AS FILED WITH THE SEC ON ______________. REGISTRATION NO. 33-20018
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-1
POST-EFFECTIVE AMENDMENT NO. 9
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
IN RESPECT OF
PRUCO LIFE OF NEW JERSEY
VARIABLE CONTRACT
REAL PROPERTY ACCOUNT
(Exact Name of Registrant)
C/O PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 445-4571
(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
(800) 445-4571
(Name, address, and telephone number of agent for service)
Copy to:
JEFFREY C. MARTIN
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036
------------------
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY FORM S-1)
<TABLE>
<CAPTION>
S-1 ITEM NUMBER AND CAPTION LOCATION
- --------------------------- ---------
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus ................................ Cover
2. Inside Front and Outside Back Cover Pages
of Prospectus ............................. Inside Front Cover
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges ........ Prospectus Cover; Summary;
Risk Factors
4. Use of Proceeds ........................... Investment Policies; Current Real Estate-Related
Investments; Management's Discussion and Analysis
of Financial Condition and Results of Operations
5. Determination of Offering Price ........... Not Applicable
6. Dilution .................................. Not Applicable
7. Selling Security Holders .................. Not Applicable
8. Plan of Distribution ...................... Distribution of the Contracts
9. Description of Securities to be Registered . Prospectus Cover; General Information about Pruco Life
Insurance Company of New Jersey, Pruco Life of New Jersey
Variable Contract Real Property Account, The Prudential
Variable Contract Real Property Partnership, and The
Investment Manager; The Real Property Account's
Unavailability to Certain Contracts; Valuation of Contract
Owners' Participating Interests; Charges; Restrictions on
Withdrawals; Restrictions on Contract Owners' Investment in
the Real Property Account
10. Interests of Named Experts and Counsel .... Not Applicable
11. Information With Respect to the Registrant . General Information about Pruco Life Insurance Company of
New Jersey, Pruco Life of New Jersey Variable Contract Real
Property Account, The Prudential Variable Contract Real
Property Partnership, and The Investment Manager; Investment
Policies; Current Real Estate-Related Investments;
Management's Discussion and Analysis of Financial Condition
and Results of Operations; Per Share Investment Income and
Capital Changes; Investment Restrictions; Conflicts of
Interest; Valuation of Contract Owners' Participating
Interests; Financial Statements; Litigation; State
Regulation; Federal Income Tax Considerations
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ................................ Not Applicable
</TABLE>
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
PROSPECTUS
MAY 1, 1997
PRUCO LIFE
OF NEW JERSEY
VARIABLE CONTRACT
REAL PROPERTY ACCOUNT
This prospectus describes the real estate investment option that Pruco Life
Insurance Company of New Jersey ("Pruco Life of New Jersey"), a stock life
insurance company that is an indirect, wholly-owned subsidiary of The Prudential
Insurance Company of America ("Prudential"), offers in connection with the
funding of benefits under certain variable life insurance and variable annuity
contracts (the "Contracts") it issues. These Contracts are described in
different prospectuses, and this prospectus is attached to the prospectus for
the type of Contract selected. Although the Contracts vary in their terms, each
provides that owners may allocate all or part of their net premiums or purchase
payments to the Pruco Life of New Jersey Variable Contract Real Property Account
(the "Real Property Account"), a separate account of Pruco Life of New Jersey.
The assets of the Real Property Account are invested entirely through The
Prudential Variable Contract Real Property Partnership (the "Partnership") which
is a general partnership established by Pruco Life of New Jersey, Prudential and
Pruco Life Insurance Company ("Pruco Life") to provide for investment of assets
allocated to the real property investment option under variable contracts issued
by those companies. Through the Partnership, the assets of the Real Property
Account will be invested primarily (at least 65%) in direct ownership interests
in income-producing real property such as office buildings, shopping centers,
apartments, industrial properties, agricultural land, or hotels, participating
mortgage loans originated by the Partnership, and real property sale-leaseback
transactions negotiated on behalf of the Partnership. It is expected that
typically the large majority of these real estate investments will be in direct
ownership interests in real estate, including but not limited to fee interests,
general partnership interests, leaseholds, and tenancies in common. Apart from a
portion of the Partnership's assets (normally 10-15%) invested in short-term or
intermediate-term debt instruments for liquidity purposes, the remainder of the
Partnership's assets may be invested in other types of real estate-related
investments, including primarily conventional, non-participating mortgage loans
and real estate investment trusts. Values under the Contracts, with respect to
the portion of the Contract owner's Contract fund allocated to the Real Property
Account, will vary with the performance of the Real Property Account's
investments through the Partnership.
The investment objectives of the Real Property Account and Partnership are to:
(i) preserve and protect capital; (ii) provide for compounding of income as a
result of reinvestment of cash flow from investments; and (iii) provide for
increases over time in the amount of such income through appreciation in the
value of assets. There can be no assurance, of course, that these investment
objectives will be met.
----------------
THIS OFFERING INVOLVES CERTAIN RISK FACTORS. INVESTMENT IN THE REAL PROPERTY
ACCOUNT INVOLVES A SIGNIFICANT DEGREE OF RISK, ATTRIBUTABLE IN PART TO THE FACT
THAT THE ASSETS HELD IN THE PARTNERSHIP MAY NOT BE READILY SALABLE ON
COMMERCIALLY REASONABLE TERMS. SEE RISK FACTORS, PAGE 11. THE ASSETS OF THE REAL
PROPERTY ACCOUNT AND PARTNERSHIP WILL NOT BE AS LIQUID AS THE INVESTMENTS
GENERALLY MADE BY VARIABLE LIFE INSURANCE AND VARIABLE ANNUITY SEPARATE ACCOUNTS
(SEE LIQUIDITY OF INVESTMENTS, PAGE 11) AND THE ABILITY OF THE CONTRACT OWNER TO
WITHDRAW OR TRANSFER PORTIONS OF HIS OR HER CONTRACT FUND ALLOCATED TO THE REAL
PROPERTY ACCOUNT MAY BE SUBJECT TO CERTAIN RESTRICTIONS. SEE RESTRICTIONS ON
WITHDRAWALS, PAGE 18. MOREOVER, THE INVESTMENTS AND OPERATION OF THE REAL
PROPERTY ACCOUNT AND PARTNERSHIP MAY BE SUBJECT TO CERTAIN CONFLICTS OF
INTEREST. SEE CONFLICTS OF INTEREST, PAGE 13.
-----------------
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ATTACHED TO
A CURRENT PROSPECTUS FOR THE RELATED VARIABLE CONTRACT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 445-4571
PRPA-2 Ed 5-97
<PAGE>
PROSPECTUS CONTENTS
PAGE
PER SHARE INVESTMENT INCOME, CAPITAL CHANGES AND SELECTED RATIOS......... 2
SUMMARY ................................................................ 3
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY,
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT, THE
PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP, AND THE
INVESTMENT MANAGER ..................................................... 4
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY ............................. 4
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT ....... 4
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP ............. 5
THE INVESTMENT MANAGER ................................................. 5
INVESTMENT POLICIES...................................................... 6
OVERVIEW .............................................................. 6
INVESTMENT IN DIRECT OWNERSHIP INTERESTS IN REAL ESTATE................ 6
INVESTMENTS IN MORTGAGE LOANS.......................................... 7
INVESTMENTS IN SALE-LEASEBACKS......................................... 9
GENERAL INVESTMENT AND OPERATING POLICIES.............................. 9
CURRENT REAL ESTATE-RELATED INVESTMENTS.................................. 10
PROPERTIES............................................................. 10
RISK FACTORS............................................................. 11
LIQUIDITY OF INVESTMENTS............................................... 11
GENERAL RISKS OF REAL PROPERTY INVESTMENTS............................. 11
RELIANCE ON THE PARTNERS AND THE INVESTMENT MANAGER.................... 13
INVESTMENT RESTRICTIONS.................................................. 13
CONFLICTS OF INTEREST.................................................... 13
THE REAL PROPERTY ACCOUNT'S UNAVAILABILITY TO CERTAIN CONTRACTS.......... 15
VALUATION OF CONTRACT OWNERS' PARTICIPATING INTERESTS.................... 15
BORROWING BY THE PARTNERSHIP............................................. 17
CHARGES ............................................................... 17
RESTRICTIONS ON WITHDRAWALS.............................................. 18
RESTRICTIONS ON CONTRACT OWNERS' INVESTMENT IN THE REAL PROPERTY ACCOUNT. 18
FEDERAL INCOME TAX CONSIDERATIONS........................................ 19
DISTRIBUTION OF THE CONTRACTS............................................ 19
STATE REGULATION......................................................... 19
ADDITIONAL INFORMATION................................................... 19
EXPERTS ................................................................ 19
LITIGATION............................................................... 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................................... 20
<PAGE>
FINANCIAL STATEMENTS..................................................... 24
FINANCIAL STATEMENTS OF PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT
REAL PROPERTY ACCOUNT.................................................. A1
FINANCIAL STATEMENTS OF THE PRUDENTIAL VARIABLE CONTRACT REAL
PROPERTY PARTNERSHIP ................................................... B1
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
The Registrant is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission. All reports and
information filed by the Registrant can be inspected and copied at the Public
Reference Section of the Commission at 450 Fifth Street, Room 1024, N.W.,
Washington, D.C. 20549, and at certain of its regional offices: Midwestern
Regional Office, CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago,
IL 60661-2511; Northeastern Regional Office SEC, 7 World Trade Center, Suite
1300, New York, NY 10048.
REPORTS TO CONTRACT OWNERS
Pruco Life of New Jersey will mail to each Contract owner who elects to allocate
a portion of his or her Contract fund to the Real Property Account an annual
report containing audited financial statements for the Real Property Account and
the Partnership and an annual statement showing the status of his or her
Contract fund and such other information as may be required by applicable
regulation or law.
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
PER SHARE INVESTMENT INCOME, CAPITAL CHANGES AND SELECTED RATIOS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
THE FOLLOWING INFORMATION ON PER SHARE INVESTMENT INCOME, CAPITAL CHANGES AND
SELECTED RATIOS HAS BEEN AUDITED BY PRICE WATERHOUSE LLP, INDEPENDENT
ACCOUNTANTS (1996 FIGURES) AND DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS (1995
AND PRIOR FIGURES). BOTH UNQUALIFIED AUDITORS' REPORTS ARE INCLUDED IN THIS
PROSPECTUS. THIS PAGE SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO OF THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY
PARTNERSHIP INCLUDED IN THIS PROSPECTUS.
<TABLE>
<CAPTION>
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
to to to to to
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Rent from properties $ 1.9173 $1.6387 $1.2754 $1.1659 $1.0727
Income from interest in properties $ 0.0510 $0.0527 $0.1838 $0.2139 $0.1970
Interest on mortgage loans $ 0.0000 $0.0000 $0.0082 $0.0755 $0.0711
Interest from short-term investments $ 0.1795 $0.2199 $0.1226 $0.0549 $0.0653
-------- -------- -------- ------- -------
INVESTMENT INCOME $ 2.1478 $1.9113 $1.5900 $1.5102 $1.4061
======== ======= ======= ======= =======
Investment management fee $ 0.2097 $0.1936 $0.1786 $0.1673 $0.1642
Real estate tax expense $ 0.1991 $0.1602 $0.1399 $0.1465 $0.1488
Administrative expenses $ 0.1569 $0.1484 $0.1103 $0.1187 $0.1046
Operating expenses $ 0.2442 $0.1546 $0.1332 $0.1209 $0.1241
Interest expense $ 0.0412 $0.0381 $0.0255 $0.0236 $0.0215
-------- ------- ------- ------- -------
EXPENSES $ 0.8511 $0.6949 $0.5875 $0.5770 $0.5632
======== ======= ======= ======= =======
NET INVESTMENT INCOME $ 1.2967 $1.2164 $1.0025 $0.9332 $0.8429
======== ======= ======= ======= =======
Net realized loss on investments
sold ($0.1323) $0.0000 $(0.0966) ($0.1816) $0.0000
Net unrealized gain/Iloss) on
investments ($0.2695) $0.0581 $ 0.2169 $0.0152 ($1.1359)
-------- ------- ------- ------- -------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS ($0.4018) $0.0581 $ 0.1203 ($0.1664) ($1.1359)
-------- ------- ------- ------- -------
Net increase/(decrease) in share
value $ 0.8949 $ 1.2745 $ 1.1228 $ 0.7668 ($0.2930)
Share Value at beginning of period $15.7537 $14.4792 $13.3564 $12.5896 $12.8826
-------- -------- -------- -------- --------
Share Value at end of period $16.6486 $15.7537 $14.4792 $13.3564 $12.5896
======== ======== ======== ======== ========
Ratio of expenses to average net
assets 5.26% 4.62% 4.27% 4.44% 4.47%
Ratio of net investment income to
average net assets 8.01% 8.08% 7.29% 7.17% 6.69%
Number of shares outstanding at
end of period (000'S) 11,848 12,037 12,241 13,031 14,189
</TABLE>
All calculations are based on average month-end shares outstanding where
applicable.
Per share information presented herein is shown on a basis
consistent with the financial statements as discussed in Note 1G.
1-Real Property
<PAGE>
SUMMARY
This prospectus describes the Pruco Life of New Jersey Variable Contract Real
Property Account (the "Real Property Account"), a separate account of Pruco Life
Insurance Company of New Jersey ("Pruco Life of New Jersey") created pursuant to
New Jersey insurance law. See PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY, page 4
and PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT, page 4.
Under that law, the assets of the Real Property Account are not chargeable with
liabilities arising out of any other business of Pruco Life of New Jersey.
Owners of certain variable life insurance and variable annuity contracts issued
by Pruco Life of New Jersey may allocate a portion of their net premiums or
purchase payments, or transfer a portion of the total amount invested under
their Contracts (known as the "Contract fund"), to the Real Property Account,
and values and benefits under the Contracts will thereafter reflect the
investment experience of the Real Property Account. Contract owners, not Pruco
Life of New Jersey, bear the risks and rewards of the investment performance of
the Real Property Account to the extent of the Contract owner's Contract fund
invested in the Real Property Account. This prospectus is attached to and should
be read in conjunction with the prospectus for the type of Contract selected.
The assets of the Real Property Account are invested through The Prudential
Variable Contract Real Property Partnership (the "Partnership"), which invests
primarily in income-producing real estate. See THE PRUDENTIAL VARIABLE CONTRACT
REAL PROPERTY PARTNERSHIP, page 5. The Prudential Insurance Company of America
("Prudential"), the ultimate parent of Pruco Life of New Jersey and a mutual
insurance company organized under the laws of New Jersey, is the investment
manager of the Partnership. See THE INVESTMENT MANAGER, page 5. The Partnership
invests at least 65% of its assets in direct ownership interests in
income-producing real estate, participating mortgage loans (mortgages providing
for participation in the revenues generated by, or the appreciation of, the
underlying property, or both) originated for the Partnership, and real property
sale-leasebacks negotiated by Prudential on behalf of the Partnership. It is
expected that typically the large majority of these real estate investments will
be in direct ownership interests in income producing real estate, such as office
buildings, shopping centers, apartments, industrial properties or hotels. The
Partnership may also invest up to 5% of its assets in direct ownership interests
in agricultural land. A small portion of the Partnership's assets (ordinarily
10-15%) will be invested in short-term or intermediate-term marketable debt
securities. The remainder of the Partnership's assets may be invested in other
types of real estate-related investments, including conventional,
non-participating mortgage loans and real estate investment trusts. The
investment objectives of the Partnership are to: (i) preserve and protect the
Partnership's capital; (ii) provide for compounding of income as a result of
reinvestment of cash flow from investments; and (iii) provide for increases over
time in the amount of such income through appreciation in the value of acquired
real property and, to a lesser extent, through mortgage loans and sale-leaseback
transactions. See INVESTMENT POLICIES, page 6. There is no assurance that
sufficient suitable investments will be found or that the Partnership's
objectives will be attained.
Investment in the Real Property Account, and thereby, participation in the
investment experience of the Partnership, involves significant risks. See RISK
FACTORS, page 11. These include the risk of fluctuating real estate values and
the risk that the appraised or estimated values of the Partnership's real
property investments will not be realized upon their disposition. Many of the
Partnership's real estate investments will not be quickly convertible into cash
through disposition on commercially reasonable terms. The Real Property Account
should therefore be viewed only as a long-term investment. See RESTRICTIONS ON
WITHDRAWALS, page 18. For certain other risk factors associated with the Real
Property Account, see RISK FACTORS, page 11.
Pruco Life of New Jersey has taken steps to ensure that the Real Property
Account and Partnership will be sufficiently liquid to satisfy all withdrawal or
loan requests promptly (within 7 days). The Partnership will normally maintain
10-15% of its assets in short-term and intermediate-term marketable debt
instruments and will have income streams from its real property investments,
mortgage loans, and leasebacks. Moreover, the Partnership may borrow funds for
liquidity purposes, if necessary. See BORROWING BY THE PARTNERSHIP, page 17.
There are currently in force limitations on transfers out of the Real Property
Account. See RESTRICTIONS ON WITHDRAWALS, page 18.
Prudential's management of the Partnership is subject to certain conflicts of
interest, including the possible acquisition of properties from affiliates. See
CONFLICTS OF INTEREST, page 13.
Prudential generally charges the Partnership a daily fee for investment
management which amounts to 1.25% per year of the average daily gross assets of
the Partnership. The Partnership also compensates Prudential for providing
certain accounting and administrative services to the Partnership. See CHARGES,
page 17.
Contract owners who select the real property investment option will also be
subject to the same Contract charges with respect to the portion of their
Contract fund allocated to the Real Property Account as they are with respect to
the portion of their Contract fund allocated to a separate account that invests
in The Prudential Series Fund, Inc. (the "Series Fund"), the underlying funding
vehicle for the other variable investment options available to
2 - Real Property
<PAGE>
Contract owners. The particular Contract prospectus should be consulted for a
description of those charges. The Real Property Account is currently available
to purchasers of Pruco Life of New Jersey's Variable APPRECIABLE LIFE(R)
Insurance Contracts, Variable Life Insurance Contracts, DISCOVERY(R) Life Plus
Contracts and DISCOVERY(R) PLUS Contracts, except for Contracts, such as those
purchased in connection with IRAs, Section 403(b) annuities, and other
tax-qualified plans, that are subject to the Employee Retirement Income Security
Act of 1974 ("ERISA") or to the prohibited transaction excise tax provisions of
the Internal Revenue Code. See THE REAL PROPERTY ACCOUNT'S UNAVAILABILITY TO
CERTAIN CONTRACTS, page 15. A Variable APPRECIABLE LIFE Contract owner, for
example, who elects to invest part of his or her net premiums in the Pruco Life
of New Jersey Variable Appreciable Account and part in the Real Property Account
will be subject to the same sales load charges, the same risk charges, the same
administrative charges, the same insurance charges, and the same deferred sales
charges without regard to what portion is invested in the Pruco Life of New
Jersey Variable Appreciable Account and what portion is invested in the Real
Property Account. The Real Property Account has established different
subaccounts, relating to the different types of variable Contracts that may
participate in the Real Property Account, and these subaccounts provide the
mechanism and maintain the records whereby these different Contract charges are
made.
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE
COMPANY OF NEW JERSEY, PRUCO LIFE OF NEW JERSEY
VARIABLE CONTRACT REAL PROPERTY ACCOUNT, THE
PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY
PARTNERSHIP, AND THE INVESTMENT MANAGER
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey") is a
stock life insurance company, organized in 1982 under the laws of the State of
New Jersey. It is licensed to sell life insurance and annuities only in the
States of New Jersey and New York. These Contracts are not offered in any state
in which the necessary approvals have not yet been obtained.
Pruco Life of New Jersey is a wholly-owned subsidiary of Pruco Life Insurance
Company ("Pruco Life"), which in turn is a wholly-owned subsidiary of
Prudential, a mutual insurance company founded in 1875 under the laws of the
State of New Jersey. As of December 31, 1996, Prudential has invested $127
million in Pruco Life of New Jersey through its subsidiary Pruco Life in
connection with Pruco Life of New Jersey's organization and operation.
Prudential intends from time to time to make additional capital contributions to
Pruco Life of New Jersey as needed to enable it to meet its reserve requirements
and expenses in connection with its business. However, Prudential is under no
obligation to make such contributions and its assets do not back the benefits
payable under the Contract. Pruco Life of New Jersey's financial statements
appear in either the attached Contract prospectus or in the statement of
additional information for the Contract prospectus, which is available upon
request.
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
The Pruco Life of New Jersey Variable Contract Real Property Account (the "Real
Property Account") was established on October 30, 1987 under New Jersey law as a
separate investment account. The Account meets the definition of a "separate
account" under the federal securities laws. The Real Property Account holds
assets that are segregated from all of Pruco Life of New Jersey's other assets.
The Real Property Account is used only to support those variable benefits
payable under the Contracts that are funded by the real estate investment
option.
The obligations to Contract owners and beneficiaries arising under the Contracts
are general corporate obligations of Pruco Life of New Jersey. Pruco Life of New
Jersey is also the legal owner of the assets in the Real Property Account. Pruco
Life of New Jersey will maintain assets in the Real Property Account with a
total market value at least equal to the amounts credited under the real estate
option to all the Contracts participating in the Real Property 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 Real
Property Account's assets may include funds contributed by Pruco Life of New
Jersey, and may include accumulations of the charges Pruco Life of New Jersey
makes against the Real Property Account.
Pruco Life of New Jersey will bear the risks and rewards of the Real Property
Account's investment experience to the extent of its investment in the Real
Property Account. After the Real Property Account has been in operation for some
time, Pruco Life of New Jersey may withdraw or redeem its investment in the Real
Property Account, but will not make any such redemption unless it is satisfied
that the redemption will not have a materially adverse impact on the Real
Property Account. Accumulations of charges will be withdrawn on a regular
periodic basis.
3 - Real Property
<PAGE>
Unlike the other separate accounts funding the Contracts, the Real Property
Account is not registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 as an investment company. For state law
purposes, the Real Property Account is treated as a part or division of Pruco
Life of New Jersey. Contract owners have no voting rights with respect to the
Real Property Account. The Real Property Account is under the control and
management of Pruco Life of New Jersey, and the Board of Directors and officers
of Pruco Life of New Jersey are responsible for the management of the Real
Property Account. No salaries of Pruco Life of New Jersey personnel are paid by
the Real Property Account. Information regarding the directors and officers of
Pruco Life of New Jersey is contained in the attached prospectus for the
Contract. The financial statements of the Real Property Account begin on page
A1.
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
All amounts allocated to the Real Property Account are invested through The
Prudential Variable Contract Real Property Partnership (the "Partnership"), a
general partnership organized under New Jersey law on April 29, 1988. The only
partners in the Partnership (collectively, the "Partners") are Prudential, Pruco
Life of New Jersey and Pruco Life, a wholly-owned subsidiary of Prudential. The
Partnership was established to provide a means for assets allocated to the real
estate investment options under variable life insurance and variable annuity
contracts issued by these three companies to be invested in a commingled pool,
so as to provide greater diversification of investments and lower transaction
costs than would be possible if such assets were separately invested by each
company. All amounts allocated to the Real Property Account are contributed by
Pruco Life of New Jersey to the Partnership. Pruco Life of New Jersey's general
partnership interest in the Partnership is held in the Real Property Account.
The initial contributions to the Partnership were made on April 29, 1988.
Prudential contributed $100,000 in cash to the Partnership; Pruco Life of New
Jersey contributed $100,000 in cash to the Partnership; and Pruco Life
contributed the real estate and other assets held in its real estate separate
account, which had been actively investing in real estate for more than a year.
Those assets had an estimated market value of $91,538,737 on that date. Each
Partner is entitled to its prospective proportionate share of all income, gains,
and losses of the Partnership.
The assets of the Partnership are valued on each business day and the value of
each Partner's interest will fluctuate with the investment performance of the
Partnership. In addition, the interests of the Partners are proportionately
readjusted, at the then current value, on each day when a Partner makes a
contribution to, or withdrawal from, the Partnership. When a Contract owner
chooses to allocate a portion of his or her net premiums or purchase payments,
or transfer a portion of his or her Contract fund, to the Real Property Account,
Pruco Life of New Jersey will contribute that amount to the Partnership as a
capital contribution, which will correspondingly increase the Real Property
Account's interest in the Partnership. Values and benefits under the Contract
will thereafter vary with the performance of the Partnership's investments. For
further discussion on how the value of a Contract owner's interest in the Real
Property Account and the value of the Partnership's investments are calculated,
see VALUATION OF CONTRACT OWNERS' PARTICIPATING INTERESTS, page 15.
Contract owners have no voting rights with respect to the operations of the
Partnership. The financial statements of the Partnership begin on page B1.
THE INVESTMENT MANAGER
Pursuant to an investment management agreement, the Partnership has retained
Prudential to act as investment manager of the Partnership. Prudential is one of
the largest real estate investors in North America. Prudential has been making
mortgage loans since before 1900 and is one of the most experienced real estate
mortgage lenders in the United States. Prudential, through its affiliates, has a
nationwide staff to underwrite, originate, and service such loan activity. Its
network of field offices has direct working relationships with regional and
national real estate developers, brokers, managers, and investors providing
Prudential with mortgage investment opportunities on a national basis. Since the
early 1970's, Prudential's mortgage lending has been concentrated in the
commercial and agricultural markets. The urban commercial lending activities
include loans secured by apartment, office, and industrial buildings, hotels and
motels, and shopping centers.
In the late 1940's, Prudential began to acquire real estate equities. Today,
Prudential and its affiliates continue to make equity investments in investment
properties and develop income-producing real estate.
At present, Prudential directly and through affiliates invests in and manages
real estate equities and mortgages for its general account and for several
separate accounts. Prudential and its affiliates also participate in real estate
ventures through public and private partnerships. As of December 31, 1996,
Prudential owned or controlled $24.9 billion of net real estate mortgages and
equities of which $20.3 billion is in the general account, $4 billion is in
separate accounts and $600 million is in subsidiaries. Statement value for
general account assets is recorded at depreciated cost and for separate account
assets at market value. For a discussion of how the Partnership's real
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estate-related investments are valued, see VALUATION OF CONTRACT OWNERS'
PARTICIPATING INTERESTS, page 15.
Prudential has organized its real estate activities into separate business units
within Prudential's Private Asset Management Group. Prudential Real Estate
Investors (PREI) is the unit responsible for the investments of the Real
Property Account. PREI's investment staff is separate and distinct from that of
Prudential's general account real estate activities.
PREI provides investment management services on a domestic basis and also acts
as part of a global team providing these services to institutional investors
worldwide. PREI is headquartered in Parsippany, New Jersey and has 4 field
offices across the United States. As of December 31, 1996, PREI had under
management approximately 11.2 million net rentable square feet of office real
estate, 23.3 million net rentable square feet of industrial real estate, 5.8
million net rentable square feet of retail real estate, 8,887 hotel rooms,
14,919 multifamily residential units, and 27 acres of unimproved land.
Prudential's general account real estate operation may provide PREI with such
services as may be required in connection with the investment management
agreement regarding the Partnership. Such operations are now located in Newark
and Parsippany, New Jersey and have 4 regional offices across the United States.
As of December 31, 1996, these operations had under management approximately
29.1 million net rentable square feet of office real estate, 5.9 million net
rentable square feet of industrial real estate, 4.3 million net rentable square
feet of retail real estate, 12,800 hotel rooms, 4,900 multifamily residential
units and manages a portfolio of mortgage loans totaling approximately $16.5
billion.
Proposals to acquire properties for the Partnership will generally be originated
by the field office and reviewed and approved by the Investment Management
Committee of PREI. Depending upon the size of the acquisition and other factors,
a proposed real estate investment may also be submitted for review to the
Finance Committee of the Board of Directors of Prudential.
INVESTMENT POLICIES
OVERVIEW
The Partnership has an investment policy of investing at least 65% of its assets
in direct ownership interests in income-producing real estate, participating
mortgage loans originated for the Partnership, and real property
sale-lease-backs negotiated by Prudential on behalf of the Partnership. It is
expected that the largest portion of these real estate investments will be in
direct ownership interests (including fee interests, general partnership
interests, leaseholds, and tenancies in common) in income-producing real estate,
such as office buildings, shopping centers, apartments, industrial properties or
hotels. The Partnership may also invest up to 5% of its assets in direct
ownership interests in agricultural land. From 10-15% of the Partnership's
assets will ordinarily be invested in short-term debt obligations of the type
purchased by the Money Market Portfolio of the Series Fund or in
intermediate-term bonds of the type invested in by the Diversified Bond
Portfolio of the Series Fund. The Partners reserve the right to increase this
amount up to 30% of the Partnership's assets. Such an increase in the portion
invested in debt obligations could occur, for example, because of property
sales, a rapid influx of Contract owners' funds or because of a perceived need
to increase the Partnership's liquidity. The remainder of the Partnership's
assets may be invested in other types of real estate-related investments,
including primarily conventional, non-participating mortgage loans and real
estate investment trusts.
INVESTMENT IN DIRECT OWNERSHIP INTERESTS IN REAL ESTATE
ACQUISITION. The Partnership's principal investment policy involves acquiring
primarily direct ownership interests in existing (including newly constructed)
income-producing real estate, including office buildings, shopping centers,
apartments, industrial properties, and hotels. The Partnership may also invest
up to 5% of its assets in direct ownership interests in agricultural land.
Property acquisitions will generally be carried out by the real estate
acquisition offices in PREI's network of field offices located throughout the
continental United States. The field office or an affiliate of Prudential also
supervise the management of properties in all of Prudential's accounts. Proposed
investments identified by a field office are reviewed and approved by the
Investment Management Committee of PREI, and in the case of larger proposals, by
the Finance Committee of the Board of Directors of Prudential.
Although it has not been deemed appropriate to establish percentage limitations
on the type and location of properties that may be acquired by the Partnership,
the Partnership plans to diversify its investments both as to the type of
property acquired and its geographic location. Moreover, the Partnership's
investments will be maintained to meet the diversification requirements of the
Internal Revenue Code and the regulations thereunder. See GENERAL INVESTMENT AND
OPERATING POLICIES, page 9.
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In order to attain the Partnership's stated objectives, it will be necessary for
the Partnership to acquire properties which will generate cash in excess of that
required to meet the gross operating expenses of the Partnership. To do this, a
substantial portion of the Partnership's assets will be invested in properties
with operating histories that include established rent and expense schedules.
However, the Partnership may also acquire recently constructed properties that
may be subject to agreements with sellers providing for certain minimum levels
of income. Upon the expiration of or default under these agreements, there can
be no assurance that the Partnership will be able to maintain the level of
operating income which is necessary to produce the return it was previously
experiencing. The Partnership may under certain conditions purchase real
property from Prudential or its affiliates. See CONFLICTS OF INTEREST, page 13.
The property acquired by the Partnership will generally be real estate which is
ready for use. Accordingly, the Partnership will not usually be subject to the
risks of development or construction inherent in the purchase of unimproved real
estate. From time to time, however, the Partnership may invest in a
developmental real estate project deemed consistent with the Partnership's
objectives, and the Partnership will then be subject to those risks.
While the Partnership will often own the entire fee interest in an acquired
property, it may also hold other direct ownership interests, including, but not
limited to, general partnership interests, limited liability company interests,
leaseholds, and tenancies in common.
PROPERTY MANAGEMENT AND LEASING SERVICES. It is anticipated that the Partnership
generally will retain a management company operating in the area of a property
to perform local property management services. Generally, a field office or
other affiliate of Prudential will supervise and monitor the performance of the
local management company, determine and establish the required accounting
information to be supplied, periodically inspect the property, review and
approve property operating budgets, and review actual operations to ensure
compliance with budgets. In addition to day-to-day management of the property,
the local management company will have responsibility for supervision of any
on-site personnel, negotiation of maintenance and service contracts, advice
regarding major repairs, replacements and capital improvements, the review of
market conditions to recommend desirable changes in rent schedules, and the
formulation of marketing and advertising programs to obtain and maintain good
occupancy rates by responsible tenants. The fees of the local management company
will reduce the cash flow from the property to the Partnership. Certain of the
Partnership's properties are expected to be managed by PREMISYS Real Estate
Services, Inc., a wholly-owned property management company of Prudential.
It is anticipated that the Partnership will retain a leasing company to perform
leasing services on any property with actual or projected vacancies. The leasing
company will coordinate with the property management company to provide
marketing and leasing services with respect to the property. In some cases, the
property management company will be qualified to handle leasing and in those
cases a separate leasing company will not be hired. Leasing commissions and
expenses will reduce the cash flow from the property to the Partnership.
Prudential may, on behalf of the Partnership, hire an affiliate to perform
property management or leasing services, so long as the affiliate's services are
provided on terms competitive with those available from unaffiliated entities
performing comparable services in the same geographic area. See CONFLICTS OF
INTEREST, page 13.
Annually, the field office which oversees the management of each property owned
by the Partnership will, together with the local property management firm,
formulate a business plan and budget for each property. This plan and budget
will consider, among other things, the projected rollover of individual leases,
necessary capital expenditures and any expansion or modification of the use of
the property and will require the approval of an officer of PREI. The field
office will also report periodically to officers of PREI regarding the operating
performance of the property.
INVESTMENTS IN MORTGAGE LOANS
TYPES OF MORTGAGE LOANS. One of the Partnership's investment policies is the
making of mortgage loans. These will include conventional mortgage loans that
may pay fixed or variable rates of interest and, to the extent available,
mortgage loans that have a "participation" (as defined below). The Partnership
will not make mortgage loans to affiliates of Prudential.
The properties to be subject to the Partnership's mortgage loans are intended to
consist of commercial properties (such as office buildings, shopping centers,
hotels, industrial properties, and office showrooms), agricultural properties,
and residential properties (such as garden apartment complexes and high-rise
apartment buildings). The Partnership's mortgage loans will generally be secured
by properties with a demonstrable income-producing potential based on historical
or projected data. Such mortgage loans will generally not be personal
obligations of the borrower and will generally not be insured or guaranteed by
government agencies or otherwise.
1. FIRST MORTGAGE LOANS. It is expected that the Partnership will primarily make
first mortgage loans secured by mortgages on existing income-producing property.
Such first mortgage loans may provide for interest-only payments and a balloon
payment at maturity.
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The yield on a traditional first mortgage loan has historically been less than
that of a wraparound mortgage loan on the same property. However, because of
recent innovations involving the terms and conditions of first mortgage loans,
such as the use of variable interest rates, equity participations and similar
devices, the yield on a first mortgage loan may, in certain instances, be
greater than that of a wraparound mortgage on the same property.
2. WRAPAROUND MORTGAGE LOANS. The Partnership also may make wraparound mortgage
loans on income-producing real properties which are already subject to prior
mortgage indebtedness to unaffiliated entities. A wraparound mortgage loan is a
mortgage having a principal amount equal to the outstanding balance under the
prior existing mortgage loan plus the amount actually to be advanced by the
lender under the wraparound mortgage loan, thereby providing the owner of a
property with additional funds without disturbing the existing loan. The terms
of any wraparound mortgage loans made by the Partnership will require the
borrower to make all principal and interest payments on the underlying loan to
the Partnership, which will in turn pay the holder of the prior loan. Because
the existing first mortgage loan is preserved, the lien of the wraparound
mortgage loan is necessarily junior to it. The Partnership will make wraparound
mortgage loans only in states where local applicable foreclosure laws permit a
lender, in the event of the borrower's default, to obtain possession of the
property which secures the loan, and it will be the policy of the Partnership to
file notices of default and attempt to obtain a court-appointed receiver where
appropriate as quickly as possible after any default.
3. JUNIOR MORTGAGE LOANS. The Partnership may also invest in other junior
mortgage loans. Junior mortgage loans will be secured by mortgages which are
subordinate to one or more prior liens on the real property and generally, but
not in all cases, will provide for repayment in full prior to the end of the
amortization period of the senior mortgages. Recourse on such loans will include
the real property encumbered by the Partnership's mortgage and additionally may
include other collateral or personal guarantees by the borrower.
The Partnership will generally make junior or wraparound mortgage loans only if
the senior mortgage, when combined with the amount of the Partnership's mortgage
loan, would not exceed the maximum amount which the Partnership would be willing
to commit to a first mortgage loan and only under such circumstances and on such
property as to which the Partnership would otherwise make a first mortgage loan.
4. PARTICIPATIONS. The Partnership may seek to make mortgage loans which, in
addition to charging a base rate of interest, will include provisions permitting
the Partnership to participate (a "participation") in the economic benefits of
the underlying property through the receipt of additional interest in the form
of a percentage of the gross or net revenues derived from operation of the
property and/or of the increase in the value of the property realized by the
borrower, such as through sale or refinancing of the property. Such arrangements
may also involve the grant to the Partnership of an option to acquire the
property or an undivided interest in the property securing the loan. To the
extent that the Partnership negotiates the right to receive additional interest
in the form of a percentage of the gross revenues or otherwise, the fixed cash
return to the Partnership from such an investment will generally be less than
would otherwise be the case. It is expected that the Partnership generally will
be entitled to such percentage participations when the gross or net revenues
derived from operation of the property exceed a certain base amount, which may
be subject to adjustment upon an increase in real estate taxes or similar
charges. The form and extent of such additional interest to be received by the
Partnership will vary with each transaction depending on such factors as the
equity investment of the owner or developer of the property, other financing or
credit obtained by the owner or developer, the fixed base interest rate on the
mortgage loan by the Partnership, any other security arrangement, the cash flow
and pro forma cash flow from the property, and market conditions.
The Partnership intends to utilize such additional interest as a hedge against
inflation on the assumption that as prices increase in the economy generally,
the rental prices obtained by properties, such as shopping centers or office
buildings, will increase and that there should be a corresponding increase in
the value of such properties. There can be no assurance that such additional
interest or increased values will in fact be received. In that event, the
Partnership would be entitled to receive only the fixed portion of its return.
STANDARDS FOR MORTGAGE LOAN INVESTMENTS. In making mortgage loans, the
investment manager will consider relevant real property and financial factors,
including the location, condition, and use of the underlying property, its
operating history, its future income-producing capacity and the quality,
experience, and creditworthiness of the unaffiliated borrower.
Prior to the Partnership's making any mortgage loan, the investment manager will
analyze the fair market value of the underlying real estate. In general, the
amount of each mortgage loan made by the Partnership will not exceed, when added
to the amount of any existing indebtedness, 80% of the estimated or appraised
value of the property mortgaged.
DEALING WITH OUTSTANDING LOANS. The Partnership may sell its mortgage loans
prior to maturity if such action is deemed advisable by the investment manager
and consistent with the Partnership's investment objectives. The investment
manager may also extend the maturity of any mortgage loan made by the
Partnership, consent to a
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sale of the property subject to a mortgage loan or finance the purchase of a
property by making a new mortgage loan in connection with the sale of a property
(either with or without requiring the repayment of the mortgage loan),
renegotiate the terms of a mortgage loan, and otherwise deal with the mortgage
loans of the Partnership.
INVESTMENTS IN SALE-LEASEBACKS
A portion of the Partnership's investments may consist of real property
sale-leaseback transactions ("leasebacks"). In a transaction of this type, the
Partnership will typically purchase land and income-producing improvements on
the land and simultaneously lease the land and improvements, generally to the
seller, under a long-term lease. Leasebacks may be for very long terms and may
provide for payments from the lessee in escalating amounts.
Generally, under the terms of the leaseback, the tenant will operate, or provide
for the operation of, the property and be responsible for the payment of all
costs, including taxes, mortgage debt service, maintenance and repair of the
improvements, and insurance. The Partnership may also, in some cases, grant to
the lessee an option to acquire the land and improvements from the Partnership
after a period of years. The option exercise price would generally be based upon
such factors as the fair market value of the property, as encumbered by the
lease, the increase in the gross revenues from the property or other objective
criteria reflecting the increased value of the property.
In some leaseback transactions, the Partnership may only purchase the land under
an income-producing building and lease the land to the owner of the building. In
such cases, the Partnership may seek, in addition to base rents in its
leasebacks, participations in the gross revenues from the building in a form
such as a percentage of the gross revenues of the lessee above a base amount
(which may be subject to adjustment upon an increase in real property taxes or
upon other events). The Partnership may invest in leasebacks which are
subordinated to other interests in the land, buildings, and improvements, such
as a first mortgage, other mortgage or lien. In those situations, the
Partnership's leaseback interest will be subject to greater risks.
The Partnership will only acquire a property for a leaseback transaction if the
purchase price is equal to not more than 100% of the estimated or appraised
value of the property. The Partnership may dispose of its leasebacks when deemed
advisable by the investment manager and consistent with the Partnership's
investment objectives.
GENERAL INVESTMENT AND OPERATING POLICIES
The Partnership does not intend to invest in any direct ownership interests in
properties, mortgage loans, leasebacks or other real estate investments with a
view to making short-term profits from their sale. However, the Partnership may
dispose of its investments to the extent such disposition is necessary to meet
its cash requirements or where it is deemed to be desirable by the investment
manager because of market conditions or otherwise. Any proceeds from the
disposition of assets (and any cash flow from operations) which are not
necessary for the Partnership's operations and which are not withdrawn by the
Partners in order to make distributions pursuant to the variable contracts
issued by the Partners will be reinvested by the Partnership in investments
consistent with the Partnership's investment objectives and policies.
In making investments in properties, mortgage loans, leasebacks or other real
estate investments, the Partnership will rely on the investment manager's own
analysis of the investment and will not receive an independent appraisal prior
to acquisition. The Partnership expects, however, that all properties owned by
the Partnership, and most mortgage loans held by the Partnership, will be
appraised or valued on an annual basis by an independent appraiser who is a
member of a nationally recognized society of appraisers. Each such appraisal
shall be maintained in the records of the Partnership for at least 5 years. It
should be noted that appraised values are opinions and, as such, may not
represent the true worth or realizable value of the property being appraised.
The Partnership will ordinarily purchase properties on an unleveraged basis and
the properties acquired will typically be free and clear of mortgage
indebtedness immediately after their acquisition. The Partnership may, however,
acquire properties subject to existing mortgage loans. In addition, while the
Partnership will generally not mortgage its properties or acquire properties
partly with the proceeds of purchase money mortgage loans, it may do so up to
75% of the value of the property where the investment manager deems such action
consistent with the Partnership's investment objectives. Where the Partnership
does mortgage its properties, it will, of course, bear the expense of mortgage
payments. See BORROWING BY THE PARTNERSHIP, page 17.
In addition to the types of real estate investments previously discussed, the
Partnership may also invest a portion of its assets in real estate limited
partnerships and shares of real estate investment trusts.
The Partnership's investments will be maintained so as to meet the
diversification requirements set forth in Treasury Regulations issued pursuant
to Section 817(h) of the Internal Revenue Code (the "Code") relating to the
investments of variable life insurance and variable annuity separate accounts.
In order to meet the diversification requirements under the regulations, the
Partnership will meet the following test: no more than 55% of the assets will be
invested in any one investment, no more than 70% of the assets will be invested
in any two investments,
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no more than 80% of the assets will be invested in any three investments, and no
more than 90% of the assets will be invested in any four investments. All
interests in the same real property project are treated as a single investment.
The Partnership must meet the above test within 30 days of the end of each
calendar quarter. To comply with the diversification requirements of the State
of Arizona, the Partnership will limit additional investments in any one parcel
or related parcels to an amount not exceeding 10% of Partnership assets.
In managing the assets of the Partnership, Prudential will use its discretion in
determining whether to foreclose on defaulting borrowers or to evict defaulting
tenants. Such determination will depend on the course of action Prudential
concludes will be in the best interests of the Partnership in maintaining the
value of the investment.
Property management services generally will be required in connection with the
Partnership's investments in properties which are owned and operated by the
Partnership but usually will not be needed with respect to mortgage loans owned
by the Partnership, except for mortgage servicing. It is possible, however, that
such services will be necessary or desirable in exercising default remedies
under a foreclosure on a mortgage loan. Prudential may engage on behalf of the
Partnership affiliated or unaffiliated entities to provide such additional
services to the Partnership. Prudential may engage its affiliates to provide
property management, property development services, loan servicing or other
services if and only if the fees paid to an affiliate do not exceed the amount
that would be paid to an independent party for similar services rendered in the
same geographic area. See CONFLICTS OF INTEREST, page 13.
Finally, Prudential will manage the Partnership so that the Real Property
Account will not be subject to registration under the Investment Company Act of
1940 (the "1940 Act"). This will require monitoring the proportion of the
Partnership's assets to be placed in various investments so that the Real
Property Account does not become subject to the 1940 Act.
CURRENT REAL ESTATE-RELATED INVESTMENTS
The current principal real estate-related investments held by the Partnership
are described below. Many of these investments were originated by, and
previously held in, The Prudential Real Property Account of Pruco Life Insurance
Company (the "Pruco Life Account"), a separate account established to fund the
real estate investment option under variable contracts issued by Pruco Life.
Prior to the formation of the Partnership, the Pruco Life Account followed the
same investment policies as those followed by the Partnership. Pruco Life
contributed the assets held in the Pruco Life Account to the Partnership as its
initial capital contribution to the Partnership.
PROPERTIES
1. OFFICE FACILITY IN LISLE, ILLINOIS. The property is a four-story office
building on 5.6 acres of land. It was constructed in 1985 and contains
approximately 102,000 square feet of leasable space. R.R. Donnelley & Sons
Company currently leases the entire building under a renewable lease expiring in
1997. The facility is located at 750 Warrenville Road in the Corporetum Office
Park in Lisle, Illinois. Corporetum Office Park is a 75 acre planned office
development located 25 miles west of downtown Chicago.
2. APARTMENT COMPLEX IN ATLANTA, GEORGIA. Brookwood Valley Apartments is a
garden apartment complex located approximately 3 miles north of downtown
Atlanta. It consists of eight three-story buildings containing a total of 240
units. Construction of the 7.1 acre site was completed in 1987. At December 31,
1996 the property was 93% leased.
3. WAREHOUSE FACILITY IN POMONA, CALIFORNIA. The Partnership owns a leasehold
estate in six industrial buildings on approximately 28 acres in Pomona,
California. The site is approximately 30 miles east of downtown Los Angeles. The
buildings were constructed between 1982 and 1984 and contain approximately
531,000 square feet of leasable space. The property was 100% leased at December
31, 1996.
Land under the leasehold estate was capitalized upon the assignment of a ground
lease from the previous owner. The lease term extends until November 2078 with
no renewal options. The annual ground lease payments are $250,000 through
November 1994, and, for each ten year increment thereafter, are subject to
increase by 50% of the increase in the Consumer Price Index during the previous
period. For 1995, the annual ground lease payment increased by $126,450 to
$376,450. The ground lease agreement contains a purchase option from November
1994 to November 1997 at a fixed price of $4,000,000, which management intends
to exercise.
4. SHOPPING CENTER IN ROSWELL, GEORGIA. King's Market shopping center was
constructed in 1988. It is located approximately 22 miles north of downtown
Atlanta on a 30 acre site. It contains approximately 300,000 square feet of
rentable space. At December 31, 1996 it was 96% leased.
5. OFFICE FACILITY IN MORRISTOWN, NEW JERSEY. This four-story suburban office
building was constructed in 1981 and contains 83,000 rentable square feet. It is
located on a 5.1 acre site, approximately 30 miles west of New York City. At
December 31, 1996 it was 93% leased.
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6. WAREHOUSE FACILITY IN BOLINGBROOK, ILLINOIS. This single-story warehouse was
completed in 1989. It contains 224,640 rentable square feet. It is located
approximately 20 miles southwest of downtown Chicago. The entire facility is
leased to the Gillette Company under a lease expiring in October, 2000.
7. APARTMENT COMPLEX IN FARMINGTON HILLS, MICHIGAN. Indian Creek Apartments
consists of fifteen two-story buildings containing 156 two-bedroom and 40 one-
bedroom units. It was constructed in 1988 and is located approximately 20 miles
northwest of Detroit. At December 31, 1996, the property was 88% leased.
8. WAREHOUSE FACILITIES IN JACKSONVILLE, FLORIDA. The Partnership owns a 50%
interest in four single-story warehouse/distribution buildings located in
Jacksonville, Fl. The remaining 50% is owned by The Prudential and one of its
subsidiaries. The buildings contain approximately 502,000 rentable square feet
and were 85% leased at December 31, 1996
9. APARTMENT COMPLEX IN RALEIGH, NORTH CAROLINA. Dunhill Trace consists of
fourteen two and three story apartment buildings. It was constructed and
acquired in June, 1995 and located on a 16.2 acre site in northwest Raleigh,
North Carolina. At December 31, 1996 the property was 97% leased.
10. OFFICE FACILITY IN NASHVILLE, TENNESSEE. Westpark is a 97,000 square foot
office center located in suburban Nashville, Tennessee. The property was
constructed in 1982, at December 31, 1996 the building was 99% leased.
11. OFFICE FACILITY IN OAKBROOK TERRACE, ILLINOIS. Oakbrook Terrace Corporate
Center is a 123,000 square foot building located in a western suburb of Chicago,
Illinois. At December 31, 1996 the property is 99% leased.
12. OFFICE FACILITY IN BEAVERTON, OREGON. This three story office building was
completed in 1995. It contains approximately 72,000 square feet of rentable
space. The building is located on a 3.89 acre land parcel in Beaverton, Oregon.
At December 31, 1996 the building was 100% leased.
RISK FACTORS
There are certain risk factors that a Contract owner should consider before
allocating a portion of his or her net premiums or purchase payments, or
transferring a portion of his or her Contract fund, to the Real Property
Account, so as to participate in the real estate-related investments held by the
Partnership. These include valuation risks, see VALUATION OF CONTRACT OWNERS'
PARTICIPATING INTERESTS, page 15, certain conflicts of interest, see CONFLICTS
OF INTEREST, page 13, as well as the following risks:
LIQUIDITY OF INVESTMENTS
Because the Real Property Account will, through the Partnership, invest
primarily in real estate, its assets will not be as liquid as the investments
generally made by separate accounts of life insurance companies funding variable
life insurance and variable annuity contracts. The Partnership will, however,
hold 10-15% of its assets in the form of marketable short-term or
intermediate-term debt securities. The primary purposes for such investments are
to meet the expenses involved in the operation of the Partnership and to allow
it to have sufficient liquid assets to meet any requests for withdrawals from
the Real Property Account to meet requested or required payments under the
Contracts. The Partnership may also borrow funds to meet liquidity needs. See
BORROWING BY THE PARTNERSHIP, page 17.
Pruco Life of New Jersey and Prudential have taken steps to ensure that the
Partnership will be sufficiently liquid to meet all anticipated withdrawals by
the Partners to meet the separate accounts' liquidity requirements, but it is
nonetheless possible that the Partnership may need to dispose of a real property
or mortgage loan investment promptly in order to meet such withdrawal requests.
GENERAL RISKS OF REAL PROPERTY INVESTMENTS
By participating in the Real Property Account and thereby in the investment
performance of the Partnership, a Contract owner will be subject to many of the
risks of real property investments. These include:
1. RISKS OF OWNERSHIP OF REAL PROPERTIES. The Partnership will be subject to the
risks inherent in the ownership of real property such as fluctuations in
occupancy rates and operating expenses and variations in rental schedules, which
in turn may be adversely affected by general and local economic conditions, the
supply of and demand for properties of the type in which the Partnership
invests, zoning laws, and real property tax rates. Operation of property in
which the Partnership invests will primarily involve rental of that property to
tenants. The financial failure of a tenant resulting in the termination of such
tenant's lease might cause a reduction in the cash flow to the Partnership. In
the event of termination of any lease, there can be no assurance that the
Partnership would be able to find a new tenant for the property on terms as
favorable to the Partnership as obtained from the prior
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tenant. Investments in hotels are subject to additional risk inherent in the
daily turnover and fluctuating occupancy rates of hotel rooms and the absence of
long-term tenants.
The Partnership's properties will also be subject to the risk of loss due to
certain types of property damage (such as that resulting from nuclear power
plant accidents and wars) which are either uninsurable or not economically
insurable.
2. RISKS OF MORTGAGE LOAN INVESTMENTS. The Partnership's mortgage loan
investments will be subject to the risk of default by the borrowers, in which
event the Partnership would have the added responsibility of foreclosing on or
pursuing other remedies on the underlying properties to protect the value of its
mortgage loans. A borrower's ability to meet its mortgage loan payments will be
dependent upon the risks generally incident to the ownership of real property.
Mortgage loans made by the Partnership will generally not be personal
obligations of the borrowers, and the Partnership will accordingly be relying
solely on the value of the underlying property for its security. Mechanics',
materialmen's, government, and other liens may have or obtain priority over the
Partnership's security interest in the property.
In addition, the Partnership's mortgage loan investments will generally be
subject to prepayment risks. If the terms of the mortgage loans so permit,
mortgagors may prepay the loans, thus possibly changing the Partnership's
return.
Junior mortgage loans (including wraparound mortgage loans) will be subject to
greater risk than first mortgage loans, since they will be subordinate to liens
of senior mortgagees. In the event a default occurs on a senior mortgage, the
Partnership may be required to make payments or take other actions to cure the
default (if it has the right to do so) in order to prevent foreclosure on the
senior mortgage and possible loss of all or portions of the Partnership's
investment. "Due on sale" clauses included in some senior mortgages,
accelerating the amount due under the senior mortgage in the case of sale of the
property, may be deemed to apply to the sale of the property upon foreclosure by
the Partnership of its junior mortgage loan.
The risk of lending on real estate increases as the proportion which the amount
of the mortgage loans bears to the fair market value of the real estate
increases. The Partnership will generally not make mortgage loans in excess of
80% of the estimated or appraised value of the property that secures the loan.
There can be no assurance, however, that in the event of a default, the
Partnership will realize an amount equal to the estimated or appraised value of
the property on which a mortgage loan was made.
Mortgage loans made by the Partnership may be subject to state usury laws
imposing limits on interest charges and possible penalties for violation of
those limits, including restitution of excess interest, unenforceability of
debt, and treble damages. The Partnership does not intend to make mortgage loans
at usurious rates of interest, but uncertainties in determining the legality of
rates of interest and other borrowing charges under some statutes could result
in inadvertent violations, in which case the Partnership could incur the
penalties mentioned above.
3. RISKS WITH PARTICIPATIONS. The Partnership may seek to invest in mortgage
loans and leasebacks with participations, which will provide the Partnership
with both fixed interest and additional interest based upon gross revenues, sale
proceeds, and/or other variable amounts. To the extent that the interest income
received by the Partnership is based, in part, on a percentage of the gross
revenues or sale proceeds of the underlying property, the Partnership's income
will be dependent upon the success in the leasing of the underlying property,
the management, and operation of such property by the borrower or lessee and
upon the market value of the property upon ultimate disposition. If the
Partnership negotiates a mortgage loan with a lower fixed interest rate and an
additional percentage of the gross revenues or eventual sale proceeds of the
underlying property, and the underlying property fails to generate increased
revenues or to appreciate, the Partnership will have foregone a potentially
greater fixed return without receiving the benefit of appreciation. In addition,
there may be limitations on participations as a result of applicable state law.
It is also possible that as a result of the Partnership's interest in the gross
revenues or sale proceeds, a court in the event of the borrower's bankruptcy
could possibly treat the Partnership as a partner or joint venturer with the
borrower, and the Partnership could, accordingly, lose the priority its security
interest would otherwise have been given, or be liable for the debts of the
borrower. The Partnership will seek to structure its participations to avoid
being characterized as a partner or joint venturer with the borrower.
4. RISKS WITH SALE-LEASEBACK TRANSACTIONS. In leaseback transactions, which
typically involve the acquisition of land and improvements thereon and the
leaseback of such land and improvements to the seller or another party, the
value of the land and improvements will depend, in large part, on the
performance and financial stability of the lessee and its tenants, if any. The
lessee's leases with its tenants may have shorter terms than the leaseback and,
accordingly, the lessee's future ability to meet payment obligations to the
Partnership will depend on its ability to obtain renewals of such leases or new
leases upon satisfactory terms and the ability of the tenants to meet their
rental payments to the lessee.
PREI investigates the stability and creditworthiness of lessees in all
commercial properties it may acquire, including leaseback transactions. However,
a lessee in a leaseback transaction may have few, if any, assets. The
Partnership will therefore be required to rely on the value of the land and the
improvements for its security. When
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the Partnership's leaseback interest is subordinate to other interests in the
land or improvements, such as a first mortgage or other lien, the Partnership's
leaseback will be subject to greater risk. A default by a lessee or other
premature termination of the leaseback may result in the Partnership being
unable to recover its investment unless the property is sold or leased on
favorable terms. The ability of the lessee to meet its obligations under the
leaseback, and the value of a property, may be affected by a number of factors
inherent in the ownership of real property which are described above.
Furthermore, the long-term nature of a leaseback may, in the future, result in
the Partnership receiving annual rentals below what it might then be receiving
under prevailing market conditions. However, such risk may be materially reduced
to the extent the Partnership is able to obtain participations in connection
with its leasebacks.
RELIANCE ON THE PARTNERS AND THE INVESTMENT MANAGER
A Contract owner does not have a vote in determining the policies of the
Partnership or the Real Property Account and will have no right or power to take
part in the management of the Partnership or the Real Property Account. The
investment manager alone, subject to the supervision of the Partners, will make
all decisions with respect to the management of the Partnership, including the
determination as to what properties to acquire, subject to the investment
policies and restrictions. Although the Partners have the right to replace
Prudential as the investment manager, it should be noted that Pruco Life is a
direct wholly-owned subsidiary of Prudential, and Pruco Life of New Jersey is an
indirect wholly-owned subsidiary of Prudential.
The Partnership will compete in the acquisition of its investments with many
other individuals and entities engaged in real estate activities, including the
investment manager and its affiliates. See CONFLICTS OF INTEREST, page 13. There
may be intense competition in obtaining properties or mortgages of the type in
which the Partnership intends to invest and competition may result in increases
in the costs of suitable investments.
Since the Partnership will continuously look for new investments, Contract
owners will be unable to evaluate for themselves the economic merit of many of
the investments which may be acquired by the Partnership and must depend solely
upon the ability of the investment manager to select investments.
INVESTMENT RESTRICTIONS
The Partnership has adopted certain restrictions relating to its investment
activities. These restrictions may be changed, if the law permits, by the
Partners. Pursuant to these restrictions, the Partnership will not:
1. Make any investments not related to real estate, other than short-term
or intermediate-term debt instruments.
2. Engage in underwriting of securities issued by others.
3. Invest in securities issued by any investment company.
4. Sell securities short.
5. Purchase or sell oil, gas or other mineral exploration or development
programs.
6. Make loans to the Partners or any of their affiliates or any investment
program sponsored by such parties.
7. Enter into leaseback transactions in which the lessee is Prudential, Pruco
Life, Pruco Life of New Jersey or their affiliates or any investment
program sponsored by such parties.
8. Borrow more than 50% of the value of the assets of the Partnership (based
upon periodic valuations and appraisals). See VALUATION OF CONTRACT
OWNERS' PARTICIPATING INTERESTS, page 15.
CONFLICTS OF INTEREST
Prudential, as the investment manager, will be subject to various conflicts of
interest in managing the Partnership. Prudential invests in real estate equities
and mortgages for its own general account and for a number of separate accounts
for qualified pension and profit-sharing plans. Prudential also manages, or
advises in the management of, real estate equities and mortgages owned by other
persons. In addition, affiliates of Prudential are general partners in publicly
offered limited partnerships that invest in real estate equities and mortgage
loans. Prudential and its affiliates may engage in additional business
activities which will be competitive with the Partnership. Moreover, the
Partnership may purchase properties from Prudential or its affiliates.
The conflicts involved in managing the Partnership include:
1. LACK OF INDEPENDENT NEGOTIATIONS BETWEEN THE PARTNERSHIP AND PRUDENTIAL. All
agreements and arrangements relating to compensation between the Partnership and
Prudential or any affiliate of Prudential will not be the result of arm's-length
negotiations.
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2. COMPETITION BY THE PARTNERSHIP WITH PRUDENTIAL'S AFFILIATES FOR ACQUISITION
AND DISPOSITION OF INVESTMENTS. Prudential and its affiliates are involved in
numerous real estate investment activities for Prudential's own general account,
its separate accounts, and other entities, many of which may involve investment
policies comparable to those of the Partnership and thus may compete with the
Partnership for the acquisition and disposition of investments. Moreover,
additional accounts or affiliated entities may be formed in the future with
investment objectives similar, in whole or part, to those of the Partnership. In
short, existing or future real estate investment accounts or entities managed or
advised by Prudential or its affiliates may have the same management as the
Partnership and may be in competition with the Partnership regarding real
property investments, mortgage loan investments, leasebacks, and the management
and sale of such investments. Prudential and its affiliates are not obligated to
present to the Partnership any particular investment opportunity, regardless of
whether such opportunity is of a character that might be suitable for investment
by the Partnership.
Prudential and its affiliates have, however, adopted certain procedures for the
purpose of distinguishing between equity investments available for the
Partnership as opposed to the other programs and entities described above. To
the extent that investment accounts or entities managed by Prudential or its
affiliates have investment objectives and policies similar to the Partnership
and are in the market to acquire properties or make investments at the same time
as the Partnership, the following procedures will be followed to resolve any
conflict of interest. Prudential will seek to locate through its contacts and
business relationships an adequate supply of equity investments for all of the
accounts and other entities which are managed by Prudential and its affiliates
and to allocate such investments equitably among such accounts and entities
based upon their respective investment goals and requirements. In those
situations where the aggregate demand by all such accounts and entities exceeds
the amount of equity investments then available, allocations will be made based
upon such factors as currently available cash flow of particular portfolios,
existing financing on the property, estimated future cash flow of such
portfolios, the effect of the acquisition on diversification of each portfolio,
and other relevant legal or investment policy factors. The rotation system
designates which of those accounts or entities has the next opportunity to make
an equity investment for which it is eligible. The use of such a system is
monitored to ensure that equitable treatment of all investment accounts and
entities is achieved.
3. COMPETITION WITH THE PARTNERSHIP FROM AFFILIATES FOR THE TIME AND SERVICES OF
COMMON OFFICERS, DIRECTORS, AND MANAGEMENT PERSONNEL. As noted above, Prudential
and its affiliates are involved in numerous real estate investment activities.
Accordingly, many of the personnel of Prudential and its affiliates who will be
involved in performing services for the Partnership have competing demands on
their time. Thus, conflicts of interest may arise with respect to allocating
time among such entities and the Partnership. The directors, officers, and other
personnel of Prudential and affiliates will devote such time to the affairs of
the Partnership as the officers and directors determine in their sole
discretion, exercised in good faith. Prudential believes it has sufficient
personnel to discharge its responsibilities to all entities to which it is
responsible.
4. COMPETITIVE PROPERTIES. Some properties of affiliated entities may be
competitive with properties in which the Partnership has an interest. Among
other things, such properties could be in competition with the Partnership's
properties for prospective tenants.
5. LESSEE POSITION. It is possible that Prudential or its affiliates may have a
lessee's position in one or more of the properties owned by the Partnership. In
the case of any such lease, however, the terms of such lease will be competitive
with leases of space in such properties entered into with non-affiliated third
parties, and the Partnership currently follows a practice of limiting the amount
of space that an affiliate of Prudential may rent in a property owned by the
Partnership.
6. USE OF AFFILIATES TO PERFORM ADDITIONAL SERVICES FOR THE PARTNERSHIP. The
Partnership may engage entities affiliated with Prudential to provide additional
services to the Partnership, such as real estate brokerage, mortgage servicing,
property management, leasing, property development, and other real
estate-related services. The Partnership may utilize the services of such
affiliates and pay their fees, so long as the fees paid to an affiliate do not
exceed the amount that would be paid to an independent party for similar
services rendered in the same geographic area.
7. JOINT VENTURES WITH AFFILIATES. The Partnership may enter into investments
through joint ventures with Prudential or its affiliates or investment programs
they sponsor. The Partnership may enter into such a joint venture investment
with an affiliate only if the following conditions are met: (i) such affiliate
must have investment objectives substantially identical to those of the
Partnership; (ii) there must be no duplicative property management fee, mortgage
servicing fee or other fees; (iii) the compensation payable to the sponsor of
such affiliate must be no greater than that payable to the Partnership's
investment manager; (iv) the Partnership must have a right of first refusal to
buy if such affiliate wishes to sell the property held in the joint venture; and
(v) the investment of the Partnership and the affiliate in the joint venture
must be made on substantially the same terms and conditions(although not the
same percentage). In connection with such an investment, both affiliated parties
would be required to approve any decision concerning the investment. Thus, an
impasse may result in the event the affiliated joint venture partners disagree.
However, in the event of a disagreement regarding a proposed sale
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or other disposition of the investment, the party not desiring to sell would
have a right of first refusal to purchase the affiliated joint venture partner's
interest in the investment. In the event of such an investment, there exists the
possibility under limited circumstances that at some future time the joint
venture partners would no longer be affiliated. In such a case, in the event of
a proposed sale initiated by the joint venture partner, the Partnership would
also have a right of first refusal to purchase the joint venture partner's
interest in the investment. The exercise of a right of first refusal would be
subject to the Partnership's having the financial resources to effectuate such a
purchase, and there can be no assurance that it would have such resources.
The investment by the Partnership in joint venture partnerships which own
properties, instead of investing directly in the properties themselves, may
under certain circumstances involve risks not otherwise present, including, for
example, risks associated with the possible bankruptcy of the Partnership's
co-venturer or such co-venturer at any time having economic or business
interests or goals which are inconsistent with the business interests or goals
of the Partnership.
8. PURCHASE OF REAL PROPERTY FROM PRUDENTIAL OR AFFILIATES. The Partnership may
acquire properties owned by Prudential or its affiliates, subject to compliance
with special conditions designed to minimize the conflicts of interests. The
Partnership may purchase property satisfying the Partnership's investment
objectives and policies from an affiliate only if: (i) the applicable insurance
regulators approve the principle of permitting the Partnership to acquire real
property from Prudential or affiliates; (ii) the Partnership acquires the
property at a price not greater than the appraised value, with the appraisal
being conducted by a qualified, unaffiliated appraiser; (iii) the affiliate has
owned the property at least 2 years, the cost paid by the affiliate is
established, and any increase in the proposed purchase price over the cost to
the affiliate is, in the opinion of the independent real estate advisor
mentioned in the next provision, explicable by reference to material factors
(including the passage of time) that have in fact increased the value of the
property; and (iv) a qualified and independent real estate advisor (other than
the appraiser) reviews the proposed acquisition and provides a letter of opinion
that the transaction is fair to the Partnership.
THE REAL PROPERTY ACCOUNT'S UNAVAILABILITY TO
CERTAIN CONTRACTS
Pruco Life of New Jersey has determined that it is in the best interest of
Contract owners participating in the Real Property Account to provide the Real
Property Account with the flexibility to engage in transactions that may be
prohibited if the Real Property Account accepts funds under Contracts subject to
ERISA or the prohibited transaction excise tax provisions of the Internal
Revenue Code. Accordingly, owners of Pruco Life of New Jersey Contracts that are
purchased in connection with IRAs, tax deferred annuities subject to Section
403(b) of the Code, or other employee benefit plans which are subject to ERISA
or to the prohibited transaction excise tax provisions of the Code, may not
select the Real Property Account as one of the investment options under their
Contract. By not offering the Real Property Account as an investment option
under such contracts, Pruco Life of New Jersey is able to comply with state
insurance law requirements that policy loans be made available to Contract
owners.
VALUATION OF CONTRACT OWNERS' PARTICIPATING
INTERESTS
A Contract owner's interest in the Real Property Account will initially be the
amount allocated to the Real Property Account in accordance with the Contract
owner's instructions. Thereafter, that value will change daily. The value of a
Contract owner's interest in the Real Property Account at the close of any day
is equal to its amount at the close of the preceding day, multiplied by the "net
investment factor" for that day arising from the Real Property Account's
participation in the Partnership, plus any additional amounts allocated to the
Real Property Account by the Contract owner, and reduced by any withdrawals by
the Contract owner from the Real Property Account and by the applicable Contract
charges recorded in that Contract's subaccount. Some of the charges will be made
daily, some on the Contract's monthly anniversary date, some at the end of each
Contract year, and some upon withdrawal or annuitization. Periodically Pruco
Life of New Jersey will withdraw from the Real Property Account an amount equal
to the aggregate charges recorded in the subaccounts.
The "net investment factor" is calculated on each business day by dividing the
value of the net assets of the Partnership at the end of that day (ignoring, for
this purpose, changes resulting from new contributions to or withdrawals from
the Partnership) by the value of the net assets of the Partnership at the end of
the preceding business day. The value of the net assets of the Partnership at
the end of any business day is equal to the sum of the value of the
Partnership's short-term and intermediate-term debt instruments, the value of
the individual real properties and other real estate-related investments owned
by the Partnership, determined in the manner described
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below, and an estimate of the accrued net operating income earned by the
Partnership from properties and other
real estate-related investments, reduced by the liabilities of the Partnership,
including the daily investment management fee and certain other expenses
attributable to the operation of the Partnership. See CHARGES, page 17.
The Partnership's short-term debt investments (obligations of 1 year's maturity
or less) will be of the type that may be held by the Series Fund's Money Market
Portfolio and will be valued on an amortized cost basis. This means that each
obligation will be valued initially at its purchase price and thereafter by
amortizing any discount or premium uniformly to maturity. This method of
valuation almost always results in a value that is extremely close to market
value. In the event of a sizable change in interest rates, the value determined
by this method may be more or less than market value. If this should occur, the
Partners will consider whether an appropriate adjustment should be made in the
valuation of these obligations. The Partnership's intermediate-term bonds will
be of the type that may be held by the Series Fund's Diversified Bond Portfolio
and will be valued utilizing an independent pricing service to determine
valuations for normal institutional size trading units of such securities. The
pricing service considers such factors as security prices, yields, maturities,
call features, ratings, and developments relating to specific securities in
arriving at securities valuations.
The value of the individual real properties and other real estate-related
investments, including mortgages, acquired by the Partnership will be determined
as follows. Each property or other real estate-related investment acquired by
the Partnership will initially be valued at its purchase price. In acquiring a
property or other real estate-related investment, Prudential will not obtain an
independent appraisal but will instead rely on its own analysis of the
investment's fair market value. Thereafter, all properties and most real
estate-related investments will ordinarily be appraised by an independent
appraiser no less frequently than annually. At least every 3 months, Prudential
will make internal reviews of each property or other real estate-related
investments and make an adjustment to its valuation if there is reason to
conclude that there has been a change in the value of the property or other real
estate-related investment since the last valuation. The revised value will
remain in effect and will be used in each day's calculation of the value of the
Partnership's assets until the next review or appraisal. It should be noted that
appraisals are only estimates and do not necessarily reflect the realizable
value of an investment.
The estimated amount of the net operating income of the Partnership from
properties and other real estate-related investments will be based on estimates
of revenues and expenses for each property and other real estate-related
investments. Annually, Prudential will prepare a month-by-month estimate of the
revenues and expenses ("estimated net operating income") for each property and
other real estate-related investments owned by the Partnership. Each day
Prudential will add to the value of the assets as determined above a
proportionate part of the estimated net operating income for the month. In
effect, Prudential will establish a daily accrued receivable of the estimated
net operating income from each property and other real estate-related
investments owned by the Partnership (the "daily accrued receivable"). On a
monthly basis, the Partnership will receive a report of actual operating results
for each property and other real estate-related investments ("actual net
operating income"). Such actual net operating income will be recognized on the
books of the Partnership and the amount of the then-outstanding daily accrued
receivable will be correspondingly adjusted. In addition, as cash from a
property or other real estate-related investment is actually received by the
Partnership, receivables and other accounts will be appropriately adjusted.
Periodically, but at least every 3 months, Prudential will review its
prospective estimates of net operating income in light of actual experience and
make an adjustment to such estimates if circumstances indicate that such an
adjustment is warranted. Prudential follows this practice of accruing estimated
net operating income from properties and other real estate-related investments
because net operating income from such investments is generally received on an
intermittent rather than daily basis, and the Partners believe it is more
equitable to participating Contract owners if such net operating income is
estimated and a proportionate amount thereof recognized daily. Because the daily
accrual of estimated net operating income is based on estimates that may not
turn out to reflect actual revenue and expenses, Contract owners will bear the
risk that this practice will result in the undervaluing or overvaluing of the
Partnership's assets.
The value of any asset held by the Partnership may be adjusted by Prudential at
any time based upon events which come to the attention of Prudential affecting a
property or other real estate-related investment that Prudential believes has
increased or decreased its realizable value. For example, adjustments may be
made for events indicating an impairment of a borrower's or a lessee's ability
to pay any amounts due or events which affect the property values of the
surrounding area. There can be no assurance that the factors for which an
adjustment may be made will immediately come to the attention of Prudential.
Additionally, because the evaluation of such factors may be subjective, there
can be no assurance that such adjustments will be timely made in all cases where
the value of the Partnership's investments may be affected. All adjustments made
to the valuation of the Partnership's investments, including adjustments to
estimated net operating income, the daily accrued receivable, and adjustments to
the valuation of properties and other real estate-related investments, will be
on a prospective basis only.
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The above method of valuation of the Partnership's assets may be changed,
without the consent of Contract owners, should the Partners determine that
another method would more accurately reflect the value of the Partnership's
investments. Changes in the method of valuation could result in a change in the
Contract fund values which may have either an adverse or beneficial effect on
both existing Contract owners and new purchasers of Contracts. Information
concerning any material change in the valuation method will be given to all
Contract owners in the annual report of the operations of the Real Property
Account.
Although the above-described valuation methods have been adopted because the
Partners believe they will provide a reasonable way to determine the fair market
value of the Partnership's investments, there may well be variations between the
amount realizable upon disposition and the Partnership's valuation of such
assets. Contract owners may be either favorably or adversely affected if the
valuation method results in either overvaluing or undervaluing the Partnership's
investments. If a Contract owner invests in the Real Property Account at a time
in which the Partnership's investments are overvalued, the Contract owner will
be credited with less of an interest than if the value had been correctly
stated. A Contract owner withdrawing from the Real Property Account during such
time will receive more than he or she would if the value had been correctly
stated, to the detriment of other Contract owners. The converse situation will
exist if the Partnership's assets are undervalued.
BORROWING BY THE PARTNERSHIP
The Partnership may borrow to meet its liquidity requirements, and the
Partnership will bear the cost of all such borrowings. Thus, the Real Property
Account, and Contract owners participating in it, will bear a portion of any
such borrowing costs equal to their percentage interest in the Partnership.
Moreover, although the Partnership will generally make unleveraged investments,
it reserves the right to borrow up to 75% of the value of a property (with the
value of a property determined as explained under VALUATION OF CONTRACT OWNERS'
PARTICIPATING INTERESTS, page 15). Increasing the Partnership's assets through
leveraged investments would result in increasing the compensation paid to
Prudential since its investment management fee is calculated as a percentage of
the Partnership's gross assets. Moreover, any borrowing by the Partnership would
increase the Partnership's risk of loss and could inhibit the Partnership from
achieving its investment objectives because the Partnership's payments on any
loans would have to be made regardless of the profitability of the Partnership's
investments. The aggregate indebtedness of the Partnership for all purposes will
not exceed 50% of the value of the Partnership's assets.
CHARGES
Pursuant to an investment management agreement, Prudential charges the
Partnership a daily investment management fee which is equal to an effective
annual rate of 1.25% of the average daily gross assets of the Partnership.
Certain other expenses and charges attributable to the operation of the
Partnership are also charged against the Partnership. Thus, in acquiring an
investment, the Partnership may incur various types of expenses paid to third
parties, including but not limited to, brokerage fees, attorneys' fees,
architects' fees, engineers' fees, and accounting fees. After acquisition of an
investment, the Partnership will incur recurring expenses for such things as the
preparation of annual reports, periodic appraisal costs, mortgage servicing
fees, annual audit charges, accounting and legal fees, and various
administrative expenses. These expenses will be charged against the
Partnership's assets. Some of these operating expenses represent reimbursement
of Prudential for the cost of providing certain services necessary to the
operation of the Partnership, such as daily accounting services, preparation of
annual reports, and various administrative services. Moreover, Prudential
charges the Partnership mortgage loan servicing fees pursuant to the standards
outlined in item 6 under CONFLICTS OF INTEREST, page 13. In addition to the
various expenses charged against the Partnership's assets, other expenses such
as insurance costs, taxes, and property management fees will ordinarily be
deducted from rental income, thereby reducing the gross income of the
Partnership.
As explained above, charges made pursuant to the Contracts will be recorded in
the corresponding subaccounts of the Real Property Account. From time to time,
Pruco Life of New Jersey will withdraw from the Real Property Account an amount
equal to the aggregate amount of such charges. Aside from these charges pursuant
to the Contracts, Pruco Life of New Jersey makes no charges to the Real Property
Account for the expenses involved in operation of the Real Property Account,
although the Real Property Account will, of course, bear its proportionate share
of the charges made to the Partnership which are described above.
The Partnership is not a taxable entity under the provisions of the Internal
Revenue Code. Rather, the income, gains, and losses of the Partnership are
attributed, for federal income tax purposes to the Partners in the Partnership,
including Pruco Life of New Jersey with respect to the Real Property Account.
The earnings of the Real Property Account are, in turn, taxed as part of the
operations of Pruco Life of New Jersey. No charge is being made currently to the
Real Property Account for company federal income taxes. Pruco Life of New Jersey
will review periodically the question of a charge to the Real Property Account
for company federal income taxes
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<PAGE>
attributable to the Contracts. Such a charge may be made in future years for any
federal income taxes attributable to the Contracts.
Under current laws Pruco Life of New Jersey may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant and they are not charged against the Contracts or the Real Property
Account. If there is a material change in applicable state or local tax laws,
the imposition of any such taxes upon Pruco Life of New Jersey that are
attributable to the Real Property Account may result in a corresponding charge
against the Real Property Account.
RESTRICTIONS ON WITHDRAWALS
Before allocating any portion of his or her net premium or purchase payments, or
transferring any portion of his or her Contract fund, to the Real Property
Account, a Contract owner should be aware that withdrawal of an investment in
the Real Property Account may be subject to greater restrictions than an
investment in the other variable investment options available under the
Contracts. Pruco Life of New Jersey reserves the right to restrict transfers
into or out of the Real Property Account. Apart from the routine limitations on
transfers out of the Real Property Account described below, Pruco Life of New
Jersey will exercise its right to restrict transfers out of the Real Property
Account only if there appears to be insufficient cash available to meet Contract
owners' requests and prompt disposition of the Partnership's investments to meet
such requests could not be made on commercially reasonable terms.
Pruco Life of New Jersey will pay any death benefit, cash surrender value,
withdrawal or loan proceeds within 7 days after receipt at a Pruco Life of New
Jersey Service Office of all the documents required for such a payment. Other
than the death benefit, which is determined as of the date of death, the amount
will be determined as of the date of receipt of the request.
The funds necessary to pay any death benefit, cash surrender value, withdrawal
or loan proceeds funded by the Real Property Account will normally be obtained,
first, from any cash flows into the Real Property Account on the day such funds
are required. If, on the day such funds are required, cash flows into the Real
Property Account are less than the amount of funds required, Pruco Life of New
Jersey will seek to obtain such funds by withdrawing a portion of its interest
in the Partnership. The Partnership will normally obtain funds to meet such a
withdrawal request from its net operating income and from the short-term and
intermediate-term debt obligations it holds. If the Partners determine that
these sources are insufficient to meet anticipated withdrawals from the
Partnership, the Partnership may use a line of credit or otherwise borrow up to
50% of the value of the Partnership's assets. See BORROWING BY THE PARTNERSHIP,
page 17. In the event that Pruco Life of New Jersey and the other Partners in
the Partnership determine that such a borrowing by the Partnership would not
best serve the interests of Contract owners, Pruco Life of New Jersey may, in
the event of a Contract loan or withdrawal, rather than taking the amount of any
loan or withdrawal request proportionately from all investment options under the
Contract (including the Real Property Account), take any such loan or withdrawal
first from the other investment options under the Contract.
Transfers from the Real Property Account to the other investment options
available under the Contract are currently permitted only during the 30-day
period beginning on the Contract anniversary. The maximum amount that may be
transferred out of the Real Property Account each year is the greater of: (a)
50% of the amount invested in the Real Property Account or (b) $10,000. Such
transfer requests received prior to the Contract anniversary will be effected on
the Contract anniversary. Transfer requests received within the 30-day period
beginning on the Contract anniversary will be effected as of the end of the
valuation period in which a proper written request or authorized telephone
request is received. The "valuation period" means the period of time from one
determination of the value of the amount invested in the Real Property Account
to the next. Such determinations are made when the value of the assets and
liabilities of the Partnership is calculated, which is generally at 4:15 p.m.
New York City time on each day during which the New York Stock Exchange is open.
Transfers into or out of the Real Property Account are also subject to the
general limits under the Contracts regarding transfers.
RESTRICTIONS ON CONTRACT OWNERS'
INVESTMENT IN THE REAL PROPERTY ACCOUNT
As noted earlier, identification and acquisition of real estate investments
meeting the Partnership's investment objectives is a time-consuming process.
Moreover, because the Real Property Account and the Partnership are managed so
as to ensure that they will not become investment companies subject to the
Investment Company Act of 1940, the portion of the Partnership's assets that may
be invested in securities, as opposed to non-securities real estate investments,
is strictly limited. For these reasons, Pruco Life of New Jersey reserves the
right to restrict or limit Contract owners' allocation of funds to the Real
Property Account. Any such restrictions are likely to take
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the form of restricting the timing, amount and/or frequency of transfers into
the Real Property Account and/or precluding Contract owners who have not
previously selected the Real Property Account from allocating a portion of their
net premiums or purchase payments to the Real Property Account.
FEDERAL INCOME TAX CONSIDERATIONS
The tax treatment of variable Contract owners is described briefly in the
attached prospectus for the particular variable life insurance or variable
annuity Contract selected. Pruco Life of New Jersey believes that the same
principles will apply with respect to Contracts funded in whole or part by the
Real Property Account. The Partnership's conformity with the diversification
standards for the investments of variable life insurance and variable annuity
separate accounts is essential to ensure that treatment. See GENERAL INVESTMENT
AND OPERATING POLICIES, page 9. Each individual is urged to consult a qualified
tax advisor.
Under the Internal Revenue Code, the Partnership is not a taxable entity and any
income, gains or losses of the Partnership are passed through to the Partners,
including Pruco Life of New Jersey, with respect to the Real Property Account.
The Real Property Account is not a separate taxpayer for purposes of the
Internal Revenue Code. The earnings of the Real Property Account are taxed as
part of the operations of Pruco Life of New Jersey. No charge is being made
currently to the Real Property Account for company federal income taxes. Pruco
Life of New Jersey will review periodically the question of a charge to the Real
Property Account for company federal income taxes attributable to the Contracts.
Such a charge may be made in future years for any federal income taxes
attributable to the Contracts, see CHARGES, page 17.
DISTRIBUTION OF THE CONTRACTS
As explained in the attached prospectus for the Contracts, Pruco Securities
Corporation, an indirect, wholly-owned subsidiary of Prudential, acts as the
principal underwriter of the Contracts. Consult that prospectus for information
about commission scales and other facts relating to sale of the Contracts.
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.
ADDITIONAL INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, relating to the offering described in this prospectus. This prospectus
does not include all 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 principal
office in Washington, D.C., upon payment of a prescribed fee.
Further information may also be obtained from Pruco Life of New Jersey's office.
The address and telephone number are set forth on the cover of this prospectus.
EXPERTS
The financial statements of the Real Property Account and the Partnership
included in this prospectus, the per share information included on page 1 of
this prospectus, and the related financial statement schedules included
elsewhere in the registration statement for the year ended December 31, 1996
have been audited by Price Waterhouse LLP, independent accountants, as stated in
their reports appearing herein and elsewhere in the registration statement. Such
financial statements, per share information, and financial statement schedules
have
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been included herein and elsewhere in the registration statement in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing. Price Waterhouse LLP's principal business address is
1177 Avenue of the Americas, New York, New York 10036.
The financial statements of the Real Property Account and the Partnership
included in this prospectus, the per share information included on page 1 of
this prospectus, and the related financial statement schedules included
elsewhere in the registration statement for the years prior to 1996 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein and elsewhere in the registration statement. Such
financial statements, per share information, and financial statement schedules
have been included herein and elsewhere in the registration statement in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing. Deloitte & Touche LLP's principal business address is
Two Hilton Court, Parsippany, New Jersey 07054-0319.
On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Pruco Life of New Jersey. There have been no disagreements with
Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of the accountant, would have caused them to make a
reference to the matter in their reports.
LITIGATION
No litigation is pending, and no litigation is known to be contemplated by
governmental authorities, that would have an adverse material effect upon the
Real Property Account or the Partnership.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion covers the operations of The Prudential Variable
Contract Real Property Partnership and should be considered in conjunction with
the PER SHARE TABLE appearing on page 1 - Real Property and the financial
statements and notes thereto, commencing on page B1 - Real Property.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Partnership's liquid assets consisted of cash and cash
equivalents and marketable securities totaling $45,164,848. This is an increase
of $20,409,428 from liquid assets at December 31, 1995 of $24,755,420. The
increase is due primarily to (1) $5,509,976 in cash received from the sale of
Oak Creek Office Park in Flint, Michigan, (2) $14,697,789 in cash received from
the sale of the Azusa, California warehouse, (3) operations of the Partnership's
properties, and (4) interest income received from short-term investments. This
was partially offset by (1) the purchase of an office building in Beaverton,
Oregon for $10,713,722, and (2) withdrawals by the partners of $3 million.
Sources of liquidity include net cash flow from property operations and interest
from short-term investments.
The Prudential has committed to fund up to $100 million to enable the
Partnership to acquire real estate investments. Contributions to the Partnership
under this commitment are utilized for property acquisitions and returned to The
Prudential on an ongoing basis from Contract owners' net contributions. The
amount of the commitment is reduced by $10 million for every $100 million in
current value net assets of the Partnership. The amount available for future
investments is approximately $50.2 million as of December 31, 1996.
The Partnership will ordinarily invest 10-15% of its assets in cash and
short-term obligations to maintain liquidity; however, its investment policy
allows up to 30% investment in cash and short-term obligations. At December 31,
1996, 22.1% of the Partnership's assets consisted of cash and cash equivalents
and marketable securities. This is in excess of the target range because
proceeds from the sales, noted earlier are being retained in the Partnership in
anticipation of potential acquisitions. Two industrial projects are scheduled to
close in mid 1997, one in Aurora, CO for an estimated purchase price of $10.4
million, and the other in Salt Lake City, UT for an estimated price of $7
million. Also during 1997, the Partnership expects to exercise an option to
acquire the land under the Pomona, CA warehouse, already owned by the
Partnership, for a cost of $4 million.
During 1996, the partners withdrew $3.0 million. Withdrawals may be made during
1997 based upon the percentage of assets invested in short-term obligations and
taking into consideration anticipated cash needs of the Partnership including
potential property acquisitions and dispositions and capital expenditures. At
December 31, 1996, and currently, the Partnership has adequate liquidity.
Management anticipates that ongoing cashflow from operations will satisfy the
Partnership's needs over the next twelve months and the foreseeable future.
The Partnership acquired an office building in Beaverton, Oregon on December 20,
1996 for $10,713,721. The acquisition was funded entirely by cash held by the
Partnership.
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During 1996 the Partnership made $550,056 in capital expenditures for tenant
alterations, leasing commissions, and land and building improvements. The most
significant of these expenses was approximately $244,000 for tenant alterations
and leasing commissions at the industrial property in Pomona, CA, of which
approximately $166,000 related to a renewal for the Treasure Chest,
approximately $46,000 related to a lease signed by Prestige Auto, a new tenant
and approximately $30,000 related to a renewal for SCI. Other significant
capital expenditures included approximately $122,000 in tenant alterations and
leasing commissions, of which approximately $100,000 related to the lease signed
by Spectrum Financial at the Morristown, NJ office building, garage repairs of
approximately $81,000 at the Oakbrook Terrace office facility in Oakbrook
Terrace, IL, and tenant improvements and leasing commissions of approximately
$65,000, of which approximately $36,000 related to Shepherd's Staff Christian
Book Store, a new tenant at the Roswell, GA retail center.
Other major capital expenditures in 1996 included approximately $29,000 for
access gates at the Atlanta, GA apartments. At the Farmington Hills apartments,
approximately $25,000 was spent for repairs to brick facade, landscaping and
replacement of fitness equipment.
Projected capital expenditures for 1997 total approximately $5,291,000. Of this,
approximately $4,581,000 consists of leasing commission and tenant alterations.
The largest of these is $3,108,000 planned for the Lisle, IL office center. The
property expects to pay approximately $2,298,000 in tenant improvements and
$810,000 in leasing commissions to acquire a new tenant, as R.R. Donnelley will
be leaving at the expiration of their lease in September. At the Morristown
Office Center, approximately $914,000 has been budgeted in tenant improvements
and leasing commissions, of which approximately $878,000 relates to efforts to
renew the Smith Barney lease prior to the October, 1997 expiration. Tenant
improvements and leasing commissions have been budgeted for approximately
$254,000 at the Roswell, GA retail center, approximately $186,000 at the
Nashville office center and approximately $119,000 at the Pomona warehouse. All
of these projected expenditures relate to prospective leases and are based on
reasonable cost. The actual amount of such expenditures will depend on the
number of new leases signed, the actual needs of the particular construction or
repair, and the timing of lease executions.
Other major capital projects planned for 1997 include, at the Lisle office
building $200,000 for upgrading of the heating and air conditioning system and
$35,000 for repairs to the roof; at the Roswell retail center, $140,000 for a
new traffic layout to ease traffic in and around the center; at the Atlanta
apartments $132,000 for exterior wood replacement and building painting; at the
Raleigh apartments $37,000 for regrading the land; at the Oakbrook Terrace
office building $15,000 for pressure washing of the exterior. Approximately
$151,000 is budgeted for smaller projects among the various properties.
RESULTS OF OPERATIONS
The following is a brief discussion of a comparison of the results of operations
for the three years ended December 31, 1996, 1995 and 1994.
1996 VS 1995
The Partnership's net investment income for 1996 was $15,419,518, an increase of
$699,247 (4.8%) from net investment income for 1995 of $14,720,271. The increase
was primarily the result of higher net income from property operations
($1,455,941) offset primarily by a higher management fee ($152,351) and lower
interest income from short-term investments ($526,479).
Income from property operations, including income from interest in properties,
was $16,061,409 for 1996. This is an increase of $980,119 (6.5%) from
$15,081,290 for 1995. This was due primarily to increased rent from properties
(approximately $2,973,000). The increase was offset by increased operating
expense (approximately $1,034,000) and real estate taxes (approximately
$429,000).
Rent from properties for 1996 increased by $2,972,650 (15.0%) to $22,799,694
from $19,827,044 for 1995. A large portion of this was the result of properties
that were acquired during 1995 and held for the full year of 1996. This increase
in revenue totaled approximately $4,367,000.
These additional revenues were primarily offset by the sale of the Azusa
industrial building which resulted in approximately $1,092,000 reduction in
revenues from last year and the Roswell, GA shopping center which accounted for
a decrease of approximately $214,000 due to lower percentage rents in 1996 and
decreased occupancy.
Income from interest in properties relates to the Partnership's 50%
co-investment in several warehouses (the Unit warehouses). Income from this
source decreased approximately $31,624 (4.9%) from $638,183 for 1995 to
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$606,558. The reduction is the result of GATX vacating a portion of its space in
October and the space not being leased. Administrative expenses on the statement
of operations includes both those related to property operations and the
administration of the Partnership. Property administrative expenses for 1996
were $1,653,934. This is $78,271 (5.0%) higher than the $1,575,663 for 1995. The
increase was primarily the result of full year administrative expenses of
approximately $234,000 at the Nashville, TN office building, Oakbrook Terrace,
IL office facility and the Raleigh, NC apartment complex, partially offset by
decreases due to the partial year of two 1996 sold properties totaling
approximately $130,000.
Property operating expenses for 1996 were $2,904,620 compared to $1,870,183 for
1995, an increase of $1,034,437 (55%). The increase was primarily due to a full
year of operating expenses totaling approximately $943,000 related to the
Raleigh, Oakbrook Terrace and Nashville properties, all which were acquired in
1995. Increases were also due to the Morristown office property incurring window
repairs of approximately $21,000 and an increase to its grounds contract for
approximately $59,000 offset by lower repairs and maintenance expenses totaling
$23,000. The Atlanta and the Farmington Hills apartments had increases totaling
approximately $57,000 for 1996 apartment make-ready due to higher turnover as
compared to 1995.
Real estate taxes for 1996 were $2,367,404, an increase of $429,314 (22.2%) from
$1,938,090 for 1995. The increase was primarily due to a full year of real
estate tax expense totaling approximately $572,000 related to the Raleigh,
Oakbrook Terrace and Nashville properties. At the Morristown office building,
real estate taxes increased by approximately $32,000. These increases were
offset by decreases of approximately $106,000, the result of the Azusa and Flint
properties being sold in 1996. Real estate taxes at the Farmington Hills
apartments reduced by approximately $26,000 due to last year's tax appeal.
Administrative expenses related to the Partnership totaled $211,499 for 1996.
This is an increase of $7,930 (3.6%) from $219,429 for 1995.
The investment management fee for 1996 was $2,494,229. This is $152,351 (6.5%)
higher than the fee for 1995 of $2,341,878. The fee is computed as 1.25% of
gross assets. During 1995, gross assets were slightly higher than the prior year
due to cash flow retained by the Partnership and increased market values of the
real estate investments.
MARKET VALUES OF INVESTED ASSETS AND PROPERTY LEASING ACTIVITY: 1996 VS 1995
During 1996, the Partnership recognized an unrealized loss of $3,211,436 on its
real estate investments. This represents 1.9% of the value of the investments at
December 31, 1995. The retail center experienced the largest unrealized loss,
approximately $3,787,000. The offices experienced a net unrealized loss of
approximately $560,000. The industrial properties experienced a net unrealized
loss of approximately $75,000 offset by the apartments experiencing net
unrealized gains of approximately $1,210,000.
Occupancy at the Partnership's properties at December 31, 1996 were generally
lower than at December 31, 1995. During 1996, the Partnership acquired a 72,109
square feet office building in Beaverton, Oregon. At December 31, 1996 the
Beaverton office building was 100% occupied to five tenants and there are no
expirations in 1997.
The Partnership's Atlanta apartment complex experienced an unrealized gain of
approximately $1,083,000 (8.6% of its year-end 1995 value) and the Farmington
Hills apartment complex experienced an unrealized gain of approximately $477,000
(3.4% of its year-end 1995 value). These increases were primarily the result of
higher rental rates and occupancy than were previously projected for these
properties. The luxury garden apartment complex in Raleigh experienced an
unrealized loss of approximately $350,000 (2.0% of its year-end 1995 value). The
property had experienced lowered loss of occupancy but has currently recovered
to a December 31, 1996 occupancy of 97%.
Occupancy at the Atlanta and the Farmington Hills apartments decreased from 97%
and 98% at December 31, 1995 to 93% and 88%, respectively. Occupancy at the
Raleigh apartments increased from 95% at December 31, 1995 to 97% at the end of
1996. All vacant apartments are being marketed as of December 31, 1996.
The Bolingbrook warehouse experienced the largest unrealized loss of this
property type, approximately $300,000 (4.1% of its year-end 1995 value).
Gillette, a tenant of the entire property, has indicated they need additional
space and will relocate at the expiration of their lease in 2000. The Pomona
property experienced an unrealized gain of approximately $175,000 (1.0% of its
year-end 1995 value), this was the result of signing leases that maintained the
property occupancy at 100%. The market values of the four Unit warehouses in
which the Partnership owns a 50% interest at the end of 1996 experienced an
unrealized gain of approximately $50,000 (.9% of their December 31, 1995 value).
Occupancy at the Pomona warehouse remained at 100%. During 1996, a total of
234,292 square feet expired and was leased at the property. The most significant
renewal included SCI signing an amendment to their lease
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to extend the term for five years. During 1997, JB Engineering's 49,697 square
feet lease is expiring. Occupancy at the Bolingbrook warehouse also remained at
100%. Gillette's lease of this entire facility will expire in the year 2000, at
which time they will relocate. At the Unit warehouses, occupancy decreased from
100% at 1995 to 85% at 1996. GATX vacated its space in October and the space has
not been leased. All vacant space is being marketed as of December 31,1996.
The Lisle office, experienced an unrealized loss of approximately $1,700,000
(14.7% of its year-end 1995 value). This was caused by R.R. Donnelley
(sole-tenant) not renewing its lease, which expires September 1997, and the
anticipated expenses that will be incurred in order to release the building in
1997. The Morristown property experienced an unrealized gain of approximately
$409,000 (4.3% of its December 31, 1995 value), due to improved market
conditions in the Northern, NJ market. The Nashville office experienced an
unrealized gain of approximately $166,000. The increase represented 1.9% of its
year-end 1995 value. The rise in value reflects the expectations of continued
high occupancy and the potential for higher rental rates in the future. The
Oakbrook Terrace office building experienced an increase of $565,000 (4.5% of
its December 31, 1995 value). This was the result of two tenant rent increases
that occurred in 1996.
Occupancy at the Lisle office building remained at 100% during 1996. R.R.
Donnelley has given notice they will be vacating their space in 1997. The
Oakbrook Terrace office building continued its 99% occupancy. The Nashville
office building occupancy remained at 99%. During 1996, a total of 25,394 square
feet was re-leased, leaving a vacant space of 1,350 square feet. During 1997, at
the Nashville office building, 11,966 square feet will expire. Occupancy at the
Morristown office decreased from 98% to 93% as of December 31, 1996. There are
four vacant suites totaling 9,583 square feet. During 1996, Mutual of Omaha
renewed their lease of 5,479 square feet and Sprint Spectrum signed a two month
temporary agreement for 4,010 square feet, while Chase Home Mortgage vacated
their suite of 4,010 square feet. During 1997, at the Morristown office
building, a total of 15,753 square feet will be up for renewal. All vacant space
is currently being marketed.
The Partnership's sole retail property in Roswell, GA, experienced an unrealized
loss of $3,786,554 (11.8% of its December 31, 1995 value). This was due to
increased competition in the local market resulting in downward pressure on
rental rates and occupancy.
Occupancy at the Roswell center decreased from 99% at December 31, 1995 to 96%
at December 31, 1996, a loss of 3%. During 1996 a total of 10,464 square feet
expired and 4,127 square feet was renewed. Shepherd's Staff Christian Book Store
leased 6,100 square feet. Two tenants leasing a total of 6,100 square feet have
vacated prior to their lease expiration. At December 31, 1996 a total of 10,464
square feet remained vacant. Several lease proposals are in negotiation, while
all other vacant space is currently being marketed.
During 1996, the Partnership sold its Azusa, CA industrial property and its
Flint, MI office building. The sale of these two properties resulted in a
realized loss of $1,573,147. The Flint, MI property experienced the largest loss
of $1,094,521 (16.7% of its year-end 1995 value). This was the result of both
the uncertain economic outlook and leasing demand for Flint, MI, as well as the
physical condition of the property. The Azusa property experienced a realized
loss of $478,627 (3.2% of its year-end 1995 value). The gross sales price of the
property was $15,250,000 and the net proceeds were $14,697,789.
1995 VS 1994
Income from property operations, including income from interest in properties,
was $15,081,290 for 1995. This is an increase of $1,058,039 (7.5%) from
$14,023,251 for 1994. This was due primarily to increased rent from properties
(approximately $3,482,785). The increase was offset by lower income from
interest in properties due to the sale for the seven Unit warehouses in October,
1994 (approximately $1,717,000), higher real estate taxes (approximately
$145,000), property administrative expenses (approximately $399,000). and
property operating expenses (approximately $163,000).
Rent from properties for 1995 increased by $3,482,785 (21.3%) to $19,827,044
from $16,344,259 for 1994. A large portion of this was the result of properties
that were acquired during 1995. This revenue totaled approximately $1,466,000.
Revenue at the apartments in Raleigh were $1,111,744, the office building in
Nashville,$331,165 and the office building in Oakbrook Terrace $23,587. Rental
income at the Flint office park increased by approximately $662,600 in 1995.
This was primarily due to the acquisition of this property through foreclosure
in July, 1994. As a result, only six months of operating results are included in
1994 as compared to a full year in 1995. Increased occupancy in 1995 resulted in
an additional $906,000 in rental revenue for the Azusa and Morristown buildings
as well as the Partnership's two other apartment properties. Rental income at
the Bolingbrook warehouse increased about $82,000 in 1995 as a result of the
expiration of a free rent period granted to the tenant in the first quarter of
1994. Revenue at the Pomona warehouse was almost $221,000 higher due to
increased occupancy and higher expense recoveries.
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These additional revenues were partially offset by lower rental income from the
Roswell, GA shopping center (approximately $15,000) due to lower percentage rent
in 1995, offset by higher rental income and expense recoveries.
Income from interest in properties relates to the Partnership's 50%
co-investment in several warehouses (the Unit warehouses). Income from this
source decreased $1,717,021 (72.9%) from $2,355,204 for 1994 to $638,183 for
1995. The Partnership sold its investments in seven of these warehouses in 1994.
This resulted in a reduction of income of approximately $1,800,000 in 1995. Of
the four remaining warehouses income increased by approximately $83,000 due to
higher occupancy at one of the warehouses.
Administrative expenses on the statement of operations includes both those
related to property operations and the administration of the Partnership.
Property administrative expenses for 1995 were $1,575,663. This is $399,265
(33.9%) higher than the $1,176,398 for 1994. Most of the increase was the result
of the inclusion of the Flint, Raleigh and Nashville properties, (almost
$270,000), higher insurance premiums ($72,000) primarily at the two California
properties and in increase in bad debt expense ($63,000). The increase in bad
debt expense arose from the 1994 application of a security deposit to amounts
owed by that tenant which reduced 1994 bad debt expense by approximately
$33,000. Professional fees also increased approximately $45,000 in 1995 due to
the utilization of real estate tax consultants to assist with the appeal of
assessed values at several of the properties. The appeal generated significant
tax savings as noted below. Advertising and promotional expenses were lower at
several of the properties which offset the increased administrative expenses by
about $40,000.
Property operating expenses for 1995 were $1,870,183 compared to $1,707,039 for
1994, an increase of $163,144 (9.6%). The increase was primarily due to the
inclusion of approximately $217,336 in operating expenses related to the Raleigh
and Nashville properties. The Flint property had an increase of $73,600 for 1995
compared to the last six months of 1994. In addition there were higher repairs
and maintenance at the Farmington Hills apartments of approximately $18,500.
These increases were reduced by lower expenses at the Azusa warehouse related to
the painting of building exteriors in 1994 ($88,500), at Pomona, ($24,500) due
to lower repairs and maintenance, and lower repairs and maintenance, security
and utilities at Roswell ($35,000).
Real estate taxes for 1995 were $1,938,090, an increase of $145,315 (8.1%) from
$1,792,775 for 1994. Approximately $244,000 of this increase was due to the
inclusion of the Flint office buildings, the Raleigh apartments and the
Nashville office center. This includes $101,000 of 1994 taxes at the Flint
property. At the Roswell shopping center, real estate taxes increased by
$31,500. Approximately $153,000 of the decreases were achieved as the result of
appealing the assessed values at the Azusa, Pomona, Morristown and Farmington
Hills properties. Real estate taxes at the net lease properties in Bolingbrook
and Lisle also increased nearly $22,000.
There was no interest income from mortgage loans in 1995. This was due to the
maturing of the Lincoln, NE loan in May 1994 and the default of the mortgagor on
the Flint loan. Interest income from short-term investments increased $1,089,471
(69.3%) from $1,571,394 for 1994 to $2,660,865 for 1995. This was the result of
increased amounts invested and higher interest rates in 1995. The Partnership
had retained increased cash balances in anticipation of acquiring properties in
1995.
Administrative expenses related to the Partnership totaled $219,429 for 1995.
This is a reduction of $17,895 (7.5%) from $237,324 for 1994. The decrease
resulted primarily from lower professional fees for 1995.
The investment management fee for 1995 was $2,341,878. This is $54,062 (2.4%)
higher than the fee for 1994 of $2,287,816. The fee is computed as 1.25% of
gross assets. During 1995, gross assets were slightly higher than the prior year
due to cash flow retained by the Partnership and increased market values of the
real estate investments.
MARKET VALUES OF INVESTED ASSETS: 1995 VS 1994
During 1995, the Partnership recognized an unrealized gain of $661,623 on its
real estate investments. This represents 0.5% of the investments' December 31,
1994 value. The apartments experienced the largest increase, approximately
$2,700,000. The warehouses increased by about $421,000. The office building
properties experienced an unrealized loss of approximately $1,933,000 and the
retail property, an unrealized loss of about $528,000.
The Partnership's luxury garden apartments in Raleigh had an unrealized gain of
nearly $1,441,300. The property has benefited from very strong leasing demand
(occupancy at December 31, 1995 was 95%) and is performing at a higher level
than anticipated. The Farmington Hills apartments experienced an unrealized gain
of $626,143 (4.6% of its year-end 1994 value) and Atlanta $634,165 (5.3% of its
year-end 1994 value). These increases were primarily the result of higher rental
rates, occupancy and tenant retention than previously projected for these
properties.
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The warehouses experienced an unrealized gain of about $421,000 during 1995. The
Pomona property had the largest unrealized gain, $684,153 (4.2% of its year-end
1994 value). This was the result of two leases that were signed which brought
the occupancy to 100%. The market values of the four Unit warehouses in which
the Partnership owns a 50% interest at the end of 1995 increased $49,134 (.9% of
their December 31, 1994 value).
The warehouse in Bolingbrook experienced an unrealized gain of $357,563 (5.1% of
the property's December 31, 1994 value). This was due to lower estimates of
operating expenditures and a scheduled step-up in the rental rate.
The increases in the market values of these warehouses were partially offset by
a decrease of $669,928 (4.3% of the property's December 31, 1994 value) in the
market value of the Azusa warehouse. The decrease in market value was partially
attributable to less optimistic assumptions of expense growth, future rental
rates and leasing activity as current leases expire, based on the property's
competitive position in the local market.
The office buildings experienced an unrealized loss approximately $1,933,000.
The Flint, property value decreased $1,314,060 (17.1% of its December 31, 1994
value). This was caused by reduced expectations of future rental rate increases
and tenant renewals due to increased competition from new construction in the
Flint market. The Lisle office building decreased in value by $400,000 (3.3% of
the property's December 31, 1994 value) and the Morristown property also
decreased in value by $473,993 (4.8% of its December 31, 1994 value). The Lisle
property's decrease in value reflects the possibility that the current tenant,
R.R. Donnelley, may not remain in the building when their current lease expires
in 1997. This would result in downtime while a new tenant was found and
necessitate incurring additional tenant improvements and leasing commissions. It
is also likely that the rental rate on any new lease would be lower than that
currently paid by Donnelley. The decline in the value of the Morristown property
was the result of increases in the discount rates, reflecting the soft market
conditions in the local areas and the expectations potential buyers are
requiring higher returns on such investments. The decreases in value at the
office buildings were partially offset by an increase of $254,871 at the
Nashville building. The increase represented 3% of its acquisition cost. The
rise in value reflects the expectations of continued high occupancy and the
potential for higher rental rates in the future.
The Partnership's sole retail property, King's Market Shopping Center in
Roswell, GA, experienced an unrealized loss of $527,726 (1.6% of its December
31, 1994 value). This was due to increased competition in the local market due
to the construction of a competing shopping center which is expected to exert
downward pressure on rental rates.
FINANCIAL STATEMENTS
Following are financial statements and independent auditors' report of the Real
Property Account, as well as financial statements and independent auditors'
report of the Partnership.
24 - Real Property
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Investment in shares of The Prudential Variable Contract
Real Property Partnership (Note 3) $ 7,878,541 $ 7,455,048
------------ ------------
------------ ------------
NET ASSETS, representing:
Equity of Contract Owners $ 6,505,842 $ 6,563,711
Equity of Pruco Life Insurance Company of New Jersey 1,372,699 891,337
------------ ------------
$ 7,878,541 $ 7,455,048
------------ ------------
------------ ------------
</TABLE>
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Net Investment Income from Partnership Operations $ 613,768 $ 575,915 $ 474,255
EXPENSES:
Asset Based Charges to Contract Owners (Note 5) 39,120 37,691 35,523
---------- ---------- -----------
NET INVESTMENT INCOME 574,648 538,224 438,732
---------- ---------- -----------
Net Unrealized (Loss)/Gain on Investments in Partnership (127,658) 27,210 102,764
Net Realized Loss on Sale of Investments in Partnership (62,618) 0 (45,675)
---------- ---------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 384,372 565,434 495,821
---------- ---------- -----------
CAPITAL TRANSACTIONS:
Net (Withdrawals)/Contributions by Contract Owners (Note 7) (380,371) 45,403 (337,574)
Net Contributions/(Withdrawals) by Pruco Life Insurance Company of New Jersey 419,492 (7,712) 373,097
---------- ---------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS 39,121 37,691 35,523
---------- ---------- -----------
TOTAL INCREASE IN NET ASSETS $ 423,493 $ 603,125 $ 531,344
NET ASSETS:
Beginning of period $7,455,048 $6,851,923 $6,320,579
---------- ---------- -----------
End of period $7,878,541 $7,455,048 $6,851,923
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A-2 THROUGH A-4.
A1 - REAL PROPERTY
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
For the Year Ended December 31, 1996
NOTE 1: GENERAL
Pruco Life of New Jersey Variable Contract Real Property Account (the "Real
Property Account") was established on October 30, 1987 by resolution of the
Board of Directors of Pruco Life Insurance Company of New Jersey ("Pruco Life of
New Jersey"), an indirect wholly-owned subsidiary of The Prudential Insurance
Company of America ("Prudential"), as a separate investment account pursuant to
New Jersey law. The assets of the Real Property Account are segregated from
Pruco Life of New Jersey's other assets. The Real Property Account is used to
fund benefits under certain variable life insurance and variable annuity
contracts issued by Pruco Life of New Jersey. These products are Variable
Appreciable Life Insurance ("VAL"), Variable Life Insurance ("VLI"), Discovery
Plus ("SPVA"), and Discovery Life Plus ("SPVL").
The assets of the Real Property Account are invested in The Prudential Variable
Contract Real Property Partnership (the "Partnership"). The Partnership is
organized under New Jersey law and is registered under the Securities and
Exchange Act of 1933. The Partnership is the investment vehicle for assets
allocated to the real property option under certain variable life insurance and
annuity contracts. The Real Property Account, along with the Pruco Life
Variable Contract Real Property Account and The Prudential Variable Contract
Real Property Account, are the sole investors in the Partnership.
The Partnership has a policy of investing at least 65% of its assets in direct
ownership interests in income-producing real estate and participating mortgage
loans.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF ACCOUNTING
The accompanying financial statements are prepared in conformity with generally
accepted accounting principles (GAAP). The preparation of the financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
B. INVESTMENT IN PARTNERSHIP INTEREST
The investment in the Partnership is based on the Real Property Account's
proportionate interest of the Partnership's market value. At December 31, 1996
and 1995 the Real Property Account's interest in the Partnership, based on
market value equity was 4.0% or 473,226 shares and 3.9% or 473,226 shares,
respectively.
C. INCOME RECOGNITION
Net investment income, realized and unrealized gains and losses are recognized
daily. Amounts are based upon the Real Property Account's proportionate
interest in the Partnership.
A2 - REAL PROPERTY
<PAGE>
D. EQUITY OF PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life of New Jersey maintains a position in the Account representing
anticipated property acquisition and capital expenditure funding needs. The
position is also utilized for the purpose of administering activity in the
Account. The activity includes unit transactions, Partnership share
transactions, and expense processing. The position does not have an effect
on the Contract owner's account or the related unit value.
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL VARIABLE CONTRACT REAL
PROPERTY PARTNERSHIP
As of December 31, 1996, the investment in the Real Property Account of
$7,878,541 was derived from the share value of $16.64859 and 473,226 shares
outstanding. The related historical cost of the investment in the Real Property
Account was $5,503,605 as of December 31, 1996.
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding Contract owner units, unit values and total value of Contract owner
equity for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
VAL VLI SPVA SPVL TOTAL
--- --- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Contract Owner
Units Outstanding: 3,460,872 509,344 85,030 94,923 4,150,169
Unit Value: $1.56700 $1.60720 $1.46726 $1.46726 n/a
Contract Owner Equity: $5,423,186 $818,618 $124,762 $139,276 $6,505,842
</TABLE>
NOTE 5: CHARGES AND EXPENSES
A. MORTALITY RISK AND EXPENSE RISK CHARGES
Mortality risk and expense charges are determined daily using an effective
annual rate of 0.6%, 0.35%, 0.9% and 0.9% for VAL, VLI, SPVA and SPVL,
respectively. Mortality risk is that life insurance contract holders may not
live as long as estimated or annuitants may live longer than estimated and
expense risk is that the cost of issuing and administering the policies may
exceed the estimated expenses. For 1996, the amount of these charges paid to
Pruco Life Insurance Company of New Jersey was $38,126.
B. ADMINISTRATIVE CHARGES
Administrative charges are determined daily using an effective annual rate of
0.35% for SPVA and SPVL. Administrative charges include costs associated with
issuing the Contract, establishing and maintaining records, and providing
reports to Contract owners. For 1996, the amount of these charges paid to Pruco
Life Insurance Company of New Jersey was $994.
A3 - REAL PROPERTY
<PAGE>
NOTE 6: TAXES
Pruco Life Insurance Company of New Jersey is taxed as a "life insurance
company" under the Internal Revenue Code and the operations of the Real Property
Account form a part of and are taxed with those of Pruco Life Insurance Company
of New Jersey. Under current federal law, no federal income taxes are payable
by the Real Property Account. As such, no provision for tax liability has been
recorded.
NOTE 7: NET WITHDRAWALS BY CONTRACT OWNERS
Contract owner activity for the Pruco Life of New Jersey products, for the year
ended December 31, 1996, was as follows:
<TABLE>
<CAPTION>
VAL VLI SPVA SPVL TOTAL
---------- ---------- --------- -------- -----------
<S> <C> <C> <C> <C> <C>
Contract Owner Contributions: $ 817,922 $ 123,259 $ 50 $ 2,434 $ 943,665
Contract Owner Redemptions: (923,872) (123,027) (26,168) (9,380) (1,082,447)
Net Transfers from (to) other
subaccounts or fixed rate option: (213,924) (27,667) 0 0 (241,591)
---------- ---------- --------- -------- -----------
Net Decrease $(319,874) $ (27,435) $(26,118) $(6,946) $ (380,373)
---------- ---------- --------- -------- -----------
---------- ---------- --------- -------- -----------
</TABLE>
NOTE 8: UNIT ACTIVITY
Transactions in units for the year ended December 31, 1996 were as follows:
VAL VLI SPV SPVL
--- --- --- ----
Contract Owner Contributions: 535,548.596 78,896.065 34.722 1,685.627
Contract Owner Redemptions: (744,916.258) (96,270.303) (17,943.310) (6,531.170)
A4 - REAL PROPERTY
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of
Pruco Life of New Jersey Variable Contract Real Property Account
and the Board of Directors of
Pruco Life Insurance Company of New Jersey
In our opinion, the accompanying statement of net assets and the related
statement of operations and changes in net assets present fairly, in all
material respects, the financial position of Pruco Life of New Jersey Variable
Contract Real Property Account at December 31, 1996, and the results of its
operations and the changes in its net assets for the year then ended, in
conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of shares owned in The Prudential Variable Contract Real Property
Partnership at December 31, 1996, provides a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
New York, New York
March 25, 1997
A5 - REAL PROPERTY
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners of
Pruco Life of New Jersey Variable Contract Real Property Account
Newark, New Jersey
We have audited the accompanying statement of assets of Pruco Life of New Jersey
Variable Contract Real Property Account ("Real Property Account") as of December
31, 1995, and the related statements of operations and changes in net assets for
each of the two years in the period ended December 31, 1995. These financial
statements are the responsibility of the Real Property Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pruco Life of New Jersey Variable Contract
Real Property Account as of December 31, 1995, and the results of its operations
and changes in net assets for each of the two years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
Investments in shares of The Prudential Variable Contract Real Property
Partnership are stated at current value at December 31, 1995, as discussed in
Note 1 to the financial statements. Determination of current value involves
subjective judgment because the actual market value of real estate can be
determined only by negotiation between the parties in a sales transaction.
Deloitte & Touche LLP
Parsippany, New Jersey
March 1, 1996
A6 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1996 1995
--------------- ----------------
<S> <C> <C>
ASSETS:
Properties at estimated market value
(cost $177,082,291 and $191,981,608,
respectively) $ 151,074,276 $ 164,695,033
Interest in properties at estimated market value
(cost $6,133,157 and $6,133,157,
respectively) 5,850,000 5,800,000
Marketable securities at estimated market value
(cost $24,345,000 and $10,480,000,
respectively) 24,426,644 10,532,155
Cash and cash equivalents 20,738,204 14,223,265
Other assets and accounts receivable
(net of allowance for uncollectible
accounts of $55,823 and $18,896, respectively) 2,066,916 1,743,305
--------------- ----------------
Total Assets $ 204,156,040 $ 196,993,758
--------------- ----------------
--------------- ----------------
LIABILITIES AND PARTNERS' EQUITY:
Obligation under capital lease $ 4,072,677 $ 3,882,421
Accounts payable and accrued expenses 1,640,360 2,142,614
Due to affiliates 719,200 682,795
Other liabilities 467,009 664,069
--------------- ----------------
Total liabilities 6,899,246 7,371,899
--------------- ----------------
Commitments and contingencies
Partners' Equity 197,256,794 189,621,859
--------------- ----------------
Total Liabilities and Partners' Equity $ 204,156,040 $ 196,993,758
--------------- ----------------
--------------- ----------------
Number of shares outstanding at end of period 11,848,275 12,036,684
--------------- ----------------
--------------- ----------------
Share Value at end of period $16.65 $15.75
--------------- ----------------
--------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B11
B1 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Rent from properties $ 22,799,694 $ 19,827,044 $ 16,344,259
Income from interest in properties 606,558 638,183 2,355,204
Interest on mortgage loans 0 0 105,694
Interest from short-term investments 2,134,386 2,660,865 1,571,394
------------- ------------- -------------
25,540,638 23,126,092 20,376,551
------------- ------------- -------------
INVESTMENT EXPENSES:
Investment management fee 2,494,229 2,341,878 2,287,816
Real estate taxes 2,367,404 1,938,090 1,792,775
Administrative 1,865,433 1,795,092 1,413,722
Operating 2,904,620 1,870,183 1,707,039
Interest 489,434 460,578 327,000
------------- ------------- ------------
10,121,120 8,405,821 7,528,352
------------- ------------- ------------
NET INVESTMENT INCOME 15,419,518 14,720,271 12,848,199
------------- ------------- ------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Net proceeds from real estate investments sold 20,497,789 0 19,014,872
Less: Cost of real estate investments sold 26,610,932 0 18,337,052
Realization of prior years' unrealized
(loss)/gain on real estate investments sold (4,539,996) 0 1,915,205
------------- ------------- ------------
NET LOSS REALIZED ON REAL ESTATE
INVESTMENTS SOLD (1,573,147) 0 (1,237,385)
------------- ------------- ------------
NET UNREALIZED (LOSS)/GAIN
ON INVESTMENTS (3,211,436) 661,623 2,576,828
------------- ------------- ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 10,634,935 $ 15,381,894 $ 14,187,642
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B11
B2 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 15,419,518 $ 14,720,271 $ 12,848,199
Net Realized and Unrealized
Gain/(Loss) on Investments (4,784,583) 661,623 1,339,443
------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 10,634,935 15,381,894 14,187,642
------------- ------------- -------------
CAPITAL TRANSACTIONS:
Withdrawals by partners
(188,409, 204,350 and 790,390
shares, respectively) (3,000,000) (3,000,000) (11,000,000)
------------- ------------- -------------
NET DECREASE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS (3,000,000) (3,000,000) (11,000,000)
------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS 7,634,935 12,381,894 3,187,642
NET ASSETS:
Beginning of year 189,621,859 177,239,965 174,052,323
------------- ------------- -------------
End of year $ 197,256,794 $ 189,621,859 $ 177,239,965
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B11
B3 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 10,634,935 $ 15,381,894 $ 14,187,642
Adjustments to reconcile net increase in net assets
resulting from operations to net cash provided by
operating activities:
Net realized and unrealized loss (gain) on investments 4,784,583 (661,623) (1,339,443)
Changes in assets and liabilities:
(Increase) Decrease in other assets
and accounts receivable (323,611) 474,790 (727,821)
Decrease in obligation under capital lease 190,256 77,585 6,271
(Decrease) Increase in accounts payable
and accrued expenses (502,254) 1,337,548 75,876
Increase (Decrease) in due to affiliates 36,405 58,589 (70,438)
(Decrease) Increase in other liabilities (197,060) 18,156 165,049
------------- ------------- ------------
Net cash provided by operating activities 14,623,254 16,686,939 12,297,136
------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from real estate investments sold 20,497,789 0 19,014,842
Acquisition of property (10,713,722) (36,774,343) 0
Capital improvements on real estate owned (997,893) (1,050,197) (1,161,224)
Capital improvements on interest in properties 0 (24,415) (12,087)
Principal repayments recieved on mortgage loans 0 0 3,947,528
(Purchase) Sale of marketable securities (13,894,489) 5,292,044 (13,845,191)
------------- ------------- ------------
Net cash provided by (used in) investing activities (5,108,315) (32,556,911) 7,943,868
------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Withdrawals (3,000,000) (3,000,000) (11,000,000)
------------- ------------- ------------
Net cash (used in) provided by financing activities (3,000,000) (3,000,000) (11,000,000)
------------- ------------- ------------
Net increase (decrease) in cash and cash equivalents 6,514,939 (18,869,972) 9,241,004
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 14,223,265 33,093,237 23,852,233
------------- ------------- ------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 20,738,204 $ 14,223,265 $ 33,093,237
------------- ------------- ------------
------------- ------------- ------------
SUPPLEMENTAL SCHEDULE
OF NONCASH INVESTING ACTIVITIES
Foreclosure on mortgage loan $ 0 $ 0 $ 5,276,262
------------- ------------- ------------
------------- ------------- ------------
SUPPLEMENTAL INFORMATION:
Interest paid $ 376,450 $ 376,450 $ 250,000
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B11
B4 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------------------
INVESTMENT IN PROPERTIES (PERCENT OF NET ASSETS) 76.6% 86.8%
Estimated Estimated
Market Market
Location Description Cost Value Cost Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Azusa, CA Warehouse $ 0 $ 0 $ 18,546,247 $ 15,083,725
Lisle, IL Office Building 17,524,421 9,900,000 17,524,421 11,600,000
Atlanta, GA Garden Apartments 15,396,738 13,707,814 15,371,495 12,600,000
Pomona, CA (a) Warehouse 23,456,751 17,553,849 23,205,172 17,127,292
Roswell, GA Retail Shopping Center 31,754,073 28,333,818 31,688,912 32,055,216
Morristown, NJ Office Building 18,797,224 10,113,986 18,664,969 9,572,688
Bolingbrook, IL Warehouse 8,948,028 7,100,000 8,948,028 7,400,000
Farmington Hills, MI Garden Apartments 13,623,952 14,706,400 13,594,950 14,200,000
Flint, MI Office Building 0 0 7,616,842 6,539,368
Raleigh, NC Garden Apartments 15,762,951 16,854,252 15,758,699 17,200,000
Nashville, TN Office Building 8,379,326 8,800,436 8,431,680 8,686,551
Oakbrook Terrace, IL Office Complex 12,725,105 13,289,999 12,630,193 12,630,193
Beaverton, OR Office Complex 10,713,722 10,713,722 0 0
------------- -------------- ------------- -------------
$ 177,082,291 $ 151,074,276 $ 191,981,608 $ 164,695,033
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
</TABLE>
(a) Cost and estimated market value include land under capital lease of
$3,412,636 representing the present value of minimum future lease
payments at the inception of the lease.
<TABLE>
<CAPTION>
INVESTMENT IN INTEREST IN PROPERTIES (PERCENT OF NET ASSETS) 3.0% 3.1%
Estimated Estimated
Market Market
Location Description Cost Value Cost Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jacksonville, FL Warehouse/Distribution 1,317,453 1,225,000 1,317,453 1,225,000
Jacksonville, FL Warehouse/Distribution 1,002,448 1,000,000 1,002,448 975,000
Jacksonville, FL Warehouse/Distribution 1,442,894 1,325,000 1,442,894 1,300,000
Jacksonville, FL Warehouse/Distribution 2,370,362 2,300,000 2,370,362 2,300,000
------------- -------------- ------------- -------------
$ 6,133,157 $ 5,850,000 $ 6,133,157 $ 5,800,000
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 12.4% 5.6%
Estimated Estimated
Face Market Face Market
Description Amount Value Amount Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marketable Securities $ 23,345,000 $ 24,426,644 $ 10,480,000 $ 10,532,155
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 10.5% 7.5%
Estimated Estimated
Face Market Face Market
Description Amount Value Amount Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper and Cash $ 20,804,826 $ 20,738,204 $ 14,282,697 $ 14,223,265
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
OTHER ASSETS -2.5% -3.0%
(net of liabilities) $ (4,832,330) $ (5,628,594)
-------------- -------------
TOTAL NET ASSETS $ 197,256,794 $ 189,621,859
-------------- -------------
-------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B11
B5 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 12.4%
Estimated
Face Market
DESCRIPTION Amount Value
- ----------------------------------------------------- ------------------------------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
PNC Bank, 5.48%, January 6, 1997 $ 2,200,000 $ 2,199,643
Wells Fargo, 5.54%, January 28, 1997 2,300,000 2,300,446
Sears Roebuck Acceptance Corp, 7.48%, February 19, 1997 100,000 102,187
General Motors Acceptance Corp, 5.88%, February 27, 1997 105,000 107,143
Sears Roebuck Acceptance Corp,7.72%, February 27, 1997 800,000 812,000
Dean Wiitter Discover & Co., 5.75%, March 6,1997 500,000 500,387
General Motors Acceptance Corp, 5.74%, March 18, 1997 1,200,000 1,201,344
Sears Discover Credit Corp, 7.81%, March 18, 1997 1,150,000 1,164,548
American Home Products, 6.88%, April 15, 1997 2,000,000 2,019,323
Ford Motor Credit, 5.90%, May 5, 1997 1,400,000 1,405,337
Ford Motor Credit, 5.90%, May 5, 1997 350,000 350,875
Ford Motor Credit, 9.15%, May 7, 1997 500,000 515,010
Key Bank NA, 5.58%, May 14, 1997 900,000 899,130
American Express Centurion Bank, 5.58%, June 10, 1997 2,300,000 2,299,862
Associates Corp of North America, 7.05%, June 30, 1997 600,000 604,766
Bank One Columbus, 5.58%, July 1, 1997 1,110,000 1,108,812
Associates Corp of North America, 5.88%, August 15, 1997 1,230,000 1,230,744
Key Bank of New York, 4.82%, September 4, 1997 1,300,000 1,298,740
Bank One Milwaukee, NA, 5.26%, October 8, 1997 1,000,000 1,002,870
Morgan Guaranty Trust Co., 5.38%, November 14, 1997 1,000,000 999,271
Norwest Financial Inc., 6.50%, November 15, 1997 300,000 302,286
Norwest Corp., 5.55%, November 21, 1997 2,000,000 2,001,920
------------- -------------
TOTAL MARKETABLE SECURITIES $ 24,345,000 $ 24,426,644
------------- -------------
------------- -------------
<CAPTION>
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 10.5%
Estimated
Face Market
DESCRIPTION Amount Value
- ----------------------------------------------------- -------------- --------------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Gateway Fuel Corp, 7.15%, January 2, 1997 $ 2,177,000 $ 2,176,135
Bell Atlantic Financial Services, 5.50%, January 14, 1997 2,650,000 2,638,664
Pioneer Hi-Bred Intl, 5.47%, January 15, 1997 1,200,000 1,194,712
Bank of Montreal, 5.43%, January 27, 1997 2,300,000 2,300,000
Canadian Imperial Bank, 5.39%, January 27, 1997 2,400,000 2,400,000
HJ Heinz Co., 5.46%, January 29, 1997 2,370,000 2,354,184
General Electric Capital Corp, 5.34%, February 3, 1997 2,300,000 2,279,871
Bankers Trust Co., 5.35%, February 20, 1997 2,000,000 2,007,723
Colonial PL Co Note, 5.60%, February 21, 1997 800,000 792,658
Colonial PL Co Note, 5.35%, March 4, 1997 783,000 773,109
General Electric Capital Corp., 5.45%, March 14, 1997 300,000 296,322
------------- -------------
TOTAL COMMERCIAL PAPER 19,280,000 19,213,378
TOTAL CASH 1,524,826 1,524,826
------------- -------------
TOTAL CASH AND CASH EQUIVALENTS $ 20,804,826 $ 20,738,204
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B11
B6 - REAL PROPERTY
<PAGE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------
MARKETABLE SECURITIES (PERCENT OF NET ASSETS) 5.6%
Estimated
Face Market
DESCRIPTION Amount Value
- ---------------------------------------------------------- ------------- -------------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Associates Corp. of North America, 8.75%, February 1, 1996 $ 410,000 $ 416,810
General Motors Acceptance Corp., 8.75%, February 1, 1996 650,000 658,860
General Motors Acceptance Corp., 8.95%, February 5, 1996 350,000 356,370
General Motors Acceptance Corp., 4.75%, February 14, 1996 430,000 426,212
General Motors Acceptance Corp., 6.01%, February 22, 1996 240,000 240,057
Household Finance Corp., 5.75%, April 19, 1996 2,000,000 1,996,520
Ford Motor Credit Corp., 6.24%, April 22, 1996 500,000 500,658
Society National Bank Cleveland, 6.00%, April 25, 1996 150,000 149,295
International Lease Finance Corp., 5.00%, May 28, 1996 1,000,000 992,120
Transamerica Financial Corp., 8.55%, June 15, 1996 400,000 409,284
John Deere Capital Corp., 6.16%, July 22, 1996 1,000,000 1,002,267
Sears Roebuck Acceptance Corp., 8.55%, August 1, 1996 1,000,000 1,039,335
Key Bank of New York, N.A., 5.43%, September 6, 1996 1,000,000 999,210
Bank One Columbus, 5.56%, September 12, 1996 1,000,000 999,297
Associates Corp. of North America, 4.48%, October 15, 1996 350,000 345,860
------------- -------------
TOTAL MARKETABLE SECURITIES $ 10,480,000 $ 10,532,155
------------- -------------
------------- -------------
<CAPTION>
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS) 7.5%
Estimated
Face Market
DESCRIPTION Amount Value
- ---------------------------------------------------------- ------------- -------------
<S> <C> <C>
Commercial Paper (with stated rate and maturity date)
Morgan Stanley Group, Inc., 6.10%, January 2, 1996 $ 1,146,000 $ 1,146,000
Engelhard Corp., 6.25%, January 3, 1996 1,038,000 1,038,000
Finova Capital Corp., 5.95%, January 4, 1996 800,000 792,198
Philip Morris Companies Inc., 5.80%, January 5, 1996 505,000 504,430
Gannett Co. Inc., 5.85%, January 9, 1996 1,700,000 1,696,409
Hanson Finance, 5.80%, January 12, 1996 354,000 352,175
Riverwoods Funding Corp., 5.78%, January 12, 1996 1,189,000 1,183,273
Finova Capital Corp., 5.97%, January 16, 1996 780,000 771,980
Smith Barney Inc., 5.79%, January 18, 1996 1,628,000 1,618,836
Fleet Financial Group, 5.75%, January 30, 1996 1,700,000 1,689,139
Countrywide Funding Corp., 5.82%, February 14, 1996 1,500,000 1,488,128
------------ ------------
TOTAL COMMERCIAL PAPER 12,340,000 12,280,568
TOTAL CASH 1,942,697 1,942,697
------------ ------------
TOTAL CASH AND CASH EQUIVALENTS $ 14,282,697 $ 14,223,265
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES B8 THROUGH B11
B7 - REAL PROPERTY
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
GENERAL
ON APRIL 29, 1988, PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP (THE
"PARTNERSHIP"), A GENERAL PARTNERSHIP ORGANIZED UNDER NEW JERSEY LAW, WAS FORMED
THROUGH AN AGREEMENT AMONG PRUDENTIAL INSURANCE COMPANY OF AMERICA
("PRUDENTIAL"), PRUCO LIFE INSURANCE COMPANY ("PRUCO LIFE"), AND PRUCO LIFE
INSURANCE COMPANY OF NEW JERSEY ("PRUCO LIFE OF NEW JERSEY"). THE PARTNERSHIP
WAS ESTABLISHED AS A MEANS BY WHICH ASSETS ALLOCATED TO THE REAL ESTATE
INVESTMENT OPTION UNDER CERTAIN VARIABLE LIFE INSURANCE AND VARIABLE ANNUITY
CONTRACTS ISSUED BY THE RESPECTIVE COMPANIES COULD BE INVESTED IN A COMMINGLED
POOL. THE PARTNERS IN THE PARTNERSHIP ARE PRUDENTIAL, PRUCO LIFE AND PRUCO
LIFE OF NEW JERSEY.
THE PARTNERSHIP HAS A POLICY OF INVESTING AT LEAST 65% OF ITS ASSETS IN DIRECT
OWNERSHIP INTERESTS IN INCOME-PRODUCING REAL ESTATE AND PARTICIPATING MORTGAGE
LOANS.
THE PARTNERSHIP'S INVESTMENTS ARE VALUED ON A DAILY BASIS, CONSISTENT WITH THE
PARTNERSHIP AGREEMENT. ON EACH DAY DURING WHICH THE NEW YORK STOCK EXCHANGE IS
OPEN FOR BUSINESS, THE NET ASSETS OF THE PARTNERSHIP ARE VALUED USING THE
ESTIMATED MARKET VALUE OF ITS INVESTMENTS AS DESCRIBED IN NOTES 1A AND 1B BELOW,
PLUS AN ESTIMATE OF NET INCOME FROM OPERATIONS REDUCED BY ANY LIABILITIES OF THE
PARTNERSHIP.
THE PERIODIC ADJUSTMENTS TO PROPERTY AND MORTGAGE LOAN VALUES DESCRIBED IN NOTES
1A AND 1B BELOW AND THE CORRECTIONS OF PREVIOUS ESTIMATES OF NET INCOME ARE MADE
ON A PROSPECTIVE BASIS. THERE CAN BE NO ASSURANCE THAT ALL SUCH ADJUSTMENTS AND
ESTIMATES WILL BE MADE TIMELY.
SHARES OF THE PARTNERSHIP ARE SOLD TO PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY
ACCOUNT, PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT, AND PRUCO LIFE OF
NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT, (THE "REAL PROPERTY
ACCOUNTS") AT THE CURRENT SHARE VALUE OF THE PARTNERSHIP'S NET ASSETS. SHARE
VALUE IS CALCULATED BY DIVIDING THE ESTIMATED MARKET VALUE OF NET ASSETS OF THE
PARTNERSHIP AS DETERMINED BELOW BY THE NUMBER OF SHARES OUTSTANDING. A CONTRACT
OWNER PARTICIPATES IN THE PARTNERSHIP THROUGH INTERESTS IN THE REAL PROPERTY
ACCOUNTS.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A: REAL ESTATE OWNED AND INTEREST IN PROPERTIES - THE PARTNERSHIP'S
INVESTMENTS IN REAL ESTATE OWNED AND INTERESTS IN PROPERTIES ARE
INITIALLY VALUED AT THEIR PURCHASE PRICE. THEREAFTER, REAL ESTATE
INVESTMENTS ARE REPORTED AT THEIR ESTIMATED MARKET VALUES BASED UPON
APPRAISAL REPORTS PREPARED BY INDEPENDENT REAL ESTATE APPRAISERS
(MEMBERS OF THE APPRAISAL INSTITUTE) WHICH ARE ORDINARILY OBTAINED ON
AN ANNUAL BASIS. THE PROPERTY VALUATIONS ARE REVIEWED INTERNALLY AT
LEAST EVERY THREE MONTHS AND ADJUSTED IF THERE HAS BEEN A CHANGE IN
THE VALUE OF THE PROPERTY SINCE THE LAST VALUATION.
THE CHIEF APPRAISER OF PRUDENTIAL COMPTROLLER'S DEPARTMENT VALUATION
UNIT IS RESPONSIBLE TO ASSURE THAT THE VALUATION PROCESS PROVIDES
INDEPENDENT AND ACCURATE ESTIMATED MARKET VALUE ESTIMATES. IN THE
INTEREST OF MAINTAINING AND MONITORING THE INDEPENDENCE AND THE
ACCURACY OF THE APPRAISAL PROCESS, THE COMPTROLLER OF PRUDENTIAL HAS
APPOINTED A THIRD PARTY FIRM TO ACT AS THE APPRAISAL MANAGEMENT
B8 - REAL PROPERTY
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
FIRM. THE APPRAISAL MANAGEMENT FIRM, AMONG OTHER RESPONSIBILITIES,
APPROVES THE SELECTION AND SCHEDULING OF EXTERNAL APPRAISALS; DEVELOPS
A STANDARD PACKAGE OF INFORMATION TO BE SUPPLIED TO THE APPRAISERS;
REVIEWS AND PROVIDES COMMENTS ON ALL EXTERNAL APPRAISALS AND A SAMPLE
OF INTERNAL APPRAISALS; ASSISTS IN DEVELOPING POLICY AND PROCEDURES
AND ASSISTS IN THE EVALUATION OF THE PERFORMANCE AND COMPETENCY OF
EXTERNAL APPRAISERS. THE PROPERTY VALUATIONS ARE REVIEWED QUARTERLY BY
PRUDENTIAL COMPTROLLER'S DEPARTMENT VALUATION UNIT AND THE CHIEF
APPRAISER AND ADJUSTED IF THERE HAS BEEN ANY SIGNIFICANT CHANGES
RELATED TO THE PROPERTY SINCE THE MOST RECENT INDEPENDENT APPRAISAL.
THE PURPOSE OF AN APPRAISAL IS TO ESTIMATE THE MARKET VALUE OF A
PROPERTY AS OF A SPECIFIC DATE. ESTIMATED MARKET VALUE HAS BEEN
DEFINED AS THE MOST PROBABLE PRICE FOR WHICH THE APPRAISED PROPERTY
WILL SELL IN A COMPETITIVE MARKET UNDER ALL CONDITIONS REQUISITE TO
FAIR SALE, WITH THE BUYER AND SELLER EACH ACTING PRUDENTLY,
KNOWLEDGEABLY, AND FOR SELF INTEREST, AND ASSUMING THAT NEITHER IS
UNDER UNDUE DURESS. THIS ESTIMATE OF MARKET VALUE GENERALLY IS A
CORRELATION OF THREE APPROACHES, ALL OF WHICH REQUIRE THE EXERCISE OF
SUBJECTIVE JUDGMENT. THE THREE APPROACHES ARE: (1) CURRENT COST OF
REPRODUCING A PROPERTY LESS DETERIORATION AND FUNCTIONAL AND ECONOMIC
OBSOLESCENCE; (2) DISCOUNTING OF A SERIES OF INCOME STREAMS AND
REVERSION AT A SPECIFIED YIELD OR BY DIRECTLY CAPITALIZING A SINGLE -
YEAR INCOME ESTIMATE BY AN APPROPRIATE FACTOR; AND (3) VALUE
INDICATED BY RECENT SALES OF COMPARABLE PROPERTIES IN THE MARKET. IN
THE RECONCILIATION OF THESE THREE APPROACHES, THE ONE MOST HEAVILY
RELIED UPON IS THE ONE GENERALLY RECOGNIZED FOR THE TYPE OF PROPERTY
IN THE MARKET.
AS DESCRIBED ABOVE, THE ESTIMATED MARKET VALUE OF REAL ESTATE IS
DETERMINED THROUGH AN APPRAISAL PROCESS. THESE ESTIMATED MARKET
VALUES MAY VARY SIGNIFICANTLY FROM THE PRICES AT WHICH THE REAL ESTATE
INVESTMENTS WOULD SELL SINCE MARKET PRICES OF REAL ESTATE INVESTMENTS
CAN ONLY BE DETERMINED BY NEGOTIATION BETWEEN A WILLING BUYER AND
SELLER. ALTHOUGH THE ESTIMATED MARKET VALUES REPRESENT SUBJECTIVE
ESTIMATES, MANAGEMENT BELIEVES THAT ESTIMATED MARKET VALUES ARE
REASONABLE APPROXIMATIONS OF MARKET PRICES AND THE AGGREGATE VALUE OF
INVESTMENTS IN REAL ESTATE FAIRLY REPRESENT THEIR ESTIMATED MARKET
VALUES AS OF DECEMBER 31, 1996 AND 1995.
B: REVENUE RECOGNITION - RENT FROM PROPERTIES CONSISTS OF ALL
AMOUNTS EARNED UNDER TENANT OPERATING LEASES INCLUDING BASE RENT,
RECOVERIES OF REAL ESTATE TAXES AND OTHER EXPENSES AND CHARGES
FOR MISCELLANEOUS SERVICES PROVIDED TO TENANTS. REVENUE FROM
LEASES WHICH PROVIDE FOR SCHEDULED RENT INCREASES IS RECOGNIZED
AS BILLED.
C: CASH EQUIVALENTS - THE PARTNERSHIP CONSIDERS ALL HIGHLY LIQUID
INVESTMENTS WITH AN ORIGINAL MATURITY OF THREE MONTHS OR LESS
WHEN PURCHASED TO BE CASH EQUIVALENTS. CASH EQUIVALENTS ARE
CARRIED AT MARKET VALUE.
D: MARKETABLE SECURITIES - MARKETABLE SECURITIES ARE HIGHLY LIQUID
INVESTMENTS WITH MATURITIES OF MORE THAN THREE MONTHS WHEN
PURCHASED AND ARE CARRIED AT MARKET VALUE.
B9 - REAL PROPERTY
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
E: FEDERAL INCOME TAXES - THE PARTNERSHIP IS NOT A TAXABLE ENTITY
UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE. THE INCOME
AND CAPITAL GAINS AND LOSSES OF THE PARTNERSHIP ARE ATTRIBUTED,
FOR FEDERAL INCOME TAX PURPOSES, TO THE PARTNERS IN THE
PARTNERSHIP. THE PARTNERSHIP MAY BE SUBJECT TO STATE AND LOCAL
TAXES IN JURISDICTIONS IN WHICH IT OPERATES.
F: RECLASSIFICATIONS - CERTAIN RECLASSIFICATIONS WERE MADE TO THE
1995 AND 1994 BALANCES TO CONFORM WITH THE 1996 PRESENTATION.
G: THE PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES REQUIRES MANAGEMENT TO
MAKE ESTIMATES AND ASSUMPTIONS THAT AFFECT THE REPORTED AMOUNTS
OF ASSETS AND LIABILITIES AT THE DATE OF THE FINANCIAL STATEMENTS
AND THE REPORTED AMOUNTS OF REVENUES AND EXPENSES DURING THE
REPORTING PERIOD. ACTUAL RESULTS COULD DIFFER FROM THOSE
ESTIMATES.
NOTE 2: OBLIGATION UNDER CAPITAL LEASE
THE PARTNERSHIP MAINTAINS AN INTEREST IN A LEASEHOLD ESTATE CONSISTING OF SIX
ONE-STORY INDUSTRIAL WAREHOUSE BUILDINGS LOCATED IN POMONA, CALIFORNIA. IN
CONJUNCTION WITH THIS INTEREST, THE PARTNERSHIP ASSUMED ASSIGNMENT OF A GROUND
LEASE AGREEMENT WHICH EXPIRES IN NOVEMBER 2078, WITH NO RENEWAL OPTIONS. THE
ANNUAL GROUND LEASE PAYMENTS AFTER NOVEMBER 1994, AND FOR EACH 10 YEAR INCREMENT
THEREAFTER, ARE SUBJECT TO INCREASE 50% OF THE INCREASE IN THE CONSUMER PRICE
INDEX DURING THE PREVIOUS PERIOD . IN 1995, THE ANNUAL GROUND LEASE PAYMENT
INCREASED $126,450 TO $376,450. THE GROUND LEASE CONTAINS A PURCHASE OPTION
EXERCISABLE AT A FIXED PRICE OF $4,000,000 FROM NOVEMBER 1994 TO NOVEMBER 1997,
WHICH THE PARTNERSHIP INTENDS TO EXERCISE IN 1997. FUTURE MINIMUM GROUND LEASE
PAYMENTS UNDER CAPITAL LEASE AT DECEMBER 31, 1996 THRU THE EXERCISE DATE OF
NOVEMBER 1997 IS $4,349,158.
NOTE 3: LEASING ACTIVITY
THE PARTNERSHIP LEASES SPACE TO TENANTS UNDER VARIOUS OPERATING LEASE
AGREEMENTS. THESE AGREEMENTS, WITHOUT GIVING EFFECT TO RENEWAL OPTIONS, HAVE
EXPIRATION DATES RANGING FROM 1997 TO 2010. AT DECEMBER 31, 1996, FUTURE
MINIMUM BASE RENTAL INCOME UNDER NON-CANCELABLE OPERATING LEASES BY YEAR, AND IN
THE AGGREGATE ARE SHOWN BELOW. ALTHOUGH THESE ARE NON-CANCELABLE LEASES, THERE
IS NO ASSURANCE THAT ALL AMOUNTS WILL BE RECEIVED.
YEAR ENDING
DECEMBER 31, (000'S)
------------ ---------
1997 $ 12,294
1998 10,365
1999 9,563
2000 8,089
2001 6,818
THEREAFTER 17,125
--------
TOTAL $ 64,254
--------
--------
B10 - REAL PROPERTY
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
FOR YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 4: COMMITMENT FROM PARTNER
ON JANUARY 9, 1990, PRUDENTIAL COMMITTED TO FUND UP TO $100 MILLION TO ENABLE
THE PARTNERSHIP TO TAKE ADVANTAGE OF OPPORTUNITIES TO ACQUIRE ATTRACTIVE REAL
PROPERTY INVESTMENTS WHOSE COST IS GREATER THAN THE PARTNERSHIP'S THEN AVAILABLE
CASH. CONTRIBUTIONS TO THE PARTNERSHIP UNDER THIS COMMITMENT ARE UTILIZED FOR
PROPERTY ACQUISITIONS AND RETURNED TO PRUDENTIAL ON AN ONGOING BASIS FROM
CONTRACT OWNERS' NET CONTRIBUTIONS. ALSO, THE AMOUNT OF THE COMMITMENT IS
REDUCED BY $10 MILLION FOR EVERY $100 MILLION IN ESTIMATED MARKET VALUE NET
ASSETS OF THE PARTNERSHIP. THE AMOUNT AVAILABLE UNDER THIS COMMITMENT FOR
PROPERTY PURCHASES AS OF DECEMBER 31, 1996 IS APPROXIMATELY $50.2 MILLION.
NOTE 5: OTHER TRANSACTIONS WITH AFFILIATES
PURSUANT TO AN INVESTMENT MANAGEMENT AGREEMENT, PRUDENTIAL CHARGES THE
PARTNERSHIP A DAILY INVESTMENT MANAGEMENT FEE AT AN ANNUAL RATE OF 1.25% OF THE
AVERAGE DAILY GROSS ASSET VALUATION OF THE PARTNERSHIP. FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994 MANAGEMENT FEES INCURRED BY THE PARTNERSHIP
WERE $2,494,229, $2,341,878 AND $2,287,816, RESPECTIVELY.
THE PARTNERSHIP ALSO REIMBURSES PRUDENTIAL FOR CERTAIN ADMINISTRATIVE SERVICES
RENDERED BY PRUDENTIAL. THE AMOUNTS INCURRED FOR THE YEARS ENDED DECEMBER 31,
1996, 1995 AND 1994 WERE $116,818, $123,919, AND $95,015, RESPECTIVELY, AND ARE
CLASSIFIED AS ADMINISTRATIVE EXPENSES IN THE STATEMENTS OF OPERATIONS.
THE PARTNERSHIP OWNS A 50% INTEREST IN FOUR WAREHOUSE/DISTRIBUTION BUILDINGS IN
JACKSONVILLE, FLORIDA (THE UNIT WAREHOUSES). THE REMAINING 50% INTEREST IS
OWNED BY PRUDENTIAL AND ONE OF ITS SUBSIDIARIES. AT DECEMBER 31, 1996, THESE
PROPERTIES HAD TOTAL ASSETS OF $17,668,652 AND LIABILITIES OF $60,987. FOR THE
YEAR ENDED DECEMBER 31, 1996, THE UNIT WAREHOUSES HAD REVENUES OF $1,516,876
AND EXPENSES OF $303,754.
THE PARTNERSHIP HAS CONTRACTED WITH PREMISYS REAL ESTATE SERVICES, INC.
(PREMISYS), AN AFFILIATE OF PRUDENTIAL, TO PROVIDE PROPERTY MANAGEMENT SERVICES
AT THE UNIT WAREHOUSES, AND THROUGH 1994 AT THE BOLINGBROOK, IL WAREHOUSE.
THE PROPERTY MANAGEMENT FEE EARNED BY PREMISYS, INCURRED BY THE PARNERSHIP AND
PRUDENTIAL FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 WAS $36,000,
$31,360 AND $92,382, RESPECTIVELY.
B11 - REAL PROPERTY
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of The Prudential
Variable Contract Real Property Partnership
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations, of changes in net assets and of cash flows and
the schedule of investments present fairly, in all material respects, the
financial position of The Prudential Variable Contract Real Property Partnership
(the "Partnership") at December 31, 1996, the results of its operations, the
changes in its net assets and its cash flows for the year then ended and its
investments at December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
New York, New York
March 25, 1997
B12 - REAL PROPERTY
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
The Prudential Variable Contract Real Property Partnership
Newark, New Jersey
We have audited the accompanying statement of assets and liabilities including
the schedule of investments, of the Prudential Variable Contract Real Property
Partnership as of December 31, 1995, and the related statements of operations,
changes in net assets, and cash flows for each of the two years in the period
ended December 31, 1995 (collectively referred to as the financial statements),
and the per share data and ratios appearing on page 1 of the prospectus for each
of the four years in the period ended December 31, 1995. These financial
statements and the per share data and ratios are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and the per share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and per share data and ratios present
fairly, in all material respects, the financial position of The Prudential
Variable Contract Real Property Partnership as of December 31, 1995, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995 and the per share data and ratios for each of the
four years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Investments in properties and interest in properties are stated at current value
at December 31, 1995, as discussed in Note 1 to the financial statements.
Determination of current value involves subjective judgment because the actual
market value of real estate can be determined only by negotiation between the
parties in a sales transaction.
Deloitte & Touche LLP
Parsippany, New Jersey
March 1, 1996
B13 - REAL PROPERTY
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<PAGE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Prudential Directors' and Officers' Liability and Corporation Reimbursement
Insurance program, purchased by Prudential from Aetna Casualty & Surety Company,
CNA Insurance Companies, Lloyds of London, Great American Insurance Company,
Reliance Insurance Company, Corporate Officers & Directors Assurance Ltd.,
A.C.E. Insurance Company, Ltd., XL Insurance Company, Ltd., and Zurich-American
Insurance Company, provides reimbursement for "Loss" (as defined in the
policies) which the Company pays as indemnification to its directors or officers
resulting from any claim for any actual or alleged act, error, misstatement,
misleading statement, omission, or breach of duty by persons in the discharge of
their duties in their capacities as directors or officers of Prudential, any of
its subsidiaries, or certain investment companies affiliated with Prudential.
Coverage is also provided to the individual directors or officers for such Loss,
for which they shall not be indemnified. Loss essentially is the legal liability
on claims against a director or officer, including adjudicated damages,
settlements and reasonable and necessary legal fees and expenses incurred in
defense of adjudicatory proceedings and appeals therefrom. Loss does not include
punitive or exemplary damages or the multiplied portion of any multiplied damage
award, criminal or civil fines or penalties imposed by law, taxes or wages, or
matters which are uninsurable under the law pursuant to which the policies are
construed.
There are a number of exclusions from coverage. Among the matters excluded are
Losses arising as the result of (1) claims brought about or contributed to by
the criminal, dishonest or fraudulent acts or omissions or the willful violation
of any law by a director or officer, (2) claims based on or attributable to
directors or officers gaining personal profit or advantage to which they were
not legally entitled, and (3) claims arising from actual or alleged performance
of, or failure to perform, services as, or in any capacity similar to, an
investment adviser, investment banker, underwriter, broker or dealer, as those
terms are defined in the Securities Act of 1933, the Securities Exchange Act of
1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940,
any rules or regulations thereunder, or any similar federal, state or local
statute, rule or regulation.
The limit of coverage under the program for both individual and corporate
reimbursement coverage is $150,000,000. The retention for corporate
reimbursement coverage is $10,000,000 per loss.
The relevant provisions of New Jersey law permitting or requiring
indemnification, New Jersey being the state of organization of Prudential and
Pruco Life of New Jersey, can be found in Section 14A:3-5 of the New Jersey
Statutes Annotated. The text of Prudential's by-law 26, which relates to
indemnification of officers and directors, is incorporated by reference to
Exhibit 1.A.(6)(b) of Post-Effective Amendment No. 1 to Form S-6, Registration
No. 33-61079, filed April 25, 1996, on behalf of The Prudential Variable
Appreciable Account. The text of Pruco Life of New Jersey's by-laws, Article V,
which relates to indemnification of officers and directors, is incorporated by
reference to Exhibit 3B to this Registration Statement.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 15. NOT APPLICABLE
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
(1A) Distribution Agreement between Incorporated by reference to
Pruco Securities Corporation and Pruco Pre-Effective Amendment No. 1 to Form
Life Insurance Company of New Jersey S-6, Registration Statement No.
with respect to the Pruco Life of New 2-81243, filed February 17, 1983, on
Jersey Variable Insurance Account. behalf of the Pruco Life of New Jersey
Variable Insurance Account.
II-1
<PAGE>
(1B) Distribution Agreement between Incorporated by reference to Form S-6,
Pruco Securities Corporation and Pruco Registration Statement No. 2-89780,
Life Insurance Company of New Jersey filed March 5, 1984, on behalf of the
with respect to the Pruco Life of New Pruco Life of New Jersey Variable
Jersey Variable Appreciable Account. Appreciable Account.
(1C) Distribution Agreement between Filed Herewith.
Pruco Securities Corporation and Pruco
Life Insurance Company of New Jersey
with respect to the Pruco Life of New
Jersey Single Premium Variable Life
Account and Pruco Life of New Jersey
Single Premium Variable Annuity
Account.
(3A) Articles of Incorporation of Incorporated by reference to
Pruco Life Insurance Company of New Post-Effective Amendment No. 17 to
Jersey, as amended March 11, 1983. Form S-6, Registration Statement No.
2-89780, filed March 1, 1991, on
behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(3B) By-Laws of Pruco Life Insurance Incorporated by reference to
Company of New Jersey, as amended Post-Effective Amendment No. 17 to
February 1, 1991. Form S-6, Registration Statement No.
2-89780, filed March 1, 1991, on
behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(3C) Resolution of the Board of Filed Herewith.
Directors establishing Pruco Life of
New Jersey Variable Contract Real
Property Account.
(4A) Variable Life Insurance Contract. Incorporated by reference to Form
N-8B-2, File No. 2-81243, filed
January 10, 1983, on behalf of the
Pruco Life of New Jersey Variable
Insurance Account.
(4B)(i) Revised Variable Appreciable Incorporated by reference to
Life Insurance Contract with fixed Post-Effective Amendment No. 5 to Form
death benefit. S-6, Registration Statement
No.2-89780, filed July 11, 1986, on
behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(4B)(ii) Revised Variable Appreciable Incorporated by reference to
Life Insurance Contract with variable Post-Effective Amendment No. 5 to Form
death benefit. S-6, Registration Statement No.
2-89780, filed July 11, 1986, on
behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(4C) Single Premium Variable Annuity Filed Herewith.
Contract.
(4D) Flexible Premium Variable Life Filed Herewith.
Insurance Contract.
(5) Opinion and Consent of Clifford E. Filed Herewith.
Kirsch, Esq., as to the legality of
the securities being registered.
(10A) Investment Management Agreement Filed Herewith.
between The Prudential Insurance
Company of America and The Prudential
Variable Contract Real Property
Partnership.
II-2
<PAGE>
(10B) Service Agreement between The Incorporated by reference to Form S-1,
Prudential Insurance Company of Registration Statement No. 33-8698,
America and The Prudential Investment filed September 12, 1986, on behalf of
Corporation. The Prudential Real Property Account
of Pruco Life Insurance Company.
(10C) Partnership Agreement of The Filed Herewith.
Prudential Variable Contract Real
Property Partnership.
(23A) Written consent of Price Filed Herewith.
Waterhouse LLP, independent
accountants.
(23B) Written consent of Deloitte & Filed Herewith.
Touche LLP, independent auditors.
(24B) Written consent of Clifford E. Incorporated by reference to Exhibit
Kirsch, Esq. (5) hereto.
(25) Powers of Attorney:
(A) W. Bethke, I. Kleinman, Incorporated by reference to Form N-4,
M. Melzer, E. Milnes, Registration No. 333-18117, filed
I. Price, W. Yelverton December 18, 1996 on behalf of the
Pruco Life of New Jersey Flexible
Premium Variable Annuity Account.
(B) L. Dougherty Filed herewith.
(27) Financial Data Schedules Filed herewith.
(b) Financial Statement Schedules
-----------------------------
Schedule III-Real Estate Owned by The Filed herewith.
Prudential Variable Contract Real
Property Partnership.
Schedule IV-Mortgage Loans on Real Not Applicable.
Estate for The Prudential Variable
Contract Real Property Partnership.
ITEM 17. UNDERTAKINGS
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.
The undersigned Registrant hereby undertakes (a) to file any prospectuses
required by Section 10(a)(3) of the Securities Act of 1933 as Post-Effective
Amendments to this Registration Statement, (b) that for the purposes of
determining any liability under the 1933 Act, each such Post-Effective Amendment
may be deemed to be a new Registration Statement relating to the securities
offered therein and the offering of such securities at that time may be deemed
to be in the initial bona fide offering thereof, (c) to reflect in the
prospectus any facts or events after the effective date of the registration
statement (or the most recent Post-Effective Amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement, (d) to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement, (e) to remove from registration by means of a
Post-Effective Amendment any of the securities being registered which remain
unsold at such time as the offering of such securities may be terminated.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Pruco Life Insurance
Company of New Jersey has duly caused this Post-Effective Amendment No. 9 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newark, State of New Jersey, on the 8th day of
April, 1997.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
In Respect of
PRUCO LIFE OF NEW JERSEY
VARIABLE CONTRACT REAL PROPERTY ACCOUNT
By: /s/ ESTHER H. MILNES
-------------------------------------
Esther H. Milnes
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 9 to the Registration Statement has been signed below by the
following Directors and Officers of Pruco Life Insurance Company of New Jersey
in the capacities indicated on this 8th day of April, 1997.
SIGNATURE AND TITLE
-------------------
/s/ *
- -------------------------------------
Esther H. Milnes
President and Director
/s/ *
- -------------------------------------
Linda S. Dougherty
Chief Accounting Officer and Comptroller
/s/ *
- --------------------------------------
William M. Bethke
Director
/s/ * *By: /s/ Thomas C. Castano
- -------------------------------------- -------------------------------
Ira J. Kleinman Thomas C. Castano
Director (Attorney-in-Fact)
/s/ *
- --------------------------------------
Mendel A. Melzer
Director
/s/ *
- --------------------------------------
I. Edward Price
Director
/s/ *
- --------------------------------------
William F. Yelverton
Director
II-4
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
<S> <C> <C>
(a)(1C) Distribution Agreement between Pruco Securities Corporation and Pruco Page II-6
Life Insurance Company of New Jersey with respect to the Pruco Life of
New Jersey Single Premium Variable Life Account and Pruco Life of New
Jersey Single Premium Variable Annuity Account.
(a)(3C) Resolution of the Board of Directors establishing Pruco Life of New Jersey Variable Page II-16
Contract Real Property Account.
(a)(4C) Single Premium Variable Annuity Contract. Page II-18
(a)(4D) Flexible Premium Variable Life Insurance Contract. Page II-37
(a)(5) Opinion and Consent of Clifford E. Kirsch, Esq. as to the legality of the securities Page II-60
being registered.
(a)(10A) Investment Management Agreement between The Prudential Insurance Company of America Page II-61
and The Prudential Variable Contract Real Property Partnership.
(a)(10C) Partnership Agreement of The Prudential Variable Contract Real Property Partnership. Page II-66
(a)(23A) Written consent of Price Waterhouse LLP, independent accountants. Page II-87
(a)(23B) Written consent of Deloitte & Touche LLP, independent auditors. Page II-88
(a)(25)(b) Power of Attorney Page II-89
(b) Financial Statement Schedules Page II-91
-----------------------------
Schedule III-Real Estate Owned by The Prudential Variable Contract Real
Property Partnership.
(27.1) Financial Data Schedule for the Pruco Life of New Jersey Real Property Account. Page II-93
(27.2) Financial Data Schedule for The Prudential Real Property Partnership. Page II-94
</TABLE>
II-5
EXHIBIT (1C)
Distribution Agreement--Single Premium Contracts
AGREEMENT made this 30th day of July, 1985, by and between Pruco Life
Insurance Company of New Jersey, a New Jersey corporation ("Company"), on its
own behalf and on behalf of the Pruco Life Single Premium Variable Life Account
and the Pruco Life Single Premium Variable Annuity Account (collectively,
"Accounts") and Pruco Securities Corporation, a New Jersey corporation
("Distributor").
WITNESSETH:
WHEREAS, the Company has established and maintains the Pruco Life Single
Premium Variable Life Account and the Pruco Life Single Premium Variable Annuity
Account, separate investment accounts, pursuant to the laws of Arizona for the
purpose of selling single premium variable life insurance contracts and single
payment variable annuity contracts (collectively, "Contracts"), respectively,
to commence after the effectiveness of respective Registration Statements filed
with the Securities and Exchange Commission on Form S-6 pursuant to the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, The Accounts are registered as unit investment trusts under the
Investment Company Act of 1940 (the "1940 Act"); and
II-6
<PAGE>
WHEREAS, Distributor is registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "Securities Exchange Act") and is a member of the
National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, the Company and the Distributor wish to enter into an agreement to
have the Distributor act as the Company's principal underwriter for the sale of
the Contracts through the Accounts;
NOW, THEREFORE, the parties agree as follows:
1. Appointment of the Distributor
------------------------------
The Company agrees that during the term of this agreement it will take all
action which is required to cause the Contracts to comply as insurance products
and registered securities with all applicable federal and state laws and
regulations. The Company appoints the Distributor and the Distributor agrees to
act as the principal underwriter for the sale of Contracts to the public, during
the term of this Agreement, in each state and other jurisdictions in which such
Contracts may lawfully be sold. Distributor shall offer the Contracts for sale
and distribution at premium rates set by the Company. Applications for the
Contracts shall be solicited only by representatives duly and appropriately
licensed or otherwise qualified for the sale
II-7
<PAGE>
of such Contracts in each state or other jurisdiction. Company shall undertake
to appoint Distributor's qualified representatives as life insurance agents of
Company. Completed applications for Contracts shall be transmitted directly to
the Company for acceptance or rejection in accordance with underwriting rules
established by the Company. Initial premium payments under the Contracts shall
be made by check payable to the Company and shall be held at all times by
Distributor or its representatives in a fiduciary capacity and remitted promptly
to the Company. Anything in this Agreement to the contrary notwithstanding, the
Company retains the ultimate right to control the sale of the Contracts and to
appoint and discharge life insurance agents of the Company. The Distributor
shall be held to the exercise of reasonable care in carrying out the provisions
of this Agreement.
2. Sales Agreements
----------------
Distributor is hereby authorized to enter into separate written agreements,
on such terms and conditions as Distributor may determine not inconsistent with
this Agreement, with one or more organizations which agree to participate in the
distribution of either or both of the single premium variable life contracts or
the single premium variable annuity contracts. Such organization (hereafter
"Dealer") shall be both registered as a broker/dealer under
II-8
<PAGE>
the Securities Exchange Act and a member of NASD. Dealer and its agents or
representatives soliciting applications for Contracts shall be duly and
appropriately licensed, registered or otherwise qualified for the sale of such
Contracts (and the riders and other policies offered in connection therewith)
under the insurance laws and any applicable blue-sky laws of each state or other
jurisdiction in which the Company is licensed to sell the Contracts.
Distributor shall have the responsibility for ensuring that Dealer
supervises its representatives. Dealer shall assume any legal responsibilities
of Company for the acts, commissions or defalcations of such representatives
insofar as they relate to the sale of the Contracts. Applications for Contracts
solicited by such Dealer through its agents or representatives shall be
transmitted directly to the Company, and if received by Distributor, shall be
forwarded to Company. All premium payments under the Contracts shall be made by
check to Company and, if received by the Distributor, shall be held at all times
in a fiduciary capacity and remitted promptly to Company.
3. Life Insurance Agents
---------------------
Company shall be responsible for insuring that Dealers are duly qualified,
under the insurance laws of the applicable jurisdictions, to sell the Contracts.
II-9
<PAGE>
4. Suitability
-----------
Company wishes to ensure that Contracts sold by Distributor will be issued
to purchasers for whom the Contract will be suitable. Distributor shall take
reasonable steps to ensure that the various representatives appointed by it
shall not make recommendations to an applicant to purchase a Contract in the
absence of reasonable grounds to believe that the purchase of the Contract is
suitable for such applicant. While not limited to the following, a determination
of suitability shall be based on information furnished to a representative after
reasonable inquiry of such applicant concerning the applicant's insurance and
investment objectives, financial situation and needs, and the likelihood that
the applicant will continue to make any premium payments contemplated by the
Contract.
5. Promotion Materials
-------------------
Company shall have the responsibility for furnishing to Distributor and its
representatives sales promotion materials and individual sales proposals related
to the sale of the Contracts. Distributor shall not use any such materials that
have not been approved by Company.
II-10
<PAGE>
6. Compensation
------------
Company shall arrange for the payment of commissions directly to those
registered representatives of Distributor who are entitled thereto in connection
with the sale of the Contracts on behalf of Distributor, in the amounts and on
such terms and conditions as Company and Distributor shall determine; provided
that such terms, conditions and commissions shall be as are set forth in or as
are not inconsistent with a Prospectus included as part of the Registration
Statement for the Contracts and effective under the 1933 Act.
Company shall arrange for the payment of commissions directly to those
Dealers who sell Contracts under agreements entered into pursuant to paragraph
2. hereof, in amounts as may be agreed to among the parties and specified in
such written agreements.
Company shall reimburse Distributor for the costs and expenses incurred by
Distributor in furnishing or obtaining the services, materials and supplies
required by the terms of this Agreement in the initial sales efforts and the
continuing obligations hereunder.
II-11
<PAGE>
7. Records
-------
Distributor shall have the responsibility for maintaining the records of
representatives licensed, registered and otherwise qualified to sell the
Contracts. Distributor shall maintain such other records as are required of it
by applicable laws and regulations. The books, accounts and records of Company,
the Accounts and Distributor shall be maintained so as to clearly and accurately
disclose the nature and details of the transactions. All records maintained by
the Distributor in connection with this Agreement shall be the property of the
Company and shall be returned to the Company upon termination of this Agreement
free from any claims or retention of rights by the Distributor. The Distributor
shall keep confidential any information obtained pursuant to this Agreement and
shall disclose such information only if the Company has authorized such
disclosure, or if such disclosure is expressly required by applicable federal or
state regulatory authorities.
8. Investigation and Proceeding
----------------------------
(a) Distributor and Company agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with the Contracts distributed under this Agreement. Distributor and
Company
II-12
<PAGE>
further agree to cooperate fully in any securities regulatory investigation or
proceeding or judicial proceeding with respect to Company, Distributor, their
affiliates and their agents or representatives to the extent that such
investigation or proceeding is in connection with Contracts distributed under
this Agreement. The Distributor shall furnish applicable federal and state
regulatory authorities with any information or reports in connection with its
services under this Agreement which such authorities may request in order to
ascertain whether the Company's operations are being conducted in a manner
consistent with any applicable law or regulation.
(b) In the case of a substantive customer complaint, Distributor and
Company will cooperate in investigating such complaint and any response to such
complaint will be sent to the other party to this Agreement for approval not
less than five business days prior to its being sent to the customer or
regulatory authority, except that if a more prompt response is required, the
proposed response shall be communicated by telephone or telegraph.
9. Termination
-----------
This Agreement shall terminate automatically upon its assignment without
the prior written consent of both parties. This Agreement may be terminated at
any time by
II-13
<PAGE>
either party on 60 days' written notice to the other party, without the payment
of any penalty. Upon termination of this Agreement all authorizations, rights
and obligations shall cease except the obligation to settle accounts hereunder,
including commissions on premiums subsequently received for Contracts in effect
at the time of termination, and the agreements contained in paragraph 8. hereof.
10. Regulation
----------
This Agreement shall be subject to the provisions of the 1940 Act and the
Securities Exchange Act and the rules, regulations, and rulings thereunder and
of the applicable rules and regulations of the NASD, from time to time in
effect, and the terms hereof shall be interpreted and construed in accordance
therewith.
11. Severability
------------
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
II-14
<PAGE>
12. Applicable Law
--------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
By /s/ [SPECIMEN]
--------------------------------------
PRESIDENT
PRUCO SECURITIES CORPORATION
By /s/ [SPECIMEN]
--------------------------------------
PRESIDENT
II-15
EXHIBIT (3C)
87-9
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Action by Executive Committee of the
Board of Directors by Unanimous Consent
Pursuant to Section 9 of Article II of the By-Laws of Pruco Life Insurance
Company of New Jersey, a New Jersey Corporation, the undersigned being or acting
for all of the regular members of the Executive Committee of the Board of
Directors of such Company, hereby consent to and adopt the following resolution:
R-126 Amendment of Establishment of
Separate Accounts
------------------------------
RESOLVED, that the Establishment of Separate Account Resolutions
R-108, R-109, R-ll0 and R-lll adopted by the Executive Committee by
Unanimous Consent on October 30, 1986 are hereby consolidated and amended
in their entirety to read as follows:
"RESOLVED, that, subject to the approval of the Commissioner of
Insurance of the State of New Jersey and to such conditions as said
Commissioner may impose, pursuant to Section 17B:28-7 of the Revised
Statutes of New Jersey, a new commingled variable contract real
property account be established, to be designated initially as The
Prudential Real Property Account of Pruco Life Insurance Company of
New Jersey (the "Account") and to be used for variable contracts under
which values of payments, or a portion thereof, vary to reflect the
investment results of the Account; and
FURTHER RESOLVED, that the Objective and Policy applicable to
the purchase and sale of investments for the Account shall be as
described in a memorandum, which has been attached hereto as Exhibit
A; and
FURTHER RESOLVED, that proper officers of the Company be and
hereby are authorized to take all necessary and appropriate action to
register interests in the Account (i.e., the variable contracts) under
the Securities Act of 1933, to take all necessary and appropriate
steps to comply with or seek regulatory relief from the requirements
of the Securities Exchange Act of 1934, if any, that may be applicable
to the Account, and to take all necessary and appropriate steps to
comply with or seek "no-action" or
II-16
<PAGE>
87-10
exemptive relief from the requirements of the Investment Company Act
of 1940, if any, that may be applicable to the Account, including but
not limited to the execution and filing of registration statements and
amendments thereto, "no-action" requests, applications for exemption,
and agreements relating to the management of the Account and for the
distribution of Variable Contracts that invest in the Account."
October 30, 1987
/s/ [SPECIMEN]
---------------------------------------
Garnett L. Keith, Jr.
(Alternate Member)
/s/ [SPECIMEN]
---------------------------------------
Joseph J. Melone
/s/ [SPECIMEN]
---------------------------------------
William J. Kelly
II-17
EXHIBIT (4C)
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Newark, New Jersey
A Stock Company Subsidiary of The Prudential Insurance Company of America
- --------------------------------------------------------------------------------
ANNUITANT(S) CONTRACT NUMBER
CONTRACT DATE
ANNUITY DATE
AGENCY
- --------------------------------------------------------------------------------
We will make monthly annuity payments starting on the annuity date we show in
the window of this page. We make this promise subject to all the provisions of
this contract.
Please read this contract with care. A guide to its contents is on the last page
before the back cover. A summary is on page 5. If there is ever a question about
it, or if there is a claim, just see a Company representative or get in touch
with one of our offices.
Benefits and values under this contract may be on a variable basis. Amounts
directed into one or more of the variable subaccounts will reflect the
investment experience of those subaccounts. They are subject to change both up
and down and are not guaranteed as to dollar amount except as provided under the
Death Of An Annuitant, Payout Provisions For The Annuitant, and Settlement
Provisions for Beneficiary or Contingent Payee sections.
RIGHT TO CANCEL CONTRACT.--Not later than ten days after you get this contract,
you may return it to us. All you have to do is take it or mail it to one of our
offices or to the agent who sold it to you. We will cancel the contract and
promptly give you its net asset value, determined as of the date your request is
received, without redemption charge.
Signed for Pruco Life Insurance Company of New Jersey,
a New Jersey Corporation.
/s/ SPECIMEN /s/ SPECIMEN
Secretary President
VARIABLE RETIREMENT ANNUITY CONTRACT. ONE PURCHASE PAYMENT. MONTHLY ANNUITY
PAYMENTS STARTING ON ANNUITY DATE. PAYMENT AS STATED UPON DEATH BEFORE ANNUITY
DATE. CASH VALUES REFLECT INVESTMENT RESULTS. NON-PARTICIPATING.
VA--85-N
II-18
<PAGE>
Page 2(VA--85)
II-19
<PAGE>
CONTRACT DATA
ANNUITANT (S) JOHN DOE XX XXX XXX CONTRACT NUMBER
MARY DOE JULY 1, 1965 CONTRACT DATE
ANNUITY DATE JULY 1, 2012
AGENCY R-NK 1
FIRST ANNUITANT:
NAME JOHN DOE
SEX AND ISSUE AGE M-35
DATE OF BIRTH 3-15-50
CO-ANNUITANT:
NAME MARY DOE
SEX AND ISSUE AGE F-32
DATE OF BIRTH 10-1-52
BENEFICIARY: CLASS 1-ROBERT DOE
SON OF ANNUITANTS
CLASS 2-BARBARA SMITH
SISTER OF CO-ANNUITANT
PURCHASE PAYMENT
THE PURCHASE PAYMENT IS $XXX.XX
INTEREST RATES
FOR THE PORTION OF THE CONTRACT FUND IN THE FIXED ACCOUNT: SEE GUARANTEED
INTEREST AND EXCESS INTEREST ON PAGE 10.
CONTRACT DATA CONTINUED ON NEXT PAGE
Page 3 (85)
II-20
<PAGE>
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
LIST OF SUBACCOUNTS AND PORTFOLIOS
EACH SUBACCOUNT OF THE PRUCO LIFE SINGLE PREMIUM VARIABLE ANNUITY ACCOUNT
INVESTS IN A SPECIFIC PORTFOLIO OF THE PRUCO LIFE SERIES FUND. WE SHOW BELOW THE
SUBACCOUNTS AND THE FUND PORTFOLIOS THEY INVEST IN.
FUND
SUBACCOUNT PORTFOLIO
- ---------- ---------
MONEY MARKET MONEY MARKET
BOND BOND
COMMON STOCK COMMON STOCK
AGGRESSIVELY MANAGED FLEXIBLE AGGRESSIVELY MANAGED FLEXIBLE
CONSERVATIVELY MANAGED FLEXIBLE CONSERVATIVELY MANAGED FLEXIBLE
*****END OF LIST*****
PRUCO LIFE WILL MAIL TO THE CONTRACT OWNER A CONFIRMATION OF THE INITIAL PREMIUM
PAYMENT. THIS CONFIRMATION WILL SHOW THE INITIAL ALLOCATION OF THE INVESTED
PREMIUM AMOUNT (SEE PAGE 9) TO THE SUBACCOUNTS AND/OR THE FIXED ACCOUNT (SEE
PAGE 8).
SERVICE OFFICE -- PLEASE DIRECT ANY COMMUNICATIONS ABOUT THIS CONTRACT TO: PRUCO
LIFE INSURANCE COMPANY OF NEW JERSEY, P.O. BOX 2925, PHOENIX, ARIZONA 85062.
Page 3A(85)
II-21
<PAGE>
CONTRACT NO. XXX XXX XXX
ENDORSEMENTS
(ONLY WE CAN ENDORSE THIS CONTRACT.)
PAGE 4 (85)
II-22
<PAGE>
CONTRACT SUMMARY
We offer this summary to help you understand this contract. We do not intend
that it change any of the provisions of the contract.
This is a contract to provide income to begin on the annuity date. It calls for
a single purchase payment. The purchase payment, less any deduction for state
and/or local premium taxes, is the contract fund at the start. The value of the
contract fund will vary with the investment performance of those subaccounts of
the Pruco Life Single Premium Variable Annuity Account that you select and the
extent to which interest is credited to any portion allocated to the fixed
account.
We will make payment on the annuity date to the Annuitant named on page 3, (the
First Annuitant named there if two annuitants are named,) if he or she is then
living and entitled to payment. But if two annuitants are named on page 3 and
(1) the First Annuitant is not living on the annuity date, or (2) both
annuitants are then living and you ask us to do so, we will make payment to the
Co-Annuitant named on page 3 if he or she is then living. If Option A, B, or C
is chosen (see Payout Provisions for the Annuitant, page 11), the income
payments will be based on the age and sex of the person(s) on whose life the
settlement is based. If, on the annuity date, no other settlement has been
chosen, we will make monthly payments under Option B, with 10 years certain. But
if the amount of the initial payment would be less than $20, we will, instead,
pay the cash value in one sum. We describe other options we offer on page 11.
We describe on page 10 the amount payable, if any, at the death of an annuitant.
For all or part of any proceeds which may arise from death before the annuity
date of a last surviving or sole annuitant: (1) You may be able to choose a
settlement option to fit the beneficiary's expected needs. (2) If the annuitant
dies, and no option has been chosen, the beneficiary may be able to choose one.
(3) We will pay interest under Option 3 from the date of death on any amount to
which no other manner of payment applies. This will be automatic as we state on
page 13. There is no need to ask for it.
You and we may agree on a change in the ownership of this contract. Also, unless
we endorse it to say otherwise, the contract gives you these rights, among
others:
o You may change the beneficiary(ies) under it.
o You may surrender it for its cash value.
o You may make withdrawals from the contract fund.
o You may remove one annuitant if two are named.
o You may transfer amounts among subaccounts and the fixed account.
PURCHASE PAYMENT
The purchase payment that we show on page 3 is due on the contract date. It may
be paid at our Service Office or to one of our representatives. If we are asked
to do so we will give a signed receipt. The purchase payment minus any deduction
for state and/or local premium taxes, becomes the contract fund (See page 9) and
will be allocated to the subaccounts and/or the fixed account in accord with
your instructions.
Page 5 (VA--85)-N
II-23
<PAGE>
GENERAL PROVISIONS
DEFINITIONS.--We define here some of the words and phrases used all through this
contract. We explain others, not defined here, in other parts of the text.
WE, OUR, US, AND COMPANY.--Pruco Life Insurance Company of New Jersey, a New
Jersey Corporation.
YOU AND YOUR.--The owner of the contract.
ANNUITANT(S).--The person or persons named on the first page. If more than one
person is so named. one of the two is named on page 3 as First Annuitant, the
other as Co-Annuitant. And, in this case, the Beneficiary provisions of the
contract will be based on the death of the last survivor of the persons so
named. The owner need not be an annuitant.
CONTINGENT ANNUITANT.--A person to whom monthly payments under a Joint and
Survivor Life Annuity will continue for life if he or she is living after the
death of the annuitant under that Annuity. If you choose a Joint and Survivor
Life Annuity, you will, at the time you make that choice, also name the
contingent annuitant for that annuity. The contingent annuitant you choose may
be a person who is named in the contract as an annuitant, but need not be.
SEC.--The Securities and Exchange Commission.
CONTRACT DATE.--The date we receive the purchase payment at our Service Office.
We show the contract date on page 3.
ANNUITY DATE.--The date the first annuity payment is due. We show the annuity
date on page 3.
MONTHLY DATE.--The contract date and the same day as the contract date in each
later month. But if the contract date is the 29th, 30th or 31st day of the month
and the later month has fewer days, then the monthly date will be the first day
of the next month.
Example: If the contract date is March 9, 1986 the Monthly Dates are each March
9, April 9, May 9 and so on.
ANNIVERSARY OR CONTRACT ANNIVERSARY.--The same day and month as the contract
date in each later year.
Example: If the contract date is March 9, 1986, the first anniversary is March
9, 1987. The second is March 9, 1988, and so on.
CONTRACT YEAR.--A year that starts on the contract date or on an anniversary.
Example: If the contract date is March 9, 1986, the first contract year starts
then and ends on March 8, 1987. The second starts on March 9, 1987 and ends on
March 8, 1988, and so on.
CONTRACT MONTH.--A month that starts on a Monthly Date.
Example: If March 9, 1986 is a Monthly Date, a contract month starts then and
ends on April 8, 1986. The next contract month starts on April 9, 1986 and ends
on May 8, 1986, and so on.
ATTAINED AGE.--An annuitant's attained age at any time is his or her issue age
plus the length of time since the contract date. You will find the issue age(s)
on page 3.
THE CONTRACT.--This contract, including all its provisions, forms the whole
contract. The consideration for the contract is the purchase payment we show on
page 3.
CONTRACT MODIFICATIONS.--Only a Company officer may agree to modify this
contract, and then only in writing.
NON-PARTICIPATING.--This contract will not share in our profits or surplus
earnings. We will pay no dividends on it.
SERVICE OFFICE.--This is the office that will service this contract. Its mailing
address is the one we show on page 3A unless we notify you of another one.
ANNUAL REPORT.--Once each contract year after the first and before the annuity
date we will send you a report. It will show (1) the amount of the contract
fund; (2) the investment amount in each subaccount; (3) the amount in the fixed
account; (4) interest credited during the year; and (5) the interest rate that
will be credited until further notice to the amount in the fixed account. The
report will include any other data that may be currently required where this
contract is delivered. You may ask for a report like this at any time. But,
except for the report we send you once a year, we have the right to charge a fee
for each report.
CHANGE OF ANNUITY DATE.--Not later than the present annuity date, you may ask us
to change that date to another date. We must have your request in writing at our
Service Office and in a form which meets our needs. You must send the contract
to us to be endorsed if we ask you to do so. We will change the date to the one
you ask for in your request. But, unless we consent, it may not be before the
later of (1) the third contract anniversary and (2) the date we receive your
request. And it may not be after the first contract anniversary after the
Annuitant's 85th birthday. Further, unless we consent, you may not make more
than one change in the annuity date.
REMOVAL OF AN ANNUITANT.--If a First Annuitant and a Co-Annuitant are named, we
will remove one from the contract upon receipt of your written request to remove
that annuitant.
(Continued on Next Page)
Page 6 (VA--85)-N
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GENERAL PROVISIONS (Continued from Preceding Page)
OWNERSHIP AND CONTROL.--Unless we endorse this contract to say otherwise: (1)
the owner of the contract is the Annuitant (the First Annuitant, if two are
named); (2) while any annuitant is living, the owner alone is entitled to (a)
any contract benefit and value, and (b) the exercise of any right and privilege
granted by the contract or by us; and (3) if two annuitants are named and the
First Annuitant dies while the Co-Annuitant is living, the Co-Annuitant will
become the Owner.
CURRENCY.--Any money we pay, or which is paid to us, will be in United States
currency. Any amount we owe will be payable at our Service Office.
MISSTATEMENT OF AGE OR SEX.--lf any annuitant's or any contingent annuitant's
stated date of birth or sex or both are not correct, we will change each benefit
and the amount of each annuity payment to what the purchase payment would have
bought for the correct date of birth and sex. Also, we will adjust the amount of
any payments we have already made. Here is how we will do it: (1) We will deduct
any overpayments, with interest at 5% a year, from any payment(s) due then or
later. (2) We will add any underpayments, with interest at 5% a year, to the
next payment we make after we receive proof of the correct date of birth and
sex.
INCONTESTABILITY.--Except for non-payment of the purchase payment, we will not
contest this contract.
PROOF OF SURVIVAL OR DEATH.--Before we make a payment, we have the right to
require proof of the life or death of any person whose life or death determines
whether or to whom we must make the payment.
ASSIGNMENT.--We will not be deemed to know of an assignment unless we receive
it, or a copy of it, at our Service Office. We are not obliged to see that an
assignment is valid or sufficient. If any annuitant is living on the annuity
date and an assignment is in effect on that date, we have the right to pay the
cash value in one sum. This contract may not be assigned to another insurance
company without our consent.
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing and
in a form which meets our needs. It will take effect only when we file it at our
Service Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if no annuitant is living when we
file the request. Unless otherwise stated, we will make payment to the
beneficiary only if the last surviving or sole annuitant dies before the annuity
date. Any beneficiary's interest is subject to the rights of any assignee of
whom we know.
When a beneficiary is designated, any relationship shown is to the Annuitant.
(First Annuitant if two annuitants are named on page 3,) unless otherwise
stated.
To show priority. we may use numbered classes, so that the class with first
priority is called class 1, the class with next priority is called class 2, and
so on. When we use numbered classes, these statements apply to beneficiaries
unless the form states otherwise:
(In these provisions and in the example, the term annuitant refers, where two
annuitants are named, to the last surviving annuitant.)
1. One who survives the annuitant will have the right to be paid only if no one
in a prior class survives the annuitant.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the annuitant.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the annuitant, we will pay in one sum to the annuitant's
estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. If the annuitant dies before the annuity date, we owe Jane
the proceeds if she is living at the annuitant's death. We owe Paul and John the
proceeds if they are living then but Jane is not. But if only one of them is
living, we owe him the proceeds. If none of them is living, we owe the
annuitant's estate.
If the annuitant dies before the annuity date, beneficiaries who do not have a
right to be paid under these terms may still have a right to be paid under the
Automatic Mode of Settlement. (See page 13.)
Before we make a payment, we have the right to decide what proof we need of the
identity, age or any other facts about any persons designated as beneficiaries.
If beneficiaries are not designated by name and we make payment(s) based on that
proof, we will not have to make the payment(s) again.
Page 7 (VA--85)-N
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<PAGE>
SEPARATE ACCOUNT
THE ACCOUNT.--The word Account, where we use it in this contract without
qualification, means the Pruco Life Single Premium Variable Annuity Account.
This is a unit investment trust registered with the SEC under the Investment
Company Act of 1940. It is also subject to the laws of New Jersey. We own the
assets of the Account; we keep them separate from the assets of our general
investment account. We established the Account to support variable annuity
contracts.
SUBACCOUNTS.--The Account has several subaccounts. We list them on the Contract
Data page(s). You determine, using percentages, how the invested premium amount
will be allocated among the subaccounts. You may choose to allocate nothing to a
particular subaccount. But any allocation you make must be at least 10%; you may
not choose a fractional percent.
Example: You may choose a percentage of 0, or 100, or 10, 11, 12, and so on, up
to 90. But you may not choose a percentage of 1 through 9, or 91 through 99, or
any percent that is not a whole number.
TRANSFERS AMONG SUBACCOUNTS AND THE FIXED ACCOUNT.--You may transfer amounts
among subaccounts and to the fixed account as often as four times in a contract
veer, if the contract is not in default. Transfers out of the fixed account to
the subaccounts will be allowed only with the Company's consent. To do so, you
must notify us in writing in a form that meets our needs. The transfer will take
effect on the date we receive your notice at our Service Office.
THE FUND.--The word fund, where we use it in this contract without
qualification, means the fund we identify in the Contract Data pages. The fund
is registered with the SEC under the Investment Company Act of 1940 as an open
end diversified management investment company. The fund has several portfolios;
there is a portfolio that corresponds to each of the subaccounts of the Account.
We list these portfolios in the Contract Data pages.
ACCOUNT INVESTMENTS.--We use the assets of the Account to buy shares in the
fund. Each subaccount is invested in a corresponding specific portfolio. Income
and realized and unrealized gains and losses from assets in each subaccount are
credited to, or charged against, the subaccount. This is without regard to
income, gains, or losses in our other investment accounts.
We will determine the value of the assets in the Account at the end of each
business day. When we use the term business day, we mean a day when the New York
Stock Exchange is open for trading. We might need to know the value of an asset
on a day that is not a business day or on which trading in that asset does not
take place. In this case, we will use the value of that asset as of the end of
the last prior business day on which trading took place.
Example: If we need to know the value of an asset on a Sunday, we will normally
use the value of the asset as of the end of business on Friday.
We will always keep assets in the Account with a total value at least equal to
the amount of the investment amounts under contracts like this one. (See page
9.) To the extent those assets do not exceed this amount, we use them only to
support those contracts; we do not use those assets to support any other
business we conduct. We may use any excess over this amount in any way we
choose.
CHANGE IN INVESTMENT POLICY.--A portfolio of the fund might make a material
change in its investment policy. In that case, we will send you a notice of the
change.
CHANGE OF FUND.--A portfolio might, in our judgment, become unsuitable for
investment by a subaccount. This might happen because of a change in investment
policy, or a change in the laws or regulations, or because the shares are no
longer available for investment, or for some other reason. If that occurs, we
have the right to substitute another portfolio of the fund, or to invest in a
fund other than the one we show on the Contract Data page(s). But we would first
seek approval from the SEC and, where required, the insurance regulator where
this contract is delivered.
FIXED ACCOUNT
THE FIXED ACCOUNT--In addition to allocating your invested premium amount (see
page 9) to one or more of the subaccounts described above, you may direct all or
part of your invested premium amount into the fixed account. The fixed account
is funded by the general account of Pruco Life. The fixed account is credited
with interest as described under Guaranteed Interest and Excess Interest on page
10. As described above, you may also transfer amounts from the subaccounts to
the fixed account. Transfers from the fixed account to the subaccounts may be
made only with the consent of and to the extent allowed by the Company.
Page 8 (VA--85)-N
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<PAGE>
CONTRACT FUND AND CONTRACT VALUE OPTIONS
Before the annuity date, you may be able to make withdrawals from the contract
fund and you may surrender this contract for its cash value.
CONTRACT FUND.--On the contract date the contract fund is equal to the invested
premium amount received, (see below), minus any of the charges described in
items (e) through (g) below which may have been due on that date. On any day
after that the contract fund is equal to what it was on the previous day, plus
these items:
(a) any increase due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated; (we explain investment amount below); and
(b) guaranteed interest at 3% on that portion of the contract fund that is
in the fixed account; and
(c) any excess interest on that portion of the contract fund that is in the
fixed account. (See page 10.)
Minus these items:
(d) any decrease due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated;
(e) a charge against the investment amount at a rate of .00245475% a day
(.90% a year) for mortality and expense risks that we assume;
(f) a charge against the investment amount at a rate of .00095723% a day
(.35% a year) for the cost of administering the contract; and
(g) any amount charged against the Contract Fund for Federal or State
income taxes.
INVESTED PREMIUM AMOUNT.--This is the portion of the purchase payment that we
add to the contract fund. It is equal to the purchase payment, minus any
applicable deduction for state and/or local premium taxes.
INVESTMENT AMOUNT.--The investment amount for this contract is the amount we use
to compute the investment results. The investment amount is allocated among the
subaccounts. The amount of the investment amount and its allocation to
subaccounts depend on (1) how you choose to allocate the invested premium
amount; (2) whether or not you transfer amounts among subaccounts; (3) the
investment performance of the subaccounts to which amounts are allocated or
transferred; and (4) whether or not you make any withdrawals. The account,
subaccounts, and account investments are described on page 8. The investment
amount at any time is equal to the contract fund, minus the portion of the
contract fund that is in the fixed account.
CASH VALUE.--The cash value of the contract at any time is the contract fund,
minus any surrender charge that applies. See Surrender Charge below, and page 9
for the period of time during which there may be a surrender charge.
SURRENDER CHARGE.--A surrender charge may be made on a withdrawal from the
contract fund or surrender of the contract during the first six contract years.
There is no surrender charge on withdrawals or surrenders made after that period
of time. Here is how we will determine the amount of any surrender charge:
FIRST WITHDRAWAL IN A CONTRACT YEAR WHEN SURRENDER CHARGES APPLY.--If you ask
for an amount that is 10% or less of the purchase payment, we will pay the
amount you ask for and reduce the contract fund by that amount. There will be no
surrender charge. But if you ask for an amount that exceeds 10% of the purchase
payment, there may be a surrender charge. It will be applied only to the excess
of the withdrawal amount over 10% of the purchase payment. It will be computed
by multiplying the amount being withdrawn in excess of 10% of the purchase
payment by the surrender factor that applies (see page 10). The total charge,
however, will never exceed 8 1/2% of the first $25,000 of the purchase payment,
plus 7 1/2% of the next $25,000, plus 6 1/2% of any amount greater than $50,000.
Example: You ask to withdraw $4,000 from your contract fund at a time when the
contract fund is $25,000 and the surrender factor is .07 (see Table of Surrender
Factors on page 10). The purchase payment for the contract was $20,000. There
were no prior withdrawals in the contract year. There is no surrender charge on
the first $2,000 of the amount withdrawn, since that is 10% of the purchase
price. There is a $140 surrender charge on the remaining $2,000 of the amount
being withdrawn, which is deducted from the contract fund. (.07 times $2,000
equals $140.) Thus the contract fund is $20,860 after the withdrawal ($25,000
minus $4,000, minus $140).
SECOND OR LATER WITHDRAWAL IN A CONTRACT YEAR WHEN SURRENDER CHARGES APPLY.--The
surrender charge will apply to the full amount being withdrawn. This will be so
even if less than 10% of the purchase price was previously withdrawn in that
contract year. The total charge, however, will never exceed 8 1/2% of the first
$25,000 of the purchase payment, plus 7 1/2% of the next $25,000, plus 6 1/2% of
any amount greater than $50,000.
(Continued on Next Page)
Page 9 (VA--85)
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<PAGE>
CONTRACT FUND AND CONTRACT VALUE OPTIONS (Continued)
Example: You ask to withdraw $4,000 from your contract fund at a time when the
contract fund is $24,000 and the surrender factor is .07. The purchase price for
your contract was $20,000. Earlier in the contract year you withdrew $1,000. The
surrender charge applies to the full $4,000 being withdrawn, even though the
earlier withdrawal was less than 10% of the purchase price. The surrender charge
is $280 (.07 times $4,000). The contract fund is reduced to $19,720 ($24,000
minus $4,000 and minus $280).
ANNUAL ADMINISTRATION CHARGE.--For contracts issued for a purchase payment of
less than $10,000, we make an annual administration charge. The amount of the
charge is shown on page 3.
CONDITIONS FOR WITHDRAWAL OR SURRENDER.--Our consent is needed for a withdrawal
if (1) its amount is less than $500; (2) it would reduce the contract fund to
less than $10,000; or (3) a withdrawal was made earlier in the same contract
year.
To make a withdrawal or to surrender this contract for its cash value, you must
ask us in writing in a form that meets our needs. Also, to surrender the
contract, you must send it to us. Unless you request otherwise, any amount
withdrawn will be taken from the subaccounts and the fixed account in proportion
to the amount in each as of the date of the withdrawal.
GUARANTEED INTEREST.--The guaranteed interest rate credited on that portion of
the contract fund in the fixed account is an effective rate of 3% a year.
EXCESS INTEREST.--Excess interest on that portion of the contract fund in the
fixed account may be credited in addition to the 3% guaranteed interest rate.
The rate of any excess interest is not guaranteed. It will be determined from
time to time and will continue thereafter until a new rate is determined. We may
use different rates of excess interest for different portions of the contract
fund that are in the fixed account.
- --------------------------------------------------------------------------------
TABLE OF SURRENDER FACTORS
- --------------------------------------------------------------------------------
Contract Surrender Contract Surrender
Year Factor Year Factor
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 .09 5 .05
2 .08 6 .04
3 .07 7 and later .00
4 .06
- --------------------------------------------------------------------------------
DEATH OF AN ANNUITANT
We will pay the beneficiary the proceeds promptly if we receive due proof that
the last surviving or sole annuitant died before the annuity date. The proceeds
will be the greater of (a) the amount of the contract fund on the date we
receive due proof of death, or (b) the amount of the purchase payment if no
withdrawals have been made. Any withdrawal reduces minimum proceeds on the date
of the withdrawal in the same proportion that it reduces your contract fund on
that date. There will be no surrender charge.
If we are making payments to an annuitant and he or she dies on or after the
annuity date, the settlement then in effect will govern whether and to whom we
will make any payment(s).
Page 10 (VA--85)
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<PAGE>
PAYOUT PROVISIONS FOR THE ANNUITANT
CHOOSING AN OPTION.--You may be able to have the amount of the contract fund on
the annuity date paid to the Annuitant(s) under one or more of the annuity
options we describe below. If two annuitants are named in the contract, and both
are living, you may choose to have payments made to either or both. If you wish
payments to be made to both, you will tell us how much of the amount you wish
applied for each annuitant and under which option(s). But, for any annuity
settlement, we may first deduct from your contract fund any charge for state
and/or local premium taxes. And under some conditions we may also deduct a
surrender charge as described on page 12.
CONDITIONS.--With respect to each option you select, your right to make the
choice is subject to all these conditions: (1) You must ask for the option in
writing and in a form which meets our needs. (2) You must send the contract to
us to be endorsed. (3) For Option A, B or C you must give us proof of the date
of birth of the annuitant who is to receive payment and (for Option C) of any
contingent annuitant. (4) We must have your request, the contract and the
proof(s) of the date(s) of birth before the annuity date.
Your choice of an option will take effect on the annuity date but only if: (1)
the annuitant on whose life the annuity is to be paid is living on that date;
(2) the contingent annuitant, if any, is living on that date; (3) the first
payment under the option to each payee will be at least $20; (4) the amount
applied to provide the option is at least $2000: and (5) you do not void the
choice by making a later choice before the annuity date.
WHEN NO OPTION CHOSEN.--If no choice of either a one-sum settlement or Option A,
C or D, which we describe below, takes effect on the annuity date, settlement
under Option B will become effective on the life of the Annuitant. or such other
mode of settlement as may be prescribed by law or regulation. If two annuitants
are named in the contract and both are living, settlement will be made on the
life of the First Annuitant, as named on page 3. But the conditions described in
the preceding paragraph will apply. And we have the right to require proof of
the date of birth of that annuitant before we make payment.
If settlement in accord with any of the options we offer does not take effect on
the annuity date, we will pay the cash value in one sum.
OPTIONS DESCRIBED.--Annuities of the following types may be chosen. The first
payment under these options is due on the annuity date. When we use the word
annuitant in the following paragraphs we mean the annuitant for whom the
annuity described was chosen and who is to receive settlement under that
annuity.
OPTION A (LIFE ANNUITY).--We will make monthly payments for as long as the
annuitant lives. They will end with the last one due before the annuitant's
death.
OPTION B (LIFE ANNUITY, WITH CERTAIN PERIOD).--We will make equal monthly
payments for as long as the annuitant lives, with payments certain for the
period chosen. Two choices are available, either ten years (10-Year Certain) or
until the sum of the payments equals the amount put under this option
(Instalment Refund). Unless otherwise stated, if the annuitant dies before the
last payment certain is payable, we will pay the residue in one sum to the
annuitant's estate. We will compute the residue as of the date the annuitant
died. But if the annuitant dies after the due date of the last payment certain,
no further payments will be due.
OPTION C (JOINT AND SURVIVOR LIFE ANNUITY).--We will make monthly payments for
as long as the annuitant or the contingent annuitant lives. Unless otherwise
stated, we will make them to the annuitant while he or she is living. After the
annuitant dies, we will make them to the contingent annuitant if he or she is
living. The payments will end with the last one due before the death of the
second to die of the annuitant and the contingent annuitant.
OPTION D (ANNUITY FOR SPECIFIED PERIOD).--We will make monthly payments for up
to 25 years. Unless otherwise stated, if the annuitant dies when one or more
payments remain unpaid in the period elected, we will pay the residue in one sum
to the annuitant's estate. We will compute the residue as of the date the
annuitant died.
RIGHT OF WITHDRAWAL.--Unless otherwise stated, when the option is chosen: under
Options B and D the residue may be withdrawn. Under Option B, withdrawal of the
residue will not affect any payments that may become due after the certain
period; the value of those payments cannot be withdrawn. Instead, the payments
will start again if they were based on the life of a person who lives past the
certain period.
(Continued on Next Page)
Page 11 (VA-85)
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<PAGE>
PAYOUT PROVISIONS FOR THE ANNUITANT (Continued)
RESIDUE DESCRIBED.--For Option B, residue means the then present value of any
unpaid payments certain. It does not include the value of any payments that may
become due after the certain period. For Option D, residue means the then
present value of any unpaid payments for the specified period of the annuity. We
will compute residue at an effective interest rate of 3 1/2% a year.
SURRENDER CHARGE.--If the annuity date is less than three years after the
Contract Date, or if the annuity option chosen is Option D, a surrender charge
may be deducted from the contract fund on the annuity date. The amount of the
charge will be the same as would have applied if the contract had been
surrendered for cash on the annuity date. If the annuity date is more than three
years after the Contract Date and the annuity option chosen is Option A, B or C,
the surrender factor will be .03 less than would have applied if the contract
had been surrendered for cash on that date. We discuss surrender charges further
on page 9.
DETERMINATION OF AMOUNT OF ANNUITY.--The contract fund on the annuity date will
be reduced by any surrender charge and any state and/or local premium taxes that
may apply. The balance will be used to determine the amount of each monthly
payment based on the option chosen and in accord with the annuity settlement
tables. (See page 14).
For Options B and D we will use the tables on page 14 to compute the amount of
the monthly payment. Payment rates for Option A and C will be provided on
request. Payments under Options A, B and C are based on the age and sex on the
due date of the first payment, of the person or persons on whose life the
settlement is based. For these three options we must have proof of the date of
birth of the person(s) on whose life the annuity is based.
If, on the due date of the first payment under any of these options, we have
declared a higher payment rate for that option, we will base the payments on
that higher rate.
SETTLEMENT PROVISIONS FOR BENEFICIARY OR CONTINGENT PAYEE
PAYEE DEFINED.--In these provisions and under the Automatic Mode of Settlement,
the word Payee means a beneficiary or a contingent payee who has a right to
receive a settlement under the contract.
CHOOSING AN OPTION.--While the Annuitant is living you may choose, or change the
choice of, an option for all or part of the proceeds which may arise from the
Annuitant's death before the annuity date. The requirements are the same as
those to designate or change a beneficiary. We describe them under Beneficiary.
A Payee may choose an option for all or part of any proceeds or residue which
becomes payable to him or her in one sum. We explain residue under Residue
Described.
In some cases, you or another Payee will need our consent to choose an option.
We describe these cases under Conditions.
OPTION 1 (INSTALMENTS FOR A SPECIFIED PERIOD).--This option is the same as
Option D in the Payout Provisions for the Annuitant on page 10, and the amount
of each payment will be based on the Option 1 Table on page 14.
OPTION 2 (LIFE INCOME WITH CERTAIN PERIOD).--This option is the same as Option B
in the Payout Provisions for the Annuitant on page 11. The amount of each
payment will be based on the Option 2 Table on page 14 and on the age and sex on
the due date of the first payment of the person on whose life the settlement is
based.
However, if a choice of Option 2 is made more than two years after the
Annuitant's death, we may use the Option 2 rates in individual annuity or life
insurance contracts we regularly issue, based on United States currency, on the
due date of the first payment. On request, we will quote the payment rates in
policies we then issue.
OPTION 3 (INTEREST PAYMENT).--We will hold an amount at interest. We will pay
interest at an effective rate of at least 3% a year ($30.00 annually, $14.89
semi-annually, $7.42 quarterly or $2.47 monthly per $1,000). We may pay more
interest.
OPTION 4 (INSTALMENTS OF A FIXED AMOUNT).--We will make equal annual,
semi-annual, quarterly or monthly payments if they total at least $90 a year for
each $1,000 put under this option. We will credit the unpaid balance with
interest at an effective rate of at least 3 1/2% a year. We may credit more
interest. If we do so, the balance will be larger. The final payment will be any
balance equal to or less than one payment.
FIRST PAYMENT DUE DATE.--Unless a different date is stated when the option is
chosen: (1) the first payment for Option 3 will be due at the end of the chosen
payment interval; and (2) the first payment for any of the other options will be
due on the date the option takes effect.
RESIDUE DESCRIBED.--For Options 1 and 2, residue on any date means the then
present value of any unpaid payments certain. We will compute it at an effective
interest rate of 3 1/2% a year. But we will use the rate we used to compute the
actual Option 2 payments if they were not based on the table in this contract.
For Option 2, residue does not include the value of any payments that may become
due after the certain period.
(Continued on Next Page)
Page 12 (VA--85)
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<PAGE>
SETTLEMENT PROVISIONS FOR BENEFICIARY OR CONTINGENT PAYEE (Continued)
For Options 3 and 4, residue on any date means any unpaid balance with interest
to that date.
WITHDRAWAL OF RESIDUE.--Unless otherwise stated when the option is chosen: (1)
under Options 1 and 2 the residue may be withdrawn; and (2) under Options 3 and
4 all, or any part not less than $100, of the residue may be withdrawn. If an
Option 3 residue is reduced to less than $1,000, we have the right to pay it in
one sum. Under Option 2, withdrawal of the residue will not affect any payments
that may become due after the certain period; the value of those payments cannot
be withdrawn. Instead, the payments will start again if they were based on the
life of a person who lives past the certain period.
DESIGNATING CONTINGENT PAYEE(S).--A Payee under an option has the right, unless
otherwise stated, to name or change a contingent payee to receive any residue at
that Payee's death. This may be done only if (1) the Payee has the full right to
withdraw the residue; or (2) the residue would otherwise have been payable to
that Payee's estate at death.
A Payee who has this right may choose, or change the choice of, an option for
all or part of the residue. In some cases, the Payee will need our consent to
choose or change an option. We describe these cases under Conditions.
Any request to exercise any of these rights must be in writing and in a form
which meets our needs. It will take effect only when we file it at our Service
Office. Then the interest of anyone who is being removed will end as of the date
of the request, even if the Payee who made the request is not living when we
file it.
CHANGING OPTIONS.--A Payee under Option 1, 3 or 4 may choose another option for
any sum which the Payee could withdraw on the date the chosen option is to
start. That date may be before the date the Payee makes the choice only if we
consent. In some cases, the Payee will need our consent to choose or change an
option. We describe these cases next.
CONDITIONS.--Our consent is needed for an option to be used for any person under
any of these conditions:
1. The person is not a natural person who will be paid in his or her own right.
2. The person will be paid as assignee.
3. The amount to be held for the person under Option 3 is less than $1,000. But
we will hold any amount for at least one year under the Automatic Mode of
Settlement.
4. Each payment to the person under the option would be less than $20.
5. The option is for residue or the then present value of unpaid payments
certain arising other than at (a) the Annuitant's death, or (b) the death of the
beneficiary who was entitled to be paid as of the date of the Annuitant's death.
DEATH OF PAYEE.--If a Payee under an option dies and if no other distribution is
shown, we will pay any residue under that option in one sum to the Payee's
estate.
AUTOMATIC MODE OF SETTLEMENT
APPLICABILITY.--These provisions apply to any proceeds payable at the last
surviving or sole annuitant's death before the annuity date and payable in one
sum to a Payee who is a beneficiary. They do not apply to any periodic payment.
INTEREST OR PROCEEDS.--We will hold the proceeds at interest under Option 3. The
Payee may withdraw the residue. We will pay it promptly on request. We will pay
interest annually unless we agree to pay it more often. We have the right to pay
the residue in one sum after one year if (1) the Payee is not a natural person
who will be paid in his or her own right; (2) the Payee will be paid as
assignee; or (3) the original amount we hold under Option 3 for the Payee is
less than $1,000.
SETTLEMENT AT PAYEE'S DEATH.--If the Payee dies and leaves an Option 3 residue,
we will honor any contingent payee provision then in effect. If there is none,
here is what we will do. We will look to the beneficiary designation of the
contract; we will see what other beneficiary(ies), if any, would have been
entitled to the portion of the proceeds which produced the Option 3 residue if
the Annuitant had not died until immediately after the Payee died. Then we will
pay the residue in one sum to such other beneficiary(ies), according to that
designation. But if, as stated in that designation, payment would be due the
estate of someone else, we will instead pay the estate of the Payee.
Example: Suppose the last surviving or sole annuitant dies before the annuity
date, and the class 1 beneficiary is Jane and the class 2 beneficiaries are Paul
and John. Jane was living when the annuitant died. Jane later died without
having chosen an option or naming someone other than Paul and John as a
contingent payee. If Paul and John are living at Jane's death we owe them the
residue. If only one of them is living then, and if the contract called for
payment to the survivor of them, we owe him the residue. If neither of them is
living then we owe Jane's estate.
SPENDTHRIFT AND CREDITOR.--A beneficiary or contingent payee may not, at or
after the Annuitant's death, assign, transfer or encumber any benefit payable.
To the extent allowed by law, the benefits will not be subject to the claims of
any creditor or any beneficiary or contingent payee.
Page 13 (VA--85)
II-31
<PAGE>
OPTION D AND
OPTION 1 TABLE
-----------------------------------
MINIMUM AMOUNT OF
MONTHLY PAYMENT FOR
EACH $1,000, THE FIRST
PAYABLE IMMEDIATELY
-----------------------------------
Number Monthly
of Years Payment
-----------------------------------
1 $84.65
2 43.05
3 29.19
4 22.27
5 18.12
6 15.35
7 13.38
8 11.90
9 10.75
10 9.83
11 9.09
12 8.46
13 7.94
14 7.49
15 7.10
16 6.76
17 6.47
18 6.20
19 5.97
20 5.75
21 5.56
22 5.39
23 5.24
24 5.09
25 4.96
-----------------------------------
Multiply the monthly amount by
2.989 for quarterly, 5.952 for
semi-annual or 11.804 for annual.
-----------------------------------
<TABLE>
OPTION B AND
OPTION 2 TABLE
- -----------------------------------------------------------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST
PAYABLE IMMEDIATELY
- -----------------------------------------------------------------------------------------------
<CAPTION>
KIND OF LIFE INCOME KIND OF LIFE INCOME
AGE ------------------------------ AGE ------------------------------
LAST 10-Year Instalment LAST 10-Year Instalment
BIRTHDAY Certain Refund BIRTHDAY Certain Refund
------------------------------ ------------------------------
Male Female Male Female Male Female Male Female
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $3.18 $3.11 $3.17 $3.10 45 $4.06 $3.82 $3.99 $3.78
and under 46 4.12 3.86 4.03 3.81
11 3.19 3.12 3.18 3.11 47 4.17 3.90 4.08 3.85
12 3.20 3.13 3.19 3.12 48 4.23 3.94 4.13 3.90
13 3.21 3.14 3.20 3.13 49 4.28 3.99 4.18 3.94
14 3.22 3.15 3.21 3.14
50 4.35 4.04 4.24 3.98
15 3.24 3.16 3.23 3.15 51 4.41 4.09 4.29 4.03
16 3.25 3.17 3.24 3.16 52 4.48 4.15 4.35 4.08
17 3.27 3.19 3.25 3.18 53 4.55 4.21 4.41 4.13
18 3.28 3.20 3.27 3.19 54 4.62 4.27 4.48 4.19
19 3.30 3.21 3.28 3.20
55 4.70 4.33 4.55 4.24
20 3.31 3.22 3.30 3.21 56 4.78 4.40 4.62 4.30
21 3.33 3.24 3.32 3.23 57 4.86 4.47 4.69 4.37
22 3.35 3.25 3.33 3.24 58 4.95 4.54 4.77 4.43
23 3.36 3.26 3.35 3.25 59 5.05 4.62 4.86 4.50
24 3.38 3.28 3.37 3.27
60 5.15 4.71 4.94 4.58
25 3.40 3.30 3.39 3.29 61 5.25 4.79 5.03 4.66
26 3.42 3.31 3.41 3.30 62 5.36 4.89 5.13 4.74
27 3.45 3.33 3.43 3.32 63 5.48 4.98 5.23 4.82
28 3.47 3.35 3.45 3.34 64 5.60 5.09 5.34 4.92
29 3.49 3.37 3.47 3.35
65 5.73 5.20 5.45 5.01
30 3.52 3.39 3.49 3.37 66 5.87 5.31 5.57 5.11
31 3.54 3.41 3.52 3.39 67 6.01 5.43 5.70 5.22
32 3.57 3.43 3.54 3.41 68 6.15 5.56 5.83 5.34
33 3.60 3.45 3.57 3.44 69 6.30 5.70 5.97 5.46
34 3.63 3.47 3.60 3.46
70 6.46 5.84 6.11 5.58
35 3.66 3.50 3.63 3.48 71 6.62 5.99 6.27 5.72
36 3.69 3.52 3.66 3.50 72 6.79 6.15 6.43 5.86
37 3.72 3.55 3.69 3.53 73 6.96 6.31 6.60 6.01
38 3.76 3.58 3.72 3.56 74 7.13 6.49 6.78 6.18
39 3.80 3.61 3.75 3.58
75 7.30 6.67 6.97 6.35
40 3.84 3.64 3.79 3.61 76 7.48 6.85 7.17 6.53
41 3.88 3.67 3.92 3.64 77 7.66 7.04 7.38 6.72
42 3.92 3.70 3.86 3.67 78 7.83 7.24 7.60 6.93
43 3.97 3.74 3.90 3.71 79 8.00 7.44 7.83 7.15
44 4.01 3.78 3.94 3.74
80 8.17 7.64 8.07 7.38
and over
- ----------------------------------------------------------------------------------------------
</TABLE>
For descriptions of these options, see pages 11 and 12.
Page 14 (VA--85)
II-32
<PAGE>
ENDORSEMENTS
(Only we can endorse this contract.)
BASIS OF COMPUTATION
MINIMUM LEGAL VALUES.--The cash values and annuity benefit values in this
contract are at least as large as those set by law where it is delivered. Where
required, we have given the insurance regulator a detailed statement of how we
compute values and benefits.
- -----------
PLIY 65--85
- -----------
Pruco Life Insurance Company of New Jersey,
By /s/ SPECIMEN
-------------------------
Secretary
Page 15 (VA--85)-N
II-33
<PAGE>
GUIDE TO CONTENTS
Page
Contract Data ........................................... 3
Contract Summary ........................................ 5
Purchase Payment ........................................ 5
General Provisions ...................................... 6
Definitions; The Contract; Contract Modifications;
Non-Participating; Service Office; Annual Report;
Change of Annuity Date; Removal of an Annuitant;
Ownership and Control; Currency; Misstatement of
Age or Sex; Incontestability; Proof of Survival
or Death; Assignment
Beneficiary ............................................. 3 & 7
Separate Account ........................................ 8
The Account; Subaccounts; Transfers
Among Subaccounts and the Fixed Account;
The Fund; Account Investments: Change in
Investment Policy; Change of Fund
Fixed Account ........................................... 8
The Fixed Account
Contract Fund and Contract Value Options ................ 9
Contract Fund; Invested Premium Amount; Investment
Amount; Cash Value; Surrender Charge; Annual
Administration Charge; Conditions for Withdrawal or
Surrender; Guaranteed Interest; Excess Interest
Table of Surrender Factors .............................. 10
Death Of An Annuitant ................................... 10
Payout Provisions For The Annuitant ..................... 11
Choosing an Option; Conditions; When No
Option Chosen; Options Described; Option A
(Life Annuity); Option B (Life Annuity,
with Certain Period); Option C (Joint
and Survivor Life Annuity); Option D
(Annuity for Specified Period); Right of
Withdrawal; Residue Described; Surrender
Charge; Determination of Amount of Annuity
Settlement Provisions for Beneficiary or Contingent
Payee ................................................... 12
Payee Defined; Choosing an Option;
Option 1 (Instalments for a Specified
Period); Option 2 (Life Income with
Certain Period); Option 3 (Interest
Payment); Option 4 (Instalments of a
Fixed Amount); First Payment Due Date;
Residue Described; Withdrawal of Residue;
Designating Contingent Payee(s); Changing
Options; Conditions; Death of Payee
Automatic Mode of Settlement ............................ 13
Applicability; Interest on Proceeds;
Settlement at Payee's Death;
Spendthrift and Creditor
Income Tables ........................................... 14
Basis of Computation .................................... 15
Minimum Legal Values
Page 16 (VA--85)
II-34
<PAGE>
ENDORSEMENTS
(Only we can endorse this contract.)
Page 17 (VA--85)-N
II-35
<PAGE>
Page 18
VARIABLE RETIREMENT ANNUITY CONTRACT. ONE PURCHASE PAYMENT. MONTHLY ANNUITY
PAYMENTS STARTING ON ANNUITY DATE. PAYMENT AS STATED UPON DEATH BEFORE ANNUITY
DATE. CASH VALUES REFLECT INVESTMENT RESULTS. NON-PARTICIPATING.
(VA--85)-N
II-36
EXHIBIT (4D)
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Newark, New Jersey
A Stock Company Subsidiary of The Prudential Insurance Company of America
INSURED CONTRACT NUMBER
CONTRACT DATE
FACE AMOUNT
AGENCY
We will pay the beneficiary the proceeds of this contract promptly if we receive
due proof that the Insured died. We make this promise subject to all the
provisions of the contract.
The cash value may increase or decrease daily depending on the payment of
premiums, the investment experience of the separate account and the level of
mortality charges made. There is no guaranteed minimum.
The Death Benefit will be the insurance amount which is the greater of (1) the
face amount we show above, and (2) the contract fund times the attained age
factor that applies.
Please read this contract with care. A guide to its contents is on the last page
before the back cover. A summary is on page 5. If there is ever a question about
it, or if there is a claim, just see a Company representative or get in touch
with one of our offices.
RIGHT TO CANCEL CONTRACT.--You may return this contract to us within (1) 10 days
after you get it, or (2) 45 days after Part 1 of the application was signed, or
(3) 10 days after we mail or deliver the Notice of Withdrawal Right, whichever
is latest. All you have to do is take the contract or mail it to one of our
offices or to the representative who sold it to you. It will be canceled from
the start and we will promptly give you the value of your Contract Fund on the
date you return the contract to us. We will also give back any charges we made
in accord with this contract
Signed for Pruco Life Insurance Company of New Jersey,
a New Jersey Corporation.
/s/ [SPECIMEN] /s/ [SPECIMEN]
Secretary President
VARIABLE LIFE INSURANCE POLICY WITH PREMIUM FLEXIBILITY. INITIAL PREMIUM, WITH
ADDITIONAL PREMIUMS PAYABLE DURING INSURED'S LIFETIME AS STATED IN THE CONTRACT.
BENEFITS REFLECT PREMIUM PAYMENTS, INVESTMENT RESULTS AND MORTALITY CHARGES.
INSURANCE PAYABLE ONLY UPON DEATH. NON-PARTICIPATING.
VFL--85-N
II-37
<PAGE>
Page 2 (VFL--85)
II-38
<PAGE>
CONTRACT DATA
INSURED'S SEX AND ISSUE AGE M-35
RATING CLASS STANDARD
INSURED JOHN DOE XX XXX XXX CONTRACT NUMBER
JULY 1, 1985 CONTRACT DATE
FACE AMOUNT $100,000--
AGENCY R-NK 1
BENEFICIARY CLASS 1 MARY DOE, WIFE
CLASS 2 ROBERT DOE, SON
SCHEDULE OF PREMIUMS
INITIAL PREMIUM IS $XX,XXX.XX
*****END OF SCHEDULE*****
INTEREST RATES
FOR THE PORTION OF THE CONTRACT FUND IN THE FIXED ACCOUNT: SEE GUARANTEED
INTEREST AND EXCESS INTEREST ON PAGES 10 AND 11.
FOR THE PORTION OF THE CONTRACT FUND EQUAL TO ANY CONTRACT LOAN: SEE INTEREST
CREDIT ON PAGE 10.
CONTRACT DATA CONTINUED ON NEXT PAGE
PAGE 3 (85)
II-39
<PAGE>
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
LIST OF SUBACCOUNTS AND PORTFOLIOS
EACH SUBACCOUNT OF THE PRUCO LIFE SINGLE PREMIUM VARIABLE ANNUITY ACCOUNT
INVESTS IN A SPECIFIC PORTFOLIO OF THE PRUCO LIFE SERIES FUND. WE SHOW BELOW THE
SUBACCOUNTS AND THE FUND PORTFOLIOS THEY INVEST IN.
FUND
SUBACCOUNT PORTFOLIO
- ---------- ---------
MONEY MARKET MONEY MARKET
BOND BOND
COMMON STOCK COMMON STOCK
AGGRESSIVELY MANAGED FLEXIBLE AGGRESSIVELY MANAGED FLEXIBLE
CONSERVATIVELY MANAGED FLEXIBLE CONSERVATIVELY MANAGED FLEXIBLE
*****END OF LIST*****
PRUCO LIFE WILL MAIL TO THE CONTRACT OWNER A CONFIRMATION OF THE INITIAL PREMIUM
PAYMENT. THIS CONFIRMATION WILL SHOW THE INITIAL ALLOCATION OF THE INVESTED
PREMIUM AMOUNT (SEE PAGE 9) TO THE SUBACCOUNTS AND/OR THE FIXED ACCOUNT (SEE
PAGE 8).
SERVICE OFFICE--PLEASE DIRECT ANY COMMUNICATIONS ABOUT THIS CONTRACT TO: PRUCO
LIFE INSURANCE COMPANY OF NEW JERSEY, P.O. BOX 2925, PHOENIX, ARIZONA 85062.
Page 3A(85)
II-40
<PAGE>
POLICY NO. XXX XXX XXX
ENDORSEMENTS
(ONLY WE CAN ENDORSE THIS POLICY.)
PAGE 4 (85)
II-41
<PAGE>
CONTRACT SUMMARY
We offer this summary to help you understand this contract. We do not intend
that it change any of the provisions of the contract.
This is a contract of life insurance. It calls for the payment of an initial
premium. Additional premiums may be payable as described on page 8. The initial
premium minus any applicable deductions for state and/or local premium taxes is
the contract fund at the start. The value of the contract fund will vary with
the payment of premiums, the investment performance of those subaccounts of the
Pruco Life Single Premium variable Life Account that you select, the extent to
which interest is credited to any portion allocated to the fixed account, and
the extent to which the monthly mortality charges are less than the guaranteed
maximums.
We describe on page 8 the way in which the contract may go into default. If the
contract remains in default at the end of its days of grace, the contract will
end and have no value.
Proceeds is a word we use to mean the amount we would pay if we were to settle
the contract in one sum. To compute the proceeds that may arise from the
Insured's death, we start with a basic amount. We may adjust that amount if
there is a loan. The table below tells what the basic amount is. The table will
refer you to the parts of the contract that tell you how we may adjust the basic
amount. If you surrender the contract, the proceeds will be the net cash value.
We describe it under Cash value Option on page 11.
Proceeds often are not taken in one sum. For instance, on surrender, you may be
able to put proceeds under a settlement option to provide retirement income or
for some other purpose. Also, for all or part of the proceeds that arise from
the Insured's death, you may be able to choose a manner of payment for the
beneficiary. If the Insured dies and an option has not been chosen, the
beneficiary may be able to choose one. We will pay interest under Option 3 from
the date of death on any proceeds to which no other manner of payment applies.
This will be automatic as we state on page 17. There is no need to ask for it.
You and we may agree on a change in the ownership of this contract. Also, unless
we endorse it to say otherwise, the contract gives you these rights, among
others:
o You may change the beneficiary under it.
o You may borrow on it up to its loan value.
o You may surrender it for its net cash value.
o You may change the allocation of additional premiums, minus any deductions
for state and/or local premium taxes, among the subaccounts and the fixed
account.
o You may transfer amounts among subaccounts and the fixed account.
- --------------------------------------------------------------------------------
TABLE OF BASIC AMOUNTS
- --------------------------------------------------------------------------------
When the proceeds arise from the Insured's death:
- --------------------------------------------------------------------------------
And the Contract Is Then The Basic And We Adjust The Basic
In Force: Amount Is: Amount For:
- --------------------------------------------------------------------------------
other than during the the insurance amount contract debt
days of grace (see page 8) (see page 10) (see page 12)
- --------------------------------------------------------------------------------
during the days the insurance amount contract debt and any
of grace additional premium due
in the days of grace
(see pages 12 and 8)
- --------------------------------------------------------------------------------
This table is part of the Contract Summary and of the Contract.
Page 5 (VFL--85)-N
II-42
<PAGE>
GENERAL PROVISIONS
DEFINITIONS.--We define here some of the words and phrases used all through this
contract. We explain others, not defined here, in other parts of the text.
WE, OUR, US, AND COMPANY.--Pruco Life Insurance Company of New Jersey, a New
Jersey Corporation.
YOU AND YOUR.--The owner of the contract.
INSURED.--The person named as the Insured on the first page. He or she need not
be the owner.
Example: Suppose we issue a contract on the life of your spouse. You applied for
it and named no one else as owner. Your spouse is the Insured and you are the
owner.
SEC.--The Securities and Exchange Commission.
ISSUE DATE.--The contract date.
MONTHLY DATE.--The contract date and the same day as the contract date in each
later month. But if the contract date is the 29th, 30th or 31st day of the month
and the later month has fewer days, then the monthly date will be the first day
of the next month.
Example: If the contract date is March 9, 1986, the Monthly Dates are each March
9, April 9, May 9 and so on.
ANNIVERSARY OR CONTRACT ANNIVERSARY.--The same day and month as the contract
date in each later year.
Example: If the contract date is March 9, 1986, the first anniversary is March
9.1987. The second is March 9, 1988, and so on.
CONTRACT YEAR.--A year that starts on the contract date or on an anniversary.
Example: If the contract date is March 9, 1986, the first contract year starts
then and ends on March 8, 1987. The second starts on March 9, 1987 and ends on
March 8, 1988, and so on.
CONTRACT MONTH.--A month that starts on a Monthly Date.
Example: If March 9, 1986 is a Monthly Date, a contract month starts then and
ends on April 8, 1986. The next contract month starts an April 9, 1986 and ends
on May 8, 1986, and so on.
ATTAINED AGE.--The Insured's attained age at any time is the issue age plus the
length of time since the contract date. You will find the issue age near the top
of page 3.
THE CONTRACT.--This policy and the application, a copy of which is attached,
form the whole contract. We assume that all statements in the application were
made to the best of the knowledge and belief of the person(s) who made them; in
the absence of fraud they are deemed to be representations and not warranties.
We relied on those statements when we issued the contract. We will not use any
statement, unless made in the application, to try to void the contract or to
deny a claim.
CONTRACT MODIFICATIONS.--Only a Company officer may agree to modify this
contract, and then only in writing.
NON-PARTICIPATING.--This contract will not share in our profits or surplus
earnings. We will pay no dividends on it.
SERVICE OFFICE.--This is the office that will service this contract. Its mailing
address is the one we show in the Contract Data pages, unless we notify you of
another one.
OWNERSHIP AND CONTROL.--Unless we endorse this contract to say otherwise: (1)
the owner of the contract is the Insured: and (2) while the Insured is living
the owner alone is entitled to (a) any contract benefit and value, and (b) the
exercise of any right and privilege granted by the contract or by us.
SUICIDE EXCLUSION.--If the Insured, whether sane or insane, dies by suicide
within two years from the issue date, we will pay no more under this contract
than the sum of the premiums paid.
CURRENCY.--Any money we pay, or that is paid to us, must be in United States
currency. Any amount we owe will be payable at our Service Office.
(Continued on Next Page)
Page 6 (VFL--85)-N
II-43
<PAGE>
GENERAL PROVISIONS (Continued)
MISSTATEMENT OF AGE OR SEX.--If the Insured's stated age or sex or both are not
correct, we will adjust each benefit and any amount to be paid to reflect the
correct age and sex. Where required, we have given the insurance regulator a
detailed statement of how we will make these adjustments.
INCONTESTABILITY.--Except for default, we will not contest this contract after
it has been in force during the Insured's lifetime for two years from the issue
date.
ASSIGNMENT.--We will not be deemed to know of an assignment unless we receive
it, or a copy of it, at our Service Office. We are not obliged to see that an
assignment is valid or sufficient. This contract may not be assigned to another
insurance company without our consent.
ANNUAL REPORT.--Once each contract year after the first we will send you a
report. It will show: (l) the insurance amount; (2) the amount of the contract
fund; (3) the investment amount in each subaccount; (4) the amount in the fixed
account; (5) the net cash value; (6) the premiums paid, interest credited and
monthly charges made during the year; (7) the interest rate that will be
credited until further notice to the amount in the Fixed Account; (8) any
additional premium which you have the right to pay; and (9) any outstanding
contract debt. The report will include any other data that may be currently
required where this contract is delivered. You may ask for a report like this at
any time. But, except for the report we send you once a year, we have the right
to charge a fee for each report.
PAYMENT OF DEATH CLAIM.--If we settle this contract in one sum as a death claim,
we will usually pay the proceeds within 7 days after we receive at our Service
Office proof of death and any other information we need to pay the claim. But we
have the right to defer paying any portion of the proceeds greater than the face
amount shown on page 3 if (1) the New York Stock Exchange is closed; or (2) the
SEC requires that trading be restricted or declares an emergency; or (3) the SEC
lets us defer payment to protect our contract owners.
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing and
in a form which meets our needs. It will take effect only when we file it at our
Service Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if the Insured is not living when
we file the request. Any beneficiary's interest is subject to the rights of any
assignee of whom we know.
When a beneficiary is designated, any relationship shown is to the Insured,
unless otherwise stated. To show priority, we may use numbered classes, so that
the class with first priority is called class 1, the class with next priority is
called class 2, and so on. When we use numbered classes, these statements apply
to beneficiaries unless the form states otherwise:
1. One who survives the Insured will have the right to be paid only if no one in
a prior class survives the Insured.
2. One who has the right to be paid will be the only one paid if no one else in
the same class survives the Insured.
3. Two or more in the same class who have the right to be paid will be paid in
equal shares.
4. If none survives the Insured, we will pay in one sum to the Insured's estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. We owe Jane the proceeds if she is living at the Insured's
death. We owe Paul and John the proceeds if they are livinq, then but Jane is
not. But if only one of them is livinq, we owe him the proceeds. If none of them
is living we owe the Insured's estate.
Beneficiaries who do not have a right to be paid under these terms may still
have a right to be paid under the Automatic Mode of Settlement.
Before we make a payment, we have the right to decide what proof we need of the
identity, age or any other facts about any persons designated as beneficiaries.
If beneficiaries are not designated by name and we make payment(s) based on that
proof, we will not have to make the payment(s) again.
Page 7 (VFL--85)
II-44
<PAGE>
PREMIUMS
INITIAL PREMIUM.--The initial premium, which we show on page 3, is due on the
contract date. It may be paid at our Service Office or to one of our
representatives. It we are asked to do so, we will give a signed receipt. The
initial premium minus any applicable deductions for state and/or local premium
taxes, becomes the contract fund. (See page 10.)
ADDITIONAL PREMIUMS.--Additional premiums may be paid as we describe below:
1. An additional premium may be paid if (1) (it is permitted according to the
definition of life insurance contained in the applicable federal tax law, and
(2) it does not result in an increase in the insurance amount. If you ask us to
do so, we will let you know the amount of any additional premium allowed and
when it can be paid. We will also include that information as part of the annual
report. (See page 7.)
2. If the contract goes into default, an additional premium sufficient to bring
the contract out of default may be paid during the grace period.
Additional premiums paid in accord with 1 or 2 above minus any applicable
deductions for state and/or local premium taxes, will be added to the contract
fund but will not increase the insurance amount.
PREMIUM TAXES.--State and local taxes on premiums paid vary according to
jurisdiction. We will deduct from each premium paid the appropriate amount
applicable for these taxes.
DEFAULT.--If on any monthly date the net cash value equals zero, this contract
is in default. In this case we will tell you what premium payment is needed to
bring the contract out of default.
GRACE PERIOD.--We grant 61 days of grace from any Monthly Date on which the
contract goes into default. We will send you a notice of default and state the
amount to pay that will bring the contract out of default. This amount is the
amount that, after deduction of any state and/or local premium taxes, is
sufficient to pay the mortality charges (See page 11.) for the Monthly Date on
which the contract goes into default and the next Monthly Date. If that amount
has not been paid by the end of the grace period the contract will end and have
no value.
The Insured might die while the contract is in default during its days of grace.
If so, the proceeds will be reduced by the amount that, after deduction of any
state and/or local premium taxes, is sufficient to pay the mortality charges
which have not yet been deducted for Monthly Dates prior to the date on which
death occurred.
REINSTATEMENT.--If this contract ends as we describe under Grace Period, you may
reinstate it, if all these conditions are met:
1. No more than three years must have elapsed since the date of default.
2. You must give us any facts we need to satisfy us that the Insured is
insurable for the contract.
3. We must be paid an amount that, after deduction of any state and/or local
premium taxes, leaves the balance equal to the sum of:
(a) the mortality charges not previously made for the grace period; and
(b) the mortality charges for the first two monthly dates on or after the date
of reinstatement.
If we approve the reinstatement, these statements apply. The date of
reinstatement will be the date of your request or the date the required premium
is paid, if later. The face amount will be the same as it was at the end of the
grace period. The contract debt will be equal to the contract debt at the end of
the grace period. The contract fund as of the date of reinstatement will be
equal to the amount paid to reinstate the contract, minus any applicable
deductions for state and/or local premium taxes, minus the charges in (a) above,
and plus the contract debt. And we will start to make monthly charges and
credits again as of the first Monthly Date on or after the date of
reinstatement.
Page 8 (VFL--85)
II-45
<PAGE>
SEPARATE ACCOUNT
THE ACCOUNT.--The word account, where we use it in this contract without
qualification, means the Pruco Life Single Premium Variable Life Account. This
is a unit investment true registered with the SEC under the Investment Company
Act of 1940. It is also subject to the laws of New Jersey. We own the assets of
the account; we keep them separate from the assets of our general investment
account. We established the account to support variable life insurance
contracts.
SUBACCOUNTS.--The account has several subaccounts. we liSt them on the Contract
Data page(s). You determine, using percentages how invested premium amounts will
be allocated among the subaccounts. You may choose to allocate nothing to a
particular subaccount. But any allocation you make must be at least 10%; you may
not choose a fractional percent.
EXAMPLE: You may choose a percentage of 0, or 100, or 10, 11, 12. and so on, up
to 90. But you may not choose a percentage of 1 through 9, or 91 through 99, or
any percent that is not a whole number.
You may change the allocation for additional invested premium amounts at any
time if the contract is not in default. To do so, you must notify us in writing
in a form that meets our needs. The change will take effect on the date we
receive your notice at our Service Office.
TRANSFERS AMONG SUBACCOUNTS AND THE FIXED ACCOUNT.--You may transfer amounts
among subaccounts and to the fixed account as often as four times in a contract
year, if the contract is not in default. In addition, at any time in the first
two contract years, the entire amount in the subaccounts may be transferred to
the Fixed Account. Transfers out of the fixed account to the subaccounts will be
allowed only with the Company's consent. To do so, you must notify us in writing
in a form that meets our needs. The transfer will take effect on the date we
receive your notice at our Service Office.
THE FUND.--The word fund, where we use it in this contract without
qualification, means the fund we identify in the Contract Data pages. The fund
is registered with the SEC under the Investment Company Act of 1940 as an
open-end diversified management investment company. The fund has several
portfolios; there is a portfolio that corresponds to each of the subaccounts of
the account. We list these portfolios in the Contract Data pages.
ACCOUNT INVESTMENTS.--We use the assets of the account to buy shares in the
fund. Each subaccount is invested in a corresponding specific portfolio. Income
and realized and unrealized gains and losses from assets in each subaccount are
credited to, or charged against, the subaccount. This is without regard to
income, gains, or losses in our other investment accounts.
We will determine the value of the assets in the account at the end of each
business day. When we use the term business day, we mean a day when the New York
Stock Exchange is open for trading. We might need to know the value of an asset
on a day that is not a business day or on which trading in that asset does not
take place. In this case, we will use the value of that asset as of the end of
the last prior business day on which trading took place.
Example: If we need to know the value of an asset on a Sunday, we will normally
use the value of the asset as of the end of business on Friday.
We will always keep assets in the account with a total value at least equal to
the amount of the investment amounts under contracts like this one. (See page
10.) To the extent those assets do not exceed this amount. we use them only to
support those contracts: we do not use those assets to support any other
business we conduct. We may use any excess over this amount in any way we
choose.
CHANGE IN INVESTMENT POLICY.--A portfolio of the fund might make a material
change in its investment policy. In that case, we will send you a notice of the
change.
CHANGE OF FUND.--A portfolio might, in our judgment, become unsuitable for
investment by a subaccount. This might happen because of a change in investment
policy, or a change in the laws or regulations, or because the shares are no
longer available for investment, or for some other reason. If that occurs, we
have the right to substitute another portfolio of the fund, or to invest in a
fund other than the one we show on the Contract Data page(s). But we would first
seek approval from the SEC and, where required, the insurance regulator where
this contract is delivered.
FIXED ACCOUNT
THE FIXED ACCOUNT--In addition to allocating your invested premium amount to one
or more of the subaccounts described above, you may direct all or part of your
invested premium amount into the fixed account. The fixed account is funded by
the general account of Pruco Life. The fixed account is credited with interest
as described under Guaranteed Interest and Excess Interest on pages 10 and 11.
As described above, you may also transfer amounts from the subaccounts to the
fixed account. Transfers from the fixed account to the subaccounts may be made
only with the consent of and to the extent allowed by the Company.
RIGHT TO TRANSFER.--You may at any time transfer that portion of your contract
fund allocated to one or more of the subaccounts into the fixed account. The
fixed account earns a fixed rate of interest as described on page 10.
Page 9 (VFL--85)-N
II-46
<PAGE>
INSURANCE AMOUNT AND CONTRACT FUND
INSURANCE AMOUNT.--The insurance amount at any time is the greater of (1) the
face amount which we show on page 3, and (2) the contract fund times the
attained age factor that applies. We show the attained age factors on page 18.
CONTRACT FUND.--On the contract date the contract fund is equal to the invested
premium amounts received, (see below), minus any of the charges described in
items (f) through (i) below which may have been due on that date. On any day
after that the contract fund is equal to what it was on the previous day, plus
any invested premium amounts received, plus these items:
(a) any increase due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated; (we explain investment amount below); and
(b) interest at the rates shown below on that portion of the contract fund
that is equal to any contract loan; and
(c) guaranteed interest at 3% on that portion of the contract fund that is
in the fixed account; and
(d) any excess interest on that portion of the contract fund that is in the
fixed account. (See page 11.)
Minus these items:
(e) any decrease due to investment results in the value of the subaccounts
to which that portion of the contract fund that is in the investment
amount is allocated;
(f) a charge against the investment amount at a rate of .00245475% a day
(.90% a year) for mortality and expense risks that we assume;
(g) a charge against the investment amount at a rate of .00095723% a day
(.35% a year) for the cost of administering the contract;
(h) any amount charged against the Contract Fund for Federal or State
income taxes;
(i) a charge for the cost of expected mortality;
We describe under Reinstatement on page 8 what the contract fund will be equal
to on any reinstatement date.
INVESTED PREMIUM AMOUNT.--This is the portion of each premium paid that we add
to the contract fund. It is equal to the premium paid, minus any applicable
deduction for state and/or local premium taxes.
INVESTMENT AMOUNT.--The investment amount for this contract is the amount we use
to compute the investment return. The investment amount is allocated among the
subaccounts. The amount of the investment amount and its allocation to
subaccounts depend on (1) how you choose to allocate invested premium amounts;
(2) whether or not you transfer amounts among subaccounts; (3) the investment
performance of the subaccounts to which amounts are allocated or transferred;
(4) the amount and timing of any additional premium payments you make; and (5)
whether or not you take any loan. The account, subaccounts, and account
investments are described on page 9.
The investment amount at any time is equal to the contract fund, minus the
portion of the contract fund equal to any contract loan, minus the portion of
the contract fund that is in the fixed account.
INTEREST CREDIT.--On the portion of the contract fund equal to any contract
loan: During each contract year we will use a monthly rate that is equivalent to
an effective annual rate of 5 1/2% on the part of the contract fund equal to the
first amount you borrow in each contract year up to the excess of the target
loan amount over any existing loan. Interest due but not paid on any loan amount
eligible for the 5 1/2% crediting rate will become part of the loan and will
also be credited with interest at 5 1/2%.
For any part of the contract fund equal to the loan amount not eligible for the
5 1/2% crediting rate as described above, we will use a monthly rate that is
equivalent to an effective annual rate of not less than 4%.
On each contract anniversary, we will transfer the part of the contract fund
equal to any contract loan (up to the target loan amount) not eligible for the
5 1/2% crediting rate to the portion of the contract fund eligible for the
5 1/2% crediting rate.
Target loan amount means an amount equal to 10% of the initial premium for each
completed contract year since the contract date.
Example: Suppose the initial premium is $20,000 and the loan value is enough to
provide the amounts stated here. The target loan amount in the second contract
year is $2,000 (10% of $20,000). In that year you borrow $1,000. Since it is the
first amount you have borrowed. we will credit interest on that part of the
contract fund equal to $1,000 at a monthly rate equivalent to an effective
annual rate of 5 1/2%. If you borrow an additional amount in that contract year,
we will credit interest on that part of the contract fund equal to the
additional loan at a monthly rate equivalent to an effective annual rate of not
less than 4%. In the next contract year your target loan amount would be $4,000
($2,000 for each of the two completed contract years since the Contract Date).
GUARANTEED INTEREST.--The guaranteed interest rate credited on that portion of
the contract fund in the fixed account is an effective rate of 3% a year.
Page 10 (VFL--85)
II-47
<PAGE>
INSURANCE AMOUNT AND CONTRACT FUND (Continued)
EXCESS INTEREST.--Excess interest on that portion of the contract fund in the
fixed account may be credited in addition to the 3% guaranteed interest rate.
The rate of any excess interest is not guaranteed. It will be determined from
time to time and will continue thereafter until a new rate is determined. We may
use different rates of excess interest for different portions of the contract
fund that are in the fixed account.
MORTALITY CHARGE.--At the beginning of each contract month we will deduct a
mortality charge from the contract fund. The maximum charge we can deduct is
determined by applying to the coverage amount a monthly rate determined as
indicated in the Basis of Computation. The coverage amount is the difference
between the insurance amount and the contract fund.
We may deduct a lower monthly charge than we describe above. The actual monthly
mortality charges we deduct are based on our expectations as to future mortality
experience. At least once every five years, but not more often than once a year,
we will consider the need to change the basis for the charges. We will make such
a change only if we do so for all contracts like this one dated in the same year
as this one.
Where required, we have given the insurance regulator where this contract is
delivered, a detailed description of our method for determining mortality
charges.
CASH VALUE OPTION
CASH VALUE OPTION.--You may surrender this contract for its net cash value. To
do so, you must ask us in writing and in a form that meets our needs. You must
also send the contract to us.
As of any date the net cash value is the cash value minus any contract debt.
(See page 12.) The cash value is equal to the contract fund minus any surrender
charge that applies.
We will usually pay any net cash value within 7 days after we receive your
request and the contract at our Service Office.
But we have the right to defer payment if (1) the New York Stock Exchange is
closed; or (2) the SEC requires that trading be restricted or declares an
emergency; or (3) the SEC lets us defer payments to protect our contract owners.
SURRENDER CHARGE.--For each of the first six contract years the surrender
charge is the contract fund times the surrender factor that applies. We show the
surrender factors below. But the surrender charge will not exceed 9% of the
initial premium. For the seventh and later contract years there is no surrender
charge.
- --------------------------------------------------------------------------------
TABLE OF SURRENDER FACTORS
- --------------------------------------------------------------------------------
Contract Surrender Contract Surrender
Year Factor Year Factor
- --------------------------------------------------------------------------------
1 .09 5 .05
2 .08 6 .04
3 .07 7 and later .00
4 .06
- --------------------------------------------------------------------------------
Page 11 (VFL--85)
II-48
<PAGE>
LOANS
LOAN REQUIREMENTS.--On or after the first contract anniversary, you may borrow
from us on the contract. All these conditions must be met:
1. The Insured is living.
2. The contract is in force.
3. The contract debt will not be more than the loan value. (We explain these
terms below.)
4. As sole security for the loan, you assign the contract to us in a form that
meets our needs.
If there is already contract debt when you borrow from us, we will add the new
amount you borrow to that debt.
CONTRACT DEBT.--Contract debt at any time means the loan on the contract, plus
the interest we have charged that is not yet due and that we have not yet added
to the loan.
Example 1: Suppose the contract date is in 1987 and the initial premium was
$10,000. Three months before the anniversary in 1992 the contract has a contract
fund of $15,000. Six months ago you borrowed $1,500. By now there is interest of
$45 charged but not yet due. The contract debt is now $1,545, which is made up
of the $1,500 loan and the $45 interest.
LOAN VALUE.--You may borrow any amount up to the difference between the loan
value and any existing contract debt. On any day, the loan value is 90% of the
contract fund minus any surrender charge that may apply.
Example 2: Suppose, in example 1, you want to borrow all that you can. We will
lend you $11,280, which is the difference between the $12,825 loan value and
the $1,545 contract debt. This will increase the contract debt to $12,825. We
will add the new amount borrowed to the existing loan and will charge interest
on it, too.
INTEREST CHARGE.--We will charge interest daily on any loan at an effective rate
of 6% a year.
Interest is due on each contract anniversary, or when the loan is paid back if
that comes first. If interest is not paid when due, it will become part of the
loan. Then we will start to charge interest on it, too.
Example 3: Suppose the contract date is in 1987. Six months before the
anniversary in 1996 you borrow $1,000 out of a $15,000 loan value. We charge 6%
a year.
Four months later, but still two months before the anniversary, we will have
charged about $20 interest. This amount will be a few cents more or less than
$20 since some months have more days than others. The interest will not be due
until the anniversary unless the loan is paid back sooner. The loan will still
be $1,000. The contract debt will be $1,020, since contract debt includes
interest charged but not yet due.
On the anniversary in 1996 we will have charged about $30 interest. The interest
will then be due.
Example 4: Suppose the $30 interest in example 3 was paid on the anniversary.
The loan and contract debt each became $1,000 right after the payment.
Example 5: Suppose the $30 interest in example 3 was not paid on the
anniversary. The interest became part of the loan, and we began to charge
interest on it, too. The loan and contract debt each became $1,030.
REPAYMENT.--All or part of any contract debt may be paid back at any time while
the Insured is living and the contract is not in default. A repayment will first
be applied to reduce the part of the loan, if any, that is subject to the lowest
interest crediting rate. When we settle the contract, any contract debt is due
us. We will make an adjustment so that the proceeds will not include the amount
of that debt.
EFFECT OF A LOAN.--When you take a loan, the amount of any loan continues to be
a part of the contract fund. However, the amount equal to the amount of the loan
is credited with interest only at the rates we state on page 10.
We will reduce the contract fund by this amount, and by loan interest that
becomes part of the loan because it is not paid when due. When you repay part or
all of a loan we will increase the contract fund by the amount of loan you
repay, plus, if you repay all the loan, interest credits accrued on the loan (at
the rates we state on page 10) since the last Monthly Date. We will not increase
the contract fund by loan interest that is paid before we make it part of the
loan.
(Continued on Next Page)
Page 12 (VFL--85)
II-49
<PAGE>
LOANS (Continued)
We will allocate loans and repayments among the subaccounts and the fixed
account in proportion to the amount in each as of the date of loan or repayment.
Only the investment amount will reflect the investment results of the
subaccounts. Since the amount you borrow is removed from the investment amount
and/or the fixed account, a loan may have a permanent effect on the net cash
value of this contract. The longer the loan is outstanding, the greater this
effect is likely to be.
EXCESS CONTRACT DEBT.--If, on a monthly date, contract debt is ever equal to or
more than the cash value, all the contract's benefits will end 61 days after
that monthly date. We will mail a notice to you and any assignee of whom we
know. Also, we may send a notice to the Insured's last known address. In the
notice we will state the amount that, if paid to us, will reduce the contract
debt enough to keep the contract's benefits from ending for a limited time.
POSTPONEMENT OF LOAN.--We will usually make a loan within 7 days after we
receive your request at our Service Office. But we have the right to defer
making the loan if (1) the New York Stock Exchange is closed; or (2) the SEC
requires that trading be restricted or declares an emergency; or (3) the SEC
lets us defer payments to protect our contract owners.
Page 13 (VFL--85)
II-50
<PAGE>
SETTLEMENT OPTIONS
PAYEE DEFINED.--In these provisions and under the Automatic Mode of Settlement,
the word Payee means a person who has a right to receive a settlement under the
contract. Such a person may be the Insured, the owner, a beneficiary, or a
contingent payee.
CHOOSING AN OPTION.--While the Insured is living you may choose, or change the
choice of, an option for all or part of the proceeds that may arise from the
Insured's death. The requirement are the same as those to designate or change a
beneficiary. We describe them under Beneficiary.
A Payee may choose an option for all or part of any proceeds or residue that
becomes payable to him or her in one sum. We describe residue later on this
page.
In some cases, you or another Payee will need our consent to choose an option.
We describe these cases under Conditions.
OPTIONS DESCRIBED.--Here are the options we offer. We may also consent to other
arrangements.
OPTION 1 (INSTALMENTS FOR A FIXED PERIOD).--We will make equal payments for up
to 25 years based on the Option 1 Table. The payments will include interest at
an effective rate of 3 1/2% a year. We may credit more interest. If and while we
do so, the payments will be larger.
OPTION 2 (LIFE INCOME, WITH CERTAIN PERIOD).--We will make equal monthly
payments for as long as the person on whose life the settlement is based lives,
with payments certain for the period chosen. The choices are either ten years
(10-Year Certain) or until the sum of the payments equals the amount put under
this option (Instalment Refund). The amount of each payment will be based on the
Option 2 Table and on the sex and age, on the due date of the first payment, of
the person on whose life the settlement is based. But if a choice is made more
than two years after the Insured's death, we may use the Option 2 payment rates
in individual annuity contracts or life insurance contracts we regularly issue,
based on United States currency, on the due date of the first payment. On
request, we will quote the payment rates in contracts we then issue. We must
have proof of the date of birth of the person on whose life the settlement is
based. If on the due date of the first payment under this option, we have
declared a higher payment rate under the option, we will base the payments on
that higher rate.
OPTION 3 (INTEREST PAYMENT).--We will hold an amount at interest. We will pay
interest at an effective rate of at least 3% a year ($30.00 annually, $14.89
semi-annually, $7.42 quarterly or $2.47 monthly per $1,000). We may pay more
interest.
OPTION 4 (INSTALMENTS OF A FIXED AMOUNT).--We will make equal annual,
semi-annual, quarterly or monthly payments if they total at least $90 a year for
each $1,000 put under this option. We will credit the unpaid balance with
interest at an effective rate of at least 3 1/2% a year. We may credit more
interest. If we do so, the balance will be larger. The final payment will be any
balance equal to or less than one payment.
FIRST PAYMENT DUE DATE.--Unless a different date is stated when the option is
chosen: (1) the first payment for Option 3 will be due at the end of the chosen
payment interval; and (2) the first payment for any of the other options will be
due on the date the option takes effect.
RESIDUE DESCRIBED.--For Options 1 and 2, residue on any date means the then
present value of any unpaid payments certain. We will compute it at an effective
interest rate of 3 1/2% a year. But we will use the interest rate we used to
compute the actual Option 2 payments if they were not based on the table in this
contract.
For Options 3 and 4, residue on any date means any unpaid balance with interest
to that date.
For Option 2, residue does not include the value of any payments that may become
due after the certain period.
(Continued on Next Page)
Page 14 (VFL--85)
II-51
<PAGE>
SETTLEMENT OPTIONS (Continued)
<TABLE>
<CAPTION>
OPTION 1 TABLE
- ------------------------- OPTION 2 TABLE
MINIMUM AMOUNT OF -----------------------------------------------------------------------------------------------
MONTHLY PAYMENT FOR MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST
EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
PAYABLE IMMEDIATELY KIND OF LIFE INCOME KIND OF LIFE INCOME
AGE 10-Year Instalment AGE 10-Year Instalment
Number Monthly LAST Certain Refund LAST Certain Refund
of Years Payment BIRTHDAY Male Female Male Female BIRTHDAY Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $3.18 $3.11 $3.17 $3.10 45 $4.06 $3.82 $3.99 $3.78
and under 46 4.12 3.86 4.03 3.81
11 3.19 3.12 3.18 3.11 47 4.17 3.90 4.08 3.85
1 $84.65 12 3.20 3.13 3.19 3.12 48 4.23 3.94 4.13 3.90
2 43.05 13 3.21 3.14 3.20 3.13 49 4.28 3.99 4.18 3.94
3 29.19 14 3.22 3.15 3.21 3.14
4 22.27 50 4.35 4.04 4.24 3.98
5 18.12 15 3.24 3.16 3.23 3.15 51 4.41 4.09 4.29 4.03
16 3.25 3.17 3.24 3.16 52 4.48 4.15 4.35 4.08
17 3.27 3.19 3.25 3.18 53 4.55 4.21 4.41 4.13
6 15.35 18 3.28 3.20 3.27 3.19 54 4.62 4.27 4.48 4.19
7 13.38 19 3.30 3.21 3.28 3.20
8 11.90 55 4.70 4.33 4.55 4.24
9 10.75 20 3.31 3.22 3.30 3.21 56 4.78 4.40 4.62 4.30
10 9.83 21 3.33 3.24 3.32 3.23 57 4.86 4.47 4.69 4.37
22 3.35 3.25 3.33 3.24 58 4.95 4.54 4.77 4.43
23 3.36 3.26 3.35 3.25 59 5.05 4.62 4.86 4.50
11 9.09 24 3.38 3.28 3.37 3.27
12 8.46 60 5.15 4.71 4.94 4.58
13 7.94 25 3.40 3.30 3.39 3.29 61 5.25 4.79 5.03 4.66
14 7.49 26 3.42 3.31 3.41 3.30 62 5.36 4.89 5.13 4.74
15 7.10 27 3.45 3.33 3.43 3.32 63 5.48 4.98 5.23 4.82
28 3.47 3.35 3.45 3.34 64 5.60 5.09 5.34 4.92
29 3.49 3.37 3.47 3.35
16 6.76 65 5.73 5.20 5 45 5.01
17 6.47 30 3.52 3.39 3.49 3.37 66 5.87 5.31 5.57 5.11
18 6.20 31 3.54 3.41 3.52 3.39 67 6.01 5.43 5.70 5.22
19 5.97 32 3.57 3.43 3.54 3.41 68 6.15 5.56 5.83 5.34
20 5.75 33 3.60 3.45 3.57 3.44 69 6.30 5.70 5.97 5.46
34 3.63 3.47 3.60 3.46
70 6.46 5.84 6.11 5.58
21 5.56 35 3.66 3.50 3.63 3.48 71 6.62 5.99 6.27 5.72
22 5.39 36 3.69 3.52 3.66 3.50 72 6.79 6.15 6.43 5.86
23 5.24 37 3.72 3.55 3.69 3.53 73 6.96 6.31 6.60 6.01
24 5.09 38 3.76 3.58 3.72 3.56 74 7.13 6.49 6.78 6.18
25 4.96 39 3.80 3.61 3.75 3.58
75 7.30 6.67 6.97 6.35
40 3.84 3.64 3.79 3.61 76 7.48 6.85 7.17 6.53
41 3.88 3.67 3.82 3.64 77 7.66 7.04 7.38 6.72
Multiply the monthly amount 42 3.92 3.70 3.86 3.67 78 7.83 7.24 7.60 6.93
by 2.989 for quarterly, 43 3.97 3.74 3.90 3.71 79 8.00 7.44 7.83 7.15
5.952 for semi-annual or 44 4.01 3.78 3.94 3.74
11.804 for annual. 80 8.17 7.64 8.07 7.38
and over
- --------------------------- -----------------------------------------------------------------------------------------------
</TABLE>
Page 15 (VFL--85)
II-52
<PAGE>
SETTLEMENT OPTIONS (Continued)
WITHDRAWAL OF RESIDUE.--Unless otherwise stated when the option is chosen: (1)
under Options 1 and 2 the residue may be withdrawn; and (2) under Options 3 and
4 all, or any part not less than $100, of the residue may be withdrawn. If an
Option 3 residue is reduced to less than $1,000, we have the right to pay it in
one sum. Under Option 2, withdrawal of the residue will not affect any payments
that may become due after the certain period; the value of those payments cannot
be withdrawn. Instead, the payments will start again if they were based on the
life of a person who lives past the certain period.
DESIGNATING CONTINGENT PAYEE(S).--A Payee under an option has the right, unless
otherwise stated, to name or change a contingent payee to receive any residue at
that Payee's death. This may be done only if (1) the Payee has the full right to
withdraw the residue; or (2) the residue would otherwise have been payable to
that Payee's estate at death.
A Payee who has this right may choose, or change the choice of, an option for
all or part of the residue. In some cases, the Payee will need our consent to
choose or change an option. We describe these cases under Conditions.
Any request to exercise any of these rights must be in writing and in a form
that meets our needs. It will take effect only when we file it at our Service
Office. Then the interest of anyone who is being removed will end as of the date
of the request, even if the Payee who made the request is not living when we
file it.
CHANGING OPTIONS.--A Payee under Option 1, 3 or 4 may choose another option for
any sum that the Payee could withdraw on the date the chosen option is to start.
That date may be before the date the Payee makes the choice only if we consent.
In some cases, the Payee will need our consent to choose or change an option. We
describe these cases next.
CONDITIONS.--Under any of these conditions, our consent is needed for an option
to be used for any person:
1. The person is not a natural person who will be paid in his or her own right.
2. The person will be paid as assignee.
3. The amount to be held for the person under Option 3 is less than $1,000. But
we will hold any amount for at least one year in accord with the Automatic Mode
of Settlement.
4. Each payment to the person under the option would be less than $20.
5. The option is for residue arising other than at (a) the Insured's death, or
(b) the death of the beneficiary who was entitled to be paid as of the date of
the Insured's death.
6. The option is for proceeds that arise other than from the Insured's death,
and we are settling with an owner or any other person who is not the Insured.
DEATH OF PAYEE.--If a Payee under an option dies and if no other distribution is
shown, we will pay any residue under that option in one sum to the Payee's
estate.
ENDORSEMENTS
(Only we can endorse this contract.)
Page 16 (VFL--85)
II-53
<PAGE>
AUTOMATIC MODE OF SETTLEMENT
APPLICABILITY.--These provisions apply to proceeds arising from the Insured's
death and payable in one sum to a Payee who is a beneficiary. They do not apply
to any periodic payment.
INTEREST ON PROCEEDS.--We will hold the proceeds at interest under Option 3 of
the Settlement Options provision. The Payee may withdraw the residue. We will
pay it promptly on request. We will pay interest annually unless we agree to pay
it more often. We have the right to pay the residue in one sum after one year if
(1) the Payee is not a natural person who will be paid in his or her own right;
(2) the Payee will be paid as assignee; or (3) the original amount we hold under
Option 3 for the Payee is less than $1,000.
SETTLEMENT AT PAYEE'S DEATH.--If the Payee dies and leaves an Option 3 residue,
we will honor any contingent payee provision then in effect. If there is none,
here is what we will do. We will look to the beneficiary designation of the
contract; we will see what other beneficiary(ies), if any, would have been
entitled to the portion of the proceeds that produced the Option 3 residue if
the Insured had not died until immediately after the Payee died. Then we will
pay the residue in one sum to such other beneficiary(ies), in accord with that
designation. But if, as stated in that designation, payment would be due the
estate of someone else, we will instead pay the estate of the Payee.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. Jane was living when the Insured died. Jane later died
without having chosen an option or naming someone other than Paul and John as
contingent payee. If Paul and John are living at Jane's death we owe them the
residue. If only one of them is living then, and if the contract called for
payment to the survivor of them, we owe him the residue. If neither of them is
living then, we owe Jane's estate.
SPENDTHRIFT AND CREDITOR.--A beneficiary or contingent payee may not, at or
after the Insured's death, assign, transfer, or encumber any benefit payable. To
the extent allowed by law, the benefits will not be subject to the claims of any
creditor of any beneficiary or contingent payee.
ENDORSEMENTS
(Only we can endorse this contract.)
BASIS OF COMPUTATION
MORTALITY TABLE DESCRIBED.--We base premiums and values to which we refer in
this contract on the Insured's issue age and sex and on the length of time since
the contract date. We use (1) the Commissioners 1980 Standard Ordinary Mortality
Table; and (2) continuous functions based on age last birthday.
MINIMUM LEGAL VALUES.-The cash, loan and other values in this contract are at
least as large as those set by law where it is delivered. Where required, we
have given the insurance regulator a detailed statement of how we compute values
and benefits.
- -----------
PLI 172--85
- -----------
Pruco Life Insurance Company of New Jersey,
By
Secretary
Page 17 (VFL--85)-N
II-54
<PAGE>
- --------------------------------------------------------------------------------
ATTAINED AGE FACTORS
- --------------------------------------------------------------------------------
The Insurance Amount at any time is the greater of (1) the Face Amount (see page
3), and (2) the Contract Fund times the Attained Age Factor for the Insured's
sex and attained age.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
ATTAINED FACTORS ATTAINED FACTORS ATTAINED FACTORS
AGE MALE/FEMALE AGE MALE/FEMALE AGE MALE/FEMALE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15 or less 4.80 7.50 43 2.49 2.88 71 1.14 1.24
16 4.78 7.49 44 2.38 2.75 72 1.12 1.22
17 4.74 7.22 45 2.27 2.64 73 1.11 1.19
18 4.70 7.01 46 2.18 2.53 74 1.10 1.17
19 4.68 6.80 47 2.09 2.44 75 1.09 1.15
20 4.66 6.67 48 2.01 2.34 76 1.09 1.14
21 4.64 6.56 49 1.93 2.26 77 1.08 1.12
22 4.62 6.46 50 1.86 2.17 78 1.07 1.11
23 4.60 6.34 51 1.79 2.10 79 1.07 1.10
24 4.58 6.22 52 1.72 2.02 80 1.06 1.09
25 4.56 6.11 53 1.66 1.95 81 1.06 1.08
26 4.54 5.98 54 1.60 1.88 82 1.05 1.07
27 4.52 5.84 55 1.55 1.82 83 1.05 1.07
28 4.52 5.69 56 1.51 1.77 84 1.05 1.06
29 4.49 5.53 57 1.47 1.73 85 1.05 1.05
30 4.42 5.37 58 1.43 1.69 86 1.05 1.05
31 4.33 5.22 59 1.39 1.66 87 1.05 1.05
32 4.21 5.07 60 1.36 1.62 88 1.05 1.05
33 4.07 4.90 61 1.33 1.57 89 1.05 1.05
34 3.92 4.72 62 1.30 1.53 90 1.05 1.05
35 3.76 4.52 63 1.28 1.48 91 1.04 1.04
36 3.59 4.29 64 1.25 1.44 92 1.03 1.03
37 3.41 4.06 65 1.23 1.40 93 1.03 1.03
38 3.24 3.82 66 1.21 1.36 94 1.02 1.03
39 3.07 3.59 67 1.19 1.34 95 1.02 1.02
40 2.91 3.38 68 1.18 1.31 96 1.02 1.02
41 2.76 3.18 69 1.16 1.29 97 1.02 1.02
42 2.62 3.02 70 1.15 1.26 98 or more 1.01 1.01
- ------------------------------------------------------------------------------------------
</TABLE>
Page 18 (VFL--85)
II-55
<PAGE>
GUIDE TO CONTENTS
Page
Contract Data ........................................................... 3
Rating Class; Schedule of Premiums;
Interest Rates; List of Subaccounts and Portfolios;
Service Office
Contract Summary ........................................................ 5
Table of Basic Amounts .................................................. 5
General Provisions ...................................................... 6
Definitions; The Contract; Contract
Modifications; Non-participating; Service Office;
Ownership and Control; Suicide Exclusion;
Currency; Misstatement of Age or Sex;
Incontestability; Assignment; Annual Report;
Payment of Death Claim
Beneficiary ............................................................. 3 & 7
Premiums ................................................................ 3 & 8
Initial Premium; Additional Premiums; Premium Taxes;
Default; Grace Period; Reinstatement
Separate Account ........................................................ 9
The Account; Subaccounts; Transfers
Among Subaccounts and the Fixed Account,
The Fund; Account Investments; Change in
Investment Policy; Change of Fund
Fixed Account ........................................................... 9
Insurance Amount and Contract Fund ...................................... 10
Insurance Amount; Contract
Fund; Investment Premium Amount; Investment
Amount; Interest Credit; Guaranteed Interest;
Excess Interest; Mortality Charge
Cash Value Option ....................................................... 11
Cash Value Option; Surrender Charge
Loans
Loan Requirements; Contract Debt;
Loan Value; Interest Charge; Repayment;
Effect of a Loan; Excess Contract Debt;
Postponement of Loan
Settlement Options .................................................. 14
Payee Defined; Choosing an Option; Options
Described; First Payment Due Date; Residue
Described; Income Tables; Withdrawal of
Residue; Designating Contingent Payee(s);
Changing Options; Conditions; Death of Payee
Automatic Mode of Settlement ........................................ 17
Applicability; Interest on Proceeds; Settlement
at Payee's Death; Spendthrift and Creditor
Basis of Computation ................................................ 17
Mortality Table Described; Minimum Legal Values
Attained Age Factors ................................................ 18
A copy of the application follows Page 20
Page 19 (VFL--85)
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<PAGE>
Page 20 (VFL--85)
II-57
<PAGE>
Page 21 (VFL--85)-N
II-58
<PAGE>
Page 22
VARIABLE LIFE INSURANCE POLICY WITH PREMIUM FLEXIBILITY. INITIAL PREMIUM. WITH
ADDITIONAL PREMIUMS PAYABLE DURING INSURED'S LIFETIME AS STATED IN THE CONTRACT.
BENEFITS REFLECT PREMIUM PAYMENTS, INVESTMENT RESULTS AND MORTALITY CHARGES.
INSURANCE PAYABLE ONLY UPON DEATH. NON-PARTICIPATING.
VFL--B5-N
II-59
Exhibit 5
April 8, 1997
Pruco Life Insurance Company
of New Jersey
213 Washington Street
Newark, New Jersey 07102-2992
Gentlemen:
In my capacity as Chief Counsel and Assistant Secretary of Pruco Life
Insurance Company of New Jersey ("Pruco Life of New Jersey"), I reviewed
the establishment of Pruco Life of New Jersey Variable Contract Real Property
Account (the "Account") on October 30, 1987 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 and variable
annuity contracts, pursuant to the provisions of Section 17B:28-7 of the
Revised Statutes of New Jersey. I was responsible for the oversight of the
preparation and review of the Registration Statement on Form S-1, as amended,
filed by Pruco Life of New Jersey with the Securities and Exchange Commission
(Registration No. 33-20018) under the Securities Act of 1933 for the
registration of 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
reserves and other liabilities for variable benefits under the
variable life insurance contracts and variable annuity 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 and variable annuity
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-60
EXHIBIT 10A
INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT, dated as of April 29, 1988, between The
Prudential Insurance Company of America ("Prudential"), a mutual life insurance
company organized under the laws of New Jersey, and The Prudential Variable
Contract Real Property Partnership (the "Partnership"), a general partnership
organized under the laws of New Jersey.
WITNESSETH THAT:
WHEREAS, The Partnership has been established to provide a means for
investing and reinvesting the assets allocated to real estate investment options
under the variable life and variable annuity contracts issued by Prudential and
under such contracts issued by affiliated life insurance companies; and
WHEREAS, Prudential has extensive experience in the acquisition and
management of real estate equities, mortgages, land sale-leasebacks and other
investments (including short-term and intermediate-term debt instruments) that
satisfy the investment policies of the Partnership; and
WHEREAS, The Partnership desires that Prudential act as the Partnership's
investment manager; and
WHEREAS, Prudential desires to accept such appointment, on the terms and
conditions set forth herein.
NOW, THEREFORE, The Partnership and Prudential agree as follows:
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1. Prudential shall act as the investment manager of the Partnership for a
daily investment management fee equal to an aggregate 1.25% per year of the
average daily gross assets of the Partnership. The Partnership shall also bear
all of its actual operating expenses. The Partnership acknowledges that
Prudential engages in real estate investment activities on its own behalf and
manages other real estate investment portfolios for separate accounts,
subsidiaries, real estate investment trusts, limited partnerships, and other
entities, and further acknowledges that such activities may be in competition
with the Partnership for the acquisition and disposition of investments and the
time and services of Prudential's employees.
2. Prudential shall manage the investment and reinvestment of assets held
by the Partnership in a manner consistent with the prospectuses for the separate
accounts participating in the Partnership contained in the then-current
registration statements for such accounts on file with the Securities and
Exchange Commission. The Partnership has delivered or will deliver to Prudential
copies of such prospectuses and shall promptly furnish Prudential with a copy of
each amendment or supplement thereto.
3. The Partnership shall provide Prudential with instructions for
monitoring the composition of investments of the Partnership to ensure that, in
accordance with a "no-action" position taken by the staff of the Securities and
Exchange Commission, the separate accounts participating in the Partnership do
not become "investment companies" within the meaning of Section 3(a) of the
Investment Company Act of 1940. Prudential shall comply with
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those instructions.
4. Prudential will make such reports regarding the management of the
Partnership as the Partnership may from time to time require. In addition
Prudential shall furnish applicable federal and state regulatory authorities
with any information or reports in connection with its services under this
Agreement which such authorities may request in order to ascertain whether the
Partnership's operations are being conducted in a manner consistent with any
applicable law or regulation.
5. The Partnership shall be ultimately responsible for the management and
control of the Partnership's assets and in furtherance thereof, the Partnership
shall have the right (a) to interpret the investment objectives and policies and
restrictions of the Partnership and direct Prudential to comply therewith, (b)
to direct Prudential to pursue, or not pursue, any investment strategies for the
Partnership, and (c) to direct Prudential to purchase or sell any specific
investments for the Partnership. The Partnership shall also have the right to
change the Partnership's investment objectives, policies and restrictions.
6. Prudential shall maintain such records regarding its management of the
Partnership as the Partnership may require. All records maintained by Prudential
in connection with this Agreement shall be the property of the Partnership and
shall be returned to the Partnership upon termination of this Agreement, free
from any rights of retention. The Partnership shall have the right to inspect,
audit and copy all pertinent records pertaining to the performance of services
under this Agreement. Prudential shall keep
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<PAGE>
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confidential any information obtained pursuant to this Agreement and shall
disclose such information only if the Partnership has authorized such
disclosure, or if such disclosure is expressly required by applicable regulatory
authorities.
7. The Partnership acknowledges that, in addition to the management fee set
forth in paragraph one of this Agreement, Prudential's management of the
Partnership's assets may result in Prudential or its affiliates obtaining
substantial fee income from the Partnership's assets or from the cash flow of
the Partnership's investments for services rendered in connection with the
Partnership's operations, including, but not limited to, real estate brokerage
commissions and fees for property management services.
8. The term of this Agreement shall be one year, commencing as of the date
set forth above and continuing automatically from year to year thereafter;
provided, however, that this Agreement may be terminated by either party at any
time upon not less than 15 days' prior written notice to the other party.
9. This Agreement may not be assigned by either party without the prior
written consent of the other party.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by the undersigned, thereunto duly authorized as of the
date first written.
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<PAGE>
-5-
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
ATTEST:
/s/ [SPECIMEN] By: /s/ [SPECIMEN]
- ---------------------------- ----------------------------
Secretary Senior Vice President
and Actuary
THE PRUDENTIAL VARIABLE CONTRACT
REAL PROPERTY PARTNERSHIP
ATTEST: By: PRUCO LIFE INSURANCE COMPANY
(A General Partner)
/s/ [SPECIMEN] By: /s/ [SPECIMEN]
- ---------------------------- ----------------------------
Assistant Secretary President
II-65
EXHIBIT 10C
THE PRUDENTIAL VARIABLE CONTRACT
REAL PROPERTY PARTNERSHIP
--------------------------------
PARTNERSHIP AGREEMENT
BETWEEN
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
AND
PRUCO LIFE INSURANCE COMPANY
AND
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
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<PAGE>
PARTNERSHIP AGREEMENT
This PARTNERSHIP AGREEMENT made and entered into on April 29, 1988, by and
between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential"), a New Jersey
corporation, on behalf of The Prudential Variable Contract Real Property Account
("Prudential Account"), PRUCO LIFE INSURANCE COMPANY ("Pruco Life"), an Arizona
corporation authorized to do business in New Jersey, on behalf of the Pruco Life
Variable Contract Real Property Account ("Pruco Life Account") and PRUCO LIFE
INSURANCE COMPANY OF NEW JERSEY ("Pruco Life N.J."), a New Jersey corporation,
on behalf of the Pruco Life of New Jersey Variable Contract Real Property
Account ("New Jersey Account").
RECITALS
A. Pruco Life is the owner of, and holds in the Pruco Life Account, several
improved parcels of real property, loans secured by mortgages on real property
and other assets being more particularly described in the financial statements,
together with the accompanying Schedule of Investments, set forth in Exhibit A
attached hereto.
B. Pruco Life intends to contribute all of the assets held in the Pruco
Life Account at the close of business on April 29, 1988, subject to all the
liabilities of the Account other than the liabilities to variable life insurance
contract owners,
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to a partnership to be formed with Prudential and Pruco Life N.J. and
Prudential and Pruco Life N.J. each intend on April 29, 1988, to contribute
$100,000.00 in cash. The partnership will thereafter own, and will invest and
reinvest the assets contributed on such date together with such other assets as
the partnership may hereafter acquire by contribution from one or more of the
partners or by purchase or other means (collectively, the "Property").
C. Prudential, Pruco Life and Pruco Life N.J. desire to form a partnership
pertaining to the Property for the limited purposes and upon the terms and
conditions hereinafter specified.
NOW, THEREFORE, in order to carry out their intent as expressed above and
in consideration of the mutual agreements hereinafter contained, Prudential,
Pruco Life and Pruco Life N.J. hereby covenant and agree as follows:
ARTICLE 1. FORMATION OF VENTURE
1.1. Formation. Prudential, Pruco Life and Pruco Life N.J. the "Partners")
hereby form a partnership (the "Partnership") for the limited purposes
hereinafter set forth.
1.2. Name. The name of the Partnership shall be "THE PRUDENTIAL VARIABLE
CONTRACT REAL PROPERTY PARTNERSHIP." The Partnership shall execute all assumed
or fictitious name certificates required by law to be published and filed, or
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either, in connection with the formation and operations of the Partnership.
1.3. Principal Office. The principal office of the Partnership shall be at
213 Washington Street, Newark, New Jersey 07102, or such other place as the
Partners may from time to time determine.
1.4. Partnership Act: Ownership. Except as otherwise stated herein, the
rights and obligations of the Partners and the administration and termination of
the Partnership shall be governed by the New Jersey Uniform Partnership Law,
N.J.S.A. ss. 42:1-1, et. seq., as it may be amended from time to time, except as
the Partners may provide otherwise. The interest of each Partner in the
Partnership shall be personal property for all purposes. Legal title to real and
other property owned by the Partnership may be held in the name of either the
Partnership or any one or more of the Partners.
1.5. Purposes. The purposes of the Partnership shall be (1) to provide a
means for the investment of the assets held in the separate accounts of the
Partners in accordance with the investment policies and practices set forth in
the registration statements filed on behalf of those accounts; (2) to own,
operate, sell, lend money secured by an interest in real property and to acquire
additional real property; and (3) to engage in such other operations and
businesses as the Partners or the Investment Manager deem necessary or
appropriate to the foregoing
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<PAGE>
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purposes. The Partnership shall not engage in any other business.
1.6. No Individual Authority. Except as otherwise expressly provided in this
Agreement, no Partner, acting alone, shall have any authority to act for,
undertake or assume any obligations or responsibility on behalf of another
Partner or the Partnership.
1.7. No Restrictions. Nothing contained in this Agreement shall be construed so
as to prohibit any Partner or any firm or corporation controlled by or
controlling such Partner from owning, operating or investing in any real estate
or real estate development not owned or operated by the Partnership, wherever
located. Each Partner agrees that the other Partners, or any director, officer,
employee, partner or other person or entity related to any Partner may engage in
or possess an interest in another business venture or ventures of any nature and
description, independently or with others, including but not limited to the
ownership, financing, leasing, operation, management, syndication, brokerage and
development of real property, and no Partner nor the Partnership shall have any
rights by virtue of this Agreement in and to said independent ventures or to the
income or profits derived therefrom.
1.8. Neither Responsible for Other's Commitments. No Partner nor the
Partnership shall be responsible or liable for any indebtedness or obligation of
any other Partner incurred
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either before or after the execution of this Agreement, except as to those joint
responsibilities, liabilities, debts or obligations incurred pursuant to the
terms of this Agreement, and each indemnifies and agrees to hold the others
harmless from such obligations and debts except as aforesaid.
1.9. Action by Subsidiaries. Any and all activities to be performed by
Prudential hereunder may be performed by officers or employees of one or more
direct or indirect subsidiaries of Prudential provided that all actions taken by
such persons on behalf of Prudential in connection with this Agreement shall be
binding upon Prudential.
ARTICLE 2. TERM
2.1. Term. The Partnership shall commence on the date first above written
and shall continue until the first to occur of the following:
(a) 99 years shall have elapsed since the commencement of the Partnership;
or
(b) Sale or other disposition of all or substantially all of the Property,
other than to a nominee or trustee of the Partnership for financial or
other business purposes; or
(c) Dissolution of the Partnership pursuant to the express provisions of
Article 8; or
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(d) Proceedings in bankruptcy, receivership, reorganization, conservation,
or liquidation are instituted with respect to any of the Partners.
ARTICLE 3. CAPITAL CONTRIBUTIONS OF THE PARTNERS
3.1. Capital of the Partnership. The initial capital of the Partnership
shall be the amounts contributed on April 29, 1988, by the Partners. Thereafter,
the capital shall be equal to the fair market value of the assets owned by it,
minus the liabilities of the Partnership plus such other assets as may hereafter
be contributed to the Partnership by any of the Partners as provided in Section
3.4.
3.2. Initial Contribution of Pruco Life. Pruco Life as its initial capital
contribution to the Partnership, will on April 29, 1988, convey or assign to the
Partnership, all of the assets held on the close of business on that date in the
Pruco Life Account, subject to the liabilities of the Account (other than the
liabilities to life insurance contract owners), which the Partnership hereby
agrees to assume. The amount of that contribution shall be the fair market value
of the net assets of the Pruco Life Account at the end of the day on April 29,
1988, determined in the manner set forth in the prospectus relating to interests
in the Pruco Life Account, dated January 1, 1988.
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3.3. Initial Contribution by Prudential and Pruco Life N.J. Upon the
contribution to the Partnership by Pruco Life on or before the date specified
in Section 3.2 and in the manner therein provided, Prudential and Pruco Life
N.J. will each, on the same date, make a cash contribution of $100,000.00 to the
Partnership, as their respective initial capital contribution.
3.4. Subsequent Contributions. Any Partner may, on any business day, make
additional cash contributions to the Partnership.
3.5. No Other Required Contributions. Except as expressly required by this
Article 3, no Partner shall have any obligation to make any contribution to the
Partnership nor to advance any funds thereto.
3.6. No Interest Payable. No Partner shall receive any interest on its
contributions to the capital of the Partnership.
3.7. Withdrawals. Any Partner may, on any business day, request the
withdrawal of cash from the Partnership, in any amount up to the value of the
Partner's interest in the Partnership in accordance with the provisions of
Article 4.1. Ordinarily payment of the amount requested will be made on the day
following the request. The Partnership reserves the right to defer such payments
for a period of up to six months if the Partners or the Investment Manager
determine that there is insufficient cash available and prompt disposition of
investments
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held by the Partnership cannot be made on commercially reasonable terms.
ARTICLE 4. INTERESTS IN THE PARTNERSHIP
4.1. Partners' Percentage Interests in the Partnership. The value of each
partner's interest in the Partnership at the close of business on April 29,
1988, is equal to the net amount contributed by the Partner on that date. The
value of a Partner's interest on any subsequent day is determined by dividing
the value of the net assets of the Partnership at the end of that day (ignoring,
for these purposes, all contributions made on such day and all payments to be
made on that day to Partners as the result of requests for withdrawals) by the
value of the net assets of the Partnership at the end of the preceding business
day, multiplying the result by the value of the Partner's interest on the
preceding business day and then adding any contributions made by such Partner on
such day and subtracting any distributions made to such Partner on such day. The
Percentage Interest of each Partner on any day is equal to the value of such
Partner's interest in the Partnership on the preceding day divided by the
aggregate value of the interests of all the Partners on that day multiplied by
100.
4.2. Valuation of the Net Assets of the Partnership. The net assets of the
Partnership shall be valued in a manner determined by the Partners which will
conform to the
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manner of valuation set forth in the registration statements filed by each of
the Partners with respect to interests in each of their respective separate
accounts.
4.3. Capital Accounts. The capital account of each Partner on any business
day shall be equal to the value of such Partner's interest in the Partnership at
the end of such business day. The capital account of each Partner on any
non-business day shall be equal to its capital account on the next preceding
business day.
4.4. Allocation of Income, Gains and Losses. Except as the Partners may
determine otherwise in order to comply with the Internal Revenue Code and the
regulations thereunder, all items of Partnership income, gains, losses,
deductions and credits shall be allocated among the Partners on the day each
such item is actually received, accrued or realized by the Partnership in
accordance with each Partner's Percentage Interest on such date. The amount of
depreciation on property of the Partnership and taxable gain or loss upon the
sale of any property of the Partnership shall be allocated so as to take proper
account of the difference between the adjusted tax basis of the property to the
Partnership and the value of the property as determined under Article 4.2.
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ARTICLE 5. MANAGEMENT OF THE VENTURE
5.1. Rights and Procedures in Management. Each Partner shall have one vote
in the management of the affairs of the Partnership, irrespective of the
amounts which each Partner has contributed, or may contribute, to the
Partnership. The affirmative votes of two Partners shall be sufficient to
authorize any action to be taken by the Partnership or on behalf of the
Partners. Each Partner may designate any of its officers or employees or any of
the officers or employees of any partner to act as its agent and attorney in
connection with the affairs of the Partnership by naming such officer or
employee in a written designation of agent and power of attorney delivered to
the other Partners. Such agent and attorney may thereafter, without the
necessity of further authorization, cast the vote of such Partner in connection
with the management of the Partnership, otherwise bind such Partner in all
matters pertaining to the Partnership, and execute all documents pertaining to
the affairs of the Partnership on behalf of such Partner. A Partner may revoke
or amend any such designation and power of attorney in a writing delivered to
the other Partners.
5.2. Management Agreement. The Partners hereby authorize any Partner, on
behalf of the Partnership, to enter into an Investment Management Agreement with
Prudential, pursuant to which Prudential or subsidiaries of Prudential selected
by it, shall serve as Investment Manager for the Partnership and, in that
capacity, invest and reinvest the assets of the Partnership
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<PAGE>
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in accordance with its investment objectives and practices and shall purchase
and sell the properties and securities owned by the Partnership.
5.3. Bank Accounts. The Partnership will maintain separate bank accounts in
such banks as the Partners may designate exclusively for the deposit and
disbursement of all funds of the Partnership. All funds of the Partnership shall
be promptly deposited in such accounts. The Partners from time to time shall
authorize signatories for such accounts.
5.4. Reimbursement for Costs and Expenses. The Partners will fix the
amounts, if any, by which the Partnership will reimburse each Partner for all
costs and expenses incurred by such Partner on behalf and for the benefit of the
Partnership; provided, however, that no overhead or general administrative
expenses of anyone other than the Partnership itself shall be allocated to the
operation of the Partnership, and no salaries, fees, commissions or other
compensations shall be paid by the Partnership to any Partner or to any officer,
employee or affiliate of any Partner for any services rendered to the
Partnership except as may be expressly provided herein or by other written
agreement.
ARTICLE 6. BOOKS AND RECORDS, AUDITS, TAXES, ETC.
6.1. Books; Statements. The Partnership shall keep such books and records
as the Partners shall determine. The
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books and records shall be prepared in accordance with generally accepted
accounting principles consistently applied, except to the extent provided for in
this Agreement or by the Partners. The Partners shall determine the methods to
be used in the preparation of financial statements.
Following the initial contributions to the Partnership pursuant to Article
3 hereof,
(a) on each business day during the term of this Agreement, the Partnership
shall maintain a record of the Percentage Interest of each Partner and of the
value of the interest of each Partner at the end of the day; the value of the
interest of each Partner shall be expressed in dollars and, in addition, in the
discretion of the Partner, in units of Partnership interest, the value of which
shall be determined on each business day.
(b) as soon as practicable after the end of each fiscal year of the
Partnership, a general accounting and audit shall be made by independent
certified public accountants of recognized standing, selected by the Partners
and retained by the Partnership, covering the assets, properties, liabilities
and net worth of the Partnership, and its dealings, transactions and operations
during such fiscal year, and all matters and things customarily included in such
accounts and audits, and such statement shall be furnished to each Partner
within 90 days after the end of such fiscal year, showing each Partner's capital
in
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<PAGE>
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the Partnership, together with a report of the audit scope and audit findings in
the form of a management audit report with an internal control memorandum.
6.2. Where Maintained. The books, accounts and records of the Partnership
shall be at all times maintained at its principal office.
6.3. Tax Returns. The Partnership shall be treated and shall file its tax
returns as a partnership for Federal, State, municipal and other governmental
income tax and other tax purposes. The Partnership shall cause to be prepared
all Federal, State, and municipal partnership tax returns required to be filed.
The Partnership shall submit the returns to each Partner for review and approval
no later than thirty (30) days prior to the due date of the returns. Each
Partner shall notify the other Partners upon receipt of any notice of tax
examination of the Partnership by Federal, State or local authorities.
6.4. Tax Matters Partner. Prudential is hereby designated as the tax
matters partner, as defined in Section 6231(a)(7) of the Internal Revenue Code
of 1986, with respect to operations conducted by the Partnership during the
period that Prudential is a Partner. Prudential shall comply with the
requirements of Section 6221 through 6232 of the Code.
6.5. Tax Policy. The Partnership shall make any and all tax accounting and
reporting elections and adopt such procedures as Prudential may determine.
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<PAGE>
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6.6. Section 754 Election. The Partnership does not intend to make the
election permitted by Section 754 of the Code.
ARTICLE 7. FISCAL YEAR
7.1. Calendar Year. The fiscal year of the Partnership shall be the
calendar year, unless (subject to obtaining consent of the Internal Revenue
Service) the parties shall hereafter in writing agree otherwise.
ARTICLE 8. DISSOLUTION
8.1. Winding Up by Partners. Upon dissolution of the Partnership by
expiration of the term hereof, by operation of law, by any provision of this
Agreement or by agreement between the Partners, the Partnership's business shall
be wound up and all its assets distributed in liquidation. In such dissolution
the Partners shall be co-liquidating Partners. In such an event the Partners
shall proceed to cause the Partnership's property to be sold and to distribute
the proceeds of sale as provided in Section 8.3. Except in respect of (i) all
assets on which a single, non-severable mortgage or other lien will be in effect
after such distribution, and (ii) any assets which the Partners shall determine
are not readily severable or distributable in kind, the Partners, to the extent
that liquidation of such assets is not required to fulfill the payments, if any,
under subsections (a), (b), (c) and (d) of Section 8.3, shall, if they
II-80
<PAGE>
- 15 -
agree, have the right to distribute, in kind, all or a portion of the assets of
the Partnership to the Partners pro rata in accordance with their respective
Percentage Interest at the time of distribution.
8.2. Distributions of Operating Cash Flow. Upon the dissolution of the
Partnership for any reason, the Partners shall continue to share profits and
losses for all tax and other purposes as provided elsewhere in this Agreement
during the period of liquidation and until final termination of the Partnership.
8.3. Distributions of Proceeds of Liquidation. The proceeds of liquidation
shall be applied in the following order of priority:
(a) First. To the payment of:
(1) debts and liabilities of the Partnership except:
(x) loans that may have been made by any Partner to the
Partnership, and
(y) debts secured by lien on property sold subject thereto,
provided that neither the Partnership nor any Partner shall be
personally liable on, or they shall be released from such
debts, and
(2) expenses of liquidation;
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<PAGE>
- 16 -
(b) Second. To the setting up of any reserves which the Partners may deem
necessary for any contingent or unforeseen liabilities or obligations
of the Partnership or of the Partners arising out of or in connection
with the Partnership. Said reserves may be deposited by the Partnership
in a bank or trust company acceptable to the Partners, as an escrow
agent, to be held by it for the purpose of disbursing such reserves in
payment of any of the aforementioned liabilities or obligations, and at
the expiration of such period as the Partners shall deem advisable,
distributing the balance, if any, thereafter remaining, in a manner
hereinafter provided;
(c) Third. To the repayment of any loans that may have been made by any of
the Partners.
(d) Fourth. Any balance remaining shall be distributed to the Partners in
proportion to their respective Percentage Interest.
8.4. Orderly Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Partnership and the discharge of
liabilities to creditors so as to enable the Partners to minimize the losses
normally attendant upon a liquidation.
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<PAGE>
- 17 -
8.5. Financial Statements. During the period of winding up, the
Partnership's then independent certified public accountants shall prepare and
furnish to each of the Partners, until complete liquidation is accomplished, all
the financial statements provided for in Section 6.1.
ARTICLE 9. NOTICES
9.1. In Writing; Address. All notices, elections, offers, acceptances,
demands, consents and reports (collectively "notice") provided for in this
Agreement shall be in writing and shall be given to the Partnership, the
Partners or the other Partners at the addresses set forth below or at such other
address as the Partnership or any of the parties hereto may hereafter specify in
writing.
Prudential: The Prudential Insurance Company of America
Attention: Prudential Realty Group
Third Floor, Plaza Building
Newark, New Jersey 07101
Pruco Life & 213 Washington Street
Pruco Life N.J.: Newark, New Jersey 07101
Partnership: c/o The Prudential Insurance Company
of America
Attention: Prudential Realty Group
Third Floor, Plaza Building
Newark, New Jersey 07101
A copy of any notice or any written communication from the Internal Revenue
Service to the Partnership shall be given to each Partner at the addresses
provided for above.
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<PAGE>
- 18 -
9.2. Method. Such notice or other communication may be made in any suitable
way.
9.3. Copies. A copy of any notice, service of process, or other document in
the nature thereof, received by any Partner from anyone other than another
Partner, shall be delivered by the receiving Partner to the other Partners as
soon as practicable.
ARTICLE 10. MISCELLANEOUS
10.1. Additional Documents and Acts. In connection with this Agreement as
well as all transactions contemplated by this Agreement, each Partner agrees to
execute and deliver such additional documents and instruments, and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement, and
all such transactions. All approvals of any party hereunder shall be in writing.
10.2. Interpretation. This Agreement and the rights and obligations of the
Partners hereunder shall be interpreted in accordance with the laws of the State
of New Jersey.
10.3. Entire Agreement. This instrument contains all of the understandings
and agreements of whatsoever kind and nature existing between the parties hereto
with respect to this Agreement and the rights, interests, understandings,
agreements and obligations of the respective parties pertaining to the
Partnership.
II-84
<PAGE>
- 19 -
10.4. References to This Agreement. Numbered or lettered articles, sections
and subsections herein contained refer to articles, sections and subsections of
this Agreement unless otherwise expressly stated.
10.5. Headings. All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
10.6. Binding Effect. Except as herein otherwise expressly stipulated to
the contrary, this Agreement shall be binding upon and inure to the benefit of
the parties signatory hereto, and their respective distributees, successors and
assigns.
11.7. Amendments. This Agreement may not be amended, altered or modified
except by a written instrument signed by all parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ [SPECIMEN]
----------------------------
Senior Vice President
and Actuary
ATTEST:
/s/ [SPECIMEN]
- ------------------------------
Secretary
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<PAGE>
- 20 -
PRUCO LIFE INSURANCE COMPANY
By: /s/ [SPECIMEN]
----------------------------
President
ATTEST:
/s/ [SPECIMEN]
- ------------------------------
Assistant Secretary
PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY
By: /s/ [SPECIMEN]
----------------------------
President
ATTEST:
/s/ [SPECIMEN]
- ------------------------------
Assistant Secretary
II-86
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 9 to the registration statement on Form S-1 (the
"Registration Statement") of our reports dated March 25, 1997, relating to the
financial statements of Pruco Life of New Jersey Variable Contract Real Property
Account and The Prudential Variable Contract Real Property Partnership, which
appear in such Prospectus. We also consent to the application of our report to
the Financial Statement Schedules of The Prudential Variable Contract Real
Property Partnership for the year ended December 31, 1996 listed under item
16(b) of this Registration Statement when such schedules are read in conjunction
with the financial statements referred to in our report. The audit referred to
in such report also included these schedules. We also consent to the references
to us under the headings "Per Share Investment Income, Capital Changes and
Selected Ratios" and "Experts" in the Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 7, 1997
II-87
EXHIBIT (a)(23B)
INDEPENDENT AUDITORS' CONSENT
We consent to (a) the use in this Post-Effective Amendment No. 9 on Form S-1 to
the Registration Statement No. 33-20018 of Pruco Life of New Jersey Variable
Contract Real Property Account of our report dated March 1, 1996, relating to
the financial statements of Pruco Life of New Jersey Variable Contract Real
Property Account, and of our report dated March 1, 1996, relating to the
financial statements of The Prudential Variable Contract Real Property
Partnership appearing in the Prospectus, which is part of such Registration
Statement, (b) the use in Part II of this Registration Statement of our report
dated March 1, 1996 relating to the financial statement schedules listed in Item
16(b) and the reference to us under the heading "Experts" in such Prospectus.
Deloitte & Touche LLP
Parsippany, New Jersey
April 8, 1997
II-88
Exhibit 25(b)
POWER OF ATTORNEY
Know all men by these presents:
That I, LINDA S. DOUGHERTY, of NEWARK, NEW JERSEY, Vice President,
Comptroller and Chief Accounting Officer of Pruco Life Insurance Company of New
Jersey, do hereby make, constitute and appoint as my true and lawful attorneys
in fact CLIFFORD E. KIRSCH, THOMAS C. CASTANO, RICHARD E. MEADE, KIRK A.
MONTGOMERY, AND THOMAS J. LOFTUS, or any of them severally for me in my name,
place and stead to sign, where applicable: Annual Reports on Form 10-K,
registration statements on the appropriate forms prescribed by the Securities
and Exchange Commission, and any other periodic documents and reports required
under the Investment Company Act of 1940, the Securities Act of 1933, and the
Securities Exchange Act of 1934, and all amendments thereto executed on behalf
of Pruco Life Insurance Company and filed with the Securities and Exchange
Commission for the following:
The Pruco Life of New Jersey Variable Appreciable Account and flexible
premium variable life insurance contracts, to the extent they represent
participating interests in said Account;
The Pruco Life of New Jersey Variable Insurance Account and scheduled
premium variable life insurance contracts, to the extent they represent
participating interests in said Account;
The Pruco Life of New Jersey Single Premium Variable Life Account and
flexible premium variable life insurance contracts, to the extent they
represent participating interests in said Account;
The Pruco Life of New Jersey Single Premium Variable Annuity Account
and single payment variable annuity contracts, to the extent they
represent participating interests in said Account;
The Pruco Life of New Jersey Variable Contract Real Property Account
and individual variable life insurance contracts and variable annuity
contracts, to the extent they represent
II-89
<PAGE>
participating interests in said Account;
The Pruco Life of New Jersey Modified Guaranteed Annuity Account and
modified guaranteed annuity contracts, to the extent they represent
participating interests in said Account; and
The Pruco Life of New Jersey Flexible Premium Variable Annuity Account
and flexible premium variable annuity contracts, to the extent they
represent participating interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of March,
1997.
/s/ Linda S. Dougherty
----------------------------------
Signature
State of New Jersey )
------------------
) SS
County of Essex )
------------------
On this 31st day of March, 1997, before me personally appeared Linda S.
Dougherty known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires:
July 26, 1999
/s/ ANN L. WELLBROOK
---------------------------------
II-90
<TABLE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE III - REAL ESTATE OWNED: PROPERTIES
DECEMBER 31, 1996
-----------------------------------------------------------------------------------
<CAPTION>
GROSS AMOUNT AT WHICH
INTIAL COSTS TO THE PARTNERSHIP CARRIED AT CLOSE OF YEAR
-------------------------------------- COSTS ---------------------------------------------------------
CAPITALIZED
BUILDING & SUBSEQUENT TO BUILDING & TOTAL YEAR OF DATE
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS (A)(B)(C) CONSTRUCTION ACQUIRED
----------- ------------ ---- ------------ ----------- ---- ------------ --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Properties:
Office Building
Lisle, IL None 1,780,000 15,743,881 540 1,780,000 15,744,421 17,524,421 1985 Sept., 1987
Garden Apartments
Atlanta, GA None 3,631,212 11,168,904 596,622(c) 3,631,212 11,765,526 15,396,738 1987 Oct., 1987
Warehouse
Pomona, CA None 3,412,636(b) 19,091,210 952,905 3,412,636 20,044,115 23,456,751 1984 Apr., 1988
Retail Shopping Center
Roswell, GA None 9,454,622 21,513,677 785,774 9,462,951 22,291,122 31,754,073 1988 Jan., 1989
Office Building
Morristown, NJ None 2,868,660 12,958,451 2,970,113 2,868,660 15,928,564 18,797,224 1981 Aug., 1988
Office/Warehouse
Bolingbrook, IL None 1,373,199 7,302,518 272,311 1,373,199 7,574,829 8,948,028 1989 Feb., 1990
Garden Apartments
Farmington Hills, MI None 1,550,000 11,744,571 329,381 1,583,320 12,040,632 13,623,952 1988 Jan., 1990
Garden Apartments
Raleigh, NC None 1,623,146 14,135,553 4,252 1,623,146 14,139,805 15,762,951 1995 Jun., 1995
Office Building
Nashville, TN None 1,797,000 6,588,451 (6,125) 1,797,327 6,581,999 8,379,326 1982 Oct., 1995
Office Park
Oakbrook Terrace, IL None 1,313,310 11,316,883 94,912 1,313,821 11,411,284 12,725,105 1988 Dec., 1995
Office Building
Beaverton, OR None 816,415 9,897,307 0 816,415 9,897,307 10,713,722 1995 Dec., 1996
---------- ----------- --------- ---------- ----------- -----------
29,620,200 141,461,406 6,000,685 29,662,687 147,419,604 177,082,291
========== =========== ========= ========== =========== ===========
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
(a) Balance at beginning of year 191,981,608 154,157,068 145,532,430
Additions:
Acquistions 10,713,722 36,774,343 7,463,414
Improvements, etc. 550,050 1,050,197 1,161,224
Deletions:
Sale (26,163,089) 0 0
----------- ----------- -----------
Balance at end of year 177,082,291 191,981,608 154,157,068
=========== =========== ===========
(b) Represents land under
capital lease.
(c) Net of $1,000,000 settlement
received from lawsuit.
</TABLE>
II-91
<PAGE>
<TABLE>
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
SCHEDULE III - REAL ESTATE OWNED: INTEREST IN PROPERTIES
DECEMBER 31, 1996
-----------------------------------------------------------------------------------
<CAPTION>
GROSS AMOUNT AT WHICH
INTIAL COSTS TO THE PARTNERSHIP CARRIED AT CLOSE OF YEAR
-------------------------------------- COSTS ---------------------------------------------------------
CAPITALIZED
BUILDING & SUBSEQUENT TO BUILDING & YEAR OF DATE
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL (A) CONSTRUCTION ACQUIRED
----------- ------------ ---- ------------ ----------- ---- ------------ --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest in properties:
Warehouse/Distribution
Jacksonville, FL None $ 231,119 $ 1,073,849 $ 12,485 $ 231,119 $ 1,086,334 $ 1,317,453 1988 Jan., 1990
Warehouse/Distribution
Jacksonville, FL None 176,256 818,935 7,257 176,256 826,192 1,002,448 1986 Jan., 1990
Warehouse/Distribution
Jacksonville, FL None 255,545 1,187,335 14 255,545 1,187,349 1,442,894 1982 Jan., 1990
Warehouse/Distribution
Jacksonville, FL None 415,548 1,930,761 24,053 415,548 1,954,814 2,370,362 1979 Jan., 1990
----------- ----------- ----------- ----------- ----------- -----------
$ 1,078,468 $ 5,010,880 $ 43,809 $ 1,078,468 $ 5,054,689 $ 6,133,157
=========== =========== =========== =========== =========== ===========
<CAPTION>
1996 1995 1994
---------- ---------- ------------
<S> <C> <C> <C>
(a) Balance at beginning of year $6,133,157 $6,108,742 $ 26,348,882
Additions:
Acquistions 0 24,415 0
Improvements, etc. 0 0 12,087
Deletions:
Sale 0 0 (20,252,227)
---------- ---------- ------------
Balance at end of year $6,133,157 $6,133,157 $ 6,108,742
========== ========== ============
</TABLE>
II-92
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Financial Data Schedule
Article 6 of Regulation S-X
Pruco Life of New Jersey Variable Contract Real Property Account
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> Pruco Life of N J Variable Contract Real Property Account
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 473,226
<SHARES-COMMON-PRIOR> 473,226
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 7,878,541
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 39,120
<NET-INVESTMENT-INCOME> 574,648
<REALIZED-GAINS-CURRENT> (62,618)
<APPREC-INCREASE-CURRENT> (127,658)
<NET-CHANGE-FROM-OPS> 384,372
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 423,493
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Financial Data Schedule
Article 6 of Regulation S-X
The Prudential Variable Contract Real Property Partnership
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> The Prudential Variable Contract Real Property Partnership
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 183,215,448
<INVESTMENTS-AT-VALUE> 156,924,276
<RECEIVABLES> 2,066,916
<ASSETS-OTHER> 45,164,848
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 204,156,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 6,899,246
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 11,848,275
<SHARES-COMMON-PRIOR> 12,036,684
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 204,156,040
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,134,386
<OTHER-INCOME> 23,406,252
<EXPENSES-NET> 10,121,120
<NET-INVESTMENT-INCOME> 15,419,518
<REALIZED-GAINS-CURRENT> (1,573,147)
<APPREC-INCREASE-CURRENT> (3,211,436)
<NET-CHANGE-FROM-OPS> 10,634,935
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 188,409
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,634,935
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,494,229
<INTEREST-EXPENSE> 489,434
<GROSS-EXPENSE> 10,121,120
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 15.754
<PER-SHARE-NII> 1.297
<PER-SHARE-GAIN-APPREC> (.402)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.649
<EXPENSE-RATIO> 5.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
