AS FILED WITH THE SEC ON ____________________. REGISTRATION NO. 33-29181
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 10
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
----------
PRUCO LIFE
VARIABLE UNIVERSAL ACCOUNT
(Exact Name of Trust)
PRUCO LIFE INSURANCE COMPANY
(Name of Depositor)
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 323-2993
(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
----------
Variable Universal Life Insurance Contracts--The Registrant has registered an
indefinite amount of securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Rule 24f-2 notice for fiscal year 1996 was filed on
February 28, 1997.
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, 1997 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. Pruco Life Variable Universal Account
6. Pruco Life Variable Universal Account
7. Not Applicable
8. Not Applicable
9. Litigation
10. Brief Description of the Contract; Short-Term
Cancellation Right or "Free Look"; Transfers; Refund of
Sales Charges; Reduction of Charges; Cash Surrender
Value; Death Benefit; Partial Withdrawal of Cash
Surrender Value; When Proceeds are Paid; Contract
Loans; Exchange Right Available in Some States;
Reduced Paid-Up Insurance Option Available in Some
States; Voting Rights; Substitution of Series Fund
Shares; Changes in Face Amount
11. Brief Description of the Contract; Pruco Life Variable
Universal Account
12. Cover Page; Brief Description of the Contract; The
Prudential Series Fund, Inc.; Sale of the Contract and
Sales Commissions
13. Brief Description of the Contract; The Prudential Series
Fund, Inc.; Premiums; Allocation of Premiums; Charges
and Expenses; Refund of Sales Charges; Reduction of
Charges; Sale of the Contract and Sales Commissions
14. Brief Description of the Contract; Detailed Information
for Prospective Contract Owners
15. Brief Description of the Contract; Premiums; Allocation
of Premiums; Transfers
16. Brief Description of the Contract; Detailed Information
for Prospective Contract Owners
17. Partial Withdrawal of Cash Surrender Value; When
Proceeds are Paid
18. Pruco Life Variable Universal Account; Cash Surrender
Value
19. Reports to Contract Owners
20. Not Applicable
21. Contract Loans
22. Not Applicable
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
23. Not Applicable
24. Other General Contract Provisions; The Prudential Series
Fund, Inc.
25. Pruco Life Insurance Company; The Prudential Series
Fund, Inc.
26. Brief Description of the Contract; The Prudential Series
Fund, Inc.; Charges and Expenses
27. Pruco Life Insurance Company
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
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. Brief Description of the Contract; The Prudential Series
Fund, Inc; Cash Surrender Value; Death Benefit
45. Not Applicable
46. Brief Description of the Contract; Pruco Life Variable
Universal Account; The Prudential Series Fund, Inc.
47. Pruco Life Variable Universal Account
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Not Applicable
52. Substitution of Series Fund Shares
53. Tax Treatment of Contract Benefits
54. Not Applicable
55. Not Applicable
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements; Financial Statements of Pruco Life
Variable Universal Account; Consolidated Financial
Statements of Pruco Life Insurance Company and
Subsidiaries
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
PROSPECTUS
MAY 1, 1997
PRUCO LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL ACCOUNT
PRUSELECT(SM) I
VARIABLE LIFE
INSURANCE CONTRACTS
This prospectus describes certain individual flexible premium variable universal
life insurance contracts issued by Pruco Life Insurance Company ("Pruco Life"),
a stock life insurance company that is a wholly-owned subsidiary of The
Prudential Insurance Company of America ("Prudential"), to employers, trusts,
associations or similar entities for the purpose of providing insurance on the
lives of selected employees. Pruco Life calls these contracts its PRUSELECT(SM)
I Variable Life Insurance Contracts* (the "Contract"). As of January 1, 1992,
these Contracts are no longer available for sale. These Contracts provide
individual universal life insurance coverage with flexible premium payments and
variable investment options. In general, the owner, not the insured employee,
makes all the premium payments and receives the benefits under the Contracts.
The Contracts may be used for such purposes as funding the owner's liabilities
for retiree medical benefits or other non-qualified employee benefits.
The Contracts provide a death benefit and cash surrender value. The cash
surrender value generally increases with the payment of each premium, decreases
to reflect charges made by Pruco Life, and varies daily with investment
performance of the chosen investment options. There is no guaranteed minimum
cash surrender value. The death benefit generally remains fixed in the amount or
amounts scheduled at the outset of the Contract (the "face amount"), unless it
is increased by Pruco Life to maintain the Contract's status as life insurance
under the Internal Revenue Code.
The Contracts provide a variety of investment options. The invested portion of
premiums may be invested in one or more of the fifteen current investment
subaccounts of the Pruco Life Variable Universal Account (the "Account"). The
assets of each subaccount of the Account are invested in a corresponding
portfolio of The Prudential Series Fund, Inc. (the "Series Fund"). The attached
prospectus for the Series Fund and the Series Fund's statement of additional
information describe the investment objectives of and the risks of investing in
the fifteen portfolios of the Series Fund currently available under the
Contracts: the MONEY MARKET PORTFOLIO, the DIVERSIFIED BOND PORTFOLIO, the
GOVERNMENT INCOME PORTFOLIO, two ZERO COUPON BOND PORTFOLIOS with different
liquidation dates--2000 and 2005, the CONSERVATIVE BALANCED PORTFOLIO, the
FLEXIBLE MANAGED PORTFOLIO, the HIGH YIELD BOND PORTFOLIO, the STOCK INDEX
PORTFOLIO, the EQUITY INCOME PORTFOLIO, the EQUITY PORTFOLIO, the PRUDENTIAL
JENNISON PORTFOLIO, the SMALL CAPITALIZATION STOCK PORTFOLIO, the GLOBAL
PORTFOLIO, and the NATURAL RESOURCES PORTFOLIO. Other subaccounts and portfolios
may be offered in the future.
THE REPLACEMENT OF LIFE INSURANCE IS GENERALLY NOT IN THE INTEREST OF THE
CUSTOMER. IN MOST CASES, WHEN A CUSTOMER REQUIRES ADDITIONAL COVERAGE, A NEW
POLICY SUPPLEMENTING THE EXISTING POLICY SHOULD BE REQUESTED, THEREBY PROTECTING
THE BENEFITS OF THE ORIGINAL POLICY. IF YOU ARE CONSIDERING REPLACING A POLICY,
YOU SHOULD COMPARE THE BENEFITS AND COSTS OF SUPPLEMENTING YOUR EXISTING POLICY
WITH THE BENEFITS AND COSTS OF PURCHASING THE CONTRACT DESCRIBED IN THIS
PROSPECTUS AND YOU SHOULD CONSULT WITH A QUALIFIED TAX ADVISOR.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ATTACHED TO
A CURRENT PROSPECTUS FOR THE PRUDENTIAL SERIES FUND, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 323-2993
*PRUSELECT is a service mark of Prudential.
CVUL-1 Ed 5-97
<PAGE>
PROSPECTUS CONTENTS
PAGE
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS..........................1
BRIEF DESCRIPTION OF THE CONTRACT.............................................2
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY, PRUCO LIFE
VARIABLE UNIVERSAL ACCOUNT, AND THE VARIABLE INVESTMENT OPTIONS
AVAILABLE UNDER THE CONTRACT................................................3
PRUCO LIFE INSURANCE COMPANY................................................3
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT.......................................3
THE PRUDENTIAL SERIES FUND, INC.............................................3
DETAILED INFORMATION FOR CONTRACT OWNERS......................................4
REQUIREMENTS FOR ISSUANCE OF A CONTRACT.....................................4
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"................................4
PREMIUMS....................................................................4
ALLOCATION OF PREMIUMS......................................................5
TRANSFERS...................................................................5
CHARGES AND EXPENSES........................................................5
REFUNDS OF SALES CHARGES....................................................7
REDUCTION OF CHARGES........................................................8
CASH SURRENDER VALUE........................................................8
DEATH BENEFIT...............................................................8
PARTIAL WITHDRAWAL OF CASH SURRENDER VALUE..................................9
CHANGES IN FACE AMOUNT......................................................9
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND
ACCUMULATED PREMIUMS....................................................10
CONTRACT LOANS.............................................................11
WHEN PROCEEDS ARE PAID.....................................................11
TAX TREATMENT OF CONTRACT BENEFITS.........................................11
WITHHOLDING................................................................13
OTHER TAX CONSIDERATIONS...................................................13
LAPSE AND REINSTATEMENT....................................................13
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS........14
EXCHANGE RIGHT AVAILABLE IN SOME STATES....................................14
REDUCED PAID-UP INSURANCE OPTION AVAILABLE IN SOME STATES..................14
OTHER GENERAL CONTRACT PROVISIONS..........................................14
VOTING RIGHTS..............................................................14
SUBSTITUTION OF SERIES FUND SHARES.........................................15
REPORTS TO CONTRACT OWNERS.................................................15
SALE OF THE CONTRACT AND SALES COMMISSIONS.................................15
STATE REGULATION...........................................................16
EXPERTS....................................................................16
LITIGATION.................................................................16
ADDITIONAL INFORMATION.....................................................16
FINANCIAL STATEMENTS.......................................................17
DIRECTORS AND OFFICERS.......................................................18
FINANCIAL STATEMENTS OF PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT................A1
CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE
COMPANY AND SUBSIDIARIES................................................B1
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR
THE SERIES FUND.
<PAGE>
DEFINITIONS OF SPECIAL TERMS
USED IN THIS PROSPECTUS
ATTAINED AGE--The insured's age on the Contract date plus the number of Contract
years since then.
CASH SURRENDER VALUE--The amount payable to the Contract owner upon surrender of
his or her Contract. The cash surrender value is equal to the Contract fund plus
any refund of sales charges due and minus any Contract debt.
CONTRACT ANNIVERSARY--The same date as the Contract date in each later year.
CONTRACT DATE--The date the Contract is issued, as specified in the Contract.
CONTRACT DEBT--The principal amount of all outstanding loans plus any interest
accrued thereon.
CONTRACT FUND--The total amount at any time credited to the Contract.
CONTRACT OWNER--The entity, typically an employer, trust or association, that
purchases the Contract.
CONTRACT YEAR--A year that starts on the Contract date or on a Contract
anniversary.
DEATH BENEFIT--The amount payable upon the death of the insured before the
deduction of any outstanding Contract debt.
FACE AMOUNT--The amount[s] of life insurance as shown in the Contract's schedule
of face amounts.
ISSUE AGE--The insured's age as of the Contract date.
LOAN VALUE--The maximum amount that a Contract owner may borrow.
MONTHLY DATE--The Contract date and the same date in each subsequent month.
NET AMOUNT AT RISK--The amount by which the death benefit exceeds the Contract
fund.
THE PRUDENTIAL SERIES FUND, INC. (THE "SERIES FUND")--A mutual fund with
separate portfolios, one or more of which may be chosen as an underlying
investment for the Contract.
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT (THE "ACCOUNT")--A separate account of
Pruco Life registered as a unit investment trust under the Investment Company
Act of 1940.
SUBACCOUNT--An investment division of the Account, the assets of which are
invested in the shares of the corresponding portfolio of the Series Fund.
VALUATION PERIOD--The period of time from one determination of the value of the
amount invested in a subaccount to the next. Such determinations are made when
the net asset values of the portfolios of the Series Fund are calculated, which
is generally at 4:15 p.m. New York City time on each day during which the New
York Stock Exchange is open.
1
<PAGE>
BRIEF DESCRIPTION OF THE CONTRACT
This prospectus describes individual flexible premium variable universal life
insurance contracts (the "Contract") that are offered by Pruco Life Insurance
Company ("Pruco Life") to employers, trusts, associations or similar entities
and that provide insurance on the lives of covered employees or other insured
individuals. As of January 1, 1992, these Contracts are no longer available for
sale. In general the owner, and not the insured, makes the premium payments and
receives the benefits under the Contracts; the original owner may, however, be
able to assign certain of the Contract rights.
The Contract provides flexibility with respect to the payment of premiums. A
minimum initial premium must be paid for the Contract to be issued. Thereafter,
the Contract owner may generally select the amount and timing of premium
payments. The Contract will typically set forth a schedule of annual target
premiums that the owner may pay, but the owner need not adhere to that schedule
and instead may vary the timing and amount of premiums. See PREMIUMS, page 4.
Payment of any specific premium level is not required to ensure that the
Contract remains in force. Rather, the Contract will remain in force as long as
the Contract fund is sufficient to pay the monthly charges. Conversely, the
payment of any specified premium level does not guarantee that the Contract will
not lapse. See LAPSE AND REINSTATEMENT, page 13.
There are circumstances, such as the payment of aggregate premiums in excess of
the sum of the annual "7-pay" premiums as defined by the Internal Revenue Code,
under which the Contract may become a Modified Endowment Contract under federal
tax law. If it does, loans and other pre-death distributions are includible in
gross income on an income-first basis. Under a Modified Endowment Contract, a
10% penalty tax may be imposed on distributions of income under certain
circumstances.
Prospective and current Contract owners are advised to consult a qualified tax
advisor before taking steps that may affect whether the Contract becomes a
Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 11.
The Contract owner may choose to have the premiums (after deduction of a $2
administrative charge, the applicable premium tax charge, and a sales load of up
to 7%) invested in one or more of fifteen subaccounts of the Pruco Life Variable
Universal Account (the "Account"). Each subaccount is invested in a
corresponding portfolio of The Prudential Series Fund, Inc. (the "Series Fund"),
a series mutual fund to which The Prudential Insurance Company of America
("Prudential") acts as the investment advisor. Information about the Series Fund
portfolios can be found under THE PRUDENTIAL SERIES FUND, INC. on page 3 and in
the attached prospectus for the Series Fund.
Because the assets that relate to the Contract may be invested in these various
investment options, the Contract offers an opportunity for the cash surrender
value to appreciate more rapidly than it would under comparable fixed-benefit
insurance. But the owner must accept the risk that, if investment performance of
the chosen option[s] is unfavorable, the cash surrender value may not appreciate
as rapidly and, indeed, may decrease in value.
Pruco Life deducts certain charges from each premium payment and from the
amounts held in the designated investment options. All these charges, which are
largely designed to cover insurance costs and risks as well as sales and
administrative expenses, are fully described under CHARGES AND EXPENSES on page
5. In brief, and subject to that fuller description, the following charges may
be made: (1) a charge for premium taxes (the most common level is 2% of the
premium) is deducted from each premium payment; (2) a $2 charge is deducted from
each premium payment to cover premium collection and processing costs; (3) a
front-end sales load of up to 7% of the remaining premium is deducted after the
above two charges have been deducted; (4) a monthly administrative charge of up
to $3 plus up to $0.04 per $1,000 of face amount of insurance is deducted from
the Contract fund; (5) a monthly charge for anticipated mortality (the "cost of
insurance charge") is deducted, with the maximum charge based on 100% of the
1980 Commissioners' Standard Ordinary Mortality Tables ("1980 CSO Tables"), with
appropriate adjustments for substandard rating classes; (6) a daily charge
equivalent to an annual rate of up to 0.9% is deducted from the assets of the
subaccounts for mortality and expense risks; (7) an administrative processing
charge of up to $15 will be made in connection with each partial withdrawal of
cash surrender value or decrease in face amount; and (8) certain fees and
expenses are deducted from the assets of the Series Fund. Under certain
circumstances, Contract owners may receive a refund of a portion of the sales
charge. See REFUNDS OF SALES CHARGES, page 7.
For a limited time, a Contract may be returned in accordance with the terms of
the "free look" provision. See SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK",
page 4.
This summary provides only a brief overview of the more significant aspects of
the Contract. Further detail is provided in the subsequent sections of this
prospectus and in the Contract. That document, together with the
2
<PAGE>
application attached to it, constitutes the entire agreement between the owner
and Pruco Life and should be retained.
For DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS, see page 1.
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE
COMPANY, PRUCO LIFE VARIABLE UNIVERSAL 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 is a wholly-owned subsidiary of Prudential, a
mutual insurance company founded in 1875 under the laws of the State of New
Jersey. As of December 31, 1996, Prudential has invested over $442 million in
Pruco Life in connection with Pruco Life's organization and operation.
Prudential intends from time to time to make additional capital contributions to
Pruco Life as needed to enable it to meet its reserve requirements and expenses
in connection with its business. Prudential is under no obligation to make such
contributions and its assets do not back the benefits payable under the
Contract. 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 VARIABLE UNIVERSAL ACCOUNT
The Pruco Life Variable Universal Account (the "Account") was established on
April 17, 1989 under Arizona law as a separate investment account. 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.
The obligations to Contract owners and beneficiaries arising under the Contracts
are general corporate obligations of Pruco Life. Pruco Life is also 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. Before making any such transfer, Pruco Life will consider any
possible adverse impact the transfer might have on the Account.
The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any
supervision by the SEC of the management or investment policies or practices of
the Account. For state law purposes, the Account is treated as a part or
division of Pruco Life. There are currently fifteen subaccounts within the
Account, each of which invests in a single corresponding portfolio of the Series
Fund. Additional subaccounts may be added in the future. The Account's financial
statements begin on page A1.
THE PRUDENTIAL SERIES FUND, INC.
The Prudential Series Fund, Inc. (the "Series Fund") is registered under the
1940 Act as an open-end diversified management investment company. Its shares
are currently sold only to separate accounts of Prudential and certain other
insurers that offer variable life insurance and variable annuity contracts. The
Account will purchase and redeem shares from the Series Fund at net asset value.
Shares will be redeemed to the extent necessary for Pruco Life to provide
benefits under the Contract and to transfer assets from one subaccount to
another, as requested by Contract owners. Any dividend or capital gain
distribution received from a portfolio of the Series Fund will be reinvested
immediately at net asset value in shares of that portfolio and retained as
assets of the corresponding subaccount.
Prudential is the investment advisor for the assets of each of the portfolios of
the Series Fund. Prudential's principal business address is Prudential Plaza,
Newark, New Jersey 07102-3777. Prudential has a Service Agreement with its
wholly-owned subsidiary The Prudential Investment Corporation ("PIC"), which
provides that, subject to Prudential's supervision, PIC will furnish investment
advisory services in connection with the management of the Series Fund. In
addition, Prudential has entered into a Subadvisory Agreement with its
wholly-owned subsidiary Jennison Associates Capital Corporation ("Jennison"),
under which Jennison furnishes investment advisory services in connection with
the management of the Prudential Jennison Portfolio. Further detail is
3
<PAGE>
provided in the prospectus and statement of additional information for the
Series Fund. Prudential, PIC, and Jennison are registered as investment advisors
under the Investment Advisers Act of 1940.
As an investment advisor, Prudential charges the Series Fund a daily investment
management fee as compensation for its services. In addition to the investment
management fee, each portfolio incurs certain expenses, such as accounting and
custodian fees. See CHARGES AND EXPENSES, page 5.
It is conceivable that in the future it may become disadvantageous for both
variable life insurance and variable annuity contract separate accounts to
invest in the same underlying mutual fund. Although neither the companies which
invest in the Series Fund, nor the Series Fund currently foresees any such
disadvantage, the Series Fund's Board of Directors 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 in response thereto. 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 Series Fund; or (4)
differences between voting instructions given by variable life insurance and
variable annuity contract owners.
A FULL DESCRIPTION OF THE SERIES FUND, ITS INVESTMENT OBJECTIVES, MANAGEMENT,
POLICIES, AND RESTRICTIONS, ITS EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN--INCLUDING ANY RISKS ASSOCIATED WITH INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO, AND ALL OTHER ASPECTS OF ITS OPERATION IS CONTAINED IN THE ATTACHED
PROSPECTUS FOR THE SERIES FUND AND IN ITS STATEMENT OF ADDITIONAL INFORMATION,
WHICH SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE MET.
DETAILED INFORMATION FOR CONTRACT OWNERS
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
As of January 1, 1992, these Contracts are no longer available for sale. Pruco
Life offers the Contracts on both an individually underwritten basis and a
guaranteed issue basis. Underwritten Contracts require individualized evidence
of the insured's insurability and rating class. Guaranteed issue Contracts may
be issued in certain circumstances on certain associated individuals, such as
those employees of a company who meet certain criteria established by Pruco
Life. Pruco Life will set from time to time certain minimum face amounts that it
will offer. The minimum face amount offered may depend on whether the Contract
is issued on an underwritten or guaranteed issue basis (the face amount is the
minimum death benefit, absent Contract debt or default). The minimum face
amounts currently offered are $100,000 for an underwritten Contract and $50,000
for a Contract issued on a guaranteed issue basis, although Pruco Life may in
its discretion reduce the minimum face amounts of the Contracts it will issue. A
Contract owner may establish a schedule of face amounts under which the face
amount will change on designated dates.
The Contract may generally be issued on insureds between the ages of 20 and 75
for underwritten Contracts, and between ages 20 and 64 for guaranteed issue
Contracts. In its discretion, Pruco Life may issue the Contract on insureds of
other ages.
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"
Generally, a Contract may be returned for a refund within 10 days after it is
received by the Contract owner. Some states allow a longer period of time during
which a Contract may be returned for a refund. A refund can be requested 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. The Contract owner 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, the Contract
owner who exercises his or her short-term cancellation right will receive a
refund of all premium payments made, with no adjustment for investment
experience.
PREMIUMS
Pruco Life will set a minimum initial premium for issuance of a Contract.
Moreover, a Contract will typically contain a schedule of annual target premiums
that the owner may pay. However, the Contract owner need not follow that
schedule and has considerable flexibility with respect to the timing and amount
of payments. The minimum premium Pruco Life will accept is $25 and Pruco Life
reserves the right to limit premiums over the target amount in any year to
$10,000. Moreover, Pruco Life may refuse to accept a premium that will
immediately result in an increase in the death benefit. See DEATH BENEFIT, page
8. The amount of premium payments made by the owner will affect the size of the
Contract's cash surrender value and the likelihood of lapse and may affect the
size of the death benefit. Payment of premiums in excess of certain amounts will
cause the Contract to become a
4
<PAGE>
Modified Endowment Contract, which affects the tax treatment of pre-death
distributions under the Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page
11.
ALLOCATION OF PREMIUMS
The following rules govern the allocation of premiums by Contract owners. On the
Contract date (the date the Contract is issued, as specified in the Contract),
the applicable premium tax charge (most frequently 2%), the $2 processing
charge, and the front-end sales charge of up to 7% of the remaining premium are
deducted from the initial premium, and the first monthly deductions are made.
See CHARGES AND EXPENSES, page 5. Except as provided below, the remainder of the
initial premium will be allocated among the subaccounts according to the
allocation specified by the Contract owner. In states which require a return of
premium with no adjustment for investment experience to a Contract owner who
exercises his or her short-term cancellation right, the initial premium
remaining after deduction of the charges described above will be allocated to
the Money Market Subaccount until the end of the "free-look" period. Thus, to
the extent that the receipt of the first premium precedes the Contract date,
there will be a period during which the Contract owner's initial premium will
not be invested.
The premium tax charge, the $2 per payment charge, and the front-end sales load
also apply to all subsequent premium payments. (The front-end sales load on
premiums after the first year is generally reduced to 5%, but Pruco Life
reserves the contractual right to charge up to 7%.) The remainder of such
subsequent premiums will be invested in accordance with the investment
allocation previously designated. The invested portion of all subsequent
premiums is invested in the selected subaccount[s] as of the end of the
valuation period in which the premium is received at the Home Office stated in
the Contract. Provided the Contract is not in default, the Contract owner may
change the way in which subsequent premiums are allocated by giving written
notice to a Home Office or by telephoning that Home Office, provided the
Contract owner is enrolled to use the Telephone Transfer System. There is no
charge for reallocating future premiums. The percentage of the invested premium
that may be allocated to a particular subaccount must be at least 10% on the
date the allocation takes effect. All percentage allocations must be in whole
numbers. For example, 33% can be selected but 331/3% cannot. Of course, the
total allocation to all selected subaccount[s] must equal 100%.
TRANSFERS
If the Contract is not in default, the Contract owner may, up to four times in
each Contract year, transfer amounts from one subaccount to another subaccount.
Currently, you may make additional transfers with our consent. There is no
charge. All or a portion of the amount credited to a subaccount may be
transferred. The minimum transfer is the lesser of $250 or the amount the
Contract owner has invested in the particular investment option.
Transfers among subaccounts 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 $10,000 from
one subaccount to another, or may be in terms of a percentage reallocation among
subaccounts. In the latter case, as with premium reallocations, the percentages
must be in whole numbers. The Contract owner may transfer amounts by proper
written notice to a Home Office or by telephone, provided the Contract owner is
enrolled to use the Telephone Transfer System. Contract owners will
automatically be enrolled to use the Telephone Transfer System unless the
Contract is jointly owned or the Contract owner elects not to have this
privilege. Telephone transfers may not be available on policies that are
assigned, see ASSIGNMENT, page 14, depending on the terms of the assignment.
Pruco Life has adopted procedures designed to ensure that requests by telephone
are genuine. Pruco Life will not be held liable for following telephone
instructions that it reasonably believes to be genuine. Pruco Life cannot
guarantee that owners will be able to get through to complete a telephone
transfer during peak periods such as periods of drastic economic or market
change.
On the liquidation date of a Zero Coupon Bond Subaccount, all the shares held by
it in the corresponding portfolio of the Series Fund will be redeemed and the
proceeds of the redemption applicable to each Contract will be transferred to
the Money Market Subaccount unless the Contract owner directs that it be
transferred to another subaccount. A transfer that occurs upon the liquidation
of a Zero Coupon Bond Subaccount will not be counted as one of the four
permissible transfers in a Contract year.
CHARGES AND EXPENSES
The total amount invested at any time under the Contract (the "Contract fund")
consists of the amount relating to the Contract held in the Account and the
principal amount of any Contract loan plus the amount of interest credited upon
the loan to the Contract owner.
All charges made by Pruco Life, whether deducted from premiums or from the
Contract fund, are set forth below.
5
<PAGE>
1. A charge is deducted from each premium payment to compensate Pruco Life
for paying premium taxes. These taxes vary by state and in some states by
locality. The most common level of premium taxes is 2% of the premium. The
tax rates generally range from 0.75% to 5% (but in some instances it may
exceed 5%). During 1996, 1995 and 1994, Pruco Life received a total of
approximately $93,083, $40,772 and $81,162 respectively, in charges for
payment of premium taxes.
2. An administrative charge of $2 is deducted from each premium payment to
cover the cost of collecting and processing premiums. During 1996, 1995
and 1994, Pruco Life received a total of approximately $1,003, $262 and
$690, respectively, in processing charges.
3. There is a charge to compensate Pruco Life for the cost of selling the
Contract. This cost includes sales commissions, advertising, and the
printing of prospectuses and sales literature. This charge is called the
"sales load" and consists of a deduction of up to 7% of the premium
remaining after the premium tax charge and the $2 premium processing
charge have been deducted. On a non-guaranteed basis, Pruco Life intends
to charge the 7% sales load on first year payments and only a 5% sales
load on subsequent payments. A portion of the sales load may be refunded
if the Contract is surrendered during the first 3 Contract years or if
aggregate premiums under all Contracts of this type purchased by the owner
exceed an amount determined by Pruco Life (currently $5 million). See
REFUNDS OF SALES CHARGES, page 7. During 1996, 1995 and 1994, Pruco Life
received a total of approximately $151,540, $173,507 and $185,265,
respectively, in sales load charges.
4. On each Monthly date, (i.e., the Contract date and the same day of each
succeeding month), the Contract fund is reduced by an administrative
charge of up to $3 plus up to $0.04 per $1,000 of face amount of insurance
(but currently on a non-guaranteed basis of not more than $6 per month).
This charge is to compensate Pruco Life for administrative expenses
incurred, among other things, in issuing the Contracts, processing claims,
paying cash surrender values and death benefits, keeping records, and
communicating with Contract owners. During 1996, 1995 and 1994, Pruco Life
received a total of approximately $34,937, $34,882 and $37,630,
respectively, in monthly administrative charges.
5. Pruco Life deducts a mortality charge (also referred to as a "cost of
insurance charge") from the Contract fund on each Monthly date to cover
anticipated mortality costs. When an insured dies, the amount of the death
benefit paid to the beneficiary is larger than the Contract fund. The
mortality charges are designed to enable Pruco Life to pay this larger
death benefit. The charge is determined by multiplying the applicable "net
amount at risk" (the amount by which the death benefit, computed as if
there were no Contract debt, exceeds the Contract fund) by a mortality
rate based upon the insured's sex, issue age and current attained age, and
the anticipated mortality for that class of persons. The maximum rate that
Pruco Life may charge for underwritten Contracts which are not in a
substandard risk class is 100% of the applicable rates of the
non-smoker/smoker 1980 CSO Tables. The maximum rate that Pruco Life may
charge under Contracts issued on a guaranteed issue basis which are not in
a substandard risk class is 100% of the applicable rates of the composite
1980 CSO Tables. Higher rates apply if the insured is determined to be in
a substandard risk class. Current cost of insurance rates are typically
lower than the maximum rates.
6. A charge is made to compensate Pruco Life for assuming mortality and
expense risks. This is done by deducting daily, from the assets of each of
the subaccounts, a percentage of those assets up to an effective annual
rate of 0.9%. Pruco Life currently intends to charge only 0.6% on these
Contracts, but reserves the right to make the full 0.9% charge. The
mortality risk assumed is that insureds may live for a shorter period of
time than Pruco Life estimated when it determined what mortality charges
to make. The expense risk assumed is that expenses will be greater than
Pruco Life estimated in fixing its administrative charges. During 1996,
1995 and 1994, Pruco Life received a total of approximately $273,293,
$227,525 and $193,493, respectively, in mortality and expense risk
charges.
7. An administrative processing charge of up to $15 will be made in
connection with each partial withdrawal of cash surrender value or
decrease in face amount. See PARTIAL WITHDRAWAL OF CASH SURRENDER VALUE,
page 9, and CHANGES IN FACE AMOUNT, page 9.
8. The Account purchases shares of the Series Fund at net asset value. The
net asset value of those shares reflects investment management fees and
expenses already deducted from the assets of the Series Fund. More
detailed information is contained in the attached prospectus for the
Series Fund.
The total expenses of each portfolio for the year 1996 expressed as a
percentage of the average assets during the year are shown below:
6
<PAGE>
- ---------------------------- -------------- ------------------ ----------------
Other Total
Investment Expenses Expenses
PORTFOLIO Advisory (after expense (after expense
Fee reimbursement)* reimbursement)*
- ---------------------------- -------------- ------------------ ----------------
MONEY MARKET 0.40% 0.04% 0.44%
DIVERSIFIED BOND 0.40% 0.05% 0.45%
GOVERNMENT INCOME 0.40% 0.06% 0.46%
ZERO COUPON BOND 2000 0.40% 0.00%* 0.40%*
ZERO COUPON BOND 2005 0.40% 0.00%* 0.40%*
CONSERVATIVE BALANCED 0.55% 0.04% 0.59%
FLEXIBLE MANAGED 0.60% 0.04% 0.64%
HIGH YIELD BOND 0.55% 0.08% 0.63%
STOCK INDEX 0.35% 0.05% 0.40%
EQUITY INCOME 0.40% 0.05% 0.45%
EQUITY 0.45% 0.05% 0.50%
PRUDENTIAL JENNISON 0.60% 0.06% 0.66%
SMALL CAPITALIZATION STOCK 0.40% 0.16% 0.56%
GLOBAL 0.75% 0.17% 0.92%
NATURAL RESOURCES 0.45% 0.07% 0.52%
- ---------------------------- -------------- ------------------ ----------------
*For some of the portfolios, the actual expenses were higher than those
shown in the second and third columns. Pruco Life, on a non-guaranteed
basis, makes daily adjustments that will offset the effect on Contract
owners of some of these expenses incurred by certain portfolios. Pruco
Life currently makes such adjustments to ensure that the portfolio
expenses indirectly borne by a Contract owner investing in: (1) the Zero
Coupon Bond Portfolios will not exceed the investment management fee; (2)
the Stock Index Portfolio will not exceed the investment management fee
plus 0.05% of the average daily net assets of the portfolio; and (3) the
High Yield Bond, Equity Income and Natural Resources Portfolios will not
exceed the investment management fee plus 0.1% of the average daily net
assets of the portfolio.
Without such adjustments the portfolio expenses indirectly borne by a
Contract owner, expressed as a percentage of the average daily net assets
by portfolio, would have been 0.52% for the Zero Coupon Bond Portfolio
2000 and 0.53% for the Zero Coupon Bond Portfolio 2005 during 1996. No
such adjustments were necessary for the High Yield Bond, Stock Index,
Equity Income and Natural Resources Portfolios in 1996. Pruco Life does
not intend to discontinue these adjustments in the future, although it
retains the right to do so.
9. Although the account is registered as a unit investment trust, it is not a
separate taxpayer for purposes of the Code. The earnings of the Account
are taxed as part of the operations of Pruco Life. No charge is being made
currently to the Account for company federal income taxes. Pruco Life will
review the question of a charge to the Account for company federal income
taxes periodically. Such a charge may be made in future years for any
federal income taxes that would be attributable to the Contracts. Under
current laws, Pruco Life may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not
significant and they are not charged against the Contracts or the Account.
If there is a material change in the applicable state or local tax laws,
the imposition of any such taxes upon Pruco Life that are attributable to
the Account may result in a corresponding charge against the Account.
10. An extra risk charge may be deducted monthly for aviation, occupational or
temporary extra risks.
In several instances Pruco Life uses 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. However, if circumstances change,
Pruco Life reserves the right to increase each current charge, up to but to no
more than the maximum charge, without giving any advance notice.
The Contract owner may specify the subaccount[s] from which the monthly
deductions are made. If the amount held in a selected subaccount is insufficient
or if no selection is made by the owner, the monthly charges will be deducted
based on the portions of the Contract fund invested in each of the selected
subaccount[s].
REFUNDS OF SALES CHARGES
If the Contract is not in default, Pruco Life will, upon full surrender of the
Contract within the first 3 Contract years, return any sales charges deducted
from premiums paid within the 365 days prior to the date Pruco Life receives the
surrender request at a Home Office.
7
<PAGE>
Furthermore, Pruco Life's sales expenses may be lower if an owner pays more than
$5 million (or some alternative amount set by Pruco Life) in aggregate first
year premiums on all Pruco Life Contracts of this type that the owner purchased.
Reductions in sales expenses may, on a non-guaranteed basis, lead to refunds of
a portion of the sales load. Thus, currently, at the end of the first Contract
year, Pruco Life intends to refund a portion of the sales load for such
Contracts. It will do so by adding an amount equal to 3% of the aggregate first
year premiums between $5 million to $10 million and 6% of the premiums in excess
of $10 million, plus such interest thereon as Pruco Life in its discretion
determines, to the Contract fund after the end of the first Contract year.
Additional non-guaranteed refunds of sales load may be made based on such
factors as total aggregate premiums of a certain amount over a given period of
time and the persistency of the Contracts.
REDUCTION OF CHARGES
In addition to the refund of sales charges noted above, Pruco Life reserves the
right to reduce the sales charges and/or other charges on certain multiple life
sales, where it is expected that the amount or nature of such multiple sales
will result in savings of sales, administrative or other costs. Pruco Life
determines both the eligibility for such reduced charges, as well as the amount
of such reductions, by considering the following factors: (1) the number of
individuals; (2) the total amount of premium payments expected to be received
from these Contracts; (3) the nature of the association between these
individuals, and the expected persistency of the individual Contracts; (4) the
purpose for which the individual Contracts are purchased and whether that
purpose makes it likely that costs will be reduced; and (5) any other
circumstances which Pruco Life believes to be relevant in determining whether
reduced costs may be expected. Some of the reductions in charges for these sales
may be contractually guaranteed; other reductions may be withdrawn or modified
by Pruco Life on a uniform basis. Pruco Life's reductions in charges for these
Contracts will not be unfairly discriminatory to the interests of any Contract
owners.
CASH SURRENDER VALUE
A Contract has a cash surrender value which the owner may obtain while the
insured is living by surrender of the Contract. Surrender of a Contract may have
tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 11. Unlike
traditional fixed-benefit insurance, however, a Contract's cash surrender value
is not known in advance because it varies daily with the investment performance
of the selected subaccount[s]. It also varies with the amount of invested
premiums and charges deducted from the Account. The cash surrender value equals
the Contract fund plus any refund of sales charges due minus any Contract debt
arising from any outstanding loan. The owner may withdraw part of the cash
surrender value under certain conditions. See PARTIAL WITHDRAWAL OF CASH
SURRENDER VALUE, page 9 and TAX TREATMENT OF CONTRACT BENEFITS, page 11.
There is no minimum cash surrender value. If the Contract fund is insufficient
to pay monthly charges, the Contract will lapse in 61 days unless a payment
sufficient to keep the Contract in force is received. See LAPSE AND
REINSTATEMENT, page 13.
The tables on pages T1 through T8 illustrate what the cash surrender values
would be for representative Contracts, assuming certain uniform hypothetical
investment results in the selected Series Fund portfolio[s].
DEATH BENEFIT
At issue, the Contract will specify a face amount or perhaps a series of face
amounts applicable at different times. Assuming that there is no Contract debt
and that the Contract is not in default, the death benefit on any date is equal
to the greater of: (1) the current face amount; and (2) the Contract fund before
deduction of any monthly charges due on that date, plus a return of any sales
charges due upon surrender during the first 3 Contract years, divided by the net
single premium per $1 at the insured's attained age. This second alternative
ensures that the death benefit will not be less than the amount of life
insurance that could be provided for an invested single premium amount equal to
the Contract fund plus any refund of sales charges due on surrender. The death
benefit proceeds will be reduced to reflect any Contract debt.
If the Contract is in default and the insured dies in the 61-day grace period,
the death benefit less any overdue charges is payable. If the insured dies past
the grace period, no death benefit is payable. See LAPSE AND REINSTATEMENT, page
13.
Under the second alternative described above, the death benefit may be increased
based on the size of the Contract fund and the insured's attained age. Such an
increase ensures that the Contract will satisfy the Internal Revenue Code's
definition of life insurance. The death benefit may thereafter vary based on the
size of the Contract fund and the insured's attained age, but will not decrease
below the face amount. The net single premium is used only in the calculation of
the death benefit, not for premium payment purposes. The following is a table of
illustrative net single premiums for $1 of death benefit.
8
<PAGE>
- --------------------------------------------------------------------------------
REGULAR ISSUE PREFERRED
- ------------ ----------- --------------- ----------- ----------- --------------
Increase in Increase in
Insurance Insurance
MALE Net Amount Per Female Net Amount Per
ATTAINED Single $1 Increase Attained Single $1 Increase
AGE Premium in Contract Age Premium in Contract
Fund Fund
- ------------ ----------- --------------- ----------- ----------- --------------
25 .17000 $ 5.88 25 .15112 $ 6.62
35 .23700 $ 4.22 35 .21127 $ 4.73
55 .45209 $ 2.21 55 .40090 $ 2.49
65 .59468 $ 1.68 65 .53639 $ 1.86
- ------------ ----------- --------------- ----------- ----------- --------------
- --------------------------------------------------------------------------------
GUARANTEED ISSUE
- ----------- ----------- ---------------- ---------- ----------- --------------
INCREASE IN INCREASE IN
INSURANCE INSURANCE
MALE NET AMOUNT PER FEMALE NET AMOUNT PER
ATTAINED SINGLE $1 INCREASE ATTAINED SINGLE $1 INCREASE
AGE PREMIUM IN CONTRACT AGE PREMIUM IN CONTRACT
FUND FUND
- ----------- ----------- ---------------- ---------- ----------- --------------
25 .18455 $ 5.42 25 .15687 $ 6.37
35 .25596 $ 3.91 35 .21874 $ 4.57
55 .47352 $ 2.11 55 .40746 $ 2.45
65 .60986 $ 1.64 65 .54017 $ 1.85
- ----------- ----------- ---------------- ---------- ----------- --------------
Whenever the death benefit is determined in this way, Pruco Life reserves the
right to refuse to accept further premium payments.
With Pruco Life's consent, a Contract owner may be able to decrease the face
amount of the Contract. Any such decrease, however, may cause the Contract to
become a Modified Endowment Contract and have tax consequences. See CHANGES IN
FACE AMOUNT, below, and TAX TREATMENT OF CONTRACT BENEFITS, page 11.
PARTIAL WITHDRAWAL OF CASH SURRENDER VALUE
Contract owners may make withdrawals from the Contract fund. Such withdrawals
may have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 11. A
Contract owner may make up to four withdrawals per year, subject to certain
requirements. The amount withdrawn must be at least $2,000 (in some states the
minimum withdrawal amount may be lower), and there is an administrative
processing fee of up to $15. The amount withdrawn plus the administrative
processing fee of up to $15 will be taken proportionately from the Contract fund
based on the portion of the total Contract fund in a particular subaccount. A
Contract owner may not designate the subaccount[s] from which a withdrawal is to
be taken, although Contract owners may make up to four transfers each Contract
year. See TRANSFERS, page 5. An amount withdrawn may not be repaid except as a
premium subject to the applicable charges. All requests for withdrawals must be
made in writing. Upon request, Pruco Life will tell a Contract owner how much
may be withdrawn. Whenever a withdrawal is made, the face amount may be reduced
in order to prevent the net amount at risk from increasing.
No partial withdrawal will be permitted if it would result in a new current face
amount of less than $100,000 under an underwritten Contract or $50,000 under a
Contract issued on a guaranteed issue basis. It is important to note, however,
that if the face amount is decreased at any time during the first 7 Contract
years, there is a danger that the Contract might be classified as a Modified
Endowment Contract. Before making any withdrawal which causes a decrease in face
amount, a Contract owner should consult with his or her tax advisor and Pruco
Life representative. See TAX TREATMENT OF CONTRACT BENEFITS, page 11. Contract
owners who make a partial withdrawal will be sent replacement Contract pages
showing the new face amount. A withdrawal may affect target premiums and monthly
deductions.
CHANGES IN FACE AMOUNT
Although there is no contractual right to do so, Pruco Life may permit a
Contract owner to decrease the Contract's face amount without withdrawing a
portion of the Contract fund. This can be done to reduce monthly charges. There
is an administrative processing fee of up to $15 for such a decrease. Contract
owners should carefully
9
<PAGE>
consider the tax consequences before requesting a decrease in face amount; if a
decrease is effected, especially during the first 7 Contract years, the Contract
may become a Modified Endowment Contract. See TAX TREATMENT OF CONTRACT
BENEFITS, page 11. No decrease will be allowed below the minimum face amounts.
Decreases in face amount may also be combined with cash withdrawals.
Furthermore, Pruco Life may in its discretion allow an owner to increase a
Contract's face amount based on such factors as changes in the insured's salary.
Increases in a Contract's face amount may also affect whether the Contract is a
Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 11.
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED
PREMIUMS
The following eight tables have been prepared to show how certain values under a
Contract change with investment performance of the Account over an extended
period of time. The tables assume that there is no Contract debt. The tables
illustrate how cash surrender values and death benefits of a Contract issued on
an insured of a given age would vary over time if the return on assets in the
selected Series Fund portfolios were a uniform, after-tax, annual rate of 0%,
6%, and 12%. The first four tables assume certain target premiums were paid
annually for all years, and the remaining tables assume payment of certain
higher annual premiums (the 7-pay premiums, i.e., the maximum annual premiums
that may be paid in the first 7 years without the Contract becoming a Modified
Endowment Contract under federal tax law) for 7 years. The death benefits and
cash surrender values would be different from those shown if the returns
averaged 0%, 6%, and 12% but fluctuated over and under those averages throughout
the years. The tables also show the values of the premiums accumulated at 4%
interest.
The tables reflect the fact that the net return on the assets held in the
subaccounts is lower than the gross return of the Series Fund's portfolios. This
is because these tables assume an investment management fee and other estimated
Series Fund expenses totalling 0.53%. The 0.53% figure is based on an average of
the current management fees and expenses of the fifteen portfolios, taking into
account any applicable expense caps or expense reimbursement arrangements.
Actual fees and expenses of the portfolios associated with a Contract may be
more or less than 0.53%, will vary from year to year, and will depend on how the
Contract fund is allocated.
The tables also reflect the daily charge to the Account for assuming mortality
and expense risks, the monthly administrative charge, and the monthly mortality
charge. As their headings indicate, the following tables alternate between
tables reflecting Pruco Life's current charges and tables reflecting the
deduction of the maximum contractual charges. They reflect the refund of the
prior year's sales charges applicable to surrenders in the first 3 Contract
years, but no other refunds of sales charges such as that based on aggregate
first year premiums in excess of $5 million. All tables assume a premium tax
charge of 2% and reflect the fact that no charges for Federal or state income
taxes are currently made against the Account. The tables relate to underwritten
contracts on preferred risk insureds.
Upon request, Pruco Life will furnish a comparable illustration based on a
proposed Contract's specific circumstances.
10
<PAGE>
ILLUSTRATIONS
-------------
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $1,402.04 ANNUAL PREMIUMS FOR ALL YEARS
USING CURRENT 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% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-1.13% NET) (4.87% NET) (10.87% NET) (-1.13% NET) (4.87% NET) (10.87% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,458 $100,000 $100,000 $ 100,000 $ 1,151 $ 1,221 $ 1,291
2 $ 2,975 $100,000 $100,000 $ 100,000 $ 2,188 $ 2,396 $ 2,613
3 $ 4,552 $100,000 $100,000 $ 100,000 $ 3,233 $ 3,650 $ 4,102
4 $ 6,192 $100,000 $100,000 $ 100,000 $ 4,191 $ 4,890 $ 5,678
5 $ 7,898 $100,000 $100,000 $ 100,000 $ 5,198 $ 6,254 $ 7,493
6 $ 9,672 $100,000 $100,000 $ 100,000 $ 6,180 $ 7,673 $ 9,495
7 $ 11,517 $100,000 $100,000 $ 100,000 $ 7,142 $ 9,151 $ 11,707
8 $ 13,435 $100,000 $100,000 $ 100,000 $ 8,084 $ 10,694 $ 14,153
9 $ 15,431 $100,000 $100,000 $ 100,000 $ 9,004 $ 12,302 $ 16,858
10 $ 17,506 $100,000 $100,000 $ 100,000 $ 9,903 $ 13,980 $ 19,851
15 $ 29,197 $100,000 $100,000 $ 104,273 $14,090 $ 23,558 $ 40,444
20 $ 43,420 $100,000 $100,000 $ 164,120 $17,589 $ 35,387 $ 74,197
25 $ 60,725 $100,000 $100,000 $ 250,929 $20,580 $ 50,943 $130,910
30 (AGE 65) $ 81,779 $100,000 $118,234 $ 375,252 $22,107 $ 70,311 $223,155
35 $107,394 $100,000 $140,462 $ 557,325 $21,180 $ 93,778 $372,093
40 $138,559 $100,000 $165,850 $ 830,757 $16,386 $122,217 $612,193
45 $176,476 $100,000(2) $196,092 $1,249,925 $ 3,899(2) $156,377 $996,777
</TABLE>
(1) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(2) BASED ON A GROSS RETURN OF 0%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY
YEAR 46, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE.
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 RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, 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 SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T1
<PAGE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $1,402.04 ANNUAL PREMIUMS FOR ALL YEARS
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% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-1.43% NET) (4.57% NET) (10.57% NET) (-1.43% NET) (4.57% NET) (10.57% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,458 $100,000 $100,000 $100,000 $ 1,101 $ 1,169 $ 1,238
2 $ 2,975 $100,000 $100,000 $100,000 $ 2,085 $ 2,285 $ 2,493
3 $ 4,552 $100,000 $100,000 $100,000 $ 3,044 $ 3,441 $ 3,872
4 $ 6,192 $100,000 $100,000 $100,000 $ 3,884 $ 4,544 $ 5,290
5 $ 7,898 $100,000 $100,000 $100,000 $ 4,795 $ 5,787 $ 6,954
6 $ 9,672 $100,000 $100,000 $100,000 $ 5,679 $ 7,074 $ 8,781
7 $ 11,517 $100,000 $100,000 $100,000 $ 6,535 $ 8,405 $ 10,790
8 $ 13,435 $100,000 $100,000 $100,000 $ 7,364 $ 9,784 $ 12,998
9 $ 15,431 $100,000 $100,000 $100,000 $ 8,165 $11,210 $ 15,428
10 $ 17,506 $100,000 $100,000 $100,000 $ 8,936 $12,685 $ 18,103
15 $ 29,197 $100,000 $100,000 $100,000 $12,288 $20,833 $ 36,177
20 $ 43,420 $100,000 $100,000 $144,246 $14,569 $30,341 $ 65,212
25 $ 60,725 $100,000 $100,000 $211,095 $15,179 $41,230 $110,128
30 (AGE 65) $ 81,779 $100,000 $100,000 $300,032 $13,075 $53,652 $178,423
35 $107,394 $100,000 $101,870 $419,566 $ 6,043 $68,013 $280,119
40 $138,559 $ 0(2) $113,642 $581,512 $ 0(2) $83,744 $428,522
45 $176,476 $ 0 $125,267 $802,743 $ 0 $99,897 $640,163
</TABLE>
(1) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(2) BASED ON A GROSS RETURN OF 0%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY
YEAR 38, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE.
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 RATES
OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%,
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 SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T2
<PAGE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $3,573.47 ANNUAL PREMIUMS FOR ALL YEARS
USING CURRENT 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% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-1.13% NET) (4.87% NET) (10.87% NET) (-1.13% NET) (4.87% NET) (10.87% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,716 $100,000 $100,000 $100,000 $ 2,889 $ 3,066 $ 3,244
2 $ 7,581 $100,000 $100,000 $100,000 $ 5,474 $ 6,001 $ 6,549
3 $ 11,601 $100,000 $100,000 $100,000 $ 8,073 $ 9,126 $ 10,269
4 $ 15,782 $100,000 $100,000 $100,000 $10,437 $ 12,203 $ 14,196
5 $ 20,129 $100,000 $100,000 $100,000 $12,917 $ 15,589 $ 18,727
6 $ 24,651 $100,000 $100,000 $100,000 $15,335 $ 19,114 $ 23,737
7 $ 29,353 $100,000 $100,000 $100,000 $17,692 $ 22,787 $ 29,285
8 $ 34,244 $100,000 $100,000 $100,000 $19,986 $ 26,619 $ 35,440
9 $ 39,330 $100,000 $100,000 $100,000 $22,213 $ 30,620 $ 42,281
10 (AGE 65) $ 44,620 $100,000 $100,000 $100,000 $24,375 $ 34,801 $ 49,897
15 $ 74,416 $100,000 $100,000 $153,060 $34,108 $ 59,016 $102,189
20 $110,668 $100,000 $123,689 $255,788 $41,875 $ 91,147 $188,493
25 $154,773 $100,000(2) $163,556 $411,118 $45,965(2) $130,431 $327,854
</TABLE>
(1) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(2) BASED ON A GROSS RETURN OF 0%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY
YEAR 40, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE.
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 RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, 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 SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T3
<PAGE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $3,573.47 ANNUAL PREMIUMS FOR ALL YEARS
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% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-1.43% NET) (4.57% NET) (10.57% NET) (-1.43% NET) (4.57% NET) (10.57% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,716 $100,000 $100,000 $100,000 $ 2,579 $ 2,746 $ 2,914
2 $ 7,581 $100,000 $100,000 $100,000 $ 4,819 $ 5,302 $ 5,806
3 $ 11,601 $100,000 $100,000 $100,000 $ 6,965 $ 7,915 $ 8,947
4 $ 15,782 $100,000 $100,000 $100,000 $ 8,768 $10,338 $ 12,117
5 $ 20,129 $100,000 $100,000 $100,000 $10,710 $13,060 $ 15,835
6 $ 24,651 $100,000 $100,000 $100,000 $12,541 $15,834 $ 19,890
7 $ 29,353 $100,000 $100,000 $100,000 $14,252 $18,658 $ 24,322
8 $ 34,244 $100,000 $100,000 $100,000 $15,832 $21,527 $ 29,173
9 $ 39,330 $100,000 $100,000 $100,000 $17,269 $24,436 $ 34,498
10 (AGE 65) $ 44,620 $100,000 $100,000 $100,000 $18,550 $27,384 $ 40,362
15 $ 74,416 $100,000 $100,000 $120,808 $22,225 $42,826 $ 80,656
20 $110,668 $100,000 $100,000 $192,077 $18,939 $59,906 $141,544
25 $154,773 $100,000(2) $101,828 $287,273 $ 1,142(2) $81,205 $229,092
</TABLE>
(1) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(2) BASED ON A GROSS RETURN OF 0%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY
YEAR 26, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE.
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 RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, 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 SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T4
<PAGE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $3,897 ANNUAL PREMIUMS FOR SEVEN YEARS
USING CURRENT 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% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-1.13% NET) (4.87% NET) (10.87% NET) (-1.13% NET) (4.87% NET) (10.87% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,053 $100,000 $100,000 $ 100,000 $ 3,573 $ 3,780 $ 3,986
2 $ 8,268 $100,000 $100,000 $ 100,000 $ 6,839 $ 7,465 $ 8,117
3 $ 12,651 $100,000 $100,000 $ 100,000 $10,140 $ 11,408 $ 12,780
4 $ 17,210 $100,000 $100,000 $ 100,000 $13,211 $ 15,351 $ 17,758
5 $ 21,952 $100,000 $100,000 $ 100,000 $16,431 $ 19,684 $ 23,490
6 $ 26,883 $100,000 $100,000 $ 102,958 $19,609 $ 24,223 $ 29,844
7 $ 32,011 $100,000 $100,000 $ 123,003 $22,747 $ 28,984 $ 36,853
8 $ 33,291 $100,000 $100,000 $ 131,067 $22,254 $ 30,167 $ 40,583
9 $ 34,623 $100,000 $100,000 $ 139,697 $21,754 $ 31,400 $ 44,696
10 $ 36,008 $100,000 $100,000 $ 148,931 $21,247 $ 32,686 $ 49,229
15 $ 43,809 $100,000 $103,145 $ 206,043 $18,607 $ 40,007 $ 79,918
20 $ 53,300 $100,000 $108,207 $ 286,794 $15,564 $ 48,919 $ 129,657
25 $ 64,848 $100,000 $116,433 $ 409,385 $12,095 $ 60,743 $ 213,576
30 (AGE 65) $ 78,898 $100,000 $126,205 $ 588,424 $ 6,985 $ 75,052 $ 349,924
35 $ 95,991 $ 0(2) $138,136 $ 853,617 $ 0(2) $ 92,225 $ 569,909
40 $116,788 $ 0 $153,240 $1,254,474 $ 0 $112,924 $ 924,435
45 $142,090 $ 0 $172,614 $1,871,134 $ 0 $137,655 $1,492,173
</TABLE>
(1) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(2) BASED ON A GROSS RETURN OF 0%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY
YEAR 35, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE.
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 RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, 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 SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T5
<PAGE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $3,897 ANNUAL PREMIUMS FOR SEVEN YEARS
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% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-1.43% NET) (4.57% NET) (10.57% NET) (-1.43% NET) (4.57% NET) (10.57% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,053 $100,000 $100,000 $ 100,000 $ 3,517 $ 3,723 $ 3,928
2 $ 8,268 $100,000 $100,000 $ 100,000 $ 6,718 $ 7,333 $ 7,973
3 $ 12,651 $100,000 $100,000 $ 100,000 $ 9,869 $11,105 $ 12,443
4 $ 17,210 $100,000 $100,000 $ 100,000 $12,701 $14,778 $ 17,117
5 $ 21,952 $100,000 $100,000 $ 100,000 $15,752 $18,896 $ 22,580
6 $ 26,883 $100,000 $100,000 $ 100,000 $18,751 $23,197 $ 28,620
7 $ 32,011 $100,000 $100,000 $ 117,701 $21,701 $27,693 $ 35,264
8 $ 33,291 $100,000 $100,000 $ 124,852 $21,094 $28,670 $ 38,659
9 $ 34,623 $100,000 $100,000 $ 132,465 $20,476 $29,680 $ 42,382
10 $ 36,008 $100,000 $100,000 $ 140,566 $19,848 $30,722 $ 46,464
15 $ 43,809 $100,000 $100,000 $ 189,564 $16,460 $36,441 $ 73,526
20 $ 53,300 $100,000 $100,000 $ 256,347 $12,342 $43,011 $115,892
25 $ 64,848 $100,000 $100,000 $ 347,269 $ 6,691 $50,333 $181,170
30 (AGE 65) $ 78,898 $ 0(2) $100,000 $ 471,052 $ 0(2) $58,291 $280,125
35 $ 95,991 $ 0 $100,000 $ 639,714 $ 0 $66,717 $427,099
40 $116,788 $ 0 $102,301 $ 870,064 $ 0 $75,387 $641,159
45 $142,090 $ 0 $105,020 $1,186,197 $ 0 $83,750 $945,956
</TABLE>
(1) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(2) BASED ON A GROSS RETURN OF 0%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY
YEAR 30, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE.
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 RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, 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 SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T6
<PAGE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $7,633 ANNUAL PREMIUMS FOR SEVEN YEARS
USING CURRENT 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% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-1.13% NET) (4.87% NET) (10.87% NET) (-1.13% NET) (4.87% NET) (10.87% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,938 $100,000 $100,000 $100,000 $ 6,845 $ 7,245 $ 7,646
2 $ 16,194 $100,000 $100,000 $100,000 $13,087 $ 14,299 $ 15,560
3 $ 24,780 $100,000 $100,000 $100,000 $19,406 $ 21,859 $ 24,513
4 $ 33,710 $100,000 $100,000 $100,000 $25,281 $ 29,425 $ 34,090
5 $ 42,997 $100,000 $100,000 $100,000 $31,462 $ 37,771 $ 45,163
6 $ 52,655 $100,000 $100,000 $107,194 $37,580 $ 46,552 $ 57,471
7 $ 62,699 $100,000 $101,321 $128,948 $43,641 $ 55,798 $ 71,012
8 $ 65,207 $100,000 $102,632 $138,131 $42,562 $ 58,022 $ 78,091
9 $ 67,815 $100,000 $104,020 $148,059 $41,442 $ 60,333 $ 85,876
10 (AGE 65) $ 70,528 $100,000 $105,490 $158,800 $40,275 $ 62,733 $ 94,435
15 $ 85,808 $100,000 $114,113 $227,371 $33,437 $ 76,187 $151,802
20 $104,399 $100,000 $126,957 $334,897 $23,532 $ 93,556 $246,789
25 $127,017 $100,000(2) $143,648 $501,623 $ 5,483(2) $114,555 $400,029
</TABLE>
(1) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(2) BASED ON A GROSS RETURN OF 0%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY
YEAR 27, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE.
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 RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, 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 SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T7
<PAGE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $7,633 ANNUAL PREMIUMS FOR SEVEN YEARS
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% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
YEAR PER YEAR (-1.43% NET) (4.57% NET) (10.57% NET) (-1.43% NET) (4.57% NET) (10.57% NET)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,938 $100,000 $100,000 $100,000 $ 6,534 $ 6,926 $ 7,317
2 $ 16,194 $100,000 $100,000 $100,000 $12,435 $13,601 $ 14,815
3 $ 24,780 $100,000 $100,000 $100,000 $18,232 $20,571 $ 23,107
4 $ 33,710 $100,000 $100,000 $100,000 $23,404 $27,335 $ 31,770
5 $ 42,997 $100,000 $100,000 $100,000 $29,003 $34,965 $ 41,969
6 $ 52,655 $100,000 $100,000 $100,000 $34,508 $42,966 $ 53,317
7 $ 62,699 $100,000 $100,000 $119,370 $39,926 $51,375 $ 65,737
8 $ 65,207 $100,000 $100,000 $126,766 $38,292 $52,839 $ 71,666
9 $ 67,815 $100,000 $100,000 $134,636 $36,543 $54,308 $ 78,090
10 (AGE 65) $ 70,528 $100,000 $100,000 $143,011 $34,659 $55,780 $ 85,046
15 $ 85,808 $100,000 $100,000 $193,670 $22,397 $63,118 $129,302
20 $104,399 $100,000 $100,000 $262,915 $ 1,094 $70,046 $193,745
25 $127,017 $ 0(2) $100,000(2) $357,992 $ 0(2) $75,848(2) $285,488
</TABLE>
(1) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(2) BASED ON A GROSS RETURN OF 0%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY
YEAR 21, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE. BASED ON A GROSS
RETURN OF 6%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY YEAR 43 UNLESS
AN ADDITIONAL PREMIUM PAYMENT WAS MADE.
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 RATES OF
INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, 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 SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T8
<PAGE>
CONTRACT LOANS
The Contract owner may borrow from Pruco Life up to the "loan value" of the
Contract, using the Contract as the only security for the loan. The loan value
of a Contract is 90% of its Contract fund, if the Contract is not in default.
The minimum amount that may be borrowed at any one time is $500 unless the loan
is used to pay premiums on a life insurance policy issued by Pruco Life or its
affiliates.
The Contract provides a choice of fixed or variable loan interest rates. Under
the fixed loan interest rate provision, interest charged on a loan accrues daily
at a fixed effective annual rate of 5.5%. Under the variable loan interest rate
provision, interest charged on any loan will accrue daily at an annual rate
Pruco Life determines at the start of each Contract year (instead of at the
fixed 5.5% rate). The interest rate will not exceed any rate required by state
law and will not exceed the greater of 5% and the "Published Monthly Average"
for the calendar month ending 2 months before the calendar month of the Contract
anniversary. The "Published Monthly Average" means Moody's Corporate Bond Yield
Average-Monthly Average Corporates, as published by Moody's Investors Service,
Inc. or any successor to that service, or if that average is no longer
published, a substantially similar average established by the insurance
regulator where the Contract is issued. For example, the Published Monthly
Average in 1996 ranged from 7.10% to 8.00%.
Interest payments on any loan are due at the end of each Contract year. If
interest is not paid when due, it is added to the principal amount of the loan.
The term "Contract debt" means the amount of all outstanding loans plus any
interest accrued but not yet due. If at any time the Contract debt exceeds the
Contract fund, Pruco Life will notify the Contract owner of its intent to
terminate the Contract in 61 days, within which time the owner may repay all or
enough of the loan to keep the Contract in force. If the Contract owner fails to
keep the Contract in force, the amount of unpaid Contract debt will be treated
as a distribution which may be taxable. See TAX TREATMENT OF CONTRACT BENEFITS--
Pre-Death Distributions, page 12, and LAPSE AND REINSTATEMENT, page 13.
When a loan is made, an amount equal to the loan proceeds will be transferred
out of the applicable subaccount[s]. The reduction will generally be made in the
same proportions as the value in each subaccount bears to the total value of the
Contract. While a fixed-rate loan is outstanding, the amount that was so
transferred will continue to be treated as part of the Contract fund but it will
be credited with the assumed effective annual rate of return of 4% rather than
with the actual rate of return of the applicable subaccount[s]. While a loan
made pursuant to the variable loan interest rate provision is outstanding, the
amount that was so transferred is credited with an effective annual rate of 4%
or an effective annual rate that is 1% less than the loan interest rate for the
Contract year, whichever is greater. If a loan remains outstanding at a time
when Pruco Life fixes a new rate, the new interest rate will apply.
Should the death benefit become payable while a loan is outstanding, or should
the Contract be surrendered, any Contract debt will be deducted from the
proceeds otherwise payable.
A loan will have a permanent effect on a Contract's cash surrender value and may
have a permanent effect on the death benefit because the investment results of
the selected subaccount[s] will apply only to the amount remaining in those
subaccount[s]. 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 upon the amount of the loan
while the loan is outstanding, Contract values 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. Loan repayments are allocated to the investment options proportionately
based on their balances at the time of the loan repayment.
The tax treatment of Contract loans depends on whether the Contract is
classified as a Modified Endowment Contract for federal tax purposes. See TAX
TREATMENT OF CONTRACT BENEFITS, this page.
WHEN PROCEEDS ARE PAID
Pruco Life will generally pay any death benefit, cash surrender value,
withdrawal or loan proceeds within 7 days after receipt at a Home Office of all
the documents required of such a payment. 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 subaccount[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.
11
<PAGE>
TAX TREATMENT OF CONTRACT BENEFITS
Each prospective purchaser is urged to consult a qualified tax advisor. The
following discussion is not intended as tax advice, and it is not a complete
statement of what the effect of federal income taxes will be under all
circumstances. Rather, it provides information about how Pruco Life believes the
tax laws apply in the most commonly occurring circumstances. There is no
guarantee, however, that the current federal income tax laws and regulations or
interpretations will not change.
Treatment as Life Insurance. Under current law, the Contract will be treated as
"life insurance," as long as it satisfies certain definitional tests set forth
in section 7702 of the Internal Revenue Code (the "Code") and as long as the
underlying investments for the Contract satisfy diversification requirements
under section 817(h) of the Code. (For further detail on diversification
requirements, see DIVIDENDS, DISTRIBUTIONS, AND TAXES in the attached prospectus
for the Series Fund.)
Pruco Life believes that it has taken adequate steps to cause the Contract to be
treated as life insurance for tax purposes. This means that (1) except as noted
below, the Contract owner should not be taxed on any part of the Contract fund,
including additions attributable to interest, dividends or appreciation until
amounts are distributed under the Contract; and (2) the death benefit should be
excludible from the gross income of the beneficiary under section 101(a) of the
Code.
However, section 7702 of the Code which defines life insurance for tax purposes
gives the Secretary of the Treasury authority to prescribe regulations to carry
out the purposes of the section. In this regard, proposed regulations governing
mortality charges were issued under section 7702 in 1991 but have not yet been
finalized. The mortality charges for substandard risks under the Contract do not
comply with the proposed regulations. Consequently, if such regulations are
finalized in their current form, the Contract insuring a substandard risk may
not qualify as life insurance for federal tax purposes or may be classified as a
Modified Endowment Contract.
Additional regulations under section 7702 may be promulgated in the future. It
is unclear whether such regulations will have any impact on the Contract.
Moreover, in connection with the issuance of temporary regulations under section
817(h), the Treasury Department announced that such regulations do not provide
guidance concerning the extent to which Contract owners may direct their
investments to particular divisions of a separate account. Such guidance will be
included in regulations or rulings under section 817(d) relating to the
definition of a variable contract.
Pruco Life intends to comply with final regulations issued under sections 7702
and 817, and therefore reserves the right to make such changes as it deems
necessary to assure such compliance. Any such changes will apply uniformly to
affected Contract owners and will be made only after advance written notice to
Contract owners.
Pre-Death Distributions. The taxation of pre-death distributions depends on
whether the Contract is classified as a Modified Endowment Contract. The
following discussion first deals with distributions under Contracts not so
classified, and then with Modified Endowment Contracts.
1. A surrender or lapse of the Contract may have tax consequences. Upon
surrender, the owner will not be taxed on the cash surrender value except
for the amount, if any, that exceeds the gross premiums paid less the
untaxed portion of any prior withdrawals. The amount of any unpaid
Contract debt will, upon surrender, be added to the cash surrender value
and treated, for this purpose, as if it had been received. Any loss
incurred upon surrender may not be deductible. The tax consequences of a
surrender may differ if the proceeds are received under any income payment
settlement option.
Extra premiums for optional benefits and riders generally do not count in
computing gross premiums paid, which in turn determine what part of
withdrawals or surrenders might be taxed.
A withdrawal generally is not taxable unless it exceeds total premiums
paid to the date of withdrawal, less the untaxed portion of any prior
withdrawals. However, under certain limited circumstances, in the first 15
Contract years all or a portion of a withdrawal may be taxable if the cash
surrender value plus any unpaid Contract debt exceeds the total premiums
paid less the untaxed portion of any prior withdrawals, even if total
withdrawals do not exceed total premiums paid to date.
Loans received under the Contract will ordinarily be treated as
indebtedness of the owner and will not be considered to be distributions
subject to tax.
2. Some of the above rules are changed if the Contract is classified as a
Modified Endowment Contract under Section 7702A of the Code. This Contract
could be classified as a Modified Endowment Contract under at least two
circumstances: if aggregate premiums in excess of the sum of the annual
"7-pay" premiums as defined by the Code are paid; or if a decrease in the
face amount of insurance is made during the first 7 Contract years.
Moreover, increases in a Contract's face amount after the Contract date
may also affect
12
<PAGE>
whether the Contract is a Modified Endowment Contract. Contract owners
contemplating any of these steps should first consult a qualified tax
advisor and their Pruco Life representative.
If the Contract is classified as a Modified Endowment Contract, then
pre-death distributions, including loans, withdrawals and surrenders are
includible in income to the extent that the Contract's cash surrender
value plus any unpaid Contract debt exceeds the gross premiums paid for
the Contract increased by the amount of any loans previously includible in
income and reduced by any untaxed amounts previously received other than
the amount of any loans excludible from income. These rules may also apply
to pre-death distributions, including loans, made during the 2 year period
prior to the Contract becoming a Modified Endowment Contract.
In addition, pre-death distributions from such Contracts (including full
surrenders) will be subject to a penalty of 10 per cent of the amount
includible in income unless the amount is distributed on or after age 59
1/2, on account of the taxpayer's disability or as a life annuity. It is
presently unclear how the penalty tax provisions apply to Contracts owned
by non-natural persons such as corporations.
Under certain circumstances, the Code requires two or more Modified
Endowment Contracts issued during a calendar year period to be treated as
a single contract for purposes of applying the above rules.
WITHHOLDING
The taxable portion of any amounts received under the contract will be subject
to withholding to meet federal income tax obligations, if the Contract owner
fails to elect that no taxes be withheld or in certain other circumstances.
Contract owners who do not provide a social security number or other taxpayer
identification number will not be permitted to elect out of withholding. All
recipients of such amounts may be subject to penalties under the estimated tax
payment rules if withholding and estimated tax payments are not sufficient.
OTHER TAX CONSIDERATIONS
Transfer of the Contract to a new owner, assignment of the Contract, or change
of insureds under the Contract may have tax consequences depending on the
circumstances. In the case of a transfer of the Contract for a valuable
consideration, the death benefit may be subject to federal income taxes under
section 101(a)(2) of the Code. In addition, a transfer of the Contract to or the
designation of a beneficiary who is either 37 1/2 years younger than the
Contract owner or a grandchild of the Contract owner may have Generation
Skipping Transfer tax consequences under section 2601 of the Code.
In certain circumstances, 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 under section 163 of the Code or under section 264 of the
Code. Contract owners should consult a tax advisor regarding the application of
these provisions to their circumstances.
Business-owned life insurance is subject to additional rules. Section 264(a)(1)
of the Code generally precludes business Contract owners from deducting premium
payments. The recently enacted Health Insurance Portability and Accountability
Act of 1996 generally disallows tax deductions for interest on Contract debt on
a business- owned insurance policy effective (with certain transitional rules)
for interest 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 such loans is limited to a prescribed
interest rate and a maximum aggregate loan amount of $50,000 per key insured
person. The Code also imposes an indirect tax upon additions to the Contract
fund or the receipt of death benefits under business-owned life insurance
policies under certain circumstances by way of the corporate alternative minimum
tax.
The individual situation of each Contract owner or beneficiary will determine
the federal estate taxes and the state and local estate, inheritance, and other
taxes due if the owner or insured dies.
In the event of the assignment of Contract benefits to natural persons, estate
or inheritance taxes may be due under certain circumstances. This depends on
individual circumstances.
LAPSE AND REINSTATEMENT
If the Contract fund on any Monthly date has decreased to zero or less, or if a
Contract's debt should exceed its Contract fund, the Contract fund will go into
default.
Should this happen, Pruco Life will send the Contract owner a notice of default
setting forth the payment necessary to keep the Contract in force. 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 lapse. A Contract that lapses
with an outstanding Contract loan may have tax consequences. See TAX TREATMENT
OF CONTRACT BENEFITS, page 11.
13
<PAGE>
A Contract that has lapsed may be reinstated within 5 years after the date of
default unless the Contract has been surrendered for its cash surrender value.
To reinstate a lapsed Contract, Pruco Life requires renewed evidence of
insurability, and submission of certain payments due under the Contract.
A Contract that has lapsed has no value and provides no benefits. Such a
Contract may become a Modified Endowment Contract. See TAX TREATMENT OF CONTRACT
BENEFITS, page 11.
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS
The Contracts employ mortality tables that distinguish between males and
females. Thus, benefits under Contracts issued on males and females of the same
age will differ. The Contract is not available in those states that have adopted
regulations prohibiting sex-distinct insurance rates. Moreover, the Contract may
not be assigned if to do so would violate regulations or laws relating to
sex-distinct insurance rates.
EXCHANGE RIGHT AVAILABLE IN SOME STATES
In some states the owner may have the right within the first 2 Contract years
after a Contract is issued, so long as the Contract is not in default, to
exchange the Contract for a Life Paid Up at age 85 plan on the insured's life
issued by The Prudential Insurance Company of America. This is a general account
policy with guaranteed minimum values. No evidence of insurability will be
required to make an exchange. The new policy will have the same issue date and
risk classification for the insured as the original Contract. The exchange may
be subject to an equitable adjustment in premiums and values, and a payment may
be required. Before effecting such an exchange, an owner may wish to obtain tax
advice.
REDUCED PAID-UP INSURANCE OPTION AVAILABLE IN SOME STATES
In some states, Contract owners will have the right to take the cash surrender
value and use it to acquire fixed reduced paid-up insurance, which provides
insurance coverage for the lifetime of the insured. The insurance amount depends
on the cash surrender value and the age, sex, and rating class of the insured.
Fixed reduced paid-up insurance has a cash surrender value and a loan value.
Acquisition of reduced paid-up insurance within the first 7 Contract years may
result in the Contract becoming a Modified Endowment Contract. See TAX TREATMENT
OF CONTRACT BENEFITS, page 11.
OTHER GENERAL CONTRACT PROVISIONS
BENEFICIARY. The beneficiary is designated and named in the application by the
Contract owner. Thereafter, the owner may change the beneficiary, provided it is
in accordance with the terms of the Contract.
INCONTESTABILITY. After the Contract has been in force during the insured's
lifetime for 2 years from the Contract date or, with respect to any change in
the Contract that requires Pruco Life's approval and could increase its
liability, after the change has been in effect during the insured's lifetime for
2 years from the effective date of the change, Pruco Life will not contest its
liability under the Contract in accordance with its terms.
MISSTATEMENT OF AGE OR SEX. If the insured's stated age or sex (except where
unisex rates apply) or both are incorrect in the Contract, Pruco Life will
adjust the death benefits payable, as required by law, to reflect the correct
age and sex. Any death benefit will be based on what the most recent charge for
mortality would have provided at the correct age and sex.
SUICIDE EXCLUSION. Generally, if the insured, whether sane or insane, dies by
suicide within 2 years from the Contract date, Pruco Life will pay no more under
the Contract than the sum of the premiums paid.
ASSIGNMENT. This Contract may not be assigned if such assignment would violate
any federal, state or local law or regulation. Generally, the Contract may not
be assigned to another insurance company or to an employee benefit plan without
Pruco Life's consent. Pruco Life assumes no responsibility for the validity or
sufficiency of any assignment, and it will not be obligated to comply with any
assignment unless it has received a copy at one of its Home Offices.
SETTLEMENT OPTIONS. The Contract grants to most owners, or to the beneficiary, a
wide 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.
VOTING RIGHTS
As stated above, all of the assets held in the subaccounts of the Account will
be invested in shares of the corresponding portfolios of the Series Fund. Pruco
Life is the legal owner of those shares and as such has the right to vote on any
matter voted on at Series Fund shareholders meetings. However, Pruco Life will,
as required by law, vote the shares of the Series Fund at any regular and
special shareholders meetings it is required to hold in
14
<PAGE>
accordance with voting instructions received from Contract owners. The Series
Fund will not hold annual shareholders meetings when not required to do so under
Maryland law or the Investment Company Act of 1940. Series Fund shares for which
no timely instructions from Contract owners are received, and any shares
attributable to general account investments of Pruco Life will be voted in the
same proportion as shares in the respective portfolios for which instructions
are received. Should the applicable federal securities laws or regulations, or
their current interpretation, change so as to permit Pruco Life to vote shares
of the Series Fund in its own right, it may elect to do so.
Matters on which Contract owners may give voting instructions include the
following: (1) election of the Board of Directors of the Series Fund; (2)
ratification of the independent accountant of the Series Fund; (3) approval of
the investment advisory agreement for a portfolio of the Series Fund
corresponding to the Contract owner's selected subaccount[s]; (4) any change in
the fundamental investment policy of a portfolio corresponding to the Contract
owner's selected subaccount[s]; and (5) any other matter requiring a vote of the
shareholders of the Series Fund. With respect to approval of the investment
advisory agreement or any change in a portfolio's fundamental investment policy,
Contract owners participating in such portfolios will vote separately on the
matter, pursuant to the requirements of Rule 18f-2 under the 1940 Act.
The number of Series Fund shares for which instructions may be given by a
Contract owner is determined by dividing the portion of the value of the
Contract derived from participation in a subaccount, by the value of one share
in the corresponding portfolio of the Series Fund. The number of votes for which
each Contract owner may give Pruco Life instructions will be determined as of
the record date chosen by the Board of Directors of the Series Fund. Pruco Life
will furnish Contract owners with proper forms and proxies to enable them to
give these instructions. Pruco Life reserves the right to modify the manner in
which the weight to be given voting instructions is calculated where such a
change is necessary to comply with current federal regulations or
interpretations of those regulations.
Pruco Life may, if required by state insurance regulations, disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the sub-classification or investment objectives of one or more
of the Series Fund's portfolios, or to approve or disapprove an investment
advisory contract for the Series Fund. In addition, Pruco Life itself may
disregard voting instructions that would require changes in the investment
policy or investment advisor of one or more of the Series Fund's portfolios,
provided that Pruco Life reasonably disapproves such changes in accordance with
applicable federal regulations. If Pruco Life does disregard voting
instructions, it will advise Contract owners of that action and its reasons for
such action in the next annual or semi-annual report to Contract owners.
SUBSTITUTION OF SERIES 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 Series Fund 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, will be required.
Contract owners will be notified of such substitution.
REPORTS TO CONTRACT OWNERS
Once each Contract year (except where the Contract is in force as fixed reduced
paid-up insurance), Contract owners will be sent statements that provide certain
information pertinent to their own Contract. These statements detail values and
transactions made and specific Contract data that apply only to each particular
Contract. On request, a Contract owner will be sent a current statement in a
form similar to that of the annual statement described above, but Pruco Life may
limit the number of such requests or impose a reasonable charge if such requests
are made too frequently.
Contract owners will also be sent annual and semi-annual reports of the Series
Fund showing the financial condition of the portfolios and the investments held
in each.
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 213 Washington
Street, Newark, New Jersey 07102-2992. 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. The
15
<PAGE>
maximum commission that will be paid to the representative is 12% of premiums
received in the first year up to certain limits. Additional first year premiums
and premiums in later years may generate up to a 4% commission. Moreover, trail
commissions of up to 0.2% of the Contract fund as of the Contract's anniversary
may be paid. The representative may be required to return all or part of the
first year commission if the Contract is not continued through the second year.
Representatives who meet certain productivity, profitability, and persistency
standards with regard to the sale of the Contract may be eligible for additional
compensation.
Sales expenses in any year are not equal to the deduction for sales load in that
year. Pruco Life expects to recover its total sales expenses over the periods
the Contracts are in effect. To the extent that the sales charges are
insufficient to cover total sales expenses, the sales expenses will be recovered
from Pruco Life's surplus which may include the amounts derived from the
mortality and expense risk charge described in item 7 under CHARGES AND
EXPENSES, page 5.
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.
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 financial statements included in this prospectus for year ended December 31,
1996 have been audited by Price Waterhouse LLP, independent accountants, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. Price Waterhouse LLP's principal business address is 1177 Avenue of
the Americas, New York, New York 10036.
The financial statements included in this prospectus for years ended December
31, 1995 and December 31, 1994, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing. Deloitte & Touche LLP's principal business
address is Two Hilton Court, Parsippany, New Jersey 07054-0319.
On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Pruco Life. There have been no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of the accountant, would have caused them to make reference to
the matter in their reports.
Actuarial matters included in this prospectus have been examined by Nancy D.
Davis, FSA, MAAA, Vice President and Actuary of Prudential whose opinion is
filed as an exhibit to the registration statement.
LITIGATION
Several actions have been brought against Pruco Life alleging that Pruco Life
and its agents engaged in improper life insurance sales practices. Prudential
has agreed to indemnify Pruco Life for losses, if any, resulting from such
litigation. No other significant litigation is being brought against Pruco Life
that would have a material effect on its financial position.
ADDITIONAL INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, relating to the offering described in this prospectus. This prospectus
does not include all 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 principal
office in Washington, D.C., upon payment of a prescribed fee.
Further information may also be obtained from Pruco Life's office. The address
and telephone number are set forth on the cover of this prospectus.
16
<PAGE>
FINANCIAL STATEMENTS
The consolidated financial statements of Pruco Life and subsidiaries included
herein should be distinguished from the financial statements of the Account and
should be considered only as bearing upon the ability of Pruco Life to meet its
obligations under the Contracts.
17
<PAGE>
DIRECTORS AND OFFICERS
The directors and major officers of Pruco Life, listed with their principal
occupations during the past 5 years, are shown below.
DIRECTORS OF PRUCO LIFE
WILLIAM M. BETHKE, Director. -- President, Prudential Capital Markets Group
since 1992.
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; 1993 to 1995:
President, Prudential Select; Prior to 1993: Senior Vice President of
Prudential.
MENDEL A. MELZER, Director. -- Chief Investment Officer, Mutual Funds and
Annuities, Prudential Investments since 1996; 1995 to 1996: Chief Financial
Officer of the Money Management Group of Prudential; 1993 to 1995: Senior Vice
President and Chief Financial Officer of Prudential Preferred Financial
Services; Prior to 1993: Managing Director, Prudential Investment Corporation.
ESTHER H. MILNES, President and Director. -- Vice President and Actuary,
Prudential Individual Insurance Group since 1996; 1993 to 1996: Senior Vice
President and Chief Actuary, Prudential Insurance and Financial Services; Prior
to 1993: Vice President and Associate Actuary of Prudential.
I. EDWARD PRICE, Vice Chairman and Director. -- Senior Vice President and
Actuary, Prudential Individual Insurance Group since 1995; 1994 to 1995: Chief
Executive Officer, Prudential International Insurance; 1993 to 1994: President,
Prudential International Insurance; Prior to 1993: Senior Vice President and
Company Actuary of Prudential.
KIYOFUMI SAKAGUCHI, Director. -- President, Prudential International Insurance
Group since 1995; 1994 to 1995: Chairman and Chief Executive Officer, The
Prudential Life Insurance Co., Ltd.; Prior to 1994: President and Chief
Executive Officer, Asia Pacific Region-Prudential International Insurance, and
President, The Prudential Life Insurance Co., Ltd.
WILLIAM F. YELVERTON, Chairman and Director. --Chief Executive Officer,
Prudential Individual Insurance Group since 1995; Prior to 1995: Chief Executive
Officer, New York Life Worldwide.
OFFICERS WHO ARE NOT DIRECTORS
SUSAN L. BLOUNT, Secretary.--Vice President and Secretary of Prudential since
1995; Prior to 1995: Assistant General Counsel for Prudential Residential
Services Company.
C. EDWARD CHAPLIN, Treasurer. -- Vice President and Treasurer of Prudential
since 1995; 1993 to 1995: Managing Director and Assistant Treasurer of
Prudential; 1992 to 1993: Vice President and Assistant Treasurer, Banking and
Cash Management for Prudential.
LINDA S. DOUGHERTY, Vice President, Comptroller and Chief Accounting Officer. --
Vice President and Comptroller, Prudential Individual Insurance Group since
1997; Prior to 1997: Vice President, Accounting, Prudential.
JAMES C. DROZANOWSKI, Senior Vice President. -- Vice President and Operations
Executive, Prudential Individual Insurance Group since 1996; 1995 to 1996:
President and Chief Executive Officer of Chase Manhattan Bank; 1993 to 1995:
Vice President, North America Customer Services, Chase Manhattan Bank; Prior to
1993: Operations Executive, Global Securities Services, Chase Manhattan Bank.
CLIFFORD E. KIRSCH, Chief Legal Officer. -- Chief Counsel, Variable Products,
Law Department of Prudential since 1995; 1994 to 1995: Associate General Counsel
with Paine Webber; Prior to 1994: Assistant Director in the Division of
Investment Management with the Securities and Exchange Commission.
FRANK P. MARINO, Senior Vice President. -- Vice President, Policyowner Relations
Department, Prudential Individual Insurance Group since 1996; Prior to 1996:
Senior Vice President, Prudential Mutual Fund Services.
MARIO A. MOSSE, Senior Vice President. -- Vice President, Annuity Services,
Prudential Investments since 1996; Prior to 1996: Vice President, Chase
Manhattan Bank.
SHIRLEY H. SHAO, Senior Vice President and Chief Actuary. -- Vice President and
Associate Actuary, Prudential.
KAREN L. SHAPIRO, Senior Vice President. -- Vice President, Prudential
Individual Insurance Group since 1996; Vice President and Associate General
Counsel, Prudential Securities Incorporated 1993 to 1996; Prior to 1993: Senior
Associate with Shaw, Pittman, Potts and Trowbridge.
The business address of all directors and officers of Pruco Life is 213
Washington Street, Newark, New Jersey 07102-2992.
* SUBSIDIARY OF PRUDENTIAL
18
<PAGE>
[The Page Intentionally Left Blank]
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc. Portfolios at net asset value [Note
3]............................................ $ 11,144,105 $ 31,727,965 $ 42,115,266 $ 29,370,399 $ 35,577,618
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 11,041,044 $ 31,651,020 $ 42,021,703 $ 29,344,436 $ 37,187,440
Equity of Pruco Life Insurance Company.......... 103,061 76,945 93,563 25,963 (1,609,822)
-------------- -------------- -------------- -------------- --------------
$ 11,144,105 $ 31,727,965 $ 42,115,266 $ 29,370,399 $ 35,577,618
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 370,956 $ 2,171,278 $ 897,405 $ 810,334 $ 1,460,883
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 5A]..... 40,789 210,590 203,014 145,789 213,652
Reimbursement for excess expenses [Note 5D]..... 0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 40,789 210,590 203,014 145,789 213,652
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 330,167 1,960,688 694,391 664,545 1,247,231
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 0 0 3,585,387 2,731,323 2,164,504
Realized gain (loss) on shares redeemed
[average cost basis].......................... 0 296,104 633,352 75,275 464,539
Net unrealized gain (loss) on investments....... 0 (852,759) 759,941 (331,513) 108,733
-------------- -------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 0 (556,655) 4,978,680 2,475,085 2,737,776
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 330,167 $ 1,404,033 $ 5,673,071 $ 3,139,630 $ 3,985,007
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A1
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc. Portfolios at net asset value [Note
3] ........................................... $ 21,247,247 $ 1,576,109 $ 61,046,304 $ 12,069,324 $ 1,489,869
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners ...................... $ 20,931,060 $ 1,564,073 $ 60,945,608 $ 12,005,485 $ 1,467,317
Equity of Pruco Life Insurance Company 316,187 12,036 100,696 63,839 22,552
-------------- -------------- -------------- -------------- --------------
$ 21,247,247 $ 1,576,109 $ 61,046,304 $ 12,069,324 $ 1,489,869
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
ZERO
COUPON
GOVERNMENT BOND
GLOBAL INCOME 2005
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc. Portfolios at net asset value [Note
3] ........................................... $ 15,676,830 $ 3,570,839 $ 987,465
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners ...................... $ 15,604,682 $ 3,467,141 $ 964,447
Equity of Pruco Life Insurance Company 72,148 103,698 23,018
-------------- -------------- --------------
$ 15,676,830 $ 3,570,839 $ 987,465
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY
2000 BOND INDEX INCOME
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received ................ $ 472,600 $ 132,351 $ 900,654 $ 475,277
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 5A] .... 34,875 7,323 260,862 94,957
Reimbursement for excess expenses [Note 5D] .... (8,393) 0 0 0
-------------- -------------- -------------- --------------
NET EXPENSES ..................................... 26,482 7,323 260,862 94,957
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) ..................... 446,118 125,028 639,792 380,320
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received ........... 0 0 673,354 485,860
Realized gain (loss) on shares redeemed
[average cost basis] ......................... 81,019 3,467 413,888 908,956
Net unrealized gain (loss) on investments ...... (17,112) (3,313) 7,149,445 1,098,444
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS ................... 63,907 154 8,236,687 2,493,260
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ...................... $ 510,025 $ 125,182 $ 8,876,479 $ 2,873,580
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<PAGE>
<CAPTION>
ZERO
COUPON
NATURAL GOVERNMENT BOND
RESOURCES GLOBAL INCOME 2005
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received ................ $ 8,770 $ 312,052 $ 215,507 $ 48,741
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 5A] .... 7,362 67,425 17,932 5,414
Reimbursement for excess expenses [Note 5D] .... (160) 0 0 (1,163)
-------------- -------------- -------------- --------------
NET EXPENSES ..................................... 7,202 67,425 17,932 4,251
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) ..................... 1,568 244,627 197,575 44,490
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received ........... 172,185 240,786 0 10,654
Realized gain (loss) on shares redeemed
[average cost basis] ......................... 33,275 155,802 553 93
Net unrealized gain (loss) on investments ...... 88,415 1,328,007 (117,230) (61,956)
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS ................... 293,875 1,724,595 (116,677) (51,209)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ...................... $ 295,443 $ 1,969,222 $ 80,898 $ (6,719)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A2
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
SMALL
PRUDENTIAL CAPITALIZATION
JENNISON STOCK
-------------- --------------
<S> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc. Portfolios at net asset value [Note
3]............................................ $ 274,784 $ 4,273,658
-------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 263,745 $ 4,258,955
Equity of Pruco Life Insurance Company.......... 11,039 14,703
-------------- --------------
$ 274,784 $ 4,273,658
-------------- --------------
-------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
SMALL
PRUDENTIAL CAPITALIZATION
JENNISON STOCK
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 547 $ 24,838
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 5A]..... 1,034 11,568
Reimbursement for excess expenses [Note 5D]..... 0 0
-------------- --------------
NET EXPENSES...................................... 1,034 11,568
-------------- --------------
NET INVESTMENT INCOME (LOSS)...................... (487) 13,270
-------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 0 76,737
Realized gain (loss) on shares redeemed
[average cost basis].......................... (693) 2,225
Net unrealized gain (loss) on investments....... 14,438 219,537
-------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 13,745 298,499
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 13,258 $ 311,769
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A3
<PAGE>
(This page intentionally left blank.)
A4
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
---------------------------------------------- ----------------------------------------------
1996 1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).... $ 330,167 $ 469,134 $ 112,867 $ 1,960,688 $ 1,810,053 $ 958,552
Capital gains distributions
received...................... 0 0 0 0 75,332 27,552
Realized gain (loss) on shares
redeemed
[average cost basis].......... 0 0 0 296,104 28,004 (45,805)
Net unrealized gain (loss) on
investments................... 0 0 0 (852,759) 2,492,319 (1,407,374)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS....... 330,167 469,134 112,867 1,404,033 4,405,708 (467,075)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[NOTE 7]........................ 4,126,018 (6,161,870) 9,294,783 (5,205,030) 12,271,219 8,748,753
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 8]........................ (2,181,943) 1,824,330 335,632 (35,291) 7,946 (39,503)
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS.......................... 2,274,242 (3,868,406) 9,743,282 (3,836,288) 16,684,873 8,242,175
NET ASSETS:
Beginning of year............... 8,869,863 12,738,269 2,994,987 35,564,253 18,879,380 10,637,205
-------------- -------------- -------------- -------------- -------------- --------------
End of year..................... $ 11,144,105 $ 8,869,863 $ 12,738,269 $ 31,727,965 $ 35,564,253 $ 18,879,380
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A5
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
FLEXIBLE
EQUITY MANAGED
---------------------------------------------- --------------
1996 1995 1994 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..... $ 694,391 $ 413,265 $ 220,739 $ 664,545
Capital gains distributions
received ....................... 3,585,387 1,044,826 546,810 2,731,323
Realized gain (loss) on shares
redeemed
[average cost basis] ........... 633,352 73,478 146,569 75,275
Net unrealized gain (loss) on
investments .................... 759,941 4,223,477 (636,156) (331,513)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS ........ 5,673,071 5,755,046 277,962 3,139,630
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[NOTE 7] ......................... 5,017,735 10,673,446 7,320,351 4,354,486
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 8] ......................... (6,721) 118,454 (22,963) 16,614
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ........................... 10,684,085 16,546,946 7,575,350 7,510,730
NET ASSETS:
Beginning of year ................ 31,431,181 14,884,235 7,308,885 21,859,669
-------------- -------------- -------------- --------------
End of year ...................... $ 42,115,266 $ 31,431,181 $ 14,884,235 $ 29,370,399
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<CAPTION>
CONSERVATIVE
BALANCED
----------------------------------------------
1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..... $ 466,846 $ 277,404 $ 1,247,231 $ 1,122,788 $ 646,637
Capital gains distributions
received ....................... 853,956 398,988 2,164,504 1,136,745 241,697
Realized gain (loss) on shares
redeemed
[average cost basis] ........... 570,360 (975,042) 464,539 252,185 (3,152)
Net unrealized gain (loss) on
investments .................... 1,861,363 (548,106) 108,733 2,076,040 (1,182,101)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS ........ 3,752,525 (846,756) 3,985,007 4,587,758 (296,919)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[NOTE 7] ......................... 5,268,603 (2,324,709) (1,853,576) 6,371,894 4,738,275
-------------- -------------- -------------- -------------- --------------
<PAGE>
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 8] ......................... 108,448 207,468 (1,583,656) (10,793) (93,449)
-------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ........................... 9,129,576 (2,963,997) 547,775 10,948,859 4,347,907
NET ASSETS:
Beginning of year ................ 12,730,093 15,694,090 35,029,843 24,080,984 19,733,077
-------------- -------------- -------------- -------------- --------------
End of year ...................... $ 21,859,669 $ 12,730,093 $ 35,577,618 $ 35,029,843 $ 24,080,984
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A6
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
ZERO COUPON HIGH
BOND YIELD
2000 BOND
---------------------------------------------- ----------------------------------------------
1996 1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).... $ 446,118 $ 34,920 $ 5,274 $ 125,028 $ 86,052 $ 27,776
Capital gains distributions
received...................... 0 32,030 169 0 0 0
Realized gain (loss) on shares
redeemed
[average cost basis].......... 81,019 (6,499) (3,957) 3,467 14,691 159
Net unrealized gain (loss) on
investments................... (17,112) 3,706 (10,721) (3,313) 33,141 (37,669)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS....... 510,025 64,157 (9,235) 125,182 133,884 (9,734)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[NOTE 7]........................ 20,209,923 26,150 10,930 594,373 306,768 258,867
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 8]........................ (9,441) 344,989 (5,495) (9,051) 8,247 (2,404)
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS.......................... 20,710,507 435,296 (3,800) 710,504 448,899 246,729
NET ASSETS:
Beginning of year............... 536,740 101,444 105,244 865,605 416,706 169,977
-------------- -------------- -------------- -------------- -------------- --------------
End of year..................... $ 21,247,247 $ 536,740 $ 101,444 $ 1,576,109 $ 865,605 $ 416,706
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A7
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
STOCK EQUITY
INDEX INCOME
---------------------------------------------- --------------
1996 1995 1994 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..... $ 639,792 $ 437,582 $ 269,539 $ 380,320
Capital gains distributions
received ....................... 673,354 232,361 18,420 485,860
Realized gain (loss) on shares
redeemed
[average cost basis] ........... 413,888 228,489 27,972 908,956
Net unrealized gain (loss) on
investments .................... 7,149,445 6,328,106 (190,892) 1,098,444
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS ........ 8,876,479 7,226,538 125,039 2,873,580
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[NOTE 7] ......................... 17,931,933 10,570,564 6,121,839 (7,025,151)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 8] ......................... 62,929 25,718 (26,394) (214,892)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ........................... 26,871,341 17,822,820 6,220,484 (4,366,463)
NET ASSETS:
Beginning of year ................ 34,174,963 16,352,143 10,131,659 16,435,787
-------------- -------------- -------------- --------------
End of year ...................... $ 61,046,304 $ 34,174,963 $ 16,352,143 $ 12,069,324
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<CAPTION>
NATURAL
RESOURCES
----------------------------------------------
1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..... $ 468,252 $ 272,094 $ 1,568 $ 6,054 $ 3,103
Capital gains distributions
received ....................... 680,332 535,607 172,185 35,173 15,956
Realized gain (loss) on shares
redeemed
[average cost basis] ........... 11,573 58,664 33,275 53,167 3,779
Net unrealized gain (loss) on
investments .................... 1,305,180 (959,390) 88,415 118,192 (77,634)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS ........ 2,465,337 (93,025) 295,443 212,586 (54,796)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[NOTE 7] ......................... 3,428,318 7,837,695 425,963 (355,647) 456,694
-------------- -------------- -------------- -------------- --------------
<PAGE>
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 8] ......................... (20,008) (33,915) 3,239 (4,104) (25,105)
-------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ........................... 5,873,647 7,710,755 724,645 (147,165) 376,793
NET ASSETS:
Beginning of year ................ 10,562,140 2,851,385 765,224 912,389 535,596
-------------- -------------- -------------- -------------- --------------
End of year ...................... $ 16,435,787 $ 10,562,140 $ 1,489,869 $ 765,224 $ 912,389
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A8
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
GOVERNMENT
GLOBAL* INCOME
---------------------------------------------- ----------------------------------------------
1996 1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)..... $ 244,627 $ 82,453 $ 2,488 $ 197,575 $ 139,648 $ 79,939
Capital gains distributions
received....................... 240,786 147,906 17 0 0 0
Realized gain (loss) on shares
redeemed
[average cost basis]........... 155,802 4,237 0 553 11,506 (445)
Net unrealized gain (loss) on
investments.................... 1,328,007 433,961 (171,640) (117,230) 220,405 (161,326)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 1,969,222 668,557 (169,135) 80,898 371,559 (81,832)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[NOTE 7]......................... 5,591,186 4,563,976 3,004,706 1,069,544 575,758 156,323
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 8]......................... 72,239 (15,748) (8,173) 75,388 40,705 (220)
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS........................... 7,632,647 5,216,785 2,827,398 1,225,830 988,022 74,271
NET ASSETS:
Beginning of year................ 8,044,183 2,827,398 0 2,345,009 1,356,987 1,282,716
-------------- -------------- -------------- -------------- -------------- --------------
End of year...................... $ 15,676,830 $ 8,044,183 $ 2,827,398 $ 3,570,839 $ 2,345,009 $ 1,356,987
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
*Commenced
Business
on 5/1/94
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A9
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
ZERO COUPON
BOND PRUDENTIAL
2005 JENNISON**
---------------------------------------------- --------------
1996 1995 1994 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..... $ 44,490 $ 26,758 $ 1,743 $ (487)
Capital gains distributions
received ....................... 10,654 18,081 6 0
Realized gain (loss) on shares
redeemed
[average cost basis] ........... 93 718 (187) (693)
Net unrealized gain (loss) on
investments .................... (61,956) 68,079 (4,079) 14,438
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS ........ (6,719) 113,636 (2,517) 13,258
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[NOTE 7] ......................... 95,281 733,842 22,810 229,628
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 8] ......................... 6,971 6,511 (2,734) 770
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ........................... 95,533 853,989 17,559 243,656
NET ASSETS:
Beginning of year ................ 891,932 37,943 20,384 31,128
-------------- -------------- -------------- --------------
End of year ...................... $ 987,465 $ 891,932 $ 37,943 $ 274,784
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
**Commenced
Business
on 5/1/95
<CAPTION>
SMALL
CAPITALIZATION
STOCK**
------------------------------
1995 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..... $ (8) $ 13,270 $ (55)
Capital gains distributions
received ....................... 0 76,737 95
Realized gain (loss) on shares
redeemed
[average cost basis] ........... 1,471 2,225 1,098
Net unrealized gain (loss) on
investments .................... 1,016 219,537 3,091
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS ........ 2,479 311,769 4,229
-------------- -------------- --------------
<PAGE>
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[NOTE 7] ......................... 13,987 3,553,224 424,320
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 8] ......................... 14,662 (50,657) 30,773
-------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ........................... 31,128 3,814,336 459,322
NET ASSETS:
Beginning of year ................ 0 459,322 0
-------------- -------------- --------------
End of year ...................... $ 31,128 $ 4,273,658 $ 459,322
-------------- -------------- --------------
-------------- -------------- --------------
**Commenced
Business
on 5/1/95
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A10
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 1996
NOTE 1: GENERAL
Pruco Life Variable Universal Account (the "Account") was established on April
17, 1989 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. The two products that
invest in the Account are Pruselect I and Pruselect II.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. There are fifteen subaccounts within the Account,
each of which invests only in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"). The Series Fund is a diversified open-end
management investment company, and is managed by Prudential.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in conformity with generally
accepted accounting principles (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 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 and are recorded on the
ex-dividend date.
Equity of Pruco Life Insurance Company--Pruco Life maintains a position in the
Account for the purpose of administering activity in the Account. The activity
includes unit transactions, fund share transactions, and expense processing.
Pruco Life monitors the balance daily and transfers funds based upon anticipated
activity. At times, Pruco Life may owe an amount to the Account, which is
reflected in Pruco Life's equity as a negative balance. The position does not
have an effect on the Contract owner's account or the related unit value.
A11
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share for each portfolio of the Series Fund, the number
of shares of each portfolio held by the subaccounts of the Account and the
aggregate cost of investments in such shares at December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
PORTFOLIOS
----------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Number of shares: 1,114,411 2,867,305 1,561,856 1,651,170 2,292,807
Net asset value
per share: $ 10.00000 $ 11.06543 $ 26.96489 $ 17.78763 $ 15.51706
Cost: $ 11,144,105 $ 31,394,630 $ 37,557,971 $ 28,686,232 $ 33,964,499
<CAPTION>
PORTFOLIOS (CONTINUED)
----------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Number of shares: 1,644,915 200,332 2,570,943 652,050 75,378
Net asset value
per share: $ 12.91693 $ 7.86749 $ 23.74471 $ 18.50982 $ 19.76541
Cost: $ 21,273,128 $ 1,576,928 $ 46,691,078 $ 10,514,299 $ 1,341,553
<CAPTION>
PORTFOLIOS (CONTINUED)
----------------------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Number of shares: 878,021 318,226 80,581 19,185 309,868
Net asset value
per share: $ 17.85474 $ 11.22109 $ 12.25430 $ 14.32319 $ 13.79187
Cost: $ 14,086,502 $ 3,569,426 $ 984,231 $ 259,330 $ 4,051,030
</TABLE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding Contract owner units, unit values and total value of Contract owner
equity for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Units Outstanding
(Pruselect I):... 1,614,253.389 4,313,893.312 707,469.885 2,476,231.572 7,687,817.036
Unit Value
(Pruselect
I):............. $ 1.39803 $ 1.79496 $ 2.57928 $ 2.12747 $ 1.93935
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(Pruselect
I):............. $ 2,256,775 $ 7,743,266 $ 1,824,763 $ 5,268,108 $ 14,909,368
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Units
Outstanding
(Pruselect
II):............ 6,283,319.564 13,319,380.003 15,584,558.672 11,316,882.414 11,487,391.218
Unit Value
(Pruselect
II):............ $ 1.39803 $ 1.79496 $ 2.57928 $ 2.12747 $ 1.93935
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(Pruselect
II):............ $ 8,784,269 $ 23,907,754 $ 40,196,940 $ 24,076,328 $ 22,278,072
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL CONTRACT
OWNER EQUITY:..... $ 11,041,044 $ 31,651,020 $ 42,021,703 $ 29,344,436 $ 37,187,440
----------------- ----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>
A12
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
---------------------------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Units Outstanding
(Pruselect I):... -- 27,328.083 7,200,490.423 279,820.691 255,814.081
Unit Value
(Pruselect
I):............. -- $ 1.97908 $ 2.41158 $ 2.35412 $ 2.24708
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(Pruselect
I):............. -- $ 54,084 $ 17,364,558 $ 658,732 $ 574,835
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Units
Outstanding
(Pruselect
II):............ 11,204,044.616 762,975.144 18,071,575.357 4,819,955.355 397,174.330
Unit Value
(Pruselect
II):............ $ 1.86817 $ 1.97908 $ 2.41158 $ 2.35412 $ 2.24708
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(Pruselect
II):............ $ 20,931,060 $ 1,509,989 $ 43,581,050 $ 11,346,753 $ 892,482
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL CONTRACT
OWNER EQUITY:..... $ 20,931,060 $ 1,564,073 $ 60,945,608 $ 12,005,485 $ 1,467,317
----------------- ----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- ----------------- -----------------
<CAPTION>
SUBACCOUNTS (CONTINUED)
---------------------------------------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Units Outstanding
(Pruselect I):... -- 187,581.849 -- -- --
Unit Value
(Pruselect
I):............. -- $ 1.69184 -- -- --
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(Pruselect
I):............. -- $ 317,358 -- -- --
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Units
Outstanding
(Pruselect
II):............ 11,747,240.234 1,861,749.861 474,533.584 185,526.923 2,994,477.024
Unit Value
(Pruselect
II):............ $ 1.32837 $ 1.69184 $ 2.03241 $ 1.42160 $ 1.42227
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(Pruselect
II):............ $ 15,604,682 $ 3,149,783 $ 964,447 $ 263,745 $ 4,258,955
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL CONTRACT
OWNER EQUITY:..... $ 15,604,682 $ 3,467,141 $ 964,447 $ 263,745 $ 4,258,955
----------------- ----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- ----------------- -----------------
</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
0.90% may be applied daily against the net assets representing equity of
Contract owners held in each subaccount. Mortality risk is that Contract
holders may not live as long as estimated and expense risk is that the cost
of issuing and administering the policies may exceed the estimated expenses.
Pruco Life currently intends to charge only 0.60% on these Contracts, but
reserves the right to make the full 0.90% charge. For 1996, the amount of
these charges paid to Pruco Life was $1,322,585.
B. Deferred Sales Charge
Subsequent to a Contract owner redemption, a deferred sales charge is
imposed upon surrenders 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 sixth
Contract year. No sales charge will be imposed on death benefits. For 1996,
the amount of these charges paid to Pruco Life was $120.
C. Partial Withdrawal Charge
A charge is imposed by Pruco Life on partial withdrawals of the cash
surrender value. For 1996, the amount of these charges paid to Pruco Life
was $120.
A13
<PAGE>
D. Expense Reimbursement
The Account is reimbursed by Pruco Life, on a non-guaranteed basis, for
expenses incurred by the Series Fund in excess of the effective rate of
0.40% for all Zero Coupon Bond Portfolios and for the Stock Index Portfolio,
0.50% for the High Dividend Stock Portfolio, 0.55% for the Natural Resources
Portfolio, and 0.65% for the High Yield Bond Portfolio of the average daily
net assets of these portfolios. For 1996, the amounts of these
reimbursements totaled $9,716.
E. Cost of Insurance Charges
Contract holder contributions are applied to the Account net of the
following charges: transaction costs, premium taxes, and sales loads. During
1996, Pruco Life received a total of $310,918, $2,306,619 and $3,549,790,
respectively.
NOTE 6: TAXES
Pruco Life is taxed as a "life insurance company" under the Internal Revenue
Code and the operations of the Account form a part of and are taxed with those
of Pruco Life. Under current federal law, no federal income taxes are payable by
the Account. As such, no provision for tax liability has been recorded.
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
Contract owner activity in the subaccount of the Account, for the year ended
December 31, 1996, were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
-------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Contributions,
net: $ 28,274,748 $ 12,660,793 $ 17,905,443 $ 9,772,843 $ 16,292,484
Contract Owner
Redemptions: $ (6,651,108) $ (6,738,485) $ (13,286,161) $ (9,602,272) $ (12,327,701)
Net Transfers
from(to) other
subaccounts or
fixed rate
option: $ (17,497,622) $ (11,127,338) $ 398,453 $ 4,183,915 $ (5,818,359)
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
-------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Contributions,
net: $ 7,330,303 $ 2,639,265 $ 24,418,247 $ 4,551,076 $ 1,053,314
Contract Owner
Redemptions: $ (7,042,572) $ (2,335,664) $ (17,903,697) $ (1,841,701) $ (765,068)
Net Transfers
from(to) other
subaccounts or
fixed rate
option: $ 19,922,192 $ 290,772 $ 11,417,383 $ (9,734,526) $ 137,717
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
-------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Contributions,
net: $ 9,531,822 $ 7,046,311 $ 79,504 $ 80,550 $ 133,200
Contract Owner
Redemptions: $ (7,135,740) $ (6,686,908) $ (56,256) $ (36,729) $ (244,305)
Net Transfers
from(to) other
subaccounts or
fixed rate
option: $ 3,195,104 $ 710,141 $ 72,033 $ 185,807 3,664,329
</TABLE>
NOTE 8: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM EQUITY TRANSFERS
The increase (decrease) in net assets resulting from equity transfers represents
the net contributions (withdrawals) of Pruco Life to the Account.
A14
<PAGE>
NOTE 9: UNIT ACTIVITY
Transactions in units (including transfers among subaccounts) for the year ended
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 20,647,285.964 7,359,670.236 7,684,190.757 7,183,433.288 8,974,255.110
Contract Owner
Redemptions: (17,694,761.491) (10,274,180.721) (5,707,765.375) (4,966,689.021) (10,034,514.954)
<CAPTION>
SUBACCOUNTS (CONTINUED)
---------------------------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 14,921,286.301 1,571,263.548 16,298,797.181 2,219,957.320 601,006.759
Contract Owner
Redemptions: (3,798,030.241) (1,254,509.408) (8,266,289.229) (5,553,498.457) (380,046.556)
<CAPTION>
SUBACCOUNTS (CONTINUED)
---------------------------------------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 10,357,717.745 4,777,803.530 78,742.069 202,257.810 2,812,163.248
Contract Owner
Redemptions: (5,813,881.205) (4,123,117.602) (28,992.975) (28,028.317) (182,921.460)
</TABLE>
NOTE 10: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments in the
Series Fund, Inc. were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
-------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1996
Purchases......... $ 14,411,000 $ 9,785,000 $ 9,137,000 $ 5,989,000 $ 5,519,000
Sales............. $ (12,562,000) $ (15,261,000) $ (4,329,000) $ (1,211,000) $ (8,634,000)
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
-------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1996
Purchases......... $ 24,233,000 $ 691,000 $ 19,805,000 $ 3,311,000 $ 612,000
Sales............. $ (4,059,000) $ (113,000) $ (2,071,000) $ (10,646,000) $ (190,000)
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
-------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1996
Purchases......... $ 7,485,000 $ 1,209,000 $ 116,000 $ 281,000 $ 3,655,000
Sales............. $ (1,889,000) $ (82,000) $ (18,000) $ (58,000) $ (164,000)
</TABLE>
A15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of
Pruco Life Variable Universal 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 Money Market Subaccount,
Diversified Bond Subaccount, Equity Subaccount, Flexible Managed Subaccount,
Conservative Balanced Subaccount, Zero Coupon Bond 2000 Subaccount, High Yield
Bond Subaccount, Stock Index Subaccount, Equity Income Subaccount, Natural
Resources Subaccount, Global Subaccount, Government Income Subaccount, Zero
Coupon Bond 2005 Subaccount, Prudential Jennison Subaccount and Small
Capitalization Stock Subaccount of Pruco Life Variable Universal Account at
December 31, 1996, and the results of each of their operations and the changes
in each of their net assets for the year then ended, in conformity with
generally accepted accounting principles. 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 generally
accepted auditing standards 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 shares owned in The Prudential Series
Fund, Inc. at December 31, 1996, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
New York, New York
March 31, 1997
A16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners of
Pruco Life Variable Universal
Account and the Board of Directors
of Pruco Life Insurance Company
Newark, New Jersey
We have audited the accompanying statements of changes in net assets of Pruco
Life Variable Universal Account of Pruco Life Insurance Company (comprising,
respectively, the Money Market, Diversified Bond, Equity, Flexible Managed,
Conservative Balanced, Zero Coupon Bond 2000, High Yield Bond, Stock Index,
Equity Income, Natural Resources, Global, Government Income, Zero Coupon Bond
2005, Prudential Jennison, and Small Capitalization Stock subaccounts) for the
periods presented for each of the two years ended December 31, 1995. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the changes in net assets of each of the respective subaccounts
constituting the Pruco Life Variable Universal Account for the respective stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996
A17
<PAGE>
<TABLE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<CAPTION>
DECEMBER 31,
1996 1995
----------- ------------
(000'S)
ASSETS
<S> <C> <C>
Fixed maturities
Held to maturity $ 405,731 $ 437,727
Available for sale 2,236,817 2,144,854
Equity securities 3,748 4,036
Mortgage loans 46,915 64,464
Investment real estate - 4,059
Policy loans 639,782 569,273
Other long term investments 4,528 4,159
Short term investments 169,830 228,016
----------- ------------
Total invested assets 3,507,351 3,456,588
----------- ------------
Cash 73,766 41,435
Deferred policy acquisition costs 633,159 566,976
Premiums due 9,084 6,367
Accrued investment income 62,110 59,862
Receivable from affiliates 1,901 8,275
Federal income tax receivable 7,191 6,375
Reinsurance recoverable on unpaid losses 27,014 27,914
Other assets 20,000 12,578
Separate Account assets 5,336,851 4,285,268
----------- ------------
TOTAL ASSETS $9,678,427 $8,471,638
=========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Future policy benefits and other policyholders'
liabilities $ 557,351 $ 501,200
Policyholders' account balances 2,188,862 2,218,330
Deferred federal income tax payable 148,960 141,048
Payable to affiliate 51,729 41,584
Other liabilities 55,090 37,387
Separate Account liabilities 5,277,454 4,263,896
----------- ------------
Total Liabilities 8,279,446 7,203,445
----------- ------------
Contingencies - Note 9
Stockholder's Equity
Common Stock, $10 par value;
1,000,000 shares, authorized;
250,000 shares, issued and outstanding at
December 31, 1996 and 1995 2,500 2,500
Paid-in-capital 439,582 439,582
Net unrealized investment gains (less deferred
income tax) 12,402 30,836
Retained earnings 944,497 795,275
----------- ------------
Total Stockholder's Equity 1,398,981 1,268,193
----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $9,678,427 $8,471,638
=========== ============
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-1
<PAGE>
<TABLE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-----------------------------------
(000'S)
REVENUES
<S> <C> <C> <C>
Premiums $ 51,525 $ 42,089 $ 22,689
Policy charges and fee income 324,976 319,012 308,753
Net investment income 247,328 246,618 241,132
Realized investment gains (losses) 10,835 13,200 (41,074)
Other income 20,818 26,986 13,259
-----------------------------------
Total Revenues 655,482 647,905 544,759
-----------------------------------
BENEFITS AND EXPENSES
Policyholders' benefits 186,873 153,987 121,949
Interest credited to policyholders' account
balances 118,246 126,926 113,711
Other operating costs and expenses 122,006 134,790 179,173
-----------------------------------
Total Benefits and Expenses 427,125 415,703 414,833
-----------------------------------
Income before income tax provision 228,357 232,202 129,926
-----------------------------------
Income tax provision 79,135 79,558 48,031
-----------------------------------
NET INCOME $ 149,222 $ 152,644 $ 81,895
===================================
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-2
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-----------------------------------
(000'S)
Common Stock
<S> <C> <C> <C>
Balance, beginning of year $ 2,500 $ 2,500 $ 2,500
Issued during year - - -
-----------------------------------
Balance, end of year 2,500 2,500 2,500
-----------------------------------
Paid in Capital
Balance, beginning of year 439,582 439,582 439,582
Paid in during year - - -
-----------------------------------
Balance, end of year 439,582 439,582 439,582
-----------------------------------
Net Unrealized Investment Gains (Losses)
(Less Deferred Income Tax)
Balance, beginning of year 30,836 (1,349) -
Adoption of SFAS 115 - (39,762) -
Net change in unrealized investment
gains (losses) (18,434) 71,947 (1,349)
-----------------------------------
Balance, end of year 12,402 30,836 (1,349)
-----------------------------------
RETAINED EARNINGS
Balance, beginning of year 795,275 642,631 560,736
Net income 149,222 152,644 81,895
-----------------------------------
Balance, end of year 944,497 795,275 642,631
-----------------------------------
TOTAL STOCKHOLDER'S EQUITY $1,398,981 $1,268,193 $1,083,364
===================================
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-3
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
------------------------------------------
(000'S)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 149,222 $ 152,644 $ 81,895
Adjustments to reconcile net income to net cash from
operating activities:
Increase in future policy benefits and other policyholders'
liabilities 56,151 22,877 31,932
General account policy fee income (50,286) (56,637) (48,401)
Interest credited to policyholders' account balances 118,246 126,926 113,711
Net decrease (increase) in Separate Accounts (38,025) (3,520) (4,121)
Net realized investment (gains) losses (10,835) (13,200) 41,074
Amortization and other non-cash items 26,709 (8,106) 6,228
Change in:
Accrued investment income (2,248) (480) (2,597)
Premiums due (2,717) (1,957) (1,374)
Receivable from affiliates 6,374 (758) (637)
Note receivable from affiliate -- -- 50,000
Deferred policy acquisition costs (66,183) 31,318 34,124
Federal income tax receivable (816) 12,031 (28,908)
Other assets (6,522) (12,689) (11,121)
Payable to affiliate 10,145 11,327 (24,029)
Deferred federal income tax payable 7,912 30,779 --
Other liabilities 17,703 (61,306) (5,293)
-----------------------------------------
Cash Flows From Operating Activities 214,830 229,249 232,483
-----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Held to maturity 138,127 144,898 2,710,423
Available for sale 3,886,254 1,886,687 --
Equity securities 7,527 5,557 1,910
Mortgage loans 19,226 7,395 10,821
Other long term investments 288 1,559 607
Investment real estate 4,488 2,926 8,677
Payments for the purchase of:
Fixed maturities:
Held to maturity (114,494) (135,092) (2,561,082)
Available for sale (4,008,810) (1,741,139) --
Equity securities (4,697) (4,279) (2,436)
Mortgage loans -- -- (35,276)
Other long term investments (657) (1,674) (1,584)
Policy loans (70,509) (75,411) (73,591)
Net proceeds (payments) of short term investments 58,186 (36,482) 9,845
-----------------------------------------
Cash Flows From Investing Activities (85,071) 54,945 68,314
-----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 536,370 95,039 114,105
Withdrawals (net of transfers to/from separate accounts) (633,798) (365,578) (387,793)
-----------------------------------------
Cash Flows From Financing Activities (97,428) (270,539) (273,688)
-----------------------------------------
Net increase in Cash 32,331 13,655 27,109
Cash, beginning of year 41,435 27,780 671
-----------------------------------------
CASH, END OF YEAR $ 73,766 $ 41,435 $ 27,780
=========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid $ 61,760 $ 53,107 $ 56,089
=========================================
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-4
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES
A. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Pruco Life Insurance Company (Pruco Life), a stock life insurance company,
and its subsidiaries (collectively, the Company). Pruco Life is a
wholly-owned subsidiary of The Prudential Insurance Company of America
(Prudential), a mutual life insurance company. The Company markets
individual life insurance and deferred annuities primarily through
Prudential's sales force in the United States, and in Taiwan. All
significant intercompany balances and transactions have been eliminated in
consolidation.
B. Basis of Presentation
The Financial Accounting Standards Board (FASB) issued Interpretation No. 40
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises", as amended by Statement of Financial
Accounting Standards (SFAS) No. 120 "Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts", effective for fiscal years beginning after
December 15, 1995. Financial statements of mutual life insurance companies,
and their wholly owned stock life insurance subsidiaries, for periods
beginning after December 15, 1995 which are prepared on the basis of
statutory accounting practices will no longer be characterized as in
conformity with generally accepted accounting principles (GAAP). As a
result, the Company has prepared its 1996 consolidated financial statements
in accordance with all applicable GAAP pronouncements. The 1995 and 1994
consolidated financial statements, which were previously prepared on the
statutory basis of accounting, have been restated in accordance with GAAP.
The cumulative effect of adopting GAAP as of January 1, 1994 was an increase
in retained earnings of $378.3 million. See Note 7 for a reconciliation of
the Company's surplus and net income determined in accordance with statutory
accounting practices with equity and net income determined on a GAAP basis.
On January 1, 1995, the Company adopted SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities," which expanded the use of fair
value accounting for those securities that a company does not have positive
intent and ability to hold to maturity. Implementation of this statement
decreased stockholder's equity by $39.8 million net of deferred income tax
benefit of $21.4 million. In 1994 prior to the adoption of SFAS 115, all
fixed maturities were carried at amortized cost.
C. Investments
Fixed Maturities - Securities held to maturity are those that the Company
has the positive intent and ability to hold to maturity and are principally
reported at amortized cost. Amortized cost is adjusted to estimated fair
value for impairments which are deemed to be other than temporary.
Where the Company may not have the positive intent to hold fixed maturities
until maturity, the securities are classified as "Available for Sale." These
securities are reported at market value based principally on their quoted
market prices. The associated unrealized gains and losses, net of income
taxes and deferred policy acquisition costs, are included as a component of
equity or if deemed to be other than temporary, are included as a realized
loss.
Equity Securities consist primarily of common and preferred stocks.
Marketable equity securities are reported at market value based principally
on their quoted market prices. Cost basis of the equity securities is $3.9
million and $5.3 million as of December 31, 1996 and 1995, respectively. The
associated unrealized gains and losses are included as a component of
equity.
Mortgage Loans and Policy Loans are stated primarily at unpaid principal
balances, net of unamortized discounts. Interest income is recognized as net
investment income earned.
B-5
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
Investment Real Estate acquired through foreclosure during 1994 was sold in
1996 for $4.5 million.
Other Long Term Investments, which consist of limited partnerships, are
valued at the aggregate net equity in the partnerships. Certain investments
in this category were non-income producing at December 31, 1995. These
investments were $.3 million at December 31, 1995. There were no non-income
producing investments at December 31, 1996 and 1994.
Partnership and joint venture interests in which the Company does not have
control and a majority economic interest are reported on the equity basis of
accounting. Non real estate related interests of $4.5 million and $4.1
million are included in other long term investments, at December 31, 1996
and 1995, respectively. The Company's share of net income from such entities
was $1.4 million, $.3 million, and $1.9 million for the years ended December
31, 1996, 1995, and 1994, respectively, and is reported in net investment
income.
Realized investment gains and losses are reported based on specific
identification of the investments sold.
Short-term investments are fixed maturities that mature within one year, and
are reported at estimated fair value.
D. Revenue Recognition and Related Expenses
Universal life contracts are long duration life insurance contracts that
involve significant mortality and morbidity risk with both fixed and
guaranteed terms. Investment contracts are long duration contracts that do
not subject the insurance enterprise to risks arising from policyholder
mortality or morbidity. Amounts received as payments for these contracts are
reported as deposits to policyholders' account balances. Revenues from these
contracts consist primarily of amounts assessed during the period against
policyholders' account balances for mortality charges, policy administration
fees and surrender charges. Policy benefits and claims that are charged to
expenses include benefit claims incurred in the period in excess of related
policyholders' account balances.
Premiums, policy benefits and claims from traditional life and annuity
policies, generally are recognized in operations when due.
E. Deferred Policy Acquisition Costs
Acquisition costs consist of commissions and other costs which vary with and
are primarily related to the production or acquisition of new business.
Acquisition costs related to universal life products and investment-type
contracts are deferred and amortized in proportion to total estimated gross
profits arising principally from investment results, mortality, expense
margins and surrender charges based on historical and anticipated future
experience. Amortization of deferred policy acquisition costs was $9.3
million, $54.4 million, and $76.0 million for the years ended December 31,
1996, 1995, and 1994, respectively. Deferred policy acquisition costs are
analyzed to determine if they are recoverable from future income, including
investment income. If such costs are determined to be unrecoverable, they
are expensed at the time of determination. The effect on the deferred policy
acquisition asset that would result from realization of unrealized
investment gains (losses) is recognized with an offset to unrealized
investment gains (losses) in consolidated stockholder's equity.
B-6
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
F. Future Policy Benefits and Policyholders' Account Balances
Benefit reserve liabilities for payout annuities such as matured deferred
annuities and supplementary contracts represent the present values of
estimated future benefits payments and related expenses. Present values for
these contracts are computed using interest rates ranging from 6.5% to 11%.
The mortality assumption for these contracts is the 83 IAM tables. Reserves
for supplementary benefits are stated at interest rates that vary from 4% to
6.5% using mortality and morbidity assumptions either from company
experience or various actuarial tables.
When liabilities for future policy benefits plus the present value of
expected future gross deposits are insufficient to provide expected future
policy benefits and expenses, unrecoverable deferred policy acquisition
costs are written off and thereafter, if required, a premium deficiency
reserve is established as a charge to income.
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account values
represent an accumulation of gross deposits plus interest credited less
expense and mortality charges and withdrawals.
Interest crediting rates on life insurance products range from 3.35% to 7%.
G. Separate Accounts
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.
All Separate Account assets are carried at market value. Deposits to all
Separate Accounts are reported as increases in Separate Account liabilities,
which equal the Separate Account policy account fund values. Charges
assessed against Policyholders' account balances for mortality, policy
administration and surrender charges are included in policy charges and fee
income. Mortality and expense risk charges are applied against the
Policyholders' account balance. The Separate Account assets are legally
segregated and are not subject to claims that arise out of any other
business of the Company.
H. Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
B-7
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
2. FIXED MATURITIES
Gross unrealized gains and losses for securities classified as Held to Maturity
and Available for Sale, by major security type, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
- ---------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(000's) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to Maturity
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ - $ - $ - $ -
Foreign government bonds - - - -
Corporate securities 405,731 10,947 576 416,102
Mortgage-backed securities - - - -
Other fixed maturities - - - -
- ---------------------------------------------------------------------------------------------------
Total $ 405,731 $ 10,947 $ 576 $ 416,102
- ---------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31, 1996
- ---------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(000's) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available For Sale
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 32,055 $ 30 $ 174 $ 31,911
Foreign government bonds 90,447 857 205 91,099
Corporate securities 2,087,250 30,365 4,206 2,113,409
Mortgage-backed securities 398 - - 398
Other fixed maturities - - - -
- ---------------------------------------------------------------------------------------------------
Total $ 2,210,150 $ 31,252 $ 4,585 $ 2,236,817
- ---------------------------------------------------------------------------------------------------
</TABLE>
B-8
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(000's) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to Maturity
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ - $ - $ - $ -
Foreign government bonds - - - -
Corporate securities 437,727 18,629 1,805 454,551
Mortgage-backed securities - - - -
Other fixed maturities - - - -
- ---------------------------------------------------------------------------------------------------
Total $ 437,727 $ 18,629 $ 1,805 $ 454,551
- ---------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(000's) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available For Sale
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 324,854 $ 6,830 $ 61 $ 331,623
Foreign government bonds 73,042 3,055 - 76,097
Corporate securities 1,507,248 54,545 2,168 1,559,625
Mortgage-backed securities 169,190 8,717 398 177,509
Other fixed maturities - - - -
- ---------------------------------------------------------------------------------------------------
Total $ 2,074,334 $ 73,147 $ 2,627 $ 2,144,854
- ---------------------------------------------------------------------------------------------------
</TABLE>
B-9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
The amortized cost and estimated fair value of fixed maturities at December 31,
1996, categorized by contractual maturity, are shown below. Actual maturities
will differ from contractual maturities because borrowers may prepay obligations
with or without call or prepayment penalties.
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
Estimated
Amortized Fair
(000's) Cost Value
- ------------------------------------------------------------------------------
Held to Maturity
Due in one year or less $ 28,653 $ 28,762
Due after one year through five years 156,013 158,183
Due after five years through ten years 194,765 202,766
Due after ten years 26,300 26,391
Mortgage-backed securities -- --
- ------------------------------------------------------------------------------
Total $ 405,731 $ 416,102
- ------------------------------------------------------------------------------
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
Estimated
Amortized Fair
(000's) Cost Value
- ------------------------------------------------------------------------------
Available For Sale
Due in one year or less $ 130,400 $ 131,301
Due after one year through five years 1,561,854 1,578,979
Due after five years through ten years 398,090 404,920
Due after ten years 119,408 121,219
Mortgage-backed securities 398 398
- ------------------------------------------------------------------------------
Total $2,210,150 $2,236,817
- ------------------------------------------------------------------------------
Proceeds from the sale of fixed maturities during 1996, 1995, and 1994 were $3.8
billion, $1.8 billion, and $2.6 billion, respectively. Gross gains of $28.7
million, $28.8 million, and $16.8 million and gross losses of $19.7 million,
$17.5 million, and $49.8 million were realized on those sales during 1996, 1995,
and 1994, respectively.
B-10
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
3. Net Investment Income YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------------
(000'S)
<S> <C> <C> <C>
Net investment income consists of:
Gross investment income
Fixed maturities
Held to maturity $ 33,419 $ 33,458 $ 196,909
Available for sale 152,445 160,740 --
Equity securities 44 104 14
Mortgage loans 5,669 7,757 4,041
Investment real estate 613 647 2,146
Policy loans 33,449 29,775 25,692
Short term investments 16,780 15,092 12,676
Other 9,438 3,949 5,075
-------------------------------------------
251,857 251,522 246,553
Investment expenses (4,529) (4,904) (5,421)
===========================================
Net investment income $ 247,328 $ 246,618 $ 241,132
===========================================
4. Investment Gains (Losses)
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------------
(000'S)
<S> <C> <C> <C>
Realized investment gains (losses)
Fixed maturities - Available for sale $ 9,036 $ 11,359 $ (38,180)
Equity securities 781 2,020 503
Mortgage loans 1,677 (90) (4,581)
Investment real estate 487 (99) 1,184
Other (1,146) 10 --
-------------------------------------------
Realized investment gains (losses) $ 10,835 $ 13,200 $ (41,074)
===========================================
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------------
(000'S)
<S> <C> <C> <C>
Net unrealized investment gains
(losses), beginning of period $ 30,836 $ (1,349) $ --
Net unrealized investment gains (losses)
Fixed maturities - Available for sale (43,853) 131,712 --
Equity securities 1,403 827 (2,108)
-------------------------------------------
(42,450) 132,539 (2,108)
Deferred income tax benefit (provision) 15,398 (47,714) 759
Deferred policy acquisition costs
(net of deferred income taxes) 8,618 (12,878) --
-------------------------------------------
Net change in unrealized
investment gains (losses) (18,434) 71,947 (1,349)
Adoption of SFAS 115 -- (39,762) --
-------------------------------------------
Net unrealized investment gains
(losses), end of period $ 12,402 $ 30,836 (1,349)
===========================================
</TABLE>
B-11
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
5. Fair Value Information
The fair value amounts have been determined by the Company using available
information and reasonable valuation methodologies. Considerable judgment is
applied, as necessary, in interpreting data to develop the estimates of fair
value. Accordingly, the 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 fair values.
Fixed Maturities - Fair values for fixed maturities, 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 quality and its remaining average
life.
Equity Securities - Fair value is based on quoted market prices.
Mortgage Loans - The fair value of the mortgage loan portfolio is primarily
based upon the present value of the scheduled 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 is calculated using a discounted cash
flow model based upon current U.S. Treasury rates and historical loan
repayments.
Policyholders' Account Balances - Fair values for policyholders' account
balances are equal to the policy account values.
Short-term Investments - Fair values for short-term investments are based on
quoted market prices or estimates from independent pricing services.
The following table discloses the carrying amounts and estimated fair values of
the Company's financial instruments at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
-------------- ---------- -------------- ----------
(000'S)
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities:
Held to maturity $ 405,731 $ 416,102 $ 437,727 $ 454,551
Available for sale 2,236,817 2,236,817 2,144,854 2,144,854
Mortgage loans 46,915 46,692 64,464 63,635
Policy loans 639,782 623,218 569,273 577,975
Equity securities 3,748 3,748 4,036 4,036
Short-term investments 169,830 169,830 228,016 228,016
Financial Liabilities:
Policyholders'
account balances $ 2,188,862 $ 2,188,862 $ 2,218,330 $ 2,218,330
</TABLE>
B-12
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
6. Income Taxes
The Company is a member of a group of affiliated companies which join in filing
a consolidated federal income tax return in addition to separate company state
and local tax returns. The Internal Revenue Code limits the amount of nonlife
insurance losses that may offset life insurance company taxable income.
Companies operating outside the United States are taxed under applicable foreign
statutes.
Pursuant to the tax allocation arrangement, 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. The Company has a net receivable from Prudential of $7.2 million and
$6.4 million as of December 31, 1996 and 1995, respectively.
Deferred income taxes are generally recognized when assets and liabilities have
different values for financial statement and tax reporting purposes.
The components of income taxes are as follows:
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------
(000'S)
Current income tax provision:
Federal income tax $ 59,489 $ 65,131 $ 59,641
State and local income tax 703 1,876 3,036
Foreign income tax 4 7 7
-------------------------------------
Total current income tax 60,196 67,014 62,684
Deferred income tax provision
(benefit):
Federal income tax 18,413 12,196 (14,246)
State and local income tax 526 348 (407)
-------------------------------------
Total deferred income tax 18,939 12,544 (14,653)
-------------------------------------
Total income tax provision $ 79,135 $ 79,558 $ 48,031
=====================================
The income tax provision is different from the amount computed using the
expected federal income tax rate of 35% for the following reasons:
YEAR ENDED
DECEMBER 31,
1996 1995 1994
-------------------------------------
(000'S)
Expected federal income tax expense $ 79,926 $ 81,271 $ 45,474
State income taxes 1,229 2,224 2,629
Other (2,020) (3,937) (72)
=====================================
Total income tax provision $ 79,135 $ 79,558 $ 48,031
=====================================
B-13
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
The components of net deferred income taxes payable are as follows:
YEAR ENDED
DECEMBER 31,
1996 1995
------------------------------
(000'S)
Deferred Income Tax Assets
Insurance liabilities $ 38,532 $ 40,732
Other -- --
------------------------------
Total deferred income tax assets $ 38,532 $ 40,732
==============================
Deferred Income Tax Liabilities
Deferred acquisition costs $ 173,785 $ 153,526
Net investment gains 12,502 28,157
Other 1,205 97
------------------------------
Total deferred income tax liabilities 187,492 181,780
------------------------------
Deferred federal income tax payable $ 148,960 $ 141,048
==============================
The Internal Revenue Service (the "Service") has completed examinations of the
consolidated federal income tax returns through 1989. The Service is examining
the years 1990 through 1992. Discussions are being held with the Service with
respect to proposed adjustments. However, management believes there are adequate
defenses against, or sufficient reserves to provide for, such adjustments.
B-14
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
7. Stockholder's Equity Reconciliation
The reconciliation of statutory net income to GAAP net income, and statutory
surplus to GAAP equity as of December 31, 1996, 1995, and 1994 are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------
(000'S)
<S> <C> <C> <C>
Statutory net income $ 73,847 $ 157,751 $ 52,955
Deferred acquisition costs 48,862 (6,103) (34,124)
Deferred premium 1,295 (743) 1,122
Insurance liabilities 10,211 22,890 31,780
Income taxes (7,780) (27,669) 42,755
Interest maintenance reserve 365 5,480 (24,704)
Separate accounts and other 22,422 1,038 12,111
---------------------------------------------------------
GAAP net income $ 149,222 $ 152,644 $ 81,895
=========================================================
Statutory surplus $ 901,645 $ 829,022 $ 676,087
Investment valuation 26,678 70,776 -
Deferred acquisition costs 633,159 566,976 598,294
Deferred premium (11,859) (13,154) (12,412)
Insurance liabilities (124,781) (153,995) (71,076)
Income taxes (124,823) (128,070) (82,167)
Asset valuation reserve and interest
maintenance reserve 68,733 64,551 23,690
Other 30,229 32,087 (49,052)
---------------------------------------------------------
GAAP stockholder's equity $ 1,398,981 $ 1,268,193 $ 1,083,364
=========================================================
</TABLE>
The New York State Insurance Department ("Department") recognizes only
statutory accounting for determining and reporting the financial condition
and results of operations of an insurance company, for determining its
solvency under the New York Insurance Law, and for determining whether its
financial condition warrants the payment of a dividend to its stockholders.
No consideration is given by the Department to financial statements prepared
in accordance with generally accepted accounting principles in making such
determinations.
B-15
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
DECEMBER 31, 1996, 1995, AND 1994
8. Related Party Transactions
A. Service Agreements
The Company, Prudential, and Pruco Securities Corporation, an indirect
wholly-owned subsidiary of Prudential, operate under service and lease
agreements whereby services of officers and employees, supplies, use of
equipment and office space are provided. The net cost of these services
allocated to the Company were $102 million, $98 million and $78 million for
the years ended December 31, 1996, 1995, and 1994, respectively.
B. Pension Plans
The Company is a wholly-owned subsidiary of Prudential which sponsors
several defined benefit pension plans that cover substantially all of its
employees. Benefits are generally based on career average earnings and
credited length of service. Prudential's funding policy is to contribute
annually the amount necessary to satisfy the Internal Revenue Service
contribution guidelines.
No pension expense for contributions to the plan was allocated to the
Company in 1996, 1995, or 1994 because the plan was subject to the full
funding limitation under the Internal Revenue Code.
C. Postretirement Life and Health Benefits
Prudential also sponsors certain life insurance and health care benefits for
its retired employees. Substantially all employees may become eligible to
receive a benefit if they retire after age 55 with at least 10 years of
service. Prudential elected to amortize its obligation over twenty years. A
provision for contributions to the postretirement fund is included in the
net cost of services allocated to the Company discussed above for the years
ended December 31, 1996, 1995, and 1994.
D. Reinsurance
The Company currently has three reinsurance agreements in place with
Prudential (the reinsurer). Specifically: 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, 1996, 1995, and 1994.
9. Contingencies
Several actions have been brought against the Company on behalf of those
persons who purchased life insurance policies based on complaints about
sales practices engaged in by Prudential, the Company and agents appointed
by Prudential and the Company. Prudential has agreed to indemnify the
Company for any and all losses resulting from such litigation.
10. 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 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, 1996, the Company would be permitted a maximum of $48 million in
dividend distribution in 1997, all of which could be paid in cash, without
approval from The State of Arizona Department of Insurance.
B-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Pruco Life Insurance Company
In our opinion, the accompanying consolidated statement of financial position
and the related consolidated statements of operations, of stockholder's equity
and of cash flows present fairly, in all material respects, the financial
position of Pruco Life Insurance Company and its subsidiaries at December 31,
1996, and the results of their operations and their cash flows for the year in
conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards 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 audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
- --------------------------
PRICE WATERHOUSE LLP
New York, New York
March 21, 1997
B-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors of
Pruco Life Insurance Company
Newark, New Jersey
We have audited the accompanying consolidated statement of financial position of
Pruco Life Insurance Company and subsidiaries as of December 31, 1995, and the
related consolidated statements of operations, stockholder's equity and cash
flows for the years ended December 31, 1995 and 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying financial statements presents fairly, in all
material respects, the consolidated financial position of Pruco Life Insurance
Company and subsidiaries as of December 31, 1995, and the consolidated results
of operations and cash flows for the years ended December 31, 1995 and 1994 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company has
retroactively adopted all applicable generally accepted accounting principles
relating to stock life insurance subsidiaries of mutual life insurance companies
and has changed, as of January 1, 1995, the method of accounting for fixed
maturity investments.
/s/ DELOITTE & TOUCHE LLP
Parsippany, N.J.
December 19, 1996
B-18
<PAGE>
PRUSELECT(SM) I
VARIABLE LIFE
INSURANCE CONTRACTS
[LOGO] Prudential
PRUCO LIFE INSURANCE COMPANY
213 Washington Street, Newark, NJ 07102-2992
Telephone 800 323-2993
A Subsidiary of
The Prudential Insurance Company of America
<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 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 Pruco
Life Insurance Company.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
Prudential Directors' and Officers' Liability and Corporation Reimbursement
Insurance program, purchased by Prudential from Aetna Casualty & Surety Company,
CNA Insurance Companies, Lloyds of London, Great American Insurance Company,
Reliance Insurance Company, Corporate Officers & Directors Assurance Ltd.,
A.C.E. Insurance Company, Ltd., XL Insurance Company, Ltd., and Zurich-American
Insurance Company, provides reimbursement for "Loss" (as defined in the
policies) which the Company pays as indemnification to its directors or officers
resulting from any claim for any actual or alleged act, error, misstatement,
misleading statement, omission, or breach of duty by persons in the discharge of
their duties in their capacities as directors or officers of Prudential, any of
its subsidiaries, or certain investment companies affiliated with Prudential.
Coverage is also provided to the individual directors or officers for such Loss,
for which they shall not be indemnified. Loss essentially is the legal liability
on claims against a director or officer, including adjudicated damages,
settlements and reasonable and necessary legal fees and expenses incurred in
defense of adjudicatory proceedings and appeals therefrom. Loss does not include
punitive or exemplary damages or the multiplied portion of any multiplied damage
award, criminal or civil fines or penalties imposed by law, taxes or wages, or
matters which are uninsurable under the law pursuant to which the policies are
construed.
There are a number of exclusions from coverage. Among the matters excluded are
Losses arising as the result of (1) claims brought about or contributed to by
the criminal, dishonest or fraudulent acts or omissions or the willful violation
of any law by a director or officer, (2) claims based on or attributable to
directors or officers gaining personal profit or advantage to which they were
not legally entitled, and (3) claims arising from actual or alleged performance
of, or failure to perform, services as, or in any capacity similar to, an
investment adviser, investment banker, underwriter, broker or dealer, as those
terms are defined in the Securities Act of 1933, the Securities Exchange Act of
1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940,
any rules or regulations thereunder, or any similar federal, state or local
statute, rule or regulation.
The limit of coverage under the program for both individual and corporate
reimbursement coverage is $150,000,000. The retention for corporate
reimbursement coverage is $10,000,000 per loss.
The relevant provisions of New Jersey law permitting or requiring
indemnification, New Jersey being the state of organization of Prudential, can
be found in Section 14A:3-5 of the New Jersey Statutes Annotated. The relevant
provisions of Arizona law, Arizona being the state of organization of Pruco
Life, can be found in Section 10-005 of the Arizona Statutes Annotated. The text
of Prudential's by-law 26, which relates to indemnification of officers and
directors, is incorporated by reference to Exhibit 1.A.(6)(b) of Post-Effective
Amendment No. 1 to Form S-6, Registration No. 33-61079, filed April 25, 1996, on
behalf of The Prudential Variable Appreciable Account. The text of Pruco Life's
by-laws, Article VIII, which relates to indemnification of officers and
directors, is incorporated by reference to Exhibit 1.A.(6)(b) to this
Registration Statement.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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 65 pages.
The undertaking to file reports.
The representation with respect to charges.
The signatures.
Written consents of the following persons:
1. Price Waterhouse LLP, independent accountants.
2. Deloitte & Touche LLP, independent auditors.
3. Clifford E. Kirsch, Esq.
4. Nancy D. Davis, FSA, MAAA
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) Resolution of Board of Directors of Pruco Life Insurance
Company establishing the Pruco Life Variable Universal
Account. (Note 1)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities
Corporation and Pruco Life Insurance Company.
(Note 1)
(b) Proposed form of Agreement between Pruco
Securities Corporation and independent brokers
with respect to the Sale of the Contracts. (Note
1)
(c) Schedule of Sales Commissions. (Note 1)
(4) Not Applicable.
(5) Variable Universal Life Insurance Contract. (Note 1)
(6) (a) Articles of Incorporation of Pruco Life Insurance
Company, as amended October 19, 1993. (Note 7)
(b) By-laws of Pruco Life Insurance Company, as
amended June 18, 1996. (Note 4)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form for Variable Universal Life
Insurance Contract. (Note 1)
(b) Supplement to the Application for Variable
Universal Life Insurance Contract. (Note 3)
(11) Memorandum describing Pruco Life Insurance Company's
issuance, transfer, and redemption procedures for the
Contracts pursuant to Rule 6e - 3 (T)(b)(12)(iii). (Note
6)
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 Nancy D. Davis, FSA, MAAA, as to actuarial
matters pertaining to the securities being registered. (Note 1)
7. Powers of Attorney.
(a) William M. Bethke, Ira J. Kleinman, Mendel A. Melzer Esther H.
Milnes, I. Edward Price, William F. Yelverton (Note 2)
(b) Linda S. Dougherty (Note 4)
II-2
<PAGE>
(c) Kiyofumi Sakaguchi (Note 5)
27. Financial Data Schedule. (Note 1)
(Note 1) Filed herewith.
(Note 2) 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 3) Incorporated by reference to Post-Effective Amendment No. 2 to
this Registration Statement, filed April 29, 1991.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 3 to
Form S-1, Registration No. 33- 86780, filed April 9, 1997 on behalf
of the Pruco Life Variable Contract Real Property Account.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 8 to Form
S-8, Registration No. 33-49994, filed on or about April 25, 1997 on
behalf of the Pruco Life PRUvider Variable Appreciable Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 9 to
this Registration Statement, filed April 25, 1996.
(Note 7) Incorporated by reference to Form S-6, Registration No. 333-07451,
filed July 2, 1996 on behalf of the Pruco Life Variable Appreciable
Account.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, the
Pruco Life Variable Universal 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 duly 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 25th day of April, 1997.
(Seal) PRUCO LIFE VARIABLE UNIVERSAL 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. 10 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 25th day of April, 1997.
SIGNATURE AND TITLE
-------------------
/s/ *
- -----------------------------------------
Esther H. Milnes
President and Director
/s/ *
- -----------------------------------------
Linda S. Dougherty
Chief Accounting Officer and Comptroller
/s/ *
- -----------------------------------------
William M. Bethke *By: /s/ Thomas C. Castano
Director ------------------------------
Thomas C. Castano
(Attorney-in-Fact)
/s/ *
- -----------------------------------------
Ira J. Kleinman
Director
/s/ *
- -----------------------------------------
Mendel A. Melzer
Director
/s/ *
- -----------------------------------------
I. Edward Price
Director
/s/ *
- -----------------------------------------
Kiyofumi Sakaguchi
Director
/s/ *
- -----------------------------------------
William F. Yelverton
Director
II-4
<PAGE>
EXHIBIT INDEX
Consent of Deloitte and Touche LLP, independent Page II-6
auditors.
Consent of Price Waterhouse LLP, independent Page II-7
accountants.
1.A.(1) Resolution of Board of Directors of Pruco Life Page II-8
Insurance Company establishing the Pruco Life
Variable Universal Account.
1.A.(3)(a) Distribution Agreement between Pruco Securities Page II-11
Corporation and Pruco Life Insurance Company.
1.A.(3)(b) Proposed form of Agreement between Pruco Securities Page II-19
Corporation and independent brokers with respect to
the Sale of the Contracts.
1.A.(3)(c) Schedule of Sales Commissions. Page II-28
1.A.(5) Variable Universal Life Insurance Contract. Page II-29
1.A.(10)(a) Application Form for Variable Universal Life Insurance Page II-52
Contract.
3. Opinion and Consent of Clifford E. Kirsch, Esq., as Page II-53
to the legality of the securities being registered.
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as Page II-54
to actuarial matters pertaining to the securities
being registered.
27. Financial Data Schedule. Page II-55
II-5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 10 to Registration
Statement No. 33-29181 on Form S-6 of Pruco Life Variable Universal Account of
Pruco Life Insurance Company of our report dated February 15, 1996, relating to
the financial statements of Pruco Life Variable Universal Account, and of our
report dated December 19, 1996, relating to the consolidated financial
statements of Pruco Life Insurance Company and subsidiaries appearing in the
Prospectus, which is part of such Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
/S/ Deloitte & Touche LLP
Parsippany, New Jersey
April 25, 1997
II-6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 10 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated March 31, 1997, relating to the
financial statements of Pruco Life Variable Universal 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, 1997, relating to the
consolidated financial statements of Pruco Life Insurance Company and
Subsidiaries, which appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
/s/ PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 24, 1997
II-7
EXHIBIT 1.A.(1)
89-6
PRUCO LIFE INSURANCE COMPANY
Action by Executive Committee of
Board of Directors by Unanimous Consent
Pursuant to Section 4.12 of Article IV of the By-Laws of Pruco Life
Insurance Company, an Arizona corporation, and pursuant to Section 10-044 of the
Arizona General Corporation Law, the undersigned, being, or acting for all of
the regular members of the Executive Committee of the Board of Directors of such
Company, hereby consent to and adopt the following resolution:
R-447 Establishment of Separate Account
RESOLVED, that the Company hereby establishes, pursuant to Section 20-651
of the Arizona Insurance Code, a variable contract account to be designated
initially as the "Pruco Life Variable Universal Account" (hereinafter in these
resolutions referred to as the ("Account"), and
FURTHER RESOLVED, that the Company shall receive and hold in the Account
amounts arising from (i) purchase payments received made pursuant to certain
Variable Universal Life Insurance Contracts (hereinafter in these resolutions
referred to as "Variable Contracts") of the Company sold as part of its Variable
Universal Life Insurance Program (hereinafter in these resolutions referred to
as "Program") and (ii) such assets of the Company as the proper officers of the
Company may deem prudent and appropriate to have invested in the same manner as
the assets applicable to its reserve liability under the Variable Contracts and
lodged in the Account, and such amounts and the dividends, interest and gains
produced thereby shall be invested and reinvested, subject to the rights of the
holders of such Variable Contracts, in shares of Pruco Life Series Fund, Inc.,
an open-end diversified management investment company of the series type, at the
net asset value of such shares at the time of acquisition; and
FURTHER RESOLVED, that the Account shall be registered as a unit investment
trust under the Investment Company Act of 1940, and that the proper officers of
the Company be and they hereby are authorized to sign and file, or cause to be
filed, with the Securities and Exchange Commission a registration statement, on
behalf of the Account, as registrant, under the Investment Company Act of 1940
("Investment Company Act Registration"), and to sign and file, or cause to be
filed, an application, including any amendments thereto, for an order under
II-8
<PAGE>
89-7
Section 6(c) of the Investment Company Act of 1940 for such exemptions from the
provisions of that Act as may be necessary or desirable (hereinafter in these
resolutions referred to as "Investment Company Act Application"); and
FURTHER RESOLVED, that the Company, shall as part of its Program shall sell
Variable Contracts on a variable basis and that the proper officers of the
Company shall be and they hereby are authorized to sign and file, or cause to be
filed, with the Securities and Exchange Commission, on behalf of the Company, as
issuer, a registration statement, including the financial statements and
schedules, exhibits and form of prospectus required as a part thereof, for the
registration of the offering and sale of such Variable Contracts, to the extent
they represent participating interests in the Account, under the Securities Act
of 1933 (hereinafter in these resolutions referred to as "Securities Act
Registration") and to pay the registration fees required in connection
therewith; and
FURTHER RESOLVED, that the proper officers of the Company are authorized
and directed to sign and file, or cause to be filed, such amendment or
amendments of such Investment Company Act Registration, Investment Company Act
Application and Securities Act Registration as they may find necessary or
advisable from to time; and
FURTHER RESOLVED, that the signature of any director or officer required by
law to affix his signature to such Investment Company Act Registration,
Investment Company Act Application and Securities Act Registration, or to any
amendment thereof, may be affixed by said director or officer personally, or by
an attorney-in-fact duly constituted in writing by said director or officer to
sign his name thereto; and
FURTHER RESOLVED, that the Senior Vice President and General Counsel of the
Company is appointed agent of the Company to receive any and all notices and
communications from the Securities and Exchange Commission relating to such
Investment Company Act Registration, Investment Company Act Application and
Securities Act Registration and any and all amendments thereof; and
FURTHER RESOLVED, that the proper officers of the Company be and they
hereby are authorized to take whatever steps may be necessary or desirable to
comply with such of the laws and regulations of the several states as may be
applicable to the Company's Program; and
II-9
<PAGE>
89-8
FURTHER RESOLVED, that the proper officers of the Company be and they
hereby are authorized, in the name and on behalf of the Company, to execute and
deliver such corporate documents and certificates and to take such further
action as may be necessary or desirable, including, but not limited to, the
payment of applicable fees, in order to effectuate the purposes of the foregoing
resolutions or any of them.
April 17, 1989
/s/ ROBERT P. HILL
---------------------------------
Robert P. Hill
/s/ JOSEPH J. MELONE
---------------------------------
Joseph J. Melone
/s/ WILLIAM J. KELLY
---------------------------------
William J. Kelly
II-10
EXHIBIT 1.A(3)(a)
DISTRIBUTION AGREEMENT
AGREEMENT made this 26th day of May 1989, by and between Pruco Life
Insurance Company, an Arizona corporation ("Company"), on its own behalf and on
behalf of the Pruco Life Variable Universal Account ("Account"), and Pruco
Securities Corporation, a New Jersey corporation ("Distributor").
WITNESSETH:
WHEREAS, the Company has established and maintains the Account, a separate
investment account, pursuant to the laws of Arizona for the purpose of selling
variable universal life insurance contracts ("Contracts"), to commence after the
effectiveness of the Registration Statement relating thereto filed with the
Securities and Exchange Commission on Form S-6 pursuant to the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Account will be registered as a unit investment trust under
the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, Distributor is registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "Securities Exchange Act") and is a member of the
National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, the Company and the Distributor wish to enter into an agreement to
have the Distributor act as the Company's principal underwriter for the sale of
the Contracts through the Account;
II-11
<PAGE>
-2-
NOW, THEREFORE, the parties agree as follows:
1. Appointment of the Distributor
The Company agrees that during the term of this Agreement it will take all
action which is required to cause the Contracts to comply as an insurance
product and a registered security with all applicable federal and state laws and
regulations. The Company appoints the Distributor and the Distributor agrees to
act as the principal underwriter for the sale of Contracts to the public, during
the term of this Agreement, in each state and other jurisdictions in which such
Contracts may lawfully be sold. Distributor shall offer the Contracts for sale
and distribution at premium rates set by the Company. Applications for the
Contracts shall be solicited only by representatives duly and appropriately
licensed or otherwise qualified for the sale of such Contracts in each state or
other jurisdiction. Company shall undertake to appoint Distributor's qualified
representatives as life insurance agents of Company. Completed applications for
Contracts shall be transmitted directly to the Company for acceptance or
rejection in accordance with underwriting rules established by the Company.
Initial premium payments under the Contracts shall be made by check payable to
the Company and shall be held at all times by Distributor or its representatives
in a fiduciary capacity and remitted promptly to the Company. Anything in this
Agreement to the contrary notwithstanding, the Company retains the ultimate
right to control the sale of the Contracts and to appoint and discharge life
insurance agents of the Company. The Distributor shall be held to the exercise
of reasonable care in carrying out the provisions of this Agreement.
II-12
<PAGE>
-3-
2. Sales Agreements
Distributor is hereby authorized to enter into separate written agreements,
on such terms and conditions as Distributor may determine not inconsistent with
this Agreement, with one or more organizations which agree to participate in the
distribution of Contracts. Such organization (hereafter "Broker") shall be both
registered as a broker/dealer under the Securities Exchange Act and a member of
NASD. Broker and its agents or representatives soliciting applications for
Contracts shall be duly and appropriately licensed, registered or otherwise
qualified for the sale of such Contracts (and the riders and other policies
offered in connection therewith) under the insurance laws and any applicable
blue-sky laws of each state or other jurisdiction in which the Company is
licensed to sell the Contracts.
Company shall have no legal obligation to ensure that Broker supervises its
representatives. Broker shall assume any legal responsibilities of Company for
the acts, commissions or defalcations of such representatives insofar as they
relate to the sale of the Contracts. Applications for Contracts solicited by
such Broker through its agents or representatives shall be transmitted directly
to the Company, and if received by Distributor, shall be forwarded to Company.
All premium payments under the Contracts shall be made by check to Company and,
if received by Distributor, shall be held at all times in a fiduciary capacity
and remitted promptly to Company.
II-13
<PAGE>
-4-
3. Life Insurance Licensing
Company shall be responsible for insuring that Brokers are duly qualified,
under the insurance laws of the applicable jurisdictions, to sell the Contracts.
4. Suitability
Company wishes to ensure that Contracts sold by Distributor will be issued
to purchasers for whom the Contract will be suitable. Distributor shall take
reasonable steps to ensure that the various representatives appointed by it
shall not make recommendations to an applicant to purchase a contract in the
absence of reasonable grounds to believe that the purchase of the Contract is
suitable for such applicant. While not limited to the following, a determination
of suitability shall be based on information furnished to a representative after
reasonable inquiry of such applicant concerning the applicant's insurance and
investment objectives, financial situation and needs, and the likelihood that
the applicant will continue to make the premium payments contemplated by the
Contracts.
5. Promotion Materials
Company shall have the responsibility for furnishing to Distributor and its
representatives sales promotion materials and individual sales proposals related
to the sale of the Contracts. Distributor shall not use any such materials that
have not been approved by Company.
II-14
<PAGE>
-5-
6. Compensation
Company shall arrange for the payment of commissions directly to those
registered representatives of Distributor who are entitled thereto in connection
with the sale of the Contracts on behalf of Distributor, in the amounts and on
such terms and conditions as Company and Distributor shall determine; provided
that such terms, conditions and commissions shall be as are set forth in or as
are not inconsistent with the Prospectus included as part of the Registration
Statement for the Contracts and effective under the 1933 Act.
Company shall arrange for the payment of commissions directly to those
Brokers who sell Contracts under agreements entered into pursuant to paragraph
2. hereof, in amounts as may be agreed to by the Company and specified in such
written agreements.
Company shall reimburse Distributor for the costs and expenses incurred by
Distributor in furnishing or obtaining the services, materials and supplies
required by the terms of this Agreement in the initial sales efforts and the
continuing obligations hereunder.
7. Records
Distributor shall have the responsibility for maintaining the records of
representatives licensed, registered and otherwise qualified to sell the
Contracts. Distributor shall maintain such other records as are required of it
by applicable laws and regulations. The books, accounts, and records of Company,
the Account and Distributor shall be maintained so as to clearly and accurately
disclose the nature and details of the transactions. All records maintained by
II-15
<PAGE>
-6-
the Distributor in connection with this Agreement shall be the property of the
Company and shall be returned to the Company upon termination of this Agreement,
free from any claims or retention of rights by the Distributor. The
Distributor shall keep confidential any information obtained pursuant to this
Agreement and shall disclose such information, only if the Company has
authorized such disclosure, or if such disclosure is expressly required by
applicable federal or state regulatory authorities.
8. Investigation and Proceeding
(a) Distributor and Company agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with the Contracts distributed under this Agreement. Distributor and
Company further agree to cooperate fully in any securities regulatory
investigation or proceeding or judicial proceeding with respect to Company,
Distributor, their affiliates and their agents or representatives to the extent
that such investigation or proceeding is in connection with Contracts
distributed under this Agreement. The Distributor shall furnish applicable
federal and state regulatory authorities with any information or reports in
connection with its services under this Agreement which such authorities may
request in order to ascertain whether the Company's operations are being
conducted in a manner consistent with any applicable law or regulations.
(b) In the case of a substantive customer complaint, Distributor and
Company will cooperate in investigating such complaint and any response to such
complaint will be sent to the other party to this Agreement for approval not
less than five business days prior to its being sent to the customer or
regulatory authority, except that if a more prompt response is required, the
proposed response shall be communicated by telephone or telegraph.
II-16
<PAGE>
-7-
9. Termination
This Agreement shall terminate automatically upon its assignment without
the prior written consent of both parties. This Agreement may be terminated at
any time by either party on 60 days' written notice to the other party, without
the payment of any penalty. Upon termination of this Agreement all
authorizations, rights and obligations shall cease except the obligation to
settle accounts hereunder, including commissions on premiums subsequently
received for Contracts in effect at time of termination, and the agreements
contained in paragraph 8 hereof.
10. Regulation
This Agreement shall be subject to the provisions of the 1940 Act and the
Securities Exchange Act of the rules, regulations, and rulings thereunder and of
the applicable rules and regulations of the NASD, from time to time in effect,
and the terms hereof shall be interpreted and construed in accordance therewith.
11. Severability
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
II-17
<PAGE>
-8-
12. Applicable Law
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PRUCO LIFE INSURANCE COMPANY
By: /s/ WILLIAM J. KELLY
-----------------------------------
President
PRUCO SECURITIES CORPORATION
By: /s/ JOHN P. GUALTIERI
------------------------------------
Vice President & General Counsel
II-18
EXHIBIT 1.A.(3)(b)
SELECTED BROKER AGREEMENT
This agreement is made on ________________, 19__ among:
NAME:__________________________________________________________________________
ADDRESS:_______________________________________________________________________
_______________________________________________________________________
CITY, STATE, ZIP:______________________________________________________________
SS OR TAX ID NUMBER:___________________________________________________________
(hereinafter called the "Broker")
AND
PRUCO SECURITIES CORPORATION, a New Jersey Corporation
(hereinafter called the "Distributor")
WITNESSETH:
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
A. DEFINITIONS
(1) Contracts - Variable life insurance contracts and/or variable annuity
contracts described in Schedule A attached hereto and issued by the
applicable one of Pruco Life Insurance Company, Pruco Life Insurance
Company of New Jersey or The Prudential Insurance Company of America
(hereinafter collectively called the "Company") and for which
Distributor has been appointed the principal underwriter pursuant to
Distribution Agreements, copies of which have been furnished to Broker.
(2) Accounts - Separate accounts established and maintained by the Company
pursuant to the laws of Arizona or New Jersey, whichever is applicable,
to fund the benefits under the Contracts.
(3) The Prudential Series Fund, Inc., or the "Fund" - An open-end management
investment company registered under the 1940 Act, shares of which are
sold to the Accounts in connection with the sale of the Contracts.
(4) Registration Statement - The registration statements and amendments
thereto relating to the Contracts, the Accounts, and the Fund,
Standard SB 11/88
II-19
<PAGE>
-2-
including financial statements and all exhibits.
(5) Prospectus - The prospectuses included within the Registration
Statements referred to herein.
(6) 1933 Act - The Securities Act of 1933, as amended.
(7) 1934 Act - The Securities Exchange Act of 1934, as amended.
(8) 1940 Act - The Investment Company Act of 1940, as amended.
(9) SEC - The Securities and Exchange Commission.
B. AGREEMENTS OF DISTRIBUTOR
(1) Pursuant to the authority delegated to it by Company, Distributor hereby
authorizes Broker during the term of this Agreement to solicit
applications for Contracts from eligible persons, provided that there is
an effective Registration Statement relating to such Contracts and
provided further that Broker has been notified by Distributor that the
Contracts are qualified for sale under all applicable securities and
insurance laws of the state or jurisdiction in which the application
will be solicited. In connection with the solicitation of applications
for Contracts, Broker is hereby authorized to offer riders that are
available with the Contracts in accordance with instructions furnished
by Distributor or Company.
(2) Distributor, during the term of this Agreement, will notify Broker of
the issuance by the SEC of any stop order with respect to the
Registration Statement or any amendments thereto or the initiation of
any proceedings for that purpose or for any other purpose relating to
the registration and/or offering of the Contracts and of any other
action or circumstance that may prevent the lawful sale of the Contracts
in any state or jurisdiction.
(3) During the term of this Agreement, Distributor shall advise Broker of
any amendment to the Registration Statement or any amendment or
supplement to any Prospectus.
Standard SB 11/88
II-20
<PAGE>
-3-
C. AGREEMENTS OF BROKER
(1) It is understood and agreed that Broker is a registered broker/dealer
under the 1934 Act and a member of the National Association of
Securities Dealers, Inc. and that the agents or representatives of
Broker who will be soliciting applications for the Contracts also will
be duly registered representatives of Broker.
(2) Commencing at such time as Distributor and Broker shall agree upon,
Broker agrees to use its best efforts to find purchasers for the
contracts acceptable to Company. In meeting its obligation to use its
best efforts to solicit applications for contracts, Broker shall, during
the term of this Agreement, engage in the following activities:
(a) Continuously utilize training, sales and promotional materials
which have been approved by Company;
(b) Establish and implement reasonable procedures for periodic
inspection and supervision of sales practices of its agents or
representatives and submit periodic reports to Distributor as may
be requested on the results of such inspections and the compliance
with such procedures.
(c) Broker shall take reasonable steps to ensure that the various
representatives appointed by it shall not make recommendations to
an applicant to purchase a Contract in the absence of reasonable
grounds to believe that the purchase of the Contract is suitable
for such applicant. While not limited to the following, a
determination of suitability shall be based on information
furnished to a representative after reasonable inquiry of such
applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and the likelihood that
the applicant will continue to make the premium payments
contemplated by the Contract.
(3) All payments for Contracts collected by agents or representatives of
Broker shall be held at all times in a fiduciary capacity and shall be
remitted promptly in full together with such applications, forms and
other required documentation to an office of the Company designated by
Distributor. Checks or
Standard SB 11/88
II-21
<PAGE>
-4-
money orders in payment of initial premiums shall be drawn to the order
of the applicable one of "Pruco Life Insurance Company", (for contracts
issued by Pruco Life Insurance Company and/or Pruco Life Insurance
Company of New Jersey) or "The Prudential Insurance Company of America".
Broker acknowledges that the Company retains the ultimate right to
control the sale of the Contracts and that the Distributor or Company
shall have the unconditional right to reject, in whole or part, any
application for the Contract. In the event Company or Distributor
rejects an application, Company immediately will return all payments
directly to the purchaser and Broker will be notified of such action. In
the event that any purchaser of a Contract elects to return such
Contract pursuant to either Rule 6e-2(b) (13) (viii) or Rule 6e-3(T)(b)
(13) (viii) of the 1940 Act, the purchaser will receive a refund in
accordance with the provisions of the applicable Rule.
(4) Broker shall act as an independent contractor, and nothing herein
contained shall make Broker, or any one of its employees, agents or
representatives, an employee of Company or Distributor in connection
with the solicitation of applications for Contracts. Broker, its agents
or representatives, and its employees shall not hold themselves out to
be employees of Company or Distributor in this connection or in any
dealings with the public.
(5) Broker agrees that any material it develops, approves or uses for sales,
training, explanatory or other purposes in connection with the
solicitation of applications for Contracts hereunder (other than generic
advertising materials which do not make specific reference to the
Contracts) will not be used without the prior written consent of
Distributor and, where appropriate, the endorsement of Company to be
obtained by Distributor.
(6) Solicitation and other activities by Broker shall be undertaken only in
accordance with applicable laws and regulations. No agent or
representative of Broker shall solicit applications for the Contracts
until duly licensed and appointed by Company as a life insurance and
variable contract broker or agent of Company in the appropriate states
or other jurisdictions. Broker shall ensure that such agents or
representatives fulfill any training requirements necessary to be
licensed. Broker understands and acknowledges that neither it nor its
agents or representatives is authorized by Distributor or
Standard SB 11/88
II-22
<PAGE>
-5-
Company to give any information or make any representation in
connection with this Agreement or the offering of the Contracts other
than those contained in the Prospectus or other solicitation material
authorized in writing by Distributor or Company.
(7) Broker shall not have authority on behalf of Distributor or Company to:
make, alter or discharge any Contract or other form; waive any
forfeiture, extend the time of paying any premium; receive any monies
or premiums due, or to become due, to Company, except as set forth in
Section C(3) of this Agreement. Broker shall not expend, nor contract
for the expenditure of the funds of Distributor, nor shall Broker
possess or exercise any authority on behalf of Broker by this
Agreement.
(8) Broker shall have the responsibility for maintaining the records of its
representatives licensed, registered and otherwise qualified to sell
the Contracts. Broker shall maintain such other records as are required
of it by applicable laws and regulations. The books, accounts and
records of Company, the Account, Distributor and Broker relating to the
sale of the Contracts shall be maintained so as to clearly and
accurately disclose the nature and details of the transactions. All
records maintained by the Broker in connection with this Agreement
shall be the property of the Company and shall be returned to the
Company upon termination of this Agreement, free from any claims or
retention of rights by the Broker. Nothing in this Section C(8) shall
be interpreted to prevent the Broker from retaining copies of any such
records which the Broker, in its discretion, deems necessary or
desirable to keep. The Broker shall keep confidential any information
obtained pursuant to this Agreement and shall disclose such
information, only if the Company has authorized such disclosure, or if
such disclosure is expressly required by applicable federal or state
regulatory authorities.
D. COMPENSATION
(1) Pursuant to the Distribution Agreement between Distributor and Company,
Distributor shall cause Company to arrange for the payment of
commissions to Broker as compensation for the sale of each contract sold
by an agent or representative of Broker. The amount of such commission
shall be based on a Compensation Schedule to be determined by agreement
of Company and Distributor. Company shall
Standard SB 11/88
II-23
<PAGE>
-6-
identify to Broker with each such payment the name of the agent or
representative of Broker who solicited each Contract covered by the
payment.
(2) Neither Broker nor any of its agents or representatives shall have any
right to withhold or deduct any part of any premium it shall receive for
purposes of payment of commission or otherwise. Neither Broker nor any
of its agents or representatives shall have an interest in any
compensation paid by Company to Distributor, now or hereafter, in
connection with the sale of any Contracts hereunder.
E. COMPLAINTS AND INVESTIGATIONS
(1) Broker and Distributor jointly agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with the Contracts marketed under this Agreement. Broker and
Distributor further agree to cooperate fully in any securities
regulatory investigation or proceeding or judicial proceeding with
respect to Broker, Distributor, their affiliates and their agents or
representatives to the extent that such investigation or proceeding is
in connection with Contracts marketed under this Agreement. Broker shall
furnish applicable federal and state regulatory authorities with any
information or reports in connection with its services under this
Agreement which such authorities may request in order to ascertain
whether the Company's operations are being conducted in a manner
consistent with any applicable law or regulation.
F. TERM OF AGREEMENT
(1) This Agreement shall continue in force for one year from its effective
date and thereafter shall automatically be renewed every year for a
further one year period; provided that either party may unilaterally
terminate this Agreement upon thirty (30) days' written notice to the
other party of its intention to do so.
(2) Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except (a) the agreements contained in Section E
hereof; (b) the indemnity set forth
Standard SB 11/88
II-24
<PAGE>
-7-
in Section G hereof; and (c) the obligations to settle accounts
hereunder, including commission payments on premiums subsequently
received for Contracts in effect at the time of termination or issued
pursuant to applications received by Broker prior to termination.
G. INDEMNITY
(1) Broker shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement.
(2) Distributor agrees to indemnify and hold harmless Broker and each
officer or director of Broker against any losses, claims, damages or
liabilities, joint or several, to which Broker or such officer or
director become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact, required to be stated therein or
necessary to make the statements therein not misleading, contained in
any Registration Statement or any post-effective amendment thereof or in
the Prospectus, or any sales literature provided by the Company or by
the Distributor.
(3) Broker agrees to indemnify and hold harmless Company and Distributor and
each of their current and former directors and officers and each person,
if any, who controls or has controlled Company or Distributor within the
meaning of the 1933 Act or the 1934 Act, against any losses, claims,
damages or liabilities to which Company or Distributor and any such
director or officer or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon:
(a) Any unauthorized use of sales materials or any verbal or written
misrepresentations or any unlawful sales practices concerning the
Contracts by Brokers; or
(b) Claims by agents or representatives or employees of Broker for
commissions, service fees, development allowances or other
compensation or renumeration of any type;
Standard SB 11/88
II-25
<PAGE>
-8-
(c) The failure of Broker, its officers, employees, or agents to comply
with the provisions of this Agreement; and Broker will reimburse
Company and Distributor and any director or officer or controlling
person of either for any legal or other expenses reasonably
incurred by Company, Distributor, or such director, officer of
controlling person in connection with investigating or defending
any such loss, claims, damage, liability or action. This indemnity
agreement will be in addition to any liability which Broker may
otherwise have.
H. ASSIGNABILITY
This Agreement shall not be assigned by either party without the written
consent of the other.
I. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey.
In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PRUCO SECURITIES CORPORATION
(Distributor)
By:_________________________________________________
Meyer Okun, President
_________________________________________________
(Broker)
By:_________________________________________________
Standard SB 11/88
II-26
<PAGE>
SCHEDULE A
CONTRACTS COVERED UNDER SELECTED BROKER AGREEMENT
Contracts Issued by Pruco Life Insurance Company
O Variable Appreciable Life Insurance (Flexible premium variable life
insurance)
O Variable Universal Life Insurance (Flexible premium variable universal
life insurance)
Standard SB 6/89
II-27
Exhibit 1.A.(3)(c)
Commission Schedule For
Pruselect I life insurance contracts
I. A. First Year Commission is 12% of paid premiums up to the target
commissionable premium. The target commissionable premium is the
seven-pay premium, for the lowest face amount scheduled in the first
seven contract years, as defined in I.R.C. Sec. 7702A.
B. On first year premium in excess of the target commissionable premium and
on all premiums paid after the first contract year, a 4% commission will
be paid.
C. At the end of each contract year, a commission of .20% of the contract
fund will be paid.
D. For contracts purchased by one owner, or for which the insureds share a
common employment or business relationship, where the total of the
target premium on all contracts exceeds $5 million, the first year
commission on that portion of the paid first year target commissionable
premium in excess of $5 million will be reduced from 12% (see I.A.
above) to 9%. The reduction will apply uniformly to all such contracts.
Additional reductions may apply on a uniform basis at Pruco Life's
discretion to the first year premium on the portion of the paid first
year tarqet commissionable premium in excess of $5 million.
II. In the event a Contract lapses or is surrendered within the first two
Contract years, a portion or all of the first $10 million year commission
may be subject to recapture by the Pruco Life Insurance Company. If the
Contract lapses at the end of year one, 30% of the commission is subject to
recapture. A higher percentage of the first year commission may be
recaptured on earlier lapses. A lower and decreasing portion of the first
year commission is subject to recapture throughout the second Contract
year.
In addition, Pruco Life will subject to recapture commissions equal to any
sales charge returned to the contract owner upon surrender within the first
three Contract years under the terms of the Contract.
III. 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 that stated
above.
II-28
EXHIBIT A(5)
Pruco Life Insurance Company
Phoenix, Arizona 85012
A Stock Company Subsidiary of
The Prudential Insurance Company of America
Policy Number
Contract Date
Insured
Initial Face Amount
Premium Period
Agency
We will pay the beneficiary the proceeds of this contract promptly if we receive
due proof that the Insured died. We make this promise subject to all the
provisions of the contract.
The proceeds arising from the Insured's death will be the insurance amount plus
the amount of any extra benefit arising from the Insured's death. The insurance
amount may be fixed or variable depending on the face amounts scheduled, the
payment of premiums, the investment experience of the investment options, and
the charges made. But it will not be less than the face amount scheduled at that
time. (We describe the insurance amount under Death Proceeds.)
The cash value may increase or decrease daily depending on the payment of
premiums and the investment experience of the investment options. There is no
guaranteed minimum.
We specify a schedule of premiums. Additional premiums may be paid at your
option subject to the limitations in the contract.
Please read this contract with care. If you have any questions or require
service, contact one of our representatives or offices.
RIGHT TO CANCEL CONTRACT.--You may return this contract to us within 10 days
after you get it. All you have to do is take the contract or mail it to one of
our offices or to the representative who sold it to you. It will be canceled
from the start and we will return your money in accordance with state law.
Signed for Pruco Life Insurance Company,
an Arizona Corporation.
SPECIMEN SPECIMEN
--------------- ---------------
Secretary President
Flexible Premium Variable Life Insurance Policy. Insurance payable only upon
death. Cash values reflect premium payments. investment results and charges.
Non-Participating.
II-29
<PAGE>
- --------------------------------------------------------------------------------
GUIDE TO CONTENTS
Page
----
Contract Data ............................................................ 3
List of Contract Limitations; Schedule of Face
Amounts; Schedule of Premiums; Schedule of
Deductions from Premium Payments;
Adjustments to the Contract Fund; Table of
Maximum Monthly Mortality Rates Per $1,000;
List of Investment Options; Schedule of Initial
Allocation of Invested Premium Amounts
Premium Payment and Reinstatement ........................................ 7
Payment of Premiums; Minimum Initial
Premium; Scheduled Premiums; Unscheduled
Premiums; Invested Premium Amount;
Allocations; Grace Period; Reinstatement
Contract Fund ............................................................ 8
Separate Account ......................................................... 8
Separate Account; Investment Options;
Separate Account Investments
Transfers ................................................................ 8
Surrender ................................................................ 9
Net Cash Value; Cash Value; Return of Sales
Charges
Loans .................................................................... 9
Loan Value; Contract Debt; Loan Requirements;
Interest Charge; Fixed Loan Rate Option;
Variable Loan Rate Option; Repayment; Effect
of a Loan; Postponement of Loan
Withdrawals .............................................................. 11
Effect on Contract Fund; Effect on Insurance
Amount
Death Proceeds ........................................................... 11
Insurance Amount: Proceeds Arising From
Insured's Death
Beneficiary .............................................................. 12
Settlement Options ....................................................... 12
Payee Defined; Choosing an Option; Options
Described; First Payment Due Date; Residue
Described; Withdrawal of Residue; Designating
Contingent Payee(s); Changing Options;
Conditions; Death of Payee
Automatic Mode of Settlement ............................................. 14
Applicability; Interest on Proceeds; Settlement
at Payee's Death: Spendthrift and Creditor
Income Tables ............................................................ 15
General Provisions ....................................................... 16
Definitions; The Contract; Contract
Modifications; Ownership and Control; Suicide
Exclusion; Currency: Misstatement of Age or
Sex; Incontestability; Assignment; Annual
Report; Unused Sales Charges; Payment of
Death Claim; Change in Plan
Basis of Computation ..................................................... 18
Mortality Table Described; Interest Rate;
Exclusions; Minimum Legal Values
Endorsements ............................................................. 19
Page 2
CVUL--89
II-30
<PAGE>
CONTRACT DATA
Insured's Sex and Issue Age M-35
Rating Class Non-smoker
Insured John Doe xx xxx xxx Policy Number
May 22, 1989 Contract Date
Initial Face Amount $100,000
Premium Period LIFE
Agency M-PASS-E-056
Beneficiary ABC Corporation
Fixed Loan Interest Rate
LIST OF CONTRACT LIMITATIONS
The minimum unscheduled premium is $25
The minimum face amount is $100,000
We may limit unscheduled premiums in any contract year to $10,000.
The minimum amount you may withdraw is $2,000.
Except to pay premiums, you may not borrow less than $500 at any one time.
***** END OF LIST *****
SCHEDULE OF FACE AMOUNTS
INITIAL FACE AMOUNT IS $100,000
Changing on May 22, 1990 to $200,000
Changing on May 22, 1991 to $400,000
Changing on May 22, 2050 to $100,000
***** END OF SCHEDULE *****
CONTRACT DATA CONTINUED ON NEXT PAGE
Page 3
CVUL--89
II-31
<PAGE>
POLICY NUMBER XX XXX XXX
CONTRACT DATA CONTINUED
SCHEDULE OF PREMIUMS
Due dates of scheduled premiums occur on the contract date and at intervals of
1 year after that date. The minimum initial premium due on the contract date is
$350.51.
SCHEDULED PREMIUMS ARE $ 1402.04 each
CHANGING ON MAY 22, 1990 TO $ 1598.98 each
CHANGING ON MAY 22, 1991 TO $ 2029.59 each
CHANGING ON MAY 22, 1992 TO $ 2072.45 each
CHANGING ON MAY 22, 1993 TO $ 2118.37 each
CHANGING ON MAY 22, 1994 TO $ 2173.47 each
CHANGING ON MAY 22, 1995 TO $ 2231.63 each
CHANGING ON MAY 22, 1996 TO $ 2292.86 each
CHANGING ON MAY 22, 1997 TO $ 2360.20 each
CHANGING ON MAY 22, 1998 TO $ 2433.6? each
CHANGING ON MAY 22, 1999 TO $ 2519.39 each
CHANGING ON MAY 22, 2000 TO $ 2611.22 each
CHANGING ON MAY 22, 2001 TO $ 2706.12 each
CHANGING ON MAY 22, 2002 TO $ 2813.27 each
CHANGING ON MAY 22, 2003 TO $ 2929.59 each
CHANGING ON MAY 22, 2004 TO $ 3064.29 each
CHANGING ON MAY 22, 2005 TO $ 3217.35 each
CHANGING ON MAY 22, 2006 TO $ 3391.84 each
CHANGING ON MAY 22, 2007 TO $ 3593.88 each
CHANGING ON MAY 22, 2008 TO $ 3817.35 each
CHANGING ON MAY 22, 2009 TO $ 4068.37 each
CHANGING ON MAY 22, 2010 TO $ 4340.82 each
CHANGING ON MAY 22, 2011 TO $ 4631.63 each
CHANGING ON MAY 22, 2012 TO $ 4953.06 each
CHANGING ON MAY 22, 2013 TO $ 5317.35 each
CHANGING ON MAY 22, 2014 TO $ 5721.43 each
CHANGING ON MAY 22, 2015 TO $ 6174.49 each
CHANGING ON MAY 22, 2016 TO $ 6694.90 each
CHANGING ON MAY 22, 2017 TO $ 7285.71 each
CHANGING ON MAY 22, 2018 TO $ 7943.88 each
CHANGING ON MAY 22, 2019 TO $ 8666.33 each
CHANGING ON MAY 22, 2020 TO $ 9450.00 each
CHANGING ON MAY 22, 2021 TO $ 10291.84 each
CHANGING ON MAY 22, 2022 TO $ 11207.14 each
CHANGING ON MAY 22, 2023 TO $ 12226.53 each
CHANGING ON MAY 22, 2024 TO $ 13383.67 each
CHANGING ON MAY 22, 2025 TO $ 14709.18 each
CHANGING ON MAY 22, 2026 TO $ 16245.92 each
CHANGING ON MAY 22, 2027 TO $ 17990.82 each
CHANGING ON MAY 22, 2028 TO $ 19922.45 each
CHANGING ON MAY 22, 2029 TO $ 21997.96 each
CHANGING ON MAY 22, 2030 TO $ 24205.10 each
CHANGING ON MAY 22, 2031 TO $ 26525.51 each
CONTRACT DATA CONTINUED ON NEXT PAGE
Page 3A.1
CVUL--89
II-32
<PAGE>
POLICY NUMBER XX XXX XXX
CONTRACT DATA CONTINUED
CHANGING ON MAY 22, 2032 TO $ 28977.55 each
CHANGING ON MAY 22, 2033 TO $ 31643.88 each
CHANGING ON MAY 22, 2034 TO $ 34613.27 each
CHANGING ON MAY 22, 2035 TO $ 37971.43 each
CHANGING ON MAY 22, 2036 TO $ 41797.96 each
CHANGING ON MAY 22, 2037 TO $ 46092.86 each
CHANGING ON MAY 22, 2038 TO $ 50785.71 each
CHANGING ON MAY 22, 2039 TO $ 55781.63 each
CHANGING ON MAY 22, 2040 TO $ 61022.45 each
CHANGING ON MAY 22, 2041 TO $ 66443.88 each
CHANGING ON MAY 22, 2042 TO $ 72021.43 each
CHANGING ON MAY 22, 2043 TO $ 77846.94 each
CHANGING ON MAY 22, 2044 TO $ 84009.18 each
CHANGING ON MAY 22, 2045 TO $ 90676.53 each
CHANGING ON MAY 22, 2046 TO $ 98124.49 each
CHANGING ON MAY 22, 2047 TO $107148.98 each
CHANGING ON MAY 22, 2048 TO $119605.10 each
CHANGING ON MAY 22, 2049 TO $139037.76 each
CHANGING ON MAY 22, 2050 TO $ 1402.04 each
CONTRACT DATA CONTINUED ON NEXT PAGE
Page 3A.2
CVUL--89
II-33
<PAGE>
POLICY NUMBER XX XXX XXX
CONTRACT DATA CONTINUED
SCHEDULE OF DEDUCTIONS FROM PREMIUM PAYMENTS
From each premium paid we first deduct a charge for applicable taxes (other than
taxes discussed under Contract Fund below) of 2.0%. We reserve the right to
change this percentage to conform to changes in the law or if the insured
changes residence.
From the remainder, we deduct a charge for payment processing of up to $2.00,
and a charge of up to 7% of the remainder to pay for sales charges. After
deduction of these amounts, the balance is the invested premium amount.
***** END OF SCHEDULE*****
ADJUSTMENTS TO THE CONTRACT FUND
On the contract date the contract fund is equal to the invested premium amounts
credited on that date, minus any of the charges described below which may be due
on that date. On any day after that the contract fund is equal to what it was on
the previous day, plus any invested premium amounts credited that day, plus
these Items:
(a) any increase due to investment results in the value of the investment
options;
(b) guaranteed interest on that part of the contract fund not in an investment
option;
(c) any excess interest on that portion of the contract fund that is not in an
investment option; and
(d) any unused sales charges (see General Provisions); and minus any of these
items applicable on that day:
(e) any decrease due to investment results in the value of the investment
options,
(f) a charge against the investment options at a rate of not more than
0.000245475% a day (0.90% a year) for mortality and expense risks that we
assume;
(g) a monthly deduction, which provides for the expected cost of mortality, of
no more than the maximum monthly rate (See Table of Maximum Monthly Rates)
multiplied by the coverage amount. The coverage amount equals the insurance
amount (See Insurance Amount) minus the contract fund.
(h) a monthly charge for administration of no more than $7.00.
(i) any amount charged against the investment options for federal or state
income taxes;
CONTRACT DATA CONTINUED ON NEXT PAGE
Page 4
CVUL--89(AZ)
II-34
<PAGE>
POLICY NUMBER XX XXX XXX
CONTRACT DATA CONTINUED
(j) any charge for extra rating class;
(k) any charge for extra benefits;
(l) any withdrawals; and
(m) any administrative charges.
***** END OF ADJUSTMENTS *****
Page 4A
CVUL--89
II-35
<PAGE>
POLICY NO. XX XXX XXX
TABLE OF MAXIMUM MONTHLY MORTALITY RATES PER $1000
Insured's Maximum Insured's Maximum
Attained Age Rate Attained Age Rate
------------ ------- ------------ -------
35 0.1439 68 2.4893
36 0.1514 69 2.7438
37 0.1614 70 3.0317
38 0.1722 71 3.3603
39 0.1839 72 3.7397
40 0.1980 73 4.1690
41 0.2130 74 4.6407
42 0.2288 75 5.1449
43 0.2463 76 5.6774
44 0.2654 77 6.2340
45 0.2870 78 6.8180
46 0.3130 79 7.4478
47 0.3353 80 8.1434
48 0.3627 81 8.9229
49 0.3927 82 9.8023
50 0.4268 83 10.7774
51 0.4659 84 11.8290
52 0.5108 85 12.9330
53 0.5624 86 14.0753
54 0.6198 87 15.2384
55 0.6839 88 16.4173
56 0.7538 89 17.6287
57 0.8278 90 18.8899
58 0.9102 91 20.2303
59 1.0025 92 21.6995
60 1.1057 93 23.4408
61 1.2205 94 25.7770
62 1.3528 95 29.2738
63 1.5025 96 35.0252
64 1.6689 97 45.0097
65 1.8511 98 61.9945
66 2.0483 99 83.1973
67 2.2596
Monthly rates are based on The Commissioners 1980 Standard Ordinary Non-Smoker
Mortality Table, modified for other than standard risks.
We may charge less than these rates. At least once every five years, but not
more often than once a year, we will consider the need to change the rates we
charge based on actual or anticipated mortality experience under contracts like
this one. We will change them only if we do so for all contracts like this one
dated in the same year as this one.
Page 5
CVUL--89
II-36
<PAGE>
POLICY NUMBER XX XXX XXX
LIST OF INVESTMENT OPTIONS
THE PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
Each investment option of this account invests in a specific portfolio of The
Prudential Series Fund, Inc. We show the available investment options of the
Account below. They invest in Series Fund Portfolios with the same names.
INVESTMENT OPTIONS
MONEY MARKET
BOND
COMMON STOCK
AGGRESSIVELY MANAGED FLX
CONSERVATIVELY MANAGED FLX
ZERO COUPON BOND 1995
ZERO COUPON BOND 2000
ZERO COUPON BOND 2005
HIGH DIVIDEND STOCK
HIGH YIELD BOND
NATURAL RESOURCES
STOCK INDEX
GOVERNMENT SECURITIES
***** END OF LIST *****
SCHEDULE OF INITIAL ALLOCATION OF INVESTED PREMIUM AMOUNTS
Money Market 20%
Common Stock 80%
Page 6
CVUL--89
II-37
<PAGE>
- --------------------------------------------------------------------------------
PREMIUM PAYMENT AND REINSTATEMENT
PAYMENT OF PREMIUMS
Premiums may be paid at our Service Office or to any of our authorized agents.
If we are asked to do so we will give a signed receipt. If the first premium
payment is received by us on or before the contract date, it will be credited as
of the contract date. If the first premium is received by us after the contract
date, we will credit an amount equal to the minimum initial premium as of the
contract date. The remainder, if any, will be credited as of the date of receipt
at our service office.
We show two types of premiums in the Schedule of Premiums, (1) the minimum
initial premium, and (2) the scheduled premium.
MINIMUM INITIAL PREMIUM
The minimum initial premium is shown in the Schedule of Premiums. There is no
insurance under this contract until an amount at least equal to the minimum
initial premium is paid.
SCHEDULED PREMIUMS
We show the amount and frequency of the scheduled premiums in the Schedule of
Premiums.
UNSCHEDULED PREMIUMS
Except as we state in the next paragraph, unscheduled premiums may be paid at
any time during the Insured's lifetime as long as the contract is not in default
beyond its days of grace. We show in the contract data pages the minimum premium
we will accept.
We have the right to limit unscheduled premiums to a total of $10,000 in any
contract year. We also have the right to refuse any payment that increases the
insurance amount.
INVESTED PREMIUM AMOUNT
This is the portion of each premium paid that we will add to the contract fund.
It is equal to the premium paid minus the charges described under Schedule of
Deductions from Premium Payments in the contract data pages.
ALLOCATIONS
You may allocate all or a part of your invested premium amount to one or more of
the investment options listed in the contract data pages. You may choose to
allocate nothing to a particular investment option. But any allocation you make
must be at least 10%. You may not choose a fractional percentage.
The initial allocation of invested premium amounts is shown in the contract data
pages. You may change the allocation for future invested premium amounts at any
time if the contract is not in default. To do so, you must notify us in a form
that meets our needs. The change will take effect on the date we receive your
notice at our Service Office. We will send you a confirmation of the
transaction.
GRACE PERIOD
On any day, the net cash value of the contract may be less than zero. If this
occurs, the contract is in default and we will mail you a notice stating the
amount we will need to keep the contract in force. That amount will equal a
premium which we estimate will keep the contract in force for three months from
the date of default. We grant 61 days from the date we mail the notice to pay
this charge. The contract will remain in force during this period. If that
amount is not paid to us by the end of the 61-day period, the grace period will
have expired and the contract will end and have no value.
REINSTATEMENT
If this contract ends as we describe under Grace Period, you may reinstate it.
All these conditions must be met.
1. No more than five years must have elapsed since the end of the grace period.
2. You must not have surrendered the contract to us for its net cash value.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the contract.
Page 7
(CVUL--89)
II-38
<PAGE>
4. We must be paid a charge equal to the deductions from the contract fund
during the grace period following the date of default, plus interest at 6% a
year. We must also be paid a premium which will result in an invested premium
amount equal to the charges for the first three monthly dates starting on or
after the date of reinstatement.
5. If there was contract debt at the end of the grace period, it may be restored
with our consent.
- --------------------------------------------------------------------------------
CONTRACT FUND
When you make your first premium payment, the invested premium amount less any
charges due on that day, becomes your contract fund. Amounts are added and
subtracted from the contract fund as described in the contract data pages. The
value of your contract fund is used to determine your loan and surrender values,
the amount you may withdraw, and the insurance amount.
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT
SEPARATE ACCOUNT
The words separate account, when we use them in this contract without
qualification, mean any separate account we establish to support variable life
insurance contracts like this one. We list the separate accounts available to
you in the contract data pages. We may establish additional separate accounts.
We will notify you within one year if we do so.
INVESTMENT OPTIONS
A separate account may offer one or more investment options. We list them in the
contract data pages. We may establish additional investment options. We will
notify you within one year if we do so.
Income and realized and unrealized gains and losses from assets in each
investment option are credited to, or charged against, that investment option.
This is without regard to income, gains, or losses in other investment options.
SEPARATE ACCOUNT INVESTMENTS
We may invest the assets of different separate accounts in different ways. But
we will do so only with the consent of the SEC and, where required. of the
insurance regulator where this contract is delivered.
We will always keep assets in the separate accounts with a total value at least
equal to the amount of the investment options under contracts like this one. To
the extent those assets do not exceed that amount, we use them only to support
those contracts; we do not use those assets to support any other business we
conduct. We may use any excess over that amount in any way we choose.
We will determine the value of the assets in each separate account and any
investment option at regular intervals.
- --------------------------------------------------------------------------------
TRANSFERS
You have the right to transfer amounts between investment options of separate
accounts. Four transfers may be made in a contract year. There is no charge for
these transfers.
To make a transfer, you must notify us in a form that meets our needs. The
transfer will take effect on the date we receive your notice at our Service
Office.
Page 8
(CVUL--89)
II-39
<PAGE>
- --------------------------------------------------------------------------------
SURRENDER
You may surrender this contract for its net cash value. To do so, you must ask
us in writing in a form that meets our needs. You must also send the contract
to us.
NET CASH VALUE
The net cash value at any time is the cash value at that time less any contract
debt.
We will usually pay any net cash value within seven days after we receive your
request and the contract at our Service Office. But we have the right to
postpone paying you the net cash value if: (1) the New York Stock Exchange is
closed; or (2) the SEC requires that trading be restricted or declares an
emergency.
CASH VALUE
If the contract is not in default, the cash value will equal the contract fund.
If the contract is in default, it has no value.
RETURN OF SALES CHARGES
If the contract is not in default, we will, upon surrender within the first
three contract years, return any sales charges deducted from premiums paid
within the 365 days prior to the date we receive your surrender request at our
Service Office. If we have already credited a portion of the sales charge as
described under Unused Sales Charges, we will not return that portion again.
- --------------------------------------------------------------------------------
LOANS
You may borrow any amount up to the existing loan value less any existing
contract debt, subject to the requirements below.
LOAN VALUE
If the contract is not in default, the loan value at any time is equal to 90% of
the cash value.
If the contract is in default, it has no loan value.
CONTRACT DEBT
Contract debt at any time means the loan on the contract, plus the interest we
have charged that is not yet due and that we have not yet added to the loan.
LOAN REQUIREMENTS
To borrow from us on the contract, all these conditions must be met:
1. The Insured must be living.
2. The contract must not be in default.
3. The contract debt will not be more than the loan value.
4. As sole security for the loan, you must assign the contract to us in a form
that meets our needs.
5. You may not borrow less than the minimum amount stated in the contract data
pages.
If there is already contract debt when you borrow from us, we will add the new
amount you borrow to that debt.
INTEREST CHARGE
You have selected either the fixed loan rate option or the variable loan rate
option. We show your selection in the contract data pages. Both options are
described below. If you request a change from one option to the other and we
agree, we will tell you the effective date of the change.
Page 9
(CVUL--89)
II-40
<PAGE>
We charge interest daily on any loan. Interest is due on each contract
anniversary, or when the loan is paid back, whichever come first. If interest is
not paid when due, it becomes part of the loan. Then we start to charge interest
on it, too.
FIXED LOAN RATE OPTION
The loan interest rate is 5-1/2% a year.
VARIABLE LOAN RATE OPTION
The variable loan interest rate is the annual rate we set from time to time. The
rate will never be greater than is permitted by law. It will change only on a
contract anniversary.
Before the start of each contract year, we will determine the loan interest rate
we can charge for that contract year. To do this, we will first find the rate
that is the greater of: (1) The Published Monthly Average (which we describe
below) for the calendar month ending two months before the calendar month of the
contract anniversary; and (2) 5%.
If that greater rate is at least 1/2% more than the loan interest rate we had
set for the current contract year, we have the right to increase the loan
interest rate by at least 1/2%, up to that greater rate. If it is at least 1/2%
less, we will decrease the loan interest rate to be no more than the greater
rate. We will not change the loan interest rate by less than 1/2%.
When you make a loan we will tell you the initial interest rate for the loan. We
will send you a notice if there is to be a change in the rate.
The Published Monthly Average means:
1. Moody's Corporate Bond Yield Average -- Monthly Average Corporates, as
published by Moody's Investors Service, Inc. or any successor to that
service; or
2. If that average is no longer published, a substantially similar average.
established by the insurance regulator where this contract is delivered.
REPAYMENT
All or part of any contract debt may be paid back at any time while the Insured
is living if the contract is not in default.
EFFECT OF A LOAN
When you take a loan, the amount of the loan continues to be a part of the
contract fund and is credited with interest at the guaranteed rate of 4% a year.
If you have selected the variable loan rate option, we will credit excess
interest at an effective rate of not less than the loan interest rate for the
contract year less 5%.
We will reduce the portion of the contract fund allocated to the investment
options by the amount you borrow, and by loan interest that becomes part of the
loan because it is not paid when due.
We will take any loan proportionately from all investment options that apply to
the contract.
On each transaction date, if there is a contract loan outstanding, we will
increase the portion of the contract fund in the investment options by interest
credits accrued on the loan since the last transaction date. 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 loan you repay, plus interest credits
accrued on the loan since the last transaction date. We will not increase the
portion of the contract fund allocated to the investment options by loan
interest that is paid before we make it part of the loan.
When a loan repayment is made we will allocate it and any interest credits to
the investment options in proportion to the amount invested in each option at
the time of the repayment.
POSTPONEMENT OF LOAN
We will usually make a loan within seven days after we receive your request at
our Home Office. But we have the right to postpone the loan if: (1) the New York
Stock Exchange is closed; or (2) the SEC requires that trading be restricted or
declares an emergency.
Page 10
(CVUL--89)
II-41
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWALS
You may make withdrawals from the contract subject to all these conditions and
the paragraphs that follow:
1. You must ask for the withdrawal in writing in a form that meets our needs.
2. The net cash value after withdrawal may not be less than zero after deducting
the next monthly charge.
3. You may not withdraw less than the minimum amount stated in the contract data
pages.
4. You may make up to four withdrawals in any contract year.
5. The current face amount after withdrawals must be at least equal to the
minimum face amount, which we show in the contract data pages.
EFFECT ON CONTRACT FUND
We will reduce your contract fund by the withdrawal amount and any
administrative fee. We will take any withdrawal proportionately from all
investment options that apply to the contract.
We may charge an administrative fee of up to $15.00.
EFFECT ON INSURANCE AMOUNT
Any withdrawal will reduce your insurance amount. Insurance amount is described
under Death Proceeds. We will reduce the scheduled face amount(s), subject to
the minimum face amount. The reduction will equal (1) the lesser of the current
face amount before withdrawal times the net single premium per $1 at the
Insured's attained age and the contract fund before the withdrawal, plus (2) the
amount of the withdrawal, less (3) the contract fund before the withdrawal. If
the result is less than zero, there will be no reduction. This is to offset any
increase in coverage amount caused by the withdrawal. We describe coverage
amount under Contract Fund. We will recompute the contract's scheduled premium,
monthly deductions, and expense charges. We will also send you new contract data
pages.
- --------------------------------------------------------------------------------
DEATH PROCEEDS
INSURANCE AMOUNT
The insurance amount on any date is equal to the greater of: (1) the current
face amount shown in the contract data pages, and (2) the contract fund before
deduction of any monthly charges due on that date, plus a return of sales
charges as described under Surrender, divided by the net single premium per $1
at the Insured's attained age.
PROCEEDS ARISING FROM INSURED'S DEATH
If the contract is not in default, the proceeds arising from the Insured's death
equal the insurance amount less any contract debt. If the contract is in default
and the Insured dies in the grace period, the proceeds equals the insurance
amount, less any contract debt and the amount needed to pay charges through the
date of death. If the Insured dies past the grace period, no proceeds are
payable.
Page 11
(CVUL--89)
II-42
<PAGE>
- --------------------------------------------------------------------------------
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing and
in a form that meets our needs. It will take effect only when we file it at our
Service Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if the Insured is not living when
we file the request. Any beneficiary's interest is subject to the rights of any
assignee of whom we know.
When a beneficiary is designated, any relationship shown is to the Insured,
unless otherwise stated. To show priority, we may use numbered classes, so that
the class with first priority is called class 1, the class with next priority is
called class 2, and soon.
Beneficiaries who do not have a right to be paid under these terms may still
have a right to be paid under the Automatic Mode of Settlement.
Before we make a payment, we have the right to decide what proof we need of the
identity, age or any other facts about any persons designated as beneficiaries.
If beneficiaries are not designated by name and we make payments based on that
proof, we will not have to make the payments again.
- --------------------------------------------------------------------------------
SETTLEMENT OPTIONS
PAYEE DEFINED
In these provisions and under the Automatic Mode of Settlement, the word payee
means a person who has a right to receive a settlement under the contract. Such
a person may be the Insured, the owner, a beneficiary, or a contingent payee.
CHOOSING AN OPTION
A payee may choose an option for all or part of any proceeds or residue that
becomes payable to him or her in one sum. We describe residue under Residue
Described.
In some cases, a payee will need our consent to choose an option. We describe
these cases under Conditions.
OPTIONS DESCRIBED
Here are the options we offer. We may also consent to other arrangements.
OPTION 1 (INSTALMENTS FOR A FIXED PERIOD)
We will make equal payments for up to 25 years based on the Option I Table. The
payments will include interest at an effective rate of 3 1/2% a year. We may
credit more interest. If and while we do so, the payments will be larger.
OPTION 2 (LIFE INCOME)
We will make equal monthly payments for as long as the person on whose life the
settlement is based lives, with payments certain for the period chosen. The
choices are either ten years (10-Year Certain) or until the sum of the payments
equals the amount put under this option (Instalment Refund). The amount of each
payment will be based on the Option 2 Table and on the sex and age, on the due
date of the first payment, of the person on whose life the settlement is based.
But if a choice is made more than two years after the contract proceeds first
become payable, we may use the Option 2 rates in Ordinary policies we regularly
issue, based on United States currency, on the due date of the first payment. On
request, we will quote the payment rates in policies we then issue. We must have
proof of the date of birth of the person on whose life the settlement is based.
The settlement will share in our surplus to the extent and in the way we decide
OPTION 3 (INTEREST PAYMENT)
We will hold an amount at interest. We will pay interest at an effective rate of
at least 3% a year ($30.00 annually, $14.89 semi-annually, $7.42 quarterly or
$2.47 monthly per $1,000). We may pay more interest.
Page 12
(CVUL--89)
II-43
<PAGE>
OPTION 4 (INSTALMENTS OF A FIXED AMOUNT)
We will make equal annual, semi-annual, quarterly or monthly payments if they
total at least $90 a year for each $1,000 put under this option. We will credit
the unpaid balance with interest at an effective rate of at least 3 1/2% a year.
We may credit more interest. If we do so, the balance will be larger. The final
payment will be any balance equal to or less than one payment.
OPTION 5 (NON-PARTICIPATING INCOME)
We will make payments like those Of any annuity we then regularly issue that:
(1) is based on United States currency; (2) is bought by a single sum; (3) does
not provide for dividends; and (4) does not normally provide for deferral of the
first payment. The payment will be at least what we would pay under that kind of
annuity with its first payment due on its contract date. At least one of the
person's on whose life the Option 5 is based must be a payee. If a life income
is chosen, we must have proof of the date of birth of any person on whose life
the option is based. Option 5 cannot be chosen more than 30 days before the due
date of the first payment. On request, we will quote the payment that would
apply for any amount placed under the option at that time.
FIRST PAYMENT DUE DATE
Unless a different date is stated when the option is chosen: (1) the first
payment for Option 3 will be due at the end of the chosen payment interval; and
(2) the first payment for any of the other options will be due on the date the
option takes effect.
RESIDUE DESCRIBED
For Options 1 and 2, residue on any date means the then present value of any
unpaid payments certain. We will compute it at an effective interest rate of
3 1/2% a year. But we will use the interest rate we used to compute the actual
Option 2 payments if they were not based on the table in this contract.
For Options 3 and 4, residue on any date means any unpaid balance with interest
to that date.
For Option 5, it means the then present value of any unpaid payments certain. We
will compute it at the effective interest rate we used to compute the option 5
payment.
For portions 2 and 5, residue does not include the value of any payments that
may become due after the certain period.
WITHDRAWAL OF RESIDUE
Unless otherwise stated when the option is chosen: (1) under Options 1 and 2 the
residue may be withdrawn; and (2) under Options 3 and 4 all, or any part not
less than $100, of the residue may be withdrawn. If an Option 3 residue is
reduced to less than $1,000, we have the right to pay it in one sum. Under
Option 2, withdrawal of the residue will not affect any payments that may become
due after the certain period; the value of those payments cannot be withdrawn.
Instead, the payments will start again if they were based on the life of a
person who lives past the certain period.
For Option 5, the residue may not be withdrawn while the payee and any other
person on whose life the option is based is living. But, unless otherwise stated
when the option is chosen, after the death of the last of them to die any
residue not already paid in one sum may be withdrawn.
DESIGNATING CONTINGENT PAYEE(S)
A payee under an option has the right, unless otherwise stated, to name or
change a contingent payee to receive any residue at that payee's death. This may
be done only if: (1) the payee has the full right to withdraw the residue, (2)
the residue would otherwise have been payable to that payee's estate at death,
or (3) a settlement with payments certain is being made in accordance with
Option 5.
A payee who has this right may choose, or change the choice of, an option for
all or part of the residue. In some cases, the payee will need our consent to
choose or change an option. We describe these cases under Conditions.
Any request to exercise any of these rights must be in writing and in a form
that meets our needs. It will take effect only when we file it at our Home
Office. Then the interest of anyone who is being removed will end as of the date
of the request, even if the payee who made the request is not living when we
file it.
Page 13
(CVUL--89)
II-44
<PAGE>
CHANGING OPTIONS
A payee under Option 1, 3 or 4 may choose another option for any sum that the
payee could withdraw on the date the chosen option is to start. That date may be
before the date the payee makes the choice only if we consent. In some cases,
the payee will need our consent to choose or change an option. We describe these
cases next.
CONDITIONS
Under any of these conditions, our consent is needed for an option to be used
for any person:
1. The person is not a natural person who will be paid in his or her own right.
2. The person will be paid as assignee.
3. The amount to be held for the person under Option 3 is less than $1,000. But
we will hold any amount for at least one year in accordance with the
Automatic Mode of Settlement.
4. Each payment to the person under the option would be less than $20.
5. The option is for residue arising other than at (a) the Insured's death, or
(b) the death of the beneficiary who was entitled to be paid as of the date
of the Insured's death.
6. The option is for proceeds that arise other than from the Insured's death,
and we are settling with an owner or any other person who is not the Insured.
DEATH OF PAYEE
If a payee under an option dies and if no other distribution is shown, we will
pay any residue under that option in one sum to the payee's estate.
- --------------------------------------------------------------------------------
AUTOMATIC MODE OF SETTLEMENT
APPLICABILITY
These provisions apply to proceeds arising from the Insured's death and payable
in one sum to a payee who is a beneficiary. They do not apply to any periodic
payment.
INTEREST ON PROCEEDS
We will hold the proceeds at interest under Option 3 of the Settlement Options
provision. The payee may withdraw the residue. We will pay it promptly on
request. We will pay interest annually unless we agree to pay it more often. We
have the right to pay the residue in one sum after one year if: (1) the payee is
not a natural person who will be paid in his or her own right; (2) the payee
will be paid as assignee; or (3) the original amount we hold under Option 3 for
the payee is less than $1,000.
SETTLEMENT AT PAYEE'S DEATH
If the payee dies and leaves an Option 3 residue, we will honor any contingent
payee provision then in effect. If there is none, here is what we will do. We
will look to the beneficiary designation of the contract; we will see what other
beneficiary(ies), if any, would have been entitled to the portion of the
proceeds that produced the Option 3 residue if the Insured had not died until
immediately after the payee died. Then we will pay the residue in one sum to
such other beneficiary(ies), in accord with that designation. But if, as stated
in that designation, payment would be due the estate of someone else, we will
instead pay the estate of the payee.
Example: Suppose the class 1 beneficiary is Jane and the class 2 beneficiaries
are Paul and John. Jane was living when the Insured died. Jane later died
without having chosen an option or naming someone other than Paul and John as
contingent payee. If Paul and John are living at Jane's death we owe them the
residue. If only one at them is living then, and if the contract called for
payment to the survivor of them, we owe him the residue. If neither of them is
living then, we owe Jane's estate.
SPENDTHRIFT AND CREDITOR
A beneficiary or contingent payee may not, at or after the insured's death,
assign, transfer, or encumber any benefit payable. To the extent allowed by law,
the benefits will not be subject to the claims of any creditor of any
beneficiary or contingent payee.
Page 14
(CVUL--89)
II-45
<PAGE>
OPTION 1 TABLE
- ----------------------------------
MINIMUM AMOUNT OF
MONTHLY PAYMENT FOR
EACH $1,000, THE FIRST
PAYABLE IMMEDIATELY
- ----------------------------------
Number Monthly
of Years Payment
- ----------------------------------
1 $84.65
2 43.05
3 29.19
4 22.27
5 18.12
6 15.35
7 13.38
8 11.90
9 10.75
10 9.83
11 9.09
12 8.46
13 7.94
14 7.49
15 7.10
16 6.76
17 6.47
18 6.20
19 5.97
20 5.75
21 5.56
22 5.39
23 5.24
24 5.09
25 4.96
- ----------------------------------
Multiply the monthly amount
by 2.989 for quarterly,
5.952 for semi-annual or
11.804 for annual.
- ----------------------------------
<TABLE>
<CAPTION>
OPTION 2 TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
- ------------------------------------------------------------------------------------------------------------------------------------
KIND OF LIFE INCOME KIND OF LIFE INCOME
-------------------------------------------- ---------------------------------------------
AGE 10-Year Instalment AGE 10-Year Instalment
LAST Certain Refund LAST Certain Refund
BIRTHDAY Male Female Male Female BIRTHDAY Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $3.18 $3.11 $3.17 $3.10 45 $4.06 $3.82 $3.99 $3.78
and under 46 4.12 3.86 4.03 3.81
11 3.19 3.12 3.18 3.11 47 4.17 3.90 4.08 3.85
12 3.20 3.13 3.19 3.12 48 4.23 3.94 4.13 3.90
13 3.21 3.14 3.20 3.13 49 4.28 3.99 4.18 3.94
14 3.22 3.15 3.21 3.14
50 4.35 4.04 4.24 3.98
15 3.24 3.16 3.23 3.15 51 4.41 4.09 4.29 4.03
16 3.25 3.17 3.24 3.16 52 4.48 4.15 4.35 4.08
17 3.27 3.19 3.25 3.18 53 4.55 4.21 4.41 4.13
18 3.28 3.20 3.27 3.19 54 4.62 4.27 4.48 4.19
19 3.30 3.21 3.28 3.20
55 4.70 4.33 4.55 4.24
20 3.31 3.22 3.30 3.21 56 4.78 4.40 4.62 4.30
21 3.33 3.24 3.32 3.23 57 4.86 4.47 4.69 4.37
22 3.35 3.25 3.33 3.24 58 4.95 4.54 4.77 4.43
23 3.36 3.26 3.35 3.25 59 5.05 4.62 4.86 4.50
24 3.38 3.28 3.37 3.27
60 5.15 4.71 4.94 4.58
25 3.30 3.30 3.39 3.29 61 5.25 4.79 5.03 4.66
26 3.42 3.31 3.41 3.30 62 5.36 4.89 5.13 4.74
27 3.45 3.33 3.43 3.32 63 5.48 4.98 5.23 4.82
28 3.47 3.35 3.45 3.34 64 5.60 5.09 5.34 4.92
29 3.49 3.37 3.47 3.35
65 5.73 5.20 5.45 5.01
30 3.52 3.39 3.49 3.37 66 5.87 5.31 5.57 5.11
31 3.54 3.41 3.52 3.39 67 6.01 5.43 5.70 5.22
32 3.57 3.43 3.54 3.41 68 6.15 5.56 5.83 5.34
33 3.60 3.45 3.57 3.44 69 6.30 5.70 5.97 5.46
34 3.63 3.47 3.60 3.46
70 6.46 5.84 6.11 5.58
35 3.66 3.50 3.63 3.48 71 6.62 5.99 6.27 5.72
36 3.69 3.52 3.66 3.50 72 6.79 6.15 6.43 5.86
37 3.72 3.55 3.69 3.53 73 6.96 6.31 6.60 6.01
38 3.76 3.58 3.72 3.56 74 7.13 6.49 6.78 6.18
39 3.80 3.61 3.75 3.58
75 7.30 6.67 6.97 6.35
40 3.84 3.64 3.79 3.61 76 7.48 6.85 7.17 6.53
41 3.88 3.67 3.82 3.64 77 7.66 7.04 7.38 6.72
42 3.92 3.70 3.86 3.67 78 7.83 7.24 7.60 6.93
43 3.97 3.74 3.90 3.71 79 8.00 7.44 7.83 7.15
44 4.01 3.78 3.94 3.74
80 8.17 7.64 8.07 7.38
and over
(CVUL--89)
</TABLE>
Page 15
II-46
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
DEFINITIONS
We define here some of the words and phrases used all through this
contract. We explain others, not defined here, in other parts of the text.
We, Our, Us and Cornpany.--Pruco Life Insurance Cornpany.
You and Your.--The owner of the contract.
lnsured.--The person named as the Insured on the first page. He or she need
not be the owner.
SEC.--The Securities and Exchange Commission.
Issue Oate.--The contract date.
Monthly Date.--The contract date and the same day as the contract date in
each later month.
Anniversary or Contract Anniversary.--The same day and month as the
contract date in each later year.
Contract Year.--A year that starts on the contract date or on an
anniversary.
Contract Month.--A month that starts on a monthly date.
Attained Age.--The Insured's attained age at any time is the issue age plus
the length of time since the contract date.
THE CONTRACT
This policy and the application, a copy of which is attached, form the
whole contract. We assume that all statements in the application were made to
the best of the knowledge and belief of the persons who made them: in the
absence of fraud they are deemed to be representations and not warranties. We
relied on those statements when we issued the contract. We will not use any
statement, unless made in the application, to try to void the contract or to
deny a claim.
CONTRACT MODIFICATIONS
Only a Pruco Life officer with the rank or title of vice president or above
may agree to modify this contract, and then only in writing.
OWNERSHIP AND CONTROL
Unless we endorse this contract to say otherwise: (1) the owner of the
contract is the Insured; and (2) while the Insured is living the owner alone is
entitled to (a) any contract benefit and value, and (b) the exercise of any
right and privilege granted by the contract or by us.
SUICIDE EXCLUSION
If the Insured, whether sane or insane, dies by suicide within two years
from the issue date. we will pay no more under this contract than the sum of the
premiums paid.
CURRENCY
Any money we pay, or that is paid to us, must be in United States currency.
Any amount we owe will be payable at our Corporate Office.
MISSTATEMENT OF AGE OR SEX
If the Insured's stated age or sex or both are not correct. we will adjust
each benefit and any amount to be paid to reflect the correct age and sex. Any
death benefit will be based on what the most recent charge for mortality would
have provided at the correct age and sex. Where required, we have given the
insurance regulator a detailed statement of how we will make these adjustments.
The Schedule of Premiums may show that premiums change or stop on a certain
date. We may have used that date because the Insured would attain a certain age
on that date. If we find that the issue age was wrong, we will correct that date
and, if necessary the amount of any changed premiums.
(CVUL--89)
Page 16
II-47
<PAGE>
INCONTESTABILITY
Except for non-payment of premium, we will not contest this contract after
it has been in force during the Insured's lifetime for two years from the issue
date.
ASSIGNMENT
We will not be deemed to know of an assignment unless we receive it, or a
copy of it, at our Service Office. We are not obliged to see that an assignment
is valid or sufficient. This contract may not be assigned to another insurance
company or to any employee benefit plan without our consent. This contract may
not be assigned if such assignment would violate any federal, state or local law
or regulation prohibiting sex distinct rates for insurance.
ANNUAL REPORT
Each year we will send you a report. It will show: (1) the current death
benefit; (2) the amount of the contract fund in each investment option; (3) the
net cash value; (4) premiums paid, investment results and charges deducted since
the last report; (5) any withdrawals since the last report; and (6) any
contract debt and the interest on the debt for the prior year. The report will
also include any other data that may be currently required where this contract
is delivered. No report will be sent if this contract is in default.
You may ask for a similar report at some other time during the year. Or you
may request from time to time a report projecting results under your contract on
the basis of assumed investment results. We have the right to make a reasonable
charge for reports such as these that you ask for and to limit the scope and
frequency of such requests.
UNUSED SALES CHARGES
Once each year, we will recalculate your sales charges based upon the total
premiums paid by you on all contracts similar to this one. This may result in
lower charges. If it does, we will credit a portion of any sales charge paid in
that year to the contract fund.
PAYMENT OF DEATH CLAIM
If we settle this contract in one sum as a death claim, we will usually pay
the proceeds within seven days after we receive at our Service Office proof of
death and any other information we need to pay the claim. But we have the
right to postpone paying the proceeds if: (1) the New York Stock Exchange is
closed; or (2) the SEC requires that trading be restricted or declares an
emergency.
CHANGE IN PLAN
You may be able to have this contract changed to another plan of life
insurance either with us or with our parent company. But any change may be made
only if we consent, and will be subject to conditions and charges that are then
determined.
(CVUL--89)
Page 17
II-48
<PAGE>
- --------------------------------------------------------------------------------
BASIS OF COMPUTATION
MORTALITY TABLE DESCRIBED
We base all net premiums and net values to which we refer in this contract
on the Insured's issue age, rating class and sex and on the length of time since
the contract date. We use the mortality table shown in the contract data pages.
We use continuous functions based on age last birthday.
INTEREST RATE
For all net premiums and net values to which we refer in this contract
we use an annual effective rate of 4%.
EXCLUSIONS
When we compute net values, we exclude the value of any supplementary
benefits and any other extra benefits added by rider to this contract.
MINIMUM LEGAL VALUES
The cash, loan and other values in this contract are at least as large
asihose set by law where it is delivered. Where required, we have given the
insurance regulator a detailed statement of how we compute values and benefits.
(CVUL--89)
Page 18
II-49
<PAGE>
ENDORSEMENTS
(Only we can endorse this contract.)
(CVUL--89)
Page 19
II-50
<PAGE>
Flexible Premium Variable Life Insurance Policy. Insurance payable only upon
death. Cash values reflect premium payments, investment results and charges.
Non-Participating.
(CVUL--89)
Page 20
II-51
No.
PRUCO LIFE IN8URANCE COMPANY
A supplemental schedule to the application for a variable contract in which
______________________ is named as the proposed Insured.
I request that the face amounts of this contract be as shown:
Date Signature of Applicant
,19
------------------ ----------------------------------------------
PLI 309--89
II-52
Exhibit 3
April 25, 1997
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992
Gentlemen:
In my capacity as Chief Legal Officer and Assistant Secretary of Pruco Life
Insurance Company ("Pruco Life"), I have reviewed the establishment on April 17,
1989 of Pruco Life Variable Universal 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 No. 33-29181 and 33-38271) under the Securities Act of 1933 for
the registration of certain variable universal 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
universal life insurance contracts is not chargeable with
liabilities arising out of any other business Pruco Life may
conduct.
(4) The variable universal 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
II-53
Exhibit 6
April 25, 1997
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 variable universal life insurance contracts ("Contracts")
under the Securities Act of 1933. The prospectus included in Post-Effective
Amendment No. 10 to Registration Statement No. 33-29181 on Form S-6 describes
the Contracts. I have reviewed the Contract form 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 prospectus section entitled "Illustrations" based on
the assumptions stated in the illustrations, are consistent with the
provisions of the Contract. 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 or male age
55, than to prospective purchasers of Contracts on males of other
ages or on females.
(2) The illustrations of the effect of an increase in the Contract fund
on the increase in insurance amount shown in the section entitled
"Death Benefit" is consistent with the provisions of the Contract.
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/
- ------------------------------------------
Nancy D. Davis, FSA, MAAA
Vice President and Assistant Actuary
The Prudential Insurance Company of America
II-54
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> $247,095
<INVESTMENTS-AT-VALUE> $272,148
<RECEIVABLES> $0
<ASSETS-OTHER> $0
<OTHER-ITEMS-ASSETS> $0
<TOTAL-ASSETS> $272,148
<PAYABLE-FOR-SECURITIES> $0
<SENIOR-LONG-TERM-DEBT> $0
<OTHER-ITEMS-LIABILITIES> $0
<TOTAL-LIABILITIES> $0
<SENIOR-EQUITY> $0
<PAID-IN-CAPITAL-COMMON> $0
<SHARES-COMMON-STOCK> $16,237
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> $0
<OVERDISTRIBUTION-NII> $0
<ACCUMULATED-NET-GAINS> $0
<OVERDISTRIBUTION-GAINS> $0
<ACCUM-APPREC-OR-DEPREC> $0
<NET-ASSETS> $272,148
<DIVIDEND-INCOME> $8,302
<INTEREST-INCOME> $0
<OTHER-INCOME> $10,141
<EXPENSES-NET> $1,313
<NET-INVESTMENT-INCOME> $6,989
<REALIZED-GAINS-CURRENT> $3,068
<APPREC-INCREASE-CURRENT> $9,383
<NET-CHANGE-FROM-OPS> $29,581
<EQUALIZATION> $0
<DISTRIBUTIONS-OF-INCOME> $0
<DISTRIBUTIONS-OF-GAINS> $0
<DISTRIBUTIONS-OTHER> $0
<NUMBER-OF-SHARES-SOLD> $0
<NUMBER-OF-SHARES-REDEEMED> $0
<SHARES-REINVESTED> $0
<NET-CHANGE-IN-ASSETS> $74,843
<ACCUMULATED-NII-PRIOR> $0
<ACCUMULATED-GAINS-PRIOR> $0
<OVERDISTRIB-NII-PRIOR> $0
<OVERDIST-NET-GAINS-PRIOR> $0
<GROSS-ADVISORY-FEES> $0
<INTEREST-EXPENSE> $0
<GROSS-EXPENSE> $0
<AVERAGE-NET-ASSETS> $0
<PER-SHARE-NAV-BEGIN> $0
<PER-SHARE-NII> $0
<PER-SHARE-GAIN-APPREC> $0
<PER-SHARE-DIVIDEND> $0
<PER-SHARE-DISTRIBUTIONS> $0
<RETURNS-OF-CAPITAL> $0
<PER-SHARE-NAV-END> $0
<EXPENSE-RATIO> $0
<AVG-DEBT-OUTSTANDING> $0
<AVG-DEBT-PER-SHARE> $0
</TABLE>
