permit a Contract to be back-dated but only to a date not
earlier than six months prior to the date of the application. It may be
advantageous for a Contract owner to have an earlier Contract date if that will
result in the use by Pruco Life of New Jersey of a lower attained age in
determining the amount of the scheduled premium. Pruco Life of New Jersey will
require the payment of all premiums that would have been due had the application
date coincided with the back-dated Contract date. The death benefit and cash
surrender value under the Contract will be equal to what they would have been
had the Contract been issued on the Contract date, all scheduled premiums been
received on their due dates, and all Contract charges been made. See CHARGES AND
EXPENSES, page 11.
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ALLOCATION OF PREMIUMS
On the Contract date, a $2 processing charge is deducted from the initial
premium and up to 7.5% of the amount remaining is deducted to cover certain
charges (described in detail below), and the first monthly deductions are made
(also described below). The remainder of the initial scheduled premium will be
allocated among the subaccounts, the fixed-rate option or the Real Property
Account on the Contract date according to the desired allocation specified in
the application form. The invested portion of any part of the first premium in
excess of the scheduled initial premium, as well as the invested portion of all
subsequent premiums, are placed in the selected investment option[s] on the date
of receipt, but not earlier than the Contract date. Thus, to the extent that the
receipt of the first premium precedes the Contract date, there will be a period
during which the Contract owner's initial premium will not be invested. The $2
per payment charge and up to 7.5% deduction also apply to all subsequent premium
payments; the remainder will be placed when received by Pruco Life of New Jersey
in the subaccount[s], the fixed-rate option or the Real Property Account in
accordance with the allocation previously designated by the Contract owner.
Provided the Contract is not in default, the Contract owner may change the way
in which subsequent premiums are allocated by giving written notice to the Pruco
Life of New Jersey Home Office stated in the Contract. Contract owners may also
change subsequent premium allocations by telephoning their Pruco Life of New
Jersey Home Office, provided the Contract owner is enrolled to use the Telephone
Transfer System. There is no charge for reallocating future premiums among
investment options. If any portion of a premium is allocated to a particular
subaccount, to the fixed-rate option or to the Real Property Account, that
portion must be at least 10% on the date the allocation takes effect. All
percentage allocations must be in whole numbers. For example, 33% can be
selected but 33 1/3% cannot. Of course, the total allocation of all selected
investment options must equal 100%.
Additionally, a feature called Dollar Cost Averaging ("DCA") is available to
Contract owners. Under this feature, premiums may be allocated to the portion of
the Money Market subaccount used for this feature (the "DCA account"), and
designated dollar amounts will be transferred monthly from the DCA account to
other investment options available under the Contract, excluding the Money
Market subaccount and the fixed-rate option, but including the Real Property
Account. Automatic monthly transfers must be at least 3% of the amount allocated
to the DCA account (that is, if $5,000 is designated, the minimum monthly
transfer is $150), with a minimum of $20 transferred into any one investment
option. These amounts are subject to change at Pruco Life of New Jersey's
discretion. The minimum transfer amount will only be recalculated if the amount
designated for transfer is increased.
Currently, the amount initially designated to DCA must be at least $2,000. This
minimum is subject to change at Pruco Life of New Jersey's discretion. After DCA
has been established and as long as the DCA account has a positive balance,
Contract owners may allocate or transfer amounts to the DCA account, subject to
the limitations on premium payments and transfers generally. In addition, if
premiums are paid on an annual or semi-annual basis, and the Contract owner has
already established DCA, the premium allocation instructions may include an
allocation of all or a portion of all your premium payments to the DCA account.
Each automatic monthly transfer will take effect as of the end of the valuation
period on the Monthly Date (i.e. the Contract Date and the same date in each
subsequent month), provided the New York Stock Exchange ("NYSE") is open on that
date. If the NYSE is not open on the Monthly Date, the transfer will take effect
as of the end of the valuation period on the next day that the NYSE is open. If
the Monthly Date does not occur in a particular month (e.g., February 30), the
transfer will take effect as of the end of the valuation period on the last day
of that month that the NYSE is open. Automatic monthly transfers will continue
until the balance in the DCA account reaches zero, or until the Contract owner
gives notification of a change in allocation or cancellation of the feature. If
the Contract has outstanding premium allocation to the DCA account, but the DCA
option has previously been canceled, premiums allocated to the DCA account will
be allocated to the Money Market subaccount. Currently, there is no charge for
using the DCA feature.
TRANSFERS
Provided the Contract is not in default or is in force as variable reduced
paid-up insurance (see Options on Lapse, page 24), the owner may, up to four
times in each Contract year, transfer amounts from one subaccount to another
subaccount, to the fixed-rate option or to the Real Property Account. All or a
portion of the amount credited to a subaccount may be transferred.
In addition, the entire amount of the Contract fund (described in detail below)
may be transferred to the fixed-rate option at any time during the first 2
Contract years. A Contract owner who wishes to convert his or her variable
Contract to a fixed-benefit Contract in this manner must request a complete
transfer of funds to the fixed-rate option and should also change his or her
allocation instructions regarding any future premiums.
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Transfers among subaccounts will take effect as of the end of the valuation
period in which a proper transfer request is received at a Pruco Life of New
Jersey Home Office. The "valuation period" means the period of time from one
determination of the value of the amount invested in a subaccount to the next.
Such determinations are made when the net asset values of the portfolios of the
Series Fund are calculated, which is generally at 4:15 p.m. New York City time
on each day during which the New York Stock Exchange is open. The request may be
in terms of dollars, such as a request to transfer $10,000 from one subaccount
to another, or may be in terms of a percentage reallocation among subaccounts.
In the latter case, as with premium reallocations, the percentages must be in
whole numbers. The Contract owner may transfer amounts by proper written notice
to a Pruco Life of New Jersey Home Office, or by telephone, provided the
Contract owner is enrolled to use the Telephone Transfer System. A Contract
owner will automatically be enrolled to use the Telephone Transfer System unless
the Contract owner elects not to have this privilege. Pruco Life of New Jersey
has adopted procedures designed to ensure that requests by telephone are
genuine. Pruco Life of New Jersey will not be held liable for following
telephone instructions that it reasonably believes to be genuine. Pruco Life of
New Jersey cannot guarantee that owners will be able to get through to complete
a telephone transfer during peak periods such as periods of drastic economic or
market change.
Transfers from the fixed-rate option to other investment options are currently
permitted once each Contract year and only during the 30-day period beginning on
the Contract anniversary. The maximum amount which may currently be transferred
out of the fixed-rate option each year is the greater of: (a) 25% of the amount
in the fixed-rate option, or (b) $2,000. Such transfer requests received prior
to the Contract anniversary will be effected on the Contract anniversary.
Transfer requests received within the 30-day period beginning on the Contract
anniversary will be effected as of the end of the valuation period in which a
proper transfer request is received at a Pruco Life of New Jersey Home Office.
These limits are subject to change in the future. Transfers to and from the Real
Property Account are subject to restrictions described in the attached
prospectus for the Real Property Account.
Pruco Life may, on a non-discriminatory basis, permit the owner of an
APPRECIABLE LIFE insurance policy issued by Pruco Life of New Jersey (this
fixed-benefit policy is briefly described under RIGHT TO EXCHANGE A CONTRACT FOR
A FIXED-BENEFIT INSURANCE POLICY on page 25) to exchange his or her policy for a
comparable Variable APPRECIABLE LIFE Contract with the same Contract date,
scheduled premiums, and Contract fund. No charge will be made for the exchange.
There is no new "free look" right when an APPRECIABLE LIFE contract owner elects
to exchange his or her policy for a comparable Variable APPRECIABLE LIFE
Contract.
Although Pruco Life of New Jersey does not give tax advice, Pruco Life of New
Jersey does believe, based on its understanding of federal income tax laws as
currently interpreted, that the original date exchange of an APPRECIABLE LIFE
contract for a Variable APPRECIABLE LIFE Contract should be considered to be a
tax-free exchange under the Internal Revenue Code of 1986, as amended. It should
be noted, however, that the exchange of an APPRECIABLE LIFE contract for a
Variable APPRECIABLE LIFE Contract may impact the status of the Contract as a
Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 25. A
contract owner should consult with his or her tax advisor and Pruco Life of New
Jersey representative before making an exchange.
CHARGES AND EXPENSES
The amount relating to the Contract held in the Account is determined by the
amount of premium payments, charges deducted from premiums before they are
placed in the Account, deductions made from the Account, including any
deductions made for a Contract loan (see CONTRACT LOANS, page 23), and the
investment results of the selected subaccount[s]. The total amount invested
under the Contract (the "Contract fund") consists of the amount related to the
Contract held in the Account, any amount allocated to the fixed-rate option, any
amount invested in the Real Property Account, and the principal amount of any
Contract loan and interest credited thereon.
All of the charges made by Pruco Life of New Jersey, whether deducted from
premiums or from the Contract fund, are set forth below.
1. A charge of $2 is deducted from each premium payment to cover the cost of
collecting and processing premiums. Thus, Contract owners who pay premiums
annually will incur lower aggregate processing charges than those who pay
premiums more frequently. During 1995 and 1994, Pruco Life of New Jersey
received a total of approximately $1,010,000 and $1,077,000, respectively,
in processing charges.
2. There is a charge to compensate Pruco Life of New Jersey for the cost of
selling the Contract. This cost includes sales commissions, advertising,
and the printing of the prospectuses and sales literature. This charge is
called the "sales load." The maximum sales load that will be charged will
be 30% of the first year's scheduled premium, 10% of the scheduled premium
for the second, third, fourth, and fifth years and 5% of each additional
premium, whether scheduled or unscheduled. Part of this sales load will be
deducted from each premium received in an amount up to 5% of the portion
of the premium remaining after the $2
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<PAGE>
processing charge has been deducted. The remainder of the sales load will
be deducted only if the Contract is surrendered or stays in default past
its days of grace. This second part is called the deferred sales charge.
The deferred sales charge will not be deducted at all, however, for
Contracts that lapse or are surrendered on or after the Contract's tenth
anniversary and it will be reduced for Contracts that lapse or are
surrendered sometime between the eighth month of year 6 and the tenth
anniversary. No deferred sales charge is applicable to the death benefit,
no matter when that may become payable.
For Contracts under which premiums are payable annually, the maximum
deferred sales charge (equal to 25% of the scheduled premium for the first
Contract year and 5% of the scheduled premium for the next 4 Contract
years) will be made under Contracts that lapse or are surrendered during
the fifth Contract year and the first 7 months of the sixth Contract year.
Thereafter the sales charge will be the maximum charge reduced uniformly
until it becomes zero at the end of the tenth Contract year. More
precisely, the deferred sales charge will be the maximum charge reduced by
a factor equal to the number of complete months that have elapsed between
the end of the sixth month in the Contract's sixth year and the date of
surrender or lapse, divided by 54 (since there are 54 months between that
date and the Contract's tenth anniversary). The following table shows
illustrative deferred sales load charges that will be made when such
Contracts are surrendered or lapse.
- --------------------------------------------------------------------------------
THE DEFERRED SALES
CHARGE WILL WHICH IS EQUAL TO THE
FOR CONTRACTS BE THE FOLLOWING FOLLOWING PERCENTAGE
SURRENDERED DURING PERCENTAGE OF THE SCHEDULED
OF ONE SCHEDULED PREMIUMS DUE TO DATE
ANNUAL PREMIUM OF SURRENDER
- --------------------------------------------------------------------------------
Entire Year 1 25% 25.00%
Entire Year 2 30% 15.00%
Entire Year 3 35% 11.67%
Entire Year 4 40% 10.00%
Entire Year 5 45% 9.00%
First 7 Months of Year 6 45% 7.50%
First Month of Year 7 40% 5.71%
First Month of Year 8 30% 3.75%
First Month of Year 9 20% 2.22%
First Month of Year 10 10% 1.00%
First Month of Year 11
and Thereafter 0% 0.00%
- --------------------------------------------------------------------------------
For Contracts under which premiums are payable more frequently than
annually, the deferred sales charge will be 25% of the first year's
scheduled premiums due on or before the date of surrender or lapse and 5%
of the scheduled premiums for the second through fifth Contract years due
on or before the date of surrender or lapse. Thus, for such Contracts the
maximum deferred sales charge will also be equal to 9% of the total
scheduled premiums for the first 5 Contract years. This amount will be
higher in dollar amount than it would have been had premiums been paid
annually because the total of the scheduled premiums is higher. See
PREMIUMS, page 8. To compensate for this, the reduction in the deferred
sales charge will start slightly earlier for Contracts under which premiums
are paid semi-annually, still earlier if premiums are paid quarterly and
even earlier if premiums are paid monthly. The reductions are graded
smoothly so that the dollar amount of the deferred sales charge for two
persons of the same age, sex, contract size, and Contract date will be
identical beginning in the seventh month of the sixth Contract year without
regard to the frequency at which premiums were paid.
For purposes of determining the deferred sales charge, the scheduled
premium is the premium payable for an insured in the preferred rating
class, even if the insured is in a higher rated risk class. Moreover, if
premiums have been paid in excess of the scheduled premiums, the charge is
based upon the scheduled premiums. If a Contract is surrendered when less
than the aggregate amount of the scheduled premiums due on or before the
date of surrender has been paid, the deferred sales charge percentages (25%
for the first year and 5% for years 2 through 5) will be applied to the
premium payments due on or before the fifth anniversary date that were
actually paid, whether timely or not, before surrender. During 1995 and
1994, Pruco Life of New Jersey received a total of approximately $143,000
and $271,000, respectively, in sales load charges.
Pruco Life of New Jersey has determined to waive the portion of the sales
load deducted from each premium (5% of the portion of the premium remaining
after the $2 processing charge has been deducted) for premiums paid after
total premiums paid under the Contract exceed 5 years of scheduled premiums
on an annual basis.
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<PAGE>
Thus, with respect to a premium paid after that total is reached, only the
2.5% premium tax charge and the $2 processing charge is deducted before the
premium is allocated to the Account, fixed-rate option or the Real Property
Account, according to the owner's instructions. This concession is not
contractually guaranteed and may be withdrawn or modified by Pruco Life of
New Jersey on a uniform basis, although it does not currently intend to do
so. If an owner elects to increase the face amount of his or her Contract,
the rules governing the non-guaranteed waiver of the 5% front-end sales
load will apply separately to the base Contract and the increase, as
explained under INCREASES IN FACE AMOUNT on page 18.
3. There is a premium tax charge equal to 2.5% of the premium remaining
after the $2 processing charge has been deducted. (The 7.5% deduction
referred to on page 10 is made up of the 5% sales load charge and the 2.5%
premium tax charge.) Pruco Life of New Jersey may collect more for this
charge than it actually pays for premium taxes. During 1995 and 1994, Pruco
Life of New Jersey received a total of approximately $1,621,000 and
$1,746,000, respectively, in charges for payment of state premium taxes.
4. On each Monthly date, the Contract fund is reduced by an expense charge of
$2.50 per Contract and up to $0.02 per $1,000 of face amount (excluding the
automatic increase under Contracts issued on insureds of 14 years of age or
less), except that currently this $0.02 per $1,000 charge will not be
greater than $2 per month and for Contracts issued after June 1, 1987 on a
Pru-Matic Plan basis, this $0.02 per $1,000 charge will currently be
waived. Thus, for a Contract with the minimum face amount of $60,000, not
issued on a Pru-Matic Plan basis, the aggregate amount deducted each year
will be $44.40. This charge is to compensate Pruco Life of New Jersey for
administrative expenses incurred, among other things, for processing
claims, paying cash surrender values, making Contract changes, keeping
records, and communicating with Contract owners. This charge will not be
made if the Contract has become paid-up or has been continued in force,
after lapse, as variable reduced paid-up insurance. During 1995 and 1994,
Pruco Life of New Jersey received a total of approximately $3,249,000 and
$3,429,000, respectively, in monthly administrative charges.
5. On each Monthly date, the Contract fund is reduced by a charge of $0.01 per
$1,000 of face amount (excluding the automatic increase under Contracts
issued on insureds of 14 years of age or less) to compensate Pruco Life of
New Jersey for the risk it assumes by guaranteeing that, no matter how
unfavorable investment experience may be, the death benefit will never be
less than the face amount; provided scheduled premiums are paid on or
before the due date or during the grace period. This charge is not made
after a Contract becomes paid-up or has been continued in force, after
lapse, as variable reduced paid-up insurance. During 1995 and 1994, Pruco
Life of New Jersey received a total of approximately $624,000 and $648,000,
respectively, for this risk charge.
6. Pruco Life of New Jersey deducts a mortality charge from the Contract fund
on each Monthly date to cover anticipated mortality costs. When an insured
dies, the amount paid to the beneficiary is larger than the Contract fund
and significantly larger if the insured dies in the early years of a
Contract. The mortality charges are designed to enable Pruco Life of New
Jersey to pay this larger death benefit. The charge is determined by
multiplying the "net amount at risk" under a Contract (the amount by which
the Contract's death benefit, computed as if there were neither riders nor
Contract debt, exceeds the Contract fund) by a rate based upon the
insured's sex (except where unisex rates apply) and current attained age,
and the anticipated mortality for that class of persons. The maximum rate
that Pruco Life of New Jersey may charge is based upon the 1980 CSO Table.
Pruco Life of New Jersey may determine that a lesser amount than that
called for by these mortality tables will be adequate to defray anticipated
mortality costs for insureds of particular ages and may thus make a lower
mortality charge for such persons. Pruco Life of New Jersey, however,
reserves the right to charge full mortality charges based on the applicable
1980 CSO Table, and any lower current mortality charges are not applicable
to Contracts in force pursuant to an option on lapse. See OPTIONS ON LAPSE,
page 24. In addition, if a Contract has a face amount of at least $100,000
and the insured under the Contract has met strict underwriting requirements
so that the Contract is in force on a "Select Rating" basis for the
particular risk classification, current mortality charges for all ages may
be lower still.
Certain Contracts, for example Contracts issued in connection with
tax-qualified pension plans, may be issued on a "guaranteed issue" basis
and may have current mortality charges which are different from those
mortality charges for Contracts which are individually underwritten. These
Contracts with different current mortality charges may be offered to
categories of individuals meeting eligibility guidelines determined by
Pruco Life of New Jersey.
7. A charge is made to compensate Pruco Life of New Jersey for assuming
mortality and expense risks. This is done by deducting daily, from the
assets of each of the subaccounts of the Account and/or from the subaccount
of the Real Property Account relating to this Contract, a percentage of
those assets equivalent to an effective annual rate of 0.6% (this amounts
to a daily charge of approximately 0.001639%). The mortality risk assumed
is that insureds may live for a shorter period of time than Pruco Life of
New Jersey
13
<PAGE>
estimated. The expense risk assumed is that expenses incurred in issuing
and administering the Contract will be greater than Pruco Life of New
Jersey estimated. Pruco Life of New Jersey will realize a gain from this
charge to the extent it is not needed to provide benefits and pay expenses
under the Contracts. During 1995 and 1994, Pruco Life of New Jersey
received a total of approximately $3,123,000 and $2,758,000, respectively,
in mortality and expense risk charges. This charge is not assessed against
amounts allocated to the fixed-rate option.
8. There is an administrative charge of $5 for each $1,000 of face amount of
insurance (excluding the automatic increase under Contracts issued on
insureds of 14 years of age or less) to compensate Pruco Life of New Jersey
for expenses incurred in connection with the issuance of the Contract,
other than sales expenses. This charge is made to cover the costs of
processing applications, conducting medical examinations, determining
insurability and the insured's risk class, and establishing records
relating to the Contract. However, this charge will not be assessed upon
issuance of the Contract, nor will it ever be deducted from any death
benefit payable under the Contract. Rather, it will be deducted only if the
Contract is surrendered or lapses when it is in default past its days of
grace, and even then it will not be deducted at all for Contracts that stay
in force through the end of the Contract's tenth year. And the charge will
be reduced for Contracts that lapse or are surrendered before then but
after the Contract's fifth anniversary. Specifically, the charge of $5 per
$1,000 will be assessed upon surrenders or lapses occurring on or before
the Contract's fifth anniversary. For each additional full month that the
Contract stays in force on a premium paying basis, this charge is reduced
by $0.0833 per $1,000 of initial face amount, so that it disappears on the
tenth anniversary. During 1995 and 1994, Pruco Life of New Jersey received
a total of approximately $978,000 and $1,834,000, respectively, from
surrendered or lapsed Contracts. Additionally, if a Contract has a face
amount of at least $100,000 and was issued on other than a Select Rating
basis (see item 6, above), the owner may request that the Contract be
reclassified to a Select Rating basis. Requests for reclassification to a
Select Rating basis may be subject to an underwriting fee of up to $250,
but Pruco Life of New Jersey currently intends to waive that charge if the
reclassification is effected concurrently with an increase in face amount.
9. A charge of $15 will be made in connection with each partial withdrawal of
the cash surrender value of a Contract. See WITHDRAWAL OF EXCESS CASH
SURRENDER VALUE, page 17.
In several instances Pruco Life of New Jersey uses the terms "maximum charge"
and "current charge." The "maximum charge," in each instance, is the highest
charge that Pruco Life of New Jersey is entitled to make under the Contract. The
"current charge" is the lower amount that Pruco Life of New Jersey is now
charging. However, if circumstances change, Pruco Life of New Jersey reserves
the right to increase each current charge, up to but to no more than the maximum
charge, without giving any advance notice.
The earnings of the Account are taxed as part of the operations of Pruco Life of
New Jersey. No charge is being made currently to the Account for Company federal
income taxes. Pruco Life of New Jersey will review the question of a charge to
the Account for Company federal income taxes periodically. Such a charge may be
made in future years for any federal income taxes that would be attributable to
the Contracts.
Under current laws Pruco Life of New Jersey may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant and they are not charged against the Contracts or the Account. If
there is a material change in applicable state or local tax laws, the imposition
of any such taxes upon Pruco Life of New Jersey that are attributable to the
Account may result in a corresponding charge against the Account.
The Account purchases shares of the Series Fund at net asset value. The net
asset value of those shares reflects management fees and expenses already
deducted from the assets of the Series Fund. The fees and expenses for the
Series Fund are briefly described under THE PRUDENTIAL SERIES FUND, INC. on page
4 in connection with a general description of the Series Fund. More detailed
information is contained in the attached prospectus for the Series Fund. The
investment management fee and other expenses charged against the Real Property
Account are described in the attached prospectus for that investment option.
REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS
Pruco Life of New Jersey may reduce the sales charges and/or other charges on
individual Contracts sold to members of a class of associated individuals, or to
a trustee, employer or other entity representing a class, where it is expected
that such multiple sales will result in savings of sales or administrative
expenses. Pruco Life of New Jersey determines both the eligibility for such
reduced charges, as well as the amount of such reductions, by considering the
following factors: (1) the number of individuals; (2) the total amount of
premium payments expected to be received from these Contracts; (3) the nature of
the association between these individuals, and the expected persistency of the
individual Contracts; (4) the purpose for which the individual Contracts are
purchased and
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<PAGE>
whether that purpose makes it likely that expenses will be reduced; and (5) any
other circumstances which Pruco Life of New Jersey believes to be relevant in
determining whether reduced sales or administrative expenses may be expected.
Some of the reductions in charges for these sales may be contractually
guaranteed; other reductions may be withdrawn or modified by Pruco Life of New
Jersey on a uniform basis. Pruco Life of New Jersey's reductions in charges for
these sales will not be unfairly discriminatory to the interests of any
individual Contract owners.
HOW A CONTRACT'S CASH SURRENDER VALUE WILL VARY
A Contract has a cash surrender value which the owner may get while the insured
is living by surrender of the Contract. Unlike traditional fixed-benefit
whole-life insurance, however, a Contract's cash surrender value is not known in
advance, even if it is assumed that only scheduled premiums will be paid,
because it varies daily with the investment performance of the subaccount[s]
and/or Real Property Account in which the Contract participates.
On the Contract date, the Contract fund value is the invested portion of the
initial premium less the first monthly deductions. This amount is placed in the
investment option[s] as designated by the owner. Thereafter the Contract fund
value changes daily, reflecting increases or decreases in the value of the
securities in which the assets of the subaccount have been invested, the
investment performance of the Real Property Account if that option has been
selected, interest credited on amounts allocated to the fixed-rate option, as
well as the daily asset charge for mortality and expense risk equal to 0.001639%
of the assets of the subaccount[s] of the Account and the subaccount of the Real
Property Account relating to this Contract. The Contract fund value also changes
to reflect the receipt of additional premium payments and the monthly deductions
described in the preceding section.
A Contract's cash surrender value on any date will be the Contract fund value
reduced by the deferred sales and administrative charges, if any, and any
Contract debt. Upon request, Pruco Life of New Jersey will tell a Contract owner
the cash surrender value of his or her Contract. It is possible that the cash
surrender value of a Contract could decline to zero because of unfavorable
investment experience, even if a Contract owner continues to pay scheduled
premiums when due.
If the net investment return in the selected investment option[s] is greater
than 4%, the Contract fund and cash surrender value for a Form B Contract can be
expected to be less than the Contract fund and cash surrender value for a Form A
Contract with identical premiums and investment experience. This is because the
monthly mortality charges under the Form B Contract will be higher to compensate
for the higher amount of insurance.
The tables on pages T1 through T4 of this prospectus illustrate what the cash
surrender values would be for representative Contracts, assuming uniform
hypothetical investment results in the selected Series Fund portfolio[s], and
also provide information about the aggregate scheduled premiums payable under
those Contracts. Illustrated also is what the death benefit would be under Form
B Contracts given the stated assumptions. The tables also show the premium
amount that would be required on the premium change date to guarantee the
Contract against lapse regardless of investment performance for each illustrated
Contract under each of the assumed investment returns.
HOW A CONTRACT'S DEATH BENEFIT WILL VARY
As noted above, there are two forms of the Contract, Form A and Form B.
Moreover, in September 1986 Pruco Life of New Jersey began issuing revised
versions of both Form A and Form B Contracts. The primary difference between the
original Contract and the revised Contract is that the original Contract may
become paid-up, while the death benefit under the revised Contract operates
differently and accordingly such Contract will not become paid-up.
1. ORIGINAL CONTRACTS. If a Form A Contract is chosen, the death benefit will
not vary (except for Contracts issued on insureds of age 14 or less, see
REQUIREMENTS FOR ISSUANCE OF A CONTRACT on page 6) regardless of the payment of
additional premiums or the investment results of the designated subaccounts,
unless the Contract becomes paid-up. See WHEN A CONTRACT BECOMES PAID-UP, page
16. The death benefit does reflect a deduction for the amount of any Contract
debt. See CONTRACT LOANS, page 23.
If a Form B Contract is chosen, the death benefit will vary with investment
experience and premium payments. Assuming no Contract debt, the death benefit
under a Form B Contract will, on any day, be equal to the face amount of
insurance plus the amount (if any) by which the Contract fund value exceeds the
applicable "tabular Contract fund value" for the Contract. The "tabular Contract
fund value" for each Contract year is an amount that is slightly less than the
Contract fund value that would result as of the end of such year if only
scheduled premiums were paid, they were paid when due, the selected investment
options earned a net return at a uniform rate of 4% per year, full mortality
charges based upon the 1980 CSO Table were deducted, maximum sales load and
expense charges were deducted, and there was no Contract debt. Each Contract
contains a table that sets forth the tabular
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Contract fund value as of the end of each of the first 20 years of the Contract.
Tabular Contract fund values between Contract anniversaries are determined by
interpolation.
Thus, under a Form B Contract, with no Contract debt, the death benefit will
equal the face amount if the Contract fund equals the tabular Contract fund
value. If, due to investment results greater than a net return of 4%, or to
greater than scheduled premiums, or to smaller than maximum charges, the
Contract fund value is a given amount greater than the tabular Contract fund
value, the death benefit will be the face amount plus that excess amount. If,
due to investment results less favorable than a net return of 4%, the Contract
fund value is less than the tabular Contract fund value, and the Contract
nevertheless remains in force because scheduled premiums have been paid, the
death benefit will not fall below the initial face amount stated in the
Contract; however, this unfavorable investment experience must subsequently be
offset before favorable investment results or greater than scheduled premiums
will increase the death benefit. The death benefit will also reflect a deduction
for the amount of any Contract debt. See CONTRACT LOANS, page 23.
A Contract owner may also increase or decrease the face amount of his or her
Contract, subject to certain conditions. See INCREASES IN FACE AMOUNT, page 18
and DECREASES IN FACE AMOUNT, page 19.
2. REVISED CONTRACTS. Under the revised Contracts issued since September of
1986, the death benefit will be calculated as follows. Under a Form A Contract,
the death benefit will be the greater of (1) the face amount; or (2) the
Contract fund divided by the net single premium per $1 of death benefit at the
insured's attained age on that date. In other words, the second alternative
ensures that the death benefit will not be less than the amount of life
insurance that could be provided for an invested single premium amount equal to
the amount of the Contract fund. Under a Form B Contract, the death benefit will
be the greater of (1) the face amount plus the excess, if any, of the Contract
fund over the tabular Contract fund value; or (2) the Contract fund divided by
the net single premium per $1 of death benefit at the insured's attained age on
that date. Thus, under the revised Contracts, the death benefit may be increased
based on the size of the Contract fund and the insured's attained age and sex.
This ensures that the Contract will satisfy the Internal Revenue Code's
definition of life insurance. The net single premium is used only in the
calculation of the death benefit, not for premium payment purposes. The
following is a table of illustrative net single premiums for $1 of death
benefit.
<TABLE>
<CAPTION>
- --------------------------------------------------- ----------------------------------------------------
INCREASE IN INCREASE IN
INSURANCE INSURANCE
MALE NET AMOUNT PER FEMALE NET AMOUNT PER
ATTAINED SINGLE $1 INCREASE ATTAINED SINGLE $1 INCREASE
AGE PREMIUM IN CONTRACT AGE PREMIUM IN CONTRACT
FUND FUND
- --------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 .09884 $10.12 5 .08198 $12.20
25 .18455 $ 5.42 25 .15687 $ 6.37
35 .25596 $ 3.91 35 .21874 $ 4.57
55 .47352 $ 2.11 55 .40746 $ 2.45
65 .60986 $ 1.64 65 .54017 $ 1.85
- --------------------------------------------------- ----------------------------------------------------
</TABLE>
Whenever the death benefit is determined in this way, Pruco Life of New Jersey
reserves the right to refuse to accept further premium payments, although in
practice the payment of the lesser of 2 years' scheduled premiums or the average
of all premiums paid over the last 5 years will generally be allowed.
A Contract owner may also increase or decrease the face amount of his or her
Contract, subject to certain conditions. See INCREASES IN FACE AMOUNT, page 18
and DECREASES IN FACE AMOUNT, page 19.
WHEN A CONTRACT BECOMES PAID-UP
Under the original Contracts, it is possible that favorable investment
experience, either alone or in conjunction with greater than scheduled premium
payments, will cause the Contract fund to increase to the point where no further
payment of premiums is necessary to provide for the then existing death benefit
for the remaining life of the insured. If this should occur, Pruco Life of New
Jersey will notify the owner that no further premium payments need be paid.
Pruco Life of New Jersey reserves the right to refuse to accept further premiums
after the Contract becomes paid-up. The purchase of an additional fixed benefit
rider may, in some cases, affect the point at which the Contract becomes
paid-up. See RIDERS, page 29. The revised Contracts will not become paid-up.
Once a Contract becomes paid-up, Pruco Life of New Jersey guarantees that the
death benefit then in force will not be reduced by the investment experience of
the subaccount[s] in which the Contract participates. The cash surrender value
of a paid-up Contract continues to vary daily to reflect investment experience
and monthly to reflect
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<PAGE>
continuing mortality charges, but the other monthly deductions (see items 4 and
5 under CHARGES AND EXPENSES, page 11) will not be made. The death benefit of a
paid-up Contract on any day (whether the Contract originally was Form A or Form
B) will be equal to the amount of paid-up insurance that can be purchased with
the Contract fund on that day, but never less than the guaranteed minimum
amount.
As noted earlier, Contracts issued on insureds of 14 years of age or less
include a special provision under which the face amount of insurance increases
automatically to 150% of the initial face amount on the Contract anniversary
after the insured reaches the age of 21. If a Contract would have been paid-up
prior to that anniversary, Pruco Life of New Jersey, in anticipation of the
increase in the face amount to 150% of the initial face amount, will, instead of
declaring the Contract to be paid-up, increase the death benefit by the amount
necessary to keep the Contract in force as a premium paying Contract. If this
should occur, the increase in the death benefit on the Contract anniversary
after the insured reaches the age of 21 will be smaller, in dollar amount, than
the increase in the face amount of insurance.
FLEXIBILITY AS TO PAYMENT OF PREMIUMS
A significant feature of this Contract is that it permits the owner to pay
greater than scheduled premiums. Conversely, payment of a scheduled premium need
not be made if the Contract fund is sufficiently large to enable the charges due
under the Contract to be made without causing the Contract to lapse. See LAPSE
AND REINSTATEMENT, page 20. In general, Pruco Life of New Jersey will accept any
premium payment if the payment is at least $25. Pruco Life of New Jersey does
reserve the right, however, to limit unscheduled premiums to a total of $10,000
in any Contract year; to refuse to accept premiums once a Contract becomes
paid-up; and to refuse to accept premiums that would immediately result in more
than a dollar-for-dollar increase in the death benefit. The flexibility of
premium payments provides Contract owners with different opportunities under the
two forms of Contract. Greater than scheduled payments under an original version
Form A Contract increases the Contract fund and makes it more likely that the
Contract will become paid-up. Greater than scheduled payments under an original
version Form B Contract increase both the Contract fund and the death benefit,
but it is less likely to become paid-up than a Form A Contract on which the same
premiums are paid. For all Contracts, the privilege of making large or
additional premium payments offers a way of investing amounts which accumulate
without current income taxation. There may, however, be a disadvantage if
substantial premiums are made. The federal income tax laws, discussed more fully
under TAX TREATMENT OF CONTRACT BENEFITS, page 25, may impose an income tax, as
well as a penalty tax, upon distributions to contract owners under life
insurance contracts that are classified as Modified Endowment Contracts. This
Contract should not be so classified if the initial scheduled premiums are paid
or even if additional premiums are paid that are not substantially higher,
assuming no changes in benefits under the Contract. It is possible, however, to
make premium payments that are high enough to cause the Contract to fall into
that classification. A Contract owner should consult with his or her own tax
advisor and Pruco Life of New Jersey representative before making a large
premium payment.
SURRENDER OF A CONTRACT
A Contract may be surrendered in whole or in part for its cash surrender value
while the insured is living. Partial surrender involves splitting the Contract
into two Contracts. One is surrendered for its cash surrender value; the other
is continued in force on the same terms as the original Contract except that
premiums and cash surrender values will be proportionately reduced based upon
the reduction in the face amount of insurance. The Contract continued must have
a face amount of insurance at least equal to the minimum face amount applicable
to the insured's Contract. See REQUIREMENTS FOR ISSUANCE OF A CONTRACT, page 6.
To surrender a Contract in whole or in part, the owner must deliver or mail it,
together with a written request in a form that meets Pruco Life of New Jersey's
needs, to a Pruco Life of New Jersey Home Office. The cash surrender value of a
surrendered or partially surrendered Contract (taking into account the deferred
sales and administrative charges, if any) will be determined as of the date such
request is received in the Home Office. Surrender of all or part of a Contract
may have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 25.
WITHDRAWAL OF EXCESS CASH SURRENDER VALUE
An alternative to surrender or partial surrender of a Contract, available only
before such Contracts become paid up, is a partial withdrawal of cash surrender
value without splitting the Contract into two Contracts. A partial withdrawal
may be made only if the following conditions are satisfied. The basic limiting
condition is that a withdrawal may be made only to the extent that the cash
surrender value plus any Contract loan exceeds the applicable tabular cash
surrender value. (The "tabular cash surrender value" refers to the tabular
Contract fund value minus any applicable surrender charges.) But because this
excess over the applicable tabular cash surrender value may be made up in part
by an outstanding Contract loan, there is a further condition that the amount
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withdrawn may not be larger than an amount sufficient to reduce the cash
surrender value to zero. The amount withdrawn must be at least $2,000 under a
Form A Contract and at least $500 under a Form B Contract. An owner may make no
more than four such withdrawals in a Contract year, and there is a fee of $15
for each such withdrawal. An amount withdrawn may not be repaid except as a
scheduled or unscheduled premium subject to the Contract charges. Upon request,
Pruco Life of New Jersey will tell a Contract owner how much he or she may
withdraw. Withdrawal of part of the cash surrender value may have tax
consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 25.
Whenever a partial withdrawal is made, the death benefit payable will
immediately be reduced, generally by the amount of the withdrawal. This will not
change the guaranteed minimum amount of insurance under a Form B Contract (i.e.,
the face amount) or the amount of the scheduled premium that will be payable
thereafter on such a Contract. Under a Form A Contract, however, the guaranteed
minimum amount of insurance will be reduced by the amount of the partial
withdrawal, and no partial withdrawal will be permitted under a Form A Contract
if it would result in a new face amount of less than the minimum face amount
applicable to the insured's Contract. See REQUIREMENTS FOR ISSUANCE OF A
CONTRACT, page 6. It is important to note, however, that if the face amount is
decreased at any time during the first 7 Contract years, there is a danger that
the Contract might be classified as a Modified Endowment Contract. See TAX
TREATMENT OF CONTRACT BENEFITS, page 25. Before making any withdrawal which
causes a decrease in face amount, a Contract owner should consult with his or
her own tax advisor and Pruco Life of New Jersey representative. In addition,
the amount of the scheduled premiums due thereafter under a Form A Contract will
be reduced to reflect the lower face amount of insurance. Since a withdrawal
under a Form A Contract results in a decrease in the face amount of insurance,
the Contract fund may be reduced, not only by the amount withdrawn but also by a
proportionate part of any surrender charges then applicable, based upon the
percentage reduction in face amount. Contract owners of a Form A Contract who
make a partial withdrawal will be sent replacement Contract pages showing the
new face amount, new tabular values and, if applicable, a new table of surrender
charges.
Withdrawal of part of the cash surrender value increases the risk that the
Contract fund may be insufficient to provide for benefits under the Contract. If
such a withdrawal is followed by unfavorable investment experience, the Contract
may lapse even if scheduled premiums continue to be paid when due. This is
because, for purposes of determining whether a lapse has occurred, Pruco Life of
New Jersey treats withdrawals as a return of premium.
INCREASES IN FACE AMOUNT
An attractive feature of this Contract is that an owner who wishes to increase
the amount of his or her insurance may do so by increasing the face amount of
the Contract (which is also the guaranteed minimum death benefit), subject to
state approval and underwriting requirements determined by Pruco Life of New
Jersey. An increase in face amount is in many ways similar to the purchase of a
second Contract, but it differs in the following respects: the minimum
permissible increase is $25,000, while the minimum for a new Contract is
$60,000; monthly fees are lower because only a single $2.50 per month
administrative charge is made rather than two; a combined premium payment
results in deduction of a single $2 per premium processing charge while separate
premium payments for separate Contracts would involve two charges; the monthly
expense charge of $0.02 per $1,000 of face amount may be lower if the increase
is to a face amount greater than $100,000; and, the Contract will lapse or
become paid-up as a unit, unlike the case if two separate Contracts are
purchased. These differences aside, the decision to increase face amount is
comparable to the purchase of a second Contract in that it involves a commitment
to higher scheduled premiums in exchange for greater insurance benefits.
A Contract owner may elect to increase the face amount of his or her Contract no
earlier than the first anniversary of the Contract. The following conditions
must be met: (1) The owner must ask for the increase in writing on an
appropriate form meeting Pruco Life of New Jersey's needs. (2) The amount of the
increase in face amount must be at least $25,000. (3) The insured must supply
evidence of insurability for the increase satisfactory to Pruco Life of New
Jersey. (4) If Pruco Life of New Jersey requests, the owner must send in the
Contract to be suitably endorsed. (5) The Contract must be neither paid up nor
in default on the date the increase takes effect. (6) The owner must pay an
appropriate premium at the time of the increase. (7) Pruco Life of New Jersey
has the right to deny more than one increase in a Contract year. (8) If Pruco
Life of New Jersey has, between the Contract date and the date that any
requested increase in face amount will take effect, changed any of the bases on
which benefits and charges are calculated under newly issued Contracts, Pruco
Life of New Jersey has the right to deny the increase. An increase in face
amount resulting in a total face amount under the Contract of at least $100,000
may, subject to strict underwriting requirements, render the Contract eligible
for a Select Rating basis, which provides lower current cost of insurance rates.
Upon an increase in face amount, Pruco Life of New Jersey will recompute the
Contract's scheduled premiums, deferred sales and administrative charges,
tabular values, and monthly deductions from the Contract fund. The
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Contract owner has a choice, limited only by applicable state law, as to whether
the recomputation will be made as of the prior or next Contract anniversary.
There will be a payment required on the date of increase; the amount of the
payment will depend, in part, on which Contract anniversary the Contract owner
selects for the recomputation. Pruco Life of New Jersey will tell the owner the
amount of the required payment. It should also be noted that an increase in face
amount may impact the status of the Contract as a Modified Endowment Contract.
See TAX TREATMENT OF CONTRACT BENEFITS, page 25. Therefore, before increasing
the face amount, a Contract owner should consult with his or her own tax advisor
and Pruco Life of New Jersey representative.
The effective date of the increase in the amount of insurance will be determined
by the same rules that apply when a new Contract is purchased. Generally
speaking, an increase will take effect on the latest of the date the owner
applies for it, the date satisfactory evidence of insurability is provided to
Pruco Life of New Jersey or the date designated by the Contract owner, provided
the necessary payment is made on or before that date.
Pruco Life of New Jersey will supply the Contract owner with pages which show
the increased face amount, the effective date of the increase, and the
recomputed items described two paragraphs above. The pages will also describe
how the increase in face amount affects the various provisions of the Contract,
including a statement that, for the amount of the increase in face amount, the
period stated in the Incontestability and Suicide provisions (see OTHER GENERAL
CONTRACT PROVISIONS, page 28) will run from the effective date of the increase.
There will be assessed upon lapse or surrender following an increase in face
amount the sum of (a) the deferred sales and administrative charges that would
have been assessed if the initial base Contract had not been amended and had
lapsed or been surrendered; and (b) the deferred sales and administrative
charges that would have been assessed if the increase in death benefit had been
achieved by the issuance of a new Contract, and that Contract had lapsed or been
surrendered. All premiums paid after the increase will, for purposes of
determining the deferred sales charge applicable in the event of surrender or
lapse, be deemed to have been made partially under the base Contract, and
partially in payment of the increase, in the same proportion as that of the
original scheduled premium and the increase in scheduled premiums. Because an
increase in face amount triggers new contingent deferred sales and
administrative charges, a Contract owner contemplating a total or partial
surrender or a decrease in the face amount of insurance should not elect to
increase the face amount of his or her Contract.
An increase in face amount will be treated comparably to the issuance of a new
Contract for purposes of the non-guaranteed waiver of the 5% front-end sales
load described under item 2 of CHARGES AND EXPENSES on page 11. Thus, premiums
paid after the increase will, for purposes of determining whether the 5%
front-end sales load will be waived, be allocated to the base Contract and to
the increase based on the proportional premium allocation rule just described.
The waiver will apply with respect to the premiums paid after the increase only
after the premiums so allocated exceed five scheduled annual premiums for the
increase. Thus, an owner considering an increase in face amount should be aware
that such an increase will entail sales charges comparable to the purchase of a
new Contract.
Each Contract owner who elects to increase the face amount of his or her
Contract will receive a "free-look" right and a right to convert to a
fixed-benefit contract, which rights will apply only to the increase in face
amount, not the entire Contract. These rights are comparable to the rights
afforded to a purchaser of a new Contract. See SHORT-TERM CANCELLATION RIGHT OR
"FREE LOOK", page 6 and RIGHT TO EXCHANGE A CONTRACT FOR A FIXED-BENEFIT
INSURANCE POLICY, page 25. The "free-look" right would have to be exercised no
later than 45 days after execution of the application for the increase or, if
later, within 10 days after either receipt of the Contract as increased or
receipt of the notice of the Right of Withdrawal by the owner. Upon exercise of
the "free-look" right, the owner will receive a refund in the amount of the
aggregate premiums paid since the increase was requested and attributable to the
increase, not the base Contract, as determined pursuant to the proportional
premium allocation rule described above. There will be no adjustment for
investment experience. Moreover, charges deducted since the increase will be
recomputed as though no increase had been effected. The right to convert the
increase in face amount to a fixed-benefit policy will exist for 24 months after
the increase is issued and the form of exchange right will be the same as that
available under the base Contract purchased. There may be a cash payment
required upon the exchange. See RIGHT TO EXCHANGE A CONTRACT FOR A FIXED-BENEFIT
INSURANCE POLICY, page 25.
DECREASES IN FACE AMOUNT
As explained earlier, a Contract owner may effect a partial surrender of a
Contract (see SURRENDER OF A CONTRACT, page 17) or a partial withdrawal of
excess cash surrender value (see WITHDRAWAL OF EXCESS CASH SURRENDER VALUE, page
17). A Contract owner also has the additional option of decreasing the face
amount (which is also the guaranteed minimum death benefit) of his or her
Contract without withdrawing any cash value. Contract owners who conclude that,
because of changed circumstances, the amount of insurance is greater than needed
will thus be able to decrease their amount of insurance protection without
decreasing their current cash surrender value. This will result in a decrease in
the amount of future scheduled premiums and in the monthly deductions for the
cost of
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insurance. The cash surrender value of the Contract on the date of the decrease
will not change, except that an administrative processing fee of $15 may be
deducted from that value (unless that fee is separately paid at the time the
decrease in face amount is requested). The Contract's Contract fund value,
however, will be reduced by deduction of a proportionate part of the then
applicable contingent deferred sales and administrative charges, if any.
Scheduled premiums for the Contract will also be proportionately reduced. The
Contracts of owners who exercise the right to reduce face amount will be amended
to show the new face amount, tabular values, scheduled premiums, monthly
charges, and if applicable, the remaining contingent deferred sales and
administrative charges.
The minimum permissible decrease is $10,000. No decrease will be permitted that
causes the face amount of the Contract to drop below the minimum face amount
applicable to the insured's Contract. See Requirements for Issuance of a
Contract, page 6. No reduction will be permitted to the extent that it would
cause the Contract to fail to qualify as "life insurance" for purposes of
section 7702 of the Internal Revenue Code. If the face amount of a Contract in
force on a Select Rating basis is reduced below $100,000, it is no longer
eligible for the Select Rating. A decrease in face amount will be effected as of
the Monthly Date immediately preceding receipt of a proper request to decrease
face amount. Monthly charges previously deducted on that date and attributed to
the decreased portion of the face amount will be credited to the Contract fund
as of that date.
It is important to note, however, that if the face amount is decreased at any
time during the first 7 Contract years, there is a danger that the Contract
might be classified as a Modified Endowment Contract. See Tax Treatment of
Contract Benefits, page 25. Before requesting any decreases in face amount, a
Contract owner should consult with his or her Pruco Life of New Jersey
representative.
Lapse and Reinstatement
The Contract has an advantageous feature that is not typically found in similar
types of life insurance contracts. If scheduled premiums are paid on or before
each due date, or within the grace period after each due date, (or missed
premiums are paid later with interest) and there are no withdrawals, a Contract
will remain in force even if the investment results of that Contract's variable
investment option[s] have been so unfavorable that the Contract fund has
decreased to zero or less. Therefore, unlike most similar types of life
insurance contracts that lapse when the cash surrender value decreases to zero
even if premiums are paid, this Contract ensures that as long as scheduled
premiums are paid, insurance protection remains in effect.
In fact, even if a scheduled premium is not paid, the Contract will remain in
force as long as the Contract fund on any Monthly date is equal to or greater
than the tabular Contract fund value on the next Monthly date. This could occur
because of such factors as favorable investment experience, deduction of less
than the maximum permissible charges, or the previous payment of greater than
scheduled premiums.
However, if a scheduled premium is not paid, and the Contract fund is
insufficient to keep the Contract in force, the Contract will go into default.
Should this happen, Pruco Life of New Jersey will send the Contract owner a
notice of default setting forth the payment necessary to keep the Contract in
force on a premium paying basis. This payment must be received at a Pruco Life
of New Jersey Home Office within the 61 day grace period after the notice of
default is mailed or the Contract will lapse. A Contract that lapses with an
outstanding Contract loan may have tax consequences. See Tax Treatment of
Contract Benefits on page 25.
A Contract that has lapsed may be reinstated within 3 years after the date of
default unless the Contract has been surrendered for its cash surrender value.
To reinstate a lapsed Contract, Pruco Life of New Jersey requires renewed
evidence of insurability, and submission of certain payments due under the
Contract.
If a Contract does lapse, it may still provide some benefits. Those benefits are
described under Options on Lapse, page 24.
When Proceeds Are Paid
Pruco Life of New Jersey will generally pay any death benefit, cash surrender
value, loan proceeds or partial withdrawal within 7 days after receipt at a
Pruco Life of New Jersey Home Office of all the documents required for such a
payment. Other than the death benefit, which is determined as of the date of
death, the amount will be determined as of the end of the valuation period in
which the necessary documents are received. However, Pruco Life of New Jersey
may delay payment of proceeds from the subaccount[s] and the variable portion of
the death benefit due under the Contract if the disposal or valuation of the
Account's assets is not reasonably practicable because the New York Stock
Exchange is closed for other than a regular holiday or weekend, trading is
restricted by the SEC or the SEC declares that an emergency exists.
With respect to the amount of any cash surrender value allocated to the
fixed-rate option, and with respect to a Contract in force as extended term
insurance, Pruco Life of New Jersey expects to pay the cash surrender value
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promptly upon request. However, Pruco Life of New Jersey has the right to delay
payment of such cash surrender value for up to 6 months (or a shorter period if
required by applicable law). Pruco Life of New Jersey will pay interest of at
least 3% a year if it delays such a payment for more than 30 days (or a shorter
period if required by applicable law).
Living Needs Benefit
Contract applicants may elect to add the Living Needs Benefit(sm) to their
Contracts at issue, subject to Pruco Life of New Jersey's receipt of
satisfactory evidence of insurability. The benefit may vary state-by-state. It
can generally be added only to Contracts of $50,000 or more.
The Living Needs Benefit allows the Contract owner to elect to receive an
accelerated payment of all or part of the Contract's death benefit, adjusted to
reflect current value, at a time when certain special needs exist. The adjusted
death benefit will always be less than the death benefit, but will generally be
greater than the Contract's cash surrender value. Depending upon state
regulatory approval, one or both of the following options may be available. A
Pruco Life of New Jersey representative should be consulted as to whether
additional options may be available.
Terminal Illness Option. This option is available if the insured is diagnosed as
terminally ill with a life expectancy of 6 months or less. When satisfactory
evidence is provided, Pruco Life of New Jersey will provide an accelerated
payment of the portion of the death benefit selected by the Contract owner as a
Living Needs Benefit. The Contract owner may (1) elect to receive the benefit in
a single sum or (2) receive equal monthly payments for 6 months. If the insured
dies before all of the payments have been made, the present value of the
remaining payments will be paid to the beneficiary designated in the Living
Needs Benefit claim form in a single sum.
Nursing Home Option. This option is available after the insured has been
confined to an eligible nursing home for 6 months or more. When satisfactory
evidence is provided, including certification by a licensed physician, that the
insured is expected to remain in the nursing home until death, Pruco Life of New
Jersey will provide an accelerated payment of the portion of the death benefit
selected by the Contract owner as a Living Needs Benefit. The Contract owner may
(1) elect to receive the benefit in a single sum or (2) receive equal monthly
payments for a specified number of years (not more than 10 nor less than 2),
depending upon the age of the insured. If the insured dies before all of the
payments have been made, the present value of the remaining payments will be
paid to the beneficiary designated in the Living Needs Benefit claim form in a
single sum.
All or part of the Contract's death benefit may be accelerated under the Living
Needs Benefit. If the benefit is only partially accelerated, a death benefit of
at least $25,000 must remain under the Contract. Pruco Life of New Jersey
reserves the right to determine the minimum amount that may be accelerated.
The Living Needs Benefit is available only to the extent regulatory approval has
been obtained. If desired by a Contract owner, the benefit must be requested on
the Contract's application. There is no charge for adding the benefit to the
Contract. However, an administrative charge (not to exceed $150) will be made at
the time the Living Needs Benefit is paid.
No benefit will be payable if the Contract owner is required to elect it in
order to meet the claims of creditors or to obtain a government benefit. Pruco
Life of New Jersey can furnish details about the amount of Living Needs Benefit
that is available to an eligible Contract owner under a particular Contract, and
the adjusted premium payments that would be in effect if less than the entire
death benefit is accelerated.
The Contract owner should consider whether adding this settlement option is
appropriate in his or her given situation. Adding the Living Needs Benefit to
the Contract has no adverse consequences; however, electing to use it could.
Contract owners should consult a qualified tax advisor before electing to
receive this benefit. Unlike a death benefit received by a beneficiary after the
death of an insured, receipt of a Living Needs Benefit payment may give rise to
a federal or state income tax. Receipt of a Living Needs Benefit payment may
also affect a Contract owner's eligibility for certain government benefits or
entitlements.
Illustrations of Cash Surrender Values, Death Benefits, and Accumulated
Premiums
The following tables have been prepared to help show how values under the
Contract change with investment performance of the Account. The tables assume
that no portion of the Contract fund is allocated to the fixed-rate option or
the Real Property Account. The tables illustrate how cash surrender values
(reflecting the deduction of deferred sales load and administrative charges, if
any) and death benefits of Contracts with the minimum scheduled premium issued
on an insured of a given age would vary over time if the return on the assets
held in the selected Series Fund portfolios were a uniform, gross, after tax,
annual rate of 0%, 4%, 8% and 12%. The death benefits and cash surrender values
would be different from those shown if the returns averaged 0%, 4%, 8% and 12%
but
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fluctuated over and under those averages throughout the years. The tables also
provide information about the premiums payable on and after the premium change
date. These tables reflect values under the revised Contracts. These values are
also applicable to the original Contracts except where the death benefit has
been increased to the Contract fund divided by the net single premium, in which
case the cash surrender value and death benefit figures shown on the table are
not applicable to the original Contracts. Footnotes to the tables indicate when
the values cease to be applicable to the original Contracts and when the
original Contracts would become paid-up for a given return.
The death benefits and cash surrender values shown in the first two tables on
pages T1 and T2 reflect Pruco Life of New Jersey's current charges. As explained
earlier, Pruco Life of New Jersey makes monthly mortality charges that are lower
than those based on the 1980 CSO Table when the insured is a male aged 36 or
more or a female aged 41 or more. The values shown in the tables are calculated
upon the assumption that Pruco Life of New Jersey will continue to use the
mortality rates that it is currently using, even though it is permitted under
the Contract to use the higher mortality charges specified in the 1980 CSO
Table. Moreover, those tables reflect Pruco Life of New Jersey's current
practice of waiving the front-end sales load of 5% after total premiums paid
exceeds five scheduled annual premiums. See item 2 under Charges and Expenses,
page 11. The tables also reflect Pruco Life of New Jersey's current practice of
increasing the Contract fund on a percentage basis based on the attained age of
the insured. While Pruco Life of New Jersey does not currently intend to
withdraw or modify these reductions in charges or additions to the Contract
fund, it reserves the right to do so. These tables are not applicable to
Contracts issued on a guaranteed issue basis or to Contracts where the risk
classification is on a multiple life basis.
The death benefits and cash surrender values shown in the next two tables on
pages T3 through T4 are calculated upon the assumption that the maximum
mortality charges specified by the 1980 CSO Table are made throughout the life
of the Contract, and reflect neither the waiver of the front-end sales load nor
the monthly additions to the Contract fund that further reduce the cost of
insurance charge.
The amounts shown for the death benefit and cash surrender value as of each
Contract year reflect the fact that the net investment return on the assets held
in the subaccounts is lower than the gross return of the portfolios. This is
because the tables assume a total Series Fund expense ratio of 0.52% (taking
into account the offsets described on page 5), and also reflect a daily
mortality and expense risk charge to the Account, equal to an effective annual
charge of 0.6%. The actual fees and expenses of the portfolios associated with a
particular Contract may be more or less than 0.52% and will depend on which
subaccounts are selected. Based on the above assumptions, gross annual rates of
return of 0%, 4%, 8% and 12% thus correspond to approximate net annual rates of
return of -1.12%, 2.88%, 6.88% and 10.88% and this fact is reflected in the
column headings. The tables also reflect the fact that no charges for federal or
state income taxes are currently made against the Account. If such a charge is
made in the future, it will take a higher gross rate of return to produce net
after-tax returns of -1.12%, 2.88%, 6.88% and 10.88% than it does now.
Upon request, Pruco Life of New Jersey will furnish a comparable illustration
based on the proposed insured's age and sex (except where unisex rates apply)
and on the guaranteed minimum death benefit or premium amount requested. Such an
illustration will assume that the insured is in the preferred rating class (or,
on request, a different rating class) and that the premium will be paid at the
frequency chosen.
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<TABLE>
ILLUSTRATIONS
-------------
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM A -- FIXED DEATH BENEFIT
MALE PREFERRED ISSUE AGE 35
$60,000 GUARANTEED DEATH BENEFIT
$554.80 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING CURRENT SCHEDULE OF CHARGES
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- -------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- -------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (3) (-1.12% Net) (2.88% Net) (6.88% Net) (10.88% Net) (-1.12% Net) (2.88% Net) (6.88% Net) (10.88% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 577 $60,000 $60,000 $ 60,000 $ 60,000 $ 0 $ 0 $ 0 $ 0
2 $ 1,177 $60,000 $60,000 $ 60,000 $ 60,000 $ 187 $ 234 $ 282 $ 331
3 $ 1,801 $60,000 $60,000 $ 60,000 $ 60,000 $ 468 $ 559 $ 654 $ 755
4 $ 2,450 $60,000 $60,000 $ 60,000 $ 60,000 $ 740 $ 887 $ 1,047 $ 1,221
5 $ 3,125 $60,000 $60,000 $ 60,000 $ 60,000 $ 999 $ 1,217 $ 1,461 $ 1,733
6 $ 3,827 $60,000 $60,000 $ 60,000 $ 60,000 $ 1,386 $ 1,690 $ 2,038 $ 2,437
7 $ 4,557 $60,000 $60,000 $ 60,000 $ 60,000 $ 1,787 $ 2,190 $ 2,666 $ 3,227
8 $ 5,317 $60,000 $60,000 $ 60,000 $ 60,000 $ 2,175 $ 2,693 $ 3,320 $ 4,081
9 $ 6,106 $60,000 $60,000 $ 60,000 $ 60,000 $ 2,550 $ 3,196 $ 4,003 $ 5,007
10 $ 6,927 $60,000 $60,000 $ 60,000 $ 60,000 $ 2,912 $ 3,702 $ 4,716 $ 6,015
15 $ 11,553 $60,000 $60,000 $ 60,000 $ 60,000 $ 4,074 $ 5,870 $ 8,537 $ 12,498
20 $ 17,182 $60,000 $60,000 $ 60,000 $ 60,000 $ 4,744 $ 8,005 $13,673 $ 23,543
25 $ 24,029 $60,000 $60,000 $ 60,000 $ 78,722 $ 4,620 $ 9,828 $20,599 $ 42,546
30 (Age 65) $ 32,361 $60,000 $60,000 $ 60,000 $121,289 $ 3,233 $10,889 $30,166 $ 73,969
35 $ 52,388 $60,000 $60,000 $ 64,669 $184,454 $14,693 $20,487 $43,895 $125,200
40 $ 76,754 $60,000 $60,000 $ 84,098 $279,131 $24,803 $30,971 $62,586 $207,729
45 $106,400 $60,000 $60,000 $108,676 $422,991 $33,491 $43,231 $87,087 $338,960
</TABLE>
(1) If premiums are paid more frequently than annually, the initial payments
would be $284.80 semi-annually, $145.40 quarterly or $50 monthly. The
ultimate payments would be $1,775.20 semi-annually, $897.80 quarterly or
$302.60 monthly. The death benefits and cash surrender values would be
slightly different for a Contract with more frequent premium payments.
(2) Assumes no Contract loan has been made.
(3) Values shown in the table are applicable to both the original Contracts
(the "1984 Contracts") and the revised Contracts that first began to be
issued in September of 1986 (the "1986 Contracts"), except where the death
benefit has been increased to the Contract fund divided by the net single
premium, in which case the cash surrender value and death benefit figures
shown are applicable only to the 1986 Contracts. This first occurs at the
time when the 1984 Contracts would become paid-up. For a hypothetical
gross investment return of 0%, the second Scheduled Premium will be
$3,477.40. For a gross return of 4%, the second Scheduled Premium will be
$2,310.74. For a gross return of 8%, the second Scheduled Premium will be
$554.80. For a gross return of 12%, the second Scheduled Premium will be
$554.80. The premiums accumulated at 4% interest in column 2 are those
payable if the gross investment return is 4%. For an explanation of why
the scheduled premium may increase on the premium change date, see
Premiums.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%,
8%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
PRUCO LIFE OF NEW JERSEY OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T1
<PAGE>
<TABLE>
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM B -- VARIABLE DEATH BENEFIT
MALE PREFERRED ISSUE AGE 35
$60,000 GUARANTEED DEATH BENEFIT
$554.80 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING CURRENT SCHEDULE OF CHARGES
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- -------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- -------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (3) (-1.12% Net) (2.88% Net) (6.88% Net) (10.88% Net) (-1.12% Net) (2.88% Net) (6.88% Net) (10.88% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 577 $60,000 $60,000 $60,013 $ 60,030 $ 0 $ 0 $ 0 $ 0
2 $ 1,177 $60,000 $60,000 $60,039 $ 60,088 $ 186 $ 232 $ 280 $ 330
3 $ 1,801 $60,000 $60,000 $60,080 $ 60,181 $ 467 $ 557 $ 652 $ 752
4 $ 2,450 $60,000 $60,000 $60,138 $ 60,311 $ 738 $ 884 $ 1,043 $ 1,217
5 $ 3,125 $60,000 $60,000 $60,215 $ 60,485 $ 997 $ 1,214 $ 1,456 $ 1,726
6 $ 3,827 $60,000 $60,000 $60,341 $ 60,737 $ 1,384 $ 1,685 $ 2,031 $ 2,427
7 $ 4,557 $60,000 $60,020 $60,492 $ 61,047 $ 1,785 $ 2,185 $ 2,656 $ 3,212
8 $ 5,317 $60,000 $60,048 $60,670 $ 61,421 $ 2,172 $ 2,686 $ 3,307 $ 4,059
9 $ 6,106 $60,000 $60,080 $60,877 $ 61,868 $ 2,547 $ 3,188 $ 3,985 $ 4,976
10 $ 6,927 $60,000 $60,118 $61,117 $ 62,396 $ 2,909 $ 3,692 $ 4,692 $ 5,971
15 $ 11,553 $60,000 $60,627 $63,236 $ 67,099 $ 4,088 $ 5,868 $ 8,477 $ 12,340
20 $ 17,182 $60,000 $61,532 $66,988 $ 76,437 $ 4,780 $ 7,993 $13,449 $ 22,898
25 $ 24,029 $60,000 $63,141 $73,205 $ 93,813 $ 4,680 $ 9,730 $19,793 $ 40,402
30 (Age 65) $ 32,361 $60,000 $65,958 $83,047 $124,927 $ 3,317 $10,458 $27,547 $ 69,427
35 $ 53,941 $60,363 $66,410 $82,644 $173,620 $14,665 $20,712 $36,946 $117,846
40 $ 80,197 $60,822 $67,861 $85,282 $264,168 $24,432 $31,471 $48,892 $196,593
45 $112,141 $60,658 $70,823 $92,492 $402,323 $32,397 $42,561 $64,231 $322,398
</TABLE>
(1) If premiums are paid more frequently than annually, the initial payments
would be $284.80 semi-annually, $145.40 quarterly or $50 monthly. The
ultimate payments would be $1,775.20 semi-annually, $897.80 quarterly or
$302.60 monthly. The death benefits and cash surrender values would be
slightly different for a Contract with more frequent premium payments.
(2) Assumes no Contract loan has been made.
(3) Values shown in the table are applicable to both the original Contracts
(the "1984 Contracts") and the revised Contracts that first began to be
issued in September of 1986 (the "1986 Contracts"), except where the death
benefit has been increased to the Contract fund divided by the net single
premium, in which case the cash surrender value and death benefit figures
shown are applicable only to the 1986 Contracts. This first occurs at the
time when the 1984 Contracts would become paid-up. For a hypothetical
gross investment return of 0%, the second Scheduled Premium will be
$3,477.40. For a gross return of 4%, the second Scheduled Premium will be
$2,586.43. For a gross return of 8%, the second Scheduled Premium will be
$554.80. For a gross return of 12%, the second Scheduled Premium will be
$554.80. The premiums accumulated at 4% interest in column 2 are those
payable if the gross investment return is 4%. For an explanation of why
the scheduled premium may increase on the premium change date, see
Premiums.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%,
8%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
PRUCO LIFE OF NEW JERSEY OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T2
<PAGE>
<TABLE>
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM A -- FIXED DEATH BENEFIT
MALE PREFERRED ISSUE AGE 35
$60,000 GUARANTEED DEATH BENEFIT
$554.80 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING MAXIMUM CONTRACTUAL CHARGES
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- -------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- -------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (3) (-1.12% Net) (2.88% Net) (6.88% Net) (10.88% Net) (-1.12% Net) (2.88% Net) (6.88% Net) (10.88% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 577 $60,000 $60,000 $60,000 $ 60,000 $ 0 $ 0 $ 0 $ 0
2 $ 1,177 $60,000 $60,000 $60,000 $ 60,000 $ 184 $ 231 $ 279 $ 328
3 $ 1,801 $60,000 $60,000 $60,000 $ 60,000 $ 460 $ 550 $ 645 $ 745
4 $ 2,450 $60,000 $60,000 $60,000 $ 60,000 $ 722 $ 868 $ 1,027 $ 1,200
5 $ 3,125 $60,000 $60,000 $60,000 $ 60,000 $ 968 $ 1,184 $ 1,426 $ 1,696
6 $ 3,827 $60,000 $60,000 $60,000 $ 60,000 $1,310 $ 1,609 $ 1,952 $ 2,346
7 $ 4,557 $60,000 $60,000 $60,000 $ 60,000 $1,661 $ 2,055 $ 2,520 $ 3,070
8 $ 5,317 $60,000 $60,000 $60,000 $ 60,000 $1,992 $ 2,494 $ 3,104 $ 3,846
9 $ 6,106 $60,000 $60,000 $60,000 $ 60,000 $2,305 $ 2,926 $ 3,704 $ 4,678
10 $ 6,927 $60,000 $60,000 $60,000 $ 60,000 $2,596 $ 3,348 $ 4,320 $ 5,571
15 $ 11,553 $60,000 $60,000 $60,000 $ 60,000 $3,140 $ 4,714 $ 7,086 $ 10,658
20 $ 17,182 $60,000 $60,000 $60,000 $ 60,000 $2,872 $ 5,488 $10,187 $ 18,576
25 $ 24,029 $60,000 $60,000 $60,000 $ 60,000 $1,265 $ 5,025 $13,342 $ 31,308
30 (Age 65) $ 32,361 $60,000 $60,000 $60,000 $ 84,811 $ 0 $ 2,228 $16,069 $ 51,723
35 $ 58,960 $60,000 $60,000 $60,000 $121,413 $3,929 $11,043 $27,864 $ 82,410
40 $ 91,322 $60,000 $60,000 $60,000 $171,657 $6,058 $18,303 $44,398 $127,747
45 $130,695 $60,000 $60,000 $83,080 $241,219 $ 0 $22,167 $66,575 $193,298
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$284.80 semi-annually, $145.40 quarterly or $50 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.
(2) Assumes no Contract loan has been made.
(3) Values shown in the table are applicable to both the original Contracts
(the "1984 Contracts") and the revised Contracts that first began to be
issued in September of 1986 (the "1986 Contracts"), except where the death
benefit has been increased to the Contract fund divided by the net single
premium, in which case the cash surrender value and death benefit figures
shown are applicable only to the 1986 Contracts. This first occurs at the
time when the 1984 Contracts would become paid-up. For a hypothetical
gross investment return of 0%, the second Scheduled Premium will be
$3,477.40; for a gross return of 4% the second Scheduled Premium will be
$3,477.40; for a gross return of 8% the second Scheduled Premium will be
$2,244.41; for a gross return of 12% the second Scheduled Premium will be
$554.80. The premiums accumulated at 4% interest in column 2 are those
payable if the gross investment return is 4%. For an explanation of why
the scheduled premium may increase on the premium change date, see
Premiums.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%,
8%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
PRUCO LIFE OF NEW JERSEY OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T3
<PAGE>
<TABLE>
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM B -- VARIABLE DEATH BENEFIT
MALE PREFERRED ISSUE AGE 35
$60,000 GUARANTEED DEATH BENEFIT
$554.80 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING MAXIMUM CONTRACTUAL CHARGES
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- -------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ---------------------------------------------------- -------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (3) (-1.12% Net) (2.88% Net) (6.88% Net) (10.88% Net) (-1.12% Net) (2.88% Net) (6.88% Net) (10.88% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 577 $60,000 $60,000 $60,013 $ 60,030 $ 0 $ 0 $ 0 $ 0
2 $ 1,177 $60,000 $60,000 $60,036 $ 60,085 $ 183 $ 229 $ 277 $ 327
3 $ 1,801 $60,000 $60,000 $60,071 $ 60,171 $ 458 $ 548 $ 642 $ 743
4 $ 2,450 $60,000 $60,000 $60,118 $ 60,291 $ 720 $ 865 $ 1,024 $ 1,196
5 $ 3,125 $60,000 $60,000 $60,180 $ 60,448 $ 966 $ 1,181 $ 1,421 $ 1,689
6 $ 3,827 $60,000 $60,000 $60,255 $ 60,646 $1,308 $ 1,605 $ 1,945 $ 2,336
7 $ 4,557 $60,000 $60,000 $60,346 $ 60,890 $1,658 $ 2,050 $ 2,511 $ 3,055
8 $ 5,317 $60,000 $60,000 $60,454 $ 61,186 $1,990 $ 2,488 $ 3,091 $ 3,824
9 $ 6,106 $60,000 $60,000 $60,579 $ 61,538 $2,302 $ 2,919 $ 3,687 $ 4,646
10 $ 6,927 $60,000 $60,000 $60,723 $ 61,952 $2,594 $ 3,341 $ 4,298 $ 5,527
15 $ 11,553 $60,000 $60,000 $61,765 $ 65,209 $3,138 $ 4,704 $ 7,006 $ 10,450
20 $ 17,182 $60,000 $60,000 $63,467 $ 71,302 $2,869 $ 5,477 $ 9,927 $ 17,763
25 $ 24,029 $60,000 $60,000 $65,976 $ 81,851 $1,263 $ 5,011 $12,564 $ 28,440
30 (Age 65) $ 32,361 $60,000 $60,000 $69,383 $ 99,252 $ 0 $ 2,210 $13,883 $ 43,752
35 $ 58,960 $60,000 $60,000 $72,024 $116,464 $3,927 $11,003 $26,326 $ 70,767
40 $ 91,322 $60,000 $60,000 $77,428 $151,913 $6,055 $18,244 $41,038 $113,054
45 $130,695 $60,000 $60,000 $86,698 $219,326 $ 0 $22,065 $58,437 $175,755
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$284.80 semi-annually, $145.40 quarterly or $50 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.
(2) Assumes no Contract loan has been made.
(3) Values shown in the table are applicable to both the original Contracts
(the "1984 Contracts") and the revised Contracts that first began to be
issued in September of 1986 (the "1986 Contracts"), except where the death
benefit has been increased to the Contract fund divided by the net single
premium, in which case the cash surrender value and death benefit figures
shown are applicable only to the 1986 Contracts. This first occurs at the
time when the 1984 Contracts would become paid-up. For a hypothetical
gross investment return of 0%, the second Scheduled Premium will be
$3,477.40; for a gross return of 4% the second Scheduled Premium will be
$3,477.40; for a gross return of 8% the second Scheduled Premium will be
$2,954.83; for a gross return of 12% the second Scheduled Premium will be
$1,291.34. The premiums accumulated at 4% interest in column 2 are those
payable if the gross investment return is 4%. For an explanation of why
the scheduled premium may increase on the premium change date, see
Premiums.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 4%,
8%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
PRUCO LIFE OF NEW JERSEY OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T4
<PAGE>
CONTRACT LOANS
The Contract owner may borrow from Pruco Life of New Jersey up to the "loan
value" of the Contract, using the Contract as the only security for the loan.
The loan value of a Contract is 90% of an amount equal to its Contract fund,
reduced by any charges due upon surrender. However, Pruco Life of New Jersey
will, on a non-contractual basis, increase the loan value by permitting a
Contract owner to borrow up to 100% of the portion of the Contract fund
attributable to the fixed-rate option (or any portion of the Contract fund
attributable to a prior loan supported by the fixed-rate option), reduced by any
charges due upon surrender. The minimum amount that may be borrowed at any one
time is $500 unless the loan is used to pay premiums.
Under one of the loan provisions available under this Contract, interest charged
on a loan accrues daily at a fixed effective annual rate of 5.5%. However, if a
Contract owner so desires, and if Pruco Life of New Jersey has received any
required approvals from the regulatory officials in the state or other
jurisdiction in which the Contract is to be issued, the Contract owner may elect
at the time of issuance of the Contract to have a different loan provision in
the Contract under which the interest rate will vary from time to time.
If an owner elects the variable loan interest rate provision, interest charged
on any loan will accrue daily at an annual rate Pruco Life of New Jersey
determines at the start of each Contract year (instead of at the fixed 5.5%
rate). This interest rate will not exceed the greatest of (1) the "Published
Monthly Average" for the calendar month ending 2 months before the calendar
month of the Contract anniversary; (2) 5%; or (3) any rate required by law in
the state of issue of the Contract. The "Published Monthly Average" means
Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published
by Moody's Investors Service, Inc. or any successor to that service, or if that
average is no longer published, a substantially similar average established by
the insurance regulator where the Contract is issued. For example, the Published
Monthly Average in 1995 ranged from 7.11% to 8.71%.
Interest payments on any loan are due at the end of each Contract year. If
interest is not paid when due, it is added to the principal amount of the loan.
The term "Contract debt" means the amount of all outstanding loans plus any
interest accrued but not yet due. If at any time the Contract debt exceeds the
cash surrender value, Pruco Life of New Jersey will notify the Contract owner of
its intent to terminate the Contract in 61 days, within which time the owner may
repay all or enough of the loan to keep the Contract in force for a limited
time. If the Contract owner fails to keep the Contract in force, the amount of
unpaid Contract debt will be treated as a distribution which may be taxable. See
LAPSE AND REINSTATEMENT, page 20 and TAX TREATMENT OF CONTRACT BENEFITS -
PRE-DEATH DISTRIBUTIONS, page 26.
When a loan is made, an amount equal to the loan proceeds will be transferred
out of the applicable investment option[s]. The reduction will be made in the
same proportions as the value in each investment option bears to the total value
of the Contract. While a fixed-rate loan is outstanding, the amount that was so
transferred will continue to be treated as part of the Contract fund but it will
be credited with the assumed rate of return of 4% rather than with the actual
rate of return of the applicable investment option[s]. While a loan made
pursuant to the variable loan interest rate provision is outstanding, the amount
that was transferred out of the subaccount[s] is credited with a rate which is
less than the loan interest rate for the Contract year by no more than 1.5%,
rather than with the actual rate of return of the subaccount[s] the fixed-rate
option or the Real Property Account. Currently, Pruco Life of New Jersey credits
such amounts with a rate that is 1% less than the loan interest rate for the
Contract year. If a loan remains outstanding at a time when Pruco Life of New
Jersey fixes a new rate, the new interest rate will apply.
A loan will not affect the amount of the premiums due. Should the death benefit
become payable while a loan is outstanding, or should the Contract be
surrendered, any Contract debt will be deducted from the death benefit or the
cash surrender value otherwise payable. Loans from Modified Endowment Contracts
may be treated for tax purposes as distributions of income. See TAX TREATMENT OF
CONTRACT BENEFITS, page 25.
A loan will have a permanent effect on a Contract's cash surrender value and may
have a permanent effect on the death benefit because the investment results of
the selected investment options will apply only to the amount remaining in those
investment options. The longer the loan is outstanding, the greater the effect
is likely to be. The effect could be favorable or unfavorable. If investment
results are greater than the rate being credited upon the amount of the loan
while the loan is outstanding, Contract values will not increase as rapidly as
they would have if no loan had been made. If investment results are below that
rate, Contract values will be higher than they would have been had no loan been
made. A loan that is repaid will not have any effect upon the guaranteed minimum
death benefit.
Consider the Form A Contract issued on a 35 year old male insured illustrated in
the table on page T1 with an 8% gross investment return. Assume a $2,000 (5.5%)
fixed-rate loan was made under this Contract at the end of
23
<PAGE>
Contract year 8 and repaid at the end of Contract year 10 and loan interest was
paid when due. Upon repayment, the cash surrender value would be $4,579.39. This
amount is lower than the cash value shown on that page for the end of Contract
year 10 because the loan amount was credited with the 4% assumed rate of return
rather than the 6.88% net return for the designated subaccount[s] resulting from
the 8% gross return in the underlying Series Fund.
REPORTS TO CONTRACT OWNERS
Once each Contract year (except where the Contract is in force as fixed extended
term insurance), Contract owners will be sent statements that provide certain
information pertinent to their own Contract. These statements detail values and
transactions made and specific Contract data that apply only to each particular
Contract. On request, a Contract owner will be sent a current statement in a
form similar to that of the annual statement described above, but Pruco Life of
New Jersey may limit the number of such requests or impose a reasonable charge
if such requests are made too frequently.
Each Contract owner will be sent an annual report for the Account. Contract
owners will also be sent annual and semi-annual reports of the Series Fund
showing the financial condition of the portfolios and the investments held in
each.
OPTIONS ON LAPSE
If a Contract lapses because the necessary premium has not been paid before the
end of the grace period, some life insurance coverage may continue in effect or
the owner may choose to surrender the Contract for its cash surrender value.
1. FIXED EXTENDED TERM INSURANCE. With two exceptions explained below, if the
owner does not communicate at all with Pruco Life of New Jersey, life insurance
coverage will continue for a length of time that depends on the cash surrender
value on the date of default (which reflects the deduction of the deferred sales
load and administrative charges, and Contract debt, if any), the amount of
insurance, and the age and sex (except where unisex rates apply) of the insured.
The insurance amount will be what it would have been on the date of default
taking into account any Contract debt on that date. The amount will not change
while the insurance stays in force. This benefit is known as extended term
insurance. If the owner requests, he or she will be told in writing how long the
insurance will be in effect. Extended term insurance has a cash surrender value,
but no loan value.
Contracts issued on the lives of certain insureds in high risk rating classes
and Contracts issued in connection with tax qualified pension plans will include
a statement that extended term insurance will not be provided. In those cases,
variable reduced paid-up insurance will be the automatic benefit provided on
lapse.
2. VARIABLE REDUCED PAID-UP INSURANCE. Variable reduced paid-up insurance
provides insurance coverage for the lifetime of the insured. The initial
insurance amount will depend upon the cash surrender value on the date of
default (which reflects the deduction of the deferred sales load and
administrative charges, and Contract debt, if any), and the age and sex of the
insured. This will be a new guaranteed minimum death benefit. Aside from this
guarantee, the cash surrender value and the amount of insurance will vary with
investment performance in the same manner as the paid-up Contract described
earlier. See WHEN A CONTRACT BECOMES PAID-UP, page 16. Variable reduced paid-up
insurance has a loan privilege identical to that available on premium paying
Contracts. See CONTRACT LOANS, page 23. Acquisition of reduced paid-up insurance
within the first 7 Contract years may result in the Contract becoming a Modified
Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 25.
As explained above, variable reduced paid-up insurance is the automatic benefit
on lapse for Contracts issued on certain insureds. Owners of other Contracts who
want variable reduced paid-up insurance must ask for it in writing, in a form
that meets Pruco Life of New Jersey's needs, within 3 months of the date of
default; it will be available to such owners only if the initial amount of
variable reduced paid-up insurance would be at least $5,000. This minimum is not
applicable to Contracts for which variable reduced paid-up insurance is the
automatic benefit upon lapse.
3. PAYMENT OF CASH SURRENDER VALUE. The owner can receive the cash surrender
value by surrendering the Contract and making a written request in a form that
meets Pruco Life of New Jersey's needs. If Pruco Life of New Jersey receives the
request after the 61-day grace period has expired, the cash surrender value will
be the net value of any extended term insurance then in force, or the net value
of any reduced paid-up insurance then in force, less any Contract debt.
Surrender of a Contract may have tax consequences. See TAX TREATMENT OF CONTRACT
BENEFITS, page 25.
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RIGHT TO EXCHANGE A CONTRACT FOR A FIXED-BENEFIT INSURANCE POLICY
1. ORIGINAL CONTRACTS. At any time during the first 24 months after a Contract
is issued, so long as the Contract is not in default, the owner may exchange it
for an APPRECIABLE LIFE insurance policy on the insured's life issued by Pruco
Life of New Jersey. This is a general account, universal-life type policy with
guaranteed minimum values. No evidence of insurability will be required to make
an exchange. The new policy's premium and death benefit will be the same as the
original Contract's on the date of exchange. The new policy will also have the
same issue date and risk classification for the insured as the original
Contract. If the Contract fund value under the original Contract is greater than
the tabular Contract fund value under the new policy, the difference will be
credited to the Contract owner and carried over to the new policy. If the
Contract fund value under the original Contract is less than the tabular
Contract fund value under the new policy, a cash payment will be required from
the exchanging owner.
The exchange will be effective when Pruco Life of New Jersey receives a written
request in a form that meets its needs. Any outstanding Contract debt must be
repaid on or before the effective date of the exchange.
The Contract owner may also exchange the Contract for an APPRECIABLE LIFE policy
according to procedures meeting applicable state insurance law requirements if
the Series Fund or one of its portfolios has a material change in its investment
policy. The Company, in conjunction with the New Jersey Insurance Commissioner,
will determine if a change in investment policy is material. For New York
Contract owners, the Company will also consult the New York Superintendent of
Insurance. The Contract owner will be able to exchange within 60 days of receipt
of notice of such a material change or of the effective date of the change,
whichever is later.
2. REVISED CONTRACTS. Under the revised Contracts, the only right to exchange
the Contract for a fixed-benefit contract is provided by allowing Contract
owners to transfer their entire Contract fund to the fixed-rate option at any
time within the first 2 years from issue (or within 2 years of any increase in
face amount with respect to the amount of insurance) without regard to the
otherwise applicable limit of four transfers per year. See TRANSFERS, page 10.
This conversion right will also be provided if the Series Fund or one of its
portfolios has a material change in its investment policy, as explained above.
There is no right to exchange for an APPRECIABLE LIFE contract.
SALE OF THE CONTRACT AND SALES COMMISSIONS
Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
The Prudential, acts as the principal underwriter of the Contract. Prusec,
organized in 1971 under New Jersey law, is registered as a broker and dealer
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. Prusec's principal business address is
1111 Durham Avenue, South Plainfield, New Jersey 07080. The Contract is sold by
registered representatives of Prusec who are also authorized by state insurance
departments to do so. The Contract may also be sold through other broker-dealers
authorized by Prusec and applicable law to do so. Registered representatives of
such other broker-dealers may be paid on a different basis than described below.
Where the insured is less than 60 years of age, the representative will
generally receive a commission of no more than 50% of the scheduled premiums for
the first year, no more than 12% of the scheduled premiums for the second,
third, and fourth years, no more than 3% of the scheduled premiums for the fifth
through tenth years, and no more than 2% of the scheduled premiums thereafter.
For insureds over 59 years of age, the commission will be lower. The
representative may be required to return all or part of the first year
commission if the Contract is not continued through the second year.
Representatives with less than 3 years of service may be paid on a different
basis. Representatives who meet certain productivity, profitability, and
persistency standards with regard to the sale of the Contract will be eligible
for additional compensation.
Sales expenses in any year are not equal to the deduction for sales load in that
year. Pruco Life of New Jersey expects to recover its total sales expenses over
the periods the Contracts are in effect. To the extent that the sales charges
are insufficient to cover total sales expenses, the sales expenses will be
recovered from Pruco Life of New Jersey's surplus, which may include amounts
derived from the mortality and expense risk charge and the guaranteed minimum
death benefit risk charge described in items 5 and 7 under CHARGES AND EXPENSES,
page 11.
TAX TREATMENT OF CONTRACT BENEFITS
Each prospective purchaser is urged to consult a qualified tax advisor. The
following discussion is not intended as tax advice, and it is not a complete
statement of what the effect of federal income taxes will be under all
circumstances. Rather, it provides information about how Pruco Life of New
Jersey believes the tax laws apply in the most commonly occurring circumstances.
There is no guarantee, however, that the current federal income tax laws and
regulations or interpretations will not change.
TREATMENT AS LIFE INSURANCE. The Contract will be treated as "life insurance,"
as long as it satisfies certain definitional tests set forth in sections 7702 of
the Internal Revenue Code ("the Code") and as long as the underlying investments
for the Contract satisfy diversification requirements under section 817(h) of
the Code. (For further
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detail on diversification requirements, see DIVIDENDS, DISTRIBUTIONS, AND TAXES
in the attached prospectus for the Series Fund.)
Pruco Life of New Jersey believes that it has taken adequate steps to cause the
Contract to be treated as life insurance for tax purposes. This means that (1)
except as noted below, the Contract owner should not be taxed on any part of the
Contract fund, including additions attributable to interest, dividends or
appreciation; and (2) the death benefit should be excludible from the gross
income of the beneficiary under section 101(a) of the Code.
However, section 7702 of the Code, which defines life insurance for tax
purposes, gives the Secretary of the Treasury authority to prescribe regulations
to carry out the purposes of the section. In this regard, proposed regulations
governing mortality charges were issued in 1991, and proposed regulations under
sections 101, 7702 and 7702A governing the treatment of life insurance policies
that provide accelerated death benefits were issued in 1992. None of these
proposed regulations has yet been finalized. Additional regulations under
section 7702 may also be promulgated in the future. Moreover, in connection with
the issuance of temporary regulations under section 817(h), the Treasury
Department announced that such regulations do not provide guidance concerning
the extent to which Contract owners may direct their investments to particular
divisions of a separate account. Such guidance will be included in regulations
or rulings under section 817(d) relating to the definition of a variable
contract.
Pruco Life of New Jersey intends to comply with final regulations issued under
sections 7702 and 817. Therefore, it reserves the right to make such changes as
it deems necessary to assure that the Contract continues to qualify as life
insurance for tax purposes. Any such changes will apply uniformly to affected
Contract owners and will be made only after advance written notice to affected
Contract owners.
PRE-DEATH DISTRIBUTIONS. The taxation of pre-death distributions depends on
whether the Contract is classified as a Modified Endowment Contract. The
following discussion first deals with distributions under Contracts not so
classified, and then with Modified Endowment Contracts.
1. A surrender or lapse of the Contract may have tax consequences. Upon
surrender, the owner will not be taxed on the cash surrender value except
for the amount, if any, that exceeds the gross premiums paid less the
untaxed portion of any prior withdrawals. The amount of any unpaid
Contract debt will, upon surrender or lapse, be added to the cash
surrender value and treated, for this purpose, as if it had been received.
Any loss incurred upon surrender is generally not deductible. The tax
consequences of a surrender may differ if the proceeds are received under
any income payment settlement option.
A withdrawal (or partial surrender) generally is not taxable unless it
exceeds total premiums paid to the date of withdrawal less the untaxed
portion of any prior withdrawals. However, under certain limited
circumstances, in the first 15 Contract years all or a portion of a
withdrawal or partial surrender may be taxable if the Contract fund
exceeds the total premiums paid less the untaxed portion of any prior
withdrawals, even if total withdrawals do not exceed total premiums paid
to date.
Extra premiums for optional benefits and riders generally do not count in
computing gross premiums paid, which in turn determine the extent to which
a withdrawal might be taxed.
Loans received under the Contract will ordinarily be treated as
indebtedness of the owner and will not be considered to be distributions
subject to tax.
2. Some of the above rules are changed if the Contract is classified as a
Modified Endowment Contract under section 7702A of the Code. It is
possible for this Contract to be classified as a Modified Endowment
Contract under at least two circumstances: premiums in excess of scheduled
premiums are paid or a decrease in the face amount of insurance is made
(or a rider removed) during the first 7 Contract years. Moreover, the
addition of a rider or the increase in the face amount of insurance after
the Contract date may have an impact on the Contract's status as a
Modified Endowment Contract. Contract owners contemplating any of these
steps should first consult a qualified tax advisor and their Pruco Life of
New Jersey representative.
If the Contract is classified as a Modified Endowment Contract, then
pre-death distributions, including loans, withdrawals and partial
surrenders are includible in income to the extent that the Contract fund
exceeds the gross premiums paid for the Contract increased by the amount
of any loans previously includible in income and reduced by any untaxed
amounts previously received other than the amount of any loans excludible
from income. These rules may also apply to pre-death distributions,
including loans, made during the 2 year period prior to the Contract
becoming a Modified Endowment Contract.
In addition, pre-death distributions from such Contracts (including full
surrenders) will be subject to a penalty of 10% of the amount includible
in income unless the amount is distributed on or after age 59 1/2, on
account
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of the taxpayer's disability or as a life annuity. It is presently unclear
how the penalty tax provisions apply to Contracts owned by nonnatural
persons such as corporations.
Under certain circumstances, the Code requires two or more Modified
Endowment Contracts issued during a calendar year period, to be treated as
a single contract for purposes of applying the above rules.
WITHHOLDING
The taxable portion of any amounts received under the Contract will be subject
to withholding to meet federal income tax obligations if the Contract owner
fails to elect that no taxes be withheld or in certain other circumstances.
Contract owners who do not provide a social security number or other taxpayer
identification number will not be permitted to elect out of withholding. All
recipients may be subject to penalties under the estimated tax payment rules if
withholding and estimated tax payments are not sufficient.
OTHER TAX CONSIDERATIONS. Transfer of the Contract to a new owner or assignment
of the Contract may have tax consequences depending on the circumstances. In the
case of a transfer of the Contract for a valuable consideration, the death
benefit may be subject to federal income taxes under section 101(a)(2) of the
Code. In addition, a transfer of the Contract to or the designation of a
beneficiary who is either 37 1/2 years younger than the Contract owner or a
grandchild of the Contract owner may have Generation Skipping Transfer tax
consequences under section 2601 of the Code.
In certain circumstances, deductions for interest paid or accrued on Contract
debt or on other loans incurred or continued to purchase or carry the Contract
may be denied under section 163 of the Code as personal interest or under
section 264 of the Code. Contract owners should consult a tax advisor regarding
the application of these provisions to their circumstances.
Business-owned life insurance is subject to additional rules. Section 264(a)(1)
of the Code generally precludes business Contract owners from deducting premium
payments. Under section 264(a)(4) of the Code, a deduction is not allowed for
any interest paid or accrued on any Contract debt on an insurance policy to the
extent the indebtedness exceeds $50,000 per officer, employee or financially
interested person. The Congress is also considering legislation to deny interest
deductions generally for loans on business-owned policies. The Code also imposes
an indirect tax upon additions to the Contract fund or the receipt of death
benefits under business-owned life insurance policies under certain
circumstances by way of the corporate alternative minimum tax.
The individual situation of each Contract owner or beneficiary will determine
the federal estate taxes and the state and local estate, inheritance and other
taxes due if the owner or insured dies.
CONTRACTS ISSUED IN CONNECTION WITH TAX-QUALIFIED PENSION PLANS
The Contracts may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of section 401 of the Internal Revenue
Code. Such Contracts may be issued with a minimum face amount of $25,000, and
increases and decreases in face amount may be effected in minimum increments of
$10,000. The monthly charge for anticipated mortality costs and the scheduled
premiums under such Contracts will be the same for male and female insureds of a
particular age and underwriting classification. Illustrations reflecting such
premiums and charges will be given to purchasers of Contracts issued in
connection with qualified plans. Only certain of the riders normally available
with the Contracts are available to Contracts issued in connection with
qualified plans. See RIDERS, page 29. Moreover, variable reduced paid-up
insurance and payment of cash surrender value are the only options on lapse
available to Contracts issued in connection with qualified plans. See OPTIONS ON
LAPSE, page 24. Finally, Contracts issued in connection with qualified plans may
not invest in the Real Property Account.
Prior to purchase of a Contract in connection with a qualified plan, the
provisions of the Code relating to such plans and life insurance thereunder
should be examined.
THE FIXED-RATE OPTION
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED-RATE
OPTION UNDER THE CONTRACT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND THE GENERAL ACCOUNT HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY, INTERESTS IN THE
FIXED-RATE OPTION ARE NOT SUBJECT TO THE PROVISIONS OF THESE ACTS, AND PRUCO
LIFE OF NEW JERSEY HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING
TO THE FIXED-RATE OPTION. DISCLOSURE REGARDING THE FIXED-RATE OPTION MAY,
HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF FEDERAL
SECURITIES LAWS RELATING TO THE ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN
PROSPECTUSES.
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As explained earlier, a Contract owner may elect to allocate, either initially
or by transfer, all or part of the amount credited under the Contract to a
fixed-rate option, and the amount so allocated or transferred becomes part of
Pruco Life of New Jersey's general assets. Sometimes this is referred to as
Pruco Life of New Jersey's general account, which consists of all assets owned
by Pruco Life of New Jersey other than those in the Account and in other
separate accounts that have been or may be established by Pruco Life of New
Jersey. Subject to applicable law, Pruco Life of New Jersey has sole discretion
over the investment of the assets of the general account, and Contract owners do
not share in the investment experience of those assets. Instead, Pruco Life of
New Jersey guarantees that the part of the Contract fund allocated to the
fixed-rate option will accrue interest daily at an effective annual rate that
Pruco Life of New Jersey declares periodically, but not less than an effective
annual rate of 4%. Currently, declared interest rates remain in effect from the
date money is allocated to the fixed-rate option until the Monthly date in the
same month in the following year. Thereafter, a new crediting rate will be
declared each year and will remain in effect for the calendar year. Pruco Life
of New Jersey reserves the right to change this practice. Pruco Life of New
Jersey is not obligated to credit interest at a higher rate than 4%, although in
its sole discretion it may do so. Different crediting rates may be declared for
different portions of the Contract fund allocated to the fixed-rate option. On
request, a Contract owner will be advised of the interest rates that currently
apply to his or her Contract.
Transfers from the fixed-rate option are subject to strict limits. (See
TRANSFERS, page 10). The payment of any cash surrender value attributable to the
fixed-rate option may be delayed up to 6 months (see WHEN PROCEEDS ARE PAID,
page 20).
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS
The Contract generally employs mortality tables that distinguish between males
and females. Thus, premiums and benefits under Contracts issued on males and
females of the same age will generally differ. However, in those states that
have adopted regulations prohibiting sex-distinct insurance rates, premiums and
cost of insurance charges will be based on a blended unisex rate whether the
insured is male or female. In addition, employers and employee organizations
considering purchase of a Contract should consult their legal advisors to
determine whether purchase of a Contract based on sex-distinct actuarial tables
is consistent with Title VII of the Civil Rights Act of 1964 or other applicable
law. Pruco Life of New Jersey may offer the Contract with unisex mortality rates
to such prospective purchasers.
OTHER GENERAL CONTRACT PROVISIONS
BENEFICIARY. The beneficiary is designated and named in the application by the
Contract owner. Thereafter, the owner may change the beneficiary, provided it is
in accordance with the terms of the Contract. Should the insured die with no
surviving beneficiary, the insured's estate will become the beneficiary.
INCONTESTABILITY. After the Contract has been in force during the insured's
lifetime for 2 years from the Contract date or, with respect to any change in
the Contract that requires Pruco Life of New Jersey's approval and could
increase its liability, after the change has been in effect during the insured's
lifetime for 2 years from the effective date of the change, Pruco Life of New
Jersey will not contest its liability under the Contract in accordance with its
terms.
MISSTATEMENT OF AGE OR SEX. If the insured's stated age or sex (except where
unisex rates apply) or both are incorrect in the Contract, Pruco Life of New
Jersey will adjust the death benefits payable, as required by law, to reflect
the correct age and sex. Any death benefit will be based on what the most recent
charge for mortality would have provided at the correct age and sex.
SUICIDE EXCLUSION. Generally, if the insured, whether sane or insane, dies by
suicide within 2 years from the Contract date, Pruco Life of New Jersey will pay
no more under the Contract than the sum of the premiums paid.
If the insured, whether sane or insane, dies by suicide within 2 years from the
effective date of an increase in the face amount of insurance, Pruco Life of New
Jersey will pay, with respect to the amount of the increase, no more than the
sum of the scheduled premiums attributable to the increase.
ASSIGNMENT. This Contract may not be assigned if such assignment would violate
any federal, state or local law or regulation. Pruco Life of New Jersey assumes
no responsibility for the validity or sufficiency of any assignment, and it will
not be obligated to comply with any assignment unless it has received a copy at
one of its Home Offices.
SETTLEMENT OPTIONS. The Contract grants to most owners, or to the beneficiary, a
variety of optional ways of receiving Contract proceeds, other than in a lump
sum. Any Pruco Life of New Jersey representative authorized to sell this
Contract can explain these options upon request.
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RIDERS
Contract owners may be able to obtain extra fixed benefits which may require an
additional premium. These benefits will be described in what is known as a
"rider" to the Contract. Charges for riders will be taken out of the Contract's
Contract fund on each Monthly date. One rider pays an additional amount if the
insured dies in an accident. Others waive certain premiums if the insured is
disabled within the meaning of the provision (or, in the case of a Contract
issued on an insured under the age of 15, if the applicant dies or becomes
disabled within the meaning of the provision). Others pay an additional amount
if the insured dies within a stated number of years after issue; similar term
insurance riders may be available for the insured's spouse or child. The amounts
of these benefits are fully guaranteed at issue; they do not depend on the
performance of the Account. Certain restrictions may apply; they are clearly
described in the applicable rider. Any Pruco Life of New Jersey representative
authorized to sell the Contract can explain these riders further. Samples of the
provisions are available from Pruco Life of New Jersey upon written request.
Under one form of rider, which provides monthly renewable term life insurance,
the amount payable upon the death of the insured may be substantially increased.
If this rider is purchased, even the original Contract will not become paid-up,
although, if the Contract fund becomes sufficiently large, a time may come when
Pruco Life of New Jersey will have the right to refuse to accept further
premiums. See WHEN A CONTRACT BECOMES PAID-UP, page 16.
Under another form of rider that is purchased for a single premium, businesses
that own a Contract covering certain employees may be able to change the insured
person from one key employee to another if certain requirements are met.
VOTING RIGHTS
As stated above, all of the assets held in the subaccounts of the Account will
be invested in shares of the corresponding portfolios of the Series Fund. Pruco
Life of New Jersey is the legal owner of those shares and as such has the right
to vote on any matter voted on at Series Fund shareholders meetings. However,
Pruco Life of New Jersey will, as required by law, vote the shares of the Series
Fund at any regular and special shareholders meetings it is required to hold in
accordance with voting instructions received from Contract owners. The Series
Fund will not hold annual shareholders meetings when not required to do so under
Maryland law or the Investment Company Act of 1940. Series Fund shares for which
no timely instructions from Contract owners are received, and any shares
attributable to general account investments of Pruco Life of New Jersey will be
voted in the same proportion as shares in the respective portfolios for which
instructions are received. Should the applicable federal securities laws or
regulations, or their current interpretation, change so as to permit Pruco Life
of New Jersey to vote shares of the Series Fund in its own right, it may elect
to do so.
Matters on which Contract owners may give voting instructions include the
following: (1) election of the Board of Directors of the Series Fund; (2)
ratification of the independent accountant of the Series Fund; (3) approval of
the investment advisory agreement for a portfolio of the Series Fund
corresponding to the Contract owner's selected subaccount[s]; (4) any change in
the fundamental investment policy of a portfolio corresponding to the Contract
owner's selected subaccount[s]; and (5) any other matter requiring a vote of the
shareholders of the Series Fund. With respect to approval of the investment
advisory agreement or any change in a portfolio's fundamental investment policy,
Contract owners participating in such portfolios will vote separately on the
matter, pursuant to the requirements of Rule 18f-2 under the 1940 Act.
The number of Series Fund shares for which instructions may be given by a
Contract owner is determined by dividing the portion of the value of the
Contract derived from participation in a subaccount, by the value of one share
in the corresponding portfolio of the Series Fund. The number of votes for which
each Contract owner may give Pruco Life of New Jersey instructions will be
determined as of the record date chosen by the Board of Directors of the Series
Fund. Pruco Life of New Jersey will furnish Contract owners with proper forms
and proxies to enable them to give these instructions. Pruco Life of New Jersey
reserves the right to modify the manner in which the weight to be given voting
instructions is calculated where such a change is necessary to comply with
current federal regulations or interpretations of those regulations.
Pruco Life of New Jersey may, if required by state insurance regulations,
disregard voting instructions if such instructions would require shares to be
voted so as to cause a change in the sub-classification or investment objectives
of one or more of the Series Fund's portfolios, or to approve or disapprove an
investment advisory contract for the Series Fund. In addition, Pruco Life of New
Jersey itself may disregard voting instructions that would require changes in
the investment policy or investment advisor of one or more of the Series Fund's
portfolios, provided that Pruco Life of New Jersey reasonably disapproves such
changes in accordance with applicable federal regulations. If Pruco Life of New
Jersey does disregard voting instructions, it will advise Contract owners of
that action and its reasons for such action in the next annual or semi-annual
report to Contract owners.
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SUBSTITUTION OF SERIES FUND SHARES
Although Pruco Life of New Jersey believes it to be unlikely, it is possible
that in the judgment of its management, one or more of the portfolios of the
Series Fund may become unsuitable for investment by Contract owners because of
investment policy changes, tax law changes or the unavailability of shares for
investment. In that event, Pruco Life of New Jersey may seek to substitute the
shares of another portfolio or of an entirely different mutual fund. Before this
can be done, the approval of the SEC, and possibly one or more state insurance
departments, will be required. Contract owners will be notified of such
substitution.
STATE REGULATION
Pruco Life of New Jersey is subject to regulation and supervision by the
Department of Insurance of the State of New Jersey, which periodically examines
its operations and financial condition. It is also subject to the insurance laws
and regulations of all jurisdictions in which it is authorized to do business.
Pruco Life of New Jersey is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business to determine solvency and
compliance with local insurance laws and regulations.
In addition to the annual statements referred to above, Pruco Life of New Jersey
is required to file with New Jersey and other jurisdictions a separate statement
with respect to the operations of all its variable contract accounts, in a form
promulgated by the National Association of Insurance Commissioners.
EXPERTS
The financial statements included in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein, and are included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing. Deloitte &
Touche LLP's principal business address is Two Hilton Court, Parsippany, New
Jersey 07054-0319. Actuarial matters included in this prospectus have been
examined by Nancy D. Davis, FSA, MAAA, whose opinion is filed as an exhibit to
the registration statement.
On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Pruco Life of New Jersey. There have been no disagreements with
Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of the accountant, would have caused them to make a
reference to the matter in their reports.
LITIGATION
Several actions have been brought against Pruco Life of New Jersey on behalf of
those persons who purchased life insurance policies based on complaints about
sales practices engaged in by The Prudential, Pruco Life of New Jersey and
agents appointed by The Prudential and Pruco Life of New Jersey. The Prudential
has agreed to indemnify Pruco Life of New Jersey for any and all losses
resulting from such litigation.
ADDITIONAL INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, relating to the offering described in this prospectus. This prospectus
does not include all the information set forth in the registration statement.
Certain portions have been omitted pursuant to the rules and regulations of the
SEC. The omitted information may, however, be obtained from the SEC's principal
office in Washington, D.C., upon payment of a prescribed fee.
Further information may also be obtained from Pruco Life of New Jersey's office.
The address and telephone number of which are set forth on the cover of this
prospectus.
FINANCIAL STATEMENTS
The financial statements of Pruco Life of New Jersey included herein should be
distinguished from the financial statements of the Account, and should be
considered only as bearing upon the ability of Pruco Life of New Jersey to meet
its obligations under the Contracts.
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DIRECTORS AND OFFICERS
The directors and major officers of Pruco Life of New Jersey, listed with their
principal occupations during the past 5 years, are shown below.
DIRECTORS OF PRUCO LIFE OF NEW JERSEY
E. MICHAEL CAULFIELD, Director. -- Chief Executive Officer, Prudential Money
Management Group since 1995; 1993 to 1995: President, Prudential Preferred
Financial Services; 1992 to 1993: President, Prudential Property and Casualty
Insurance Company*; Prior to 1992: President of Investment Services of The
Prudential.
GARNETT L. KEITH, JR., Director. -- Vice Chairman of The Prudential.
IRA J. KLEINMAN, Director. -- Chief Marketing and Product Development Officer,
Prudential Individual Insurance Group since 1995; 1993 to 1995: President,
Prudential Select; Prior to 1993: Senior Vice President of The Prudential.
ESTHER H. MILNES, President and Director. -- Vice President and Actuary,
Prudential Individual Insurance Group since 1996; 1993 to 1996: Senior Vice
President and Chief Actuary, Prudential Insurance and Financial Services; Prior
to 1993: Vice President and Associate Actuary of The Prudential.
I. EDWARD PRICE, Vice Chairman and Director. -- Senior Vice President and
Actuary, Prudential Individual Insurance Group since 1995; 1994 to 1995: Chief
Executive Officer, Prudential International Insurance; 1993 to 1994: President,
Prudential International Insurance; Prior to 1993: Senior Vice President and
Company Actuary of The Prudential.
WILLIAM F. YELVERTON, Director. -- Chief Executive Officer, Prudential
Individual Insurance Group since 1995; Prior to 1995: Chief Executive Officer,
New York Life Worldwide.
OFFICERS WHO ARE NOT DIRECTORS
BEVERLY R. BARNEY, Senior Vice President. -- Vice President and Re-Engineering
Officer, Prudential Individual Insurance Group since 1995; 1993 to 1995: Senior
Vice President and Associate Actuary, Prudential Direct; Prior to 1993: Senior
Vice President and Actuary of Pruco Life Insurance Company*.
SUSAN L. BLOUNT, Secretary. -- Vice President and Secretary of The Prudential
since 1995; Prior to 1995: Assistant General Counsel for Prudential Residential
Services Company.
C. EDWARD CHAPLIN, Treasurer. -- Vice President and Treasurer of The Prudential
since 1995; 1993 to 1995: Managing Director and Assistant Treasurer of The
Prudential; 1992 to 1993: Vice President and Assistant Treasurer, Banking and
Cash Management for The Prudential; Prior to 1992: Regional Vice President of
Prudential Mortgage Capital Company.
CLIFFORD E. KIRSCH, Chief Legal Officer. -- Chief Counsel, Variable Products,
Law Department of The Prudential since 1995; 1994 to 1995: Associate General
Counsel with Paine Webber; Prior to 1994: Assistant Director in the Division of
Investment Management with the Securities and Exchange Commission.
RICHARD F. LAMBERT, Senior Vice President and Chief Actuary. -- Vice President
and Actuary, Prudential Individual Insurance Group since 1996; 1994 to 1996:
Vice President and Chief Actuary, Prudential Preferred Financial Services; 1993
to 1994: Vice President and Actuary, Prudential Preferred Financial Services;
Prior to 1993: Vice President and Associate Actuary of The Prudential.
FRANK MARINO, Senior Vice President. -- Vice President, Policyholder Relations
Department, Prudential Individual Insurance Group since 1996; Prior to 1996:
Senior Vice President, Prudential Mutual Fund Services.
MICHAEL R. SHAPIRO, Senior Vice President. -- Vice President, Marketing and
Product Development, Prudential Individual Insurance Group since 1996; Prior to
1996: Senior Vice President, Prudential Select Brokerage.
STEPHEN P. TOOLEY, Vice President, Comptroller and Chief Accounting Officer. --
Vice President, Product Performance, Prudential Individual Insurance Group since
1996; 1993 to 1996: Vice President and Comptroller, Prudential Insurance and
Financial Services; Prior to 1993: Director, Financial Analysis for The
Prudential.
The business address of all directors and officers of Pruco Life of New Jersey
is 213 Washington Street, Newark, New Jersey 07102-2992.
* SUBSIDIARY OF THE PRUDENTIAL
31
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE
TOTAL MARKET BOND EQUITY MANAGED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 586,120,713 $ 7,115,815 $ 21,276,136 $ 135,231,596 $ 297,266,309
-------------- -------------- -------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 33,067 11,363 0 0 0
-------------- -------------- -------------- -------------- --------------
NET ASSETS........................................ $ 586,087,646 $ 7,104,452 $ 21,276,136 $ 135,231,596 $ 297,266,309
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 585,610,537 $ 7,026,761 $ 21,261,054 $ 135,217,589 $ 297,126,259
Equity of Pruco Life Insurance Company of New
Jersey........................................ 477,109 77,691 15,082 14,007 140,050
-------------- -------------- -------------- -------------- --------------
$ 586,087,646 $ 7,104,452 $ 21,276,136 $ 135,231,596 $ 297,266,309
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE
TOTAL MARKET BOND EQUITY MANAGED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 17,734,349 $ 395,145 $ 1,348,240 $ 2,592,180 $ 8,628,964
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 3,163,143 41,596 116,720 721,554 1,585,674
Reimbursement for excess expenses [Note 3D]..... (939,421) (2,844) (8,901) (119,115) (646,788)
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 2,223,722 38,752 107,819 602,439 938,886
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 15,510,627 356,393 1,240,421 1,989,741 7,690,078
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Capital gains distributions received............ 21,100,377 0 46,623 4,749,315 12,349,890
Realized gain on shares redeemed
[average cost basis].......................... 1,894,329 0 20,406 544,107 862,723
Net unrealized gain on investments.............. 72,688,699 0 2,276,752 24,536,585 35,084,463
-------------- -------------- -------------- -------------- --------------
NET GAIN ON INVESTMENTS........................... 95,683,405 0 2,343,781 29,830,007 48,297,076
-------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 111,194,032 $ 356,393 $ 3,584,202 $ 31,819,748 $ 55,987,154
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A1
<PAGE>
STATEMENTS OF NET ASSETS (CONTINUED)
December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
HIGH
CONSERVATIVE YIELD STOCK EQUITY NATURAL
BALANCED BOND INDEX INCOME RESOURCES
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 94,432,471 $ 5,290,156 $ 6,929,748 $ 5,817,719 $ 9,473,913
-------------- -------------- -------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 0 0 17,021 0 0
-------------- -------------- -------------- -------------- --------------
NET ASSETS........................................ $ 94,432,471 $ 5,290,156 $ 6,912,727 $ 5,817,719 $ 9,473,913
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 94,287,759 $ 5,288,344 $ 6,912,727 $ 5,788,761 $ 9,460,778
Equity of Pruco Life Insurance Company of New
Jersey........................................ 144,712 1,812 0 28,958 13,135
-------------- -------------- -------------- -------------- --------------
$ 94,432,471 $ 5,290,156 $ 6,912,727 $ 5,817,719 $ 9,473,913
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
GOVERNMENT PRUDENTIAL
GLOBAL INCOME JENNISON
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 1,689,243 $ 1,017,623 $ 397,862
-------------- -------------- --------------
LIABILITIES
Payable to Related Separate Account............. 4,683 0 0
-------------- -------------- --------------
NET ASSETS........................................ $ 1,684,560 $ 1,017,623 $ 397,862
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 1,659,872 $ 1,017,342 $ 390,810
Equity of Pruco Life Insurance Company of New
Jersey........................................ 24,688 281 7,052
-------------- -------------- --------------
$ 1,684,560 $ 1,017,623 $ 397,862
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS (CONTINUED)
For the year ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
HIGH
CONSERVATIVE YIELD STOCK EQUITY NATURAL
BALANCED BOND INDEX INCOME RESOURCES
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 3,716,087 $ 531,794 $ 125,371 $ 200,809 $ 108,596
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 538,559 30,204 33,345 30,252 50,470
Reimbursement for excess expenses [Note 3D]..... (161,773) 0 0 0 0
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 376,786 30,204 33,345 30,252 50,470
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 3,339,301 501,590 92,026 170,557 58,126
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Capital gains distributions received............ 3,199,302 0 48,903 244,033 430,971
Realized gain on shares redeemed
[average cost basis].......................... 395,934 22,462 18,971 9,122 10,519
Net unrealized gain on investments.............. 6,759,491 262,552 1,528,471 507,923 1,451,364
-------------- -------------- -------------- -------------- --------------
NET GAIN ON INVESTMENTS........................... 10,354,727 285,014 1,596,345 761,078 1,892,854
-------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 13,694,028 $ 786,604 $ 1,688,371 $ 931,635 $ 1,950,980
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
GOVERNMENT PRUDENTIAL
GLOBAL INCOME JENNISON*
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 23,408 $ 63,162 $ 27
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 8,227 5,534 659
Reimbursement for excess expenses [Note 3D]..... 0 0 0
-------------- -------------- --------------
NET EXPENSES...................................... 8,227 5,534 659
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 15,181 57,628 (632)
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Capital gains distributions received............ 29,689 0 0
Realized gain on shares redeemed
[average cost basis].......................... 6,264 3,821 0
Net unrealized gain on investments.............. 152,195 100,163 18,835
-------------- -------------- --------------
NET GAIN ON INVESTMENTS........................... 188,148 103,984 18,835
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 203,329 $ 161,612 $ 18,203
-------------- -------------- --------------
-------------- -------------- --------------
*Commenced
Business
on 5/1/95
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A2
<PAGE>
STATEMENTS OF NET ASSETS (CONTINUED)
December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------
SMALL
CAPITALIZATION
STOCK
--------------
<S> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 182,122
--------------
LIABILITIES
Payable to Related Separate Account............. 0
--------------
NET ASSETS........................................ $ 182,122
--------------
--------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 172,481
Equity of Pruco Life Insurance Company of New
Jersey........................................ 9,641
--------------
$ 182,122
--------------
--------------
</TABLE>
STATEMENTS OF OPERATIONS (CONTINUED)
For the year ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------
SMALL
CAPITALIZATION
STOCK*
--------------
<S> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 566
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 3A]..... 349
Reimbursement for excess expenses [Note 3D]..... 0
--------------
NET EXPENSES...................................... 349
--------------
NET INVESTMENT INCOME (LOSS)...................... 217
--------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Capital gains distributions received............ 1,651
Realized gain on shares redeemed
[average cost basis].......................... 0
Net unrealized gain on investments.............. 9,905
--------------
NET GAIN ON INVESTMENTS........................... 11,556
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 11,773
--------------
--------------
*Commenced
Business
on 5/1/95
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A3
<PAGE>
(This page intentionally left blank.)
A4
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
MONEY DIVERSIFIED
TOTAL MARKET BOND
------------------------------ ------------------------------ ------------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 15,510,627 $ 12,006,195 $ 356,393 $ 231,113 $ 1,240,421 $ 1,083,068
Capital gains distributions
received....................... 21,100,377 12,135,274 0 0 46,623 41,781
Realized gain (loss) on shares
redeemed
[average cost basis]........... 1,894,329 1,203,189 0 0 20,406 (104)
Net unrealized gain (loss) on
investment..................... 72,688,699 (33,188,850) 0 0 2,276,752 (1,843,417)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 111,194,032 (7,844,192) 356,393 231,113 3,584,202 (718,672)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 8,534,669 13,952,723 (230,261) 346,388 (301,132) (516,748)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (438,080) 230 54,650 (14,326) (64,049) 30,158
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 119,290,621 6,108,761 180,782 563,175 3,219,021 (1,205,262)
NET ASSETS:
Beginning of year................ 466,797,025 460,688,264 6,923,670 6,360,495 18,057,115 19,262,377
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 586,087,646 $ 466,797,025 $ 7,104,452 $ 6,923,670 $ 21,276,136 $ 18,057,115
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A5
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
FLEXIBLE
EQUITY MANAGED
------------------------------ ------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 1,989,741 $ 1,856,844 $ 7,690,078 $ 5,619,063
Capital gains distributions
received....................... 4,749,315 4,322,517 12,349,890 6,536,164
Realized gain (loss) on shares
redeemed
[average cost basis]........... 544,107 515,498 862,723 469,942
Net unrealized gain (loss) on
investment..................... 24,536,585 (4,328,575) 35,084,463 (20,633,412)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 31,819,748 2,366,284 55,987,154 (8,008,243)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... (302,145) (624,287) 7,645,276 10,588,266
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (82,656) (81,783) (84,390) 28,940
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 31,434,947 1,660,214 63,548,040 2,608,963
NET ASSETS:
Beginning of year................ 103,796,649 102,136,435 233,718,269 231,109,306
-------------- -------------- -------------- --------------
End of year...................... $ 135,231,596 $ 103,796,649 $ 297,266,309 $ 233,718,269
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<CAPTION>
HIGH
CONSERVATIVE YIELD
BALANCED BOND
------------------------------ ------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 3,339,301 $ 2,486,229 $ 501,590 $ 446,386
Capital gains distributions
received....................... 3,199,302 863,296 0 0
Realized gain (loss) on shares
redeemed
[average cost basis]........... 395,934 84,451 22,462 52,883
Net unrealized gain (loss) on
investment..................... 6,759,491 (4,531,190) 262,552 (661,387)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 13,694,028 (1,097,214) 786,604 (162,118)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... (668,617) 1,744,736 (172,703) (144,528)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (183,597) 139,892 (11,093) (156,329)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 12,841,814 787,414 602,808 (462,975)
NET ASSETS:
Beginning of year................ 81,590,657 80,803,243 4,687,348 5,150,323
-------------- -------------- -------------- --------------
End of year...................... $ 94,432,471 $ 81,590,657 $ 5,290,156 $ 4,687,348
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A6
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
STOCK EQUITY NATURAL
INDEX INCOME RESOURCES
------------------------------ ------------------------------ ------------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 92,026 $ 80,268 $ 170,557 $ 121,856 $ 58,126 $ 28,372
Capital gains distributions
received....................... 48,903 6,533 244,033 215,095 430,971 149,531
Realized gain (loss) on shares
redeemed
[average cost basis]........... 18,971 34,397 9,122 30,957 10,519 12,569
Net unrealized gain (loss) on
investment..................... 1,528,471 (106,816) 507,923 (353,186) 1,451,364 (556,096)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 1,688,371 14,382 931,635 14,722 1,950,980 (365,624)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 794,158 64,430 697,170 1,011,765 203,566 372,914
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (10,835) 3,553 (1,918) (6,373) 13,079 (24,609)
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 2,471,694 82,365 1,626,887 1,020,114 2,167,625 (17,319)
NET ASSETS:
Beginning of year................ 4,441,033 4,358,668 4,190,832 3,170,718 7,306,288 7,323,607
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 6,912,727 $ 4,441,033 $ 5,817,719 $ 4,190,832 $ 9,473,913 $ 7,306,288
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------------------------
SMALL
GOVERNMENT PRUDENTIAL CAPITALIZATION
GLOBAL** INCOME JENNISON* STOCK*
------------------------------ ------------------------------ -------------- --------------
1995 1994 1995 1994 1995 1995
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 15,181 $ (375) $ 57,628 $ 53,371 $ (632) $ 217
Capital gains distributions
received....................... 29,689 357 0 0 0 1,651
Realized gain (loss) on shares
redeemed
[average cost basis]........... 6,264 1,151 3,821 1,445 0 0
Net unrealized gain (loss) on
investment..................... 152,195 (60,675) 100,163 (114,096) 18,835 9,905
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 203,329 (59,542) 161,612 (59,280) 18,203 11,773
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 323,710 1,200,810 6,352 (91,023) 376,388 162,907
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS........................ (48,166) 64,419 (29,818) 16,688 3,271 7,442
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS.................... 478,873 1,205,687 138,146 (133,615) 397,862 182,122
NET ASSETS:
Beginning of year................ 1,205,687 0 879,477 1,013,092 0 0
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 1,684,560 $ 1,205,687 $ 1,017,623 $ 879,477 $ 397,862 $ 182,122
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
**Commenced *Commenced
Business Business
on 5/1/94 on 5/1/95
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A9 AND A10.
A8
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
NOTE 1: GENERAL
Pruco Life of New Jersey Variable Appreciable Account (the "Account") was
established on January 13, 1984 under New Jersey law as a separate investment
account of Pruco Life Insurance Company of New Jersey ("Pruco Life of New
Jersey") which is a wholly-owned subsidiary of Pruco Life Insurance Company (an
Arizona domiciled company) and is indirectly wholly-owned by The Prudential
Insurance Company of America ("The Prudential"). The assets of the Account are
segregated from Pruco Life of New Jersey's other assets. The two products that
invest in the Account are Pruco Life of New Jersey Variable Appreciable Life
("VAL") and Pruco Life of New Jersey PRUvider Variable Appreciable Life
("PRUvider").
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. 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.
New sales of the VAL product were discontinued as of May 1, 1992. However,
premium payments made by current Contract owners will continue to be received by
the Account.
NOTE 2: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share for each portfolio of the Series Fund, the number
of shares of each portfolio held by the subaccounts of the Account and the
aggregate cost of investments in such shares at December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
PORTFOLIOS
-----------------------------------------------------------
PORTFOLIO MONEY DIVERSIFIED FLEXIBLE
INFORMATION MARKET BOND EQUITY MANAGED
- -------------------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Number of shares: 711,582 1,880,660 5,274,274 16,644,884
Net asset value per share: $ 10.0000 $ 11.3131 $ 25.6399 $ 17.8593
Cost: $ 7,115,815 $ 19,928,929 $ 93,283,424 $ 253,095,408
<CAPTION>
PORTFOLIOS (CONTINUED)
-----------------------------------------------------------
HIGH
PORTFOLIO CONSERVATIVE YIELD STOCK EQUITY
INFORMATION BALANCED BOND INDEX INCOME
- -------------------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Number of shares: 6,168,525 678,190 347,250 357,554
Net asset value per share: $ 15.3088 $ 7.8004 $ 19.9561 $ 16.2709
Cost: $83,689,007 $ 5,010,446 $ 4,721,848 $ 5,334,919
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIOS (CONTINUED)
---------------------------------------------------------------------------
SMALL
PORTFOLIO NATURAL GOVERNMENT PRUDENTIAL CAPITALIZATION
INFORMATION RESOURCES GLOBAL INCOME JENNISON STOCK
- -------------------------- ------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Number of shares: 548,519 108,751 86,836 31,710 15,391
Net asset value per share: $ 17.2718 $ 15.5332 $ 11.7189 $ 12.5468 $ 11.8334
Cost: $ 8,222,130 $ 1,597,723 $ 963,864 $ 379,027 $ 172,217
</TABLE>
NOTE 3: CHARGES AND EXPENSES
A. Mortality Risk and Expense Risk Charges
The mortality risk and expense risk charges at an effective annual rate of
0.60% are applied daily against the net assets representing equity of VAL
Contract owners held in each subaccount.
The mortality risk and expense risk charges at an effective annual rate of
0.90% are applied daily against the net assets representing equity of
PRUvider Contract owners held in each subaccount.
A9
<PAGE>
B. Deferred Sales Charge
A deferred sales charge is imposed upon the surrender of certain variable
life insurance contracts to compensate Pruco Life of New Jersey for sales
and other marketing expenses. The amount of any sales charge will depend on
the number of years that have elapsed since the Contract was issued. No
sales charge will be imposed after the tenth year of the Contract. No sales
charge will be imposed on death benefits.
C. Partial Withdrawal Charge
A $15 charge is imposed in connection with partial withdrawals of the cash
surrender value from certain variable life insurance contracts.
D. Expense Reimbursement
Pursuant to a prior merger agreement, the Account is reimbursed by Pruco
Life of New Jersey for expenses in excess of 0.40% of the VAL product's
average daily net assets incurred by the Money Market, Diversified Bond,
Equity, Flexible Managed and the Conservative Balanced Portfolios of the
Series Fund.
NOTE 4: TAXES
The operations of the subaccounts form a part of, and are taxed with, the
operations of Pruco Life of New Jersey. Under the Internal Revenue Code, all
ordinary income and capital gains allocated to the Contract owners are not taxed
to Pruco Life of New Jersey. As a result, the net asset values of the
subaccounts are not affected by federal income taxes on distributions received
by the subaccounts.
NOTE 5: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The increase (decrease) in net assets resulting from surplus transfers
represents the net contributions (withdrawals) of Pruco Life of New Jersey to
the Account.
NOTE 6: RELATED PARTY TRANSACTIONS
The Prudential has purchased multiple individual VAL contracts of the Account
insuring the lives of certain employees. The Prudential is the owner and
beneficiary of the contracts. Net premium payments of approximately $12.0
million for each of the years ended December 31, 1995 and December 31, 1994,
respectively, were directed to the Flexible Managed subaccount. Equity of
Contract owners in that subaccount at December 31, 1995 and December 31, 1994
includes approximately $104.1 million and $73.6 million, respectively, owned by
The Prudential.
A10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners of
Pruco Life of New Jersey Variable Appreciable
Account and the Board of Directors
of Pruco Life Insurance Company of New Jersey
Newark, New Jersey
We have audited the accompanying statements of net assets of Pruco Life of New
Jersey Variable Appreciable Account of Pruco Life Insurance Company of New
Jersey (comprising, respectively, the Money Market, Diversified Bond, Equity,
Flexible Managed, Conservative Balanced, High Yield Bond, Stock Index, High
Dividend Stock, Natural Resources, Global, Government Income, Prudential
Jennison, and Small Capitalization Stock subaccounts) as of December 31, 1995,
the related statements of operations for the periods presented in the year then
ended, and the statements of changes in net assets for each of the periods
presented in the two years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the respective subaccounts
constituting the Pruco Life of New Jersey Variable Appreciable Account as of
December 31, 1995, the results of their operations, and the changes in their net
assets for the respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996
A11
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
STATEMENTS OF FINANCIAL POSITION
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------- ----------
($000'S)
<S> <C> <C>
ASSETS
Fixed maturities (market value $513,433
and $509,821)................................................. $ 498,041 $ 527,304
Policy loans...................................................... 98,194 85,277
Short-term investments............................................ 45,308 41,695
---------- ----------
Total Investments............................................. 641,543 654,276
Cash.............................................................. - 17
Accrued investment income......................................... 11,579 11,262
Premiums due and deferred......................................... 2,770 2,753
Receivable from affiliate......................................... 3,616 1,827
Federal income taxes.............................................. 368 8,597
Other assets...................................................... 253 1,549
Assets held in Separate Accounts.................................. 789,427 642,049
---------- ----------
TOTAL ASSETS........................................................... $1,449,556 $1,322,330
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy liabilities and insurance reserves:
Future policy benefits and claims............................. $ 449,617 $ 497,353
Other policy claims and benefits payable...................... 2,494 3,268
Interest maintenance reserve (IMR) ........................... 8,216 6,931
Payable to affiliates............................................. 5,375 4,568
Other liabilities................................................. 8,878 14,117
Asset valuation reserve (AVR)..................................... 5,749 5,512
Liabilities related to Separate Accounts.......................... 777,620 627,515
---------- ----------
TOTAL LIABILITIES...................................................... 1,257,949 1,159,264
---------- ----------
STOCKHOLDER'S EQUITY:
Common Stock, $5 par value; 400,000 shares
authorized, issued and outstanding............................ 2,000 2,000
Paid-in capital................................................... 125,000 125,000
Unassigned surplus ............................................... 64,607 36,066
---------- ----------
TOTAL STOCKHOLDER'S EQUITY............................................. 191,607 163,066
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............................. $1,449,556 $1,322,330
========== ==========
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
-------- -------- --------
($000'S)
<S> <C> <C> <C>
REVENUE
Premiums and annuity considerations................................. $ 97,660 $106,117 $105,390
Net investment income............................................... 44,580 44,381 47,700
Net realized investment gains/(losses).............................. 1,257 (2,825) 6,066
Other income........................................................ 3,900 3,201 2,831
-------- -------- --------
TOTAL REVENUE......................................................... 147,397 150,874 161,987
-------- --------- --------
BENEFITS AND EXPENSES
Current and future benefits and claims.............................. 89,115 100,555 100,514
Commission expenses................................................. 2,538 3,075 3,038
General, administrative and other expenses.......................... 18,133 17,149 19,182
-------- -------- --------
TOTAL BENEFITS AND EXPENSES........................................... 109,786 120,779 122,734
-------- -------- --------
Income before provision in lieu of federal
income tax . . . . . . ......................................... 37,611 30,095 39,253
Provision in lieu of federal
income tax...................................................... (8,833) (16,765) (19,460)
-------- -------- --------
NET INCOME.......................................................... $ 28,778 $ 13,330 $ 19,793
======== ======== ========
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS
B-1
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
STATEMENTS OF STOCKHOLDER'S EQUITY
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
-------- -------- --------
($000'S)
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of year......................................... $ 2,000 $ 2,000 $ 2,000
Issued during year................................................. - - -
-------- -------- --------
Balance, end of year............................................... 2,000 2,000 2,000
-------- -------- --------
PAID-IN CAPITAL
Balance, beginning of year......................................... 125,000 125,000 125,000
Paid-in during year................................................ - - -
-------- -------- --------
Balance, end of year............................................... 125,000 125,000 125,000
-------- -------- --------
UNASSIGNED SURPLUS
Balance, beginning of year......................................... 36,066 22,942 29,333
Net income ........................................................ 28,778 13,330 19,793
Net unrealized investment gains/(losses) ......................... - - -
(Increase)/Decrease in AVR ........................................ (237) (206) (184)
Dividends to stockholder........................................... - - (26,000)
-------- -------- --------
Balance, end of year............................................... 64,607 36,066 22,942
-------- -------- --------
TOTAL STOCKHOLDER'S EQUITY............................................ $191,607 $163,066 $149,942
======== ======== ========
STATEMENTS OF CASH FLOWS
CASH FLOW FROM OPERATING ACTIVITIES
Net income ........................................................ $ 28,778 $ 13,330 $ 19,793
Adjustments to reconcile net income to
net cash from operations:
Increase (decrease) in policy
liabilities and insurance reserves........................... (48,509) (40,237) (13,998)
Net (increase) decrease in Separate
Accounts..................................................... 2,728 1,220 3,426
Net realized investment (gains)/loss............................ (1,257) 2,825 (6,066)
Amortization and other non-cash items........................... 879 1,696 1,791
(Increase) decrease in operating assets:
Policy loans................................................. (12,917) (15,511) (13,921)
Accrued investment income.................................... (317) (679) 500
Premiums due and deferred.................................... (17) 268 115
Receivable from affiliate.................................... (1,789) (132) (953)
Federal income taxes ........................................ 8,229 (8,448) 4,065
Other assets................................................. 1,296 2,760 (3,808)
Increase (decrease) in operating liabilities:
Payable to affiliates........................................ 807 (3,419) 732
Federal income taxes........................................... - - -
Other liabilities............................................ (5,239) 10,522 (1,271)
-------- -------- --------
CASH FLOW FROM (USED FOR) OPERATING ACTIVITIES........................ (27,328) (35,805) (9,595)
-------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity of:
Fixed maturities................................................ 553,681 705,889 443,879
Payments for the purchase of:
Fixed maturities................................................ (522,757) (658,008) (391,561)
Net proceeds (payments) of short-term
investments..................................................... (3,613) (12,096) (17,838)
-------- -------- --------
CASH FLOW FROM (USED FOR) INVESTING ACTIVITIES........................ 27,311 35,785 34,480
-------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid..................................................... - - (26,000)
-------- -------- --------
Net increase (decrease) in Cash.................................... (17) (20) (1,115)
Cash, beginning of year............................................ 17 37 1,152
-------- -------- --------
CASH, END OF YEAR..................................................... $ 0 $ 17 $ 37
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid in lieu of income taxes.................................. $ 7,900 $ 17,679 $ 15,396
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Dividends paid in the form of fixed
maturities...................................................... $ - $ - $ -
======== ======== ========
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS
B-2
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. GENERAL
Pruco Life Insurance Company of New Jersey (the Company), a stock life
insurance company domiciled in the State of New Jersey, is an indirect
subsidiary of The Prudential Insurance Company of America (The Prudential),
a mutual life insurance company, and a direct subsidiary of Pruco Life
Insurance Company (Pruco Life), a stock life insurance company domiciled in
the State of Arizona. The Company markets individual life insurance and
single-pay deferred annuities through The Prudential's sales force.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES
A. BASIS OF PRESENTATION
The financial statements are presented in conformity with generally
accepted accounting principles ("GAAP"), which for mutual life
insurance companies and their insurance subsidiaries are statutory
accounting practices prescribed or permitted by the National
Associations of Insurance Commissioners ("NAIC") and their respective
domiciliary home state insurance departments. Prescribed statutory
accounting practices include publications of the NAIC, state laws,
regulations and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so
prescribed.
Certain reclassifications have been made to the 1993 and 1994 financial
statements and footnotes to conform to the 1995 presentation. Included
in the Statement of Operations are certain items which, under statutory
accounting practices, are charged or credited directly to surplus.
Pruco Life Insurance Company of New Jersey, domiciled in the State of
New Jersey, prepares its statutory financial statements in accordance
with accounting practices prescribed or permitted by the New Jersey
Department of Insurance ("the Department").
The Company, with permission from the Department, prepares an Annual
Report that differs from the Annual Statement filed with the Department
in that subsidiaries are consolidated and certain financial statement
captions are presented differently.
Management has used estimates and assumptions in the preparation of the
financial statements that affect the reported amounts of assets,
liabilities, revenue and expenses. Actual results could differ from
those estimates.
The following is a reconciliation of Statutory Net Income with net
income per the financial statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------- ------- -------
($000'S)
<S> <C> <C> <C>
Statutory net income including net
gains and losses on sales of investments ................. $25,567 $16,309 $20,075
Adjustments to reconcile to net income
as follows:
Change in General Account reserve
due to changes in valuation basis ........................ 24 3,156 166
Gain/(Loss) due to income tax applicable
to other than current year................................ 5,266 (7,534) -
Net gain/(loss) from operations in
Separate Accounts......................................... (2,080) 1,372 (458)
Other........................................................ 1 27 10
------- ------- -------
Net Income................................................... $28,778 $13,330 $19,793
======= ======= =======
</TABLE>
B. FUTURE APPLICATION OF ACCOUNTING STANDARDS
The Financial Accounting Standards Board (the "FASB") issued
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises", which, as
amended, is effective for fiscal years beginning after December 15,
1995. Interpretation No. 40 changes the current practice of mutual life
insurance companies with respect to utilizing statutory basis financial
statements for general purposes, in not allowing such financial
statements to be referred to as having been prepared in accordance with
B-3
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
GAAP. Interpretation No. 40 requires GAAP financial statements of
mutual life insurance companies to apply all GAAP pronouncements,
unless specifically exempted. Implementation of Interpretation No. 40
will require significant effort and judgement. The Company is assessing
the impact of Interpretation No. 40 on its consolidated financial
statements, such effort has not been completed. Management currently
believes surplus will increase significantly.
C. INVESTMENTS
Fixed maturities are stated at amortized cost. Short-term investments
are stated at amortized cost, which approximates fair value.
Policy loans are stated primarily at unpaid principal balances.
Realized investment gains and losses are reported based on specific
identification of the investments sold.
D. FUTURE POLICY BENEFITS, LOSSES, AND CLAIMS
Reserves for individual life insurance are calculated using various
methods, interest rates and mortality tables which produce reserves
that meet the aggregate requirements of state laws and regulations.
Approximately 7% of individual life insurance reserves are determined
using the net level premium method, or by using the greater of net
level premium reserve or the policy cash value. About 93% of individual
life insurance reserves are calculated according to the Commissioner's
Reserve Valuation Method (CRVM), or methods which compare CRVM reserves
to policy cash values.
Reserves for deferred individual annuity contracts are determined using
the Commissioner's Annuity Reserve Valuation Method (CARVM) and the Net
Level Premium Method.
For life insurance and annuities, unpaid claims include estimates of
both death benefits on reported claims and those which are incurred but
not reported.
Reserves for other deposit funds or other liabilities with life
contingencies reflect the contract deposit account or experience
accumulation for the contract and any purchased annuity reserves.
E. REVENUE RECOGNITION AND RELATED EXPENSES
Premium revenues are recognized as income over the premium paying
period of the related policy. Annuity considerations are recognized as
revenue when received. Expenses, including new business acquisition
costs such as commissions, are charged to operations as incurred.
F. FEDERAL INCOME TAXES
The Company is a member of a group of affiliated companies which join
in filing a consolidated federal tax return. Pursuant to a tax
allocation agreement, current tax liabilities are determined for
individual companies based upon their separate return basis taxable
income. Members with taxable income incur an amount in lieu of the
separate return basis federal tax. Members with a loss for tax purposes
recognize a current benefit in proportion to the amount of their losses
utilized in computing consolidated taxable income. Differences between
estimated liabilities and actual payments are included in the current
year's operations as an adjustment to the provision in lieu of income
taxes. For the year 1993, the Company was allocated a portion of the
consolidated income tax liability attributable to Section 809 in the
Internal Revenue Code (commonly referred to as the "Equity Tax"). Since
1994, the Company has no longer been allocated this Equity Tax.
Taxes on the Company are calculated under the Internal Revenue Code of
1986 which provides that life insurance companies be taxed on their
gain from operations after dividends to policyholders. In calculating
this tax, the Code requires the capitalization and amortization of
policy acquisition expenses.
G. ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
The Asset Valuation Reserve (AVR) and the Interest Maintenance Reserve
(IMR) are required for life insurance companies under NAIC regulations.
The AVR is calculated based on a statutory formula and designed to
mitigate the effects of valuation and credit-related losses on
unassigned surplus.
B-4
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
The components of AVR at December 31, 1995 and 1994 are as follows:
FIXED MATURITIES
($000,s)
----------------
Beginning of Year 1994 -- AVR .................... $ 5,306
Additions ........................................ 206
Deductions ....................................... -
-------
End of Year 1994 -- AVR .......................... $ 5,512
=======
Beginning of Year 1995 -- AVR .................... $ 5,512
Additions ........................................ 237
Deductions ....................................... -
=======
End of Year 1995 -- AVR .......................... $ 5,749
=======
The IMR captures net realized capital gains and losses resulting from
changes in the general level of interest rates. These gains and losses
are amortized into investment income over the expected remaining life
of the investment sold. The IMR balance was $8.2 million, and $ 6.9
million at December 31, 1995 and 1994 respectively. "Net realized
investment gains/(losses)" of $2.3 million and $(5.5) million were
deferred in 1995 and 1994, respectively. Amortized into "Net investment
income" were $1.1 million and $2.0 million of IMR for the year ended
December 31, 1995 and 1994, respectively.
H. SEPARATE ACCOUNTS
Separate accounts represent funds for which investment income and
investment gains and losses accrue directly to, and investment risk is
borne by, the policyholders. Assets are carried at market value.
Deposits to such accounts are included in revenues with a corresponding
liability increase included in benefits and expenses. The assets of
each account are legally segregated and are not subject to claims that
arise out of any other business of the Company. Consequently,
management believes that is appropriate to combine Separate Account
policyholder net investment income and net realized and unrealized
capital gains/(losses) along with benefit payments and change in
reserves in "Current and future benefits and claims". Policyholder net
investment income and net realized and unrealized gains/(losses) for
the years ended December 31, 1995, 1994 and 1993 were $152 million,
$(7) million and $86 million, respectively.
B-5
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
3. FEDERAL INCOME TAXES
The following is a reconciliation of the Company's federal tax provision as
computed at the federal tax rate with that computed at the Company's
effective tax rate.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
------- ------- -------
($000'S)
<S> <C> <C> <C>
Income before provision in lieu of federal income taxes....... $37,611 $30,095 $39,253
Statutory tax rate............................................ 35% 35% 35%
------- ------- -------
Expected federal income taxes ................................ $13,164 $10,533 $13,739
Tax effect of:
Statutory/tax policy reserve difference.................. (3,994) 4,279 1,367
Timing differences in tax/book income recognition........ 1,366 (2,743) 2,151
Timing differences in tax/book income recognition--other. (840) (78) (25)
(Increase)/Decrease in life insurance
premiums deferred and uncollected .................... (14) 94 40
Capitalization of policy acquisition expenses............ (849) 4,680 1,541
Allocated equity tax..................................... - - 647
------- ------- -------
Federal income taxes. . . .................................... $ 8,833 $16,765 $19,460
======= ======= =======
Effective tax rate............................................ 23% 56% 50%
======= ======= =======
</TABLE>
4. NET INVESTMENT INCOME
Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
------- ------- -------
($000'S)
<S> <C> <C> <C>
Gross investment income
Fixed maturities........................................... $36,861 $36,565 $40,546
Policy loans............................................... 5,029 4,290 3,506
Short-term investments..................................... 2,290 2,364 1,817
Other...................................................... 51 44 25
------- ------- -------
44,231 43,263 45,894
Investment expenses........................................... (701) (906) (581)
------- ------- -------
43,530 42,357 45,313
Amortization of interest maintenance reserve.................. 1,050 2,024 2,387
------- ------- -------
Net investment income............................................ $44,580 $44,381 $47,700
======= ======= =======
</TABLE>
B-6
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
5. INVESTMENTS AND INVESTMENT GAINS (LOSSES)
Net realized and unrealized gains (losses) were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
------- ------- -------
($000'S)
<S> <C> <C> <C>
Realized Gains
Fixed maturities....................................... $ 3,593 $(8,311) $13,225
Short-term investments................................. - 1 26
Tax effected amounts transferred to
interest maintenance reserve........................... (2,335) 5,485 (7,185)
------- ------- -------
Net realized investment gains.............................. $ 1,258 $(2,825) $ 6,066
======= ======= =======
Unrealized Gains (Losses)
Fixed maturities....................................... $ - $ - $ -
------- ------- -------
Net unrealized investment gains ........................... - - -
Balance beginning of year.................................. - - -
------- ------- -------
Balance end of year........................................ $ - $ - $ -
======= ======= =======
</TABLE>
<TABLE>
FIXED MATURITIES
----------------
($000'S)
<CAPTION>
AT DECEMBER 31,
INCREASE (DECREASE) IN
AMORTIZED MARKET DIFFERENCE BETWEEN MARKET VALUE
COST VALUE AND AMORTIZED COST DURING THE YEAR
-------- -------- ----------------------------------
<S> <C> <C> <C>
1995.................. $498,041 $513,433 $32,875
1994.................. 527,304 509,821 (36,813)
1993.................. 587,213 606,543 (1,472)
</TABLE>
The amortized cost and estimated market values of investments in fixed
maturities at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
($000's) ($000's) ($000's) ($000's)
-------- ------- ------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations
and agencies............................... $ 81,806 $ 1,287 $ - $ 83,093
Debt securities issued by foreign
governments and their agencies............. 25,849 1,128 - 26,977
Corporate securities......................... 353,514 11,131 340 364,305
Mortgage-backed securities................... 36,871 2,192 5 39,058
-------- ------- ------- --------
Total........................................ $498,040 $15,738 $ 345 $513,433
======== ======= ======= ========
</TABLE>
B-7
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1994
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
($000's) ($000's) ($000's) ($000's)
-------- ------- ------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations
and agencies............................... $116,502 $ 10 $11,641 $104,871
Debt securities issued by foreign
governments and their agencies............. 34,554 1,631 723 35,462
Corporate securities......................... 336,641 1,261 7,524 330,378
Mortgage-backed securities................... 39,607 180 677 39,110
-------- ------- ------- --------
Total........................................ $527,304 $ 3,082 $20,565 $509,821
======== ======= ======= ========
</TABLE>
The amortized cost and estimated market value of fixed maturities at
December 31, 1995 by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
($000'S) ($000's)
-------- --------
<S> <C> <C>
Due in one year or less........................................................... $ 57,798 $ 58,194
Due after one year through five years............................................. 329,260 339,601
Due after five years through ten years............................................ 55,151 57,404
Due after ten years............................................................... 18,960 19,176
-------- --------
461,169 474,375
Mortgage-backed securities........................................................ 36,872 39,058
-------- --------
Total............................................................................. $498,041 $513,433
======== ========
</TABLE>
Proceeds from the sale/maturity of fixed maturities during 1995, 1994 and
1993 were $553.7 million, $705.9 million and $443.9 million, respectively.
Gross gains of $6.8 million, $3.3 million and $13.4 million and gross
losses of $3.2 million, $11.6 million and $.2 million were realized on
those sales during 1995, 1994 and 1993, respectively.
The Company invests in both investment grade and non-investment grade
securities. The Securities Valuation Office (SVO) of the NAIC rates fixed
maturities held by insurers (SVO rated securities accounted for
approximately 94.3% and 99.0% of the Company's total fixed maturities
balances at December 31, 1995 and 1994, respectively) for regulatory
purposes and groups investments into six categories ranging from highest
quality bonds to those in or near default. The lowest three NAIC categories
represent, for the most part, high yield securities and are defined by the
NAIC as including any security with a public agency rating of B+ or B1 or
less. At December 31, 1995 the Company held two securities at statement
value of $4.5 million with a NAIC rating of 4. At December 31, 1994, the
Company held no securities in the three lowest NAIC categories.
6. RELATED PARTY TRANSACTIONS
A. SERVICE AGREEMENTS
The Company, The Prudential, Pruco Life, and Pruco Securities
Corporation, an indirect wholly-owned subsidiary of the Prudential,
operate under service and lease agreements whereby services of
officers and employees, supplies, use of equipment and office space
are provided. The net cost of these services allocated to the Company
were $16 million, $15 million, and $17 million for the years ended
December 31, 1995, 1994 and 1993, respectively.
B-8
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
B. EMPLOYEES BENEFIT PLANS
PENSION PLANS
The Company is a wholly-owned subsidiary of The Prudential which,
sponsors several defined benefit pension plans that cover
substantially all of its employees. Benefits are generally based on
career average earnings and credited length of service. The
Prudential's funding policy is to contribute annually the amount
necessary to satisfy the Internal Revenue Service contribution
guidelines.
No pension expense for contributions to the plan was allocated to the
Company in 1995, 1994 or 1993 because the plan was subject to the full
funding limitation under the Internal Revenue Code.
POSTRETIREMENT LIFE AND HEALTH BENEFITS
The Prudential also sponsors certain life insurance and health care
benefits for its retired employees. Substantially all employees may
become eligible to receive a benefit if they retire after age 55 with
at least 10 years of service. Postretirement benefits, with respect to
The Prudential, are recognized in accordance with prescribed NAIC
policy. The Prudential has elected to amortized its obligation over
twenty years. A provision for contributions to the postretirement fund
is included in the net cost of services allocated to the Company
discussed above for the years ended December 31, 1995, 1994 and 1993.
C. REINSURANCE
The Company currently has one reinsurance agreement in place with The
Prudential (the reinsurer). Specifically: a Yearly Renewable Term
agreement in which the Company may offer and the reinsurer may accept
reinsurance on any life in excess of the Company's maximum limit of
retention ($2.5 million). This agreement had no material effect on net
income for the years ended December 31, 1995, 1994, 1993.
D. OTHER TRANSACTIONS
The Company has issued approximately 375 variable appreciable life
contracts to The Prudential for the purpose of funding non-qualified
pension benefits for certain employees. Included in insurance premiums
and annuity considerations are $12 million each for the years ended
December 31, 1995, 1994 and 1993, which are attributable to these
contracts.
7. DIVIDENDS
The Company is subject to New Jersey law which limits the amount of
dividends that insurance companies can pay to stockholders. The maximum
dividend that may be paid in any 12 month period without prior approval of
the New Jersey Commissioner of Insurance is limited to the greater of 10%
of surplus as of December 31 of the preceding year or the net gain from
operations of the preceding calendar year. Based on these limitations, the
Company would be permitted a maximum of $26 million in dividend
distributions in 1996, all of which could be paid in cash, without the
approval from The Department of Insurance of the State of New Jersey.
8. FAIR VALUE INFORMATION
The fair value amounts have been determined by the Company using available
information and reasonable valuation methodologies for only those accounts
for which fair value disclosures are required. Considerable judgment is
necessarily applied in interpreting data to develop the estimates of fair
value. Accordingly, the estimates presented may not be realized in a
current market exchange. The use of different market assumptions and/or
estimation methodologies could have a material effect on the estimated fair
values.
The following methods and assumptions were used in calculating the fair
values. For all other financial instruments presented in the table, the
carrying value is a reasonable estimate of fair value.
FIXED MATURITIES. Fair values for fixed maturities, 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.
B-9
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Treasury yield curve and corporate bond yield curve adjusted for the type
of issue, its current quality and its remaining average life. The fair
value of certain non-performing private placement securities is based on
amounts provided by state regulatory authorities.
POLICY LOANS. The estimated fair value is calculated using a discounted
cash flow model based upon current U.S. Treasury rates and historical loan
repayments.
INVESTMENT-TYPE INSURANCE CONTRACT LIABILITIES. Fair values for the
Company's investment-type insurance contract liabilities are estimated
using a discounted cash flow model, based on interest rates currently being
offered for similar contracts.
The following table discloses the carrying amounts and estimated fair
values of the Company's financial instruments at December 31, 1995 and
1994.
<TABLE>
<CAPTION>
($000's) ($000's)
1995 1994
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities ......................... $498,041 $513,433 $527,304 $509,821
Policy loans ............................. 98,194 99,057 85,277 76,734
Short-term investments ................... 45,308 45,308 41,695 41,695
Financial Liabilities:
Investment-type insurance contracts ...... $100,625 $ 99,929 $166,183 $159,463
</TABLE>
9. CONTINGENCIES
Several actions have been brought against the Company on behalf of those
persons who purchased life insurance policies based on complaints about
sales practices engaged in by The Prudential, the Company, and agents
appointed by The Prudential and the Company. The Prudential has agreed to
indemnify the Company for any and all losses resulting from such
litigation.
B-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Pruco Life Insurance Company of New Jersey
Newark, New Jersey
We have audited the accompanying statements of financial position of Pruco Life
Insurance Company of New Jersey (the "Company") as of December 31, 1995 and
1994, and the related statements of operations, stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Pruco Life Insurance Company of New
Jersey as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1995
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
March 15, 1996
B-11
<PAGE>
VARIABLE
APPRECIABLE
LIFE(R) ------------
INSURANCE CONTRACTS
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 437-4016, Ext. 46
<PAGE>
PART II
OTHER INFORMATION
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
The Prudential Directors' and Officers' Liability and Corporation Reimbursement
Insurance Program, purchased by The Prudential from Aetna Casualty & Surety
Company, CNA Insurance Companies, Lloyds of London, Great American Insurance
Company, Reliance Insurance Company, Corporate Officers & Directors Assurance
Ltd., A.C.E. Insurance Company, Ltd., XL Insurance Company, Ltd., and
Zurich-American Insurance Company, provides reimbursement for "Loss" (as defined
in the policies) which the Company pays as indemnification to its directors or
officers resulting from any claim for any actual or alleged act, error,
misstatement, misleading statement, omission, or breach of duty by persons in
the discharge of their duties in their capacities as directors or officers of
The Prudential, any of its subsidiaries, or certain investment companies
affiliated with The Prudential. Coverage is also provided to the individual
directors or officers for such Loss, for which they shall not be indemnified.
Loss essentially is the legal liability on claims against a director or officer,
including adjudicated damages, settlements and reasonable and necessary legal
fees and expenses incurred in defense of adjudicatory proceedings and appeals
therefrom. Loss does not include punitive or exemplary damages or the multiplied
portion of any multiplied damage award, criminal or civil fines or penalties
imposed by law, taxes or wages, or matters which are uninsurable under the law
pursuant to which the policies are construed.
There are a number of exclusions from coverage. Among the matters excluded are
Losses arising as the result of (1) claims brought about or contributed to by
the criminal or fraudulent acts or omissions or the willful violation of any law
by a director or officer, (2) claims based on or attributable to directors or
officers gaining personal profit or advantage to which they were not legally
entitled, and (3) claims arising from actual or alleged performance of, or
failure to perform, services as, or in any capacity similar to, an investment
adviser, investment banker, underwriter, broker or dealer, as those terms are
defined in the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Advisers Act of 1940, the Investment Company Act of 1940, any rules
or regulations thereunder, or any similar federal, state or local statute, rule
or regulation.
The limit of coverage under the Program for both individual and corporate
reimbursement coverage is $150,000,000. The retention for corporate
reimbursement coverage is $10,000,000 per loss.
The relevant provisions of New Jersey law permitting or requiring
indemnification, New Jersey being the state of organization of The Prudential
and Pruco Life of New Jersey, can be found in Section 14A:3-5 of the New Jersey
Statutes Annotated. The text of The Prudential's by-law 26, which relates to
indemnification of officers and directors, is incorporated by reference to
Exhibit 1.A.(6)(b) of Post-Effective Amendment No. 1 to Form S-6, Registration
No. 33-61079, filed April 25, 1996, on behalf of The Prudential Variable
Appreciable Account. The text of Pruco Life of New Jersey's by-laws, Article V,
which relates to indemnification of officers and directors, is incorporated by
reference to Exhibit 1.A.(6)(b) to this Registration Statement.
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.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 62 pages.
The undertaking to file reports.
The undertaking with respect to indemnification.
The signatures.
Written consents of the following persons:
1. Deloitte & Touche LLP, independent auditors.
2. Clifford E. Kirsch, Esq.
3. Nancy D. Davis, FSA, MAAA.
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-B-2:
A. (1) Resolution of Board of Directors of Pruco Life Insurance
Company of New Jersey establishing the Pruco Life of New
Jersey Variable Appreciable Account. (Note 2)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities
Corporation and Pruco Life Insurance Company of New
Jersey. (Note 2)
(b) Proposed form of Agreement between Pruco Securities
Corpoation and independent brokers with respect to the
Sale of the Contracts. (Note 4)
(c) Schedules of Sales Commissions. (Note 13)
(4) Not Applicable.
(5) Variable Life Insurance Contracts.
(a) With fixed death benefit. (Note 4)
(b) With variable death benefit. (Note 4)
(c) Revised Contract with fixed death benefit. (Note 9)
(d) Revised Contract with variable death benefit. (Note 9)
(6) (a) Articles of Incorporation of Pruco Life Insurance
Company of New Jersey, as amended March 11, 1983.
(Note 15)
(b) By-laws of Pruco Life Insurance Company of New Jersey,
as amended February 1, 1991. (Note 15)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form for Variable Appreciable Life Insurance
Contract. (Note 2)
(b) Supplement to the Application for Variable Appreciable
Life Insurance Contract. (Note 3)
(c) New Jersey Application Form for Variable Appreciable
Life Insurance Contract.(Note 4)
(d) New York Application Form for Variable Appreciable Life
Insurance Contract. (Note 4)
(e) Revised New York Application Form for Variable
Appreciable Life Insurance Contract. (Note 5)
(11) Form of Notice of Withdrawal Right. (Note 3)
(12) Memorandum describing Pruco Life Insurance Company of
New Jersey's issuance, transfer, and redemption
procedures for the Contracts pursuant to Rule 6e-2(b)
(12)(ii) and method for computing cash adjustment upon
exercise of right to exchange for fixed benefit
insurance
II-2
<PAGE>
pursuant to Rule 6e-2(b)(13)(v)(B). (Note 1)
(13) Available Contract Riders.
(a) Rider for Insured's Waiver of Premium Benefit. (Note 5)
(b) Rider for Applicant's Waiver of Premium Benefit.
(Note 5)
(c) Rider for Insured's Accidental Death Benefit. (Note 5)
(d) Rider for Level Term Insurance Benefit on Life of
Insured. (Note 5)
(e) Rider for Decreasing Term Insurance Benefit on Life of
Insured. (Note 5)
(f) Rider for Interim Term Insurance Benefit. (Note 5)
(g) Rider for Option to Purchase Additional Insurance on
Life of Insured. (Note 5)
(h) Rider for Decreasing Term Insurance on Life of Insured
Spouse. (Note 5)
(i) Rider for Level Term Insurance on Dependent Children.
(Note 5)
(j) Rider for Level Term Insurance on Dependent
Children-from Term Conversions. (Note 5)
(k) Rider for Level Term Insurance on Dependent
Children-from Term Conversions or Attained Age Change.
(Note 5)
(l) Rider for Coverage on Other Insured. (Note 5)
(m) Rider defining Insured Spouse. (Note 5)
(n) Rider covering lack of Evidence of Insurability on a
Child. (Note 5)
(o) Rider modifying Waiver of Premium. (Note 5)
(p) Rider to terminate a Supplementary Benefit. (Note 5)
(q) Rider providing for election of Variable Reduced
Paid-up Insurance. (Note 5)
(r) Rider to provide for exclusion of Aviation Risk.
(Note 5)
(s) Rider to provide for exclusion of Military Aviation
Risk. (Note 5)
(t) Rider to provide for exclusion of War Risk. (Note 5)
(u) Endorsement for conversion of a Dependent Child.
(Note 5)
(v) Endorsement for Contractual Conversion of a Term Policy.
(Note 5)
(w) Endorsement for conversion of Level Term Insurance
Benefit on a Child. (Note 5)
(x) Endorsement providing for Variable Loan Interest Rate.
(Note 5)
(y) Endorsement for Increase in Face Amount. (Note 6)
(z) Supplementary Monthly Renewable Non-Convertible One
Month Term Insurance
(i) for use in New Jersey with fixed death benefit
Contract. (Note 7)
(ii) for use in New Jersey with variable death benefit
Contract. (Note 7)
(iii) for use in New York with fixed death benefit
Contract. (Note 7)
(iv) for use in New York with variable death benefit
Contract. (Note 7)
(aa) Rider for Term Insurance Benefit on Life of
Insured-Decreasing Amount After Three Years.
(Note 8)
(bb) New Jersey Rider for Term Insurance Benefit on Life of
Insured Spouse-Decreasing Amount After Three Years.
(Note 8)
(cc) New York Rider for Term Insurance Benefit on Life of
Insured Spouse-Decreasing Amount After Three Years.
(Note 8)
(dd) Endorsement for Contracts issued in connection with
tax-qualified pension plans. (Note 10)
(ee) Appreciable Plus Rider
(i) for use in New Jersey. (Note 11)
(ii) for use in New York. (Note 11)
(ff) Living Needs Benefit Rider for use in New Jersey.
(Note 14)
(gg) Living Needs Benefit Rider for use in New York.
(Note 17)
2. See Exhibit 1.A.(5).
3. Opinion and Consent of Clifford E. Kirsch, Esq., as to the legality
of the securities being registered. (Note 1)
4. None.
5. Not Applicable.
II-3
<PAGE>
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as to actuarial
matters pertaining to the securities being registered. (Note 1)
7. Powers of Attorney.
(a) G. Keith Jr., I. Kleinman, I. Price, (Note 16)
(b) E. Caulfield, E. Milnes, S. Tooley (Note 18)
(c) William F. Yelverton (Note 19)
27. Financial Data Schedule (Note 1)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Registrant's Form S-6, filed March 5,
1984.
(Note 3) Incorporated by reference to Pre-Effective Amendment No. 1 to this
Registration Statement, filed June 19, 1984.
(Note 4) Incorporated by reference to Pre-Effective Amendment No. 2 to this
Registration Statement, filed October 25, 1984.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 1 to this
Registration Statement, filed April 30, 1985.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 2 to this
Registration Statement, filed September 13, 1985.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 3 to this
Registration Statement, filed April 8, 1986.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 4 to this
Registration Statement, filed April 30, 1986.
(Note 9) Incorporated by reference to Post-Effective Amendment No. 5 to this
Registration Statement, filed July 11, 1986.
(Note 10) Incorporated by reference to Post-Effective Amendment No. 6 to this
Registration Statement, filed September 8, 1986.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 7 to this
Registration Statement, filed October 30, 1986.
(Note 12) Incorporated by reference to Post-Effective Amendment No. 8 to this
Registration Statement, filed February 27, 1987.
(Note 13) Incorporated by reference to Post-Effective Amendment No. 9 to this
Registration Statement, filed April 27, 1987.
(Note 14) Incorporated by reference to Post-Effective Amendment No. 16 to this
Registration Statement, filed April 26, 1990.
(Note 15) Incorporated by reference to Post-Effective Amendment No. 17 to this
Registration Statement, filed March 1, 1991.
(Note 16) Incorporated by reference to Post-Effective Amendment No. 15 to Form
S-6, Registration No. 2-99537, filed March 2, 1993, on behalf of
the Pruco Life of New Jersey Single Premium Variable Life Account.
(Note 17) Incorporated by reference to Post-Effective Amendment No. 20 to this
Registration Statement filed April 28, 1993.
(Note 18) Incorporated by reference to Post-Effective Amendment No. 17 to Form
S-6, Registration No. 2-99537, filed March 2, 1994 on behalf of the
Pruco Life of New Jersey Single Premium Variable Life Account.
(Note 19) Incorporated by reference to Post-Effective Amendment No. 8 to Form
S-1, Registration No. 33-20018, filed April 5, 1996 on behalf of the
Pruco Life of New Jersey Variable Contract Real Property Account.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Pruco Life of New Jersey Variable Appreciable Account, 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 included a prospectus and has caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized and its seal hereunto affixed and attested, all in the city of
Newark and the State of New Jersey, on this 25th day April, 1996.
(Seal) PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
(Registrant)
By: PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(Depositor)
Attest: /s/ Thomas C. Castano By: /s/ Esther H. Milnes
---------------------------- -------------------------------
Thomas C. Castano Esther H. Milnes
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 25 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 25th day of April, 1996.
SIGNATURE AND TITLE
/s/ *
- -------------------------------------
Esther H. Milnes
President and Director
/s/ *
- -------------------------------------
Stephen P. Tooley
Chief Accounting Officer and Comptroller
/s/ *
- -------------------------------------
E. Michael Caulfield
Director
/s/ * *By: /s/ Thomas C. Castano
- ------------------------------------- --------------------------------
Garnett L. Keith, Jr. Thomas C. Castano
Director (Attorney-in-Fact)
/s/*
- -------------------------------------
Ira J. Kleinman
Director
/s/ *
- -------------------------------------
I. Edward Price
Director
/s/ *
- -------------------------------------
William F. Yelverton
Director
II-5
<PAGE>
EXHIBIT INDEX
Consent of Deloitte & Touche LLP, independent auditors. Page II-6
1.A.(12) Memorandum describing Pruco Life Insurance Company of New Page II-8
Jersey's issuance, transfer, and redemption procedures
for the Contracts pursuant to Rule 6e-2(b)(12)(ii) and
method of computing cash adjustment upon exercise of
right to exchange for fixed-benefit insurance pursuant
to Rule 6e-2(b)(13)(v)(B).
3. Opinion and Consent of Clifford E. Kirsch, Esq., as to Page II-19
the legality of the securities being registered.
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as Page II-20
to actuarial matters pertaining to the securities
being registered.
27. Financial Data Schedule. Page II-21
II-7
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 25 to Registration
Statement No. 2-89780 on Form S-6 of Pruco Life of New Jersey Variable
Appreciable Account of Pruco Life Insurance Company of New Jersey of our report
dated February 15, 1996, relating to the financial statements of Pruco Life of
New Jersey Variable Appreciable Account, and of our report dated March 15, 1996,
relating to the financial statements of Pruco Life Insurance Company of New
Jersey appearing in the Prospectus, which is part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
April 25, 1996
II-6
Exhibit A(12)
Description of Pruco Life Insurance Company of New Jersey's Issuance, Transfer
and redemption procedures for Variable Appreciable Life Insurance Contracts
pursuant to Rule 6e-2(b)(l2)(ii)
and
Method of Computing Adjustments in payments and Cash surrender values
Upon conversion to Fixed Benefit policies pursuant to Rule 6e-2(b)(l3)(v)(B)
This document sets forth the administrative procedures that will be followed by
Pruco Life Insurance Company of New Jersey ("Pruco Life") in connection with the
issuance of its Variable Appreciable Life Insurance Contract ("Contract"), the
transfer of assets held thereunder, and the redemption by contract owners of
their interests in said contracts. The document also explains the method that
Pruco Life will follow in making a cash adjustment when a Contract is exchanged
for a fixed benefit insurance policy pursuant to Rule 6e-2(b)(13)(v)(B).
I. Procedures Relating to Issuance and Purchase of the Contracts
-------------------------------------------------------------
A. Premiums Schedules and Underwriting Standards
---------------------------------------------
Premiums for the contract will not be the same for all owners. Insurance is
based on the principle of pooling and distribution of mortality risks,
which assumes that each owner pays a premium commensurate with the
Insured's mortality risk as actuarially determined utilizing factors such
as age, sex, health and occupation. A uniform premium for all Insureds
would discriminate unfairly in favor of those Insureds representing greater
risks. However, for a given face amount of insurance, contracts issued on
insureds of the same age and sex who are non-smokers will have the same
scheduled premium. Contracts issued on insureds who smoke, or who for
reasons of health, occupation or avocation present higher risks, will have
a correspondingly higher scheduled premium.
The underwriting standards and premium processing practices followed by
Pruco Life are similar to those followed in connection with the offer and
sale of fixed-benefit life insurance, modified where necessary to meet the
requirements of the federal securities laws. The prospectus specifies
scheduled premiums for illustrative ages. In addition, the scheduled
premiums to be paid by each owner will be specified in his or her Contract.
If they are paid on time, Pruco Life guarantees to keep the Contract in
force and to provide at least the guaranteed minimum death benefit (i.e.,
the face amount specified in each contract), regardless of investment
performance, unless there is an outstanding contract debt or the guaranteed
amount has been changed or affected because of some action taken by the
owner, pursuant to the Contract, such as a partial withdrawal or surrender.
The owner will have the option of paying more than the scheduled premiums,
thereby increasing Contract values beyond what they would be if only the
scheduled premiums were paid. If favorable investment experience,
less-than-maximum mortality charges by Pruco Life, or higher-than-scheduled
premiums paid in the past have produced greater-than-tabular values in the
Contract, the owner will have the further option of paying
less-than-scheduled premiums and still keeping the Contract in force. But
unless the owner has paid premiums which, accumulated at 4% interest are at
least equal
II-8
<PAGE>
to scheduled premiums accumulated at the same rate, there is a risk that
future unfavorable investment performance will cause the contract to go
into default.
Scheduled premiums on the Contract are payable during the insured's
lifetime on an annual, semi-annual, quarterly or monthly basis on due dates
set forth in the Contract. If paid more often than annually, the aggregate
annual premium will be higher to compensate Pruco Life for the additional
processing costs (reflected in a charge of $2 per payment) and for the loss
of interest incurred because premiums are paid throughout rather than at
the beginning of each contract year.
B. Application and Initial Premium Processing
------------------------------------------
Upon receipt of a completed application form from a prospective owner,
Pruco Life will follow certain insurance underwriting (i.e., evaluation of
risk) procedures designed to determine whether the proposed Insured is
insurable. In the majority of cases this will involve only evaluation of
the answers to the questions on the application and will not include a
medical examination. In other cases, the process may involve such
verification procedures as medical examinations and may require that
further information be provided by the proposed Insured before a
determination can be made. A contract cannot be issued, i.e., physically
issued through Pruco Life's computerized issue system, until this
underwriting procedure has been completed.
These processing procedures are designed to provide immediate benefits to
every prospective owner who pays the initial scheduled premium at the time
the application is submitted, without diluting any benefit payable to any
existing owner. Although a Contract cannot be issued until after the
underwriting process has been completed, such a proposed Insured will
receive immediate insurance coverage for the face amount of the Contract,
if he or she proves to be insurable and the owner has paid the first
scheduled premium.
The Contract Date marks the date on which benefits begin to vary in
accordance with the investment performance of the selected investment
option(s). It is also the date as of which the insurance age of the
proposed Insured is determined. It represents the first day of the Contract
year and therefore determines the Contract anniversary and also the Monthly
Dates. It also represents the commencement of the suicide and contestable
periods for purposes of the Contract.
If the initial scheduled premium is paid with the application and no
medical examination is required (so that Part 2 of the application is not
completed) the Contract Date will ordinarily be the date of the
application. If an unusual delay is encountered (for example, if a request
for further information is not met promptly), the Contract Date will be 21
days prior to the date on which the Contract is physically issued. If a
medical examination is required, the Contract Date will ordinarily be the
date on which Part 2 of the application (the medical report) is completed,
subject to the same qualification as that noted above.
If the first scheduled premium is not paid with the application, the
Contract Date will be the Contract Date stated in the Contract, which will
generally be about 3 days after the date of physical issue (to permit time
for delivery), provided the Owner pays the necessary scheduled premium.
II-9
<PAGE>
There are two principal variations from the foregoing procedure. First, if
the owner wishes permanent insurance protection and variability of benefits
to commence at a future date, he or she can designate that date and
purchase term insurance in a fixed amount for the intervening period. The
maximum length of initial term insurance available varies from state to
state.
Second, if permitted by the insurance laws of the state in who the Contract
is issued, the Contract may be back dated up to six months, provided that
all past due scheduled premiums are paid and that the backdating results in
a lower insurance age for the Insured. Pruco Life will require the payment
of all scheduled premiums that would have been due had the application date
coincided with the backdated Contract Date. The values under the Contract
and the amount(s) deposited into the selected investment option(s) will be
calculated upon the assumptions that the Contract had been issued on the
Contract Date and all scheduled premiums had been received on their due
dates. If the initial premium paid is in excess of the aggregate of the
scheduled premiums due since the Contract Date, the excess (after the
front-end deductions) will be credited to the Contract and placed in the
selected investment option(s) on the date of receipt.
Pruco Life will transfer the appropriate amounts to the selected investment
option(s) on the date the Contract is approved unless, as noted above, the
owner selects a period of preliminary term insurance in which case the
invested portion of the first scheduled premium will be transferred to the
selected investment option(s) on the Contract Date. The variable benefits
under all Contracts will be calculated on the assumption that the invested
portion of the first scheduled premium was transferred to the Selected
investment option(s) on the Contract Date. Any portion of the first premium
payment in excess of the first scheduled premium will be credited (after
deduction of up to 7-1/2% thereof) as of the date of receipt. If the first
premium is received before the Contract Date, the entire invested portion
will be credited as of the Contract Date.
C. Premium Processing
------------------
Whenever a premium after the first is received, unless the Contract is in
default past its days of grace, Pruco Life will subtract $2 and up to
7-1/2% of the rest of the premium. What is left will be invested in the
selected investment option(s) on the date received (or, if that is not a
business day, on the next business day). There is an exception if the
Contract is in default within its days of grace. Then to the extent
necessary to end the default, premiums will be credited as of the date of
the default or the Monthly Date after default, and premiums greater than
this amount will be credited when received. The Contract provides a grace
period of 61 days from the date Pruco Life mails the Contract owner a
notice of default. As an administrative practice, Pruco Life extends the
grace period by seven days to minimize manual processing required when
premium payments are processed shortly after the 61st day.
D. Reinstatement
-------------
The Contract may be reinstated within three years after default (this
period will be longer if required by state law) unless the Contract has
been surrendered for its cash surrender value. A Contract will be
reinstated upon receipt by Pruco Life of a written application for
reinstatement, production of evidence of insurability satisfactory to Pruco
Life and payment of at least the amount required to bring the premium
account up to zero on the first Monthly date on which a scheduled premium
is due after the date of reinstatement. The premium
II-10
<PAGE>
account is the sum of the premiums paid, with interest at 4%, less the sum
of the scheduled premiums due, with interest at the same rate. It is a
measure of whether, on a time-weighted basis, the owner has paid enough
premiums to keep the Contract with its minimum death benefit guarantee in
effect. The Contract cannot go into default if the premium account is above
zero.
Pruco Life will treat the amount paid upon reinstatement as a premium. It
will deduct $2, plus up to 7-1/2% of the remaining payment, plus any
charges with interest for any extra benefits, plus any expense charges with
interest. The Contract Fund of the reinstated Contract will, immediately
upon reinstatement, be equal to this net premium payment, plus the cash
surrender value of the Contract immediately before reinstatement, plus a
refund of that part of the deferred sales and administrative charges which
would be charged if the Contract were surrendered immediately after
reinstatement. This last addition to the Contract Fund is designed to avoid
duplicative surrender charges. The original Contract Date still controls
for purposes of calculating any contingent deferred sales and
administrative charges.
The reinstatement will take effect as of the date the required proof of
insurability and payment of the reinstatement amount have been received by
Pruco Life at its Service Office.
There is an alternative to this reinstatement procedure that applies only
if reinstatement is requested within a 30-day period following the end of
the 61-day grace period. In such a case evidence of insurability will not
be required and the amount of the required payment will be the lesser of
the unpaid scheduled premiums and the amount necessary to make the Contract
Fund equal to the tabular Contract Fund on the third Monthly Date following
the date on which the Contract went into default.
E. Repayment of Loan
-----------------
A loan made under the Contract may be repaid with an amount equal to the
monies borrowed plus interest which accrues daily, either at a fixed annual
rate of 5-1/2% (6% for Contracts issued to Texas residents) or, if a
Contract Owner has elected to have a variable loan interest rate applicable
to loans made under the Contract, at the variable loan interest rate then
applicable to the loan.
When a loan is made, Pruco Life will transfer an amount equal to the
Contract debt from the investment option(s). Under the fixed-rate contract
loan provision, the amount of Contract Fund attributable to the outstanding
Contract loan will be credited with interest at an annual rate of 4%, and
Pruco Life thus will realize the difference between that rate and the fixed
loan interest rate, which will be used to cover the loan investment
expenses, income taxes, if any, and processing costs. If an owner so
desires, and if Pruco Life has received any required approvals from the
state or other jurisdiction in which the Contract is to be issued, the
Owner may elect, when the Contract is issued, to have a variable loan
interest rate apply to the Contract loans, if any, that he or she may make.
If this election is made:
1. Interest on the loan will accrue daily at an annual rate Pruco Life
determines at the start of each Contract year (instead of at a fixed rate).
This interest rate will not exceed the greatest of (1) the "Published
Monthly Average" for the calendar month ending two months before the
calendar month of the Contract anniversary; (2) 5%; or (3) any rate
required by law in the state of issue of the Contract. The "Published
Monthly Average" means Moody's Corporate Bond Yield Average Monthly
Average Corporates, as published by Moody's
II-11
<PAGE>
Investors Service, Inc. or any successor to that service, or if that
average is no longer published, a substantially similar average established
by the insurance regulator where the Contract is delivered.
2. While a loan is outstanding, the amount of the Contract Fund
attributable to the outstanding Contract loan will be credited with
interest at a rate which is less than the loan interest rate for the
Contract year by no more than 1 1/2% (instead of 4%). Currently, Pruco Life
credits such amounts with a rate that is 1% less than the loan interest
rate for the Contract year.
Upon repayment of Contract debt, the payment will be added to the
investment option(s) and allocated among the investment option(s) in
proportion to the amounts in each investment option attributable to the
Contract as of the date of repayment.
II. Transfers
---------
The Pruco Life Variable Appreciable Account ("Account") currently has seven
subaccounts, each of which is invested in shares of a corresponding
portfolio of the Pruco Life Series Fund, Inc. ("Fund"), which is registered
under the 1940 Act as an open-end diversified management investment
company. In addition, a fixed-rate option and Real Property Account are
available for investment by Contract Owners. Provided the Contract is not
in default or is in force as variable reduced paid-up insurance, the Owner
may, up to four times in each Contract year, transfer amounts from one
subaccount to another subaccount, to the fixed-rate option, or to the Real
Property Account without charge. All or a portion of the amount credited to
a subaccount may be transferred.
In addition, the entire amount of the Contract Fund may be transferred to
the fixed-rate option at any time during the first two Contract years. A
Contract Owner who wishes to convert his or her variable Contract to a
fixed-benefit Contract in this manner must request a complete transfer of
funds to the fixed-rate option and should also change his or her allocation
instructions regarding any future premiums.
Transfers amount subaccounts will take effect on the day a proper written
request or authorized telephone request is received at a Pruco Life Service
Office. The request may be in terms of dollars such as a request to
transfer $10,000 from one account to another, or may be in terms of a
percentage reallocation among subaccounts. In the latter case, as with
premium reallocations, the percentages must be in whole numbers.
Transfers from the fixed-rate option to other investment options are
currently permitted once each Contract year and only during the thirty-day
period beginning on the Contract anniversary. The maximum amount which may
currently be transferred out of the fixed-rate option each year is the
greater of: (a) -25% of the amount in the fixed-rate option, or (b) $1,000.
The maximum amount which may currently be transferred out of the Real
Property Account each year is the greater of: (a) 50% of the amount in the
Real Property Account, or (b) $10,000. Such transfer requests received
prior to the Contract anniversary will be effected on the Contract
anniversary. Transfer requests received within the thirty-day period
beginning on the Contract anniversary will be effected as of the end of the
business day on which the request is received. These limits are subject to
change in the future.
II-12
<PAGE>
III. "Redemption" Procedures: Surrender and Related Transactions
-----------------------------------------------------------
A. Surrender for Cash Surrender Value
----------------------------------
If the insured party under a Contract is alive, Pruco Life will pay, within
seven days, the Contract's net cash value as of the date of receipt at its
Service Office of the Contract and a signed request for surrender. The
Contract's net cash value (i.e., its cash surrender value) is computed as
follows:
1. If the Contract is not in default: The net cash value or cash surrender
value at any time in the first ten Contract years is the Contract Fund,
minus a surrender charge, consisting of a deferred sales charge and a
deferred administrative charge, minus contract debt. The net cash value on
surrender at the end of the 10th Contract year or later is the Contract
Fund minus Contract debt.
In no event will the deferred sales charge upon the surrender be greater
than 25% of scheduled premiums due in Contract year 1, plus 5% of the
scheduled premiums due in Contract years 2 through 5. For the purpose of
computing this limit Pruco Life uses the lesser of premiums due and
premiums paid. For this purpose scheduled premium means what an insured in
the non-smoker rating class would pay if the Contract had no extra
benefits. The maximum deferred sales charge in Contract years 6 through 10
is the maximum charge at the end of the fifth Contract year, reduced for
persistency as explained in the prospectus and each Contract. The deferred
administrative charge is $5 per $1000 of face amount for surrenders in
Contract years 1 through 5; this charge is reduced by 1/60 for each
completed month since the fifth Contract anniversary. After ten full
Contract years the deferred sales charge and the deferred administrative
charge are zero. The deferred administrative charge is designed to recover,
as far as possible, the administrative expenses, such as underwriting
expenses, incurred in connection with issuance of a Contract. As a result,
in the early months after issue, there may be no net cash value if only
scheduled premiums are paid.
For a paid-up Contract that includes extra benefits, the cash surrender
value is the amount described above, plus the cash value of any extra
benefits, which are paid from the general account.
2. If the Contract is in default during its days of grace, Pruco Life will
compute the net cash value as of the date the Contract went into default.
It will adjust this value for any loan the owner took out or paid back or
premium payments or withdrawals made in the days of grace.
3. If the Contract is in default beyond its days of grace, the net cash
value as of any date will be either the value on the date of any extended
insurance benefit then in force, or the value on that date of any variable
reduced paid-up insurance benefit then in force, less any Contract debt.
In lieu of the payment of the net cash value in a single sum upon surrender
of a Contract, an election may be made by the owner to apply all or a
portion of the proceeds under one of the fixed benefit settlement options
described in the Contract or, with the approval of Pruco Life, a
combination of options. An option is available only if the proceeds to be
applied are $1,000 or more or would result in periodic payments of at least
$20.00. The fixed benefit settlement options are subject to the
restrictions and limitations set forth in the Contract.
II-13
<PAGE>
B. Partial Surrenders and Withdrawal of Excess Cash Surrender Value
----------------------------------------------------------------
An owner may surrender a Contract in part. Partial surrender involves
splitting the Contract into two Contracts. One is surrendered for its cash
surrender value; the other is continued in force on the same terms as the
original Contract except that future scheduled premiums are reduced based
upon the continued Contract's face amount and all values under the Contract
are proportionately reduced based upon the reduction in the face amount of
insurance. The Contract continued must have a face amount of insurance of
at least $50,000. An alternative to surrender or partial surrender of a
Contract, available only before such Contracts become paid-up, is a partial
withdrawal of cash surrender value without splitting the Contract into two
Contracts. A partial withdrawal may be made only if the following
conditions are satisfied. First, the amount withdrawn, plus the net cash
value after withdrawal, may not be more than the net cash value before
withdrawal. Second, the Contract Fund after withdrawal must not be less
than the amount that will grow to the tabular Contract Fund as of the next
Monthly Date, assuming no premium payments, no withdrawals, no loan or
repayments of loan, a net investment return in the investment options equal
to the assumed rate of return of 4%, and the deduction of all Contract
charges. Third, the amount withdrawn must be at least $500 under a Form B
Contract and at least $2000 under a Form A Contract. An owner may make no
more than four such withdrawals in a Contract year, and there is a fee of
$15 for each such withdrawal. An amount withdrawn may not be repaid except
as a scheduled or unscheduled premium subject to the Contract charges.
Whenever a partial withdrawal is made, the death benefit payable will
immediately be reduced by the amount of the withdrawal. This will not
change the guaranteed minimum amount of insurance under a Form a Contract
(i.e., the face amount) nor the amount of the scheduled premium that will
be payable thereafter on such a Contract. Under a Form A Contract, however,
the reduction in death benefit also means the same reduction in face
amount. No partial withdrawal will be permitted under a Form A Contract if
it would result in a new face amount of less than $50,000. Furthermore, any
applicable backload payable upon future lapse or surrender (i.e., any
applicable deferred administrative and sales charges) is reduced in
proportion to the reduction in face amount. The Contract Fund is reduced by
the sum of the cash withdrawn and the reduction in the backload. An amount
equal to the reduction in the Contract Fund will be withdrawn from the
investment options. In addition, the amount of the scheduled premiums due
thereafter under a Form A Contract will be reduced to reflect the lower
face amount of insurance.
C. Death Claims
------------
Pruco Life will pay a death benefit to the beneficiary within seven days
after receipt at its Service Office of due proof of death of the Insured,
and all other requirements necessary to make payment. (*1)The following
describes the death benefit if the Contract is not in default past its days
of grace.
(*1) State Insurance laws impose various requirements, such as receipt of a
tax waiver, before payment of the death benefit may be made. In addition,
payment of the death benefit is subject to the provisions of the Contract
regarding suicide and incontestability. In the event Pruco Life should
contest the validity of a death claim, an amount up to the Contract's
investment base will be withdrawn, if appropriate, from the Account and/or
the Real Property Account and held in Pruco Life's general account.
II-14
<PAGE>
The death benefit under a Form A Contract is the face amount less Contract
debt. The death benefit under a Form B Contract is the face amount, plus
any excess of the Contract Fund over the tabular Contract Fund, less any
contract debt. There may be an additional amount payable from an extra
benefit added to the Contract by rider. Tabular Contract Funds on Contract
anniversaries are shown in the contract data pages. Tabular Contract Funds
at other times can be obtained by interpolation.
If the Contract Fund less the present value of all future charges for any
extra benefits of either a Form A or a Form B Contract grows to exceed the
net single premium at the insured's attained age for the death benefit
described above, the death benefit will be the Contract Fund, divided by
such net single premium. The death benefit will be adjusted for any
Contract debt and any extra benefits.
The proceeds payable on death also will include interest (at a rate
determined by Pruco Life from time to time) from the date that the death
benefit is computed (the date of death) until the date of payment.
Pruco Life will make payment of the death benefit out of its general
account, and will transfer assets, if appropriate, from the Account and/or
the Real Property Account to the general account in an amount up to the
Contract Fund.
In lieu of payment of the death benefit in a single sum, an election may
be made to apply all or a portion of the proceeds under one of the fixed
benefit settlement options described in the Contract or, with the approval
of Pruco Life, a combination of options. The election may be made by the
owner during the Insured's lifetime, or, at death, by the beneficiary. An
option in effect at death may not be changed to another form of benefit
after death. An option is available only if the proceeds to be applied are
$1,000 or more or would result in periodic payments of at least $20.00. The
fixed benefit settlement options are subject to the restrictions and
limitations set forth in the Contract.
D. Default and Options on Lapse
----------------------------
The Contract is in default on any Monthly Date on which the premium account
is less than zero and the Contract Fund is less than an amount which will
grow at the assumed net rate of return to the tabular Contract Fund
applicable on the next Monthly Date. Monthly Dates occur on the Contract
Date and in each later month on the same day in the month as the Contract
Date. The Contract provides for a 61-day grace period, commencing with the
mailing-date of the notice of default, in which to remedy the default. The
insurance coverage continues in force during the grace period, but if the
Insured dies during the grace period, any charges due during the grace
period are deducted from the amount payable to the beneficiary. Except for
Contracts issued on certain insureds in high risk rating classes, a lapsed
Contract will provide extended term insurance at expiration of the grace
period. The death benefit of the extended term insurance is equal to the
death benefit of the Contract (excluding riders) as of the date of default,
less any Contract debt. The extended term insurance will continue for a
length of time that depends on the net cash value on the date of default,
the amount of insurance, and the age and sex of the insured. However,
extended term insurance may be exchanged, if the Contract Owner so elects,
for variable reduced paid-up insurance within three months of the date of
default. The face amount of the variable reduced paid-up insurance will
depend on the net cash value on the date of default, and the age and sex of
the insured.
II-15
<PAGE>
Contracts issued on the above-mentioned high risk insureds will be
converted to variable reduced paid-up whole-life insurance at expiration of
the grace period.
E. Loans
-----
The Contract provides that an owner, if the Contract is not in default
beyond the grace period(*2), may take out a loan at any time a loan value
is available. The owner may borrow money on completion of a form
satisfactory to Pruco Life. The Contract is the only security for the loan.
Disbursement of the amount of the loan will be made within seven days of
receipt of the form at Pruco Life's Service Office. The investment options
will be debited in the amount of the loan on the day the form is received.
The percentage of the loan withdrawn from each investment option will be
equal to the percentage of the value of such assets held in the investment
option. An owner may borrow up to the Contract's full loan value. During
the first contract year, the loan value is zero. After the first Contract
year, the loan value is 90% of an amount equal to the Contract Fund reduced
by any charges due upon surrender. The loan provisions have previously been
described. See pp. 9-10.
(*2) The Contract also provides for a loan value if the Contract is in
effect under the Contract value option for variable reduced paid-up
insurance, but not if it is in effect as extended term insurance.
A loan does not affect the amount of scheduled premiums due. When a loan is
made, the Contract Fund is not reduced but the value of the assets relating
to the Contract held in the investment option(s) is reduced. Accordingly,
the daily changes in the net cash value will be different from what they
would have been had no loan been taken. Cash surrender values (and the
death benefit under a Form a Contract) are thus permanently affected by
any Contract debt, whether or not repaid. The guaranteed minimum death
benefit is not affected by Contract debt if premiums are duly paid.
However, on settlement the amount of any Contract debt is subtracted from
the insurance proceeds. If Contract. debt ever becomes equal to or more
-than what the net cash value would be if there were no Contract debt, all
the Contract's benefits will end 61 days after notice is mailed to the
owner and any known assignee, unless repayment of an amount sufficient to
end the default is made within that period.
F. Key Employee Rider
------------------
Many life insurance companies offer fixed-benefit "person" insurance
policies. Those policies enable an employer to purchase life insurance
payable to the employer upon the death of an important or "key" employee
whose death would constitute a financial disadvantage to the employer. Such
policies often permit the owner the right to change the person insured
under the policy, a right often exercised when the original insured
terminates his or her employment with the company and is replaced by
another person.
If permitted by the insurance laws of the state in which the Contract is
issued, a rider to the Contract is available, referred to herein as the
"key person" rider, that allows the owner the option to continue the
Contract in force on the life of a different insured, subject to certain
conditions. This rider is primarily offered to corporate and non-corporate
employers who own or may purchase a Contract issued on the life of a key
employee. The rider may be included at the time the original contract is
issued or added after issue. If the Contract includes this rider, the owner
will be able to continue the Contract in force on the life of a different
key
II-16
<PAGE>
employee. Thus, the rider provides employers with a way to purchase the
Contract on the life of a key employee that may continue in force in an
appropriately modified form on the life of a new employee when the original
insured leaves the owner's employment. The revised Contract will have a new
scheduled premium and certain other revised specifications, which will be
set forth in a new Contract document. An Owner's exercise of the option
provided by the key person rider could be viewed as an exchange of the
existing Contract for a new contract. The Contract prior to the owner's
exercise of the option to change insureds will be referred to as the
"original Contract". The Contract in force after the exchange is effected
will be referred to as the "new Contract."
An owner's exercise of the right granted by the key person rider is
subject to several conditions. These conditions include but are not limited
to the following: (i) the new insured must have been alive as of the
original Contract Date (i.e., the date the Contract was issued) and must be
less than 70 years old as of the date of the proposed change of insureds;
(ii) the new insured must satisfy Pruco Life's underwriting requirements;
(iii) the owner of the new Contract must remain the same as the owner of
the original Contract and that owner must have an insurable interest in the
new insured's life; and (iv) Pruco Life must not be waiving any premiums
under the Contract pursuant to a rider that waives premiums in the event of
disability.
The specifications of the new Contract will be determined as follows. The
Contract Date will remain the same as that of the original Contract. The
face amount of the new Contract will generally be the amount requested by
the owner in the application to effect the change of insureds, except that
it cannot be more than the face amount of the original Contract. The
Contract Fund of the original Contract will become the initial Contract
Fund of the new Contract. The scheduled premium for the new Contract will
be based on Pruco Life's rates in force on the date of the change for the
new insured's rating class. The old Contract's premium account will become
the premium account of the new Contract. If the Contract Fund and premium
account are such that the new Contract would be in default on the date that
the new Contract is to go in effect, Pruco Life will require payment of a
premium sufficient to bring the Contract out of default. If the original
Contract has Contract debt due to an outstanding loan, the Contract debt
may be transferred to the new Contract unless that debt would exceed the
new Contract's loan value, in which case the excess Contract debt must be
paid off.
Upon the exchange of the original Contract for the new Contract, neither
the contingent deferred sales charge nor the contingent deferred
administrative charge is assessed. If the new Contract is subsequently
surrendered, however, the Contract's cash surrender value will be
determined by using the greater of the surrender charges that would apply
under the original or the new Contract. Thus, with respect to the
contingent deferred administrative charge, the amount of this charge upon
surrender of the new Contract will be determined on the basis of the face
amount of the original Contract since the face amount cannot be increased
upon exercise of the right to change insureds. The original Contract Date,
however, will govern for purposes of determining whether this charge will
be reduced or eliminated for persistency. With respect to the contingent
deferred sales load, the amount of this charge can be increased following
exercise of the option granted by the key person rider because the
scheduled premiums on the new Contract can be higher than the scheduled
premiums on the original Contract due to the replacement of the original
insured with an insured of an older issue age. If this is so, the
contingent deferred sales load will be calculated as if the Contract had
originally been issued on the life of the new insured. Thus, in that event,
the deferred sales
II-17
<PAGE>
charge will be 25% of the first year's scheduled premium (calculated as if
the Contract had originally been issued on the new insured) and 5% of the
scheduled premiums (calculated as if the Contract had originally been
issued on the new insured) for the second through fifth Contract years due
on or before the date of surrender or lapse, and these percentages will be
applied only to premiums actually paid, whether timely or not, prior to
surrender or lapse. The original Contract Date will control for purposes of
calculating the reduction in the contingent deferred sales charge for
persistency.
IV. Cash Adjustment Upon Exchange of Contract
-----------------------------------------
At any time during the first 24 months after a Contract is issued, so long
as the Contract is not in default, the Owner may exchange it for an
Appreciable Life insurance policy on the insured's life issued by Pruco
Life. This is a general account, universal-life type policy with guaranteed
minimum values. No evidence of insurability will be required to make an
exchange. The new policy's premium and death benefit will be the same as
the original Contract's on the date of exchange. The new policy will also
have the same issue date and risk classification for the insured as the
original Contract. Any outstanding Contract debt must be repaid.
If the Contract Fund of the old Contract is at or above the tabular
Contract Fund, the Contract Fund of the new policy will be the same as that
of the old one. If the Contract Fund of the old contract is less than the
tabular Contract Fund, the difference must be paid in cash at the time of
the exchange. Then the Contract Fund of the new policy will be the tabular
Contract Fund.
At the time of the exchange, Pruco Life will transfer assets, if
appropriate, from the Account and/or the Real Property Account to the
general account in an amount up to the applicable reserve.
II-18
Exhibit 3
April 25, 1996
Pruco Life Insurance Company
of New Jersey
213 Washington Street
Newark, New Jersey 07102-2992
Gentlemen:
In my capacity as Chief Legal Officer and Assistant Secretary of Pruco Life
Insurance Company of New Jersey ("Pruco Life of New Jersey"), I have reviewed
the establishment on January 13, 1984 of Pruco Life of New Jersey Variable
Appreciable Account (the "Account") by the Executive Committee of the Board of
Directors of Pruco Life of New Jersey as a separate account for assets
applicable to certain variable life insurance contracts, pursuant to the
provisions of Section 17B:28-7 of the Revised Statutes of New Jersey. I am
responsible for oversight of the preparation and review of the Registration
Statements on Form S-6, as amended, filed by Pruco Life of New Jersey with the
Securities and Exchange Commission (Registration No. 2-89780 and Registration
No. 33-57186) under the Securities Act of 1933 for the registration of certain
variable appreciable life insurance contracts issued with respect to the
Account.
I am of the following opinion:
(1) Pruco Life of New Jersey 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 variable appreciable
life insurance contracts is not chargeable with liabilities arising out
of any other business Pruco Life of New Jersey may conduct.
(4) The variable appreciable life insurance contracts are legal and binding
obligations of Pruco Life of New Jersey 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
II-19
Exhibit 6
April 25, 1996
Pruco Life Insurance Company of New Jersey
213 Washington Street
Newark, New Jersey 07102-2992
To Pruco Life Insurance Company of New Jersey:
This opinion is furnished in connection with the registration by Pruco Life
Insurance Company of New Jersey of variable appreciable life insurance contracts
("Contracts") under the Securities Act of 1933. The prospectus included in
Post-Effective Amendment No. 24 to Registration Statement No. 2-89780 on Form
S-6 describes the Contracts. I have reviewed the two Contract forms and I have
participated in the preparation and review of the Registration Statement and
Exhibits thereto. In my opinion:
(1) The illustrations of cash surrender values and death benefits included
in the section of the prospectus entitled "Illustrations", based on the
assumptions stated in the illustrations, are consistent with the
provisions of the respective forms of the Contracts. The rate structure
of the Contracts has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear
more favorable to a prospective purchaser of a Contract for male age 35
than to prospective purchasers of Contracts on males of other ages or
on females.
(2) The illustration of the effect of a Contract loan on the cash surrender
value included in the section entitled "Contract Loans", based on the
assumptions stated in the illustration, is consistent with the
provisions of the Form A Contract.
(3) The illustrations of the effect of an increase in the Contract fund on
the increase in insurance amount shown in the section entitled "Revised
Contracts" (How a Contract's Death Benefits will Vary") are consistent
with the provisions of the Revised Form A and Form B Contracts.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
Nancy D. Davis, FSA, MAAA
Vice President and Assistant Actuary
The Prudential Insurance Company of America
II-20
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 483,515
<INVESTMENTS-AT-VALUE> 586,121
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</TABLE>
