As filed with the Securities and Exchange Commission on March __, 1997
File No. 333-
File No. 811-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. ___ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
THE PRUDENTIAL DISCOVERY SELECT GROUP VARIABLE CONTRACT ACCOUNT
(Exact Name of Registrant)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Name of Depositor)
2 Gateway Center , 18th Floor
Newark, NJ 07102-5096
Depositor's Telephone Number: (201) 367-1215
Peter T. Scott, Esq.
Assistant General Counsel
The Prudential Insurance Company Of America
C/O Prudential Retirement Services
30 Scranton Office Park
Moosic, PA 18507-1789
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the registrant
hereby elects to register an indefinite amount of securities being offered.
<PAGE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.
<PAGE>
Cross Reference Sheet
Pursuant to Rules 481(a) and 495(a)
Showing location in Part A (prospectus) and Part B (statement of additional
information) of registration statement of information required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page ..........................Cover Page
2. Definitions .........................Definitions
3. Synopsis ............................Fee Table; Brief Description of the
Contract
4. Condensed Financial
Information .......................Performance Information
5. General
(a) Depositor ......................Prudential Insurance Company of America
(b) Registrant......................Prudential Discovery Select Group
Variable Contract Account
(c) Portfolio Company ..............The Funds
(d) Fund Prospectus ................The Funds
(e) Voting Rights ..................Voting Rights
(f) Administrators .................Prudential Insurance Company of America
6. Deductions and Expenses
(a) General ........................Charges, Fees and Deductions; Brief
Description of the Contract
(b) Sales Load .....................Charges, Fees and Deductions; Brief
Description of the Contract
(c) Special Purchase Plan ..........N/A
(d) Commissions ....................Sale of the Contract and Sales
Commission
(e) Expenses - Registrant ..........Charges, Fees and Deductions; Brief
Description of the Contract
(f) Fund Expenses ..................Charges, Fees and Deductions
(g) Organizational Expenses ........N/A
<PAGE>
7. Contracts
(a) Persons with Rights ............Brief Description of the Contract;
Substitution of Fund Shares; The
Contracts; Voting Rights; Death
Benefit; Modified Procedures
(b) (i) Allocation of
Purchase Payments ..........Brief Description of the Contract;
Allocation of Purchase Payments
(ii) Transfers .................Brief Description of the Contract;
Transfers
(iii) Exchanges ................Transfers
(c) Changes ........................Substitution of Funds; The Contracts;
Modified Procedures;
(d) Inquiries ......................Cover page
8. Annuity Period ......................Brief Description of the Contract;
Effecting an Annuity
9. Death Benefit .......................Death Benefit
10. Purchases and Contract Value
(a) Purchases ......................Brief Description of the Contract;
Allocation of Purchase Payments;
The Accumulation Period; Transfers
(b) Valuation ......................Definitions; The Accumulation Period
(c) Daily Calculation ..............Definitions; The Accumulation Period
(d) Underwriter ....................Sale of the Contract and Sales
Commission
11. Redemptions
(a) - By Owners ....................Brief Description of the Contract;
Transfers; Withdrawals; Effecting An
Annuity; Federal Tax Status
- By Annuitant .................Transfers; Withdrawals; Effecting An
Annuity; Federal Tax Status
(b) Texas ORP ......................Texas Optional Retirement Plan
(c) Check Delay ....................N/A
(d) Lapse ..........................N/A
(e) Free Look ......................The Accumulation Period
12. Taxes ...............................Brief Description of the Contract;
Federal Tax Status
13. Legal Proceedings ...................Litigation
14. Table of Contents for the Statement
of Additional Information ........Statement of Additional Information
<PAGE>
PART B
Item of Form N-4 Part B Caption
15. Cover Page ..........................Cover Page
16. Table of Contents ...................Table of Contents
17. General Information and
History ...........................N/A
18. Services
(a) Fees and Expenses of
Registrant ....................Charges, Fees and Deductions
(prospectus)
(b) Management Contracts ...........N/A
(c) Custodian ......................N/A
Independent Public
Accountant .....................Expert
(d) Assets of Registrant ...........Prudential Discovery Select Group
Variable Contract Account (prospectus)
(e) Affiliated Persons .............Prudential Insurance Company of America
(prospectus)
(f) Principal Underwriter ..........Sale of the Contract and Sales
Commission (prospectus)
19. Purchase of Securities
Being Offered .....................Sale of the Contract and Sales
Commission (prospectus)
Offering Sales Load ................N/A
20. Underwriters ........................Sale of the Contract and Sales
Commission (prospectus)
21. Calculation of Performance
Data ................................Performance Information; Performance
Information (prospectus)
22. Annuity Payments ....................Effecting An Annuity (prospectus)
23. Financial Statements ................Financial Statements
<PAGE>
PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits ........................Financial Statements and Exhibits
(a) Financial Statements ...........(a) Financial Statements
(b) Exhibits .......................(b) Exhibits
25. Directors and Officers
of the Depositor ....................Directors and Officers of Prudential
Insurance Company of America
26. Persons Controlled By or
Under Common Control with the
Depositor or Registrant .............Persons Controlled By or Under Common
Control with the Depositor or
Registrant
27. Number of Contractowners ............Number of Contractholders
28. Indemnification .....................Indemnification
29. Principal Underwriters ..............Principal Underwriter
30. Location of Accounts
and Records .........................Location of Books and Records
31. Management Services .................Management Services
32. Undertakings ........................Undertakings and Representations
Signature Page ......................Signatures
<PAGE>
PART A
PROSPECTUS
<PAGE>
PROSPECTUS
THE PRUDENTIAL DISCOVERY SELECT GROUP VARIABLE CONTRACT ACCOUNT
Group Variable Annuity Contracts
DISCOVERY SELECT
This prospectus describes the DISCOVERY SELECT(SM) Group Variable Annuity
Contract*, a group variable annuity contract offered by The Prudential Insurance
Company of America ("Prudential"), a mutual life insurance company, in
connection with retirement arrangements that qualify for federal tax benefits
under sections 401, 403(b), 408 or 457 of the Internal Revenue Code of 1986 and
with non-qualified annuity arrangements.
Following the deduction for any applicable taxes, contributions made on behalf
of Participants may be allocated as the Participant directs in one or more of
the following ways.
o They may be allocated to one or more of twenty-two Subaccounts, each of which
invests in one of the following portfolios of The Prudential Series Fund,
Inc. (the "Prudential Series Fund") or other listed portfolios (collectively,
the "Funds"):
THE PRUDENTIAL SERIES FUND, INC.
<TABLE>
<CAPTION>
<S> <C> <C>
Money Market Portfolio Equity Income Portfolio Flexible Managed Portfolio
Diversified Bond Portfolio Equity Portfolio Conservative Balanced Portfolio
High Yield Bond Portfolio Prudential Jennison Portfolio Government Income Portfolio
Stock Index Portfolio Global Portfolio
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. T. ROWE PRICE EQUITY SERIES, INC.
AIM V.I. Growth and Income Fund AIM V.I. Value Fund Equity Income Portfolio
JANUS ASPEN SERIES T. ROWE PRICE INTERNATIONAL
Growth Portfolio International Growth Portfolio International Stock Series
OCC ACCUMULATION TRUST Portfolio Inc.
Managed Portfolio Small Cap Portfolio MFS VARIABLE INSURANCE TRUST
WARBURG PINCUS TRUST Emerging Growth Series Research Series
Post-Venture Capital Portfolio
</TABLE>
o They may be allocated to the Guaranteed Interest Account which guarantees a
stipulated rate of interest if held for a specified period of time. This
prospectus does not describe that account and will mention the Guaranteed
Interest Account only where necessary to explain how Prudential Discovery
Select Group Variable Contract Account works.
Continued on next page
----------
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ACCOMPANIED
BY A CURRENT PROSPECTUS FOR EACH OF THE FUNDS. EACH OF THESE PROSPECTUSES SHOULD
BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
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.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
C/O Prudential Retirement Services
30 Scranton Office Park
Moosic, PA 18507-1789
Telephone 1-800-458-6333
<PAGE>
Continued from front cover
This prospectus provides information a prospective investor should know before
investing. Additional Information about the Contract has been filed with the
Securities and Exchange Commission in a Statement of Additional Information,
dated _____________ 1997, which information is incorporated herein by reference,
and is available without charge upon written or oral request directed to the
address or telephone number shown below.
The accompanying prospectuses for the Funds and the related statements of
additional information describe the investment objectives and risks of investing
in the portfolios. Additional portfolios and subaccounts may be offered in the
future.
The Contents of the Statement of Additional information with respect to the
contract appear on page__ of this prospectus.
<PAGE>
PROSPECTUS CONTENTS
Page
----
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS.......................
BRIEF DESCRIPTION OF THE CONTRACT..........................................
FEE TABLE..................................................................
GENERAL INFORMATION ABOUT PRUDENTIAL, PRUDENTIAL DISCOVERY VARIABLE
SELECT GROUP CONTRACT ACCOUNT AND THE INVESTMENT OPTIONS AVAILABLE
UNDER THE CONTRACT.........................................................
Prudential Insurance Company of America..............................
Prudential Discovery Select Group Variable Contract Account..........
The Funds............................................................
Guaranteed Interest Account..........................................
THE CONTRACTS..............................................................
The Accumulation Period .............................................
Allocation of Purchase Payments......................................
Asset Allocation Program.............................................
Transfers............................................................
Dollar Cost Averaging................................................
Auto-Rebalancing.....................................................
Withdrawals..........................................................
Systematic Withdrawal Plan...........................................
Texas Optional Retirement Plan.......................................
Death Benefit........................................................
Discontinuance of Contribution.......................................
Loan Provision.......................................................
Modified Procedures..................................................
CHARGES, FEES AND DEDUCTIONS...............................................
Administrative Charge and Annual Account Charge......................
Charge for Assuming Mortality and Expense Risks......................
Expenses Incurred by the Funds.......................................
Withdrawal Charge....................................................
Limitations on Withdrawal Charge.....................................
Premium Taxes........................................................
FEDERAL TAX STATUS.........................................................
Taxes on Prudential..................................................
Qualified Retirement Arrangements Using the Contracts................
Non-Qualified Arrangements Using the Contracts.......................
Withholding..........................................................
EFFECTING AN ANNUITY.......................................................
Life Annuity with Payments Certain...................................
Annuity Certain......................................................
Joint and Survivor Annuity with Payment Certain......................
Purchasing the Annuity...............................................
OTHER INFORMATION..........................................................
Misstatement of Age or Sex...........................................
Sale of the Contract and Sales Commission............................
i
<PAGE>
Voting Rights........................................................
Substitution of Fund Shares..........................................
Performance Information..............................................
Reports to Participants..............................................
State Regulation.....................................................
Litigation...........................................................
Statement of Additional Information........................................
Additional Information...............................................
Financial Statements.................................................
ii
<PAGE>
DEFINITIONS OF SPECIAL TERMS USED
IN THIS PROSPECTUS
Account - See the Prudential Discovery Select Group Variable Contract Account
(the "Discovery Account") below.
Accumulation Period - The period, prior to the effecting of an annuity, during
which the amount credited to a Participant Account may vary with the investment
performance of any Subaccount of the Discovery Account, or the interest rate
credited under the Guaranteed Interest Account, as selected.
Annuitant - The person or persons, designated by the Participants upon whose
life or lives monthly annuity payments are based after an annuity is effected.
Beneficiary - A person designated by a Participant to receive benefits from
funds held under the Contract.
Business Day - A day on which both the New York Stock Exchange and Prudential
are open for business.
Code - The Internal Revenue Code of 1986, as amended.
Contractholder - The employer, association or trust to which Prudential has
issued a Contract. "You" or "Your" means the Contractholder.
Contracts - The Group Variable Annuity Contracts described in this Prospectus
and offered for use in connection with retirement arrangements that qualify for
federal tax benefits under Sections 401, 403(b), 408 or 457 of the Internal
Revenue Code and with non-qualified annuity arrangements.
Contract Value - The dollar amount held under a Contract.
Employer - Plan Sponsor.
Funds - The Portfolios of the Prudential Series Fund, Inc., AIM Variable
Insurance Funds, Inc., T. Rowe Price Equity Series, Inc., T. Rowe Price
international Series, Inc., Janus Aspen Series, MFS Variable Insurance Trust,
Warburg Pincus Trust, and OCC Accumulation Trust available under the Contract.
General Account - The assets of Prudential other than those allocated to the
Discovery Account or any other separate account of Prudential.
Guaranteed Interest Account - An allocation option under the Contract funded by
Prudential's General Account. It is not part of nor dependent upon the
investment performance of the Discovery Account. This prospectus does not
describe the Guaranteed Interest Account.
Participant - A person who makes contributions, or for whom contributions have
been made, and to whom they remain credited under the Contract.
Participant Account - An account established for each Participant to record the
amount credited to the Participant under the Contract.
Participant Account Value - The dollar amount held in a Participant Account.
Prudential - The Prudential Insurance Company of America. "We," "us," or "our"
means Prudential.
Prudential Discovery Select Group Variable Contract Account - A separate account
of Prudential registered under the Investment Company Act of 1940 as a unit
investment trust, invested through its Subaccounts in shares of the
corresponding Fund Portfolios.
Subaccount - A division of the Discovery Account, the assets of which are
invested in shares of the corresponding portfolio of the Funds.
Unit and Unit Value - A Participant is credited with Units in each Subaccount in
which he invests. The value of these Units changes each Business Day to reflect
the investment results of, and deductions of charges from, the Subaccounts, and
the expenses of the Funds in which the assets of the Subaccounts are invested.
The number of Units credited to a Participant in any Subaccount of the Discovery
Account is determined by dividing the amount of the contribution or transfer
made on his behalf to that Subaccount by the applicable Unit Value for the
Business Day on which the contribution or transfer is received at the address
shown on the
1
<PAGE>
cover of this Prospectus. The number of Units credited to a Participant under
any Subaccount will be reduced by the number of Units canceled as a result of
any transfer or withdrawal by a Participant from that Subaccount.
Valuation Period - The period of time from one determination of the value of the
amount invested in a Subaccount to the next. Such determinations are made when
the net asset values of the Funds are calculated, which is generally at 4:15
p.m. New York City time on each day during which the New York Stock Exchange and
Prudential are open.
Variable Investment Options - The Subaccounts.
2
<PAGE>
BRIEF DESCRIPTION OF THE CONTRACT
The Prudential Insurance Company of America ("Prudential") offers the Discovery
Select Group Variable Annuity Contracts for use in connection with retirement
arrangements that qualify for federal tax benefits under Sections 401, 403(b),
408 or 457 of the Internal Revenue Code of 1986 (the "Code") and with
nonqualified annuity arrangements. The Contracts are group annuity contracts and
generally are issued to employers (Contractholders) who make contributions under
them on behalf of their employees. A person for whom contributions have been
made and to whom they remain credited under a Contract is a "Participant."
The value of a Participant's investment depends upon the performance of the
investment option[s]. Currently, there are twenty-two variable investment
options, each of which is called a Subaccount. The assets of each Subaccount are
invested in a corresponding Fund listed beginning on page __. A Participant may
direct contributions made on his or her behalf to one or a combination of
variable investment options as well as the Guaranteed Interest Account. A
separate Participant Account is set up for each Participant. Amounts held under
a Participant Account may be withdrawn, in whole or in part, prior to the
annuity date. The Contract also provides for a death benefit.
Contributions to the Contract made on behalf of a Participant through payroll
deduction arrangements or similar agreements with the Contractholder must be
made at a rate of at least $200 during any 12-month period. Any other
contribution to the Contract must be at least $500, except for contributions to
an Individual Retirement Annuity for a non-working spouse under Section 408 of
the Code (or working spouse who elects to be treated as a non-working spouse),
which must be at least $250. All contributions may be divided among the
Discovery Account and Guaranteed Interest Account that comprise the Contract.
See "The Accumulation Period," pages __ .
Prudential assesses charges under the Contract for the costs of selling and
distributing the Contract, for administering the Contract, and for assuming
mortality and expense risks under the Contract. A mortality and expense risk
charge equal to an annual rate of 0.15% is deducted from the assets held in the
variable investment options. This charge may decrease for certain qualified
plans. An administrative charge is also deducted from the assets held in the
variable investment options which charge is scheduled to decrease as the number
of Participants or the Contract Value under a Contract reaches certain specified
levels. Further details about the schedule of administrative charges is found
under Fee Table, page __ and Administrative Fee and Annual Account Charge, page
__.
If we provide services under an administrative services agreement, an additional
administrative charge of $30, the annual account charge, is assessed on or about
the last day each calendar year and at the time of a full withdrawal. The annual
account charge will be prorated for new Participants on a monthly basis for
their first year of participation. A withdrawal charge may be imposed upon
withdrawals made in the first seven years after the initial contribution made on
behalf of a Participant. The maximum withdrawal charge is 7% of the
contributions made on behalf of the Participant. A charge against each of the
Fund's assets is also made by the investment adviser for providing investment
advisory and management services. Further detail about charges may be found
under Charges, Fees and Deductions, page __.
Unless restricted by the retirement arrangement under which he is covered, or by
the withdrawal restrictions imposed by federal tax law on tax-deferred annuity
contracts subject to Section 403(b) of the Code and on interests in deferred
compensation plans under Section 457 of the Code, a Participant may withdraw, at
any time, all or part of his Participant Account. See "Withdrawals," pages____.
Withdrawals may be subject to tax under the Internal Revenue Code, including,
under certain circumstances, a 10% penalty tax on premature withdrawals. See
"Federal Tax Status," pages _____. In addition, all or a part of a Participant's
Account may be transferred among the Subaccounts and Guaranteed Interest Account
without the imposition of the withdrawal charge or tax liability.
This Brief Description of the Contract is intended to provide a broad overview
of the more significant features of the Contract. More detailed information will
be found in subsequent sections of this prospectus and in the Contract document.
3
<PAGE>
FEE TABLE
Participant Transaction Expenses
Sales Charge Imposed on Contributions.................................. None
Maximum Withdrawal Charge (as a percentage of contributions withdrawn):
The Withdrawal Charge Will Be Equal
To The Following Percentage Of The
Years of Contract Participation Contribution Withdrawn
------------------------------- -----------------------------------
First Year 7%
Second Year 6%
Third Year 5%
Fourth Year 4%
Fifth Year 3%
Sixth Year 2%
Seventh Year 1%
Eighth and Subsequent Years No Charge
Maximum Annual Account Charge.......................................... $30
Discovery Account Annual Expenses
(as a Percentage of average Participant Account Value)
All Subaccounts
<TABLE>
<CAPTION>
Size of Contract Mortality & Expense Administrative Total Separate Account
Number of Participants and Contract Value Risk Fee Fee Annual Expenses
- ----------------------------------------- ------------------- -------------- ----------------------
<S> <C> <C> <C> <C> <C>
Below 250 and Below $1 million 0.15% 1.10% 1.25%
250 to 5000 or $1 million to $50 million 0.15% 0.80% 0.95%
Over 5000 or In excess of $50 million 0.15% 0.60% 0.75%
</TABLE>
Annual Expenses Of The Funds
(as a percentage of portfolio average net assets)
Total Fund Annual
Investment Expenses (After
Management Other Expense
Fee Expenses Reimbursements)
----- -------- ----------------
THE PRUDENTIAL SERIES
FUND(1)
Money Market Portfolio 0.40% __% __%
Diversified Bond Portfolio 0.40% __% __%
High Yield Bond Portfolio 0.55% __% __%
Stock Index Portfolio 0.35% __% __%
Equity Income Portfolio 0.40% __% __%
Equity Portfolio 0.45% __% __%
Prudential Jennison Portfolio 0.60% __% __%
Global Portfolio 0.75% __% __%
Flexible Managed Portfolio 0.60% __% __%
Conservative Balanced
Portfolio 0.55% __% __%
4
<PAGE>
Government Income 0.40% __% __%
Portfolio
Total Fund Annual
Investment Expenses (After
Management Other Expense
Fee Expenses Reimbursements)
----- -------- ----------------
AIM VARIABLE INSURANCE
FUNDS, INC.(2)
AIM V.I. Growth and Income 0.65% ___% ___%
Fund..........................
AIM V.I. Value Fund........... 0.65% ___% ___%
JANUS ASPEN SERIES(3)
Growth Portfolio.............. 0.65% ___% ___%
International Growth Portfolio 0.00% ___% ___%
MFS VARIABLE INSURANCE
TRUST(4)
Emerging Growth Series ....... 0.75% ___% ___%
Research Series............... 0.75% ___% ___%
OCC ACCUMULATION
TRUST(5)
Managed Portfolio............. 0.80% ___% ___%
Small Cap Portfolio.......... 0.80% ___% ___%
T. ROWE PRICE(6)
T. Rowe Price Equity Series,
Inc., Equity Income Portfolio 0.85% ___% ___%
T. Rowe Price International
Series, Inc., International Stock
Portfolio ....................... 1.05% ___% ___%
WARBURG PINCUS TRUST(7)
Post-Venture Capital Portfolio 0.64% ___% ___%
The purpose of the foregoing tables is to assist Participants in understanding
the expenses that they bear, directly or indirectly relating to the Prudential
Discovery Select Group Variable Contract Account and the Funds. The expenses
relating to the Funds (other than those in the Prudential Series Fund) have been
provided to Prudential by the Funds and have not been independently verified by
Prudential. See the sections on charges in this Prospectus and the accompanying
prospectuses for the Funds. The above tables do not include any taxes
attributable to contributions nor any premium taxes. Currently, there is no
deduction for such taxes at the time contributions are made, but in some states,
a deduction is made when an annuity is effected.
(1) The Prudential Series Fund. With respect to The Prudential Series Fund
portfolios, except for the Global Portfolio, Prudential reimburses a portfolio
when its ordinary operating expenses, excluding taxes, interest, and brokerage
commissions exceed 0.75% of the portfolio's average daily net assets. The
amounts listed for the portfolios under "Other Expenses" are based on amounts
incurred in the last fiscal year.
(2) AIM Variable Insurance Funds, Inc. AIM may from time to time voluntarily
waive or reduce their respective fees. Fee waivers or reductions, other than
those contained in the agreement with the adviser,
5
<PAGE>
may be modified or terminated at any time. Management fees and other expenses
have been restated to reflect current agreements which do not include waivers or
reductions for the AIM V.I. Growth and Income Fund.
(3) Janus Aspen Series. Janus Capital has agreed to reduce each Portfolio's
advisory fee to the extent such fee exceeds the effective rate of the Janus
retail fund corresponding to such Portfolio. Janus Capital may terminate this
fee reduction or any of the expense limitations set forth herein at any time
upon 90 days' notice to the Trustees of the Janus Aspen Series. The fees and
expenses for the International Growth Portfolio have been restated to reflect
the 1.25% expense limitation in effect from June 3, 1996 through April 30, 1997.
Without fee waivers or reductions, the Management Fee, Other Expenses and Total
Fund Annual Expenses would have been ___%, ___% and ___% for the Growth
Portfolio and ___%, ___% and ___% for the International Growth Portfolio.
(4) MFS Variable Insurance Trust. With respect to the MFS Trust Emerging Growth
Series and Research Series the adviser has agreed to bear, subject to
reimbursement, expenses for each of the MFS Funds such that each aggregate
Funds' operating expenses shall not exceed, on an annualized basis, 1.00% of the
average daily net assets of the MFS Funds from November 2, 1994 through December
31, 1996, 1.25% of the average daily net assets of the Series from January 1,
1997 through December 31, 1988, and 1.50% of the average daily net assets of the
Series from January 1, 1999 through December 31, 2004; provided however, that
this obligation may be terminated or revised at any time. Absent this expense
arrangement, "Other Expenses" and "Total Fund Annual Expenses" for the fiscal
year ended December 31, 1996 would be ___% and ___% respectively for the
Emerging Growth Series and ___% and ___% respectively for the Research Series.
(5) OCC Accumulation Trust. Effective May 1, 1996, the expenses of the Managed
and Small Cap Portfolios of the OCC Accumulation Trust are contractually limited
by OpCap Advisors so that their respective annualized operating expenses do not
exceed 1.25% of their respective average daily net assets. Furthermore, through
April 30, 1997, the annualized operating expenses of the Managed and Small Cap
Portfolios will be voluntarily limited by OpCap Advisors so that annualized
operating expense limitations, and taking into account the revised contractual
provisions effective May 1, 1996 concerning management fees and expenses
limitations, the Management Fees, Other Expenses and Total Portfolio Annual
Expenses incurred for the fiscal year ended December 31,1996 would have been
____%, ___%, and ____%, respectively, for the Managed Portfolio and would have
been ___%, ___% and ___%, respectively, for the Small Cap Portfolio.
(6) T. Rowe Price Equity Series, Inc. and T. Rowe Price International Series,
Inc. With respect to the T. Rowe Price Funds, the Investment Management Fees
include the ordinary expenses of operating the Funds.
(7) Warburg Pincus Trust. With respect to the Warburg Trust Post-Venture Capital
Portfolio, absent the anticipated waiver of fees by the Fund's investment
adviser and co-administrator, the Investment Management Fee would equal ____%;
Other Expenses would equal ____%, and Total Fund Annual Expenses would equal
____%.
Examples of Fees and Expenses
The following examples illustrate the cumulative dollar amount of all the above
expenses that would be incurred on each $1,000 of Participant investment.
o The examples assume a consistent 5% annual return on invested assets.
o The examples do not take into consideration any taxes attributable to
contributions nor any premium taxes which may be payable at the time of
annuitization or at the time contributions are made.
o The examples assume that the maximum administrative fee equivalent to an
effective annual rate of 1.10% is deducted daily from the assets in each
of the Subaccounts.
6
<PAGE>
o The examples assume that the annual account charge is deducted from the
assets of each Subaccount based on a Participant Account Value of ______.
For a term less than 3 years, the expenses shown in Table I describe applicable
charges for withdrawal of an entire Participant Account. The examples should not
be considered to be a representation of past or future expenses; actual expenses
incurred in any given year may be more or less than those shown in the examples.
TABLE I
If a Participant withdraws his entire Participant Account Value from the
specified Subaccount just prior to the end of the applicable time period, the
Participant would pay the following cumulative expenses on each $1,000 invested.
------
1 Year 3 Years
------ -------
THE PRUDENTIAL SERIES
FUND
Money Market Subaccount... __ __
Diversified Bond Subaccount __ __
High Yield Bond Subaccount __ __
Stock Index Subaccount.... __ __
Equity Income Subaccount.. __ __
Equity Subaccount......... __ __
Prudential Jennison __ __
Subaccount................
Global Subaccount.........
Flexible Managed Subaccount __ __
Conservative Balanced
Subaccount................ __ __
Government Income
Subaccount................ __ __
AIM VARIABLE INSURANCE
FUNDS, INC.
AIM V.I. Growth and Income
Subaccount................ __ __
AIM V.I. Value Subaccount. __ __
JANUS ASPEN SERIES
Growth Subaccount......... __ __
International Growth
Subaccount................ __ __
MFS VARIABLE INSURANCE
TRUST
Emerging Growth Subaccount __ __
Research Subaccount....... __ __
OCC ACCUMULATION TRUST
Managed Subaccount........ __ __
Small Cap Subaccount... __ __
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T. ROWE PRICE
T Rowe Price Equity Series
Inc., Equity Income
Portfolio ................. __ __
T. Rowe Price International
Series, Inc., International
Stock Subaccount........... __ __
WARBURG PINCUS TRUST
Post-Venture Capital Portfolio __ __
TABLE II
If a Participant does not withdraw any portion of his Participant Account Value
from the specified Subaccount or use his Participant Account Value to affect an
annuity as of the end of the applicable time period, the Participant would pay
the following cumulative expenses on each $1,000 invested.
------
1 Year 3 Years
------ -------
THE PRUDENTIAL SERIES
FUND
Money Market Subaccount... __ __
Diversified Bond Subaccount __ __
High Yield Bond Subaccount __ __
Stock Index Subaccount.... __ __
Equity Income Subaccount.. __ __
Equity Subaccount......... __ __
Prudential Jennison
Subaccount................ __ __
Global Subaccount......... __ __
Flexible Managed
Subaccount................ __ __
Conservative Balanced
Subaccount................ __ __
Government Income
Subaccount................ __ __
AIM VARIABLE INSURANCE
FUNDS, INC.
AIM V.I. Growth and Income
Subaccount.......... __ __
AIM V.I. Value Subaccount. __ __
JANUS ASPEN SERIES
Growth Subaccount......... __ __
International Growth
Subaccount................ __ __
MFS VARIABLE INSURANCE
TRUST
Emerging Growth
Subaccount................ __ __
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Research Subaccount....... __ __
OCC ACCUMULATION TRUST
Managed Subaccount........ __ __
Small Cap Subaccount..... __ __
T. ROWE PRICE
T. Rowe Price Equity Series,
Inc., Equity Income
Subaccount................ __ __
T. Rowe Price International
Series, Inc., International
Stock Subaccount.......... __ __
WARBURG PINCUS TRUST
Post-Venture Capital
Subaccount................ __ __
Loans taken by a Participant from a Participant Account may be subject to
charges for establishing and maintaining the loan. The examples do not take into
account any deduction for such charges.
GENERAL INFORMATION ABOUT PRUDENTIAL,
THE PRUDENTIAL DISCOVERY SELECT GROUP VARIABLE CONTRACT ACCOUNT AND
THE INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT
The Prudential Insurance Company of America
Prudential is a mutual life insurance company incorporated in 1873 under the
laws of the State of New Jersey. Its corporate office is located at Prudential
Plaza, Newark, New Jersey. It has been investing for pension funds since 1928.
Prudential is responsible for the administrative and recordkeeping functions of
the Prudential Discovery Select Group Variable Contract Account and pays the
expenses associated with them. These functions include enrolling Participants,
receiving and allocating contributions, maintaining Participant Accounts,
preparing and distributing confirmations, statements, and reports. The
administrative and recordkeeping expenses borne by Prudential include salaries,
rent, postage, telephone, travel, legal, actuarial and accounting fees, office
equipment, stationery and maintenance of computer and other systems.
Prudential is reimbursed for these administrative and recordkeeping expenses by
the annual account charge and the daily charge against the assets of each
Subaccount for administrative expenses.
THE PRUDENTIAL DISCOVERY SELECT GROUP VARIABLE CONTRACT ACCOUNT
The Prudential Discovery Select Group Variable Contract Discovery Account (the
"Discovery Account") was established on February 11, 1997, under New Jersey law
as a separate investment account. The Discovery Account meets the definition of
a "separate account" under federal securities laws. Prudential is the legal
owner of the assets in the Discovery Account and is obligated to provide all
benefits under the Contracts. Prudential will at all times maintain assets in
the Discovery Account with a total market value at least equal to the reserve
and other liabilities relating to the variable benefits attributable to the
Discovery Account. These assets are segregated from all of Prudential's other
assets and are not chargeable with liabilities arising out of any other business
Prudential conducts. In addition to these assets, the Discovery Account's assets
may include funds contributed by Prudential to commence operation of the
Discovery Account and may include accumulations of the charges Prudential makes
against the Discovery Account. From time
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to time these additional assets will be transferred to Prudential's General
Account. Before making any such transfer, Prudential will consider any possible
adverse impact the transfer might have on the Discovery Account.
The Discovery Account is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust, which is a type of investment company. This does not involve
any supervision by the SEC of the management or investment policies or practices
of the Discovery Account. For state law purposes, the Discovery Account is
treated as a part or division of Prudential. There are currently twenty-two
Subaccounts within the Discovery Account which invest in corresponding
portfolios of the Funds available under the Contracts. Additional Subaccounts
may be established in the future.
The Funds
The following is a list of each Fund, its investment objectives and its
investment adviser:
THE PRUDENTIAL SERIES FUND, INC.
Money Market Portfolio. The maximum current income that is consistent with
stability of capital and maintenance of liquidity through investment in
high-quality short-term debt obligations. There are no assurances that this
portfolio will maintain a stable net asset value.
Diversified Bond Portfolio. A high level of income over the longer term while
providing reasonable safety of capital through investment primarily in readily
marketable intermediate and long-term fixed income securities that provide
attractive yields but do not involve substantial risk of loss of capital through
default.
High Yield Bond Portfolio. Achievement of a high total return through investment
in high yield/high risk fixed income securities in the medium to lower quality
ranges.
Stock Index Portfolio. Achievement of investment results that correspond to the
price and yield performance of publicly traded common stocks in the aggregate by
following a policy of attempting to duplicate the price and yield performance of
the Standard & Poor's 500 Composite Stock Price Index.
Equity Income Portfolio. Both current income and capital appreciation through
investment primarily in common stocks and convertible securities that provide
favorable prospects for investment income returns above those of the Standard &
Poor's 500 Composite Stock Price Index or the New York Stock Exchange Composite
Index.
Equity Portfolio. Capital appreciation through investment primarily in common
stocks of companies, including major established corporations as well as smaller
capitalization companies, that appear to offer attractive prospects of price
appreciation that is superior to broadly-based stock indices. Current income, if
any, is incidental.
Prudential Jennison Portfolio. Long-term growth of capital through investment
primarily in equity securities of established companies with above-average
growth prospects. Current income, if any, is incidental.
Global Portfolio. Long-term growth of capital through investment primarily in
common stock and common stock equivalents of foreign and domestic issues.
Current income, if any, is incidental.
Flexible Managed Portfolio (formerly Aggressively Managed Flexible Portfolio).
Achievement of a high total return consistent with a portfolio having an
aggressively managed mix of money market instruments, fixed income securities,
and common stocks, in proportions believed by the investment advisor to be
appropriate for an investor desiring diversification of investment who is
willing to accept a relatively high risk of loss in an effort to achieve greater
appreciation.
Conservative Balanced Portfolio (formerly Conservatively Managed Flexible
Portfolio). Achievement of a favorable total investment return consistent with a
portfolio having a conservatively managed mix of money market instruments, fixed
income securities, and common stocks of established companies, in
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proportions believed by the investment advisor to be appropriate for an investor
desiring diversification of investment who prefers a relatively lower risk of
loss than that associated with the Flexible Managed Portfolio while recognizing
that this reduces the chances of greater appreciation.
Government Income Portfolio (formerly Government Securities Portfolio). A high
level of income over the longer term consistent with the preservation of capital
through investment primarily in U.S. Government securities, including
intermediate and long-term U.S. Treasury securities and debt obligations issued
by agencies of or instrumentalities established, sponsored or guaranteed by the
U.S. Government. At least 65% of the total assets of the portfolio will be
invested in U.S. Government securities. Prudential is the investment advisor for
the assets of each of the portfolios of the Prudential Series Fund. Prudential
has a Service Agreement with its wholly-owned subsidiary, The Prudential
Investment Corporation ("PIC"), which provides that, subject to Prudential's
supervision, PIC will furnish investment advisory services in connection with
the management of the Prudential Series Fund. In addition, Prudential has
entered into a Subadvisory Agreement with its wholly-owned subsidiary Jennison
Associates Capital Corp. ("Jennison"), under which Jennison furnishes investment
advisory services in connection with the management of the Prudential Jennison
Portfolio.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund. The Fund's investment objective is to seek
growth of capital, with current income as a secondary objective.
AIM V.I. Value Fund. The Fund's investment objective is to achieve long-term
growth of capital by investing primarily in equity securities judged by AIM
Advisors, Inc. to be undervalued relative to the current or projected earnings
of the companies issuing the securities, or relative market values of assets
owned by the companies issuing the securities or relative to the equity market
generally. Income is a secondary objective and would be satisfied principally
from the income (interest and dividends) generated by the common stocks,
convertible bonds and convertible preferred stocks that make up the Fund's
portfolio.
AIM Advisors, Inc., serves as the investment adviser to the AIM V.I. Value Fund
and the AIM V.I. Growth and Income Fund.
JANUS ASPEN SERIES
Growth Portfolio. A diversified portfolio that seeks long-term growth of capital
by investing primarily in common stocks, with an emphasis on companies with
larger market capitalizations.
International Growth Portfolio. A diversified portfolio that seeks long-term
growth of capital by investing primarily in common stocks of foreign issuers.
Janus Capital Corporation is the investment adviser to the Growth Portfolio and
is responsible for the day-to-day management of the portfolios and other
business affairs of the portfolios.
MFS VARIABLE INSURANCE TRUST
Emerging Growth Series. This Series seeks to provide long-term growth of
capital. Dividend and interest income from portfolio securities, if any, is
incidental to the Series' investment objective of long-term growth of capital.
Research Series. The Research Series' investment objective is to provide
long-term growth of capital and future income. Massachusetts Financial Services
Company, a Delaware corporation, is the investment adviser to each MFS Series.
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OCC ACCUMULATION TRUST (formerly known as Quest for Value Accumulation Trust)
Managed Portfolio. Growth of capital over time through investment in a portfolio
consisting of common stocks, bonds and cash equivalents, the percentages of
which will vary based on management's assessments of relative investment.
Small Cap Portfolio. Capital appreciation through investment in a diversified
portfolio of equity securities of companies with market capitalizations of under
$1 billion.
OpCap Advisors (formerly known as Quest for Value Advisors, the "OCC Manager")
is responsible for management of the OCC Accumulation Trust's business. Pursuant
to the investment advisory agreement with the OCC Accumulation Trust, and
subject to the authority of the Board of Trustees, the OCC Manager supervises
the investment operation of the Managed Portfolio and the Small Cap Portfolio,
furnishes advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities and provides certain
administrative services for the OCC Accumulation Trust.
T. ROWE PRICE
T. Rowe Price Equity Series, Inc., Equity Income Portfolio. The fund's objective
is to provide substantial dividend income as well as long-term capital
appreciation through investment in common stocks of established companies.
T. Rowe Price International Series, Inc., International Stock Portfolio. The
fund's objective is long-term growth of capital through investment primarily in
common stocks of established, non-U.S. companies.
T. Rowe Price Associates, Inc. is the Investment Manager for the Equity Income
Portfolio and Rowe Price- Fleming International, Inc. is the Investment Manager
for the International Stock Portfolio.
WARBURG PINCUS TRUST
Post-Venture Capital Portfolio. Seeks long-term growth of capital by investing
primarily in equity securities of issuers in their post-venture capital stage of
development and pursues an aggressive investment strategy.
The Warburg Pincus Trust employs Warburg, Pincus Counselors, Inc. as investment
adviser and Abbott Capital Management, L.P. as its sub-investment adviser with
respect to a portion of the Post-Venture Capital Portfolio allocated to private
limited partnerships or other investment funds.
Further information about the Fund portfolios can be found in the accompanying
prospectuses for each Fund.
The investment advisors with respect to the various funds charge a daily
investment management fee as compensation for their services, as set forth in
the table beginning on page __ and as more fully described in the prospectus for
each Fund.
It is conceivable that in the future it may become disadvantageous for both
variable life insurance and variable annuity contract separate accounts to
invest in the same underlying mutual fund. Although neither Prudential, nor the
Funds currently foresees any such disadvantage, the Funds' Boards of Directors
intend to monitor events in order to identify any material conflict between
variable life insurance and variable annuity Contractholders and to determine
what action, if any, should be taken in response thereto. This might force a
Fund to sell securities at disadvantageous prices. Material conflicts could
result from such things as: (1) changes in state insurance law; (2) changes in
federal income tax law; (3) changes in the investment management of any
portfolio of the Funds; or (4) differences between voting instructions given by
variable life insurance and variable annuity Contractholders.
Prudential will be compensated by an affiliate of each of the Funds (other than
those in the Prudential Series Fund) based upon an annual percentage of the
average assets held in the Fund by Prudential under
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<PAGE>
the Contracts. These percentages vary by Fund, and reflect administrative and
other services provided by Prudential.
A full description of the Funds, their investment objectives, management,
policies, and restrictions, their expenses, the risks attendant to investment
therein, and all other aspects of their operation is contained in the
accompanying prospectuses for each Fund and in the related statements of
additional information, which should be read in conjunction with this
Prospectus. There is no assurance that the investment objectives will be met.
GUARANTEED INTEREST ACCOUNT
The Guaranteed Interest Account is a credited interest option available to fund
certain group annuity contracts issued by Prudential. Amounts allocated to the
Guaranteed Interest Account become part of the General Account of Prudential,
which consists of all assets owned by Prudential other than those in the Account
and other separate accounts of Prudential. Subject to applicable law, Prudential
has sole discretion over the investment of the assets of the General Account.
Because of exemptive and exclusionary provisions, interests in the General
Account (which include interests in the Guaranteed Interest Account) are not
registered under the Securities Act of 1933 and the General Account is not
registered as an investment company under the Investment Company Act of 1940.
Accordingly, neither the General Account nor any interests therein are subject
to the provisions of these Acts, and Prudential has been advised that the staff
of the Securities and Exchange Commission has not reviewed the disclosures in
the Prospectus relating to the General Account. Disclosures regarding the
General Account may, however, be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
THE CONTRACTS
Prudential generally issues the Contracts to employers whose employees may
become Participants. Under an IRA, a Participant's spouse may also become a
Participant. A Contract may be issued to an association that represents
employers of employees who become Participants, to an association or union
members that become Participants and to a trustee of a trust with participating
employers whose employees become Participants. Even though an employer, an
association or a trustee is the Contractholder, the Contract normally provides
that Participants shall have the rights and interests under them that are
described in this prospectus. However, when a Contract is used to fund a
deferred compensation plan established under Section 457 of the Internal Revenue
Code, for example, all rights under the Contract are owned by the employer to
whom, or on whose behalf, the Contract is issued. All amounts becoming payable
under the Contract are payable to the employer and are its exclusive property.
For a plan established under Section 457 of the Code, the employee has no rights
or interests under the Contract, including any right or interest in any
Subaccount of the Discovery Account, except as provided in the employer's plan.
This may also be true with respect to certain non-qualified annuity
arrangements.
Also, a particular plan, even if it is not a deferred compensation plan, may
limit a Participant's exercise of certain rights under a Contract. Participants
should check the provisions of their employer's plan or any agreements with the
employer to see if there are any such limitations and, if so, what they are.
THE ACCUMULATION PERIOD
Contributions; Crediting Units; Enrollment Forms; Deduction for Administrative
Expenses.
Contributions to the Contract ordinarily will be made periodically pursuant to a
payroll deduction or similar agreement between the Participant and his employer.
Any contributions to an IRA must be in an amount of no less than $500, except
for contributions to an IRA for a non-working spouse (or working spouse who
elects to be treated as a non-working spouse).
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A Participant designates what portion of the contributions made on his behalf
should be invested in the Subaccounts or the Guaranteed Interest Account. The
Participant may change this designation usually by notifying Prudential at the
address shown on the cover page of this prospectus. Under certain Contracts, an
entity other than Prudential keeps certain records, and Participants under those
Contracts must contact the record-keeper. See "Modified Procedures," page __.
The full amount (100%) of each contribution designated for investment in any
Subaccount is credited to a Participant Account maintained for the Participant.
The number of Units credited to a Participant in a Subaccount is determined by
dividing the amount of the contribution made on his behalf to that Subaccount by
the Subaccount's Unit Value for the business day on which the contribution is
received at the address shown on the cover page of this Prospectus.
The initial contribution made for a Participant will be invested in a Subaccount
no later than two business days after it is received by Prudential, if it is
preceded or accompanied by satisfactory enrollment information. If the
Contractholder submits an initial contribution on behalf of one or more new
Participants that is not preceded or accompanied by satisfactory enrollment
information, then Prudential will allocate such contribution to the Money Market
Subaccount upon receipt, and also will send a notice to the Contractholder that
request allocation information for each such Participant. If the necessary
enrollment information is not received in response to its initial notice to the
Contractholder, Prudential will deliver up to three additional notices to the
Contractholder at monthly intervals that request such allocation information.
After 105 days have passed from the time that Units of the Money Market
Subaccount were purchased on behalf of Participants who failed to provide the
necessary enrollment information, Prudential will redeem the relevant Units and
pay the proceeds (including earnings thereon) to the Contractholder. Any
proceeds paid to the Contractholder under this procedure may be considered a
prohibited and taxable reversion to the Contractholder under current provisions
of the Internal Revenue Code of 1986, as amended. Similarly, returning proceeds
may cause the Contractholder to violate a requirement under the Employee
Retirement Income Security Act of 1974, as amended, to hold all plan assets in
trust. Both problems may be avoided if the Contractholder arranges to have the
proceeds paid into a qualified trust or annuity contract.
The number of Units of a particular Subaccount credited to a Participant will
not be affected by any subsequent change in the value of those Units, but the
dollar value of a Unit will vary from business day to business day depending
upon the investment experience of the Subaccount. The number of Units credited
to a Participant in a Subaccount will be reduced as the result of any annual
account charge.
The value of a Participant Account in a Subaccount on any particular day is
determined by multiplying the total number of Units credited to the Participant
by the Subaccount's Unit Value on that day.
The Unit Value for each Subaccount was set at $1.00 on the date of commencement
of operations of that Subaccount. The Unit Value for any subsequent business day
is determined as of the end of that day by multiplying the Unit Change Factor
for that day by the Unit Value for the preceding business day.
The Unit Change Factor for a Subaccount for any business day is determined by
dividing the current day net asset value for Fund shares by the net asset value
for shares on the previous business day. This factor is then reduced by a daily
equivalent of the mortality and expense risk fee and the administrative fee. The
value of the assets of a Subaccount is determined by multiplying the number of
Fund shares held by that Subaccount by the net asset value of each share and
adding the value of dividends declared by the Fund but not yet paid.
Allocation of Purchase Payments
A Participant determines how the initial contribution will be allocated among
the Subaccounts by specifying the desired allocation on the application or
enrollment form. A Participant may choose to allocate nothing to a particular
Subaccount. Unless a Participant tells us otherwise, subsequent contributions
will be allocated in the same proportions as the most recent contribution made
by that Participant. A Participant may change the way in which subsequent
contributions are allocated by providing Prudential with proper written
instruction or by telephoning the Prudential Retirement Services, P.O. Box 5410,
Scranton,
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Pennsylvania 18505-5410 at the toll-free number provided by Prudential, once a
Participant provided the appropriate identification to effect a telephone
transfer. See Transfers, below.
Asset Allocation Program
An Asset Allocation Program may be available to assist Participants in
determining how to allocate purchase payments. If a Participant chooses to
participate in the program, the Participant's registered representative will
provide him or her with an investor profile questionnaire. Based on the
Participant's answers to the questionnaire, a software program, designed by The
Prudential with the assistance of Ibbotson Associates, will identify an asset
allocation model that is appropriate for investors that have investment
objectives, risk tolerance and time horizons comparable to the Participant. The
Asset Allocation Program will be available at no charge to the Participant. A
Participant is under no obligation to participate in the program or to invest
according to the program recommendations. A Participant may ignore, in whole or
in part, the investment allocations provided by the program.
The Asset Allocation Program is intended as an aid in making purchase payment
allocations. It is not a guarantee of investment return and there can be no
assurance that any portfolio will attain its investment objectives. A
Participant should consider reviewing his or her investor profile questionnaire
annually, and each time his or her investor profile changes.
Transfers
A Participant may transfer out of an investment option into any combination of
other investment options available under the Contract. The transfer request may
be in dollars, such as a request to transfer $1,000 from one Subaccount or from
the Guaranteed Interest Account, or, in the case of Subaccounts, may be in terms
of a percentage reallocation among Subaccounts. In the latter case, the
percentages must be whole numbers. A Participant may make transfers by proper
written notice to the Prudential Retirement Services, or by telephone, once the
Participant has provided appropriate identification to effect a telephone
transfer.
If a Contractholder has telephone privileges, each Participant will
automatically be enrolled to use the Telephone Transfer System. A Participant
may decline those privileges on a form supplied by the Contractholder or
Prudential. Prudential has adopted procedures designed to ensure that requests
by telephone are genuine. We will not be held liable for following telephone
instructions we reasonably believe to be genuine. We cannot guarantee that a
Participant will be able to get through to complete a telephone transfer during
peak periods such as periods of drastic economic or market change.
Unless restricted by the retirement arrangement under which a Participant is
covered, upon the receipt by Prudential of a duly completed written transfer
request form or properly authorized telephone transfer request, all or a portion
of the Participant Account in any of the Subaccounts will be transferred to
another Subaccount or from the Guaranteed Interest Account to the Subaccounts.
Transfers from the Guaranteed Interest Account may be restricted. There is no
minimum transfer amount. As of the day the transfer request is received, the
Participant's Subaccount(s) from which the transfer is made will be reduced by
the number of Units obtained by dividing the amount to be transferred by the
Unit Value for that day. If the transfer is made to another Subaccount as of the
same day, the number of Units credited to the Participant in that Subaccount
will be increased by means of a similar calculation. Prudential reserves the
right to limit the frequency of these transfers. All transfers are subject to
the terms and conditions set forth in this Prospectus and in the Contract(s)
covering a Participant.
Different procedures may apply for Contracts under which an entity other than
Prudential provides record keeping services. Although there is presently no
charge for transfers, Prudential reserves the right to impose such charges in
the future. In no event will Dollar Cost Averaging and Auto-Rebalancing
transfers be subject to such charge.
A Contract may include a provision that, upon discontinuance of contributions
for all Participants of an employer covered under a Contract, the Contractholder
may request Prudential to make transfer payments from any of the Subaccounts to
a designated alternate funding agency. If the Contract is used in connection
with certain tax-deferred annuities subject to Section 403(b) of the Code, or
with IRAs, Prudential will
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promptly notify each affected Participant and each beneficiary of a deceased
Participant that such a request has been received. Within thirty days of receipt
of such notice, each recipient may elect in writing on a form approved by
Prudential to have any of his or her Subaccounts transferred to the alternate
funding agency. If he or she does not so elect, his or her investment options
will continue in force under the Contract. If he or she does so elect, his or
her account will be canceled as of a "transfer date" which is the business day
specified in the Contractholder's request or 90 days after Prudential receives
the request, whichever is later. The product of units in the Participant's
Subaccounts immediately prior to cancellation and the appropriate unit value on
the transfer date, less the applicable withdrawal and annual account charges,
will be transferred to the designated funding agency in cash.
Subject to any conditions or limitations regarding transfers contained in the
tax-deferred annuity arrangement under which a Participant is covered, a
Participant can continue to make transfers of all or part of his interest in his
Participant Account among the available investment options offered, and can
transfer directly all or part of his interest in his Participant Account to a
Section 403(b) tax-deferred annuity contract of another insurance company or to
a mutual fund custodial account under Section 403(b)(7).
Contributions may be discontinued for all Participants under a Contract or for
all Participants of an employer covered under the Contract used in connection
with a deferred compensation plan subject to Section 457 of the Code due to
certain circumstances, such as a change in any law or regulation, which would
have an adverse effect on Prudential in fulfilling the terms of the Contract. If
contributions are so discontinued, Prudential may initiate transfer payments
from any Subaccount to an alternate funding agency. The transfer would be made
as described in the paragraph above.
Under certain types of retirement arrangements, the Retirement Equity Act of
1984 requires that in the case of a married Participant, certain requests for
transfer payments other than those described above must include the consent of
the Participant and spouse and must be notarized or witnessed by an authorized
plan representative.
Transfers among Subaccounts will take effect as of the end of the Valuation
Period in which a proper transfer request is received at the Prudential
Retirement Services.
Dollar Cost Averaging
Additionally, an administrative feature called Dollar Cost Averaging ("DCA") may
be available to Contractholders. This feature allows Participants to transfer
amounts out of the Guaranteed Interest Account or one of the variable investment
options and into one or more other variable investment options. Transfers may be
specific dollar amounts or percentages of the amount in the DCA account at the
time of the transfer. A Participant may ask that transfers be made monthly,
quarterly, semi-annually or annually. A Participant can add to the DCA account
at any time.
Each automatic transfer will take effect in monthly, quarterly, semi-annual or
annual intervals as designated by the Participant. If the New York Stock
Exchange is not open on a transfer date, the transfer will take effect as of the
end of the valuation period which immediately follows that date. Automatic
transfers continue until the amount specified has been transferred, or until the
Participant notifies us and we process a change in allocation or cancellation of
the feature.
Auto-Rebalancing
This Contract offers another investment technique that Participants may find
attractive. The Auto-Rebalancing feature allows Participants to automatically
rebalance subaccount assets at specified intervals based on percentage
allocations that they choose. For example, suppose a Participant's initial
investment allocation of variable investment options is split 40% and 60%,
respectively. Then, due to investment results, that split changes. A Participant
may instruct that those assets be rebalanced to his or her original or different
allocation percentages. Auto-Rebalancing can be performed on a one-time basis or
periodically, as a Participant chooses. A Participant may select that
rebalancing occur in monthly, quarterly, semi-annual or annual intervals.
Rebalancing will take effect as of the end of the valuation period in the
intervals and will continue at those intervals until he or she notifies us
otherwise. If the New York Stock Exchange
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is not open on the rebalancing date, the transfer will take effect as of the end
of the valuation period which immediately follows that date. The Guaranteed
Interest Account cannot participate in this administrative feature.
Withdrawals
Under certain circumstances as described in the tax-deferred annuity arrangement
under which he is covered, a Participant may withdraw at any time all or part of
his Participant Account Value that is attributable to employer contributions or
after-tax Participant contributions, if any.
The Internal Revenue Code imposes restrictions on withdrawals from tax-deferred
annuities subject to Section 403(b) of the Code. Pursuant to Section 403(b)(11)
of the Code, amounts attributable to a Participant's salary reduction
contributions (including the earnings thereon) that are made under a tax
deferred annuity after December 31, 1988 can only be withdrawn (redeemed) when
the Participant attains age 59 1/2, separates from service with his employer,
dies, or becomes disabled (within the meaning of Section 72(m)(7) of the Code).
However, the Code permits the withdrawal at any time of amounts attributable to
tax-deferred annuity salary reduction contributions (excluding the earnings
thereon) that are made after December 31, 1988, in the case of a hardship. If
the arrangement under which a Participant is covered contains a financial
hardship provision, withdrawals can be made in the event of the hardship.
Furthermore, subject to any restrictions upon withdrawals contained in the
tax-deferred annuity arrangement under which a Participant is covered, a
Participant can withdraw at any time all or part of his Participant Account
Value under a predecessor Prudential tax-sheltered annuity contract, as of
December 31, 1988. Amounts earned after December 31, 1988 on the December 31,
1988 balance in a Participant Account attributable to salary reduction
contributions are, however, subject to the Section 403(b)(11) withdrawal
restrictions discussed above.
With respect to retirement arrangements other than tax-deferred annuities
subject to Section 403(b) of the Code, a Participant's right to withdraw at any
time all or part of his Participant Account Value may be restricted by the
retirement arrangement under which he is covered. For example, Code Section 457
plans typically permit withdrawals only upon attainment of age 70 1/2,
separation of service, or for unforeseeable emergencies.
You may specify from which investment options you would like the withdrawal
processed. The withdrawal amount may be specified as a dollar amount or as a
percentage of the Participant Account Value in the applicable Subaccount(s). If
you do not specify from where you would like the withdrawal processed, a partial
withdrawal will be withdrawn proportionally from all investment options.
Only amounts withdrawn from contributions (including full withdrawals) are
subject to a withdrawal charge. For purposes of determining withdrawal charges,
withdrawals are considered as having been made first from contributions. See
Withdrawal Charge, page __. The withdrawal will be effected as of the end of the
Valuation Period in which a proper withdrawal request is received at the
Prudential Retirement Services.
Prudential will generally pay the amount of any withdrawal, less any required
tax withholding, within 7 days after we receive a properly completed withdrawal
request. We will adjust a Participant Account to reflect any applicable
withdrawal and/or annual account charge. We may delay payment of any withdrawal
allocable to the Subaccount(s) for a longer period if the disposal or valuation
of the Discovery Account's assets is not reasonably practicable because the New
York Stock Exchange is closed for other than a regular holiday or weekend,
trading is restricted by the SEC or the SEC declares that an emergency exists.
Systematic Withdrawal Plan
If permitted by the Internal Revenue Code and the retirement arrangement under
which a Participant is covered, Prudential offers systematic withdrawals as an
administrative privilege. Under a systematic withdrawal arrangement a
Participant may arrange for systematic withdrawals from the Subaccounts and the
Guaranteed Interest Account in which he invests. A Participant may arrange for
systematic withdrawals only if at the time he elects to have such an
arrangement, the balance in his Participant Account is at least
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$5000. A Participant who has not reached age 59 1/2, however, may not elect a
systematic withdrawal arrangement unless he has first separated from service
with his employer. In addition, the $5,000 minimum balance does not apply to
systematic withdrawals made for the purpose of satisfying minimum distribution
rules.
Federal income tax provisions applicable to the retirement arrangement under
which a Participant is covered may significantly affect the availability of
systematic withdrawals, how they may be made, and the consequences of making
them. Withdrawals by Participants are generally taxable and Participants who
have not reached age 59 1/2 may incur substantial tax penalties. Withdrawals
made after a Participant has attained age 70 1/2 (or in the case of Participants
in Section 403(b) annuity plans and certain governmental or church plans who
retire after age 70 1/2, after the Participant has retired) and by beneficiaries
must satisfy certain minimum distribution rules. See "Federal Tax Status," pages
__ - __.
Systematic withdrawals may be arranged only pursuant to an election on a form
approved by Prudential. Under certain types of retirement arrangements, an
election to arrange for systematic withdrawals by a married Participant must be
consented to in writing by the Participant's spouse, with signatures notarized
or witnessed by an authorized plan representative. The election must specify
that the systematic withdrawals shall be made on a monthly, quarterly,
semi-annual, or annual basis.
All systematic withdrawals shall be effected as of the day of the month
specified by the Contractholder, or, if such day is not a business day, then on
the next succeeding business day. Systematic withdrawals shall continue until
the Participant has withdrawn all of the balance in his Participant Account or
has instructed Prudential in writing to terminate his systematic withdrawal
arrangement. The Participant may elect to make systematic withdrawals in equal
dollar amounts (in which case each withdrawal must be at least $250), unless it
is made to satisfy minimum distribution rules, or over a specified period of
time (at least three years). Where the Participant elects to make systematic
withdrawals over a specified period of time, the amount of each withdrawal --
which will vary, reflecting investment experience during the withdrawal period
- -- will be equal to the sum of the balances then in the Participant Account
divided by the number of systematic withdrawals remaining to be made during the
withdrawal period.
Systematic withdrawals shall be taken first out of the Participant's investment,
if any, in the Guaranteed Interest Account until that amount is exhausted.
Thereafter, systematic withdrawals will be taken pro rata from the Subaccounts.
A Participant may change the frequency, amount or duration of his systematic
withdrawals by submitting a form to Prudential that Prudential will provide to
him upon request. A Participant may make such a change only once during each
calendar year.
A Participant may at any time instruct Prudential to terminate the Participant's
systematic withdrawal arrangement, and no systematic withdrawals will be made
for him after Prudential has received his instruction. A Participant who chooses
to stop making systematic withdrawals may not again make them until the next
calendar year and may be subject to federal tax consequences as a result
thereof.
An arrangement to make systematic withdrawals will not affect any of the
Participant's other rights under the Contracts, including the right to make
withdrawals, and purchase a fixed dollar annuity.
Currently, Prudential does not impose a withdrawal charge upon systematic
withdrawals, however, Prudential may to apply a withdrawal charge on systematic
withdrawals where payments are made for less than three years. Prudential
currently permits a Participant who is receiving systematic withdrawals and over
the age of 59 1/2 to make one additional, non-systematic, withdrawal during each
calendar year in an amount that does not exceed 10% of the sum of his balances
in the Account and the Guaranteed Interest Account without the application of
the withdrawal charge.
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Texas Optional Retirement Program
Special rules apply with respect to Contracts covering persons participating in
the Texas Optional Retirement Program ("Texas Program").
Under the terms of the Texas Program, Texas will contribute an amount somewhat
larger than a Participant's contribution. Texas' contributions will be credited
to the Participant Account. Until the Participant begins his second year of
participation in the Texas Program, Prudential will have the right to withdraw
the value of the Units purchased for this account with Texas' contributions. If
the Participant does not commence his second year of Texas Program
participation, the value of those Units representing Texas' contribution will be
withdrawn and returned to the State.
Withdrawal benefits of Contracts issued under the Texas Program are available
only in the event of a Participant's death, retirement or termination of
employment. Participants will not, therefore, be entitled to exercise the right
of withdrawal in order to receive in cash the Participant Account Value credited
to them under the Contract unless one of the foregoing conditions has been
satisfied. The value of a Participant's interest under the Contract may,
however, be transferred to another Prudential contract or contracts of other
carriers approved under the Texas Program during the period of the Participant's
Texas Program participation.
Death Benefit
Upon receipt by Prudential of due proof of a Participant's death and a claim and
payment election submitted on a form approved by Prudential, a death benefit
made up of the balance in the Participant Account (after deduction of any annual
account charges) will be payable to his designated beneficiary. The appropriate
address to which a death benefit claim should be sent is set out on the cover
page of this prospectus. For certain Contracts, a death benefit claim should be
sent to a designated record keeper rather than Prudential.
The death benefit will be paid in one sum as if it were a single withdrawal, as
systematic withdrawals, as an annuity, or a combination of the three, as the
Participant may have directed subject to the minimum distribution rules of Code
Section 401(a)(9) as described below under "Federal Tax Status." If the
Participant has not so directed, the beneficiary may, within any time limit
prescribed by or for the retirement arrangement that covered the Participant,
elect:
a. to receive a one sum cash payment;
b. to have a fixed dollar annuity purchased under the Contract on a specified
date, using the same annuity purchase rate basis that would have applied if
the Participant Account were being used to purchase an annuity for the
Participant.
c. to receive regular payments in accordance with the systematic withdrawal
plan; or
d. a combination of all or any two of (a), (b), and (c).
Unless restricted by the retirement arrangement under which the Participant is
covered, or unless the Participant has elected otherwise, if within one year
after the Participant's death the beneficiary elects to receive a one-sum cash
payment of the entire Participant Account, including the balance in all
Subaccounts in which the Participant has a balance, the total amount made
available to the beneficiary will be the greatest of: (1) the Participant's
Account Value as of the date Prudential receives a death benefit payment
request in good order; (2) the sum of all contributions made to the Participant
Account less withdrawals, transfers and charges; and (3) the greatest of the
Participant's Account Value calculated on
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every third anniversary of the first contribution made on behalf of the
Participant (accompanied by complete documentation) under the contract.
Under certain types of retirement arrangements, the Retirement Equity Act of
1984 requires that in the case of a married Participant, a death benefit will be
payable to the Participant's spouse in the form of a "qualified pre-retirement
survivor annuity." A "qualified pre-retirement survivor annuity" is an annuity
for the lifetime of the Participant's spouse in an amount which can be purchased
with no less than 50% of the balance in the Participant Account as of the
Participant's date of death. Under the Retirement Equity Act, the spouse of a
Participant in a retirement arrangement which is subject to these rules may
consent to waive the pre-retirement survivor annuity benefit. Such consent must
acknowledge the effect of waiving the coverage, contain the signatures of the
Participant and spouse and must be notarized or witnessed by an authorized plan
representative. Unless the spouse of a Participant in a Plan which is subject to
these requirements properly consents to the waiver of the benefit, 50% of the
balance in the Participant Account will be paid to such spouse even if the
designated beneficiary is someone other than the spouse. Under these
circumstances, the remaining 50% would be paid to the Participant's designated
beneficiary.
Unless the retirement arrangement that covered the Participant provides
otherwise, a beneficiary who elects to have a fixed-dollar annuity purchased for
himself may choose from among the available forms of annuity. See "Effecting an
Annuity," page __. The beneficiary may elect to purchase an annuity
immediately or at a future date. If an election includes systematic withdrawals,
the beneficiary will have the right to terminate such withdrawals and receive
the remaining balance in the Participant Account in cash (or effect an annuity
with it), or to change the frequency, size or duration of such withdrawals,
subject to the minimum distribution rules. See "Federal Tax Status" section of
this prospectus. If the beneficiary fails to make any election within any time
limit prescribed by or for the retirement arrangement that covered the
Participant, within seven days after the expiration of that time limit, a one
sum cash payment will be made to the beneficiary, after deduction of the annual
account charge. A specific contract may provide that an annuity is payable to
the beneficiary if the beneficiary fails to make an election.
Until a death benefit is paid that results in reducing to zero the balance in
the Participant Account, the Participant Account Value in the Subaccounts and
the Guaranteed Interest Account that make up the Participant Account will be
maintained for the beneficiary in the same manner as they had been for the
Participant, except (i) the beneficiary may make no contributions (ii) no loans
may be taken and (iii) no withdrawal charge will be imposed upon withdrawals.
Discontinuance of Contribution
Contributions on behalf of all Participants under a Contract or for all
Participants of an employer covered under a Contract may be discontinued upon
notice by the Contractholder to Prudential. Contributions under the Contract
will also be discontinued for all Participants covered by a retirement
arrangement that is terminated.
On 90 days' advance notice to the Contractholder, Prudential may elect not to
accept any new Participant, or not to accept further contributions for existing
Participants.
The discontinuance of contributions on a Participant's behalf does not otherwise
affect his or her rights under the Contracts. He may make withdrawals from his
Participant Account -- for transfer, for the purchase of an annuity or for any
other purpose -- just as if contributions were still being made for him or her.
However, if contributions under a Program are not made for a Participant for a
specified period of time (24 months in certain states, 36 months in others) and
the total value of his Participant Accounts is at or below a specified amount
($1,000 in certain states, $2,000 in others), Prudential may, if permitted by
the Code, elect to cancel those Participant Accounts unless prohibited by the
retirement arrangement, and pay the Participant their value (less the annual
account charge) as of the date of cancellation.
Loan Provision
The loans described in this section are generally available to Participants in
401(a) plans and 403(b) programs. The interest rate and other terms and
conditions of the loan may vary from Contract to Contract.
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For plans that are subject to ERISA, it is the responsibility of the Contract
trustee or fiduciary to ensure that the interest rate or other terms and
conditions of the loan comply with all Contract qualification requirements
including the ERISA regulations.
The loans described in this section, which involve the variable investment
options, work as follows. The minimum loan amount is as specified in the
Contract, or if not specified, as determined by Prudential. The maximum loan
amount is the lesser of (a) $50,000, reduced by the highest outstanding balance
of loans during the one year period immediately preceding the date of the loan
or (b) 50% of the value of the Participant's vested interest under a Contract.
In the loan application, the Contractholder (or in certain cases, the
Participant) designates the Subaccount(s) from which the loan amount is
deducted. To repay the loan, the Participant makes periodic payments of interest
plus a portion of the principal. Those payments are invested in the Subaccounts
chosen by the Participant. The Participant may specify the Subaccounts from
which he may borrow and into which repayments may be invested. If the
Participant does not specify the Subaccounts from which the loan amount is
deducted, the loan amount will be deducted from the Participant Account Value in
the Subaccounts.
The maximum loan amount referred to above is imposed by federal tax law. That
limit, however, applies to all loans from any qualified plan of the employer.
Since Prudential cannot monitor a Participant's loan activity relating to other
plans offered to Participants, it is the Participant's responsibility to do so.
Provided that a Participant adheres to these limitations, the loan will not be
treated as a taxable distribution. If, however, the Participant defaults on the
loan by, for example, failing to make required payments, the defaulted loan
amount (as described in loan disclosure information provided to a borrowing
Participant) will be treated as a taxable distribution and Prudential will send
the appropriate tax information to the Participant and the Internal Revenue
Service.
Prudential charges a loan application fee of up to $75, which is deducted from
the Participant Account at the time the loan is initiated. Prudential will not
accept a personal check as payment of the loan application fee. Prudential also
charges up to $25 per year as a loan maintenance fee for recordkeeping and other
administrative services provided in connection with the loan. This charge is
guaranteed not to increase during the term of any loan and is not greater that
the average expected cost of the services required to maintain the loan. This
annualized loan maintenance charge will be prorated based on the number of full
months that the loan is outstanding and is generally deducted quarterly. The
loan maintenance charge will first be made against the Participant Account Value
under the Guaranteed Interest Account (if available). If the Participant is not
invested in the Guaranteed Interest Account, or if the Participant does not have
enough money in such an option to pay the charge, the charge will then be made
against any one or more of the Subaccounts in which the Participant is invested.
Modified Procedures
Under certain Contracts, the Contractholder or a third party acting on their
behalf provides record keeping services that would otherwise be performed by
Prudential. Such Contracts may require procedures somewhat different than those
set forth in this Prospectus. For example, such Contracts may require that
contribution allocation requests, withdrawal requests, and/or transfer requests
be directed to the Contract's record keeper rather than Prudential. The
record-keeper is the Contractholder's agent, not Prudential's agent.
Accordingly, transactions will be processed and priced as of the end of the
valuation period in which Prudential receives appropriate instructions and/or
funds from the record-keeper. Any such different procedures will be set forth in
the Contract.
CHARGES, FEES AND DEDUCTIONS
Administrative Fee and Annual Account Charge
There is an administrative charge to reimburse Prudential for the expenses
incurred in administering the Contracts. This includes such things as issuing
the Contract, establishing and maintaining records, and providing reports to
Contractholders and Participants. This charge is deducted daily from the assets
in each of the Subaccounts at the effective annual rates set forth in the
following schedule.
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Size of Contract Administrative
Number of Participants and Contract Value Fee
----------------------------------------- --------------
Below 250 and Below $1 million 1.10%
250 to 5000 or $1 million to $50 million 0.80%
Over 5000 or In excess of $50 million 0.60%
If we provide services under an administrative services agreement, an annual
account charge for recordkeeping and other administrative services is deducted
pro rata from each Participant Account. This annual account charge is payable to
Prudential and is made on the last business day of each calendar year as long as
the Participant still has money invested in the Subaccounts and the Guaranteed
Interest Account. The annual account charge will be pro rated for new
Participants for the first year of their participation, based on the number of
full months remaining in the calendar year after the first contribution is
received. If a Participant Account is canceled before the end of the year, the
charge will be made on the date that Participant Account is canceled (and the
charge will not be pro rated if this occurs during the year in which the first
contribution is made to the Participant Account). The annual account charge will
not be made, however, upon the cancellation of a Participant Account to purchase
an annuity under a Contract if the annuity becomes effective on January 1, of
any year. After a cancellation, the Participant may again participate in the
Contract only as a new Participant and will be subject to a new annual account
charge. Also, the annual account charge will not be made if the Participant's
employer has chosen to pay the charge.
The aggregate annual account charge for each Participant will not be greater
than $30. The charge will first be made against the Participant Account Value
under the Guaranteed Interest Account (if available). If the Participant is not
invested in the Guaranteed Interest Account, or if the Participant does not have
enough money in such an option to pay the charge, the charge will then be made
against any one or more of the Subaccounts in which the Participant is invested.
Charge for Assuming Mortality and Expense Risks
A deduction is made daily from the assets of each of the Subaccounts to
reimburse Prudential for assuming the risk that our estimates of longevity and
of the expenses we expect to incur over the lengthy periods that the Contract
may be in effect will turn out to be incorrect. The charge is made daily at an
annual rate of 0.15% (_________% daily) of the assets held in the Subaccounts.
Expenses Incurred by the Funds
The charges and expenses of the Funds are indirectly borne by the Participants.
Details about investment management fees and other underlying fund expenses are
provided in the fee table and in the accompanying prospectuses for the Funds and
the related statements of additional information.
Withdrawal Charge
A withdrawal charge may be made upon full or partial withdrawals. The charge
compensates Prudential for paying all of the expenses of selling and
distributing the Contracts, including sales commissions, printing of
prospectuses, sales administration, preparation of sales literature, and other
promotional activities. No withdrawal charge is imposed whenever earnings are
withdrawn.
The amount of the withdrawal charge imposed upon any withdrawal depends upon the
number of years of a Participant's participation in the Contract, the year in
which the withdrawal is made, and the kind of retirement arrangement that covers
the Participant. Participation in the Contract begins upon the date when the
first contribution on behalf of the Participant, along with enrollment
information in a form satisfactory to Prudential, is received by Prudential.
Such participation ends on the date when the Participant Account under the
Contract is canceled. In the event of such cancellation, Prudential reserves the
right to consider the Participant to be participating in the Contract for a
limited time (currently about one year) for the purposes of calculating any
withdrawal charge on the withdrawal of any future contributions.
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The table below describes the maximum amount of the withdrawal charge.
Withdrawal Charge,
Years of Contract as a Percentage of
Participation Contributions Withdrawn
--------------- -----------------------
First Year ....................... 7%
Second Year ....................... 6%
Third Year ....................... 5%
Fourth Year ....................... 4%
Fifth Year ....................... 3%
Sixth Year ....................... 2%
Seventh Year ....................... 1%
Eighth & Subsequent ....................... No Charge
Years
The proceeds received by a Participant upon any partial or full withdrawal will
be reduced by the amount of any withdrawal charge. Also, at our discretion, we
may reduce or waive withdrawal charges for certain classes of contracts (e.g.,
contracts exchanged from existing contracts).
Limitations on Withdrawal Charge
We will not impose a withdrawal charge upon contributions withdrawn to purchase
an annuity, to provide a death benefit, pursuant to a systematic withdrawal
plan, to provide a minimum distribution payment, or in cases of financial
hardship or disability retirement as determined pursuant to provisions of the
employer's retirement arrangement. A withdrawal charge will not be imposed upon
withdrawals attributable to roll-over contributions. Further, for all plans
other than IRAs, no withdrawal charge is imposed upon contributions withdrawn
due to resignation or retirement by the Participant or termination of the
Participant by the Contractholder. In addition, no withdrawal charge is imposed
upon contributions withdrawn for any reason after seven years of participation
in a Program.
Contributions transferred among the Guaranteed Interest Account and the
Subaccounts are considered to be withdrawals from the Guaranteed Interest
Account or the Subaccount from which the transfer is made, but no withdrawal
charge is imposed upon them. They will, however, be considered as contributions
to the receiving Subaccount or Guaranteed Interest Account for purposes of
calculating any charge imposed upon their subsequent withdrawal from that
investment option.
Loans are considered to be withdrawals from the Subaccounts from which the loan
amount was deducted but are not considered a withdrawal from the Contract.
Therefore, no charge is imposed upon them. The principal portion of any loan
repayment, however, will be treated as a contribution to the receiving
Subaccount for purposes of calculating any charge imposed upon any subsequent
withdrawal. If the Participant defaults on the loan by, for example, failing to
make required payments, the outstanding balance of the loan will be treated as a
withdrawal for purposes of the withdrawal charge. The withdrawal charge will be
withdrawn from the same Subaccounts, and in the same proportions, as the loan
amount was withdrawn. If sufficient funds do not remain in those Subaccounts,
the withdrawal charge will be withdrawn from the Participant's other Subaccounts
and the Guaranteed Interest Account as well.
Premium Taxes
Certain states and other jurisdictions impose premium taxes or similar
assessments upon Prudential, either at the time Contributions are made or when
the Participant's Account Value is surrendered or applied to purchase an
annuity. Prudential reserves the right to deduct an amount from Contributions or
the Participant's Account to cover such taxes or assessments, if any, when
applicable. Various states levy a premium tax, currently ranging from 0.5% to
4.0%, on variable annuity contracts.
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FEDERAL TAX STATUS
The following discussion is based on current law and interpretations which may
change. The discussion is general in nature. It is not intended as tax advice,
nor does it consider any applicable state or other tax laws. A qualified tax
adviser should be consulted for complete information and advice. The following
rules do not generally apply to annuity contracts held by or for non-natural
persons (e.g., corporations). Where a Contract is held by a non-natural person,
unless the Contractholder is a nominee or agent for a natural person (or in
other limited circumstances), the contract will generally not be treated as an
annuity for tax purposes.
Taxes on Prudential
The Prudential Series Fund, Inc. is not considered a separate taxpayer for
purposes of the Internal Revenue Code. As distinguished from most other
registered investment companies - which are separate taxpayers--the earnings of
the Subaccounts invested in the Prudential Series Fund, Inc. Portfolios are
taxed as part of the income of Prudential. No charge is being made currently to
those Subaccounts for company federal income taxes. Prudential will review
periodically the question of a charge to the Subaccounts invested in the
Prudential Series Fund, Inc. Portfolios 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.
Qualified Retirement Arrangements Using the Contracts.
The Contracts may be used in connection with qualified pension and profit
sharing plans, plans established by self-employed persons ("Keogh plans"),
simplified employee pension plans ("SEPS"), individual retirement plan accounts
("IRA's") and retirement programs for certain persons known as Section 403(b)
annuity plans.
The provisions of the Code that apply to the retirement arrangements that may be
funded by the Contracts are complex and Participants are advised to consult a
qualified tax adviser. In general, however, assuming that the requirements and
limitations of the provisions of the Code applicable to the particular type of
plan are adhered to by Participants and employers, contributions made under a
retirement arrangement funded by a Contract are deductible (or not includible in
income) up to certain amounts each year. Further, under the retirement programs
with which the Contracts may be used, Federal income tax currently is not
imposed upon the investment income and realized gains earned by the Accounts and
Subaccounts in which the contributions have been invested until a distribution
or withdrawal is received. When a distribution or withdrawal is received, either
as a lump sum, an annuity, or as regular payments in accordance with a
systematic withdrawal arrangement, all or a portion of the distribution or
withdrawal is normally taxable as ordinary income. In some cases, the tax on
lump sum distributions may be limited by a special income-averaging rule. The
effect of Federal income taxation depends largely upon the type of retirement
plan and a generalized description, beyond that given here, is not particularly
useful. Careful review of the provisions of the Code applicable to the
particular type of plan is necessary.
As noted above, withdrawals or distributions are taxable. Furthermore, premature
distributions or withdrawals may be subject to a penalty tax. Participants
contemplating a withdrawal should consult a qualified tax adviser. In addition,
Federal tax laws impose restrictions on withdrawals from Section 403(b)
annuities. Distributions are subject to certain minimum distribution
requirements.
The Contracts may be used in connection with deferred compensation plans that
meet the requirements of Section 457 of the Code. The tax rules for such plans
involve, among other things, limitations on contributions and minimum
distribution requirements. Tax-exempt organizations or governmental employers
considering the use of the Contracts to fund or otherwise provide deferred
compensation to their employees should consult with a qualified tax adviser
concerning the applicability of Section 457 to their plans as well as the
specific requirements. Reference is also made to the discussion below of Section
72(u) of the Code which may be applicable in certain circumstances.
Subject to the exceptions discussed below with respect to Section 403(b) annuity
plans and certain governmental or church plans, distributions from IRA's,
qualified retirement arrangements, and deferred compensation plans that meet the
requirements of Section 457 of the Code, must begin by April 1 of the
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calendar year following the year in which the Participant attains age 70 1/2 or
actual retirement, if later (the "Required Beginning Date"). Distributions from
a Section 403(b) annuity plan attributable to benefits accruing after December
31, 1986 must begin by the Required Beginning Date. The Required Beginning Date
for distributions from a governmental or church plan is the later of April 1 of
the calendar year after the calendar year in which the Participant retires. In
general, distributions that are made after the Required Beginning Date must be
made in the form of an annuity for the life of the Participant or the lives of
the Participant and his designated beneficiary, or over a period that is not
longer than the life expectancy of the Participant or the life expectancies of
the Participant and his designated beneficiary.
Distributions to beneficiaries are also subject to minimum distribution rules.
If a Participant dies before his entire interest in his Participant Account has
been distributed, his remaining interest must be distributed at least as rapidly
as under the method of distribution being used as of the date of death. If the
Participant dies before distributions have begun (or are treated as having
begun) the entire interest in his Participant Account must be distributed by
December 31 of the calendar year containing the fifth anniversary of the
Participant's death. Alternatively, if there is a designated beneficiary, the
designated beneficiary may elect to receive payments beginning no later than
December 31 of the calendar year immediately following the year in which the
Participant dies and continuing for the beneficiary's life or a period not
exceeding the beneficiary's life expectancy (except that with respect to
distributions from a deferred compensation plan subject to Section 457 of the
Code, such period cannot exceed 15 years). Special rules apply to the spouse of
a deceased Participant.
In addition to the above rules, with respect to a deferred compensation plan
subject to Section 457 of the Code, any distribution that is payable over a
period of more than one year can only be made in substantially non-increasing
amounts no less frequently than annually.
An excise tax applies to Participants or beneficiaries who fail to make the
minimum distribution in any calendar year.
Non-qualified Arrangements Using the Contracts.
The Contracts constitute variable annuity contracts. Accordingly, no tax should
be payable by a Participant as a result of any increase in the value of his
share of the investment income and realized gain earned by the Discovery Account
or his Participant Account in which his accumulated premium payments are held.
Generally, amounts are taxed when received, either as an annuity or as a
withdrawal before the annuity starting date. For these purposes, loans against
the Contracts or the pledging of the Contracts are treated as withdrawals.
Amounts withdrawn before the annuity starting date are treated for tax purposes
first as being withdrawals of investment income, rather than withdrawals of
premium payments, until all investment income earned by a Participant's Account
or Subaccount has been withdrawn. Thus, a Participant will be taxed on the
amount he withdraws before he starts receiving annuity payments to the extent
that the cash value of his Contract, unreduced by the withdrawal charge, exceeds
his premium payments.
In addition to the ordinary income tax, the Code further provides that premature
withdrawals that are includible in income will be subject to a penalty tax. The
amount of the penalty is 10 percent of the amount withdrawn that is includible
in income will be subject to a penalty tax. The amount of the penalty is 10
percent of the amount withdrawn that is includible in income. Some withdrawals
will be exempt from the penalty. These include withdrawals (1) made on or after
the date on which the Participant reaches age 59 1/2, (2) made on or after the
death of the Participant, (3) attributable to the Participant becoming disabled
(as defined in Code Section 72(m)), (4) in the form of level annuity payments
under a lifetime annuity, or (5) in the form of substantially equal periodic
payments (made at least annually) for the life expectancy of the Participant or
the joint life expectancies of the Participant and his designated beneficiary.
Different tax rules apply to the receipt of annuity payments or regular payments
in accordance with a systematic withdrawal arrangement by a Participant after
the annuity starting date. A portion of each payment he receives under a
Contract will be treated as a partial return of his post-tax premium payments,
if any, and will not be taxable. The remaining portion of the payment will be
taxed as ordinary income. Exactly how each payment is divided into taxable and
nontaxable portions depends upon (i) the period over which annuity payments are
expected to be received, which in turn is governed by the form of annuity
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<PAGE>
selected and, where a lifetime annuity is chosen, by the life expectancy of the
annuitant, payee or, in the case of a joint and survivor life annuity, payees,
or (ii) whether you elect to have regular payments made in accordance with a
systematic withdrawal plan over a fixed period of time or in fixed dollar
amounts. Once a Participant has recovered all his premium payments, the balance
of the annuity payments will be fully taxable.
Certain minimum distribution requirements apply in the case where the
Participant dies before the entire interest in his annuity has been distributed.
Further, certain transfers of an annuity for less than full compensation, e.g.,
certain gifts, will trigger tax on the gain in the Contract.
Special rules under Section 72(u) of the Code apply to the Contracts if held by
a person who is not a natural person and if not covered by one of several
exceptions. Under these rules, if a Contract is held by a corporation,
partnership, trust or similar nonnatural person, the income on the Contract each
year is treated as ordinary income received or accrued that year by the owner of
the Contract. Income on the Contract is the excess of the sum of the net
surrender value of the Contract at the end of the taxable year plus any amounts
distributed for all years over the aggregate amount of premiums paid under the
Contract minus premiums paid and amounts received under the Contract that have
been included in income. Exceptions to these rules include contracts held by a
nonnatural person as an agent for a natural person, contracts acquired by an
estate by reason of the death of the Participant, contracts held under a
qualified pension or profit sharing plan, a Section 403(b) annuity plan or
individual retirement plan (see discussion above) or contracts which provide for
immediate annuities.
Withholding
Generally, under a nonqualified annuity arrangement, or individual retirement
account or individual retirement annuity, unless a Participant elects to the
contrary, any amounts that are received under his Contract that Prudential
reasonably believes are includible in gross income tax for tax purposes will be
subject to withholding to meet Federal income tax obligations. In the absence of
an election by a Participant that Prudential should not do so, it will withhold
from every withdrawal or annuity payment the appropriate percentage of the
amount of the payment that Prudential reasonable believes is subject to
withholding. In addition, certain distributions from qualified plans under
Section 401 or Section 403(b) of the Code, which are not directly rolled over or
transferred to another eligible qualified plan, are subject to a mandatory 20%
withholding for federal income tax. The 20% withholding requirement does not
apply to: (a) distributions for the life or life expectancy of the Participant,
or joint and last survivor expectancy of the Participant and a designated
beneficiary; or (b) distributions for a specified period of ten years or more;
or (c) distributions which are required as minimum distributions. Accordingly, a
Participant would be well advised to check the Contractholder's retirement
arrangement and consult with appropriate tax advisers regarding the current
state of the law before making a withdrawal. Prudential will provide forms and
instructions concerning withholding. However, amounts that are received under a
Contract used in connection with a plan that is subject to Section 457 of the
Code are treated as wages for Federal income tax purposes and are, thus, subject
to general withholding requirements.
EFFECTING AN ANNUITY
Subject to the restrictions on withdrawals from tax-deferred annuities subject
to Section 403(b) of the Code, and subject to the provisions of the retirement
arrangement that covers him or her, a Participant may elect at any time to have
all or a part of his or her interest in the Participant Account used to purchase
a fixed dollar annuity under the Contracts. The Contracts do not provide for
annuities that vary with the investment results of any Subaccount. Withdrawals
from the Participant Account that are used to purchase a fixed dollar annuity
under the Contracts become part of Prudential's General Account, which supports
insurance and annuity obligations.
In electing to have an annuity purchased, the Participant may select from the
forms of annuity described below, unless the retirement arrangement covering the
Participant provides otherwise. The annuity is purchased on the first day of the
month following receipt by Prudential of proper written notice on a form
approved by Prudential that the Participant has elected to have an annuity
purchased, or on the first day
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<PAGE>
of any subsequent month that the Participant designates. The first monthly
annuity payment generally will be made within one month of the date on which the
annuity is purchased.
Under certain types of retirement arrangements, the Retirement Equity Act of
1984 requires that in the case of a married Participant, certain elections of
payouts which are not qualified joint and survivor annuities must include the
consent and signatures of the Participant and spouse and must be notarized or
witnessed by an authorized plan representative. A "qualified joint and survivor
annuity" is an annuity for the Participant's lifetime with at least 50% of the
amount payable to the Participant continued after the Participant's death to his
or her spouse, if then living.
Once annuity payments begin, the annuitant cannot surrender his or her annuity
benefit and receive a one sum payment in lieu thereof.
The following forms of annuity are available to Participants.
Life Annuity with Payments Certain
This is an immediate annuity payable monthly during the lifetime of the
annuitant with the guarantee that if, at the death of the annuitant, payments
have been made for less than the period certain (which may be 60, 120, 180, or
240 months, as selected by the annuitant), they will be continued during the
remainder of the selected period to his or her beneficiary.
Annuity Certain
This is an immediate annuity payable monthly for a period certain which may be
60, 120, 180, or 240 months, as selected by the annuitant. If the annuitant dies
during the period certain, payments in the same amount the annuitant was
receiving will be continued to his or her beneficiary, but no further payments
are payable after the end of the period certain.
Joint and Survivor Annuity with Payment Certain
This is an immediate annuity payable monthly during the lifetime of the
annuitant with payments continued after his or her death to the contingent
annuitant, if surviving, for the latter's lifetime. Until the selected number of
payments certain have been paid, payments made to the contingent annuitant after
the annuitant's death are the same as those the annuitant was receiving.
Thereafter, the payments continued to the contingent annuitant will be a
percentage of the monthly amount paid to the annuitant such as 33%, 50%, 66%, or
100% as selected by the annuitant (the amounts of each payment made to the
annuitant will be lower as the percentage he or she selects to be paid to the
contingent annuitant is higher). If both the annuitant and the contingent
annuitant die during the period certain (which may be 60, 120, 180, or 240
months, as selected by the annuitant), payments will be continued during the
remainder of the period certain to the properly designated beneficiary.
Other forms of annuity may be available under the Contracts. The retirement
arrangement under which the Participant is covered may restrict the forms of
annuity that a Participant may elect.
If the dollar amount of the first monthly annuity payment is less than the
minimum amount specified in the Contract, or if the beneficiary is other than a
natural person receiving payments in his or her own right, Prudential may elect
to pay the commuted value of the unpaid payments certain in one sum.
Purchasing the Annuity
No withdrawal charge is deducted from contributions withdrawn to purchase an
annuity. If, as a result of a withdrawal to purchase an annuity, the Participant
Account has been reduced to zero, the full annual account charge is deducted,
unless the annuity becomes effective on January 1 of any year. The resulting
amount, less any applicable taxes on annuity considerations, is applied to the
appropriate annuity purchase rate determined in accordance with the schedule in
the Contract at the time the annuity is purchased. However, Prudential may
determine monthly payments from schedules of annuity purchase rates providing
for larger payments than the rates shown in the Contract.
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<PAGE>
The schedule of annuity purchase rates in a Contract is guaranteed by Prudential
for ten years from the date the Contract is issued. If at any time after a
Contract has been in effect for ten years, the schedule of annuity purchase
rates is modified, the modification is also guaranteed for ten years. A change
in the schedule of annuity purchase rates used for annuity certain with 180
payments or less, as described above will apply only to amounts added to a
Participant Account after the date of change. A change in any other schedule
will apply to all amounts in a Participant Account.
OTHER INFORMATION
Misstatement of Age or Sex
If an annuitant's stated age or sex (except where unisex rates apply) or both
are incorrect in the Certificate, we will change each benefit and the amount of
each annuity payment to that which the total contributions would have bought for
the correct age and sex. Also, we will adjust for the amount of any overpayments
we have already made.
Sale of the Contract and Sales Commissions
Prudential Investment Management Services LLC ("PIMS"), a wholly-owned direct
subsidiary of The Prudential, acts as the principal underwriter of the Contract.
PIMS was organized in ____ under New Jersey law, is registered as a broker and
dealer under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. PIMS' principal business address is
____________________________. The Contract is sold by registered representatives
of PIMS who are also authorized by state insurance department to do so. The
maximum commission that will be paid to the representative is ___% of the
contribution received, and the amount paid to the broker-dealer to cover both
the individual representative's commission and other distribution expenses will
not exceed __% of the purchase payment. In addition, trail commissions based on
the size of the Contract may be paid. The representative may be required to
return all of the first year commission if the Contract is not continued through
the first year. Representatives who meet certain productivity, profitability,
and persistency standards with regard to the sale of the Contract will be
eligible for additional compensation.
Voting Rights
As stated above, all of the assets held in the Subaccounts of the Discovery
Account are invested in shares of the corresponding Funds. Prudential is the
legal owner of those shares and as such has the right to vote on any matter
voted on at any shareholders meetings of the Funds. However, as required by law,
Prudential votes the shares of the Funds at any regular and special shareholders
meetings the Funds are required to hold in accordance with voting instructions
received from Participants. The Funds may not hold annual shareholders meetings
when not required to do so under the laws of the state of their incorporation or
the Investment Company Act of 1940. Fund shares for which no timely instructions
from Participants are received, and any shares owned directly or indirectly by
Prudential, are voted in the same proportion as shares in the respective
portfolios for which instructions are received. Should the applicable federal
securities laws or regulations, or their current interpretation, change so as to
permit Prudential to vote shares of the Funds in its own right, it may elect to
do so.
Generally, Participants may give voting instructions on matters that would be
changes in fundamental policies and any matter requiring a vote of the
shareholders of the Funds. With respect to approval of the investment advisory
agreement or any change in a portfolio's fundamental investment policy,
Participants participating in such portfolios will vote separately on the
matter, pursuant to the requirements of Rule 18f-2 under the Investment Company
Act of 1940.
The number of Funds shares for which a Participant may give instructions is
determined by dividing the portion of the value of the Participant Account
derived from participation in a Subaccount, by the value of one share in the
corresponding portfolio of the applicable Fund. The number of voters for which
you may give Prudential instructions is determined as of the record date chosen
by the Board of the applicable Fund. We furnish you with proper forms and
proxies to enable you to give these instructions. We reserve the right
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<PAGE>
to modify the manner in which the weight to be given voting instructions is
calculated where such a change is necessary to comply with current federal
regulations of interpretations of those regulations.
Prudential may, if required by state insurance regulations, disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the sub-classification or investment objectives of one or more
of the Funds' portfolios, or to approve or disapprove an investment advisory
contract for a Fund. In addition, Prudential itself may disregard voting
instructions that would require changes in the investment policy or investment
adviser of one or more of the Funds' portfolios, provided that we reasonably
disapprove such changes in accordance with applicable federal regulations. If we
do disregard voting instructions, we will advise you of that action and our
reasons for such action in the next annual or semi-annual report.
Substitution of Fund Shares
Although Prudential believes it to be unlikely, it is possible that in the
judgment of its management, one or more of the portfolios of the Funds may
become unsuitable for investment by Contractholders and Participants. This may
occur because of investment policy changes, tax law changes, the unavailability
of shares for investment or at the discretion of Prudential. In that event,
Prudential may seek to substitute the shares of another portfolio or of an
entirely different mutual fund. Before this can be done, the approval of the
SEC, and possibly one or more state insurance departments, will be required.
Contractholders and Participants will be notified of such substitution.
Performance Information
Performance information for the Subaccounts may appear in advertising and
reports to current and prospective Contractholders and Participants. Performance
information is based on historical investment experience of the Funds, adjusted
to take charges under the Contract into account, and does not indicate or
represent future performance.
Total returns are based on the overall dollar or percentage change in value of a
hypothetical investment over a stipulated period, and assume a surrender of the
Contract at the end of the period. Total return quotations reflect changes in
unit values and the deduction of applicable charges including any applicable
withdrawal charges.
A cumulative total return reflects performance over a stated period of time. An
average annual total return reflects the hypothetical annually compounded return
that would have produced the same cumulative total return if the performance had
been constant over the entire period.
The Money Market Subaccount may advertise its current and effective yield.
Current yield reflects the income generated by an investment in the Subaccount
over a specified seven-day period. Effective yield is calculated in a similar
manner except that income earned is assumed to be reinvested.
Reports or advertising may include comparative performance information,
including, but not limited to: comparisons to market indices; comparisons to
other investments; performance rankings; personalized illustrations of
historical performance; and data presented by analysts or included in
publications.
See Performance Information in the Statement of Additional Information for
recent performance information.
Reports to Participants
Participants will be sent, at least annually, reports showing as of a specified
date the number of units credited to them in the Subaccounts of the Discovery
Account. Each Participant will also be sent semi-annual reports showing the
financial condition of the Discovery Account and the Subaccounts with their
corresponding Fund Portfolios, and the investment held in each.
29
<PAGE>
State Regulation
Prudential is subject to regulation by the Department of Insurance of the State
of New Jersey as well as by the insurance departments of all the other states
and jurisdictions in which it does business. Prudential must file an annual
statement in a form promulgated by the National Association of Insurance
Commissioners. This annual statement is reviewed and analyzed by the New Jersey
Department, which makes an independent computation of Prudential's legal reserve
liabilities and statutory apportionments under its outstanding contracts. New
Jersey law requires a quinquennial examination of Prudential to be made.
Examination involves an extensive audit including, but not limited to, an
inventory check of assets, sampling techniques to check the performance by
Prudential of its contracts and an examination of the manner in which divisible
surplus has been apportioned and distributed to policyholders and
Contractholders. This regulation does not involve any supervision or control
over the investment policies of the Subaccounts or over the selection of
investments for them, except for verification of the compliance of Prudential's
investment portfolio with New Jersey law.
The laws of New Jersey also contain special provisions which relate to the
issuance and regulation of contracts on a variable basis. These laws set forth a
number of mandatory provisions which must be included in contracts on a variable
basis and prohibit such contracts from containing other specified provisions. No
variable contract may be issued for delivery in New Jersey prior to the written
acknowledgment by the Department of Insurance of its filing. The Department may
initially disapprove or subsequently withdraw approval of any contract if it
contains provisions which are "unjust, unfair, inequitable, ambiguous,
misleading, likely to result in misrepresentation or contrary to law." Approval
can also be withheld or withdrawn if sales are solicited by communications which
involve misleading or inadequate descriptions of the provisions of the contract.
In addition to the annual statement referred to above, Prudential is required to
file with New Jersey and other states a separate statement with respect to the
operations of all its variable contracts accounts, in a form promulgated by the
National Association of Insurance Commissioners.
Litigation
Prudential is engaged in routine litigation of various kinds which in its
judgment is not of material importance in relation to its total assets.
Several actions have been brought against Prudential, on behalf of those persons
who purchased life insurance policies based on complaints about sales practices
engaged in by Prudential certain insurance companies affiliated with Prudential,
and agents appointed by Prudential and such companies.
There is no litigation pending the outcome of which might have a material effect
on the operations of the Discovery Account or The Prudential Series Fund.
Statement Of Additional Information
The contents of the Statement of Additional Information include:
OTHER INFORMATION CONCERNING THE DISCOVERY ACCOUNT PAGE
Principal Underwriter...................................................
Determination of Subaccount Unit Values.................................
Performance Information.................................................
Comparative Performance Information.....................................
Financial Statement of the Discovery Account............................
Financial Statements of the Prudential..................................
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
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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, including the Statement of Additional Information prepared
by Prudential, may also be obtained from Prudential without charge. The
addresses and telephone numbers are set forth on the cover of this Prospectus.
Financial Statements
The consolidated financial statements of Prudential should be distinguished from
the financial statements of the Account, and should be considered only as
bearing upon the ability of Prudential to meet its obligations under the
Contracts.
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<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
DISCOVERY SELECT
GROUP VARIABLE ANNUITY CONTRACTS
ISSUED THROUGH
THE PRUDENTIAL DISCOVERY SELECT GROUP
VARIABLE CONTRACT ACCOUNT
The Prudential Insurance Company of America ("Prudential") offers the Discovery
Select Group Variable Annuity Contracts for use in connection with retirement
arrangements that qualify for federal tax benefits under Sections 401, 403(b),
408 or 457 of the Internal Revenue Code of 1986 (the "Code") and with
non-qualified annuity arrangements on a continuous basis. Contribution to the
Contract made on behalf of a Participant may be invested in one or more of the
twenty-two Subaccounts of The Prudential Discovery Select Group Variable
Contract Account as well as the Guaranteed Interest Account. Each Subaccount is
invested in a corresponding Portfolio of The Prudential Series Fund, Inc., AIM
Variable Insurance Funds, Inc., T. Rowe Price Equity Series, Inc., Janus Aspen
Series, MFS Variable Insurance Trust, OCC Accumulation Trust and Warburg Pincus
Trust.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus, dated May 1, 1997, which is available
without charge upon written request to The Prudential Insurance Company of
America, c/o Prudential Retirement Services, 30 Scranton Office Park, Moosic, PA
18507-1789, or by telephoning 1-800-458-6333.
TABLE OF CONTENTS
DEFINITIONS.............................................................
OTHER CONTRACT PROVISIONS...............................................
Assignment........................................................
Participation in Divisible Surplus................................
ADMINISTRATION..........................................................
PERFORMANCE INFORMATION.................................................
Annual Average Total Return.......................................
Non-Standard Total Return.........................................
Performance Information...........................................
Total Return......................................................
SALE OF CONTRACTS.......................................................
EXPERTS.................................................................
FINANCIAL STATEMENTS....................................................
The Prudential Insurance Company of America
c/o Prudential Retirement Services
30 Scranton Office Park
Moosic, PA 18507-1789
Telephone 1-800-458-6333
<PAGE>
DEFINITIONS
Contracts - The group variable annuity contracts described in the Prospectus and
offered for use in connection with retirement arrangements that qualify for
federal tax benefits under Sections 401, 403(b), 408 or 457 of the Internal
Revenue Code and with non-qualified annuity arrangements.
Funds - The Portfolios of the Prudential Series Fund, Inc., AIM Variable
Insurance Funds, Inc., T. Rowe Price Equity Series, Inc., T. Rowe Price
International Series, Inc., Janus Aspen Series, MFS Variable Insurance Trust,
Warburg Pincus Trust, and OCC Accumulation Trust available under the Contract.
Participant - A person who makes contributions, or for whom contributions have
been made, and to whom they remain credited under the Contract.
Participant Account - An account established for each Participant to record the
amount credited to the Participant under the Contract.
Participant Account Value - The dollar amount held in a Participant Account.
Prudential - The Prudential Insurance Company of America. "We," "us," or "our"
means Prudential.
Prudential Discovery Select Group Variable Contract Account - A separate account
of Prudential registered under the Investment Company Act of 1940 as a unit
investment trust (the "Discovery Account"), invested through its Subaccounts in
shares of the corresponding Funds.
Subaccount - A division of the Discovery Account, the assets of which are
invested in shares of the corresponding Funds.
OTHER CONTRACT PROVISIONS
Assignment
Unless contrary to applicable law, the right to any payment under the Contract
is neither assignable nor subject to the claim of any creditor.
Participation in divisible surplus
A mutual life insurance company differs from a stock life insurance company in
that it has no stockholders who are the owners of the enterprise. Accordingly, a
Contractholder of Prudential participates in the divisible surplus of
Prudential, according to the annual determination of Prudential's Board of
Directors as to the portion, if any, of the divisible surplus which has accrued
on the Contract. In the case of the Contracts described in the prospectus, any
surplus determined to be payable as a dividend is credited to Participants. No
assurance can be given as to the amount of divisible surplus, if any, that will
be available for distribution under these Contracts in the future.
ADMINISTRATION
The assets of each Subaccount of the Discovery Account are invested in a
corresponding Fund. The prospectus and the statement of
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additional information of each Fund describe the investment management and
administration of that Fund. Subject to Prudential's supervision, all of the
investment management services provided to the Prudential Series Fund, Inc. by
Prudential are furnished by its wholly-owned subsidiary, The Prudential
Investment Corporation ("PIC"), pursuant to the service agreement between
Prudential and PIC (the "Service Agreement") which provides that Prudential will
reimburse PIC for its costs and expenses. PIC is registered as an investment
adviser under the Investment Advisers Act of 1940.
Prudential is responsible for the administrative and recordkeeping functions of
the Discovery Account and pays the expenses associated with them. These
functions include enrolling Participants, receiving and allocating
contributions, maintaining Participant Accounts, preparing and distributing
confirmations, statements, and reports. The administrative and recordkeeping
expenses borne by Prudential include salaries, rent, postage, telephone, travel,
legal, actuarial and accounting fees, office equipment, stationery and
maintenance of computer and other systems.
Prudential is reimbursed for these administrative and recordkeeping expenses by
the annual account charge and the daily charge against the assets of each
Subaccount for administrative expenses.
A daily charge is made which is equal to an effective annual rate of 0.15% of
the net value of the assets in each Subaccount. All of this charge is for
administrative expenses not covered by the annual account charge. There is also
an annual account charge for administrative expenses of not greater than $30
assessed against a Participant Account.
A withdrawal charge is also imposed on certain withdrawals from the Subaccounts
and the Guaranteed Interest Account.
PERFORMANCE INFORMATION
Annual Average Total Return
The Discovery Account may advertise average annual total return information
calculated according to a formula prescribed by the Securities and Exchange
Commission ("SEC"). Average annual total return shows the average annual
percentage increase, or decrease, in the value of a hypothetical contribution
allocated to a Subaccount from the beginning to the end of each specified period
of time. The SEC standardized version of this performance information is based
on an assumed contribution of $1,000 allocated to a Subaccount at the beginning
of each period and full withdrawal of the value of that amount at the end of
each specified period, giving effect to any withdrawal charge and all other
charges and fees applicable under the Contract. This method of calculating
performance further assumes that (i) a $1,000 contribution was allocated to a
Subaccount and (ii) no transfers or additional payments were made. Premium taxes
are not included in the term "charges" for purposes of this calculation. Average
annual total return is calculated by finding the average annual compounded rates
of return of a hypothetical contribution that would compare the Unit Value on
the first day of the specified period to the ending redeemable value at the end
of the period according to the following formula:
T = (ERV/C) 1/n - 1
Where T equals average annual total return, where ERV (the ending redeemable
value) is the value at the end of the applicable period of a hypothetical
contribution of $1,000 made at the beginning of the applicable period, where C
equals a hypothetical contribution of $1,000, and
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where n equals the number of years.
Non-Standard Total Return
In addition to the standardized average annual total return information
described above, we may present total return information computed on bases
different from that standardized method. The Discovery Account may present total
return information computed on the same basis as the standardized method except
that charges deducted from the hypothetical contribution will not include any
withdrawal charge. Consistent with the long-term investment and retirement
objectives of the Contract, this total return presentation assumes investment in
the Contract continues beyond the period when the withdrawal charge applies. The
total return percentage under this non-standardized method will be higher than
that resulting from the standardized method.
The Discovery Account may also present actual aggregate total return figures for
various periods, reflecting the cumulative change in value of an investment in
the Discovery Account for the specified period.
Performance Information
The tables below provide performance information for each Subaccount for
specified periods ending December 31, 1996. For the periods prior to the date
the Subaccounts commenced operations, performance information for the Contracts
will be calculated based on the performance of the Funds and the assumption that
the Subaccounts were in existence for the same periods as those indicated for
the Funds, with the level of Contract charges that were in effect at the
inception of the Subaccounts (this is referred to as "hypothetical performance
data"). This information does not indicate or represent future performance.
Total Return
Total returns quoted in sales literature or advertisements reflect all aspects
of a Subaccount's return. Average annual returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in the
Subaccount over a stated period of time, and then calculating the annually
compounded percentage rate that would have produced the same result if the rate
of growth or decline had been constant over the period. Contractholders and
Participants should recognize that average annual returns represent averaged
returns rather than actual year-to-year performance.
The respective Funds in which the Subaccounts invest had performance history
prior to the Subaccounts' inception. Performance information covering those
periods reflects a hypothetical performance as if the Funds were available under
the Discovery Account at that time, using the charges applicable to the
Contracts.
Table 1A below assumes a hypothetical investment of $1,000 at the beginning of
the period via the Subaccount investing in the applicable Fund and withdrawal of
the investment on 12/31/96. The rates thus reflect the mortality and expense
risk fee, the withdrawal charge and a pro rata portion of the annual account
charge.
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<PAGE>
TABLE 1 -- SUBACCOUNT STANDARDIZED "HYPOTHETICAL" AVERAGE
ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING
DATE 12/31/96 12/31/96 12/31/96 12/31/96
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
Money Market Subaccount ___ ___ ___ ___ ___
Diversified Bond Subaccount ___ ___ ___ ___ ___
High Yield Bond Subaccount ___ ___ ___ ___ ___
Stock Index Subaccount ___ ___ ___ ___ ___
Equity Income Subaccount ___ ___ ___ ___ ___
Equity Subaccount ___ ___ ___ ___ ___
Prudential Jennison Subaccount ___ ___ ___ ___ ___
Global Subaccount ___ ___ ___ ___ ___
Flexible Managed Subaccount ___ ___ ___ ___ ___
Conservative Balanced Subaccount ___ ___ ___ ___ ___
Government Income Subaccount ___ ___ ___ ___ ___
AIM VARIABLE INSURANCE FUNDS,
INC
AIM V.I. Growth and Income
Subaccount ___ ___ ___ ___ ___
AIM V.I. Value Subaccount ___ ___ ___ ___ ___
JANUS ASPEN SERIES
Growth Subaccount ___ ___ ___ ___ ___
International Growth Subaccount ___ ___ ___ ___ ___
MFS VARIABLE INSURANCE TRUST
Emerging Growth Subaccount ___ ___ ___ ___ ___
Research Subaccount ___ ___ ___ ___ ___
OCC ACCUMULATION TRUST
Managed Subaccount ___ ___ ___ ___ ___
Small Cap Subaccount ___ ___ ___ ___ ___
T. ROWE PRICE
T. Rowe Price Equity Series, Inc.,
Equity Income Subaccount ___ ___ ___ ___ ___
T. Rowe Price International Series,
Inc., International Stock Subaccount ___ ___ ___ ___ ___
WARBURG PINCUS TRUST
Post-Venture Capital Subaccount ___ ___ ___ ___ ___
</TABLE>
Tables 2 and 3 below show annual average total return and cumulative total
return, respectively, on the same assumptions as Table 1 except that the value
in the Subaccount is not withdrawn at the end of the period or is withdrawn to
affect an annuity. The rates of return shown below reflect the mortality and
expense risk fee and a pro rata portion of the annual account charge.
- 5 -
<PAGE>
TABLE 2 -- SUBACCOUNT "HYPOTHETICAL" AVERAGE TOTAL RETURN
ASSUMING NO WITHDRAWAL
<TABLE>
<CAPTION>
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING
DATE 12/31/96 12/31/96 12/31/96 12/31/96
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND ____ ____ ____ ____ ____
Money Market Subaccount ____ ____ ____ ____ ____
Diversified Bond Subaccount ____ ____ ____ ____ ____
High Yield Bond Subaccount ____ ____ ____ ____ ____
Stock Index Subaccount ____ ____ ____ ____ ____
Equity Income Subaccount ____ ____ ____ ____ ____
Equity Subaccount ____ ____ ____ ____ ____
Prudential Jennison Subaccount ____ ____ ____ ____ ____
Global Subaccount ____ ____ ____ ____ ____
Flexible Managed Subaccount ____ ____ ____ ____ ____
Conservative Balanced Subaccount ____ ____ ____ ____ ____
Government Income Subaccount ____ ____ ____ ____ ____
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Subaccount ____ ____ ____ ____ ____
AIM V.I. Value Subaccount ____ ____ ____ ____ ____
JANUS ASPEN SERIES
Growth Subaccount ____ ____ ____ ____ ____
International Growth Subaccount ____ ____ ____ ____ ____
MFS VARIABLE INSURANCE TRUST
Emerging Growth Subaccount ____ ____ ____ ____ ____
Research Subaccount ____ ____ ____ ____ ____
OCC ACCUMULATION TRUST
Managed Subaccount ____ ____ ____ ____ ____
Small Cap Subaccount ____ ____ ____ ____ ____
T. ROWE PRICE
T. Rowe Price Equity Series, Inc.,
Equity Income Subaccount ____ ____ ____ ____ ____
T. Rowe Price International Series, Inc.,
International Stock Subaccount ____ ____ ____ ____ ____
WARBURG PINCUS TRUST
Post-Venture Capital Subaccount ____ ____ ____ ____ ____
</TABLE>
- 6 -
<PAGE>
TABLE 3 -- SUBACCOUNT "HYPOTHETICAL" CUMULATIVE TOTAL RETURN
ASSUMING NO WITHDRAWAL
<TABLE>
<CAPTION>
LIFE
FUND YEAR TO 1 YEAR 3 YEARS 5 YEARS OF FUND
INCEPTION DATE ENDING ENDING ENDING ENDING
DATE 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
Money Market Subaccount ___ ___ ___ ___ ___ ___
Diversified Bond Subaccount ___ ___ ___ ___ ___ ___
High Yield Bond Subaccount ___ ___ ___ ___ ___ ___
Stock Index Subaccount ___ ___ ___ ___ ___ ___
Equity Income Subaccount ___ ___ ___ ___ ___ ___
Equity Subaccount ___ ___ ___ ___ ___ ___
Prudential Jennison Subaccount ___ ___ ___ ___ ___ ___
Global Subaccount ___ ___ ___ ___ ___ ___
Flexible Managed Subaccount ___ ___ ___ ___ ___ ___
Conservative Balanced Subaccounts ___ ___ ___ ___ ___ ___
Government Income Subaccount ___ ___ ___ ___ ___ ___
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Subaccount ___ ___ ___ ___ ___ ___
AIM V.I. Value Subaccount ___ ___ ___ ___ ___ ___
JANUS ASPEN SERIES
Growth Subaccount ___ ___ ___ ___ ___ ___
International Growth Subaccount
MFS VARIABLE INSURANCE TRUST
Emerging Growth Subaccount ___ ___ ___ ___ ___ ___
Research Subaccount ___ ___ ___ ___ ___ ___
OCC ACCUMULATION TRUST
Managed Subaccount ___ ___ ___ ___ ___ ___
Small Cap Subaccount ___ ___ ___ ___ ___ ___
T. ROWE PRICE
T. Rowe Price Equity Series, Inc.,
Equity Income Subaccount ___ ___ ___ ___ ___ ___
T. Rowe Price International Series, Inc.,
International Stock Subaccount ___ ___ ___ ___ ___ ___
WARBURG PINCUS TRUST
Post-Venture Capital Subaccount ___ ___ ___ ___ ___ ___
</TABLE>
SALE OF THE CONTRACTS
Prudential offers the Contracts on a continuous basis through Corporate Office,
regional home office and group sales office employees in those states in which
the Contracts may be lawfully sold. It may also offer the Contracts through
licensed insurance brokers and agents, or through appropriately registered
direct or indirect subsidiary(ies) of Prudential, provided clearances to do so
are obtained in any jurisdiction where such clearances may be necessary.
EXPERTS
The consolidated financial statements and schedules appearing in this SAI and
registration statement have been audited by Price Waterhouse LLP, independent
auditors, at ___________, to the extent indicated in their report thereon, also
appearing elsewhere herein and in the registration statement. Such consolidated
- 7 -
<PAGE>
financial statements and schedules have been included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
FINANCIAL STATEMENTS
As of the date of this SAI, the Discovery Account had not yet commenced
operations, had no assets or liabilities and no income. Accordingly, it has no
financial statements for prior periods.
The consolidated financial statements and schedules of Prudential which are
included in this SAI, should be considered only as bearing on the ability of
Prudential to meet its obligations under the Contracts. The consolidated
financial statements and schedules of Prudential are presented in accordance
with generally accepted accounting principles.
- 8 -
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial statements and Exhibits
(a) The following financial statements are included in Part B:
Financial Statements of Registrant - The Prudential Discovery Variable
Contract Account.
Financial Statements of Depositor - The Prudential Insurance Company of
America.
(b) Exhibits
1. Resolution adopted by the Board of Directors of The Prudential
Insurance Company of America on February 11, 1997
establishing the Prudential Discovery Select Group
Variable Contract Account (the "Discovery Account").*
2. Not applicable.
3(a). Principal Underwriting Contract.*
3(b). Broker-dealer sales agreement.*
4(a). Form of Group Annuity Contract for The Prudential Insurance
Company of America.*
5(a). Not applicable.
5(b). Form of Participant enrollment form (including acknowledgment
of restrictions on redemption imposed by I.R.C. Section
403(b)).*
6. Copy of certificate of incorporation and by-laws of The
Prudential Insurance Company of America.*
7. Not applicable.
8(a). Participation Agreement between The Prudential Insurance
Company of America and The Prudential Series Fund, Inc.*
8(b). Participation Agreement between The Prudential Insurance
Company of America and AIM Variable Insurance Funds, Inc.*
8(c). Participation Agreement between The Prudential Insurance
Company of America and T. Rowe Price Equity Series, Inc.*
8(d). Participation Agreement between The Prudential Insurance
Company of America and Janus Aspen Series.*
- ----------
* To be filed by amendment.
<PAGE>
8(e). Participation Agreement between The Prudential Insurance
Company of America and MFS Variable Insurance Trust.*
8(f). Participation Agreement between The Prudential Insurance
Company of America and OCC Accumulation Trust.*
8(g). Participation Agreement between The Prudential Insurance
Company of America and Warburg Pincus Trust.*
9. Consent and opinion of _______________, _______________, The
Prudential Insurance Company of America, as to the legality of
the securities being registered.*
10(a).Consent of Price Waterhouse, LLP, Independent Auditors.*
10(b).Powers of Attorney.
11. Not applicable.
12. Not applicable.
13. Schedule for Computation of Performance Quotations.*
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following list contains the officers and directors of The Prudential
Insurance Company of America ("Prudential") who are engaged directly or
indirectly in activities relating to the Discovery Account as well as the
Contracts. The list also shows Prudential's executive officers.
Name and Address Positions and Offices with Prudential
[Information to be provided by Amendment.]
Item 26. Persons Controlled by or Under Common Control with Prudential or the
Discovery Account
The Discovery Account is a separate account of Prudential and may be deemed to
be controlled by Prudential although Prudential will follow voting instructions
of Participants with respect to voting on certain important matters requiring a
vote of Participants.
The following chart indicates the persons controlled or under common control
with Prudential and the Discovery Account:
[Information to be provided by Amendment.]
- ----------
* To be filed by amendment.
<PAGE>
Item 27. Number of Contractholders
Not applicable.
Item 28. Indemnification
The 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 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, 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 (8)(ii) to this Registration
Statement.
Insofar as indemnification for liability 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 Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
<PAGE>
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 Securities
Act of 1933 and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriter
(a) Prudential Investment Management Services LLC ("PIMS") an indirect
wholly owned subsidiary of Prudential, acts as the principal
underwriter for the registrant and also for The Prudential Variable
Contract Account-2, The Prudential Variable Contract Account-10, and
The Prudential Variable Contract Account-11, which are registered as
open-end management investment companies under the Investment Company
Act of 1940. It also acts as principal underwriter for The Prudential
Variable Contract Account-24 and The Prudential Variable Contract
GI-2, which are registered as unit investment trusts under the
Investment Company Act of 1940.
(b)(1)The following table sets forth certain information regarding the
officers and directors of PIMS:
Name and Principal Business Position and Offices
Address with Underwriter
--------------------------- --------------------
E. Michael Caulfield* President
Jeffrey Hiller* Vice President, Chief
Operating Officer and
Chief Compliance Officer
Michael Williamson* Vice President,
Chief Financial Officer and
Comptroller
Carl L. McGuire* Vice President
James J. Toma* Vice President
Michael T. Dorsey* Secretary and
Chief Legal Officer
C. Edward Chapin* Treasurer
Kim E. Forrester* Assistant Comptroller
Mary L. Cavanaugh* Assistant Secretary
* Principal business address is _____________________________.
c)
Name of Net Underwriting
Principal Discounts and Compensation Brokerage
Underwriter Commissions on Redemption Commissions
----------- ---------------- ------------- -----------
Not applicable.
Item 30. Location of Accounts and Records
The names and addresses of the persons who maintain physical possession of the
accounts, books and documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder are:
The Prudential Insurance Company of America
and The Prudential Investment Corporation
Prudential Plaza
Newark, New Jersey 07102-3777
The Prudential Insurance Company of America
and The Prudential Investment Corporation
Gateway Buildings Two, Three and Four
100 Mulberry Street
Newark, New Jersey 07102
The Prudential Insurance Company of America and
The Prudential Investment Corporation
56 North Livingston Avenue
Roseland, New Jersey 07088
The Prudential Retirement Insurance Company of America
c/o Prudential Retirement Services
30 Scranton Office Park
Moosic, Pennsylvania 18507-1789
The Prudential Insurance Company of America
c/o The Prudential Asset Management Company, Inc.
71 Hanover Road
Florham Park, New Jersey 07932
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Item 31. Management Services
None
Item 32. Undertakings
The Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements
in this registration statement are never more than 16 months old for so
long as payments under the variable annuity Contracts may be accepted,
unless otherwise permitted.
(b) to include either (1) as part of any enrollment form to purchase a contract
offered by the prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or similar written
communication affixed to or included in
<PAGE>
the prospectus that the applicant can remove to send for a Statement of
Additional Information.
(c) To deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promptly upon
written or oral request.
(d) Prudential Insurance Company of America hereby represents that the fees
and charges deducted under the Contract, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Prudential Insurance Company of
America."
403(b) ANNUITIES
The Registrant intends to rely on the no-action response dated November
28, 1988, from Ms. Angela C. Goelzer of the Commission staff to the American
Council of Life Insurance concerning the redeemability of Section 403(b) annuity
contracts and the Registrant has complied with the provisions of paragraphs
(1)-(4) thereof.
TEXAS ORP
The Registrant intends to offer Contracts to Participants in the Texas
Optional Retirement Program. In connection with that offering, Rule 6c-7 of the
Investment Company Act of 1940 is being relied upon and paragraphs (a)-(d) of
that Section will be complied with.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant and the Depositor have duly caused this Registration
Statement to be signed on their behalf, in the City of Newark, and the State of
New Jersey on this 12th day of March, 1997.
The Prudential Discovery Variable Contract Account
(Registrant)
By: The Prudential Insurance Company of America
(Depositor)
By: ___________________________
---------------------------
(Signature and Title)
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
*/s/ ARTHUR F. RYAN Chairman of the Board, March 12, 1997
- ------------------------- President and Chief
Arthur F. Ryan Executive Officer
*/s/ GARNETT L. KEITH, JR. Vice Chairman and Director March 12, 1997
- -------------------------
Garnett L. Keith, Jr.
*/s/ MARK B. GRIER Senior Vice President March 12, 1997
- -------------------------- and Comptroller and
Mark B. Grier Principal Financial
Officer
*/s/ FRANKLIN E. AGNEW Director March 12, 1997
- -------------------------
Franklin E. Agnew
*/s/ FREDERIC K. BECKER Director March 12, 1997
- -------------------------
Frederic K. Becker
*/s/ WILLIAM W. BOESCHENSTEIN Director March 12, 1997
- -------------------------
William W. Boeschenstein
<PAGE>
*/s/ LISLE C. CARTER, JR. Director March 12, 1997
- -------------------------
Lisle C. Carter, Jr.
*/s/ JAMES G. CULLEN Director March 12, 1997
- -------------------------
James G. Cullen
*/s/ CAROLYNE K. DAVIS Director March 12, 1997
- -------------------------
Carolyne K. Davis
*/s/ ROGER A. ENRICO Director March 12, 1997
- -------------------------
Roger A. Enrico
*/s/ ALLAN D. GILMOUR Director March 12, 1997
- -------------------------
Allan D. Gilmour
*/s/ WILLIAM H. GRAY, III Director March 12, 1997
- -------------------------
William H. Gray, III
*/s/ JON F. HANSON Director March 12, 1997
- -------------------------
Jon F. Hanson
*/s/ CONSTANCE J. HORNER Director March 12, 1997
- -------------------------
Constance J. Horner
*/s/ ALLEN F. JACOBSON Director March 12, 1997
- -------------------------
Allen F. Jacobson
*/s/ BURTON G. MALKIEL Director March 12, 1997
- -------------------------
Burton G. Malkiel
Director February __, 1997
- -------------------------
Charles R. Sitter
Director February __, 1997
- -------------------------
Donald L. Staheli
*/s/ RICHARD M. THOMSON Director March 12, 1997
- -------------------------
Richard M. Thomson
*/s/ JAMES A. UNRUH Director March 12, 1997
- -------------------------
James A. Unruh
*/s/ P. ROY VAGELOS, M.D. Director March 12, 1997
- -------------------------
P. Roy Vagelos, M.D.
*/s/ STANLEY C. VAN NESS Director March 12, 1997
- -------------------------
Stanley C. Van Ness
<PAGE>
*/s/ PAUL A. VOLCKER Director March 12, 1997
- -------------------------
Paul A. Volcker
*/s/ JOSEPH H. WILLIAMS Director March 12, 1997
- -------------------------
Joseph H. Williams
*By: /s/ PETER T. SCOTT
-------------------------
(Attorney-in-Fact)
