With-Profits Bonus Declaration
February 2013

Watch Barry O'Dwyer, Deputy Chief Executive, talk about this year's Bonus Declaration

Dear Policyholder,

A year of strong performance

I am very pleased to report that 2012 was a strong year for the Prudential With-Profits Fund and we have been able to build on the positive returns achieved in 2010 and 2011.

Delivering for you

We are living in very difficult economic times and the outlook remains uncertain. You can be assured, however, that our focus is on looking after your money carefully. We want to continue to deliver steady performance over the medium to long term.

The approach taken by the team of investment experts running the Prudential With-Profits Fund has meant we have delivered a total return on the Fund of 20.1% (net of tax) and 21.3% (gross of tax) over the last 5 years and 111.1% (net of tax) and 131.8% (gross of tax) over the last 10 years, both up to 31 December 2012. Over the course of 2012 alone, we achieved a return on the Fund of 8.8% (net of tax) and 10.5% (gross of tax). All of these figures quoted are before your plan charges and the effects of smoothing. Please note that past performance is not a reliable indicator of future performance.

What this means for you

You receive your share of the With-Profits Fund's performance by way of bonuses added to your policy. The return on your policy will be different to the 8.8% (net of tax) and 10.5% (gross of tax) return on the Fund quoted above because of the effects of smoothing, taxes and charges. The rate of bonus added will also vary depending on the type of policy you have. You'll find the details of how your policy has performed in your yearly statement.

In some circumstances, we may apply a Market Value Reduction which will have the effect of reducing your fund value if you take money from your policy. We do this to ensure that no-one gets more than their fair share of the Fund and it is there to protect customers who stay invested in the Fund.

The smoothing process

We try to ensure that our With-Profits Fund delivers a smooth return. We do this by holding back some of the investment returns in good years so we have the scope to top up bonuses in years when the Fund does not perform as well.

The smoothing process is a key feature of With-Profits. For instance, some of the money held back in good years softened the impact of the significant market downturn back in 2008 and 2009, when returns were very poor because of the financial crisis.

You're right to be with the Pru

Ours is one of the largest and strongest With-Profits Funds in the UK. As at 31 December 2012, it amounted to around £68.7bn. I believe the size, strength and diversity of our Fund makes us stand out from the crowd. We will continue to do our best to generate the steady returns you are looking for over the medium to long term.

Thank you for continuing to invest with us.

Yours faithfully,

Barry O'Dwyer
Deputy Chief Executive, UK & Europe