<PAGE>
AS FILED WITH THE SEC ON ______________________. REGISTRATION NO. 333-07451
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
POST-EFFECTIVE AMENDMENT NO. 5 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
--------------
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
(Exact Name of Trust)
PRUCO LIFE INSURANCE COMPANY
(Name of Depositor)
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 778-2255
(Address and telephone number of principal executive offices)
----------------------
THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(Name and address of agent for service)
Copy to:
JEFFREY C. MARTIN
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036
----------------------
It is proposed that this filing will become effective (check appropriate space):
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
-----------
(date)
[_] 60 days after filing pursuant to paragraph (a) of Rule 485
[_] on _______________________ pursuant to paragraph (a) of Rule 485
(date)
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY FORM N-8B-2)
N-8B-2 ITEM NUMBER LOCATION
------------------ --------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Sale of the Contract and Sales Commissions
5. The Pruco Life Variable Appreciable Account
6. The Pruco Life Variable Appreciable Account
7. Not Applicable
8. Not Applicable
9. Litigation
10. Introduction and Summary; Voting Rights; Charges
and Expenses; Short-Term Cancellation Right, or
"Free Look"; Type of Death Benefit; Changing the
Type of Death Benefit; Contract Date; Premiums;
Allocation of Premiums; Transfers; Dollar Cost
Averaging, Auto-Rebalancing; How a Contract's Cash
Surrender Value Will Vary; How a Type A (Fixed)
Contract's Death Benefit Will Vary; How a Type B
(Variable) Contract's Death Benefit Will Vary;
Surrender of a Contract; Withdrawals; Increases in
Basic Insurance Amount; Decreases in Basic
Insurance Amount; Lapse and Reinstatement; When
Proceeds are Paid; Riders; Other General ConTract
Provisions; Substitution of Fund Shares
11. Introduction and Summary; The Pruco Life Variable
Appreciable Account
12. Cover Page; Introduction and Summary; The Funds;
Sale of the Contract and Sales Commissions
13. Introduction and Summary; The Funds; Charges and
Expenses; Sale of the Contract and Sales
Commissions
14. Introduction and Summary; Requirements for
Issuance of a Contract
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
------------------ --------
15. Introduction and Summary; Allocation of Premiums;
Transfers; Dollar Cost Averaging, Auto-
Rebalancing; The Fixed-Rate Option
16. Introduction and Summary; Detailed Information for
Prospective Contract Owners
17. When Proceeds are Paid
18. The Pruco Life Variable Appreciable Account
19. Reports to Contract Owners
20. Not Applicable
21. Contract Loans
22. Not Applicable
23. Not Applicable
24. Other General Contract Provisions
25. Pruco Life Insurance Company
26. Introduction and Summary; The Funds; Charges and
Expenses
27. Pruco Life Insurance Company; The Funds
28. Pruco Life Insurance Company; Directors and
Officers
29. Pruco Life Insurance Company
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Pruco Life Insurance Company
36. Not Applicable
37. Not Applicable
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
------------------ --------
38. Sale of the Contract and Sales Commissions
39. Sale of the Contract and Sales Commissions
40. Not Applicable
41. Sale of the Contract and Sales Commissions
42. Not Applicable
43. Not Applicable
44. Introduction and Summary; The Funds; How a
Contract's Cash Surrender Value Will Vary; How a
Type A (Fixed) Contract's Death Benefit Will Vary;
How a Type B (Variable) Contract's Death Benefit
Will Vary
45. Not Applicable
46. Introduction and Summary; The Pruco Life Variable
Appreciable Account; The Funds
47. The Pruco Life Variable Appreciable Account; The
Funds
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Not Applicable
52. Substitution of Fund Shares
53. Tax Treatment of Contract Benefits
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements; Financial Statements of the
Variable Universal Life Subaccounts of Pruco Life
Variable Appreciable Account; Consolidated
Financial Statements of Pruco Life Insurance
Company and Subsidiaries
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
VARIABLE UNIVERSAL LIFE
INSURANCE
PROSPECTUS
PRUCO LIFE
VARIABLE APPRECIABLE ACCOUNT
MAY 1, 2000
PRUCO LIFE INSURANCE COMPANY
<PAGE>
PROSPECTUS
MAY 1, 2000
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
VARIABLE UNIVERSAL LIFE
This prospectus describes an individual flexible premium variable universal life
insurance contract (the "Contract") offered by Pruco Life Insurance Company
("Pruco Life," "us," "we," or "our"). The Contract provides life insurance
coverage with flexible premium payments.
INVESTMENT CHOICES:
Variable Universal Life offers a wide variety of investment choices, including
15 variable investment options that invest in mutual funds managed by these
leading asset managers:
. THE PRUDENTIAL INVESTMENT CORPORATION
. A I M ADVISORS, INC.
. AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
. JANUS CAPITAL CORPORATION
. MASSACHUSETTS FINANCIAL SERVICES COMPANY
. ROWE PRICE-FLEMING INTERNATIONAL, INC.
For a complete list of the 15 available variable investment options and their
investment objectives, see THE FUNDS, page 7.
You may also choose to invest your Contract's premiums and its earnings in the
fixed-rate option which pays a guaranteed interest rate. See THE FIXED-RATE
OPTION, page 9.
This prospectus describes the Contract generally and the Pruco Life Variable
Appreciable Account (the "Account"). The attached prospectuses for the Funds and
their related statements of additional information describe the investment
objectives and the risks of investing in the Fund portfolios. Pruco Life may add
additional investment options in the future. Please read this prospectus and
keep it for future reference.
The Securities and Exchange Commission ("SEC") maintains a Web site
(http://www.sec.gov) that contains material incorporated by reference and other
information regarding registrants that file electronically with the SEC.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE CONTRACT MAY BE PURCHASED THROUGH REGISTERED REPRESENTATIVES LOCATED IN
BANKS AND OTHER FINANCIAL INSTITUTIONS. AN INVESTMENT IN THE CONTRACT IS NOT A
BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY AND MAY LOSE VALUE. AN
INVESTMENT IS ALSO NOT A CONDITION TO THE PROVISION OR TERM OF ANY BANKING
SERVICE OR ACTIVITY. THE PARTICIPATING BANK IS NOT A REGISTERED BROKER-DEALER
AND IS NOT AFFILIATED WITH PRUCO SECURITIES CORPORATION.
PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 778-2255
<PAGE>
<TABLE>
<CAPTION>
PROSPECTUS CONTENTS
PAGE
<S> <C>
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS.................................................................... 1
INTRODUCTION AND SUMMARY................................................................................................ 2
BRIEF DESCRIPTION OF THE CONTRACT.................................................................................... 2
CHARGES.............................................................................................................. 2
TYPES OF DEATH BENEFIT............................................................................................... 4
PREMIUM PAYMENTS..................................................................................................... 5
REFUND............................................................................................................... 5
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY, THE PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT, AND THE VARIABLE
INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT........................................................................ 6
PRUCO LIFE INSURANCE COMPANY......................................................................................... 6
THE PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT.......................................................................... 6
THE FUNDS............................................................................................................ 7
VOTING RIGHTS........................................................................................................ 9
THE FIXED-RATE OPTION................................................................................................ 9
WHICH INVESTMENT OPTION SHOULD BE SELECTED?.......................................................................... 10
DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS.................................................................... 10
CHARGES AND EXPENSES................................................................................................. 10
REQUIREMENTS FOR ISSUANCE OF A CONTRACT.............................................................................. 14
SHORT-TERM CANCELLATION RIGHT OR "FREE-LOOK"......................................................................... 14
TYPE OF DEATH BENEFIT................................................................................................ 14
CHANGING THE TYPE OF DEATH BENEFIT................................................................................... 15
CONTRACT DATE........................................................................................................ 15
PREMIUMS............................................................................................................. 16
ALLOCATION OF PREMIUMS............................................................................................... 16
DEATH BENEFIT GUARANTEE.............................................................................................. 17
TRANSFERS............................................................................................................ 18
DOLLAR COST AVERAGING................................................................................................ 19
AUTO-REBALANCING..................................................................................................... 19
HOW A CONTRACT'S CASH SURRENDER VALUE WILL VARY...................................................................... 19
HOW A TYPE A (FIXED) CONTRACT'S DEATH BENEFIT WILL VARY.............................................................. 20
HOW A TYPE B (VARIABLE) CONTRACT'S DEATH BENEFIT WILL VARY........................................................... 21
SURRENDER OF A CONTRACT.............................................................................................. 21
WITHDRAWALS.......................................................................................................... 22
INCREASES IN BASIC INSURANCE AMOUNT.................................................................................. 22
DECREASES IN BASIC INSURANCE AMOUNT.................................................................................. 23
WHEN PROCEEDS ARE PAID............................................................................................... 23
LIVING NEEDS BENEFIT................................................................................................. 24
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS..................................... 25
CONTRACT LOANS....................................................................................................... 26
SALE OF THE CONTRACT AND SALES COMMISSIONS........................................................................... 27
TAX TREATMENT OF CONTRACT BENEFITS................................................................................... 27
LAPSE AND REINSTATEMENT.............................................................................................. 29
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS.................................................. 29
OTHER GENERAL CONTRACT PROVISIONS.................................................................................... 29
RIDERS............................................................................................................... 30
SUBSTITUTION OF FUND SHARES.......................................................................................... 30
REPORTS TO CONTRACT OWNERS........................................................................................... 30
STATE REGULATION..................................................................................................... 30
EXPERTS.............................................................................................................. 31
LITIGATION.......................................................................................................... 31
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ADDITIONAL INFORMATION.............................................................................................. 34
FINANCIAL STATEMENTS................................................................................................ 34
DIRECTORS AND OFFICERS................................................................................................. 35
FINANCIAL STATEMENTS OF THE VARIABLE UNIVERSAL LIFE SUBACCOUNTS OF THE PRUCO LIFE
VARIABLE APPRECIABLE ACCOUNT........................................................................................... A1
CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES..................................... B1
</TABLE>
<PAGE>
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS
ACCUMULATED NET PAYMENTS -- The actual premium payments you make accumulated at
an effective annual rate of 4%, less any withdrawals you make, accumulated at an
effective annual rate of 4%.
ATTAINED AGE -- The insured's age on the Contract date plus the number of years
since then.
BASIC INSURANCE AMOUNT -- The amount of life insurance as shown in the Contract.
Also referred to as "face amount."
CASH SURRENDER VALUE -- The amount payable to the Contract owner upon surrender
of the Contract. It is equal to the Contract Fund minus any Contract debt and,
during the first 10 Contract years, minus the applicable surrender charge. Also
referred to in the Contract as "Net Cash Value."
CONTRACT -- The variable universal life insurance policy described in this
prospectus.
CONTRACT ANNIVERSARY -- The same date as the Contract date in each later year.
CONTRACT DATE -- The date the Contract is effective, as specified in the
Contract.
CONTRACT DEBT -- The principal amount of all outstanding loans plus any interest
accrued thereon.
CONTRACT FUND -- The total amount credited to a specific Contract. On any date
it is equal to the sum of the amounts in all the variable investment options and
the fixed-rate option, and the principal amount of any Contract debt plus any
interest earned thereon.
CONTRACT OWNER -- You. Unless a different owner is named in the application, the
owner of the Contract is the insured.
CONTRACT YEAR -- A year that starts on the Contract date or on a Contract
anniversary. For any portion of a Contract representing an increase (see page
22), "Contract year" is a year that starts on the effective date of the
increase.
DEATH BENEFIT -- If the Contract is not in default, this is the amount we will
pay upon the death of the insured, assuming no Contract debt.
FIXED-RATE OPTION -- An investment option under which interest is accrued daily
at a rate that Pruco Life declares periodically, but not less than an effective
annual rate of 4%.
FUNDS -- Mutual funds with separate portfolios. One or more of the available
Fund portfolios may be chosen as an underlying investment for the Contract.
LIFETIME DEATH BENEFIT GUARANTEE PERIOD -- The lifetime of the Contract, during
which time the Lifetime Death Benefit Guarantee is available if sufficient
premiums are paid. Lifetime Death Benefit Guarantee not available in
Massachusetts. See DEATH BENEFIT GUARANTEE, page 17.
LIMITED DEATH BENEFIT GUARANTEE PERIOD -- A period which is determined on a
case-by-case basis, during which time the Limited Death Benefit Guarantee is
available if sufficient premiums are paid. See DEATH BENEFIT GUARANTEE, page 17.
The period applicable to your Contract is shown on the Contract data pages.
MONTHLY DATE -- The Contract date and the same date in each subsequent month.
PRUCO LIFE INSURANCE COMPANY -- Us, we, our, Pruco Life. The company offering
the Contract.
SEPARATE ACCOUNT -- Amounts under the Contract that are allocated to the
variable investment options held by us in a separate account called the Pruco
Life Variable Appreciable Account (the "Account"). The separate account is set
apart from all of the general assets of Pruco Life Insurance Company.
VALUATION PERIOD -- The period of time from one determination of the value of
the amount invested in a variable investment option to the next. Such
determinations are made when the net asset values of the portfolios of the Funds
are calculated, which is generally at 4:00 p.m. Eastern time on each day during
which the New York Stock Exchange is open.
VARIABLE INVESTMENT OPTIONS -- the 15 mutual funds available under this
Contract, whose shares are held in the separate account.
YOU -- The owner of the Contract.
1
<PAGE>
INTRODUCTION AND SUMMARY
This Summary provides a brief overview of the more significant aspects of the
Contract. We provide further detail in the subsequent sections of this
prospectus and in the Contract.
BRIEF DESCRIPTION OF THE CONTRACT
The Contract is a form of variable universal life insurance. It is based on a
Contract Fund, the value of which changes every day. The chart below describes
how the value of your Contract Fund changes.
A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. You may invest premiums in
one or more of the 15 available variable investment options or in the fixed-rate
option. Your Contract Fund value changes every day depending upon the change in
the value of the particular investment options that you have selected.
Although the value of your Contract Fund will increase if there is favorable
investment performance in the variable investment options you select, investment
returns in the variable investment options are NOT guaranteed. There is a risk
that investment performance will be unfavorable and that the value of your
Contract Fund will decrease. The risk will be different, depending upon which
investment options you choose. See WHICH INVESTMENT OPTION SHOULD BE SELECTED?,
page 10. If you select the fixed-rate option, Pruco Life credits your account
with a declared rate or rates of interest but you assume the risk that the rate
may change, although it will never be lower than an effective annual rate of
4%.
Variable life insurance contracts are unsuitable as short-term savings vehicles.
Withdrawals and loans will negate any guarantee against lapse and may result in
adverse tax consequences. See DEATH BENEFIT GUARANTEE, page 17, and TAX
TREATMENT OF CONTRACT BENEFITS, page 27.
CHARGES
The following chart outlines the components of your Contract Fund and the
adjustments which may be made including the maximum charges which may be
deducted from each premium payment and from the amounts held in the designated
investment options. These charges are largely designed to cover insurance costs
and risks as well as sales and administrative expenses.
The maximum charges shown in the chart, as well as the current lower charges,
are fully described under CHARGES AND EXPENSES, page 10.
2
<PAGE>
----------------------------
PREMIUM PAYMENT
----------------------------
--------------------------------------------
. less a charge of up to 7.5% of the
premiums paid for taxes attributable
to premiums.
. less a charge for sales expenses of
up to 4% of the premiums paid.
--------------------------------------------
----------------------------------------------------
INVESTED PREMIUM AMOUNT
To be invested in one or a combination of:
. 15 investment portfolios of the Funds
. The fixed-rate option
----------------------------------------------------
------------------------------------------------------------
CONTRACT FUND
On the Contract Date, the Contract Fund is equal to the
invested premium amount minus any of the charges described
below which may be due on that date. Thereafter, the value
of the Contract Fund changes daily.
------------------------------------------------------------
----------------------------------------------------------------------
PRUCO LIFE ADJUSTS THE CONTRACT FUND FOR:
. Addition of any new invested premium amounts.
. Addition of any increase due to investment results of the chosen
variable investment options.
. Addition of guaranteed interest at an effective annual rate of
4% (plus any excess interest if applicable) on the portion of
the Contract Fund allocated to the fixed-rate option.
. Addition of guaranteed interest at an effective annual rate of
4% on the amount of any Contract loan. (Separately, interest
charged on the loan accrues at an effective annual rate of 4.5%
or 5%. See CONTRACT LOANS, page 26.)
. Subtraction of any decrease due to investment results of the
chosen variable investment options.
. Subtraction of any amount withdrawn.
. Subtraction of the charges listed below, as applicable.
----------------------------------------------------------------------
----------------------------------------------------------------------
DAILY CHARGES
. Management fees and expenses are deducted from the Fund assets.
See UNDERLYING PORTFOLIO EXPENSES chart, below.
. We deduct a daily mortality and expense risk charge, equivalent
to an annual rate of up to 0.9%, from the assets in the variable
investment options.
----------------------------------------------------------------------
----------------------------------------------------------------------
MONTHLY CHARGES
. We reduce the Contract Fund by a monthly administrative charge
of up to $10 plus $0.07 per $1,000 ($10 plus $0.08 per $1,000 in
Massachusetts) of the basic insurance amount; after the first
Contract year, the $0.07 per $1,000 ($0.08 per $1,000 in
Massachusetts) portion of the charge is reduced to $0.01 per
$1,000 ($0.02 per $1,000 in Massachusetts) of the basic insurance
amount.
. We deduct a cost of insurance ("COI") charge.
. We reduce the Contract Fund by a Death Benefit Guarantee risk
charge of $0.01 per $1,000 of the basic insurance amount (not
applicable in Massachusetts).
. If the Contract includes riders, we deduct rider charges from the
Contract Fund.
. If the rating class of an insured results in an extra charge, we
will deduct that charge from the Contract Fund.
----------------------------------------------------------------------
3
<PAGE>
----------------------------------------------------------------------
POSSIBLE ADDITIONAL CHARGES
. During the first 10 Contract years, we will assess a contingent
deferred sales charge if the Contract lapses, is surrendered, or
the basic insurance amount is decreased (including as a result
of a withdrawal or a death benefit type change). For insureds
age 76 or less at issue, the maximum contingent deferred sales
charge is 26% of the lesser of the target level premium or the
actual premiums paid (see PREMIUMS, page 16) for the Contract.
The charge is level for six years and then declines monthly to
zero at the end of the 10th Contract year. For insureds age 77
or over at issue, the maximum charge will be a lesser percentage
of the target level premium for the Contract or the actual
premiums paid.
. During the first 10 Contract years, we will assess a contingent
deferred administrative charge if the Contract lapses, is
surrendered or the basic insurance amount is decreased
(including as a result of a withdrawal or a death benefit type
change). This charge equals the lesser of: (a) $5 per $1,000 of
basic insurance amount; and (b) $500. It is level for six years
and then declines monthly until it reaches zero at the end of
the 10th Contract year.
. We assess an administrative charge of up to $25 for any
withdrawals.
. We may assess an administrative charge of up to $25 for any
change in basic insurance amount.
. We assess an administrative charge of up to $25 for each
transfer exceeding 12 in any Contract year.
----------------------------------------------------------------------
----------------------------------------------------------------------
UNDERLYING PORTFOLIO EXPENSES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
TOTAL
PORTFOLIO INVESTMENT OTHER CONTRACTUAL TOTAL ACTUAL
ADVISORY FEE EXPENSES EXPENSES EXPENSES*
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERIES FUND
Money Market 0.40% 0.02% 0.42% 0.42%
Diversified Bond 0.40% 0.03% 0.43% 0.43%
Conservative Balanced 0.55% 0.02% 0.57% 0.57%
Flexible Managed 0.60% 0.02% 0.62% 0.62%
High Yield Bond 0.55% 0.05% 0.60% 0.60%
Stock Index 0.35% 0.04% 0.39% 0.39%
Equity Income 0.40% 0.02% 0.42% 0.42%
Equity 0.45% 0.02% 0.47% 0.47%
Prudential Jennison 0.60% 0.03% 0.63% 0.63%
Global 0.75% 0.09% 0.84% 0.84%
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Value Fund 0.61% 0.15% 0.76% 0.76%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. (1)
VP Value Fund 1.00% 0.00% 1.00% 1.00%
JANUS ASPEN SERIES (2)
Growth Portfolio 0.65% 0.02% 0.67% 0.67%
MFS(R) VARIABLE INSURANCE TRUST(SM) (3)
Emerging Growth Series 0.75% 0.09% 0.84% 0.84%
T. ROWE PRICE INTERNATIONAL SERIES, INC. (1)
International Stock Portfolio 1.05% 0.00% 1.05% 1.05%
- ---------------------------------------------------------------------------------------------------------------
* Reflects fee waivers and reimbursement of expenses, if any.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) AMERICAN CENTURY VARIABLE PORTFOLIOS, INC./ T. ROWE PRICE INTERNATIONAL
SERIES, INC.
The Investment Advisory Fee includes the ordinary expenses of
operating the Fund.
(2) JANUS ASPEN SERIES
The table reflects expenses based on expenses for the fiscal year ended
December 31, 1999, restated to reflect a reduction in the management fee.
(3) MFS(R) VARIABLE INSURANCE TRUST(SM)
An expense offset arrangement with the Fund's custodian resulted in a
reduction in Other Expenses by 0.01%.
4
<PAGE>
TYPES OF DEATH BENEFIT
There are two types of death benefit available. You may choose a Contract with a
Type A (fixed) death benefit under which the cash surrender value varies daily
with investment experience, and the death benefit generally remains at the basic
insurance amount you initially chose. However, the Contract Fund may grow to a
point where the death benefit may increase and vary with investment experience.
If you choose a Contract with a Type B (variable) death benefit, the cash
surrender value and the death benefit both vary with investment experience. For
either type of death benefit, as long as the Contract is inforce, the death
benefit will never be less than the basic insurance amount shown in your
Contract. See TYPES OF DEATH BENEFIT, page 14.
PREMIUM PAYMENTS
The Contract is a flexible premium contract - there are no scheduled premiums.
Except for the minimum initial premium, and subject to a minimum of $25 per
subsequent payment, you choose the timing and amount of premium payments. The
Contract will remain inforce if the Contract Fund less any applicable surrender
charges is greater than zero and more than any Contract debt. Paying
insufficient premiums, poor investment results, or the taking of loans or
withdrawals from the Contract will increase the possibility that the Contract
will lapse. However, if the accumulated premiums you pay are high enough, and
Contract debt does not equal or exceed the Contract Fund less any applicable
surrender charges, Pruco Life guarantees that your Contract will not lapse even
if investment experience is very unfavorable and the Contract Fund drops below
zero. Each Contract generally provides two guarantees, one that lasts for the
lifetime of the Contract and another that lasts for a stated, reasonably lengthy
period. The guarantee for the life of the Contract requires higher premium
payments. In Massachusetts, only one death benefit guarantee is available. The
length of this death benefit guarantee is generally five Contract years,
however, for some Contracts, it may be shorter. See PREMIUMS, page 16, DEATH
BENEFIT GUARANTEE, page 17 and LAPSE AND REINSTATEMENT, page 29.
We offer and suggest regular billing of premiums even though you decide when to
make premium payments and, subject to a $25 minimum, in what amounts. You should
discuss your billing options with your Pruco Life representative when you apply
for the Contract. See PREMIUMS, page 16.
REFUND
For a limited time, you may return your Contract for a refund in accordance with
the terms of its "Free-Look" provision. See SHORT-TERM CANCELLATION RIGHT OR
"FREE-LOOK," page 14.
For the DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS, see page 1.
THE REPLACEMENT OF LIFE INSURANCE IS GENERALLY NOT IN YOUR BEST INTEREST. IN
MOST CASES, IF YOU REQUIRE ADDITIONAL COVERAGE, THE BENEFITS OF YOUR EXISTING
CONTRACT CAN BE PROTECTED BY PURCHASING ADDITIONAL INSURANCE OR A SUPPLEMENTAL
CONTRACT. IF YOU ARE CONSIDERING REPLACING A CONTRACT, YOU SHOULD COMPARE THE
BENEFITS AND COSTS OF SUPPLEMENTING YOUR EXISTING CONTRACT WITH THE BENEFITS AND
COSTS OF PURCHASING THE CONTRACT DESCRIBED IN THIS PROSPECTUS AND YOU SHOULD
CONSULT WITH A QUALIFIED TAX ADVISER.
THIS PROSPECTUS MAY ONLY BE OFFERED IN JURISDICTIONS IN WHICH THE OFFERING IS
LAWFUL. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION FOR THE FUNDS.
5
<PAGE>
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY,
THE PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT,
AND THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company ("Pruco Life") is a stock life insurance company,
organized in 1971 under the laws of the State of Arizona. It is licensed to sell
life insurance and annuities in the District of Columbia, Guam, and in all
states except New York. Pruco Life's consolidated financial statements begin on
page B1 and should be considered only as bearing upon Pruco Life's ability to
meet its obligations under the Contracts.
Pruco Life is a wholly-owned subsidiary of The Prudential Insurance Company of
America ("Prudential"), a mutual insurance company founded in 1875 under the
laws of the State of New Jersey. Prudential is currently considering
reorganizing itself into a publicly traded stock company through a process known
as "demutualization". On February 10, 1998, Prudential's Board of Directors
authorized management to take preliminary steps necessary to allow Prudential 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 Prudential'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 types, amounts and
issue years of the 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
Prudential's subsidiaries (such as the Pruco Life insurance companies) 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. 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.
THE PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
We have established a separate account, the Pruco Life Variable Appreciable
Account (the "Account") to hold the assets that are associated with the
Contracts. The Account was established on January 13, 1984 under Arizona law and
is registered with the Securities and Exchange Commission ("SEC") under the
Investment Company Act of 1940 as a unit investment trust, which is a type of
investment company. The Account meets the definition of a "separate account"
under the federal securities laws. The Account holds assets that are segregated
from all of Pruco Life's other assets.
Pruco Life is the legal owner of the assets in the Account. Pruco Life will
maintain assets in the Account with a total market value at least equal to the
reserve and other liabilities relating to the variable benefits attributable to
the Account. These assets may not be charged with liabilities which arise from
any other business Pruco Life conducts. In addition to these assets, the
Account's assets may include funds contributed by Pruco Life to commence
operation of the Account and may include accumulations of the charges Pruco Life
makes against the Account. From time to time these additional assets will be
transferred to Pruco Life's general account. Pruco Life will consider any
possible adverse impact the transfer might have on the Account before making any
such transfer.
The obligations to Contract owners and beneficiaries arising under the Contracts
are general corporate obligations of Pruco Life.
6
<PAGE>
Currently, you may invest in one or a combination of 15 available variable
investment options. When you choose a variable investment option, we purchase
shares of a mutual fund which are held as an investment for that option. We hold
these shares in the separate account. The division of the separate account of
Pruco Life that invests in a particular mutual fund is referred to in your
Contract as the subaccount. Pruco Life may add additional variable investment
options in the future. The Account's financial statements begin on page A1.
THE FUNDS
Listed below are the mutual funds (the "Funds") in which the variable investment
options invest, the investment objectives, and investment advisers.
EACH FUND HAS A SEPARATE PROSPECTUS THAT IS PROVIDED WITH THIS PROSPECTUS. YOU
SHOULD READ THE FUND PROSPECTUS BEFORE YOU DECIDE TO ALLOCATE ASSETS TO THE
VARIABLE INVESTMENT OPTION USING THAT FUND. THERE IS NO ASSURANCE THAT THE
INVESTMENT OBJECTIVES OF THE FUNDS WILL BE MET.
THE PRUDENTIAL SERIES FUND, INC. (THE "SERIES FUND"):
. 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 high quality 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 investments.
. 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 Stock Index (the "S&P 500").
. 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 S&P 500 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.
Prudential is the investment adviser for the assets of each of the portfolios of
the Series Fund. Prudential's principal business address is 751 Broad Street,
Newark, New Jersey 07102-3777. Prudential has a Service Agreement with its
wholly-owned subsidiary, The Prudential Investment Corporation ("PIC"). The
Service Agreement provides that,
7
<PAGE>
subject to Prudential's supervision, PIC will furnish investment advisory
services in connection with the management of the Series Fund. In addition,
Prudential has entered into a Subadvisory Agreement with its wholly-owned
subsidiary Jennison Associates LLC ("Jennison"), under which Jennison furnishes
investment advisory services in connection with the management of the Prudential
Jennison Portfolio.
AIM VARIABLE INSURANCE FUNDS:
. AIM V.I. VALUE FUND. Seeks to achieve long-term growth of capital. Income
is a secondary objective.
A I M Advisors, Inc. ("AIM") is the investment adviser for this fund. The
principal business address for AIM is 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.:
. AMERICAN CENTURY VP VALUE FUND. Seeks long-term capital growth with income
as a secondary objective. The Fund seeks to achieve its objective by
investing primarily in equity securities of well-established companies with
intermediate-to-large market capitalizations that are believed by
management to be undervalued at the time of purchase.
American Century Investment Management, Inc. ("ACIM") is the investment adviser
for this fund. ACIM's principal business address is American Century Tower, 4500
Main Street, Kansas City, Missouri 64111. The principal underwriter of the Fund
is American Century Services, Inc., located at 4500 Main Street, Kansas City,
Missouri 64111.
JANUS ASPEN SERIES:
. GROWTH PORTFOLIO. Seeks long-term growth of capital in a manner
consistent with the preservation of capital.
Janus Capital Corporation is the investment adviser and is responsible for the
day-to-day management of the portfolio and other business affairs of the
portfolio. Janus Capital Corporation's principal business address is 100
Fillmore Street, Denver, Colorado 80206-4928.
MFS(R) VARIABLE INSURANCE TRUST(SM):
. EMERGING GROWTH SERIES. Seeks to provide long-term growth of capital.
Massachusetts Financial Services Company, a Delaware corporation, is the
investment adviser to this MFS Series. The principal business address for the
Massachusetts Financial Services Company is 500 Boylston Street, Boston,
Massachusetts 02116.
T. ROWE PRICE INTERNATIONAL SERIES, INC.:
. INTERNATIONAL STOCK PORTFOLIO. Seeks long-term growth of capital through
investments primarily in common stocks of established, non-U.S.
companies.
Rowe Price-Fleming International, Inc. is the investment manager for this fund.
The principal business address for Rowe Price-Fleming International, Inc. is 100
East Pratt Street, Baltimore, Maryland 21202.
The investment advisers for the Funds charge a daily investment management fee
as compensation for their services. These fees are described in the table under
DEDUCTIONS FROM PORTFOLIOS in the CHARGES AND EXPENSES section, see page 10, and
are more fully described in the prospectus for each Fund.
8
<PAGE>
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 funds. Although neither of the companies that invest in the Funds nor the
Funds currently foresee any such disadvantage, the Board of Directors for each
Fund intends to monitor events in order to identify any material conflict
between variable life insurance and variable annuity contract owners and to
determine what action, if any, should be taken. Material conflicts could result
from such things as:
(1) changes in state insurance law;
(2) changes in federal income tax law;
(3) changes in the investment management of any portfolio of the Funds; or
(4) differences between voting instructions given by variable life
insurance and variable annuity contract owners.
Pruco Life may be compensated by an affiliate of each of the Funds (other than
the Prudential Series Fund) based upon an annual percentage of the average
assets held in the Fund by Pruco Life under the Contracts. These percentages
vary by Fund, and reflect administrative and other services provided by Pruco
Life.
VOTING RIGHTS
We are the legal owner of the shares in the Funds associated with the variable
investment options. However, we vote the shares in the Funds according to voting
instructions we receive from Contract owners. We will mail you a proxy, which is
a form you need to complete and return to us to tell us how you wish us to vote.
When we receive those instructions, we will vote all of the shares we own on
your behalf in accordance with those instructions. We will vote the shares for
which we do not receive instructions and shares that we own, in the same
proportion as the shares for which instructions are received. We may change the
way your voting instructions are calculated if it is required by federal
regulation. Should the applicable federal securities laws or regulations, or
their current interpretation, change so as to permit Pruco Life to vote shares
of the Funds in its own right, it may elect to do so.
THE FIXED-RATE OPTION
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED-RATE
OPTION UNDER THE CONTRACT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND THE GENERAL ACCOUNT HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY, INTERESTS IN THE
FIXED-RATE OPTION ARE NOT SUBJECT TO THE PROVISIONS OF THESE ACTS, AND PRUCO
LIFE HAS BEEN ADVISED THAT THE STAFF OF THE SEC HAS NOT REVIEWED THE DISCLOSURE
IN THIS PROSPECTUS RELATING TO THE FIXED-RATE OPTION. ANY INACCURATE OR
MISLEADING DISCLOSURE REGARDING THE FIXED-RATE OPTION MAY, HOWEVER, BE SUBJECT
TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF FEDERAL SECURITIES LAWS.
You may choose to allocate, either initially or by transfer, all or part of your
Contract Fund to a fixed-rate option. This amount becomes part of Pruco Life's
general account. The general account consists of all assets owned by Pruco Life
other than those in the Account and in other separate accounts that have been or
may be established by Pruco Life. Subject to applicable law, Pruco Life has sole
discretion over the investment of the general account assets. Contract owners do
not share in the investment experience of those assets. Instead, Pruco Life
guarantees that the part of the Contract Fund allocated to the fixed-rate option
will accrue interest daily at an effective annual rate that Pruco Life declares
periodically, but not less than an effective annual rate of 4%.
Currently, the following steps are taken for crediting interest rates:
(1) declared interest rates remain in effect from the date money is
allocated to the fixed-rate option until the first day of the same
month in the following year;
(2) a new crediting rate will apply to that money until the first day of
the same month in the next year;
(3) a new declared crediting rate will apply to that money for the
remainder of that calendar year;
(4) a new crediting rate will be declared each year for that money and it
will remain in effect for the entire calendar year.
Pruco Life reserves the right to change this practice. Pruco Life is not
obligated to credit interest at a higher rate than 4%, although it may do so.
Different crediting rates may be declared for different portions of the Contract
Fund allocated to the fixed-rate option. On request, you will be advised of the
interest rates that currently apply to your Contract.
9
<PAGE>
Transfers from the fixed-rate option are subject to strict limits, see
TRANSFERS, page 18. The payment of any cash surrender value attributable to the
fixed-rate option may be delayed up to six months. See WHEN PROCEEDS ARE PAID,
page 23.
WHICH INVESTMENT OPTION SHOULD BE SELECTED?
Historically, for investments held over relatively long periods, the investment
performance of common stocks has generally been superior to that of short or
long-term debt securities, even though common stocks have been subject to much
more dramatic changes in value over short periods of time. Accordingly,
portfolios such as the Stock Index, Equity Income, Equity, Prudential Jennison,
Global, AIM V.I. Value Fund, American Century VP Value Fund, Janus Growth, MFS
Emerging Growth Series, or T. Rowe Price International Stock may be desirable
options if you are willing to accept such volatility in your Contract values.
Each of these equity portfolios involves different policies and investment
risks.
You may prefer the somewhat greater protection against loss of principal (and
reduced chance of high total return) provided by the Diversified Bond Portfolio.
You may want even greater safety of principal and may prefer the Money Market
Portfolio or the fixed-rate option, recognizing that the level of short-term
rates may change rather rapidly. If you are willing to take risks and possibly
achieve a higher total return, you may prefer the High Yield Bond Portfolio,
recognizing that the risks are greater for lower quality bonds with normally
higher yields. You may wish to divide your invested premium among two or more of
the portfolios. You may wish to obtain diversification by relying on
Prudential's judgment for an appropriate asset mix by choosing the Conservative
Balanced or Flexible Managed Portfolio.
Your choice should take into account your willingness to accept investment
risks, how your other assets are invested, and what investment results you may
experience in the future. You should consult your Pruco Life representative from
time to time about the choices available to you under the Contract. Pruco Life
recommends against frequent transfers among the several options. Experience
generally indicates that "market timing" investing, particularly by
non-professional investors, is likely to prove unsuccessful.
DETAILED INFORMATION FOR
PROSPECTIVE CONTRACT OWNERS
CHARGES AND EXPENSES
The total amount invested at any time in the Contract Fund consists of the sum
of the amount credited to the variable investment options, the amount allocated
to the fixed-rate option, and the principal amount of any Contract loan plus the
amount of interest credited to the Contract upon that loan. See CONTRACT LOANS,
page 26. Most charges, although not all, are made by reducing the Contract
Fund.
This section provides a more detailed description of each charge that is
described briefly in the chart on page 3.
In several instances we will use the terms "maximum charge" and "current
charge." The "maximum charge," in each instance, is the highest charge that
Pruco Life is entitled to make under the Contract. The "current charge" is the
lower amount that Pruco Life is now charging. If circumstances change, we
reserve the right to increase each current charge, up to the maximum charge,
without giving any advance notice.
DEDUCTIONS FROM PREMIUM PAYMENTS
(a) We charge up to 7.5% for taxes attributable to premiums. For these
purposes, "taxes attributable to premiums" shall include any federal,
state or local income, premium, excise, business or any other type of tax
(or component thereof) measured by or based upon the amount of premium
received by Pruco Life. That charge is made up of two parts which
currently equal a total of 3.75% of the premiums received. The first part
is a charge for state and local premium taxes. The current amount for this
first part is 2.5% of the premium and is Pruco Life's estimate of the
average burden of state taxes generally. Tax rates vary from jurisdiction
to jurisdiction and generally range from 0.75% to 5%. The rate applies
uniformly to all policyholders without regard to state of residence. Pruco
Life may collect more for this charge than it actually pays for state and
local premium taxes. The second part is for
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<PAGE>
federal income taxes measured by premiums, and it is currently equal to
1.25% of premiums. We believe that this charge is a reasonable estimate of
an increase in its federal income taxes resulting from a 1990 change in
the Internal Revenue Code. It is intended to recover this increased tax.
During 1999, 1998, and 1997, Pruco Life deducted a total of approximately
$17,466,000, $10,924,000 and $1,001,000, respectively, in taxes
attributable to premiums.
(b) We charge up to 4% for sales expenses. This charge, often called a "sales
load", is deducted to compensate us for the costs of selling the
Contracts, including commissions, advertising and the printing and
distribution of prospectuses and sales literature.
Currently, the charge is equal to 4% of premiums paid in each Contract
year up to the amount of the target premium (see PREMIUMS, page 16) and 0%
of premiums paid in excess of this amount. Consequently, paying more than
this amount in any Contract year could reduce your total sales load. For
example, assume that a Contract with no riders or extra insurance charges
has a target premium of $884 and the Contract owner would like to pay 10
target premiums. If the Contract owner paid $1,768 (two times the amount
of the target premium) in every other Contract year up to the ninth year
(i.e. in years 1, 3, 5, 7, 9), the sales load charge would be $176.80. If
the Contract owner paid $884 in each of the first 10 Contract years, the
total sales load would be $353.60. For additional information, see
INCREASES IN BASIC INSURANCE AMOUNT, page 22.
Attempting to structure the timing and amount of premium payments to
reduce the potential sales load may increase the risk that your Contract
will lapse without value. Delaying the payment of target premium amounts
to later years will adversely affect the Death Benefit Guarantee if the
accumulated premium payments do not reach the accumulated values shown
under your Contract's Limited Death Benefit Guarantee Values. See DEATH
BENEFIT GUARANTEE, page 17. In addition, there are circumstances where
payment of premiums that are too large may cause the Contract to be
characterized as a Modified Endowment Contract, which could be
significantly disadvantageous. See TAX TREATMENT OF CONTRACT BENEFITS,
page 27. During 1999, 1998, and 1997, Pruco Life received a total of
approximately $4,458,000, $2,268,000, and $595,000, respectively, in sales
charges.
DEDUCTIONS FROM PORTFOLIOS
We deduct an investment advisory fee daily from each portfolio of the Funds at a
rate, on an annualized basis, ranging from 0.35% for the Series Fund Stock Index
Portfolio to 1.05% for the T. Rowe Price International Stock Portfolio. The
expenses incurred in conducting the investment operations of the portfolios
(such as custodian fees and preparation and distribution of annual reports) are
paid out of the portfolio's income. These expenses also vary from portfolio to
portfolio.
The total expenses of each portfolio for the year ended December 31, 1999,
expressed as a percentage of the average assets during the year, are shown
below:
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TOTAL PORTFOLIO EXPENSES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TOTAL
PORTFOLIO INVESTMENT ADVISORY OTHER EXPENSES CONTRACTUAL TOTAL ACTUAL
FEE EXPENSES EXPENSES*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERIES FUND
Money Market 0.40% 0.02% 0.42% 0.42%
Diversified Bond 0.40% 0.03% 0.43% 0.43%
Conservative Balanced 0.55% 0.02% 0.57% 0.57%
Flexible Managed 0.60% 0.02% 0.62% 0.62%
High Yield Bond 0.55% 0.05% 0.60% 0.60%
Stock Index 0.35% 0.04% 0.39% 0.39%
Equity Income 0.40% 0.02% 0.42% 0.42%
Equity 0.45% 0.02% 0.47% 0.47%
Prudential Jennison 0.60% 0.03% 0.63% 0.63%
Global 0.75% 0.09% 0.84% 0.84%
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Value Fund 0.61% 0.15% 0.76% 0.76%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. (1) 1.00% 0.00% 1.00% 1.00%
VP Value Fund
JANUS ASPEN SERIES (2) 0.65% 0.02% 0.67% 0.67%
Growth Portfolio
MFS(R)VARIABLE INSURANCE TRUST(SM) (3) 0.75% 0.09% 0.84% 0.84%
Emerging Growth Series
T. ROWE PRICE INTERNATIONAL SERIES, INC. (1) 1.05% 0.00% 1.05% 1.05%
International Stock Portfolio
- ---------------------------------------------------------------------------------------------------------------------
* Reflects fee waivers and reimbursement of expenses, if any.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. / T. ROWE PRICE INTERNATIONAL
SERIES, INC.
The Investment Advisory Fee includes the ordinary expenses of operating the
Fund.
(2) JANUS ASPEN SERIES
The table reflects expenses based on expenses for the fiscal year ended
December 31, 1999, restated to reflect a reduction in the management fee.
(3) MFS(R)VARIABLE INSURANCE TRUST(SM)
An expense offset arrangement with the Fund's custodian resulted in a
reduction in Other Expenses by 0.01%.
THE EXPENSES RELATING TO THE FUNDS (OTHER THAN THOSE OF THE SERIES FUND) HAVE
BEEN PROVIDED TO PRUCO LIFE BY THE FUNDS. PRUCO LIFE HAS NOT INDEPENDENTLY
VERIFIED THEM.
DAILY DEDUCTION FROM THE CONTRACT FUND
Each day we deduct a charge from the assets of each of the variable investment
options in an amount equivalent to an effective annual rate of up to 0.9%.
Currently, we charge 0.6%. This charge is intended to compensate Pruco Life for
assuming mortality and expense risks under the Contract. The mortality risk
assumed is that insureds may live for shorter periods of time than Pruco Life
estimated when it determined what mortality charge to make. The expense risk
assumed is that expenses incurred in issuing and administering the Contract will
be greater than Pruco Life estimated in fixing its administrative charges.
During 1999, 1998, and 1997, Pruco Life received a total of approximately
$3,352,000, $1,150,000, and $40,000, respectively, in mortality and expense risk
charges. This charge is not assessed against amounts allocated to the fixed-rate
option.
MONTHLY DEDUCTIONS FROM THE CONTRACT FUND
Pruco Life deducts the following monthly charges proportionately from the dollar
amounts held in each of the chosen investment option[s].
(a) An administrative charge based on the basic insurance amount is deducted.
The charge is intended to compensate us for things like processing claims,
keeping records and communicating with Contract owners. Currently, the
charge is equal to $10 per Contract plus $0.07 per $1,000 ($10 per Contract
12
<PAGE>
plus $0.08 per $1,000 in Massachusetts) of basic insurance amount in the
first Contract year and $5 per Contract plus $0.01 per $1,000 ($5 per
Contract plus $0.02 per $1,000 in Massachusetts) of basic insurance amount
in all subsequent years. Pruco Life reserves the right, however to charge
up to $10 per Contract plus $0.07 per $1,000 ($10 per Contract plus $0.08
per $1,000 in Massachusetts) of basic insurance amount in the first
Contract year and $10 per Contract plus $0.01 per $1,000 ($10 per Contract
plus $0.02 per $1,000 in Massachusetts) of basic insurance amount in all
subsequent years.
For example, a Contract with a basic insurance amount of $100,000 would
currently have a charge equal to $10 plus $7 for a total of $17 ($10 plus
$8 for a total of $18 in Massachusetts) per month for the first Contract
year and $5 plus $1 for a total of $6 ($5 plus $2 for a total of $7 in
Massachusetts) per month in all later years. The maximum charge for this
same Contract would be $10 plus $7 for a total of $17 ($10 plus $8 for a
total of $18 in Massachusetts) per month during the first Contract year. In
later years, the maximum charge would be $10 plus $1 for a total of $11
($10 plus $2 for a total of $12 in Massachusetts) per month. During 1999,
1998 and 1997, Pruco Life received a total of approximately $6,294,000,
$1,993,000, and $324,000, respectively, in monthly administrative
charges.
(b) A cost of insurance ("COI") charge is deducted. When an insured dies, the
amount payable to the beneficiary (assuming there is no Contract debt) is
larger than the Contract Fund - significantly larger if the insured dies in
the early years of a Contract. The cost of insurance charges collected from
all Contract owners enables Pruco Life to pay this larger death benefit.
The maximum COI charge is determined by multiplying the "net amount at
risk" under a Contract (the amount by which the Contract's death benefit
exceeds the Contract Fund) by maximum COI rates. The maximum COI rates are
based upon the 1980 Commissioners Standard Ordinary ("CSO") Tables and an
insured's current attained age, sex (except where unisex rates apply),
smoker/non-smoker status, and extra rating class, if any. At most ages,
Pruco Life's current COI rates are lower than the maximum rates. For
additional information, see INCREASES IN BASIC INSURANCE AMOUNT, page 22.
(c) A charge of $0.01 per $1,000 of basic insurance amount is made to
compensate Pruco Life for the risk we assume by providing the Death Benefit
Guarantee feature (not applicable in Massachusetts). See DEATH BENEFIT
GUARANTEE, page 17. During 1999, 1998 and 1997, Pruco Life received a total
of approximately $1,314,000, $844,000, and $135,000, respectively, for this
risk charge.
(d) You may add one or more of several riders to the Contract. Some riders are
charged for separately. If you add such a rider to the basic Contract,
additional charges will be deducted.
(e) If an insured is in a substandard risk classification (for example, a
person in a hazardous occupation), additional charges will be deducted.
(f) A charge may be deducted to cover federal, state or local taxes (other than
"taxes attributable to premiums" described above) that are imposed upon the
operations of the Account. At present no such taxes are imposed and no
charge is made.
The earnings of the Account are taxed as part of the operations of Pruco
Life. Currently, no charge is being made to the Account for Pruco Life's
federal income taxes, other than the 1.25% charge for federal income taxes
measured by premiums. See DEDUCTIONS FROM PREMIUMS, page 10. Pruco Life
periodically reviews the question of a charge to the Account for Company
federal income taxes. We may make such a charge in the future for any
federal income taxes that would be attributable to the Contracts.
SURRENDER CHARGES
(a) An additional sales load is charged if during the first 10 Contract years
the Contract lapses, is surrendered or if the basic insurance amount is
decreased. It is not deducted from the death benefit if the insured should
die during this period. For issue ages 76 or less, this contingent deferred
charge will be 26% of the lesser of: (a) the target level premium for the
Contract; and (b) the actual premiums paid (see PREMIUMS, page 16). The
rate used in the calculation of this contingent deferred charge will be 22%
for issue ages 77-79, 16% for issue ages 80-83 and 13% for issue ages 84-
85. The rate used in the calculation of this contingent deferred charge
will remain level for six years. After six years, this charge will reduce
monthly at a constant rate until it reaches zero at the end of the 10th
year.
(b) If during the first 10 Contract years the Contract lapses, is surrendered
or if the basic insurance amount is decreased, an administrative charge is
deducted to cover the cost of processing applications, conducting medical
13
<PAGE>
examinations, determining insurability and the insured's rating class, and
establishing records. The charge is equal to the lesser of: (a) $5 per
$1,000 of basic insurance amount; and (b) $500. This charge is level for
six years. After six years, this charge will be reduced monthly at a
constant rate until it reaches zero at the end of the 10th year.
We will show a surrender charge threshold amount in the Contract data pages.
This threshold amount is the lowest basic insurance amount since issue. If
during the first 10 Contract years, the basic insurance amount is decreased
[including as a result of a withdrawal or a change in type of death benefit from
Type A (fixed) to Type B (variable)], and the new basic insurance amount is
below the threshold, we will deduct a percentage of the surrender charge. The
percentage will be the amount by which the new basic insurance amount is less
than the threshold, divided by the threshold. After this transaction, the
threshold will be updated and a corresponding new surrender charge schedule will
also be determined to reflect that portion of surrender charges deducted in the
past. During 1999, 1998, and 1997, Pruco Life received a total of approximately
$1,519,000, $123,000 and $3,000, respectively, from surrendered or lapsed
Contracts.
TRANSACTION CHARGES
(a) We currently charge an administrative processing fee equal to the lesser of
$25 or 2% of the withdrawal amount in connection with each withdrawal.
(b) We currently do not charge an administrative processing fee in connection
with a change in basic insurance amount. We reserve the right to make such
a charge in an amount of up to $25 for any change in basic insurance
amount.
(c) We currently charge an administrative processing fee of up to $25 for each
transfer exceeding 12 in any Contract year.
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
The Contract may generally be issued on insureds below the age of 81. Currently,
the minimum basic insurance amount that can be applied for is $100,000. Pruco
Life requires evidence of insurability, which may include a medical examination,
before issuing any Contract. Non-smokers are offered the most favorable cost of
insurance rates. We charge a higher cost of insurance rate and/or an additional
amount if an extra mortality risk is involved. These are the current
underwriting requirements. We reserve the right to change them on a
non-discriminatory basis.
SHORT-TERM CANCELLATION RIGHT OR "FREE-LOOK"
Generally, you may return the Contract for a refund within 10 days after you
receive it. Some states allow a longer period of time during which a Contract
may be returned for a refund. You can request a refund by mailing or delivering
the Contract to the representative who sold it or to the Home Office specified
in the Contract. A Contract returned according to this provision shall be deemed
void from the beginning. You will then receive a refund of all premium payments
made, plus or minus any change due to investment experience. However, if
applicable law so requires and you exercise your short-term cancellation right,
you will receive a refund of all premium payments made, with no adjustment for
investment experience.
TYPES OF DEATH BENEFIT
You may select either of two types of death benefit. Generally, a Contract with
a Type A (fixed) death benefit has a death benefit equal to the basic insurance
amount. This type of death benefit does not vary with the investment performance
of the investment options you selected, except in certain circumstances. See HOW
A TYPE A (FIXED) CONTRACT'S DEATH BENEFIT WILL VARY, page 20. The payment of
additional premiums and favorable investment results of the variable investment
options to which the assets are allocated will generally increase the cash
surrender value. See HOW A CONTRACT'S CASH SURRENDER VALUE WILL VARY, page
19.
A Contract with a Type B (variable) death benefit has a death benefit which will
generally equal the basic insurance amount plus the Contract Fund. Since the
Contract Fund is a part of the death benefit, favorable investment performance
and payment of additional premiums generally result in an increase in the death
benefit as well as in the
14
<PAGE>
cash surrender value. Over time, however, the increase in the cash surrender
value will be less than under a Type A (fixed) Contract. This is because, given
two Contracts with the same basic insurance amount and equal Contract Funds,
generally the cost of insurance charge for a Type B (variable) Contract will be
greater. See HOW A CONTRACT'S CASH SURRENDER VALUE WILL VARY, page 19 and HOW A
TYPE B (VARIABLE) CONTRACT'S DEATH BENEFIT WILL VARY, page 21. Unfavorable
investment performance will result in decreases in the death benefit and in the
cash surrender value. But, as long as the Contract is not in default, the death
benefit may not fall below the basic insurance amount stated in the Contract.
In choosing a death benefit type, you should also consider whether you intend to
use the withdrawal feature. Contract owners of Type A (fixed) Contracts should
note that any withdrawal may result in a reduction of the basic insurance amount
and the deduction of any applicable surrender charges. In addition, we will not
allow you to make a withdrawal that will decrease the basic insurance amount
below the minimum basic insurance amount. See WITHDRAWALS, page 22.
CHANGING THE TYPE OF DEATH BENEFIT
You may change the type of death benefit on or after the first Contract
anniversary and subject to Pruco Life's approval. We will increase or decrease
the basic insurance amount so that the death benefit immediately after the
change matches the death benefit immediately before the change.
If you are changing your Contract's type of death benefit from Type A (fixed) to
Type B (variable), we will reduce the basic insurance amount by the amount in
your Contract Fund on the date the change takes place. The basic insurance
amount after the change may not be lower than the minimum basic insurance amount
applicable to the Contract. If you are changing from a Type B (variable) to a
Type A (fixed) death benefit, we will increase the basic insurance amount by the
amount in your Contract Fund on the date the change takes place. This is
illustrated in the following chart.
<TABLE>
<CAPTION>
------------------------------------------ ------------------------------------------
CHANGING THE DEATH BENEFIT FROM CHANGING THE DEATH BENEFIT FROM
TYPE A(-)TYPE B TYPE B(-)TYPE A
(FIXED) (VARIABLE) (VARIABLE) (FIXED)
- ----------------------------------- ------------------------------------------ ------------------------------------------
<S> <C> <C>
BASIC INSURANCE AMOUNT $300,000-$250,000 $250,000-$300,000
CONTRACT FUND $50,000-$50,000 $50,000-$50,000
DEATH BENEFIT $300,000-$300,000 $300,000-$300,000
- ----------------------------------- ------------------------------------------ ------------------------------------------
</TABLE>
Changing your Contract's type of death benefit from Type A (fixed) to Type B
(variable) during the first 10 Contract years may result in the assessment of
surrender charges. In addition, we reserve the right to make an administrative
processing charge of up to $25 for any change in basic insurance amount,
although we do not currently do so. See CHARGES AND EXPENSES, page 10.
To request a change, fill out an application for change which can be obtained
from your Pruco Life representative or a Home Office. If the change is approved,
we will recompute the Contract's charges and appropriate tables and send you new
Contract data pages. We may require you to send us your Contract before making
the change.
CONTRACT DATE
When the first premium payment is paid with the application for a Contract, the
Contract date will ordinarily be the later of the application date or the
medical examination date. If the first premium is not paid with the application,
the Contract date will be the date on which the first premium is paid and the
Contract is delivered. Under certain circumstances, we may allow the Contract to
be backdated for the purpose of lowering the insured's issue age, but only to a
date not earlier than six months prior to the application date. This may be
advantageous for some Contract owners as a lower issue age may result in lower
current charges. For a Contract that is backdated, we will credit the initial
premium as of the date of receipt and will deduct any charges due on or before
that date.
15
<PAGE>
PREMIUMS
The Contract is a flexible premium contract. The minimum initial premium is due
on or before the Contract date. Thereafter, you decide when to make premium
payments and, subject to a $25 minimum, in what amounts. We reserve the right to
refuse to accept any payment that increases the death benefit by more than it
increases the Contract Fund. See HOW A TYPE A (FIXED) CONTRACT'S DEATH BENEFIT
WILL VARY, page 20 and HOW A TYPE B (VARIABLE) CONTRACT'S DEATH BENEFIT WILL
VARY, page 21. There are circumstances under which the payment of premiums in
amounts that are too large may cause the Contract to be characterized as a
Modified Endowment Contract, which could be significantly disadvantageous. See
TAX TREATMENT OF CONTRACT BENEFITS, page 27.
The Contract has several types of "premiums" which are described below.
Understanding them will help you understand how the Contract works.
MINIMUM INITIAL PREMIUM -- the premium needed to start the Contract. There
is no insurance under the Contract unless the minimum initial premium is
paid.
GUIDELINE PREMIUMS (not applicable in Massachusetts) -- the premiums that,
if paid at the beginning of each Contract year, will keep the Contract
inforce for the lifetime of the insured regardless of investment
performance, assuming no loans or withdrawals. These guideline premiums
will be higher for a Type B (variable) Contract than for a Type A (fixed)
Contract. For a Contract with no riders or extra risk charges, these
premiums will be level. If certain riders are included, the guideline
premium may increase each year. Payment of guideline premiums at the
beginning of each Contract year is one way to achieve the Lifetime Death
Benefit Guarantee Values shown on the Contract data pages. See DEATH
BENEFIT GUARANTEE, below. When you purchase a Contract, your Pruco Life
representative can tell you the amount[s] of the guideline premium.
TARGET PREMIUMS -- the premiums that, if paid at the beginning of each
Contract year, will keep the Contract inforce during the Limited Death
Benefit Guarantee period regardless of investment performance, assuming no
loans or withdrawals. As is the case with the guideline premium, for a
Contract with no riders or extra risk charges, these premiums will be
level. If certain riders are included, the target premium may increase
each year. Payment of target premiums at the beginning of each Contract
year is one way to achieve the Limited Death Benefit Guarantee Values
shown on the Contract data pages. At the end of the Limited Death Benefit
Guarantee period, continuation of the Contract will depend on the Contract
Fund having sufficient money to cover all charges or meeting the
conditions of the Lifetime Death Benefit Guarantee. See DEATH BENEFIT
GUARANTEE, below. When you purchase a Contract, your Pruco Life
representative can tell you the amount[s] of the target premium.
TARGET LEVEL PREMIUM -- the target premium at issue minus any premiums
associated with riders or with aviation, avocation, occupational or
temporary extra insurance charges. We use the target level premium in
calculating the contingent deferred sales charges. See CHARGES AND
EXPENSES, page 10.
We can bill you for the amount you select annually, semi-annually, quarterly or
monthly. Because the Contract is a flexible premium contract, there are no
scheduled premium due dates. When you receive a premium notice, you are not
required to pay this amount. The Contract will remain inforce if: (1) the
Contract Fund, less any applicable surrender charges, is greater than zero and
more than any Contract debt or (2) you have paid sufficient premiums, on an
accumulated basis, to meet the Death Benefit Guarantee conditions and Contract
debt is not equal to or greater than the Contract Fund, less any applicable
surrender charges. You may also pay premiums automatically through
pre-authorized monthly transfers from a bank checking account. If you elect to
use this feature, you choose the day of the month on which premiums will be paid
and the amount of the premiums paid.
When you apply for the Contract, you should discuss with your Pruco Life
representative how frequently you would like to be billed (if at all) and for
what amount.
ALLOCATION OF PREMIUMS
On the Contract date, we deduct the charge for sales expenses and the charge for
taxes attributable to premiums from the initial premium. The remainder of the
initial premium will be allocated on the Contract date among the variable
investment options and/or the fixed-rate option according to your desired
allocation as specified in the application form
16
<PAGE>
and the first monthly deductions are made. If the first premium is received
before the Contract date, there will be a period during which the Contract
owner's initial premium will not be invested. See CHARGES AND EXPENSES, page
10.
The charge for sales expenses and the charge for taxes attributable to premiums
also apply to all subsequent premium payments. The remainder will be invested as
of the end of the valuation period in which it is received at a Home Office, in
accordance with the allocation you previously designated. Provided the Contract
is not in default, you may change the way in which subsequent premiums are
allocated by giving written notice to a Home Office or by telephoning a Home
Office, provided you are enrolled to use the Telephone Transfer System. There is
no charge for reallocating future premiums. All percentage allocations must be
in whole numbers. For example, 33% can be selected but 33"% cannot. Of course,
the total allocation to all selected investment options must equal 100%.
DEATH BENEFIT GUARANTEE
Although you decide what premium amounts you wish to pay, sufficient premium
payments, on an accumulated basis, will guarantee that your Contract will not
lapse and a death benefit will be paid upon the death of the insured. This will
be true even if, because of unfavorable investment experience, your Contract
Fund value drops to zero. However, the guarantee is contingent upon Contract
debt not being equal to or greater than the Contract Fund less any applicable
surrender charges. See CONTRACT LOANS, page 26. You should consider the
importance of the Death Benefit Guarantee to you when deciding what amounts of
premiums to pay into the Contract.
For purposes of determining this guarantee, we generally calculate, and show in
the Contract data pages, two sets of values -- the Lifetime Death Benefit
Guarantee Values (not applicable in Massachusetts) and Limited Death Benefit
Guarantee Values. These are not cash values that you can realize by surrendering
the Contract, nor are they payable death benefits. They are values used solely
to determine if a Death Benefit Guarantee is in effect. The Lifetime Death
Benefit Guarantee Values are shown for the lifetime of the Contract and are the
end-of-year accumulations of Guideline Premiums at 4% annual interest assuming
premiums are paid at the beginning of each Contract year. The Limited Death
Benefit Guarantee Values are lower, but only apply for the length of the Limited
Death Benefit Guarantee period. They are the end-of-year accumulations of Target
Premiums at 4% annual interest assuming premiums are paid at the beginning of
each Contract year.
The length of the Limited Death Benefit Guarantee period is determined on a case
by case basis depending on things like the insured's age, sex (except where
unisex rates apply), smoker/non-smoker status, death benefit type and extra
rating class, if any. In Massachusetts, the length of the Limited Death Benefit
Guarantee period is generally five years. The length of the Limited Death
Benefit Guarantee period applicable to your particular Contract is shown on the
Contract data pages. For certain insureds, generally those who are older and/or
in a substandard risk classification, the Limited Death Benefit Guarantee period
may be of shorter duration.
At the Contract date, and on each Monthly date, we calculate your Contract's
"Accumulated Net Payments" as of that date. Accumulated Net Payments equal the
premiums you paid, accumulated at an effective annual rate of 4%, less
withdrawals also accumulated at 4%.
At each Monthly date within the Limited Death Benefit Guarantee period, we will
compare your Accumulated Net Payments to the Limited Death Benefit Guarantee
Value as of that date. At each Monthly date after the Limited Death Benefit
Guarantee period, we will compare your Accumulated Net Payments to the Lifetime
Death Benefit Guarantee Value as of that date (not applicable in Massachusetts).
If your Accumulated Net Payments equal or exceed the applicable (Lifetime or
Limited) Death Benefit Guarantee Value and Contract debt does not equal or
exceed the Contract Fund less any applicable surrender charges, then the
Contract is kept inforce, regardless of the amount in the Contract Fund.
The Contract data pages show Lifetime Death Benefit Guarantee Values and Limited
Death Benefit Guarantee Values as of Contract anniversaries. Values for
non-anniversary Monthly dates will reflect the number of months elapsed between
Contract anniversaries.
Guideline and target premiums are premium levels that, if paid at the start of
each Contract year, correspond to the Lifetime and Limited Death Benefit
Guarantee Values, respectively (assuming no withdrawals or loans). See PREMIUMS,
page 16. They are one way of reaching the Death Benefit Guarantee Values; they
are certainly not the only way.
17
<PAGE>
Here is a table of typical guideline and target premiums along with
corresponding Limited Death Benefit Guarantee periods. The examples assume the
insured is a male, non-smoker, with no extra risk or substandard ratings, and no
extra benefit riders added to the Contract.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
BASIC INSURANCE AMOUNT -- $100,000
ILLUSTRATIVE ANNUAL PREMIUMS
- ------------------------------------------------------------------------------------------------------------------
AGE OF INSURED AT TYPE OF DEATH GUIDELINE PREMIUM CORRESPONDING TO TARGET PREMIUM CORRESPONDING TO THE
ISSUE BENEFIT CHOSEN THE LIFETIME DEATH BENEFIT LIMITED DEATH BENEFIT GUARANTEE
GUARANTEE VALUES* VALUES AND NUMBER OF YEARS OF
GUARANTEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
35 Type A (fixed) $ 1,494 $ 884 for 35 years**
35 Type B (variable) $ 4,896 $ 884 for 33 years**
45 Type A (fixed) $ 2,266 $ 1,272 for 25 years**
45 Type B (variable) $ 6,940 $ 1,272 for 23 years**
55 Type A (fixed) $ 3,640 $ 2,389 for 20 years**
55 Type B (variable) $ 10,324 $ 2,389 for 18 years**
- ------------------------------------------------------------------------------------------------------------------
* not applicable in Massachusetts
** for 5 years in Massachusetts
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
You should consider carefully the value of maintaining the Death Benefit
Guarantee. If you desire the Death Benefit Guarantee for lifetime protection,
you may prefer to pay generally higher premiums in all years, rather than trying
to make such payments on an as needed basis. For example, if you pay only enough
premium to meet the Limited Death Benefit Guarantee Values, a substantial amount
may be required to meet the Lifetime Death Benefit Guarantee Values in order to
continue the guarantee at the end of the Limited Death Benefit Guarantee period
(not applicable in Massachusetts). In addition, it is possible that the payment
required to continue the guarantee after the Limited Death Benefit Guarantee
period could cause the Contract to become a Modified Endowment Contract. See TAX
TREATMENT OF CONTRACT BENEFITS, page 27.
The Death Benefit Guarantee allows considerable flexibility as to the timing of
premium payments. Your Pruco Life representative can supply sample illustrations
of various premium amount and frequency combinations that correspond to the
Death Benefit Guarantee Values.
TRANSFERS
You may, up to 12 times each Contract year, transfer amounts from one variable
investment option to another variable investment option or to the fixed-rate
option without charge. There is an administrative charge of up to $25 for each
transfer made exceeding 12 in any Contract year. All or a portion of the amount
credited to a variable investment option may be transferred.
Transfers will take effect as of the end of the valuation period in which a
proper transfer request is received at a Home Office. The request may be in
terms of dollars, such as a request to transfer $5,000 from one variable
investment option to another, or may be in terms of a percentage reallocation
among variable investment options. In the latter case, as with premium
reallocations, the percentages must be in whole numbers. You may transfer
amounts by proper written notice to a Home Office or by telephone, provided you
are enrolled to use the Telephone Transfer System. You will automatically be
enrolled to use the Telephone Transfer System unless the Contract is jointly
owned or you elect not to have this privilege. Telephone transfers may not be
available on Contracts that are assigned (see ASSIGNMENT, page 29), depending on
the terms of the assignment.
We will use reasonable procedures, such as asking you to provide certain
personal information provided on your application for insurance, to confirm that
instructions given by telephone are genuine. We will not be held liable for
following telephone instructions that we reasonably believe to be genuine. Pruco
Life cannot guarantee that you will be able to get through to complete a
telephone transfer during peak periods such as periods of drastic economic or
market change.
18
<PAGE>
Only one transfer from the fixed-rate option will be permitted during each
Contract year. The maximum amount which may be transferred out of the fixed-rate
option each year is the greater of: (a) 25% of the amount in the fixed-rate
option; and (b) $2,000. Pruco Life may change these limits in the future. We may
waive these restrictions for limited periods of time in a non-discriminatory
way, (e.g., when interest rates are declining).
The Contract was not designed for professional market timing organizations,
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 investment option or to the disadvantage of other
contract owners. If such a pattern were to be found, we may modify your right to
make transfers by restricting the number, timing and amount of transfers. We
also reserve the right to prohibit transfer requests made by an individual
acting under a power of attorney on behalf of more than one contract owner.
DOLLAR COST AVERAGING
As an administrative practice, we are currently offering a feature called Dollar
Cost Averaging ("DCA"). Under this feature, either fixed dollar amounts or a
percentage of the amount designated for use under the DCA option will be
transferred periodically from the DCA Money Market investment option into other
variable investment options available under the Contract, excluding the
fixed-rate option. You may choose to have periodic transfers made monthly or
quarterly.
Each automatic transfer will take effect as of the end of the valuation period
on the date coinciding with the periodic timing you designate provided the New
York Stock Exchange is open on that date. If the New York Stock Exchange is not
open on that date, or if the date does not occur in that particular month, the
transfer will take effect as of the end of the valuation period which
immediately follows that date. Automatic transfers will continue until: (1) $50
or less remains of the amount designated for Dollar Cost Averaging, at which
time the remaining amount will be transferred; or (2) you give us notification
of a change in DCA allocation or cancellation of the feature. Currently, a
transfer that occurs under the DCA feature is not counted towards the 12 free
transfers permitted each Contract year. We reserve the right to change this
practice, modify the requirements or discontinue the feature.
AUTO-REBALANCING
As an administrative practice, we are currently offering a feature called
Auto-Rebalancing. This feature allows you to automatically rebalance variable
investment option assets at specified intervals based on percentage allocations
that you choose. For example, suppose your initial investment allocation of
variable investment options X and Y is split 40% and 60%, respectively. Then,
due to investment results, that split changes. You may instruct that those
assets be rebalanced to your original or different allocation percentages.
Auto-Rebalancing can be performed on a quarterly, semi-annual, or annual basis.
Each rebalance will take effect as of the end of the valuation period on the
date coinciding with the periodic timing you designate provided the New York
Stock Exchange is open on that date. If the New York Stock Exchange is not open
on that date, or if the date does not occur in that particular month, the
transfer will take effect as of the end of the valuation period which
immediately follows that date. The fixed-rate option cannot participate in this
administrative procedure. Currently, a transfer that occurs under the Auto-
Rebalancing feature is not counted towards the 12 free transfers permitted each
Contract year. We reserve the right to change this practice, modify the
requirements or discontinue the feature.
HOW A CONTRACT'S CASH SURRENDER VALUE WILL VARY
You may surrender the Contract for its cash surrender value (referred to as net
cash value in the Contract). The Contract's cash surrender value on any date
will be the Contract Fund less any applicable surrender charges and less any
Contract debt. See CONTRACT LOANS, page 26. The Contract Fund value changes
daily, reflecting: (1) increases or decreases in the value of the variable
investment options; (2) interest credited on any amounts allocated to the
fixed-rate option; (3) interest credited on any loan; and (4) the daily asset
charge for mortality and expense risks assessed against the variable investment
options. The Contract Fund value also changes to reflect the receipt of premium
payments and the monthly deductions described under CHARGES AND EXPENSES, page
10. Upon request, Pruco Life will tell you the cash surrender value of your
Contract. It is possible for the cash surrender value of a Contract to decline
to zero because of unfavorable investment performance or outstanding Contract
debt.
19
<PAGE>
The tables on pages T1 through T4 (M1 through M4 in Massachusetts) of this
prospectus illustrate approximately what the cash surrender values would be for
representative Contracts paying target premium amounts (see Premiums, page 16),
assuming hypothetical uniform investment results in the Fund portfolios. Two of
the tables assume current charges will be made throughout the lifetime of the
Contract and two tables assume maximum charges will be made. See Illustrations
of Cash Surrender Values, Death Benefits, and Accumulated Premiums, page 25.
HOW A TYPE A (FIXED) CONTRACT'S DEATH BENEFIT WILL VARY
As described earlier, there are two types of death benefit available under the
Contract: Type A, a generally fixed death benefit and Type B, a variable death
benefit. A Type B (variable) death benefit varies with investment performance
while a Type A (fixed) death benefit does not, unless it must be increased to
comply with the Internal Revenue Code's definition of life insurance.
Under a Type A (fixed) Contract, the death benefit is generally equal to the
basic insurance amount. See CONTRACT LOANS, page 26. If the Contract is kept
inforce for several years, depending on how much premium you pay, and/or if
investment performance is reasonably favorable, the Contract Fund may grow to
the point where Pruco Life will increase the death benefit in order to ensure
that the Contract will satisfy the Internal Revenue Code's definition of life
insurance.
The death benefit under a Type A (fixed) Contract will always be the greater
of:
(1) the basic insurance amount; and
(2) the Contract Fund before the deduction of any monthly charges due on
that date, multiplied by the attained age factor that applies.
A listing of attained age factors can be found on your Contract data pages. The
latter provision ensures that the Contract will always have a death benefit
large enough so that the Contract will be treated as life insurance for tax
purposes under current law.
The following table illustrates at different ages how the attained age factor
affects the death benefit for different Contract Fund amounts. The table assumes
a $100,000 Type A (fixed) Contract was issued when the insured was a male
nonsmoker, age 35.
<TABLE>
<CAPTION>
TYPE A (FIXED) DEATH BENEFIT
- -------------------------------------------------------------------------------------------------------------------------------
IF THEN
===============================================================================================================================
THE INSURED IS AGE AND THE CONTRACT THE ATTAINED AGE THE CONTRACT FUND MULTIPLIED BY THE AND THE DEATH BENEFIT
FUND IS FACTOR IS ATTAINED AGE FACTOR IS IS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
40 $ 10,000 3.64 $ 36,400 $ 100,000
40 $ 30,000 3.64 $ 109,200 $ 109,200*
40 $ 50,000 3.64 $ 182,000 $ 182,000*
- -------------------------------------------------------------------------------------------------------------------------------
60 $ 30,000 1.96 $ 58,800 $ 100,000
60 $ 50,000 1.96 $ 98,000 $ 100,000
60 $ 70,000 1.96 $ 137,200 $ 137,200*
- -------------------------------------------------------------------------------------------------------------------------------
80 $ 50,000 1.28 $ 64,000 $ 100,000
80 $ 80,000 1.28 $ 102,400 $ 102,400*
80 $ 90,000 1.28 $ 115,200 $ 115,200*
- -------------------------------------------------------------------------------------------------------------------------------
* Note that the death benefit has been increased to comply with the Internal Revenue Code's definition of life insurance.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This means, for example, that if the insured has reached the age of 60, and the
Contract Fund is $70,000, the death benefit will be $137,200, even though the
original basic insurance amount was $100,000. In this situation, for every $1
increase in the Contract Fund, the death benefit will be increased by $1.96. We
reserve the right to refuse to accept any premium payment that increases the
death benefit by more than it increases the Contract Fund. If we exercise this
right, it may in certain situations result in the loss of the death benefit
guarantee.
20
<PAGE>
HOW A TYPE B (VARIABLE) CONTRACT'S DEATH BENEFIT WILL VARY
Under a Type B (variable) Contract, while the Contract is inforce, the death
benefit will never be less than the basic insurance amount, but will also vary,
immediately after it is issued, with the investment results of the selected
investment options. The death benefit may be further increased to ensure that
the Contract will satisfy the Internal Revenue Code's definition of life
insurance.
The death benefit under a Type B (variable) Contract will always be the greater
of:
(1) the basic insurance amount plus the Contract Fund before the
deduction of any monthly charges due on that date; and
(2) the Contract Fund before the deduction of any monthly
charges due on that date, multiplied by the attained age
factor that applies.
For purposes of computing the death benefit, if the Contract Fund is less than
zero we will consider it to be zero. A listing of attained age factors can be
found on your Contract data pages. The latter provision ensures that the
Contract will always have a death benefit large enough so that the Contract will
be treated as life insurance for tax purposes under current law.
The following table illustrates various attained age factors and Contract Funds
and the corresponding death benefits. The table assumes a $100,000 Type B
(variable) Contract was issued when the insured was a male nonsmoker, age 35.
<TABLE>
<CAPTION>
TYPE B (VARIABLE) DEATH BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------
IF THEN
==============================================================================================================================
THE INSURED IS AGE AND THE CONTRACT THE ATTAINED AGE THE CONTRACT FUND MULTIPLIED BY AND THE DEATH
FUND IS FACTOR IS THE ATTAINED AGE FACTOR IS BENEFIT IS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
40 $ 10,000 3.64 $ 36,400 $ 110,000
40 $ 30,000 3.64 $ 109,200 $ 130,000
40 $ 50,000 3.64 $ 182,000 $ 182,000*
- ------------------------------------------------------------------------------------------------------------------------------
60 $ 30,000 1.96 $ 58,800 $ 130,000
60 $ 50,000 1.96 $ 98,800 $ 150,000
60 $ 70,000 1.96 $ 137,200 $ 170,000
- ------------------------------------------------------------------------------------------------------------------------------
80 $ 50,000 1.28 $ 64,000 $ 150,000
80 $ 80,000 1.28 $ 102,400 $ 180,000
80 $ 90,000 1.28 $ 115,200 $ 190,000
- ------------------------------------------------------------------------------------------------------------------------------
* Note that the death benefit has been increased to comply with the Internal Revenue Code's definition of life insurance.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This means, for example, that if the insured has reached the age of 40, and the
Contract Fund is $50,000, the death benefit will be $182,000, even though the
original basic insurance amount was $100,000. In this situation, for every $1
increase in the Contract Fund, the death benefit will be increased by $3.64. We
reserve the right to refuse to accept any premium payment that increases the
death benefit by more than it increases the Contract Fund. If we exercise this
right, it may in certain situations result in the loss of the death benefit
guarantee.
SURRENDER OF A CONTRACT
A Contract may be surrendered for its cash surrender value while the insured is
living. To surrender a Contract, we may require you to deliver or mail the
Contract with a written request in a form that meets Pruco Life's needs, to a
Home Office. The cash surrender value of a surrendered Contract will be
determined as of the end of the valuation period in which such a request is
received in a Home Office. Surrender of a Contract may have tax consequences.
See TAX TREATMENT OF CONTRACT BENEFITS, page 27.
21
<PAGE>
WITHDRAWALS
Under certain circumstances, you may withdraw a portion of the Contract's cash
surrender value without surrendering the Contract. The withdrawal amount is
limited by the requirement that the cash surrender value after the withdrawal
may not be zero or less than zero after deducting the withdrawal charges. The
amount withdrawn must be at least $500. There is an administrative processing
fee for each withdrawal which is the lesser of: (a) $25 and; (b) 2% of the
withdrawal amount. An amount withdrawn may not be repaid except as a premium
subject to the applicable charges. Upon request, we will tell you how much you
may withdraw. Withdrawal of the cash surrender value may have tax consequences.
See TAX TREATMENT OF CONTRACT BENEFITS, page 27.
Whenever a withdrawal is made, the death benefit will immediately be reduced by
at least the amount of the withdrawal. For a Type B (variable) Contract, this
will not change the basic insurance amount. However, under a Type A (fixed)
Contract, the resulting reduction in death benefit usually requires a reduction
in the basic insurance amount. If the basic insurance amount is decreased to an
amount less than the basic insurance amount at issue, a surrender charge may be
deducted. See CHARGES AND EXPENSES, page 10. No withdrawal will be permitted
under a Type A (fixed) Contract if it would result in a basic insurance amount
of less than the minimum basic insurance amount. It is important to note,
however, that if the basic insurance amount is decreased, there is a possibility
that the Contract might be classified as a Modified Endowment Contract. See TAX
TREATMENT OF CONTRACT BENEFITS, page 27. Before making any withdrawal which
causes a decrease in basic insurance amount, you should consult with your tax
adviser and your Pruco Life representative.
When a withdrawal is made, the Contract Fund is reduced by the sum of the cash
withdrawn and the withdrawal fee. An amount equal to the reduction in the
Contract Fund will be withdrawn proportionally from the investment options
unless you direct otherwise.
Withdrawal of the cash surrender value increases the risk that the Contract Fund
may be insufficient to provide Contract benefits. If such a withdrawal is
followed by unfavorable investment experience, the Contract may go into default.
Withdrawals may also affect whether a Contract is kept inforce under the Death
Benefit Guarantee, since withdrawals decrease the accumulated net payments. See
DEATH BENEFIT GUARANTEE, page 17.
INCREASES IN BASIC INSURANCE AMOUNT
Subject to state approval and subject to the underwriting requirements
determined by Pruco Life, on or after the first Contract anniversary, you may
increase the amount of insurance by increasing the basic insurance amount of the
Contract. The following conditions must be met:
(1) you must ask for the change in a form that meets Pruco Life's needs;
(2) the amount of the increase must be at least equal to the minimum
increase in basic insurance amount shown under CONTRACT LIMITATIONS in
your Contract data pages;
(3) you must prove to us that the insured is insurable for any increase;
(4) the Contract must not be in default;
(5) we must not be paying premiums into the Contract as a result of the
insured's total disability; and
(6) if we ask you to do so, you must send us the Contract to be endorsed.
If we approve the change, we will send you new Contract data pages showing the
amount and effective date of the change and the recomputed charges, values and
limitations. If the insured is not living on the effective date, the change will
not take effect. No administrative processing charge is currently being made in
connection with an increase in basic insurance amount. We reserve the right to
make such a charge in an amount of up to $25.
For sales load purposes, the target premium is calculated separately for each
basic insurance amount segment. The target premium for each segment also
includes the premium for extra insurance charges associated to that segment.
When premiums are paid, each payment is allocated to each basic insurance amount
segment based on the proportion of the target premium in each segment to the
total target premiums of all segments. Currently, the sales load charge for each
segment is equal to 4% of the allocated premium paid in each Contract year up to
the target premium and 0% of allocated premiums paid in excess of the target
premium. See the definition of Contract year for an increase in basic insurance
amount in DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS, page 1.
22
<PAGE>
The COI rates for an increase in basic insurance amount are based upon 1980 CSO
Tables, the age at the increase effective date and the number of years since
then, sex (except where unisex rates apply); smoker/nonsmoker status, and extra
rating class, if any. The net amount at risk for the whole contract (the death
benefit minus the Contract Fund) is allocated to each basic insurance amount
segment based on the proportion of its basic insurance amount to the total of
all basic insurance amount segments. In addition, the attained age factor for a
Contract with an increase in basic insurance amount is based on the Insured's
attained age for the initial basic insurance amount segment. For a description
of attained age factor, see HOW A TYPE A (FIXED) CONTRACT'S DEATH BENEFIT WILL
VARY, page 20 and HOW A TYPE B (VARIABLE) CONTRACT'S DEATH BENEFIT WILL VARY,
page 21.
Each Contract owner who elects to increase the basic insurance amount of his or
her Contract will receive a "free-look" right which will apply only to the
increase in basic insurance amount, not the entire Contract. This right is
comparable to the right afforded to a purchaser of a new Contract except that,
any cost of insurance charge for the increase in the basic insurance amount will
be returned to the Contract Fund instead of a refund of premium. See SHORT-TERM
CANCELLATION RIGHT or "FREE-LOOK", page 14. Generally, the "free-look" right
would have to be exercised no later than 10 days after receipt of the Contract
as increased.
An increase in basic insurance amount may cause the Contract to be classified as
a Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 27.
Therefore, before increasing the basic insurance amount, you should consult with
your tax adviser and your Pruco Life representative.
DECREASES IN BASIC INSURANCE AMOUNT
As explained earlier, you may make a withdrawal (see WITHDRAWALS, page 22). On
or after the first Contract anniversary, you also have the option of decreasing
the basic insurance amount of your Contract without withdrawing any cash
surrender value. Contract owners who conclude that, because of changed
circumstances, the amount of insurance is greater than needed will be able to
decrease their amount of insurance protection, and the monthly deductions for
the cost of insurance. The amount of the decrease must be at least equal to the
minimum decrease in basic insurance amount shown under CONTRACT LIMITATIONS in
your Contract data pages. In addition, the basic insurance amount after the
decrease must be at least equal to the minimum basic insurance amount shown
under Contract Limitations in your Contract data pages. If the basic insurance
amount is decreased to an amount less than the lowest basic insurance amount
since issue, a surrender charge may be deducted. No administrative processing
charge is currently being made in connection with a decrease in basic insurance
amount. We reserve the right to make such a charge in an amount of up to $25.
See CHARGES AND EXPENSES, page 10. If we ask you to, you must send us your
Contract to be endorsed. The Contract will be amended to show the new basic
insurance amount, charges, values in the appropriate tables and the effective
date of the decrease.
We may decline a reduction if we determine it would cause the Contract to fail
to qualify as "life insurance" for purposes of Section 7702 of the Internal
Revenue Code. A decrease will not take effect if the insured is not living on
the effective date.
It is important to note, however, that if the basic insurance amount is
decreased, there is a possibility that the Contract might be classified as a
Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 27.
Before requesting any decrease in basic insurance amount, you should consult
with your tax adviser and your Pruco Life representative.
WHEN PROCEEDS ARE PAID
Pruco Life will generally pay any death benefit, cash surrender value, loan
proceeds or withdrawal within seven days after all the documents required for
such a payment are received at a Home Office. Other than the death benefit,
which is determined as of the date of death, the amount will be determined as of
the end of the valuation period in which the necessary documents are received at
a Home Office. However, Pruco Life may delay payment of proceeds from the
variable investment option[s] and the variable portion of the death benefit due
under the Contract if the disposal or valuation of the 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.
23
<PAGE>
With respect to the amount of any cash surrender value allocated to the
fixed-rate option, Pruco Life expects to pay the cash surrender value promptly
upon request. However, Pruco Life has the right to delay payment of such cash
surrender value for up to six months (or a shorter period if required by
applicable law). Pruco Life will pay interest of at least 3% a year if it delays
such a payment for 30 days or more (or a shorter period if required by
applicable law).
LIVING NEEDS BENEFIT
You may elect to add the LIVING NEEDS BENEFIT(SM) to your Contract at issue. The
benefit may vary by state. There is no charge for adding the benefit to the
Contract. However, an administrative charge (not to exceed $150) will be made at
the time the LIVING NEEDS BENEFIT is paid.
Subject to state regulatory approval, the Living Needs Benefit allows you to
elect to receive an accelerated payment of all or part of the Contract's death
benefit, adjusted to reflect current value, at a time when certain special needs
exist. The adjusted death benefit will always be less than the death benefit,
but will generally be greater than the Contract's cash surrender value. One or
both of the following options may be available. A Pruco Life representative
should be consulted as to whether additional options may be available.
TERMINAL ILLNESS OPTION. This option is available if the insured is diagnosed as
terminally ill with a life expectancy of six months or less. When satisfactory
evidence is provided, Pruco Life will provide an accelerated payment of the
portion of the death benefit selected by the Contract owner as a LIVING NEEDS
BENEFIT. The Contract owner may (1) elect to receive the benefit in a single sum
or (2) receive equal monthly payments for six months. If the insured dies before
all the payments have been made, the present value of the remaining payments
will be paid to the beneficiary designated in the LIVING NEEDS BENEFIT claim
form in a single sum.
NURSING HOME OPTION. This option is available after the insured has been
confined to an eligible nursing home for six months or more. When satisfactory
evidence is provided, including certification by a licensed physician, that the
insured is expected to remain in the nursing home until death, Pruco Life will
provide an accelerated payment of the portion of the death benefit selected by
the Contract owner as a LIVING NEEDS BENEFIT. The Contract owner may (1) elect
to receive the benefit in a single sum or (2) receive equal monthly payments for
a specified number of years (not more than 10 nor less than 2), depending upon
the age of the insured. If the insured dies before all of the payments have been
made, the present value of the remaining payments will be paid to the
beneficiary designated in the LIVING NEEDS BENEFIT claim form in a single sum.
Subject to state approval, all or part of the Contract's death benefit may be
accelerated under the LIVING NEEDS BENEFIT. If the benefit is only partially
accelerated, a death benefit of at least $25,000 must remain under the Contract.
Pruco Life reserves the right to determine the minimum amount that may be
accelerated.
No benefit will be payable if you are required to elect it in order to meet the
claims of creditors or to obtain a government benefit. Pruco Life can furnish
details about the amount of LIVING NEEDS BENEFIT that is available to an
eligible Contract owner, and the effect on the Contract if less than the entire
death benefit is accelerated.
You should consider whether adding this settlement option is appropriate in your
given situation. Adding the LIVING NEEDS BENEFIT to the Contract has no adverse
consequences; however, electing to use it could. With the exception of certain
business-related Contracts, the LIVING NEEDS BENEFIT is excluded from income if
the insured is terminally ill or chronically ill as defined in the tax law
(although the exclusion in the latter case may be limited). You should consult a
qualified tax adviser before electing to receive this benefit. Receipt of a
LIVING NEEDS BENEFIT payment may also affect your eligibility for certain
government benefits or entitlements.
24
<PAGE>
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS
The following six tables (pages T1 through T6; M1 through M6 in Massachusetts)
show how a Contract's death benefit and cash surrender values change with the
investment experience of the Account. They are "hypothetical" because they are
based, in part, upon several assumptions, which are described below. All six
tables assume the following:
. a Contract with a basic insurance amount of $100,000 bought by a 35 year
old male, select, non-smoker, with no extra risks or substandard ratings,
and no extra benefit riders added to the Contract.
. the target premium amount (see PREMIUMS, page 16) is paid on each Contract
anniversary and no loans are taken.
. the Contract Fund has been invested in equal amounts in each of the 15
portfolios of the Funds and no portion of the Contract Fund has been
allocated to the fixed-rate option.
The first table (page T1; M1 in Massachusetts) assumes a Type A (fixed) Contract
has been purchased and the second table (page T2; M2 in Massachusetts) assumes a
Type B (variable) Contract has been purchased. Both assume the current charges
will continue for the indefinite future. The third and fourth tables (pages T3
and T4; M3 and M4 in Massachusetts) are based upon the same assumptions except
it is assumed the maximum contractual charges have been made from the beginning.
See CHARGES AND EXPENSES, page 10.
Under the Type B (variable) Contract the death benefit changes to reflect
investment returns. Under the Type A (fixed) Contract, the death benefit
increases only if the Contract Fund becomes large enough that an increase in the
death benefit is necessary for the Contract to satisfy the Internal Revenue
Code's definition of life insurance. See TYPES OF DEATH BENEFIT, page 14.
Finally, there are four assumptions, shown separately, about the average
investment performance of the portfolios. The first is that there will be a
uniform 0% gross rate of return with the average value of the Contract Fund
uniformly adversely affected by very unfavorable investment performance. The
other three assumptions are that investment performance will be at a uniform
gross annual rate of 4%, 8% and 12%. Actual returns will fluctuate from year to
year. In addition, death benefits and cash surrender values would be different
from those shown if investment returns averaged 0%, 4%, 8% and 12% but
fluctuated from those averages throughout the years. Nevertheless, these
assumptions help show how the Contract values will change with investment
experience.
The first column in the following illustrations (pages T1 through T4; M1 through
M4 in Massachusetts) shows the Contract year. The second column, to provide
context, shows what the aggregate amount would be if the premiums had been
invested to earn interest, after taxes, at 4% compounded annually. The next four
columns show the death benefit payable in each of the years shown for the four
different assumed investment returns. The last four columns show the cash
surrender value payable in each of the years shown for the four different
assumed investment returns. The cash surrender values in the first 10 years
reflect the surrender charges that would be deducted if the Contract were
surrendered in those years.
A gross return (as well as the net return) is shown at the top of each column.
The gross return represents the combined effect of investment income and capital
gains and losses, realized or unrealized, of the portfolios before any reduction
is made for investment advisory fees or other Fund expenses. The net return
reflects average total annual expenses of the 15 portfolios of 0.65%, and the
daily deduction from the Contract Fund of 0.60% per year for the tables based on
current charges and 0.90% per year for the tables based on maximum charges.
Thus, assuming current charges, gross returns of 0%, 4%, 8% and 12% are the
equivalent of net returns of -1.25%, 2.75%, 6.75% and 10.75%, respectively.
Assuming maximum charges, gross returns of 0%, 4%, 8% and 12% are the equivalent
of net returns of -1.55%, 2.45%, 6.45% and 10.45%, respectively. The actual fees
and expenses of the portfolios associated with a particular Contract may be more
or less than 0.65% and will depend on which variable investment options are
selected. The death benefits and cash surrender values shown reflect the
deduction of all expenses and charges both from the Funds and under the
Contract.
If you are considering the purchase of a variable life insurance contract from
another insurance company, you should not rely upon these tables for comparison
purposes. A comparison between two tables, each showing values for a 35 year old
man, may be useful for a 35 year old man but would be inaccurate if made for
insureds of other ages or sex. Your Pruco Life representative can provide you
with a hypothetical illustration for your own age, sex, and rating class.
25
<PAGE>
VARIABLE UNIVERSAL LIFE
TYPE A (FIXED) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1)
--------------------------------------------------------------
Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of
End of Accumulated --------------------------------------------------------------
Policy at 4% 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.25 Net) (2.75 Net) (6.75 Net) (10.75% Net)
------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1 $ 919 $100,000 $100,000 $100,000 $ 100,000
2 $ 1,875 $100,000 $100,000 $100,000 $ 100,000
3 $ 2,870 $100,000 $100,000 $100,000 $ 100,000
4 $ 3,904 $100,000 $100,000 $100,000 $ 100,000
5 $ 4,980 $100,000 $100,000 $100,000 $ 100,000
6 $ 6,098 $100,000 $100,000 $100,000 $ 100,000
7 $ 7,261 $100,000 $100,000 $100,000 $ 100,000
8 $ 8,471 $100,000 $100,000 $100,000 $ 100,000
9 $ 9,729 $100,000 $100,000 $100,000 $ 100,000
10 $ 11,038 $100,000 $100,000 $100,000 $ 100,000
15 $ 18,409 $100,000 $100,000 $100,000 $ 100,000
20 $ 27,377 $100,000 $100,000 $100,000 $ 100,000
25 $ 38,288 $100,000 $100,000 $100,000 $ 134,273
30 $ 51,562 $100,000 $100,000 $100,000 $ 199,145
35 $ 67,713 $100,000 $100,000 $111,882 $ 293,828
40 $ 87,363 $100,000 $100,000 $139,400 $ 427,548
45 $111,270 $ 0(2) $100,000 $174,115 $ 627,455
50 $140,356 $ 0 $ 0(2) $217,119 $ 923,626
55 $175,744 $ 0 $ 0 $269,270 $1,357,076
60 $218,799 $ 0 $ 0 $331,377 $1,984,121
65 $271,182 $ 0 $ 0 $410,758 $2,928,580
<CAPTION>
Cash Surrender Value (1)
------------------------------------------------------------
Assuming Hypothetical Gross (and Net)
Annual Investment Return of
-------------------------------------------------------------
End of
Policy 0% Gross 4% Gross 8% Gross 12% Gross
Year (-1.25 Net) (2.75 Net) (6.75 Net) (10.75% Net)
------ ----------- --------- --------- -----------
<S> <C> <C> <C> <C>
1 $ 0 $ 0 $ 0(2) $ 0(2)
2 $ 270 $ 341 $ 413 $ 488
3 $ 823 $ 963 $ 1,111 $ 1,267
4 $ 1,366 $ 1,599 $ 1,852 $ 2,127
5 $ 1,898 $ 2,249 $ 2,641 $ 3,076
6 $ 2,418 $ 2,912 $ 3,477 $ 4,122
7 $ 3,108 $ 3,770 $ 4,547 $ 5,458
8 $ 3,784 $ 4,638 $ 5,669 $ 6,912
9 $ 4,445 $ 5,518 $ 6,847 $ 8,495
10 $ 5,089 $ 6,405 $ 8,083 $ 10,219
15 $ 7,103 $10,025 $ 14,315 $ 20,628
20 $ 8,812 $13,999 $ 22,830 $ 37,960
25 $10,088 $18,272 $ 34,504 $ 66,803
30 $10,096 $22,081 $ 50,066 $ 113,151
35 $ 8,270 $24,904 $ 71,262 $ 187,151
40 $ 2,503 $24,887 $ 98,866 $ 303,226
45 $ 0(2) $18,831 $133,935 $ 482,658
50 $ 0 $ 0(2) $177,966 $ 757,070
55 $ 0 $ 0 $232,129 $1,169,894
60 $ 0 $ 0 $298,538 $1,787,497
65 $ 0 $ 0 $391,198 $2,789,123
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the cash surrender value would go to zero in
year 1 and in year 42 and later. Because the Target Premium is being paid,
the Contract is kept inforce through the Limited Death Benefit Guarantee
Period of 35 years. The contract would be in default at the beginning of
year 42. Based on a gross return of 4% the cash surrender value would go to
zero in year 1 and in year 50 and later. Because the Target Premium is
being paid, the Contract is kept inforce through the Limited Death Benefit
Guarantee Period of 35 years. The contract would be in default at the
beginning of year 50. Based on a gross return of 8% the cash surrender
value would go to zero in year 1. Because the Target Premium is being paid,
the Contract is kept inforce through the Limited Death Benefit Guarantee
Period of 35 years. Based on a gross return of 12% the cash surrender value
would go to zero in year 1. Because the Target Premium is being paid, the
Contract is kept inforce through the Limited Death Benefit Guarantee Period
of 35 years.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rate of
inflation. The Death Benefit and Cash Surrender Value for a contract would be
different from those shown if the actual rates of return average 0%, 4%, 8%, and
12% over a period of years but also fluctuated above or below those averages for
individual contract years. No representations can be made by Pruco Life or the
funds that these hypothetical rates of return can be achieved for any one year
or sustained over any period of time.
T1
<PAGE>
VARIABLE UNIVERSAL LIFE
TYPE B (VARIABLE) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
-------------------------------------------------- --------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated -------------------------------------------------- --------------------------------------------------
Policy at 4% 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (1.25 Net) (2.75 Net) (6.75 Net) (10.75% Net) (-1.25 Net) (2.75 Net) (6.75 Net) (10.75% Net)
------ -------- -------- --------- --------- ----------- ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 919 $100,437 $100,462 $100,487 $ 100,511 $ 0 $ 0 0 $ 0(2)
2 $ 1,875 $100,997 $101,068 $101,140 $ 101,214 $ 268 $ 338 410 $ 485
3 $ 2,870 $101,547 $101,687 $101,834 $ 101,990 $ 818 $ 957 1,104 $ 1,260
4 $ 3,904 $102,087 $102,319 $102,571 $ 102,844 $1,357 $ 1,589 1,841 $ 2,114
5 $ 4,980 $102,614 $102,964 $103,353 $ 103,785 $1,884 $ 2,234 2,623 $ 3,055
6 $ 6,098 $103,129 $103,620 $104,180 $ 104,821 $2,399 $ 2,890 3,451 $ 4,091
7 $ 7,261 $103,630 $104,286 $105,056 $ 105,959 $3,082 $ 3,738 4,509 $ 5,412
8 $ 8,471 $104,115 $104,961 $105,982 $ 107,211 $3,750 $ 4,596 5,617 $ 6,846
9 $ 9,729 $104,585 $105,645 $106,959 $ 108,586 $4,402 $ 5,462 6,777 $ 8,404
10 $ 11,038 $105,035 $106,334 $107,989 $ 110,096 $5,035 $ 6,334 7,989 $ 10,096
15 $ 18,409 $106,968 $109,821 $114,008 $ 120,164 $6,968 $ 9,821 14,008 $ 20,164
20 $ 27,377 $108,558 $113,560 $122,064 $ 136,615 $8,558 $13,560 22,064 $ 36,615
25 $ 38,288 $109,660 $117,422 $132,781 $ 163,544 $9,660 $17,422 32,781 $ 63,544
30 $ 51,562 $109,349 $120,369 $146,020 $ 206,641 $9,349 $20,369 46,020 $ 106,641
35 $ 67,713 $107,057 $121,554 $161,979 $ 276,072 $7,057 $21,554 61,979 $ 175,842
40 $ 87,363 $100,802 $118,417 $179,189 $ 402,028 $ 802 $18,417 79,189 $ 285,126
45 $111,270 $ 0(2) $107,370 $194,886 $ 590,380 $ 0(2) $ 7,370 94,886 $ 454,138
50 $140,356 $ 0 $ 0(2) $204,048 $ 869,398 $ 0 $ 0(2) 104,048 $ 712,621
55 $175,744 $ 0 $ 0 $196,222 $1,277,726 $ 0 $ 0 96,222 $1,101,488
60 $218,799 $ 0 $ 0 $154,417 $1,868,416 $ 0 $ 0 54,417 $1,683,257
65 $271,182 $ 0 $ 0 $ 0(2) $2,758,093 $ 0 $ 0 0(2) $2,626,756
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the cash surrender value would go to zero in
year 1 and in year 41 and later. Because the Target Premium is being paid,
the Contract is kept inforce through the Limited Death Benefit Guarantee
Period of 33 years. The contract would be in default at the beginning of
year 41. Based on a gross return of 4% the cash surrender value would go to
zero in year 1 and in year 47 and later. Because the Target Premium is
being paid, the Contract is kept inforce through the Limited Death Benefit
Guarantee Period of 33 years. The contract would be in default at the
beginning of year 47. Based on a gross return of 8% the cash surrender
value would go to zero in year 1 and in year 64 and later. Because the
Target Premium is being paid, the Contract is kept inforce through the
Limited Death Benefit Guarantee Period of 33 years. The contract would be
in default at the beginning of year 64. Based on a gross return of 12% the
cash surrender value would go to zero in year 1. Because the Target Premium
is being paid, the Contract is kept inforce through the Limited Death
Benefit Guarantee Period of 33 years.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rate of
inflation. The Death Benefit and Cash Surrender Value for a contract would be
different from those shown if the actual rates of return average 0%, 4%, 8%, and
12% over a period of years but also fluctuated above or below those averages for
individual contract years. No representations can be made by Pruco Life or the
funds that these hypothetical rates of return can be achieved for any one year
or sustained over any period of time.
T2
<PAGE>
VARIABLE UNIVERSAL LIFE
TYPE A (FIXED) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING MAXIMUM CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
--------------------------------------------------- --------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated --------------------------------------------------- --------------------------------------------------
Policy at 4% 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.55 Net) (2.45 Net) (6.45 Net) (10.45% Net) (-1.55 Net) (2.45 Net) (6.45 Net) (10.45% Net)
------ ---------- ----------- ---------- ---------- ------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 919 $100,000 $100,000 $100,000 $100,000 $ 0 $ 0 $ 0 $ 0(2)
2 $ 1,875 $100,000 $100,000 $100,000 $100,000 $ 100 $ 163 $ 228 $ 296
3 $ 2,870 $100,000 $100,000 $100,000 $100,000 $ 525 $ 647 $ 777 $ 914
4 $ 3,904 $100,000 $100,000 $100,000 $100,000 $ 932 $1,132 $ 1,349 $ 1,585
5 $ 4,980 $100,000 $100,000 $100,000 $100,000 $1,321 $1,616 $ 1,946 $ 2,314
6 $ 6,098 $100,000 $100,000 $100,000 $100,000 $1,687 $2,095 $ 2,565 $ 3,103
7 $ 7,261 $100,000 $100,000 $100,000 $100,000 $2,214 $2,753 $ 3,390 $ 4,142
8 $ 8,471 $100,000 $100,000 $100,000 $100,000 $2,718 $3,405 $ 4,240 $ 5,253
9 $ 9,729 $100,000 $100,000 $100,000 $100,000 $3,199 $4,050 $ 5,115 $ 6,443
10 $ 11,038 $100,000 $100,000 $100,000 $100,000 $3,653 $4,685 $ 6,013 $ 7,720
15 $ 18,409 $100,000 $100,000 $100,000 $100,000 $4,561 $6,720 $ 9,949 $ 14,779
20 $ 27,377 $100,000 $100,000 $100,000 $100,000 $4,423 $8,005 $14,339 $ 25,520
25 $ 38,288 $100,000 $100,000 $100,000 $100,000 $2,499 $7,623 $18,658 $ 42,087
30 $ 51,562 $100,000 $100,000 $100,000 $120,245 $ 0 $3,921 $21,853 $ 68,321
35 $ 67,713 $100,000 $100,000 $100,000 $168,247 $ 0 $ 0 $21,476 $107,163
40 $ 87,363 $ 0(2) $ 0(2) $100,000 $229,476 $ 0(2) $ 0(2) $11,689 $162,749
45 $111,270 $ 0 $ 0 $ 0(2) $311,716 $ 0 $ 0 $ 0(2) $239,781
50 $140,356 $ 0 $ 0 $ 0 $420,948 $ 0 $ 0 $ 0 $345,039
55 $175,744 $ 0 $ 0 $ 0 $564,134 $ 0 $ 0 $ 0 $486,323
60 $218,799 $ 0 $ 0 $ 0 $756,526 $ 0 $ 0 $ 0 $681,555
65 $271,182 $ 0 $ 0 $ 0 $975,709 $ 0 $ 0 $ 0 $929,246
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the cash surrender value would go to zero in
year 1 and in year 29 and later, but because the Target Premium is being
paid, the Contract is kept inforce through the Limited Death Benefit
Guarantee Period of 35 years. The contract would be in default at the
beginning of year 36. Based on a gross return of 4% the cash surrender
value would go to zero in year 1 and in year 33 and later, but because the
Target Premium is being paid, the Contract is kept inforce through the
Limited Death Benefit Guarantee Period of 35 years. The contract would be
in default at the beginning of year 36. Based on a gross return of 8% the
cash surrender value would go to zero in year 1 and in year 43 and later.
Because the Target Premium is being paid, the Contract is kept inforce
through the Limited Death Benefit Guarantee Period of 35 years. The
contract would be in default at the beginning of year 43. Based on a gross
return of 12% the cash surrender value would go to zero in year 1. Because
the Target Premium is being paid, the Contract is kept inforce through the
Limited Death Benefit Guarantee Period of 35 years.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rate of
inflation. The Death Benefit and Cash Surrender Value for a contract would be
different from those shown if the actual rates of return average 0%, 4%, 8%, and
12% over a period of years but also fluctuated above or below those averages for
individual contract years. No representations can be made by Pruco Life or the
funds that these hypothetical rates of return can be achieved for any one year
or sustained over any period of time.
T3
<PAGE>
VARIABLE UNIVERSAL LIFE
TYPE B (VARIABLE) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING MAXIMUM CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
--------------------------------------------------- --------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated --------------------------------------------------- --------------------------------------------------
Policy at 4% 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.55 Net) (2.45 Net) (6.45 Net) (10.45% Net) (-1.55 Net) (2.45 Net) (6.45 Net) (10.45% Net)
------ ---------- ----------- ---------- ---------- ------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 919 $100,385 $100,408 $100,431 $100,454 $ 0 $ 0 $ 0 $ 0
2 $ 1,875 $100,827 $100,890 $100,955 $101,022 $ 97 $ 160 $ 225 $ 292
3 $ 2,870 $101,250 $101,371 $101,500 $101,637 $ 520 $ 641 $ 770 $ 907
4 $ 3,904 $101,653 $101,851 $102,067 $102,302 $ 923 $1,122 $ 1,338 $ 1,572
5 $ 4,980 $102,036 $102,329 $102,657 $103,022 $1,307 $1,599 $ 1,927 $ 2,292
6 $ 6,098 $102,397 $102,801 $103,266 $103,799 $1,667 $2,072 $ 2,536 $ 3,070
7 $ 7,261 $102,734 $103,267 $103,897 $104,639 $2,187 $2,720 $ 3,350 $ 4,092
8 $ 8,471 $103,048 $103,725 $104,548 $105,547 $2,683 $3,360 $ 4,184 $ 5,182
9 $ 9,729 $103,335 $104,173 $105,221 $106,527 $3,153 $3,991 $ 5,038 $ 6,345
10 $ 11,038 $103,596 $104,609 $105,912 $107,586 $3,596 $4,609 $ 5,912 $ 7,586
15 $ 18,409 $104,418 $106,501 $109,614 $114,266 $4,418 $6,501 $ 9,614 $ 14,266
20 $ 27,377 $104,142 $107,499 $113,429 $123,883 $4,142 $7,499 $13,429 $ 23,883
25 $ 38,288 $102,046 $106,606 $116,426 $137,261 $2,046 $6,606 $16,426 $ 37,261
30 $ 51,562 $100,000 $102,210 $116,812 $155,190 $ 0 $2,210 $16,812 $ 55,190
35 $ 67,713 $ 0(2) $ 0(2) $111,009 $177,732 $ 0(2) $ 0(2) $11,009 $ 77,732
40 $ 87,363 $ 0 $ 0 $ 0(2) $203,344 $ 0 $ 0 $ 0(2) $103,344
45 $111,270 $ 0 $ 0 $ 0 $226,513 $ 0 $ 0 $ 0 $126,513
50 $140,356 $ 0 $ 0 $ 0 $236,993 $ 0 $ 0 $ 0 $136,993
55 $175,744 $ 0 $ 0 $ 0 $212,985 $ 0 $ 0 $ 0 $112,985
60 $218,799 $ 0 $ 0 $ 0 $121,664 $ 0 $ 0 $ 0 $ 21,664
65 $271,182 $ 0 $ 0 $ 0 $ 0(2) $ 0 $ 0 $ 0 $ 0(2)
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the cash surrender value would go to zero in
year 1 and in year 28 and later, but because the Target Premium is being
paid, the Contract is kept inforce through the Limited Death Benefit
Guarantee Period of 33 years. The contract would be in default at the
beginning of year 34. Based on a gross return of 4% the cash surrender
value would go to zero in year 1 and in year 32 and later, but because the
Target Premium is being paid, the Contract is kept inforce through the
Limited Death Benefit Guarantee Period of 33 years. The contract would be
in default at the beginning of year 34. Based on a gross return of 8% the
cash surrender value would go to zero in year 1 and in year 39 and later.
Because the Target Premium is being paid, the Contract is kept inforce
through the Limited Death Benefit Guarantee Period of 33 years. The
contract would be in default at the beginning of year 39. Based on a gross
return of 12% the cash surrender value would go to zero in year 1 and in
year 61 and later. Because the Target Premium is being paid, the Contract
is kept inforce through the Limited Death Benefit Guarantee Period of 33
years. The contract would be in default at the beginning of year 61.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rate of
inflation. The Death Benefit and Cash Surrender Value for a contract would be
different from those shown if the actual rates of return average 0%, 4%, 8%, and
12% over a period of years but also fluctuated above or below those averages for
individual contract years. No representations can be made by Pruco Life or the
funds that these hypothetical rates of return can be achieved for any one year
or sustained over any period of time.
T4
<PAGE>
FOR MASSACHUSETTS ONLY
VARIABLE UNIVERSAL LIFE
TYPE A (FIXED) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
-------------------------------------------------- ---------------------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return Of
End of Accumulated -------------------------------------------------- ---------------------------------------------------------
Policy at 4% 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.25 Net) (2.75 Net) (6.75 Net) (10.75% Net) (-1.25 Net) (2.75 Net) (6.75 Net) (10.75% Net)
- ------ ----------- ----------- --------- ---------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 919 $100,000 $100,000 $100,000 $ 100,000 $ 0 $ 0 $ 0(2) $ 0(2)
2 $ 1,875 $100,000 $100,000 $100,000 $ 100,000 $ 270 $ 341 $ 413 $ 488
3 $ 2,870 $100,000 $100,000 $100,000 $ 100,000 $ 823 $ 963 $ 1,111 $ 1,267
4 $ 3,904 $100,000 $100,000 $100,000 $ 100,000 $ 1,366 $ 1,599 $ 1,852 $ 2,127
5 $ 4,980 $100,000 $100,000 $100,000 $ 100,000 $ 1,898 $ 2,249 $ 2,641 $ 3,076
6 $ 6,098 $100,000 $100,000 $100,000 $ 100,000 $ 2,418 $ 2,912 $ 3,477 $ 4,122
7 $ 7,261 $100,000 $100,000 $100,000 $ 100,000 $ 3,108 $ 3,770 $ 4,547 $ 5,458
8 $ 8,471 $100,000 $100,000 $100,000 $ 100,000 $ 3,784 $ 4,638 $ 5,669 $ 6,912
9 $ 9,729 $100,000 $100,000 $100,000 $ 100,000 $ 4,445 $ 5,518 $ 6,847 $ 8,495
10 $ 11,038 $100,000 $100,000 $100,000 $ 100,000 $ 5,089 $ 6,405 $ 8,083 $ 10,219
15 $ 18,409 $100,000 $100,000 $100,000 $ 100,000 $ 7,103 $10,025 $ 14,315 $ 20,628
20 $ 27,377 $100,000 $100,000 $100,000 $ 100,000 $ 8,812 $13,999 $ 22,830 $ 37,960
25 $ 38,288 $100,000 $100,000 $100,000 $ 134,273 $10,088 $18,272 $ 34,504 $ 66,803
30 $ 51,562 $100,000 $100,000 $100,000 $ 199,145 $10,096 $22,081 $ 50,066 $ 113,151
35 $ 67,713 $100,000 $100,000 $111,882 $ 293,828 $ 8,270 $24,904 $ 71,262 $ 187,151
40 $ 87,363 $100,000 $100,000 $139,400 $ 427,548 $ 2,503 $24,887 $ 98,866 $ 303,226
45 $111,270 $ 0(2) $100,000 $174,115 $ 627,455 $ 0(2) $18,831 $133,935 $ 482,658
50 $140,356 $ 0 $ 0(2) $217,119 $ 923,626 $ 0 $ 0(2) $177,966 $ 757,070
55 $175,744 $ 0 $ 0 $269,270 $1,357,076 $ 0 $ 0 $232,129 $1,169,894
60 $218,799 $ 0 $ 0 $331,377 $1,984,121 $ 0 $ 0 $298,538 $1,787,497
65 $271,182 $ 0 $ 0 $410,758 $2,928,580 $ 0 $ 0 $391,198 $2,789,123
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the cash surrender value would go to zero in
year 1 and in year 42 and later. Because the Target Premium is being paid,
the Contract is kept inforce through the Limited Death Benefit Guarantee
Period of 5 years. The contract would be in default at the beginning of
year 42. Based on a gross return of 4% the cash surrender value would go to
zero in year 1 and in year 50 and later. Because the Target Premium is
being paid, the Contract is kept inforce through the Limited Death Benefit
Guarantee Period of 5 years. The contract would be in default at the
beginning of year 50. Based on a gross return of 8% the cash surrender
value would go to zero in year 1. Because the Target Premium is being paid,
the Contract is kept inforce through the Limited Death Benefit Guarantee
Period of 5 years. Based on a gross return of 12% the cash surrender value
would go to zero in year 1. Because the Target Premium is being paid, the
Contract is kept inforce through the Limited Death Benefit Guarantee Period
of 5 years.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rate of
inflation. The Death Benefit and Cash Surrender Value for a contract would be
different from those shown if the actual rates of return average 0%, 4%, 8%, and
12% over a period of years but also fluctuated above or below those averages for
individual contract years. No representations can be made by Pruco Life or the
funds that these hypothetical rates of return can be achieved for any one year
or sustained over any period of time.
M1
<PAGE>
FOR MASSACHUSETTS ONLY
VARIABLE UNIVERSAL LIFE
TYPE B (VARIABLE) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (1) Cash Surrender Value (1)
----------------------------------------------------- ---------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of Annual Investment Return of
End of Accumulated ----------------------------------------------------- ---------------------------------------------
Policy at 4% 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.25 Net) (2.75 Net) (6.75 Net) (10.75% Net) (-1.25 Net) (2.75 Net) (6.75 Net) (10.75% Net)
----- ---------- ---------- ---------- ---------- ------------ ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 919 $100,437 $100,462 $100,487 $ 100,511 $ 0 $ 0 $ 0 $ 0(2)
2 $ 1,875 $100,997 $101,068 $101,140 $ 101,214 $ 268 $ 338 $ 410 $ 485
3 $ 2,870 $101,547 $101,687 $101,834 $ 101,990 $ 818 $ 957 $ 1,104 $ 1,260
4 $ 3,904 $102,087 $102,319 $102,571 $ 102,844 $1,357 $ 1,589 $ 1,841 $ 2,114
5 $ 4,980 $102,614 $102,964 $103,353 $ 103,785 $1,884 $ 2,234 $ 2,623 $ 3,055
6 $ 6,098 $103,129 $103,620 $104,180 $ 104,821 $2,399 $ 2,890 $ 3,451 $ 4,091
7 $ 7,261 $103,630 $104,286 $105,056 $ 105,959 $3,082 $ 3,738 $ 4,509 $ 5,412
8 $ 8,471 $104,115 $104,961 $105,982 $ 107,211 $3,750 $ 4,596 $ 5,617 $ 6,846
9 $ 9,729 $104,585 $105,645 $106,959 $ 108,586 $4,402 $ 5,462 $ 6,777 $ 8,404
10 $ 11,038 $105,035 $106,334 $107,989 $ 110,096 $5,035 $ 6,334 $ 7,989 $ 10,096
15 $ 18,409 $106,968 $109,821 $114,008 $ 120,164 $6,968 $ 9,821 $ 14,008 $ 20,164
20 $ 27,377 $108,558 $113,560 $122,064 $ 136,615 $8,558 $13,560 $ 22,064 $ 36,615
25 $ 38,288 $109,660 $117,422 $132,781 $ 163,544 $9,660 $17,422 $ 32,781 $ 63,544
30 $ 51,562 $109,349 $120,369 $146,020 $ 206,641 $9,349 $20,369 $ 46,020 $ 106,641
35 $ 67,713 $107,057 $121,554 $161,979 $ 276,072 $7,057 $21,554 $ 61,979 $ 175,842
40 $ 87,363 $100,802 $118,417 $179,189 $ 402,028 $ 802 $18,417 $ 79,189 $ 285,126
45 $111,270 $ 0(2) $107,370 $194,886 $ 590,380 $ 0(2) $ 7,370 $ 94,886 $ 454,138
50 $140,356 $ 0 $ 0(2) $204,048 $ 869,398 $ 0 $ 0(2) $104,048 $ 712,621
55 $175,744 $ 0 $ 0 $196,222 $1,277,726 $ 0 $ 0 $ 96,222 $1,101,488
60 $218,799 $ 0 $ 0 $154,417 $1,868,416 $ 0 $ 0 $ 54,417 $1,683,257
65 $271,182 $ 0 $ 0 $ 0(2) $2,758,093 $ 0 $ 0 $ 0(2) $2,626,756
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the cash surrender value would go to zero in
year 1 and in year 41 and later. Because the Target Premium is being paid,
the Contract is kept inforce through the Limited Death Benefit Guarantee
Period of 5 years. The contract would be in default at the beginning of
year 41. Based on a gross return of 4% the cash surrender value would go to
zero in year 1 and in year 47 and later. Because the Target Premium is
being paid, the Contract is kept inforce through the Limited Death Benefit
Guarantee Period of 5 years. The contract would be in default at the
beginning of year 47. Based on a gross return of 8% the cash surrender
value would go to zero in year 1 and in year 64 and later. Because the
Target Premium is being paid, the Contract is kept inforce through the
Limited Death Benefit Guarantee Period of 5 years. The contract would be in
default at the beginning of year 64. Based on a gross return of 12% the
cash surrender value would go to zero in year 1. Because the Target Premium
is being paid, the Contract is kept inforce through the Limited Death
Benefit Guarantee Period of 5 years.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rate of
inflation. The Death Benefit and Cash Surrender Value for a contract would be
different from those shown if the actual rates of return average 0%, 4%, 8%, and
12% over a period of years but also fluctuated above or below those averages for
individual contract years. No representations can be made by Pruco Life or the
funds that these hypothetical rates of return can be achieved for any one year
or sustained over any period of time.
M2
<PAGE>
<TABLE>
<CAPTION>
FOR MASSACHUSETTS ONLY
VARIABLE UNIVERSAL LIFE
TYPE A (FIXED) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING MAXIMUM CONTRACTUAL CHARGES
Death Benefit (1)
-------------------------------------------------------------------
Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of
End of Accumulated -------------------------------------------------------------------
Policy at 4% 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year ( - 1.55 Net) (2.45 Net) (6.45 Net) (10.45% Net)
------ ----------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1 $ 919 $100,000 $100,000 $100,000 $100,000
2 $ 1,875 $100,000 $100,000 $100,000 $100,000
3 $ 2,870 $100,000 $100,000 $100,000 $100,000
4 $ 3,904 $100,000 $100,000 $100,000 $100,000
5 $ 4,980 $100,000 $100,000 $100,000 $100,000
6 $ 6,098 $100,000 $100,000 $100,000 $100,000
7 $ 7,261 $100,000 $100,000 $100,000 $100,000
8 $ 8,471 $100,000 $100,000 $100,000 $100,000
9 $ 9,729 $100,000 $100,000 $100,000 $100,000
10 $ 11,038 $100,000 $100,000 $100,000 $100,000
15 $ 18,409 $100,000 $100,000 $100,000 $100,000
20 $ 27,377 $100,000 $100,000 $100,000 $100,000
25 $ 38,288 $100,000 $100,000 $100,000 $100,000
30 $ 51,562 $ 0(2) $100,000 $100,000 $120,245
35 $ 67,713 $ 0 $ 0(2) $100,000 $168,247
40 $ 87,363 $ 0 $ 0 $100,000 $229,476
45 $111,270 $ 0 $ 0 $ 0(2) $311,716
50 $140,356 $ 0 $ 0 $ 0 $420,948
55 $175,744 $ 0 $ 0 $ 0 $564,134
60 $218,799 $ 0 $ 0 $ 0 $756,526
65 $271,182 $ 0 $ 0 $ 0 $975,709
<CAPTION>
FOR MASSACHUSETTS ONLY
VARIABLE UNIVERSAL LIFE
TYPE A (FIXED) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING MAXIMUM CONTRACTUAL CHARGES
Cash Surrender Value (1)
-------------------------------------------------------------------
Assuming Hypothetical Gross (and Net)
Annual Investment Return of
-------------------------------------------------------------------
0% Gross 4% Gross 8% Gross 12% Gross
( - 1.55 Net) (2.45 Net) (6.45 Net) (10.45% Net)
------------- ----------- ----------- ------------
<S> <C> <C> <C>
$ 0 $ 0 $ 0 $ 0(2)
$ 100 $ 163 $ 228 $ 296
$ 525 $ 647 $ 777 $ 914
$ 932 $1,132 $ 1,349 $ 1,585
$1,321 $1,616 $ 1,946 $ 2,314
$1,687 $2,095 $ 2,565 $ 3,103
$2,214 $2,753 $ 3,390 $ 4,142
$2,718 $3,405 $ 4,240 $ 5,253
$3,199 $4,050 $ 5,115 $ 6,443
$3,653 $4,685 $ 6,013 $ 7,720
$4,561 $6,720 $ 9,949 $ 14,779
$4,423 $8,005 $14,339 $ 25,520
$2,499 $7,623 $18,658 $ 42,087
$ 0(2) $3,921 $21,853 $ 68,321
$ 0 $ 0(2) $21,476 $107,163
$ 0 $ 0 $11,689 $162,749
$ 0 $ 0 $ 0(2) $239,781
$ 0 $ 0 $ 0 $345,039
$ 0 $ 0 $ 0 $486,323
$ 0 $ 0 $ 0 $681,555
$ 0 $ 0 $ 0 $929,246
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the cash surrender value would go to zero in
year 1 and in year 29 and later, but because the Target Premium is being
paid, the Contract is kept inforce through the Limited Death Benefit
Guarantee Period of 5 years. The contract would be in default at the
beginning of year 29. Based on a gross return of 4% the cash surrender
value would go to zero in year 1 and in year 33 and later, but because the
Target Premium is being paid, the Contract is kept inforce through the
Limited Death Benefit Guarantee Period of 5 years. The contract would be in
default at the beginning of year 33. Based on a gross return of 8% the cash
surrender value would go to zero in year 1 and in year 43 and later.
Because the Target Premium is being paid, the Contract is kept inforce
through the Limited Death Benefit Guarantee Period of 5 years. The contract
would be in default at the beginning of year 43. Based on a gross return of
12% the cash surrender value would go to zero in year 1. Because the Target
Premium is being paid, the Contract is kept inforce through the Limited
Death Benefit Guarantee Period of 5 years.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rate of
inflation. The Death Benefit and Cash Surrender Value for a contract would be
different from those shown if the actual rates of return average 0%, 4%, 8%, and
12% over a period of years but also fluctuated above or below those averages for
individual contract years. No representations can be made by Pruco Life or the
funds that these hypothetical rates of return can be achieved for any one year
or sustained over any period of time.
M3
<PAGE>
<TABLE>
<CAPTION>
FOR MASSACHUSETTS ONLY
VARIABLE UNIVERSAL LIFE
TYPE B (VARIABLE) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING MAXIMUM CONTRACTUAL CHARGES
Death Benefit (1)
-------------------------------------------------------------------
Assuming Hypothetical Gross (and Net)
Premiums Annual Investment Return of
End of Accumulated -------------------------------------------------------------------
Policy at 4% 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year ( - 1.55 Net) (2.45 Net) (6.45 Net) (10.45% Net)
------ ----------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1 $ 919 $100,385 $100,408 $100,431 $100,454
2 $ 1,875 $100,827 $100,890 $100,955 $101,022
3 $ 2,870 $101,250 $101,371 $101,500 $101,637
4 $ 3,904 $101,653 $101,851 $102,067 $102,302
5 $ 4,980 $102,036 $102,329 $102,657 $103,022
6 $ 6,098 $102,397 $102,801 $103,266 $103,799
7 $ 7,261 $102,734 $103,267 $103,897 $104,639
8 $ 8,471 $103,048 $103,725 $104,548 $105,547
9 $ 9,729 $103,335 $104,173 $105,221 $106,527
10 $ 11,038 $103,596 $104,609 $105,912 $107,586
15 $ 18,409 $104,418 $106,501 $109,614 $114,266
20 $ 27,377 $104,142 $107,499 $113,429 $123,883
25 $ 38,288 $102,046 $106,606 $116,426 $137,261
30 $ 51,562 $ 0(2) $102,210 $116,812 $155,190
35 $ 67,713 $ 0 $ 0(2) $111,009 $177,732
40 $ 87,363 $ 0 $ 0 $ 0(2) $203,344
45 $111,270 $ 0 $ 0 $ 0 $226,513
50 $140,356 $ 0 $ 0 $ 0 $236,993
55 $175,744 $ 0 $ 0 $ 0 $212,985
60 $218,799 $ 0 $ 0 $ 0 $121,664
65 $271,182 $ 0 $ 0 $ 0 $ 0(2)
<CAPTION>
FOR MASSACHUSETTS ONLY
VARIABLE UNIVERSAL LIFE
TYPE B (VARIABLE) DEATH BENEFIT
MALE NON-SMOKER SELECT AGE 35
$100,000.00 BASIC INSURANCE AMOUNT
$884.00 ANNUAL PREMIUM PAYMENT
USING MAXIMUM CONTRACTUAL CHARGES
Cash Surrender Value (1)
-------------------------------------------------------------------
Assuming Hypothetical Gross (and Net)
Annual Investment Return of
-------------------------------------------------------------------
0% Gross 4% Gross 8% Gross 12% Gross
( - 1.55 Net) (2.45 Net) (6.45 Net) (10.45% Net)
------------- ----------- ----------- ------------
<S> <C> <C> <C>
$ 0 $ 0 $ 0 $ 0
$ 97 $ 160 $ 225 $ 292
$ 520 $ 641 $ 770 $ 907
$ 923 $1,122 $ 1,338 $ 1,572
$1,307 $1,599 $ 1,927 $ 2,292
$1,667 $2,072 $ 2,536 $ 3,070
$2,187 $2,720 $ 3,350 $ 4,092
$2,683 $3,360 $ 4,184 $ 5,182
$3,153 $3,991 $ 5,038 $ 6,345
$3,596 $4,609 $ 5,912 $ 7,586
$4,418 $6,501 $ 9,614 $ 14,266
$4,142 $7,499 $13,429 $ 23,883
$2,046 $6,606 $16,426 $ 37,261
$ 0(2) $2,210 $16,812 $ 55,190
$ 0 $ 0(2) $11,009 $ 77,732
$ 0 $ 0 $ 0(2) $103,344
$ 0 $ 0 $ 0 $126,513
$ 0 $ 0 $ 0 $136,993
$ 0 $ 0 $ 0 $112,985
$ 0 $ 0 $ 0 $ 21,664
$ 0 $ 0 $ 0 $ 0(2)
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0% the cash surrender value would go to zero in
year 1 and in year 28 and later, but because the Target Premium is being
paid, the Contract is kept inforce through the Limited Death Benefit
Guarantee Period of 5 years. The contract would be in default at the
beginning of year 28. Based on a gross return of 4% the cash surrender
value would go to zero in year 1 and in year 32 and later, but because the
Target Premium is being paid, the Contract is kept inforce through the
Limited Death Benefit Guarantee Period of 5 years. The contract would be in
default at the beginning of year 32. Based on a gross return of 8% the cash
surrender value would go to zero in year 1 and in year 39 and later.
Because the Target Premium is being paid, the Contract is kept inforce
through the Limited Death Benefit Guarantee Period of 5 years. The contract
would be in default at the beginning of year 39. Based on a gross return of
12% the cash surrender value would go to zero in year 1 and in year 61 and
later. Because the Target Premium is being paid, the Contract is kept
inforce through the Limited Death Benefit Guarantee Period of 5 years. The
contract would be in default at the beginning of year 61.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rate of
inflation. The Death Benefit and Cash Surrender Value for a contract would be
different from those shown if the actual rates of return average 0%, 4%, 8%, and
12% over a period of years but also fluctuated above or below those averages for
individual contract years. No representations can be made by Pruco Life or the
funds that these hypothetical rates of return can be achieved for any one year
or sustained over any period of time.
M4
<PAGE>
CONTRACT LOANS
You may borrow from Pruco Life an amount up to the current loan value of your
Contract less any existing Contract debt using the Contract as the only security
for the loan. The loan value at any time is equal to the sum of (1) 90% of the
portion of the cash value attributable to the variable investment options, and
(2) the balance of the cash value. The cash value is equal to the Contract Fund
less any surrender charge. A Contract in default has no loan value. The minimum
loan amount you may borrow is $200.
Interest charged on a loan accrues daily. Interest is due on each Contract
anniversary or when the loan is paid back, whichever comes first. If interest is
not paid when due, it becomes part of the loan and we will charge interest on
it, too. Except in the case of preferred loans, we charge interest at an
effective annual rate of 5%.
A portion of any amount you borrow on or after the 10th Contract anniversary may
be considered a preferred loan. The maximum preferred loan amount is the total
amount you may borrow minus the total net premiums paid (net premiums equal
premiums paid less total withdrawals, if any). If the net premium amount is less
than zero, we will, for purposes of this calculation, consider it to be zero.
Only new loans borrowed after the 10th Contract anniversary may be considered
preferred loans. Standard loans will not automatically be converted into
preferred loans. Preferred loans are charged interest at an effective annual
rate of 4.5%.
The Contract debt is the amount of all outstanding loans plus any interest
accrued but not yet due. If at any time the Contract debt equals or exceeds the
Contract Fund less any applicable surrender charges, the Contract will go into
default. See LAPSE AND REINSTATEMENT, page 29. If the Contract debt equals or
exceeds the Contract Fund less any applicable surrender charges and you fail to
keep the Contract inforce, the amount of unpaid Contract debt will be treated as
a distribution which may be taxable. See TAX TREATMENT OF CONTRACT BENEFITS,
page 27.
When a loan is made, an amount equal to the loan proceeds is transferred out of
the Account and/or the fixed-rate option, as applicable. Unless you ask us to
take the loan amount from specific investment options and we agree, the
reduction will be made in the same proportions as the value in each variable
investment option and the fixed-rate option bears to the total value of the
Contract. While a loan is outstanding, the amount that was so transferred will
continue to be treated as part of the Contract Fund. It will be credited with an
effective annual rate of return of 4%. On each Monthly date, we will increase
the portion of the Contract Fund in the investment options by interest credits
accrued on the loan since the last Monthly date. The net cost of a standard loan
is 1% and the net cost of a preferred loan is 1/2%.
A loan will not affect the Death Benefit Guarantee as long as Contract debt does
not equal or exceed the Contract Fund, less any applicable surrender charges.
Loans from Modified Endowment Contracts may be treated for tax purposes as
distributions of income. See TAX TREATMENT OF CONTRACT BENEFITS, page 27.
Any Contract debt will directly reduce a Contract's cash surrender value and
will be subtracted from the death benefit to determine the amount payable. In
addition, even if the loan is fully repaid, it may have an effect on future
death benefits because the investment results of the selected investment options
will apply only to the amount remaining invested under those options. The longer
the loan is outstanding, the greater the effect is likely to be. The effect
could be favorable or unfavorable. If investment results are greater than the
rate being credited on the amount of the loan while the loan is outstanding,
values under the Contract will not increase as rapidly as they would have if no
loan had been made. If investment results are below that rate, Contract values
will be higher than they would have been had no loan been made.
When you repay all or part of a loan, we will increase the portion of the
Contract Fund in the investment options by the amount of the loan you repay
using the investment allocation for future premium payments as of the loan
payment date, plus interest credits accrued on the loan since the last
transaction date. If loan interest is paid when due, it will not change the
portion of the Contract Fund allocated to the investment options. We reserve the
right to change the manner in which we allocate loan repayments.
26
<PAGE>
SALE OF THE CONTRACT AND SALES COMMISSIONS
Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
Prudential, acts as the principal underwriter of the Contract. Prusec, organized
in 1971 under New Jersey law, is registered as a broker and dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. Prusec's principal business address is 751 Broad
Street, Newark, New Jersey 07102-3777. The Contract is sold by registered
representatives of Prusec who are also authorized by state insurance departments
to do so. The Contract may also be sold through other broker-dealers authorized
by Prusec and applicable law to do so. Registered representatives of such other
broker-dealers may be paid on a different basis than described below.
Generally, representatives will receive a commission of no more than: (1) 50% of
the premiums received in the first year on premiums up to the target premium
(see PREMIUMS, page 16); (2) 5% of premiums received in years two through 10 on
premiums up to the target premium; and (3) 3% on premiums received in the first
10 years in excess of the target premium or received after 10 years. If the
basic insurance amount is increased, representatives will generally receive a
commission of no more than: (1) 25% of the premiums received up to the target
premium for the increase received in the first year; (2) 5% of the premiums
received up to the target premium for years two through 10; and (3) 3% on other
premiums received for the increase. Moreover, trail commissions of up to 0.025%
of the Contract Fund as of the end of each calendar quarter may be paid.
Representatives with less than 4 years of service may receive compensation on a
different basis. Representatives who meet certain productivity or persistency
standards may be eligible for additional compensation.
TAX TREATMENT OF CONTRACT BENEFITS
This summary provides general information on the federal income tax treatment of
the Contract. It is not a complete statement of what the federal income taxes
will be in all circumstances. It is based on current law and interpretations,
which may change. It does not cover state taxes or other taxes. It is not
intended as tax advice. You should consult your own qualified tax adviser for
complete information and advice.
TREATMENT AS LIFE INSURANCE. The Contract must meet certain requirements to
qualify as life insurance for tax purposes. These requirements include certain
definitional tests and rules for diversification of the Contract's investments.
For further information on the diversification requirements, see TAXATION OF THE
FUND in the statement of additional information for the Series Fund.
We believe we have taken adequate steps to insure that the Contract qualifies as
life insurance for tax purposes. Generally speaking, this means that:
. you will not be taxed on the growth of the funds in the Contract,
unless you receive a distribution from the Contract,
. the Contract's death benefit will be income tax free to your
beneficiary.
Although we believe that the Contract should qualify as life insurance for tax
purposes, there are some uncertainties, particularly because the Secretary of
Treasury has not yet issued permanent regulations that bear on this question.
Accordingly, we reserve the right to make changes -- which will be applied
uniformly to all Contract owners after advance written notice -- that we deem
necessary to insure that the Contract will qualify as life insurance.
PRE-DEATH DISTRIBUTIONS. The tax treatment of any distribution you receive
before the insured's death depends on whether the Contract is classified as a
Modified Endowment Contract.
CONTRACTS NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
. If you surrender the Contract or allow it to lapse, you will be
taxed on the amount you receive in excess of the premiums you
paid less the untaxed portion of any prior withdrawals. For this
purpose, you will be treated as receiving any portion of the cash
surrender value used to repay Contract debt. The tax consequences
of a surrender may differ if you take the proceeds under an
income payment settlement option.
27
<PAGE>
. Generally, you will be taxed on a withdrawal to the extent the
amount you receive exceeds the premiums you paid for the Contract
less the untaxed portion of any prior withdrawals. However, under
some limited circumstances, in the first 15 Contract years, all
or a portion of a withdrawal may be taxed if the Contract Fund
exceeds the total premiums paid less the untaxed portions of any
prior withdrawals, even if total withdrawals do not exceed total
premiums paid.
. Extra premiums for optional benefits and riders generally do not
count in computing the premiums paid for the Contract for the
purposes of determining whether a withdrawal is taxable.
. Loans you take against the Contract are ordinarily treated as
debt and are not considered distributions subject to tax.
However, there is some risk the Internal Revenue Service might
assert that the preferred loan should be treated as a
distribution for tax purposes because of the relatively low
differential between the loan interest rate and Contract's
crediting rate. Were the Internal Revenue Service to take this
position, Pruco Life would take reasonable steps to avoid this
result, including modifying the Contract's loan provisions.
MODIFIED ENDOWMENT CONTRACTS.
. The rules change if the Contract is classified as a Modified
Endowment Contract. The Contract could be classified as a
Modified Endowment Contract if premiums in amounts that are too
large are paid or a decrease in the face amount of insurance is
made (or a rider removed). The addition of a rider or an increase
in the face amount of insurance may also cause the Contract to be
classified as a Modified Endowment Contract. You should first
consult a qualified tax adviser and your Pruco Life
representative if you are contemplating any of these steps.
. If the Contract is classified as a Modified Endowment Contract,
then amounts you receive under the Contract before the insured's
death, including loans and withdrawals, are included in income to
the extent that the Contract Fund before surrender charges
exceeds the premiums paid for the Contract increased by the
amount of any loans previously included in income and reduced by
any untaxed amounts previously received other than the amount of
any loans excludible from income. An assignment of a Modified
Endowment Contract is taxable in the same way. These rules also
apply to pre-death distributions, including loans and
assignments, made during the two-year period before the time that
the Contract became a Modified Endowment Contract.
. Any taxable income on pre-death distributions (including full
surrenders) is subject to a penalty of 10 percent unless the
amount is received on or after age 59 1/2, on account of your
becoming disabled or as a life annuity. It is presently unclear
how the penalty tax provisions apply to Contracts owned by
businesses.
. All Modified Endowment Contracts issued by us to you during the
same calendar year are treated as a single Contract for purposes
of applying these rules.
WITHHOLDING. You must affirmatively elect that no taxes be withheld from a
pre-death distribution. Otherwise, the taxable portion of any amounts you
receive will be subject to withholding. You are not permitted to elect out of
withholding if you do not provide a social security number or other taxpayer
identification number. You may be subject to penalties under the estimated tax
payment rules if your withholding and estimated tax payments are insufficient to
cover the tax due.
OTHER TAX CONSIDERATIONS. If you transfer or assign the Contract to someone
else, there may be gift, estate and/or income tax consequences. If you transfer
the Contract to a person two or more generations younger than you (or designate
such a younger person as a beneficiary), there may be Generation Skipping
Transfer tax consequences. Deductions for interest paid or accrued on Contract
debt or on other loans that are incurred or continued to purchase or carry the
Contract may be denied. Your individual situation or that of your beneficiary
will determine the federal estate taxes and the state and local estate,
inheritance and other taxes due if you or the insured dies.
28
<PAGE>
BUSINESS-OWNED LIFE INSURANCE. If a business, rather than an individual, is the
owner of the Contract, there are some additional rules. Business Contract owners
generally cannot deduct premium payments. Business Contract owners generally
cannot take tax deductions for interest on Contract debt paid or accrued after
October 13, 1995. An exception permits the deduction of interest on policy loans
on Contracts for up to 20 key persons. The interest deduction for Contract debt
on these loans is limited to a prescribed interest rate and a maximum aggregate
loan amount of $50,000 per key insured person. The corporate alternative minimum
tax also applies to business-owned life insurance. This is an indirect tax on
additions to the Contract Fund or death benefits received under business-owned
life insurance policies.
LAPSE AND REINSTATEMENT
Pruco Life will determine the value of the Contract Fund on each Monthly date.
If the Contract Fund less any applicable surrender charges is zero or less, the
Contract is in default unless it remains inforce under the Death Benefit
Guarantee. See DEATH BENEFIT GUARANTEE, page 17. If the Contract debt ever grows
to be equal to or more than the Contract Fund less any applicable surrender
charges, the Contract will be in default. Should this happen, Pruco Life will
send you a notice of default setting forth the payment which we estimate will
keep the Contract inforce for three months from the date of default. This
payment must be received at a Home Office within the 61-day grace period after
the notice of default is mailed or the Contract will end and have no value. A
Contract that lapses with an outstanding Contract loan may have tax
consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 27.
A Contract that ended in default may be reinstated within 5 years after the date
of default if the following conditions are met: (1) renewed evidence of
insurability is provided on the insured; (2) submission of certain payments
sufficient to bring the Contract up to date plus a premium that we estimate will
cover all charges and deductions for the next three months; and (3) any Contract
debt with interest to date must be restored or paid back. If the Contract debt
is restored and the debt with interest would exceed the loan value of the
reinstated Contract, the excess must be paid to us before reinstatement. The
reinstatement date will be the Monthly date that coincides with or next follows
the date we approve your request. We will deduct all required charges from your
payment and the balance will be placed into your Contract Fund. If we approve
the reinstatement, we will credit the Contract Fund with an amount equal to the
surrender charge applicable as of the date of reinstatement.
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS
The Contract generally employs mortality tables that distinguish between males
and females. Thus, premiums and benefits differ under Contracts issued on males
and females of the same age. However, in those states that have adopted
regulations prohibiting sex-distinct insurance rates, premiums and cost of
insurance charges will be based on male rates, whether the insureds are male or
female. In addition, employers and employee organizations considering purchase
of a Contract should consult their legal advisers to determine whether purchase
of a Contract based on sex-distinct actuarial tables is consistent with Title
VII of the Civil Rights Act of 1964 or other applicable law.
OTHER GENERAL CONTRACT PROVISIONS
ASSIGNMENT. This Contract may not be assigned if the assignment would violate
any federal, state or local law or regulation prohibiting sex distinct rates for
insurance. Generally, the Contract may not be assigned to an employee benefit
plan or program without Pruco Life's consent. Pruco Life assumes no
responsibility for the validity or sufficiency of any assignment. We will not be
obligated to comply with any assignment unless we receive a copy at a Home
Office.
BENEFICIARY. You designate and name your beneficiary in the application.
Thereafter, you may change the beneficiary, provided it is in accordance with
the terms of the Contract. Should the insured die with no surviving beneficiary,
the insured's estate will become the beneficiary.
INCONTESTABILITY. We will not contest the Contract after it has been inforce
during the insured's lifetime for two years from the issue date except when any
change is made in the Contract that requires Pruco Life's approval and would
increase our liability. We will not contest such change after it has been in
effect for two years during the lifetime of the insured.
29
<PAGE>
MISSTATEMENT OF AGE OR SEX. If the insured's stated age or sex or both are
incorrect in the Contract, Pruco Life will adjust the death benefits payable and
any amount to be paid, as required by law, to reflect the correct age and sex.
Any such benefit will be based on what the most recent deductions from the
Contract Fund would have provided at the insured's correct age and sex.
SETTLEMENT OPTIONS. The Contract grants to most owners, or to the beneficiary, a
variety of optional ways of receiving Contract proceeds, other than in a lump
sum. Any Pruco Life representative authorized to sell this Contract can explain
these options upon request.
SUICIDE EXCLUSION. Generally, if the insured, whether sane or insane, dies by
suicide within two years from the Contract date, the Contract will end and Pruco
Life will return the premiums paid, less any Contract debt, and less any
withdrawals. Generally, if the insured, whether sane or insane, dies by suicide
after two years from the issue date, but within two years of the effective date
of an increase in the basic insurance amount, we will pay, as to the increase in
amount, no more than the sum of the premiums paid on and after the effective
date of an increase.
RIDERS
Contract owners may be able to obtain extra fixed benefits which may require an
additional premium. These optional insurance benefits will be described in what
is known as a "rider" to the Contract. Charges applicable to the riders will be
deducted from the Contract Fund on each Monthly date.
One rider pays certain premiums into the Contract if the insured is totally
disabled within the meaning of the provision. Others pay an additional amount if
the insured dies within a stated number of years after issue; similar benefits
may be available if the insured's spouse or child should die. The amounts of
these benefits are fully guaranteed at issue; they do not depend on the
performance of the Account, although they will no longer be available if the
Contract lapses. Certain restrictions may apply; they are clearly described in
the applicable rider.
Any Pruco Life representative authorized to sell the Contract can explain these
extra benefits further. Samples of the provisions are available from Pruco Life
upon written request.
SUBSTITUTION OF FUND SHARES
Although Pruco Life believes it to be unlikely, it is possible that in the
judgment of its management, one or more of the portfolios of the Funds may
become unsuitable for investment by Contract owners because of investment policy
changes, tax law changes, or the unavailability of shares for investment. In
that event, Pruco Life may seek to substitute the shares of another portfolio or
of an entirely different mutual fund. Before this can be done, the approval of
the SEC, and possibly one or more state insurance departments, may be required.
Contract owners will be notified of any such substitution.
REPORTS TO CONTRACT OWNERS
Once each year, Pruco Life will send you a statement that provides certain
information pertinent to your own Contract. This statement will detail values,
transactions made, and specific Contract data that apply only to your particular
Contract.
You will also be sent annual and semi-annual reports of the Funds showing the
financial condition of the portfolios and the investments held in each
portfolio.
STATE REGULATION
Pruco Life is subject to regulation and supervision by the Department of
Insurance of the State of Arizona, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business.
Pruco Life is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business to determine solvency and compliance with local
insurance laws and regulations.
30
<PAGE>
In addition to the annual statements referred to above, Pruco Life is required
to file with Arizona and other jurisdictions a separate statement with respect
to the operations of all its variable contract accounts, in a form promulgated
by the National Association of Insurance Commissioners.
EXPERTS
The consolidated financial statements of Pruco Life and its subsidiaries as of
December 31, 1999 and 1998 and for each of the three years in the period ended
December 31, 1999 and the financial statements of the Account as of December 31,
1999 and for each of the three years in the period then ended included in this
prospectus have been so included in reliance on the reports 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.
Actuarial matters included in this prospectus have been examined by Ching-Meei
Chang, MAAA, FSA, Actuarial Director of Prudential, whose opinion is filed as an
exhibit to the registration statement.
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. In certain of these
lawsuits, large and/or indeterminate amounts are sought, including punitive or
exemplary damages.
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.
Prudential has indemnified Pruco Life for any liabilities incurred in connection
with sales practices litigation covering policyholders of individual permanent
life insurance policies issued in the United States from 1982 to 1995.
In 1999, 1998, 1997 and 1996, Prudential recorded provision in its Consolidated
Statements of Operations 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.
31
<PAGE>
ADDITIONAL INFORMATION
Pruco Life 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 the information set forth in the registration
statement. Certain portions have been omitted pursuant to the rules and
regulations of the SEC. The omitted information may, however, be obtained from
the SEC's Public Reference Section at 450 Fifth Street, N.W., Washington, D.C.
20549, or by telephoning (800) SEC-0330, upon payment of a prescribed fee.
Further information may also be obtained from Pruco Life. Its address and
telephone number are set forth on the inside front cover of this prospectus.
FINANCIAL STATEMENTS
The financial statements of the Account should be distinguished from the
consolidated financial statements of Pruco Life and its subsidiaries, which
should be considered only as bearing upon the ability of Pruco Life to meet its
obligations under the Contracts.
32
<PAGE>
DIRECTORS AND OFFICERS
The directors and major officers of Pruco Life, listed with their principal
occupations during the past five years, are shown below.
DIRECTORS OF PRUCO LIFE
JAMES J. AVERY, JR., Chairman and Director - President, Prudential Individual
Life Insurance since 1998; 1997 to 1998: Senior Vice President, Chief Actuary
and CFO, Prudential Individual Insurance Group; 1995 to 1997: President,
Prudential Select.
WILLIAM M. BETHKE, Director - Chief Investment Officer, Prudential since 1997;
prior to 1997: President, Prudential Capital Markets Group.
IRA J. KLEINMAN, Director - Executive Vice President, Prudential International
Insurance Group since 1997; 1995 to 1997: Chief Marketing and Product
Development Officer, Prudential Individual Insurance Group.
ESTHER H. MILNES, President and Director - Vice President and Chief Actuary,
Prudential Individual Life Insurance since 1999; prior to 1999: Vice President
and Actuary, Prudential Individual Insurance Group.
DAVID R. ODENATH, JR., Director - President, Prudential Investments since 1999;
prior to 1999: Senior Vice President and Director of Sales, Investment
Consulting Group, PaineWebber.
I. EDWARD PRICE, Vice Chairman and Director - Senior Vice President and Actuary,
Prudential Individual Life Insurance since 1998; 1995 to 1998: Senior Vice
President and Actuary, Prudential Individual Insurance Group.
OFFICERS WHO ARE NOT DIRECTORS
C. EDWARD CHAPLIN, Treasurer - Vice President and Treasurer, Prudential since
1995.
JAMES C. DROZANOWSKI, Senior Vice President - Vice President, Operations and
Systems, Prudential Individual Financial Services since 1998; 1996 to 1998: Vice
President and Operations Executive, Prudential Individual Insurance Group; 1995
to 1996: President, Credit Card Division, Chase Manhattan Bank.
CLIFFORD E. KIRSCH, Chief Legal Officer and Secretary - Chief Counsel, Variable
Products, Prudential Law Department since 1995.
SHIRLEY H. SHAO, Senior Vice President and Chief Actuary - Vice President and
Associate Actuary, Prudential since 1996; prior to 1996: Vice President and
Assistant Actuary, Prudential Corporate Risk Management.
DENNIS G. SULLIVAN, Vice President and Chief Accounting Officer - Vice President
and Deputy Controller, Prudential since 1998; 1997 to 1998: Vice President and
Controller, ContiFinancial Corporation; prior to 1997: Director, Salomon
Brothers.
The business address of all directors and officers of Pruco Life is 213
Washington Street, Newark, New Jersey 07102-2992.
Pruco Life directors and officers are elected annually.
33
<PAGE>
FINANCIAL STATEMENTS OF
THE VARIABLE UNIVERSAL LIFE SUBACCOUNTS OF
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF NET ASSETS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED PRUDENTIAL FLEXIBLE CONSERVATIVE HIGH
MARKET BOND EQUITY MANAGED BALANCED YIELD BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in The Prudential Series
Fund, Inc. Portfolios and non-
Prudential administered funds,
at net asset value [Note 3] ........... $352,861,083 $ 78,006,360 $865,577,753 $1,176,342,105 $604,324,669 $ 81,214,445
Receivable from (Payable to) Pruco Life
Insurance Company [Note 2] ............ (105,656) 2,934 (154,096) (123,743) (71,002) (52,708)
------------ ------------ ------------ -------------- ------------ ------------
Net Assets .............................. $352,755,427 $ 78,009,294 $865,423,657 $1,176,218,362 $604,253,667 $ 81,161,737
============ ============ ============ ============== ============ ============
NET ASSETS, representing:
Equity of contract owners [Note 4] ...... $352,755,427 $ 78,009,294 $865,423,657 $1,176,218,362 $604,253,667 $ 81,161,737
------------ ------------ ------------ -------------- ------------ ------------
$352,755,427 $ 78,009,294 $865,423,657 $1,176,218,362 $604,253,667 $ 81,161,737
============ ============ ============ ============== ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A1
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL T. ROWE PRICE JANUS MFS AMERICAN
STOCK EQUITY PRUDENTIAL PRUDENTIAL INTERNATIONAL AIM V.I. ASPEN EMERGING CENTURY
INDEX INCOME GLOBAL JENNISON STOCK VALUE GROWTH GROWTH VP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO FUND PORTFOLIO SERIES VALUE
- ------------ ------------ ------------ ------------ ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$371,750,279 $102,976,714 $187,555,899 $178,019,449 $ 6,471,799 $ 14,867,034 $ 19,533,719 $ 26,062,647 $ 5,466,211
74,466 (15,589) 1,875 224,249 0 0 0 0 0
- ------------ ------------ ------------ ------------ ----------- ------------ ------------ ------------ -----------
$371,824,745 $102,961,125 $187,557,774 $178,243,698 $ 6,471,799 $ 14,867,034 $ 19,533,719 $ 26,062,647 $ 5,466,211
============ ============ ============ ============ =========== ============ ============ ============ ===========
$371,824,745 $102,961,125 $187,557,774 $178,243,698 $ 6,471,799 $ 14,867,034 $ 19,533,719 $ 26,062,647 $ 5,466,211
- ------------ ------------ ------------ ------------ ----------- ------------ ------------ ------------ -----------
$371,824,745 $102,961,125 $187,557,774 $178,243,698 $ 6,471,799 $ 14,867,034 $ 19,533,719 $ 26,062,647 $ 5,466,211
============ ============ ============ ============ =========== ============ ============ ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A2
<PAGE>
FINANCIAL STATEMENTS OF
THE VARIABLE UNIVERSAL LIFE SUBACCOUNTS OF
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF OPERATIONS
For the periods ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
-------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income ....................... $ 11,957,892 $ 7,321,694 $ 2,458,119 $ 0 $ 4,540,659 $ 5,128,836
------------ ----------- ----------- ---------- ----------- -----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk
[Note 5A] ........................... 1,437,464 832,314 276,535 467,557 440,438 417,937
Reimbursement for excess expenses
[Note 5D] ........................... (10,332) (6,522) (10,194) (18,429) (17,331) (16,936)
------------ ----------- ----------- ---------- ----------- -----------
NET EXPENSES ............................ 1,427,132 825,792 266,341 449,128 423,107 401,001
------------ ----------- ----------- ---------- ----------- -----------
NET INVESTMENT INCOME (LOSS) ............ 10,530,760 6,495,902 2,191,778 (449,128) 4,117,552 4,727,835
------------ ----------- ----------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received .. 0 0 0 217,355 262,836 819,446
Realized gain (loss) on shares
redeemed ............................ 0 0 0 69,374 174,627 216,418
Net change in unrealized gain (loss)
on investments ...................... 0 0 0 (831,201) 73,088 (456,475)
------------ ----------- ----------- ---------- ----------- -----------
NET GAIN (LOSS) ON INVESTMENTS .......... 0 0 0 (544,472) 510,551 579,389
------------ ----------- ----------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ............................ $ 10,530,760 $ 6,495,902 $ 2,191,778 $ (993,600) $ 4,628,103 $ 5,307,224
============ =========== =========== ========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A3
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
PRUDENTIAL FLEXIBLE CONSERVATIVE
EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- ---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 14,415,104 $ 15,582,045 $ 17,535,990 $ 53,182 $ 38,101,728 $ 32,821,189 $ 24,546,800 $ 25,145,187 $ 25,761,286
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,122,283 5,123,051 4,548,952 7,020,385 7,013,282 6,514,308 3,606,639 3,550,351 3,334,597
(692,806) (740,855) (588,463) (2,725,324) (2,657,281) (2,462,808) (1,065,488) (1,018,563) (912,152)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
4,429,477 4,382,196 3,960,489 4,295,061 4,356,001 4,051,500 2,541,151 2,531,788 2,422,445
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
9.985,627 11,199,849 13,575,501 (4,241,879) 33,745,727 28,769,689 22,005,649 22,613,399 23,338,841
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
101,838,960 92,257,856 43,792,759 13,493,901 120,086,729 170,075,692 3,418,854 35,735,484 61,582,374
30,562,177 22,299,396 12,144,753 8,687,128 8,717,338 13,389,631 4,164,171 3,601,498 5,214,424
(45,860,592) (55,442,702) 91,191,354 66,161,585 (53,221,275) (37,601,198) 7,019,129 1,172,190 (22,803,360)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
86,540,545 59,114,550 147,128,866 88,342,614 75,582,792 145,864,125 14,602,154 40,509,172 43,993,438
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 96,526,172 $ 70,314,399 $160,704,367 $ 84,100,735 $109,328,519 $174,633,814 $ 36,607,803 $ 63,122,571 $ 67,332,279
============ ============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A4
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
THE VARIABLE UNIVERSAL LIFE SUBACCOUNTS OF
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF OPERATIONS
For the periods ended December 31, 1999, 1998 and 1997
SUBACCOUNTS
------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
HIGH YIELD STOCK
BOND INDEX
PORTFOLIO PORTFOLIO
---------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
----------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income .......................... $ 231,604 $ 5,833,057 $ 3,606,406 $ 3,454,325 $ 2,391,120 $ 1,739,314
----------- ------------ ----------- ------------ ------------ ------------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk
[Note 5A] .............................. 491,069 313,600 226,827 1,869,495 1,080,631 677,531
Reimbursement for excess expenses
[Note 5D] .............................. 0 0 0 0 0 0
----------- ------------ ----------- ------------ ------------ ------------
NET EXPENSES ............................... 491,069 313,600 226,827 1,869,495 1,080,631 677,531
----------- ------------ ----------- ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............... (259,465) 5,519,457 3,379,579 1,584,830 1,310,489 1,061,783
----------- ------------ ----------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received ..... 0 0 0 4,290,756 3,715,956 3,715,259
Realized gain (loss) on shares redeemed .. (829,891) (184,781) 19,344 15,770,959 5,816,280 2,487,203
Net change in unrealized gain (loss)
on investments ......................... 4,361,938 (5,663,620) 1,276,625 36,090,405 39,830,579 23,073,809
----------- ------------ ----------- ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS ............. 3,532,047 (5,848,401) 1,295,969 56,152,120 49,362,815 29,276,271
----------- ------------ ----------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ............................... $ 3,272,582 $ (328,944) $ 4,675,548 $ 57,736,950 $ 50,673,304 $ 30,338,054
=========== ============ =========== ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A5
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
PRUDENTIAL
EQUITY PRUDENTIAL PRUDENTIAL
INCOME GLOBAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------- ----------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2,352,951 $ 2,687,713 $ 1,948,909 $ 582,037 $ 767,006 $ 328,183 $ 187,237 $ 94,006 $ 40,345
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
611,129 607,915 441,648 794,369 282,944 158,801 641,137 252,490 100,484
0 0 0 0 0 0 0 0 0
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
611,129 607,915 441,648 794,369 282,944 158,801 641,137 252,490 100,484
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
1,741,822 2,079,798 1,507,261 (212,332) 484,062 169,382 (453,900) (158,484) (60,139)
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
11,452,953 5,974,930 8,147,416 1,020,553 3,473,934 1,296,459 6,522,518 971,435 1,372,676
2,443,128 997,898 256,502 14,965,295 651,742 251,779 6,738,415 1,799,613 167,648
(4,214,000) (13,181,479) 12,255,558 45,405,939 6,143,980 (363,854) 29,898,188 11,054,729 2,544,336
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
9,682,081 (6,208,651) 20,659,476 61,391,787 10,269,656 1,184,384 43,159,121 13,825,777 4,084,660
- ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------ -----------
$ 11,423,903 $ (4,128,853) $ 22,166,737 $ 61,179,455 $ 10,753,718 $ 1,353,766 $ 42,705,221 $ 13,667,293 $ 4,024,521
============ ============ ============ ============ ============ =========== ============ ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A6
<PAGE>
FINANCIAL STATEMENTS OF
THE VARIABLE UNIVERSAL LIFE SUBACCOUNTS OF
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF OPERATIONS
For the periods ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
-----------------------------------------------------------------------------
T. ROWE PRICE AIM V.I.
INTERNATIONAL STOCK VALUE
PORTFOLIO* FUND*
-------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income .......................... $ 22,529 $ 65,861 $ 2,930 $ 36,577 $ 14,397 $ 3,293
----------- ---------- --------- ----------- ---------- --------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk
[Note 5A] .............................. 23,027 13,588 472 45,204 9,772 424
Reimbursement for excess expenses
[Note 5D] .............................. 0 0 0 0 0 0
----------- ---------- --------- ----------- ---------- --------
NET EXPENSES ............................... 23,027 13,588 472 45,204 9,772 424
----------- ---------- --------- ----------- ---------- --------
NET INVESTMENT INCOME (LOSS) ............... (498) 52,273 2,458 (8,627) 4,625 2,869
----------- ---------- --------- ----------- ---------- --------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received ... 70,806 23,244 4,151 191,273 127,325 10,111
Realized gain (loss) on shares
redeemed ............................. 865,549 268,182 367 1,390,692 2,503 649
Net change in unrealized gain (loss)
on investments ....................... 728,570 72,884 (7,256) 759,066 384,848 (12,003)
----------- ---------- --------- ----------- ---------- --------
NET GAIN (LOSS) ON INVESTMENTS ............. 1,664,925 364,310 (2,738) 2,341,031 514,676 (1,243)
----------- ---------- --------- ----------- ---------- --------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ............................... $ 1,664,427 $ 416,583 $ (280) $ 2,332,404 $ 519,301 $ 1,626
=========== ========== ========= =========== ========== ========
</TABLE>
* Became available on June 30, 1997 (Note 1)
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A7
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------
MFS
JANUS ASPEN EMERGING GROWTH AMERICAN CENTURY
GROWTH PORTFOLIO* SERIES* VP VALUE*
- ------------------------------------ -------------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ----------- ---------- ---------- ----------- ----------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 26,559 $ 45,081 $ 0 $ 0 $ 0 $ 0 $ 26,882 $ 3,101 $ 0
- ----------- ---------- ---------- ----------- ----------- --------- ---------- --------- --------
54,421 7,904 553 63,390 16,723 483 21,707 5,036 371
0 0 0 0 0 0 0 0 0
- ----------- ---------- ---------- ----------- ----------- --------- ---------- --------- --------
54,421 7,904 553 63,390 16,723 483 21,707 5,036 371
- ----------- ---------- ---------- ----------- ----------- --------- ---------- --------- --------
(27,862) 37,177 (553) (63,390) (16,723) (483) 5,175 (1,935) (371)
- ----------- ---------- ---------- ----------- ----------- --------- ---------- --------- --------
42,800 35,736 0 0 57,356 0 254,685 37,021 0
967,207 82,695 (43,819) 4,379,704 705,856 (8,124) (180,693) (4,083) 0
3,145,569 455,645 0 4,577,759 329,413 55,064 (236,903) (3,206) 4,263
- ----------- ---------- ---------- ----------- ----------- --------- ---------- --------- --------
4,155,576 574,076 (43,819) 8,957,463 1,092,625 46,940 (162,911) 29,732 4,263
- ----------- ---------- ---------- ----------- ----------- --------- ---------- --------- --------
$ 4,127,714 $ 611,253 $ (44,372) $ 8,894,073 $ 1,075,902 $ 46,457 $ (157,736) $ 27,797 $ 3,892
=========== ========== ========== =========== =========== ========= ========== ========= ========
</TABLE>
* Became available on June 30, 1997 (Note 1)
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A8
<PAGE>
FINANCIAL STATEMENTS OF
THE VARIABLE UNIVERSAL LIFE SUBACCOUNTS OF
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the periods ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
----------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) .............. $ 10,530,760 $ 6,495,902 $ 2,191,778 $ (449,128) $ 4,117,552 $ 4,727,835
Capital gains distributions received ...... 0 0 0 217,355 262,836 819,446
Realized gain (loss) on shares redeemed ... 0 0 0 69,374 174,627 216,418
Net change in unrealized gain (loss) on
investments ............................. 0 0 0 (831,201) 73,088 (456,475)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ................................ 10,530,760 6,495,902 2,191,778 (993,600) 4,628,103 5,307,224
------------ ------------ ------------ ------------ ------------ ------------
PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ............... 291,867,279 230,584,983 11,064,582 9,213,218 6,525,706 5,585,180
Policy Loans .............................. (4,003,912) (2,667,911) (1,916,044) (1,646,549) (1,912,675) (2,089,744)
Policy Loan Repayments and Interest ....... 3,688,681 1,177,559 1,011,194 1,939,244 1,564,318 1,615,960
Surrenders, Withdrawals and Death
Benefits ................................ (3,216,419) (10,685,261) (3,863,779) (3,977,332) (3,620,023) (3,778,210)
Net Transfers From (To) Other Subaccounts
or Fixed Rate Option .................... (68,358,175) (139,236,713) (7,633,294) (41,084) 1,555,360 (2,617,340)
Administrative and Other Charges .......... (6,681,729) (3,846,260) (2,185,866) (3,374,192) (2,755,767) (2,918,054)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS ................................. 213,295,725 75,326,397 (3,523,207) 2,113,305 1,356,919 (4,202,208)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE
ACCOUNT [Note 7] .......................... 0 (1,697,004) 1,532,549 0 3,878 (68,990)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS .................................... 223,826,485 80,125,295 201,120 1,119,705 5,988,900 1,036,026
NET ASSETS
Beginning of period ....................... 128,928,942 48,803,647 48,602,527 76,889,589 70,900,689 69,864,663
------------ ------------ ------------ ------------ ------------ ------------
End of period ............................. $352,755,427 $128,928,942 $ 48,803,647 $ 78,009,294 $ 76,889,589 $ 70,900,689
============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A9
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
PRUDENTIAL FLEXIBLE CONSERVATIVE
EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- ---------------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------ ------------ ------------ -------------- -------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9,985,627 $ 11,199,849 $ 13,575,501 $ (4,241,879) $ 33,745,727 $ 28,769,689 $ 22,005,649 $ 22,613,399 $ 23,338,841
101,838,960 92,257,856 43,792,759 13,493,901 120,086,729 170,075,692 3,418,854 35,735,484 61,582,374
30,562,177 22,299,396 12,144,753 8,687,128 8,717,338 13,389,631 4,164,171 3,601,498 5,214,424
(45,860,592) (55,442,702) 91,191,354 66,161,585 (53,221,275) (37,601,198) 7,019,129 1,172,190 (22,803,360)
- ------------ ------------ ------------ -------------- -------------- -------------- ------------ ------------ ------------
96,526,172 70,314,399 160,704,367 84,100,735 109,328,519 174,633,814 36,607,803 63,122,571 67,332,279
- ------------ ------------ ------------ -------------- -------------- -------------- ------------ ------------ ------------
21,967,601 46,913,467 45,437,359 25,375,491 64,854,058 71,851,051 16,841,992 35,878,600 37,767,948
(25,270,787) (27,628,665) (25,646,232) (31,546,845) (34,421,241) (34,658,782) (13,483,060) (14,672,747) (14,693,056)
22,439,687 19,108,549 15,784,614 32,238,484 24,491,018 24,227,411 12,607,451 11,720,294 10,942,826
(35,567,708) (52,901,596) (38,595,315) (53,970,161) (56,024,536) (59,613,280) (25,211,828) (29,207,186) (30,175,056)
(31,481,752) (3,542,834) 6,718,514 (28,719,869) (17,651,111) (13,344,352) (11,980,279) (8,889,136) (9,474,946)
(25,189,715) (25,435,162) (27,110,637) (37,896,636) (39,005,157) (43,984,351) (20,727,360) (20,731,480) (23,099,749)
- ------------ ------------ ------------ -------------- -------------- -------------- ------------ ------------ ------------
(73,102,674) (43,486,241) (23,411,697) (94,519,536) (57,756,969) (55,522,303) (41,953,084) (25,901,655) (28,732,033)
- ------------ ------------ ------------ -------------- -------------- -------------- ------------ ------------ ------------
0 (160,831) (108,813) 0 (399,096) (938,199) 0 (143,273) (423,806)
- ------------ ------------ ------------ -------------- -------------- -------------- ------------ ------------ ------------
23,423,498 26,667,327 137,183,857 (10,418,801) 51,172,454 118,173,312 (5,345,281) 37,077,643 38,176,440
842,000,159 815,332,832 678,148,975 1,186,637,163 1,135,464,709 1,017,291,397 609,598,948 572,521,305 534,344,865
- ------------ ------------ ------------ -------------- -------------- -------------- ------------ ------------ ------------
$865,423,657 $842,000,159 $815,332,832 $1,176,218,362 $1,186,637,163 $1,135,464,709 $604,253,667 $609,598,948 $572,521,305
============ ============ ============ ============== ============== ============== ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A10
<PAGE>
FINANCIAL STATEMENTS OF
THE VARIABLE UNIVERSAL LIFE SUBACCOUNTS OF
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the periods ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------
PRUDENTIAL
HIGH YIELD PRUDENTIAL
BOND STOCK INDEX
PORTFOLIO PORTFOLIO
---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) ............ $ (259,465) $ 5,519,457 $ 3,379,579 $ 1,584,830 $ 1,310,489 $ 1,061,783
Capital gains distributions received 0 0 0 4,290,756 3,715,956 3,715,259
Realized gain (loss) on shares
redeemed .............................. (829,891) (184,781) 19,344 15,770,959 5,816,280 2,487,203
Net change in unrealized gain (loss) on
investments ........................... 4,361,938 (5,663,620) 1,276,625 36,090,405 39,830,579 23,073,809
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS .............................. 3,272,582 (328,944) 4,675,548 57,736,950 50,673,304 30,338,054
------------ ------------ ------------ ------------ ------------ ------------
PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ............. 3,691,424 4,510,013 3,024,941 34,027,403 22,254,412 11,823,208
Policy Loans ............................ (901,124) (1,009,491) (1,149,056) (9,143,580) (4,951,084) (4,047,578)
Policy Loan Repayments and Interest ..... 942,474 832,922 751,249 8,218,322 5,657,189 3,296,705
Surrenders, Withdrawals and Death
Benefits .............................. (1,587,661) (1,848,918) (1,898,223) (12,349,782) (9,039,306) (8,511,446)
Net Transfers From (To) Other Subaccounts
or Fixed Rate Option .................. (1,433,615) 39,327,603 (3,054) 50,141,104 62,958,405 16,075,177
Administrative and Other Charges ........ (2,332,129) (1,832,130) (1,622,796) (12,115,753) (7,374,716) (4,374,518)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS ............................... (1,620,631) 39,979,999 (896,939) 58,777,714 69,504,900 14,261,548
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE
ACCOUNTS [Note 7] ....................... 0 (79,861) 23,767 0 790,662 (535,016)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS .................................. 1,651,951 39,571,194 3,802,376 116,514,664 120,968,866 44,064,586
NET ASSETS:
Beginning of period ..................... 79,509,786 39,938,592 36,136,216 255,310,081 134,341,215 90,276,629
------------ ------------ ------------ ------------ ------------ ------------
End of period ........................... $ 81,161,737 $ 79,509,786 $ 39,938,592 $371,824,745 $255,310,081 $134,341,215
============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A11
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------
PRUDENTIAL
EQUITY PRUDENTIAL PRUDENTIAL
INCOME GLOBAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------- ---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,741,822 $ 2,079,798 $ 1,507,261 $ (212,332) $ 484,062 $ 169,382 $ (453,900) $ (158,484) $ (60,139)
11,452,953 5,974,930 8,147,416 1,020,553 3,473,934 1,296,459 6,522,518 971,435 1,372,676
2,443,128 997,898 256,502 14,965,295 651,742 251,779 6,738,415 1,799,613 167,648
(4,214,000) (13,181,479) 12,255,558 45,405,939 6,143,980 (363,854) 29,898,188 11,054,729 2,544,336
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
11,423,903 (4,128,853) 22,166,737 61,179,455 10,753,718 1,353,766 42,705,221 13,667,293 4,024,521
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
9,746,539 12,000,153 6,514,479 5,006,744 3,547,480 2,426,347 30,287,545 10,395,819 3,275,515
(2,784,001) (3,291,047) (2,378,404) (1,079,045) (1,153,101) (665,649) (4,044,172) (1,342,282) (615,994)
2,348,262 1,845,415 1,466,470 818,588 577,417 410,448 1,878,823 802,423 403,472
(4,314,358) (4,700,423) (3,616,294) (1,254,030) (1,106,969) (1,030,134) (3,757,076) (8,014,188) (663,449)
(7,934,532) 9,923,725 9,926,365 40,973,920 46,088,034 3,018,892 55,494,343 24,792,645 8,134,626
(4,541,664) (3,993,433) (2,739,257) (2,371,271) (1,342,564) (923,293) (7,124,250) (2,746,775) (840,471)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(7,479,754) 11,784,390 9,173,359 42,094,906 46,610,297 3,236,611 72,735,213 23,887,642 9,693,699
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
0 (206,095) 226,288 0 (317,822) (120,958) 0 288,264 (30,216)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
3,944,149 7,449,442 31,566,384 103,274,361 57,046,193 4,469,419 115,440,434 37,843,199 13,688,004
99,016,976 91,567,534 60,001,150 84,283,413 27,237,220 22,767,801 62,803,264 24,960,065 11,272,061
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$102,961,125 $ 99,016,976 $ 91,567,534 $187,557,774 $ 84,283,413 $ 27,237,220 $178,243,698 $ 62,803,264 $ 24,960,065
============ ============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A12
<PAGE>
FINANCIAL STATEMENTS OF
THE VARIABLE UNIVERSAL LIFE SUBACCOUNTS OF
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the periods ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
T. ROWE PRICE AIM V.I.
INTERNATIONAL VALUE
STOCK PORTFOLIO* FUND*
------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- --------- ------------ ----------- ---------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) ............. $ (498) $ 52,273 $ 2,458 $ (8,627) $ 4,625 $ 2,869
Capital gains distributions received ..... 70,806 23,244 4,151 191,273 127,325 10,111
Realized gain (loss) on shares
redeemed ............................... 865,549 268,182 367 1,390,692 2,503 649
Net change in unrealized gain (loss) on
investments ............................ 728,570 72,884 (7,256) 759,066 384,848 (12,003)
----------- ----------- --------- ------------ ----------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ............................... 1,664,427 416,583 (280) 2,332,404 519,301 1,626
----------- ----------- --------- ------------ ----------- ---------
PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments .............. 2,977,838 1,654,002 249,422 8,558,676 2,440,911 328,696
Policy Loans ............................. (29,165) (890) 0 (177,358) (4,704) 0
Policy Loan Repayments and Interest ...... 1,269 88 0 6,360 26 0
Surrenders, Withdrawals and Death
Benefits ............................... (61,496) (7,222) 0 (145,243) (7,602) 0
Net Transfers From (To) Other Subaccounts
or Fixed Rate Option ................... 442,737 (380,435) 209,865 2,503,335 165,072 234,653
Administrative and Other Charges ......... (555,992) (298,123) (21,962) (1,473,668) (398,776) (36,112)
----------- ----------- --------- ------------ ----------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS ................................ 2,775,191 967,420 437,325 9,272,102 2,194,927 527,237
----------- ----------- --------- ------------ ----------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE
ACCOUNTS [Note 7] ........................ 0 239,675 (28,542) 0 250 19,187
----------- ----------- --------- ------------ ----------- ---------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ................................... 4,439,618 1,623,678 408,503 11,604,506 2,714,478 548,050
NET ASSETS
Beginning of period ...................... 2,032,181 408,503 0 3,262,528 548,050 0
----------- ----------- --------- ------------ ----------- ---------
End of period ............................ $ 6,471,799 $ 2,032,181 $ 408,503 $ 14,867,034 $ 3,262,528 $ 548,050
=========== =========== ========= ============ =========== =========
</TABLE>
* Became available on June 30, 1997 (Note 1)
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A13
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------------
AMERICAN
JANUS ASPEN MFS CENTURY
GROWTH EMERGING VP
PORTFOLIO* GROWTH SERIES VALUE*
- -------------------------------------- ---------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------ ----------- --------- ------------ ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (27,862) $ 37,177 $ (553) $ (63,390) $ (16,723) $ (483) $ 5,175 $ (1,935) $ (371)
42,800 35,736 0 0 57,356 0 254,685 37,021 0
967,207 82,695 (43,819) 4,379,704 705,856 (8,124) (180,693) (4,083) 0
3,145,569 455,645 0 4,577,759 329,413 55,064 (236,903) (3,206) 4,263
- ------------ ----------- --------- ------------ ----------- ----------- ----------- ----------- ---------
4,127,714 611,253 (44,372) 8,894,073 1,075,902 46,457 (157,736) 27,797 3,892
- ------------ ----------- --------- ------------ ----------- ----------- ----------- ----------- ---------
10,318,898 2,418,661 167,622 8,690,503 2,884,035 425,611 3,324,711 1,278,357 168,974
(133,935) (2,766) 0 (203,531) (10,637) 0 (12,970) (3,346) 0
5,698 14 0 12,824 2,886 0 2,466 106 0
(133,244) (4,272) 0 (149,983) (1,472,154) 30 (72,617) (2,912) 0
3,891,786 340,962 207,117 5,836,315 217,538 1,719,780 1,449,853 155,288 151,959
(1,841,631) (370,447) (23,479) (1,511,977) (549,479) (42,152) (616,554) (217,397) (19,728)
- ------------ ----------- --------- ------------ ----------- ----------- ----------- ----------- ---------
12,107,572 2,382,152 351,260 12,674,151 1,072,189 2,103,269 4,074,889 1,210,096 301,205
- ------------ ----------- --------- ------------ ----------- ----------- ----------- ----------- ---------
0 (42,971) 41,111 0 228,916 (32,310) 0 (4,098) 10,166
- ------------ ----------- --------- ------------ ----------- ----------- ----------- ----------- ---------
16,235,286 2,950,434 347,999 21,568,224 2,377,007 2,117,416 3,917,153 1,233,795 315,263
3,298,433 347,999 0 4,494,423 2,117,416 0 1,549,058 315,263 0
- ------------ ----------- --------- ------------ ----------- ----------- ----------- ----------- ---------
$ 19,533,719 $ 3,298,433 $ 347,999 $ 26,062,647 $ 4,494,423 $ 2,117,416 $ 5,466,211 $ 1,549,058 $ 315,263
============ =========== ========= ============ =========== =========== =========== =========== =========
</TABLE>
* Became available on June 30, 1997 (Note 1)
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A20
A14
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
THE VARIABLE UNIVERSAL LIFE SUBACCOUNTS OF
PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
DECEMBER 31, 1999
NOTE 1: GENERAL
Pruco Life Variable Appreciable Account (the "Account") was
established on January 13, 1984 under Arizona law as a separate
investment account of Pruco Life Insurance Company ("Pruco Life")
which is a wholly-owned subsidiary of The Prudential Insurance Company
of America ("Prudential"). The assets of the Account are segregated
from Pruco Life's other assets. Proceeds from the purchases of Pruco
Life's Variable Appreciable Life ("VAL") contracts and Pruco Life's
Variable Universal Life ("VUL") contracts are invested in the Account
as directed by the contract owners.
The Account is registered under the Investment Company Act of 1940, as
amended, as a unit investment trust. There are eighteen subaccounts
within the Account. VUL contracts offer the option to invest in
fifteen of these subaccounts within the Account, each of which invests
in either a corresponding portfolio of The Prudential Series Fund,
Inc. (the "Series Fund"), or any of the non-Prudential administered
funds shown in Note 3. The Series Fund is a diversified open-end
management investment company, and is managed by Prudential.
New sales of the VAL product which invests in the Account were
discontinued as of May 1, 1992. However, premium payments made by
current VAL contract owners will continue to be received by the
Account.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in conformity with
accounting principles generally accepted in the United States
("GAAP"). The preparation of the financial statements in conformity
with GAAP requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could
differ from those estimates.
Investments--The investments in shares of the Series Fund or the
-----------
non-Prudential administered funds are stated at the net asset value of
the respective portfolio.
Security Transactions--Realized gains and losses on security
---------------------
transactions are reported on an average cost basis. Purchase and sale
transactions are recorded as of the trade date of the security being
purchased or sold.
Distributions Received--Dividend and capital gain distributions
----------------------
received are reinvested in additional shares of the Series Fund or the
non-Prudential administered funds and are recorded on the ex-dividend
date.
Receivable from (Payable to) Pruco Life Insurance Company--At times,
---------------------------------------------------------
Pruco Life may owe an amount to or expect to receive an amount from
the Account primarily related to processing contract owner payments,
surrenders, withdrawals and death benefits. This amount is reflected
in the Account's Statements of Net Assets as either a receivable from
or payable to Pruco Life. The receivable and or payable does not have
an effect on the Contract owner's account or the related unit value.
A15
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUCO LIFE VARIABLE
APPRECIABLE ACCOUNT
The net asset value per share for each portfolio of the Series Fund or
the non-Prudential administered funds, the number of shares (rounded)
of each portfolio held by the Account and the aggregate cost of
investments in such shares at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED PRUDENTIAL FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Number of shares (rounded): 35,286,108 7,123,868 29,950,787 66,686,060 39,344,054
Net asset value per share $ 10.00 $ 10.95 $ 28.90 $ 17.64 $ 15.36
Cost: $352,861,083 $ 77,108,157 $ 668,536,559 $1,042,854,501 $552,783,183
<CAPTION>
PRUDENTIAL PRUDENTIAL PRUDENTIAL
HIGH YIELD STOCK EQUITY PRUDENTIAL PRUDENTIAL
BOND INDEX INCOME GLOBAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Number of shares (rounded): 10,799,793 8,363,336 5,275,446 6,054,096 5,496,124
Net asset value per share $ 7.52 $ 44.45 $ 19.52 $ 30.98 $ 32.39
Cost: $ 82,299,164 $239,275,544 $ 96,217,690 $ 133,251,383 $133,592,098
<CAPTION>
T. ROWE PRICE JANUS MFS
INTERNATIONAL AIM V.I. ASPEN EMERGING AMERICAN
STOCK VALUE GROWTH GROWTH CENTURY VP
PORTFOLIO FUND PORTFOLIO SERIES VALUE
------------ ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Number of shares (rounded): 339,905 443,792 580,497 686,944 918,691
Net asset value per share $ 19.04 $ 33.50 $ 33.65 $ 37.94 $ 5.95
Cost: $ 5,677,601 $ 13,735,124 $ 15,932,505 $ 21,100,411 $ 5,702,057
</TABLE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding contract owner units (rounded), unit values and total
value of contract owner equity at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED PRUDENTIAL FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding
(VAL - rounded):................... 24,005,606 22,325,516 104,669,108 228,032,365 142,916,141
Unit Value (VAL)..................... $ 2.01098 $ 2.99334 $ 8.06306 $ 5.10277 $ 4.13896
------------ ------------ ------------ -------------- ------------
Contract Owner Equity (VAL).......... $ 48,274,794 $ 66,827,860 $843,953,297 $1,163,596,713 $591,524,192
------------ ------------ ------------ -------------- ------------
Contract Owner Units Outstanding
(VUL - rounded):................... 265,035,413 9,873,231 14,119,106 9,153,352 9,520,853
Unit Value (VUL)..................... $ 1.14883 $ 1.13250 $ 1.52066 $ 1.37891 $ 1.33701
------------ ------------ ------------ -------------- ------------
Contract Owner Equity (VUL).......... $304,480,633 $ 11,181,434 $ 21,470,360 $ 12,621,649 $ 12,729,475
------------ ------------ ------------ -------------- ------------
TOTAL CONTRACT OWNER EQUITY.......... $352,755,427 $ 78,009,294 $865,423,657 $1,176,218,362 $604,253,667
============ ============= ============= ============== ============
</TABLE>
A16
<PAGE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL
HIGH YIELD STOCK EQUITY PRUDENTIAL PRUDENTIAL
BOND INDEX INCOME GLOBAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding
(VAL - rounded): .................... 13,118,467 37,436,327 18,598,933 19,809,214 35,619,066
Unit Value (VAL)....................... $ 2.48308 $ 6.20254 $ 4.70908 $ 2.58864 $ 3.60270
------------ ------------ ------------- -------------- ------------
Contract Owner Equity (VAL)............ $ 32,574,203 $232,200,315 $ 87,583,865 $ 51,278,924 $128,324,808
------------ ------------ ------------- -------------- ------------
Contract Owner Units Outstanding
(VUL - rounded): .................... 42,337,281 68,982,698 10,176,876 68,443,657 20,010,619
Unit Value (VUL)....................... $ 1.14763 $ 2.02405 $ 1.51100 $ 1.99111 $ 2.49462
------------ ------------ ------------- -------------- ------------
Contract Owner Equity (VUL)............ $ 48,587,534 $139,624,430 $ 15,377,260 $ 136,278,850 $ 49,918,890
------------ ------------ ------------- -------------- ------------
TOTAL CONTRACT OWNER EQUITY............ $ 81,161,737 $371,824,745 $ 102,961,125 $ 187,557,774 $178,243,698
============ ============ ============= ============== ============
</TABLE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------
T. ROWE PRICE JANUS MFS
INTERNATIONAL AIM V.I. ASPEN EMERGING AMERICAN
STOCK VALUE GROWTH GROWTH CENTURY VP
PORTFOLIO FUND PORTFOLIO SERIES VALUE
------------ ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding
(VAL - rounded): .................... N/A N/A N/A N/A N/A
Unit Value (VAL)....................... N/A N/A N/A N/A N/A
------------ ------------ ------------- -------------- ------------
Contract Owner Equity (VAL)............ N/A N/A N/A N/A N/A
------------ ------------ ------------- -------------- ------------
Contract Owner Units Outstanding
(VUL - rounded): .................... 4,629,658 8,254,465 9,400,747 10,136,217 4,823,099
Unit Value (VUL)....................... $ 1.39790 $ 1.80109 $ 2.07789 $ 2.57124 $ 1.13334
------------ ------------ ------------- -------------- ------------
Contract Owner Equity (VUL)............ $ 6,471,799 $ 14,867,034 $ 19,533,719 $ 26,062,647 $ 5,466,211
------------ ------------ ------------- -------------- ------------
TOTAL CONTRACT OWNER EQUITY............ $ 6,471,799 $ 14,867,034 $ 19,533,719 $ 26,062,647 $ 5,466,211
============ ============ ============= ============== ============
</TABLE>
NOTE 5: CHARGES AND EXPENSES
A. Mortality Risk and Expense Risk Charges
The mortality risk and expense risk charges at an effective annual
rate of 0.60% are applied daily against the net assets
representing equity of VAL and VUL contract owners held in each
subaccount. Mortality risk is that contract owners may not live as
long as estimated and expense risk is that the cost of issuing and
administering the policies may exceed related charges by Pruco
Life.
B. Deferred Sales Charge
A deferred sales charge is imposed upon the surrender of certain
variable life insurance contracts to compensate Pruco Life for
sales and other marketing expenses. The amount of any sales charge
will depend on the number of years that have elapsed since the
contract was issued. No sales charge will be imposed after the
tenth year of the contract. No sales charge will be imposed on
death benefits.
C. Partial Withdrawal Charge
A charge is imposed by Pruco Life on partial withdrawals of the
cash surrender value. A charge equal to the lesser of $25 or 2%
will be made in connection with each partial withdrawal of the
cash surrender value of a contract.
D. Expense Reimbursement
Pursuant to a prior merger agreement, the Account is reimbursed by
Pruco Life for expenses in excess of 0.40% of VAL's average daily
net assets incurred by the Money Market, Diversified Bond, Equity,
Flexible Managed, and the Conservative Balanced Portfolios of the
Series Fund.
E. Cost of Insurance and Other Related Charges
Contract owner contributions are subject to certain deductions
prior to being invested in the Account. The deductions are for (1)
state premium taxes; (2) sales charges which are deducted in order
to compensate
A17
<PAGE>
Pruco Life for the cost of selling the contract. Contracts are
also subject to monthly charges for the costs of administering
the contract and to compensate Pruco Life for the guaranteed
minimum death benefit risk.
NOTE 6: TAXES
Pruco Life is taxed as a "life insurance company" as defined by the
Internal Revenue Code and the results of operations of the Account
form a part of Prudential's consolidated federal tax return. Under
current federal law, no federal income taxes are payable by the
Account. As such, no provision for tax liability has been recorded in
these financial statements.
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN THE ACCOUNT
The increase (decrease) in net assets retained in the account
represents the net contributions (withdrawals) of Pruco Life to (from)
the Account. Effective October 13, 1998, Pruco Life no longer
maintains a position in the account. Previously, Pruco Life maintained
a position in the Account for liquidity purposes including unit
purchases and redemptions, fund share transactions and expense
processing.
NOTE 8: UNIT ACTIVITY
Transactions in units (including transfers among subaccounts) for the
years ended December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
-------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
MONEY MARKET DIVERSIFIED BOND
PORTFOLIO PORTFOLIO
------------------------------------------ --------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 688,439,469 498,180,793 29,773,083 18,867,479 9,113,632 3,976,684
Contract Owner
Redemptions: (501,235,815) (423,252,123) (30,480,425) (13,957,645) (7,079,685) (5,177,102)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
EQUITY FLEXIBLE MANAGED
PORTFOLIO PORTFOLIO
------------------------------------------ --------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 17,583,983 18,906,117 16,279,305 18,092,420 25,741,091 28,250,561
Contract Owner
Redemptions: (21,980,273) (20,093,393) (18,324,622) (33,917,508) (36,167,230) (40,903,219)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
CONSERVATIVE BALANCED HIGH YIELD BOND
PORTFOLIO PORTFOLIO
------------------------------------------ -------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 14,980,379 18,420,856 18,585,299 11,122,173 44,158,742 4,131,802
Contract Owner
Redemptions: (22,112,313) (23,069,969) (26,481,934) (9,085,397) (7,229,637) (4,240,015)
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
STOCK INDEX EQUITY INCOME
PORTFOLIO PORTFOLIO
------------------------------------------ ------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 108,072,695 120,829,432 13,730,033 10,044,553 14,537,433 8,191,055
Contract Owner
Redemptions: (81,305,298) (76,717,334) (7,373,719) (8,957,622) (8,866,254) (4,945,056)
</TABLE>
A18
<PAGE>
NOTE 8: UNIT ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
GLOBAL JENNISON
PORTFOLIO PORTFOLIO
------------------------------------------ -------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 114,173,237 43,728,816 6,841,694 204,117,698 132,450,542 9,601,165
Contract Owner
Redemptions: (82,857,290) (6,235,706) (4,372,292) (175,266,138) (119,371,798) (3,617,614)
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------------------
T. ROWE PRICE AIM V.I.
INTERNATIONAL STOCK VALUE
PORTFOLIO* FUND*
------------------------------------------ ------------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- --------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 46,454,627 171,490,487 2,496,937 19,310,773 2,310,710 535,143
Contract Owner
Redemptions: (43,751,608) (170,009,856) (2,048,705) (13,395,423) (467,027) (39,711)
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------------------
MFS
JANUS EMERGING
ASPEN GROWTH GROWTH
PORTFOLIO* SERIES*
------------------------------------------ ------------------------------------------
1999 1998 1997 1999 1998 1997
----------- --------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 12,731,721 3,889,309 1,778,211 55,426,917 127,030,308 8,307,260
Contract Owner
Redemptions: (5,602,997) (1,940,522) (1,452,996) (48,361,164) (125,888,906) (6,378,197)
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------
AMERICAN
CENTURY
VP VALUE*
------------------------------------------
1999 1998 1997
----------- --------- -------
Contract Owner
Contributions: 6,373,133 1,359,801 295,651
Contract Owner
Redemptions: (2,897,228) (288,508) (19,750)
* Became available on June 30, 1997 (Note 1)
</TABLE>
NOTE 9: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of
investments in the Series Fund and the non-Prudential administered
funds for the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED PRUDENTIAL FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Purchases ................ $ 720,067,352 $ 19,358,925 $ 21,839,746 $ 8,240,674 $ 11,063,685
Sales .................... $(508,093,105) $ (17,697,681) $ (99,217,802) $(106,931,529) $ (55,486,919)
</TABLE>
A19
<PAGE>
NOTE 9: PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRUDENTIAL PRUDENTIAL PRUDENTIAL
HIGH YIELD STOCK EQUITY PRUDENTIAL PRUDENTIAL
BOND INDEX INCOME GLOBAL JENNISON
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Purchases............... $ 10,850,647 $ 179,194,348 $ 9,122,543 $ 162,902,272 $ 387,122,376
Sales................... $ (12,909,639) $(122,360,595) $ (17,197,837) $(121,603,611) $(315,252,640)
<CAPTION>
T. ROWE PRICE JANUS MFS
INTERNATIONAL AIM V.I. ASPEN EMERGING AMERICAN
STOCK VALUE GROWTH GROWTH CENTURY VP
PORTFOLIO* FUND* PORTFOLIO* SERIES* VALUE*
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Purchases............... $ 49,617,427 $ 29,344,954 $ 19,133,903 $ 91,936,007 $ 7,437,393
Sales................... $ (46,865,263) $ (20,118,056) $ (7,080,752) $ (79,325,246) $ (3,384,211)
</TABLE>
* Became available on June 30, 1997 (Note 1)
NOTE 10: RELATED PARTY TRANSACTIONS
Prudential has purchased multiple individual VUL contracts of the
Account insuring the lives of certain employees. Prudential is the
owner and beneficiary of the contracts. There were $267.9 million in
net premium payments directed to the Account for the year ended
December 31, 1999. At December 31, equity of contract owners included
$526.1 million owned by Prudential in the Money Market, Stock Index,
High Yield and Global subaccounts.
A20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of the
Variable Universal Life Subaccounts of the
Pruco Life Variable Appreciable Account
and the Board of Directors of
Pruco Life Insurance Company
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets present fairly, in all
material respects, the financial position of the subaccounts (Prudential Money
Market Portfolio, Prudential Diversified Bond Portfolio, Prudential Equity
Portfolio, Prudential Flexible Managed Portfolio, Prudential Conservative
Balanced Portfolio, Prudential High Yield Bond Portfolio, Prudential Stock Index
Portfolio, Prudential Equity Income Portfolio, Prudential Global Portfolio,
Prudential Jennison Portfolio, T. Rowe Price International Stock Portfolio, AIM
V.I. Value Fund, Janus Aspen Growth Portfolio, MFS Emerging Growth Series and
American Century VP Value) of the Variable Universal Life Subaccounts of the
Pruco Life Variable Appreciable Account at December 31, 1999, the results of
each of their operations and the changes in each of their net assets for each of
the three years in the period then ended (for each of the two years ended
December 31, 1999 and December 31, 1998 and for the period June 30, 1997 through
December 31, 1997 for T. Rowe Price International Stock Portfolio, AIM V.I.
Value Fund, Janus Aspen Growth Portfolio, MFS Emerging Growth Series and
American Century VP Value), in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of Pruco Life Insurance Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of fund shares owned at
December 31, 1999, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 17, 2000
A21
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Consolidated Statements of Financial Position
December 31, 1999 and 1998 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value (amortized cost, 1999: $3,084,057; $2,998,362 $2,763,926
1998: $2,738,654)
Held to maturity, at amortized cost (fair value, 1999: $377,822; 1998: 388,990 410,558
$421,845)
Equity securities - available for sale, at fair value (cost, 1999: $3,238; 4,532 2,847
1998: $2,951)
Mortgage loans on real estate 10,509 17,354
Policy loans 792,352 766,917
Short-term investments 207,219 240,727
Other long-term investments 77,769 42,050
----------------- -----------------
Total investments 4,479,733 4,244,379
Cash 76,396 89,679
Deferred policy acquisition costs 1,062,785 861,713
Accrued investment income 68,917 61,114
Receivables from affiliate 23,329 -
Other assets 48,228 65,145
Separate Account assets 16,032,449 11,490,751
----------------- -----------------
TOTAL ASSETS $21,791,837 $16,812,781
================= =================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Policyholders' account balances $3,116,261 $2,702,011
Future policy benefits and other policyholder liabilities 635,978 528,779
Cash collateral for loaned securities 87,336 73,336
Securities sold under agreement to repurchase 21,151 49,708
Income taxes payable 145,600 193,358
Payables to affiliate - 66,568
Other liabilities 83,243 55,038
Separate Account liabilities 16,032,449 11,490,751
----------------- -----------------
Total liabilities 20,122,018 15,159,549
----------------- -----------------
Contingencies (See Footnote 12)
Stockholder's Equity
Common stock, $10 par value;
1,000,000 shares, authorized;
250,000 shares, issued and outstanding 2,500 2,500
Paid-in-capital 439,582 439,582
Retained earnings 1,258,428 1,202,833
Accumulated other comprehensive (loss) income
Net unrealized investment (losses) gains (28,364) 9,902
Foreign currency translation adjustments (2,327) (1,585)
----------------- -----------------
Accumulated other comprehensive (loss) income (30,691) 8,317
----------------- -----------------
Total stockholder's equity 1,669,819 1,653,232
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 21,791,837 $16,812,781
================= =================
</TABLE>
See Notes to Consolidated Financial Statements
B1
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
Years Ended December 31, 1999, 1998 and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES
Premiums $ 98,976 $ 82,139 $ 69,614
Policy charges and fee income 414,425 350,569 332,132
Net investment income 276,821 261,430 259,634
Realized investment (losses) gains, net (32,545) 44,841 10,974
Asset management fees 60,392 40,200 33,310
Other income 1,397 1,067 491
-------------- --------------- ---------------
Total revenues 819,466 780,246 706,155
-------------- --------------- ---------------
BENEFITS AND EXPENSES
Policyholders' benefits 205,042 193,739 199,537
Interest credited to policyholders' account balances 136,852 118,992 110,815
General, administrative and other expenses 392,041 231,320 227,561
-------------- --------------- ---------------
Total benefits and expenses 733,935 544,051 537,913
-------------- --------------- ---------------
Income from operations before income taxes 85,531 236,195 168,242
-------------- --------------- ---------------
Income tax provision 29,936 84,233 61,868
-------------- --------------- ---------------
NET INCOME 55,595 151,962 106,374
-------------- --------------- ---------------
Other comprehensive (loss) income, net of tax:
Unrealized gains (losses) on securities, net of
reclassification adjustment (38,266) (7,227) 3,025
Foreign currency translation adjustments (742) 2,980 (2,863)
-------------- --------------- ---------------
Other comprehensive (loss) income (39,008) (4,247) 162
-------------- --------------- ---------------
TOTAL COMPREHENSIVE INCOME $ 16,587 $147,715 $106,536
============== =============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
B2
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Consolidated Statements of Changes in Stockholder's Equity
Years Ended December 31, 1999, 1998, and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
other Total
Common Paid-in- Retained comprehensive stockholder's
stock capital earnings income (loss) equity
------------- ------------ ---------------- ---------------- -------------------
------------- ------------ ---------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 2,500 $ 439,582 $944,497 $12,402 $1,398,981
Net income - - 106,374 - 106,374
Change in foreign currency - - - (2,863) (2,863)
translation adjustments,
net of taxes
Change in net unrealized
investment gains, net of - - - 3,025 3,025
reclassification
adjustment and taxes
------------- ------------ ---------------- ---------------- -------------------
Balance, December 31, 1997 2,500 439,582 1,050,871 12,564 1,505,517
Net income - - 151,962 - 151,962
Change in foreign currency
translation adjustments, - - - 2,980 2,980
net of taxes
Change in net unrealized
investment losses, net of - - - (7,227) (7,227)
reclassification
adjustment and taxes
------------- ------------ ---------------- ---------------- -------------------
Balance, December 31, 1998 2,500 439,582 1,202,833 8,317 1,653,232
Net income - - 55,595 - 55,595
Change in foreign currency
translation adjustments, - - - (742) (742)
net of taxes
Change in net unrealized
investment losses, net of - - - (38,266) (38,266)
reclassification
adjustment and taxes
------------- ------------ ---------------- ---------------- -------------------
Balance, December 31, 1999 $ 2,500 $ 439,582 $ 1,258,428 $ (30,691) $1,669,819
============= ============================= ================ ===================
</TABLE>
See Notes to Consolidated Financial Statements
B3
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998, and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ------------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 55,595 $ 151,962 $ 106,374
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Policy charges and fee income (83,961) (29,827) (40,783)
Interest credited to policyholders' account balances 136,852 118,992 110,815
Realized investment (gains) losses, net 32,545 (44,841) (10,974)
Amortization and other non-cash items 75,037 19,655 (26,405)
Change in:
Future policy benefits and other policyholders'
liabilities 107,199 61,095 34,907
Accrued investment income (7,803) 5,886 (4,890)
Payable to affiliate (89,897) (3,807) 20,547
Policy loans (25,435) (62,962) (64,173)
Deferred policy acquisition costs (201,072) (206,471) (22,083)
Income taxes payable (47,758) (16,828) 68,417
Other, net 45,122 (43,675) 34,577
----------------- ------------------- ---------------
Cash Flows (Used In) From Operating Activities (3,576) (50,821) 206,329
----------------- ------------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Available for sale 3,076,848 5,429,396 2,828,665
Held to maturity 45,841 74,767 138,626
Equity securities 5,209 4,101 6,939
Mortgage loans on real estate 6,845 5,433 24,925
Other long-term investments 385 33,428 (10,618)
Payments for the purchase of:
Fixed maturities:
Available for sale (3,452,289) (5,617,208) (3,141,785)
Held to maturity (24,170) (145,919) (70,532)
Equity securities (5,110) (2,274) (4,594)
Other long-term investments (39,094) (409) (51)
Cash collateral for loaned securities, net 14,000 (70,085) 143,421
Securities sold under agreement to repurchase, net (28,557) 49,708 --
Short-term investments, net 33,580 75,771 (147,030)
----------------- ------------------- ---------------
Cash Flows Used In Investing Activities (366,512) (163,291) (232,034)
----------------- ------------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 3,448,370 3,098,764 2,099,600
Withdrawals (3,091,565) (2,866,331) (2,076,303)
----------------- ------------------- ---------------
Cash Flows From (Used in) Financing Activities 356,805 232,433 23,297
----------------- ------------------- ---------------
Net increase (decrease) in Cash (13,283) 18,321 (2,408)
Cash, beginning of year 89,679 71,358 73,766
----------------- ------------------- ---------------
CASH, END OF PERIOD $ 76,396 $ 89,679 $ 71,358
================= =================== ===============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid (received) $ 55,144 $ 99,810 $ (7,904)
================= =================== ===============
</TABLE>
See Notes to Consolidated Financial Statements
B4
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. BUSINESS
Pruco Life Insurance Company ("the Company") is a stock life insurance company,
organized in 1971 under the laws of the state of Arizona. The Company is
licensed to sell individual life insurance, variable life insurance, variable
annuities, fixed annuities, and a group annuity program ("the Contracts") in the
District of Columbia, Guam and in all states and territories except New York. In
addition, the Company markets individual life insurance through its branch
office in Taiwan. The Company has two wholly owned subsidiaries, Pruco Life
Insurance Company of New Jersey ("PLNJ") and The Prudential Life Insurance
Company of Arizona ("PLICA"). PLNJ is a stock life insurance company organized
in 1982 under the laws of the state of New Jersey. It is licensed to sell
individual life insurance, variable life insurance, fixed annuities, and
variable annuities only in the states of New Jersey and New York. PLICA is a
stock life insurance company organized in 1988 under the laws of the state of
Arizona. PLICA had no new business sales in 1997, 1998 or 1999 and at this time
will not be issuing new business.
The Company is a wholly owned subsidiary of The Prudential Insurance Company of
America ("Prudential"), a mutual insurance company founded in 1875 under the
laws of the state of New Jersey. Prudential is currently considering
reorganizing itself into a publicly traded stock company through a process known
as "demutualization." On February 10, 1998, Prudential's Board of Directors
authorized management to take the preliminary steps necessary to allow
Prudential 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 Prudential's Board of Directors, a
public hearing and review and approval by two-thirds of the qualified
policyholders who vote on the plan, review and approved by the New Jersey
Department of Banking and Insurance. Prudential's management is in the process
of developing a proposed plan of demutualization, although there can be no
assurance that Prudential's Board of Directors will approve such a plan.
Prudential intends to make additional capital contributions to the Company, as
needed, to enable it to comply with its reserve requirements and fund expenses
in connection with its business. Generally, Prudential is under no obligation to
make such contributions and its assets do not back the benefits payable under
the Contracts.
The Company is engaged in a business that is highly competitive because of the
large number of stock and mutual life insurance companies and other entities
engaged in marketing insurance products, and individual and group annuities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. ("GAAP"). The
Company has extensive transactions and relationships with Prudential and other
affiliates, as more fully described in Footnote 14. Due to these relationships,
it is possible that the terms of these transactions are not the same as those
that would result from transactions among wholly unrelated parties. All
significant intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, in particular deferred policy acquisition costs ("DAC")
and future policy benefits, and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
Investments
Fixed maturities classified as "available for sale" are carried at estimated
fair value. Fixed maturities that the Company has both the intent and ability to
hold to maturity are stated at amortized cost and classified as "held to
maturity". The amortized cost of fixed maturities is written down to estimated
fair value if a decline in value is considered to be other than temporary.
Unrealized gains and losses on fixed maturities "available for sale", including
the effect on deferred policy acquisition costs and policyholders' account
balances that would result from the realization of unrealized gains and losses,
net of income taxes, are included in a separate component of equity,
"Accumulated other comprehensive income."
B5
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity securities, available for sale, comprised of common and non-redeemable
preferred stock, are carried at estimated fair value. The associated unrealized
gains and losses, net of income tax, the effects on deferred policy acquisition
costs and on policyholders' account balances that would result from the
realization of unrealized gains and losses, are included in a separate component
of equity, "Accumulated other comprehensive income."
Mortgage loans on real estate are stated primarily at unpaid principal balances,
net of unamortized discounts and an allowance for losses. The allowance for
losses includes a loan specific reserve for impaired loans and a portfolio
reserve for incurred but not specifically identified losses. Impaired loans
include those loans for which a probability exists that all amounts due
according to the contractual terms of the loan agreement will not be collected.
Impaired loans are measured at the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the fair value of the
collateral if the loan is collateral dependent. Interest received on impaired
loans, including loans that were previously modified in a troubled debt
restructuring, is either applied against the principal or reported as revenue,
according to management's judgment as to the collectibility of principal.
Management discontinues accruing interest on impaired loans after the loans are
90 days delinquent as to principal or interest, or earlier when management has
serious doubts about collectibility. When a loan is recognized as impaired, any
accrued but uncollectible interest is reversed against interest income of the
current period. Generally, a loan is restored to accrual status only after all
delinquent interest and principal are brought current and, in the case of loans
where the payment of interest has been interrupted for a substantial period, a
regular payment performance has been established. The portfolio reserve for
incurred but not specifically identified losses considers the Company's past
loan loss experience, the current credit composition of the portfolio,
historical credit migration, property type diversification, default and loss
severity statistics and other relevant factors.
Policy loans are carried at unpaid principal balances.
Short-term investments, including highly liquid debt instruments purchased with
an original maturity of twelve months or less, are carried at amortized cost,
which approximates fair value.
Other long-term investments represent the Company's investments in joint
ventures and partnerships in which the Company does not have control. These
investments are recorded using the equity method of accounting, reduced for
other than temporary declines in value. The Company's investment in the Separate
Accounts are included on this line.
Realized investment gains, net are computed using the specific identification
method. Costs of fixed maturity and equity securities are adjusted for
impairments considered to be other than temporary.
Cash
Cash includes cash on hand, amounts due from banks, and money market
instruments.
Deferred Policy Acquisition Costs
The costs which vary with and that are related primarily to the production of
new insurance business are deferred to the extent that they are deemed
recoverable from future profits. Such costs include certain commissions, costs
of policy issuance and underwriting, and certain variable field office expenses.
Deferred policy acquisition costs are subject to recoverability testing at the
time of policy issue and loss recognition testing at the end of each accounting
period. Deferred policy acquisition costs are adjusted for the impact of
unrealized gains or losses on investments as if these gains or losses had been
realized, with corresponding credits or charges included in "Accumulated other
comprehensive income".
Policy acquisition costs related to interest-sensitive products and certain
investment-type products are deferred and amortized over the expected life of
the contracts (periods ranging from 15 to 30 years) in proportion to estimated
gross profits arising principally from investment results, mortality and expense
margins, and surrender charges based on historical and anticipated future
experience, which is updated periodically. The effect of changes to estimated
gross profits on unamortized deferred acquisition costs is reflected in "General
and administrative expenses" in the period such estimated gross profits are
revised.
B6
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Securities loaned
Securities loaned are treated as financing arrangements and are recorded at the
amount of cash received as collateral. The Company obtains collateral in an
amount equal to 102% and 105% of the fair value of the domestic and foreign
securities, respectively. The Company monitors the market value of securities
loaned on a daily basis with additional collateral obtained as necessary.
Non-cash collateral received is not reflected in the consolidated statements of
financial position because the debtor typically has the right to redeem the
collateral on short notice. Substantially all of the Company's securities loaned
are with large brokerage firms.
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase are treated as financing
arrangements and are carried at the amounts at which the securities will be
subsequently reacquired, including accrued interest, as specified in the
respective agreements. Assets to be repurchased are the same, or substantially
the same, as the assets transferred and the transferor, through right of
substitution, maintains the right and ability to redeem the collateral on short
notice. The market value of securities to be repurchased is monitored and
additional collateral is obtained, where appropriate, to protect against credit
exposure.
Securities lending and securities repurchase agreements are used to generate net
investment income and facilitate trading activity. These instruments are
short-term in nature (usually 30 days or less). Securities loaned are
collateralized principally by U.S. Government and mortgage-backed securities.
Securities sold under repurchase agreements are collateralized principally by
cash. The carrying amounts of these instruments approximate fair value because
of the relatively short period of time between the origination of the
instruments and their expected realization.
Separate Account Assets and Liabilities
Separate Account assets and liabilities are reported at estimated fair value and
represent segregated funds which are invested for certain policyholders and
other customers. Separate Account assets include common stocks, fixed
maturities, real estate related securities, and short-term investments. The
assets of each account are legally segregated and are not subject to claims that
arise out of any other business of the Company. Investment risks associated with
market value changes are borne by the customers, except to the extent of minimum
guarantees made by the Company with respect to certain accounts. The investment
income and gains or losses for Separate Accounts generally accrue to the
policyholders and are not included in the Consolidated Statements of Operations.
Mortality, policy administration and surrender charges on the accounts are
included in "Policy charges and fee income".
Separate Accounts represent funds for which investment income and investment
gains and losses accrue directly to, and investment risk is borne by, the
policyholders, with the exception of the Pruco Life Modified Guaranteed Annuity
Account. The Pruco Life Modified Guaranteed Annuity Account is a non-unitized
Separate Account, which funds the Modified Guaranteed Annuity Contract and the
Market Value Adjustment Annuity Contract. Owners of the Pruco Life Modified
Guaranteed Annuity and the Market Value Adjustment Annuity Contracts do not
participate in the investment gain or loss from assets relating to such
accounts. Such gain or loss is borne, in total, by the Company.
Insurance Revenue and Expense Recognition
Premiums from insurance policies are generally recognized when due. Benefits are
recorded as an expense when they are incurred. For traditional life insurance
contracts, a liability for future policy benefits is recorded using the net
level premium method. For individual annuities in payout status, a liability for
future policy benefits is recorded for the present value of expected future
payments based on historical experience.
Premiums from non-participating group annuities with life contingencies are
generally recognized when due. For single premium immediate annuities, premiums
are recognized when due with any excess profit deferred and recognized in a
constant relationship to insurance in-force or, for annuities, the amount of
expected future benefit payments.
B7
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Amounts received as payment for interest-sensitive life, individual annuities
and guaranteed investment contracts are reported as deposits to "Policyholders'
account balances". Revenues from these contracts reflected as "Policy charges
and fee income" consist primarily of fees assessed during the period against the
policyholders' account balances for mortality charges, policy administration
charges and surrender charges. In addition, interest earned from the investment
of these account balances is reflected in "Net investment income". Benefits and
expenses for these products include claims in excess of related account
balances, expenses of contract administration, interest credited and
amortization of deferred policy acquisition costs.
Foreign Currency Translation Adjustments
Assets and liabilities of the Taiwan branch are translated to U.S. dollars at
the exchange rate in effect at the end of the period. Revenues, benefits and
other expenses are translated at the average rate prevailing during the period.
Cumulative translation adjustments arising from the use of differing exchange
rates from period to period are charged or credited directly to "Other
comprehensive income". The cumulative effect of changes in foreign exchange
rates are included in "Accumulated other comprehensive income".
Asset Management Fees
The Company receives asset management fee income from policyholder account
balances invested in The Prudential Series Fund ("PSF"), which are a portfolio
of mutual fund investments related to the Company's Separate Account products.
Derivative Financial Instruments
Derivatives are financial instruments whose values are derived from interest
rates, foreign exchange rates, various financial indices or the value of
securities or commodities. Derivative financial instruments used by the Company
include futures, currency swaps and options contracts and can be exchange-traded
or contracted in the over-the-counter market. The Company uses derivative
financial instruments to seek to reduce market risk from changes in interest
rates or foreign currency exchange rates, and to alter interest rate or currency
exposures arising from mismatches between assets and liabilities. All
derivatives used by the Company are for other than trading purposes.
To qualify as a hedge, derivatives must be designated as hedges for existing
assets, liabilities, firm commitments or anticipated transactions which are
identified and probable to occur, and effective in reducing the market risk to
which the Company is exposed. The effectiveness of the derivatives must be
evaluated at the inception of the hedge and throughout the hedge period.
When derivatives qualify as hedges, the changes in the fair value or cash flows
of the derivatives and the hedged items are recognized in earnings in the same
period. If the Company's use of derivatives does not meet the criteria to apply
hedge accounting, the derivatives are recorded at fair value in "Other
liabilities" in the Consolidated Statements of Financial Position, and changes
in their fair value are recognized in earnings in "Realized investment gains,
net" without considering changes in the hedged assets or liabilities. Cash flows
from derivative assets and liabilities are reported in the operating activities
section in the Consolidated Statements of Cash Flows.
Income Taxes
The Company and its subsidiaries are members of the consolidated federal income
tax return of Prudential and files separate company state and local tax returns.
Pursuant to the tax allocation arrangement with Prudential, total federal income
tax expense is determined on a separate company basis. Members with losses
record tax benefits to the extent such losses are recognized in the consolidated
federal tax provision. Deferred income taxes are generally recognized, based on
enacted rates, when assets and liabilities have different values for financial
statement and tax reporting purposes. A valuation allowance is recorded to
reduce a deferred tax asset to that portion that is expected to be realized.
B8
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. SFAS No. 133 does not apply to most traditional
insurance contracts. However, certain hybrid contracts that contain features
which may affect settlement amounts similarly to derivatives may require
separate accounting for the "host contract" and the underlying "embedded
derivative" provisions. The latter provisions would be accounted for as
derivatives as specified by the statement.
SFAS No. 133 provides, if certain conditions are met, that a derivative may be
specifically designated as (1) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment
(fair value hedge), (2) a hedge of the exposure to variable cash flows of a
forecasted transaction (cash flow hedge), or (3) a hedge of the foreign currency
exposure of a net investment in a foreign operation, an unrecognized firm
commitment, an available-for-sale security or a foreign-currency-denominated
forecasted transaction (foreign currency hedge).
Under SFAS No. 133, the accounting for changes in fair value of a derivative
depends on its intended use and designation. For a fair value hedge, the gain or
loss is recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item. For a cash flow hedge, the effective
portion of the derivative's gain or loss is initially reported as a component of
other comprehensive income and subsequently reclassified into earnings when the
forecasted transaction affects earnings. For a foreign currency hedge, the gain
or loss is reported in other comprehensive income as part of the foreign
currency translation adjustment. For all other derivatives not designated as
hedging instruments, the gain or loss is recognized in earnings in the period of
change. The Company is required to adopt this Statement, as amended, as of
January 1, 2001 and is currently assessing the effect of the new standard.
In October 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-7, "Deposit Accounting: Accounting for
Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk" ("SOP
98-7"). This statement provides guidance on how to account for insurance and
reinsurance contracts that do not transfer insurance risk. SOP 98-7 is effective
for fiscal years beginning after June 15, 1999. The adoption of this statement
is not expected to have a material effect on the Company's financial position or
results of operations.
Reclassifications
Certain amounts in the prior years have been reclassified to conform to current
year presentation.
B9
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS
Fixed Maturities and Equity Securities:
The following tables provide additional information relating to fixed maturities
and equity securities as of December 31,:
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities available for sale
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 113,172 $ 2 $ 2,052 $ 111,122
Foreign government bonds 92,725 1,718 1,455 92,988
Corporate securities 2,876,602 8,013 92,075 2,792,540
Mortgage-backed securities 1,558 157 3 1,712
---------- ---------- ---------- ----------
Total fixed maturities available for sale $3,084,057 $ 9,890 $ 95,585 $2,998,362
========== ========== ========== ==========
Fixed maturities held to maturity
Corporate securities $ 388,990 $ 1,832 $ 13,000 $ 377,822
---------- ---------- ---------- ----------
Total fixed maturities held to maturity $ 388,990 $ 1,832 $ 13,000 $ 377,822
========== ========== ========== ==========
Equity securities available for sale $ 3,238 $ 1,373 $ 79 $ 4,532
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities available for sale
U.S. Treasury securities and obligations of
U.S government corporation and agencies $ 110,294 $ 864 $ 319 $ 110,839
Foreign government bonds 87,112 2,003 696 88,419
Corporate securities 2,540,498 30,160 6,896 2,563,762
Mortgage-backed securities 750 156 -- 906
---------- ---------- ---------- ----------
Total fixed maturities available for sale $2,738,654 $ 33,183 $ 7,911 $2,763,926
========== ========== ========== ==========
Fixed maturities held to maturity
Corporate securities $ 410,558 $ 11,287 $ -- $ 421,845
---------- ---------- ---------- ----------
Total fixed maturities held to maturity $ 410,558 $ 11,287 $ -- $ 421,845
========== ========== ========== ==========
Equity securities available for sale $ 2,951 $ 168 $ 272 $ 2,847
========== ========== ========== ==========
</TABLE>
B10
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS (continued)
The amortized cost and estimated fair value of fixed maturities, categorized by
contractual maturities at December 31, 1999 are shown below:
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------------------------ ------------------------------------
Amortized Estimated Fair Amortized Estimated Fair
Cost Value Cost Value
----------------- ------------------ ---------------- -------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 178,298 $ 175,638 $ 18,369 $ 18,296
Due after one year through five 1,144,552 1,118,150 178,893 178,624
years
Due after five years through ten 1,326,637 1,283,515 175,549 165,341
years
Due after ten years 433,012 419,347 16,179 15,561
Mortgage-backed securities 1,558 1,712 - -
---------------- ------------------- ----------------- ------------------
Total $3,084,057 $2,998,362 $ 388,990 $ 377,822
================ =================== ================= ==================
</TABLE>
Actual maturities will differ from contractual maturities because, in certain
circumstances, issuers have the right to call or prepay obligations.
Proceeds from the sale of fixed maturities available for sale during 1999, 1998,
and 1997 were $2,950.4 million, $5,327.3 million, and $2,796.3 million,
respectively. Gross gains of $13.1 million, $46.3 million, and $18.6 million and
gross losses of $31.1 million, $14.1 million, and $7.9 million were realized on
those sales during 1999, 1998, and 1997, respectively. During the years ended
December 31, 1999, 1998, and 1997, there were no securities classified as held
to maturity that were sold.
Proceeds from the maturity of fixed maturities available for sale during 1999,
1998, and 1997 were $126.5 million, $102.1 million, and $32.4 million,
respectively
Writedowns for impairments of fixed maturities which were deemed to be other
than temporary were $11.2 million, $2.8 million and $0.1 million for the years
1999, 1998 and 1997, respectively.
Mortgage Loans on Real Estate
The Company's mortgage loans were collateralized by the following property types
at December 31, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
---------------------------- ---------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Retail stores $ 6,518 62.0% $ 7,356 42.4%
Apartment complexes - - 5,988 34.5%
Industrial buildings 3,991 38.0% 4,010 23.1%
---------------------------- ---------------------------
Net carrying value $10,509 100.0% $17,354 100.0%
============================ ===========================
</TABLE>
The largest concentration of mortgage loans are in the states of Washington
(51%), New Jersey (38%), and North Dakota (11%).
Special Deposits and Restricted Assets
Fixed maturities of $8.2 million and $8.6 million at December 31, 1999 and 1998,
respectively, were on deposit with governmental authorities or trustees as
required by certain insurance laws. Equity securities restricted as to sale were
$.3 million and $2.5 million at December 31, 1999 and 1998, respectively.
B11
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS (continued)
Other Long-Term Investments
The Company's "Other long-term investments" of $77.8 million and $42.0 million
as of December 31, 1999 and 1998, respectively, are comprised of joint ventures,
limited partnerships, and the Company's investment in the Separate Accounts.
Joint ventures, limited partnerships and other totaled $32.8 million and $1.0
million at December 31, 1999 and 1998, respectively. The Company's share of net
income from the joint ventures was $0.3 million, $0.1 million and $2.2 million
for the years ended December 31, 1999, 1998 and 1997, respectively, and is
reported in "Net investment income." The Company's investment in the Separate
Accounts was $45.0 million and $41.0 million at December 31, 1999 and 1998,
respectively.
Investment Income and Investment Gains and Losses
Net investment income arose from the following sources for the years ended
December 31:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities - available for sale $188,236 $179,184 $ 161,140
Fixed maturities - held to maturity 29,245 26,128 26,936
Equity securities - 14 76
Mortgage loans on real estate 2,825 1,818 2,585
Policy loans 42,422 40,928 37,398
Short-term investments 19,208 23,110 22,011
Other 4,432 6,886 14,920
---------------- ----------------- -----------------
Gross investment income 286,368 278,068 265,066
Less: investment expenses (9,547) (16,638) (5,432)
---------------- ----------------- -----------------
Net investment income $276,821 $261,430 $ 259,634
================ ================= =================
</TABLE>
Realized investment gains (losses), net including charges for other than
temporary reductions in value, for the years ended December 31, were from the
following sources:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities - available for sale $ (29,192) $29,330 $9,039
Fixed maturities - held to maturity 102 487 821
Equity securities 392 3,489 8
Mortgage loans on real estate - - 797
Derivative instruments (1,557) 12,414 -
Other (2,290) (879) 309
---------------- ----------------- -----------------
Realized investment (losses) gains, net $ (32,545) $44,841 $10,974
================ ================= =================
</TABLE>
B12
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Net Unrealized Investment Gains (Losses)
Net unrealized investment gains (losses) on securities available for sale are
included in the Consolidated Statements of Financial Position as a component of
"Accumulated other comprehensive income". Changes in these amounts include
reclassification adjustments to avoid including in "Other Comprehensive income
(loss)", those items that are included as part of "Net income" for a period that
also had been part of "Other Comprehensive income (loss)" in earlier periods.
The amounts for the years ended December 31, net of tax, are as follows:
<TABLE>
<CAPTION>
Accumulated
other
comprehensive
income (loss)
Deferred Deferred related to net
Unrealized policy Policyholders' income tax unrealized
gains(losses) acquisition Account (liability) investment
investments costs Balances benefit gains(losses)
--------- --------- --------- --------- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 26,930 $ (7,893) $ 2,451 $ (7,384) $ 14,104
Net investment gains (losses) on
investments arising during the period 21,338 -- -- (7,445) 13,893
Reclassifications adjustment for
gains included in net income (10,277) -- -- 3,585 (6,692)
Impact of net unrealized investment
gains on deferred policy acquisition
costs -- (8,412) -- 2,944 (5,468)
Impact of net unrealized investment
gains on policyholders' account
balances -- -- 1,292 -- 1,292
--------- --------- --------- --------- ---------
Balance, December 31, 1997 37,991 (16,305) 3,743 (8,300) 17,129
Net investment gains (losses) on
investments arising during the period 22,801 -- -- (7,588) 15,213
Reclassifications adjustment for
gains included in net income (35,623) -- -- 11,855 (23,768)
Impact of net unrealized investment
gains on deferred policy acquisition
costs -- 3,190 -- (1,048) 2,142
Impact of net unrealized investment
gains on policyholders' account
balances -- -- (1,063) 249 (814)
--------- --------- --------- --------- ---------
Balance, December 31, 1998 25,169 (13,115) 2,680 (4,832) 9,902
Net investment gains (losses) on
investments arising during the period (138,268) -- -- 47,785 (90,483)
Reclassifications adjustment for
gains included in net income 28,698 -- -- (9,970) 18,728
Impact of net unrealized investment
gains on deferred policy acquisition -- 53,407 -- (16,283) 37,124
costs
Impact of net unrealized investment
gains on policyholders' account -- -- (5,712) 2,077 (3,635)
balances
--------- --------- --------- --------- ---------
Balance, December 31, 1999 $ (84,401) $ 40,292 $ (3,032) $ 18,777 $ (28,364)
========= ========= ========= ========= =========
</TABLE>
B13
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
4. DEFERRED POLICY ACQUISITION COSTS
The balances of and changes in deferred policy acquisition costs for the year
ended December 31, 1999, are as follows:
<TABLE>
<CAPTION>
1999
-----------------
(In Thousands)
<S> <C>
Balance, beginning of year $ 861,713
Capitalization on commissions, sales and issue expenses 242,373
Amortization (96,451)
Change in unrealized investment gains 53,407
Foreign currency translation 1,743
-----------------
Balance, end of year $1,062,785
=================
</TABLE>
5. POLICYHOLDERS' LIABILITIES
Future policy benefits and other policyholder liabilities at December 31 are as
follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
(In Thousands)
<S> <C> <C>
Life insurance $ 587,162 $ 500,429
Annuities 48,816 28,350
------------------- -------------------
$ 635,978 $ 528,779
=================== ===================
</TABLE>
Life insurance liabilities include reserves for death benefits. Annuity
liabilities include reserves for immediate annuities.
The following table highlights the key assumptions generally utilized in
calculating these reserves:
<TABLE>
<CAPTION>
Product Mortality Interest Rate Estimation Method
- ------------------------------- ------------------------- -------------------- -------------------------
<S> <C> <C> <C>
Life insurance - Domestic Generally rates guaranteed 2.5% to 7.5% Net level premium based
in calculating cash on the non-forfeiture interest
surrender values rate
Life insurance - International Generally rates guaranteed 2.5% to 7.5% Net level premium based
in calculating cash on the expected investment
surrender values return
Individual immediate annuities 1983 Individual Annuity 3.5% to 11.0% Present value of
Mortality Table with expected future payment
certain modifications based on historical
experience
</TABLE>
B14
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
5. POLICYHOLDERS' LIABILITIES (continued)
Policyholders' account balances at December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
(In Thousands)
<S> <C> <C>
Interest-sensitive life contracts $1,383,795 $1,392,649
Individual annuities 1,147,722 1,077,996
Guaranteed investment contracts 584,744 231,366
------------------- -------------------
$3,116,261 $2,702,011
=================== ===================
</TABLE>
Policyholders' account balances for interest-sensitive life, individual
annuities, and guaranteed investment contracts are equal to policy account
values plus unearned premiums. The policy account values represent an
accumulation of gross premium payments plus credited interest less withdrawals,
expenses and mortality charges.
Certain contract provisions that determine the policyholder account balances are
as follows:
<TABLE>
<CAPTION>
Product Interest Rate Withdrawal / Surrender Charges
- --------------------------------- ------------------------------------ ------------------------------------
<S> <C> <C>
Interest sensitive life 4.0% to 6.5 % Various up to 10 years
Individual annuities 3.0% to 5.6% 0% to 8% for up to 8 years
Guaranteed investment contracts 5.02% to 7.32% Subject to market value withdrawal
provisions for any funds withdrawn
other than for benefit responsive
and contractual payments
</TABLE>
6. REINSURANCE
The Company participates in reinsurance, with Prudential and other companies, in
order to provide greater diversification of business, provide additional
capacity for future growth and limit the maximum net loss potential arising from
large risks. Reinsurance ceded arrangements do not discharge the Company or the
insurance subsidiaries as the primary insurer, except for cases involving a
novation. Ceded balances would represent a liability of the Company in the event
the reinsurers were unable to meet their obligations to the Company under the
terms of the reinsurance agreements. The likelihood of a material reinsurance
liability reassumed by the Company is considered to be remote.
B15
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
6. REINSURANCE (continued)
Reinsurance amounts included in the Consolidated Statements of Operations for
the year ended December 31 are below.
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(In Thousands)
<S> <C> <C> <C>
Reinsurance premiums assumed 1,778 1,395 1,369
Reinsurance premiums ceded - affiliated (6,882) (6,532) (686)
Reinsurance premiums ceded - unaffiliated (1,744) (2,819) (3,038)
================ ================ ================
Policyholders' benefits ceded $4,228 $4,044 $3,912
================ ================ ================
</TABLE>
Reinsurance recoverables, included in "Other assets" in the Company's
Consolidated Statements of Financial Position, at December 31 include amounts
recoverable on unpaid and paid losses and were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -----------------
(In Thousands)
<S> <C> <C>
Life insurance - affiliated $ 6,653 $ 4,155
Life insurance - unaffiliated 2,625 2,326
Other reinsurance - affiliated 15,600 21,650
------------------- -----------------
$24,878 $28,131
=================== =================
</TABLE>
7. EMPLOYEE BENEFIT PLANS
Pension and Other Postretirement Plans
The Company has a non-contributory defined benefit pension plan which covers
substantially all of its Taiwanese employees. This plan was established as of
September 30, 1998 and the projected benefit obligation and related expenses at
December 31, 1999 were not material to the Consolidated Statements of Financial
Position or results of operations for the years presented. All other employee
benefit costs are allocated to the Company by Prudential in accordance with the
service agreement described in Footnote 14.
B16
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
8. INCOME TAXES
The components of income taxes for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Current tax expense (benefit):
U.S. $ (14,093) $67,272 $71,989
State and local 378 2,496 1,337
Foreign 15 - -
---------------- ----------------- -----------------
Total (13,700) 69,768 73,326
---------------- ----------------- -----------------
Deferred tax expense (benefit):
U.S. 42,320 14,059 (11,458)
State and local 1,316 406 -
---------------- ----------------- -----------------
Total 43,636 14,465 (11,458)
---------------- ----------------- -----------------
Total income tax expense $29,936 $84,233 $61,868
================ ================= =================
</TABLE>
The income tax expense for the years ended December 31, differs from the amount
computed by applying the expected federal income tax rate of 35% to income from
operations before income taxes for the following reasons:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Expected federal income tax expense $29,936 $82,668 $58,885
State and local income taxes 1,101 1,886 869
Dividends received deduction (1,010) (199) -
Other (91) (122) 2,114
---------------- ----------------- -----------------
Total income tax expense $29,936 $84,233 $61,868
================ ================= =================
</TABLE>
Deferred tax assets and liabilities at December 31, resulted from the items
listed in the following table:
<TABLE>
<CAPTION>
1999 1998
------------------ -------------------
(In Thousands)
<S> <C> <C>
Deferred tax assets
Insurance reserves $ 93,949 $ 93,564
Net unrealized (gains) losses on
securities 31,132 (9,061)
Other 2,502 -
------------------ -------------------
Deferred tax assets 127,583 84,503
------------------ -------------------
Deferred tax liabilities
Deferred acquisition costs 299,683 224,179
Net investment gains 110 3,180
Other - 5,978
------------------ -------------------
Deferred tax liabilities 299,793 233,337
------------------ -------------------
Net deferred tax liability $172,210 $148,834
================== ===================
</TABLE>
B17
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
8. INCOME TAXES (continued)
Management believes that based on its historical pattern of taxable income, the
Company and its subsidiaries will produce sufficient income in the future to
realize its deferred tax assets after valuation allowance. Adjustments to the
valuation allowance will be made if there is a change in management's assessment
of the amount of the deferred tax asset that is realizable. At December 31, 1999
and 1998, respectively, the Company and its subsidiaries had no federal or state
operating loss carryforwards for tax purposes.
The Internal Revenue Service (the "Service") has completed all examinations of
the consolidated federal income tax returns through 1992. The Service has begun
their examination of the years 1993 through 1995.
9. EQUITY
Reconciliation of Statutory Surplus and Net Income
Accounting practices used to prepare statutory financial statements for
regulatory purposes differ in certain instances from GAAP. The following table
reconciles the Company's statutory net income and surplus as of and for the
years ended December 31, determined in accordance with accounting practices
prescribed or permitted by the Arizona Department of Insurance and the New
Jersey Department of Banking and Insurance with net income and equity determined
using GAAP.
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(In Thousands)
<S> <C> <C> <C>
Statutory net (loss) income $ (82,291) $ (33,097) $ 12,778
Adjustments to reconcile to net income on a GAAP basis:
Statutory income of subsidiaries 20,221 18,953 18,553
Amortization and capitalization of deferred
acquisition costs 145,921 202,375 38,003
Deferred premium 639 2,625 1,144
Insurance revenue and expenses 45,915 (24,942) 26,517
Income taxes (43,644) (21,805) 11,956
Valuation of investments (24,908) 20,077 506
Asset management fees (13,503) - -
Other, net 7,245 (12,224) (3,083)
---------------- ---------------- ----------------
GAAP net income $ 55,595 $151,962 $106,374
================ ================ ================
1999 1998
----------------- -----------------
(In Thousands)
Statutory surplus $889,186 $931,164
Adjustments to reconcile to equity on a GAAP basis:
Valuation of investments (38,258) 117,254
Deferred acquisition costs 1,062,785 861,713
Deferred premium (16,539) (15,625)
Insurance liabilities (54,927) (133,811)
Income taxes (150,957) (123,343)
Asset management fees (13,503) -
Other, net (7,968) 15,880
----------------- -----------------
GAAP stockholder's equity $1,669,819 $1,653,232
================= =================
</TABLE>
B18
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values presented below have been determined using available
information and valuation methodologies. Considerable judgment is applied in
interpreting data to develop the estimates of fair value. Accordingly, such
estimates presented may not be realized in a current market exchange. The use of
different market assumptions and/or estimation methodologies could have a
material effect on the estimated fair values. The following methods and
assumptions were used in calculating the estimated fair values (for all other
financial instruments presented in the table, the carrying value approximates
estimated fair value).
Fixed maturities and Equity securities
Estimated fair values for fixed maturities and equity securities, other than
private placement securities, are based on quoted market prices or estimates
from independent pricing services. Fair values for private placement securities
are estimated using a discounted cash flow model which considers the current
market spreads between the U.S. Treasury yield curve and corporate bond yield
curve, adjusted for the type of issue, its current credit quality and its
remaining average life. The estimated fair value of certain non-performing
private placement securities is based on amounts estimated by management.
Mortgage loans on real estate
The estimated fair value of the mortgage loan portfolio is primarily based upon
the present value of the scheduled future cash flows discounted at the
appropriate U.S. Treasury rate, adjusted for the current market spread for a
similar quality mortgage.
Policy loans
The estimated fair value of policy loans is calculated using a discounted cash
flow model based upon current U.S. Treasury rates and historical loan
repayments.
Investment contracts
For guaranteed investment contracts, estimated fair values are derived by using
discounted projected cash flows based on interest rates being offered for
similar contracts, with maturities consistent with those remaining for the
contracts being valued. Estimated fair values for individual deferred annuities
are derived using the policyholder's account balance.
Derivative financial instruments
The fair value of futures is estimated based on market quotes for transactions
with similar terms.
The following table discloses the carrying amounts and estimated fair values of
the Company's financial instruments at December 31:
<TABLE>
<CAPTION>
1999 1998
---------------------------------- --------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
---------------- ---------------- --------------- ----------------
(In Thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities: Available for sale $2,998,362 $2,998,362 $2,763,926 $2,763,926
Fixed maturities: Held to maturity 388,990 377,822 410,558 421,845
Equity securities 4,532 4,532 2,847 2,847
Mortgage loans on real estate 10,509 11,550 17,354 19,465
Policy loans 792,352 761,232 766,917 806,099
Short-term investments 207,219 207,219 240,727 240,727
Cash 76,396 76,396 89,679 89,679
Separate Account assets 16,032,449 16,032,449 11,490,751 11,490,751
Derivatives 38 38 - -
Financial Liabilities:
Investment contracts $1,282,964 $1,277,317 $ 835,034 $ 839,105
Cash collateral for loaned securities 87,336 87,336 73,336 73,336
Securities sold under repurchase
agreements 21,151 21,151 49,708 49,708
Separate Account liabilities 16,032,449 16,032,449 11,490,751 11,490,751
Derivatives 5,012 5,243 1,723 2,374
</TABLE>
B19
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
11. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS
Futures & Options
The Company uses exchange-traded Treasury futures and options to reduce market
risk from changes in interest rates and to manage the duration of assets and the
duration of liabilities supported by those assets. The Company enters into
exchange-traded futures and options with regulated futures commissions merchants
who are members of a trading exchange. The fair value of futures and options is
estimated based on market quotes for a transaction with similar terms.
Under exchange-traded futures, the Company agrees to purchase a specified number
of contracts with other parties and to post variation margin on a daily basis in
an amount equal to the difference in the daily market values of those contracts.
Treasury futures move substantially in value as interest rates change and can be
used to either modify or hedge existing interest rate risk. This strategy
protects against the risk that cash flow requirements may necessitate
liquidation of investments at unfavorable prices resulting from increases in
interest rates. This strategy can be a more cost effective way of temporarily
reducing the Company's exposure to a market decline than selling fixed income
securities and purchasing a similar portfolio when such a decline is believed to
be over.
If futures meet hedge accounting criteria, changes in their fair value are
deferred and recognized as an adjustment to the carrying value of the hedged
item. Deferred gains or losses from the hedges for interest-bearing financial
instruments are amortized as a yield adjustment over the remaining lives of the
hedged item. Futures that do not qualify as hedges are carried at fair value
with changes in value reported in current period earnings. The notional value of
futures contracts was $122.1 million and $40.8 million at December 31, 1999 and
1998, respectively. The fair value of futures contracts was $(2.0) million at
December 31, 1999 and immaterial at December 31, 1998.
When the Company anticipates a significant decline in the stock market which
will correspondingly affect its diversified portfolio, it may purchase put index
options where the basket of securities in the index is appropriate to provide a
hedge against a decrease in the value of the equity portfolio or a portion
thereof. This strategy effects an orderly sale of hedged securities. When the
Company has large cash flows which it has allocated for investment in equity
securities, it may purchase call index options as a temporary hedge against an
increase in the price of the securities it intends to purchase. This hedge
permits such investment transactions to be executed with the least possible
adverse market impact.
Option premium paid or received is reported as an asset or liability and
amortized into income over the life of the option. If options meet the criteria
for hedge accounting, changes in their fair value are deferred and recognized as
an adjustment to the hedged item. Deferred gains or losses from the hedges for
interest-bearing financial instruments are recognized as an adjustment to
interest income or expense of the hedged item. If the options do not meet the
criteria for hedge accounting, they are fair valued, with changes in fair value
reported in current period earnings. The fair value of options was immaterial at
December 31, 1999 and 1998.
Currency Derivatives
The Company uses currency swaps to reduce market risk from changes in currency
values of investments denominated in foreign currencies that the Company either
holds or intends to acquire and to manage the currency exposures arising from
mismatches between such foreign currencies and the US Dollar.
Under currency swaps, the Company agrees with other parties to exchange, at
specified intervals, the difference between one currency and another at a
forward exchange rate and calculated by reference to an agreed principal amount.
Generally, the principal amount of each currency is exchanged at the beginning
and termination of the currency swap by each party. These transactions are
entered into pursuant to master agreements that provide for a single net payment
to be made by one counterparty for payments made in the same currency at each
due date.
If currency swaps are effective as hedges of foreign currency translation and
transaction exposures, gains or losses are recorded in "Accumulated Other
Comprehensive Income". If currency swaps do not meet hedge accounting criteria,
gains or losses from those derivatives are recognized in current period
earnings.
The notional value and fair value of the currency swaps $31.0 million and $(3.2)
million and $40.5 million and $(2.3) million, respectively, at December 31, 1999
and 1998.
B20
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
11. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (continued)
Credit Risk
The current credit exposure of the Company's derivative contracts is limited to
the fair value at the reporting date. Credit risk is managed by entering into
transactions with creditworthy counterparties and obtaining collateral where
appropriate and customary. The Company also attempts to minimize its exposure to
credit risk through the use of various credit monitoring techniques. All of the
net credit exposure for the Company from derivative contracts are with
investment grade counterparties. As of December 31, 1999, 80% of notional
consisted of interest rate derivatives, and 20% of notional consisted of foreign
currency derivatives.
12. CONTINGENCIES
Various lawsuits against the Company have arisen in the course of the Company's
business. In certain of these matters, large and/or indeterminate amounts are
sought.
On October 28, 1996, the Company entered into a Stipulation of Settlement with
attorneys for the plaintiffs in a consolidated class action lawsuit pending in a
Multi-District Litigation proceeding in the U.S. District Court for the District
of New Jersey. The class action suit involved alleged improprieties in
connection with the sale, servicing and operation of permanent life insurance
policies from 1982 through 1995. Pursuant to the settlement, the Company has
participated in a remediation program pursuant to which relief was offered to
policyowners who were misled when they purchased permanent life insurance
policies in the United States from 1982 to 1995. Prudential has agreed to
indemnify the Company for any liability incurred in connection with that
litigation.
The balance of the Company's litigation is subject to many uncertainties, and
given the complexity and scope, the outcomes cannot be predicted with precision.
Management believes that any ultimate liability which could result from such
litigation would not have a material adverse effect on the Company's financial
position.
13. DIVIDENDS
The Company is subject to Arizona law which limits the amount of dividends that
insurance companies can pay to stockholders. The maximum dividend which may be
paid in any twelve month period without notification or approval is limited to
the lesser of 10% of statutory surplus as of December 31 of the preceding year
or the net gain from operations of the preceding calendar year. Cash dividends
may only be paid out of surplus derived from realized net profits. Based on
these limitations and the Company's surplus position at December 31, 1999, the
Company would not be permitted a non-extraordinary dividend distribution in
2000.
14. RELATED PARTY TRANSACTIONS
Service Agreements
Prudential and the Company operate under service and lease agreements whereby
services of officers and employees (except for those agents employed directly by
the Company in Taiwan), supplies, use of equipment and office space are provided
by Prudential. Prudential periodically reviews its methods for determining the
level of administrative expenses charged to the Company. Late in 1998,
Prudential revised its allocation methodology to more closely align allocations
based on business processes, resulting in increased allocations from 1998
levels. Management believes that the updated methodology is reasonable and
better reflects actual costs incurred by Prudential to process transactions on
behalf of the Company. The net cost of these services allocated to the Company
were $317.4 million, $269.9 million and $139.5 million for the years ended
December 31, 1999, 1998, and 1997, respectively.
In addition, the Company received allocated distribution expenses from
Prudential's retail agency network. Beginning in 1999, market based distribution
transfer pricing was the basis for allocating costs to each product line that
distributes products through Prudential's retail agency channels. A majority of
these distribution expenses have been capitalized by the Company as deferred
policy acquisition costs ("DAC").
The Company receives asset management fee income from policyholder account
balances invested in the Prudential Series Fund ("PSF"). These amounts are shown
as asset management fees on the statement of operations. The Company also
collects these fees on behalf of Prudential. The amounts due to Prudential
related to PSF fees were $0.1 million and $22.6 million at December 31, 1999 and
December 31, 1998, respectively.
B21
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
14. RELATED PARTY TRANSACTIONS (continued)
The Company pays an asset management fee to Prudential Global Asset Management
("PGAM") for managing the Separate Account investment portfolio. The expense for
the year was $25.9 million, which is shown in general, administrative and other
expenses.
The Company has sold three Corporate Owned Life Insurance ("COLI") policies to
Prudential. The cash surrender value included in Separate Accounts was $725.3
million and $362.3 million at December 31, 1999, and 1998, respectively. The
fees received in 1999 related to the COLI policies were $4.0 million.
Reinsurance
The Company currently has three reinsurance agreements in place with Prudential
(the reinsurer). Specifically a reinsurance Group Annuity Contract, whereby the
reinsurer, in consideration for a single premium payment by the Company,
provides reinsurance equal to 100% of all payments due under the contract, and
two yearly renewable term agreements in which the Company may offer and the
reinsurer may accept reinsurance on any life in excess of the Company's maximum
limit of retention. The Company is not relieved of its primary obligation to the
policyholder as a result of these reinsurance transactions. These agreements had
no material effect on net income for the years ended December 31, 1999, 1998,
and 1997.
Debt Agreements
In July 1998, the Company established a revolving line of credit facility of up
to $500 million with Prudential Funding Corporation, a wholly owned subsidiary
of Prudential. There is no outstanding debt relating to this credit facility as
of December 31, 1999.
B22
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholder of
Pruco Life Insurance Company
In our opinion, the accompanying consolidated statements of financial
position and the related consolidated statements of operations, of changes in
stockholder's equity and of cash flows present fairly, in all material
respects, the financial position of Pruco Life Insurance Company (a
wholly-owned subsidiary of the Prudential Insurance Company of America) and
its subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with auditing standards
generally accepted in the United States which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 21, 2000
B23
<PAGE>
Variable Universal Life
Insurance
Variable Universal Life is issued by Pruco Life
Insurance Company, 213 Washington Street,
Newark, NJ 07102-2992 and offered through
Pruco Securities Corporation, 751 Broad Street,
Newark, NJ 07102-3777, both subsidiaries of
The Prudential Insurance Company of America,
751 Broad Street, Newark, NJ 07102-3777.
[GRAPHIC OMITTED]
Pruco Life Insurance Company
213 Washington Street, Newark, NJ 07102-2992
Telephone 800 778-2255
VUL-1 Ed. 5/2000 CAT# 64M9743
<PAGE>
PART II
OTHER INFORMATION
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
REPRESENTATION WITH RESPECT TO CHARGES
Pruco Life Insurance Company ("Pruco Life") represents that the fees and charges
deducted under the Variable Universal Life Insurance Contracts registered by
this registration statement, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the depositor.
UNDERTAKING WITH RESPECT TO 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.
Arizona, being the state of organization of Pruco Life, permits entities
organized under its jurisdiction to indemnify directors and officers with
certain limitations. The relevant provisions of Arizona law permitting
indemnification can be found in Section 10-850 et seq. of the Arizona Statutes
Annotated. The text of Pruco Life's By-law, Article VIII, which relates to
indemnification of officers and directors, is incorporated by reference to
Exhibit 3(ii) to its Form 10-Q, SEC File No. 33-37587, filed August 15,
1997.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
- -------------------------------------------------------------------------
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 89 pages.
The undertaking to file reports.
The representation with respect to charges.
The undertaking with respect to indemnification.
The signatures.
Written consents of the following persons:
1. PricewaterhouseCoopers LLP
2. Clifford E. Kirsch, Esq.
3. Ching-Meei Chang, MAAA, FSA
The following exhibits:
- -----------------------
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
A. (1) (a) Resolution of Board of Directors of Pruco Life Insurance
Company establishing the Pruco Life Variable Appreciable
Account. (Note 3)
(b) Amendment of Separate Account Resolution. (Note 8)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities Corporation
and Pruco Life Insurance Company. (Note 3)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the Sale
of the Contracts. (Note 3)
(c) Schedules of Sales Commissions. (Note 5)
(d) Participation Agreements.
(i) AIM Variable Insurance Funds, Inc., AIM V.I. Value
Fund. (Note 8)
(ii) American Century Variable Portfolios, Inc., VP Value
Portfolio. (Note 8)
(iii) Janus Aspen Series, Growth Portfolio. (Note 8)
(iv) MFS Variable Insurance Trust, Emerging Growth Series.
(Note 8)
(v) T. Rowe Price International Series, Inc.,
International Stock Portfolio. (Note 8)
(4) Not Applicable.
(5) Variable Universal Life Insurance Contract: (Note 3)
(6) (a) Articles of Incorporation of Pruco Life Insurance Company,
as amended October 19, 1993. (Note 3)
(b) By-laws of Pruco Life Insurance Company, as amended May 6,
1997. (Note 9)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form. (Note 3)
(b) Supplement to the Application. (Note 2)
(11) Form of Notice of Withdrawal Right. (Note 5)
II-2
<PAGE>
(12) Memorandum describing Prudential's issuance, transfer, and
redemption procedures for the Contracts pursuant to Rule 6e-3
(T)(b)(12)(iii) and method of computing adjustments in payments
and cash surrender values upon conversion to fixed-benefit
policies pursuant to Rule 6e-3(T)(b)(13)(v)(B). (Note 10)
(13) Available Contract Riders and Endorsements:
(a) Rider for Payment of Premium Benefit Upon Insured's Total
Disability. (Note 3)
(b) 10 Year Level Premium Term Rider on Insured. (Note 5)
(c) 10 Year Level Premium Term Rider on Spouse. (Note 5)
(d) Annually Renewable Term Rider on Insured. (Note 5)
(e) Children's Rider. (Note 5)
(f) Living Needs Benefit Rider
(i) for use in Florida. (Note 3)
(ii) for use in all approved jurisdictions except Florida.
(Note 3)
2. See Exhibit 1.A.(5).
3. Opinion and Consent of Clifford E. Kirsch, Esq. as to the legality of the
securities being registered. (Note 1)
4. None.
5. Not Applicable.
6. Opinion and Consent of Ching-Meei Chang, MAAA, FSA, as to actuarial matters
pertaining to the securities being registered. (Note 1)
7. Powers of Attorney:
(a) William M. Bethke, Ira J. Kleinman, Esther H. Milnes, I. Edward Price
(Note 6)
(b) Kiyofumi Sakaguchi (Note 4)
(c) James J. Avery, Jr. (Note 8)
(d) Dennis G. Sullivan (Note 7)
(e) David R. Odenath, Jr. (Note 11)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post-Effective Amendment No. 11 to Form
S-6, Registration No. 33-38271, filed on April 28, 1998 on behalf of
the Pruco Life Variable Universal Account.
(Note 3) Incorporated by reference to Registrant's Form S-6, filed July 2,
1996.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 8 to Form S-
6, Registration No. 33-49994, filed on April 28, 1997 on behalf of the
Pruco Life PRUvider Variable Appreciable Account.
(Note 5) Incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Form S-6, filed November 25, 1996.
(Note 6) Incorporated by reference to Form 10-K, Registration No. 33-08698,
filed March 31, 1997 on behalf of the Pruco Life Variable Contract
Real Property Account.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 5 to Form S-
1, Registration No. 33-86780, filed April 12, 1999 on behalf of the
Pruco Life Variable Contract Real Property Account.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 2 to this
Registration Statement, filed June 25, 1997.
(Note 9) Incorporated by reference to Form 10-Q, Registration No. 033-37587,
filed August 15, 1997 on behalf of the Pruco Life Insurance Company.
(Note 10) Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Form S-6, filed on April 29, 1998.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 7 to
Form S-1, Registration No. 33-86780, filed April 10, 2000 on behalf of
the Pruco Life Variable Contract Real Property Account.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, the
Pruco Life Variable Appreciable Account, certifies that this Amendment is filed
solely for one or more of the purposes specified in Rule 485(b)(1) under the
Securities Act of 1933 and that no material event requiring disclosure in the
prospectus, other than one listed in Rule 485(b)(1), has occurred since the
effective date of the most recent Post-Effective Amendment to the Registration
Statement which included a prospectus, and has caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal hereunto affixed and attested, all in the city of
Newark and the State of New Jersey, on this 24th day of April, 2000.
(Seal) THE PRUCO LIFE VARIABLE APPRECIABLE ACCOUNT
(Registrant)
By: PRUCO LIFE INSURANCE COMPANY
(Depositor)
Attest: /s/ Thomas C. Castano By: /s/ Esther H. Milnes
----------------------- ------------------------
Thomas C. Castano Esther H. Milnes
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 5 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 24th day of April,
2000.
SIGNATURE AND TITLE
-------------------
/s/ *
- --------------------------------
Esther H. Milnes
President and Director
/s/ *
- --------------------------------
Dennis G. Sullivan
Vice President and Chief
Accounting Officer
/s/ *
- --------------------------------
James J. Avery, Jr. *By: /s/ Thomas C. Castano
Director ------------------------
Thomas C. Castano
(Attorney-in-Fact)
/s/ *
- --------------------------------
William M. Bethke
Director
/s/ *
- --------------------------------
Ira J. Kleinman
Director
/s/ *
- --------------------------------
David R. Odenath, Jr.
Director
/s/ *
- --------------------------------
I. Edward Price
Director
/s/ *
- --------------------------------
Kiyofumi Sakaguchi
Director
II-4
<PAGE>
EXHIBIT INDEX
1. Consent of PricewaterhouseCoopers LLP, independent accountants.
2. Opinion and Consent of Clifford E. Kirsch, Esq. as to the legality of the
securities being registered.
3. Opinion and Consent of Ching-Meei Chang, MAAA, FSA, as to actuarial matters
pertaining to the securities being registered.
II-5
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this Post-
Effective Amendment No. 5 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated March 17, 2000, relating to the
financial statements of the Variable Universal Life Subaccounts of Pruco Life
Variable Appreciable Account, which appears in such Prospectus.
We also consent to the use in the Prospectus constituting part of this
Registration Statement of our report dated March 21, 2000, relating to the
consolidated financial statements of Pruco Life Insurance Company and its
subsidiaries, which appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
PricewaterhouseCoopers LLP
New York, New York
April 24, 2000
<PAGE>
EXHIBIT 3
April 10, 2000
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992
Gentlemen:
In my capacity as Chief Legal Officer of Pruco Life Insurance Company ("Pruco
Life"), I have reviewed the establishment on January 13, 1984 of Pruco Life
Variable Appreciable Account (the "Account") by the Executive Committee of the
Board of Directors of Pruco Life as a separate account for assets applicable to
certain variable life insurance contracts, pursuant to the provisions of Section
20-651 of the Arizona Insurance Code. I am responsible for oversight of the
preparation and review of the Registration Statement on Form S-6, as amended,
filed by Pruco Life with the Securities and Exchange Commission (Registration
Numbers: 2-89558, and 333-07451) under the Securities Act of 1933 for the
registration of certain variable life insurance contracts issued with respect to
the Account.
I am of the following opinion:
(1) Pruco Life was duly organized under the laws of Arizona and is a
validly existing corporation.
(2) The Account has been duly created and is validly existing as a
separate account pursuant to the aforesaid provisions of Arizona law.
(3) The portion of the assets held in the Account equal to the reserve
and other liabilities for variable benefits under the variable life
insurance contracts is not chargeable with liabilities arising out of
any other business Pruco Life may conduct.
(4) The variable life insurance contracts are legal and binding
obligations of Pruco Life in accordance with their terms.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as I judged to be necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/
- --------------------------
Clifford E. Kirsch
<PAGE>
EXHIBIT 6
April 24, 2000
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992
To Pruco Life Insurance Company:
This opinion is furnished in connection with the registration by Pruco Life
Insurance Company of its Variable Universal Life Contract (the "Contract") under
the Securities Act of 1933. The prospectus included in Post-Effective Amendment
No. 5 to Registration Statement No. 333-07451 on Form S-6 describes the
Contract. I have reviewed the Contract and I have participated in the
preparation and review of the Registration Statement and Exhibits thereto. In
my opinion:
(1) The illustrations of cash surrender values and death benefits included
in the section of the prospectus entitled "Illustrations of Cash
Surrender Values, Death Benefits, and Accumulated Premiums," based on
the assumptions stated in the illustrations, are consistent with the
provisions of the Contracts. The rate structure of the Contract has
not been designed so as to make the relationship between premiums and
benefits, as shown in the illustrations, appear more favorable to a
prospective purchaser of a Contract for male age 35 than to
prospective purchasers of Contracts on males of other ages or on
females.
(2) The examples shown in the section of the prospectus entitled "Changing
the Type of Death Benefit" are consistent with the provisions of the
Contract.
(3) The examples shown in the section of the prospectus entitled "Death
Benefit Guarantee" are consistent with the provisions of the Contract.
(4) The charts included in the sections of the prospectus "How a Type A
(Fixed) Contract's Death Benefit Will Vary" and "How a Type B
(Variable) Contract's Death Benefit Will Vary" are consistent with the
provisions of the Contract.
(5) The deduction in an amount equal to 1.25% of each premium is a
reasonable charge in relation to the additional income tax burden
imposed upon The Prudential Insurance Company of America as the result
of the enactment of Section 848 of the internal Revenue Code. In
reaching that conclusion, a number of factors were taken into account
that, in my opinion, were appropriate and which resulted in a project
after-tax rate of return that is a reasonable rate to use in
discounting the tax benefit of the deductions allowed in Section 848
in taxable years subsequent to the year in which the premiums are
received.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
/s/
- -------------------------------------------
Ching-Meei Chang, FSA, MAAA
Actuarial Director
The Prudential Insurance Company of America
