As filed with the SEC on __________________, 2000.
File No. 333-95637
File No. 811-09799
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
___
Post-Effective Amendment No. ___ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
PRUDENTIAL DISCOVERY PREMIER GROUP VARIABLE CONTRACT ACCOUNT
[Exact Name of Registrant]
PRUDENTIAL INSURANCE COMPANY OF AMERICA
[Name of Depositor]
3 Gateway Center, 4th Floor
Newark, NJ 07102-4077
Depositor's Telephone Number: (973) 802-6997
C. Christopher Sprague, Esq.
Assistant General Counsel
The Prudential Insurance Company of America
3 Gateway Center, 4th Floor
Newark, New Jersey 07102-4077
[Name and Address of Agent for Service of Process]
Copies to:
Christopher E. Palmer, Esq.
Shea & Gardner
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
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.
Title of Securities Being Registered: Interests in Group Variable Annuity
Contracts.
<PAGE>
PROSPECTUS MAY 1, 2000
DISCOVERY PREMIER
GROUP RETIREMENT ANNUITY
This prospectus describes the Prudential DISCOVERY PREMIERSM Group Variable
Annuity Contracts* (the "Contracts"). The Contracts are group variable annuity
contracts sold by The Prudential Insurance Company of America to retirement
plans qualifying for federal tax benefits under sections 401, 403(b), 408 or 457
of the Internal Revenue Code of 1986 as amended (the "Code") and to defined
contribution annuity plans qualifying for federal tax benefits under Section
403(c) of the Code. In this Prospectus, The Prudential Insurance Company of
America may be referred to as either "Prudential" or as "we" or "us". We may
refer to a participant under a retirement plan as "you."
As a plan participant, you can allocate contributions made on your behalf in a
number of ways. You can allocate contributions to one or more of the 35
Subaccounts. Each Subaccount invests in one of the following portfolios of The
Prudential Series Fund, Inc. (the "Prudential Series Fund") or other listed
portfolios (collectively, the "Funds"):
<TABLE>
<CAPTION>
THE PRUDENTIAL SERIES FUND, INC.
<S> <C> <C>
Money Market Portfolio Flexible Managed Portfolio Equity Portfolio
Diversified Bond Portfolio High Yield Bond Portfolio Prudential Jennison Portfolio
Government Income Portfolio Stock Index Portfolio Global Portfolio
Conservative Balanced Portfolio Equity Income Portfolio 20/20 Focus Portfolio
Small Capitalization Stock Portfolio
</TABLE>
<TABLE>
<S> <C> <C>
AIM VARIABLE INSURANCE FUNDS, INC. ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
AIM V.I. Government Securities Fund AIM V.I. Value Fund Premier Growth Portfolio Quasar Portfolio
AIM V.I. International Equity Fund Growth and Income Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. DAVIS VARIABLE ACCOUNT FUND, INC.
VP Income & Growth DAVIS VALUE PORTFOLIO
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. FRANKLIN TEMPLETON VARIABLE INSURANCE
Dreyfus Socially Responsible Growth Fund PRODUCTS TRUST
FRANKLIN SMALL CAP FUND
TEMPLETON INTERNATIONAL SECURITIES FUND
JOHN HANCOCK DECLARATION TRUST INVESCO VARIABLE INVESTMENT FUNDS, INC.
V.A. Bond Fund INVESCO VIF - DYNAMICS FUND
JANUS ASPEN SERIES MFS VARIABLE INSURANCE TRUST
Aggressive Growth Portfolio Growth and Income Portfolio MFS Bond Series MFS Growth With Income Series
Worldwide Growth Portfolio MFS Emerging Growth Series MFS Total Return Series
MFS GROWTH SERIES
WARBURG PINCUS TRUST
EMERGING GROWTH PORTFOLIO
</TABLE>
In this Prospectus, we provide information that you should know before you
invest. We have filed additional information about the Contracts with the
Securities and Exchange Commission ("SEC") in a Statement of Additional
Information ("SAI"), dated May 1, 2000. That SAI is legally a part of this
Prospectus. You can get a copy of the SAI free of charge by contacting us at the
address or telephone number shown on the cover page. The SEC maintains a Web
site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC. The SEC's mailing address is 450 Fifth Street, N.W., Washington,
DC 20549, and its public reference number is (800) SEC-0330.
The accompanying prospectuses for the Funds and the related statements of
additional information describe the investment objectives and risks of investing
in the Funds. We may offer additional Funds and Subaccounts in the future. The
contents of the SAI with respect to the Contracts appears on page __ of this
Prospectus.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ACCOMPANIED
BY A CURRENT PROSPECTUS FOR EACH OF THE FUNDS. YOU SHOULD READ THOSE
PROSPECTUSES CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
AS WITH ALL VARIABLE ANNUITY CONTRACTS, THE FACT THAT WE HAVE FILED A
REGISTRATION STATEMENT WITH THE SEC DOES NOT MEAN THAT THE SEC HAS DETERMINED
THAT THE CONTRACTS ARE A GOOD INVESTMENT. NOR HAS THE SEC DETERMINED THAT THIS
PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
30 Scranton Office Park
Scranton, PA 18507-1789
Telephone 1-800-458-6333
* DISCOVERY PREMIER IS A SERVICE MARK OF PRUDENTIAL
1
<PAGE>
PROSPECTUS CONTENTS
PAGE
GLOSSARY 1
BRIEF DESCRIPTION OF THE CONTRACTS 2
FEE TABLE 3
GENERAL INFORMATION ABOUT PRUDENTIAL, PRUDENTIAL DISCOVERY
PREMIER GROUP VARIABLE CONTRACT ACCOUNT AND THE INVESTMENT
OPTIONS AVAILABLE UNDER THE CONTRACTS 8
Prudential 8
Prudential Discovery Premier Group Variable Contract
Account 8
The Funds 8
THE CONTRACTS 9
The Accumulation Period 13
Allocation of Purchase Payments 14
Asset Allocation Program 14
Transfers 14
Dollar Cost Averaging 15
Auto-Rebalancing 15
Withdrawals 15
Systematic Withdrawal Plan 16
Texas Optional Retirement Plan 16
Death Benefit 17
Discontinuance of Contributions 18
Loan Provision 18
Modified Procedures 18
CHARGES, FEES AND DEDUCTIONS 19
Administrative Fee 19
Charge for Assuming Mortality and Expense Risks 19
Expenses Incurred by the Funds 19
Premium Taxes 19
FEDERAL TAX STATUS 19
ERISA CONSIDERATIONS 22
EFFECTING AN ANNUITY 22
Life Annuity with Payments Certain 22
Annuity Certain 22
Joint and Survivor Annuity with Payments Certain 23
Purchasing the Annuity 23
OTHER INFORMATION 23
Misstatement of Age or Sex 23
Sale of the Contract and Sales Commissions 23
Voting Rights 23
Substitution of Fund Shares 24
Performance Information 24
Reports to Participants 24
State Regulation 24
Legal Proceedings 25
Statement of Additional Information 25
Additional Information 25
i
<PAGE>
GLOSSARY
ACCOUNT--See the Prudential Discovery Premier 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.
ANNUITANT--The person or persons designated by the Participant upon whose life
or lives monthly annuity payments are based after an annuity is effected.
ANNUITY DATE --The date that the accumulation period ends and annuity payments
begin.
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.
CONTRACTS--The Group Variable Annuity Contracts that we describe in this
Prospectus and offer for use in connection with retirement arrangements that
qualify for federal tax benefits under Sections 401, 403(b), 408 or 457 of the
Code and with non-qualified annuity arrangements.
CONTRACT VALUE--The dollar amount held under a Contract.
EMPLOYER--The sponsor of the retirement plan or non-qualified annuity
arrangement.
FUNDS--The portfolios of The Prudential Series Fund, Inc., AIM Variable
Insurance Funds, Inc., Alliance Variable Products Series Fund, Inc., American
Century Variable Portfolios, Inc., Davis Variable Account Fund, Inc., Dreyfus
Socially Responsible Growth Fund, Inc., Franklin Templeton Variable Insurance
Products Trust, John Hancock Declaration Trust, Invesco Variable Investment
Funds, Inc., Janus Aspen Series, MFS Variable Insurance Trust, and Warburg
Pincus Trust available under the Contracts.
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, or under certain Contracts, a separate account. It
is not part of nor dependent upon the investment performance of the Discovery
Account. This Prospectus does not describe in detail the Guaranteed Interest
Account or any separate account funding a guaranteed interest rate option.
PARTICIPANT--A person who makes contributions, or for whom contributions have
been made, and to whom they remain credited under the Contract. "You" means the
Participant.
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 PREMIER 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 Funds.
SUBACCOUNT--A division of the Discovery Account, the assets of which are
invested in shares of the corresponding Fund.
UNIT AND UNIT VALUE--We credit a Participant with Units for each Subaccount in
which he invests. The value of these Units may change 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 cover of this Prospectus or such other
address that Prudential has specified. We will reduce the number of Units
credited to a Participant under any Subaccount 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. We make such determinations
generally as of 4:00 p.m. Eastern time on each day during which the New York
Stock Exchange and Prudential are open. Currently, the Prudential business unit
that receives transaction requests for the Contracts is open each day on which
the New York Stock Exchange is open.
VARIABLE INVESTMENT OPTIONS--The Subaccounts.
1
<PAGE>
BRIEF DESCRIPTION OF THE CONTRACTS
We offer the Contracts to retirement plans qualifying for federal tax benefits
under Sections 401, 403(b), 408 or 457 of the Internal Revenue Code of 1986, as
amended (the "Code") and to annuity arrangements qualifying for federal tax
benefits under Section 403(c) of the Code. The Contracts are group annuity
contracts that we typically issue to employers. These employers then make
contributions under the Contract 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
selected investment option[s]. Currently, there are 35 variable investment
options, each of which is called a Subaccount. Prudential may limit the number
of subaccounts an employer may select in order to ensure that Prudential is the
owner of the assets in the Subaccounts for tax purposes. We invest the assets of
each Subaccount in one of the Funds listed beginning on page __. You may direct
contributions to one or a combination of variable investment options as well as
the Guaranteed Interest Account. We set up a separate Participant Account to
record your investment choices. You can withdraw amounts held under your
Participant Account, in whole or in part, prior to the annuity date. We also
provide for a death benefit under the Contract.
Through payroll deduction or similar agreements with the Contractholder, you may
make contributions under the Contract if permitted under your retirement
arrangement. In addition, you may make contributions in ways other than payroll
deduction under certain circumstances if permitted under your retirement
arrangement.
We assess charges under the Contracts for administering the Contracts and for
assuming mortality and expense risks under the Contracts. We deduct a mortality
and expense risk charge equal to an annual rate of 0.15% from the assets held in
the variable investment options. We also deduct an administrative charge equal
to a maximum annual rate of 0.75% from the assets held in the variable
investment options. You can find further details about the administrative charge
in the Fee Table, page __, and under Administrative Fee, page ___.
A charge against each of the Funds' assets is also made by the investment
adviser for providing investment advisory and management services. You can find
further details about charges under the section entitled Charges, Fees and
Deductions, page __.
Unless restricted by the retirement arrangement under which you are covered, or
by a section of the Code, you may withdraw, at any time, all or part of your
Participant Account. See "Withdrawals," page __. We do not impose any charge
upon withdrawal. If you withdraw, you may be taxed under the Code, including,
under certain circumstances, a 10% penalty tax on premature withdrawals. See
"Federal Tax Status," page __. In addition, you may transfer all or a part of
your Participant Account Value among the Subaccounts and the Guaranteed Interest
Account without the imposition of the withdrawal charge or tax liability.
As explained below, notices, forms and requests for transactions related to the
Contracts may be provided in traditional paper form or by electronic means,
including telephone and Internet. Prudential reserves the right to vary the
means available, including limiting them to electronic means, from Contract to
Contract by Contract terms, related service agreements with the Contractholder,
or notice to the Contractholder and Participants.
You should send all written requests, notices, and transfer requests required or
permitted by the Contracts (other than withdrawal requests and death benefit
claims), to Prudential at the address shown on the cover of this Prospectus. You
may effect permitted telephone transactions by calling us at 1-800-458-6333. All
permitted Internet transactions may be made through www.prudential.com. You must
send all written withdrawal requests or death benefit claims to Prudential by
one of the following three means: (1) By U.S. mail to: Prudential, P.O. Box
5410, Scranton, Pennsylvania 18505-5410; (2) Delivery service other than the
U.S. mail (e.g., Federal Express, etc.) sent to our office at the following
address: Prudential, 30 Scranton Office Park, Scranton, Pennsylvania 18507-1789;
or (3) Fax to Prudential, Attention: Client Payments at: (570) 340-4328. Under
certain Contracts, the Contractholder or a third party acting on their behalf
provides record-keeping services that we would otherwise perform. See "Modified
Procedures," page __.
Prudential may provide other permitted telephone numbers or Internet addresses
through the Contractholder directly to Participants as authorized by the
Contractholder.
We intend this brief description of the Contracts to provide a broad overview of
the more significant features of the Contracts. You can find more detailed
information about the Contracts in subsequent sections of this Prospectus and in
the Contracts themselves.
Transaction requests (including death benefit claims) received directly by
Prudential in good order on a given Business Day before the established
transaction cutoff time (4 PM Eastern Time, or such earlier time that the New
York Stock Exchange may close) will be effective for that Business Day. For
purposes of the preceding sentence, we define "good order" generally as an
instruction received by us that is sufficiently complete and clear that we do
not need to exercise any discretion to follow such instruction.
2
<PAGE>
FEE TABLE
PARTICIPANT TRANSACTION EXPENSES
Sales Charge Imposed on Contributions......................................None
Sales Charge Imposed on Withdrawals or Surrenders..........................None
Annual Account Charge......................................................None
DISCOVERY ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE PARTICIPANT ACCOUNT VALUE)
ALL SUBACCOUNTS
Mortality and Expense Risk Charge 0.15%
Maximum Administrative Fee 0.75%
-----
Total Separate Account Annual Expenses 0.90%
=====
3
<PAGE>
ANNUAL EXPENSES OF THE FUNDS
(AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
(BASED ON THE YEAR ENDED DECEMBER 31, 1999, UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
TOTAL
ACTUAL
INVESTMENT TOTAL EXPENSES
MANAGEMENT OTHER CONTRACTUAL (AFTER EXPENSE
FEE EXPENSES EXPENSES REIMBURSEMENT)*
<S> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND, INC.
Conservative Balanced Portfolio 0.55% 0.02% 0.57% 0.57%
Diversified Bond Portfolio 0.40% 0.03% 0.43% 0.43%
Equity Income Portfolio 0.40% 0.02% 0.42% 0.42%
Equity Portfolio 0.45% 0.02% 0.47% 0.47%
Flexible Managed Portfolio 0.60% 0.02% 0.62% 0.62%
Global Portfolio 0.75% 0.09% 0.84% 0.84%
Government Income Portfolio 0.40% 0.04% 0.44% 0.44%
High Yield Bond Portfolio 0.55% 0.05% 0.60% 0.60%
Money Market Portfolio 0.40% 0.02% 0.42% 0.42%
Prudential Jennison Portfolio 0.60% 0.03% 0.63% 0.63%
Small Capitalization Stock Portfolio 0.40% 0.05% 0.45% 0.45%
Stock Index Portfolio 0.35% 0.04% 0.39% 0.39%
20/20 Focus Portfolio 0.75% 0.34% 1.09% 1.09%
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Government Securities Fund 0.50% 0.40% 0.90% 0.90%
AIM V.I. International Equity Fund 0.75% 0.22% 0.97% 0.97%
AIM V.I. Value Fund 0.61% 0.15% 0.76% 0.76%
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. (1)
Premier Growth Portfolio 1.00% 0.05% 1.05% 1.05%
Growth and Income Portfolio 0.63% 0.08% 0.71% 0.71%
Quasar Portfolio 1.00% 0.19% 1.19% 0.95%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth 0.70% 0.00% 0.70% 0.70%
DAVIS VARIABLE ACCOUNT FUND, INC. (2)
Davis Value Portfolio 0.75% 1.54% 2.29% 1.00%
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Dreyfus Socially Responsible Growth Fund 0.75% 0.04% 0.79% 0.79%
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST
VIP Franklin Small Cap Fund-Class 1 (3) 0.55% 0.27% 0.82% 0.82%
Templeton International Securities Fund-Class 1 (4) 0.69% 0.19% 0.88% 0.88%
JOHN HANCOCK DECLARATION TRUST (5)
V.A. Bond Fund 0.50% 0.51% 1.01% 0.75%
INVESCO VARIABLE INVESTMENT FUNDS, INC. (6)
INVESCO VIF - Dynamics Fund 0.75% 1.53% 2.28% 1.26%
JANUS ASPEN SERIES (7)
Aggressive Growth Portfolio 0.65% 0.02% 0.67% 0.67%
Growth and Income Portfolio 0.65% 0.40% 1.05% 1.05%
Worldwide Growth Portfolio 0.65% 0.05% 0.70% 0.70%
MFS VARIABLE INSURANCE TRUST (8)
MFS Bond Series 0.60% 0.46% 1.06% 0.76%
MFS Emerging Growth Series 0.75% 0.09% 0.84% 0.84%
MFS Growth Series 0.75% 0.71% 1.46% 0.91%
MFS Growth With Income Series 0.75% 0.13% 0.88% 0.88%
MFS Total Return Series 0.75% 0.15% 0.90% 0.90%
WARBURG PINCUS TRUST (13)
Emerging Growth Portfolio 0.90% 0.63% 1.53% 1.25%
</TABLE>
* Reflects fee waivers and reimbursement of expenses, if any. The following
Expense Examples use "Total Actual Expenses."
4
<PAGE>
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 Premier Group Variable Contract Account and the Funds. See the
sections on charges in this Prospectus and the accompanying prospectuses for the
Funds.
(1) Alliance Variable Products Series Fund. The expense limitation of 0.95%
for the Quasar Portfolio may be discontinued at any time. During 1999,
after applying the expense limitations, the investment management fee
was 0.81% and other expenses were 0.14%.
(2) Davis Variable Account Fund, Inc. Fees and expenses shown are for the
period from 07/01/99, commencement of operations, through 12/31/99. The
adviser has guaranteed that the total expenses will not exceed 1.00%
through at least 5/1/2001. During 1999, the adviser waived the entire
investment management fee of 0.75% and reimbursed the fund for other
expenses of 0.54%.
(3) VIP Franklin Small Cap Fund-Class 1. On 2/8/00, a merger and
reorganization was approved that combined the assets of the fund with a
similar fund of the Templeton Variable Products Series Fund, effective
5/1/00. On 2/8/00, fund shareholders approved new management fees,
which apply to the combined fund effective 5/1/00. The table shows
restated total expenses based on the new fees and assets of the fund as
of 12/31/99, and not the assets of the combined fund. However, if the
table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.55%,
Other Expenses 0.27%, Total Contractual Expenses 0.82% and Total Fund
Actual Expenses 0.82%.
(4) Templeton International Securities Fund-Class 1. On 2/8/00,
shareholders approved a merger and reorganization that combined the
fund with the Templeton International Equity Fund effective 5/1/00. The
shareholders of that fund had approved new management fees, which apply
to the combined fund effective 5/1/00. The table shows restated total
expenses based on the new fees and assets of the fund as of 12/31/99,
and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.69%,
Other Expenses 0.19%, Total Contractual Expenses 0.88% and Total Fund
Actual Expenses 0.88%.
(5) John Hancock Declaration Trust. The adviser has guaranteed that it will
limit other expenses to 0.25% through at least 5/1/2001.
(6) INVESCO. The expense limitation may be discontinued at any time
following consultation with the Fund's board of directors. During 1999,
after applying the expense limitation, the investment management fee
was 0.75% and other expenses were 0.51%.
(7) Janus Aspen Series. Expenses are based upon expenses for the fiscal
year ended December 31, 1999, restated to reflect a reduction in the
management fee for Aggressive Growth, Worldwide Growth, and Growth and
Income Portfolios.
(8) MFS Variable Insurance Trust. The expense limitations for the Bond
Series and the Growth Series may be discounted at any time. During
1999, after applying the expense limitation for the Bond Series, the
investment management fee was 0.60% and other expenses were 0.16%, and,
for the Growth Series, the investment management was 0.75% and other
expenses were 0.21%.
(9) Warburg Pincus Trust. The expense limitation of 1.25% may be
discontinued at any time. Fees and expenses in the chart are based on
estimated expenses for the fiscal year ended December 31, 2000. After
applying the 1.25% expense limitation to those numbers, the estimated
investment management fee is 0.72% and estimated other expenses are
0.53%.
5
<PAGE>
EXAMPLES OF FEES AND EXPENSES
The following examples illustrate the cumulative dollar amount of all the above
expenses that you would incur on each $1,000 of investment.
* The examples assume a consistent 5% annual return on invested
assets.
* The examples assume that the current fee waivers and expense
reimbursement arrangements for the Funds continue for the periods
shown.
* Because this Contract has no withdrawal charges, your expenses are
not impacted by whether or not you choose to make withdrawals.
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>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
THE PRUDENTIAL SERIES FUND, INC.
Conservative Balanced Portfolio $ 14.85 $ 46.10
Diversified Bond Portfolio 13.45 41.83
Equity Income Portfolio 13.35 41.52
Equity Portfolio 13.85 43.05
Flexible Managed Portfolio 15.34 47.62
Global Portfolio 17.52 54.28
Government Income Portfolio 13.55 42.13
High Yield Bond Portfolio 15.14 47.02
Money Market Portfolio 13.35 41.52
Prudential Jennison Portfolio 15.44 47.93
Small Capitalization Stock Portfolio 13.65 42.44
Stock Index Portfolio 13.05 40.60
20/20 Focus Portfolio 19.99 61.77
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Government Securities Fund 18.12 56.08
AIM V.I. International Equity Fund 18.81 58.18
AIM V.I. Value Fund 16.73 51.86
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Premier Growth Portfolio 19.60 60.58
Growth and Income Portfolio 16.24 50.35
Quasar Portfolio 18.61 57.58
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income and Growth 16.14 50.05
DAVIS VARIABLE ACCOUNT FUND, INC.
Davis Value Portfolio 19.11 59.08
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Dreyfus Socially Responsible Growth Fund 17.03 52.77
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
VIP Franklin Small Cap Fund - Class 1 17.33 53.67
Templeton International Equity Fund 17.92 55.48
JOHN HANCOCK DECLARATION TRUST
Bond Fund 16.63 51.56
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - Dynamics Fund 21.67 66.82
JANUS ASPEN SERIES
Aggressive Growth Portfolio 15.84 49.14
Growth and Income Portfolio 19.60 60.58
Worldwide Growth Portfolio 16.14 50.05
MFS VARIABLE INSURANCE TRUST
MFS Bond Series 16.73 51.86
MFS Emerging Growth Series 17.52 54.28
MFS Growth Series 18.22 56.38
MFS Growth With Income Series 17.92 55.48
MFS Total Return Series 18.22 56.38
WARBURG PINCUS TRUST
Emerging Growth Portfolio 21.57 66.52
</TABLE>
If permitted under your retirement arrangement, loans taken by a Participant
from a Participant Account may be subject to charges for establishing and
maintaining the loan. The examples with respect to the Contracts do not take
into account any deduction for such charges.
6
<PAGE>
GENERAL INFORMATION ABOUT PRUDENTIAL,
PRUDENTIAL DISCOVERY PREMIER GROUP VARIABLE CONTRACT ACCOUNT AND THE
INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACTS
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
The Prudential Insurance Company of America ("Prudential") is a mutual life
insurance company incorporated in 1875 under the laws of the State of New
Jersey. Our corporate office is located at 751 Broad Street, Newark, New Jersey.
We have been investing for pension funds since 1928.
Prudential is currently considering reorganizing itself into a publicly traded
stock company through a process known as "demutualization." On February 10,
1998, the company's Board of Directors authorized management to take the
preliminary steps necessary to allow the company to demutualize. On July 1,
1998, legislation was enacted in New Jersey that would permit this conversion to
occur and that specified the process for conversion. Demutualization is a
complex process involving development of a plan of reorganization, adoption of a
plan by the company's Board of Directors, a public hearing, voting by qualified
policyholders and regulatory approval. Prudential is working toward completing
this process in 2001 and currently expects adoption by the Board of Directors to
take place in the latter part of 2000. However, there is no certainty that the
demutualization will be completed in this timeframe or that the necessary
approvals will be obtained. Also it is possible that after careful review,
Prudential could decide not to demutualize or could decide to delay its plans.
The plan of reorganization, which has not been fully developed and approved,
would provide the criteria for determining eligibility and the methodology for
allocating shares or other consideration to those who would be eligible.
Generally, the amount of shares or other consideration eligible customers would
receive would be based on a number of factors, including the types, amounts and
issue years of their policies. As a general rule, owners of Prudential-issued
insurance policies and annuity contracts would be eligible, provided that their
policies were in force on the date Prudential's Board of Directors adopted a
plan of reorganization, while mutual fund customers and customers of the
company's subsidiaries would not be. It has not yet been determined whether any
exceptions to that general rule will be made with respect to policyholders and
contractholders of Prudential's subsidiaries. Eligible policyholders would
generally include employers, associations, other groups, and trusts established
by or for such entities, that own group policies issued by Prudential, and
generally would include Contractholders. The individuals covered under a group
plan, such as the Participants under a Contract, generally would not be eligible
to receive stock or other consideration from Prudential. It has not yet been
determined whether any exceptions to that general rule will be made with respect
to policyholders and contractholders of Prudential's subsidiaries. This does not
constitute a proposal, offer, solicitation or recommendation regarding any plan
of reorganization that may be proposed or a recommendation regarding the
ownership of any stock that could be issued in connection with any such
demutualization.
Prudential generally is responsible for the administrative and record-keeping
functions of the Prudential Discovery Premier 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 record-keeping expenses that we bear include salaries, rent,
postage, telephone, travel, legal, actuarial and accounting fees, office
equipment, stationery and maintenance of computer and other systems.
We are reimbursed for these administrative and record-keeping expenses by the
daily charge against the assets of each Subaccount for administrative expenses.
PRUDENTIAL DISCOVERY PREMIER GROUP VARIABLE CONTRACT ACCOUNT
Prudential established the Prudential Discovery Premier Group Variable Contract
Account (the "Discovery Account") on November 9, 1999, 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 sufficient to support its
obligations under the Contracts. Prudential segregates the Discovery Account
assets from all of its other assets. Thus, those assets are not chargeable with
liabilities arising out of any other business Prudential conducts. 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 to time, Prudential
will transfer these additional assets 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.
Prudential registered the Discovery Account with the U.S. 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
registration does not mean that the SEC supervises 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 35 Subaccounts within the Discovery Account. These Subaccounts invest
in the corresponding Fund available under the Contracts. We may establish
additional Subaccounts in the future.
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THE FUNDS
The following is a list of each Fund, its investment objective and its
investment adviser:
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO. The investment objective is maximum current income
consistent with the stability of capital and the maintenance of liquidity. The
portfolio invests in short-term debt obligations that mature in 13 months or
less.
DIVERSIFIED BOND PORTFOLIO. The investment objective is a high level of income
over a longer term while providing reasonable safety of capital. The portfolio
invests primarily in higher grade debt obligations and high quality money market
instruments.
GOVERNMENT INCOME PORTFOLIO. The investment objective is a high level of income
over the longer term consistent with the preservation of capital. The portfolio
invests primarily in U.S. Government securities, including intermediate and
long-term U.S. Treasury securities and debt obligations issued by agencies or
instrumentalities established by the U.S. Government.
CONSERVATIVE BALANCED PORTFOLIO. The investment objective is a total investment
return consistent with a conservatively managed diversified portfolio. The
portfolio invests in a mix of equity securities, debt obligations and money
market instruments.
FLEXIBLE MANAGED PORTFOLIO. The investment objective is a total investment
return consistent with an aggressively managed diversified portfolio. The
portfolio invests in a mix of equity securities, debt obligations and money
market instruments.
HIGH YIELD BOND PORTFOLIO. The investment objective is a high total return. The
portfolio invests primarily in high yield/high risk debt securities.
STOCK INDEX PORTFOLIO. The investment objective is investment results that
generally correspond to the performance of publicly-traded common stocks. The
portfolio attempts to duplicate the price and yield performance of the Standard
& Poor's 500 Composite Stock Price Index (the "S&P 500 Index").
EQUITY INCOME PORTFOLIO. The investment objective is both current income and
capital appreciation. The portfolio invests primarily in common stocks and
convertible securities that provide good prospects for returns above those of
the Standard & Poor's 500 Composite Stock Price Index or the NYSE Composite
Index.
EQUITY PORTFOLIO. The investment objective is capital appreciation. The
portfolio invests primarily in common stocks of major established corporations
as well as smaller companies that offer attractive prospects of appreciation.
PRUDENTIAL JENNISON PORTFOLIO. The investment objective is to achieve long-term
growth of capital. The portfolio invests primarily in equity securities of major
established corporations that offer above average growth prospects.
GLOBAL PORTFOLIO. The investment objective is long-term growth of capital. The
portfolio invests primarily in common stocks (and their equivalents) of foreign
and U.S. companies.
20/20 FOCUS PORTFOLIO. The investment objective is long-term growth of capital.
The portfolio will invest primarily in up to 40 equity securities of U.S.
companies.
SMALL CAPITALIZATION STOCK PORTFOLIO. The investment objective is long-term
growth of capital. The portfolio attempts to duplicate the performance of the
Standard Poor's Small Capitalization Stock Index.
Prudential is the investment adviser for 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 Subadvisory Agreements 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 and the 20/20 Focus Portfolio.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. GOVERNMENT SECURITIES FUND. The investment objective is to achieve a
high level of current income consistent with reasonable concern for safety of
principal by investing in debt securities issued, guaranteed or otherwise backed
by the United States Government.
AIM V.I. INTERNATIONAL EQUITY FUND. The investment objective is to provide
long-term growth of capital by investing in a diversified portfolio of
international equity securities whose issuers are considered to have strong
earnings momentum.
AIM V.I. VALUE FUND. The investment objective is to achieve long-term growth of
capital by investing primarily in equity securities judged by the adviser to be
undervalued relative to the adviser's appraisal of 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.
The investment adviser for these Funds is AIM Advisors, Inc.
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ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
PREMIER GROWTH PORTFOLIO. The investment objective is growth of capital rather
than current income. In pursuing its investment objective, the Fund will employ
aggressive investment policies. The Fund invests primarily in equity securities
of U.S. companies.
GROWTH AND INCOME PORTFOLIO. The investment objective is reasonable current
income and reasonable opportunity for appreciation through investments primarily
in dividend-paying common stocks of good quality.
QUASAR PORTFOLIO. The investment objective is growth of capital by pursuing
aggressive investment policies. This Fund invests principally in a diversified
portfolio of equity securities.
The investment adviser for these Funds is Alliance Capital Management L.P.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP INCOME AND GROWTH. The Fund seeks dividend growth, current income and capital
appreciation by investing primarily in common stocks. The investment adviser for
this Fund is American Century Investment Management, Inc.
DAVIS VARIABLE ACCOUNT FUND, INC.
DAVIS VALUE PORTFOLIO. The Fund's investment objective is growth of capital. The
Fund invests primarily in common stock of U.S. companies with market
capitalization of at least $5 billion. The investment adviser for this Fund is
Davis Select Advisers, L.P.
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND. The Fund's primary goal is to provide
capital growth with current income as a secondary goal. The Fund invests
primarily in common stock of companies that, in the opinion of the Fund's
management, not only meet traditional investment standards but which also show
evidence that they conduct their business in manner that contributes to the
enhancement of the quality of life in America. The investment adviser for this
Fund is The Dreyfus Corporation.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (VIP)
FRANKLIN SMALL CAP FUND. The Fund's investment goal is long-term capital growth.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in the equity securities of U.S. small capitalization (small cap) growth
companies. The investment adviser for the Franklin Small Cap Fund is Franklin
Advisers, Inc.
TEMPLETON INTERNATIONAL SECURITIES FUND. The Fund's investment goal is long-term
capital growth. Under normal market conditions, the Fund will invest at least
65% of its total assets in the equity securities of companies located outside
the U.S., including emerging markets. The investment adviser for the Templeton
International Securities Fund is Templeton Investment Counsel, Inc.
JOHN HANCOCK DECLARATION TRUST
V.A. BOND FUND. The Fund seeks to generate a high level of current income
consistent with prudent investment risk. In pursuing this goal, the Fund
normally invests in a diversified portfolio of debt securities. The investment
adviser for this Fund is John Hancock Advisers, Inc.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - DYNAMICS FUND. The Fund attempts to make your investment grow over
the long term. The Fund invests in a variety of securities that the advisor
believes present opportunities for capital growth - primarily common stocks of
companies traded on U.S. securities exchanges, as well as over-the-counter. The
Fund also may invest in preferred stock (which generally pays higher dividends
than common stocks) and debt instruments that are convertible into common
stocks, as well as in securities of foreign companies. It is aggressively
managed. Because its strategy includes many short-term factors - including
current information about a company, investor interest, price movements of a
company's securities and general market and monetary conditions - securities in
its portfolio usually are bought and sold relatively frequently. The investment
adviser for this Fund is INVESCO Funds Group, Inc.
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JANUS ASPEN SERIES
AGGRESSIVE GROWTH PORTFOLIO. The investment objective of the Fund is long-term
growth of capital. It is a diversified portfolio that seeks its objective
primarily by investing in common stocks selected for growth potential, and it
normally invests at least 50% of its equity assets in medium-sized companies.
GROWTH AND INCOME PORTFOLIO. The investment objective of this Fund is long-term
capital growth and current income. It is a diversified portfolio that normally
invests up to 75% of its assets in equity securities selected primarily for
growth potential and at least 25% of its assets in securities the portfolio
manager believes have income potential.
WORLDWIDE GROWTH PORTFOLIO. The investment objective of this Fund is long-term
growth of capital in a manner consistent with the preservation of capital. It is
a diversified portfolio that pursues its objective primarily through investments
in common stocks of foreign and domestic issuers.
The investment adviser for these Funds is Janus Capital Corporation.
MFS VARIABLE INSURANCE TRUST
MFS BOND SERIES. The investment objective is primarily to provide as high level
of current income as is believed to be consistent with prudent risk. Its
secondary objective is to protect shareholders capital. Under normal market
conditions, the fund invests at least 65% of its assets in fixed income
securities.
MFS EMERGING GROWTH SERIES. The investment objective is long-term growth of
capital. Under normal market conditions, the Fund invests at least 65% of its
assets in common stocks and related securities of emerging growth companies.
MFS GROWTH SERIES. The investment objective is to provide long-term growth of
capital and future income rather than current income. Under normal market
conditions, the Fund invests at least 80% of its assets in common stock and
related securities.
MFS GROWTH WITH INCOME SERIES. The investment objective is to provide reasonable
current income and long-term growth of capital and income. Under normal market
conditions, the Fund invests at least 65% of its assets in common stocks and
related securities.
MFS TOTAL RETURN SERIES. The investment objective is above-average income
(compared to a portfolio invested entirely in equity securities) consistent with
the prudent employment of capital, and secondarily to provide a reasonable
opportunity for growth of capital and income.
The investment adviser for these Funds is MFS Investment Management.
WARBURG PINCUS TRUST
EMERGING GROWTH PORTFOLIO. The objective of this Fund is to seek maximum capital
appreciation by investing in equity securities of small or medium-sized domestic
companies with emerging or renewed growth potential. The investment adviser for
this Fund is Credit Suisse Asset Management, LLC.
- -----------------------------------------
The investment advisers 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.
We recognize 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 to a conflict. 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 Fund; or (4)
differences between voting instructions given by variable life insurance and
variable annuity contractholders.
An affiliate of each of the Funds (other than the portfolios in the Prudential
Series Fund) may compensate Prudential based upon an annual percentage of the
average assets held in the Fund by Prudential under the Contracts. These
percentages vary by Fund, and reflect administrative and other services we
provide.
You can review a full description of the Funds in the accompanying prospectuses
for each Fund and in the related statements of additional information. You
should read those documents in conjunction with this Prospectus. There is no
assurance that the investment objectives will be met.
A Fund may have an investment objective and investment policies closely
resembling those of a mutual fund within the same complex that is sold directly
to individual investors. Despite such similarities, there can be no assurance
that the investment performance of any such Fund will resemble that of its
retail fund counterpart.
Not all Funds described in this prospectus are available to Participants. Of the
Funds described in this prospectus, your Employer may choose up to 28 Funds that
will be available to you. Once your Employer has made that choice, it cannot
substitute other Funds for any Funds that it has already selected. However, if
your employer chooses fewer than 28 Funds initially, we will permit it to select
additional Funds, so long as the total number of Funds available to Participants
does not exceed 28. Prudential reserves the right to change the number of Funds
that an Employer may make available to Participants to comport with future
amendments of the Code and future rulings or interpretations issued by the
Internal Revenue Service.
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GUARANTEED INTEREST ACCOUNT
The Guaranteed Interest Account is a credited interest option available to fund
certain group annuity contracts issued by Prudential. Amounts that you allocate
to the Guaranteed Interest Account become part of the General Account of
Prudential. Prudential's General Account consists of all assets owned by
Prudential other than those in the Discovery 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, Prudential has not registered
interests in the General Account (which include interests in the Guaranteed
Interest Account) under the Securities Act of 1933. Nor has Prudential
registered the General Account as an investment company under the Investment
Company Act of 1940. Accordingly, those Acts do not apply to the General Account
or any interests therein, and Prudential has been advised that the staff of the
SEC has not reviewed the disclosures in the Prospectus relating to the General
Account. Disclosures that we make 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.
Under certain Contracts, amounts that you allocate to the Guaranteed Interest
Account may be held within one or more guaranteed separate accounts. Prudential
has not registered interests in such separate account(s) under the Securities
Act of 1933 and has not registered the separate accounts as investment companies
under the Investment Company Act of 1940.
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THE CONTRACTS
We generally issue the Contracts to Employers whose employees may become
Participants. Under an IRA, a Participant's spouse may also become a
Participant. We may issue a Contract to an association that represents employers
of employees who become Participants, to an association or union that represents
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 will have the rights and interests under them that are
described in this Prospectus. When a Contract is used to fund a deferred
compensation plan established by a tax-exempt entity under Section 457 of the
Code, all rights under the Contract are owned by the Employer to whom, or on
whose behalf, the Contract is issued. All amounts that we pay 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.
Notwithstanding the foregoing, the rules for Section 457 plans established by
state and local governments would be similar to those specified in this
paragraph.
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.
If permitted under your retirement arrangement, an Employer will make
contributions periodically to the Contract pursuant to a payroll deduction or
similar agreement between the Participant and his Employer. In addition, you may
make contributions in ways other than payroll deduction under certain
circumstances.
As a Participant, you designate what portion of the contributions made on your
behalf should be invested in the Subaccounts or the Guaranteed Interest Account.
The Participant may change this designation usually by notifying us as described
under "Requests, Consents and Notices," page ___. Under certain Contracts, an
entity other than us keeps certain records. Participants under those Contracts
must contact the record-keeper. See "Modified Procedures," page __.
We credit the full amount (100%) of each contribution designated for investment
in any Subaccount to a Participant Account maintained for the Participant.
Except for the initial contribution, the number of Units that we credit 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 determined as of the end of the Valuation Period during which the
contribution is received by us at the address shown on the cover page of this
Prospectus or such other address as we may direct.
We will invest the initial contribution made for a Participant in a Subaccount
no later than two Business Days after we receive it, 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 we
will allocate such contribution to the Prudential Series Fund Money Market
Subaccount upon receipt, and also will send a notice to the Contractholder or
its agent that requests allocation information for each such Participant. If we
do not receive the necessary enrollment information in response to its initial
notice, we will deliver up to three additional notices to the Contractholder or
its agent 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, we will redeem the relevant Units and pay the proceeds
(including earnings) to the Contractholder. Any proceeds that we pay to the
Contractholder under this procedure may be considered a prohibited and taxable
reversion to the Contractholder under current provisions of the Code. Similarly,
proceeds that we return may cause the Contractholder to violate a requirement
under the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended,
to hold all plan assets in trust. The Contractholder may avoid both problems if
it arranges to have the proceeds paid into a qualified trust or annuity
contract.
A change in the value of a Unit will not affect the number of Units of a
particular Subaccount credited to a Participant. However, the dollar value of a
Unit will vary from Business Day to Business Day depending upon the investment
experience of the Subaccount.
We determine the value of a Participant Account in a Subaccount on any
particular day by multiplying the total number of Units credited to the
Participant by the Subaccount's Unit Value on that day.
We set the Unit Value for each Subaccount at $10.00 on the date of commencement
of operations of that Subaccount. We determine the Unit Value for any subsequent
Business Day 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.
We determine the Unit Change Factor for any Business Day 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. We determine the
value of the assets of a Subaccount 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.
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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, we will allocate subsequent
contributions 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 us with proper instruction as described
under "Requests, Consents and Notices," page __.
ASSET ALLOCATION PROGRAM
We may make available an Asset Allocation Program to assist Participants in
determining how to allocate purchase payments. If a Participant chooses to
participate in the program, the Participant may do so by utilizing a form
available in the employee enrollment kit. The form will include a series of
illustrations depicting various asset allocation models based on age and risk
tolerance. We also make available a more comprehensive model based on an
internet web site for use by Participants. We offer the Asset Allocation Program
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.
We regard the Asset Allocation Program as an aid in making purchase payment
allocations. You should not view the Program as any guarantee of investment
return. You also should realize that there can be no assurance that any Fund
will attain its investment objectives. As a Participant, you should consider
reviewing your investor profile questionnaire annually, and each time your
investor profile changes.
TRANSFERS
A Participant may transfer out of an investment option into any combination of
other investment options available under the Contract. Generally, the transfer
request may be in dollars, such as a request to transfer $1,000 from one
investment option to another, or may be in terms of a percentage reallocation
among investment options. Under certain Contracts, we may require that transfer
requests be effected in terms of whole number percentages only, and not by
dollar amount. A Participant may make transfers by proper notice to us as
described under "Requests, Consents and Notices," page __.
If a Contractholder chooses telephone privileges, each Participant will
automatically be enrolled to use the Telephone Transfer System. A Participant
may decline telephone privileges on a form supplied by the Contractholder or us.
We have 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, when we receive a duly completed written transfer request form or
properly authorized telephone transfer request, we will transfer all or a
portion of the Participant Account in any of the Subaccounts to another
Subaccount or the Guaranteed Interest Account. We may restrict transfers from
the Guaranteed Interest Account. There is no minimum transfer amount. As of the
Business Day you make the transfer request, we will reduce the Subaccount(s)
from which the transfer is made by the number of Units obtained by dividing the
amount to be transferred by the Unit Value for the applicable Business Day. If
the transfer is made to another Subaccount as of the same day, the number of
Units we credit to the Participant in that Subaccount will be increased by means
of a similar calculation. We reserve 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.
We did not design the Contracts for professional market timing organizations or
other organizations or individuals using programmed, large, or frequent
transfers. A pattern of exchanges that coincides with a "market timing" strategy
may be disruptive to the Discovery Account and the Funds, and we will discourage
such a practice. If such a pattern were to be found, we may be required to
modify the transfer procedures, including but not limited to, not accepting
transfer requests of an agent acting under a power of attorney on behalf of more
than one owner.
We may stipulate different procedures for Contracts under which another entity
provides record keeping services. Although there is presently no charge for
transfers, we reserve the right to impose such charges in the future.
Certain Contracts may prohibit transfers from the Guaranteed Interest Account
into non-equity investment options that are characterized in such Contract as
"competing" with Prudential's General Account options with regard to investment
characteristics. If a Contract precludes such transfers, the Contract will
further require that amounts transferred from the Guaranteed Interest Account
into non-competing investment options, such as a Subaccount investing in a stock
Fund, may not for 90 days thereafter be transferred into a "competing" option or
back to the Guaranteed Interest Account.
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 that we 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, we will 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 us to have any of his or her Participant Account Value 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 we
receive 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 will be transferred to the designated alternate
funding agency in cash.
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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
* 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 us in fulfilling the terms of the Contract. If
contributions are so discontinued, we may initiate transfer payments from any
Subaccount to an alternate funding agency. The transfer would be made as
described in the paragraph above.
Transfers that you make among Subaccounts will take effect as of the end of the
Valuation Period in which we receive a proper transfer request.
From time to time, we may make an offer to holders of other variable annuities
that we or an affiliate issues to exchange their variable annuity contracts for
interests in a Contract issued by the Account. We will conduct any such exchange
offer in accordance with SEC rules and other applicable law. Current SEC rules
pertaining to exchange offers among affiliated variable annuity contracts
generally require, with certain exceptions, that no fee be imposed at the time
of the exchange. Under this rule, we could charge an administrative fee at the
time of the exchange, although we have no present intention of doing so.
DOLLAR COST AVERAGING
We may make available an administrative feature called Dollar Cost Averaging
("DCA"). This feature allows Participants to transfer amounts out of the
Guaranteed Interest Account or one of the Subaccounts and into one or more other
Subaccounts. Transfers may be in 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 and Prudential are 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. We currently impose no charge for
this feature. We would impose such a charge only pursuant to an amendment to an
administrative services agreement. Such an amendment would have to be agreed to
in writing (or its electronic equivalent) by both us and the Contractholder.
AUTO-REBALANCING
The Contracts may offer another investment technique. The Auto-Rebalancing
feature will allow 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 Subaccounts 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 for each applicable interval. It will continue at those intervals until
the Participant notifies us otherwise. If the New York Stock Exchange and
Prudential are not open on the rebalancing date, the transfer will take effect
as of the end of the Valuation Period which immediately follows that date. We
currently impose no charge for this feature. We would impose such a charge only
pursuant to an amendment to an administrative services agreement, which would
have to be agreed to in writing (or its electronic equivalent) by both us and
the Contractholder.
WITHDRAWALS
Under certain circumstances as described in the retirement 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 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, a
Participant can make withdrawals in the event of the hardship.
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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. You may specify the withdrawal amount 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.
We will generally pay the amount of any withdrawal within 7 days after receipt
of a properly completed withdrawal request. We will pay the amount of any
withdrawal requested, less any applicable tax withholding. 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 Code and the retirement arrangement under which a
Participant is covered, we may offer 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 or she invests. A Participant may arrange for systematic
withdrawals only if at the time he or she elects to have such an arrangement,
the balance in his or her Participant Account is at least $5,000. A Participant
who has not reached age 59 1/2, however, may not elect a systematic withdrawal
arrangement unless he or she 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. 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 and withdrawals by beneficiaries
must satisfy certain minimum distribution rules. See "Federal Tax Status," page
__.
You may arrange systematic withdrawals only pursuant to an election in a form we
have approved. 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, or equivalent electronic procedure
permitted by ERISA and related federal regulations. The election must specify
that the systematic withdrawals will be made on a monthly, quarterly,
semi-annual, or annual basis.
We will effect all systematic withdrawals 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 will continue until the
Participant has withdrawn all of the balance in his or her Participant Account
or has instructed Prudential in writing to terminate the 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.
We will take systematic withdrawals first out of the Participant's investment,
if any, in the Guaranteed Interest Account until that money is exhausted.
Thereafter, we will take systematic withdrawals pro rata from the Subaccounts.
Certain Contracts may specify that systematic withdrawals be deducted in a
different manner.
A Participant may change the frequency, amount or duration of his or her
systematic withdrawals by submitting a form to us or our designee. We will
provide such a form to a Participant upon request. A Participant may make such a
change only once during each calendar year.
A Participant may at any time instruct us to terminate the Participant's
systematic withdrawal arrangement. No systematic withdrawals will be made for a
Participant after we have received this 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.
If a Participant arranges for systematic withdrawals, that 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.
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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 or her 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 or her second year of
Texas Program participation, the value of those Units representing Texas'
contributions will be withdrawn and returned to the State.
A Participant has withdrawal benefits for Contracts issued under the Texas
Program only in the event of the 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. A Participant may, however, transfer the value of the
Participant's interest under the Contract 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
When we receive due proof of a Participant's death and a claim and payment
election submitted on a form approved by us, we will pay to the designated
beneficiary a death benefit made up of the balance in the Participant Account.
The appropriate address to which a death benefit claim generally 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 us.
We will pay the death benefit, according to the Participant's instructions, in:
* one sum as if it were a single withdrawal,
* systematic withdrawals,
* an annuity, or
* a combination of the three.
Any such payment will be 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:
* to receive a one sum cash payment;
* 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;
* to receive regular payments in accordance with the systematic
withdrawal plan; or
* a combination of all or any two of the three options above.
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, we will pay
50% of the balance in the Participant Account to such spouse even if the
designated beneficiary is someone other than the spouse. Under these
circumstances, we would pay the remaining 50% 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 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, we will make a one sum cash payment to
the beneficiary. A specific Contract may provide that an annuity is payable to
the beneficiary if the beneficiary fails to make an election.
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Until we pay a death benefit that results in reducing to zero the balance in the
Participant Account, we will maintain the Participant Account Value in the
Subaccounts and the Guaranteed Interest Account that make up the Participant
Account for the beneficiary in the same manner as they had been for the
Participant, except:
* the beneficiary may make no contributions; and
* the beneficiary may not take a loan.
DISCONTINUANCE OF CONTRIBUTIONS
By notifying us, the Contractholder generally may discontinue contributions on
behalf of all Participants under a Contract or for all Participants of an
Employer covered under a Contract. 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, we may elect not to accept any
new Participant, or not to accept further contributions for existing
Participants.
The fact that contributions on a Participant's behalf are discontinued does not
otherwise affect the Participant's rights under the Contracts. 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 Account is at or below a specified amount ($1,000 in
certain states, $2,000 in others), we may, if permitted by the Code, elect to
cancel that Participant Account unless prohibited by the retirement arrangement,
and pay the Participant the value 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. Loans are not generally available under
non-qualified arrangements. The interest rate and other terms and conditions of
the loan may vary from Contract to Contract.
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 we determine. The maximum loan amount is the
lesser of:
* $50,000, reduced by the highest outstanding balance of loans
during the one year period immediately preceding the date of the
loan, or
* 50% of the value of the Participant's vested interest under a
Contract.
Generally, 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. Prudential invests those payments 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, we will deduct the loan amount pro rata 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 we 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. In that event, we will
send the appropriate tax information to the Participant and the Internal Revenue
Service.
We charge a loan application fee of up to $75, which is deducted from the
Participant Account at the time the loan is initiated. We will not accept a
personal check as payment of the loan application fee. We also impose an annual
charge of up to $60 as a loan maintenance fee for record-keeping and other
administrative services provided in connection with the loan. This charge is
guaranteed not to increase during the term of any loan. This annualized loan
maintenance charge will be pro rated based on the number of full months that the
loan is outstanding, and we generally deduct it quarterly. Under certain
Contracts, we will deduct the loan maintenance fee annually. We will deduct the
loan maintenance charge first against the Participant Account Value under the
Guaranteed Interest Account (if available). If the Participant is not invested
in the Guaranteed Interest Account, of if the Participant does not have enough
money in that option to pay the charge, we will then deduct the charge from any
one or more of the Subaccounts in which the Participant is invested.
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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 us.
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 us. The record-keeper is the
Contractholder's agent, not our agent. Accordingly, transactions will be
processed and priced as of the end of the Valuation Period in which we receive
appropriate instructions and/or funds from the record-keeper. The Contract will
set forth any such different procedures.
CHARGES, FEES AND DEDUCTIONS
ADMINISTRATIVE FEE
We impose an administrative fee to compensate 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. We deduct this fee daily from the assets in each of the
Subaccounts at a maximum effective annual rate of 0.75%. We may reduce this
administrative fee under Contracts as to which, due to economies of scale or
other factors, our administrative costs are reduced.
CHARGE FOR ASSUMING MORTALITY AND EXPENSE RISKS
We make a deduction daily from the assets of each of the Subaccounts as
compensation 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. We assess the charge daily at an annual
rate of 0.15% of the assets held in the Subaccounts.
EXPENSES INCURRED BY THE FUNDS
Participants indirectly bear the charges and expenses of the Funds. You can
review details about investment management fees and other Fund expenses in the
fee table and in the accompanying prospectuses for the Funds and the related
statements of additional information.
PREMIUM TAXES
Certain states and other jurisdictions impose on us premium taxes or similar
assessments, either at the time contributions are made or when the Participant's
Account Value is surrendered or applied to purchase an annuity. We reserve the
right to deduct an amount from contributions or the Participant's Account to
cover such taxes or assessments, if any, when applicable. Not all states impose
premium taxes on annuities. However, the rates in those that do currently range
from 0.5% to 5%.
REQUESTS, CONSENTS AND NOTICES
The way you provide all or some requests, consents, or notices under a Contract
(or related agreement or procedure) may include telephone access to an automated
system, telephone access to a staffed call center, or Internet access through
www.prudential.com, as well as traditional paper. Prudential reserves the right
to vary the means available from Contract to Contract, including limiting them
to electronic means, by Contract terms, related service agreements with the
Contractholder, or notice to the Contractholder and Participants. If electronic
means are authorized, you will automatically be able to use them.
Prudential also will be able to use electronic means to provide notices to you,
provided your Contract or other agreement with the Contractholder does not
specifically limit these means. Electronic means will only be used, however,
when Prudential reasonably believes that you have effective access to the
electronic means and that they are allowed by applicable law. Also, you will be
able to receive a paper copy of any notice upon request.
For your protection and to prevent unauthorized exchanges, telephone calls and
other electronic communications will be recorded and stored, and you will be
asked to provide your personal identification number or other identifying
information before any request will be processed. Neither Prudential nor our
agents will be liable for any loss, liability, or cost which results form acting
upon instructions reasonably believed to be authorized by you.
During times of extraordinary economic or market changes, electronic and other
instructions may be difficult to implement.
Some states, retirement programs, or Contractholders may not allow these
privileges, or allow them only in modified form.
FEDERAL TAX STATUS
The following discussion is general in nature and describes only federal income
tax law (not state or other tax laws). It is based on current law and
interpretations, which may change. It is not intended as tax advice.
Participants and Contractholders should consult a qualified tax adviser for
complete information and advice.
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ANNUITY QUALIFICATION
This discussion assumes the Contracts will be treated as annuity contracts for
federal income tax purposes. In order to qualify for the tax rules applicable to
annuity contracts, the assets underlying the Contracts must be diversified
according to certain rules. For further detail on diversification requirements,
see Dividends, Distributions and Taxes in the attached prospectus for the
Prudential Series Fund. Tax rules also require that Prudential must have
sufficient control over the underlying assets to be treated as the owner of the
underlying assets for tax purposes. Treasury Department regulations do not
provide guidance concerning the extent to which Participants may direct
investments in the particular investment options without causing Participants,
instead of Prudential, to be considered the owner of the underlying assets. The
ownership rights under the Contract are similar to, but different in certain
aspects from, those addressed by the Internal Revenue Service in rulings holding
that the insurance company was the owner of the assets. For example,
Participants have the choice of more funds and the ability to reallocate amounts
among available Subaccounts more frequently than in the Ruling. While we believe
that Prudential will be treated as the owner of the assets of the Discovery
Account, it is possible that the Participants may be considered to own the
assets. Because of these uncertainties, Prudential reserves the right to make
any changes it deems necessary to assure that the Contracts qualify as annuity
contracts for tax purposes. Any such changes will apply uniformly to affected
Participants and will be made with such notice to affected Participants as is
feasible under the circumstances.
TAX-QUALIFIED RETIREMENT ARRANGEMENTS USING THE CONTRACTS
The Contracts may be used with qualified pension and profit sharing plans, plans
established by self-employed persons ("Keogh plans"), simplified employee
pension plans ("SEPs"), individual retirement plan accounts ("IRAs"), Roth IRAs,
and tax-deferred annuities ("TDAs"). The Contracts may also be used with defined
contribution annuity plans qualifying for federal tax benefits under Section
403(c) of the Code ("Section 403(c) annuities"). The provisions of the tax law
that apply to these retirement arrangements that may be funded by the Contracts
are complex, and Participants are advised to consult a qualified tax adviser.
The Contracts may also be used with certain deferred compensation plans of a
state or local government or a tax-exempt organization (called "Section 457
Plans" after the Internal Revenue Code section that governs their structure).
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 these specific requirements. Please refer to the
discussion of Entity Owners on page __, which may be applicable in certain
circumstances.
CONTRIBUTIONS
In general, assuming that the requirements and limitations of tax law applicable
to the particular type of plan are adhered to by Participants and Employers,
contributions made under a qualified retirement arrangement funded by a Contract
are deductible (or not includible in income) up to certain amounts each year.
Contributions to a Roth IRA are subject to certain limits, and are not
deductible for federal income tax purposes. Contributions to Section 403(c)
annuities are not deductible.
EARNINGS
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 Subaccounts in which the contributions have been invested
until a distribution or withdrawal is received.
DISTRIBUTIONS OR WITHDRAWALS
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 tax law
applicable to the particular type of plan is necessary.
Furthermore, premature distributions or withdrawals may be restricted or subject
to a penalty tax. Participants contemplating a withdrawal should consult a
qualified tax adviser.
Under a Roth IRA, distributions are generally not taxable for federal income tax
purposes if they are made after attainment of age 59-1/2 or for certain other
reasons and if the individual had a Roth IRA in effect for at least five years.
MINIMUM DISTRIBUTION RULES
In general, distributions from qualified retirement arrangements and Section 457
Plans must begin by the "Required Beginning Date" which is April 1 of the
calendar year following the later of (1) the year in which the Participant
attains age 70-1/2 or (2) the Participant retires. The following exceptions
apply:
* For a TDA, only benefits accruing after December 31, 1986 must begin
distribution by the Required Beginning Date.
* For IRAs, (2) above does not apply.
* Roth IRAs are not subject to these pre-death minimum distribution
rules.
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Distributions that are made after the Required Beginning Date must generally 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 Participant's 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 Section 457 Plan, such period cannot exceed 15 years).
Special rules apply where the deceased Participant's spouse is his designated
beneficiary.
In addition to the above rules, with respect to a Section 457 Plan, 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 take the
minimum distribution in any calendar year.
SECTION 403(C) ANNUITY ARRANGEMENTS USING THE CONTRACTS
Contributions to Section 403(c) annuities are neither deductible nor subject to
tax law limitations on their amount. Federal income tax currently is not imposed
upon the investment income and realized gains earned by the Subaccounts in which
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, a
portion of the distribution or withdrawal is taxable as ordinary income. Section
403(c) annuities are subject to neither the Minimum Distribution Rules described
above nor to the rules described below as Penalty Taxes on Withdrawals and
Annuity Payments and Required Distributions Upon Death of Participant.
TAXES PAYABLE BY PARTICIPANT
We believe the Contracts are annuity contracts for tax purposes. Accordingly, as
a general rule, Participants should not pay any tax on investment earnings until
money is received under the Contracts. Generally, annuity contracts issued by
the same company (and affiliates) to a Participant during the same calendar year
must be treated as one annuity contract for purposes of determining the amount
subject to tax under the rules described below.
TAXES ON WITHDRAWALS AND SURRENDER
If a Participant makes a withdrawal from the Contract or surrenders it before
annuity payments begin, the amount received will be taxed as ordinary income,
rather than as return of purchase payments, until all gain has been withdrawn.
If a Participant assigns all or part of the Contract as collateral for a loan,
the part assigned will be treated as a withdrawal. Also, if a Participant elects
the interest payment option, this will be treated, for tax purposes, as a
surrender of the Contract.
If a Participant transfers the Contract for less than full consideration, such
as by gift, tax will be triggered on the gain in the Contract. This rule does
not apply to transfers to a spouse or incident to divorce.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment a Participant receives will be treated as a
partial return of purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment received by a fraction, the
numerator of which is the purchase payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the Contract.
After the full amount of the purchase payments have been recovered tax-free, the
full amount of the annuity payments will be taxable. If annuity payments stop
due to the death of the annuitant before the full amount of the purchase
payments have been recovered, a tax deduction is allowed for the unrecovered
amount.
PENALTY TAXES ON WITHDRAWALS AND ANNUITY PAYMENTS
Any taxable amount received under the Contract may be subject to a 10 percent
penalty tax. Amounts are not subject to this penalty tax if:
* the amount is paid on or after age 59-1/2 or the death of the
Participant;
* the amount received is attributable to the Participant becoming
disabled;
* the amount paid or received is in the form of level payments not
less frequently than annually for life (or a period not exceeding
life expectancy); or
* the amount received is paid under an immediate annuity contract
(in which annuity payments begin within one year of purchase).
If the lifetime annuity payment stream is modified (other than as a result of
death or disability) before age 59-1/2 (or before the end of the five year
period beginning with the first payment and ending after age 59-1/2), the tax
for the year of modification will be increased by the penalty tax that would
have been imposed without the exception, plus interest for the deferral.
TAXES PAYABLE BY BENEFICIARIES
Generally, the same tax rules apply to amounts received by a beneficiary as
those set forth above with respect to a Participant. The election of an annuity
payment option instead of a lump sum death benefit may defer taxes. Certain
minimum distribution requirements apply upon the death of a Participant, as
discussed further below.
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REQUIRED DISTRIBUTIONS UPON DEATH OF PARTICIPANT
Certain distributions must be made under the Contract upon the death of a
Participant. The required distributions depend on whether the Participant dies
on or before the start of annuity payments under the Contract or after annuity
payments are started under the Contract.
If the Participant dies on or after the annuity date, the remaining portion of
the interest in the Contract 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 the annuity date, the entire interest in the
Contract must be distributed within 5 years after the date of death. However, if
an annuity payment option is selected by the designated beneficiary and if
annuity payments begin within 1 year of the death of the Participant, the value
of the Contract may be distributed over the beneficiary's life or a period not
exceeding the beneficiary's life expectancy. The designated beneficiary is the
person to whom ownership of the Contract passes by reason of death, and must be
a natural person.
If any portion of the Contract is payable to (or for the benefit of) a
Participant's surviving spouse, such portion of the Contract may be continued
with the spouse as the owner.
ENTITY OWNERS
When a Contract is held by a non-natural person (for example, a corporation),
the Contract generally will not be taxed as an annuity and increases in the
value of the Contract will be subject to tax. Exceptions include contracts held
by an entity as an agent for a natural person, contracts held under a qualified
pension or profit sharing plan, a TDA or individual retirement plan (see
discussion above) or contracts that provide for immediate annuities.
WITHHOLDING
Taxable amounts distributed from annuity contracts in nonqualified annuity
arrangements are subject to tax withholding. Participants may generally elect
not to have tax withheld from payments. The rate of withholding on annuity
payments will be determined on the basis of the withholding certificate filed
with us. Absent these elections, we will withhold the tax amounts required by
the applicable tax regulations. Participants may be subject to penalties under
the estimated tax payment rules if withholding and estimated tax payments are
not sufficient. Participants who fail to provide a social security number or
other taxpayer identification number will not be permitted to elect out of
withholding.
In addition, certain distributions from qualified plans, 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: (1) distributions for the life or life expectancy
of the Participant, or joint and last survivor expectancy of the Participant and
a designated beneficiary; or (2) distributions for a specified period of 10
years or more; (3) distributions required as minimum distributions. Amounts that
are received under a Contract used in connection with a Section 457 Plan are
treated as wages for federal income tax purposes and are, thus, subject to
general withholding requirements; or (4) hardship distribution of salary
deferral amounts.
TAXES ON PRUDENTIAL
Although the Account is registered as an investment company, it is not a
separate taxpayer for purposes of the Code. The earnings of the Subaccounts
invested in the Funds are taxed as part of the operations of Prudential. No
charge is being made currently against those Subaccounts for company federal
income taxes. Prudential will review the question of a charge to the Subaccounts
invested in the Funds for company federal income taxes periodically. Such a
charge may be made in future years for any federal income taxes that would be
attributable to the Contracts.
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ERISA CONSIDERATIONS
Employer involvement and other factors will determine whether a Contract is
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). If applicable, ERISA and the Code prevent a fiduciary and other
"parties in interest" with respect to a plan (and, for these purposes, an IRA
would also constitute a "plan") from receiving any benefit from any party
dealing with the plan, as a result of the sale of the Contract. Administrative
exemptions under ERISA generally permit the sale of insurance/annuity products
to plans, provided that certain information is disclosed to the person
purchasing the Contract. This information has to do primarily with the fees,
charges, discounts and other costs related to the Contract, as well as any
commissions paid to any agent selling the Contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under "Charges, Fees and Deductions" starting on page
__.
Information about sales representatives and commissions may be found under
"Other Information" and "Sale of the Contract and Sales Commissions" on page __.
In addition, other relevant information required by the exemptions is contained
in the Contract and accompanying documentation. Please consult your tax advisor
if you have any additional questions.
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 us of proper written notice on a form we have
approved that the Participant has elected to have an annuity purchased, or on
the first day of any subsequent month that the Participant designates. We
generally will make the first monthly annuity payment 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 his 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.
We make the following forms of annuity available to Participants.
LIFE ANNUITY WITH PAYMENTS CERTAIN
This is an immediate annuity payable monthly during the lifetime of the
annuitant. We 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, we will continue payments in the same amount the
annuitant was receiving to his or her beneficiary. We make no further payments
after the end of the period certain.
JOINT AND SURVIVOR ANNUITY WITH PAYMENTS 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), we will continue payments during the
remainder of the period certain to the properly designated beneficiary.
We may make other forms of annuity 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, we may elect to pay
the commuted value of the unpaid payments certain in one sum.
PURCHASING THE ANNUITY
We apply the value of your Participant Account, less any applicable taxes, to
the appropriate annuity purchase rate determined in accordance with the schedule
in the Contract at the time the annuity is purchased. However, we may determine
monthly payments from schedules of annuity purchase rates providing for larger
payments than the rates shown in the Contract.
We guarantee the schedule of annuity purchase rates in a Contract for ten years
from the date the Contract is issued. If at any time after a Contract has been
in effect for ten years, we modify the schedule of annuity purchase rates, the
modification is also guaranteed for ten years. A change in the schedule of
annuity purchase rates used for an 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.
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OTHER INFORMATION
MISSTATEMENT OF AGE OR SEX
If an annuitant's stated age or sex (except where unisex rates apply) or both
are incorrect, 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 Prudential, acts as the principal underwriter of the Contract.
PIMS was organized in 1996 under Delaware 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 751 Broad Street, Newark, NJ 07102. The Contract is sold by
registered representatives of PIMS who are also authorized by state insurance
departments to do so. The maximum commission that we will pay to the
broker-dealer to cover both the individual representative's commission and other
distribution expenses will not exceed 3.0% of the purchase payment.
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. We are the legal
owner of those shares. As such, we have the right to vote on any matter voted on
at any shareholders meetings of the Funds. However, as required by law, we vote
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
us, 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 us to
vote shares of the Funds in our own right, we 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, as required by applicable securities laws.
The number of Fund 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 votes for which
you may give us 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 to modify the manner
in which the weight to be given to voting instructions is calculated where such
a change is necessary to comply with current federal regulations or
interpretations of those regulations.
We 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, we 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 we believe it to be unlikely, it is possible that in the judgment of
its management, one or more 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 our
discretion. In that event, we may seek to substitute the shares of another
portfolio or of an entirely different mutual fund. Before this can be done, we
would have to obtain the approval of the SEC, and possibly one or more state
insurance departments. We would notify Contractholders and Participants of any
such substitution.
PERFORMANCE INFORMATION
We may depict performance information for the Subaccounts in advertising and
reports to current and prospective Contractholders and Participants. Performance
information is based on the historical investment experience of the Funds,
adjusted to take charges under the Contract into account, and does not indicate
or represent future performance.
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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.
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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
We will send Participants, at least annually, reports showing as of a specified
date the number of units credited to them in the Subaccounts of the Discovery
Account. We also will send each Participant annual and semi-annual reports for
the applicable Funds.
STATE REGULATION
Prudential is subject to regulation by the Department of Banking and 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.
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." New Jersey also can withhold or withdraw approval 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
We are subject to legal and regulatory actions in the ordinary course of our
businesses, including class actions. Pending legal regulatory actions include
proceedings specific to our practices and proceedings generally applicable to
business practices in the industries in which we operate. As an example of such
litigation, in March, 2000, plaintiffs filed a purported class action against us
titled Olmsted v. Pruco Life Insurance Company of New Jersey and The Prudential
Insurance Company of America, alleging that certain fees and expenses charged to
the plaintiffs in connection with the sale of variable annuities since March 1,
1997 were excessive and unreasonable. In certain of these lawsuits, large and/or
indeterminate amounts are sought, including punitive or exemplary damages.
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In particular, Pruco Life and Prudential have been subject to substantial
regulatory actions and civil litigation involving individual life insurance
sales practices. In 1996, Prudential, on behalf of itself and many of its life
insurance subsidiaries including Pruco Life, entered into settlement agreements
with relevant insurance regulatory authorities and plaintiffs in the principal
life insurance sales practices class action lawsuit covering policyholders of
individual permanent life insurance policies issued in the United States from
1982 to 1995. Pursuant to the settlements, the companies agreed to various
changes to their sales and business practices controls and a series of fines,
and are in the process of distributing final remediation relief to eligible
class members. In many instances, claimants have the right to "appeal" the
decision to an independent reviewer. The bulk of such appeals were resolved in
1999, and the balance is expected to be addressed in 2000. As of January 31,
2000, Prudential and/or Pruco Life remained a party to two putative class
actions and approximately 158 individual actions relating to permanent life
insurance policies issued in the United States between 1982 and 1995. Additional
suits may be filed by individuals who opted out of the settlements. While the
approval of the class action settlement is now final, Prudential and Pruco Life
remain subject to oversight and review by insurance regulators and other
regulatory authorities with respect to their sales practices and the conduct of
the remediation program. The U.S. District Court has also retained jurisdiction
as to all matters relating to the administration, consummation, enforcement and
interpretation of the settlements.
In 1999, 1998, 1997 and 1996, Prudential recorded provision in its Consolidated
Statements of Operation of $100 million, $1,150 million, $2,030 million and
$1,125 million, respectively, to provide for estimated remediation costs, and
additional sales practices costs including related administrative costs,
regulatory fines, penalties and related payments, litigation costs and
settlements, including settlements associated with the resolution of claims of
deceptive sales practices asserted by policyholders who elected to "opt-out" of
the class action settlement and litigate their claims against Prudential
separately, and other fees and expenses associated with the resolution of sales
practices issues.
STATEMENT OF ADDITIONAL INFORMATION
Page
The contents of the Statement of Additional Information include:
Definitions 2
Other Contract Provisions 2
Administration 2
Performance Information 2
Directors of Prudential 6
Principal Officers of Prudential 8
Sale of Contracts 9
Legal Matters 9
Experts 9
Consolidated Financial Statements
of the Prudential Insurance Company
of America and its Subsidiaries A-1
ADDITIONAL INFORMATION
Prudential has filed a registration statement with the SEC under the Securities
Act of 1933, relating to the offering described in this Prospectus. This
Prospectus does not include all of the information set forth in the registration
statement. Certain portions have been omitted pursuant to the rules and
regulations of the SEC. You may obtain the omitted information, however, from
the SEC's principal office in Washington, D.C., upon payment of a prescribed
fee.
You may obtain further information, including the Statement of Additional
Information, from us without charge. The addresses and telephone numbers are set
forth on the cover page of this Prospectus.
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STATEMENT OF ADDITIONAL INFORMATION MAY 1, 2000
DISCOVERY PREMIER
GROUP RETIREMENT ANNUITY
DISCOVERY PREMIER
GROUP VARIABLE ANNUITY CONTRACTS
ISSUED THROUGH
PRUDENTIAL DISCOVERY PREMIER GROUP
VARIABLE CONTRACT ACCOUNT
The Prudential Insurance Company of America ("Prudential") offers the DISCOVERY
PREMIERSM 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. Contributions to the
Contract made on behalf of a Participant may be invested in one or more of the
35 Subaccounts of Prudential Discovery Premier 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., Alliance Variable Products Series Fund, American Century
Variable Portfolios, Inc., Davis Variable Account Fund, Inc., Dreyfus Socially
Responsible Growth Fund, Inc., Franklin Templeton Variable Insurance Products
Trust, John Hancock Declaration Trust, Invesco Variable Investment Funds, Inc.,
Janus Aspen Series, MFS Variable Insurance 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, 2000. Certain portions of that
May 1, 2000 prospectus are incorporated by reference into this Statement of
Additional Information.
<PAGE>
TABLE OF CONTENTS
PAGE
DEFINITIONS....................................................... 2
OTHER CONTRACT PROVISIONS......................................... 2
ASSIGNMENT....................................................... 2
PARTICIPATION IN DIVISIBLE SURPLUS .............................. 2
ADMINISTRATION.................................................... 2
PERFORMANCE INFORMATION........................................... 2
AVERAGE ANNUAL TOTAL RETURN...................................... 2
NON-STANDARD TOTAL RETURN........................................ 3
PERFORMANCE INFORMATION.......................................... 3
DIRECTORS OF PRUDENTIAL........................................... 6
OFFICERS OF PRUDENTIAL............................................ 8
SALE OF THE CONTRACTS............................................. 9
LEGAL MATTERS..................................................... 9
EXPERTS .......................................................... 9
CONSOLIDATED FINANCIAL STATEMENTS OF THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA AND ITS SUBSIDIARIES.......................... A-1
Prudential
30 Scranton Office Park
Scranton, PA 18507-1789
Telephone 1-800-458-6333
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., Alliance Variable Products Series Fund, American Century
Variable Portfolios, Inc., Davis Variable Account Fund, Inc., Dreyfus Socially
Responsible Growth Fund, Inc., Franklin Templeton Variable Insurance Products
Trust, John Hancock Declaration Trust, Invesco Variable Investment Funds, Inc.,
Janus Aspen Series, MFS Variable Insurance Trust, and Warburg Pincus Trust.
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 PREMIER 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.
We set out other defined terms in the Prospectus.
<PAGE>
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 Contracts. 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. As discussed in the Prospectus, Prudential is considering
reorganizing itself into a stock company.
ADMINISTRATION
The assets of each Subaccount of the Discovery Account are invested in a
corresponding Fund. The prospectus and the statement of additional information
of each Fund describe the investment management and administration of that Fund.
We are generally responsible for the administrative and recordkeeping functions
of the Discovery Account and pay 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 us include salaries, rent, postage, telephone, travel, legal,
actuarial and accounting fees, office equipment, stationery and maintenance of
computer and other systems.
We are reimbursed for these administrative and recordkeeping expenses by the
daily charge against the assets of each Subaccount for administrative expenses.
That daily charge is equal to a maximum effective annual rate of 0.75% of the
net assets in each Subaccount.
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURN
The Discovery Account may advertise average annual total return information
calculated according to a formula prescribed by the U.S. 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. (There are no withdrawal charges 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:
P(1 + T)n = ERV
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 P
equals a hypothetical contribution of $1,000, and 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 also present 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, 1999. No standard total return table is
included because the Subaccounts are only commencing operations on or after the
date of this Statement of Additional Information. For the periods prior to the
date the Subaccounts commenced operations, non-standard 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"). Standard and non-standard average annual return calculations
include all of the fees under the Contract (i.e., the mortality and expense risk
charge and the administrative fee). This information does not indicate or
represent future performance.
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Table 1 below shows average annual total return assuming a hypothetical
investment of $1,000 at the beginning of the period via the Subaccount investing
in the applicable Fund and ending on 12/31/99. The tables use the same
assumptions as SEC standardized performance. That means that the rates of return
shown below reflect the mortality and expense risk fee and the administrative
fee.
TABLE 1
SUBACCOUNT "HYPOTHETICAL"
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
From Date
One Year Three Years Five Years Ten Years Established
Ended Ended Ended Ended Through Inception
Fund Portfolio 12/31/99 12/31/99 12/31/99 12/31/99 12/31/99 Date
<S> <C> <C> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND, INC.
Conservative Balanced Portfolio 5.66% 9.59% 11.30% N/A 8.99% Jan-94
Diversified Bond Portfolio -1.63% 3.98% 6.83% N/A 4.93% Jan-94
Equity Income Portfolio 11.27% 12.42% 15.53% 12.55% 13.21% Feb-88
Equity Portfolio 11.45% 14.29% 17.95% N/A 15.10% Jan-94
Flexible Managed Portfolio 6.85% 10.94% 13.60% N/A 10.45% Jan-94
Global Portfolio 46.97% 24.23% 21.18% N/A 16.21% Jan-94
Government Income Portfolio -3.57% 4.27% 6.35% N/A 4.18% Jan-94
High Yield Bond Portfolio 3.43% 3.95% 7.54% 8.56% 6.76% Feb-87
Money Market Portfolio 3.79% 3.73% 3.96% 3.89% 5.04% May-83
Prudential Jennison Portfolio 40.64% 35.00% N/A N/A 29.89% May-95
Small Capitalization Stock Portfolio 12.53% 11.71% N/A N/A 15.93% Apr-95
Stock Index Portfolio 19.51% 26.08% 27.03% N/A 22.09% Jan-94
20/20 Focus Portfolio N/A N/A N/A N/A 18.80% May-99
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Government Securities Fund -2.22% 3.86% 5.43% N/A 3.77% May-93
AIM V.I. International Equity Fund 54.14% 23.28% 21.03% N/A 17.92% May-93
AIM V.I. Value Fund 29.00% 27.71% 26.33% N/A 22.17% May-93
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Premier Growth Portfolio 31.42% 36.97% 35.13% N/A 25.41% Jun-92
Growth and Income Portfolio 10.47% 19.24% 23.01% N/A 14.58% Jan-91
Quasar Portfolio 16.18% 8.97% N/A N/A 9.73% Aug-96
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP Income & Growth 17.12% N/A N/A N/A 23.79% Oct-97
DAVIS VARIABLE ACCOUNT FUND, INC.
Davis Value Portfolio N/A N/A N/A N/A -22.33% Jun-99
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Dreyfus Socially Responsible Growth Fund 29.90% 28.40% 27.76% N/A 23.21% Oct-93
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST
Franklin Small Cap Fund - Class 1 74.03% N/A N/A N/A 32.30% May-98
Templeton International Securities Fund - Class 1 22.71% 14.59% 16.31% N/A 14.46% May-92
JOHN HANCOCK DECLARATION TRUST
V.A. Bond Fund -1.42% 5.07% N/A N/A 5.82% Aug-96
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - Dynamics Fund 54.70% N/A N/A N/A 91.12% Aug-97
JANUS ASPEN SERIES
Aggressive Growth Portfolio 124.49% 49.60% 35.33% N/A 33.30% Sep-93
Growth & Income Portfolio 73.15% N/A N/A N/A 63.74% Jun-99
Worldwide Growth Portfolio 63.57% 36.43% 32.71% N/A 28.63% Sep-93
MFS VARIABLE INSURANCE TRUST
MFS Bond Series -2.46% 4.11% N/A N/A 3.92% Oct-95
MFS Emerging Growth Series 75.81% 41.54% N/A N/A 35.54% Jul-95
MFS Growth Series N/A N/A N/A N/A 39.11% May-99
MFS Growth With Income Series 5.79% 18.30% N/A N/A 20.22% Oct-95
MFS Total Return Series 2.18% 11.09% N/A N/A 14.52% Jan-95
WARBURG PINCUS TRUST
Emerging Growth Portfolio N/A N/A N/A N/A 31.05% Sep-99
</TABLE>
4
<PAGE>
MONEY MARKET SUBACCOUNT YIELD
The "yield" and "effective yield" figures for the Money Market Subaccount shown
below were calculated using historical investment returns of the Money Market
Portfolio of the Prudential Series Fund. All fees, expenses and charges
associated with the DISCOVERY PREMIER Group Annuity and the Series Fund have
been reflected.
The "yield" and "effective yield" of the Money Market Subaccount for the seven
days ended December 31, 1999, were 4.05% and 4.14%, respectively.
The yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one accumulation unit of the Money Market Subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from contract
owner accounts, and dividing the difference by the value of the subaccount at
the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7), with the resulting figure carried
to the nearest ten-thousandth of 1%.
The deduction referred to above consists of the 0.15% charge for mortality and
expense risks and the 0.35% charge for administration.
The effective yield is obtained by taking the base period return, adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result, according to the following formula: Effective Yield = (base period
return + 1) 365/7 -1.
The yield on amounts held in the Money Market Subaccount will fluctuate on a
daily basis. Therefore, the stated yields for any given period are not an
indication of future yields.
COMPARATIVE PERFORMANCE INFORMATION
Reports or advertising may include comparative performance information,
including, but not limited to: (1) comparisons to market indices such as the Dow
Jones Industrial Average, the Standard & Poor's 500 Index, the Value Line
Composite Index, the Russell 2000 Index, the Morgan Stanley World Index, the
Lehman Brothers bond indices; (2) comparisons to other investments, such as
certificates of deposit; (3) performance rankings assigned by services such as
Morningstar, Inc. and Variable Research and Data Services (VARDS), and Lipper
Analytical Services, Inc.; (4) data presented by analysts such as Dow Jones,
A.M. Best, The Bank Rate Monitor National Index; and (5) data in publications
such as The Wall Street Journal, Times, Forbes, Barrons, Fortune, Money
Magazine, and Financial World.
5
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
DIRECTORS
FRANKLIN E. AGNEW--Director since 1994 (current term expires April, 2005).
Member, Committee on Finance & Dividends; Member, Corporate Governance
Committee. Business consultant since 1987. Chief Financial Officer, H.J. Heinz
from 1971 to 1986. Mr. Agnew is also a director of Erie Plastics Corporation.
Age 65. Address: 600 Grant Street, Suite 660, Pittsburgh, PA 15219.
FREDERIC K. BECKER--Director since 1994 (current term expires April, 2005).
Member, Auditing Committee; Member, Corporate Governance Committee. President,
Wilentz Goldman and Spitzer, P.A. (law firm) since 1989, with firm since 1960.
Age 64. Address: 90 Woodbridge Center Drive, Woodbridge, NJ 07095.
GILBERT F. CASELLAS--Director since 1998 (current term expires April, 2003).
Member, Compensation Committee. President and Chief Operating Officer, The
Swarthmore Group, Inc. since 1999. Partner, McConnell Valdes, LLP in 1998.
Chairman, U.S. Equal Employment Opportunity Commission from 1994 to 1998. Age
47. Address: 1646 West Chester Pike, Suite 3, West Chester, PA 19382.
JAMES G. CULLEN--Director since 1994 (current term expires April, 2001). Member,
Compensation Committee; Member, Committee on Business Ethics. President & Chief
Operating Officer, Bell Atlantic Corporation, since 1998. President & Chief
Executive Officer, Telecom Group, Bell Atlantic Corporation, from 1997 to 1998.
Vice Chairman, Bell Atlantic Corporation from 1995 to 1997. President, Bell
Atlantic Corporation from 1993 to 1995. Mr. Cullen is also a director of Bell
Atlantic Corporation and Johnson & Johnson. Age 57. Address: 1310 North Court
House Road, 11th Floor, Alexandria, VA 22201.
CAROLYNE K. DAVIS--Director since 1989 (current term expires April, 2001).
Member, Committee on Business Ethics; Member, Compensation Committee.
Independent Health Care Advisor since 1997. Health Care Advisor, Ernst & Young,
LLP from 1985 to 1997. Dr. Davis is also a director of Beckman Coulter
Instruments, Inc., Merck & Co., Inc., Minimed Incorporated, Science Applications
International Corporation, and Beverley Enterprises. Age 68. Address: 751 Broad
Street, 21st Floor, Newark, NJ 07102-3777.
ROGER A. ENRICO--Director since 1994 (current term expires April, 2002). Member,
Committees on Nominations & Corporate Governance; Member, Compensation
Committee. Chairman and Chief Executive Officer, PepsiCo, Inc. since 1996. Mr.
Enrico originally joined PepsiCo, Inc. in 1971. Mr. Enrico is also a director of
A.H. Belo Corporation, Target Corporation, and Electronic Data Systems. Age 55.
Address: 700 Anderson Hill Road, Purchase, NY 10577.
ALLAN D. GILMOUR--Director since 1995 (current term expires April, 2003).
Member, Investment Committee; Member, Committee on Finance & Dividends. Retired
since 1995. Vice Chairman, Ford Motor Company, from 1993 to 1995. Mr. Gilmour
originally joined Ford in 1960. Mr. Gilmour is also a director of Whirlpool
Corporation, MediaOne Group, Inc., The Dow Chemical Company and DTE Energy
Company. Age 65. Address: 751 Broad Street, 21st Floor, Newark, NJ 07102-3777.
WILLIAM H. GRAY III--Director since 1991 (current term expires April, 2004).
Chairman, Committees on Nominations & Corporate Governance. Member, Executive
Committee; Member, Committee on Business Ethics. President and Chief Executive
Officer, The College Fund/UNCF since 1991. Mr. Gray served in Congress from 1979
to 1991. Mr. Gray is also a director of Chase Manhattan Corporation, Chase
Manhattan Bank, Municipal Bond Investors Assurance Corporation, Rockwell
International Corporation, Warner-Lambert Company, CBS Corporation, Electronic
Data Systems, and Ezgov.com, Inc. Age 58. Address: 8260 Willow Oaks Corp. Drive,
Fairfax,VA 22031-4511.
JON F. HANSON--Director since 1991 (current term expires April, 2003). Member,
Investment Committee; Member, Committee on Business Ethics. Chairman, Hampshire
Management Company since 1976. Mr. Hanson is also a director of James E. Hanson
Management Company, Neumann Distributors, Inc., United Water Resources, and
Consolidated Delivery and Logistics. Age 63. Address: 235 Moore Street, Suite
200, Hackensack, NJ 07601.
GLEN H. HINER--Director since 1997 (current term expires April, 2001). Member,
Compensation Committee. Chairman and Chief Executive Officer, Owens Corning
since 1992. Senior Vice President and Group Executive, Plastics Group, General
Electric Company from 1983 to 1991. Mr. Hiner is also a director of Dana
Corporation, Owens Corning, and Kohler, Co. Age 65. Address: One Owens Corning
Parkway, Toledo, OH 43659.
6
<PAGE>
CONSTANCE J. HORNER--Director since 1994 (current term expires April, 2002).
Member, Auditing Committee; Member, Committees on Nominations & Corporate
Governance. Guest Scholar, The Brookings Institution since 1993. Ms. Horner is
also a director of Foster Wheeler Corporation, Ingersoll-Rand Company, and
Pfizer, Inc. Age 58. Address: 1775 Massachusetts Ave., N.W. Washington, D.C.
20036-2188.
GAYNOR N. KELLEY--Director since 1997 (current term expires April, 2001).
Member, Auditing Committee. Retired since 1996. Chairman and Chief Executive
Officer, The Perkin Elmer Corporation from 1990 to 1996. Mr. Kelley is also a
director of Hercules Incorporated and Alliant Techsystems. Age 68. Address: 751
Broad Street, 21st Floor, Newark, NJ 07102-3777.
BURTON G. MALKIEL--Director since 1978 (current term expires April, 2002).
Chairman, Investment Committee; Member, Executive Committee; Member, Committee
on Finance & Dividends. Professor of Economics, Princeton University, since
1988. Dr. Malkiel is also a director of Banco Bilbao Vizcaya Gestinova, Baker
Fentress & Company, The Jeffrey Company, Select Sector SPDR Trusts, and Vanguard
Group, Inc. Age 67. Address: Princeton University, Department of Economics, 110
Fisher Hall, Prospect Avenue, Princeton, NJ 08544-1021.
ARTHUR F. RYAN--Chairman of the Board Chief Executive Officer and President of
Prudential since 1994. President and Chief Operating Officer, Chase Manhattan
Bank from 1990 to 1994, with Chase since 1972. Age 57. Address: 751 Broad
Street, Newark, NJ 07102-3777.
IDA F.S. SCHMERTZ--Director since 1997 (current term expires April, 2004).
Member, Audit Committee. Principal, Investment Strategies International since
1994. Age 65. Address: 751 Broad Street, 21st Floor, Newark, NJ 07102-3777.
CHARLES R. SITTER--Director since 1995 (current term expires April, 2003).
Member, Committee on Finance & Dividend; Member, Investment Committee. Retired
since 1996. President, Exxon Corporation from 1993 to 1996. Mr. Sitter began his
career with Exxon in 1957. Age 69. Address: 5959 Las Colinas Boulevard, Irving,
TX 75039-2298.
DONALD L. STAHELI--Director since 1995 (current term expires April, 2003).
Member, Compensation Committee; Member, Auditing Committee. Retired since 1996.
Chairman and Chief Executive Officer, Continental Grain Company from 1994 to
1997. President and Chief Executive Officer, Continental Grain Company from 1988
to 1994. Age 68 Address: 47 East South Temple, #501, Salt Lake City, UT 84150.
RICHARD M. THOMSON--Director since 1976 (current term expires April, 2004).
Chairman, Executive Committee; Chairman, Compensation Committee. Retired since
1998. Chairman of the Board, The Toronto-Dominion Bank from 1997 to 1998.
Chairman and Chief Executive Officer from 1978 to 1997. Mr. Thomson is also a
director of CGC, Inc., INCO, Limited, S.C. Johnson & Son, Inc., The Thomson
Corporation, Canadian Occidental Petroleum Ltd., The Toronto-Dominion Bank,
Ontario Power Generation, Inc., Canada Pension Plan Investment Board, and
TrizecHahn Corporation. Age 66. Address: P.O. Box 1, Toronto-Dominion Centre,
Toronto, Ontario, M5K 1A2, Canada.
JAMES A. UNRUH--Director since 1996 (current term expires April, 2004). Member,
Committees on Nominations & Corporate Governance; Member, Investment Committee.
Founding Member, Alerion Capital Group, LLC since 1998. Chairman and Chief
Executive Officer, Unisys Corporation, from 1990 to 1997. Mr. Unruh is also a
director of Moss Software, Inc. Age 59. Address: 751 Broad Street, 21st Floor,
Newark, NJ 07102-3777.
P. ROY VAGELOS, M.D.--Director since 1989 (current term expires April, 2001).
Chairman, Auditing Committee; Member, Executive Committee; Member, Committees on
Nominations & Corporate Governance. Chairman, Regeneron Pharmaceuticals since
1995. Chairman, Advanced Medicines, Inc. since 1997. Chairman, Chief Executive
Officer and President, Merck & Co., Inc. from 1986 to 1995. Dr. Vagelos
originally joined Merck in 1975. Dr. Vagelos is also a director of The Estee
Lauder Companies, Inc. and PepsiCo., Inc. Age 70. Address: One Crossroads Drive,
Building A, 3rd Floor, Bedminster, NJ 07921.
STANLEY C. VAN NESS--Director since 1990 (current term expires April, 2002).
Chairman, Committee on Business Ethics; Member, Executive Committee; Member,
Auditing Committee. Partner, Herbert, Van Ness, Cayci & Goodell (law firm) since
1998. Counselor at Law, Picco Herbert Kennedy (law firm) from 1990 to 1998. Mr.
Van Ness is also a director of Jersey Central Power & Light Company. Age 66.
Address: 22 Chambers Street, Princeton, NJ 08542.
PAUL A. VOLCKER--Director since 1988 (current term expires April, 2004).
Chairman, Committee on Finance & Dividends; Member, Executive Committee; Member,
Committee on Nominations & Corporate Governance. Consultant since 1997. Chairman
and Chief Executive Officer, Wolfensohn & Co., Inc. 1995 to 1996. Chairman,
James D. Wolfensohn, Inc. 1988 to 1995. Mr. Volcker is also a director of
Nestle, S.A,. and as well as a Member of the Board of Overseers of TIAA-CREF.
Age 72. Address: 610 Fifth Avenue, Suite 420, New York, NY 10020.
7
<PAGE>
JOSEPH H. WILLIAMS--Director since 1994 (current term expires April, 2002).
Member, Committee on Finance & Dividends; Member, Investment Committee.
Director, The Williams Companies since 1979. Chairman & Chief Executive Officer,
The Williams Companies from 1979 to 1993. Mr. Williams is also a director of The
Orvis Company, and AEA Investors, Inc. Age 66. Address: One Williams Center,
Tulsa, OK 74172.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
PRINCIPAL OFFICERS
ARTHUR F. RYAN--Chairman of the Board, Chief Executive Officer, and President
since 1994; prior to 1994, President and Chief Operating Officer, Chase
Manhattan Corporation. Age 57.
MICHELE S. DARLING--Executive Vice President, Corporate Governance and Human
Resources since 2000; Executive Vice President, Human Resources from 1997 to
2000; prior to 1997, Executive Vice President, Human Resources, Canadian
Imperial Bank of Commerce. Age 46.
ROBERT C. GOLDEN--Executive Vice President, Operations and Systems since 1997;
prior to 1997, Executive Vice President, Prudential Securities. Age 53.
MARK B. GRIER--Executive Vice President, Financial Management since 2000;
Executive Vice President, Corporate Governance from 1998 to 2000; Executive Vice
President, Financial Management from 1997 to 1998; Chief Financial Officer from
1995 to 1997; prior to 1995, Executive Vice President, Chase Manhattan
Corporation. Age 47.
JEAN D. HAMILTON--Executive Vice President, Prudential Institutional since 1998;
President, Diversified Group since 1995 to 1998; prior to 1995, President,
Prudential Capital Group. Age 53.
RODGER A. LAWSON--Executive Vice President, International Investments & Global
Marketing Communications since 1998; Executive Vice President, Marketing and
Planning from 1996 to 1998; President and CEO, Van Eck Global, from 1994 to
1996; prior to 1994, President and CEO, Global Private Banking, Bankers Trust
Company. Age 53.
KIYOFUMI SAKAGUCHI--Executive Vice President, International Insurance since
1998; President, International Insurance Group from 1995 to 1998; prior to 1995,
Chairman and CEO, The Prudential Life Insurance Co., Ltd., Japan. Age 57.
JOHN R. STRANGFELD--Executive Vice President, Global Asset Management since
1998; Chief Executive Officer, Private Asset Management Group (PAMG) from 1996
to 1998; President, PAMG, from 1994 to 1996; prior to 1994, Senior Managing
Director. Age 46.
VIVIAN BANTA--Executive Vice President, Individual Financial Services since
2000; Consultant, Individual Financial Services from 1998 to 1999; Consultant,
Morgan Stanley from 1997 to 1998; Executive Vice President, Global Investor
Service, The Chase Manhattan Bank from 1991 to 1997. Age 49.
RICHARD J. CARBONE--Senior Vice President and Chief Financial Officer since
1997; Controller, Salomon Brothers, from 1995 to 1997; prior to 1995,
Controller, Bankers Trust. Age 52.
ANTHONY S. PISZEL--Senior Vice President and Controller since 2000; Vice
President and Controller from 1998 to 2000. Vice President, Enterprise Financial
Management from 1997 to 1998; prior to 1997, Chief Financial Officer, Individual
Insurance Group. Age 45.
SUSAN J. BLOUNT--Vice President and Secretary since 1995; prior to 1995,
Assistant General Counsel. Age 42.
C. EDWARD CHAPLIN--Vice President and Treasurer since 1995; prior to 1995,
Managing Director and Assistant Treasurer. Age 43.
8
<PAGE>
SALE OF THE CONTRACTS
Prudential Investment Management Services LLC ("PIMS"), a subsidiary of
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.
We may pay trail commissions to registered representatives who maintain an
ongoing relationship with a Contractholder. Typically, a trail commission is
compensation that is paid periodically to a representative, the amount of which
is linked to the value of the Contract and the amount of time that the Contract
has been in effect.
LEGAL MATTERS
All matters relating to New Jersey law pertaining to the Contracts, including
the validity of the Contracts and Prudential's authority to issue the Contracts,
have been passed upon by C. Christopher Sprague, Assistant General Counsel of
Prudential. Shea and Gardner of Washington, D.C. has provided advice on certain
matters relating to the federal securities laws.
EXPERTS
The consolidated financial statements of Prudential and its subsidiaries as of
December 31, 1999 and 1998 and for each of the three years in the period ended
December 31, 1999 included in this statement of additional information have been
so included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. PricewaterhouseCoopers LLP's principal business address is 1177
Avenue of the Americas, New York, New York 10036.
FINANCIAL STATEMENTS
The consolidated financial statements for Prudential and its subsidiaries
included herein should be distinguished from the financial statements of the
Discovery Account, and should be considered only as bearing upon the ability of
Prudential to meet its obligations under the Contracts. No financial statements
are included for the Discovery Account because the Discovery Account had not yet
commenced operations as of the date of this Statement of Additional Information.
[Include Prudential Financial Module Here -
CIK = 0000828972
CCC = sgk5b@od
Module = PRU_FIN_99]
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements are included in Part B:
Consolidated Financial Statement of The Prudential Insurance
Company of America and its subsidiaries.
(b) Exhibits
1. Resolution adopted by the Board of Directors of The
Prudential Insurance Company of America on November 9,
1999 establishing the Prudential Discovery Premier
Group Variable Contract Account (the "Discovery
Account"). (Note 1)
2. Not applicable.
3(a). Distribution Agreement. (Note 1)
3(b). Broker-dealer sales agreement (Marketing Agreement).
(Note 1)
4(a). Form of Group Annuity Contract. (Note 1)
4(b). Form of Group Annuity Contract Amendment. (Note 1)
5(a). Not applicable.
5(b). Not applicable.
6(a). Charter of The Prudential Insurance Company of America,
as amended November 14, 1995. (Note 3)
6(b). By-Laws of The Prudential Insurance Company of America,
as amended May 12, 1998. (Note 4)
7. Not applicable.
8. Form of Participation Agreement. (Note 5)
9. Consent and opinion of C. Christopher Sprague,
Assistant General Counsel, The Prudential Insurance
Company of America, as to the legality of the
securities being registered. (Note 1)
10(a). Consent of PricewaterhouseCoopers LLC, Independent
Accountants. (Note 1)
10(b). Consent of Shea & Gardner. (Note 1)
10(c). Powers of Attorney.
Ryan, Piszel, Carbone, Becker, Casellas,
Cullen, Kelley, Malkiel, Agnew, Enrico,
Gilmour, Hanson, Hiner, Vagelos, Van Ness
(Note 2)
Davis, Gray, Horner, Sitter, Staheli,
Thomson, Unruh, Volcker, Williams (Note 1)
11. Not applicable.
12. Not applicable.
13. Schedule for Computation of Performance Calculations.
(Note 1)
- ---------------------
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Form N-4, Registration No.
333-95637, filed January 28, 2000, on behalf of Registrant.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 9 to
Form S-1, Registration No. 33-20083, filed April 9, 1998 on
behalf of The Prudential Variable Contract Real Property
Account.
(Note 4) Incorporated by reference to Form S-6, Registration No.
333-64957, filed September 30, 1998 on behalf of The
Prudential Variable Appreciable Account.
(Note 5) Incorporated by reference to Form N-4 Registration No.
333-0671, filed June 24, 1996 on behalf of the Pruco Life
Flexible Premium Variable Annuity Account.
<PAGE>
Item 25. Directors and Officers of the Depositor
Information about the Directors and Executive Officers of Prudential,
Registrant's depositor, appears under the heading of "Directors and Officers of
Prudential" in the Statement of Additional information (Part B of this
Registration Statement).
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Registrant is a separate account of The Prudential Insurance Company of America,
a mutual life insurance company organized under the laws of the State of New
Jersey. The subsidiaries of Prudential and short descriptions of each are listed
under Item 25 to Post-Effective Amendment No. 36 to the Form N-1A registration
Statement for the Prudential Series Fund, Inc., Registration No. 2-80896, filed
May 1, 1999, the text of which is hereby incorporated.
In addition to the subsidiaries shown on the Organization Chart, Prudential
holds all of the voting securities of Prudential's Gibraltar Fund, Inc., a
Maryland corporation, in three of its separate accounts. Prudential also holds
directly and in three of its separate accounts, shares of The Prudential Series
Fund, Inc., a Maryland corporation. The balance of the shares of The Prudential
Series Fund, Inc. are hold in separate accounts of Pruco Life Insurance Company
and Pruco Life Insurance Company of New Jersey, wholly-owned subsidiaries of
Prudential. All of the separate accounts referred to above are unit investment
trusts registered under the Investment Company Act of 1940. Prudential's
Gibraltar Fund, Inc. and The Prudential Series Fund, Inc. are registered as
open-end, diversified management investment companies under the Investment
Company Act of 1940. The shares of these investment companies are voted in
accordance with the instructions of persons having interests in the unit
investment trusts, and Prudential, Pruco Life Insurance Company and Pruco Life
Insurance Company of New Jersey vote the shares they hold directly in the same
manner that they vote the shares that they hold in their separate accounts.
Registrant may also be deemed to be under common control with The Prudential
Variable Contract Account-2, The Prudential Variable Contract Account-10, and
The Prudential Variable Contract Account-11, separate accounts of Prudential
registered as open-end, diversified management investment companies under the
Investment Company Act of 1940.
Prudential is a mutual insurance company. Its financial statements have been
prepared in conformity with generally accepted accounting principles, which
include statutory accounting practices prescribed or permitted by state
regulatory authorities for insurance companies.
Item 27. Number of Contractholders
Not applicable.
Item 28. Indemnification
The Registrant, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.
New Jersey, being the state of organization of The Prudential Insurance Company
of America ("Prudential"), permits entities organized under its jurisdiction to
indemnify directors and officers with certain limitations. The relevant
provisions of New Jersey law permitting indemnification can be found in Section
14A:3-5 of the New Jersey Statutes Annotated. The text of Prudential's By-law
27, which relates to indemnification of officers and directors, is incorporated
by reference to Form S-6, Registration No. 333-64957, filed September 30, 1998,
on behalf of The Prudential Variable Appreciable Account.
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
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 of 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.
<PAGE>
Item 29. Principal Underwriter
(a) Prudential Investment Management Services LLC ("PIMS"), a
direct 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, The Prudential
Variable Contract GI-2, and The Prudential Discovery Premier
Group Variable Contract Account, which are registered as unit
investment trusts under the Investment Company Act of 1940.
PIMS is also distributor for the following companies, which
are registered as open-end management investment companies
under the Investment Company Act of 1940: Cash Accumulation
Trust, Command Money Fund, Command Government Fund, Command
Tax-Free Fund, the Global Total Return Fund, Inc., Global
Utility Fund, Inc., Nicholas-Applegate Fund, Inc.
(Nicholas-Applegate Growth Equity Fund), Prudential Balanced
Fund, Prudential California Municipal Fund, Prudential
Distressed Securities Fund, Inc., Prudential Diversified Bond
Fund, Inc., Prudential Emerging Growth Fund, Inc., Prudential
Equity Fund, Inc., Prudential Equity Income Fund, Prudential
Europe Growth Fund, Inc., Prudential Global Genesis Fund,
Inc., Prudential Global Limited Maturity Fund, Inc.,
Prudential Government Income Fund, Inc., Prudential Government
Securities Trust, Prudential High Yield Fund, Inc., Prudential
High Yield Total Return Fund, Inc., Prudential Index Series
Fund, Prudential Institutional Liquidity Portfolio, Inc.,
Prudential Intermediate Global Income Fund, Inc., Prudential
International Bond Fund, Inc., The Prudential Investment
Portfolios, Inc., Prudential Mid-Cap Value Fund, Prudential
MoneyMart Assets, Inc., Prudential Mortgage Income Fund, Inc.,
Prudential Municipal Bond Fund, Prudential Municipal Series
Fund, Prudential National Municipals Fund, Inc., Prudential
Natural Resources Fund, Inc., Prudential Pacific Growth Fund,
Inc., Prudential Real Estate Securities Fund, Prudential
Small-Cap Quantum Fund, Inc. Prudential Small Company Value
Fund, Inc., Prudential Special Money Market Fund, Inc.,
Prudential Structured Maturity Fund, Inc., Prudential Tax-Free
Money Fund, Inc., Prudential 20/20 Focus Fund, Prudential
Utility Fund, Inc., Prudential World Fund, Inc. and The Target
Portfolio Trust.
(b)(1) The following table sets forth information regarding certain
officers of PIMS. As a limited liability company, PIMS has no
directors. None of these persons has a position or office with
the Registrant. The principal business address for the
following persons is 751 Broad Street, Newark, NJ 07102.
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
------------------ ---------------------
Robert F. Gunia President
C. Edward Chaplin Treasurer
Kevin B. Frawley Senior Vice President
and Chief Compliance
Officer
Jean D. Hamilton Executive Vice President
John R. Strangfeld Executive Vice President
William V. Healey Senior Vice President,
Secretary and Chief Legal
Officer
Margaret M. Deverell Senior Vice President,
Comptroller and Chief
Financial Officer
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING
PRINCIPAL DISCOUNTS AND COMPENSATION
UNDERWRITER COMMISSIONS ON REDEMPTION
----------- ---------------- -------------
<S> <C> <C>
Prudential Investment
Management Services, LLC $0 $0
</TABLE>
<PAGE>
Item 30. Location of Accounts and Records
All accounts, books and documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the rules thereunder are maintained by
the Registrant through Prudential at the following addresses:
The Prudential Insurance Company of America
and The Prudential Investment Corporation
751 Broad Street
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 Insurance Company of America
c/o Prudential Investments
30 Scranton Office Park
Scranton, 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
State Street Bank and Trust Company
801 Pennsylvania
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 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 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 Rule will be complied with.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 24th day of
April, 2000.
The Prudential Discovery Premier Group Variable
Contract Account
------------------------------------------------
(Registrant)
BY: The Prudential Insurance Company of America
------------------------------------------------
(Depositor)
By: /s/ C. Christopher Sprague
- -------------------------------------
C. Christopher Sprague
Assistant General Counsel
- -------------------------------------
(Signature and Title)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
below on this 24th day of April, 2000.
Signature and Title
- -------------------
/s/ *
-----------------------
Arthur F. Ryan
Chairman of the Board,
President and Chief Executive
Officer
/s/ *
-----------------------
Anthony S. Piszel
Vice President and Controller
(Chief Accounting Officer)
/s/ *
-----------------------
Richard J. Carbone
Senior Vice President and
Principal Financial Officer
/s/ *
-----------------------
Frederic K. Becker
Director
/s/ *
-----------------------
Gilbert F. Casellas
Director
/s/ *
-----------------------
James G. Cullen
Director
/s/ *
-----------------------
Carolyne K. Davis
Director
/s/ *
-----------------------
Roger A. Enrico
Director
/s/ *
-----------------------
Allan D. Gilmour
Director
/s/ *
-----------------------
William H. Gray III
Director
/s/ *
-----------------------
Jon F. Hanson
Director
/s/ *
-----------------------
Glen H. Hiner
Director
/s/ *
-----------------------
Constance J. Horner
Director
/s/ *
-----------------------
Gaynor N. Kelley
Director
/s/ *
-----------------------
Burton G. Malkiel
Director
/s/ *
-----------------------
Charles R. Sitter
Director
/s/ *
-----------------------
Donald L. Staheli
Director
/s/ *
-----------------------
Richard M. Thomson
Director
/s/ *
-----------------------
James A. Unruh
Director
/s/ *
-----------------------
P. Roy Vagelos, M.D.
Director
/s/ *
-----------------------
Stanley C. Van Ness
Director
/s/ *
-----------------------
Paul A. Volcker
Director
/s/ *
-----------------------
Joseph H. Williams
Director
* By: C. Christopher Sprague
----------------------
C. Christopher Sprague
(Attorney-In-Fact)
<PAGE>
EXHIBIT INDEX
1 Resolution Establishing Account
3(a) Distribution Agreement
3(b) Broker-Dealer Sales Agreement (Marketing Agreement)
4(a) Form of Group Annuity Contract
4(b) Form of Group Annuity Contract Amendment
9 Consent and Opinion as to the Legality of Securities Being Registered
10(a) Consent of PricewaterhouseCoopers LLP, independent accountants
10(b) Consent of Shea & Gardner
10(c) Powers of Attorney
13 Schedule for Computation of Performance Calculations
EXHIBIT 1
RESOLUTION
RESOLVED THAT, subject to the approval of the Commissioner of Insurance of New
Jersey, and to such conditions as said Commissioner may impose, pursuant to
Section 17B:28-7 of the Revised Statues of New Jersey, a commingled separate
account be established, to be designated the Prudential Discovery Premier Group
Variable Contract Account. This Account will be registered as a unit investment
trust under the Investment Company Act of 1940 and will invest in selected
portfolios within the Prudential Series Fund, Inc., an open-end management
investment company registered under the Investment Company Act of 1940, as
hereinafter provided, and in the shares of certain open-end management
investment companies not affiliated with Prudential or its subsidiaries. Such
portfolios and management investment companies will be within investment
categories recognized as appropriate for retirement investing. The Account will
be used for the variable portion of combination fixed and variable group annuity
contracts under which portion the values vary to reflect the investment results
of said Account.
FURTHER RESOLVED, that the Company shall receive and hold in the Account amounts
arising from (i) group variable contracts sold in connection with retirement
arrangements that qualify for certain federal tax benefits and (ii) such other
assets of the Company as the proper officers of the Company may deem prudent and
appropriate to have invested on the same manner as the assets applicable to its
reserve liability under variable contract funded in the Account, and such
amounts, together with dividends, interest and gains produced thereby shall be
invested and reinvested, subject to the rights of the holders of such variable
contracts, in shares of the Prudential Series Fund, Inc., an open-end management
investment company, or in shares of certain open-end management investment
companies not affiliated with Prudential or its subsidiaries which have entered
into participation agreements with Prudential; and
FURTHER RESOLVED, that the proper officers of the Company be and they hereby are
authorized to sign and file, or cause to be filed, with the Securities and
Exchange Commission a registration statement on behalf of the Account, as
registrant, under the Investment Company Act of 1940, and, on behalf of the
Company as issuer, a registration statement, including the financial statements
and schedules, exhibits and form of prospectus required as a part thereof, for
the registration under the Securities Act of 1933 of the offering and sale of
the group variable contracts funded in the Account to the extent they represent
participating interests in the Account, and to pay the registration fees
required in connection therewith; and
FURTHER RESOLVED, that the proper officers of the Company are authorized and
directed to sign and file, or cause to be filed, such amendment or amendments of
such Investment Company Act registration and Securities Act registration
statement as they may find necessary or desirable from time to time; and
FURTHER RESOLVED, that the signature of any director or officer required by law
to affix his or her signature to any such Investment Company Act registration
application and Securities Act registration, or to any amendment thereof, may be
affixed by said director or officer personally, or by an attorney in fact duly
constituted in writing by said director or officer to sign his name thereto; and
FURTHER RESOLVED, that the Secretary of the Company is appointed agent of the
Company to receive any and all notices and communications from the Securities
and Exchange Commission relating to such Investment Company Act registration and
Securities Act registration and any and all amendments thereof; and
FURTHER RESOLVED, that the proper officers of the Company be and they hereby are
authorized to take whatever steps may be necessary or desirable to comply with
such laws and regulations of the several states as may be applicable to the sale
of the group variable contracts funded in the Account; and
FURTHER RESOLVED, that the proper officers of the Company be and they hereby are
authorized, in the name and on behalf of the Company, to execute and deliver
such corporate documents and certificates and to take such further action as may
be necessary or desirable including but not limited to, the payment of
applicable fees, in order to effectuate the purposes of the foregoing
resolutions or any of them.
EXHIBIT 3(A)
FORM OF
DISTRIBUTION AGREEMENT
AGREEMENT made this ____ day of __________, 2000, by and between The
Prudential Insurance Company of America (the "Company"), a New Jersey insurance
company on its own behalf and on behalf of Prudential Discovery Premier Group
Variable Contract Account (the "Account") and Prudential Investment Management
Services LLC (the "Distributor"), a Delaware limited liability company.
WITNESSETH:
WHEREAS, the Company has established and maintains the Account, a
separate investment account, pursuant to the laws of New Jersey for the purpose
of providing a choice of variable investment options under group annuity
contracts (the "Contracts"), to commence after the effectiveness of a
Registration Statement filed with the Securities and Exchange Commission on Form
N-4 pursuant to the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, the Account is registered as a unit investment trust under the
Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Distributor is a broker-dealer registered with the
Securities and Exchange Commission (the "Commission") under Section 15(b) of the
Securities Exchange Act of 1934 (the "Exchange Act") and is a member of the
National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Company and the Distributor wish to enter into an
agreement to have the Distributor act as the Company's principal underwriter for
the sale of Contracts and the distribution of certificates of participation (the
"Certificates") in the Contracts:
NOW THEREFORE, the parties agree as follows:
1. APPOINTMENT OF THE DISTRIBUTOR
The Company agrees that during the term of this Agreement it will take
all action required to cause the Contracts to comply with all applicable federal
and state laws and regulations. During the term of this Agreement, the Company
appoints the Distributor and the Distributor agrees to act as the principal
underwriter for the sale of Contracts, as well as the Certificates issued
thereunder, in each state and other jurisdictions in which such Contracts may
lawfully be sold. Distributor shall offer the Contracts for sale and distribute
Certificates at premium rates set by the Company. Applications for the Contracts
and the underlying Certificates shall be solicited only by representatives of
Distributor duly qualified and appropriately licensed in each state or other
jurisdiction where they solicit such applications. Company shall appoint
Distributor's qualified representatives as life insurance agents of
<PAGE>
Company. Completed applications for Contracts and the underlying
Certificates shall be transmitted directly to the Company for acceptance or
rejection in accordance with underwriting rules established by the Company.
Initial premium payments for the Certificates under the Contracts shall be made
by check (or other payment method) payable to the Company and shall be held at
all times by Distributor or its representatives in a fiduciary capacity and
remitted promptly to the Company. Anything in this Agreement to the contrary
notwithstanding, the Company retains the ultimate right to control the sale of
the Contracts, as well as the Certificates issued thereunder, and to appoint and
discharge life insurance agents of the Company. The Distributor shall be held to
the exercise of reasonable care in carrying out the provisions of this
Agreement.
2. SALES AGREEMENTS
Distributor is hereby authorized to enter into separate written
agreements, on such terms and conditions as Distributor may determine not
inconsistent with this Agreement, with one or more organizations which agree to
participate in the distribution of the Contracts and Certificates under the
Contracts. Such organization (hereafter "Broker") shall be registered with the
Commission under Section 15(b) of the Exchange Act and with the NASD as a member
firm. Broker and its representatives soliciting applications for Contracts and
Certificates shall be duly and appropriately licensed, registered, or otherwise
qualified for the sale of such Contracts and Certificates (and the riders and
other policies offered in connection therewith) under the insurance laws and any
applicable blue-sky laws of each state or other jurisdiction in which the Broker
or its representatives solicit such sales. Broker shall assume any legal
responsibilities of Company for the acts, commissions or defalcations of such
representatives insofar as they relate to the sale of the Contracts and
Certificates. Applications for Contracts and Certificates solicited by such
Broker through its representatives shall be transmitted directly to the Company,
and if received by Distributor, shall be forwarded to Company. All premium
payments under the Contracts shall be made by check (or other payment method) to
Company and, if received by Broker, shall be held at all times in a fiduciary
capacity and remitted promptly to Company.
3. LIFE INSURANCE LICENSING
Company shall be responsible for insuring that Brokers are duly
qualified, under the insurance laws of the applicable jurisdictions, to sell the
Contracts and Certificates.
4. SUITABILITY
Parties to this Agreement are prohibited from recommending the purchase
of investment options or interests in the Account to prospective Contract
holders and Certificates purchasers. Such prohibition also shall extend to
contributions, transfers, exchanges, and redemptions by Certificate purchasers
of investment options or interests in the Account. Parties shall take reasonable
steps to ensure that their representatives and associates refrain from making
the aforementioned recommendations. Parties to this Agreement shall take
reasonable steps to ensure that they will offer Certificates that are
appropriate to the needs of the prospective Certificate purchasers. While not
limited to the following, a determination of appropriateness shall be based on
information furnished to the parties after reasonable inquiry of such applicants
concerning the
2
<PAGE>
applicants' insurance and investment objectives, financial
situations and needs, and the likelihood that the applicants will continue to
make the premium payments contemplated by the Certificates under the Contracts.
5. PROMOTIONAL MATERIALS
Company shall have the responsibility for furnishing to Distributor and
its representatives sales promotion materials and individual sales proposals
relating to the sale of the Contracts and Certificates. Distributor shall not
use any such materials that have not been approved by Company. Distributor shall
be responsible for obtaining NASD review of all promotional materials.
6. COMPENSATION
Company shall arrange for the payment of commissions directly to those
representatives of Distributor who are entitled thereto in connection with the
sale of the Contracts on behalf of Distributor, in the amounts and on such terms
and conditions as Company and Distributor shall determine; provided that such
terms, conditions and commissions shall be as are set forth in or as are not
inconsistent with the Prospectus included as part of the Registration Statement
for the Contracts and effective under the Securities Act. Company shall arrange
for the payment of commissions directly to those Brokers who sell Contracts and
Certificates under agreements entered into pursuant to paragraph 2 hereof, in
amounts as may be agreed to by the Company and specified in such written
agreements between Distributor and Brokers. Company shall reimburse Distributor
for the costs and expenses incurred by Distributor in furnishing or obtaining
the services, materials, and supplies required by the terms of this Agreement in
the initial sales efforts and the continuing obligations hereunder.
Reimbursement shall be a portion of Distributor's yearly expenses based on
Company's share of relevant activity. In addition, Company shall pay Distributor
a surcharge of one (1) to three (3) percent of the commissions Company pays to
Brokers and to representatives of Distributor.
7. RECORDS
Distributor shall have the responsibility for maintaining the records
of its representatives that are licensed, registered and otherwise qualified to
sell the Contracts and the underlying Certificates. Distributor shall maintain
such other records as are required of it by applicable laws and regulations. The
books, accounts, and records of the Company, the Account and Distributor shall
be maintained so as to disclose clearly and accurately the nature and details of
the transactions. Copies of all records maintained by the Distributor in
connection with this Agreement shall be made available to and become the
property of the Company upon its request. The Distributor shall keep
confidential any information obtained pursuant to this Agreement and shall
disclose such information only if the Company has authorized such disclosure, or
if such disclosure is expressly required by applicable federal or state
regulatory authorities.
8. INVESTIGATION AND PROCEEDING
Distributor and Company agree to cooperate fully in any insurance
regulatory
3
<PAGE>
investigation or proceeding or judicial proceeding arising in
connection with the Contracts and Certificates distributed under this Agreement.
Distributor and Company further agree to cooperate fully in any securities
regulatory investigation or proceeding with respect to Company, Distributor,
their affiliates and their representatives to the extent that such investigation
or proceeding is in connection with the Contracts and Certificates distributed
under this Agreement. The Distributor shall furnish applicable federal and state
regulatory authorities with any information or reports in connection with its
services under this Agreement which such authorities may request to ascertain
whether the Company's operations are being conducted in a manner consistent with
any applicable law or regulation. In the case of a substantive customer
complaint, Distributor and Company will cooperate in investigating such
complaint and any response to such complaint will be sent to the other party to
this Agreement for approval not less than five business days before being sent
to the customer or regulatory authority, except that if a more prompt response
is required, the proposed response shall be communicated by telephone or
telegraph.
9. TERMINATION
This Agreement shall terminate automatically upon its assignment within
the meaning of such term in the Investment Company Act. This Agreement, however,
may be transferred by the Distributor without the prior written consent of the
Company in the circumstances set forth in Rule 2a-6 under the Investment Company
Act. The Agreement may be terminated at any time by either party on 60 days
written notice to the other party, without the payment of any penalty. Upon
termination of this Agreement all authorizations, rights and obligations shall
cease except the obligation to settle accounts hereunder, including commissions
on premiums subsequently received for Contracts in effect at a time of
termination, and the agreements contained in paragraph 8 hereof.
10. REGULATION
This Agreement shall be subject to the provisions of the Investment
Company Act of 1940 and the Exchange Act and of the rules, regulations, and
rulings thereunder and the applicable rules and regulations of the NASD, from
time to time in effect, and the terms hereof shall be interpreted and construed
in accordance therewith.
11. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
12. WARRANTIES
Each party to this Agreement warrants to the other party as follows:
(a) it has full power and authority to execute and deliver this Agreement and to
perform and observe the provisions herein; (b) the execution, delivery, and
performance of this Agreement have been duly authorized by all necessary
corporate actions and do not and will not contravene any requirement of law or
any contractual restrictions or agreement binding on or affecting such party or
4
<PAGE>
its assets; and (c) this Agreement has been duly and properly executed and
delivered by such party and constitutes a legal, valid, and binding obligation
of such party enforceable in accordance with its terms.
13. APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: ---------------------------------------
Name:
Title:
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
By: ---------------------------------------
Name:
Title:
5
<PAGE>
EXHIBIT 3(B)
FORM OF
MARKETING AGREEMENT
This Marketing Agreement (the "Agreement") is made as of ______________
between Prudential Investment Management Services LLC ("PIMS"), a Delaware
limited liability company with its principal place of business at 751 Broad
Street, Newark, New Jersey 07102, and _________________________________
("Broker"), a ________________ corporation with its principal place of business
at ______________________________________.
WITNESSETH:
WHEREAS, PIMS and Broker each is a broker-dealer registered with the
U.S. Securities and Exchange Commission under the Securities Exchange Act of
1934 ("Exchange Act") and with any applicable State securities commission, and
each also is a member of the National Association of Securities Dealers, Inc.
("NASD");
WHEREAS, PIMS and Broker wish to enter into this Agreement to allow
certain of Broker's registered representatives to assist Prudential (as defined
below) in the offer and sale of the Products and Services (as defined below) to
the Plans (as defined below); and
[WHEREAS, the parties intend that this Agreement shall replace the
Broker Agreement and Marketing Assistance Agreement, both dated ____________,
between them and that such Broker and Marketing Assistance Agreements are hereby
terminated as of the date hereof].
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
1. DEFINITIONS
A. "Agreement" means this Marketing Agreement, and any appendices
thereto.
B. "Broker" means ___________________________ and, as the
context requires, certain of its associated persons.
C. "Plans" means the defined contribution pension plans each
consisting of at least $3 million in assets that have been
referred by Broker to The Prudential Insurance Company of
America ("Prudential"), and that receive administrative and/or
recordkeeping services from Prudential and Broker in
accordance with Section 3 of this Agreement.
D. "Products and Services" means the investment products and
certain recordkeeping and administrative products and services
that comprise the PruArray program (the "Program"), the
<PAGE>
Discovery Premier group variable annuity and ___________. The
parties recognize and agree that certain aspects of the
Products and Services may be provided by an affiliate of
Prudential or PIMS. The parties further recognize and agree
that Prudential has the unilateral right to add or remove
mutual funds from the Program. Any such addition or removal
will be binding upon Broker upon written notice from
Prudential or PIMS to Broker.
2. SCOPE OF AGREEMENT
A. PIMS and Broker each intend that only those registered
representatives of Broker that have been approved in advance
by PIMS and continue to be associated with Broker and
appropriately licensed are authorized under this Agreement to
offer and sell the Products and Services to the Plans. Any
such authorized registered representative of Broker is
referred to herein as an "Authorized Representative." Upon
written notice to Broker, PIMS shall have the unilateral right
to terminate a registered representative's authority as an
Authorized Representative. In that event, such registered
representative no longer shall have any authority to act under
this Agreement and PIMS and Broker shall agree on one or more
Authorized Representatives to assume the responsibilities of
such registered representative with respect to any Plans; if
PIMS and Broker are unable to so agree on one or more new
Authorized Representative(s), PIMS shall have the unilateral
right to appoint a registered representative who is not
employed by or associated with Broker.
B. PIMS shall make the Products and Services available to Plans
that are referred to it in writing by an Authorized
Representative. Broker shall perform such services as may be
necessary or appropriate to assist PIMS in marketing the
Products and Services to such prospective Plans. The services
provided by Broker pursuant to this Agreement may include, but
are not limited to, the introduction or referral to PIMS of
Plans that may desire to retain PIMS to provide certain of the
Products and Services. Broker also agrees that generally, of
the investment options that Broker offers to Plans, at least
50% of such investment options shall be Prudential proprietary
mutual funds. For purposes of satisfying the 50% requirement,
the Prudential MoneyMart Assets Fund (the "Money Market Fund")
will not be considered if any of the investment options that
Broker offers to Plans include the Stable Value Fund,
Guaranteed Interest Account ("GIA") or Guaranteed Interest
Account Plus ("GIA Plus").
C. Broker shall notify PIMS in writing of any pending
introduction or referral of a prospective Plan to PIMS. Within
ten (10) business days after being notified, PIMS shall inform
Broker in writing if Prudential already had established a
prior relationship with such Plan. At Broker's request, PIMS
shall provide Broker with evidence of such prior relationship
(such as prior correspondence, etc.). The existence of such a
prior relationship shall remove that potential Plan from the
applicability of this Agreement; provided, however, that this
proviso shall not exclude from this Agreement any Plan (a
"Transferred Plan") (i) that was covered under a PIMS
Marketing Agreement with a broker-dealer other than Broker
("Other Broker") and (ii) the
2
<PAGE>
account for which was transferred to Broker in connection with
an Authorized Representative leaving the employ of Other
Broker and becoming associated with Broker. If PIMS does not
notify Broker of a prior relationship with a prospective Plan,
then Broker shall have twelve (12) months from the date of its
original notification to PIMS to facilitate the prospective
Plan's acquisition of the Products or Services pursuant to
this Agreement. If such Plan (including any Transferred Plan)
acquires the Products or Services during the twelve month
period, it becomes a "Sold Engagement Plan" hereunder. Once a
Plan has become a Sold Engagement Plan, such Plan shall be
"registered" to Broker and Broker shall be compensated by PIMS
for all Products and Services provided to that Plan pursuant
to this Agreement; provided, however, that at any time a Plan
determines that it no longer wishes to have a relationship
with Broker through which relationship such Plan receives or
has received Products and Services, then such Plan shall no
longer be considered a "Sold Engagement Plan" for the purposes
of this Agreement.
D. Plan accounts ("Accounts") originated under this Agreement
shall be exclusively accounts of PIMS for the purposes of the
federal and state securities laws, but nothing in this
Agreement shall prevent Broker from providing consulting and
other services to the Plans.
E. This Agreement shall not give Broker the right to offer, sell,
or market any Prudential product or service that is not
specifically referenced in this Agreement. Nor shall this
Agreement give Prudential the right to offer, sell, or market
any Product or Service directly to the Accounts without the
prior written approval of Broker.
3. DUTIES OF PARTIES
All on-going services provided to the Plans originated under this
Agreement shall be provided in accordance with this Section 3.
A. FUNCTIONS EXCLUSIVE TO PRUDENTIAL
Prudential or PIMS, as the context may require, shall have sole
responsibility for:
(1) the opening, approval, and maintenance of Accounts;
(2) maintaining for each Account the books and records required of
broker-dealers under the Exchange Act and applicable State
securities laws, and the Conduct Rules of the NASD;
(3) receiving and disbursing Account funds;
(4) preparing enrollment and educational materials for use with
prospective participants in Plans;
3
<PAGE>
(5) safeguarding any Account funds and securities;
(6) preparing and delivering confirmations and statements for
Accounts;
(7) accepting orders from Accounts and executing transactions; and
(8) providing continuous administrative support to Plans and Plan
participants regarding their pension plans.
B. FUNCTIONS EXCLUSIVE TO BROKER
Broker shall have sole responsibility:
(1) for maintaining a supervisory system reasonably designed to
ensure that the activities of the Authorized Representatives
and its other personnel are conducted in accordance with this
Agreement and the standards imposed by the Conduct Rules of
the NASD;
(2) for ensuring that any Authorized Representative is
appropriately licensed with the NASD and any appropriate state
or other jurisdiction;
(3) for ensuring that the Authorized Representatives' activities
in offering and selling the Products and Services to the Plans
are conducted in accordance with this Agreement and the
standards imposed by the Conduct Rules of the NASD;
(4) for ensuring that only Authorized Representatives service
Sold Engagement Plans; and
(5) for ensuring that at the time an Authorized Representative
sells Products and Services, and for so long as any such
Authorized Representative continues to be compensated by
Broker under this Agreement, such Authorized Representative
has not, within the previous 10 years:
(a) been convicted, pleaded guilty (or no contest) to a felony
or misdemeanor, or was the subject of a criminal
proceeding (any of the foregoing referred to hereafter as
an "Action"), and any such Action involved either an
"investment-related" business (i.e., a business pertaining
to securities, commodities, banking, insurance, or real
estate), fraud, false statements or omissions, wrongful
taking of property, bribery, forgery, counterfeiting, or
extortion;
(b) been found to have been involved in a violation of an
investment-related (as defined above) statute or
regulation;
(c) been the subject of any order, judgment, or decree
permanently or temporarily enjoining him/her from, or
otherwise limiting him/her from, engaging in any
investment-related (as defined above) activity;
(d) been the subject of administrative proceedings before the
U.S. Securities and Exchange Commission, any other federal
regulatory agency, any state agency, the NASD, or any
registered stock exchange
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in which he/she (i) was found to have caused an
investment-related (as defined above) business to lose its
authorization to do business or (ii) was found to have
been involved in a violation of an investment-related (as
defined above) statute or regulation and was the subject
of an order by any such regulator denying, suspending, or
revoking the authorization of the person to act in, or
barring or suspending the person's association with, an
investment-related (as defined above) business, or
otherwise significantly limiting the person's involvement
in investment-related (as defined above) activities.
Notwithstanding the foregoing, an Authorized Representative shall not
be disqualified under this paragraph 3(B)(5) with respect to any Action or other
proceeding that ultimately was resolved in his/her favor, or subsequently
reversed, suspended, or vacated.
C. FUNCTIONS TO BE PERFORMED BY PRUDENTIAL, BROKER OR BOTH
PIMS and Broker shall use their best efforts to offer and sell the
Products and Services to prospective Plans. These functions include cooperation
in: (1) preparation of marketing materials for use with prospective Plans; (2)
providing personnel to attend sales meetings with prospective Plans; and (3)
providing personnel to attend enrollment meetings with new Plans.
D. COMPLIANCE WITH RULES AND REGULATIONS
PIMS and Broker shall comply with all laws, rules, and regulations of
any governmental agency having jurisdiction with respect to their respective
performance of their obligations hereunder. PIMS and Broker shall each be solely
responsible for maintaining any and all licenses which may be required for the
provision of the Products and Services and the performance of their obligations
hereunder generally.
E. DISCLOSURE DOCUMENTS, ADVERTISING AND/OR SALES MATERIAL
Broker shall not distribute any disclosure document regarding any
Products or Services (such as prospectuses and statements of additional
information) other than those supplied by Prudential or PIMS. If Broker wishes
to distribute advertising and/or sales material related to the Products and
Services, such advertising and/or sales material must be prepared by PIMS or be
approved by PIMS prior to first use.
F. USE OF INSURANCE AGENCY AFFILIATE OF BROKER
[It is understood and agreed that Broker's Authorized Representatives
may be employed by, or associated with (as defined in Article I of the By-Laws
of the NASD), __________________________________, an affiliate of Broker that is
licensed as an insurance agency (hereinafter referred to as "Insurance Agency
Affiliate"), and whose shareholders, officers, and employees are "associated
persons" of Broker within the meaning of Section 3(a)(18) of the Exchange Act.
Broker agrees that if the Products and Services are offered, sold or serviced
through Insurance Agency Affiliate:
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(1) Broker will retain full responsibility for compliance with the requirements
of all applicable federal and state securities laws and insurance laws,
except as otherwise set forth in this Agreement and except with respect to
the maintenance of the SEC Registration Statement under the Securities Act
of 1933, and will continue to perform all obligations set forth above;
(2) Any books and records maintained by Insurance Agency Affiliate in the
offer, sale and service of Products and Services will be deemed, for
purposes of the Exchange Act, to be books and records of Broker and will
conform to the requirements of Section 17 of the Exchange Act and the rules
thereunder. The manner in which the books and records of Broker and
Insurance Agency Affiliate are made and maintained will permit supervisory
personnel of Broker as well as authorized examiners of the SEC, or of
another appropriate governmental agency or self-regulatory organization, to
review data concerning transactions relating to Products and Services
effected through Insurance Agency Affiliate to the same extent as if such
transactions had been effected through Broker itself. This may be
accomplished either through maintaining one set of books and records for
Broker and Insurance Agency Affiliate or by maintaining separate sets of
books and records with adequate integration, through cross-referencing or
otherwise, between records maintained by Broker and those maintained by
Insurance Agency Affiliate;
(3) Compensation to be paid to Broker attributable to sales of Products and
Services shall be paid to Insurance Agency Affiliate in accordance with the
SEC no-action letter dated ___________________ issued to
_____________________________. At all times for which compensation payments
are to be made to Insurance Agency Affiliate under this Agreement,
Insurance Agency Affiliate is and shall be an insurance agency properly
licensed and appointed as required under the insurance laws in any state(s)
or jurisdictions(s) in which the Products and Services are solicited and
sold;
(4) All obligations and responsibilities of Broker under this Agreement,
including but not limited to any supervisory, compliance, and
indemnification provisions, shall apply to the activities of the Insurance
Agency Affiliate and any other registered representative associated with
the Broker offering or selling the Products and Services, for which
compensation is payable to Insurance Agency Affiliate hereunder and
notwithstanding payment of compensation to Insurance Agency Affiliate
hereunder;
(5) Payments by PIMS to Insurance Agency Affiliate shall constitute full
payment for all compensation to be paid to Broker for the sale of the
Products and Services in all applicable states and/or jurisdictions. PIMS
has no responsibility for, nor any liability with respect to, any
compensation arrangements between Broker and Insurance Agency Affiliate,
and/or any Authorized Representative;
(6) Broker agrees to provide Insurance Agency Affiliate's Taxpayer
Identification Number ("TIN") to PIMS, and Broker understands and agrees,
and will cause Insurance Agency Affiliate to understand and agree, that
PIMS shall, for all the compensation payments made to Insurance Agency
Affiliate, use Insurance Agency Affiliate's TIN for purposes of federal and
state tax reporting and shall issue tax reporting forms with respect to
such payments solely to Insurance Agency Affiliate. Broker also agrees to
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cause Insurance Agency Affiliate to refund to PIMS any amounts due PIMS
under this Agreement;
(7) Payments under this Agreement to Insurance Agency Affiliate shall cease
immediately:
(a) with respect to any state or jurisdiction in which the Insurance
Agency Affiliate's insurance license is expired, revoked,
suspended, terminated, or impaired; or
(b) when Insurance Agency Affiliate's status as an associated person
of Broker terminates.
(8) Broker may, upon the written consent of PIMS, designate a substitute
Insurance Agency Affiliate, provided the substitute Insurance Agency
Affiliate meets all of the requirements set forth herein.]
4. LIMITS ON AUTHORITY
A. LIMITS ON BROKER'S AUTHORITY
(1) Apart from this Agreement, Broker shall not bind Prudential in
any way. In all of its activities under this Agreement,
including assisting in the offer and sale of the Products and
Services, Broker shall act as an independent contractor and
not as an agent or employee of Prudential or PIMS. Broker
shall not have any authority to assume or create any
obligation or contract, express or implied, on behalf of
Prudential or PIMS.
(2) Neither Broker nor any of Broker's employees or
representatives shall be considered employees of, or persons
associated with, Prudential or PIMS for purposes of any
federal or state securities law or regulation, or otherwise.
Broker shall require all representatives or employees who
perform services pursuant to this Agreement to agree to be
bound by the terms of Sections 8, 9, 10, and 11 of this
Agreement.
(3) Broker is not authorized to use the name of Prudential or its
affiliates in advertising or promoting its business without
the prior written consent of Prudential.
B. LIMITS ON PRUDENTIAL'S AUTHORITY
(1) Apart from this Agreement, neither PIMS nor Prudential shall
bind or obligate Broker in any way. In all of its activities
under this Agreement, PIMS agrees to assist Broker in the
offer and sale of the Products and Services, and not act as an
agent of Broker, and shall not hold itself out as such. PIMS
shall not have any authority to assume or create any
obligation or contract, express or implied, on behalf of
Broker.
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(2) Neither PIMS nor any of PIMS's employees or representatives
shall be considered employees of or persons associated with
Broker for purposes of any federal or state securities law or
regulation, or otherwise.
(3) Prudential and PIMS are not authorized to use the name of
Broker or its affiliates in advertising or promoting their
business without the prior written consent of Broker.
5. TERM
This Agreement is effective as of the date of its execution, and shall
continue in force for one year from that date. Thereafter, this Agreement shall
automatically be renewed every year for a further one year period; provided that
either party may terminate this Agreement for any reason upon 60 days' prior
written notice. PIMS may terminate this Agreement immediately if Broker breaches
the Agreement, becomes insolvent, or ceases to maintain the net capital required
under the Exchange Act.
Termination of this Agreement shall not excuse Broker from any
agreement, obligation, or undertaking pursuant to Sections 8, 9, and 10 of this
Agreement, which sections shall survive the termination of this Agreement.
6. CONSIDERATION AND PAYMENT
A. For the services provided herein with respect to each Plan,
Broker shall receive compensation from PIMS ("compensation")
pursuant to the fee arrangement outlined in Appendix A, which
may be amended as provided for in Section 16 of this
Agreement. Such compensation shall be paid to Broker by PIMS
within thirty (30) days of PIMS's receipt of fees from Plans
pursuant to this Agreement. Broker shall be responsible for
paying Authorized Representatives the compensation that they
are owed.
B. PIMS agrees, in the event of termination of this Agreement, to
pay to Broker any unpaid compensation accrued by Broker up to
the date of termination. Notwithstanding anything to the
contrary in this Agreement or any Appendix to this Agreement,
any and all compensation owing to Broker hereunder (other than
unpaid and accrued amounts up to the date of termination)
shall cease as of the date of termination. Furthermore, to the
extent that a Plan ceases to be a "Sold Engagement Plan"
pursuant to the circumstances set forth in the final sentence
of Section 2C of this Agreement or PIMS exercises its
unilateral right to appoint a registered representative who is
not employed by or associated with Broker pursuant to the
final sentence of Section 2A, any and all compensation payable
to Broker with respect to affected Plans will cease as of that
time.
C. PIMS shall on a monthly basis provide Broker with a report of
any revenues derived from the Products and Services provided
hereunder and from which Broker is entitled to receive
compensation. In the event Broker should dispute any payment,
PIMS, after receiving notice from Broker of such dispute,
shall cause to be provided to Broker a statement of
reconciliation which demonstrates the amount of compensation
paid to Broker. If an inaccuracy is found, the payment made to
Broker shall be adjusted in accordance with the statement of
reconciliation. If the statement of reconciliation indicates
that the payment made to Broker was correct, and Broker still
disputes the payment, PIMS shall cause its independent
auditors to supply Broker with an independent statement of
reconciliation ("Independent Report"). If the Independent
Report indicates that the payment to Broker was not deficient,
then Broker agrees to reimburse PIMS for the cost of the
Independent Report.
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7. GOVERNMENTAL REQUIREMENTS
Broker agrees to provide copies of all documents and other information
requested by, and to otherwise cooperate with, Prudential and PIMS for purposes
of complying with federal and state laws and regulations, which copies shall
become the property of PIMS.
8. STANDARDS OF CONDUCT
All services performed, directly or indirectly, by, or on behalf of
Broker in connection with this Agreement, or in furtherance of its objectives,
shall be carried out in form and substance in accordance with all applicable
laws and regulations of the United States, the laws of all applicable states and
other jurisdictions, and in accordance with the Conduct Rules of the NASD.
9. INTELLECTUAL PROPERTY AND DATA RIGHTS
Broker shall not use any of the trademark(s) or tradename(s),
servicemark(s) or any similar name or names, or combinations thereof, owned or
claimed by Prudential or an affiliate, without the prior written consent of
Prudential or PIMS. As soon as practicable, but no later than fifteen (15) days
after termination or cancellation of this Agreement, Broker shall return all of
the physically deliverable sales data or materials relating to the Products and
Services to PIMS. Effective on the date of termination or cancellation, Broker
shall discontinue using any such data or materials.
10. INDEMNIFICATION
A. GENERAL PROVISION
PIMS agrees to indemnify and hold harmless Broker, its members,
directors, officers, employees, agents and representatives against any and all
claims, liabilities, losses or damages which arise from PIMS's material breach
of any term of this Agreement or any representation or warranty in Section 11 of
this Agreement.
Broker agrees to indemnify and hold harmless PIMS and its affiliates,
and its current and former directors, officers, employees, agents and
representatives against all claims, liabilities, losses or damages which arise
from Broker's performance, negligent or otherwise, of its duties under this
Agreement, any misstatement or omission made by Broker or any Authorized
Representative regarding the Products and Services, or the
9
<PAGE>
breach of any term of
this Agreement or any representation or warranty in Section 11 of this
Agreement.
B. PAYMENT OF FINES AND PENALTIES
PIMS shall indemnify and hold Broker harmless from any fines,
penalties, and related expenses incurred by Broker because of PIMS's failure to
comply with the laws, rules, and regulations of any governmental agency having
jurisdiction over its performance of obligations hereunder. Broker shall
indemnify and hold PIMS and its affiliates harmless from any fines, penalties,
and related expenses incurred by PIMS because of Broker's failure to comply with
the laws, rules, and regulations of any governmental agency having jurisdiction
over the performance of its obligations hereunder.
11. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF BROKER
Broker represents and warrants that:
(1) It is duly organized and existing and in good standing under
the laws of the State of _________________.
(2) It is empowered by its organizational documents to enter into
and perform under this Agreement.
(3) This Agreement has been fully authorized, executed and
delivered by Broker and constitutes a legal, valid and binding
agreement enforceable in accordance with its terms.
(4) The execution, delivery and performance by Broker of this
Agreement shall not violate any provision of current law,
including, without limitation, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); the Internal
Revenue Code of 1986, as amended (the "Code"); any federal or
state or other jurisdiction's securities law or regulation;
any order, rule or regulation of any court or governmental or
regulatory body; or any agreement or instrument to which
Broker is a party or by which Broker is bound.
(5) It currently is, and shall continue to be during the term of
this Agreement, registered as a broker-dealer under the
Exchange Act and any applicable State securities laws, and is
and will continue to be a member of the NASD.
(6) It will use its best efforts to meet business goals and
standards pertaining to the Products and Services, as mutually
agreed upon from time to time between the parties, with
respect to the activities it performs pursuant to this
Agreement.
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B. REPRESENTATIONS AND WARRANTIES OF PIMS
PIMS represents and warrants that:
(1) It is duly organized and existing and is in good standing
under the laws of Delaware.
(2) It is empowered under its organizational documents to enter
into and perform this Agreement.
(3) This Agreement has been duly authorized, executed and
delivered by PIMS and constitutes a legal, valid and binding
obligation enforceable in accordance with its terms.
(4) The execution, delivery and performance by PIMS of this
Agreement shall not violate any provision of current law,
including, without limitation, ERISA, the Code and federal and
state securities laws; any order, rule or regulation of any
court or governmental or regulatory body; or any agreement or
instrument to which PIMS is a party or by which PIMS is bound.
(5) It currently is, and shall continue to be during the term of
this Agreement, registered as a broker-dealer under the
Exchange Act and any applicable State securities law, and is
and will continue to be a member of the NASD.
12. ASSIGNMENT
Broker may not transfer this Agreement without the prior written
consent of PIMS. PIMS may assign this Agreement to any affiliate upon notice to
Broker.
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13. THIRD PARTY BENEFICIARIES
This Agreement shall not be construed to create any enforceable right
or interest in any party other than Prudential, PIMS, and Broker.
14. APPLICABLE LAW AND ARBITRATION
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New Jersey, without giving effect to the
conflicts of laws principles thereof. Any controversy or dispute arising out of
or related to this Agreement, or the breach thereof, which cannot first be
settled amicably between PIMS and Broker shall be settled by arbitration
pursuant to the Code of Arbitration Procedure of the NASD. Neither party shall
seek punitive damages from the other, and, if punitive damages are so awarded by
the arbitration panel, neither party shall seek to collect that part of the
panel's award from the other. Arbitration shall be held in the State of New
Jersey. Judgment on any award rendered by the arbitration panel may be entered
in any court having jurisdiction thereof except to the extent punitive damages
are part of the award.
15. SECTION HEADINGS
The section headings in this Agreement are provided solely for the
convenience of the parties, and shall not be construed as having any legal or
interpretative effect.
16. ENTIRE AGREEMENT
This Agreement supersedes all prior oral or written agreements, if any,
between the parties relating to the subject matter hereof, and constitutes the
entire agreement between the parties. Any revisions, amendments, or changes to
this Agreement (except revisions, amendments, or changes to Appendix A, and
except for PIMS's ability to unilaterally terminate the authority of an
Authorized Representative and unilaterally appoint a registered representative
who is not employed by or associated with Broker as described in Section 2A)
shall be in writing and signed by authorized representatives of the parties.
Appendix A may be amended only by PIMS, and will be considered amended upon
notice to Broker.
17. NOTICES AND CORRESPONDENCE
All notices and correspondence pertaining to this Agreement shall be
sent by first class mail, express mail, or courier service to the following
addresses, or other address(es), provided that prior written notice regarding
such other address(es) is given to the other party:
(a) To PIMS: Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
12th Floor
Newark, NJ 07102
Attn.: Chief Legal Officer
cc: Scott S. Wallner, Legal Officer
Prudential Investment Management Services
LLC
751 Broad Street
Newark, NJ 07102-3777
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(b) To Broker:
Attn: ___________________
18. EXECUTION
The parties hereto have executed this Agreement as of the day and year
first written above.
[BROKER] PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
By: __________________________ By: __________________________
13
EXHIBIT 4(A)
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
CONTRACT FORM
agrees to pay the benefits provided under this Contract in accordance with and
subject to its terms.
Contractholder: ABC COMPANY
Plan: ABC Company Pension Plan
Effective Date: April 1, 19XX
Jurisdiction: Any State
Contract Number: GA-XXXX
ABC COMPANY THE PRUDENTIAL INSURANCE COMPANY
ANY TOWN, ANY STATE OF AMERICA
- ------------------------------------- ---------------------------------
Title: Chairman of the Board and
Chief Executive Officer
Date: ________________________________ _________________________________
Secretary
Attest:__________________________
Date: ________________________
FIXED DOLLAR AND VARIABLE GROUP ANNUITY CONTRACT
THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA APPLICABLE TO THE FIXED
INVESTMENT OPTION. THE APPLICATION OF THIS FORMULA MAY RESULT IN A DOWNWARD
ADJUSTMENT IN CASH VALUES. SECTIONS 6.2 AND 6.3 IDENTIFY WHEN CASH VALUES ARE
AVAILABLE WITHOUT THE APPLICATION OF THE MARKET VALUE ADJUSTMENT FORMULA.
CONTRIBUTIONS TO THIS GROUP ANNUITY CONTRACT MAY BE INVESTED IN SEPARATE
INVESTMENT ACCOUNTS. ALL BENEFIT PAYMENTS PROVIDED UNDER THIS CONTRACT THAT ARE
BASED ON THE INVESTMENT RESULTS OF A SEPARATE INVESTMENT ACCOUNT ARE VARIABLE,
SUBJECT TO GAIN OR LOSS, AND ARE NOT GUARANTEED AS TO A FIXED AMOUNT.
SPECIMEN
DC-401-97
<PAGE>
DEFINITIONS PAGE
1.0 Annual Account Charge 1
1.1 Beneficiary 1
1.2 Business Day 1
1.3 Code 1
1.4 Competing Fund 1
1.5 Contractholder 1
1.6 Contractholder Account 1
1.7 Contractholder Fixed Account 1
1.8 Contractholder Variable Account 2
1.9 Contributions 2
1.10 Effective Annual Rate 2
1.11 ERISA 2
1.12 Good Order 2
1.13 Participant 2
1.14 Participant Account 2
1.15 Plan 2
1.16 Plan Investment Fund 2
1.17 Prudential 3
1.18 Rate Segment 3
1.19 Separate Account 3
1.20 Subaccount 3
1.21 Transfer Payments 3
1.22 Transfer Request 3
1.23 Unit 3
1.24 Unit Value 3
1.25 Withdrawal 3
1.26 Withdrawal Date 4
1.27 Withdrawal Value 4
RELATIONSHIP BETWEEN PLAN AND CONTRACT
2.1 General Understanding 4
2.2 Statutory Requirements 4
2.3 Conditions 4
CONTRIBUTIONS AND CONTRACTHOLDER ACCOUNT
- ----------------------------------------
3.1 Contributions 4
3.2 Participant Account Segments 5
3.3 Contractholder Fixed Account
Interest Rates 5
3.4 Contributions from Prior
Prudential Fixed Account Contracts 5
3.5 Contractholder Variable Account 6
3.6 Reports 6
VARIABLE INVESTMENT OPTIONS
4.1 Separate Accounts 6
4.2 Subaccounts 6
4.3 Voting Rights 7
4.4 Modification of Separate
Accounts and Subaccounts 7
TRANSFER PAYMENTS
5.1 Transfer Payments to Plan
Investment Funds 7
5.2 Transfer Payment Terms 8
WITHDRAWALS
6.1 Withdrawals 9
6.2 Withdrawals for Benefit
Payments 9
6.3 Withdrawals at Termination
of Contract 10
6.4 Withdrawals Subject to a
Market Value Adjustment 11
6.5 Market Value Adjustment Formula 11
FORMS OF BENEFITS
- -----------------
7.1 General 12
7.2 Terms of Payment of Annuities 12
7.3 Certificates 12
7.4 Minimum Death Benefit 12
TERMINATION OF CONTRACT
- -----------------------
8.1 Sixty Day Termination 13
8.2 Termination for Cause 13
8.3 Effect of Termination 13
8.4 Partial Contract Termination 14
CHANGES
- -------
9.1 Changes by Agreement 14
9.2 Changes by Prudential 14
9.3 Persons Empowered to Act for Us 14
GENERAL TERMS
10.1 Communications 15
10.2 Place of Payment 15
10.3 Information - Records 15
10.4 Misstatements 15
10.5 Beneficiary 15
10.6 Small Annuities and Amounts;
Natural Persons 16
10.7 Divisible Surplus 16
10.8 Limit on Assignment 16
10.9 Plan Changes 16
10.10 Entire Contract 16
10.11 Governing Law 17
10.12 Interest on Benefit Payments 17
10.13 Contractholder 17
10.14 Exclusive Benefit 17
DEFERRED SALES CHARGES
11.1 Deferred Sales Charge 18
APPENDIX A Separate Investment Accounts
SCHEDULES
Schedule A. Forms of Annuity which may be
Purchased
Schedule B. Life - Payment Certain Annuity
Schedule C. Life - Contingent Annuity
Schedule D. Payment Certain Annuity
<PAGE>
- -------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- -------------------------------------------------------------------------------
1.0 ANNUAL ACCOUNT CHARGE
If we provide services under an administrative services agreement, we
will assess an Annual Account Charge on or about the last day of each calendar
year and at the time of full Withdrawal for each Participant for whom an account
is maintained in connection with this Contract. This charge will not exceed [$0]
each calendar year per Participant. This charge will be deducted directly from
funds maintained under this Contract, unless paid directly by the
Contractholder. The Annual Account Charge will be prorated for new Participants
on a monthly basis for their first year of participation.
1.1 BENEFICIARY
A person designated by a Participant to receive benefits from funds
held under this Contract.
1.2 BUSINESS DAY
A day on which the New York Stock Exchange and Prudential are open for
business.
1.3 CODE
The Internal Revenue Code of 1986, as amended, or any of the
corresponding provisions of prior or subsequent United States revenue
laws.
1.4 COMPETING FUND
An investment option available under the Plan that is primarily
comprised of high quality fixed income securities with an average
duration of less than or equal to 4.5 years. For purposes of the
Contract, Competing Funds include but are not limited to money market
and short term bond funds.
1.5 CONTRACTHOLDER
The holder of the Contract as shown on the cover page, its successors
and assigns. "You" or "your"
means the Contractholder.
1.6 CONTRACTHOLDER ACCOUNT
An account that is equal to the sum of the Contractholder Fixed Account
and the Contractholder Variable Account.
1.7 CONTRACTHOLDER FIXED ACCOUNT
An unallocated account that is equal to the sum of all Contributions
earning a guaranteed rate of interest under Section 3.3 of this
Contract plus interest credits, less all Withdrawals, Transfer
Payments, fees and charges. There are no required Contributions to the
Contractholder Fixed Account.
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1.8 CONTRACTHOLDER VARIABLE ACCOUNT
An unallocated account that is equal to the dollar amount of all Units
in the separate accounts or Subaccounts in which you invest, less any
fees or charges.
1.9 CONTRIBUTIONS
Payments you make to us as described in Section 3.1. We will grant a
period of 31 days for the payment of any required Contributions under
this Contract.
1.10 EFFECTIVE ANNUAL RATE
A method of crediting interest where the annualized income is expressed
as a compound annual rate of interest. An amount invested for a full
year would increase by a percentage equal to the Effective Annual Rate.
1.11 ERISA
The Employee Retirement Income Security Act of 1974, as amended.
1.12 GOOD ORDER
An instruction received by us, utilizing such forms as we may require,
that is sufficiently complete and clear that we do not need to exercise
any discretion to follow such instruction.
1.13 PARTICIPANT
A natural person on whose behalf funds are contributed or maintained
under the Plan.
1.14 PARTICIPANT ACCOUNT
The dollar value of funds maintained for each person in accordance with
the terms of the Plan. The Participant Account may be invested in the
fixed interest option through the Contractholder Fixed Account, or the
variable separate account options through the Contractholder Variable
Account.
1.15 PLAN
[A plan adopted by you that provides Participants with coverage under
an annuity contract intended to meet the requirements of Section 401 of
the Code. The Plan is mentioned for reference purposes only and is
shown on the cover page. "Plan" shall include such other plans of the
Contractholder or plans maintained for other employers as the parties
agree. The terms of this Contract shall apply separately with respect
to each plan maintained thereunder. We are not a party to the Plan.]
1.16 PLAN INVESTMENT FUND
An investment fund available under the Plan as of the Effective Date or
of which we are later notified.
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1.17 PRUDENTIAL
The Prudential Insurance Company of America. "We," "us," or "our"
means Prudential.
1.18 RATE SEGMENT
A section of the Contractholder Fixed Account that credits the same
rate of interest for the same time period for Contributions and
accumulated interest thereon.
1.19 SEPARATE ACCOUNT
An Account established by Prudential and maintained primarily for one
or more group annuity contracts. The Separate Account will hold assets
acquired with the proceeds of Contributions.
1.20 SUBACCOUNT
A subdivision of a Separate Account, the assets of which are invested
in a corresponding portfolio of a fund or portfolio of securities.
1.21 TRANSFER PAYMENTS
An amount transferred by or on behalf of Participants among Plan
Investment Funds.
1.22 TRANSFER REQUEST
A request by you or your designee pursuant to elections by
Participants, received by us in Good Order to make a Transfer Payment.
1.23 UNIT
You are credited with units in each Separate Account or Subaccount in
which you invest. The number of Units credited to the account is
determined by dividing each Contribution made to a Separate Account or
Subaccount by the applicable Unit Value for the Business Day on which
the Contribution is received by us in Good Order.
1.24 UNIT VALUE
The dollar value of an interest in a Separate Account or Subaccount.
The Unit Value of each Separate Account or Subaccount will be
determined each Business Day, and will measure changes in the value of
the Separate Account's or Subaccounts assets minus its outstanding
liabilities, fees and expenses. The Unit Value is determined before
giving effect to additions to and withdrawals or transfers from a
Separate Account or Subaccount for that day.
1.25 WITHDRAWAL
A payment from the Contractholder Account that is not a Transfer
Payment.
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1.26 WITHDRAWAL DATE
The Business Day we receive notice from you in Good Order to make a
Withdrawal as described further in Section 6.
1.27 WITHDRAWAL VALUE
The dollar value of any Withdrawal less any charges or fees incurred,
including any applicable market value adjustment.
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SECTION 2 - RELATIONSHIP BETWEEN PLAN AND CONTRACT
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2.1 GENERAL UNDERSTANDING
You will make Contributions as provided in this Contract. However, the
existence of this Contract does not cause us to be a party to or a
fiduciary of the Plan. We make no representation and assume no
liability as to the sufficiency of Contributions or the Contractholder
Account for the benefits to be provided under the Plan. You are solely
responsible for the selection of this Contract as a suitable funding
vehicle for the Plan.
2.2 STATUTORY REQUIREMENTS
[This Contract is issued in conjunction with a 401 Plan. We reserve the
right to administer this Contract in accordance with the provisions of
Code Section 401 and its regulations and rules, the eligible rollover
distribution rules of Code Section 401(a)(31), and other applicable
provisions of the Code.]
2.3 CONDITIONS
The continuation of this Contract is conditioned upon there being no
change in the Plan or its investment policy that, in our judgment,
would materially disrupt the level of Contributions or increase
Withdrawals compared to prior periods.
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SECTION 3 - CONTRIBUTIONS AND CONTRACTHOLDER ACCOUNT
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3.1 CONTRIBUTIONS
You will remit as Contributions to this Contract all or a portion of
funds contributed to the Plan unless we agree otherwise in writing or
unless such remittance is to end according to the terms of this
Contract. Contributions may include rollovers of amounts held by
Participants under other tax-qualified retirement plans or funds
transferred from Plan Investment Funds. You may direct that
contributions be allocated to the Contractholder Fixed Account and/or
the Contractholder Variable Account.
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3.2 PARTICIPANT ACCOUNT SEGMENTS
We may maintain the fixed interest portion of Participant Accounts in
two or more Rate Segments The dollar value of any Segment is equal to
the sum of all Contributions and interest credited to it, less all
Withdrawals and Transfer Payments withdrawn from it.
3.3 CONTRACTHOLDER FIXED ACCOUNT INTEREST RATES
We will notify you in advance of each interest rate we set under this
Contract. Each interest rate is an Effective Annual Rate. Interest is
credited to Contributions on a daily basis.
(A) CURRENT QUARTERLY INTEREST RATE
All Contributions received during the current calendar quarter will be
allocated to the same Rate Segment and will be credited with interest
at the current quarterly interest rate. This rate is set prior to the
beginning of each calendar quarter, and remains in effect on all
Contributions received during that quarter throughout the remainder of
the current calendar year and all of the following calendar year.
(B) RENEWAL INTEREST RATE
After the expiration of a current quarterly interest rates, we will set
a renewal interest rate for that Rate Segment to apply to Contributions
(and interest thereon) that previously were credited that current
quarterly interest rate. We may set one renewal interest rate to
replace each expiring current quarterly interest rate. The renewal
interest rate will be reset by us annually.
(C) CONTRACTUAL ANNUAL MINIMUM INTEREST RATE
Each interest rate set under Section 3.3 for the years shown below will
not be less than the following:
Calendar Year Rate
1998 and each year thereafter [3.0%]
3.4 CONTRIBUTIONS FROM PRIOR PRUDENTIAL FIXED ACCOUNT CONTRACTS
If you contribute amounts to the Contractholder Fixed Account from the
fixed rate investment of a predecessor Prudential group annuity
contract, such amounts will be invested within Rate Segments that
correspond to the investment segments or portions, if any, under the
prior contract.
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3.5 CONTRACTHOLDER VARIABLE ACCOUNT
Contributions to the Contractholder Variable Account may be made to any
of the Separate Accounts or Subaccounts listed in Appendix A.
3.6 REPORTS
We will make a quarterly report to you of the financial activity within
the Contractholder Account.
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SECTION 4 - VARIABLE INVESTMENT OPTIONS
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4.1 SEPARATE ACCOUNTS
The Separate Accounts in which this Contract participates, and their
primary investments, are described in Appendix A. Assets held in each
Separate Account, except assets representing Prudential surplus, if
any, are not chargeable with liabilities arising out of any other
business of Prudential. The total market value of the assets held in
each Separate Account at all times will be at least equal to the total
reserve liability required by law for all payments or values which vary
in dollar amount to reflect the investment results of each Separate
Account.
[To the extent that applicable laws and regulations permit, investments
for each Separate Account will be free of all limitations applicable to
other investments by Prudential. Prudential restricts use of its
Separate Accounts to certain plans. These plans include those which
meet the requirements for qualification under Section 401 of the Code.
If, at any time, we are informed that your Plan does not meet
applicable requirements, we will (1) notify you and (2) cancel your
Contractholder Variable Account. The dollar value of your canceled
account will, within seven Business Days thereafter, be transferred to
you, your trustee, or your financial institution that you designate.
After that, no Contributions may be made to the Separate Account under
this Contract until the Plan again satisfies applicable qualification
requirements.]
4.2 SUBACCOUNTS
A Separate Account may consist of Subaccounts. The income, gains and
losses, realized or unrealized, from the assets allocated to a Subaccount are
credited to or charged against each Subaccount, without regard to other income,
gains or losses of the Prudential.
Those Subaccounts currently available under this Contract are listed in
Appendix A. Each Subaccount invests exclusively in shares of a corresponding
fund or a portfolio of securities. Shares of a fund are purchased and redeemed
for a Subaccount at their net asset value. Any amounts of income, dividends and
gains distributed from the shares of a fund are reinvested in additional shares
of that fund at net asset value.
The dollar amounts of values and benefits of this Contract provided by
a Separate Account vary as a function of the investment performance of the
Subaccounts. You bear the investment risk for Subaccount value in the selected
Subaccounts.
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4.3 VOTING RIGHTS
Certain Separate Accounts hold securities that have voting rights. We
normally exercise these rights. However we reserve the right to solicit
Contractholders for instruction as to how to vote some or all of the
securities in these Accounts.
4.4 MODIFICATION OF SEPARATE ACCOUNTS AND SUBACCOUNTS
We may from time to time change material features of, or close, certain
Separate Accounts or Subaccounts. Any changes will be made only if
permitted by applicable law and regulations. Also, when required by
law, we will obtain the approval of Contractholders of the changes and
the approval of any appropriate regulatory authority.
For example, we may combine Separate Accounts or Subaccounts, or
provide additional Subaccounts, transfer part or all of the assets of a
Separate Account or Subaccount to another Separate Account of
Subaccount, make any changes necessary to comply with, or obtain and
continue any exemptions from the Investment Company Act of 1940 (the
1940 Act), and make any other necessary technical changes to this
Contract to conform with any action this provision permits us to take.
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SECTION 5 - TRANSFER PAYMENTS
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5.1 TRANSFER PAYMENTS TO PLAN INVESTMENT FUNDS
You may, pursuant to elections by Participants, subject to any
restrictions in the Plan, direct us to make Transfer Payments from the
Contractholder Fixed Account or Variable Accounts to any Plan
Investment Fund made available under the Plan. Transfers will be made
under the terms of Section 5.1(a) unless you request, and we agree, to
allow transfers under the terms of Sections 5.1(b) and 5.1(c). If we
are not provided sufficient information to effectively administer
transfers under Sections 5.1(b) and 5.1(c), we will reinstate the terms
of Section 5.1(a) upon written notice.
Prudential may, upon notice to the Contract-Holder and Participants,
limit the frequency of Transfer Payments. The action will take effect
on the date of the notice. In the event that a Participant Transfer is
made as a result of a communication by the Contractholder, Employer,
agent or broker to the Participant, which communication in Prudential's
reasonable judgment advised Participants to transfer or withdraw their
funds held under this Contract, the Transfer will be treated as a
Contractholder Withdrawal under Section 6.4. If such communication is
not provided to Prudential upon written request, Prudential reserves
the right to consider the communication as one which advises
Participants to transfer or withdraw their funds held under this
Contract.
(A) TRANSFERS FROM CONTRACTHOLDER'S FIXED ACCOUNT
A Participant may transfer an amount from the Fixed Account to
another investment option made available under the Plan, subject
to the following conditions:
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In any one year, a Participant may transfer 20% of his Fixed Account
balance, as measured as of the first day of the year, without a market
value adjustment. The amount transferred in excess of 20% of such
balance will be transferred subject to the adjustment described in
Section 6.5.
(B) DIRECT TRANSFERS TO A COMPETING FUND
Transfer Payments directly between the Contractholder Fixed
Account under this Contract and a Competing Fund as defined in
Section 1.4 may not be made without Prudential's consent.
(C) INDIRECT TRANSFERS TO A COMPETING FUND
Indirect transfers between the Contractholder Fixed Account under
this Contract and a Competing Fund may be made, provided the
amount to be transferred is first transferred to a fund which is
not a Competing Fund and such amount is held in a non-Competing
Fund for a period of at least 90 days before being transferred to
a Competing Fund. Amounts transferred from the Contractholder
Fixed Account to a non-Competing Fund may be transferred back into
the Contractholder Fixed Account after being held in the
non-competing fund for at least 90 days.
In the event of unusual volatility in the financial markets,
Prudential may, in its discretion, eliminate or reduce the 90-day
restriction of this Section 5.1(c) for all Contractholders within
this class of contracts. The 90-day provision may be prospectively
reinstated by Prudential upon written notice to the
Contractholder.
We reserve the right, upon 30 days notice and in our sole discretion,
to determine whether any investment option under the Plan is or becomes
a Competing Fund. We also may upon 30 days notice, in order to protect
the financial interests of other group annuity Contractholders with
similar transfer rights, require that transfers be made under Section
5.1(a) instead of 5.1(b) and (c). We may also waive transfer
restrictions to accommodate asset allocation programs offered by
Prudential. Any such action will be made uniformly for all similarly
situated Contractholders.
5.2 TRANSFER PAYMENT TERMS
Transfer Payments will be made from the Contractholder Fixed Account
and the Contractholder Variable Account. Transfer payments from the
Contractholder Fixed Account will be made on a pro rata basis from all
Rate Segments. Each payment will be in full settlement of our liability
for the Transfer Payment. Transfer Payments from the Contractholder
Fixed Account will be effective on the Business Day we receive the
Transfer Request in Good Order. Transfer Payments from the
Contractholder Variable Account will be at the Unit Value of the
applicable Subaccount(s) at the close of the Business Day we receive
the Transfer Request in Good Order. You agree to provide for the
recordkeeping of investment funds available under the Plan on a
Participant-level basis, and to furnish us with such information as we
may reasonably require in connection with Transfer Requests. We reserve
the right to monitor the Participant-level investment activity in order
to enforce these transfer provisions. We will notify you immediately
upon receipt of a Transfer Request that is inconsistent with the
Transfer Payment conditions then in effect.
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We may, upon notice to you, limit the frequency of Transfer Payments.
This action will take effect on the date of the notice. Any such limit
will allow transfers as least as frequently as quarterly.
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SECTION 6 - WITHDRAWALS
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6.1 WITHDRAWALS
You may make Withdrawals from the Contract. Withdrawals from the
Contractholder Fixed Account for purposes listed in Sections 6.2 and
6.3 will not be subject to the market value adjustment described in
Section 6.5. However, we may apply this adjustment if, at the time you
request the Withdrawal, the terms of your Plan are materially different
from the terms or manner of administration in effect on this Contract's
effective date, and such amendment or change adversely affects our
rights or liabilities under this Contract. Withdrawals from the
Contractholder Fixed Account will be made on a pro-rata basis from all
Rate Segments applicable to a Participant under the Contract.
Payment to the Participant ordinarily will be made within seven days of
our receipt of a properly completed payment request. If any Withdrawal
payment under this section is not made within 10 Business Days,
interest on the delayed payment will be credited (starting as of the
first day following receipt of the Withdrawal request) at the rate
applicable to new contributions under Section 3.3 on the date the
Withdrawal request is received.
If more than one employer participates in the Plan, and Contributions
are discontinued for one employer, Withdrawals of funds attributable to
that employer may be made under any option available within this
Section.
You may make Withdrawals to pay expenses of the Plan. Such Withdrawals
will not be subject to any market value adjustment.
6.2 WITHDRAWALS FOR BENEFIT PAYMENTS
We will make payments to the Contractholder to provide benefits
permitted under the terms of the Plan. Such benefit payments may be
made for reasons of a Participant's retirement, termination of
employment, death, disability, hardship, loans, or in-service
withdrawal after age 59 1/2. Benefits may also include such other
payments made pursuant to the Plan provisions as agreed to by us in
accordance with our existing administrative practices. The amount of a
benefit payment will be the amount certified by you as necessary to
fulfill a benefit payment request of a Participant. You agree to supply
us with documentation to support benefit payments on request. We will
also make distribution payments consistent with the terms of the Plan
relating to the minimum required distribution provisions of Sections
401(a)(9) and/or 457(d) of the Code, as applicable. Loans made
available to a Participant under this Contract will be made in
accordance with the terms provided in the Plan. Prudential will
administer loans in conformity with the Code and ERISA.
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With respect to amounts invested in the Contractholder Fixed Account,
if permitted by the Plan, we will make payments to you to provide for
Participant requests for payments of after-tax contributions. For each
Participant request for a payment of after-tax contributions, you will
inform us of the amount that comprises one-third of the Participant's
entire interest in after-tax contributions held under this Contract as
of the first day of the year. The lesser of such amount or the amount
of the request will be paid under this Section; any excess of the
request over one-third of the Participant's interest under this
Contract will be paid under Section 6.4. "After-tax" means employee
contributions made to the Plan which were, when made, subject to
federal income taxes.
6.3 WITHDRAWALS AT TERMINATION OF CONTRACT
You may, in conjunction with a termination of the Contract, make a
Withdrawal of the balance from the entire Contractholder Fixed Account
over a four-year period. During the four-year payout period, interest
will be added to the Contractholder Fixed Account at the end of each
day on the amount of the Contractholder Fixed Account at the end of the
preceding day at an Effective Annual Rate determined on the Withdrawal
Date. This rate is determined by multiplying each Rate Segment by the
interest rate that applies to that segment, adding the products,
dividing the sum by the total dollar amount of all segments and
subtracting 0.50%. In no event will the interest paid under this
provision be less than 3.0%.
We will pay one-fifth of the balance of the Contractholder Fixed
Account within 90 days of the Withdrawal Date. We will pay one-fourth
of the Contractholder Fixed Account as of the first anniversary of the
Withdrawal Date on the first Business Day following the first
anniversary of the Withdrawal Date. If payments are over a period of
greater than two years, subsequent payments will be made on the first
Business Day following the anniversary of the Withdrawal Date, with
each such payment substantially equal in amount to the previous
payment. We will pay the entire balance of the Contractholder Fixed
Account on the first Business Day following the fourth anniversary of
the Withdrawal Date. We will make all payments to you or to any
institution or account you designate. We will make all payments from
the Contractholder Variable Account to you or to an institution or
account you designate. We will usually pay the entire balance of the
Contractholder Variable Account within seven Business Days after
receipt of a Good Order request for a Withdrawal at termination of the
Contract. However, we can postpone such payments if:
1. the New York Stock Exchange is closed, other than customary weekend
and holiday closing, or trading on the exchange is restricted as
determined by the Securities and Exchange Commission (SEC)
2. the SEC permits, by an order, the postponement for the protection of
Contractholders
3. the SEC determines that an emergency exits that would make the
disposal of securities held in the Contractholder Variable Account,
or the determination of their value, not reasonably practicable.
You may also elect to make a withdrawal at Contract termination under
Section 6.4 in accordance with the terms of the above paragraph.
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6.4 WITHDRAWALS SUBJECT TO A MARKET VALUE ADJUSTMENT
Withdrawals from the Contractholder Fixed Account that are not governed
by the provisions of Sections 6.2 and 6.3 may be made at any time. If
the amount withdrawn under this paragraph in any calendar year exceeds
$5 million, the Withdrawal may be paid in up to five substantially
equal quarterly payments. The first payment will be made within 10
Business Days of our receipt of your written request in Good Order. A
separate market value will be calculated for each quarterly Withdrawal.
During the quarterly Withdrawal period, the unpaid amounts will be
credited interest at the rate in effect under Section 3.3 of the
Contract, less a daily risk charge of one-half of one percent annually.
The amount withdrawn under this Section shall be equal to the
Withdrawal request decreased by the market value adjustment (MVA), and
reduced by any applicable deferred sales charges as described in
Section 11. The market value adjustment will be applied before the
deduction of any applicable deferred sales charge.
6.5 MARKET VALUE ADJUSTMENT FORMULA
The market value of the amount withdrawn from the Contractholder Fixed
Account in accordance with Section 6.4 will be calculated using the
formula described in this paragraph. A separate market value adjustment
is determined for each Rate Segment. The interest rate applicable to
each such Rate Segment is compared to the interest rate credited for
new Contributions in the current quarter.
The market value adjustment for a Rate Segment is calculated by
subtracting the interest rate for new Contributions from the interest
rate credited to that Rate Segment and multiplying that result by a
factor of 3.0. In no event will the market value adjustment exceed
0.0%.
Each market value adjustment is then applied to the dollars withdrawn
from the corresponding Rate Segment. The market value of the amount
withdrawn from the Contractholder Fixed Account is equal to the sum of
the market values of the amount withdrawn from each Rate Segment. The
market value adjustment factor may be changed in accordance with
Section 9.2.
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In the event that a Participant Withdrawal is made as a result of a
communication of the Contractholder or Employer received by the
Participant, which communication in Prudential's reasonable judgment
advises Participants to transfer or withdraw their funds held under
this Contract, the Withdrawal will be treated as a Withdrawal at
Contract termination under Section 6.4. If communication to a
Participant is not provided to Prudential upon written request,
Prudential reserves the right to consider the communication as one
which advises Participants to transfer or withdraw their funds held
under this Contract.
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SECTION 7 - FORMS OF BENEFITS
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7.1 GENERAL
You may request that we pay amounts that are withdrawn for benefit
payments under Section 6.2 in any of the following forms, to the extent
not contrary to the terms of the Plan:
(a) a lump sum;
(b) any annuity form described in Schedule A;
(c) any other settlement method or combination of methods to
which we consent.
7.2 TERMS OF PAYMENT OF ANNUITIES
If, a Participant, elects an annuity pursuant to Section 7.1(b), the
amount withdrawn will be applied to purchase an annuity in accordance
with Schedule A. The monthly annuity payment is determined from the
schedule of purchase rates for that annuity. Any payments made in
annuity form will be governed by the terms of the annuity certificate.
7.3 CERTIFICATES
A Certificate will be provided for each Annuitant, summarizing the
amount and the terms of such annuity. Certificates are not a part of
this Contract.
7.4 MINIMUM DEATH BENEFIT
[Any lump sum death payment from this Contract made to a Beneficiary
within one year of the Participant's death will be equal to 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's Account less
withdrawals, transfers and charges; and (3) the greatest of the
Participant's Account value calculated on every third anniversary of
the first contribution made on behalf of the Participant less any
withdrawals, transfers and charges under the Contract.]
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SECTION 8 - TERMINATION OF CONTRACT
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8.1 SIXTY DAY TERMINATION
This Contract may be terminated by either party by providing the other
party with 60 days written notice. The Contract termination date will
be established as the first Business Day occurring 60 calendar days
following receipt of the notice of termination. The parties may agree
to a different termination date.
8.2 TERMINATION FOR CAUSE
We may terminate this Contract for cause by giving you 30 days written
notice. Causes for our termination are:
(a) You fail to meet any of your obligations under this
Contract or under any related agreement.
(b) The Plan is no longer a qualified plan under the Code.
(c) The Plan is terminated.
(d) You no longer have any obligations under the Plan.
(e) You, your agent, or your trustee take an action
which, in our reasonable determination, materially
and adversely affects our rights and obligations
under this Contract.
(f) You reject a change or an amendment to this Contract
proposed by us under Section 9.1 or 9.2.
(g) You distribute communication material to Plan Participants
that can reasonably be expected to materially decrease the
amounts directed to this Contract or materially increase
the amounts of Withdrawals or Transfer Payments from this
Contract.
8.3 EFFECT OF TERMINATION
You may make no further Contributions or Transfer Payments after a
contract termination date is established, unless we agree otherwise.
Death benefits and previously purchased annuities will continue to be
paid. Benefit Withdrawals, including the purchase of annuities if we
agree, may be made from the Contractholder Fixed Account after the
contract termination date. Benefit withdrawals from the Contractholder
Variable Account will continue to be made after the
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contract termination date. The Contractholder Fixed Account will be
distributed under the terms of Section 6.3 unless you elect to have it
distributed under the terms of Section 6.4.
Withdrawals upon termination are subject to any limitations or
restrictions that appear elsewhere in this Contract.
8.4 PARTIAL CONTRACT TERMINATION
If, through a divestiture or other corporate restructuring, employees
of an employer cease to be eligible to participate in the Plan, you may
partially terminate this Contract and request that we issue a new
contract to a successor plan. Any such contract is subject to any terms
and conditions mutually agreed to. Section 8.3 applies to amounts
payable in connection with a partial termination.
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SECTION 9 - CHANGES
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9.1 CHANGES BY AGREEMENT
This Contract may be changed at any time by agreement between the
parties. A change will be effective after each party receives notice of
such change. Any change made to this Contract will be consistent with
applicable state and federal law.
9.2 CHANGES BY PRUDENTIAL
We may change this Contract if we, in our discretion, deem it
appropriate to conform to the requirements of any law or regulation.
We reserve the right to change the method for determining the market
value adjustment upon 30 days prior written notice to you and to
periodically update the annuity purchase rates.
No modifications or amendments to this Contract may affect the terms of
any annuity purchased prior to the effective date of the modification
or amendment. The annuity purchase rates will not be modified or
amended (i) during the first year that the Contract is in effect, or
(ii) more than once in any 12 month period; and (iii) may not be less
favorable to you than the annuity purchase rates we offer to any
Contractholder in the same class as this Contract.
9.3 PERSONS EMPOWERED TO ACT FOR US
No agent or other person except one of the following Prudential
officers may change this Contract or bind us.
Chairman of the Board and Actuary
Chief Executive Officer Associate Actuary
President Secretary
Vice President Assistant Secretary
Second Vice President
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SECTION 10 - GENERAL TERMS
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10.1 COMMUNICATIONS
All communications under this Contract shall be in writing. They will
be addressed to you at your principal office, or at such other address
as you may communicate to us. Communications to us should be addressed
to Prudential, c/o Prudential Investments, 30 Scranton Office Park,
Scranton, Pennsylvania 18507-1789, or at such other address as we may
communicate.
10.2 PLACE OF PAYMENT
All payments to us under this Contract shall be payable at our office
described above or at an address or to a representative we specify by
notice to you.
10.3 INFORMATION - RECORDS
You agree to furnish all information which we may reasonably require
for the administration of this Contract. You also agree to provide to
us any applicable administrative agreements pertaining to recordkeeping
or servicing of Participant Accounts. We will not be liable for the
fulfillment of any obligations in any way dependent upon information
unless and until we receive the information in a form satisfactory to
us, which includes receiving information in Good Order where
appropriate. Information furnished to us may be corrected for
demonstrated errors unless we have already acted to our prejudice by
relying on the information. Except for the corrections, information
furnished to us will be regarded as conclusive.
10.4 MISSTATEMENTS
If there has been a misstatement as to any annuitant, we will not pay
more than that which should be paid based on the correct information.
Any overpayment will, together with interest, be deducted from future
payments. Any underpayment will, together with interest, be paid
immediately upon receipt of the corrected information. The interest
rate credited or charged under this section will be 3.0%.
10.5 BENEFICIARY
You may, if permitted by law, direct that we pay any benefit under this
Contract directly to the Beneficiary of a Participant or other
designated payee. Payments in annuity form will be governed by the
terms of the annuity certificate.
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10.6 SMALL ANNUITIES AND AMOUNTS; NATURAL PERSONS
To the extent consistent with the terms of the Plan and Code Section
411(a)(11) as applicable, if the total monthly payment from the annuity
that would otherwise be purchased on behalf of any person, or any
series of payments under this Contract, is less than $50, we may, in
our discretion, make a single sum payment in lieu of purchasing such
annuity or making such series of payments. The single sum paid will be
equal to the amount that would otherwise be applied to purchase such
annuity. The single sum paid in lieu of a stream of payments will be
equal to the value of the series of payments discounted at interest
from each payment due date to the date of the single sum payment. The
discount interest rate will be the interest rate in the schedule of
annuity purchase rates used to establish the series of payments.
If the payee is not a natural person and a series of payments is
payable, we may choose to make a payment in one sum.
10.7 DIVISIBLE SURPLUS
The portion, if any, of our divisible surplus accruing under this
Contract will be determined annually by our Board of Directors and
credited to the Contractholder Account as determined by the Board. It
is unlikely that any divisible surplus will accrue upon this Contract.
No annuity under this Contract will be taken into account in the
determination of any divisible surplus to be credited to this Contract.
10.8 LIMIT ON ASSIGNMENT
To the extent applicable law requires, the interests in and payments
from this contract are not transferable nor assignable or subject to
the claims of any creditor. For this purpose, compliance with the terms
of a Qualified Domestic Relations Order as defined in subsection 414(p)
of the Internal Revenue Code will not be considered to be an assignment
of benefits.
10.9 PLAN CHANGES
This Contract applies to the terms of the Plan in effect on the
Effective Date of this Contract. You shall furnish us a copy of the
Plan, any proposed amendment or any change to the Plan, its operation,
or its investment policy, and any communications by you to the
Participants concerning investments available through the Plan. If we
notify you within 60 days of receipt of a proposed Plan amendment,
change in Plan operation, or change in Plan investment policy that such
change, in our reasonable judgment, will adversely affect the financial
experience of Prudential or other Contractholders in this class of
Contracts, the change will be effective only upon agreement between the
parties.
10.10 ENTIRE CONTRACT
This document constitutes the entire Contract between us.
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10.11 GOVERNING LAW
This Contract will be construed according to the laws of the
jurisdiction set forth on the cover page.
10.12 INTEREST ON BENEFIT PAYMENTS
Any benefit payment we make under Section 6.2 that is not made within
10 Business Days of the receipt in Good Order of a request for such
payment will be credited with interest in the same rate and manner as
provided in Section 3.3 or as required by state insurance or Federal
securities law. We reserve the right to credit interest on benefit
payments paid within 10 Business Days for all Contractholders within
this class of contracts.
10.13 CONTRACTHOLDER
We will normally conduct business only with you. We will be entitled to
rely on any acts or omissions by you pursuant to the terms of this
Contract.
Either party may, from time to time, delegate to an agency or trustee
certain administrative powers and responsibilities under this Contract.
No party is bound to recognize any such delegation until it has
received notice of it. The notice must specify those powers and
responsibilities and include evidence of acceptance by the agency. On
and after the date of receipt of the notice, the notified party will
deal with the agency with respect to those powers and responsibilities
and will be entitled to any action taken or omitted by the agency with
respect thereto in the same manner as if dealing with the party to the
Contract. Either party may give notice to the other party of a
subsequent delegation to another agency of specified powers and
responsibilities.
10.14 EXCLUSIVE BENEFIT
Under this contract it is impossible, at any time prior to the
satisfaction of all liabilities with respect to Participants and their
beneficiaries under the contract, for any part of the corpus or income
to be used for, or directed to, purposes other than for the exclusive
benefit of the Participants or their beneficiaries.
17
<PAGE>
- ------------------------------------------------------------------------------
SECTION 11 - DEFERRED SALES CHARGES
- ------------------------------------------------------------------------------
11.1 DEFERRED SALES CHARGES
Transfer Payments made to Plan Investment Funds on behalf of
Participants and Withdrawals made under Section 6 on behalf of
Participants (other than those made under Section 6.2) are subject to a
Deferred Sales Charge. The amount of a Transfer Payment or Withdrawal
subject to a Deferred Sales Charge shall be the amount requested less
the Deferred Sales Charge determined from the following table. However,
if the entire dollar amount held on behalf of a Participant under the
Contractholder Fixed Account is withdrawn, the amount paid will not be
less than the Contributions made into that option for the Participant
reduced by previous Withdrawals and transfers.
Withdrawals or Transfer Payments made in the years indicated, counting
from the day an amount was contributed on behalf of a Participant under
this or a predecessor Prudential Contract, will have the following
Deferred Sales Charge, measured as a percentage of Contributions
withdrawn:
0 - 1 year [0%]
1 - 2 years [0%]
2 - 3 years [0%]
3 - 4 years [0%]
4 - 5 years [0%]
After 5 years [0%]
Deferred sales charges do not apply to amounts withdrawn in excess of
the Participant's Contributions under this Contract. No charge is
imposed upon rollover contributions, contributions withdrawn due to the
Participant's termination of employment, death, financial hardship or
disability retirement.
Withdrawals from the Contractholder Fixed Account will be made on a
pro-rata basis from all Rate Segments applicable to a Participant under
the Contract.
<PAGE>
APPENDIX A - SEPARATE INVESTMENT ACCOUNTS
Contributions paid to the Contractholder Variable Account may be invested in the
Subaccounts of the Prudential Discovery Premier Group Variable Contract Account
("the Discovery Account"). This variable separate account, sponsored by
Prudential Insurance Company of America, is currently divided into 35
Subaccounts. Any income and realized or unrealized gains and losses in a
Subaccount are credited to or charged against that Subaccount without regard to
income, gains, or losses in other Subaccounts.
- -- Subaccounts invest in portfolios of the Prudential Series Fund. These
portfolios include _____________. The Subaccounts of the Discovery Account
also invest in other underlying Fund portfolios. These include ___________
__________.
The investment strategy of each Subaccount is described in the Prospectus. The
choice of Subaccounts may change. Any such change will be described in the
Prospectus.
[The administrative charge for each Subaccount in the Discovery Account will not
exceed an effective annual rate of 0.75%. This charge is deducted daily from the
assets in each of the Subaccounts. This charge is for the issuing of the
Contract, establishing and maintaining records, and providing reports to the
Contractholder and the Participants. Prudential may impose a lower
administrative charge for certain classes of contractholders that meet minimum
size requirements (for example, assets exceeding $25 million or plans with 500
or more Participants). In addition, Prudential may impose a lower administrative
charge for any contractholder in Prudential's MEDLEY group annuity program for
whom Prudential is providing administrative services as of June 1, 1997 that
exchanges their MEDLEY contract(s) for a Discovery Premier contract to reflect
the reduced set-up, recordkeeping and administrative costs incurred by
Prudential. Any reductions in administrative charges will be available on a
uniform basis to similarly-situated contractholders.]
[Mortality risk and expense charges are deducted daily at an effective annual
rate of not more than 0.15% of the assets held in the Subaccounts.] Participants
selecting from any of the Subaccounts in the Discovery Account must receive a
Prospectus prior to investing.
<PAGE>
- -------------------------------------------------------------------------------
SCHEDULE A - FORMS OF ANNUITY WHICH MAY BE PURCHASED
Form of Payment Payable Applicable Schedule
1. Life - Payment Certain Annuity. Use Schedule B
2. Life - Contingent Annuity. Use Schedule C
3. Payment Certain Annuity. Use Schedule D
We may provide monthly amounts of annuity larger than those shown in the
following schedules for annuities purchased during any period we specify.
Annuity purchase rates for other forms of annuity to which we consent will be
furnished on request.
The annuity purchase rates under this contract will be no less favorable to a
Participant than used under other Prudential group annuity contracts of this
Class.
The forms of annuities which may be purchased are fixed dollar annuities which
are guaranteed by Prudential. The amount of fixed annuity payments depends only
on the form and duration of the annuity selected, the dollar amount applied to
purchase the form of annuity, the age of the Annuitant and the annuity purchase
rates in Schedules B, C and D. The amount of the fixed annuity payments does not
depend on the performance of the Discovery Account or any Subaccount.
AVAILABLE FORMS OF ANNUITIES
Life annuities and Payment Certain annuities are available under this Contract.
A Life form of annuity is one payable at least during the lifetime of the person
(referred to as the "Annuitant") for whom it was purchased. Depending on the
existence and nature of any payment payable after the death of the Annuitant, a
Life annuity will be either a Life-Payment Certain or a Life-Contingent annuity.
A Payment Certain form of annuity may be payable for a period less than the
lifetime of the Annuitant. The terms of payment for each form of annuity are
described below.
Life-Payment Certain Annuity:
The first monthly payment of a Life-Payment Certain annuity is payable
as of the date the annuity is purchased. Monthly payments are payable
on the first day of each month thereafter throughout the Annuitant's
remaining lifetime. If the Annuitant dies before the number of annuity
payments made equals the number of Payments Certain applicable to him,
monthly annuity payments will continue to be made to the Annuitant's
Beneficiary until the total number of payments is so equal. The number
of Payments Certain is established when the annuity is purchased and
may be 60, 120, 180, 240, or any other number accepted by Prudential.
<PAGE>
Life-Contingent Annuity:
The first monthly payment of a Life-Contingent annuity is payable on
the date the annuity is purchased. Monthly payments are payable on the
first day of each month thereafter throughout the Annuitant's remaining
lifetime. If the Annuitant dies before the death of his Contingent
Annuitant, monthly payments will continue to the Contingent Annuitant
throughout the Contingent Annuitant's remaining lifetime. The amount of
each monthly Contingent Annuity payment will be a percentage of the
monthly annuity payment payable before the Annuitant's death. The
percentage is established when the annuity is purchased and may be 33
1/3%, 50%, 66 2/3%, or 100%, or any other percentage we accept.
Payment Certain Annuity:
The first monthly payment of a Payment Certain annuity is payable on
the date the annuity is purchased. Monthly payments are payable on the
first day of each month thereafter until the total number of Payments
Certain specified when the annuity was purchased has been paid. The
number of payments may be 60, 120, 180, 240 or any other number we
accept. If the Annuitant dies before his Beneficiary, monthly annuity
payments will continue to be made to the Beneficiary until the number
of payments specified by the Annuitant has been made.
Other forms of annuity may be provided with our consent.
<PAGE>
- -------------------------------------------------------------------------------
ANNUITY SCHEDULES
The schedules show the monthly amount of annuity purchased per $10,000, after
deduction of any taxes on annuity premiums that may apply.
The amounts of annuity for other ages of the Annuitant or Contingent Annuitant
will be provided upon request.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SCHEDULE B - LIFE - PAYMENT CERTAIN ANNUITY (120 PAYMENTS CERTAIN)
Monthly Amount
If the date the annuity is purchased is in:
AGE 1998 1999 2000 2005
--- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
60 $34.89 $34.75 $34.61 $33.90
65 39.86 39.67 39.49 38.59
70 46.17 45.93 45.70 44.55
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE C - LIFE - CONTINGENT ANNUITY
Monthly Amount
If Annuitant and Contingent Annuitant have same date of birth. If the
date the annuity is purchased is in:
AGE 1998 1999 2000 2005
--- ---- ---- ---- ----
If specified percentage to Contingent Annuitant is 100%:
<S> <C> <C> <C> <C> <C>
60 $29.87 $29.77 $29.66 $29.15
65 33.64 33.49 33.35 32.66
70 38.74 38.54 38.34 37.40
If specified percentage to Contingent Annuitant is 50%:
60 $32.36 $32.23 $32.10 $31.48
65 36.87 36.70 36.53 35.71
70 42.97 42.74 42.50 41.37
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE D - PAYMENT CERTAIN ANNUITY
Monthly Amount
If the date the annuity is purchased is in:
<TABLE>
<CAPTION>
NUMBER OF
PAYMENTS
CERTAIN 1998 1999 2000 2005
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
60 $160.49 $160.49 $160.49 $160.49
120 84.21 84.21 84.21 84.21
180 58.87 58.87 58.87 58.87
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 4(B)
AMENDMENT TO BE ATTACHED TO AND MADE A PART OF
GROUP ANNUITY CONTRACT NO. [GA-XXXXXX]
Section [9.1] of the contract provides that the contract may be changed by
agreement between the Contractholder and Prudential. Therefore, by mutual
agreement between the signatories below, the contract is hereby amended as
follows:
Effective [ ], Section [7.4] MINIMUM DEATH BENEFIT is replaced with the
following:
[7.4] MINIMUM DEATH BENEFIT
Any lump sum death payment from this Contract made to a Beneficiary
will be equal to the Participant's Account value as of the date
Prudential receives a death benefit payment request in Good Order.
Also effective [ ], [the attached Appendix A is hereby added to the
contract][the existing Appendix A will be replaced with the attached Appendix
A].
[ABC COMPANY THE PRUDENTIAL INSURANCE
Any Town, New York] COMPANY OF AMERICA
By:__________________________ By:______________________
Title: Title:
Date:________________________ Date:____________________
DCA-1-DP
<PAGE>
[APPENDIX A--SEPARATE INVESTMENT ACCOUNTS
Contributions paid to the Contractholder Variable Account may be invested in the
Subaccounts of the Prudential Discovery Premier Group Variable Contract Account
("the Premier Account"). This variable separate account, sponsored by Prudential
Insurance Company of America, is currently divided into 35 Subaccounts. Any
income and realized or unrealized gains and losses in a Subaccount are credited
to or charged against that Subaccount without regard to income, gains, or losses
in other Subaccounts.
Thirteen Subaccounts invest in portfolios of the Prudential Series Fund. These
portfolios include Money Market Portfolio, Flexible Managed Portfolio, Equity
Portfolio, Diversified Bond Portfolio, High Yield Bond Portfolio, Prudential
Jennison Portfolio, Government Income Portfolio, Stock Index Portfolio, Global
Portfolio, Conservative Balanced Portfolio, Equity Income Portfolio, 20/20 Focus
Portfolio, and Small Capitalization Stock Portfolio. The Subaccounts of the
Premier Account also invest in other underlying Fund portfolios. These include
the [AIM V.I. Government Securities Fund, AIM V.I. Value Fund, AIM V.I.
International Equity Fund, Alliance Premier Growth Portfolio, Alliance Quasar
Portfolio, Alliance Growth and Income Portfolio, American Century VP Income &
Growth, Davis Value Portfolio, Dreyfus Socially Responsible Growth Fund,
Franklin Small Cap Fund, Franklin Templeton International Equity Fund, John
Hancock Bond Fund, INVESCO VIF Dynamics Fund, Janus Aggressive Growth Portfolio,
Janus Worldwide Growth Portfolio, Janus Growth & Income Portfolio, MFS Bond
Series, MFS Growth with Income Series, MFS Emerging Growth Series, MFS Total
Return Series, MFS Growth Series, and the Warburg Pincus Emerging Growth
Portfolio].
The investment strategy of each Subaccount is described in the Prospectus. The
choice of Subaccounts may change. Any such change will be described in the
Prospectus.
The administrative charge for each Subaccount in the Premier Account will not
exceed an effective annual rate of [0.75%]. This charge is deducted daily from
the assets in each of the Subaccounts. This charge is for the issuing of the
Contract, establishing and maintaining records, and providing reports to the
Contractholder and the Participants. Prudential may impose a lower
administrative charge for certain classes of contractholders that meet minimum
size requirements (for example, assets exceeding $50 million or plans with 1,000
or more Participants). [In addition, Prudential may impose a lower
administrative charge for any contractholder in Prudential's MEDLEY group
annuity program for whom Prudential is providing administrative services as of
[February 14, 2000] that exchanges their MEDLEY contract(s) for a Discovery
Premier contract to reflect the reduced set-up, recordkeeping and administrative
costs incurred by Prudential.] Any reductions in administrative charges will be
available on a uniform basis to similarly-situated contractholders.
<PAGE>
Mortality risk and expense charges are deducted daily at an effective annual
rate of not more than [0.15%] of the assets held in the Subaccounts.
Participants selecting from any of the Subaccounts in the Premier Account must
receive a Prospectus prior to investing.]
EXHIBIT 9
CONSENT AND OPINION OF C. CHRISTOPHER SPRAGUE
April 13, 2000
The Prudential Insurance Company of America
751 Broad Street
Newark, New Jersey 07102-3777
Gentlemen:
In my capacity as Assistant General Counsel of The Prudential Insurance Company
of America, I have reviewed the establishment of the Prudential Discovery
Premier Group Variable Contract Account (the "Account") on November 9, 1999 by
the Finance Committee of the Board of Directors of Prudential as a separate
account for assets applicable to certain variable annuity contracts, pursuant to
the provisions of Section 17B:28-7 of the Revised Statutes of New Jersey and
relevant documents contained in the registration statement.
I was responsible for oversight of the preparation of the Registration Statement
(Registration Number 333-95637) under the Securities Act of 1933 for the
registration of certain variable annuity contracts issued with respect to the
Account.
I am of the following opinion:
(1) Prudential was duly organized under the laws of New Jersey and is a
validly existing insurance company.
(2) The Account has been duly created and is validly existing as a separate
account pursuant to the aforementioned provisions of New Jersey law.
(3) The portion of the assets held in the Account equal to the reserve and
other liabilities for variable benefits under the variable annuity
contracts is not chargeable with liabilities arising out of any other
business Prudential may conduct.
(4) Assuming that the variable annuity contracts are issued in accordance
with their terms, and that any necessary payment for the contracts is
received by Prudential, the variable annuity contracts are legally
issued and are valid and binding obligations of Prudential.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as I judged to be necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/S/ C. Christopher Sprague
C. Christopher Sprague
Assistant General Counsel
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated March
21, 2000, relating to the consolidated financial statements of The Prudential
Insurance Company of America and its subsidiaries, which appears in such
Statement of Additional Information.
We also consent to the reference to us under the heading "Experts" in the
Statement of Additional Information.
PricewaterhouseCoopers LLP
New York, New York
April 21, 2000
<PAGE>
EXHIBIT 10(B)
SHEA & GARDNER
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
(202) 828-2000
Fax: (202) 828-2195
April 14, 2000
Board of Directors
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the State of Additional Information filed as part of Pre-Effective
Amendment No. 1 to the registration statement on Form N-4 for The Prudential
Discovery Premier Group Variable Contract Account (File No. 333-95637). In
giving this consent, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SHEA & GARDNER
By: /s/ CHRISTOPHER E. PALMER
Christopher E. Palmer
<PAGE>
EXHIBIT 10 C
POWER OF ATTORNEY
Know all men by these presents:
That I, CAROLYNE K. DAVIS, of NEW HOPE, PENNSYLVANIA, a member of the
Board of Directors of The Prudential Insurance Company of America, do hereby
make, constitute and appoint as my true and lawful attorney in fact, LEE D.
AUGSBURGER, SUSAN L. BLOUNT, THOMAS C. CASTANO, CLIFFORD E. KIRSCH, THOMAS J.
LOFTUS, LINDA E. SENKER, ANDREW M. SHAINBERG, C. CHRISTOPHER SPRAGUE and ARTHUR
D. WOODS III or any of them severally, for me and in my name, place and stead,
to sign, where applicable: annual reports on Form 10-K, registration statements
on the appropriate forms prescribed by the Securities and Exchange Commission,
and any other periodic documents and reports required under the Investment
Company Act of 1940, the Securities Act of 1933 and all amendments thereto
executed on behalf of The Prudential Insurance Company of America and filed with
the Securities and Exchange Commission for the following:
The Prudential Discovery Premier Group Variable Contract Account and
group annuity contracts, to the extent they represent participating
interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hands this 8th day of
February, 2000.
/s/ Carolyne K. Davis
State of __________)
) SS
County of _________)
On this ____ day of __________ 2000, before me personally appeared ,to
me known to me to be the person mentioned and described in and who executed the
foregoing instrument and duly acknowledged to me that (s)he executed the same.
My commission expires:
Notary Public
<PAGE>
POWER OF ATTORNEY
Know all men by these presents:
That I, William H. Gray III, of Vienna, Virginia, a member of the Board
of Directors of The Prudential Insurance Company of America, do hereby make,
constitute and appoint as my true and lawful attorney in fact, LEE D.
AUGSBURGER, SUSAN L. BLOUNT, THOMAS C. CASTANO, CLIFFORD E. KIRSCH, THOMAS J.
LOFTUS, LINDA E. SENKER, ANDREW M. SHAINBERG, C. CHRISTOPHER SPRAGUE and ARTHUR
D. WOODS III or any of them severally, for me and in my name, place and stead,
to sign, where applicable: annual reports on Form 10-K, registration statements
on the appropriate forms prescribed by the Securities and Exchange Commission,
and any other periodic documents and reports required under the Investment
Company Act of 1940, the Securities Act of 1933 and all amendments thereto
executed on behalf of The Prudential Insurance Company of America and filed with
the Securities and Exchange Commission for the following:
The Prudential Discovery Premier Group Variable Contract Account and
group annuity contracts, to the extent they represent participating
interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hands this 7th day of
February, 2000.
/s/ William H. Gray III
State of __________)
) SS
County of _________)
On this ____ day of __________ 2000, before me personally appeared ,to
me known to me to be the person mentioned and described in and who executed the
foregoing instrument and duly acknowledged to me that (s)he executed the same.
My commission expires:
Notary Public
<PAGE>
POWER OF ATTORNEY
Know all men by these presents:
That I, Constance J. Horner, of Washington, D.C., a member of the Board
of Directors of The Prudential Insurance Company of America, do hereby make,
constitute and appoint as my true and lawful attorney in fact, LEE D.
AUGSBURGER, SUSAN L. BLOUNT, THOMAS C. CASTANO, CLIFFORD E. KIRSCH, THOMAS J.
LOFTUS, LINDA E. SENKER, ANDREW M. SHAINBERG, C. CHRISTOPHER SPRAGUE and ARTHUR
D. WOODS III or any of them severally, for me and in my name, place and stead,
to sign, where applicable: annual reports on Form 10-K, registration statements
on the appropriate forms prescribed by the Securities and Exchange Commission,
and any other periodic documents and reports required under the Investment
Company Act of 1940, the Securities Act of 1933 and all amendments thereto
executed on behalf of The Prudential Insurance Company of America and filed with
the Securities and Exchange Commission for the following:
The Prudential Discovery Premier Group Variable Contract Account and
group annuity contracts, to the extent they represent participating
interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hands this ____ day of _______, 2000.
/s/ Constance J. Horner
<PAGE>
POWER OF ATTORNEY
Know all men by these presents:
That I, Charles R. Sitter, of Dallas, Texas, a member of the Board of
Directors of The Prudential Insurance Company of America, do hereby make,
constitute and appoint as my true and lawful attorney in fact, LEE D.
AUGSBURGER, SUSAN L. BLOUNT, THOMAS C. CASTANO, CLIFFORD E. KIRSCH, THOMAS J.
LOFTUS, LINDA E. SENKER, ANDREW M. SHAINBERG, C. CHRISTOPHER SPRAGUE and ARTHUR
D. WOODS III or any of them severally, for me and in my name, place and stead,
to sign, where applicable: annual reports on Form 10-K, registration statements
on the appropriate forms prescribed by the Securities and Exchange Commission,
and any other periodic documents and reports required under the Investment
Company Act of 1940, the Securities Act of 1933 and all amendments thereto
executed on behalf of The Prudential Insurance Company of America and filed with
the Securities and Exchange Commission for the following:
The Prudential Discovery Premier Group Variable Contract Account and
group annuity contracts, to the extent they represent participating
interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hands this 28th day of January, 2000.
/s/ Charles R. Sitter
State of __________)
) SS
County of _________)
On this ____ day of __________ 2000, before me personally appeared ,to
me known to me to be the person mentioned and described in and who executed the
foregoing instrument and duly acknowledged to me that (s)he executed the same.
My commission expires:
Notary Public
<PAGE>
POWER OF ATTORNEY
Know all men by these presents:
That I, Donald L. Staheli, of Salt Lake City, Utah, a member of the
Board of Directors of The Prudential Insurance Company of America, do hereby
make, constitute and appoint as my true and lawful attorney in fact, LEE D.
AUGSBURGER, SUSAN L. BLOUNT, THOMAS C. CASTANO, CLIFFORD E. KIRSCH, THOMAS J.
LOFTUS, LINDA E. SENKER, ANDREW M. SHAINBERG, C. CHRISTOPHER SPRAGUE and ARTHUR
D. WOODS III or any of them severally, for me and in my name, place and stead,
to sign, where applicable: annual reports on Form 10-K, registration statements
on the appropriate forms prescribed by the Securities and Exchange Commission,
and any other periodic documents and reports required under the Investment
Company Act of 1940, the Securities Act of 1933 and all amendments thereto
executed on behalf of The Prudential Insurance Company of America and filed with
the Securities and Exchange Commission for the following:
The Prudential Discovery Premier Group Variable Contract Account and
group annuity contracts, to the extent they represent participating
interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hands this 27th day of
January, 2000.
/s/ Donald L. Staheli
State of __________)
) SS
County of _________)
On this ____ day of __________ 2000, before me personally appeared ,to
me known to me to be the person mentioned and described in and who executed the
foregoing instrument and duly acknowledged to me that (s)he executed the same.
My commission expires:
Notary Public
<PAGE>
POWER OF ATTORNEY
Know all men by these presents:
That I, Richard M. Thomson, of Toronto, Ontario, a member of the Board
of Directors of The Prudential Insurance Company of America, do hereby make,
constitute and appoint as my true and lawful attorney in fact, LEE D.
AUGSBURGER, SUSAN L. BLOUNT, THOMAS C. CASTANO, CLIFFORD E. KIRSCH, THOMAS J.
LOFTUS, LINDA E. SENKER, ANDREW M. SHAINBERG, C. CHRISTOPHER SPRAGUE and ARTHUR
D. WOODS III or any of them severally, for me and in my name, place and stead,
to sign, where applicable: annual reports on Form 10-K, registration statements
on the appropriate forms prescribed by the Securities and Exchange Commission,
and any other periodic documents and reports required under the Investment
Company Act of 1940, the Securities Act of 1933 and all amendments thereto
executed on behalf of The Prudential Insurance Company of America and filed with
the Securities and Exchange Commission for the following:
The Prudential Discovery Premier Group Variable Contract Account and
group annuity contracts, to the extent they represent participating
interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hands this 15th day of February,
2000.
/s/ Richard M. Thomson
State of __________)
) SS
County of _________)
On this ____ day of __________ 2000, before me personally appeared ,to
me known to me to be the person mentioned and described in and who executed the
foregoing instrument and duly acknowledged to me that (s)he executed the same.
My commission expires:
Notary Public
<PAGE>
POWER OF ATTORNEY
Know all men by these presents:
That I, James A. Unruh, of Paradise Valley, Arizona, a member of the
Board of Directors of The Prudential Insurance Company of America, do hereby
make, constitute and appoint as my true and lawful attorney in fact, LEE D.
AUGSBURGER, SUSAN L. BLOUNT, THOMAS C. CASTANO, CLIFFORD E. KIRSCH, THOMAS J.
LOFTUS, LINDA E. SENKER, ANDREW M. SHAINBERG, C. CHRISTOPHER SPRAGUE and ARTHUR
D. WOODS III or any of them severally, for me and in my name, place and stead,
to sign, where applicable: annual reports on Form 10-K, registration statements
on the appropriate forms prescribed by the Securities and Exchange Commission,
and any other periodic documents and reports required under the Investment
Company Act of 1940, the Securities Act of 1933 and all amendments thereto
executed on behalf of The Prudential Insurance Company of America and filed with
the Securities and Exchange Commission for the following:
The Prudential Discovery Premier Group Variable Contract Account and
group annuity contracts, to the extent they represent participating
interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hands this 31st day of January, 2000.
/s/ James A. Unruh
State of __________)
) SS
County of _________)
On this ____ day of __________ 2000, before me personally appeared ,to
me known to me to be the person mentioned and described in and who executed the
foregoing instrument and duly acknowledged to me that (s)he executed the same.
My commission expires:
Notary Public
<PAGE>
POWER OF ATTORNEY
Know all men by these presents:
That I, Paul A. Volcker, of New York, New York, a member of the Board
of Directors of The Prudential Insurance Company of America, do hereby make,
constitute and appoint as my true and lawful attorney in fact, LEE D.
AUGSBURGER, SUSAN L. BLOUNT, THOMAS C. CASTANO, CLIFFORD E. KIRSCH, THOMAS J.
LOFTUS, LINDA E. SENKER, ANDREW M. SHAINBERG, C. CHRISTOPHER SPRAGUE and ARTHUR
D. WOODS III or any of them severally, for me and in my name, place and stead,
to sign, where applicable: annual reports on Form 10-K, registration statements
on the appropriate forms prescribed by the Securities and Exchange Commission,
and any other periodic documents and reports required under the Investment
Company Act of 1940, the Securities Act of 1933 and all amendments thereto
executed on behalf of The Prudential Insurance Company of America and filed with
the Securities and Exchange Commission for the following:
The Prudential Discovery Premier Group Variable Contract Account and
group annuity contracts, to the extent they represent participating
interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hands this 31st day of
January, 2000.
/s/ Paul A. Volcker
State of __________)
) SS
County of _________)
On this ____ day of __________ 2000, before me personally appeared ,to
me known to me to be the person mentioned and described in and who executed the
foregoing instrument and duly acknowledged to me that (s)he executed the same.
My commission expires:
Notary Public
<PAGE>
POWER OF ATTORNEY
Know all men by these presents:
That I, Joseph H. Williams, of Spring Island, South Carolina, a member
of the Board of Directors of The Prudential Insurance Company of America, do
hereby make, constitute and appoint as my true and lawful attorney in fact, LEE
D. AUGSBURGER, SUSAN L. BLOUNT, THOMAS C. CASTANO, CLIFFORD E. KIRSCH, THOMAS J.
LOFTUS, LINDA E. SENKER, ANDREW M. SHAINBERG, C. CHRISTOPHER SPRAGUE and ARTHUR
D. WOODS III or any of them severally, for me and in my name, place and stead,
to sign, where applicable: annual reports on Form 10-K, registration statements
on the appropriate forms prescribed by the Securities and Exchange Commission,
and any other periodic documents and reports required under the Investment
Company Act of 1940, the Securities Act of 1933 and all amendments thereto
executed on behalf of The Prudential Insurance Company of America and filed with
the Securities and Exchange Commission for the following:
The Prudential Discovery Premier Group Variable Contract Account and
group annuity contracts, to the extent they represent participating
interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hands this 27th day of
January, 2000.
/s/ Joseph H. Williams
State of __________)
) SS
County of _________)
On this ____ day of __________ 2000, before me personally appeared ,to
me known to me to be the person mentioned and described in and who executed the
foregoing instrument and duly acknowledged to me that (s)he executed the same.
My commission expires:
Notary Public
Exhibit 13
Schedule For Computation of Performance
The performance that appears in Table 1 of the SAI was calculated by reducing
the annual total return by the total maximum expense charge of 0.90%. The 0.90%
charge is composed of the 0.15% charge for mortality and expense risk and the
maximum 0.75% charge for administration. The following example uses the One Year
Total Return for the Prudential Conservative Balanced Portfolio:
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------- -----------------------------------
Gross Average Annual Total Return Mortality and Expense Risk and "Hypothetical" Average Annual
One Year Maximum Administrative Charge Total Return
Ended One Year Ended
12/31/99 12/31/99
- ---------------------------------------- -------------------------------- -----------------------------------
<S> <C> <C> <C>
6.56% 0.90% 5.66%
- ---------------------------------------- -------------------------------- -----------------------------------
</TABLE>
