<PAGE>
As filed with the SEC on ________. Registration No. 333-94115
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Pre-Effective Amendment No. 1 to
FORM S-6
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) 286-7754
(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
----------------------
Survivorship Variable Universal Life Insurance Contracts--The Registrant hereby
elects to register an indefinite amount of securities pursuant to Rule 24f-2
under the Investment Company Act of 1940.
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
This filing is being made pursuant to Rules 6c-3 and 6e-3(T) under the
Investment Company Act of 1940.
<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 and Regulatory Proceedings
10. Introduction and Summary; Voting Rights;
Charges and Expenses; Short-Term
Cancellation Right or "Free Look"; Types
of Death Benefit; Changing the Type of
Death Benefit; Premiums; Allocation of
Premiums; Transfers; Dollar Cost
Averaging; Auto-Rebalancing; How a
Contract's Surrender Value Will Vary; How
a Type A (Fixed) Contract's Death Benefit
Will Vary; How a Type B (Variable)
Contract's Death Benefit Will Vary; Cash
Surrender of a Contract; Withdrawals;
Decreases in Basic Insurance Amount; When
Proceeds are Paid; Contract Loans; Lapse
and Reinstatement; Other General Contract
Provisions; Riders; Substitution of Fund
Shares
11. Introduction and Summary; Pruco Life of
New Jersey Variable Appreciable Account
12. Cover Page; Introduction and Summary; The
Funds; Sale of the Contract and Sales
Commissions
13. Introduction and Summary; The Funds;
Charges and Expenses; Premiums; Allocation
of Premiums; Sale of the Contract and
Sales Commissions
14. Introduction and Summary; Detailed
Information for Prospective Contract
Owners
15. Introduction and Summary; Premiums;
Allocation of Premiums; Transfers; Dollar
Cost Averaging; Auto-Rebalancing
16. Introduction and Summary; Detailed
Information for Contract Owners
17. When Proceeds are Paid
<PAGE>
N-B-2 Item Number Location
----------------- --------
18. Pruco Life of New Jersey Variable
Appreciable Account
19. Reports to Contract Owners
20. Not Applicable
21. Contract Loans
22. Not Applicable
23. Not Applicable
24. Other General Contract Provisions
25. Pruco Life Insurance Company of New Jersey
26. Introduction and Summary; The Funds;
Charges and Expenses
27. Pruco Life Insurance Company of New
Jersey; The Funds
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
<PAGE>
N-B-2 Item Number Location
----------------- --------
44. Introduction and Summary; The Funds; How a
Contract's Cash Surrender Value Will Vary;
How a Type A (Fixed) Contract's Death
Benefit Will Vary; How a Type B (Variable)
Contract's Death Benefit Will Vary;
45. Not Applicable
46. Introduction and Summary; Pruco Life of
New Jersey Variable Appreciable Account;
The Funds
47. Pruco Life of New Jersey Variable
Appreciable Account; The Funds
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Not Applicable
52. Substitution of Fund Shares
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 the 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, 2000
SURVIVORSHIP VARIABLE
UNIVERSAL LIFE
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
Pruco Life Insurance Company of New Jersey
(In New Jersey and New York)
[LOGO] PRUDENTIAL
<PAGE>
PROSPECTUS
MAY 1, 2000
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
SURVIVORSHIP VARIABLE UNIVERSAL LIFE
This prospectus describes an individual flexible premium survivorship variable
universal life insurance contract (the "Contract"), offered by Pruco Life
Insurance Company of New Jersey ("Pruco Life of New Jersey," "us," "we," or
"our"). Pruco Life of New Jersey is an indirect, wholly-owned subsidiary of The
Prudential Insurance Company of America. The Contract provides life insurance
coverage on two insureds with a death benefit payable on the second death.
INVESTMENT CHOICES
Survivorship Variable Universal Life offers a wide variety of investment
choices, including 16 variable investment options that invest in mutual funds
managed by these leading asset managers:
o THE PRUDENTIAL INVESTMENT CORPORATION
o A I M ADVISORS, INC.
o AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
o JANUS CAPITAL CORPORATION
o MASSACHUSETTS FINANCIAL SERVICES COMPANY
o FRANKLIN ADVISERS, INC.
o ROWE PRICE-FLEMING INTERNATIONAL, INC.
For a complete list of the 16 available variable investment options and their
investment objectives, see THE FUNDS, page 7.
You may also choose to invest your Contract's premiums and its earnings in the
fixed-rate option which pays a guaranteed interest rate. See THE FIXED-RATE
OPTION, page 10.
This prospectus describes the Contract generally and the Pruco Life of New
Jersey Variable Appreciable Account (the "Account"). The attached prospectuses
for the Funds, and their related statements of additional information describe
the investment objectives and the risks of investing in the Fund portfolios.
Pruco Life of New Jersey may add additional investment options in the future.
Please read this prospectus and keep it for future reference.
The Securities and Exchange Commission ("SEC") maintains a Web site
(http://www.sec.gov) that contains material incorporated by reference and other
information regarding registrants that file electronically with the SEC.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE CONTRACT MAY BE PURCHASED THROUGH REGISTERED REPRESENTATIVES LOCATED IN
BANKS AND OTHER FINANCIAL INSTITUTIONS. AN INVESTMENT IN THE CONTRACT IS NOT A
BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY AND MAY LOSE VALUE. AN
INVESTMENT IS ALSO NOT A CONDITION TO THE PROVISION OR TERM OF ANY BANKING
SERVICE OR ACTIVITY. THE PARTICIPATING BANK IS NOT A REGISTERED BROKER-DEALER
AND IS NOT AFFILIATED WITH PRUCO SECURITIES CORPORATION.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 782-5356
<PAGE>
<TABLE>
<CAPTION>
PROSPECTUS CONTENTS
PAGE
<S> <C>
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS.................................................1
INTRODUCTION AND SUMMARY.............................................................................2
BRIEF DESCRIPTION OF THE CONTRACT................................................................2
CHARGES..........................................................................................2
TYPES OF DEATH BENEFIT...........................................................................5
PREMIUM PAYMENTS.................................................................................5
REFUND...........................................................................................5
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.............................................6
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY.......................................................6
THE PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT........................................6
THE FUNDS........................................................................................7
VOTING RIGHTS....................................................................................9
THE FIXED-RATE OPTION...........................................................................10
WHICH INVESTMENT OPTION SHOULD BE SELECTED?.....................................................11
DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS................................................11
CHARGES AND EXPENSES............................................................................11
REQUIREMENTS FOR ISSUANCE OF A CONTRACT.........................................................15
SHORT-TERM CANCELLATION RIGHT OR "FREE-LOOK"....................................................15
TYPES OF DEATH BENEFIT..........................................................................15
CHANGING THE TYPE OF DEATH BENEFIT..............................................................16
CONTRACT DATE...................................................................................17
PREMIUMS........................................................................................17
ALLOCATION OF PREMIUMS..........................................................................18
DEATH BENEFIT GUARANTEE.........................................................................19
TRANSFERS.......................................................................................20
DOLLAR COST AVERAGING...........................................................................21
AUTO-REBALANCING................................................................................21
HOW A CONTRACT'S CASH SURRENDER VALUE WILL VARY.................................................22
HOW A TYPE A (FIXED) CONTRACT'S DEATH BENEFIT WILL VARY.........................................22
HOW A TYPE B (VARIABLE) CONTRACT'S DEATH BENEFIT WILL VARY......................................23
SURRENDER OF A CONTRACT.........................................................................24
WITHDRAWALS.....................................................................................25
DECREASES IN BASIC INSURANCE AMOUNT.............................................................25
WHEN PROCEEDS ARE PAID..........................................................................26
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS................26
CONTRACT LOANS..................................................................................28
SALE OF THE CONTRACT AND SALES COMMISSIONS......................................................29
TAX TREATMENT OF CONTRACT BENEFITS..............................................................29
LAPSE AND REINSTATEMENT.........................................................................31
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS.............................32
OTHER GENERAL CONTRACT PROVISIONS...............................................................32
RIDERS..........................................................................................33
SUBSTITUTION OF FUND SHARES.....................................................................33
REPORTS TO CONTRACT OWNERS......................................................................33
STATE REGULATION................................................................................33
EXPERTS.........................................................................................34
</TABLE>
<PAGE>
<TABLE>
<S> <C>
LITIGATION AND REGULATORY PROCEEDINGS...........................................................34
ADDITIONAL INFORMATION..........................................................................35
FINANCIAL STATEMENTS............................................................................35
DIRECTORS AND OFFICERS..............................................................................36
FINANCIAL STATEMENTS OF THE PRUCO LIFE OF NEW JERSEY
VARIABLE APPRECIABLE ACCOUNT........................................................................A1
FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY..................................B1
</TABLE>
<PAGE>
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS
ACCUMULATED NET PAYMENTS -- The actual premium payments you make accumulated at
an effective annual rate of 4%, less any withdrawals you make, accumulated at an
effective annual rate of 4%.
ATTAINED AGE -- An insured's age on the Contract date plus the number of years
since then.
BASIC INSURANCE AMOUNT -- The amount of life insurance as shown in the Contract.
Also referred to as "face amount."
CASH VALUE -- An amount equal to the Contract Fund minus surrender charges.
CASH SURRENDER VALUE -- The amount payable to the Contract owner upon surrender
of the Contract. It is equal to the Contract Fund minus any Contract debt and
minus surrender charges. Also referred to in the Contract as Net Cash Value.
CONTRACT -- The Pruco Life of New Jersey Survivorship Variable Universal Life
policy described in this prospectus.
CONTRACT ANNIVERSARY -- The same date as the Contract date in each later year.
CONTRACT DATE -- The date the Contract is effective, as specified in the
Contract.
CONTRACT DEBT -- The principal amount of all outstanding loans plus any interest
accrued thereon.
CONTRACT FUND -- The total amount credited to a specific Contract. On any date
it is equal to the sum of the amounts in all the variable investment options and
the fixed-rate option, and the principal amount of any Contract debt plus any
interest earned thereon.
CONTRACT MONTH -- A month that starts on the Monthly date.
CONTRACT OWNER[S] -- You. Unless a different owner is named in the application,
the owners of the Contract are the insureds jointly or the survivor of them. If
the Contract is owned jointly, the exercise of rights under the Contract must be
made by both jointly.
CONTRACT YEAR -- A year that starts on the Contract date or on a Contract
anniversary.
DEATH BENEFIT -- If the Contract is not in default, this is the amount we will
pay upon the second death of two insureds, assuming no Contract debt.
FIXED-RATE OPTION -- An investment option under which Pruco Life of New Jersey
guarantees that interest will be added to the amount invested at a rate declared
periodically in advance.
FUNDS -- Mutual funds with separate portfolios. One or more of the available
Fund portfolios may be chosen as an underlying investment for the Contract.
ISSUE AGE -- An insured's age as of the Contract date.
LIFETIME DEATH BENEFIT GUARANTEE PERIOD -- The lifetime of the Contract, during
which time the Lifetime Death Benefit Guarantee is available if sufficient
premiums are paid and there is no outstanding loan. See DEATH BENEFIT GUARANTEE,
page 19.
LIMITED DEATH BENEFIT GUARANTEE PERIOD -- the period until age 75 of the younger
insured or 10 years after issue, whichever comes later, during which time the
Limited Death Benefit Guarantee is available if sufficient premiums are paid and
there is no outstanding loan. The period applicable to your Contract is shown on
the Contract data pages. See DEATH BENEFIT GUARANTEE, page 19.
MONTHLY DATE -- The Contract date and the same date in each subsequent month.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY -- Pruco Life of New Jersey, us, we,
our. The company offering the Contract.
SEPARATE ACCOUNT -- Amounts under the Contract that are allocated to the
variable investment options held by us in a separate account called the Pruco
Life of New Jersey Variable Appreciable Account. The separate account is set up
apart from all of the general assets of Pruco Life Insurance Company of New
Jersey.
VALUATION PERIOD -- The period of time from one determination of the value of
the amount invested in a variable investment option to the next. Such
determinations are made when the net asset values of the portfolios of the Funds
are calculated, which is generally at 4:00 p.m. Eastern time on each day during
which the New York Stock Exchange is open.
VARIABLE INVESTMENT OPTION -- the 16 mutual funds available under this Contract,
whose shares are held in the separate account.
YOU -- The owner[s] of the Contract.
1
<PAGE>
INTRODUCTION AND SUMMARY
THIS SUMMARY PROVIDES A BRIEF OVERVIEW OF THE MORE SIGNIFICANT ASPECTS OF THE
CONTRACT. WE PROVIDE FURTHER DETAIL IN THE SUBSEQUENT SECTIONS OF THIS
PROSPECTUS AND IN THE CONTRACT.
BRIEF DESCRIPTION OF THE CONTRACT
The PRUCO LIFE OF NEW JERSEY SURVIVORSHIP VARIABLE UNIVERSAL LIFE Contract is a
flexible premium variable universal life insurance policy. It is issued by Pruco
Life Insurance Company of New Jersey. The Contract provides life insurance
coverage, with a death benefit payable upon the second death of two insureds. If
the Contract is not in default, the amount we will pay will be the death benefit
determined as of the date of the second death reduced by any Contract debt. See
CONTRACT LOANS, page 28. A significant element of the Contract is the Contract
Fund. The Contract Fund represents the value of your Contract and changes every
business day.
A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. You may invest premiums in
one or more of the 16 available variable investment options or in the fixed-rate
option. Your Contract Fund value changes every day depending upon the change in
value of the particular investment options that you have selected.
Although the value of your Contract Fund will increase if there is favorable
investment performance in the variable investment options you select, investment
returns in the variable investment options are NOT guaranteed. There is a risk
that investment performance will be unfavorable and that the value of your
Contract Fund will decrease. The risk will be different, depending upon which
investment options you choose. See WHICH INVESTMENT OPTION SHOULD BE SELECTED?,
page 11. If you select the fixed-rate option, Pruco Life of New Jersey credits
your account with a declared rate or rates of interest. You assume the risk that
the rate may change, although it will never be lower than an effective annual
rate of 4%.
Variable life insurance contracts are unsuitable as short-term savings vehicles.
Loans will negate any guarantee against lapse and may result in adverse tax
consequences. See DEATH BENEFIT GUARANTEE, page 19, and TAX TREATMENT OF
CONTRACT BENEFITS, page 29.
CHARGES
The following chart outlines the components of your Contract Fund and the
adjustments which may be made including the maximum charges which may be
deducted from each premium payment and from the amounts held in the designated
investment options. These charges are largely designed to cover insurance costs
and risks as well as sales and administrative expenses.
The maximum charges shown in the chart, as well as the current lower charges,
are fully described under CHARGES AND EXPENSES, page 11.
2
<PAGE>
----------------------------------------------------------------
PREMIUM PAYMENT
----------------------------------------------------------------
- --------------------------------------------------------------------------------
o less a charge of up to 7.5% for any taxes attributable to premiums.
o less a charge for sales expenses during the first five contract years at a
rate of up to 12%; after the fifth contract year, we may charge up to 4%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTED PREMIUM AMOUNT
To be invested in one or a combination of:
o 16 investment portfolios of the Funds
o The fixed-rate option
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACT FUND
On the Contract Date, the Contract Fund is equal to the invested premium amount
minus any of the charges described below which may be due on that date.
Thereafter, the value of the Contract Fund changes daily.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DAILY CHARGES
o We deduct management fees and expenses from the Fund assets. See
UNDERLYING PORTFOLIO EXPENSES chart, below.
o We deduct a daily mortality and expense risk charge, equivalent to an
effective annual rate of up to 0.9%, from assets in the variable investment
options.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MONTHLY CHARGES
o During the first five years, we reduce the Contract Fund by a monthly
administrative charge of $10.00 per Contract plus up to $0.10 per $1,000
of basic insurance amount; after the first five Contract years, we charge
$10.00 per Contract plus up to $0.05 per $1,000 of the basic insurance
amount.
o We deduct a cost of insurance ("COI") charge.
o If the Contract includes riders, we deduct rider charges from the Contract
Fund.
o If the rating class of an insured results in an extra charge, we will
deduct that charge from the Contract Fund.
o We reserve the right to deduct a charge to cover federal, state or local
taxes imposed upon the operations of the Account.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
POSSIBLE ADDITIONAL CHARGES
o We will assess contingent deferred sales and administrative charges
(surrender charges) if the Contract is surrendered. We may charge up to $8
per $1,000 of basic insurance amount if you surrender your Contract. This
charge is level for the first five years and declines monthly until it
reaches zero at the end of the 10th Contract year.
o We assess an administrative processing charge of up to $25 for any
withdrawals.
o We reserve the right to charge up to $25 for each basic insurance amount
decrease, although no such charge is currently being made.
o We assess an administrative processing charge of up to $25 for each
transfer exceeding 12 in any Contract year.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
UNDERLYING PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT TOTAL CONTRACTUAL TOTAL ACTUAL
PORTFOLIO ADVISORY FEE OTHER EXPENSES EXPENSES EXPENSES*
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES FUND
<S> <C> <C> <C> <C>
Money Market 0.40% 0.02% 0.42% 0.42%
Diversified Bond 0.40% 0.03% 0.43% 0.43%
Conservative Balanced 0.55% 0.02% 0.57% 0.57%
Flexible Managed 0.60% 0.02% 0.62% 0.62%
High Yield Bond 0.55% 0.05% 0.60% 0.60%
Stock Index 0.35% 0.04% 0.39% 0.39%
Equity Income 0.40% 0.02% 0.42% 0.42%
Equity 0.45% 0.02% 0.47% 0.47%
Prudential Jennison 0.60% 0.03% 0.63% 0.63%
Global 0.75% 0.09% 0.84% 0.84%
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Value Fund 0.61% 0.15% 0.76% 0.76%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. (1)
VP Value Fund 1.00% 0.00% 1.00% 1.00%
JANUS ASPEN SERIES (2)
Growth Portfolio 0.65% 0.02% 0.67% 0.67%
MFS(R) VARIABLE INSURANCE TRUST SM (3)
Emerging Growth Series 0.75% 0.09% 0.84% 0.84%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST (4)
Franklin Small Cap Fund - Class 2
T. ROWE PRICE INTERNATIONAL SERIES, INC. (1) 0.55% 0.52% 1.07% 1.07%
International Stock Portfolio
1.05% 0.00% 1.05% 1.05%
- -----------------------------------------------------------------------------------------------------------------------------------
* Reflects fee waivers and reimbursement of expenses, if any.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. / T. ROWE PRICE INTERNATIONAL
SERIES, INC. The Investment Advisory Fee includes the ordinary expenses of
operating the Fund.
(2) JANUS ASPEN SERIES The table reflects expenses based on expenses for the
fiscal year ended December 31, 1999, restated to reflect a reduction in the
management fee.
(3) MFS(R) VARIABLE INSURANCE TRUST SM An expense offset arrangement with the
Fund's custodian resulted in a reduction in Other Expenses by 0.01%.
(4) FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST The table reflects
restated management fees and expenses based on a merger that became
effective on May 1, 2000. The formally adopted distribution plan, or "12b-1
Plan," provides for a maximum annual fee of 0.35% of the Fund's average
daily net assets, however, the Fund's Board of Trustees has set the current
rate at 0.25%.
THE EXPENSES RELATING TO THE FUNDS (OTHER THAN THOSE OF THE PRUDENTIAL SERIES
FUND, INC. (THE "SERIES FUND") HAVE BEEN PROVIDED TO PRUCO LIFE OF NEW JERSEY BY
THE FUNDS. PRUCO LIFE OF NEW JERSEY HAS NOT INDEPENDENTLY VERIFIED THEM.
4
<PAGE>
TYPES OF DEATH BENEFIT
There are two types of death benefit available: Type A (fixed) death benefit and
Type B (variable) death benefit. You may choose a Type A death benefit under
which the cash surrender value varies daily with investment experience, and the
death benefit you initially chose does not change. However, the Contract Fund
may grow to a point where the death benefit may increase and vary with
investment experience. You may choose a Type B death benefit under which the
cash surrender value and the death benefit both vary with investment experience.
For either type of death benefit, as long as the Contract is inforce, the death
benefit will never be less than the basic insurance amount shown in your
Contract. See TYPE OF DEATH BENEFIT, page 15.
PREMIUM PAYMENTS
The Contract is a flexible premium contract - there are no scheduled premiums.
Except for the minimum initial premium, and subject to a minimum of $25 per
subsequent payment ($15 for premiums made by electronic fund transfer), you
choose the timing and amount of premium payments. The Contract will remain
inforce if the Contract Fund is sufficient to cover the charges, including
surrender charges. Paying insufficient premiums, poor investment results, or the
taking of loans or withdrawals from the Contract will increase the possibility
that the Contract will lapse. However, if the accumulated premiums you pay, less
withdrawals, are high enough, and you have no Contract debt, Pruco Life of New
Jersey guarantees that your Contract will not lapse even if investment
experience is very unfavorable and the Contract Fund drops below zero. There are
two guarantees available, one that lasts for the lifetime of the Contract and
one that lasts for a stated, reasonably lengthy period. The guarantee for the
life of the Contract requires higher premium payments. See PREMIUMS, page 17,
DEATH BENEFIT GUARANTEE, page 19 and LAPSE AND REINSTATEMENT, page 31. You
should discuss your billing options with your Pruco Life of New Jersey
representative when you apply for the Contract. See PREMIUMS, page 17.
REFUND
For a limited time, you may return your Contract for a refund in accordance with
the terms of its "free-look" provision. See SHORT-TERM CANCELLATION RIGHT OR
"FREE-LOOK," page 15.
For the DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS, see page 1.
THE REPLACEMENT OF LIFE INSURANCE IS GENERALLY NOT IN YOUR BEST INTEREST. IN
MOST CASES, IF YOU REQUIRE ADDITIONAL COVERAGE, THE BENEFITS OF YOUR EXISTING
CONTRACT CAN BE PROTECTED BY PURCHASING ADDITIONAL INSURANCE OR A SUPPLEMENTAL
CONTRACT. IF YOU ARE CONSIDERING REPLACING A CONTRACT, YOU SHOULD COMPARE THE
BENEFITS AND COSTS OF SUPPLEMENTING YOUR EXISTING CONTRACT WITH THE BENEFITS AND
COSTS OF PURCHASING THE CONTRACT DESCRIBED IN THIS PROSPECTUS AND YOU SHOULD
CONSULT WITH A QUALIFIED TAX ADVISER.
THIS PROSPECTUS MAY ONLY BE OFFERED IN JURISDICTIONS IN WHICH THE OFFERING IS
LAWFUL. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION FOR THE FUNDS.
5
<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", "us",
"we", or "our") is a stock 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. These Contracts are not offered
in any state where the necessary approvals have not been obtained.
Pruco Life of New Jersey is an indirect, wholly-owned subsidiary of The
Prudential Insurance Company of America ("Prudential"), a mutual insurance
company founded in 1875 under the laws of the state of New Jersey. Prudential is
currently considering reorganizing itself into a publicly traded stock company
through a process known as "demutualization". On February 10, 1998, Prudential's
Board of Directors authorized management to take preliminary steps necessary to
allow Prudential to demutualize. On July 1, 1998, legislation was enacted in New
Jersey that would permit this conversion to occur and that specified the process
for conversion. Demutualization is a complex process involving development of a
plan of reorganization, adoption of a plan by Prudential's Board of Directors, a
public hearing, voting by qualified policyholders and regulatory approval.
Prudential is working toward completing this process in 2001 and currently
expects adoption by the Board of Directors to take place in the latter part of
2000. However, there is no certainty that the demutualization will be completed
in this timeframe or that the necessary approvals will be obtained. Also it is
possible that after careful review, Prudential could decide not to demutualize
or could decide to delay its plans.
The plan of reorganization, which has not been fully developed and approved,
would provide the criteria for determining eligibility and the methodology for
allocating shares or other consideration to those who would be eligible.
Generally the amount of shares or other consideration eligible customers would
receive would be based on a number of factors, including types, amounts and
issue years of the policies. As a general rule, owners of Prudential-issued
insurance policies and annuity contracts would be eligible, provided that their
policies were in force on the date Prudential's Board of Directors adopted a
plan of reorganization, while mutual fund customers and customers of
Prudential's subsidiaries (such as the Pruco Life insurance companies) would not
be. It has not yet been determined whether any exceptions to that general rule
will be made with respect to policyholders and contractholders of Prudential's
subsidiaries. This does not constitute a proposal, offer, solicitation or
recommendation regarding any plan of reorganization that may be proposed or a
recommendation regarding the ownership of any stock that could be issued in
connection with any such demutualization.
THE PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
We have established a separate account, the Pruco Life of New Jersey Variable
Appreciable Account (the "Account"), to hold the assets that are associated with
the Contracts. The Account was established on January 13, 1984 under New Jersey
law and is registered with the Securities and Exchange Commission ("SEC") under
the Investment Company Act of 1940 as a unit investment trust, which is a type
of investment company. 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.
Pruco Life of New Jersey is also the legal owner of the assets in the Account.
Pruco Life of New Jersey will maintain assets in the Account with a total market
value at least equal to the reserve and other
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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 Prudential 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. Pruco Life of New
Jersey will consider any possible adverse impact the transfer might have on the
Account before making any such transfer.
The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Pruco Life of New Jersey.
Currently, you may invest in one or a combination of 16 available variable
investment options. When you choose a variable investment option, we purchase
shares of a mutual fund which are held as an investment for that option. We hold
these shares in the separate account. The division of the separate account of
Pruco Life of New Jersey that invests in a particular mutual fund is referred to
in your Contract as the subaccount. Pruco Life of New Jersey may add additional
variable investment options in the future. The Account's financial statements
begin on page A1.
THE FUNDS
Listed below are the mutual funds (the "Funds") in which the variable investment
options invest, the investment objectives, and investment advisers.
EACH OF THE FUNDS HAS A SEPARATE PROSPECTUS THAT IS PROVIDED WITH THIS
PROSPECTUS. YOU SHOULD READ THE FUND PROSPECTUS BEFORE YOU DECIDE TO ALLOCATE
ASSETS TO THE VARIABLE INVESTMENT OPTION USING THAT FUND. THERE IS NO ASSURANCE
THAT THE INVESTMENT OBJECTIVES OF THE FUNDS WILL BE MET.
THE PRUDENTIAL SERIES FUND, INC. (THE "SERIES FUND"):
o MONEY MARKET PORTFOLIO: The investment objective is maximum current income
consistent with the stability of capital and the maintenance of liquidity.
The Portfolio invests in high quality short-term debt obligations that
mature in 13 months or less.
o DIVERSIFIED BOND PORTFOLIO: The investment objective is a high level of
income over a longer term while providing reasonable safety of capital. The
Portfolio invests primarily in higher grade debt obligations and high
quality money market investments.
o CONSERVATIVE BALANCED PORTFOLIO: The investment objective is a total
investment return consistent with a conservatively managed diversified
portfolio. The Portfolio invests in a mix of equity securities, debt
obligations and money market instruments.
o FLEXIBLE MANAGED PORTFOLIO: The investment objective is a total investment
return consistent with an aggressively managed diversified portfolio. The
Portfolio invests in a mix of equity securities, debt obligations and money
market instruments.
o HIGH YIELD BOND PORTFOLIO: The investment objective is a high total return.
The Portfolio invests primarily in high yield/high risk debt securities.
o STOCK INDEX PORTFOLIO: The investment objective is investment results that
generally correspond to the performance of publicly-traded common stocks.
The Portfolio attempts to duplicate the price and yield performance of the
Standard & Poor's 500 Stock Index (the "S&P 500").
o EQUITY INCOME PORTFOLIO: The investment objective is both current income
and capital appreciation. The Portfolio invests primarily in common stocks
and convertible securities that provide good prospects for returns above
those of the S&P 500 or the NYSE Composite Index.
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o EQUITY PORTFOLIO: The investment objective is capital appreciation. The
Portfolio invests primarily in common stocks of major established
corporations as well as smaller companies that offer attractive prospects
of appreciation.
o PRUDENTIAL JENNISON PORTFOLIO: The investment objective is to achieve
long-term growth of capital. The Portfolio invests primarily in equity
securities of major established corporations that offer above-average
growth prospects.
o GLOBAL PORTFOLIO: The investment objective is long-term growth of capital.
The Portfolio invests primarily in common stocks (and their equivalents) of
foreign and U.S. companies.
Prudential is the investment adviser for the assets of each of the portfolios of
the Series Fund. Prudential's principal business address is 751 Broad Street,
Newark, New Jersey 07102-3777. Prudential has a Service Agreement with its
wholly-owned subsidiary, The Prudential Investment Corporation ("PIC"). The
Service Agreement provides that, subject to Prudential's supervision, PIC will
furnish investment advisory services in connection with the management of the
Series Fund. In addition, Prudential has entered into a Subadvisory Agreement
with its wholly-owned subsidiary, Jennison Associates LLC ("Jennison"), under
which Jennison furnishes investment advisory services in connection with the
management of the Prudential Jennison Portfolio.
AIM VARIABLE INSURANCE FUNDS:
o AIM V.I. VALUE FUND. Seeks to achieve long-term growth of capital. Income
is a secondary objective.
A I M Advisors, Inc. ("AIM") is the investment adviser for this fund. The
principal business address for AIM is 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.:
o AMERICAN CENTURY VP VALUE FUND. Seeks long-term capital growth with income
as a secondary objective. The Fund seeks to achieve its objective by
investing primarily in equity securities of well-established companies with
intermediate-to-large market capitalizations that are believed by
management to be undervalued at the time of purchase.
American Century Investment Management, Inc. ("ACIM") is the investment adviser
for this fund. ACIM's principal business address is American Century Tower, 4500
Main Street, Kansas City, Missouri 64111. The principal underwriter of the Fund
is American Century Services, Inc., located at 4500 Main Street, Kansas City,
Missouri 64111.
JANUS ASPEN SERIES:
o GROWTH PORTFOLIO. Seeks long-term growth of capital in a manner consistent
with the preservation of capital.
Janus Capital Corporation is the investment adviser and is responsible for the
day-to-day management of the portfolio and other business affairs of the
portfolio. Janus Capital Corporation's principal business address is 100
Fillmore Street, Denver, Colorado 80206-4928.
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MFS(R) VARIABLE INSURANCE TRUST SM:
o EMERGING GROWTH SERIES. Seeks to provide long-term growth of capital.
Massachusetts Financial Services Company, a Delaware corporation, is the
investment adviser to this MFS Series. The principal business address for the
Massachusetts Financial Services Company is 500 Boylston Street, Boston,
Massachusetts 02116.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
o FRANKLIN SMALL CAP FUND-- CLASS 2. Seeks long-term capital growth. The Fund
invests primarily in equity securities of U.S. small capitalization growth
companies.
Franklin Advisers, Inc. (Advisers) is the fund's investment manager. The
principal business address for Franklin Advisers, Inc. is 777 Mariners Island
Boulevard, San Mateo, California 94403-7777.
T. ROWE PRICE INTERNATIONAL SERIES, INC.:
o INTERNATIONAL STOCK PORTFOLIO. Seeks long-term growth of capital through
investments primarily in common stocks of established, non-U.S. companies.
Rowe Price-Fleming International, Inc. is the investment manager for this fund.
The principal business address for Rowe Price-Fleming International, Inc. is 100
East Pratt Street, Baltimore, Maryland 21202.
The investment advisers for the Funds charge a daily investment management fee
as compensation for their services. These fees are described in the table in the
INTRODUCTION AND SUMMARY section, see page 4, and are more fully described in
the prospectus for each Fund.
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 funds. Although neither of the companies that invest in the Funds nor the
Funds currently foresee any such disadvantage, the Board of Directors for each
Fund 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. 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
Funds; or (4) differences between voting instructions given by variable life
insurance and variable annuity contract owners.
Pruco Life of New Jersey may be compensated by an affiliate of each of the Funds
(other than the Prudential Series Fund) based upon an annual percentage of the
average assets held in the Funds by Pruco Life of New Jersey under the
Contracts. These percentages vary by Fund, and reflect administrative and other
services provided by Pruco Life of New Jersey.
VOTING RIGHTS
As described earlier, all of the assets held in the variable investment options
will be invested in shares of the corresponding portfolios of the Funds. 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 shareholders meetings of the Funds. However,
Pruco Life of New Jersey will, as required by law, vote the shares of the Funds
in accordance with voting instructions received from Contract owners at any
regular and special shareholders meetings. A Fund may not hold annual
shareholders meetings when not required to do so under the laws of the state of
its incorporation or the Investment Company Act of 1940. 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,
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change so as to permit Pruco Life of New Jersey to vote shares of the Funds 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 variable investment option[s];
(4) any change in the fundamental investment policy of a portfolio corresponding
to the Contract owner's selected variable investment option[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 Investment Company Act of 1940.
The number of Fund shares for which a Contract owner may give instructions is
determined by dividing the portion of the value of the Contract derived from
participation in a variable investment option, by the value of one share in the
corresponding portfolio of the applicable 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
applicable 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 they would require shares to be voted so as to
cause a change in the sub-classification or investment objectives of one or more
of a Fund's portfolios, or to approve or disapprove an investment advisory
contract for a Fund. In addition, Pruco Life of New Jersey itself may disregard
voting instructions that would require changes in the investment policy or
investment adviser of one or more of the 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.
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 SEC HAS NOT REVIEWED
THE DISCLOSURE IN THIS PROSPECTUS RELATING TO THE FIXED-RATE OPTION. ANY
INACCURATE OR MISLEADING DISCLOSURE REGARDING THE FIXED-RATE OPTION MAY,
HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF FEDERAL
SECURITIES LAWS.
You may choose to invest, either initially or by transfer, all or part of your
Contract Fund to a fixed-rate option. This amount becomes part of Pruco Life of
New Jersey's general account. The general account 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 general account assets, 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%. Pruco Life of New Jersey is not obligated to credit interest at a rate
higher than an effective annual rate of 4%, although we may do so.
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Transfers from the fixed-rate option may be subject to strict limits. See
TRANSFERS, page 20. The payment of any cash surrender value attributable to the
fixed-rate option may be delayed up to six months. See WHEN PROCEEDS ARE PAID,
page 26.
WHICH INVESTMENT OPTION SHOULD BE SELECTED?
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, Global, AIM, American
Century, Janus, MFS, T. Rowe Price, or Franklin Templeton Portfolios may be
desirable options if you are willing to accept such volatility in your Contract
values. Each of these equity portfolios involves different investment risks,
policies, and programs.
You may prefer the somewhat greater protection against loss of principal (and
reduced chance of high total return) provided by the Diversified Bond Portfolio.
You may want even greater safety of principal and may prefer the Money Market
Portfolio or the fixed-rate option, recognizing that the level of short-term
rates may change rather rapidly. If you are willing to take risks and possibly
achieve a higher total return, you may prefer the High Yield Bond Portfolio,
recognizing that the risks are greater for lower quality bonds with normally
higher yields. You may wish to divide your invested premium among two or more of
the portfolios. You may wish to obtain diversification by relying on
Prudential's judgment for an appropriate asset mix by choosing the Conservative
Balanced or Flexible Managed Portfolios.
Your choice should take into account your willingness to accept investment
risks, how your other assets are invested, and what investment results you may
experience in the future. You should consult your Pruco Life of New Jersey
representative from time to time about the choices available to you under the
Contract. Pruco Life of New Jersey recommends AGAINST frequent transfers among
the several investment options. Experience generally indicates that "market
timing" investing, particularly by non-professional investors, is likely to
prove unsuccessful.
DETAILED INFORMATION FOR PROSPECTIVE
CONTRACT OWNERS
CHARGES AND EXPENSES
The total amount invested at any time in the Contract Fund consists of the sum
of the amount credited to the variable investment options, the amount allocated
to the fixed-rate option, and the principal amount of any Contract loan plus the
amount of interest credited to the Contract upon that loan. See CONTRACT LOANS,
page 28. Most charges, although not all, are made by reducing the Contract Fund.
This section provides a more detailed description of each charge that is
described briefly in the chart on page 2.
In several instances we will use 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, we reserve the right to increase each current
charge, up to the maximum charge, without giving any advance notice.
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DEDUCTIONS FROM PREMIUM PAYMENTS
(a) We charge up to 7.5% from each premium for taxes attributable to premiums.
For these purposes, "taxes attributable to premiums" shall include any
federal, state or local income, premium, excise, business or any other type
of tax (or component thereof) measured by or based upon the amount of
premium received by Pruco Life of New Jersey. That charge is currently made
up of two parts, which currently equal a total of 3.75% of the premiums
received. The first part is a charge for state and local premium-based
taxes. The current charge for this first part is 2.5% of the premium and is
Pruco Life of New Jersey's estimate of the average burden of state taxes
generally. The rate applies uniformly to all policyholders without regard
to state of residence. This amount may be more than Pruco Life of New
Jersey actually pays. The second part is for federal income taxes measured
by premiums, and it is currently equal to 1.25% of the premium. We believe
that this charge is a reasonable estimate of an increase in Pruco Life of
New Jersey's federal income taxes resulting from a 1990 change in the
Internal Revenue Code. It is intended to recover this increased tax.
(b) We may deduct up to 12% of premiums paid in the first five Contract years
for sales expenses. This charge is reduced to 4% of premiums paid in
subsequent Contract years. This charge, often called a "sales load", is
deducted to compensate us for the costs of selling the Contracts, including
commissions, advertising and the printing and distribution of prospectuses
and sales literature. Part of those costs related to sales are also
recovered by surrender charges. See SURRENDER CHARGES, page 14.
Currently, we deduct 12% of premiums paid in the first five Contract years
up to the amount of the Lifetime Premium, excluding any premiums for riders
or extra risk charges, (see PREMIUMS, page 17) and 4% of premiums paid in
excess of this amount. We deduct 4% of the premiums paid in Contract years
six through 10, and 2% of premiums paid thereafter.
Attempting to structure the timing and amount of premium payments to reduce
the potential sales load may increase the risk that your Contract will
lapse without value. Delaying the payment of premium amounts to later years
will adversely affect the Death Benefit Guarantee if the accumulated
premium payments do not reach the accumulated values shown under your
Contract's Death Benefit Guarantee Values. See DEATH BENEFIT GUARANTEE,
page 19. In addition, there are circumstances where payment of premiums
that are too large may cause the Contract to be characterized as a Modified
Endowment Contract, which could be significantly disadvantageous. See TAX
TREATMENT OF CONTRACT BENEFITS, page 29.
DEDUCTIONS FROM PORTFOLIOS
We deduct an investment advisory fee daily from each portfolio at a rate, on an
annualized basis, ranging from 0.35% for the Series Fund Stock Index Portfolio
to 1.05% for the T. Rowe Price International Stock Portfolio. The expenses
incurred in conducting the investment operations of the portfolios (such as
custodian fees and preparation and distribution of annual reports) are paid out
of the portfolio's income. These expenses also vary from portfolio to portfolio.
The total expenses of each portfolio for the year ended December 31, 1999,
expressed as a percentage of the average assets during the year, are shown
below:
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<TABLE>
<CAPTION>
TOTAL PORTFOLIO EXPENSES
TOTAL CONTRACTUAL
PORTFOLIO INVESTMENT ADVISORY OTHER EXPENSES EXPENSES TOTAL ACTUAL
FEE EXPENSES*
- ----------------------------------------------------------------------------------------------------------------------------------
SERIES FUND
<S> <C> <C> <C> <C>
Money Market 0.40% 0.02% 0.42% 0.42%
Diversified Bond 0.40% 0.03% 0.43% 0.43%
Conservative Balanced 0.55% 0.02% 0.57% 0.57%
Flexible Managed 0.60% 0.02% 0.62% 0.62%
High Yield Bond 0.55% 0.05% 0.60% 0.60%
Stock Index 0.35% 0.04% 0.39% 0.39%
Equity Income 0.40% 0.02% 0.42% 0.42%
Equity 0.45% 0.02% 0.47% 0.47%
Prudential Jennison 0.60% 0.03% 0.63% 0.63%
Global 0.75% 0.09% 0.84% 0.84%
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Value Fund 0.61% 0.15% 0.76% 0.76%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. (1)
VP Value Fund 1.00% 0.00% 1.00% 1.00%
JANUS ASPEN SERIES (2)
Growth Portfolio 0.65% 0.02% 0.67% 0.67%
MFS(R) VARIABLE INSURANCE TRUST SM (3)
Emerging Growth Series 0.75% 0.09% 0.84% 0.84%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST (4)
Franklin Small Cap Fund - Class 2
T. ROWE PRICE INTERNATIONAL SERIES, INC. (1) 0.55% 0.52% 1.07% 1.07%
International Stock Portfolio
1.05% 0.00% 1.05% 1.05%
- ----------------------------------------------------------------------------------------------------------------------------------
* Reflects fee waivers and reimbursement of expenses, if any.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. / T. ROWE PRICE INTERNATIONAL
SERIES, INC.
The Investment Advisory Fee includes the ordinary expenses of operating
the Fund.
(2) JANUS ASPEN SERIES
The table reflects expenses based on expenses for the fiscal year ended
December 31, 1999, restated to reflect a reduction in the management fee.
(3) MFS(R) VARIABLE INSURANCE TRUST SM
An expense offset arrangement with the Fund's custodian resulted in a
reduction in Other Expenses by 0.01%.
(4) FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
The table reflects restated management fees and expenses based on a merger
that became effective on May 1, 2000. The formally adopted distribution
plan, or "12b-1 Plan," provides for a maximum annual fee of 0.35% of the
Fund's average daily net assets, however, the Fund's Board of Trustees has
set the current rate at 0.25%.
DAILY DEDUCTION FROM THE CONTRACT FUND
Each day we deduct a charge from the assets of each of the variable investment
options in an amount equivalent to an effective annual rate of 0.9%. This charge
is intended to compensate Pruco Life of New Jersey for assuming mortality and
expense risks under the Contract. The mortality risk assumed is that the
insureds may live for shorter periods of time than Pruco Life of New Jersey
estimated when it determined what mortality charge to make. The expense risk
assumed is that expenses incurred in issuing and
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administering the Contract will be greater than Pruco Life of New Jersey
estimated in fixing its administrative charges. This charge is not assessed
against amounts allocated to the fixed-rate option.
MONTHLY DEDUCTIONS FROM CONTRACT FUND
Pruco Life of New Jersey deducts the following monthly charges proportionately
from the dollar amounts held in each of the chosen investment option[s].
a) An administrative charge based on the basic insurance amount is deducted.
The charge is intended to compensate us for things like processing claims,
keeping records and communicating with Contract owners. Currently, we
charge the following:
o generally, if the average issue age of the insureds is less than 40 in the
first five Contract years, we deduct $10 per Contract plus $0.07 per $1,000
of basic insurance amount;
o if the average issue age of the insureds is 40 or greater in the first five
Contract years, we deduct $10 per Contract plus $0.08 per $1,000 of basic
insurance amount;
o in all subsequent years, we deduct $10 per Contract plus $0.01 per $1,000
of basic insurance amount.
Pruco Life of New Jersey reserves the right, however, to charge up to $10 per
Contract plus $0.10 per $1,000 of basic insurance amount in the first five
Contract years and $10 per Contract plus $0.05 per $1,000 of basic insurance
amount in subsequent years.
b) A cost of insurance ("COI") charge is deducted. Upon the second death of
two insureds, the amount payable to the beneficiary (assuming there is no
Contract debt) is larger than the Contract Fund - significantly larger if
both insureds died in the early years of the Contract. The cost of
insurance charges collected from all Contract owners enables Pruco Life of
New Jersey to pay this larger death benefit. The maximum COI charge is
determined by multiplying the "net amount at risk" under a Contract (the
amount by which the Contract's death benefit exceeds the Contract Fund) by
maximum COI rates. The maximum COI rates are based upon both insureds'
current attained age, sex, smoking status, and extra rating class, if any.
c) You may add one or more of several riders to the Contract. Some riders are
charged for separately. If you add such a rider to the basic Contract,
additional charges will be deducted.
d) If an insured is in a substandard risk classification (for example, a
person in a hazardous occupation), additional charges will be deducted.
e) A charge may be deducted to cover federal, state or local taxes (other than
"taxes attributable to premiums" described above) that are imposed upon the
operations of the Account. At present no such taxes are imposed and no
charge is made.
The earnings of the Account are taxed as part of the operations of Pruco
Life of New Jersey. Currently, no charge is being made to the Account for
Pruco Life of New Jersey's federal income taxes, other than the 1.25%
charge for federal income taxes measured by premiums. See DEDUCTIONS FROM
PREMIUMS, page 12. Pruco Life of New Jersey reviews the question of a
charge to the Account for Company federal income taxes periodically. We may
make such a charge in the future for any federal income taxes that would be
attributable to the Contracts.
SURRENDER CHARGE
We will assess a surrender charge if, during the first 10 Contract years, the
Contract lapses, is surrendered, or in some instances, the basic insurance
amount is decreased. See CHANGING THE TYPE OF DEATH BENEFIT, page 16,
WITHDRAWALS, page 25, and DECREASES IN BASIC INSURANCE AMOUNT, page 25.
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This charge is deducted to cover sales costs and administrative costs, such as:
the cost of processing applications, conducting examinations, determining
insurability and the insured's rating class, and establishing records. We may
charge up to $8 per $1,000 of basic insurance amount if you surrender your
Contract. Currently, we charge $5 per $1,000 of basic insurance amount. This
charge is level for the first five Contract years and declines monthly until it
reaches zero at the end of the 10th Contract year.
TRANSACTION CHARGES
(a) We currently charge an administrative processing fee equal to the lesser of
$25 or 2% of the withdrawal amount in connection with each withdrawal.
(b) We reserve the right to charge an administrative processing fee of up to
$25 made in connection with each decrease in basic insurance amount. We
currently do not make such a charge.
(c) We currently charge an administrative processing fee of $25 for each
transfer exceeding 12 in any Contract year.
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
You may apply for a minimum basic insurance amount of $250,000. The Contract may
be issued on two insureds each between the ages of 18 and 90. Pruco Life of New
Jersey requires evidence of insurability on each insured which may include a
medical examination before issuing any Contract. Non-smokers are offered more
favorable cost of insurance rates than smokers. Pruco Life of New Jersey charges
a higher cost of insurance rate and/or an additional amount if an extra
mortality risk is involved. These are the current underwriting requirements. We
reserve the right to change them on a non-discriminatory basis.
SHORT-TERM CANCELLATION RIGHT OR "FREE-LOOK"
Generally, you may return the Contract for a refund within 10 days after you
receive it. Some states allow a longer period of time during which a Contract
may be returned for a refund. You can request a refund by mailing or delivering
the Contract to the representative who sold it or to the Home Office specified
in the Contract. A Contract returned according to this provision shall be deemed
void from the beginning. You will then receive a refund of all premium payments
made, plus or minus any change due to investment experience. However, if
applicable law so requires, you will receive a refund of all premium payments
made with no adjustment for investment experience. For information on how
premium payments are allocated during the "free-look" period, see ALLOCATION OF
PREMIUMS, page 18.
TYPES OF DEATH BENEFIT
You may select either a Type A (fixed) or a Type B (variable) death benefit.
Generally, a Contract with a Type A (fixed) death benefit has a death benefit
equal to the basic insurance amount. This type of death benefit does not vary
with the investment performance of the investment options you selected, except
in certain circumstances. See HOW A TYPE A (FIXED) CONTRACT'S DEATH BENEFIT WILL
VARY, page 22. The payment of additional premiums and favorable investment
results of the investment options to which the assets are allocated will
generally increase the cash surrender value. See HOW A CONTRACT'S CASH SURRENDER
VALUE WILL VARY, page 22.
A Contract with a Type B (variable) death benefit has a death benefit which will
generally equal the basic insurance amount plus the Contract Fund. Since the
Contract Fund is a part of the death benefit, favorable investment performance
and payment of additional premiums generally result in an increase in the death
benefit, as well as in the cash surrender value. Over time, however, the
increase in the cash surrender value will be less than under a Contract with a
fixed death benefit. This is because, given two Contracts with the same basic
insurance amount and equal Contract Funds, generally the cost of insurance
charge for a Contract with a Type B death benefit will be greater. See HOW A
CONTRACT'S CASH SURRENDER VALUE WILL VARY, page 22 and HOW A TYPE B (VARIABLE)
CONTRACT'S DEATH BENEFIT WILL VARY, page 23.
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Unfavorable investment performance will result in decreases in the cash
surrender value and may result in decreases in the death benefit. As long as the
Contract is not in default and there is no Contract debt, the death benefit may
not fall below the basic insurance amount stated in the Contract.
In choosing a death benefit type, you should also consider whether you intend to
use the withdrawal feature. Contract owners with a Type A (fixed) death benefit
should note that any withdrawal may result in a reduction of the basic insurance
amount and possible surrender charges. In addition, we will not allow you to
make a withdrawal that will decrease the basic insurance amount below the
minimum basic insurance amount. See WITHDRAWALS, page 25.
The way in which the cash surrender values and death benefits will change
depends significantly upon the investment results that are actually achieved.
CHANGING THE TYPE OF DEATH BENEFIT
This Contract has two types of death benefit, Type A (fixed) or Type B
(variable). You may change the type of death benefit, subject to Pruco Life of
New Jersey's approval. Currently, Pruco Life of New Jersey does not require a
medical examination. Except as stated below, we will adjust the basic insurance
amount so that the death benefit immediately after the change will remain the
same as the death benefit immediately before the change.
If you are changing your Contract's death benefit from Type A to Type B, we will
reduce the basic insurance amount by the amount in your Contract Fund on the
date the change takes place. The basic insurance amount after the change may not
be lower than the minimum basic insurance amount applicable to the Contract. If
you are changing your Contract's death benefit from Type B to Type A, we will
increase the basic insurance amount by the amount in your Contract Fund on the
date the change takes place. This is illustrated in the following chart.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
CHANGING THE DEATH BENEFIT FROM CHANGING THE DEATH BENEFIT FROM
TYPE A TYPE B TYPE B TYPE A
(FIXED) to (VARIABLE) (VARIABLE) to (FIXED)
- --------------------------------------------------------------------------------------------------
BASIC INSURANCE
<S> <C> <C> <C> <C>
AMOUNT $300,000 to $250,000 $300,000 to $350,000
CONTRACT FUND $50,000 to $50,000 $50,000 to $50,000
DEATH BENEFIT* $300,000 to $300,000 $350,000 to $350,000
- --------------------------------------------------------------------------------------------------
</TABLE>
* assuming there is no Contract debt
Changing your Contract's type of death benefit from Type A to Type B during the
first 10 Contract years may result in the assessment of surrender charges. In
addition, we reserve the right to make an administrative processing charge of up
to $25 for any decrease in basic insurance amount, although we do not currently
do so. See CHARGES AND EXPENSES, page 11.
To request a change, fill out an application for change which can be obtained
from your Pruco Life of New Jersey representative or a Home Office. If the
change is approved, we will recompute the Contract's charges and appropriate
tables and send you new Contract data pages. We may ask that you send us your
Contract before making the change. There may be circumstances under which a
change in the death benefit type may cause the Contract to be classified as a
Modified Endowment Contract, which could be significantly disadvantageous. See
TAX TREATMENT OF CONTRACT BENEFITS, page 29.
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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 application date or the
medical examination date. If the first premium is not paid with the application,
the Contract date will be the date on which the first premium is paid and the
Contract is delivered. Under certain circumstances, we may allow the Contract to
be backdated for the purpose of lowering one or both insureds' issue ages, but
only to a date not earlier than six months prior to the application date. This
may be advantageous for some Contract owners as a lower issue age may result in
lower current charges. For a Contract that is backdated, we will credit the
initial premium as of the date of receipt and will deduct any charges due on or
before that date.
PREMIUMS
The Contract is a flexible premium contract. The minimum initial premium is due
on or before the Contract date. Thereafter, you decide when you would like to
make premium payments and, subject to a $25 minimum, in what amounts. However,
the minimum premium payment is $15 for premiums made by electronic fund
transfer. We may require an additional premium if adjustments to premium
payments exceed the minimum initial premium or there are Contract Fund charges
due on or before the payment date. We reserve the right to refuse to accept any
payment that increases the death benefit by more than it increases the Contract
Fund. See HOW A TYPE A (FIXED) CONTRACT'S DEATH BENEFIT WILL VARY, page 22 and
HOW A TYPE B (VARIABLE) CONTRACT'S DEATH BENEFIT WILL VARY, page 23. There are
circumstances under which the payment of premiums in amounts that are too large
may cause the Contract to be characterized as a Modified Endowment Contract,
which could be significantly disadvantageous. See TAX TREATMENT OF CONTRACT
BENEFITS, page 29.
If we receive the first premium payment on or before the Contract date, we will
credit the invested premium amount to the Contract Fund on the Contract date. If
we receive the first premium payment after the Contract date, we will credit the
premium amount to the Contract Fund on the payment receipt date.
Once the minimum initial premium payment is made, there are no required
premiums. However, there are several types of "premiums" which are described
below. Understanding them may help you understand how the Contract works.
MINIMUM INITIAL PREMIUM - the premium needed to start the Contract.
There is no insurance under the Contract unless the minimum initial
premium is paid.
TARGET PREMIUM - the premiums that, if paid at the beginning of each
Contract year, will keep the Contract inforce during the full Limited
Death Benefit Guarantee period regardless of investment performance,
assuming no loans or withdrawals. For a Contract with no riders or extra
risk charges, these premiums will be level. Payment of Target Premiums
at the beginning of each Contract year is one way to achieve the Limited
Death Benefit Guarantee Values shown on the Contract data pages. At the
end of the Limited Death Benefit Guarantee period, continuation of the
Contract will depend on the Contract Fund having sufficient money to
cover all charges or meeting the conditions of the Lifetime Death
Benefit Guarantee. See DEATH BENEFIT GUARANTEE, page 19. These Target
Premiums will be higher for a Contract with a Type B (variable) death
benefit than for a Contract with a Type A (fixed) death benefit. When
you purchase a Contract, your Pruco Life of New Jersey representative
can tell you the amount[s] of the Target Premium.
It is possible, in some instances, to pay a lower premium (the
"SHORT-TERM PREMIUM") than the Target Premium. These Short-Term
Premiums, if paid at the beginning of each Contract year, will keep the
Contract inforce only during the first five years of the Limited Death
Benefit Guarantee period regardless of investment performance, and
assuming no loans or withdrawals. As is the case with the Target
Premium, for a Contract with no riders or extra risk charges, these
premiums will be level. Payment of Short-Term Premiums at the beginning
of each of the first five Contract years is one
17
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way to achieve the Limited Death Benefit Guarantee Values shown on the
Contract data pages, but only for the first five Contract years. At
the end of the first five years, continuation of the Contract will
depend on the Contract Fund having sufficient money to cover all
charges or meeting the conditions of the Lifetime Death Benefit
Guarantee or the Limited Death Benefit Guarantee. See DEATH BENEFIT
GUARANTEE, page 19. When you purchase a Contract, your Pruco Life of
New Jersey representative can tell you the amount[s] of the Short-Term
Premium. This Contract may not be suitable for those who can afford to
pay only the Short-Term Premium.
LIFETIME PREMIUM - the premiums that, if paid at the beginning of each
Contract year, will keep the Contract inforce during the lifetime of
the insureds regardless of investment performance, assuming no loans
or withdrawals. These Lifetime Premiums will be higher for a Contract
with a Type B (variable) death benefit than for a Contract with a Type
A (fixed) death benefit. As is the case with the Target Premium, for a
Contract with no riders or extra risk charges, these premiums will be
level. Payment of Lifetime Premiums at the beginning of each Contract
year is one way to achieve the Lifetime Death Benefit Guarantee Values
shown on the Contract data pages. See DEATH BENEFIT GUARANTEE, page
19. When you purchase a Contract, your Pruco Life of New Jersey
representative can tell you the amount[s] of the Lifetime Premium.
We can bill you annually, semi-annually, or quarterly for an amount you select.
Because the Contract is a flexible premium contract, there are no scheduled
premium due dates. When you receive a premium notice, you are not required to
pay this amount. The Contract will remain inforce if: (1) the Contract Fund is
sufficient to pay monthly charges including surrender charges; or (2) you have
paid sufficient premiums on an accumulated basis to meet the Death Benefit
Guarantee conditions and there is no Contract debt. You may also pay premiums
automatically through pre-authorized monthly transfers from a bank checking
account. If you elect to use this feature, you choose the day of the month on
which premiums will be paid and the amount of the premiums paid. We will then
draft from your account the same amount on the same date each month.
When you apply for the Contract, you should discuss with your Pruco Life of New
Jersey representative how frequently you would like to be billed (if at all) and
for what amount.
ALLOCATION OF PREMIUMS
On the Contract date, Pruco Life of New Jersey deducts the charge for sales
expenses and the charge for taxes attributable to premiums from the initial
premium. Also on the Contract date, the remainder of the initial premium and any
other premium received during the short-term cancellation right ("free-look")
period, will be allocated to the Money Market investment option and the first
monthly deductions are made. At the end of the "free-look" period, these funds
will be transferred out of the Money Market investment option and allocated
among the variable investment options and/or the fixed-rate option according to
your most current allocation request. See SHORT-TERM CANCELLATION RIGHT OR
"FREE-LOOK", page 15. The transfer from the Money Market investment option
immediately following the "free-look" period will not be counted as one of your
12 free transfers described below. If the first premium is received before the
Contract date, there will be a period during which the Contract owner's initial
premium will not be invested.
The charge for sales expenses and the charge for taxes attributable to premiums
also apply to all subsequent premium payments; the remainder will be invested as
of the end of the valuation period when received at a Home Office in accordance
with the allocation you previously designated. Provided the Contract is not in
default, you may change the way in which subsequent premiums are allocated by
giving written notice to a Home Office or by telephoning a Home Office, provided
you are enrolled to use the Telephone Transfer System. There is no charge for
reallocating future premiums. All percentage allocations must be in whole
numbers. For example, 33% can be selected but 33 1/3% cannot. Of course, the
total allocation to all selected investment options must equal 100%.
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<PAGE>
DEATH BENEFIT GUARANTEE
Although you decide what premium amounts you wish to pay, sufficient premium
payments, on an accumulated basis, will guarantee that your Contract will not
lapse and a death benefit will be paid upon the second death of two insureds.
This will be true even if, because of unfavorable investment experience, your
Contract Fund value drops to zero. Withdrawals may adversely affect the status
of the guarantee. A contract loan will negate any guarantee, regardless of the
value of your accumulated net payments. See WITHDRAWALS, page 25 and CONTRACT
LOANS, page 28. You should consider how important the Death Benefit Guarantee is
to you when deciding what premium amounts to pay into the Contract. We offer two
levels of death benefit guarantees: (1) Limited Death Benefit Guarantee, and (2)
Lifetime Death Benefit Guarantee.
For purposes of determining if a Death Benefit Guarantee is in effect, we
calculate two sets of values: (1) Limited Death Benefit Guarantee Values, and
(2) Lifetime Death Benefit Guarantee Values. These are values used solely to
determine if a Death Benefit Guarantee is in effect. They are not cash values
that you can realize by surrendering the Contract, nor are they payable death
benefits. The Limited Death Benefit Guarantee Values apply until age 75 of the
younger insured, or 10 years after issue, whichever is later. Correspondingly,
the Lifetime Death Benefit Guarantee Values are shown for the lifetime of the
Contract. In addition, the Contract data pages show Limited and Lifetime Death
Benefit Guarantee Values as of Contract anniversaries. Values for
non-anniversary Monthly dates will reflect the number of months elapsed between
Contract anniversaries.
The Limited Death Benefit Guarantee Values for the first five years are the
end-of-year accumulations of premiums at 4% annual interest assuming Short-Term
Premiums are paid at the beginning of each Contract year. The Limited Death
Benefit Guarantee Values after five years are the end-of-year accumulations of
premiums at 4% annual interest assuming Target Premiums are paid at the
beginning of each Contract year (including years one through five). The Lifetime
Death Benefit Guarantee Values are the end-of-year accumulations of premiums at
4% annual interest assuming Lifetime Premiums are paid at the beginning of each
Contract year.
Short-Term, Target, and Lifetime Premiums are premium levels that, if paid at
the beginning of each Contract year, correspond to the Limited (first five years
only), Limited (all years of the Limited Death Benefit Guarantee period), and
Lifetime Death Benefit Guarantee Values, respectively (assuming no withdrawals
or loans). If you want a death benefit guarantee to last longer than five years,
you should expect to pay at least the Target Premium. See PREMIUMS, page 17.
Paying the Short-Term, Target, or Lifetime Premiums at the start of each
Contract year is one way of reaching the Death Benefit Guarantee Values; they
are certainly not the only way.
At the Contract date, and on each Monthly date, we calculate your Contract's
"Accumulated Net Payments" as of that date. Accumulated Net Payments equal the
premiums you paid, accumulated at an effective annual rate of 4%, less
withdrawals also accumulated at 4%.
At each Monthly date within the Limited Death Benefit Guarantee period
(including years one through five), we will compare your Accumulated Net
Payments to the Limited Death Benefit Guarantee Value as of that date. After the
Limited Death Benefit Guarantee period, we will compare your Accumulated Net
Payments to the Lifetime Death Benefit Guarantee Value as of that date. If your
Accumulated Net Payments equal or exceed the applicable (Limited or Lifetime)
Death Benefit Guarantee Value and there is no Contract debt, then the Contract
is kept inforce, regardless of the amount in the Contract Fund.
Here is a table of Short-Term, Target, or Lifetime Premiums (to the nearest
dollar) for sample cases. The examples assume the insureds are a male and a
female, both the same age, both smokers, with no extra risk or substandard
ratings, and no riders added to the Contract. For those who qualify for more
favorable underwriting classes, the premiums may be lower than those shown on
the chart, and for those who are classified as substandard, the premiums may be
higher.
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- --------------------------------------------------------------------------------
BASIC INSURANCE AMOUNT - $250,000
ILLUSTRATIVE ANNUAL PREMIUMS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM PREMIUM
CORRESPONDING LIFETIME PREMIUM
TO THE LIMITED TARGET PREMIUM CORRESPONDING TO
DEATH BENEFIT CORRESPONDING TO THE THE LIFETIME DEATH
AGE OF BOTH TYPE OF GUARANTEE VALUES LIMITED DEATH BENEFIT BENEFIT GUARANTEE
INSUREDS AT ISSUE DEATH BENEFIT CHOSEN (FIRST FIVE YEARS ONLY) GUARANTEE VALUES VALUES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
40 Type A (Fixed) $1,137 $2,697 $3,447
40 Type B (Variable) $1,137 $3,456 $11,862
60 Type A (Fixed) $3,766 $6,358 $8,746
60 Type B (Variable) $3,766 $7,613 $27,694
80 Type A (Fixed) $21,803 $26,238 $28,887
80 Type B (Variable) $21,803 $33,321 $71,153
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
You should consider carefully the value of maintaining the Death Benefit
Guarantee. If you desire the Death Benefit Guarantee for the full Limited Death
Benefit Guarantee period, you may prefer to pay at least the Target Premium in
all years, rather than paying the lower Short-Term Premium in the first five
years. If you pay only enough premium to meet the Limited Death Benefit
Guarantee Values in the first five years, you will need to pay more than the
Target Premium at the beginning of the sixth year in order to continue the
guarantee after the first five years of the Limited Death Benefit Guarantee
period.
If you desire the Death Benefit Guarantee for lifetime protection, you may
prefer to pay generally higher premiums in all years, rather than trying to make
such payments on an as needed basis. For example, if you pay only enough premium
to meet the Limited Death Benefit Guarantee Values, a substantial amount may be
required to meet the Lifetime Death Benefit Guarantee Values in order to
continue the guarantee at the end of the Limited Death Benefit Guarantee period.
In addition, it is possible that the payment required to continue the guarantee
after the Limited Death Benefit Guarantee period could exceed the premium
payments allowed to be paid without causing the Contract to become a Modified
Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 29.
The Death Benefit Guarantee allows considerable flexibility as to the timing of
premium payments. Your Pruco Life of New Jersey representative can supply sample
illustrations of various premium amount and frequency combinations that
correspond to the Death Benefit Guarantee Values.
TRANSFERS
You may, up to 12 times in each Contract year, transfer amounts from one
variable investment option to another variable investment option or to the
fixed-rate option without charge. Additional transfers may be made during each
Contract year, but only with our consent. There is an administrative charge of
up to $25 for each transfer made exceeding 12 in any Contract year. All or a
portion of the amount credited to a variable investment option may be
transferred.
Only one transfer from the fixed-rate option will be permitted during the
Contract year. The maximum amount which may be transferred out of the fixed-rate
option each year is the greater of (a) 25% of the amount in the fixed-rate
option; and (b) $2,000. Pruco Life of New Jersey may change these limits in the
future. We may waive these restrictions for limited periods of time in a
non-discriminatory way, (e.g., when interest rates are declining).
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Transfers among variable investment options will take effect as of the end of
the valuation period in which a proper transfer request is received at a Home
Office. The request may be in terms of dollars, such as a request to transfer
$10,000 from one variable investment option to another, or may be in terms of a
percentage reallocation among variable investment options. In the latter case,
as with premium reallocations, the percentages must be in whole numbers. You may
transfer amounts by proper written notice to a Home Office or by telephone,
provided you are enrolled to use the Telephone Transfer System. You will
automatically be enrolled to use the Telephone Transfer System unless the
Contract is jointly owned or you elect not to have this privilege. Telephone
transfers may not be available on Contracts that are assigned (see ASSIGNMENT,
page 32), depending on the terms of the assignment.
We will use reasonable procedures, such as asking you to provide certain
personal information provided on your application for insurance, to confirm that
instructions given by telephone are genuine. We will not be held liable for
following telephone instructions that we reasonably believe to be genuine. Pruco
Life of New Jersey cannot guarantee that you will be able to get through to
complete a telephone transfer during peak periods such as periods of drastic
economic or market change.
The Contract was not designed for professional market timing organizations,
other organizations, or individuals using programmed, large, or frequent
transfers. We may restrict the number, timing, and amount of transfers in
accordance with our rules if your transfer activity is determined by us to be
disruptive to the variable investment option or to the disadvantage of other
Contract owners. We may prohibit transfer requests made by an individual acting
under a power of attorney on behalf of more than one Contract owner.
DOLLAR COST AVERAGING
We offer a feature called Dollar Cost Averaging ("DCA"). Under this feature,
either fixed dollar amounts or a percentage of the amount designated for use
under the DCA option will be transferred periodically from the Money Market
investment option into other investment options available under the Contract,
excluding the fixed-rate option. You may choose to have periodic transfers made
monthly or quarterly. DCA transfers will not begin until the end of the
"free-look" period. See SHORT-TERM CANCELLATION RIGHT OR "FREE-LOOK", page 15.
Each automatic transfer will take effect as of the end of the valuation period
on the date coinciding with the periodic timing you designate provided the New
York Stock Exchange is open on that date. If the New York Stock Exchange is not
open on that date, or if the date does not occur in that particular month, the
transfer will take effect as of the end of the valuation period which
immediately follows that date. Automatic transfers will continue until: (1) $50
or less remains of the amount designated for Dollar Cost Averaging, at which
time the remaining amount will be transferred; or (2) you give us notification
of a change in DCA allocation or cancellation of the feature. Currently, there
is no charge for using the Dollar Cost Averaging feature. We reserve the right
to change this practice, modify the requirements, or discontinue the feature.
AUTO-REBALANCING
As an administrative practice, we are currently offering a feature called
Auto-Rebalancing. This feature allows you to automatically rebalance assets in
the variable investment options at specified intervals based on percentage
allocations that you choose. For example, suppose your initial investment
allocation of variable investment options X and Y is split 40% and 60%,
respectively. Then, due to investment results, the portion in each of the
investment options changes. You may instruct that those assets be rebalanced to
your original or different allocation percentages. Auto-Rebalancing is not
available until the end of the "free-look" period. See SHORT-TERM CANCELLATION
RIGHT OR "FREE-LOOK", page 15.
Auto-Rebalancing can be performed on a quarterly, semi-annual or annual basis.
Each rebalance will take effect as of the end of the valuation period on the
date coinciding with the periodic timing you designate provided the New York
Stock Exchange is open on that date. If the New York Stock Exchange is not open
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on that date, or if the date does not occur in that particular month, the
transfer will take effect as of the end of the valuation period which
immediately follows that date. The fixed-rate option cannot participate in this
administrative procedure. Currently, a transfer that occurs under the
Auto-Rebalancing feature is not counted towards the 12 free transfers permitted
each Contract year. We reserve the right to change this practice, modify the
requirements, or discontinue the feature.
HOW A CONTRACT'S CASH SURRENDER VALUE WILL VARY
You may surrender the Contract for its cash surrender value. The Contract's cash
surrender value on any date will be the Contract Fund value minus any Contract
debt and minus any applicable surrender charges. See CONTRACT LOANS, page 28.
The Contract Fund value changes daily, reflecting: (1) increases or decreases in
the value of the variable investment options; (2) interest credited on any
amounts allocated to the fixed-rate option; (3) interest credited on any loan;
and (4) by the daily asset charge for mortality and expense risks assessed
against the variable investment options. The Contract Fund value also changes to
reflect the receipt of premium payments and the monthly deductions described
under CHARGES AND EXPENSES, page 11. Upon request, Pruco Life of New Jersey will
tell you the cash surrender value of your Contract. It is possible for the cash
surrender value of a Contract to decline to zero because of unfavorable
investment performance.
The tables on pages T1 through T4 of this prospectus illustrate approximately
what the cash surrender values would be for representative Contracts paying
Target Premium amounts (see PREMIUMS, page 17), assuming hypothetical uniform
investment results in the Fund portfolios. Two of the tables assume current
charges will be made throughout the lifetime of the Contract and two tables
assume maximum charges will be made. See ILLUSTRATIONS OF CASH SURRENDER VALUES,
DEATH BENEFITS, AND ACCUMULATED PREMIUMS, page 26.
HOW A TYPE A (FIXED) CONTRACT'S DEATH BENEFIT WILL VARY
As described earlier, there are two types of death benefit available under the
Contract: Type A, a fixed death benefit and Type B, a variable death benefit.
The Type B death benefit varies according to changes in the Contract Fund while
the Type A death benefit does not, unless it must be increased to comply with
the Internal Revenue Code's definition of life insurance.
Under the Type A (fixed) Contract, the death benefit is generally equal to the
basic insurance amount, before any reduction of Contract debt. See CONTRACT
LOANS, page 28. If the Contract is kept inforce for several years, depending on
how much premium you pay, and/or if investment performance is reasonably
favorable, the Contract Fund may grow to the point where Pruco Life of New
Jersey will increase the death benefit in order to ensure that the Contract will
satisfy the Internal Revenue Code's definition of life insurance.
Assuming no Contract debt, the death benefit of a Type A (fixed) Contract will
always be the greater of:
(1) the basic insurance amount; and
(2) the Contract Fund before the deduction of any monthly charges due on that
date, multiplied by the attained age factor that applies.
A listing of attained age factors can be found on your Contract data pages. The
latter provision ensures that the Contract will always have a death benefit
large enough to be treated as life insurance for tax purposes under current law.
The following table illustrates at different ages how the attained age factor
affects the death benefit for different Contract Fund amounts. The table assumes
a $1,000,000 Type A Contract was issued when the younger insured was age 35 and
there is no Contract debt.
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TYPE A (FIXED) DEATH BENEFIT
- --------------------------------------------------------------------------------
IF THEN
- --------------------------------------------------------------------------------
THE CONTRACT
THE YOUNGER AND THE THE ATTAINED FUND MULTIPLIED AND THE
INSURED IS CONTRACT AGE FACTOR BY THE ATTAINED DEATH BENEFIT
AGE FUND IS IS AGE FACTOR IS IS
40 $100,000 5.7 570,000 $1,000,000
40 $200,000 5.7 1,140,000 $1,140,000*
40 $300,000 5.7 1,710,000 $1,710,000*
60 $300,000 2.8 840,000 $1,000,000
60 $400,000 2.8 1,120,000 $1,120,000*
60 $600,000 2.8 1,680,000 $1,680,000*
80 $600,000 1.5 900,000 $1,000,000
80 $700,000 1.5 1,050,000 $1,050,000*
80 $800,000 1.5 1,200,000 $1,200,000*
- --------------------------------------------------------------------------------
* Note that the death benefit has been increased to comply with the Internal
Revenue Code's definition of life insurance. At this point, any additional
premium payment will increase the death benefit by more than it increases
the Contract Fund.
- --------------------------------------------------------------------------------
This means, for example, that if the younger insured has reached the age of 60,
and the Contract Fund is $400,000, the death benefit will be $1,120,000, even
though the basic insurance amount is $1,000,000. In this situation, for every $1
increase in the Contract Fund, the death benefit will be increased by $2.80. We
reserve the right to refuse to accept any premium payment that increases the
death benefit by more than it increases the Contract Fund. IF WE EXERCISE THIS
RIGHT, IT MAY IN CERTAIN SITUATIONS RESULT IN THE LOSS OF THE DEATH BENEFIT
GUARANTEE.
HOW A TYPE B (VARIABLE) CONTRACT'S DEATH BENEFIT WILL VARY
Under the Type B (variable) Contract, the death benefit will never be less than
the basic insurance amount, before any reduction of Contract debt, but will also
vary, immediately after it is issued, with the investment results of the
selected investment options. The death benefit may be further increased to
ensure that the Contract will satisfy the Internal Revenue Code's definition of
life insurance.
Assuming no Contract debt, the death benefit of a Type B (variable) Contract
will always be the greater of:
(1) the basic insurance amount plus the Contract Fund before the deduction
of any monthly charges due on that date; and
(2) the Contract Fund before the deduction of any monthly charges due on
that date, multiplied by the attained age factor that applies.
For purposes of determining the death benefit, if the Contract Fund is less than
zero, we will consider it to be zero. A listing of attained age factors can be
found on your Contract data pages. The latter provision ensures that the
Contract will always have a death benefit large enough to be treated as life
insurance for tax purposes under current law.
23
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The following table illustrates various attained age factors and Contract Funds
and the corresponding death benefits. The table assumes a $1,000,000 Type B
Contract was issued when the younger insured was age 35 and there is no Contract
debt.
Type B (Variable) Death Benefit
- --------------------------------------------------------------------------------
IF THEN
- --------------------------------------------------------------------------------
THE CONTRACT
THE YOUNGER AND THE THE ATTAINED FUND MULTIPLIED AND THE
INSURED IS CONTRACT AGE FACTOR BY THE ATTAINED DEATH BENEFIT
AGE FUND IS IS AGE FACTOR IS IS
- --------------------------------------------------------------------------------
40 $100,000 5.7 570,000 $1,100,000
40 $200,000 5.7 1,140,000 $1,200,000
40 $300,000 5.7 1,710,000 $1,710,000*
60 $300,000 2.8 840,000 $1,300,000
60 $400,000 2.8 1,120,000 $1,400,000
60 $600,000 2.8 1,680,000 $1,680,000*
80 $600,000 1.5 900,000 $1,600,000
80 $700,000 1.5 1,050,000 $1,700,000
80 $800,000 1.5 1,200,000 $1,800,000
- --------------------------------------------------------------------------------
* Note that the death benefit has been increased to comply with the Internal
Revenue Code's definition of life insurance. At this point, any additional
premium payment will increase the death benefit by more than it increases
the Contract Fund.
- --------------------------------------------------------------------------------
This means, for example, that if the younger insured has reached the age of 60,
and the Contract Fund is $600,000, the death benefit will be $1,680,000, even
though the basic insurance amount is $1,000,000. In this situation, for every $1
increase in the Contract Fund, the death benefit will be increased by $2.80. We
reserve the right to refuse to accept any premium payment that increases the
death benefit by more than it increases the Contract Fund. IF WE EXERCISE THIS
RIGHT, IT MAY IN CERTAIN SITUATIONS RESULT IN THE LOSS OF THE DEATH BENEFIT
GUARANTEE.
SURRENDER OF A CONTRACT
A Contract may be surrendered for its cash surrender value (or for a fixed
reduced paid-up insurance benefit in New York state) while one or both of the
insureds is living. To surrender a Contract, you must deliver or mail it,
together with a written request in a form that meets Pruco Life of New Jersey's
needs, to a Home Office. The cash surrender value of a surrendered Contract will
be determined as of the end of the valuation period in which such a request is
received in the Home Office. Surrender of a Contract may have tax consequences.
See TAX TREATMENT OF CONTRACT BENEFITS, page 29.
Fixed reduced paid-up insurance (available in New York state only) provides
paid-up insurance, the amount of which will be paid when the second insured
dies. There will be cash values and loan values. The loan interest rate for
fixed reduced paid-up insurance is 5%. Upon surrender of the Contract, the
amount of fixed reduced paid-up insurance depends upon the net cash value and
the insured's issue age, sex, smoker/non-smoker status, and the length of time
since the Contract date.
24
<PAGE>
WITHDRAWALS
Under certain circumstances, you may withdraw a portion of the Contract's cash
surrender value without surrendering the Contract. You must ask for a withdrawal
on a form that meets our needs. The cash surrender value after withdrawal may
not be less than or equal to zero after deducting: (a) any charges associated
with the withdrawal and (b) an amount sufficient to cover the Contract Fund
deductions for two monthly dates following the date of the withdrawal. The
amount withdrawn must be at least $500. There is an administrative processing
fee for each withdrawal equal to the lesser of $25 or 2% of the withdrawal
amount. An amount withdrawn may not be repaid except as a premium subject to the
applicable charges. Upon request, we will tell you how much you may withdraw.
Withdrawal of the cash surrender value may have tax consequences. See TAX
TREATMENT OF CONTRACT BENEFITS, page 29.
Whenever a withdrawal is made, the death benefit payable will immediately be
reduced by at least the amount of the withdrawal. For a Contract with a Type B
death benefit, this will not change the basic insurance amount. However, under a
Contract with a Type A death benefit, the resulting reduction in death benefit
usually requires a reduction in the basic insurance amount. We will send you new
Contract data pages showing these changes. We may also deduct a surrender charge
from the Contract Fund. See DECREASES IN BASIC INSURANCE AMOUNT, page 25. No
withdrawal will be permitted under a Contract with a fixed death benefit if it
would result in a basic insurance amount of less than the minimum basic
insurance amount. It is important to note, however, that if the basic insurance
amount is decreased at any time during the life of the Contract, there is a
possibility that the Contract might be classified as a Modified Endowment
Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 29. Before making any
withdrawal which causes a decrease in basic insurance amount, you should consult
with your Pruco Life of New Jersey representative.
When a withdrawal is made, the Contract Fund is reduced by the sum of the cash
withdrawn, the withdrawal fee, and any applicable surrender charge. An amount
equal to the reduction in the Contract Fund will be withdrawn proportionally
from the investment options unless you direct otherwise.
Withdrawal of the cash surrender value increases the risk that the Contract Fund
may be insufficient to provide Contract benefits. If such a withdrawal is
followed by unfavorable investment experience, the Contract may go into default.
Withdrawals may also affect whether a Contract is kept inforce under the Death
Benefit Guarantee. This is because, for purposes of determining whether a lapse
has occurred, Pruco Life of New Jersey treats withdrawals as a return of
premium. Therefore, withdrawals decrease the accumulated net payments. See DEATH
BENEFIT GUARANTEE, page 19.
DECREASES IN BASIC INSURANCE AMOUNT
As described earlier, you may make a withdrawal (see WITHDRAWALS, page 25). You
also have the additional option of decreasing the basic insurance amount of your
Contract without withdrawing any cash surrender value. Contract owners who
conclude that, because of changed circumstances, the amount of insurance is
greater than needed, will be able to decrease their amount of insurance
protection and the monthly deductions for the cost of insurance without
decreasing their current cash surrender value. The cash surrender value of the
Contract on the date of the decrease will not change, except that an
administrative processing fee of up to $25 and a surrender charge may be
deducted. If we ask you to, you must send us your Contract to be endorsed. The
Contract will be amended to show the new basic insurance amount, charges, values
in the appropriate tables and the effective date of the decrease.
If you decrease your basic insurance amount to an amount equal to or greater
than the Surrender Charge Threshold shown in your Contract, we will not impose a
surrender charge. The Surrender Charge Threshold is the lowest basic insurance
amount since issue. If you decrease your basic insurance amount below this
threshold, we will subtract the new basic insurance amount from the threshold
amount. We will then multiply the surrender charge (see SURRENDER CHARGE, page
14) by the lesser of this difference and
25
<PAGE>
the amount of the decrease and divide by the threshold amount. The result is the
maximum surrender charge we will deduct from the Contract Fund as a result of
this transaction.
The minimum permissible decrease for your Contract is shown under CONTRACT
LIMITATIONS in your Contract data pages. The basic insurance amount after the
decrease may not be lower than the minimum basic insurance amount. No reduction
will be permitted if it would cause the Contract to fail to qualify as "life
insurance" for purposes of Section 7702 of the Internal Revenue Code. The basic
insurance amount cannot be restored to any greater amount once a decrease has
taken effect.
It is important to note, however, that if the basic insurance amount is
decreased at any time during the life of the Contract, there is a possibility
that the Contract might be classified as a Modified Endowment Contract. See TAX
TREATMENT OF CONTRACT BENEFITS, page 29. Before requesting any decrease in basic
insurance amount, you should consult with your Pruco Life of New Jersey
representative.
WHEN PROCEEDS ARE PAID
Pruco Life of New Jersey will generally pay any death benefit, cash surrender
value, loan proceeds or withdrawal within seven days after all the documents
required for such a payment are received at a Home Office. Other than the death
benefit, which is determined as of the date of the second death, the amount will
be determined as of the end of the valuation period in which the necessary
documents are received at a Home Office. However, Pruco Life of New Jersey may
delay payment of proceeds from the variable investment options 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, Pruco Life of New Jersey expects to pay the cash surrender
value promptly upon request. However, Pruco Life of New Jersey has the right to
delay payment of such cash value for up to six months (or a shorter period if
required by applicable law). Any payable death benefit will be credited with
interest from the date of death in accordance with applicable law.
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS
The following four tables (pages T1 through T4) show how a Contract's death
benefit and cash surrender values change with the investment experience of the
Account. They are "hypothetical" because they are based, in part, upon several
assumptions, which are described below. All four tables assume the following:
o a Contract with a basic insurance amount of $1,000,000 bought by a 55 year
old male Preferred Non-Smoker and a 50 year old female Preferred Best, with
no extra risks and no extra benefit riders added to the Contract.
o the Target Premium amount (see PREMIUMS, page 17) is paid on each Contract
anniversary and no loans are taken.
o the Contract Fund has been invested in equal amounts in each of the 16
portfolios of the Funds and no portion of the Contract Fund has been
allocated to the fixed-rate option.
The first table (page T1) assumes a Type A (fixed) Contract has been purchased
and the second table (page T2) assumes a Type B (variable) Contract has been
purchased. Both assume the current charges will continue indefinitely. The third
and fourth tables (pages T3 and T4) are based upon the same assumptions except
it is assumed the maximum contractual charges have been made from the beginning.
See CHARGES AND EXPENSES, page 11.
26
<PAGE>
Under the Type B Contract the death benefit changes to reflect investment
returns. Under the Type A Contract, the death benefit increases only if the
Contract Fund becomes large enough that an increase in the death benefit is
necessary for the Contract to satisfy the Internal Revenue Code's definition of
life insurance. See TYPE OF DEATH BENEFIT, page 15.
There are four assumptions, shown separately, about the average investment
performance of the portfolios. The first is that there will be a uniform 0%
gross rate of return with the average value of the Contract Fund uniformly
adversely affected by very unfavorable investment performance. The other three
assumptions are that investment performance will be at a uniform gross annual
rate of 4%, 8% and 12%. Actual returns will fluctuate from year to year. In
addition, death benefits and cash surrender values would be different from those
shown if investment returns averaged 0%, 4%, 8% and 12% but fluctuated from
those averages throughout the years. Nevertheless, these assumptions help show
how the Contract values will change with investment experience.
The first column in the following four tables (pages T1 through T4) shows the
Contract year. The second column, to provide context, shows what the aggregate
amount would be if the premiums had been invested to earn interest, after taxes,
at 4% compounded annually. The next four columns show the death benefit payable
in each of the years shown for the four different assumed investment returns.
The last four columns show the cash surrender value payable in each of the years
shown for the four different assumed investment returns.
A gross return (as well as the net return) is shown at the top of each column.
The gross return represents the combined effect of investment income and capital
gains and losses, realized or unrealized, of the portfolios before any reduction
is made for investment advisory fees or other Fund expenses. The net return
reflects average total annual expenses of the 16 portfolios of 0.67%, and the
daily deduction from the Contract Fund of 0.90% per year. Thus gross returns of
0%, 4%, 8% and 12% are the equivalent of net returns of -1.57%, 2.43%, 6.43% and
10.43%, respectively. The actual fees and expenses of the portfolios associated
with a particular Contract may be more or less than 0.67% and will depend on
which variable investment options are selected. The death benefits and cash
surrender values shown reflect the deduction of all expenses and charges both
from the Funds and under the Contract.
If you are considering the purchase of a variable life insurance contract from
another insurance company, you should not rely upon these tables for comparison
purposes. A comparison between two tables, each showing values for a 55 year old
man and a 50 year old woman, may be useful for a 55 year old man and a 50 year
old woman, but would be inaccurate if made for insureds of other ages or sex.
Your Pruco Life of New Jersey representative can provide you with a hypothetical
illustration for your own age, sex, and rating class.
27
<PAGE>
ILLUSTRATIONS
-------------
SURVIVORSHIP VARIABLE UNIVERSAL LIFE
FIXED INSURANCE AMOUNT
MALE ISSUE AGE 55, PREFERRED NONSMOKER
FEMALE ISSUE AGE 50, PREFERRED BEST
$ 1,000,000 BASIC INSURANCE AMOUNT
$ 12,196.33 ANNUAL PREMIUM PAYMENT
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
---------------------------------------------------- ----------------------------------------------------
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 (-1.57% Net) (2.43% Net) (6.43% Net) (10.43% Net) (-1.57% Net) (2.43% Net) (6.43% Net) (10.43% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 12,684 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 4,039 $ 4,426 $ 4,814 $ 5,202
2 $ 25,876 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 12,923 $ 14,069 $ 15,247 $ 16,456
3 $ 39,595 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 21,650 $ 23,927 $ 26,330 $ 28,863
4 $ 53,863 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 30,213 $ 33,998 $ 38,099 $ 42,536
5 $ 68,702 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 38,608 $ 44,280 $ 50,592 $ 57,602
6 $ 84,134 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 49,626 $ 57,623 $ 66,755 $ 77,164
7 $ 100,183 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 60,441 $ 71,220 $ 83,847 $ 98,615
8 $ 116,875 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 71,041 $ 85,063 $ 101,914 $ 122,141
9 $ 134,234 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 81,409 $ 99,136 $ 120,999 $ 147,939
10 $ 152,288 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $ 91,532 $113,432 $ 141,153 $ 176,235
15 $ 253,983 $1,000,000 $1,000,000 $1,000,000 $ 1,000,000 $134,358 $184,371 $ 256,744 $ 361,869
20 $ 377,711 $1,000,000 $1,000,000 $1,000,000 $ 1,346,486 $169,903 $260,453 $ 411,239 $ 663,294
25 $ 528,244 $1,000,000 $1,000,000 $1,078,805 $ 1,999,781 $197,178 $341,641 $ 620,003 $ 1,149,300
30 $ 711,392 $1,000,000 $1,000,000 $1,357,698 $ 2,913,934 $204,723 $419,524 $ 893,223 $ 1,917,062
35 $ 934,218 $1,000,000 $1,000,000 $1,691,788 $ 4,234,519 $176,823 $485,124 $1,243,962 $ 3,113,617
40 $1,205,321 $1,000,000 $1,000,000 $2,088,416 $ 6,131,788 $ 70,640 $518,013 $1,684,207 $ 4,944,991
45 $1,535,159 $ 0(2)$1,000,000 $2,512,538 $ 8,692,704 $ 0(2) $391,825 $2,184,815 $ 7,558,873
50 $1,936,457 $ 0 $ 0(2)$2,923,357 $11,958,321 $ 0 $ 0(2) $2,810,920 $11,498,386
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the Contract would go into default in policy
year 42. Based on a gross return of 4% the Contract would go into default
in policy year 49.
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>
SURVIVORSHIP VARIABLE UNIVERSAL LIFE
VARIABLE INSURANCE AMOUNT
MALE ISSUE AGE 55, PREFERRED NONSMOKER
FEMALE ISSUE AGE 50, PREFERRED BEST
$ 1,000,000 BASIC INSURANCE AMOUNT
$ 14,567.25 ANNUAL PREMIUM PAYMENT
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
---------------------------------------------------- ----------------------------------------------------
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 (-1.57% Net) (2.43% Net) (6.43% Net) (10.43% Net) (-1.57% Net) (2.43% Net) (6.43% Net) (10.43% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 15,150 $1,011,005 $1,011,472 $1,011,940 $ 1,012,408 $ 6,005 $ 6,472 $ 6,940 $ 7,408
2 $ 30,906 $1,021,824 $1,023,211 $1,024,635 $ 1,026,097 $ 16,824 $ 18,211 $ 19,635 $ 21,097
3 $ 47,292 $1,032,454 $1,035,214 $1,038,125 $ 1,041,193 $ 27,454 $ 30,214 $ 33,125 $ 36,193
4 $ 64,334 $1,042,890 $1,047,481 $1,052,455 $ 1,057,834 $ 37,890 $ 42,481 $ 47,455 $ 52,834
5 $ 82,057 $1,053,127 $1,060,010 $1,067,669 $ 1,076,173 $ 48,127 $ 55,010 $ 62,669 $ 71,173
6 $ 100,489 $1,065,141 $1,074,846 $1,085,926 $ 1,098,554 $ 61,141 $ 70,846 $ 81,926 $ 94,554
7 $ 119,659 $1,076,915 $1,089,990 $1,105,305 $ 1,123,214 $ 73,915 $ 86,990 $ 102,305 $ 120,214
8 $ 139,595 $1,088,437 $1,105,433 $1,125,859 $ 1,150,376 $ 86,437 $103,433 $ 123,859 $ 148,376
9 $ 160,329 $1,099,687 $1,121,158 $1,147,640 $ 1,180,273 $ 98,687 $120,158 $ 146,640 $ 179,273
10 $ 181,892 $1,110,649 $1,137,151 $1,170,705 $ 1,213,170 $110,649 $137,151 $ 170,705 $ 213,170
15 $ 303,356 $1,162,135 $1,222,364 $1,309,530 $ 1,436,154 $162,135 $222,364 $ 309,530 $ 436,154
20 $ 451,136 $1,204,716 $1,312,932 $1,493,018 $ 1,795,629 $204,716 $312,932 $ 493,018 $ 795,629
25 $ 630,933 $1,236,791 $1,407,160 $1,735,027 $ 2,395,447 $236,791 $407,160 $ 735,027 $ 1,376,694
30 $ 849,683 $1,243,728 $1,488,590 $2,038,414 $ 3,490,455 $243,728 $488,590 $1,038,414 $ 2,296,352
35 $1,115,827 $1,207,097 $1,533,273 $2,401,230 $ 5,072,370 $207,097 $533,273 $1,401,230 $ 3,729,684
40 $1,439,631 $1,086,619 $1,489,309 $2,794,304 $ 7,345,085 $ 86,619 $489,309 $1,794,304 $ 5,923,455
45 $1,833,588 $ 0(2)$1,138,429 $3,005,379 $10,412,771 $ 0(2)$138,429 $2,005,379 $ 9,054,583
50 $2,312,897 $ 0 $ 0(2)$2,377,098 $14,390,078 $ 0 $ 0(2) $1,377,098 $13,390,078
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the Contract would go into default in policy
year 42. Based on a gross return of 4% the Contract would go into default
in policy year 46.
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>
SURVIVORSHIP VARIABLE UNIVERSAL LIFE
FIXED INSURANCE AMOUNT
MALE ISSUE AGE 55, PREFERRED NONSMOKER
FEMALE ISSUE AGE 50, PREFERRED BEST
$ 1,000,000 BASIC INSURANCE AMOUNT
$ 12,196.33 ANNUAL PREMIUM PAYMENT
USING MAXIMUM CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
---------------------------------------------------- ----------------------------------------------------
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 (-1.57% Net) (2.43% Net) (6.43% Net) (10.43% Net) (-1.57% Net) (2.43% Net) (6.43% Net) (10.43% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 12,684 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 320 $ 684 $ 1,047 $ 1,412
2 $ 25,876 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 8,429 $ 9,496 $ 10,593 $ 11,719
3 $ 39,595 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 16,312 $ 18,421 $ 20,649 $ 22,997
4 $ 53,863 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 23,949 $ 27,440 $ 31,226 $ 35,323
5 $ 68,702 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 31,319 $ 36,529 $ 42,332 $ 48,783
6 $ 84,134 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 41,552 $ 48,867 $ 57,232 $ 66,778
7 $ 100,183 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 51,441 $ 61,257 $ 72,777 $ 86,274
8 $ 116,875 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 60,953 $ 73,663 $ 88,975 $ 107,396
9 $ 134,234 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 70,051 $ 86,044 $105,830 $ 130,280
10 $ 152,288 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $ 78,690 $ 98,350 $123,337 $ 155,071
15 $ 253,983 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $104,422 $147,975 $211,802 $ 305,498
20 $ 377,711 $1,000,000 $1,000,000 $1,000,000 $1,085,420 $102,746 $178,615 $309,435 $ 534,690
25 $ 528,244 $1,000,000 $1,000,000 $1,000,000 $1,500,950 $ 43,125 $158,172 $401,412 $ 862,615
30 $ 711,392 $ 0(2)$1,000,000 $1,000,000 $1,956,907 $ 0(2) $ 2,491 $453,341 $1,287,439
35 $ 934,218 $ 0 $ 0(2)$1,000,000 $2,457,065 $ 0 $ 0(2) $381,758 $1,806,665
40 $1,205,321 $ 0 $ 0 $ 0(2)$3,020,037 $ 0 $ 0 $ 0(2) $2,435,513
45 $1,535,159 $ 0 $ 0 $ 0 $3,724,642 $ 0 $ 0 $ 0 $3,238,819
50 $1,936,457 $ 0 $ 0 $ 0 $4,602,468 $ 0 $ 0 $ 0 $4,425,450
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the Contract would go into default in policy
year 27. Based on a gross return of 4% the Contract would go into default
in policy year 31. Based on a gross return of 8% the Contract would go into
default in policy year 40.
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>
SURVIVORSHIP VARIABLE UNIVERSAL LIFE
VARIABLE INSURANCE AMOUNT
MALE ISSUE AGE 55, PREFERRED NONSMOKER
FEMALE ISSUE AGE 50, PREFERRED BEST
$ 1,000,000 BASIC INSURANCE AMOUNT
$ 14,567.25 ANNUAL PREMIUM PAYMENT
USING MAXIMUM CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
---------------------------------------------------- ----------------------------------------------------
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 (-1.57% Net) (2.43% Net) (6.43% Net) (10.43% Net) (-1.57% Net) (2.43% Net) (6.43% Net) (10.43% Net)
- ------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 15,150 $1,010,199 $1,010,638 $1,011,078 $1,011,519 $ 2,199 $ 2,638 $ 3,078 $ 3,519
2 $ 30,906 $1,020,155 $1,021,451 $1,022,783 $1,024,151 $ 12,155 $ 13,451 $ 14,783 $ 16,151
3 $ 47,292 $1,029,852 $1,032,421 $1,035,133 $1,037,992 $ 21,852 $ 24,421 $ 27,133 $ 29,992
4 $ 64,334 $1,039,269 $1,043,528 $1,048,144 $1,053,140 $ 31,269 $ 35,528 $ 40,144 $ 45,140
5 $ 82,057 $1,048,382 $1,054,745 $1,061,830 $1,069,703 $ 40,382 $ 46,745 $ 53,830 $ 61,703
6 $ 100,489 $1,058,904 $1,067,842 $1,078,057 $1,089,710 $ 52,504 $ 61,442 $ 71,657 $ 83,310
7 $ 119,659 $1,069,033 $1,081,024 $1,095,091 $1,111,562 $ 64,233 $ 76,224 $ 90,291 $ 106,762
8 $ 139,595 $1,078,731 $1,094,249 $1,112,936 $1,135,404 $ 75,531 $ 91,049 $109,736 $ 132,204
9 $ 160,329 $1,087,955 $1,107,467 $1,131,592 $1,161,389 $ 86,355 $105,867 $129,992 $ 159,789
10 $ 181,892 $1,096,650 $1,120,613 $1,151,047 $1,189,677 $ 96,650 $120,613 $151,047 $ 189,677
15 $ 303,356 $1,129,196 $1,181,736 $1,258,547 $1,371,076 $129,196 $181,736 $258,547 $ 371,076
20 $ 451,136 $1,130,364 $1,219,077 $1,370,863 $1,631,349 $130,364 $219,077 $370,863 $ 631,349
25 $ 630,933 $1,069,758 $1,193,736 $1,450,563 $1,978,392 $ 69,758 $193,736 $450,563 $ 978,392
30 $ 849,683 $ 0(2)$1,029,094 $1,410,517 $2,385,831 $ 0(2) $ 29,094 $410,517 $1,385,831
35 $1,115,827 $ 0 $ 0(2)$1,101,179 $2,777,294 $ 0 $ 0(2) $101,179 $1,777,294
40 $1,439,631 $ 0 $ 0 $ 0(2)$2,999,124 $ 0 $ 0 $ 0(2) $1,999,124
45 $1,833,588 $ 0 $ 0 $ 0 $2,748,325 $ 0 $ 0 $ 0 $1,748,325
50 $2,312,897 $ 0 $ 0 $ 0 $ 0(2) $ 0 $ 0 $ 0 $ 0(2)
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the Contract would go into default in policy
year 28. Based on a gross return of 4% the Contract would go into default
in policy year 31. Based on a gross return of 8% the Contract would go into
default in policy year 36. Based on a gross return of 12% the Contract
would go into default in policy year 50.
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.
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CONTRACT LOANS
You may borrow from Pruco Life of New Jersey an amount up to the current "loan
value" of your Contract less any existing Contract debt using the Contract as
the only security for the loan. The loan value at any time will equal the sum of
(a) 90% of the cash value attributable to the variable investment options, and
(b) the balance of the cash value, provided the Contract is not in default. A
Contract in default has no loan value. The minimum loan amount you may borrow is
$500.
Interest charged on a loan accrues daily. Interest is due on each Contract
anniversary or when the loan is paid back, whichever comes first. If interest is
not paid when due, it becomes part of the loan and we will charge interest on
it, too. Except in the case of preferred loans, we charge interest at an
effective annual rate of 5%.
Unless you ask us otherwise, a portion of the amount you may borrow on or after
the 10th Contract anniversary will be considered a preferred loan up to an
amount equal to the maximum preferred loan amount. The maximum preferred loan
amount is the total amount you may borrow minus the total net premiums paid (net
premiums equal premiums paid less total withdrawals, if any). If the net premium
amount is less than zero, we will, for purposes of this calculation, consider it
to be zero. Only new loans borrowed after the 10th Contract anniversary may be
considered preferred loans; standard loans will not automatically be converted
into preferred loans. Preferred loans are charged interest at an effective
annual rate of 4.25%.
The Contract debt is the amount of all outstanding loans plus any interest
accrued but not yet due. If at any time the Contract debt equals or exceeds the
cash value, the Contract will go into default. We will notify you of a 61-day
grace period, within which time you may repay all or enough of the loan to
obtain a positive cash surrender value and thus keep the Contract inforce for a
limited time. If the Contract debt equals or exceeds the cash value and you fail
to keep the Contract inforce, the amount of unpaid Contract debt will be treated
as a distribution which may be taxable. See TAX TREATMENT OF CONTRACT BENEFITS,
page 29 and LAPSE AND REINSTATEMENT, page 31.
When a loan is made, an amount equal to the loan proceeds is transferred out of
the Account and/or the fixed-rate option, as applicable. Unless you ask us to
take the loan amount from specific investment options and we agree, the
reduction will be made in the same proportions as the loanable amount in each
variable investment option and the fixed-rate option bears to the total loanable
amount of the Contract. When you take a loan, the amount of the loan continues
to be a part of the Contract Fund and is credited with interest at an effective
annual rate of 4%. Therefore, the net cost of a standard loan is 1% and the net
cost of a preferred loan is 1/4%.
Any Contract debt will be deducted from the death benefit should the death
benefit become payable while a loan is outstanding. Loans from Modified
Endowment Contracts may be treated for tax purposes as distributions of income.
See TAX TREATMENT OF CONTRACT BENEFITS, page 29.
Any Contract debt will be deducted from the cash value to calculate the cash
surrender value should the Contract be surrendered.
In addition, even if the loan is fully repaid, it may have an effect on future
death benefits, because the investment results of the selected investment
options will apply only to the amount remaining invested under those 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, values under the Contract 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.
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When you repay all or part of a loan, we will increase the portion of the
Contract Fund in the variable investment options by the amount of that
repayment, plus the interest credits accrued on the loan since the last
transaction date. To do this, we will use your investment allocation for future
premium payments as of the loan payment date. We will also decrease the portion
of the Contract Fund on which we credit the guaranteed annual interest rate of
4% by the amount of loan you repay.
SALE OF THE CONTRACT AND SALES COMMISSIONS
Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
Prudential, acts as the principal underwriter of the Contract. Prusec, organized
in 1971 under New Jersey law, is registered as a broker and dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. Prusec's principal business address is 751 Broad
Street, Newark, New Jersey 07102-3777. The Contract is sold by registered
representatives of Prusec who are also authorized by state insurance departments
to do so. The Contract may also be sold through other broker-dealers authorized
by Prusec and applicable law to do so. Registered representatives of such other
broker-dealers may be paid on a different basis than described below.
Commissions are based on a premium value referred to as the commissionable
Target Premium. The commissionable Target Premium may vary from the Target
Premium, depending on the rating class of the insureds, any extra risk charges,
or additional riders.
Generally, representatives will receive a commission of no more than: (1) 50% of
the premiums received in the first year on premiums up to the commissionable
Target Premium amount (see PREMIUMS, page 17); (2) 3% commission on premiums
received in the first year in excess of the commissionable Target Premium
amount; (3) 4% of premiums received in years two through 10; and (4) a trail
commission of 0.0375% of the Contract Fund as of the end of each calendar
quarter starting with the second Contract year. Representatives with less than
four years of service may receive compensation on a different basis.
Representatives who meet certain productivity or persistency standards may be
eligible for additional compensation.
TAX TREATMENT OF CONTRACT BENEFITS
This summary provides general information on the federal income tax treatment of
the Contract. It is not a complete statement of what the federal income taxes
will be in all circumstances. It is based on current law and interpretations,
which may change. It does not cover state taxes or other taxes. It is not
intended as tax advice. You should consult your own qualified tax adviser for
complete information and advice.
TREATMENT AS LIFE INSURANCE. The Contract must meet certain requirements to
qualify as life insurance for tax purposes. These requirements include certain
definitional tests and rules for diversification of the Contract's investments.
For further information on the diversification requirements, see TAXATION OF THE
FUND in the statement of additional information for the Series Fund.
We believe we have taken adequate steps to insure that the Contract qualifies as
life insurance for tax purposes. Generally speaking, this means that:
o you will not be taxed on the growth of the funds in the Contract, unless
you receive a distribution from the Contract,
o the Contract's death benefit will be income tax free to your beneficiary.
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<PAGE>
Although we believe that the Contract should qualify as life insurance for tax
purposes, there are some uncertainties, particularly because the Secretary of
Treasury has not yet issued permanent regulations that bear on this question.
Accordingly, we reserve the right to make changes -- which will be applied
uniformly to all Contract owners after advance written notice -- that we deem
necessary to insure that the Contract will qualify as life insurance.
PRE-DEATH DISTRIBUTIONS. The tax treatment of any distribution you receive
before the insured's death depends on whether the Contract is classified as a
Modified Endowment Contract.
CONTRACTS NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
o If you surrender the Contract or allow it to lapse, you will be
taxed on the amount you receive in excess of the premiums you
paid less the untaxed portion of any prior withdrawals. For this
purpose, you will be treated as receiving any portion of the cash
surrender value used to repay Contract debt. The tax consequences
of a surrender may differ if you take the proceeds under an
income payment settlement option.
o Generally, you will be taxed on a withdrawal to the extent the
amount you receive exceeds the premiums you paid for the Contract
less the untaxed portion of any prior withdrawals. However, under
some limited circumstances, in the first 15 Contract years, all
or a portion of a withdrawal may be taxed if the Contract Fund
exceeds the total premiums paid less the untaxed portions of any
prior withdrawals, even if total withdrawals do not exceed total
premiums paid.
o Extra premiums for optional benefits and riders generally do not
count in computing the premiums paid for the Contract for the
purposes of determining whether a withdrawal is taxable.
o Loans you take against the Contract are ordinarily treated as
debt and are not considered distributions subject to tax.
However, there is some risk the Internal Revenue Service might
assert that the preferred loan should be treated as a
distribution for tax purposes because of the relatively low
differential between the loan interest rate and Contract's
crediting rate. Were the Internal Revenue Service to take this
position, Pruco Life of New Jersey would take reasonable steps to
avoid this result, including modifying the Contract's loan
provisions.
MODIFIED ENDOWMENT CONTRACTS.
o The rules change if the Contract is classified as a Modified
Endowment Contract. The Contract could be classified as a
Modified Endowment Contract if premiums in amounts that are too
large are paid or a decrease in the face amount of insurance is
made (or a rider removed). The addition of a rider or an increase
in the face amount of insurance may also cause the Contract to be
classified as a Modified Endowment Contract. You should first
consult a qualified tax adviser and your Pruco Life of New Jersey
representative if you are contemplating any of these steps.
o If the Contract is classified as a Modified Endowment Contract,
then amounts you receive under the Contract before the insured's
death, including loans and withdrawals, are included in income to
the extent that the Contract Fund before surrender charges
exceeds the premiums paid for the Contract increased by the
amount of any loans previously included in income and reduced by
any untaxed amounts previously received other than the amount of
any loans excludible from income. An assignment of a Modified
30
<PAGE>
Endowment Contract is taxable in the same way. These rules also
apply to pre-death distributions, including loans and
assignments, made during the two-year period before the time that
the Contract became a Modified Endowment Contract.
o Any taxable income on pre-death distributions (including full
surrenders) is subject to a penalty of 10 percent unless the
amount is received on or after age 59 1/2, on account of your
becoming disabled or as a life annuity. It is presently unclear
how the penalty tax provisions apply to Contracts owned by
businesses.
o All Modified Endowment Contracts issued by us to you during the
same calendar year are treated as a single Contract for purposes
of applying these rules.
WITHHOLDING. You must affirmatively elect that no taxes be withheld from a
pre-death distribution. Otherwise, the taxable portion of any amounts you
receive will be subject to withholding. You are not permitted to elect out of
withholding if you do not provide a social security number or other taxpayer
identification number. You may be subject to penalties under the estimated tax
payment rules if your withholding and estimated tax payments are insufficient to
cover the tax due.
OTHER TAX CONSIDERATIONS. If you transfer or assign the Contract to someone
else, there may be gift, estate and/or income tax consequences. If you transfer
the Contract to a person two or more generations younger than you (or designate
such a younger person as a beneficiary), there may be Generation Skipping
Transfer tax consequences. Deductions for interest paid or accrued on Contract
debt or on other loans that are incurred or continued to purchase or carry the
Contract may be denied. Your individual situation or that of your beneficiary
will determine the federal estate taxes and the state and local estate,
inheritance and other taxes due if you or the insured dies.
BUSINESS-OWNED LIFE INSURANCE. If a business, rather than an individual, is the
owner of the Contract, there are some additional rules. Business Contract owners
generally cannot deduct premium payments. Business Contract owners generally
cannot take tax deductions for interest on Contract debt paid or accrued after
October 13, 1995. An exception permits the deduction of interest on policy loans
on Contracts for up to 20 key persons. The interest deduction for Contract debt
on these loans is limited to a prescribed interest rate and a maximum aggregate
loan amount of $50,000 per key insured person. The corporate alternative minimum
tax also applies to business-owned life insurance. This is an indirect tax on
additions to the Contract Fund or death benefits received under business-owned
life insurance policies.
LAPSE AND REINSTATEMENT
Pruco Life of New Jersey will determine the value of the cash surrender value on
each Monthly date. If the cash surrender value is zero or less, the Contract is
in default unless it remains inforce under the Death Benefit Guarantee. See
DEATH BENEFIT GUARANTEE, page 19. If the Contract debt ever grows to be equal to
or more than the cash surrender value, the Contract will be in default. Should
this happen, Pruco Life of New Jersey will send you a notice of default setting
forth the payment which we estimate will keep the Contract inforce for three
months from the date of default. This payment must be received at a Home Office
within the 61-day grace period after the notice of default is mailed or the
Contract will end and have no value. If the second death occurs past the grace
period, no death benefit is payable. A Contract that lapses with an outstanding
Contract loan may have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS,
page 29.
A Contract that ended in default may be reinstated within five years after the
date of default if all the following conditions are met:
(1) both insureds are alive or one insured is alive and the Contract ended
without value after the death of the other insured;
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<PAGE>
(2) you must provide renewed evidence of insurability on any insured who
was living when the Contract went into default;
(3) submission of certain payments sufficient to bring the Contract up to
date and cover all charges and deductions for the next three months;
and
(4) any Contract debt with interest to date must be restored or paid back.
If the Contract debt is restored and the debt with interest would
exceed the loan value of the reinstated Contract, the excess must be
paid to us before reinstatement.
The reinstatement date will be the date we approve your request. We will deduct
all required charges from your payment and the balance will be placed into your
Contract Fund. If we approve the reinstatement, we will credit the Contract Fund
with a refund of that part of any surrender charge deducted at the time of
default which would have been charged if the Contract were surrendered
immediately after reinstatement.
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 male rates, whether the insureds are
male or female. In addition, employers and employee organizations considering
purchase of a Contract should consult their legal advisers 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.
OTHER GENERAL CONTRACT PROVISIONS
ASSIGNMENT. This Contract may not be assigned if the assignment would violate
any federal, state or local law or regulation prohibiting sex distinct rates for
insurance. Generally, the Contract may not be assigned to an employee benefit
plan or program without Pruco Life of New Jersey's consent. Pruco Life of New
Jersey assumes no responsibility for the validity or sufficiency of any
assignment, and we will not be obligated to comply with any assignment unless we
receive a copy at a Home Office.
BENEFICIARY. You designate and name your beneficiary in the application.
Thereafter, you may change the beneficiary, provided it is in accordance with
the terms of the Contract. Should the second insured to die do so with no
surviving beneficiary, that insured's estate will become the beneficiary, unless
someone other than the insureds owned the Contract. In that case, we will make
the Contract owner or the Contract owner's estate the beneficiary.
INCONTESTABILITY. We will not contest the Contract after it has been inforce
during the lifetime of both insureds for two years from the issue date. The
exceptions are: (1) non-payment of enough premium to pay the required charges;
and (2) when any change is made in the Contract that requires Pruco Life of New
Jersey's approval and would increase our liability. We will not contest such
change after it has been in effect for two years during the lifetime of at least
one insured. At the end of the second Contract year we will mail you a notice
requesting that you tell us if either insured has died. Failure to tell us of
the death of an insured will not avoid a contest, if we have a basis for one,
even if premium payments continue to be made.
MISSTATEMENT OF AGE OR SEX. If an insured's stated age or sex or both are
incorrect in the Contract, Pruco Life of New Jersey will adjust each benefit and
any amount to be paid, as required by law, to reflect the correct age and sex.
Any such benefit will be based on what the most recent deductions from the
Contract Fund would have provided at the insured's correct age and sex.
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<PAGE>
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.
SIMULTANEOUS DEATH. If both insureds die while the Contract is inforce and we
find there is lack of sufficient evidence that they died other than
simultaneously, we will assume that the older insured died first.
SUICIDE EXCLUSION. If either insured, whether sane or insane, dies by suicide
within two years from the issue date, the Contract will end and we will return
the premiums paid. If there is a surviving insured, we will make a new contract
available on the life of that insured. The issue age, Contract date, and the
insured's underwriting classification will be the same as they are in the
Contract. The amount of coverage will be the lesser of (1) the contract's basic
insurance amount, and (2) the maximum amount we allow on the Contract date for
single life contracts. The new contract will not take effect unless all premiums
due since the Contract date are paid within 31 days after we notify you of the
availability of the new contract.
RIDERS
Contract owners may be able to obtain extra fixed benefits which may require an
additional premium. These optional insurance benefits will be described in what
is known as a "rider" to the Contract. Charges applicable to the riders will be
deducted from the Contract Fund on each Monthly date.
One rider gives insureds the option to exchange the Contract for two new life
insurance contracts, one on the life of each insured, in the event of a divorce
or if certain changes in tax law occur. Exercise of this option may give rise to
taxable income. Another pays an additional amount if both insureds die within a
specified number of years. See TAX TREATMENT OF CONTRACT BENEFITS, page 29.
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 extra benefits further. Samples of the provisions are
available from Pruco Life of New Jersey upon written request.
SUBSTITUTION OF 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
Funds 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, may be required. Contract owners will be notified of any such
substitution.
REPORTS TO CONTRACT OWNERS
Once each year, Pruco Life of New Jersey will send you a statement that provides
certain information pertinent to your own Contract. This statement will detail
values, transactions made, and specific Contract data that apply only to your
particular Contract.
You will also be sent annual and semi-annual reports of the Funds showing the
financial condition of the portfolios and the investments held in each
portfolio.
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.
33
<PAGE>
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 of Pruco Life of New Jersey as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999 and
the financial statements of the Account as of December 31, 1999 and for each of
the three years in the period then ended included in this prospectus have been
so included in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. PricewaterhouseCoopers LLP's principal business address
is 1177 Avenue of the Americas, New York, New York 10036.
Actuarial matters included in this prospectus have been examined by Ching-Meei
Chang, MAAA, FSA, Actuarial Director of Prudential, whose opinion is filed as an
exhibit to the registration statement.
LITIGATION AND REGULATORY PROCEEDINGS
We are subject to legal and regulatory actions in the ordinary course of our
businesses, including class actions. Pending legal regulatory actions include
proceedings specific to our practices and proceedings generally applicable to
business practices in the industries in which we operate. In certain of these
lawsuits, large and/or indeterminate amounts are sought, including punitive or
exemplary damages.
In particular, Pruco Life of New Jersey and Prudential have been subject to
substantial regulatory actions and civil litigation involving individual life
insurance sales practices. In 1996, Prudential, on behalf of itself and many of
its life insurance subsidiaries including Pruco Life of New Jersey, entered into
settlement agreements with relevant insurance regulatory authorities and
plaintiffs in the principal life insurance sales practices class action lawsuit
covering policyholders of individual permanent life insurance policies issued in
the United States from 1982 to 1995. Pursuant to the settlements, the companies
agreed to various changes to their sales and business practices controls and a
series of fines, and are in the process of distributing final remediation relief
to eligible class members. In many instances, claimants have the right to
"appeal" the decision to an independent reviewer. The bulk of such appeals were
resolved in 1999, and the balance is expected to be addressed in 2000. As of
January 31, 2000, Prudential and/or Pruco Life of New Jersey remained a party to
two putative class actions and approximately 158 individual actions relating to
permanent life insurance policies issued in the United States between 1982 and
1995. Additional suits may be filed by individuals who opted out of the
settlements. While the approval of the class action settlement is now final,
Prudential and Pruco Life of New Jersey remain subject to oversight and review
by insurance regulators and other regulatory authorities with respect to their
sales practices and the conduct of the remediation program. The U.S. District
Court has also retained jurisdiction as to all matters relating to the
administration, consummation, enforcement and interpretation of the settlements.
Prudential has indemnified Pruco Life for any liabilites incurred in connection
with sales practices litigation covering policyholders of individual permanent
life insurance polices issued in the United States from 1982 to 1995.
In 1999, 1998, 1997 and 1996, Prudential recorded provision in its Consolidated
Statements of Operations of $100 million, $1,150 million, $2,030 million and
$1,125 million, respectively, to provide for estimated remediation costs, and
additional sales practices costs including related administrative costs,
regulatory
34
<PAGE>
fines, penalties and related payments, litigation costs and settlements,
including settlements associated with the resolution of claims of deceptive
sales practices asserted by policyholders who elected to "opt-out" of the class
action settlement and litigate their claims against Prudential separately, and
other fees and expenses associated with the resolution of sales practices
issues.
ADDITIONAL INFORMATION
Pruco Life of New Jersey has filed a registration statement with the SEC under
the Securities Act of 1933, relating to the offering described in this
prospectus. This prospectus does not include all of 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 Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or by telephoning (800) SEC-0330, upon payment of a
prescribed fee.
Further information may also be obtained from Pruco Life of New Jersey. The
address and telephone number are set forth on the inside front cover of this
prospectus.
FINANCIAL STATEMENTS
The financial statements of the Account should be distinguished from the
financial statements of Pruco Life of New Jersey, which 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 five years, are shown below.
DIRECTORS OF PRUCO LIFE OF NEW JERSEY
JAMES J. AVERY, JR., CHAIRMAN AND DIRECTOR - President, Prudential Individual
Life Insurance since 1998; 1997 to 1998: Senior Vice President, Chief Actuary
and CFO, Prudential Individual Insurance Group; 1995 to 1997: President,
Prudential Select.
WILLIAM M. BETHKE, DIRECTOR - Chief Investment Officer, Prudential since 1997;
prior to 1997: President, Prudential Capital Markets Group.
IRA J. KLEINMAN, DIRECTOR - Executive Vice President, Prudential International
Insurance Group since 1997; 1995 to 1997: Chief Marketing and Product
Development Officer, Prudential Individual Insurance Group.
ESTHER H. MILNES, PRESIDENT AND DIRECTOR - Vice President and Chief Actuary,
Prudential Individual Life Insurance since 1999; prior to 1999: Vice President
and Actuary, Prudential Individual Insurance Group.
DAVID R. ODENATH, JR., DIRECTOR - President, Prudential Investments since 1999;
prior to 1999: Senior Vice President and Director of Sales, Investment
Consulting Group, PaineWebber.
I. EDWARD PRICE, VICE CHAIRMAN AND DIRECTOR - Senior Vice President and Actuary,
Prudential Individual Life Insurance since 1998; 1995 to 1998: Senior Vice
President and Actuary, Prudential Individual Insurance Group.
OFFICERS WHO ARE NOT DIRECTORS
C. EDWARD CHAPLIN, TREASURER - Vice President and Treasurer, Prudential since
1995.
JAMES C. DROZANOWSKI, SENIOR VICE PRESIDENT - Vice President, Operations and
Systems, Prudential Individual Financial Services since 1998; 1996 to 1998: Vice
President and Operations Executive, Prudential Individual Insurance Group; 1995
to 1996: President, Credit Card Division, Chase Manhattan Bank.
CLIFFORD E. KIRSCH, CHIEF LEGAL OFFICER AND SECRETARY - Chief Counsel, Variable
Products, Prudential Law Department since 1995.
SHIRLEY H. SHAO, SENIOR VICE PRESIDENT AND CHIEF ACTUARY - Vice President and
Associate Actuary, Prudential since 1996; prior to 1996: Vice President and
Assistant Actuary, Prudential Corporate Risk Management.
DENNIS G. SULLIVAN, VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER - Vice President
and Deputy Controller, Prudential since 1998; 1997 to 1998: Vice President and
Controller, ContiFinancial Corporation; prior to 1997: Director, Salomon
Brothers.
The business address of all directors and officers of Pruco Life of New Jersey
is 213 Washington Street, Newark, New Jersey 07102-2992.
Pruco Life of New Jersey directors and officers are elected annually.
36
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF THE
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
SUBACCOUNTS
- -----------------------------------------------------------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
ASSETS
Investment in The Prudential Series Fund, Inc.
<S> <C> <C> <C> <C> <C>
Portfolios at net asset value [Note 3] ..... $ 7,473,027 $ 23,340,683 $ 193,971,356 $ 246,446,762 $ 115,373,893
Receivable from (Payable to) Pruco
Life of New Jersey [Note 2] ................ (52,351) (2,743) (39,548) 5,862 10,073
------------- ------------- ------------- ------------- -------------
Net Assets ................................... $ 7,420,676 $ 23,337,940 $ 193,931,808 $ 246,452,624 $ 115,383,966
============= ============= ============= ============= =============
NET ASSETS, representing:
Equity of contract owners [Note 4] ........... $ 7,420,676 $ 23,337,940 $ 193,931,808 $ 246,452,624 $ 115,383,966
------------- ------------- ------------- ------------- -------------
$ 7,420,676 $ 23,337,940 $ 193,931,808 $ 246,452,624 $ 115,383,966
============= ============= ============= ============= =============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
A1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ----------------------------------------------------------------------------
HIGH
YIELD STOCK EQUITY PRUDENTIAL
BOND INDEX INCOME GLOBAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$ 32,097,556 $ 84,394,710 $ 11,892,035 $ 84,715,059 $ 25,369,217
(463) 8,257 1,252 19,516 7,181
- ------------ ------------ ------------ ------------ ------------
$ 32,097,093 $ 84,402,967 $ 11,893,287 $ 84,734,575 $ 25,376,398
============ ============ ============ ============ ============
$ 32,097,093 $ 84,402,967 $ 11,893,287 $ 84,734,575 $ 25,376,398
- ------------ ------------ ------------ ------------ ------------
$ 32,097,093 $ 84,402,967 $ 11,893,287 $ 84,734,575 $ 25,376,398
============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
A2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF THE
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF OPERATIONS
For the years ended December 31, 1999, 1998 and 1997
SUBACCOUNTS
------------------------------------------------------------------------------------
MONEY MARKET DIVERSIFIED BOND
PORTFOLIO PORTFOLIO
---------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ----------- -----------
INVESTMENT INCOME
<S> <C> <C> <C> <C> <C> <C>
Dividend income $ 362,423 $ 376,466 $ 390,865 $ 0 $ 1,518,983 $ 1,730,646
---------- ---------- ---------- ---------- ----------- -----------
EXPENSES
Charges to contract owners for assuming ..
mortality risk and expense risk [Note 5A] 44,562 43,083 44,046 144,104 147,669 140,877
Reimbursement for excess expenses ........
[Note 5D] (1,825) (1,102) (1,630) (6,334) (5,945) (5,701)
---------- ---------- ---------- ---------- ----------- -----------
NET EXPENSES .............................. 42,737 41,981 42,416 137,770 141,724 135,176
---------- ---------- ---------- ---------- ----------- -----------
NET INVESTMENT INCOME (LOSS) .............. 319,686 334,485 348,449 (137,770) 1,377,259 1,595,470
---------- ---------- ---------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received .. 0 0 0 67,535 88,872 276,650
Realized gain (loss) on shares
redeemed ............................ 0 0 0 41,756 65,294 70,032
Net change in unrealized gain (loss)
on investments ...................... 0 0 0 (295,317) 22,951 (154,839)
---------- ---------- ---------- ---------- ----------- -----------
NET GAIN (LOSS) ON INVESTMENTS ............ 0 0 0 (186,026) 177,117 191,843
---------- ---------- ---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS .............................. $ 319,686 $ 334,485 $ 348,449 $ (323,796) $ 1,554,376 $ 1,787,313
========== ========== ========== ========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
A3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------------------------------------------------------
EQUITY FLEXIBLE MANAGED CONSERVATIVE BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------- ---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ---------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 3,250,226 $ 3,479,231 $ 3,958,383 $ 11,143 $ 10,349,173 $ 10,897,673 $ 4,689,573 $ 4,872,397 $ 4,982,357
----------- ----------- ----------- ---------- ------------ ------------ ----------- ----------- -----------
1,150,889 1,143,923 1,028,832 1,509,261 2,116,233 2,184,985 718,530 713,776 665,939
(158,561) (166,679) (133,380) (544,224) (767,447) (793,096) (190,933) (183,772) (163,989)
----------- ----------- ----------- ---------- ------------ ------------ ----------- ----------- -----------
992,328 977,244 895,452 965,037 1,348,786 1,391,889 527,597 530,004 501,950
----------- ----------- ----------- ---------- ------------ ------------ ----------- ----------- -----------
2,257,898 2,501,987 3,062,931 (953,894) 9,000,387 9,505,784 4,161,976 4,342,393 4,480,407
----------- ----------- ----------- ---------- ------------ ------------ ----------- ----------- -----------
22,859,279 20,675,751 9,847,752 2,827,339 27,434,444 56,731,648 658,398 6,925,741 11,925,141
5,681,025 4,685,572 3,605,717 1,322,321 8,721,978 2,974,960 787,439 594,578 961,056
(9,060,032) (12,015,861) 19,914,304 14,382,751 (22,408,120) (11,688,757) 1,388,838 329,870 (4,407,263)
----------- ----------- ----------- ---------- ------------ ------------ ----------- ----------- -----------
19,480,272 13,345,462 33,367,773 18,532,411 13,748,302 48,017,851 2,834,675 7,850,189 8,478,934
----------- ----------- ----------- ---------- ------------ ------------ ----------- ----------- -----------
$ 21,738,170 $ 15,847,449 $ 36,430,704 $ 17,578,517 $ 22,748,689 $ 57,523,635 $ 6,996,651 $ 12,192,582 $ 12,959,341
============ ============ ============ ============ ============ ============ =========== ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
</TABLE>
A4
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF THE
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF OPERATIONS
For the years ended December 31, 1999, 1998 and 1997
SUBACCOUNTS
----------------------------------------------------------------------------
HIGH YIELD BOND STOCK INDEX
PORTFOLIO PORTFOLIO
------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------- -------- ----------- ----------- ----------
INVESTMENT INCOME
<S> <C> <C> <C> <C> <C> <C>
Dividend income ............................... $ 85,549 $ 1,994,015 $568,574 $ 767,914 $ 540,470 $ 188,173
----------- ----------- -------- ----------- ----------- ----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A] .... 193,583 97,586 35,704 443,707 207,744 73,231
Reimbursement for excess expenses
[Note 5D] .................................... 0 0 0 0 0 0
----------- ----------- -------- ----------- ----------- ----------
NET EXPENSES .................................... 193,583 97,586 35,704 443,707 207,744 73,231
----------- ----------- -------- ----------- ----------- ----------
NET INVESTMENT INCOME (LOSS) .................... (108,034) 1,896,429 532,870 324,207 332,726 114,942
----------- ----------- -------- ----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received ........ 0 0 0 976,749 1,074,502 412,169
Realized gain (loss) on shares
redeemed .................................. (217,380) (173,650) 32,615 4,605,818 1,754,137 260,629
Net change in unrealized gain (loss)
on investments ............................ 1,589,321 (2,569,803) 171,940 8,162,150 11,731,008 2,468,185
----------- ----------- -------- ----------- ----------- ----------
NET GAIN (LOSS) ON INVESTMENTS .................. 1,371,941 (2,743,453) 204,555 13,744,717 14,559,647 3,140,983
----------- ----------- -------- ----------- ----------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ................................... $ 1,263,907 $ (847,024) $737,425 $14,068,924 $14,892,373 $3,255,925
=========== =========== ======== =========== =========== ==========
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
A5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME GLOBAL PRUDENTIAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------- ----------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ---------- ------------- ----------- ------------ ------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 273,914 $ 327,421 $ 237,992 $ 295,800 $ 490,032 $ 69,248 $ 22,451 $ 10,621 $ 5,371
- ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
71,439 74,057 53,801 411,889 140,140 31,924 81,659 29,296 13,312
0 0 0 0 0 0 0 0 0
- ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
71,439 74,057 53,801 411,889 140,140 31,924 81,659 29,296 13,312
- ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
202,475 253,364 184,191 (116,089) 349,892 37,324 (59,208) (18,675) (7,941)
- ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,332,460 721,671 998,911 518,662 2,640,161 352,331 970,020 104,664 171,556
244,341 117,016 52,359 1,889,924 32,172 32,176 108,823 27,074 16,410
(422,725) (1,610,976) 1,459,574 25,916,670 7,149,778 (672,740) 4,732,816 1,492,381 364,364
- ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,154,076 (772,289) 2,510,844 28,325,256 9,822,111 (288,233) 5,811,659 1,624,119 552,330
- ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 1,356,551 $ (518,925) $ 2,695,035 $ 28,209,167 $ 10,172,003 $ (250,909) $ 5,752,451 $ 1,605,444 $ 544,389
=========== ============ ============ ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
A6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF THE
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999, 1998 and 1997
SUBACCOUNTS
--------------------------------------------------------------------------------------
MONEY MARKET DIVERSIFIED BOND
PORTFOLIO PORTFOLIO
----------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) ............. $ 319,686 $ 334,485 $ 348,449 $ (137,770) $ 1,377,259 $ 1,595,470
Capital gains distributions received ..... 0 0 0 67,535 88,872 276,650
Realized gain (loss) on shares redeemed .. 0 0 0 41,756 65,294 70,032
Net change in unrealized gain (loss) on ..
investments ............................ 0 0 0 (295,317) 22,951 (154,839)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ............................... 319,686 334,485 348,449 (323,796) 1,554,376 1,787,313
------------ ------------ ------------ ------------ ------------ ------------
PREMIUM PAYMENTS AND OTHER
OPERATING TRANSFERS
Contract Owner Net Payments .............. 18,255 362,297 505,183 485,236 1,209,116 1,404,553
Policy Loans ............................. (182,692) (147,149) (409,790) (553,832) (529,009) (473,054)
Policy Loan Repayments and Interest ...... 204,337 265,406 140,076 509,659 421,496 409,993
Surrenders, Withdrawals and
Death Benefits ......................... (433,849) (627,277) (550,152) (1,188,933) (1,336,342) (1,502,838)
Net Transfers From (To) Other
Subaccounts or Fixed Rate Option ....... 252,166 538,372 (156,879) (351,534) 682,202 194,525
Withdrawal and Other Charges ............. (231,397) (246,028) (301,944) (571, 355) (621,531) (732,626)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
PREMIUM PAYMENTS
AND OTHER OPERATING
TRANSFERS ................................ (373,180) 145,621 (773,506) (1,670,759) (174,068) (699,447)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE
ACCOUNT [Note 7] ......................... 0 (15,018) (99,078) 0 (2,680) (57,377)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ................................... (53,494) 465,088 (524,135) (1,994,555) 1,377,628 1,030,489
NET ASSETS
Beginning of year ........................ 7,474,170 7,009,082 7,533,217 25,332,495 23,954,867 22,924,378
------------ ------------ ------------ ------------ ------------ ------------
End of year .............................. $ 7,420,676 $ 7,474,170 $ 7,009,082 $ 23,337,940 $ 25,332,495 $ 23,954,867
============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
A7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY FLEXIBLE MANAGED CONSERVATIVE BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- ----------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2,257,898 $ 2,501,987 $ 3,062,931 $ (953,894) $ 9,000,387 $ 9,505,784 $ 4,161,976 $ 4,342,393 $ 4,480,407
22,859,279 20,675,751 9,847,752 2,827,339 27,434,444 56,731,648 658,398 6,925,741 11,925,141
5,681,025 4,685,572 3,605,717 1,322,321 8,721,978 2,974,960 787,439 594,578 961,056
(9,060,032) (12,015,861) 19,914,304 14,382,751 (22,408,120) (11,688,757) 1,388,838 329,870 (4,407,263)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
21,738,170 15,847,449 36,430,704 17,578,517 22,748,689 57,523,635 6,996,651 12,192,582 12,959,341
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
484,980 8,768,106 10,298,271 4,963,270 19,460,603 22,730,005 2,955,315 8,965,691 10,313,838
(5,865,015) (6,477,542) (6,145,354) (7,384,636) (7,974,049) (7,849,567) (2,889,851) (3,015,778) (3,213,273)
5,452,661 4,223,794 3,591,634 7,010,849 5,598,233 5,129,697 2,927,288 1,976,521 2,156,195
(7,992,313) (9,891,027) (10,093,245) (10,727,647) (13,996,390) (15,259,724) (5,619,206) (6,131,547) (6,793,526)
(3,629,986) (1,215,581) 678,473 (4,161,991) (144,967,979) (2,359,588) (2,179,539) (1,292,182) (1,375,131)
(5,119,578) (5,422,744) (6,160,863) (9,811,225) (11,055,099) (12,720,067) (4,974,621) (5,312,571) (6,059,806)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(16,669,251) (10,014,994) (7,831,084) (20,111,380) (152,934,681) (10,329,244) (9,780,614) (4,809,866) (4,971,703)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
0 (132,641) (149,464) 0 (177,182) (219,866) 0 (8,012) (508,220)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,068,919 5,699,814 28,450,156 (2,532,863) (130,363,174) 46,974,525 (2,783,963) 7,374,704 7,479,418
188,862,889 183,163,075 154,712,919 248,985,487 379,348,661 332,374,136 118,167,929 110,793,225 103,313,807
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$193,931,808 $188,862,889 $183,163,075 $246,452,624 $248,985,487 $379,348,661 $115,383,966 $118,167,929 $110,793,225
============ ============ ============ ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
A8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF THE
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999, 1998 and 1997
SUBACCOUNTS
------------------------------------------------------------------------------------
HIGH YIELD BOND STOCK INDEX
PORTFOLIO PORTFOLIO
----------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ -----------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) ............. $ (108,034) $ 1,896,429 $ 532,870 $ 324,207 $ 332,726 $ 114,942
Capital gains distributions received 0 0 0 976,749 1,074,502 412,169
Realized gain (loss) on shares redeemed .. (217,380) (173,650) 32,615 4,605,818 1,754,137 260,629
Net change in unrealized gain (loss) on
investments ............................ 1,589,321 (2,569,803) 171,940 8,162,150 11,731,008 2,468,185
------------ ------------ ------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ............................... 1,263,907 (847,024) 737,425 14,068,924 14,892,373 3,255,925
------------ ------------ ------------ ------------ ------------ -----------
PREMIUM PAYMENTS AND OTHER
OPERATING TRANSFERS
Contract Owner Net Payments .............. 247,400 356,982 469,592 836,738 (458,592) 919,468
Policy Loans ............................. (145,200) (163,296) (201,423) (768,138) (528,435) (466,875)
Policy Loan Repayments and Interest ...... 288,800 167,408 118,870 641,476 429,300 254,143
Surrenders, Withdrawals and
Death Benefits ......................... (164,918) (501,296) (305,958) (1,093,052) (1,117,895) (558,323)
Net Transfers From (To) Other
Subaccounts or Fixed Rate Option ....... (3,734,139) 29,637,732 130,175 (6,699,608) 50,128,317 2,108,397
Deferred Sales and Other Charges ......... (332,102) (283,352) (265,639) (876,437) (637,808) (474,579)
------------ ------------ ------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
PREMIUM PAYMENTS
AND OTHER OPERATING
TRANSFERS ................................ (3,840,159) 29,214,178 (54,383) (7,959,021) 47,814,887 1,782,231
------------ ------------ ------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN
NET ASSETS RETAINED IN THE
ACCOUNT [Note 7] ......................... 0 (60,128) 3,000 0 687,255 22,000
------------ ------------ ------------ ------------ ------------ -----------
TOTAL INCREASE (DECREASE) IN
NET ASSETS ............................... (2,576,252) 28,307,026 686,042 6,109,903 63,394,515 5,060,156
NET ASSETS
Beginning of year ........................ 34,673,345 6,366,319 5,680,277 78,293,064 14,898,549 9,838,393
------------ ------------ ------------ ------------ ------------ -----------
End of year .............................. $32,097,093 $ 34,673,345 $ 6,366,319 $ 84,402,967 $ 78,293,064 $ 14,898,549
============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
A9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME GLOBAL PRUDENTIAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------- ----------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 202,475 $ 253,364 $ 184,191 $ (116,089) $ 349,892 $ 37,324 $ (59,208)$ (18,675)$ (7,941)
1,332,460 721,671 998,911 518,662 2,640,161 352,331 970,020 104,664 171,556
244,341 117,016 52,359 1,889,924 32,172 32,176 108,823 27,074 16,410
(422,725) (1,610,976) 1,459,574 25,916,670 7,149,778 (672,740) 4,732,816 1,492,381 364,364
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------
1,356,551 (518,925) 2,695,035 28,209,167 10,172,003 (250,909) 5,752,451 1,605,444 544,389
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------
93,369 625,273 636,376 (1,977,776) (404,538) 296,914 918,991 350,999 221,934
(299,074) (348,765) (321,220) (156,604) (117,217) (119,989) (541,040) (186,693) (95,540)
310,105 211,308 165,506 170,944 65,209 60,528 423,520 207,729 33,699
(501,214) (642,033) (413,503) (19,903) (359,688) (118,830) (548,558) (263,749) (53,534)
(548,343) 1,663,734 1,464,170 (5,578,438) 47,651,150 5,040,462 12,249,824 2,831,858 976,677
(331,274) (356,431) (325,521) (418,808) (207,310) (125,863) (318,494) (156,276) (85,689)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------
(1,276,431) 1,153,086 1,205,808 (7,980,585) 46,627,606 5,033,222 12,184,243 2,783,868 997,547
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------
0 12,012 (21,017) 0 99,132 37,702 0 (7,320) (34,235)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------
80,120 646,173 3,879,826 20,228,582 56,898,741 4,820,015 17,936,694 4,381,992 1,507,701
11,813,167 11,166,994 7,287,168 64,505,993 7,607,252 2,787,237 7,439,704 3,057,712 1,550,011
- ----------- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------
$11,893,287 $ 11,813,167 $ 11,166,994 $ 84,734,575 $ 64,505,993 $ 7,607,252 $ 25,376,398 $ 7,439,704 $ 3,057,712
=========== ============ ============ ============ ============ ============ ============ =========== ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A16
</TABLE>
A10
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF THE
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
DECEMBER 31, 1999
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
("Prudential"). The assets of the Account are segregated from Pruco
Life of New Jersey's other assets. Proceeds from the purchases of
Pruco Life of New Jersey Variable Appreciable Life ("VAL"), Pruco Life
of New Jersey PRUvider Variable Appreciable Life ("PRUvider") and,
effective November 10, 1999, Pruco Life of New Jersey Pruselect III
("PSEL III") contracts are invested in the Account. In addition,
effective May 1, 2000, purchases of Survivorship Variable Universal
Life contracts ("SVUL") may be invested in the Account.
The Account is registered under the Investment Company Act of 1940, as
amended, as a unit investment trust. There are eighteen subaccounts
within the Account. VAL contracts offer the option to invest in
thirteen of these subaccounts. SVUL contracts offer the option to
invest in 16 subaccounts, 10 of which are presented in these financial
statements as well as 6 non-Prudential administered funds which will
become available effective May 1, 2000. Each subaccount invests in a
corresponding portfolio of The Prudential Series Fund, Inc. (the
"Series Fund"), or any of the non-Prudential administered funds: Aim
V.I. Value Fund, American Century VP Value Fund, Janus Aspen Growth
Portfolio, MFS Emerging Growth Series, Franklin Small Cap Fund and T.
Rowe Price International Stock Portfolio. The Series Fund is a
diversified open-end management investment company, and is managed
by Prudential.
New sales of the VAL product, which invests in the Account, were
discontinued as of May 1, 1992. However, premium payments made by
contract owners existing at that date will continue to be received by
the Account.
At December 31, 1999, there were no balances pertaining to PruSelect
III and SVUL in the subaccounts investing in the Series Fund or the
non-Prudential administered funds.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in conformity with
accounting principles generally accepted in the United States ("GAAP").
The preparation of the financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts and disclosures. Actual results could differ from
those estimates.
Investments--The investments in shares of the Series Fund are stated at
the net asset value of the respective portfolio.
Security Transactions--Realized gains and losses on security
transactions are reported on an average cost basis. Purchase and sale
transactions are recorded as of the trade date of the security being
purchased or sold.
Distributions Received--Dividend and capital gain distributions
received are reinvested in additional shares of the Series Fund and are
recorded on the ex-dividend date.
Receivable from (Payable to) Pruco Life of New Jersey--At times, Pruco
Life of New Jersey may owe an amount to or expect to receive an amount
from the Account primarily related to processing contract owner
payments, surrenders, withdrawals and death benefits. This amount is
reflected in the Account's Statements of Net Assets as either a
receivable from or payable to Pruco Life of New Jersey. The receivable
and or payable does not have an effect on the contract owner's account
or the related unit value.
A11
<PAGE>
NOTE 3: 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 (rounded) of each portfolio held by the
subaccounts of the Account and the aggregate cost of investments in
such shares at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
----------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Number of shares (rounded): ..... 747,303 2,131,569 6,711,812 13,970,904 7,511,321
Net asset value per share: ...... $ 10.00 $ 10.95 $ 28.90 $ 17.64 $ 15.36
Cost: ........................... $7,473,027 $22,886,755 $147,783,464 $224,296,992 $106,500,171
PORTFOLIOS (CONTINUED)
----------------------------------------------------------------------
HIGH
YIELD STOCK EQUITY PRUDENTIAL
BOND INDEX INCOME GLOBAL JENNISON
----------- ----------- ----------- ----------- -----------
Number of shares (rounded): ....... 4,268,292 1,898,644 609,223 2,734,508 783,242
Net asset value per share: ........ $ 7.52 $ 44.45 $ 19.52 $ 30.98 $ 32.39
Cost: ............................. $32,591,158 $58,429,400 $11,183,919 $51,938,586 $18,635,716
A12
</TABLE>
<PAGE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding contract owner units (rounded), unit values and total value
of contract owner equity at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ------------ ------------ ------------
Contract Owner Units Outstanding
<S> <C> <C> <C> <C> <C>
(VAL - rounded) .................... 3,690,079 7,796,622 24,051,887 45,581,573 25,613,699
Unit Value (VAL) ..................... $ 2.01098 $ 2.99334 $ 8.06306 $ 5.10277 $ 4.13896
---------- ----------- ------------ ------------ ------------
Contract Owner Equity (VAL) .......... $7,420,676 $23,337,940 $193,931,808 $232,592,282 $106,014,078
---------- ----------- ------------ ------------ ------------
Contract Owner Units Outstanding
(PRUvider - rounded) ............... N/A N/A N/A 3,960,460 3,221,133
Unit Value (PRUvider) ................ N/A N/A N/A $ 3.49968 $ 2.90888
---------- ----------- ------------ ------------ ------------
Contract Owner Equity (PRUvider) ..... N/A N/A N/A $ 13,860,342 $ 9,369,888
---------- ----------- ------------ ------------ ------------
Contract Owner Units Outstanding
(PSEL III - rounded) ............... 0 0 0 0 0
Unit Value (PSEL III) ................ $ 1.00775 $ 0.99424 $ 1.05287 $ 1.03671 $ 1.02714
---------- ----------- ------------ ------------ ------------
Contract Owner Equity (PSEL III) ..... $ 0 $ 0 $ 0 $ 0 $ 0
---------- ----------- ------------ ------------ ------------
TOTAL CONTRACT OWNER EQUITY .......... $7,420,676 $23,337,940 $193,931,808 $246,452,624 $115,383,966
========== =========== ============ ============ ============
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------
HIGH
YIELD STOCK EQUITY PRUDENTIAL
BOND INDEX INCOME GLOBAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- -----------
Contract Owner Units Outstanding
<S> <C> <C> <C> <C> <C>
(VAL - rounded) ...................... 12,926,323 13,607,807 2,525,607 32,733,240 7,043,717
Unit Value (VAL) ....................... $ 2.48308 $ 6.20254 $ 4.70908 $ 2.58864 $ 3.60270
----------- ----------- ----------- ----------- -----------
Contract Owner Equity (VAL) ............ $32,097,093 $84,402,967 $11,893,287 $84,734,575 $25,376,398
----------- ----------- ----------- ----------- -----------
Contract Owner Units Outstanding
(PRUvider - rounded) ................. N/A N/A N/A N/A N/A
Unit Value (PRUvider) .................. N/A N/A N/A N/A N/A
----------- ----------- ----------- ----------- -----------
Contract Owner Equity (PRUvider) ....... N/A N/A N/A N/A N/A
----------- ----------- ----------- ----------- -----------
Contract Owner Units Outstanding
(PSEL III - rounded) ................. 0 0 0 0 0
Unit Value (PSEL III) .................. $ 1.02134 $ 1.07712 $ 1.07537 $ 1.20743 $ 1.16040
----------- ----------- ----------- ----------- -----------
Contract Owner Equity (PSEL III) ....... $ 0 $ 0 $ 0 $ 0 $ 0
----------- ----------- ----------- ----------- -----------
TOTAL CONTRACT OWNER EQUITY ............ $32,097,093 $84,402,967 $11,893,287 $84,734,575 $25,376,398
=========== =========== =========== =========== ===========
</TABLE>
A13
<PAGE>
NOTE 5: 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%, 0.90% and 0.20%, are applied daily against the net
assets representing equity of VAL, PRUvider and PruSelect III
contract owners held in each subaccount, respectively. Mortality
risk is that contract owners may not live as long as estimated and
expense risk is that the cost of issuing and administering the
policies may exceed related charges by Pruco Life of New Jersey.
B. Deferred Sales Charge
A deferred sales charge is imposed upon surrenders of certain VAL
and PRUvider 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 charge is imposed by Pruco Life of New Jersey on partial
withdrawals of the cash surrender value. A charge equal to the
lesser of $15 or 2% and $25 or 2% will be made in connection with
each partial withdrawal of the cash surrender value of a VAL or
PRUvider contract and PruSelect III contract, respectively.
D. Expense Reimbursement
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 Conservative Balanced Portfolios of the Series Fund.
E. Cost of Insurance and Other Related Charges
Contract owner contributions are subject to certain deductions prior
to being invested in the Account. The deductions are for (1)
transaction costs which are deducted from each premium payment to
cover premium collection and processing costs; (2) state premium
taxes; (3) sales charges which are deducted in order to compensate
Pruco Life of New Jersey for the cost of selling the contract.
Contracts are also subject to monthly charges for the costs of
administering the contract and to compensate Pruco Life of New
Jersey for the guaranteed minimum death benefit risk.
NOTE 6: TAXES
Pruco Life of New Jersey is taxed as a "life insurance company" as
defined by the Internal Revenue Code and the results of operations of
the Account form a part of Prudential's consolidated federal tax
return. Under current federal law, no federal income taxes are payable
by the Account. As such, no provision for tax liability has been
recorded in these financial statements.
A14
<PAGE>
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN THE ACCOUNT
The increase (decrease) in net assets retained in the Account
represents the net contributions (withdrawals) of Pruco Life of New
Jersey to (from) the Account. Effective October 13, 1998 Pruco Life of
New Jersey no longer maintains a position in the account. Previously,
Pruco Life of New Jersey maintained a position in the Account for
liquidity purposes including unit purchases and redemptions, fund share
transactions and expense processing.
NOTE 8: UNIT ACTIVITY
Transactions in units (including transfers among subaccounts), for the
years ended December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
-------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
Contract Owner
<S> <C> <C> <C> <C> <C> <C>
Contributions: 1,394,252 1,651,137 1,852,551 1,817,938 3,461,354 957,470
Contract Owner
Redemptions: (1,583,513) (1,575,664) (2,279,240) (2,374,019) (3,523,454) (1,208,781)
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------------
FLEXIBLE
EQUITY MANAGED
PORTFOLIO PORTFOLIO
-------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ---------- -------- ------------ ---------- ----------
Contract Owner
<S> <C> <C> <C> <C> <C> <C>
Contributions: 1,053,096 4,007,348 2,872,723 2,928,417 16,398,289 7,728,571
Contract Owner
Redemptions: (3,213,126) (5,431,230) (4,155,330) (6,981,728) (51,572,419) (10,193,317)
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------
CONSERVATIVE HIGH YIELD
BALANCED BOND
PORTFOLIO PORTFOLIO
-------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
Contract Owner
<S> <C> <C> <C> <C> <C> <C>
Contributions: 2,742,649 3,568,780 4,308,577 10,923,909 33,003,985 415,705
Contract Owner
Redemptions: (5,207,302) (4,841,159) (5,775,601) (12,518,142) (21,070,995) (440,795)
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------
STOCK EQUITY
INDEX INCOME
PORTFOLIO PORTFOLIO
-------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- --------
Contract Owner
<S> <C> <C> <C> <C> <C> <C>
Contributions: 10,650,541 25,612,492 1,448,957 214,150 724,545 651,898
Contract Owner
Redemptions: (12,168,789) (14,154,931) (982,534) (494,521) (492,449) (352,895)
</TABLE>
A15
<PAGE>
<TABLE>
<CAPTION>
NOTE 8: UNIT ACTIVITY (CONTINUED)
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------
GLOBAL JENNISON
PORTFOLIO PORTFOLIO
-------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- --------
Contract Owner
<S> <C> <C> <C> <C> <C> <C>
Contributions: 31,717,854 84,626,033 3,871,182 4,934,733 1,808,411 862,419
Contract Owner
Redemptions: (35,712,959) (53,280,086) (575,706) (810,425) (520,419) (284,443)
NOTE 9: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
in the Series Fund for the year ended December 31, 1999 were as follows:
PORTFOLIOS
-------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
---------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Purchases ........... $ 2,157,046 $ 285,296 $ 343,856 $ 1,048,953 $ 583,087
Sales ............... $(2,520,612) $(2,091,082) $(17,965,888) $(22,131,232) $(10,901,371)
PORTFOLIOS (CONTINUED)
-------------------------------------------------------------------------
HIGH YIELD STOCK EQUITY PRUDENTIAL
BOND INDEX INCOME GLOBAL JENNISON
---------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Purchases ........... $ 780,770 $ 9,032,528 $ 401,468 $ 701,472 $ 12,573,470
Sales ............... $(4,814,050) $(17,443,512) $(1,750,590) $(9,113,462) $ (473,067)
</TABLE>
NOTE 10: RELATED PARTY TRANSACTIONS
Prudential has purchased multiple individual VAL contracts of the
Account insuring the lives of certain employees. Prudential is the
owner and beneficiary of the contracts. There were no net premium
payments for the year ended December 31, 1999. Equity of contract
owners in that subaccount at December 31, 1999 includes approximately
$199.1 million owned by Prudential in the Small Capitalization Stock,
High Yield Bond, Global and Stock Index Subaccounts.
A16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of the Survivorship Variable Universal Life Subaccounts
of Pruco Life of New Jersey Variable Appreciable Account
and the Board of Directors of
Pruco Life Insurance Company of New Jersey
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets present fairly, in all
material respects, the financial position of the subaccounts (Money Market
Portfolio, Diversified Bond Portfolio, Equity Portfolio, Flexible Managed
Portfolio, Conservative Balanced Portfolio, High Yield Bond Portfolio, Stock
Index Portfolio, Equity Income Portfolio, Global Portfolio and Prudential
Jennison Portfolio) of the Pruco Life of New Jersey Variable Appreciable Account
at December 31, 1999, the results of each of their operations and the changes in
each of their net assets for each of the three years in the period then ended,
in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of Pruco Life
Insurance Company of New Jersey's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of fund shares owned at
December 31, 1999, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 17, 2000
A17
<PAGE>
Pruco Life Insurance Company of New Jersey
Statements of Financial Position
December 31, 1999 and 1998 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------------- ---------------
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value (amortized cost, 1999: $604,223; and $ 585,271 $ 622,990
1998: $617,758)
Held to maturity, at amortized cost (fair value, 1999: $6,938) 7,470 -
Policy loans 143,815 139,443
Short-term investments 27,473 53,761
Other long-term investments 2,520 2,421
----------------- ---------------
Total investments 766,549 818,615
Cash 117 45
Deferred policy acquisition costs 129,184 113,923
Accrued investment income 12,492 12,209
Receivables from affiliate 16,231 -
Other assets 474 15,379
Separate Account assets 1,827,484 1,450,986
----------------- ---------------
TOTAL ASSETS $2,752,531 $2,411,157
================= ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Policyholders' account balances $ 414,917 $ 414,546
Future policy benefits and other policyholder liabilities 105,861 89,832
Cash collateral for loaned securities 17,900 34,424
Securities sold under agreements to repurchase - 27,210
Income taxes payable 27,829 25,325
Payables to affiliate - 3,492
Other liabilities 7,571 19,489
Separate Account liabilities 1,827,484 1,450,986
----------------- ---------------
Total liabilities 2,401,562 2,065,304
----------------- ---------------
Contingencies - (See Footnote 11)
Stockholder's Equity
Common stock, $5 par value;
400,000 shares, authorized;
issued and outstanding at
December 31, 1999 and 1998 2,000 2,000
Paid-in-capital 125,000 125,000
Retained earnings 230,057 217,260
Accumulated other comprehensive (loss) income (6,088) 1,593
----------------- ---------------
Total stockholder's equity 350,969 345,853
----------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,752,531 $2,411,157
================= ===============
</TABLE>
See Notes to Financial Statements
B1
<PAGE>
Pruco Life Insurance Company of New Jersey
Statements of Operations and Comprehensive Income
Years Ended December 31, 1999, 1998, and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ----------------- ----------------
<S> <C> <C> <C>
REVENUES
Premiums $ 6,742 $ 7,282 $ 6,832
Policy charges and fee income 52,714 53,152 56,687
Net investment income 47,600 47,032 46,324
Realized investment (losses) gains, net (5,013) 8,446 1,707
Asset management fees 7,407 5,641 5,287
Other income 386 114 -
---------------- ----------------- ----------------
Total revenues 109,836 121,667 116,837
---------------- ----------------- ----------------
BENEFITS AND EXPENSES
Policyholders' benefits 26,237 30,679 39,727
Interest credited to policyholders' account 18,846 19,038 19,372
balances
General, administrative and other expenses 45,065 22,557 27,541
---------------- ----------------- ----------------
Total benefits and expenses 90,148 72,274 86,640
---------------- ----------------- ----------------
Income from operations before income taxes 19,688 49,393 30,197
---------------- ----------------- ----------------
Income tax provision 6,891 17,570 10,974
---------------- ----------------- ----------------
NET INCOME $ 12,797 $ 31,823 $ 19,223
================ ================= ================
Net unrealized investment (losses) gains on
securities, net of reclassification adjustment and
taxes (7,681) (1,363) 924
---------------- ----------------- ----------------
TOTAL COMPREHENSIVE INCOME $ 5,116 $ 30,460 $ 20,147
================ ================= ================
</TABLE>
See Notes to Financial Statements
B2
<PAGE>
Pruco Life Insurance Company of New Jersey
Statements of Changes in Stockholder's Equity
Years Ended December 31, 1999, 1998, and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
other Total
Common Paid - in - Retained comprehensive stockholder's
stock capital earnings income (loss) equity
------------ ----------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 2,000 $ 125,000 $ 166,214 $ 2,032 $ 295,246
Net income - - 19,223 - 19,223
Change in net unrealized
investment (losses) gains,
net of reclassification
and taxes adjustment - - - 924 924
--------- --------- --------- --------- ---------
Balance, December 31, 1997 2,000 125,000 185,437 2,956 315,393
Net income - - 31,823 - 31,823
Change in net unrealized
investment (losses) gains,
net of reclassification
and taxes - - - (1,363) (1,363)
--------- --------- --------- --------- ---------
Balance, December 31, 1998 2,000 125,000 217,260 1,593 345,853
Net income - - 12,797 - 12,797
Change in net unrealized
investment (losses) gains,
net of reclassification
and taxes - - - (7,681) (7,681)
--------- --------- --------- --------- ---------
Balance, December 31, 1999 $ 2,000 $ 125,000 $ 230,057 $ (6,088) $ 350,969
========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
B3
<PAGE>
Pruco Life Insurance Company of New Jersey
Statements of Cash Flows
Years Ended December 31, 1999, 1998, and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,797 $ 31,823 $ 19,223
Adjustments to reconcile net income to net cash (used in)
provided by
operating activities:
Policy charges and fee income (11,399) (5,180) (7,841)
Interest credited to policyholders' account balances 18,846 19,038 19,372
Realized investment losses (gains), net 5,013 (8,446) (1,707)
Amortization and other non-cash items 18,092 2,497 (342)
Change in:
Future policy benefits and other policyholders' 16,029 5,304 8,277
liabilities
Accrued investment income (283) 1,866 (1,167)
Policy loans (4,372) (12,137) (13,388)
Payable to affiliates (19,723) (815) (1,752)
Deferred policy acquisition costs (15,261) (12,298) 5,340
Income taxes payable 2,504 (9,826) 9,006
Other, net 2,987 (8,954) 2,812
----------- ----------- -----------
Cash Flows From Operating Activities 25,230 2,872 37,833
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Available for sale 702,380 1,001,096 645,355
Payments for the purchase of:
Fixed maturities:
Available for sale (695,198) (1,029,988) (679,709)
Held to maturity (7,470) -- --
Other long term investments, net 99 (854) 1,629
Cash collateral for loaned securities, net (16,524) 761 33,663
Securities sold under agreements to repurchase, net (27,210) 27,210 --
Short term investments, net 26,296 (1,297) (35,461)
----------- ----------- -----------
Cash Flows Used in Investing Activities (17,627) (3,072) (34,523)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 256,842 298,391 134,020
Withdrawals (264,373) (298,149) (141,255)
----------- ----------- -----------
Cash Flows (Used in) From Financing Activities (7,531) 242 (7,235)
----------- ----------- -----------
Net increase (decrease) in Cash 72 42 (3,925)
Cash, beginning of year 45 3 3,928
----------- ----------- -----------
CASH, END OF PERIOD $ 117 $ 45 $ 3
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 480 $ 27,083 $ 1,896
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
B4
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. BUSINESS
Pruco Life Insurance Company of New Jersey ("the Company") is a stock life
insurance company organized in 1982 under the laws of the state of New
Jersey. It is licensed to sell individual life insurance, variable life
insurance, variable annuities, and fixed annuities ("the Contracts") only in
the states of New Jersey and New York.
The Company is a wholly owned subsidiary of Pruco Life Insurance Company
("Pruco Life"), a stock life insurance company organized in 1971 under the
laws of the state of Arizona. Pruco Life, in turn, is a wholly owned
subsidiary of The Prudential Insurance Company of America (Prudential), a
mutual insurance company founded in 1875 under the laws of the state of New
Jersey. Prudential is currently considering reorganizing itself into a
publicly traded stock company through a process known as "demutualization."
On February 10, 1998, Prudential's Board of Directors authorized management
to take the preliminary steps necessary to allow Prudential to demutualize.
On July 1, 1998, legislation was enacted in New Jersey that would permit this
conversion to occur and that specified the process for conversion.
Demutualization is a complex process involving development of a plan of
reorganization, adoption of a plan by Prudential's Board of Directors, a
public hearing, approval by two-thirds of the qualified policyholders who
vote on the plan review and approval by the New Jersey Department of Banking
and Insurance. Prudential's management is in the process of developing a
proposed plan of demutualization, although there can be no assurance that
Prudential's Board of Directors will approve such a plan. Prudential's
decision whether to demutualize is not expected to have a material effect on
the Company's operations.
The Company is engaged in a business that is highly competitive because of
the large number of stock and mutual life insurance companies and other
entities engaged in marketing insurance products, and individual annuities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements include the accounts of the Company, a stock life
insurance company. The financial statements have been prepared in accordance
with accounting principles generally accepted in the United States ("GAAP").
The Company has extensive transactions and relationships with Prudential and
other affiliates, as more fully described in Footnote 13. Due to these
relationships, it is possible that the terms of those transactions are not
the same as those that would result from transactions among wholly unrelated
parties.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, in particular deferred policy acquisition costs
("DAC") and future policy benefits, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the period. Actual results could differ from
those estimates.
Investments
Fixed maturities classified as "available for sale" are carried at estimated
fair value. The amortized cost of fixed maturities is written down to
estimated fair value if a decline in value is considered to be other than
temporary. Unrealized gains and losses on fixed maturities "available for
sale" including the effect on DAC and policyholders' account balances that
would result from the realization of unrealized gains and losses, net of
income taxes, are included in a separate component of equity, "Accumulated
other comprehensive income."
Policy loans are carried at unpaid principal balances.
Short-term investments, including highly liquid debt instruments purchased
with an original maturity of twelve months or less and are carried at
amortized cost, which approximates fair value.
Realized investment gains (losses), net, are computed using the specific
identification method. Costs of fixed maturities are adjusted for impairments
considered to be other than temporary.
Cash
Cash includes cash on hand, amounts due from banks, and money market
instruments.
B5
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred Policy Acquisition Costs
The costs which vary with and that are related primarily to the production of
new insurance business are deferred to the extent that they are deemed
recoverable from future profits. Such costs include certain commissions,
costs of policy issuance and underwriting, and certain variable field office
expenses. Deferred policy acquisition costs are subject to recoverability
testing at the time of policy issue and loss recognition testing at the end
of each accounting period. Deferred policy acquisition costs are adjusted for
the impact of unrealized gains or losses on investments as if these gains or
losses had been realized, with corresponding credits or charges included in
equity.
Policy acquisition costs related to interest-sensitive products and certain
investment-type products are deferred and amortized over the expected life of
the contracts (periods ranging from 15 to 30 years) in proportion to
estimated gross profits arising principally from investment results,
mortality and expense margins, and surrender charges based on historical and
anticipated future experience, which is updated periodically. The effect of
changes to estimated gross profits on unamortized deferred acquisition costs
is reflected in "General and administrative expenses" in the period such
estimated gross profits are revised.
Securities loaned
Securities loaned are treated as financing arrangements and are recorded at
the amount of cash received as collateral. The Company obtains collateral in
an amount equal to 102% and 105% of the fair value of the domestic and
foreign securities, respectively. The Company monitors the market value of
securities loaned on a daily basis with additional collateral obtained as
necessary. Non-cash collateral received is not reflected in the statements of
financial position because the debtor typically has the right to redeem the
collateral on short notice. Substantially all of the Company's securities
loaned are with large brokerage firms.
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase are treated as financing
arrangements and are carried at the amounts at which the securities will be
subsequently reacquired, including accrued interest, as specified in the
respective agreements. Assets to be repurchased are the same, or
substantially the same, as the assets transferred and the transferor, through
right of substitution, maintains the right and ability to redeem the
collateral on short notice. The market value of securities to be repurchased
is monitored and additional collateral is obtained, where appropriate, to
protect against credit exposure.
Securities lending and securities repurchase agreements are used to generate
net investment income and facilitate trading activity. These instruments are
short-term in nature (usually 30 days or less). Securities loaned are
collateralized principally by U.S. Government and mortgage-backed securities.
Securities sold under repurchase agreements are collateralized principally by
cash. The carrying amounts of these instruments approximate fair value
because of the relatively short period of time between the origination of the
instruments and their expected realization.
Separate Account Assets and Liabilities
Separate Account assets and liabilities are reported at estimated fair value
and represent segregated funds which are invested for certain policyholders
and other customers. Separate Account assets include common stocks, fixed
maturities, real estate related securities, and short-term investments. The
assets of each account are legally segregated and are not subject to claims
that arise out of any other business of the Company. Investment risks
associated with market value changes are borne by the customers, except to
the extent of minimum guarantees made by the Company with respect to certain
accounts. The investment income and gains or losses for Separate Accounts
generally accrue to the policyholders and are not included in the
Consolidated Statements of Operations. Mortality, policy administration and
surrender charges on the accounts are included in "Policy charges and fee
income."
B6
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Separate Accounts represent funds for which investment income and investment
gains and losses accrue directly to, and investment risk is borne by, the
policyholders, with the exception of the Pruco Life of New Jersey Modified
Guaranteed Annuity Account. The Pruco Life of New Jersey Modified Guaranteed
Annuity Account is a non-unitized Separate Account, which funds the Modified
Guaranteed Annuity Contract and the Market Value Adjustment Annuity Contract.
Owners of the Pruco Life of New Jersey Modified Guaranteed Annuity and the
Market Value Adjustment Annuity Contracts do not participate in the
investment gain or loss from assets relating to such accounts. Such gain or
loss is borne, in total, by the Company.
Insurance Revenue and Expense Recognition
Premiums from insurance policies are generally recognized when due. Benefits
are recorded as an expense when they are incurred. For individual annuities
in payout status, a liability for future policy benefits is recorded for the
present value of expected future payments based on historical experience.
Amounts received as payment for interest sensitive life, investment contracts
and variable annuities are reported as deposits to "Policyholders' account
balances." Revenues from these contracts are reflected as "Policy charges and
fee income" and consist primarily of fees assessed during the period against
the policyholders' account balances for mortality charges, policy
administration charges, and surrender charges. In addition, interest earned
from the investment of these account balances is reflected in "Net investment
income." Benefits and expenses for these products include claims in excess of
related account balances, expenses of contract administration, interest
credited and amortization of DAC.
Asset Management Fees
The Company receives asset management fee income from Separate Account
policyholder account balances invested in the Prudential Series Fund ("PSF").
Derivative Financial Instruments
Derivatives are financial instruments whose values are derived from interest
rates, foreign exchange rates, various financial indices, or the value of
securities or commodities. Derivative financial instruments used by the
Company are futures and can be exchange-traded or contracted in the
over-the-counter market. The Company uses derivative financial instruments to
seek to reduce market risk from changes in interest rates and to alter
interest rate or currency exposures arising from mismatches between assets
and liabilities. All derivatives used by the Company are for other than
trading purposes.
To qualify as a hedge, derivatives must be designated as hedges for existing
assets, liabilities, firm commitments, or anticipated transactions which are
identified and probable to occur, and effective in reducing the market risk
to which the Company is exposed. The effectiveness of the derivatives must be
evaluated at the inception of the hedge and throughout the hedge period.
When derivatives qualify as hedges, the changes in the fair value or cash
flows of the derivatives and the hedged items are recognized in earnings in
the same period. If the Company's use of derivatives does not meet the
criteria to apply hedge accounting, the derivatives are recorded at fair
value in "Other liabilities" in the Statements of Financial Position, and
changes in their fair value are recognized in earnings in "Realized
investment gains, net" without considering changes in the hedged assets or
liabilities. Cash flows from derivative assets and liabilities are reported
in the operating activities section in the Statements of Cash Flows.
Income Taxes
The Company is a member of the consolidated federal income tax return of
Prudential and files separate company state and local tax returns. Pursuant
to the tax allocation arrangement, total federal income tax expense is
determined on a separate company basis. Members with losses record tax
benefits to the extent such losses are recognized in the consolidated federal
tax provision. Deferred income taxes are generally recognized, based on
enacted rates, when assets and liabilities have different values for
financial statement and tax reporting purposes. A valuation allowance is
recorded to reduce a deferred tax asset to that portion that is expected to
be realized.
B7
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires that companies
recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. SFAS No. 133 does not
apply to most traditional insurance contracts. However, certain hybrid
contracts that contain features which may affect settlement amounts similarly
to derivatives may require separate accounting for the "host contract" and
the underlying "embedded derivative" provisions. The latter provisions would
be accounted for as derivatives as specified by the statement.
SFAS No. 133 provides, if certain conditions are met, that a derivative may
be specifically designated as (1) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment (fair value hedge), (2) a hedge of the exposure to variable cash
flows of a forecasted transaction (cash flow hedge), or (3) a hedge of the
foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security or a
foreign-currency-denominated forecasted transaction (foreign currency hedge).
Under SFAS No. 133, the accounting for changes in fair value of a derivative
depends on its intended use and designation. For a fair value hedge, the gain
or loss is recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item. For a cash flow hedge, the
effective portion of the derivative's gain or loss is initially reported as a
component of other comprehensive income and subsequently reclassified into
earnings when the forecasted transaction affects earnings. For a foreign
currency hedge, the gain or loss is reported in other comprehensive income as
part of the foreign currency translation adjustment. For all other
derivatives not designated as hedging instruments, the gain or loss is
recognized in earnings in the period of change. The Company is required to
adopt this Statement, as amended, as of January 1, 2001 and is currently
assessing the effect of the new standard.
In October 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-7, "Deposit Accounting: Accounting
for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk"
("SOP 98-7"). This statement provides guidance on how to account for
insurance and reinsurance contracts that do not transfer insurance risk. SOP
98-7 is effective for fiscal years beginning after June 15, 1999. The
adoption of this statement is not expected to have a material effect on the
Company's financial position or results of operations.
Reclassifications
Certain amounts in the prior years have been reclassified to conform to
current year presentation.
B8
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS
Fixed Maturities
The following tables provide additional information relating to fixed
maturities as of December 31:
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------- ---------------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities available for sale
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 9,489 $ - $ 63 $ 9,426
Foreign government bonds 5,000 - 68 4,932
Corporate Securities 588,695 681 19,499 569,877
Mortgage-backed securities 1,039 - 3 1,036
--------- ------- -------- ---------
Total fixed maturities available for $ 604,223 $ 681 $ 19,633 $ 585,271
sale
Fixed Maturities held to maturity
Corporate Securities $ 7,470 $ - $ 531 $ 6,938
--------- ------- -------- ---------
Total fixed maturities held to $ 7,470 $ - $ 532 $ 6,938
maturity
========= ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
1998
--------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------------------------------------- ---------------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities available for sale
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 51,663 $ 260 $ 318 $ 51,605
Foreign government bonds 34,744 887 236 35,395
Corporate securities 529,844 7,273 2,633 534,484
Mortgage-backed securities 1,507 - 1 1,506
--------- ------- -------- ---------
Total fixed maturities available for
sale $ 617,758 $ 8,420 $ 3,188 $ 622,990
========= ======== ======== =========
</TABLE>
B9
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS (continued)
The amortized cost and estimated fair value of fixed maturities, categorized
by contractual maturities at December 31, 1999, are shown below:
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------------------------ ---------------------------------------
Amortized Estimated Fair Amortized Estimated Fair
Cost Value Cost Value
------------------------------------ ------------------- ------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 78,150 $ 76,922 $ - $ -
Due after one year through five 187,710 183,686 - -
years
Due after five years through ten 268,224 257,241 7,470 6,938
years
Due after ten years 70,139 67,422 - -
---------- ----------- --------- ----------
Total $ 604,223 $ 585,271 $ 7,470 $ 6,938
========== =========== ========= ==========
</TABLE>
Actual maturities will differ from contractual maturities because, in certain
circumstances, issuers have the right to call or prepay obligations.
Proceeds from the sale of fixed maturities available for sale during 1999,
1998, and 1997 were $698.8 million, $990.7 million, and $635.4 million,
respectively. Gross gains of $3.5 million, $8.8 million, and $2.9 million,
and gross losses of $8.0 million, $1.8 million, and $1.2 million were
realized on those sales during 1999, 1998, and 1997, respectively. Proceeds
from maturities of fixed maturities available for sale during 1999, 1998, and
1997 were $3.6 million, $10.4 million, and $10.0 million, respectively.
During the years ended December 31, 1999, 1998, and 1997, there were no
securities classified as held to maturity that were sold.
Special Deposits
Fixed maturities of $.5 million at both December 31, 1999 and 1998
respectively, were on deposit with governmental authorities or trustees as
required by certain insurance laws.
Investment Income and Investment Gains and Losses
Net investment income arose from the following sources for the years ended
December 31:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- -----------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities - AFS & HTM $ 39,538 $ 39,478 $ 37,563
Policy loans 7,641 7,350 6,596
Short-term investments 2,516 3,502 3,023
Other 60 (842) 333
--------- --------- ----------
Gross investment income 49,755 49,488 47,515
Less investment expenses (2,155) (2,456) (1,191)
--------- --------- ----------
Net investment income $ 47,600 $ 47,032 $ 46,324
========= ========== ==========
Realized investment gains (losses), net, including charges for other than
temporary reductions in value, for the years ended December 31, were as
follows:
1999 1998 1997
------------------ ------------------ -------------------
(In Thousands)
Realized investment gains $ 6,436 $ 17,957 $ 2,898
Realized investment losses (11,449) (9,511) (1,191)
---------- ---------- ---------
Realized investment (losses) gains, net $ (5,013) $ 8,446 $ 1,707
========== ========== =========
</TABLE>
B10
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS (continued)
Net Unrealized Investment Gains
Net unrealized investment gains on fixed maturities available for sale are
included in the Statements of Financial Position as a component of
"Accumulated other comprehensive income". Changes in these amounts include
adjustments to avoid including in "Other comprehensive income (loss)" those
items that are included as part of "net income" for a period that also had
been part of "Other comprehensive income (loss)" in earlier periods. The
amounts for the years ended December 31, net of tax, are as follows:
<TABLE>
<CAPTION>
Accumulated
other
comprehensive
income (loss)
Deferred Deferred related to net
Unrealized policy Policyholders' income tax unrealized
gains (losses) acquisition Account (liability) investment
on investments costs Balances benefit gains (losses)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 4,170 $ (1,209) $330 $ (1,259) $ 2,032
Net investment gains on investments
arising during the period 4,788 (1,676) 3,112
Reclassification adjustment for
(losses) included in net income (1,706) 597 (1,109)
Impact of net unrealized investment
(losses) on deferred policy
acquisition costs (2,170) 759 (1,411)
Impact of net unrealized investment
gains on policyholders' account
balances 519 (187) 332
--------- -------- --------- --------- --------
Balance, December 31, 1997 $ 7,252 $ (3,379) $ 849 $ (1,766) $ 2,956
Net investment gains on investments
arising during the period 4,966 (1,662) 3,304
Reclassification adjustment for
(losses) included in net income (6,985) 2,338 (4,647)
Impact of net unrealized investment
(losses) on deferred policy
acquisition costs (166) 58 (108)
Impact of net unrealized investment
gains on policyholders' account
balances 138 (50) 88
--------- -------- --------- --------- --------
Balance, December 31, 1998 $ 5,233 $(3,545) $ 987 $ (1,082) $ 1,593
Net investment (losses) on investments
arising during the period (28,794) 10,366 (18,428)
Reclassification adjustment for gains
included in net income 4,610 (1,660) 2,950
Impact of net unrealized investment
gains on deferred policy acquisition
costs 14,681 (5,285) 9,396
Impact of net unrealized investment
(losses) on policyholders' account
balances (2,499) 900 (1,599)
--------- -------- --------- --------- --------
Balance, December 31, 1999 $ (18,951) $ 11,136 $ (1,512) $ 3,239 $ (6,088)
========= ========= ========= ========= ========
</TABLE>
B11
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
4. DEFERRED POLICY ACQUISITION COSTS
The balance of and changes in deferred policy acquisition costs for the year
ended December 31, are as follows:
<TABLE>
<CAPTION>
1999
---------------------
(In Thousands)
<S> <C>
Balance, beginning of year $ 113,923
Capitalization of commissions, sales and issue 13,439
expenses
Amortization (12,859)
Change in unrealized investment losses 14,681
---------------------
Balance, end of year $ 129,184
=====================
</TABLE>
5. POLICYHOLDERS' LIABILITIES
Future policy benefits and other policyholder liabilities at December 31 are
as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
(In Thousands)
<S> <C> <C>
Life insurance $ 100,686 $ 84,825
Annuities 5,175 5,007
------------------- -------------------
$ 105,861 $ 89,832
=================== ===================
</TABLE>
Life insurance liabilities include reserves for death and endowment policy
benefits. Annuity liabilities include reserves for immediate annuities.
The following table highlights the key assumptions generally utilized in
calculating these reserves:
<TABLE>
<CAPTION>
Product Mortality Interest Rate Estimation Method
------------------------- -------------------------- ---------------------- ---------------------------
<S> <C> <C> <C>
Life insurance Generally rates 2.5% to 7.5% Net level premium based
guaranteed in on non-forfeiture
calculating interest rate
cash surrender values
Individual immediate 1983 Individual Annuity 3.5% to 8.75% Present value of
annuities Mortality Table with expected future payment
certain modifications based on historical
experience
Policyholders' account balances at December 31, are as follows:
<CAPTION>
1999 1998
------------------- -------------------
(In Thousands)
<S> <C> <C>
Individual annuities $ 150,687 $ 148,327
Interest-sensitive life contracts 264,230 266,219
------------------- -------------------
$ 414,917 $ 414,546
=================== ===================
</TABLE>
Policyholders' account balances for interest-sensitive life and individual
annuities are equal to policy account values plus unearned premiums. The
policy account values represent an accumulation of gross premium payments
plus credited interest less withdrawals, expenses, mortality charges.
B12
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. POLICYHOLDERS' LIABILITIES (continued)
Certain contract provisions that determine the policyholder account balances
are as follows:
<TABLE>
<CAPTION>
Product Interest Rate Withdrawal / Surrender Charges
-------------------------------- ------------------------------------ -------------------------------------
<S> <C> <C>
Interest sensitive life 4.0% to 5.4 % Various up to 10 years
contracts
Individual annuities 3.0% to 5.6% 0% to 8% for up to 8 years
</TABLE>
6. REINSURANCE
The Company participates in reinsurance with Prudential in order to provide
greater diversification of business, provide additional capacity for future
growth and limit the maximum net loss potential arising from large risks.
Reinsurance ceded arrangements do not discharge the Company or the insurance
subsidiaries as the primary insurer, except for cases involving a novation.
Ceded balances would represent a liability of the Company in the event the
reinsurers were unable to meet their obligations to the Company under the
terms of the reinsurance agreements. The likelihood of a material reinsurance
liability reassumed by the Company is considered to be remote.
Reinsurance amounts included in the Statement of Operations for the year
ended December 31 are below.
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ -------------------
(In Thousands)
<S> <C> <C> <C>
Reinsurance premiums ceded - affiliated $ (17) $ (28) $ (12)
================== ================== ===================
Policyholders' benefits ceded $ 0 $ 0 $ 0
================== ================== ===================
</TABLE>
Reinsurance recoverables, included in "Other assets" in the Company's
Statements of Financial Position, at December 31 include amounts recoverable
on unpaid and paid losses and were as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
(In Thousands)
<S> <C> <C>
Life insurance - affiliated $16 $ 31
============ ============
</TABLE>
B13
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. INCOME TAXES
The components of income taxes for the years ended December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ---------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Current tax expense (benefit):
U.S. $ 6,769 $14,786 $12,880
State and local 178 523 399
----------------- ---------------- -----------------
Total 6,947 15,309 13,279
----------------- ---------------- -----------------
Deferred tax expense (benefit):
U.S. (54) 2,198 (2,305)
State and local (2) 63 -
----------------- ---------------- -----------------
Total (56) 2,261 (2,305)
----------------- ---------------- -----------------
Total income tax expense $ 6,891 $17,570 $10,974
================= ================ =================
</TABLE>
The Company's income tax expense for the years ended December 31, differs
from the amount computed by applying the expected federal income tax rate of
35% to income from operations before income taxes for the following reasons:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ---------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Expected federal income tax expense $6,891 $17,288 $10,569
State and local income taxes 115 381 259
Other (115) (99) 146
----------------- ---------------- -----------------
Total income tax expense $6,891 $17,570 $10,974
================= ================ =================
</TABLE>
Deferred tax assets and liabilities at December 31, resulted from the items
listed in the following table:
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Insurance reserves $ 9,711 $10,016
Net unrealized (gains) losses on 6,823 (1,884)
securities
Investment gains 2,083 -
---------------- ----------------
Deferred tax assets $18,617 $8,132
---------------- ----------------
Deferred tax liabilities:
Deferred acquisition costs 37,174 28,509
Investment gains - 963
Other 879 2,375
---------------- ----------------
Deferred tax liabilities 38,053 31,847
---------------- ----------------
Net deferred tax liability $19,436 $23,715
================ ================
</TABLE>
Management believes that based on its historical pattern of taxable income,
the Company will produce sufficient income in the future to realize its
deferred tax assets after valuation allowance. Adjustments to the valuation
allowance will be made if there is a change in management's assessment of the
amount of the deferred tax asset that is realizable. At December 31, 1999 and
1998, respectively, the Company had no federal or state operating loss
carryforwards for tax purposes.
B14
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. INCOME TAXES (continued)
The Internal Revenue Service (the "Service") has completed examinations of
the consolidated federal income tax returns through 1992. The Service has
begun their examination of the years 1993 through 1995.
8. EQUITY
Reconciliation of Statutory Surplus and Net Income
Accounting practices used to prepare statutory financial statements for
regulatory purposes differ in certain instances from GAAP. The following
table reconciles the Company's statutory net income and surplus as of and for
the years ended December 31, determined in accordance with accounting
practices prescribed or permitted by the New Jersey Department of Banking and
Insurance with net income and equity determined using GAAP.
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ --------
(In Thousands)
<S> <C> <C> <C>
Statutory net income $ 20,221 $ 18,704 $ 18,306
Adjustments to reconcile to net income on a GAAP basis:
Amortization and capitalization of deferred 580 12,464 (3,170)
acquisition costs
Deferred premium (314) 534 198
Insurance revenues and expenses 983 (808) 2,324
Income taxes (139) (2,973) 2,517
Valuation of investments (3,199) 5,896 1,707
Amortization of IMR (2,089) (2,102) (1,850)
Asset management fees (2,050) -- --
Other, net (1,196) 108 (809)
-------- -------- --------
GAAP net income $ 12,797 $ 31,823 $ 19,223
======== ======== ========
<CAPTION>
1999 1998
---------------- ----------------
(In Thousands)
<S> <C> <C>
Statutory surplus $274,437 $252,530
Adjustments to reconcile to equity on a GAAP basis:
Valuation of investments (9,644) 20,799
Deferred acquisition costs 129,184 113,923
Deferred premium (1,159) (1,473)
Insurance liabilities (23,889) (18,141)
Income Taxes (17,977) (21,716)
Asset management fees (2,050) -
Other, net 2,067 (69)
---------------- ----------------
GAAP stockholder's equity $350,969 $345,853
================ ================
</TABLE>
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values presented below have been determined using
available information and valuation methodologies. Considerable judgment is
applied in interpreting data to develop the estimates of fair value.
Accordingly, such estimates presented may not be realized in a current market
exchange. The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair values. The
following methods and assumptions were used in calculating the fair values
(for all other financial instruments presented in the table, the carrying
value approximates estimated fair value).
B15
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Fixed maturities
Estimated fair values for fixed maturities are based on quoted market prices
or estimates from independent pricing services.
Policy loans
The estimated fair value of policy loans is calculated using a discounted
cash flow model based upon current U.S. Treasury rates and historical loan
repayments.
Investment contracts
Estimated fair values of investment contracts are derived by using the
policyholder's account balance.
Derivative financial instruments
The fair value of futures is estimated based on market quotes for
transactions with similar terms.
The following table discloses the carrying amounts and estimated fair values
of the Company's financial instruments at December 31:
<TABLE>
<CAPTION>
1999 1998
---------------------------------- -----------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
---------------- ----------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities:
Available for sale $ 585,271 $585,271 $622,990 $622,990
Held to maturity 7,470 6,938 - -
Policy loans 143,815 136,990 139,443 146,504
Short-term investments 27,473 27,473 53,761 53,761
Cash 117 117 45 45
Separate Accounts assets 1,827,484 1,827,484 1,450,986 1,450,986
Financial Liabilities:
Investment contracts $ 92,096 $ 92,096 $ 87,948 $ 87,948
Cash collateral for loaned 17,900 17,900 34,424 34,424
securities
Securities sold under
agreements to repurchase - - 27,210 27,210
Separate Accounts liabilities 1,827,484 1,827,484 1,450,986 1,450,986
Derivatives 597 597 - -
</TABLE>
10. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS
Futures
The Company uses exchange-traded Treasury futures to reduce market risks from
changes in interest rates and to manage the duration of assets to better
match the duration of liabilities supported by those assets. The Company
enters into exchange-traded futures with regulated futures commissions
merchants who are members of a trading exchange. The fair value of futures is
estimated based on market quotes for a transaction with similar terms.
Under exchange-traded futures, the Company agrees to purchase a specified
number of contracts with other parties and to post variation margin on a
daily basis in an amount equal to the difference in the daily market values
of those contracts. Treasury futures move substantially in value as interest
rates change and can be used to either modify or hedge existing interest rate
risk. This strategy protects against the risk that cash flow requirements may
necessitate liquidation of investments at unfavorable prices resulting from
increases in interest rates. This strategy can be a more cost effective way
of temporarily reducing the Company's exposure to a market decline than
selling fixed income securities and purchasing a similar portfolio when such
a decline is believed to be over.
B16
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
10. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (continued)
If futures meet hedge accounting criteria, changes in their fair value are
deferred and recognized as an adjustment to the carrying value of the hedged
item. Deferred gains or losses from the hedges for interest-bearing financial
instruments are amortized as a yield adjustment over the remaining lives of
the hedged item. Futures that do not qualify as hedges are carried at fair
value with changes in value reported in current period earnings. The notional
and fair value of futures contracts was $46.4 million and $(.6) million at
December 31, 1999, respectively. There were no open futures contracts at
December 31, 1998.
Credit Risk
The current credit exposure of the Company's derivative contracts is limited
to the fair value at the reporting date. Credit risk is managed by entering
into transactions with creditworthy counterparties and obtaining collateral
where appropriate and customary. The Company also attempts to minimize its
exposure to credit risk through the use of various credit monitoring
techniques. All of the net credit exposure for the Company from derivative
contracts is with investment-grade counterparties. As of December 31, 1999
100% of the notional consisted of interest rate derivatives.
11. CONTINGENCIES
Various lawsuits against the Company have arisen in the course of the
Company's business. In certain of these matters, large and/or indeterminate
amounts are sought.
On October 28, 1996, the Company entered into a Stipulation of Settlement
with attorneys for the plaintiffs in a consolidated class action lawsuit
pending in a Multi-District Litigation proceeding in the U.S. District Court
for the District of New Jersey. The class action suit involved alleged
improprieties in connection with the sale, servicing and operation of
permanent life insurance policies from 1982 through 1995. Pursuant to the
settlement, the Company has participated in a remediation program pursuant to
which relief was offered to policyowners who were misled when they purchased
permanent life insurance policies in the United States from 1982 to 1995.
Prudential has agreed to indemnify the Company for any liability incurred in
connection with that litigation.
The balance of the Company's litigation is subject to many uncertainties, and
given the complexity and scope, the outcomes cannot be predicted with
precision. Management believes that any ultimate liability which could result
from such litigation would not have a material adverse effect on the
Company's financial position.
12. DIVIDENDS
The Company is subject to New Jersey law which requires any shareholder
dividend or distribution must be filed with the New Jersey Commissioner of
Insurance. Cash dividends may only be paid out of earned surplus derived from
realized net profits.
13. RELATED PARTY TRANSACTIONS
Service Agreements
Prudential and the Company operate under service and lease agreements whereby
services of officers and employees, supplies, use of equipment and office
space are provided by Prudential. Prudential periodically reviews its methods
for determining the level of administrative expenses charged to the Company.
Late in 1998, Prudential revised its allocation methodology to more closely
align allocations based on business processes, resulting in increased
allocations from 1998 levels. Management believes that the updated
methodology is reasonable and better reflects actual costs incurred by
Prudential to process transactions on behalf of the Company. The net cost of
these services allocated to the Company were $28.3 million, $23.5 million and
$16.2 million for the years ended December 31, 1999, 1998, and 1997,
respectively.
In addition, the Company received allocated distribution expenses from
Prudential's retail agency network. Beginning in 1999, market based
distribution transfer pricing was the basis for allocating costs to each
product line that distributes products through Prudential's retail agency
channels. A majority of these distribution expenses have been capitalized by
the Company as DAC.
The Company receives asset management fees from Pruco Life for its
policyholder account balances invested in the Prudential Series Fund ("PSF")
managed by Pruco Life. The Company received from Pruco Life its allocable
shares of such compensation in the amount of $7.4 million, $5.6 million, and
$5.3 million, during 1999, 1998, and 1997, respectively, recorded as "Asset
management fee income" in the Statements of Operations and Comprehensive
Income.
B17
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
13. RELATED PARTY TRANSACTIONS (continued)
The Company pays an asset management fee to Prudential Global Asset
Management ("PGAM") for managing the Separate Account investment portfolio.
The expense for the year was $3.0 million, which is shown in general,
administrative and other expenses.
The Company has sold a Corporate Owned Life Insurance ("COLI") policy to
Prudential. The cash surrender value included in Separate Accounts at
December 31, 1999 was $199.0 million.
Reinsurance
The Company currently has a reinsurance agreement in place with Prudential
("the reinsurer"). The reinsurance agreement is 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. The Company is not relieved of its primary obligation to the
policyholder as a result of these reinsurance transactions. These agreements
had no material effect on net income for the years ended December 31, 1999,
1998, and 1997.
Debt Agreements
In July 1998, the Company established a revolving line of credit facility
with Prudential Funding Corporation, a wholly-owned subsidiary of Prudential.
There is no outstanding debt relating to this credit facility as of December
31, 1999.
B18
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholder of
Pruco Life Insurance Company of New Jersey
In our opinion, the accompanying statements of financial position and the
related statements of operations, of changes in stockholder's equity and of
cash flows present fairly, in all material respects, the financial position
of Pruco Life Insurance Company of New Jersey (an indirect, wholly-owned
subsidiary of the Prudential Insurance Company of America) at December 31,
1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 21, 2000
B19
<PAGE>
SURVIVORSHIP VARIABLE
UNIVERSAL LIFE INSURANCE
Survivorship Variable Universal Life is issued by Pruco Life Insurance Company
of New Jersey, 213 Washington Street, Newark, NJ 07102-2992 and offered through
Pruco Securities Corporation, 751 Broad Street, Newark, NJ 07102-3777, both
subsidiaries of The Prudential Insurance Company of America, 751 Broad Street,
Newark, NJ 07102-3777.
[LOGO] PRUDENTIAL
Pruco Life Insurance Company of New Jersey
213 Washington Street, Newark, NJ 07102-2992
Telephone: 800 782-5356
SVUL-2NJ Ed. 5/2000
<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.
REPRESENTATION WITH RESPECT TO CHARGES
Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey")
represents that the fees and charges deducted under the Survivorship Variable
Universal Life Insurance Contracts registered by this registration statement, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Pruco Life of New Jersey.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
The Registrant, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.
New Jersey, being the state or organization of Pruco Life of New Jersey, permits
entities organized under its jurisdiction to indemnify directors and officers
with certain limitations. The relevant provisions of New Jersey law permitting
indemnification can be found in Section 14A:3-5 of the New Jersey Statutes
Annotated. The text of Pruco Life of New Jersey's By-law, Article V, which
relates to indemnification of officers and directors, is filed as Exhibit
1.A.(6)(c) to Form S-6, Registration No. 333-85117, filed on August 13, 1999 on
behalf of the Pruco Life of New Jersey Variable Appreciable Account.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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 81 pages.
The undertaking to file reports.
The representation with respect to charges.
The undertaking with respect to indemnification.
The signatures.
Written consents of the following persons:
1. PricewaterhouseCoopers, LLP
2. Clifford E. Kirsch, Esq.
3. Ching-Meei Chang, 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) (a) Resolution of Board of Directors of Pruco establishing the
Pruco Life of New Jersey Life Insurance Company of New Jersey
Variable Appreciable Account. (Note 7)
(b) Amendment of Separate Account Resolution. (Note 10)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities Corporation
and Pruco Life Insurance Company of New Jersey. (Note 7)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the Sale
of the Contracts. (Note 9)
(c) Schedules of Sales Commissions. (Note 1)
(d) Participation Agreements and Amendments:
(i) (a) AIM Variable Insurance Funds, Inc., AIM V.I. Value
Fund. (Note 9)
(b) Amendment to the AIM Variable Insurance Funds,
(Note 1) Inc. Participation Agreement.
(ii) (a) American Century Variable Portfolios, Inc., VP
Value Portfolio. (Note 9)
(iii) (a) Janus Aspen Series, Growth Portfolio. (Note 9)
(b) Amendment to the Janus Aspen Series Participation
Agreement. (Note 1)
(iv) (a) MFS Variable Insurance Trust, Emerging Growth
Series. (Note 9)
(b) Amendment to the MFS Variable Insurance Trust
Participation Agreement. (Note 1)
(v) (a) T. Rowe Price International Series, Inc.,
International Stock Portfolio. (Note 9)
(b) Amendment to the T. Rowe Price International
Series, Inc. Participation Agreement. (Note 1)
(vi) (a) Franklin Templeton Variable Insurance Products
Trust, Franklin Small Cap Fund - Class 2. (Note 10)
(b) Amendment to the Franklin Templeton Variable
Insurance Products Trust Participation Agreement.
(Note 1)
II-2
<PAGE>
(4) Not Applicable.
(5) Survivorship Variable Universal Life Insurance Contract.
(Note 10)
(6) (a) Articles of Incorporation of Pruco Life Insurance Company of
New Jersey, as amended March 11, 1983. (Note 7)
(b) Certificate of Amendment of the Articles of Incorporation of
Pruco Life Insurance Company of New Jersey, February 12, 1998.
(Note 8)
(c) By-laws of Pruco Life Insurance Company of New Jersey, as
amended August 4, 1999. (Note 9)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) New Jersey Application Form for Survivorship Variable
Universal Life Insurance Contract. (Note 9)
(b) Supplement to the Application for Survivorship Variable
Universal Life Insurance Contract. (Note 9)
(11) Not Applicable.
(12) Memorandum describing Pruco Life Insurance Company of New Jersey's
issuance, transfer, and redemption procedures for the Contracts
pursuant to Rule 6e-3(T)(b)(12)(iii). (Note 10)
(13) Available Contract Riders and Endorsements.
(a) Rider for Term Insurance Benefit on Life of Second Insured
to Die. (Note 1)
(b) Option to Exchange for Separate Contracts. (Note 1)
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.
6. Opinion and Consent of Ching-Meei Chang, FSA, MAAA, as to actuarial matters
pertaining to the securities being registered. (Note 1)
7. Powers of Attorney.
(a) William M. Bethke, Ira J. Kleinman, Esther H. Milnes, I. Edward Price
(Note 4)
(b) James J. Avery, Jr. (Note 6)
(c) Dennis G. Sullivan (Note 8)
(d) David R. Odenath, Jr. (Note 11)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post-Effective Amendment No. 24 to Form
S-6, Registration No. 2-81243, filed April 29, 1997 on behalf of the
Pruco Life of New Jersey Variable Insurance Account.
(Note 3) Incorporated by reference to Form 10-Q, Registration No. 333-18053,
filed August 15, 1997 on behalf of the Pruco Life Insurance Company of
New Jersey.
(Note 4) Incorporated by reference to Form N-4, Registration No. 333-18117,
filed December 18, 1996 on behalf of the Pruco Life of New Jersey
Flexible Premium Variable Annuity Account.
(Note 5) Incorporated by reference to Post-Effective filed April 25, 1996 on
behalf of the Pruco Amendment No. 25 to Form S-6, Registration No. Life
of New Jersey Variable Appreciable 2-89780, Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 10 to Form
S-1, Registration No. 33-20018, filed April 9, 1998 on behalf of the
Pruco Life of New Jersey Variable Contract Real Property Account.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 26 to Form
S-6, Registration No. 2-89780, filed April 28, 1997 on behalf of the
Pruco Life of New Jersey Variable Appreciable Account.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 12 to Form
S-1, Registration No. 33-20018, filed on April 19, 1999 on behalf of
the Pruco Life of New Jersey Variable Contract Real Property Account.
II-3
<PAGE>
(Note 9) Incorporated by reference to Form S-6, Registration No. 333-85117,
filed on August 13, 1999 on behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(Note 10) Incorporated by reference to Registrant's Form S-6, filed on January
5, 2000.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 13 to Form
S-1, Registration No. 33-20018, filed on April 12, 2000 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, the
Pruco Life of New Jersey Variable Appreciable Account, has duly 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 14th day of April, 2000.
(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 Registration
Statement has been signed below by the following persons in the capacities
indicated on this 14th day of April, 2000.
<TABLE>
<CAPTION>
Signature and Title
-------------------
<S> <C>
/s/ *
- ---------------------------------------------------------
Esther H. Milnes
President and Director
/s/ *
- ---------------------------------------------------------
Dennis G. Sullivan
Vice President and Chief Accounting Officer
/s/ * *By: /s/ Thomas C. Castano
- --------------------------------------------------------- ---------------------------------------------------------
James J. Avery, Jr. Thomas C. Castano
Director (Attorney-in-Fact)
/s/ *
- ---------------------------------------------------------
William M. Bethke
Director
/s/*
- ---------------------------------------------------------
Ira J. Kleinman
Director
/s/ *
- ---------------------------------------------------------
David R. Odenath, Jr.
Director
/s/ *
- ---------------------------------------------------------
I. Edward Price
Director
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
Consent of PricewaterhouseCoopers LLP, independent accountants
1.A (3)(c) Schedule of Sales Commissions
1.A (3)(d)(i)(b) Amendment to the AIM Variable Insurance Funds, Inc. Participation Agreement
1.A (3)(d)(iii)(b) Amendment to the Janus Aspen Series Participation Agreement
1.A (3)(d)(iv)(b) Amendment to the MFS Variable Insurance Trust Participation Agreement
1.A (3)(d)(v)(b) Amendment to the T. Rowe Price International Series, Inc. Participation
Agreement
1.A (3)(d)(vi)(b) Amendment to the Franklin Templeton Variable Insurance Products Trust
Participation Agreement
1.A (13)(a) Rider for Term Insurance Benefit on Life of Second Insured to Die.
1.A (13)(b) Option to Exchange for Separate Contracts.
3. Opinion and Consent of Clifford E. Kirsch, Esq. as to the legality of the
securities being registered
6. Opinion and Consent of Ching-Meei Chang, MAAA, FSA, as to actuarial matters
pertaining to the securities being registered
</TABLE>
II-6
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this Post-
Effective Amendment No. 1 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated March 17, 2000, relating to the
financial statements of the Survivorship Variable Universal Life Subaccounts of
Pruco Life of New Jersey Variable Appreciable Account, which appears in such
Prospectus.
We also consent to the use in the Prospectus constituting part of this
Registration Statement of our report dated March 21, 2000, relating to the
financial statements of Pruco Life Insurance Company of New Jersey, which
appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
PricewaterhouseCoopers LLP
New York, New York
April 10, 2000
<PAGE>
Exhibit 1.A.(3)(c)
Commission Schedule for
Survivorship Variable Universal Life Insurance Contracts
--------------------------------------------------------
I. Commissions
First Year Commission - rate will be 50% of the Commissionable Target
Premiums (CTP). The CTP is an annual premium amount excluding aviation,
avocation, occupational and temporary extras on the base policy and any
riders that does not exceed the policy's target premium.
As premiums are received in the first contract year, commissions will be
paid at a rate of 50% until the total premium received reaches the CTP
amount. Any premiums received above the CTP in year 1 will generate a 3%
excess commission.
If we issue a policy with the sum of the issue ages in excess of 150, we
may reduce the first year commissions.
Agents in their first 3 years in Prudential Preferred Financial Services
(PPFS) or the first 2 years in Prudential Insurance and Financial Services
(PI&FS) may be paid on a different basis.
Renewal Commissions, Service Commissions and Drop-ins, the commission rate
on renewal premiums in policy years 2 through 10 is 4% or less
Asset Based Commissions may be payable at the rate of 15 basis points or
-----------------------
less on the mean asset value of the contract beginning after the first policy
year or later.
II. Commission Recaptures
In PPFS and PIFS, if a case lapses or is surrendered before the end of the
sixth month, 100% of the commission paid will be withdrawn. If the case
lapses or is surrendered after being in force 7 months but within the first
24 months, a portion of the commission will be withdrawn.
III. Other Broker-Dealers
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 that stated above.
<PAGE>
Exhibit 1.A.(3)(d)(i)(b)
AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated February 14, 1997, by and
among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware corporation, Pruco Life Insurance Company of New
Jersey, a New Jersey life insurance company and Pruco Securities Corporation, a
New Jersey corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
----------
<TABLE>
<S> <C> <C>
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES FUNDED BY THE
THE POLICIES UTILIZING THE FUNDS SEPARATE ACCOUNTS
AIM V.I. Growth and Income Fund Pruco Life of New Jersey Discovery Select Annuity
AIM V.I. Value Fund Flexible Premium Variable Contract
Annuity Account,
established May 20, 1996
Pruco Life of New Jersey Discovery Choice Annuity
Flexible Premium Variable Contract
Annuity Account,
established May 20, 1996
Pruco Life of New Jersey PruSelect III Variable
Variable Appreciable Account, Universal
established May 20,1989 Life Policy
Pruco Life of New Jersey Suvivorship Variable
Variable Appreciable Account, Universal
established May 20,1989 Life Policy
</TABLE>
All other terms and provisions of the Agreement not amended herein shall remain
in full force and effect.
Effective Date: _____________________
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ By: /s/
---------------------- -------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ By: /s/
---------------------- -------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
<PAGE>
PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY
Attest: /s/ By: /s/
---------------------- -------------------------
Name: Thomas C. Castano Name: Dennis G. Sullivan
Title: Assistant Secretary Title: VP & Chief Accounting Officer
(SEAL)
PRUCO SECURITIES CORPORATION
Attest: /s/ By: /s/
---------------------- -------------------------
Name: Thomas C. Castano Name: Clifford Kirsch
Title: Assistant Secretary Title: Chief Legal Officer
(SEAL)
<PAGE>
Exhibit 1.A.(3)(d)(iii)(b)
SCHEDULE A
----------
<TABLE>
<CAPTION>
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account Designated Portfolio
-------------------------------------- ------------------- --------------------
<S> <C> <C> <C>
Pruco Life of New Jersey Flexible Discovery Select Annuity Janus Aspen Series
Premium Variable Annuity Account Contract - Growth Portfolio
est. May 20, 1996 - International Growth Portfolio
Pruco Life of New Jersey Variable Variable Universal Life Janus Aspen Series
------------------
Appreciable Account Insurance Contract - Growth Portfolio
est. January 13, 1984 - International Growth Portfolio
Pruco Life of New Jersey Flexible Discovery Choice Janus Aspen Series
------------------
Premium Variable Annuity Contract - Growth Portfolio
Annuity Account - International Growth Portfolio
est. May 20, 1996
Pruco Life of New Jersey Variable Pruselect III Variable Janus Aspen Series
------------------
Appreciable Account Universal Life Insurance - Growth Portfolio
est. January 13, 1984 Contract - International Growth Portfolio
Pruco Life of New Jersey Variable Survivorship Variable Janus Aspen Series
------------------
Appreciable Account Universal Life Insurance - Growth Portfolio
est. January 13, 1984 Contract - International Growth Portfolio
</TABLE>
<PAGE>
IN WITNESS WHEREOF, the undersigned parties hereby amend this Schedule A in
accordance with the Participation Agreement made and entered into as of the 21st
day of January, 1997. This amendment shall be effective as of the 15th day of
August, 1999.
COMPANY: PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
By its authorized officer,
By: /s/ Esther H. Milnes
--------------------
Title: President
---------
Date: April 3, 2000
-------------
FUND: JANUS ASPEN SERIES
By its authorized officer,
By: /s/ Bonnie Howe
---------------
Title: Vice President
--------------
Date: March 31, 2000
--------------
FUND: JANUS CAPITAL CORPORATION
By its authorized officer,
By: /s/ Bonnie Howe
---------------
Title: Vice President
--------------
Date: March 31, 2000
--------------
<PAGE>
SCHEDULE A
Effective as of April 1, 2000.
Name of Separate Account
and Date Established by Contracts Funded by
Board of Directors Separate Account Designated Portfolios
- --------------------------------------------------------------------------------
Pruco Life of New Jersey Discovery Select MFS Variable Insurance Trust
----------------------------
Flexible Premium Annuity Contract - MFS Emerging Growth Series
Variable Annuity Account - MFS Research Series
est. May 20, 1996
Pruco Life of New Jersey Discovery Choice MFS Variable Insurance Trust
----------------------------
Flexible Premium Annuity Contract - MFS Emerging Growth Series
Variable Annuity Account - MFS Research Series
est. May 20, 1996
Pruco Life of New Jersey Pruselect III MFS Variable Insurance Trust
Variable ----------------------------
Variable Appreciable Universal Life - MFS Emerging Growth Series
Account Policy
est. May 20,1989 - MFS Research Series
Pruco Life of New Jersey Survivorship MFS Variable Insurance Trust
Variable ----------------------------
Variable Appreciable Universal Life - MFS Emerging Growth Series
Account Policy
est. May 20,1989 - MFS Research Series
<PAGE>
IN WITNESS WHEREOF, the undersigned parties hereby amend this Schedule A in
accordance with the Participation Agreement made and entered into as of the 2nd
day of July, 1996. The Amendment shall take effect on April 1, 2000.
COMPANY: PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY
By its authorized officer,
By: /s/______________________
Title: _______________________
Date: ________________________
FUND: MFS(R) VARIABLE INSURANCE TRUSTSM
By its authorized officer,
By: /s/ _____________________
Date: ________________________
UNDERWRITER: MFS FUND DISTRIBUTORS, INC.
By its authorized officer,
By: /s/ _____________________
Date: ________________________
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Name of Separate Account
and Date Established by Contracts Funded by
Board of Directors Separate Account Designated Portfolios
- --------------------------------------------------------------------------------
<S> <C> <C>
Pruco Life of New Jersey Discovery Select T. Rowe Price International Series, Inc.
----------------------------------------
Flexible Premium Annuity Contract - T. Rowe Price International Stock
Variable Annuity Account Portfolio
est. May 20, 1996
T. Rowe Price Equity Series, Inc.
---------------------------------
- T. Rowe Price Equity Income
Portfolio
Pruco Life of New Jersey Discovery Choice T. Rowe Price International Series, Inc.
----------------------------------------
Flexible Premium Annuity Contract - T. Rowe Price International Stock
Variable Annuity Account Portfolio
est. May 20, 1996
T. Rowe Price Equity Series, Inc.
---------------------------------
- T. Rowe Price Equity Income Portfolio
Pruco Life of New Jersey Pruselect III Variable T. Rowe Price International Series, Inc.
----------------------------------------
Variable Appreciable Universal Life Policy - T. Rowe Price International Stock
Account Portfolio
est. May 20, 1996
Pruco Life of New Jersey Survivorship Variable T. Rowe Price International Series, Inc.
----------------------------------------
Variable Appreciable Universal Life Policy - T. Rowe Price International Stock
Account Portfolio
est. May 20, 1996
</TABLE>
<PAGE>
IN WITNESS WHEREOF, the undersigned parties hereby amend this Schedule A in
accordance with the Participation Agreement made and entered into as of the 14th
day of February, 1997. This amendment shall be effective as of the 1st day of
April, 2000.
COMPANY: PRUCO LIFE INSURANCE COMPANY OF
NEW JERSEY
By its authorized officer
By: /s/ Esther H. Milnes
---------------------------
Title: President
----------------------------
Date: 4/3/00
----------------------
FUND: T. ROWE PRICE EQUITY SERIES, INC.
By its authorized officer
By: /s/
---------------------------
Title: Vice President
--------------
Date: 3/31/00
-------
FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer
By: /s/
---------------------------
Title: Vice President
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Date: 3/31/00
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UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By: /s/
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Title: Vice President
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Date: 3/31/00
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Exhibit 1.A.(3)(d)(vi)(b)
Participation Agreement
as of May 1, 2000
Franklin Templeton Variable Insurance Products Trust
Franklin Templeton Distributors, Inc.
The Pruco Life Insurance Company
The Pruco Life Insurance Company of New Jersey
Prudential Insurance Company of America
CONTENTS
Section Subject Matter
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1. Parties and Purpose
2. Representations and Warranties
3. Purchase and Redemption of Trust Portfolio Shares
4. Fees, Expenses, Prospectuses, Proxy Materials and Reports
5. Voting
6. Sales Material, Information and Trademarks
7. Indemnification
8. Notices
9. Termination
10. Miscellaneous
Schedules to this Agreement
A. The Company
B. Accounts of the Company
C. Available Portfolios and Classes of Shares of the Trust; Investment
Advisers
D. Contracts of the Company
E. Other Portfolios Available under the Contracts
F. (Redacted)
G. Addresses for Notices
H. Shared Funding Order
1. Parties and Purpose
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This agreement (the "Agreement") is between certain portfolios, specified
below and in Schedule C, of Franklin Templeton Variable Insurance Products
Trust, an open-end management investment company organized as a business trust
under Massachusetts law (the "Trust"), Franklin Templeton Distributors, Inc., a
California corporation which is the principal underwriter for the Trust (the
"Underwriter," and together with the Trust, "we" or "us") and the insurance
company identified on Schedule A ("you"), on your own behalf and on behalf of
each segregated asset account maintained by you that is listed on Schedule B, as
that schedule may be amended from time to time ("Account" or "Accounts").
The purpose of this Agreement is to entitle you, on behalf of the Accounts,
to purchase the shares, and classes of shares, of portfolios of the Trust
("Portfolios") that are identified on Schedule C, solely for
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the purpose of funding benefits of your variable life insurance policies or
variable annuity contracts ("Contracts") that are identified on Schedule D. This
Agreement does not authorize any other purchases or redemptions of shares of the
Trust.
2. Representations and Warranties
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2.1 Representations and Warranties by You
You represent and warrant that:
2.1.1 You are an insurance company duly organized and in good
standing under the laws of your state of incorporation.
2.1.2 All of your directors, officers, employees, and other
individuals or entities dealing with the money and/or securities of the Trust
are and shall be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust, in an amount not less than $5 million.
Such bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. You agree to make all reasonable efforts
to see that this bond or another bond containing such provisions is always in
effect, and you agree to notify us in the event that such coverage no longer
applies.
2.1.3 Each Account is a duly organized, validly existing segregated
asset account under applicable insurance law and interests in each Account are
offered exclusively through the purchase of or transfer into a "variable
contract" within the meaning of such terms under Section 817 of the Internal
Revenue Code of 1986, as amended ("Code") and the regulations thereunder. You
will use your best efforts to continue to meet such definitional requirements,
and will notify us immediately upon having a reasonable basis for believing that
such requirements have ceased to be met or that they might not be met in the
future.
2.1.4 Each Account either: (i) has been registered or, prior to any
issuance or sale of the Contracts, will be registered as a unit investment trust
under the Investment Company Act of 1940 ("1940 Act"); or (ii) has not been so
registered in proper reliance upon an exemption from registration under Section
3(c) of the 1940 Act; if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, you will use your best
efforts to maintain such exemption and will notify us immediately upon having a
reasonable basis for believing that such exemption no longer applies or might
not apply in the future.
2.1.5 The Contracts or interests in the Accounts: (i) are or, prior
to any issuance or sale will be, registered as securities under the Securities
Act of 1933, as amended (the "1933 Act"); or (ii) are not registered because
they are properly exempt from registration under Section 3(a)(2) of the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under Section 4(2) or Regulation D of the 1933 Act, in which case
you will make every effort to maintain such exemption and will notify us
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future.
2.1.6 The Contracts: (i) will be sold by broker-dealers, or their
registered representatives, who are registered with the Securities and Exchange
Commission ("SEC") under the Securities and Exchange Act of 1934, as amended
(the "1934 Act") and who are members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); (ii) will be issued and
sold in compliance in all material respects with all applicable federal and
state laws; and (iii) will be sold in compliance in all material respects with
state insurance suitability requirements and NASD suitability guidelines.
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2.1.7 The Contracts currently are and will be treated as annuity
contracts or life insurance contracts under applicable provisions of the Code
and you will use your best efforts to maintain such treatment; you will notify
us immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.1.8 The fees and charges deducted under each Contract, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by you.
2.1.9 You will use shares of the Trust only for the purpose of
funding benefits of the Contracts through the Accounts.
2.1.10 Contracts will not be sold outside of the United States.
2.1.11 With respect to any Accounts which are exempt from
registration under the 1940 Act in reliance on 3(c)(1) or Section 3(c)(7)
thereof:
2.1.11.1 the principal underwriter for each such Account and any
subaccounts thereof is a registered broker-dealer with
the SEC under the 1934 Act;
2.1.11.2 the shares of the Portfolios of the Trust are and will
continue to be the only investment securities held by
the corresponding subaccounts; and
2.1.11.3 with regard to each Portfolio, you, on behalf of the
corresponding subaccount, will:
(a) vote such shares held by it in the same proportion
as the vote of all other holders of such shares;
and
(b) refrain from substituting shares of another
security for such shares unless the SEC has
approved such substitution in the manner provided
in Section 26 of the 1940 Act.
2.2 Representations and Warranties by the Trust
The Trust represents and warrants that:
2.2.1 It is duly organized and in good standing under the laws of the
State of Massachusetts.
2.2.2 All of its directors, officers, employees and others dealing
with the money and/or securities of a Portfolio are and shall be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Trust in an amount not less that the minimum coverage required by Rule 17g-1 or
other regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
2.2.3 It is registered as an open-end management investment company
under the 1940 Act.
2.2.4 Each class of shares of the Portfolios of the Trust is
registered under the 1933 Act.
2.2.5 It will amend its registration statement under the 1933 Act and
the 1940 Act from time to time as required in order to effect the continuous
offering of its shares.
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2.2.6 It will comply, in all material respects, with the 1933 and
1940 Acts and the rules and regulations thereunder.
2.2.7 It is currently qualified as a "regulated investment company"
under Subchapter M of the Code, it will make every effort to maintain such
qualification, and will notify you immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.2.8 The Trust will use its best efforts to comply with the
diversification requirements for variable annuity, endowment or life insurance
contracts set forth in Section 817(h) of the Code, and the rules and regulations
thereunder, including without limitation Treasury Regulation 1.817-5. Upon
having a reasonable basis for believing any Portfolio has ceased to comply and
will not be able to comply within the grace period afforded by Regulation 1.817-
5, the Trust will notify you immediately and will take all reasonable steps to
adequately diversify the Portfolio to achieve compliance.
2.2.9 (Redacted)
2.3 Representations and Warranties by the Underwriter
The Underwriter represents and warrants that:
2.3.1 It is registered as a broker dealer with the SEC under the 1934
Act, and is a member in good standing of the NASD.
2.3.2 Each investment adviser listed on Schedule C (each, an
"Adviser") is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and any applicable state securities law.
a 2.4 Warranty and Agreement by Both You and Us
We received an order from the SEC dated November 16, 1993 (file no. 812-
8546), which was amended by a notice and an order we received on September 17,
1999 and October 13, 1999, respectively (file no. 812-11698) (collectively, the
"Shared Funding Order," attached to this Agreement as Schedule H). The Shared
Funding Order grants exemptions from certain provisions of the 1940 Act and the
regulations thereunder to the extent necessary to permit shares of the Trust to
be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies and
qualified pension and retirement plans outside the separate account context.
You and we both warrant and agree that both you and we will comply with the
"Applicants' Conditions" prescribed in the Shared Funding Order as though such
conditions were set forth verbatim in this Agreement, including, without
limitation, the provisions regarding potential conflicts of interest between the
separate accounts which invest in the Trust and regarding contract owner voting
privileges. In order for the Trust's Board of Trustees to perform its duty to
monitor for conflicts of interest, you agree to inform us of the occurrence of
any of the events specified in condition 2 of the Shared Funding Order to the
extent that such event may or does result in a material conflict of interest as
defined in that order.
3. Purchase and Redemption of Trust Portfolio Shares
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3.1 We will make shares of the Portfolios available to the Accounts for
the benefit of the Contracts. The shares will be available for purchase at the
net asset value per share next computed after we (or our agent) receive a
purchase order, as established in accordance with the provisions of the then
current
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prospectus of the Trust. Notwithstanding the foregoing, the Trust's Board of
Trustees ("Trustees") may refuse to sell shares of any Portfolio to any person,
or may suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
if, in the sole discretion of the Trustees, they deem such action to be in the
best interests of the shareholders of such Portfolio. Without limiting the
foregoing, the Trustees have determined that there is a significant risk that
the Trust and its shareholders may be adversely affected by investors whose
purchase and redemption activity follows a market timing pattern, and have
authorized the Trust, the Underwriter and the Trust's transfer agent to adopt
procedures and take other action (including, without limitation, rejecting
specific purchase orders) as they deem necessary to reduce, discourage or
eliminate market timing activity. You agree to cooperate with us to assist us in
implementing the Trust's restrictions on purchase and redemption activity that
follows a market timing pattern.
3.2 We agree that shares of the Trust will be sold only to life insurance
companies which have entered into fund participation agreements with the Trust
("Participating Insurance Companies") and their separate accounts or to
qualified pension and retirement plans in accordance with the terms of the
Shared Funding Order. No shares of any Portfolio will be sold to the general
public.
3.3 (Redacted)
3.4 (Redacted)
3.5 (Redacted)
3.6 (Redacted)
3.7 We will redeem any full or fractional shares of any Portfolio, when
requested by you on behalf of an Account, at the net asset value next computed
after receipt by us (or our agent) of the request for redemption, as established
in accordance with the provisions of the then current prospectus of the Trust.
We shall make payment for such shares in the manner we establish from time to
time, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act. Payments for the purchase or redemption of shares by
you may be netted against one another on any Business Day for the purpose of
determining the amount of any wire transfer on that Business Day.
3.8 Issuance and transfer of the Portfolio shares will be by book entry
only. Stock certificates will not be issued to you or the Accounts. Portfolio
shares purchased from the Trust will be recorded in the appropriate title for
each Account or the appropriate subaccount of each Account.
3.9 We shall furnish, on or before the ex-dividend date, notice to you of
any income dividends or capital gain distributions payable on the shares of any
Portfolio. You hereby elect to receive all such income dividends and capital
gain distributions as are payable on shares of a Portfolio in additional shares
of that Portfolio, and you reserve the right to change this election in the
future. We will notify you of the number of shares so issued as payment of such
dividends and distributions.
4. Fees, Expenses, Prospectuses, Proxy Materials and Reports
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4.1 (Redacted)
4.2 We shall prepare and be responsible for filing with the SEC, and any
state regulators requiring such filing, all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
We shall bear the
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costs of preparation and filing of the documents listed in the preceding
sentence, registration and qualification of the Trust's shares of the
Portfolios.
4.3 We shall use reasonable efforts to provide you, on a timely basis,
with such information about the Trust, the Portfolios and each Adviser, in such
form as you may reasonably require, as you shall reasonably request in
connection with the preparation of disclosure documents and annual and semi-
annual reports pertaining to the Contracts.
4.4 (Redacted)
4.5 (Redacted)
4.6 You assume sole responsibility for ensuring that the Trust's
prospectuses, shareholder reports and communications, and proxy materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws.
5. Voting
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5.1 All Participating Insurance Companies shall have the obligations and
responsibilities regarding pass-through voting and conflicts of interest
corresponding to those contained in the Shared Funding Order.
5.2 If and to the extent required by law, you shall: (i) solicit voting
instructions from Contract owners; (ii) vote the Trust shares in accordance with
the instructions received from Contract owners; and (iii) vote Trust shares for
which no instructions have been received in the same proportion as Trust shares
of such Portfolio for which instructions have been received; so long as and to
the extent that the SEC continues to interpret the 1940 Act to require pass-
through voting privileges for variable contract owners. You reserve the right
to vote Trust shares held in any Account in your own right, to the extent
permitted by law.
5.3 So long as, and to the extent that, the SEC interprets the 1940 Act to
require pass-through voting privileges for Contract owners, you shall provide
pass-through voting privileges to Contract owners whose Contract values are
invested, through the Accounts, in shares of one or more Portfolios of the
Trust. We shall require all Participating Insurance Companies to calculate
voting privileges in the same manner and you shall be responsible for assuring
that the Accounts calculate voting privileges in the manner established by us.
With respect to each Account, you will vote shares of each Portfolio of the
Trust held by an Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares held by that
Account for which voting instructions are received. You and your agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without our prior written consent,
which consent may be withheld in our sole discretion.
6. Sales Material, Information and Trademarks
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6.1 (Redacted)
6.2 (Redacted)
6.3 You and your agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser, other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Trust shares (as such registration statement and prospectus
may be amended or supplemented from time to
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time), annual and semi-annual reports of the Trust, Trust-sponsored proxy
statements, or in Sales literature or other Promotional material approved by the
Trust or its designee, except as required by legal process or regulatory
authorities or with the written permission of the Trust or its designee.
6.4 We shall not give any information or make any representations or
statements on behalf of you or concerning you, the Accounts or the Contracts
other than information or representations contained in and accurately derived
from disclosure documents for the Contracts (as such disclosure documents may be
amended or supplemented from time to time), or in materials approved by you for
distribution, including Sales literature or other Promotional materials, except
as required by legal process or regulatory authorities or with your written
permission. We may use the names of you, the Accounts and the Contracts in our
sales literature and disclosure documents.
6.5 Except as provided in Section 6.2, you shall not use any designation
comprised in whole or part of the names or marks "Franklin" or "Templeton" or
any logo or other trademark relating to the Trust or the Underwriter without
prior written consent, and upon termination of this Agreement for any reason,
you shall cease all use of any such name or mark as soon as reasonably
practicable.
7. Indemnification
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7.1 Indemnification By You
7.1.1 You agree to indemnify and hold harmless the Underwriter, the
Trust and each of its Trustees, officers, employees and agents and each person,
if any, who controls the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually the "Indemnified
Party" for purposes of this Section 7) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with your written
consent, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or acquisition of
shares of the Trust or the Contracts and
7.1.1.1 arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a disclosure
document for the Contracts or in the Contracts themselves or in sales
literature generated or approved by you on behalf of the Contracts or
Accounts (or any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this Section 7), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to you by or on
behalf of the Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
7.1.1.2 arise out of or result from statements or
representations (other than statements or representations contained in and
accurately derived from Trust Documents as defined below in Section 7.2) or
wrongful conduct of you or persons under your control, with respect to the
sale or acquisition of the Contracts or Trust shares; or
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7.1.1.3 arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust Documents as
defined below in Section 7.2 or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of you; or
7.1.1.4 arise out of or result from any failure by you to
provide the services or furnish the materials required under the terms of
this Agreement (including a failure, whether unintentional or in good faith
or otherwise, to comply with the requirements specified above in Sections
2.1.3 and 2.1.7);
7.1.1.5 arise out of or result from any material breach of any
representation and/or warranty made by you in this Agreement or arise out
of or result from any other material breach of this Agreement by you; or
7.1.1.6 arise out of or result from a Contract failing to be
considered a life insurance policy or an annuity Contract, whichever is
appropriate, under applicable provisions of the Code thereby depriving the
Trust of its compliance with Section 817(h) of the Code.
7.1.2 You shall not be liable under this indemnification provision
with respect to any Losses to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Trust or Underwriter, whichever is applicable.
You shall also not be liable under this indemnification provision with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified you in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but failure
to notify you of any such claim shall not relieve you from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, you shall be entitled to
participate, at your own expense, in the defense of such action. Unless the
Indemnified Party releases you from any further obligations under this Section
7.1, you also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from you to such
party of the your election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
you will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.1.3 The Indemnified Parties will promptly notify you of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.
7.2 Indemnification By The Underwriter
7.2.1 The Underwriter agrees to indemnify and hold harmless you, and
each of your directors and officers and each person, if any, who controls you
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually an "Indemnified Party" for purposes of
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this Section 7.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses") to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the shares of
the Trust or the Contracts and:
7.2.1.1 arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement, prospectus or sales literature of the Trust (or any
amendment or supplement to any of the foregoing) (collectively, the "Trust
Documents") or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission of such alleged statement or omission was made in
reliance upon and in conformity with information furnished to us by or on
behalf of you for use in the Registration Statement or prospectus for the
Trust or in sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Trust shares; or
7.2.1.2 arise out of or as a result of statements or
representations (other than statements or representations contained in the
disclosure documents or sales literature for the Contracts not supplied by
the Underwriter or persons under its control) or wrongful conduct of the
Trust, Adviser or Underwriter or persons under their control, with respect
to the sale or distribution of the Contracts or Trust shares; or
7.2.1.3 arise out of any untrue statement or alleged untrue
statement of a material fact contained in a disclosure document or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or omission was made
in reliance upon information furnished to you by or on behalf of the Trust;
or
7.2.1.4 arise as a result of any failure by us to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise,
to comply with the qualification representation specified above in Section
2.2.7 and the diversification requirements specified above in Section
2.2.8; or
7.2.1.5 arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Underwriter; as limited by and in accordance with the provisions of
Sections 7.2.2 and 7.2.3 hereof.
7.2.2 The Underwriter shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to you or the Accounts, whichever
is applicable.
7.2.3 The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the
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Underwriter in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to notify
the Underwriter of any such claim shall not relieve the Underwriter from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Underwriter will be
entitled to participate, at its own expense, in the defense thereof. Unless the
Indemnified Party releases the Underwriter from any further obligations under
this Section 7.2, the Underwriter also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from the Underwriter to such party of the Underwriter's election to
assume the defense thereof, the Indemnified Party shall bear the expenses of any
additional counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.2.4 You agree promptly to notify the Underwriter of the
commencement of any litigation or proceedings against you or the Indemnified
Parties in connection with the issuance or sale of the Contracts or the
operation of each Account.
7.3 Indemnification By The Trust
7.3.1 The Trust agrees to indemnify and hold harmless you, and each
of your directors and officers and each person, if any, who controls you within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust, which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Trust, and arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material breach of this Agreement by the Trust; as
limited by and in accordance with the provisions of Sections 7.3.2 and 7.3.3
hereof. It is understood and expressly stipulated that neither the holders of
shares of the Trust nor any Trustee, officer, agent or employee of the Trust
shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Trust only shall be liable.
7.3.2 The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against any Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
you, the Trust, the Underwriter or each Account, whichever is applicable.
7.3.3 The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Trust of any
such claim shall not relieve the Trust from any liability which it may have to
the Indemnified Party against whom
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such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Trust will be entitled to participate, at its own expense, in the defense
thereof. Unless the Indemnified Party releases the Trust from any further
obligations under this Section 7.3, the Trust also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Trust to such party of the Trust's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Trust will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
7.3.4 You agree promptly to notify the Trust of the commencement of
any litigation or proceedings against you or the Indemnified Parties in
connection with this Agreement, the issuance or sale of the Contracts, with
respect to the operation of the Account, or the sale or acquisition of shares of
the Trust.
8. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth in Schedule G below or
at such other address as such party may from time to time specify in writing to
the other party.
9. Termination
-----------
9.1 This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios for any reason by sixty (60) days advance
written notice delivered to the other parties, and shall terminate immediately
in the event of its assignment, as that term is used in the 1940 Act.
9.2 This Agreement may be terminated immediately by us upon written notice
to you if:
9.2.1 you notify the Trust or the Underwriter that the exemption from
registration under Section 3(c) of the 1940 Act no longer applies, or might
not apply in the future, to the unregistered Accounts, or that the
exemption from registration under Section 4(2) or Regulation D promulgated
under the 1933 Act no longer applies or might not apply in the future, to
interests under the unregistered Contracts; or
9.2.2 either one or both of the Trust or the Underwriter
respectively, shall determine, in their sole judgment exercised in good
faith, that you have suffered a material adverse change in your business,
operations, financial condition or prospects since the date of this
Agreement or are the subject of material adverse publicity; or
9.2.3 you give us the written notice specified above in Section 3.3
and at the same time you give us such notice there was no notice of
termination outstanding under any other provision of this Agreement;
provided, however, that any termination under this Section 9.2.3 shall be
effective forty-five (45) days after the notice specified in Section 3.3
was given; or
9.2.4 upon your assignment of this Agreement without our prior
written approval.
9.3 If this Agreement is terminated for any reason, except as required by
the Shared Funding Order or pursuant to Section 9.2.1, above, we shall, at your
option, continue to make available additional shares of any Portfolio and redeem
shares of any Portfolio pursuant to all of the terms and conditions of this
11
<PAGE>
Agreement for all Contracts in effect on the effective date of termination of
this Agreement. If this Agreement is terminated as required by the Shared
Funding Order, its provisions shall govern.
9.4 The provisions of Sections 2 (Representations and Warranties) and 7
(Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 9.3, except that we shall have no further obligation
to sell Trust shares with respect to Contracts issued after termination.
9.5 You shall not redeem Trust shares attributable to the Contracts (as
opposed to Trust shares attributable to your assets held in the Account) except:
(i) as necessary to implement Contract owner initiated or approved transactions;
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption"); or (iii) as permitted by an order of the SEC
pursuant to Section 26(b) of the 1940 Act. Upon request, you shall promptly
furnish to us the opinion of your counsel (which counsel shall be reasonably
satisfactory to us) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, you shall not prevent Contract
owners from allocating payments to a Portfolio that was otherwise available
under the Contracts without first giving us ninety (90) days notice of your
intention to do so.
10. Miscellaneous
-------------
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions of this
Agreement or otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
10.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
10.4 This Agreement shall be construed and its provisions interpreted
under and in accordance with the laws of the State of California. It shall also
be subject to the provisions of the federal securities laws and the rules and
regulations thereunder, to any orders of the SEC on behalf of the Trust granting
it exemptive relief, and to the conditions of such orders. We shall promptly
forward copies of any such orders to you.
10.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
10.6 The parties to this Agreement agree that the assets and liabilities
of each Portfolio of the Trust are separate and distinct from the assets and
liabilities of each other Portfolio. No Portfolio shall be liable or shall be
charged for any debt, obligation or liability of any other Portfolio.
10.7 Each party to this Agreement shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
12
<PAGE>
10.8 Each party to this Agreement shall treat as confidential all
information reasonably identified as confidential in writing by any other party
to this Agreement, and, except as permitted by this Agreement or as required by
legal process or regulatory authorities, shall not disclose, disseminate, or use
such names and addresses and other confidential information until such time as
they may come into the public domain, without the express written consent of the
affected party. Without limiting the foregoing, no party to this Agreement
shall disclose any information that such party has been advised is proprietary,
except such information that such party is required to disclose by any
appropriate governmental authority (including, without limitation, the SEC, the
NASD, and state securities and insurance regulators).
10.9 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties to this Agreement are entitled to under
state and federal laws.
10.10 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided above in
Section 3.3.
10.11 Neither this Agreement nor any rights or obligations created by it
may be assigned by any party without the prior written approval of the other
parties.
10.12 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
13
<PAGE>
IN WITNESS WHEREOF, each of the parties have caused their duly authorized
officers to execute this Agreement.
The Company: Pruco Life Insurance Company
----------------------------
By:______________________________________
Name:____________________________________
Title:___________________________________
Pruco Life Insurance Company of New Jersey
-------------------------------------------
By:______________________________________
Name:____________________________________
Title:___________________________________
Prudential Insurance Company of North America
---------------------------------------------
By:______________________________________
Name:____________________________________
Title:___________________________________
14
<PAGE>
The Trust: Franklin Templeton Variable Insurance Products Trust
----------------------------------------------------
Only on behalf of each
Portfolio listed on
Schedule C hereof.
By:______________________________________________
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant
Secretary
The Underwriter: Franklin Templeton Distributors, Inc.
-------------------------------------
By:_______________________________________________
Name: [ ]
Title: [ ]
15
<PAGE>
Schedule A
The Company
Pruco Life Insurance Company
751 Broad Street
Newark, New Jersey 07102-2992
A life insurance company organized as a corporation under Arizona law.
Pruco Life Insurance Company of New Jersey
751 Broad Street
Newark, New Jersey 07102-2992
A life insurance company organized as a corporation under New Jersy law.
Prudential Insurance Company of America
751 Broad Street
Newark, New Jersey 07102-2992
A life insurance company organized as a corporation under New Jersy law.
16
<PAGE>
Schedule B
Accounts of the Company
<TABLE>
<CAPTION>
<S> <C> <C>
1. Name: Pruco Life Flexible Premium Variable Annuity Account
Date Established: June 16, 1995
SEC Registration Number: 811-07325
2. Name: Pruco Life of New Jersey Flexible Premiun Variable
Annuity Account
Date Established: May 20, 1996
SEC Registration Number: 811-07975
3. Name: Prudential Variable Contract Account GI-2
Date Established: June 24 1988
SEC Registration Number: 811-____
4. Name: Prudential Discovery Premier Group Variable Contract
Account
Date Established: [date]
SEC Registration Number: 811-____
5. Name: Pruco Life of New Jersey Variable Appreciable Account
Date Established: January 13, 1984
SEC Registration Number: 811-3974
6. Name: Pruco Life Variable Universal Account
Date Established: April 17, 1989
SEC Registration Number: 811-5826
</TABLE>
...
17
<PAGE>
Schedule C
Available Portfolios and Classes of Shares of the Trust; Investment Advisers
<TABLE>
<CAPTION>
Franklin Templeton Variable Insurance Products Trust Investment Adviser
- ---------------------------------------------------- ------------------
<S> <C>
Franklin Small Cap Fund Class 2 Franklin Advisers, Inc.
Franklin Small Cap Fund Class 1 Franklin Advisers, Inc
Templeton Asset Strategy Fund Class 2 Templeton Investment Counsel, Inc.
Templeton Global Income Securities Fund Class 2 Franklin Advisers, Inc.
Templeton Developing Markets Securities Fund Class 2 Templeton Asset Management, Ltd.
Templeton International Securities Fund Class 2 Templeton Investment Counsel, Inc.
Templeton Growth Securities Fund Class 2 Templeon Global Advisors Limited
</TABLE>
18
<PAGE>
Schedule D
Contracts of the Company
<TABLE>
<CAPTION>
Contract 1 Contract 2 Contract 3
- -----------------------------------------------------------------------------------------------------------------------
Contract/Product Discovery Select Discovery Choice Discovery Select Annuity
Name Contract
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Registered (Y/N) Yes Yes Yes
- -----------------------------------------------------------------------------------------------------------------------
SEC Registration
Number 333-06701 333-79201 333-18117
- -----------------------------------------------------------------------------------------------------------------------
Representative Form ORD 96639 ORD 990046 ORD 96639 NY
Numbers
- -----------------------------------------------------------------------------------------------------------------------
Separate Account Pruco Life Flexible Premium Pruco Life Flexible Premium Pruco Life of New Jersey
Name/Date Variable Annuity Account / Variable Annuity Account / Flexible Premiun Variable
Established June 16, 1995 June 16, 1995 Annuity Account / May 20, 1996
- -----------------------------------------------------------------------------------------------------------------------
SEC Registration 811-07325 811-07325 811-07975
Number
- -----------------------------------------------------------------------------------------------------------------------
Portfolios and Franklin Small Cap Fund Class Franklin Small Cap Fund Class Franklin Small Cap Fund Class
Classes -Adviser 2 - Franklin Advisers, Inc. 2 - Franklin Advisers, Inc. 2 - Franklin Advisers, Inc.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Schedule D cont.
Contracts of the Company
<TABLE>
<CAPTION>
Contract 4 Contract 5 Contract 6
- -----------------------------------------------------------------------------------------------------------------------
Contract/Product Discovery Choice GVUL Discovery Premier Group
Name Retirment Annuity
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Registered (Y/N) Yes
- -----------------------------------------------------------------------------------------------------------------------
SEC Registration 333-86083
Number
- -----------------------------------------------------------------------------------------------------------------------
Representative Form
Numbers
- -----------------------------------------------------------------------------------------------------------------------
Separate Account Pruco Life of New Jersey Prudential Variable Contract Prudential Discovery Premier
Name/Date Flexible Premiun Variable Account GI-2 / June 24 1988 Group Variable Contract Account
Established Annuity Account / May 20, 1996
- -----------------------------------------------------------------------------------------------------------------------
SEC Registration 811-07975
Number
- -----------------------------------------------------------------------------------------------------------------------
Portfolios and Franklin Small Cap Fund Class Templeton Global Income Franklin Small Cap Fund Class
Classes -Adviser 2 - Franklin Advisers, Inc. Securities Fund Class 2 - 1 - Franklin Advisers, Inc.
Franklin Adviser, Inc.
Templeton International
Templeton Asset Strategy Fund Securities Fund Class 1 -
Class 2 - Templeton Investment Templeton Investment Counsel,
Counsel, Inc. Inc.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Schedule D cont.
Contracts of the Company
<TABLE>
<CAPTION>
Contract 7 Contract 8 Contract 9
- -----------------------------------------------------------------------------------------------------------------------
Contract/Product Survivorship Variable Survivorship Variable
Name Universal Life Universal Life
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Registered (Y/N) Yes Yes
- -----------------------------------------------------------------------------------------------------------------------
SEC Registration 333-94115 333-94117
Number
- -----------------------------------------------------------------------------------------------------------------------
Representative Form SVUL-2000-NJ SVUL-2000
Numbers
- -----------------------------------------------------------------------------------------------------------------------
Separate Account Pruco Life of New Jersey Pruco Life Variable Universal
Name/Date Variable Appreciable Account / Account / April 17, 1989
Established January 13, 1984
- -----------------------------------------------------------------------------------------------------------------------
SEC Registration 811-3974 811-5826
Number
- -----------------------------------------------------------------------------------------------------------------------
Portfolios and Franklin Small Cap Fund Class Franklin Small Cap Fund Class
Classes -Adviser 2 - Franklin Advisers, Inc. 2 - Franklin Advisers, Inc.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Schedule E
Other Portfolios Available under the Contracts
1. The Prudential Series Fund, Inc.
Money Market Portfolio
Diversified Bond Portfolio
High Yield Bond Portfolio
Stock Index Portfolio
Equity Income Portfolio
Equity Portfolio
Prudential Jennison Portfolio
Global Portfolio
Diversified Conservative Growth Portfolio
Small Capitalization Stock Portfolio
20/20 Focus Portfolio
2. AIM Variable Insurance Funds, Inc.
AIM V.I. Growth and Income Fund
AIM. V.I. Value Fund
3. Janus Aspen Series
Growth Portfolio
International Growth Portfolio
4. MFS Variable Insurance Trust
Emerging Growth Series
Research Series
5. OCC Accumulation Trust
Managed Portfolio
Small Cap Portfolio
6. T.Rowe Price Equity Series, Inc.
Equity Income Portfolio
7. T. Rowe Price International Series, Inc.
International Stock Portfolio
8. Warburg Pincus Trust
Post-Venture Capital Portfolio
9. American Century Variable Portfolios, Inc.
American Century VP Value
22
<PAGE>
Schedule F
(Redacted)
23
<PAGE>
Schedule G
Addresses for Notices
To the Company: Pruco Life Insurance Company
751 Broad Street
Newark, New Jersey 07102-2992
Attention: [name, title]
Or:
Pruco Life Insurance Company of New Jersey
751 Broad Street
Newark, New Jersey 07102-2992
Attention: [name, title]
Or:
Prudential Insurance Company of America
751 Broad Street
Newark, New Jersey 07102-2992
Attention: [name, title]
To the Trust: Franklin Templeton Variable Insurance Products Trust
777 Mariners Island Boulevard
San Mateo, California 94404
Attention: Karen L. Skidmore
Asssistant Vice President, Assistant
Secretary
To the Underwriter: Franklin Templeton Distributors, Inc.
777 Mariners Island Boulevard
San Mateo, California 94404
Attention: [name, title]
24
<PAGE>
Schedule H
Shared Funding Order
Templeton Variable Products Series Fund, et al.
File No. 812-11698
SECURITIES AND EXCHANGE COMMISSION
Release No. IC-24018
1999 SEC LEXIS 1887
September 17, 1999
ACTION: Notice of application for an amended order of exemption pursuant to
Section 6(c) of the Investment Company Act of 1940 (the "1940 Act") from the
provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.
TEXT: Summary of Application: Templeton Variable Products Series Fund (the
"Templeton Trust"), Franklin Templeton Variable Insurance Products Trust
(formerly Franklin Valuemark Funds) (the "VIP Trust," and together with the
Templeton Trust, the "Funds"), Templeton Funds Annuity Company ("TFAC") or any
successor to TFAC, and any future open-end investment company for which TFAC or
any affiliate is the administrator, sub-administrator, investment manager,
adviser, principal underwriter, or sponsor ("Future Funds") seek an amended
order of the Commission to (1) add as parties to that order the VIP Trust and
any Future Funds and (2) permit shares of the Funds and Future Funds to be
issued to and held by qualified pension and retirement plans outside the
separate account context.
Applicants: Templeton Variable Products Series Fund, Franklin Templeton
Variable Insurance Products Trust, Templeton Funds Annuity Company or any
successor to TFAC, and any future open-end investment company for which TFAC or
any affiliate is the administrator, sub-administrator, investment manager,
adviser, principal underwriter, or sponsor (collectively, the "Applicants").
Filing Date: The application was filed on July 14, 1999, and amended and
restated on September 17, 1999.
Hearing or Notification of Hearing: An order granting the application will be
issued unless the Commission orders a hearing. Interested persons may request a
hearing by writing to the Secretary of the Commission and serving Applicants
with a copy of the request, personally or by mail. Hearing requests should be
received by the Commission by 5:30 p.m., on October 12, 1999, and should be
accompanied by proof of service on the Applicants in the form of an affidavit
or, for lawyers, a certificate of service. Hearing requests should state the
nature of the writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request notification
by writing to the Secretary of the Commission.
Addresses: Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, D.C. 20549-0609.
25
<PAGE>
Applicants: Templeton Variable Products Series Fund and Franklin Templeton
Variable Insurance Products Trust, 777 Mariners Island Boulevard, San Mateo,
California 94404, Attn: Karen L. Skidmore, Esq.
For Further Information Contact: Kevin P. McEnery, Senior Counsel, or Susan M.
Olson, Branch Chief, Office of Insurance Products, Division of Investment
Management, at (202) 942-0670.
Supplementary Information: The following is a summary of the application. The
complete application is available for a fee from the SEC's Public Reference
Branch, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 (tel. (202) 942-
8090).
Applicants' Representations:
1. Each of the Funds is registered under the 1940 Act as an open-end
management investment company and was organized as a Massachusetts business
trust. The Templeton Trust currently consists of eight separate series, and the
VIP Trust consists of twenty-five separate series. Each Fund's Declaration of
Trust permits the Trustees to create additional series of shares at any time.
The Funds currently serve as the underlying investment medium for variable
annuity contracts and variable life insurance policies issued by various
insurance companies. The Funds have entered into investment management
agreements with certain investment managers ("Investment Managers") directly or
indirectly owned by Franklin Resources, Inc. ("Resources"), a publicly owned
company engaged in the financial services industry through its subsidiaries.
2. TFAC is an indirect, wholly owned subsidiary of Resources. TFAC is the sole
insurance company in the Franklin Templeton organization, and specializes in the
writing of variable annuity contracts. The Templeton Trust has entered into a
Fund Administration Agreement with Franklin Templeton Services, Inc. ("FT
Services"), which replaced TFAC in 1998 as administrator, and FT Services
subcontracts certain services to TFAC. FT Services also serves as administrator
to all series of the VIP Trust. TFAC and FT Services provide certain
administrative facilities and services for the VIP and Templeton Trusts.
3. On November 16, 1993, the Commission issued an order granting exemptive
relief to permit shares of the Templeton Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (Investment Company Act
Release No. 19879, File No. 812-8546) (the "Original Order"). Applicants
incorporate by reference into the application the Application for the Original
Order and each amendment thereto, the Notice of Application for the Original
Order, and the Original Order, to the extent necessary, to supplement the
representations made in the application in support of the requested relief.
Applicants represent that all of the facts asserted in the Application for the
Original Order and any amendments thereto remain true and accurate in all
material respects to the extent that such facts are relevant to any relief on
which Applicants continue to rely. The Original Order allows the Templeton Trust
to offer its shares to insurance companies as the investment vehicle for their
separate accounts supporting variable annuity contracts and variable life
insurance contracts (collectively, the "Variable Contracts"). Applicants state
that the Original Order does not (i) include the VIP Trust or Future Funds as
parties, nor (ii) expressly address the sale of shares of the Funds or any
Future Funds to qualified pension and retirement plans outside the separate
account context including, without limitation, those trusts, plans, accounts,
contracts or annuities described in Sections 401(a), 403(a), 403(b), 408(b),
408(k), 414(d), 457(b), 501(c)(18) of the Internal Revenue Code of 1986, as
amended (the "Code"), and any other trust, plan, contract, account or annuity
that is determined to be within the scope of Treasury Regulation
1.817.5(f)(3)(iii) ("Qualified Plans").
26
<PAGE>
4. Separate accounts owning shares of the Funds and their insurance company
depositors are referred to in the application as "Participating Separate
Accounts" and "Participating Insurance Companies," respectively. The use of a
common management investment company as the underlying investment medium for
both variable annuity and variable life insurance separate accounts of a single
insurance company (or of two or more affiliated insurance companies) is referred
to as "mixed funding." The use of a common management investment company as the
underlying investment medium for variable annuity and/or variable life insurance
separate accounts of unaffiliated insurance companies is referred to as "shared
funding."
Applicants' Legal Analysis:
1. Applicants request that the Commission issue an amended order pursuant to
Section 6(c) of the 1940 Act, adding the VIP Trust and Future Funds to the
Original Order and exempting scheduled premium variable life insurance separate
accounts and flexible premium variable life insurance separate accounts of
Participating Insurance Companies (and, to the extent necessary, any principal
underwriter and depositor of such an account) and the Applicants from Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) (and any comparable rule) thereunder, respectively, to the extent
necessary to permit shares of the Funds and any Future Funds to be sold to and
held by Qualified Plans. Applicants submit that the exemptions requested are
appropriate in the public interest, consistent with the protection of investors,
and consistent with the purposes fairly intended by the policy and provisions of
the 1940 Act.
2. The Original Order does not include the VIP Trust or Future Funds as
parties nor expressly address the sale of shares of the Funds or any Future
Funds to Qualified Plans. Applicants propose that the VIP Trust and Future Funds
be added as parties to the Original Order and the Funds and any Future Funds be
permitted to offer and sell their shares to Qualified Plans.
3. Section 6(c) of the 1940 Act provides, in part, that the Commission, by
order upon application, may conditionally or unconditionally exempt any person,
security or transaction, or any class or classes of persons, securities or
transactions from any provisions of the 1940 Act or the rules or regulations
thereunder, if and to the extent that such exemption is necessary or appropriate
in the public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the 1940 Act.
4. In connection with the funding of scheduled premium variable life insurance
contracts issued through a separate account registered under the 1940 Act as a
unit investment trust ("UIT"), Rule 6e-2(b)(15) provides partial exemptions from
various provisions of the 1940 Act, including the following: (1) Section 9(a),
which makes it unlawful for certain individuals to act in the capacity of
employee, officer, or director for a UIT, by limiting the application of the
eligibility restrictions in Section 9(a) to affiliated persons directly
participating in the management of a registered management investment company;
and (2) Sections 13(a), 15(a) and 15(b) of the 1940 Act to the extent that those
sections might be deemed to require "pass-through" voting with respect to an
underlying fund's shares, by allowing an insurance company to disregard the
voting instructions of contractowners in certain circumstances.
5. These exemptions are available, however, only where the management
investment company underlying the separate account (the "underlying fund")
offers its shares "exclusively to variable life insurance separate accounts of
the life insurer, or of any affiliated life insurance company." Therefore, Rule
6e-2 does not permit either mixed funding or shared funding because the relief
granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium
variable life insurance separate account that owns shares of an underlying fund
that also offers its shares to a variable annuity or a flexible premium variable
life insurance
27
<PAGE>
separate account of the same company or of any affiliated life insurance
company. Rule 6e-2(b)(15) also does not permit the sale of shares of the
underlying fund to Qualified Plans.
6. In connection with flexible premium variable life insurance contracts
issued through a separate account registered under the 1940 Act as a UIT, Rule
6e-3(T)(b)(15) also provides partial exemptions from Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act. These exemptions, however, are available only where
the separate account's underlying fund offers its shares "exclusively to
separate accounts of the life insurer, or of any affiliated life insurance
company, offering either scheduled contracts or flexible contracts, or both; or
which also offer their shares to variable annuity separate accounts of the life
insurer or of an affiliated life insurance company." Therefore, Rule 6e-3(T)
permits mixed funding but does not permit shared funding and also does not
permit the sale of shares of the underlying fund to Qualified Plans. As noted
above, the Original Order granted the Templeton Trust exemptive relief to permit
mixed and shared funding, but did not expressly address the sale of its shares
to Qualified Plans.
7. Applicants note that if the Funds were to sell their shares only to
Qualified Plans, exemptive relief under Rule 6e-2 and Rule 6e-3(T) would not be
necessary. Applicants state that the relief provided for under Rule 6e-2(b)(15)
and Rule 6e-3(T)(b)(15) does not relate to qualified pension and retirement
plans or to a registered investment company's ability to sell its shares to such
plans.
8. Applicants state that changes in the federal tax law have created the
opportunity for each of the Funds to increase its asset base through the sale of
its shares to Qualified Plans. Applicants state that Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code"), imposes certain
diversification standards on the assets underlying Variable Contracts. Treasury
Regulations generally require that, to meet the diversification requirements,
all of the beneficial interests in the underlying investment company must be
held by the segregated asset accounts of one or more life insurance companies.
Notwithstanding this, Applicants note that the Treasury Regulations also contain
an exception to this requirement that permits trustees of a Qualified Plan to
hold shares of an investment company, the shares of which are also held by
insurance company segregated asset accounts, without adversely affecting the
status of the investment company as an adequately diversified underlying
investment of Variable Contracts issued through such segregated asset accounts
(Treas. Reg. 1.817-5(f)(3)(iii)).
9. Applicants state that the promulgation of Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) under the 1940 Act preceded the issuance of these Treasury
Regulations. Thus, Applicants assert that the sale of shares of the same
investment company to both separate accounts and Qualified Plans was not
contemplated at the time of the adoption of Rules 6e-2(b)(15) and 6e-
3(T)(b)(15).
10. Section 9(a) provides that it is unlawful for any company to serve as
investment adviser or principal underwriter of any registered open-end
investment company if an affiliated person of that company is subject to a
disqualification enumerated in Section 9(a)(1) or (2). Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) provide exemptions from Section 9(a) under certain circumstances,
subject to the limitations on mixed and shared funding. These exemptions limit
the application of the eligibility restrictions to affiliated individuals or
companies that directly participate in the management of the underlying
portfolio investment company.
11. Applicants state that the relief granted in Rule 6e-2(b)(15) and 6e-
3(T)(b)(15) from the requirements of Section 9 limits, in effect, the amount of
monitoring of an insurer's personnel that would otherwise be necessary to ensure
compliance with Section 9 to that which is appropriate in light of the policy
and purposes of Section 9. Applicants submit that those Rules recognize that it
is not necessary for the protection of investors or the purposes fairly intended
by the policy and provisions of the 1940 Act to apply the provisions
28
<PAGE>
of Section 9(a) to the many individuals involved in an insurance company
complex, most of whom typically will have no involvement in matters pertaining
to investment companies funding the separate accounts.
12. Applicants to the Original Order previously requested and received relief
from Section 9(a) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to the extent
necessary to permit mixed and shared funding. Applicants maintain that the
relief previously granted from Section 9(a) will in no way be affected by the
proposed sale of shares of the Funds to Qualified Plans. Those individuals who
participate in the management or administration of the Funds will remain the
same regardless of which Qualified Plans use such Funds. Applicants maintain
that more broadly applying the requirements of Section 9(a) because of
investment by Qualified Plans would not serve any regulatory purpose. Moreover,
Qualified Plans, unlike separate accounts, are not themselves investment
companies and therefore are not subject to Section 9 of the 1940 Act.
13. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii)
provide exemptions from the pass-through voting requirement with respect to
several significant matters, assuming the limitations on mixed and shared
funding are observed. Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A)
provide that the insurance company may disregard the voting instructions of its
contractowners with respect to the investments of an underlying fund or any
contract between a fund and its investment adviser, when required to do so by an
insurance regulatory authority (subject to the provisions of paragraphs
(b)(5)(i) and (b)(7)(ii)(A) of the Rules). Rules 6e-2(b)(15)(iii)(B) and 6e-
3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard
contractowners' voting instructions if the contractowners initiate any change in
such company's investment policies, principal underwriter, or any investment
adviser (provided that disregarding such voting instructions is reasonable and
subject to the other provisions of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and
(C) of the Rules).
14. Applicants assert that Qualified Plans, which are not registered as
investment companies under the 1940 Act, have no requirement to pass-through the
voting rights to plan participants. Applicants state that applicable law
expressly reserves voting rights to certain specified persons. Under Section
403(a) of the Employment Retirement Income Security Act ("ERISA"), shares of a
fund sold to a Qualified Plan must be held by the trustees of the Qualified
Plan. Section 403(a) also provides that the trustee(s) must have exclusive
authority and discretion to manage and control the Qualified Plan with two
exceptions: (1) when the Qualified Plan expressly provides that the trustee(s)
are subject to the direction of a named fiduciary who is not a trustee, in which
case the trustees are subject to proper directions made in accordance with the
terms of the Qualified Plan and not contrary to ERISA; and (2) when the
authority to manage, acquire or dispose of assets of the Qualified Plan is
delegated to one or more investment managers pursuant to Section 402(c)(3) of
ERISA. Unless one of the two above exceptions stated in Section 403(a) applies,
Qualified Plan trustees have the exclusive authority and responsibility for
voting proxies. Where a named fiduciary to a Qualified Plan appoints an
investment manager, the investment manager has the responsibility to vote the
shares held unless the right to vote such shares is reserved to the trustees or
the named fiduciary. Where a Qualified Plan does not provide participants with
the right to give voting instructions, Applicants do not see any potential for
material irreconcilable conflicts of interest between or among variable contract
holders and Qualified Plan investors with respect to voting of the respective
Fund's shares. Accordingly, Applicants state that, unlike the case with
insurance company separate accounts, the issue of the resolution of material
irreconcilable conflicts with respect to voting is not present with respect to
such Qualified Plans since the Qualified Plans are not entitled to pass-through
voting privileges.
15. Even if a Qualified Plan were to hold a controlling interest in one of the
Funds, Applicants believe that such control would not disadvantage other
investors in such Fund to any greater extent than is the case when
29
<PAGE>
any institutional shareholder holds a majority of the voting securities of any
open- end management investment company. In this regard, Applicants submit that
investment in a Fund by a Qualified Plan will not create any of the voting
complications occasioned by mixed funding or shared funding. Unlike mixed or
shared funding, Qualified Plan investor voting rights cannot be frustrated by
veto rights of insurers or state regulators.
16. Applicants state that some of the Qualified Plans, however, may provide
for the trustee(s), an investment adviser (or advisers), or another named
fiduciary to exercise voting rights in accordance with instructions from
participants. Where a Qualified Plan provides participants with the right to
give voting instructions, Applicants see no reason to believe that participants
in Qualified Plans generally or those in a particular Qualified Plan, either as
a single group or in combination with participants in other Qualified Plans,
would vote in a manner that would disadvantage Variable Contract holders. In
sum, Applicants maintain that the purchase of shares of the Funds by Qualified
Plans that provide voting rights does not present any complications not
otherwise occasioned by mixed or shared funding.
17. Applicants do not believe that the sale of the shares of the Funds to
Qualified Plans will increase the potential for material irreconcilable
conflicts of interest between or among different types of investors. In
particular, Applicants see very little potential for such conflicts beyond that
which would otherwise exist between variable annuity and variable life insurance
contractowners.
18. As noted above, Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable contracts held in an underlying
mutual fund. The Code provides that a variable contract shall not be treated as
an annuity contract or life insurance, as applicable, for any period (and any
subsequent period) for which the investments are not, in accordance with
regulations prescribed by the Treasury Department, adequately diversified.
19. Treasury Department Regulations issued under Section 817(h) provide that,
in order to meet the statutory diversification requirements, all of the
beneficial interests in the investment company must be held by the segregated
asset accounts of one or more insurance companies. However, the Regulations
contain certain exceptions to this requirement, one of which allows shares in an
underlying mutual fund to be held by the trustees of a qualified pension or
retirement plan without adversely affecting the ability of shares in the
underlying fund also to be held by separate accounts of insurance companies in
connection with their variable contracts (Treas. Reg. 1.817-5(f)(3)(iii)). Thus,
Applicants believe that the Treasury Regulations specifically permit "qualified
pension or retirement plans" and separate accounts to invest in the same
underlying fund. For this reason, Applicants have concluded that neither the
Code nor the Treasury Regulations or revenue rulings thereunder presents any
inherent conflict of interest.
20. Applicants note that while there are differences in the manner in which
distributions from Variable Contracts and Qualified Plans are taxed, these
differences will have no impact on the Funds. When distributions are to be made,
and a Separate Account or Qualified Plan is unable to net purchase payments to
make the distributions, the Separate Account and Qualified Plan will redeem
shares of the Funds at their respective net asset value in conformity with Rule
22c-1 under the 1940 Act (without the imposition of any sales charge) to provide
proceeds to meet distribution needs. A Qualified Plan will make distributions in
accordance with the terms of the Qualified Plan.
21. Applicants maintain that it is possible to provide an equitable means of
giving voting rights to Participating Separate Account contractowners and to
Qualified Plans. In connection with any meeting of shareholders, the Funds will
inform each shareholder, including each Participating Insurance Company and
30
<PAGE>
Qualified Plan, of information necessary for the meeting, including their
respective share of ownership in the relevant Fund. Each Participating Insurance
Company will then solicit voting instructions in accordance with Rules 6e-2 and
6e-3(T), as applicable, and its participation agreement with the relevant Fund.
Shares held by Qualified Plans will be voted in accordance with applicable law.
The voting rights provided to Qualified Plans with respect to shares of the
Funds would be no different from the voting rights that are provided to
Qualified Plans with respect to shares of funds sold to the general public.
22. Applicants have concluded that even if there should arise issues with
respect to a state insurance commissioner's veto powers over investment
objectives where the interests of contractowners and the interests of Qualified
Plans are in conflict, the issues can be almost immediately resolved since the
trustees of (or participants in) the Qualified Plans can, on their own, redeem
the shares out of the Funds. Applicants note that state insurance commissioners
have been given the veto power in recognition of the fact that insurance
companies usually cannot simply redeem their separate accounts out of one fund
and invest in another. Generally, time-consuming, complex transactions must be
undertaken to accomplish such redemptions and transfers. Conversely, the
trustees of Qualified Plans or the participants in participant-directed
Qualified Plans can make the decision quickly and redeem their interest in the
Funds and reinvest in another funding vehicle without the same regulatory
impediments faced by separate accounts or, as is the case with most Qualified
Plans, even hold cash pending suitable investment.
23. Applicants also state that they do not see any greater potential for
material irreconcilable conflicts arising between the interests of participants
under Qualified Plans and contractowners of Participating Separate Accounts from
possible future changes in the federal tax laws than that which already exist
between variable annuity contractowners and variable life insurance
contractowners.
24. Applicants state that the sale of shares of the Funds to Qualified Plans
in addition to separate accounts of Participating Insurance Companies will
result in an increased amount of assets available for investment by the Funds.
This may benefit variable contractowners by promoting economies of scale, by
permitting increased safety of investments through greater diversification, and
by making the addition of new portfolios more feasible.
25. Applicants assert that, regardless of the type of shareholders in each
Fund, each Fund's Investment Manager is or would be contractually and otherwise
obligated to manage the Fund solely and exclusively in accordance with that
Fund's investment objectives, policies and restrictions as well as any
guidelines established by the Board of Trustees of such Fund (the "Board"). The
Investment Manager works with a pool of money and (except in a few instances
where this may be required in order to comply with state insurance laws) does
not take into account the identity of the shareholders. Thus, each Fund will be
managed in the same manner as any other mutual fund. Applicants therefore see no
significant legal impediment to permitting the sale of shares of the Funds to
Qualified Plans.
26. Applicants state that the Commission has permitted the amendment of a
substantially similar original order for the purpose of adding a party to the
original order and has permitted open-end management investment companies to
offer their shares directly to Qualified Plan in addition to separate accounts
of affiliated or unaffiliated insurance companies which issue either or both
variable annuity contracts or variable life insurance contracts. Applicants
state that the amended order sought in the application is identical to precedent
with respect to the conditions Applicants propose should be imposed on Qualified
Plans in connection with investment in the Funds.
31
<PAGE>
Applicants' Conditions:
If the requested amended order is granted, Applicants consent to the following
conditions:
1. A majority of the Board of each Fund shall consist of persons who are not
"interested persons" thereof, as defined by Section 2(a)(19) of the 1940 Act,
and the rules thereunder and as modified by any applicable orders of the
Commission, except that if this condition is not met by reason of the death,
disqualification or bona fide resignation of any Board Member or Members, then
the operation of this condition shall be suspended: (a) for a period of 45 days
if the vacancy or vacancies may be filled by the remaining Board Members; (b)
for a period of 60 days if a vote of shareholders is required to fill the
vacancy or vacancies; or (c) for such longer period as the Commission may
prescribe by order upon application.
2. The Board will monitor their respective Fund for the existence of any
material irreconcilable conflict among the interests of the Variable Contract
owners of all Separate Accounts investing in the Funds and of the Qualified Plan
participants investing in the Funds. The Board will determine what action, if
any, shall be taken in response to such conflicts. A material irreconcilable
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of the Funds are being managed; (e) a difference in voting
instructions given by variable annuity contract owners, variable life insurance
contract owners, and trustees of Qualified Plans; (f) a decision by an insurer
to disregard the voting instructions of Variable Contract owners; or (g) if
applicable, a decision by a Qualified Plan to disregard the voting instructions
of Qualified Plan participants.
3. Participating Insurance Companies, the Investment Managers, and any
Qualified Plan that executes a fund participation agreement upon becoming an
owner of 10 percent or more of the assets of an Fund (a "Participating Qualified
Plan"), will report any potential or existing conflicts of which it becomes
aware to the Board of any relevant Fund. Participating Insurance Companies, the
Investment Managers and the Participating Qualified Plans will be responsible
for assisting the Board in carrying out its responsibilities under these
conditions by providing the Board with all information reasonably necessary for
the Board to consider any issues raised. This responsibility includes, but is
not limited to, an obligation by each Participating Insurance Company to inform
the Board whenever voting instructions of Contract owners are disregarded and,
if pass-through voting is applicable, an obligation by each Participating
Qualified Plan to inform the Board whenever it has determined to disregard
Qualified Plan participant voting instructions. The responsibility to report
such information and conflicts, and to assist the Board, will be contractual
obligations of all Participating Insurance Companies investing in the Funds
under their agreements governing participation in the Funds, and such agreements
shall provide that these responsibilities will be carried out with a view only
to the interests of the Variable Contract owners. The responsibility to report
such information and conflicts, and to assist the Board, will be contractual
obligations of all Participating Qualified Plans under their agreements
governing participation in the Funds, and such agreements will provide that
their responsibilities will be carried out with a view only to the interests of
Qualified Plan participants.
4. If it is determined by a majority of the Board of a Fund, or by a majority
of the disinterested Board Members, that a material irreconcilable conflict
exists, the relevant Participating Insurance Companies and Participating
Qualified Plans will, at their own expense and to the extent reasonably
practicable as determined by a majority of the disinterested Board Members, take
whatever steps are necessary to remedy
32
<PAGE>
or eliminate the material irreconcilable conflict, which steps could include:
(a) in the case of Participating Insurance Companies, withdrawing the assets
allocable to some or all of the Separate Account s from the Fund or any
portfolio thereof and reinvesting such assets in a different investment medium,
including another portfolio of an Fund or another Fund, or submitting the
question as to whether such segregation should be implemented to a vote of all
affected Variable Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., variable annuity contract owners or variable life
insurance contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Variable
Contract owners the option of making such a change; (b) in the case of
Participating Qualified Plans, withdrawing the assets allocable to some or all
of the Qualified Plans from the Fund and reinvesting such assets in a different
investment medium; and (c) establishing a new registered management investment
company or managed Separate Account. If a material irreconcilable conflict
arises because of a decision by a Participating Insurance Company to disregard
Variable Contract owner voting instructions, and that decision represents a
minority position or would preclude a majority vote, then the insurer may be
required, at the Fund's election, to withdraw the insurer's Separate Account
investment in such Fund, and no charge or penalty will be imposed as a result of
such withdrawal. If a material irreconcilable conflict arises because of a
Participating Qualified Plan's decision to disregard Qualified Plan participant
voting instructions, if applicable, and that decision represents minority
position or would preclude a majority vote, the Participating Qualified Plan may
be required, at the Fund's election, to withdraw its investment in such Fund,
and no charge or penalty will be imposed as a result of such withdrawal. The
responsibility to take remedial action in the event of a determination by a
Board of a material irreconcilable conflict and to bear the cost of such
remedial action will be a contractual obligation of all Participating Insurance
Companies and Participating Qualified Plans under their agreements governing
participation in the Funds, and these responsibilities will be carried out with
a view only to the interest of Variable Contract owners and Qualified Plan
participants.
5. For purposes of Condition 4, a majority of the disinterested Board Members
of the applicable Board will determine whether or not any proposed action
adequately remedies any material irreconcilable conflict, but in no event will
the relevant Fund or the Investment Managers be required to establish a new
funding medium for any Contract. No Participating Insurance Company shall be
required by Condition 4 to establish a new funding medium for any Variable
Contract if any offer to do so has been declined by vote of a majority of the
Variable Contract owners materially and adversely affected by the material
irreconcilable conflict. Further, no Participating Qualified Plan shall be
required by Condition 4 to establish a new funding medium for any Participating
Qualified Plan if (a) a majority of Qualified Plan participants materially and
adversely affected by the irreconcilable material conflict vote to decline such
offer, or (b) pursuant to governing Qualified Plan documents and applicable law,
the Participating Qualified Plan makes such decision without a Qualified Plan
participant vote.
6. The determination of the Board of the existence of a material
irreconcilable conflict and its implications will be made known in writing
promptly to all Participating Insurance Companies and Participating Qualified
Plans.
7. Participating Insurance Companies will provide pass-through voting
privileges to Variable Contract owners who invest in registered Separate
Accounts so long as and to the extent that the Commission continues to interpret
the 1940 Act as requiring pass-through voting privileges for Variable Contract
owners. As to Variable Contracts issued by unregistered Separate Accounts, pass-
through voting privileges will be extended to participants to the extent granted
by issuing insurance companies. Each Participating Insurance Company will also
vote shares of the Funds held in its Separate Accounts for which no voting
instructions from Contract owners are timely received, as well as shares of the
Funds which the Participating Insurance
33
<PAGE>
Company itself owns, in the same proportion as those shares of the Funds for
which voting instructions from contract owners are timely received.
Participating Insurance Companies will be responsible for assuring that each of
their registered Separate Accounts participating in the Funds calculates voting
privileges in a manner consistent with other Participating Insurance Companies.
The obligation to calculate voting privileges in a manner consistent with all
other registered Separate Accounts investing in the Funds will be a contractual
obligation of all Participating Insurance Companies under their agreements
governing their participation in the Funds. Each Participating Qualified Plan
will vote as required by applicable law and governing Qualified Plan documents.
8. All reports of potential or existing conflicts received by the Board of a
Fund and all action by such Board with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating
Qualified Plans of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
meetings of such Board or other appropriate records, and such minutes or other
records shall be made available to the Commission upon request.
9. Each Fund will notify all Participating Insurance Companies that separate
disclosure in their respective Separate Account prospectuses may be appropriate
to advise accounts regarding the potential risks of mixed and shared funding.
Each Fund shall disclose in its prospectus that (a) the Fund is intended to be a
funding vehicle for variable annuity and variable life insurance contracts
offered by various insurance companies and for qualified pension and retirement
plans; (b) due to differences of tax treatment and other considerations, the
interests of various Contract owners participating in the Fund and/or the
interests of Qualified Plans investing in the Fund may at some time be in
conflict; and (c) the Board of such Fund will monitor events in order to
identify the existence of any material irreconcilable conflicts and to determine
what action, if any, should be taken in response to any such conflict.
10. Each Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders (which, for these purposes, will be the persons having a voting
interest in the shares of the Funds), and, in particular, the Funds will either
provide for annual shareholder meetings (except insofar as the Commission may
interpret Section 16 of the 1940 Act not to require such meetings) or comply
with Section 16(c) of the 1940 Act, although the Funds are not the type of trust
described in Section 16(c) of the 1940 Act, as well as with Section 16(a) of the
1940 Act and, if and when applicable, Section 16(b) of the 1940 Act. Further,
each Fund will act in accordance with the Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of Board
Members and with whatever rules the Commission may promulgate with respect
thereto.
11. If and to the extent Rules 6e-2 or 6e-3(T) under the 1940 Act is amended,
or proposed Rule 6e-3 under the 1940 Act is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated thereunder, with
respect to mixed or shared funding on terms and conditions materially different
from any exemptions granted in the order requested in the application, then the
Funds and/or Participating Insurance Companies and Participating Qualified
Plans, as appropriate, shall take such steps as may be necessary to comply with
such Rules 6e-2 and 6e-3(T), as amended, or proposed Rule 6e-3, as adopted, to
the extent that such Rules are applicable.
12. The Participating Insurance Companies and Participating Qualified Plans
and/or the Investment Managers, at least annually, will submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out obligations imposed upon it by the conditions contained in
the application. Such reports, materials and data will be submitted more
frequently if deemed
34
<PAGE>
appropriate by the Board. The obligations of the Participating Insurance
Companies and Participating Qualified Plans to provide these reports, materials
and data to the Board, when the Board so reasonably requests, shall be a
contractual obligation of all Participating Insurance Companies and
Participating Qualified Plans under their agreements governing participation in
the Funds.
13. If a Qualified Plan should ever become a holder of ten percent or more of
the assets of a Fund, such Qualified Plan will execute a participation agreement
with the Fund that includes the conditions set forth herein to the extent
applicable. A Qualified Plan will execute an application containing an
acknowledgment of this condition upon such Qualified Plan's initial purchase of
the shares of any Fund.
Conclusion:
Applicants assert that, for the reasons summarized above, the requested
exemptions are appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy and
provisions of the 1940 Act.
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
35
<PAGE>
Templeton Variable Products Series Fund, et al.
File No. 812-11698
SECURITIES AND EXCHANGE COMMISSION
Release No. IC-24079
1999 SEC LEXIS 2177
October 13, 1999
ACTION: Order Granting Exemptions
TEXT: Templeton Variable Products Series Fund ("Templeton Trust"), Franklin
Templeton Variable Insurance Products Trust ("VIP Trust"), Templeton Funds
Annuity Company ("TFAC") or any successor to TFAC, and any future open-end
investment company for which TFAC or any affiliate is the administrator, sub-
administrator, investment manager, adviser, principal underwriter, or sponsor
("Future Funds") filed an application on July 14, 1999, and an amendment on
September 17, 1999 seeking an amended order of the Commission pursuant to
Section 6(c) of the Investment Company Act of 1940 ("1940 Act") exempting them
from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15). The prior order (Rel. No. IC-19879)
granted exemptive relief to permit shares of the Templeton Trust to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies. The proposed relief
would amend the prior order to add as parties to that order the VIP Trust and
any Future Funds and to permit shares of the Templeton Trust, the VIP Trust, and
Future Funds to be issued to and held by qualified pension and retirement plans
outside the separate account context.
A notice of the filing of the application was issued on September 17, 1999
(Rel. No. IC-24018). The notice gave interested persons an opportunity to
request a hearing and stated that an order granting the application would be
issued unless a hearing should be ordered. No request for a hearing has been
filed, and the Commission has not ordered a hearing.
The matter has been considered, and it is found that granting the requested
exemptions is appropriate in the public interest and consistent with the
protection of investors and the purposes intended by the policy and provisions
of the 1940 Act.
Accordingly,
IT IS ORDERED, pursuant to Section 6(c) of the 1940 Act, that the requested
exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, be, and hereby are, granted,
effective forthwith.
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
<PAGE>
Exhibit 1.A.(13)(a)
RIDER FOR TERM INSURANCE BENEFIT ON LIFE OF SECOND INSURED TO DIE
This benefit is part of this contract only if it is included in the list of
other benefits on the contract data pages. As part of the contract, it is
subject to all the provisions of the contract.
Benefit
We will pay an amount under this rider if we receive due
proof that the death of the second Insured to die occurred in the term period
for the rider and while this contract is in force. We will pay this amount to
the beneficiary for insurance payable upon the death of the second Insured to
die. But our payment is subject to all the provisions of the rider and of the
rest of this contract.
We show the amount of term insurance under this benefit and the term period on a
contract data page. The term period starts on the contract date. The anniversary
at the end of the term period is part of that period.
Rider Charges
The maximum charge for this rider is shown under Adjustments to the Contract
Fund. In determining this charge we will periodically consider factors such as
mortality, persistency, expenses, taxes and/or investment experience.
Termination
This rider will end on the earliest of:
the end of its term period;
the end of the grace period if the contract is in default and the premium
required to bring it out of default has not been paid; and
the date the contract ends for any other reason.
Further, if you ask us in a form that meets our needs, we will cancel the
benefit as of the first monthly date on or after we receive your request.
Monthly charges due then and later will be reduced accordingly.
This rider is subject to the terms and conditions of the Incontestability and
Suicide provisions of this contract.
Rider attached to and made part of this contract on the Contract Date.
<PAGE>
PROCESSING DATE: XXX XX, XXXX
CONTRACT DATA
Insured(s) Information
(1) [JOHN DOE] [Male], [Issue Age 55]
(2) [MARY DOE] [Female], [Issue Age 52]
- --------------------------------------------------------------------------------
Rating Class
Insured (1) [Non-smoker]
Insured (2) [Non-smoker]
- --------------------------------------------------------------------------------
Basic Contract Information
Policy Number [xx xxx xx]
Contract Date [January 1, 2000]
Premium Period While either Insured is living
Beneficiary [See Beneficiary Provision attached]
Loan Interest Rate 5.00%
Preferred Loan Interest Rate 4.25%
- --------------------------------------------------------------------------------
Type of Death Benefit (see Death Benefit Provisions)
Type [A]
- --------------------------------------------------------------------------------
Survivorship Insurance
Basic Insurance Amount [$250,000.00]
Additional amount(s) provided by rider(s). Refer to the appropriate form for
details.
Rider VL 194 C
Rider for Term Insurance Benefit on Life of Second Insured to Die
(Term Period is 4 years starting on the Contract Date)
Amount [$100,000.00]
Total Survivorship Insurance on the Contract Date [$350,000.00]
- --------------------------------------------------------------------------------
CONTRACT DATA CONTINUED ON THE NEXT PAGE
Page 3 (2000)
<PAGE>
PROCESSING DATE: XXX XX, XXXX
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
Minimum Initial Premium
The minimum initial premium due on the Contract Date is [$622.11].
- --------------------------------------------------------------------------------
Contract Limitations
The minimum premium we will accept is $25.00.
The minimum Basic Insurance Amount is $250,000.00.
The minimum decrease in Basic Insurance Amount is $10,000.00.
The minimum amount you may withdraw is $500.00.
The minimum amount you may borrow is $500.00.
The surrender charge threshold is [$250,000.00].
- --------------------------------------------------------------------------------
Adjustments to Premium Payments
From each premium paid we will:
subtract a charge of up to 7.5% for any taxes attributable to premiums. For
--------
purposes of this charge, the term "taxes attributable to premiums" shall
include: (a) any federal, state or local income tax, (b) any premium, excise,
or business tax, and (c) any other type of tax (or component thereof) measured
by or based upon the amount of premium received by us.
subtract a charge for sales expenses from premiums paid in the first five
--------
contract years at a rate of up to 12%.
subtract a charge for sales expenses from premiums paid after the fifth
--------
contract year at a rate of up to 4%.
The remainder of the premium is the invested premium amount.
- --------------------------------------------------------------------------------
Adjustments to the Contract Fund
On the Contract Date the contract fund is equal to the invested premium amount
credited on that date, minus
-----
a charge for administrative expenses of up to $0.10 per $1,000 of the basic
insurance amount effective on the Contract Date plus $10.00.
CONTRACT DATA CONTINUED ON NEXT PAGE
Page 3A (2000)(NJ)
<PAGE>
PROCESSING DATE: XXX XX, XXXX
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
a charge for the cost of insurance of up to the maximum monthly rate (see
Table of Maximum Monthly Insurance Rates) multiplied by the coverage amount
divided by $1000. The coverage amount is equal to the death benefit (see Death
Benefit) minus the contract fund.
On each day after the contract date, we will adjust the contract fund by:
adding any invested premium amounts.
------
adding any increase due to investment results of the variable investment
------
options.
adding guaranteed interest at an effective annual rate of 4% (0.01074598% a
------
day) on that portion of the contract fund that is not in a variable investment
option (see Fixed Investments and Loans).
adding any excess interest on that portion of the contract fund that is not in
------
a variable investment option.
subtracting any decrease due to investment results of the variable investment
-----------
options.
subtracting a charge against the variable investment options at an effective
-----------
annual rate of not more than 0.90% a year (.00245475% a day) for mortality and
expense risks that we assume.
subtracting any withdrawals.
-----------
subtracting an administrative charge of up to $25.00 for any withdrawals.
-----------
subtracting an administrative charge of up to $25.00 for any decrease in Basic
-----------
Insurance Amount.
subtracting an administrative charge of up to $25.00 for each transfer
-----------
exceeding twelve in any contract year.
subtracting any surrender charge that may result from a withdrawal, surrender,
-----------
or reduction in the Basic Insurance Amount.
And on each monthly date, we will adjust the contract fund by:
subtracting a monthly charge for administrative expenses during the first five
-----------
Contract Years of up to $0.10 per $1000 of the Basic Insurance Amount plus
$10.00.
subtracting a monthly charge for administrative expenses after the first five
-----------
Contract Years of up to $0.05 per $1000 of the Basic Insurance Amount plus
$10.00.
CONTRACT DATA CONTINUED ON NEXT PAGE
Page 3B (2000)(NJ)
<PAGE>
PROCESSING DATE: XXX XX, XXXX
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
subtracting a monthly charge for the cost of insurance of up to the maximum
-----------
monthly rate (see Table of Maximum Monthly Insurance Rates) multiplied by the
coverage amount divided by $1000. The coverage amount is equal to the death
benefit (see Death Benefit) minus the contract fund.
subtracting a maximum monthly charge for the following benefits:
-----------
the maximum monthly charge for Rider VL 194 C during the first four contract
years is the rate shown under the Table of Maximum Monthly Insurance Rates,
plus $0.05 multiplied by the rider amount (shown under Survivorship
Insurance) divided by $1,000.
- --------------------------------------------------------------------------------
Schedule of Maximum Surrender Charges
For a full surrender at the beginning of the contract year indicated, the
maximum charge we will deduct from the contract fund is shown below. For a
full surrender at other times, the surrender charge will reflect the completed
contract months that have passed since the last anniversary.
For a Surrender Occurring
At the Start of The Maximum Surrender
Contract Year Charge is
- --------------------------------------------------------------------------------
1 [$2,000.00]
2 [$2,000.00]
3 [$2,000.00]
4 [$2,000.00]
5 [$2,000.00]
6 [$2,000.00]
7 [$1,600.00]
8 [$1,200.00]
9 [$800.00]
10 [$400.00]
11 and later [$0.00]
- --------------------------------------------------------------------------------
We may also deduct a surrender charge when you decrease the Basic
Insurance Amount or change the type of death benefit, and when you make a
withdrawal. (See Decrease in Basic Insurance Amount, Changing the Type of
Death Benefit, and Withdrawals.)
- --------------------------------------------------------------------------------
CONTRACT DATA CONTINUED ON NEXT PAGE
Page 3C (2000)
<PAGE>
PROCESSING DATE: XXX XX, XXXX
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
Variable Investment Options
The Pruco Life of New Jersey Variable Appreciable Account
Each variable investment option of this account invests in a specific
portfolio of The Prudential Series Fund, Inc. and such other funds as we may
specify from time to time. We show the available variable investment options
of the account below. Unless we say otherwise, the variable investment
options invest in funds or fund portfolios with the same names. This account
is registered with the SEC under the Investment Company Act of 1940.
The Prudential Series Fund, Inc.
Money Market Portfolio
Diversified Bond Portfolio
Conservative Balanced Portfolio
Flexible Managed Portfolio
High Yield Bond Portfolio
Stock Index Portfolio
Equity Income Portfolio
Equity Portfolio
Prudential Jennison Portfolio
Global Portfolio
AIM Variable Insurance Funds, Inc.
AIM V.I. Value Fund
Janus Aspen Series
Janus Aspen Growth Portfolio
MFS Variable Insurance Trust
MFS Emerging Growth Series
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
CONTRACT DATA CONTINUED ON NEXT PAGE
Page 3D (2000)(NJ)
<PAGE>
PROCESSING DATE: XXX XX, XXXX
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
American Century Variable Portfolio, Inc.
American Century VP Value Fund
Templeton Variable Products Series Fund
Franklin Small Cap Investments Fund-Class 2
Fixed Interest Rate Investment Option
The fixed interest rate investment option is funded by the general account of
the Company. It is described in the Fixed Investments provision of this
contract.
- --------------------------------------------------------------------------------
Initial Allocation of Invested Premium Amounts
[Fixed Interest Rate Investment Option] [40%]
[Flexible Managed Portfolio] [60%]
- --------------------------------------------------------------------------------
END OF CONTRACT DATA
Page 3E (2000)
<PAGE>
PROCESSING DATE: XXX XX, XXXX
POLICY NO. XX XXX XXX
TABLE(S)
Table of Death Benefit Guarantee Values
These values are used to determine the death benefit guarantee as described
under Death Benefit Guarantee. The values on contract anniversaries are shown
below. On a date that falls between two anniversaries, the value will fall
between the values for those anniversaries considering the time that has passed
since the last anniversary.
The Limited Death Benefit Guarantee period is the first [23] contract years.
Limited Lifetime
Contract Death Benefit Death Benefit
Anniversary Guarantee Value Guarantee Value
- --------------------------------------------------------------------------------
Contract Date [$0.00] [$0.00]
1st [$1,674.97] [$5,631.90]
2nd [$3,416.94] [$11,489.08]
3rd [$5,228.59] [$17,580.54]
4th [$7,112.71] [$23,915.66]
5th [$8,968.51] [$30,400.51]
6th [$25,550.39] [$37,144.75]
7th [$30,352.64] [$44,158.76]
8th [$35,346.98] [$51,453.33]
9th [$40,541.09] [$59,039.69]
10th [$45,942.97] [$66,929.50]
11th [$51,560.92] [$75,134.90]
12th [$57,403.59] [$83,668.52]
13th [$63,479.97] [$92,543.48]
14th [$69,799.40] [$101,773.44]
15th [$76,371.61] [$111,372.60]
16th [$83,206.71] [$121,355.73]
17th [$90,315.21] [$131,738.18]
18th [$97,708.05] [$142,535.93]
19th [$105,396.61] [$153,765.59]
20th [$113,392.71] [$165,444.44]
21st [$121,708.65] [$177,590.44]
22nd [$130,357.23] [$190,222.28]
23rd [$139,351.75] [$203,359.40]
24th [$217,022.00]
25th [$231,231.10]
TABLE(S) CONTINUED ON NEXT PAGE
Page 4 (2000)
<PAGE>
PROCESSING DATE: XXX XX, XXXX
POLICY NO. XX XXX XXX
TABLE(S) CONTINUED
Limited Lifetime
Contract Death Benefit Death Benefit
Anniversary Guarantee Value Guarantee Value
- --------------------------------------------------------------------------------
26th [$246,008.57]
27th [$261,377.14]
28th [$277,360.45]
29th [$293,983.09]
30th [$311,270.64]
31st [$329,249.69]
32rd [$347,947.90]
33rd [$367,394.04]
34th [$387,618.03]
35th [$408,650.98]
36th [$430,525.24]
37th [$453,274.47]
38th [$476,933.67]
39th [$501,539.24]
40th [$527,129.03]
41st [$553,742.42]
42nd [$581,420.34]
43rd [$610,205.38]
44th [$640,141.82]
45th [$671,275.72]
46th [$703,654.97]
47th [$737,329.39]
48th [$772,350.79]
- --------------------------------------------------------------------------------
On the [23rd] Contract Anniversary, if your accumulated net payments (premium
payments accumulated at 4% annual interest less any withdrawals accumulated at
4% annual interest) are equal to the Limited Death Benefit Guarantee Value shown
above for that anniversary, a monthly net premium payment (premium less any
withdrawal) of no more than [$6,472.52]. would be needed to bring the
accumulated net payments up to the Lifetime Death Benefit Guarantee Value shown
above for the next anniversary.
- --------------------------------------------------------------------------------
TABLE(S) CONTINUED ON NEXT PAGE
Page 4A (2000) (NJ)
<PAGE>
PROCESSING DATE: XXX XX, XXXX
POLICY NO. XX XXX XXX
TABLE(S) CONTINUED
Table of Maximum Monthly Insurance Rates per $1,000
Contract Maximum Contract Maximum
Year Monthly Rate Year Monthly Rate
- --------------------------------------------------------------------------------
1 [0.00346] 26 [3.59752]
2 [0.01159] 27 [4.16392]
3 [0.02168] 28 [4.80287]
4 [0.03412] 29 [5.52620]
5 [0.04921] 30 [6.34146]
6 [0.06728] 31 [7.25393]
7 [0.08873] 32 [8.25881]
8 [0.11463] 33 [9.34439]
9 [0.14605] 34 [10.49932]
10 [0.18443] 35 [11.71790]
11 [0.23149] 36 [12.99841]
12 [0.28919] 37 [14.34320]
13 [0.35833] 38 [15.76527]
14 [0.44016] 39 [17.29274]
15 [0.53580] 40 [18.99353]
16 [0.64692] 41 [20.97260]
17 [0.77599] 42 [23.40832]
18 [0.92855] 43 [26.56868]
19 [1.11005] 44 [30.68652]
20 [1.32664] 45 [35.84659]
21 [1.58423] 46 [44.77000]
22 [1.88796] 47 [61.99667]
23 [2.23965] 48 [83.33333]
24 [2.64066]
25 [3.09213]
- --------------------------------------------------------------------------------
We may charge less than the maximum monthly rates. From time to time, we
will consider the need to change the rates we charge. We describe the
factors we use to determine such changes under General Provisions.
See the Basis of Computation for a description of the basis we use to
compute these rates.
- --------------------------------------------------------------------------------
TABLES CONTINUED ON NEXT PAGE
Page 4B (2000)
<PAGE>
PROCESSING DATE: XXX XX, XXXX
POLICY NO. XX XXX XXX
TABLE(S) CONTINUED
Table of Attained Age Factors
These factors are used to determine your death benefit as described under Death
Benefit Provisions.
These factors apply during each contract year starting on the contract
anniversary when the younger insured's attained age is as shown.
Attained Age of Attained Age of
Younger Insured Factors Younger Insured Factors
- --------------------------------------------------------------------------------
52 [3.70] 76 [1.65]
53 [3.60] 77 [1.61]
54 [3.40] 78 [1.60]
55 [3.30] 79 [1.52]
56 [3.20] 80 [1.50]
57 [3.10] 81 [1.45]
58 [3.00] 82 [1.42]
59 [2.90] 83 [1.40]
60 [2.80] 84 [1.36]
61 [2.70] 85 [1.33]
62 [2.60] 86 [1.31]
63 [2.50] 87 [1.30]
64 [2.40] 88 [1.26]
65 [2.32] 89 [1.24]
66 [2.30] 90 [1.22]
67 [2.20] 91 [1.20]
68 [2.10] 92 [1.19]
69 [2.03] 93 [1.17]
70 [2.00] 94 [1.15]
71 [1.91] 95 [1.13]
72 [1.90] 96 [1.10]
73 [1.80] 97 [1.07]
74 [1.74] 98 [1.06]
75 [1.70] 99 [1.04]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
END OF TABLE(S)
Page 4C (2000)
<PAGE>
Exhibit 1.A.(13)(b)
OPTION TO EXCHANGE FOR SEPARATE CONTRACTS
Right to Exchange
While both Insureds are living and neither has reached his or her 75th birthday,
you may exchange this contract for two new contracts of life insurance, one on
the life of each Insured, if the unlimited marital deduction allowed under
Internal Revenue Code Section 2056 is no longer available to the Insureds.
Exchange Date
The exchange date will be the date you ask for in your request, provided it is
within 31 days of the date we receive your request at our Home Office.
Conditions
Your right to make this exchange is subject to these conditions:
You must ask for the exchange in a form that meets our needs.
You must repay any contract debt under this contract.
You must surrender this contract to us.
We must receive your request and this contract at our Home Office while this
contract is in force.
You must prove to us that each Insured is insurable for the new contract.
The new contracts will not take effect unless any premiums due for them and the
charge for the exchange, if any, (which we describe under Charge or Allowance)
are paid while both persons to be insured are living. This must be done within
31 days after the date of your request. If the new contracts take effect, they
will take effect on the exchange date and this contract will end just before the
exchange date.
Contract Date
The new contract will have the same contract date as this one.
Contract Specifications
For each Insured the new contract will be on the Life Paid Up at Age 85 plan
issued by us or the Prudential Insurance Company of America. The issue ages and
the premiums for the new contracts will be set in accordance with the regular
rules in use on the contract date.
Each new contract must have the same basic (face) amount. It can be any amount
from $10,000 up to 50% of the basic insurance amount of this contract. There
will be no extra benefit.
Charge or Allowance
We will make a charge for the exchange if, on the exchange date, the sum of the
tabular cash values for the new contracts is more than the contract fund value
for this contract. The charge will be 105% of the difference between these
amounts.
If, on the exchange date, the contract fund value for this contract is more than
the sum of the tabular cash values for the new ones, we will send you the
difference.
<PAGE>
Contestability or Suicide for New Contracts
We will endorse each new contract to state that the period for the
Incontestability provision and in the Suicide Exclusion will start on the
exchange date, not on the issue date. The endorsement will also state how we
will compute the amount to be paid under each new contract if we have a legal
basis for contesting it or if death results from suicide in the stated period.
To compute the amount to be paid under either new contract if we have a legal
basis for contesting it or if death results from suicide in the stated period,
here is what we will do. We will identify the part of the tabular cash value of
the new contract that came from this contract on the exchange date. We will add
to that one-half the amount of the charge, if any, for the exchange and any
premiums paid on the new contract. And we will subtract any dividends credited
to the new contract on and after the exchange date. Then we will increase the
total by any existing dividend credits and reduce it by any contract debt. The
new cash value of the new contract might be more than the amount so determined.
If so, we will pay that value instead. If the Insured is living, we will make
this computation as of the date the new contract is ended. Otherwise we will do
so as of the date of his or her death.
Other Exchanges
You may be able to exchange this contract other than in accordance with the
requirements we state in this rider. But this may be done only if we consent,
and will be subject to conditions and charges that are then determined.
<PAGE>
Exhibit 3
April 10, 2000
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 Numbers: 2-89780, 33-57186,
333-85117, and 333-94115) under the Securities Act of 1933 for the registration
of certain variable 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 life
insurance contracts is not chargeable with liabilities arising out of
any other business Pruco Life of New Jersey may conduct.
(4) The variable 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,
/s/
- -------------------------------------
Clifford E. Kirsch
<PAGE>
Exhibit 6
April 10, 2000
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 ("Pruco Life of New Jersey") of Survivorship
Variable Universal Life Insurance Contracts (the "Contracts") under the
Securities Act of 1933. The prospectus included in Pre-Effective Amendment No.
1 to Registration Statement No. 333-94115 on Form S-6 describes the Contracts.
I have reviewed the Contract form 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 prospectus section entitled "Illustrations of Surrender Values,
Death Benefits, and Accumulated Premiums," based on the assumptions
stated in the illustrations, are consistent with the provisions of the
Contract. The rate structure of the Contract 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 issued on a male age 55 and a female age 50, than to
prospective purchasers of Contracts of different combinations of age,
sex, or smoking status.
2. The examples shown in the section of the prospectus entitled "Changing
the Type of Death Benefit" are consistent with the provisions of the
Contract.
3. The charts included in the sections of the prospectus entitled: "How a
Type A (Fixed) Contract's Death Benefit Will Vary" and "How a Type B
(Variable) Contract's Death Benefit Will Vary" are consistent with the
provisions of the Contract.
4. The examples shown in the section of the prospectus entitled "Death
Benefit Guarantee" are consistent with the provisions of the Contract.
5. The deduction in an amount equal to 1.25% of each premium is a
reasonable charge in relation to the additional income tax burden
imposed upon Pruco Life of New Jersey and its parent company, The
Prudential Insurance Company of America, as the result of the
enactment of Section 848 of the Internal Revenue Code. In reaching
that conclusion a number of factors were taken into account that, in
my opinion, were appropriate and which resulted in a projected after-
tax rate of return that is a reasonable rate to use in discounting the
tax benefit of the deductions allowed in Section 848 in taxable years
subsequent to the year in which the premiums are received.
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,
/s/
- ---------------------------------
Ching-Meei Chang, FSA, MAAA
Actuarial Director
The Prudential Insurance Company of America
