<PAGE>
AS FILED WITH THE SEC ON _______________. REGISTRATION NO. 33-57186
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 12
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) 778-2255
(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
----------------------
It is proposed that this filing will become effective (check appropriate space):
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
-------------------
(date)
[_] 60 days after filing pursuant to paragraph (a) of Rule 485
[_] on____________________ pursuant to paragraph (a) of Rule 485
(date)
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY FORM N-8B-2)
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Sale of the Contract and Sales Commissions
5. Pruco Life of New Jersey Variable Appreciable Account
6. Pruco Life of New Jersey Variable Appreciable Account
7. Not Applicable
8. Not Applicable
9. Litigation
10. Brief Description of the Contract; Short-Term
Cancellation Right or "Free-Look"; Transfers; How the
Contract Fund Changes with Investment Experience; How a
Contract's Death Benefit Will Vary; Surrender of a
Contract; Withdrawal of Excess Cash Surrender Value;
When Proceeds are Paid; Contract Loans; Lapse and
Reinstatement; Paid-Up Insurance Option; Reduced Paid-
Up Insurance Option; The Fixed-Rate Option; Voting
Rights
11. Brief Description of the Contract; Pruco Life of New
Jersey Variable Appreciable Account
12. Cover Page; Brief Description of the Contract; Flexible
Portfolios; Sale of the Contract and Sales Commissions
13. Brief Description of the Contract; Premiums; Allocation
of Premiums; Contract Fees and Charges; Reduction of
Charges for Concurrent Sales to Several Individuals;
Sale of the Contract and Sales Commissions
14. Brief Description of the Contract; Detailed Information
for Prospective Contract Owners
15. Brief Description of the Contract; Premiums; Allocation
of Premiums; Transfers; General Information About Pruco
Life of New Jersey Variable Appreciable Account, and
The Fixed Rate Option
16. Brief Description of the Contract; Detailed Information
for Prospective Contract Owners
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
17. Surrender of a Contract; Withdrawal of Excess Cash
Surrender Value; When Proceeds are Paid
18. Pruco Life of New Jersey Variable Appreciable Account;
How the Contract Fund Changes with Investment
Experience
19. Reports to Contract Owners
20. Not Applicable
21. Contract Loans
22. Not Applicable
23. Not Applicable
24. Other Standard Contract Provisions
25. Brief Description of the Contract
26. Brief Description of the Contract; Contract Fees and
Charges
27. Brief Description of the Contract
28. Brief Description of the Contract; Directors and
Officers of Pruco Life of New Jersey
29. Brief Description of the Contract
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Brief Description of the Contract
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-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
44. Brief Description of the Contract; How the Contract
Fund Changes with Investment Experience; How a
Contract's Death Benefit Will Vary
45. Not Applicable
46. Brief Description of the Contract; Pruco Life of New
Jersey Variable Appreciable Account
47. Pruco Life of New Jersey Variable Appreciable Account
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Not Applicable
52. Not Applicable
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
PRUvider Variable Appreciable Life Subaccounts of Pruco
Life of New Jersey Variable Appreciable Account;
Financial Statements of Pruco Life Insurance Company of
New Jersey
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
PRUVIDER VARIABLE(SM)
APPRECIABLE LIFE(R) INSURANCE
PROSPECTUS
The Pruco Life of New Jersey Variable
Appreciable Account
May 1, 2000
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
<PAGE>
PROSPECTUS
MAY 1, 2000
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
PRUVIDER(SM)
VARIABLE APPRECIABLE LIFE(R)
INSURANCE CONTRACT
This prospectus describes an individual variable life insurance contract (the
"Contract") offered by Pruco Life Insurance Company of New Jersey ("Pruco Life
of New Jersey", "us", "we", or "our") under the name PRUvider(SM) Variable
Appreciable Life(R) Insurance. Pruco Life of New Jersey, a stock life insurance
company, is an indirect, wholly-owned subsidiary of The Prudential Insurance
Company of America ("Prudential").
AS OF MAY 1, 1999, PRUCO LIFE OF NEW JERSEY NO LONGER OFFERED THESE CONTRACTS
FOR SALE.
You, the Contract owner, may choose to invest your Contract's premiums and their
earnings in one or more of the following ways:
. Invest in either one or both of two available variable investment options
of the Pruco Life of New Jersey Variable Appreciable Account (the
"Account"), each of which invests in a corresponding portfolio of The
Prudential Series Fund, Inc. (the "Series Fund"): the CONSERVATIVE BALANCED
PORTFOLIO and the FLEXIBLE MANAGED PORTFOLIO. Pruco Life of New Jersey may
add additional variable investment options in the future.
. Invest in the FIXED-RATE OPTION, which pays a guaranteed interest rate.
Pruco Life of New Jersey will credit interest daily on any portion of the
premium payment that you have allocated to the fixed-rate option at rates
periodically declared by Pruco Life of New Jersey, in its sole discretion.
Any such interest rate will never be less than an effective annual rate of
4%.
This prospectus describes the Contract generally and the Account. The attached
prospectus for the Series Fund and the Series Fund's statement of additional
information describe the investment objectives and the risks of investing in the
Series Fund portfolios. Pruco Life of New Jersey may add additional 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.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 778-2255
PRUVIDER is a service mark of Prudential.
APPRECIABLE LIFE is a registered mark of Prudential.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION AND SUMMARY.................................................................. 1
Brief Description of The Contract........................................................ 1
Charges.................................................................................. 1
Premium Payments......................................................................... 2
Lapse and Guarantee Against Lapse........................................................ 3
Refund................................................................................... 3
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY, PRUCO LIFE OF
NEW JERSEY VARIABLE APPRECIABLE ACCOUNT, THE VARIABLE INVESTMENT OPTIONS AVAILABLE
UNDER THE CONTRACT, AND THE FIXED-RATE OPTION............................................. 4
Pruco Life Insurance Company of New Jersey............................................... 4
Pruco Life of New Jersey Variable Appreciable Account.................................... 4
The Prudential Series Fund, Inc.......................................................... 5
Voting Rights............................................................................ 6
The Fixed-Rate Option.................................................................... 6
DETAILED INFORMATION FOR CONTRACT OWNERS.................................................. 6
Contract Fees and Charges................................................................ 6
Requirements for Issuance of a Contract.................................................. 9
Short-term Cancellation Right or "Free-look"............................................. 10
Reduction of Charges for Concurrent Sales to Several Individuals......................... 10
Contract Date............................................................................ 10
Premiums................................................................................. 10
Allocation of Premiums................................................................... 11
Transfers................................................................................ 12
How the Contract Fund Changes with Investment Experience................................. 12
How a Contract's Death Benefit Will Vary................................................. 13
Withdrawal of Excess Cash Surrender Value................................................ 13
Illustrations of Cash Surrender Values, Death Benefits, and Accumulated Premiums......... 14
Contract Loans........................................................................... 15
Surrender of a Contract.................................................................. 15
Lapse and Reinstatement.................................................................. 15
Paid-Up Insurance Option................................................................. 16
Reduced Paid-Up Insurance Option......................................................... 17
When Proceeds Are Paid................................................................... 17
Living Needs Benefit..................................................................... 17
Reports to Contract Owners............................................................... 18
Tax Treatment of Contract Benefits....................................................... 18
Riders................................................................................... 20
Legal Considerations Relating to Sex-Distinct Premiums and Benefits...................... 20
Other Standard Contract Provisions....................................................... 20
Paying Premiums by Payroll Deduction..................................................... 21
Sale of the Contract and Sales Commissions............................................... 21
State Regulation......................................................................... 21
Experts.................................................................................. 21
Litigation and Regulatory Proceedings.................................................... 21
Additional Information................................................................... 22
Financial Statements..................................................................... 22
DIRECTORS AND OFFICERS OF PRUCO LIFE OF NEW JERSEY........................................ 23
FINANCIAL STATEMENTS OF THE PRUVIDER VARIABLE APPRECIABLE LIFE SUBACCOUNTS OF PRUCO LIFE
OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT................................................ A1
FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY........................ B1
</TABLE>
<PAGE>
INTRODUCTION AND SUMMARY
This summary provides only an overview of the more significant provisions of the
Contract. We provide further detail in the subsequent sections of this
prospectus and in the Contract.
AS OF MAY 1, 1999, PRUCO LIFE OF NEW JERSEY NO LONGER OFFERED THESE CONTRACTS
FOR SALE.
BRIEF DESCRIPTION OF THE CONTRACT
The Pruco Life of New Jersey PRUvider Variable APPRECIABLE LIFE Insurance
Contract (the "Contract") is a form of flexible premium variable life insurance.
It was issued by Pruco Life Insurance Company of New Jersey ("Pruco Life of New
Jersey", "us", "we", or "our"). It is based on a Contract Fund, the value of
which changes every business day. The Contract Fund represents the total amount
credited to a specific Contract. On any date it is equal to the sum of the
amounts invested in the variable investment options and the fixed-rate option,
and the principal amount of any Contract debt plus any interest earned thereon.
There is a surrender charge if you decide to surrender the Contract during the
first 10 Contract years.
A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. You choose whether to invest
in one or both variable investment options and/or the fixed-rate option.
Whenever you pay a premium, Pruco Life of New Jersey first deducts certain
charges and, except for amounts allocated to the fixed-rate option, puts the
remainder - the "net premium" - into the Account. The money allocated to each
variable investment option is immediately invested in a corresponding portfolio
of The Prudential Series Fund, Inc. (the "Series Fund"), a series mutual fund
for which Prudential is the investment adviser. The two Series Fund portfolios
- - the CONSERVATIVE BALANCED PORTFOLIO and the FLEXIBLE MANAGED PORTFOLIO -
differ in the amount of risk associated with them and are described in more
detail on page 5.
Variable life insurance contracts are unsuitable as short-term savings vehicles.
Withdrawals and loans may negate any guarantee against lapse (see LAPSE AND
REINSTATEMENT, page 15) and possibly may result in adverse tax consequences.
See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
CHARGES
Pruco Life of New Jersey deducts certain charges from each premium payment and
from the amounts held in the designated variable investment option[s] and the
fixed-rate option. In addition, Pruco Life of New Jersey makes certain
additional charges if a Contract lapses or is surrendered during the first 10
Contract years. All these charges, which are largely designed to cover
insurance costs and risks as well as sales and administrative expenses, are
fully described under CONTRACT FEES AND CHARGES on page 6. In brief, and
subject to that fuller description, the following diagram outlines the maximum
charges which Pruco Life of New Jersey may make:
------------------------------------------------------------------
PREMIUM PAYMENT
------------------------------------------------------------------
-----------------------------------------------
. less charge for taxes attributable to
premiums
. less $2 processing fee
-----------------------------------------------
- -------------------------------------------------------------------------------
INVESTED PREMIUM AMOUNT
. To be invested in one or a combination of:
. The Conservative Balanced Portfolio
. The Flexible Managed Portfolio
. The fixed-rate option
- -------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
DAILY CHARGES
. We deduct management fees and expenses from the Series Fund assets. The
total expenses of each portfolio for the year 1999, expressed as a
percentage of the average assets during the year, are as follows:
Portfolios Conservative Balanced Flexible Managed
Advisory Fee 0.55% 0.60%
Other Expenses 0.02% 0.02%
Total Expenses 0.57% 0.62%
. We deduct a daily mortality and expense risk charge equivalent to an annual
rate of up to 0.9% from the assets of the variable investment options.
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MONTHLY CHARGES
. We deduct a sales charge from the Contract Fund in the amount of 1/2 of 1%
of the primary annual premium.
. We reduce the Contract Fund by a guaranteed minimum death benefit risk
charge of not more than $0.01 per $1,000 of the face amount of insurance.
. We reduce the Contract Fund by an administrative charge of up to $6 per
Contract and up to $0.19 per $1,000 of face amount of insurance (currently,
on a non-guaranteed basis, the $0.19 charge is decreased to $0.09 per
$1,000); if the face amount of the Contract is less than $10,000, there is
an additional charge of $0.30 per $1,000 of face amount.
. We deduct a charge for anticipated mortality. The maximum charge is based
on the non-smoker/smoker 1980 CSO Tables.
. If the Contract includes riders, we deduct rider charges from the Contract
Fund.
. If the rating class of the insured results in an extra charge, we will
deduct that charge from the Contract Fund.
- -------------------------------------------------------------------------------
------------------------------------------------------------------------------
POSSIBLE ADDITIONAL CHARGES
. During the first 10 years, we will assess a contingent deferred sales
charge if the Contract lapses or is surrendered. During the first five
years, the maximum contingent deferred sales charge is 50% of the first
year's primary annual premium. This charge is both subject to other
important limitations and reduced for Contracts that have been inforce for
more than five years.
. During the first 10 years, we will assess a contingent deferred
administrative charge if the Contract lapses or is surrendered. During the
first five years, this charge equals $5 per $1,000 of face amount. It
begins to decline uniformly after the fifth Contract year so that it
disappears on the 10th Contract anniversary.
. We assess an administrative processing charge of up to $15 for each
withdrawal of excess cash surrender value.
- -------------------------------------------------------------------------------
Because of the charges listed above, and in particular because of the
significant charges deducted upon early surrender or lapse, you should purchase
a Contract only if you intend to, and have the financial capability to, keep it
for a substantial period.
PREMIUM PAYMENTS
Your Contract sets forth an annual Scheduled Premium, or one that is payable
more frequently, such as monthly. Pruco Life of New Jersey guarantees that, if
the Scheduled Premiums are paid when due (or if missed premiums are paid later,
with interest), the death benefit will be paid upon the death of the insured.
Your Contract will not lapse even if investment experience is so unfavorable
that the Contract Fund value drops to zero.
The amount of the Scheduled Premium depends on the Contract's face amount, the
insured's sex and age at issue, the insured's risk classification, the rate for
taxes attributable to premiums, and the frequency of premium payments selected.
Under certain low face amount Contracts issued on younger insureds, the payment
of the Scheduled
2
<PAGE>
Premium may cause the Contract to be classified as a Modified
Endowment Contract. See Tax Treatment of Contract Benefits, page 18.
Lapse and Guarantee Against Lapse
Pruco Life of New Jersey's PRUvider Variable Appreciable Life Insurance Contract
is a form of life insurance that provides much of the flexibility of variable
universal life, with two important distinctions:
. Pruco Life of New Jersey guarantees that if the Scheduled Premiums are paid
when due, or within the grace period (or missed premiums are paid later with
interest), the Contract will not lapse and, at least the face amount of
insurance will be paid upon the death of the insured. This is true even if,
because of unfavorable investment experience, the Contract Fund value should
drop to zero.
. If all premiums are not paid when due (or not made up later), the Contract
will still not lapse as long as the Contract Fund is higher than a stated
amount set forth in a table in the Contract. This amount is called the
"Tabular Contract Fund", and it increases each year. In later years it
becomes quite high. The Contract lapses when the Contract Fund falls below
this stated amount, rather than when it drops to zero. This means that, when
a PRUVIDER Variable APPRECIABLE LIFE Contract lapses, it may still have
considerable value, and you may have a substantial incentive to reinstate it.
If you choose not to reinstate, on the other hand, you may take the cash
surrender value under several options.
REFUND
For a limited time, a Contract may be returned for a refund in accordance with
the terms of its "free-look" provision. See SHORT-TERM CANCELLATION RIGHT OR
"FREE-LOOK", page 10.
______________________
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 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
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR THE PRUDENTIAL SERIES
FUND, INC.
3
<PAGE>
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE
COMPANY OF NEW JERSEY, PRUCO LIFE OF NEW JERSEY
VARIABLE APPRECIABLE ACCOUNT, THE
VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER
THE CONTRACT, AND THE FIXED-RATE OPTION
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.
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.
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 ("1940 Act") 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 liabilities relating to the
variable benefits attributable to the Account. These assets may not be charged
with liabilities which arise from any other business Pruco Life of New Jersey
conducts. In addition to these assets, the Account's assets may include funds
contributed by Pruco Life of New Jersey to commence operation of the Account and
may include accumulations of the charges Pruco Life of New Jersey makes against
the Account. From time to time these additional assets will be transferred to
Pruco Life of New Jersey's general account. Before making any such transfer,
Pruco Life of New Jersey will consider any possible adverse impact the transfer
might have on the Account.
4
<PAGE>
The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Pruco Life of New Jersey.
There are currently two variable investment options within the Account, one of
which invests in the Conservative Balanced Portfolio and the other of which
invests in the Flexible Managed Portfolio of the Series Fund. We may add
additional variable investment options in the future. The Account's financial
statements begin on page A1.
THE PRUDENTIAL SERIES FUND, INC.
The Prudential Series Fund, Inc. (the "Series Fund") is registered under the
1940 Act as an open-end diversified management investment company. Its shares
are currently sold only to separate accounts of Prudential and certain other
insurers that offer variable life insurance and variable annuity contracts. On
October 31, 1986, the Pruco Life Series Fund, Inc., an open-end diversified
management investment company, which sold its shares only to separate accounts
of Pruco Life and Pruco Life Insurance Company of New Jersey, was merged into
the Series Fund. Prior to that date, the Account invested only in shares of
Pruco Life Series Fund, Inc. The Account will purchase and redeem shares from
the Series Fund at net asset value. Shares will be redeemed to the extent
necessary for Pruco Life of New Jersey to provide benefits under the Contracts
and to transfer assets from one variable investment option to another, as
requested by Contract owners. Any dividend or capital gain distribution
received from a portfolio of the Series Fund will be reinvested immediately at
net asset value in shares of that portfolio and retained as assets of the
corresponding variable investment option.
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. Further detail is provided in the prospectus and statement of
additional information for the Series Fund. Prudential and PIC are registered
as investment advisers under the 1940 Act.
As an investment adviser, Prudential charges the Series Fund a daily investment
management fee as compensation for its services. In addition to the investment
management fee, each portfolio incurs certain expenses, such as accounting and
custodian fees. See CONTRACT FEES AND CHARGES, page 6.
In the future it may become disadvantageous for both variable life insurance and
variable annuity contract separate accounts to invest in the same underlying
mutual fund. Neither the companies that invest in the Series Fund nor the
Series Fund currently foresees any such disadvantage. The Series Fund's Board
of Directors intends to monitor events in order to identify any material
conflict between variable life insurance and variable annuity contract owners
and to determine what action, if any, should be taken. Material conflicts could
result from such things as:
(1) changes in state insurance law;
(2) changes in federal income tax law;
(3) changes in the investment management of any portfolio of the Series
Fund; or
(4) differences between voting instructions given by variable life
insurance and variable annuity contract owners.
THE SERIES FUND HAS A SEPARATE PROSPECTUS THAT IS PROVIDED WITH THIS PROSPECTUS.
YOU SHOULD READ THE SERIES FUND PROSPECTUS BEFORE YOU DECIDE TO ALLOCATE ASSETS
TO THE VARIABLE INVESTMENT OPTIONS. THERE IS NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES OF THE SERIES FUND PORTFOLIOS WILL BE MET.
Listed below are the available portfolios of the Series Fund and their
investment objectives:
. 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. This Portfolio is appropriate for
an investor desiring diversification with a relatively lower risk of loss
than that associated with the Flexible Managed Portfolio.
. 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. This Portfolio is appropriate for an investor desiring
diversification, who is willing to accept a relatively high level of loss, in
an effort to achieve greater appreciation.
5
<PAGE>
VOTING RIGHTS
We are the legal owner of the shares in the Series Fund. However, we vote the
shares in the Series Fund according to voting instructions we receive from
Contract owners. We will mail you a proxy, which is a form you need to complete
and return to us to tell us how you wish us to vote. When we receive those
instructions, we will vote all of the shares we own on your behalf in accordance
with those instructions. We will vote the shares for which we do not receive
instructions and shares that we own, in the same proportion as the shares for
which instructions are received. We may change the way your voting instructions
are calculated if it is required by federal regulation. Should the applicable
federal securities laws or regulations, or their current interpretation, change
so as to permit Pruco Life of New Jersey to vote shares of the Series Fund in
its own right, it may elect to do so.
THE FIXED-RATE OPTION
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED-RATE
OPTION UNDER THE CONTRACT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND THE GENERAL ACCOUNT HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY, INTERESTS IN THE FIXED-
RATE OPTION ARE NOT SUBJECT TO THE PROVISIONS OF THESE ACTS, AND PRUCO LIFE OF
NEW JERSEY HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING TO THE
FIXED-RATE OPTION. 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 allocate, either initially or by transfer, all or part of your
Contract Fund to the fixed-rate option. This amount becomes part of Pruco Life
of New Jersey's general account. Pruco Life of New Jersey's 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. 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. This rate may not be less
than an effective annual rate of 4%.
Currently, the following steps are taken for crediting interest rates: declared
interest rates remain in effect from the date money is allocated to the fixed-
rate option until the Monthly date in the same month in the following year (see
CONTRACT DATE on page 10); thereafter, a new crediting rate will be declared
each year and will remain in effect for the calendar year. Pruco Life of New
Jersey reserves the right to change this practice. Pruco Life of New Jersey is
not obligated to credit interest at a higher rate than 4%, although we may do
so. Different crediting rates may be declared for different portions of the
Contract Fund allocated to the fixed-rate option. At least annually and on
request, you will be advised of the interest rates that currently apply to your
Contract. The term Monthly Date means the day of each month that is the same as
the Contract Date.
Transfers from the fixed-rate option are subject to strict limits. See
TRANSFERS, page 12. 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 17.
DETAILED INFORMATION FOR CONTRACT OWNERS
CONTRACT FEES AND CHARGES
This section provides a more detailed description of each charge that is
described briefly in the chart on page 1.
In several instances we 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 we are now charging. If circumstances change, we reserve the
right to increase each current charge, up to the maximum charge, without giving
any advance notice.
A Contract owner may add several "riders" to the Contract which provide
additional benefits and are charged for separately. The statement and
description of charges that follows assumes there are no riders to the Contract.
DEDUCTIONS FROM PREMIUMS
(a) Pruco Life of New Jersey deducts a charge for taxes attributable to premiums
from each premium payment. That charge is currently made up of two parts.
The first part is a charge for state and local premium-based taxes which
6
<PAGE>
depend on the state in which you live. The tax rate varies from state to
state, generally ranging from 0.75% to 5% (but in some instances may exceed
5%) of the premium received by Pruco Life of New Jersey. The amount charged
may be more than Pruco Life of New Jersey actually pays. The second part is
a charge for federal income taxes measured by premiums, equal to 1.25% of
the premium. We believe that this charge is a reasonable estimate of an
increase in its federal income taxes resulting from a 1990 change in the
Internal Revenue Code. It is intended to recover this increased tax. During
1999, 1998, and 1997, we received a total of approximately $111,000,
$124,201, and $130,658, respectively, in charges for taxes attributable to
premiums.
(b) Pruco Life of New Jersey deducts a charge of $2 from each premium payment to
cover the cost of collecting and processing premiums. Thus, if you pay
premiums annually, this charge will be $2 per year. If you pay premiums
monthly, the charge will be $24 per year. If you pay premiums more
frequently, for example under a payroll deduction plan with your employer,
the charge may be more than $24 per year. During 1999, 1998, and 1997, we
received a total of approximately $205,000, $217,724, and $219,537,
respectively, in processing charges.
DEDUCTIONS FROM PORTFOLIOS
Pruco Life of New Jersey deducts an investment advisory fee daily from each
portfolio at a rate, on an annualized basis, of 0.55% for the Conservative
Balanced Portfolio and 0.60% for the Flexible Managed Portfolio.
We pay expenses incurred in conducting the investment operations of the
portfolios (such as investment advisory fees, custodian fees and preparation and
distribution of annual reports) out of the portfolio's income. These expenses
also vary by portfolio. The total expenses of each portfolio for the year 1999,
expressed as a percentage of the average assets during the year, are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ADVISORY OTHER TOTAL
PORTFOLIO FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
Conservative Balanced 0.55% 0.02% 0.57%
Flexible Managed 0.60% 0.02% 0.62%
- -------------------------------------------------------------------------------
</TABLE>
DAILY DEDUCTION FROM THE CONTRACT FUND
Each day Pruco Life of New Jersey deducts a charge from the assets of each of
the variable investment options in an amount equivalent to an effective annual
rate of up to 0.9%. This charge is intended to compensate us for assuming
mortality and expense risks under the Contract. The mortality risk assumed is
that insureds may live for shorter periods of time than we estimated when we
determined what mortality charge to make. The expense risk assumed is that
expenses incurred in issuing and administering the Contract will be greater than
we estimated in fixing our administrative charges. This charge is not assessed
against amounts allocated to the fixed-rate option. During 1999, 1998, and 1997,
we received a total of approximately $200,000, $182,115, and $154,038,
respectively, in mortality and expense risk charges.
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) Pruco Life of New Jersey deducts a sales charge, often called a "sales
load", to pay part of the costs of selling the Contracts, including
commissions, advertising, and the printing and distribution of prospectuses
and sales literature. The charge is equal to 0.5% of the "primary annual
premium." The primary annual premium is equal to the Scheduled Premium that
would be payable if premiums were being paid annually, less the two
deductions from premiums (taxes attributable to premiums and the $2
processing charge), and less the $6 part of the monthly deduction described
in (c) below, the $0.30 per $1,000 of face amount for Contracts with a face
amount of less than $10,000, and any extra premiums for riders or
substandard risks. The sales load is charged whether the Contract owner is
paying premiums annually or more frequently. It is lower on Contracts issued
on insureds over 60 years of age. To summarize, for most Contracts, this
charge is somewhat less than 6% of the annual Scheduled Premium.
There is a second sales load, which will be charged only if a Contract
lapses or is surrendered before the end of the 10th Contract year. It is
often described as a contingent deferred sales load ("CDSL") and is
described under
7
<PAGE>
SURRENDER OR WITHDRAWAL CHARGES, page 8. During 1999, 1998, and 1997, we
received a total of approximately $394,000, $513,309, and $568,524,
respectively, in sales load charges.
(b) Pruco Life of New Jersey deducts a charge of not more than $0.01 per $1000
of face amount of insurance to compensate for the risk we assume in
guaranteeing that, no matter how unfavorable investment experience may be,
the death benefit will never be less than the guaranteed minimum death
benefit, so long as Scheduled Premiums are paid on or before the due date or
during the grace period. This charge will not be made if the Contract has
been continued inforce pursuant to an option on lapse. During 1999, 1998,
and 1997, we received a total of approximately $20,000, $25,605, and
$26,181, respectively, for this risk charge.
(c) Pruco Life of New Jersey deducts an administrative charge of $6 plus up to
$0.19 per $1,000 of face amount of insurance. Currently, on a non-guaranteed
basis, this charge is reduced from $0.19 to $0.09 per $1,000. The charge is
intended to pay for processing claims, keeping records, and communicating
with Contract owners. If premiums are paid by automatic transfer under the
Pru-Matic Plan, as described on page 10, the current charge is further
reduced to $0.07 per $1,000 of face amount. There is an additional charge of
$0.30 per $1,000 of face amount if the face amount of the Contract is less
than $10,000. This monthly administrative charge will not be made if the
Contract has been continued inforce pursuant to an option on lapse. During
1999, 1998, and 1997, we received a total of approximately $1,248,000,
$1,268,693, and $1,352,185, respectively, in monthly administrative charges.
(d) Pruco Life of New Jersey deducts a mortality charge that is intended to be
used to pay death benefits. When an insured dies, the amount payable to the
beneficiary is larger than the Contract Fund and significantly larger if the
insured dies in the early years of a Contract. The mortality charges
collected from all Contract owners enable us to pay the death benefit for
the few insureds who die. We determine the maximum mortality charge by
multiplying the "net amount at risk" under a Contract (the amount by which
the Contract's death benefit, computed as if there were neither riders nor
Contract debt, exceeds the Contract Fund) by a rate based upon the insured's
current attained age, sex and the anticipated mortality for that class of
persons. The anticipated mortality is based upon mortality tables published
by The National Association of Insurance Commissioners called the Non-
Smoker/Smoker 1980 CSO Tables. We may determine that a lesser amount than
that called for by these mortality tables will be adequate for insureds of
particular ages and may thus make a lower mortality charge for such persons.
Any lower current mortality charges are not applicable to Contracts inforce
pursuant to an option on lapse. See LAPSE AND REINSTATEMENT, page 15.
(e) If a rider is added to the basic Contract, or if an insured is in a
substandard risk classification (for example, a person in a hazardous
occupation), we increase the Scheduled Premium and deduct additional charges
monthly.
(f) Pruco Life of New Jersey may deduct a charge 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. We will review 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 Account.
Under current law, Pruco Life of New Jersey may incur state and local taxes
(in addition to premium taxes) in several states. At present, these taxes
are not significant and they are not charged against the Account. If there
is a material change in the applicable state or local tax laws, the
imposition of any such taxes upon Pruco Life of New Jersey that are
attributable to the Account may result in a corresponding charge against the
Account.
SURRENDER OR WITHDRAWAL CHARGES
(a) Pruco Life of New Jersey charges an additional contingent deferred sales
load (the CDSL) if a Contract lapses or is surrendered during the first 10
Contract years. No such charge is applicable to the death benefit, no matter
when it may become payable. The maximum contingent deferred charge is equal
to 50% of the first year's primary annual premium upon Contracts that lapse
or are surrendered during the first five Contract years. That percentage is
reduced uniformly on a daily basis starting from the Contract's fifth
anniversary until it disappears on the 10th anniversary.
The contingent deferred sales load is also further limited at older issue
ages (approximately above age 61) in order to comply with certain
requirements of state law. Specifically, the contingent deferred sales load
for such insureds is no more than $32.50 per $1,000 of face amount.
The sales load is subject to a further important limitation that may,
particularly for Contracts that lapse or are surrendered within the first
five or six years, result in a lower contingent deferred sales load than
that described
8
<PAGE>
above. (This limitation might also, under unusual circumstances, apply to
reduce the monthly sales load deductions described in item (a) under MONTHLY
DEDUCTIONS FROM CONTRACT FUND, page 7.)
The limitation is based on a Guideline Annual Premium ("GAP") that is
associated with every Contract. The GAP is a defined amount determined
actuarially in accordance with a regulation of the Securities and Exchange
Commission ("SEC"). Pruco Life of New Jersey will charge a maximum aggregate
sales load (that is, the sum of the monthly sales load deduction and the
contingent deferred sales charge) that will not be more than 30% of the
premiums actually paid until those premiums total one GAP plus no more than
9% of the next premiums paid until total premiums are equal to five GAPS,
plus no more than 6% of all subsequent premiums. If the sales charges
described above would at any time exceed this maximum amount then, to the
extent of any excess, we will not make the charge.
The amount of this charge can be more easily understood by reference to the
following table which shows the sales loads that would be paid by a 35 year
old man with $20,000 face amount of insurance, both through the monthly
deductions from the Contract Fund described above and upon the surrender of
the Contract. The primary annual premium is $304.20.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL SALES
CUMULATIVE LOAD AS
SURRENDER, CUMULATIVE SALES LOAD CONTINGENT TOTAL PERCENTAGE OF
LAST DAY OF SCHEDULED DEDUCTED FROM DEFERRED SALES SALES SCHEDULED PREMIUMS
YEAR No. PREMIUMS PAID CONTRACT FUND LOAD* LOAD PAID**
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $ 390.90 $ 18.24 $ 87.22 $105.46 26.98%
2 781.80 36.48 104.16 140.64 17.99%
3 1,172.70 54.72 121.10 175.82 14.99%
4 1,563.60 72.96 138.04 211.00 13.49%
5 1,954.50 91.20 146.55 237.75 12.16%
6 2,345.40 109.44 121.80 231.24 9.86%
7 2,736.30 127.68 91.40 219.08 8.01%
8 3,127.20 145.92 60.80 206.72 6.61%
9 3,518.10 164.16 30.40 194.56 5.53%
10 3,909.00 182.40 0.00 182.40 4.67%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The maximum CDSL is $152.20 for years one through five; $121.80 for year
six; $91.40 for year seven; $60.80 for year eight; $30.40 for year nine;
and zero for year 10.
** The percentages shown in the last column will not be appreciably different
for insureds of different ages.
(b) Pruco Life of New Jersey deducts an administrative charge of $5 per $1,000
of face amount of insurance upon lapse or surrender to cover the cost of
processing applications, conducting medical examinations, determining
insurability and the insured's rating class, and establishing records.
However, this charge is reduced beginning on the Contract's fifth
anniversary and declines daily at a constant rate until it disappears
entirely on the 10th Contract anniversary. We are currently allowing
partial surrenders of the Contract, but we reserve the right to cancel
this administrative practice. If the Contract is partially surrendered
during the first 10 years, we deduct a proportionate amount of the charge
from the Contract Fund. During 1999, 1998, and 1997, we received a total
of approximately $61,000, $38,805, and $53,157, respectively, for
surrendered or lapsed Contracts. Surrender of all or part of a Contract
may have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page
18.
TRANSACTION CHARGES
Pruco Life of New Jersey will make an administrative processing charge equal to
the lesser of $15 or 2% of the amount withdrawn in connection with each
withdrawal of excess cash surrender value of a Contract.
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
As of May 1, 1999, Pruco Life of New Jersey no longer offered these Contracts
for sale. Generally, the Contract was issued on insureds below the age of 76.
The minimum initial guaranteed death benefit was $5,000; the maximum you could
apply for was $25,000. Proposed insureds, 21 years of age or less, could apply
for a minimum initial guaranteed
9
<PAGE>
death benefit of $10,000. Before issuing any Contract, Pruco Life of New Jersey
required evidence of insurability, which may have included a medical
examination. Non-smokers who met preferred underwriting requirements were
offered the most favorable premium rate. Pruco Life of New Jersey charges a
higher premium if an extra mortality risk is involved.
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 and if you exercise your short-term cancellation
right, you will receive a refund of all premium payments made, with no
adjustment for investment experience.
REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS
Pruco Life of New Jersey may have reduced the sales charges and/or other charges
on individual Contracts sold to members of a class of associated individuals, or
to a trustee, employer or other entity representing such a class, where it is
expected that such multiple sales will result in savings of sales or
administrative expenses. Pruco Life of New Jersey determines both the
eligibility for such reduced charges, as well as the amount of such reductions,
by considering the following factors:
(1) the number of individuals;
(2) the total amount of premium payments expected to be received from these
Contracts;
(3) the nature of the association between these individuals, and the expected
persistency of the individual Contracts;
(4) the purpose for which the individual Contracts are purchased and whether
that purpose makes it likely that expenses will be reduced; and
(5) any other circumstances which Pruco Life of New Jersey believes to be
relevant in determining whether reduced sales or administrative expenses
may be expected.
Some of the reductions in charges for these sales may be contractually
guaranteed; other reductions may be withdrawn or modified by Pruco Life of New
Jersey on a uniform basis. Pruco Life of New Jersey's reductions in charges for
these sales will not be unfairly discriminatory to the interests of any
individual Contract owners.
CONTRACT DATE
When the first premium payment is paid with the application for a Contract, the
Contract Date is ordinarily the later of the application date and the medical
examination date. In most cases no medical examination is necessary. If the
first premium was not paid with the application, the Contract Date is ordinarily
the date the first premium was paid and the Contract was delivered. It may have
been advantageous for a Contract owner to have an earlier Contract Date if it
resulted in Pruco Life of New Jersey using a lower issue age in determining the
Scheduled Premium amount. Pruco Life of New Jersey permits a Contract to be
back-dated but only to a date not earlier than six months prior to the date of
the application. Pruco Life of New Jersey requires the payment of all premiums
that would have been due had the application date coincided with the back-dated
Contract Date. The death benefit and cash surrender value under the Contract
will be equal to what they would have been had the Contract been issued on the
Contract Date, all Scheduled Premiums been received on their due dates, and all
Contract charges been made.
PREMIUMS
The Contract provides for a Scheduled Premium which, if paid when due or within
a 61 day grace period, ensures that the Contract will not lapse. If you pay
premiums other than on a monthly basis, you will receive a notice that a premium
is due about three weeks before each due date. If you pay premiums monthly, you
will receive a book each year with 12 coupons that will serve as a reminder.
With Pruco Life of New Jersey's consent, you may change the frequency of premium
payments.
You may elect to have monthly premiums paid automatically under the "Pru-Matic
Premium Plan" by pre-authorized transfers from a bank checking account. If you
select the Pru-Matic Premium Plan, one of the current monthly charges will be
reduced. See MONTHLY DEDUCTIONS FROM CONTRACT FUND, page 7. Some Contract
owners may also be eligible to have monthly premiums paid by pre-authorized
deductions from an employer's payroll.
10
<PAGE>
The following table shows, for two face amounts, representative preferred and
standard annual premium amounts under Contracts issued on insureds who are not
substandard risks. These premiums do not reflect any additional riders or
supplementary benefits.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
$10,000 FACE AMOUNT $20,000 FACE AMOUNT
---------------------------------------------------------------
PREFERRED STANDARD PREFERRED STANDARD
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Male, age 35 $233.70 $274.01 $390.90 $ 471.52
at issue
- -------------------------------------------------------------------------------------
Female, age 45 $278.04 $308.53 $479.59 $ 540.57
at issue
- -------------------------------------------------------------------------------------
Male, age 55 $450.96 $562.17 $825.43 $1047.86
at issue
- -------------------------------------------------------------------------------------
</TABLE>
The following table compares annual and monthly premiums for insureds who are in
the preferred rating class. Note that in these examples the sum of 12 monthly
premiums for a particular Contract is approximately 110% to 116% of the annual
Scheduled Premium for that Contract.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
$10,000 FACE AMOUNT $20,000 FACE AMOUNT
---------------------------------------------------------------
MONTHLY ANNUAL MONTHLY ANNUAL
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Male, age 35 $22.43 $233.70 $36.59 $390.90
at issue
- -------------------------------------------------------------------------------------
Female, age 45 $26.46 $278.04 $44.65 $479.59
at issue
- -------------------------------------------------------------------------------------
Male, age 55 $41.96 $450.96 $75.66 $825.43
at issue
- -------------------------------------------------------------------------------------
</TABLE>
A significant feature of this Contract is that it permits you to pay greater
than Scheduled Premiums. You may make unscheduled premium payments occasionally
or on a periodic basis. If you wish, you may select a higher contemplated
premium than the Scheduled Premium. Pruco Life of New Jersey will then bill you
for the chosen premium. In general, the regular payment of higher premiums will
result in higher cash surrender values and higher death benefits. Conversely, a
Scheduled Premium payment does not need to be made if the Contract Fund is large
enough to enable the charges due under the Contract to be made without causing
the Contract to lapse. See LAPSE AND REINSTATEMENT, page 15. The payment of
premiums in excess of Scheduled Premiums may cause the Contract to become a
Modified Endowment Contract for federal income tax purposes. If this happens,
loans and other distributions which would otherwise not be taxable events may be
subject to federal income taxation. See TAX TREATMENT OF CONTRACT BENEFITS, page
18.
Pruco Life of New Jersey will generally accept any premium payment of at least
$25. Pruco Life of New Jersey reserves the right to limit unscheduled premiums
to a total of $5,000 in any Contract year, and to refuse to accept premiums that
would immediately result in more than a dollar-for-dollar increase in the death
benefit. See HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page 13. The privilege of
making large or additional premium payments offers a way of investing amounts
which accumulate without current income taxation, but again, there are tax
consequences if the Contract becomes a Modified Endowment Contract. See TAX
TREATMENT OF CONTRACT BENEFITS, page 18.
ALLOCATION OF PREMIUMS
Pruco Life of New Jersey deducts a $2 processing charge and the charge for taxes
attributable to premiums from premium payments. Each payment, after the
deductions from premiums, will be invested as of the end of the valuation period
when received at a Home Office in accordance with the allocation you have
designated. A valuation period is 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 are
calculated, which is generally 4:00 p.m. Eastern time on each day during which
the New York Stock Exchange is open. 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. You may also change the way in which subsequent
premiums are allocated by telephoning a Home Office,
11
<PAGE>
provided you are enrolled to use the Telephone Transfer system. There is no
charge for reallocating future premiums. If any part of the invested portion of
a premium is allocated to a particular investment option, that portion must be
at least 10% on the date the allocation takes effect. All percentage allocations
must be in whole numbers. For example, 33% can be selected but 331/3% cannot. Of
course, the total allocation of all selected investment options must equal 100%.
TRANSFERS
If the Contract is not in default, or if the Contract is inforce as variable
reduced paid-up insurance (see LAPSE AND REINSTATEMENT, page 15), you may, up to
four times in each Contract year, transfer amounts from one variable investment
option to the other variable investment option or to the fixed-rate option.
Currently, you may make additional transfers with our consent without charge.
All or a portion of the amount credited to a variable investment option may be
transferred. If you wish to convert your variable Contract to a fixed-benefit
Contract in this manner, you must request a complete transfer of funds to the
fixed-rate option and change your allocation instructions regarding any future
premiums.
Transfers between variable investment options will take effect as of the end of
the valuation period (usually the business day) 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 $1,000 from one variable investment option to the
other, or may be in terms of a percentage reallocation between 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, if 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, depending on the terms of the assignment. We will use
reasonable procedures, such as asking you for certain personal information
provided on your application for insurance, to confirm that instructions given
by telephone are genuine. Pruco Life of New Jersey 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.
Transfers from the fixed-rate option to the variable investment options are
currently permitted once each Contract year and only during the 30-day period
beginning on the Contract anniversary. The maximum amount which may be
transferred out of the fixed-rate option each year is currently the greater of:
(a) 25% of the amount in the fixed-rate option, or (b) $2,000. Such transfer
requests received prior to the Contract anniversary will be effective on the
Contract anniversary. Transfer requests received within the 30-day period
beginning on the Contract anniversary will be effective as of the end of the
valuation period in which a proper transfer request is received at a Home
Office. Pruco Life of New Jersey may change these limits in the future.
HOW THE CONTRACT FUND CHANGES WITH INVESTMENT EXPERIENCE
As explained earlier, after the 10th Contract year, there will no longer be a
surrender charge and, if there is no Contract loan, the cash surrender value
will be equal to the Contract Fund. This section, therefore, also describes how
the cash surrender value of the Contract will change with investment experience.
On the Contract Date, the Contract Fund value is the initial premium less the
deductions from premiums and the first monthly deductions. See CONTRACT FEES
AND CHARGES, page 6. This amount is placed in the variable investment option[s]
you choose and/or the fixed-rate option. Thereafter, the Contract Fund value
changes daily, reflecting increases or decreases in the value of the assets in
the variable investment options, and interest credited on any amounts allocated
to the fixed-rate option. It is also reduced by the daily asset charge for
mortality and expense risks assessed against the variable investment options.
The Contract Fund value also increases to reflect the receipt of additional
premium payments and is decreased by the monthly deductions.
A Contract's cash surrender value on any date will be the Contract Fund value
reduced by the withdrawal charges, if any, and by any Contract debt. Upon
request, Pruco Life of New Jersey will tell you the cash surrender value of your
Contract. It is possible, although highly unlikely, that the cash surrender
value of a Contract could decline to zero because of unfavorable investment
performance, even if you continue to pay Scheduled Premiums when due.
The tables on pages T1 through T4 of this prospectus (immediately following page
14) illustrate what the death benefit and cash surrender values would be for a
representative Contract, assuming uniform hypothetical investment results in the
selected portfolio[s], and also provide information about the aggregate premiums
payable under the Contract.
12
<PAGE>
HOW A CONTRACT'S DEATH BENEFIT WILL VARY
The death benefit will vary with investment experience. The death benefit will
be equal to the face amount of insurance plus the amount, if any, by which the
Contract Fund value exceeds the applicable "Tabular Contract Fund Value" for the
Contract (subject to an exception described below under which the death benefit
is higher). Each Contract contains a table that sets forth the Tabular Contract
Fund Value as of the end of each of the first 20 years of the Contract. Tabular
Contract Fund Values between Contract anniversaries are determined by
interpolation. The "Tabular Contract Fund Value" for each Contract year is an
amount that is slightly less than the Contract Fund value that would result as
of the end of such year if:
(1) you paid only Scheduled Premiums;
(2) you paid the Scheduled Premiums when due;
(3) your selected investment options earned a net return at a uniform rate
of 4% per year;
(4) we deducted full mortality charges based upon the 1980 CSO Table;
(5) we deducted the maximum sales load and expense charges; and
(6) there was no Contract debt.
The death benefit will equal the face amount if the Contract Fund equals the
Tabular Contract Fund Value. In general, and assuming the optional paid-up
benefit is not in effect (see PAID-UP INSURANCE OPTION on page 16), if, due to
investment results greater than a net return of 4%, or to payment of greater
than Scheduled Premiums, or to smaller than maximum charges, the Contract Fund
value is a given amount greater than the Tabular Contract Fund Value, the death
benefit will be the face amount plus that excess amount. If, due to investment
results less favorable than a net return of 4%, the Contract Fund value is less
than the Tabular Contract Fund Value, the death benefit will not fall below the
initial face amount stated in the Contract. Again, the death benefit will
reflect a deduction for the amount of any Contract debt. See CONTRACT LOANS,
page 15. Any unfavorable investment experience must first be offset by
favorable performance or additional payments that bring the Contract Fund up to
the Tabular level before favorable investment results or additional payments
will increase the death benefit.
The Contract Fund could grow to the point where it is necessary to increase the
death benefit by a greater amount in order to ensure that the Contract will
satisfy the Internal Revenue Code's definition of life insurance. Thus, the
death benefit will always be the greatest of (1) the face amount plus the
Contract Fund minus the Tabular Contract Fund Value; (2) the guaranteed minimum
death benefit; and (3) the Contract Fund times the attained age factor that
applies.
WITHDRAWAL OF EXCESS CASH SURRENDER VALUE
Under certain circumstances, you may withdraw a portion of the Contract's cash
surrender value without surrendering the Contract. The withdrawal amount is
limited by the requirement that the Contract Fund after withdrawal must not be
less than the Tabular Contract Fund Value. (A Table of Tabular Contract Fund
Values is included in the Contract; the Values increase with each year the
Contract remains inforce.) But because the Contract Fund may be made up in part
by an outstanding Contract loan, there is a further limitation that the amount
withdrawn may not be larger than an amount sufficient to reduce the cash
surrender value to zero. The amount withdrawn must be at least $200. You may
make no more than four such withdrawals in each Contract year, and there is an
administrative processing fee for each withdrawal equal to the lesser of $15 and
2% of the amount withdrawn. An amount withdrawn may not be repaid except as a
scheduled or unscheduled premium subject to the applicable charges. Upon
request, Pruco Life of New Jersey will tell you how much you may withdraw.
Withdrawal of part of the cash surrender value may have tax consequences. See
TAX TREATMENT OF CONTRACT BENEFITS, page 18. A temporary need for funds may
also be met by making a loan and you should consult your Pruco Life of New
Jersey representative about how best to meet your needs.
When a withdrawal is made, the cash surrender value and Contract Fund value are
reduced by the amount of the withdrawal, and the death benefit is reduced
accordingly. Neither the face amount of insurance nor the amount of Scheduled
Premiums will be changed due to a withdrawal of excess cash surrender value. No
surrender charges will be assessed for a withdrawal.
Withdrawal of part 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
lapse even if Scheduled Premiums continue to be paid when due. This is because,
for purposes of determining whether a lapse has occurred, Pruco Life of New
Jersey treats withdrawals as a return of premium.
13
<PAGE>
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS,
AND ACCUMULATED PREMIUMS
The following four tables show how a Contract's death benefit and cash surrender
values change with the investment performance 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:
. a Contract of a given face amount bought by a 35 year old male, non-smoker,
with no extra risks or substandard ratings, and no extra benefit riders
added to the Contract.
. the Scheduled Premium is paid on each Contract anniversary, the deduction
for taxes attributable to premiums is 3.25% and no loans are taken.
. the Contract Fund has been invested in equal amounts in each of the two
available portfolios of the Series Fund and no portion of the Contract Fund
has been allocated to the fixed-rate option.
The first table (page T1) assumes a Contract with a $5,000 face amount has been
purchased and the second table (page T2) assumes a Contract with a $20,000 face
amount has been purchased. Both assume the current charges will continue for
the indefinite future. 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.
Finally, 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 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 Scheduled Premiums had been invested to earn interest,
after taxes, at 4% compounded annually. The next four columns show the death
benefit payable at the end of each of the years shown for the four different
assumed investment returns. The last four columns show the cash surrender value
payable at the end of each of the years shown for the four different assumed
investment returns. The cash surrender values in the first 10 years reflect the
surrender charges that would be deducted if the Contract were surrendered in
those years.
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 Series Fund expenses. The net
return reflects average total annual expenses of the two portfolios of 0.60%,
and the daily deduction from the Contract Fund of 0.90% per year. Thus, based on
the above assumptions, gross investment returns of 0%, 4%, 8% and 12% are the
equivalent of net investment returns of -1.50%, 2.50%, 6.50%, and 10.50%,
respectively. The actual fees and expenses of the portfolios associated with a
particular Contract may be more or less than 0.60% 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, including
monthly charges, both from the Series Fund 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 35 year
old man, may be useful for a 35 year old man 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 a person of your own age, sex,
and rating class.
14
<PAGE>
ILLUSTRATIONS
-------------
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$5,000 GUARANTEED DEATH BENEFIT
$173.70 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
----------------------------------------------------- -------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ----------------------------------------------------- -------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net)
--- -------- ----------- ----------- ----------- ------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 181 $5,003 $5,007 $ 5,011 $ 5,016 $ 0 $ 0 $ 2 $ 6
2 $ 369 $5,002 $5,013 $ 5,025 $ 5,036 $ 48 $ 59 $ 70 $ 82
3 $ 564 $5,000 $5,019 $ 5,040 $ 5,063 $101 $ 121 $ 142 $ 165
4 $ 767 $5,000 $5,024 $ 5,058 $ 5,096 $153 $ 185 $ 219 $ 257
5 $ 978 $5,000 $5,028 $ 5,079 $ 5,136 $204 $ 249 $ 300 $ 357
6 $ 1,198 $5,000 $5,033 $ 5,105 $ 5,187 $268 $ 329 $ 400 $ 483
7 $ 1,427 $5,000 $5,038 $ 5,134 $ 5,248 $331 $ 411 $ 506 $ 620
8 $ 1,665 $5,000 $5,043 $ 5,167 $ 5,319 $392 $ 493 $ 618 $ 770
9 $ 1,912 $5,000 $5,047 $ 5,205 $ 5,404 $452 $ 578 $ 736 $ 935
10 $ 2,169 $5,000 $5,050 $ 5,247 $ 5,502 $511 $ 663 $ 860 $ 1,115
15 $ 3,617 $5,000 $5,057 $ 5,542 $ 6,269 $720 $1,046 $ 1,531 $ 2,257
20 $ 5,379 $5,000 $5,046 $ 6,024 $ 9,106 $881 $1,456 $ 2,433 $ 4,117
25 $ 7,523 $5,000 $5,013 $ 6,972 $13,529 $969 $1,879 $ 3,638 $ 7,058
30 (Age 65) $10,132 $5,000 $5,000 $ 8,731 $19,569 $938 $2,299 $ 5,192 $11,638
35 $13,305 $5,000 $5,000 $10,696 $27,909 $697 $2,689 $ 7,141 $18,633
40 $17,166 $5,000 $5,000 $12,938 $39,541 $ 48 $3,007 $ 9,534 $29,138
45 $21,864 $5,000 $5,000 $15,560 $55,982 $ 0 $3,167 $12,408 $44,644
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$89.46 semi-annually, $46.15 quarterly or $16.90 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.
(2) Assumes no Contract loan has been made.
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>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- -------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ----------------------------------------------------- -------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net)
--- -------- ----------- ----------- ----------- ------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,012 $20,024 $20,036 $ 20,048 $ 38 $ 50 $ 62 $ 74
2 $ 829 $20,013 $20,046 $20,080 $ 20,115 $ 243 $ 276 $ 310 $ 345
3 $ 1,269 $20,002 $20,065 $20,133 $ 20,204 $ 442 $ 505 $ 573 $ 644
4 $ 1,726 $20,000 $20,082 $20,194 $ 20,317 $ 636 $ 739 $ 852 $ 974
5 $ 2,202 $20,000 $20,095 $20,266 $ 20,456 $ 833 $ 985 $ 1,156 $ 1,347
6 $ 2,697 $20,000 $20,112 $20,356 $ 20,636 $1,083 $ 1,296 $ 1,539 $ 1,819
7 $ 3,211 $20,000 $20,127 $20,460 $ 20,852 $1,335 $ 1,617 $ 1,949 $ 2,341
8 $ 3,746 $20,000 $20,140 $20,578 $ 21,109 $1,581 $ 1,943 $ 2,381 $ 2,912
9 $ 4,302 $20,000 $20,151 $20,713 $ 21,414 $1,823 $ 2,274 $ 2,837 $ 3,537
10 $ 4,881 $20,000 $20,159 $20,865 $ 21,770 $2,059 $ 2,611 $ 3,317 $ 4,222
15 $ 8,140 $20,000 $20,161 $21,943 $ 24,581 $2,898 $ 4,115 $ 5,898 $ 8,536
20 $12,106 $20,000 $20,085 $23,726 $ 34,455 $3,545 $ 5,723 $ 9,364 $ 15,577
25 $16,931 $20,000 $20,000 $26,816 $ 51,232 $3,894 $ 7,379 $13,990 $ 26,728
30 (Age 65) $22,801 $20,000 $20,000 $33,613 $ 74,143 $3,767 $ 9,012 $19,989 $ 44,092
35 $29,942 $20,000 $20,000 $41,212 $105,773 $2,790 $10,484 $27,514 $ 70,618
40 $38,631 $20,000 $20,000 $49,880 $149,893 $ 167 $11,581 $36,757 $110,458
45 $49,203 $20,000 $20,000 $60,014 $212,247 $ 0 $11,848 $47,860 $169,261
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$202.79 semi-annually, $103.98 quarterly or $36.59 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.
(2) Assumes no Contract loan has been made.
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>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$5,000 GUARANTEED DEATH BENEFIT
$173.70 ANNUAL PREMIUM (1)
USING MAXIMUM CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
---------------------------------------------------- -------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
---------------------------------------------------- -------------------------------------------------
End of Accumulated
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net)
------- -------------- ------------ ----------- ----------- ------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 181 $5,000 $5,000 $ 5,004 $ 5,009 $ 0 $ 0 $ 0 $ 0
2 $ 369 $5,000 $5,000 $ 5,010 $ 5,022 $ 35 $ 45 $ 56 $ 67
3 $ 564 $5,000 $5,000 $ 5,018 $ 5,039 $ 82 $ 100 $ 120 $ 142
4 $ 767 $5,000 $5,000 $ 5,028 $ 5,063 $128 $ 157 $ 189 $ 224
5 $ 978 $5,000 $5,000 $ 5,040 $ 5,093 $172 $ 214 $ 261 $ 314
6 $ 1,198 $5,000 $5,000 $ 5,054 $ 5,129 $228 $ 284 $ 350 $ 425
7 $ 1,427 $5,000 $5,000 $ 5,070 $ 5,174 $283 $ 356 $ 443 $ 546
8 $ 1,665 $5,000 $5,000 $ 5,089 $ 5,227 $336 $ 428 $ 540 $ 678
9 $ 1,912 $5,000 $5,000 $ 5,112 $ 5,291 $388 $ 500 $ 643 $ 822
10 $ 2,169 $5,000 $5,000 $ 5,137 $ 5,365 $438 $ 574 $ 750 $ 978
15 $ 3,617 $5,000 $5,000 $ 5,319 $ 5,952 $602 $ 886 $1,308 $ 1,940
20 $ 5,379 $5,000 $5,000 $ 5,625 $ 7,692 $713 $1,203 $2,034 $ 3,477
25 $ 7,523 $5,000 $5,000 $ 6,105 $11,223 $740 $1,501 $2,970 $ 5,855
30 (Age 65) $10,132 $5,000 $5,000 $ 7,008 $15,903 $633 $1,740 $4,167 $ 9,457
35 $13,305 $5,000 $5,000 $ 8,432 $22,169 $282 $1,847 $5,629 $14,801
40 $17,166 $5,000 $5,000 $ 9,987 $30,626 $ 0 $1,661 $7,359 $22,568
45 $21,864 $5,000 $5,000 $11,714 $42,130 $ 0 $ 749 $9,341 $33,597
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$89.46 semi-annually, $46.15 quarterly or $16.90 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.
(2) Assumes no Contract loan has been made.
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>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING MAXIMUM CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
------------------------------------------------- --------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
------------------------------------------------- --------------------------------------------------
End of Accumulated
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,000 $20,000 $20,009 $ 20,020 $ 12 $ 24 $ 35 $ 46
2 $ 829 $20,000 $20,000 $20,024 $ 20,057 $ 191 $ 221 $ 253 $ 286
3 $ 1,269 $20,000 $20,000 $20,045 $ 20,111 $ 364 $ 423 $ 485 $ 551
4 $ 1,726 $20,000 $20,000 $20,073 $ 20,186 $ 533 $ 627 $ 731 $ 843
5 $ 2,202 $20,000 $20,000 $20,109 $ 20,283 $ 705 $ 844 $ 1,000 $ 1,174
6 $ 2,697 $20,000 $20,000 $20,154 $ 20,407 $ 924 $1,116 $ 1,337 $ 1,591
7 $ 3,211 $20,000 $20,000 $20,207 $ 20,560 $1,144 $1,398 $ 1,696 $ 2,049
8 $ 3,746 $20,000 $20,000 $20,270 $ 20,745 $1,359 $1,682 $ 2,073 $ 2,548
9 $ 4,302 $20,000 $20,000 $20,344 $ 20,967 $1,568 $1,969 $ 2,468 $ 3,091
10 $ 4,881 $20,000 $20,000 $20,430 $ 21,229 $1,770 $2,258 $ 2,882 $ 3,681
15 $ 8,140 $20,000 $20,000 $21,065 $ 23,339 $2,431 $3,484 $ 5,020 $ 7,293
20 $12,106 $20,000 $20,000 $22,159 $ 28,907 $2,877 $4,719 $ 7,797 $ 13,069
25 $16,931 $20,000 $20,000 $23,906 $ 42,230 $2,989 $5,864 $11,368 $ 22,032
30 (Age 65) $22,801 $20,000 $20,000 $26,798 $ 59,888 $2,559 $6,758 $15,937 $ 35,614
35 $29,942 $20,000 $20,000 $32,287 $ 83,529 $1,145 $7,080 $21,556 $ 55,768
40 $38,631 $20,000 $20,000 $38,281 $115,433 $ 0 $6,147 $28,210 $ 85,064
45 $49,203 $20,000 $20,000 $44,938 $158,832 $ 0 $2,078 $35,837 $126,663
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$202.79 semi-annually, $103.98 quarterly or $36.59 monthly. The death
benefits and cash surrender values would be slightly different for a
Contract with more frequent premium payments.
(2) Assumes no Contract loan has been made.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more
or less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rates
of inflation. The death benefit and cash surrender value for a contract would
be different from those shown if the actual rates of return averaged 0%, 4%,
8%, and 12% over a period of years but also fluctuated above or below those
averages for individual contract years. No representations can be made by
Pruco Life of New Jersey or the Series Fund that these hypothetical rates of
return can be achieved for any one year or sustained over any period of time.
T4
<PAGE>
CONTRACT LOANS
You may borrow from Pruco Life of New Jersey up to the "loan value" of the
Contract, using the Contract as the only security for the loan. The loan value
is equal to (1) 90% of an amount equal to the portion of the Contract Fund value
attributable to the variable investment options and to any prior loan[s]
supported by the variable investment options, minus the portion of any charges
attributable to the variable investment options that would be payable upon an
immediate surrender; plus (2) 100% of an amount equal to the portion of the
Contract Fund value attributable to the fixed-rate option and to any prior
loan[s] supported by the fixed-rate option, minus the portion of any charges
attributable to the fixed-rate option that would be payable upon an immediate
surrender. The minimum amount that may be borrowed at any one time is $200
unless the proceeds are used to pay premiums on the Contract.
Interest charged on a loan accrues daily at a fixed effective annual rate of
5.5%. Interest payments on any loan are due at the end of each Contract year.
If interest is not paid when due, it is added to the principal amount of the
loan. The Contract debt is the principal amount of all outstanding loans plus
any interest accrued thereon. If at any time the Contract debt exceeds what the
cash surrender value would be if there were no Contract debt, Pruco Life of New
Jersey will notify you of its intent to terminate the Contract in 61 days,
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
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 18, and LAPSE AND REINSTATEMENT, below.
When a loan is made, an amount equal to the loan proceeds (the "loan amount") is
transferred out of the variable investment options and/or the fixed-rate option,
as applicable. The reduction will normally be made in the same proportions as
the value in each variable investment option and the fixed-rate option bears to
the total value of the Contract. While a loan is outstanding, the amount that
was so transferred will continue to be treated as part of the Contract Fund, but
it will be credited with the assumed rate of return of 4% rather than with the
actual rate of return of the variable investment options or fixed-rate option.
A loan will not affect the amount of the premiums due. Should the death benefit
become payable while a loan is outstanding, or should the Contract be
surrendered, any Contract debt will be deducted from the death benefit or the
cash surrender value.
A loan will have an effect on a Contract's cash surrender value and may have an
effect on the death benefit, even if the loan is fully repaid, because the
investment results of the selected 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. A loan that is repaid will not
have any effect upon the guaranteed minimum death benefit.
Loans from Modified Endowment Contracts may be treated for tax purposes as
distributions of income. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
SURRENDER OF A CONTRACT
You may surrender a Contract, in whole or in part, for its cash surrender value
while the insured is living. To surrender a Contract, in whole or in part, 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 or partially surrendered Contract (taking into account the
deferred sales and administrative charges, if any) will be determined as of the
end of the valuation period in which such a request is received in a Home
Office. Surrender of all or part of a Contract may have tax consequences. See
Tax Treatment of Contract Benefits, page 18.
Lapse and Reinstatement
As explained earlier, if Scheduled Premiums are paid on or before each due date,
or within the grace period after each due date, and there are no withdrawals or
outstanding loans, a Contract will remain inforce even if the investment results
of that Contract's variable investment option[s] have been so unfavorable that
the Contract Fund has decreased to zero.
In addition, even if a Scheduled Premium is not paid, the Contract will remain
inforce as long as the Contract Fund on any Monthly Date is equal to or greater
than the Tabular Contract Fund Value on the following Monthly Date. (A Table of
Tabular Contract Fund Values is included in the Contract; the values increase
with each year the Contract remains
15
<PAGE>
inforce.) This could occur because of such factors as favorable investment
experience, deduction of current rather than maximum charges, or the previous
payment of greater than Scheduled Premiums.
However, if a Scheduled Premium is not paid, and the Contract Fund is
insufficient to keep the Contract inforce, the Contract will go into default.
Should this happen, Pruco Life of New Jersey will send the Contract owner a
notice of default setting forth the payment necessary to keep the Contract
inforce on a premium paying basis. 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 lapse. A Contract that lapses with an outstanding Contract
loan may have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page
18.
A Contract that has lapsed may be reinstated within five years after the date of
default unless the Contract has been surrendered for its cash surrender value.
To reinstate a lapsed Contract, Pruco Life of New Jersey requires renewed
evidence of insurability, and submission of certain payments due under the
Contract.
If your Contract does lapse, it will still provide some benefits. You can
receive the cash surrender value by making a request of Pruco Life of New Jersey
prior to the end of the 61 day grace period. You may also choose one of the
three forms of insurance described below for which no further premiums are
payable.
FIXED EXTENDED TERM INSURANCE. The amount of insurance that would have been
paid on the date of default will continue for a stated period of time. You will
be told in writing how long that will be. The insurance amount will not change.
There will be a diminishing cash surrender value but no loan value. Extended
term insurance is not available to insureds in high risk classifications or
under Contracts issued in connection with tax-qualified pension plans.
FIXED REDUCED PAID-UP INSURANCE. This insurance continues for the lifetime of
the insured but at an insurance amount that is generally lower than that
provided by fixed extended term insurance. It will decrease only if you take a
Contract loan. Upon request, we will tell you what the amount of insurance will
be. Fixed paid-up insurance has a cash surrender value and a loan value. It is
possible for this Contract to be classified as a Modified Endowment Contract if
this option is exercised. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
VARIABLE REDUCED PAID-UP INSURANCE. This is similar to fixed paid-up insurance
and will initially be in the same amount. The Contract Fund will continue to
vary to reflect the experience of the variable investment options and/or the
fixed-rate option. There will be a new guaranteed minimum death benefit. Loans
will be available subject to the same rules that apply to premium-paying
Contracts.
Variable reduced paid-up insurance is the automatic option provided upon lapse
only if the amount of variable reduced paid-up insurance is at least as great as
the amount of fixed extended term insurance which would have been provided upon
lapse. In addition, variable reduced paid-up insurance will be available only
if the insured is not in one of the high risk rating classes for which Pruco
Life of New Jersey does not offer fixed extended term insurance. It is possible
for this Contract to be classified as a Modified Endowment Contract if this
option is exercised. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
WHAT HAPPENS IF NO REQUEST IS MADE? Except in the two situations that follow,
if no request is made, the "automatic option" will be fixed extended term
insurance. If fixed extended term insurance is not available to the insured,
then fixed reduced paid-up insurance will be provided. However, if variable
reduced paid-up insurance is available and the amount is at least as great as
the amount of fixed extended term insurance, then the automatic option will be
variable reduced paid-up insurance. This could occur if the Contract lapses and
there is a Contract debt outstanding.
PAID-UP INSURANCE OPTION
In certain circumstances you may elect to stop paying premiums and to have
guaranteed insurance coverage for the lifetime of the insured. This benefit is
available only if the following conditions are met: (1) the Contract is not in
default; (2) Pruco Life of New Jersey is not paying premiums in accordance with
any payment of premium benefit that may be included in the Contract; and (3) the
Contract Fund is sufficiently large so that the calculated guaranteed paid-up
insurance amount is at least equal to the face amount of insurance plus the
excess, if any, of the Contract Fund over the Tabular Contract Fund. The amount
of guaranteed paid-up insurance coverage may be greater. It will be equal to
the difference between the Contract Fund and the present value of future monthly
charges from the Contract Fund (other than charges for anticipated mortality
costs and for payment of premium riders) multiplied by the attained age factor.
This option will generally be available only when the Contract has been inforce
for many years and the Contract Fund has grown because of favorable investment
experience or the payment of unscheduled premiums or both. Once the paid-up
insurance option is exercised, the actual death benefit is equal to the greater
of the guaranteed paid-up insurance amount and the Contract Fund multiplied by
the attained age factor.
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Upon request, Pruco Life of New Jersey will tell you the amount needed to pay up
the Contract and to guarantee the paid-up insurance amount as long as a payment
equal to or greater than this amount is received within two weeks of the date it
was quoted. There is no guarantee if the payment is received within the two
week period and is less than the quoted amount or if the payment is received
outside the two week period. In that case, Pruco Life of New Jersey will add
the payment to the Contract Fund and recalculate the guaranteed paid-up
insurance amount. If the guaranteed paid-up insurance amount is equal to or
greater than the face amount, the paid-up request will be processed. If the
guaranteed paid-up insurance amount calculated is below the face amount, you
will be notified that the amount is insufficient to process the request. In
some cases, the quoted amount, if paid, would increase the death benefit by more
than it increases the Contract Fund. In these situations, underwriting might be
required to accept the premium payment and to process the paid-up request.
Pruco Life of New Jersey reserves the right to change this procedure in the
future. After the first Contract year, you must make a proper written request
for the Contract to become fully paid-up and send the Contract to a Home Office
to be endorsed. It is possible for this Contract to be classified as a Modified
Endowment Contract if this option is exercised. See TAX TREATMENT OF CONTRACT
BENEFITS, page 18. A Contract in effect under a paid-up insurance option will
have cash surrender and loan values.
REDUCED PAID-UP INSURANCE OPTION
Like the paid-up insurance option, reduced paid-up insurance provides the
insured with lifetime insurance coverage without the payment of additional
premiums. However, reduced paid-up insurance provides insurance coverage which
is generally lower than the death benefit of the Contract. Reduced paid-up
insurance is based upon a Contract's current net cash value and can be requested
at any time. This option is available only when the Contract is not in default
and Pruco Life of New Jersey is not paying any premiums in accordance with any
payment of premium benefit that may be included in the Contract. In order to
receive reduced paid-up insurance, a Contract owner must make a proper written
request, and Pruco Life of New Jersey may request that the owner send the
Contract to a Home Office to be endorsed. It is possible for this Contract to
be classified as a Modified Endowment Contract if this option is exercised. See
TAX TREATMENT OF CONTRACT BENEFITS, page 18.
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 payment are received at a Home Office. Other than the death
benefit, which is determined as of the date of death, the amount will be
determined as of the end of the valuation period in which the necessary
documents are received at a Home Office. 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 sale or valuation of
the Account's assets is not reasonably practicable because the New York Stock
Exchange is closed for other than a regular holiday or weekend, trading is
restricted by the SEC, or the SEC declares that an emergency exists.
With respect to the amount of any cash surrender value allocated to the fixed-
rate option, and with respect to a Contract inforce as fixed reduced paid-up
insurance or as extended term insurance, 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 surrender value for up to six
months (or a shorter period if required by applicable law). Pruco Life of New
Jersey will pay interest of at least 3% a year if it delays such a payment for
more than 30 days (or a shorter period if required by applicable law).
LIVING NEEDS BENEFIT
You may elect to add the LIVING NEEDS BENEFIT(SM) to your Contract at issue. The
benefit may vary by state. It can generally be added only when the aggregate
face amounts of the insured's eligible contracts equal $50,000 or more. There is
no charge for adding the benefit to the Contract. However, an administrative
charge (not to exceed $150) will be made at the time the LIVING NEEDS BENEFIT is
paid.
Subject to state regulatory approval, the LIVING NEEDS BENEFIT allows you to
elect to receive an accelerated payment of all or part of the Contract's death
benefit, adjusted to reflect current value, at a time when certain special needs
exist. The adjusted death benefit will always be less than the death benefit,
but will generally be greater than the Contract's cash surrender value. The
following option may be available. A Pruco Life of New Jersey representative
should be consulted as to whether additional options may be available.
TERMINAL ILLNESS OPTION. This option is available if the insured is diagnosed
as terminally ill with a life expectancy of six months or less. When you
provide satisfactory evidence, Pruco Life of New Jersey will provide an
accelerated payment of the portion of the death benefit you select as a LIVING
NEEDS BENEFIT. The Contract owner may (1) elect to receive the benefit in a
single sum or (2) receive equal monthly payments for six months. If the insured
dies before
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all the payments have been made, the present value of the remaining payments
will be paid to the beneficiary designated in the LIVING NEEDS BENEFIT claim
form in a single sum.
All or part of the Contract's death benefit may be accelerated under the LIVING
NEEDS BENEFIT. If the benefit is only partially accelerated, a death benefit of
at least $25,000 must remain under the Contract. Pruco Life of New Jersey
reserves the right to determine the minimum amount that may be accelerated.
No benefit will be payable if the Contract owner is required to elect it in
order to meet the claims of creditors or to obtain a government benefit. Pruco
Life of New Jersey can furnish details about the amount of LIVING NEEDS BENEFIT
that is available to an eligible Contract owner, and the adjusted premium
payments that would be in effect if less than the entire death benefit is
accelerated.
You should consider whether adding this settlement option is appropriate in your
given situation. Adding the LIVING NEEDS BENEFIT to the Contract has no adverse
consequences; however, electing to use it could. With the exception of certain
business-related policies, the LIVING NEEDS BENEFIT is excluded from income if
the insured is terminally ill or chronically ill as defined by the tax law
(although the exclusion in the latter case may be limited). You should consult
a qualified tax adviser before electing to receive this benefit. Receipt of a
LIVING NEEDS BENEFIT payment may also affect your eligibility for certain
government benefits or entitlements.
REPORTS TO CONTRACT OWNERS
Once each Contract year (except where the Contract is inforce as fixed extended
term insurance or fixed reduced paid-up insurance), 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. On request,
you will be sent a current statement in a form similar to that of the annual
statement described above, but Pruco Life of New Jersey may limit the number of
such requests or impose a reasonable charge if such requests are made too
frequently.
You will also receive, usually at the end of February, an annual report of the
operations of the Series Fund. That report will list the investments held in
both portfolios and include audited financial statements for the Series Fund. A
semi-annual report with similar unaudited information will be sent to you,
usually at the end of August.
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 ensure that the Contract qualifies as
life insurance for tax purposes. Generally speaking, this means that:
. You will not be taxed on the growth of the funds in the Contract,
unless you receive a distribution from the Contract.
. The Contract's death benefit will be income tax free to your
beneficiary.
Although we believe the Contract should qualify as "life insurance" for federal
tax purposes, there are some uncertainties, particularly because the Secretary
of the Treasury has not yet issued permanent regulations that bear on this
question. Accordingly, we have reserved the right to make changes ? which will
be applied uniformly to all Contract owners after advance written notice ? that
we deem necessary to ensure that the Contract will continue to 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.
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CONTRACTS NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
. 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.
. 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.
. 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.
. Loans you take against the Contract are ordinarily treated as debt and
are not considered distributions subject to tax.
MODIFIED ENDOWMENT CONTRACTS.
. 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 substantially in excess of Scheduled Premiums 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 even though the Contract owner pays only Scheduled
Premiums or even less than the Scheduled Premiums. You should first
consult a qualified tax adviser and your Pruco Life of New Jersey
representative if you are contemplating any of these steps.
. 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 excludable from income. An
assignment of a Modified 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.
. 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 591/2, 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.
. 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 CONSEQUENCES. 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
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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.
RIDERS
Contract owners may be able to obtain additional fixed benefits which may
increase the Scheduled Premium. If they do cause an increase in the Scheduled
Premium, they will be charged for by making monthly deductions from the Contract
Fund. These optional insurance benefits will be described in what is known as a
"rider" to the Contract. Charges for the riders will be deducted from the
Contract Fund on each Monthly date.
One rider pays an additional amount if the insured dies in an accident. Another
waives certain premiums if the insured is disabled within the meaning of the
provision (or, in the case of a Contract issued on an insured under the age of
15, if the applicant dies or becomes disabled within the meaning of the
provision). Others pay an additional amount if the insured dies within a stated
number of years after issue; similar benefits may be available if the insured's
spouse or child should die. The amounts of these benefits are fully guaranteed
at issue; they do not depend on the performance of the Account, although they
will no longer be available if the Contract lapses. 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.
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS
The Contract generally uses mortality tables that distinguish between males and
females. Thus, premiums and benefits differ under Contracts issued on males and
females of the same age. However, in those states that have adopted regulations
prohibiting sex-distinct insurance rates, premiums and cost of insurance charges
will be based on a blended unisex rate, whether the insured is male or female.
In addition, Pruco Life of New Jersey may have offered the Contract with unisex
mortality rates to employers and employee organizations.
OTHER STANDARD CONTRACT PROVISIONS
ASSIGNMENT. This Contract may not be assigned if the assignment would violate
any federal, state, or local law or regulation. 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. 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 insured die with no surviving
beneficiary, the insured's estate will become the beneficiary.
INCONTESTABILITY. We will not contest the Contract after it has been inforce
during the insured's lifetime for two years from the issue date except 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 the insured.
MISSTATEMENT OF AGE OR SEX. If the insured's stated age or sex (except where
unisex rates apply) or both are incorrect in the Contract, Pruco Life of New
Jersey will adjust the death benefits payable and any amount to be paid, as
required by law, to reflect the correct age and sex. Any such death benefit will
be based on what the most recent deductions from the Contract Fund would have
provided at the correct age and sex.
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.
SUICIDE EXCLUSION. Generally, if the insured, whether sane or insane, dies by
suicide within two years from the Contract Date, the Contract will end and Pruco
Life of New Jersey will return the premiums paid, less any Contract debt, and
less any withdrawals.
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PAYING PREMIUMS BY PAYROLL DEDUCTION
In addition to the annual, semi-annual, quarterly and monthly premium payment
modes, a payroll budget method of paying premiums may also be available under
certain Contracts. The employer generally deducts the necessary amounts from
employee paychecks and sends premium payments to Pruco Life of New Jersey
monthly. Any Pruco Life of New Jersey representative authorized to sell this
Contract can provide further details concerning the payroll budget method of
paying premiums.
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 was sold by
registered representatives of Prusec who were also authorized by state insurance
departments to do so. The Contract may also have been sold through other
broker-dealers authorized by Prusec and applicable law to do so. Registered
representatives of such other broker-dealers may have been paid on a different
basis than described below.
Where the insured is less than 60 years of age, the representative generally
receives a commission of: (1) no more than 50% of the Scheduled Premiums for the
first year: (2) no more than 6% of the Scheduled Premiums for the second through
10th years; and (3) no more than 2% of the Scheduled Premiums thereafter. For
insureds over 59 years of age, the commission is lower. The representative may
be required to return all or part of the first year commission if the Contract
is not continued through the second year. Representatives with less than three
years of service may be paid on a different basis.
Sales expenses in any year are not equal to the deduction for sales load in that
year. Pruco Life of New Jersey expects to recover its total sales expenses over
the periods the Contracts are in effect. To the extent that the sales charges
are insufficient to cover total sales expenses, the sales expenses will be
recovered from Pruco Life of New Jersey's surplus, which may include amounts
derived from the mortality and expense risk charge and the guaranteed minimum
death benefit risk charge described under item (d) under MONTHLY DEDUCTIONS FROM
CONTRACT FUND, page 7 and DAILY DEDUCTION FROM THE CONTRACT FUND, page 7.
STATE REGULATION
Pruco Life of New Jersey is subject to regulation and supervision by the
Department of Insurance of the State of New Jersey, which periodically examines
its operations and financial condition. It is also subject to the insurance
laws and regulations of all jurisdictions in which it is authorized to do
business.
Pruco Life of New Jersey is required to submit annual statements of its
operations, including financial statements, to the insurance departments of the
various jurisdictions in which it does business to determine solvency and
compliance with local insurance laws and regulations.
In addition to the annual statements referred to above, Pruco Life of New Jersey
is required to file with New Jersey and other jurisdictions a separate statement
with respect to the operations of all its variable contract accounts, in a form
promulgated by the National Association of Insurance Commissioners.
EXPERTS
The financial statements 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 Nancy D.
Davis, FSA, MAAA, Vice President and Actuary 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
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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 of New Jersey for any liabilities incurred
in connection with sales practices litigation covering policyholders of
individual permanent life insurance policies 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 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. Its
address and telephone number are 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 OF PRUCO LIFE OF NEW JERSEY
DIRECTORS OF PRUCO LIFE OF NEW JERSEY
The directors and major officers of Pruco Life of New Jersey, listed with their
principal occupations during the past five years, are shown below.
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.
PLNJ directors and officers are elected annually.
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<PAGE>
FINANCIAL STATEMENTS OF THE
PRUvider VARIABLE APPRECIABLE LIFE SUBACCOUNTS
OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------
Flexible Conservative
Managed Balanced
Portfolio Portfolio
------------- -------------
<S> <C> <C>
ASSETS
Investment in The Prudential Series Fund, Inc.
Portfolios, at net asset value [Note 3] .............. $ 246,446,762 $ 115,373,893
Receivable from Pruco Life of New Jersey [Note 2] ...... 5,862 10,073
------------- -------------
Net Assets ............................................. $ 246,452,624 $ 115,383,966
============= =============
NET ASSETS, representing:
Equity of contract owners [Note 4] ..................... $ 246,452,624 $ 115,383,966
------------- -------------
$ 246,452,624 $ 115,383,966
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 THROUGH A7
A-1
<PAGE>
FINANCIAL STATEMENTS OF THE
PRUvider VARIABLE APPRECIABLE LIFE SUBACCOUNTS
OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF OPERATIONS
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------
Flexible Conservative
Managed Balanced
Portfolio Portfolio
---------------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income .......................... $ 11,143 $10,349,173 $ 10,897,673 $4,689,573 $ 4,872,397 $ 4,982,357
----------- ----------- ----------- ---------- ----------- -----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk
[Note 5A] ............................... 1,509,261 2,116,233 2,184,985 718,530 713,776 665,939
Reimbursement for excess
expenses [Note 5D] ..................... (544,224) (767,447) (793,096) (190,933) (183,772) (163,989)
----------- ----------- ----------- ---------- ----------- -----------
NET EXPENSES ............................... 965,037 1,348,786 1,391,889 527,597 530,004 501,950
----------- ----------- ----------- ---------- ----------- -----------
NET INVESTMENT INCOME (LOSS) ............... (953,894) 9,000,387 9,505,784 4,161,976 4,342,393 4,480,407
----------- ----------- ----------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received ..... 2,827,339 27,434,444 56,731,648 658,398 6,925,741 11,925,141
Realized gain on shares redeemed ......... 1,322,321 8,721,978 2,974,960 787,439 594,578 961,056
Net change in unrealized gain (loss)
on investments ......................... 14,382,751 (22,408,120) (11,688,757) 1,388,838 329,870 (4,407,263)
----------- ----------- ----------- ---------- ----------- -----------
NET GAIN ON INVESTMENTS .................... 18,532,411 13,748,302 48,017,851 2,834,675 7,850,189 8,478,934
----------- ----------- ----------- ---------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................ $17,578,517 $22,748,689 $57,523,635 $6,996,651 $12,192,582 $12,959,341
=========== =========== =========== ========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 THROUGH A7
A2
<PAGE>
FINANCIAL STATEMENTS OF THE
PRUvider VARIABLE APPRECIABLE LIFE SUBACCOUNTS
OF PRUCO LIFE OF NEW JERSEY VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
-------------------------------------------------------------------------------------
Flexible Managed Portfolio Conservative Balanced Portfolio
----------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) .............. $ (953,894) $ 9,000,387 $ 9,505,784 $ 4,161,976 $ 4,342,393 $ 4,480,407
Capital gains distributions received ...... 2,827,339 27,434,444 56,731,648 658,398 6,925,741 11,925,141
Realized gain on shares redeemed .......... 1,322,321 8,721,978 2,974,960 787,439 594,578 961,056
Net change in unrealized gain (loss) on
investments ............................. 14,382,751 (22,408,120) (11,688,757) 1,388,838 329,870 (4,407,263)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. 17,578,517 22,748,689 57,523,635 6,996,651 12,192,582 12,959,341
------------ ------------ ------------ ------------ ------------ ------------
PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ............... 4,963,269 19,460,603 22,730,003 2,955,315 8,965,691 10,313,839
Policy Loans .............................. (7,384,636) (7,974,049) (7,849,567) (2,889,852) (3,015,778) (3,213,273)
Policy Loan Repayments and Interest ....... 7,010,849 5,598,233 5,129,697 2,927,288 1,976,521 2,156,195
Surrenders, Withdrawals and Death
Benefits ................................ (10,727,647) (13,996,390) (15,259,724) (5,619,206) (6,131,547) (6,793,526)
Net Transfers To Other Subaccounts
or Fixed Rate Option .................... (4,161,990) (144,967,979) (2,359,588) (2,179,538) (1,292,182) (1,375,131)
Deferred Sales and Other Charges .......... (9,811,225) (11,055,099) (12,720,065) (4,974,621) (5,312,571) (6,059,807)
------------ ------------ ------------ ------------ ------------ ------------
NET (DECREASE) IN NET ASSETS
RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS ................................. (20,111,380) (152,934,681) (10,329,244) (9,780,614) (4,809,866) (4,971,703)
------------ ------------ ------------ ------------ ------------ ------------
NET (DECREASE) IN NET ASSETS
RETAINED IN THE ACCOUNT [Note 7] .......... 0 (177,182) (219,866) 0 (8,012) (508,220)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS .................................... (2,532,863) (130,363,174) 46,974,525 (2,783,963) 7,374,704 7,479,418
NET ASSETS
Beginning of year ......................... 248,985,487 379,348,661 332,374,136 118,167,929 110,793,225 103,313,807
------------ ------------ ------------ ------------ ------------ ------------
End of year ............................... $246,452,624 $248,985,487 $379,348,661 $115,383,966 $118,167,929 $110,793,225
============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 THROUGH A7
A3
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF THE
PRUvider VARIABLE APPRECIABLE LIFE SUBACCOUNTS OF
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
("PSELIII") contracts are 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. PRUvider contracts offer the option to invest in
two of these subaccounts, each of which invests only in a
corresponding portfolio of The Prudential Series Fund, Inc. (the
"Series Fund"). The Series Fund is a diversified open-end management
investment company, and is managed by 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 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.
A4
<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:
PORTFOLIOS
--------------------------------
Flexible Conservative
Managed Balanced
------------ ------------
Number of shares (rounded): 13,970,904 7,511,321
Net asset value per share: $ 17.64 $ 15.36
Cost: $224,296,992 $106,500,171
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
--------------------------------
Flexible Conservative
Managed Balanced
Portfolio Portfolio
------------ ------------
<S> <C> <C>
Contract Owner Units Outstanding
(VAL-rounded) 45,581,573 25,613,699
Unit Value (VAL) $ 5.10277 $ 4.13896
------------ ------------
Contract Owner Equity (VAL) $232,592,282 $106,014,078
============ ============
Contract Owner Units Outstanding
(PRUvider-rounded) 3,960,460 3,221,133
Unit Value (PRUvider) $ 3.49968 $ 2.90888
------------ ------------
Contract Owner Equity (PRUvider) $ 13,860,342 $ 9,369,888
============ ============
Contract Owner Units Outstanding
(PSELIII-rounded) 0 0
Unit Value (PSELIII) $ 1.03671 $ 1.02714
------------ ------------
Contract Owner Equity (PSELIII) $ 0 $ 0
============ ============
TOTAL CONTRACT OWNER EQUITY $246,452,624 $115,383,966
============ ============
</TABLE>
A5
<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 Flexible Managed and Conservative
Balanced Portfolios of the Series Fund. PRUvider contracts do not
provide for reimbursement by Pruco Life of New Jersey.
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.
A6
<PAGE>
NOTE 7: NET DECREASE IN NET ASSETS RETAINED IN THE ACCOUNT
The decrease in net assets retained in the Account represents the net
withdrawals of Pruco Life of New Jersey 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
-----------------------------------------------------------------------------------------
Flexible Conservative
Managed Balanced
Portfolio Portfolio
----------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
---------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 2,928,417 16,398,289 7,728,571 2,742,649 3,568,780 4,308,577
Contract Owner
Redemptions: (6,981,728) (51,572,419) (10,193,317) (5,207,302) (4,841,158) (5,775,601)
</TABLE>
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
--------------------------------
Flexible Conservative
Managed Balanced
------------ ------------
Purchases .................. $ 1,048,953 $ 583,087
Sales ...................... $(22,131,232) $(10,901,371)
A7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of the
PRUvider Variable Appreciable 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 Flexible Managed Portfolio and
Conservative Balanced Portfolio of the PRUvider Variable Appreciable Life
Subaccounts of 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 stardands 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
A8
<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>
PRUVIDER(SM)
VARIABLE APPRECIABLE LIFE(R)
INSURANCE
PRUvider(SM) Variable Appreciable Life(R) was 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. PRUvider is a
service mark of Prudential. Appreciable Life is a
registered mark of Prudential.
[LOGO] PRUDENTIAL
Pruco Life Insurance Company of New Jersey
213 Washington Street, Newark, NJ 07102-2992
Telephone 800 778-2255
SVAL-2 Ed. 5/2000 CAT#640189U
<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 PRUvider Variable
Appreciable Life Insurance Contracts registered by this registration statement,
in the aggregate, are reasonable in relation to the services rendered, the
expenses to be incurred, and the risks assumed by the depositor.
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 on 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 incorporated by
reference to Exhibit 1.A.(6)(c) to its Form S-6, Registration No. 333-85117,
filed August 13, 1999.
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 58 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, independent accountants.
2. Clifford E. Kirsch, Esq.
3. Nancy Davis, FSA, MAAA
The following exhibits:
- -----------------------
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of Board of Directors of Pruco Life Insurance
Company of New Jersey establishing the Pruco Life of New
Jersey Variable Appreciable Account. (Note 2)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities
Corporation and Pruco Life Insurance Company of New
Jersey. (Note 8)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the
Sale of the Contracts. (Note 8)
(c) Schedules of Sales Commissions. (Note 8)
(4) Not Applicable.
(5) PRUvider Variable Appreciable Life Insurance Contract. (Note
8)
(6) (a) Articles of Incorporation of Pruco Life Insurance Company
of New Jersey, as amended March 11, 1983. (Note 2)
(b) Certificate of Amendment of the Articles of Incorporation
of Pruco Life Insurance Company of New Jersey, February
12, 1998. (Note 10)
(c) By-laws of Pruco Life Insurance Company of New Jersey, as
amended August 4, 1999. (Note 3)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form. (Note 5)
(b) Supplement to the Application for PRUvider Variable
Appreciable Life Insurance Contract. (Note 9)
(11) Form of Notice of Withdrawal Right. (Note 8)
(12) Memorandum describing Pruco Life Insurance Company of New
Jersey's issuance, transfer, and redemption procedures for the
Contracts pursuant to Rule 6e-3(b)(12)(iii) and method of
computing cash adjustment upon exercise of right to exchange
for fixed-benefit insurance pursuant to Rule 6e-
3(T)(b)(13)(v)(B). (Note 6)
(13) Available Contract Riders.
(a) Rider for Insured's Payment of Premium Benefit. (Note 8)
(b) Rider for Applicant's Payment of Premium Benefit. (Note
8)
II-2
<PAGE>
(c) Rider for Insured's Accidental Death and Dismemberment
Benefit. (Note 8)
(d) Rider for Option to Purchase Additional Insurance on Life
of Insured. (Note 8)
(e) Rider for Term Insurance Benefit on Life of Insured--
Decreasing Amount. (Note 8)
(f) Rider for Term Insurance Benefit on Life of Insured
Spouse--Decreasing Amount. (Note 8)
(g) Rider for Level Term Insurance Benefit on Dependent
Children. (Note 8)
(h) Rider for Level Term Insurance Benefit on Dependent
Children--from Term Conversions. (Note 8)
(i) Rider for Level Term Insurance Benefit on Dependent
Children--from Term Conversions or Attained Age Change.
(Note 8)
(j) Living Needs Benefit Rider for use in New York. (Note 8)
(k) Endorsement altering the Assignment provision ORD
89224--94-P NY. (Note 8)
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 Nancy D. Davis, FSA, MAAA, as to actuarial
matters pertaining to the securities being registered. (Note 1)
7. Indemnification Agreement. (Note 8)
8. Powers of Attorney:
(a) W. Bethke, I. Kleinman, E. Milnes, I. Price (Note 4)
(b) James J. Avery, Jr. (Note 7)
(c) Dennis G. Sullivan (Note 10)
(d) David R. Odenath, Jr. (Note 11)
(Note 1) Filed herewith.
(Note 2) 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 3) Incorporated by reference to Form S-6, Registration No. 333-85117,
filed August 13, 1999 on behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(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 Form S-6, Registration No. 333-07451,
filed July 2, 1996 on behalf of the Pruco Life Variable Appreciable
Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 6 to this
Registration Statement, filed April 25, 1996.
(Note 7) 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 8) Incorporated by reference to Post-Effective Amendment No. 7 to this
Registration Statement, filed April 28, 1997.
(Note 9) Incorporated by reference to Post-Effective Amendment No. 8 to this
Registration Statement, filed April 24, 1998.
(Note 10) Incorporated by reference to Post-Effective Amendment No.12 to Form
S-1, Registration No. 33-20018, filed April 19, 1999 on behalf of the
Pruco Life of New Jersey Variable Contract Real Property Account.
(Note 11) Incorporated by reference to Post-Effective Amendment No.13 to Form
S-1, Registration No. 33-20018, filed April 12, 2000 on behalf of the
Pruco Life of New Jersey Variable Contract Real Property Account.
PlEASE NOTE: A Post-Effective Amendment No.1 was not filed for this
Registration Statement.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, the
Pruco Life of New Jersey PRUvider Variable Appreciable Account, certifies that
this Amendment is filed solely for one or more of the purposes specified in Rule
485(b)(1) under the Securities Act of 1933 and that no material event requiring
disclosure in the prospectus, other than one listed in Rule 485(b)(1), has
occurred since the effective date of the most recent Post-Effective Amendment to
the Registration Statement which included a prospectus and has caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal hereunto affixed and attested, all in the city of
Newark and the State of New Jersey, on this 24th 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 Post-Effective
Amendment No. 12 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 24th day of April,
2000.
SIGNATURE AND TITLE
-------------------
/s/ *
- ----------------------------------
Esther H. Milnes
President and Director
/s/ * *By: /s/ Thomas C. Castano
- ---------------------------------- -----------------------------
Dennis G. Sullivan Thomas C. Castano
Vice President and Chief Accounting Officer (Attorney-in-Fact)
/s/ *
- ----------------------------------
James J. Avery, Jr.
Director
/s/ *
- ----------------------------------
William M. Bethke
Director
/s/ *
- ----------------------------------
David R. Odenath, Jr.
Director
/s/ *
- ----------------------------------
Ira J. Kleinman
Director
/s/ *
- ----------------------------------
I. Edward Price
Director
II-4
<PAGE>
EXHIBIT INDEX
Consent of PricewaterhouseCoopers LLP, independent Page II-5
accountants.
3. Opinion and Consent of Clifford E. Kirsch, Esq. as to the Page II-7
legality of the securities being registered.
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as to Page II-8
actuarial matters pertaining to the securities being registered.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this Post-
Effective Amendment No. 12 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 PRUvider Variable Appreciable 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 24, 2000
II-5
<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 of 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
II-7
<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 of variable life insurance contracts (the
"Contracts") under the Securities Act of 1933. The prospectus included in Post-
Effective Amendment No. 12 to Registration Statement No. 33-57186 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 section of the prospectus entitled "Illustrations",
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 35 than to prospective purchasers of Contracts on males of other
ages or on females.
(2) 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/
- ---------------------------------------
Nancy D. Davis, FSA, MAAA
Vice President and Actuary
The Prudential Insurance Company of America
II-8
