PruFund Growth & Income Fund Unit Price Adjustment

Due to the continued turbulence in financial markets and its impact on the underlying performance of the PruFund Growth & Income Fund, we have reduced the unit price of this fund from 8 October 2008 by 9.3%.

This is because the difference between the smoothed and unsmoothed unit price of this fund has moved outside the parameters of PruFund?s smoothing formula.

What about policyholders in the Holding Account?

Policyholders who invested on or after 26 August 2008 will not be affected by this price adjustment as their investment is held in the relevant holding account until the next quarter date on 25 November 2008. Units in the smoothed funds are then purchased using the smoothed unit price on 25 November 2008.

What about the PruFund Growth Fund?

We reduced the unit price for the PruFund Growth Fund by 8.2% on 6 October 2008.

A reminder of how the smoothing process works.

In normal conditions, the 'smoothed prices' increase in line with the Expected Growth Rates set at each quarter date. However, the 'smoothed price' (i.e., the price at which policyholders buy units and which determines the amount payable in the event of a claim) is automatically adjusted if it differs from the underlying asset value (the 'unsmoothed price') by more than a specified percentage.

The triggers for these pricing adjustments are as follows:

• On and between the quarter dates:
  
  If the 'unsmoothed price' differs from the 'smoothed price' by 10% or more, based on both the actual 'unsmoothed price' and a 5-day rolling average of the 'unsmoothed price', then the 'smoothed price' is adjusted to 102.5% of the 'unsmoothed price' from above or 97.5% of the 'unsmoothed price' from below.
• In addition, at the quarter date:
  
  If the 'unsmoothed price' differs from the 'smoothed price' by 5% or more, either above or below, then the 'smoothed price' is moved 50% of the way to the 'unsmoothed price'.

What it means to policyholders?

Growth and Income Fund - For an investment of £30,000 on 14 September 2004, the surrender value on 8 October 2008 would be £34,398 assuming no withdrawals. This would represent a growth of 14.60%.

Growth and Income Fund (including the 5th anniversary guarantee, launched on 25 May 2005) - For an investment of £30,000 on 25 May 2005, the surrender value on 8 October 2008 would be £31,816 assuming no withdrawals. This would represent a growth of 6.00%.

PruFund performance - Despite this unit price adjustment, both funds in the PruFund Investment Plan have once again continued to produce impressive long-term results. Here's how PruFund compares with indices we use for comparative purposes.