AS FILED WITH THE SEC ON ____________________. REGISTRATION NO. 33-38271
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)
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
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Pruselect II Variable 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; Increases in
Face Amount; Decreases in Face Amount; Lapse and
Reinstatement
11. Brief Description of the Contract; Pruco Life
Variablev 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
56. Not Applicable
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
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) II
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"). Pruco Life calls these
contracts its PRUSELECT(sm) II Variable Life Insurance Contracts* (the
"Contract"). These Contracts provide individual universal life insurance
coverage with flexible premium payments and a variety of investment options. The
Contracts are available on a multiple life basis where the insureds share a
common employment or business relationship, and may be owned individually or by
a corporation, trust, association or similar entity. The Contract owner will
have all rights and privileges under the Contract. The Contracts may be used for
such purposes as funding non-qualified executive deferred compensation or salary
continuation plans, retiree medical benefits, or other purposes.
The Contracts provide a choice of death benefit plans. Under the first plan, the
death benefit generally remains fixed in the amount or amounts scheduled at the
outset of the Contract (the "face amount"). Under the second plan, the death
benefit varies daily with the investment performance of the chosen investment
options. Under either plan, the death benefit will never be less than the face
amount, regardless of investment experience, as long as the Contract remains in
force. The Contracts also have a cash surrender value which generally increases
with the payment of each premium, decreases to reflect charges made by Pruco
Life, and varies with the investment performance of the chosen investment
options. There is no guaranteed minimum cash surrender value.
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-2 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.............................................................4
PRUCO LIFE INSURANCE COMPANY.............................................4
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT....................................4
THE PRUDENTIAL SERIES FUND, INC..........................................4
DETAILED INFORMATION FOR PROSPECTIVE CONTRACT OWNERS...........................5
REQUIREMENTS FOR ISSUANCE OF A CONTRACT..................................5
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK".............................5
PREMIUMS.................................................................5
ALLOCATION OF PREMIUMS...................................................6
TRANSFERS................................................................6
CHARGES AND EXPENSES.....................................................7
REFUNDS OF SALES CHARGES.................................................9
REDUCTION OF CHARGES.....................................................9
CASH SURRENDER VALUE....................................................10
DEATH BENEFIT...........................................................10
PARTIAL WITHDRAWAL OF CASH SURRENDER VALUE..............................10
INCREASES IN FACE AMOUNT................................................11
DECREASES IN FACE AMOUNT................................................11
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED
PREMIUMS..............................................................11
CONTRACT LOANS..........................................................13
WHEN PROCEEDS ARE PAID..................................................13
TAX TREATMENT OF CONTRACT BENEFITS......................................14
WITHHOLDING.............................................................15
OTHER TAX CONSIDERATIONS................................................15
LAPSE AND REINSTATEMENT.................................................15
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS.....16
EXCHANGE RIGHT AVAILABLE IN SOME STATES.................................16
REDUCED PAID-UP INSURANCE OPTION AVAILABLE IN SOME STATES...............16
OTHER GENERAL CONTRACT PROVISIONS.......................................16
VOTING RIGHTS...........................................................17
SUBSTITUTION OF SERIES FUND SHARES......................................17
REPORTS TO CONTRACT OWNERS..............................................17
SALE OF THE CONTRACT AND SALES COMMISSIONS..............................18
STATE REGULATION........................................................18
EXPERTS.................................................................18
LITIGATION..............................................................18
ADDITIONAL INFORMATION..................................................19
FINANCIAL STATEMENTS....................................................19
DIRECTORS AND OFFICERS........................................................20
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 individual or entity 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"). The Contracts are available on a multiple life basis
where the insureds share a common employment or business relationship, and may
be owned individually or by a corporation, trust, association or similar entity.
The Contract owner will have all rights and privileges under the Contract. The
Contracts may be used for such purposes as funding non-qualified executive
deferred compensation or salary continuation plans, retiree medical benefits, or
other purposes.
The Contracts provide a choice of either fixed or variable death benefit plans.
Under the fixed death benefit plan, the death benefit generally remains fixed in
amount unless it is increased to ensure that the Contract continues to satisfy
the Internal Revenue Code's definition of life insurance, and only the cash
surrender value will vary with investment experience. Under the variable death
benefit plan, both the death benefit and cash surrender value will vary with
investment experience, but the death benefit of an in-force Contract will never
be less than the face amount regardless of investment experience. There is no
minimum cash surrender value under either death benefit plan.
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.
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 15.
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 14.
The Contract owner may choose to have the premiums (after deduction of a $2
administrative charge, any applicable taxes attributable to premiums, and a
sales load) 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 4 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
life insurance. But the owner must accept the risk that, if investment
performance 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 option[s]. 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, page 7.
In brief, and subject to that fuller description, the following diagram outlines
the charges which may be made:
2
<PAGE>
-------------------------------------------------------
PREMIUM PAYMENT
-------------------------------------------------------
----------------------------
o less charge for taxes
attributable to premiums
o less $2 processing fee
----------------------------
---------------------------------------------------
o less a front-end sales load of not more than 8%
---------------------------------------------------
- --------------------------------------------------------------------------------
INVESTED PREMIUM AMOUNT
o To be invested in one or a combination of the fifteen available portfolios of
The Prudential Series Fund, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DAILY CHARGES
o A daily charge equivalent to an annual rate of up to 0.9% is deducted from
the assets of each of the variable investment options for mortality and
expense risks. Currently, Pruco Life intends to charge only 0.6% on these
Contracts, but reserves the right to make the full charge.
o Management fees and expenses are deducted from the assets of the Series Fund.
See THE PRUDENTIAL SERIES FUND, INC., page 4.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MONTHLY CHARGES
o An administrative charge of up to $4 plus up to $0.04 per $1,000 of face
amount of insurance is deducted from the Contract fund.
o A 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
POSSIBLE ADDITIONAL CHARGES
o An administrative processing charge of up to $15 will be made in connection
with each partial withdrawal of excess cash surrender value.
o An administrative processing charge of up to $15 will be made in connection
with each decrease in face amount.
- --------------------------------------------------------------------------------
Under certain circumstances, Contract owners may receive a refund of a portion
of the sales charge. See REFUNDS OF SALES CHARGES, page 9.
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 5.
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 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.
3
<PAGE>
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. These Contracts are not offered in any state in which
the necessary approvals have not been obtained. 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
4
<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 7.
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 PROSPECTIVE CONTRACT
OWNERS
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
Pruco Life offers the Contract on a regular underwriting, a simplified
underwriting, and a guaranteed issue basis. Underwritten Contracts require
individualized evidence of the insured's insurability and rating class.
Guaranteed issue Contracts do not require evidence of insurability and rating
class, but may only be issued in certain circumstances on associated
individuals, such as those employees of a company who meet criteria established
by Pruco Life. Pruco Life will set from time to time 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 minimum
face amounts currently offered are $50,000 for Contracts issued on a guaranteed
basis and $100,000 for Contracts issued on an underwritten 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 regular underwriting Contracts and between the ages of 20 and 64 for
simplified underwriting and 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. Within
certain maximum and minimum limitations, premiums may generally be paid in any
desired frequency or amount. 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. There are circumstances, however, under which the payment
of premiums in amounts that are too large may cause the Contract to be
characterized, under the Internal Revenue Code, as a Modified Endowment
Contract, which could be significantly disadvantageous. See TAX TREATMENT OF
CONTRACT BENEFITS, page 14. Moreover, Pruco
5
<PAGE>
Life may refuse to accept a premium that will increase the death benefit by more
than the Contract fund. See DEATH BENEFIT, page 10.
ALLOCATION OF PREMIUMS
The following rules govern allocation of premiums by Contract owners. On the
Contract date (the date the Contract is issued, as specified in the Contract),
any applicable charge for taxes attributable to premiums, the $2 processing
charge, and the front-end sales charge are deducted from the initial premium,
and the first monthly deductions are made. See CHARGES AND EXPENSES, page 7.
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 charge for taxes attributable to premiums, 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 not more than 8%.)
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 investment option[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 investment option 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 investment option[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 a particular subaccount.
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 16, 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.
Unless otherwise restricted, a transfer will take effect on the date that proper
notice is received at a Home Office.
6
<PAGE>
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.
1. A charge is deducted from each premium payment for taxes attributable to
premiums. For these purposes, "taxes attributable to premiums" includes any
federal, state or local income, premium, excise, business or any other type
of tax measured by or based upon the amount of premiums received by Pruco
Life. Currently, two such charges are made. The first is for state and
local premium taxes imposed on premium payments. These taxes vary by state,
and in some states by locality, with the most common level being 2% of
premiums. The tax rates generally range from 0.75% to 5% (but in some
instances it may exceed 5%). The second charge is for federal income taxes
measured by premiums and is equal to 1.25% of premiums. Pruco Life believes
that this charge is a reasonable estimate of an increase in its federal
income taxes resulting from a 1990 change in the Internal Revenue Code. It
is intended to recover this increased tax. During 1996, 1995 and 1994,
Pruco Life received a total of approximately $2,213,536, $2,023,142 and
$1,823,291, respectively, in charges for payment of taxes attributable to
premiums.
2. A charge of $2 is deducted from each premium payment to cover the cost of
collecting and processing premiums. Pruco Life does not expect to make a
profit on this charge. During 1996, 1995 and 1994, Pruco Life received a
total of approximately $9,339, $14,104 and $13,564, 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 a percentage of the premium
remaining after the charge for taxes attributable to premiums and the $2
premium processing charge have been deducted. This percentage is not more
than 8%. This is to ensure compliance with a requirement of the Investment
Company Act of 1940 that sales load may not exceed 9% of premium. On a
non-guaranteed basis, Pruco Life intends to charge a 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. Under certain circumstances, Pruco Life may, on a
non-guaranteed basis, reduce or refund sales and certain other expenses.
See REFUNDS OF SALES CHARGES, page 9 and REDUCTION OF CHARGES, page 9.
During 1996, 1995 and 1994, Pruco Life received a total of approximately
$3,398,250, $3,004,189 and $2,849,157, 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 $4 plus up to $0.04 per $1,000 of face amount of insurance (but
currently on a non-guaranteed basis of not more than $8 per month). This
charge is to compensate Pruco Life for administrative expenses incurred,
among other things, in issuing the Contract, 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 $265,639, $245,225 and $182,234, 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 and simplified issue 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. An extra risk charge may be deducted monthly for aviation, occupational or
temporary extra risks.
7. 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
7
<PAGE>
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 $1,049,292, $685,283 and $354,430, respectively, in
mortality and expense risk charges.
8. 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 10, and
DECREASES IN FACE AMOUNT, page 11.
9. 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:
- --------------------------------------------------------------------------------
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.
10. 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 currently being
made 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
company federal income taxes that would be attributable to the Account.
Under current law, 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 Account. If there is a
material change
8
<PAGE>
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.
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 investment option[s] from which the monthly
deductions are made. If the amount held in a designated investment option 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 investment option[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.
Furthermore, Pruco Life's sales expenses may be reduced if a number of Contracts
are purchased with aggregate first year premiums exceeding $5 million by an
employer or by employees affiliated with a common employer. On a non-guaranteed
basis, this may result in 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.
Any such refund will be generated only by that portion of the aggregate first
year premiums over $5 million that 1) does not exceed the "7-pay" premium amount
as defined under section 7702A of the Internal Revenue Code, and 2) is received
within 11 months of the first Contract date for that employer. Each Contract's
portion of the total refund will be proportional to that Contract's contribution
to the total aggregate first year premiums eligible for the refund.
Beginning with Contracts sold on or after March 21, 1997, a portion of the sales
load may be refunded on a non-guaranteed basis if aggregate premiums paid within
the first 11 months of the Contract date, under all Contracts purchased by an
employer or by employees affiliated with a common employer (a) exceed two times
the "7-pay" premium amount, as defined under section 7702A of the Internal
Revenue Code, and (b) exceed $5 million. Currently, at the end of the first
Contract year, Pruco Life will refund, by adding to the Contract fund, an amount
equal to 4% of the aggregate premiums paid within the first 11 months of the
Contract date in excess of the 7-pay limit.
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 will 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.
9
<PAGE>
CASH SURRENDER VALUE
The Contract has a cash surrender value which the owner may obtain while the
insured is living by surrendering the Contract. Surrendering the Contract may
have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 14. Unlike
traditional fixed-benefit life insurance, however, a Contract's cash surrender
value is not known in advance because it varies daily with the investment
performance of the selected investment option[s]. It also varies with the amount
of invested premiums and the 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 10 and TAX TREATMENT OF CONTRACT
BENEFITS, page 14.
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 15.
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
The Contracts provide a choice of either fixed or variable death benefit plans.
Under the fixed death benefit plan, the death benefit on any date is equal to
the greater of: (1) the current Contract 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, multiplied by the "attained age factor" (a
list of applicable attained age factors is included in the Contract). Under the
variable death benefit plan, the death benefit on any date is equal to the
greater of: (1) the Contract face amount plus the Contract fund before deduction
of any monthly charges due on that date (but not less than the Contract face
amount); and (2) the Contract fund before deduction of any monthly charges, plus
a return of any sales charges due upon surrender, multiplied by the attained age
factor. Both death benefit plans assume that there is no Contract debt and that
the Contract is not in default. Death benefit proceeds will be reduced to
reflect any Contract debt. Under either plan, if the death benefit is determined
by applying the attained age factor, Pruco Life reserves the right to refuse to
accept further premium payments.
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 after
the grace period, no death benefit is payable. See LAPSE AND REINSTATEMENT, page
15.
With Pruco Life's consent, a Contract owner may be able to increase or decrease
the face amount of the Contract. Such action, however, may cause the Contract to
be treated as a Modified Endowment Contract and may have tax consequences. See
INCREASES IN FACE AMOUNT, page 11, DECREASES IN FACE AMOUNT, page 11, and TAX
TREATMENT OF CONTRACT BENEFITS, page 14.
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 14. A
Contract owner may make up to four withdrawals per year, subject to certain
requirements. The amount withdrawn must be at least $2,000 for Contracts with a
fixed death benefit and $500 for Contracts with a variable death benefit, and
there is an administrative processing fee of up to $15. A Contract owner may not
designate the investment option[s] from which a withdrawal is to be taken. 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 investment option. 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 less than $50,000
under a guaranteed issue Contract. 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 14. 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.
10
<PAGE>
INCREASES IN FACE AMOUNT
A Contract owner may elect to increase the face amount[s] of the Contract no
earlier than the first Contract anniversary. The following conditions must be
met: (1) the owner must ask for the increase in writing on an appropriate form;
(2) the amount of the increase in face amount must be at least $25,000; (3) if
more than one face amount is shown in the Contract, each must be increased by
the same amount unless Pruco Life consents otherwise; (4) the insured must
supply evidence of insurability for the increase that is satisfactory to Pruco
Life; (5) if Pruco Life requests, the owner must send in the Contract to be
suitably endorsed; (6) the Contract must not be in default on the date the
increase takes effect; (7) if Pruco Life has, between the Contract date and the
date that any requested increase in face amount will take effect, changed any of
the bases on which benefits and charges are calculated under newly issued
Contracts, Pruco Life has the right to deny the increase; (8) the owner must
make any required payment at the time of the increase; and (9) Pruco Life has
the right to deny more than one increase in a Contract year.
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 14.
Pruco Life will supply the Contract owner with pages which show the increased
face amount[s], the effective date of the increase, and the recomputed charges.
If the insured is not living on the effective date of the increase, the increase
will not take effect.
DECREASES IN FACE AMOUNT
Pruco Life may permit a Contract owner to decrease the Contract's face amount[s]
without withdrawing a portion of the Contract fund. This can be done to reduce
monthly charges. There is an administrative processing charge of up to $15 for
each decrease. Decreases in face amount may be combined with cash withdrawals.
A Contract owner may elect to decrease the Contract's face amount[s] no earlier
than the first Contract anniversary. The following conditions must be met: (1)
the owner must ask for the decrease in writing on an appropriate form; (2) the
amount of the decrease in face amount must be at least $10,000; (3) if more than
one face amount is shown in the Contract, each must be decreased by the same
amount unless Pruco Life consents otherwise; and (4) if Pruco Life requests, the
owner must send in the Contract to be suitably endorsed. Pruco Life reserves the
right to refuse to reduce the Contract's face amount[s] to the extent that this
would cause the Contract to fail to qualify as "life insurance" for purposes of
section 7702 of the Internal Revenue Code.
Pruco Life will supply the Contract owner with pages which show the decreased
face amount[s], the effective date of the decrease, and the recomputed charges.
If the insured is not living on the effective date of the decrease, the decrease
will not take effect.
Contract owners should carefully 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 14.
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 after-tax return of the Series Fund's
portfolios. This is because these tables assume an investment management fee and
other estimated Series Fund expenses totaling 0.53%. The 0.53% figure is based
on an average of the current management fees and expenses of the available
fifteen portfolios, taking into account any applicable expense caps or expense
reimbursement arrangements. Actual fees and expenses of the portfolios
associated with
11
<PAGE>
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 charge of 3.25%
for taxes attributable to premiums and reflect the fact that no charges against
the Account are currently made for other federal, state or local taxes
attributable to the Contract. The tables relate to regularly underwritten
contracts on preferred risk insureds.
Upon request, Pruco Life will furnish a comparable illustration based on a
proposed Contract's specific circumstances.
12
<PAGE>
ILLUSTRATIONS
-------------
PRUSELECT II VARIABLE LIFE INSURANCE CONTRACT
FIXED DEATH BENEFIT PLAN - MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $1,447.03 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 $ 1,505 $100,000 $100,000 $ 100,000 $ 1,188 $ 1,260 $ 1,331
2 $ 3,070 $100,000 $100,000 $ 100,000 $ 2,262 $ 2,476 $ 2,699
3 $ 4,698 $100,000 $100,000 $ 100,000 $ 3,351 $ 3,780 $ 4,246
4 $ 6,391 $100,000 $100,000 $ 100,000 $ 4,354 $ 5,075 $ 5,887
5 $ 8,151 $100,000 $100,000 $ 100,000 $ 5,411 $ 6,502 $ 7,781
6 $ 9,982 $100,000 $100,000 $ 100,000 $ 6,452 $ 7,996 $ 9,880
7 $ 11,886 $100,000 $100,000 $ 100,000 $ 7,480 $ 9,561 $ 12,205
8 $ 13,867 $100,000 $100,000 $ 100,000 $ 8,493 $ 11,200 $ 14,783
9 $ 15,926 $100,000 $100,000 $ 100,000 $ 9,493 $ 12,919 $ 17,641
10 $ 18,068 $100,000 $100,000 $ 100,000 $10,476 $ 14,716 $ 20,807
15 $ 30,134 $100,000 $100,000 $ 109,841 $15,139 $ 25,042 $ 42,604
20 $ 44,813 $100,000 $100,000 $ 173,753 $19,244 $ 37,931 $ 78,552
25 $ 62,673 $100,000 $105,446 $ 267,925 $23,018 $ 55,011 $ 139,776
30 (AGE 65) $ 84,403 $100,000 $128,972 $ 406,916 $25,843 $ 76,696 $ 241,983
35 $110,840 $100,000 $155,726 $ 617,246 $27,269 $103,969 $ 412,096
40 $143,005 $100,000 $186,630 $ 938,160 $25,693 $137,528 $ 691,333
45 $182,138 $100,000(2) $223,705 $1,437,059 $18,505(2) $178,396 $1,145,999
</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 50, 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 II VARIABLE LIFE INSURANCE CONTRACT
FIXED DEATH BENEFIT PLAN - MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $1,447.03 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 $ 1,505 $100,000 $100,000 $100,000 $ 1,115 $ 1,184 $ 1,252
2 $ 3,070 $100,000 $100,000 $100,000 $ 2,097 $ 2,297 $ 2,506
3 $ 4,698 $100,000 $100,000 $100,000 $ 3,055 $ 3,452 $ 3,883
4 $ 6,391 $100,000 $100,000 $100,000 $ 3,877 $ 4,537 $ 5,284
5 $ 8,151 $100,000 $100,000 $100,000 $ 4,786 $ 5,778 $ 6,945
6 $ 9,982 $100,000 $100,000 $100,000 $ 5,668 $ 7,063 $ 8,770
7 $ 11,886 $100,000 $100,000 $100,000 $ 6,523 $ 8,392 $ 10,776
8 $ 13,867 $100,000 $100,000 $100,000 $ 7,350 $ 9,768 $ 12,982
9 $ 15,926 $100,000 $100,000 $100,000 $ 8,149 $11,192 $ 15,409
10 $ 18,068 $100,000 $100,000 $100,000 $ 8,918 $12,665 $ 18,080
15 $ 30,134 $100,000 $100,000 $100,000 $12,262 $20,799 $ 36,130
20 $ 44,813 $100,000 $100,000 $144,060 $14,536 $30,287 $ 65,128
25 $ 62,673 $100,000 $100,000 $210,826 $15,137 $41,151 $109,987
30 (AGE 65) $ 84,403 $100,000 $100,000 $299,652 $13,024 $53,536 $178,196
35 $110,840 $100,000 $101,620 $419,035 $ 5,979 $67,845 $279,763
40 $143,005 $ 0(2) $113,372 $580,777 $ 0(2) $83,544 $427,977
45 $182,138 $ 0 $124,977 $801,729 $ 0 $99,664 $639,348
</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 II VARIABLE LIFE INSURANCE CONTRACT
FIXED DEATH BENEFIT PLAN - MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $3,670.28 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 $ 3,817 $100,000 $100,000 $100,000 $ 3,085 $ 3,270 $ 3,454
2 $ 7,787 $100,000 $100,000 $100,000 $ 5,867 $ 6,420 $ 6,996
3 $ 11,915 $100,000 $100,000 $100,000 $ 8,668 $ 9,780 $ 10,985
4 $ 16,209 $100,000 $100,000 $100,000 $11,239 $ 13,109 $ 15,217
5 $ 20,675 $100,000 $100,000 $100,000 $13,934 $ 16,769 $ 20,096
6 $ 25,319 $100,000 $100,000 $100,000 $16,575 $ 20,593 $ 25,502
7 $ 30,149 $100,000 $100,000 $100,000 $19,161 $ 24,590 $ 31,500
8 $ 35,172 $100,000 $100,000 $100,000 $21,716 $ 28,794 $ 38,185
9 $ 40,395 $100,000 $100,000 $100,000 $24,240 $ 33,220 $ 45,644
10 (AGE 65) $ 45,828 $100,000 $100,000 $100,000 $26,737 $ 37,887 $ 53,978
15 $ 76,432 $100,000 $100,000 $166,912 $38,591 $ 65,278 $111,437
20 $113,666 $100,000 $135,469 $278,475 $48,597 $ 99,828 $205,209
25 $158,966 $100,000(2) $179,744 $452,214 $56,433(2) $143,339 $360,623
</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 44, 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 II VARIABLE LIFE INSURANCE CONTRACT
FIXED DEATH BENEFIT PLAN - MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $3,670.28 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 $ 3,817 $100,000 $100,000 $100,000 $ 2,616 $ 2,784 $ 2,952
2 $ 7,787 $100,000 $100,000 $100,000 $ 4,854 $ 5,337 $ 5,842
3 $ 11,915 $100,000 $100,000 $100,000 $ 6,998 $ 7,948 $ 8,981
4 $ 16,209 $100,000 $100,000 $100,000 $ 8,760 $10,331 $ 12,110
5 $ 20,675 $100,000 $100,000 $100,000 $10,700 $13,051 $ 15,826
6 $ 25,319 $100,000 $100,000 $100,000 $12,529 $15,822 $ 19,879
7 $ 30,149 $100,000 $100,000 $100,000 $14,239 $18,644 $ 24,307
8 $ 35,172 $100,000 $100,000 $100,000 $15,817 $21,510 $ 29,155
9 $ 40,395 $100,000 $100,000 $100,000 $17,252 $24,417 $ 34,476
10 (AGE 65) $ 45,828 $100,000 $100,000 $100,000 $18,530 $27,362 $ 40,336
15 $ 76,432 $100,000 $100,000 $120,728 $22,195 $42,784 $ 80,602
20 $113,666 $100,000 $100,000 $191,956 $18,895 $59,831 $141,453
25 $158,966 $100,000(2) $101,666 $287,095 $ 1,073(2) $81,074 $228,947
</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 II VARIABLE LIFE INSURANCE CONTRACT
FIXED DEATH BENEFIT PLAN - 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 $ 3,536 $ 3,740 $ 3,944
2 $ 8,268 $100,000 $100,000 $ 100,000 $ 6,769 $ 7,388 $ 8,032
3 $ 12,651 $100,000 $100,000 $ 100,000 $10,041 $ 11,295 $ 12,651
4 $ 17,210 $100,000 $100,000 $ 100,000 $13,088 $ 15,204 $ 17,585
5 $ 21,952 $100,000 $100,000 $ 100,000 $16,285 $ 19,502 $ 23,266
6 $ 26,883 $100,000 $100,000 $ 102,007 $19,446 $ 24,010 $ 29,568
7 $ 32,011 $100,000 $100,000 $ 121,948 $22,573 $ 28,741 $ 36,537
8 $ 33,291 $100,000 $100,000 $ 130,103 $22,121 $ 29,946 $ 40,285
9 $ 34,623 $100,000 $100,000 $ 138,867 $21,670 $ 31,210 $ 44,430
10 $ 36,008 $100,000 $100,000 $ 148,273 $21,217 $ 32,530 $ 49,012
15 $ 43,809 $100,000 $103,390 $ 206,896 $18,921 $ 40,102 $ 80,248
20 $ 53,300 $100,000 $109,371 $ 290,826 $16,392 $ 49,445 $ 131,479
25 $ 64,848 $100,000 $118,886 $ 419,961 $13,643 $ 62,023 $ 219,092
30 (AGE 65) $ 78,898 $100,000 $130,999 $ 614,360 $ 9,816 $ 77,902 $ 365,345
35 $ 95,991 $100,000 $146,545 $ 911,776 $ 4,094 $ 97,839 $ 608,735
40 $116,788 $ 0(2) $165,852 $1,368,030 $ 0(2) $122,217 $1,008,106
45 $142,090 $ 0 $190,269 $2,079,360 $ 0 $151,732 $1,658,208
</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.
T5
<PAGE>
PRUSELECT II VARIABLE LIFE INSURANCE CONTRACT
FIXED DEATH BENEFIT PLAN - 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 $ 3,458 $ 3,658 $ 3,857
2 $ 8,268 $100,000 $100,000 $ 100,000 $ 6,566 $ 7,164 $ 7,787
3 $ 12,651 $100,000 $100,000 $ 100,000 $ 9,625 $10,827 $ 12,129
4 $ 17,210 $100,000 $100,000 $ 100,000 $12,333 $14,352 $ 16,626
5 $ 21,952 $100,000 $100,000 $ 100,000 $15,294 $18,350 $ 21,931
6 $ 26,883 $100,000 $100,000 $ 100,000 $18,205 $22,526 $ 27,796
7 $ 32,011 $100,000 $100,000 $ 114,333 $21,067 $26,889 $ 34,255
8 $ 33,291 $100,000 $100,000 $ 121,230 $20,455 $27,815 $ 37,538
9 $ 34,623 $100,000 $100,000 $ 128,575 $19,833 $28,771 $ 41,137
10 $ 36,008 $100,000 $100,000 $ 136,392 $19,200 $29,756 $ 45,084
15 $ 43,809 $100,000 $100,000 $ 183,696 $15,787 $35,141 $ 71,250
20 $ 53,300 $100,000 $100,000 $ 248,205 $11,636 $41,265 $112,211
25 $ 64,848 $100,000 $100,000 $ 336,061 $ 5,941 $47,968 $175,322
30 (AGE 65) $ 78,898 $ 0(2) $100,000 $ 455,695 $ 0(2) $55,011 $270,990
35 $ 95,991 $ 0 $100,000 $ 618,717 $ 0 $61,943 $413,078
40 $116,788 $ 0 $100,000 $ 841,384 $ 0 $68,126 $620,019
45 $142,090 $ 0 $100,000(2) $1,146,981 $ 0 $72,274(2) $914,673
</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 29, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE. BASED ON A
GROSS RETURN OF 6%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY YEAR 59
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 II VARIABLE LIFE INSURANCE CONTRACT
FIXED DEATH BENEFIT PLAN - 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 $ 6,892 $ 7,291 $ 7,690
2 $ 16,194 $100,000 $100,000 $100,000 $13,188 $ 14,399 $ 15,660
3 $ 24,780 $100,000 $100,000 $100,000 $19,560 $ 22,016 $ 24,672
4 $ 33,710 $100,000 $100,000 $100,000 $25,496 $ 29,648 $ 34,320
5 $ 42,997 $100,000 $100,000 $100,000 $31,738 $ 38,062 $ 45,468
6 $ 52,655 $100,000 $100,000 $107,930 $37,923 $ 46,920 $ 57,865
7 $ 62,699 $100,000 $102,140 $129,942 $44,057 $ 56,248 $ 71,559
8 $ 65,207 $100,000 $103,796 $139,659 $43,170 $ 58,680 $ 78,954
9 $ 67,815 $100,000 $105,576 $150,247 $42,273 $ 61,235 $ 87,144
10 (AGE 65) $ 70,528 $100,000 $107,489 $161,800 $41,367 $ 63,921 $ 96,218
15 $ 85,808 $100,000 $118,825 $236,898 $36,333 $ 79,332 $158,162
20 $104,399 $100,000 $133,079 $351,481 $28,908 $ 98,066 $259,008
25 $127,017 $100,000(2) $152,818 $534,637 $15,495(2) $121,867 $426,352
</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 29, 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 II VARIABLE LIFE INSURANCE CONTRACT
FIXED DEATH BENEFIT PLAN - 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 $ 6,428 $ 6,809 $ 7,191
2 $ 16,194 $100,000 $100,000 $100,000 $12,156 $13,290 $ 14,472
3 $ 24,780 $100,000 $100,000 $100,000 $17,780 $20,055 $ 22,521
4 $ 33,710 $100,000 $100,000 $100,000 $22,714 $26,535 $ 30,846
5 $ 42,997 $100,000 $100,000 $100,000 $28,140 $33,933 $ 40,740
6 $ 52,655 $100,000 $100,000 $100,000 $33,472 $41,688 $ 51,745
7 $ 62,699 $100,000 $100,000 $115,908 $38,715 $49,834 $ 63,830
8 $ 65,207 $100,000 $100,000 $123,063 $37,066 $51,189 $ 69,572
9 $ 67,815 $100,000 $100,000 $130,677 $35,301 $52,539 $ 75,793
10 (AGE 65) $ 70,528 $100,000 $100,000 $138,781 $33,398 $53,880 $ 82,529
15 $ 85,808 $100,000 $100,000 $187,804 $20,990 $60,322 $125,385
20 $104,399 $ 0(2) $100,000 $254,830 $ 0(2) $65,583 $187,785
25 $127,017 $ 0 $100,000(2) $346,871 $ 0 $67,649(2) $276,616
</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 20, UNLESS AN ADDITIONAL PREMIUM PAYMENT WAS MADE. BASED ON A
GROSS RETURN OF 6%, THE CONTRACT WOULD GO INTO DEFAULT IN POLICY YEAR 37
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 equal to 90% of the 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 provide funds
sufficient 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 14, and LAPSE AND REINSTATEMENT, page 15.
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 investment option[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 investment option[s] will apply only to the amount remaining in
those investment options. The longer the loan is outstanding, the greater the
effect is likely to be. The effect could be favorable or unfavorable. If
investment results are greater than the rate being credited 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 available 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, page 14.
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.
13
<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 total premiums paid, which in turn determines the extent to which
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
14
<PAGE>
Contract years. Moreover, the addition of a rider or increases in the face
amount of insurance after the Contract date may have an impact on the
Contract's status as 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. For example, it is unclear
whether the age of the insured controls.
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 371/2 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.
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
15
<PAGE>
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 14.
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 14.
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 14.
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.
If the insured, whether sane or insane, dies by suicide within 2 years from the
effective date of an increase in the face amount of insurance that was requested
after issue and required Company approval, Pruco Life will pay, with respect to
the amount of the increase, no more than the sum of the monthly charges
attributable to the increase.
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.
16
<PAGE>
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 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.
17
<PAGE>
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
maximum commission that will be paid to the representative is 14 1/2% of
premiums received in the first year up to certain limits. Additional first year
premiums and premiums in later years may generate up to 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 7.
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
statements disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of the accountant, would have caused them to make a 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.
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<PAGE>
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.
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.
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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
20
<PAGE>
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<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
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<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
-------------- -------------- -------------- -------------- --------------
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
-------------- -------------- -------------- -------------- --------------
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
-------------- -------------- --------------
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) II
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
The 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 67 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 3)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities
Corporation and Pruco Life Insurance Company. (Note 3)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the
Sale of the Contracts. (Note 3)
(c) Schedule of Sales Commissions. (Note 1)
(4) Not Applicable.
(5) Variable Universal Life Insurance Contracts. (Note 1)
(a) With the fixed-rate option. Note: this version was
never sold and is no longer available for sale.
(b) Without the fixed-rate option.
(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 6)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form for Variable Universal Life Insurance
Contract. (Note 7)
(b) Supplement to the Application for Variable Universal Life
Insurance Contract. (Note 5)
(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 9)
(12) Rider for Interim Term Insurance Benefit. (Note 1)
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.
II-2
<PAGE>
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 4)
(b) Linda S. Dougherty (Note 6)
(c) Kiyofumi Sakaguchi (Note 8)
27. Financial Data Schedule (Note 1).
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Registrant's Form S-6, filed January 8,
1991.
(Note 3) Incorporated by reference to Form S-6, Registration No. 33-29181,
filed June 8, 1989, on behalf of the Pruco Life Variable Universal
Account.
(Note 4) 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 5) Incorporated by reference to Pre-Effective Amendment No. 1 to this
Registration Statement, filed April 16, 1991.
(Note 6) 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 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.
(Note 8) 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 9) Incorporated by reference to Post-Effective Amendment No. 9 to this
Registration Statement, filed April 25, 1996.
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
Director
*By: /s/ Thomas C. Castano
------------------------------
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 & Touche LLP, independent
auditors. Page II-6
Consent of Price Waterhouse LLP, independent
accountants. Page II-7
1.A.(3)(c) Schedule of Sales Commissions. Page II-8
1.A.(5)(a) Variable Universal Life Insurance Contract with
the fixed-rate option. Page II-9
1.A.(5)(b) Variable Universal Life Insurance Contract without
the fixed-rate option. Page II-34
1.A.(12) Rider for Interim Term Insurance Benefit. Page II-57
3. Opinion and Consent of Clifford E. Kirsch, Esq.,
as to the legality of the securities being
registered. Page II-58
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA,
as to actuarial matters pertaining to the securities
being registered. Page II-59
27. Financial Data Schedule. Page II-60
II-5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 10 to Registration
Statement No. 33-38271 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.(3)(C)
Commission Schedule For
PRUSELECT II 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 target 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-8
EXHIBIT 1.A.(5)(a)
- --------------------------------------------------------------------------------
THE PRUDENTIAL
PRUCO LIFE INSURANCE COMPANY
Phoenix, Arizona 85012
A STOCK COMPANY SUBSIDIARY OF
The Prudential Insurance Company of America
INSURED JOHN DOE
xx xxx xxx POLICY NUMBER
JAN 10, 1991 CONTRACT DATE
INITIAL FACE AMOUNT $100,000
PREMIUM PERIOD LIFE
AGENCY 0-MIL7
- --------------------------------------------------------------------------------
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 variable investment
options, any excess interest credited to the fixed 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, the investment experience of the variable investment options, any
excess interest credited to the fixed investment options, and the charges made.
There is no guaranteed minimum.
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
/s/ SPECIMEN /s/ SPECIMEN
Secretary President
Flexible Premium Variable Life Insurance Policy. Insurance payable only upon
death. Cash values reflect premium payments, investment results and charges.
Eligible for annual dividends as stated under Dividends.
- --------------------------------------------------------------------------------
(VUL-A-102)
II-9
<PAGE>
- --------------------------------------------------------------------------------
GUIDE TO CONTENTS
Page
----
Contract Data.............................................................. 3
Schedule of Face Amounts; List of Contract Limitations; List of
Supplementary Benefits; Minimum Initial Premium; Adjustments to
Premium Payments; Adjustments to the Contract Fund
Table of Maximum Monthly Mortality Rates................................... 4
Table of Maximum Monthly Mortality Rates per $1000
List of Investment Options................................................. 5
Schedule of Initial Allocation of Invested Premium Amounts
Attained Age Factors....................................................... 6
Premium Payment and Reinstatement.......................................... 7
Payment of Premiums; Minimum Initial Premium; Premiums; Invested
Premium Amount: Allocations; Grace Period; Reinstatement
Contract Fund.............................................................. 8
Coverage Amount
Separate Account........................................................... 8
Separate Account; Investment Options; Separate Account Investments
Fixed Investment Options .................................................. 9
Guaranteed Interest; Excess Interest
Transfers.................................................................. 9
Class One Investments; Class Two Investments; Class Three
Investments
Surrender.................................................................. 10
Net Cash Value; Return of Sales Charges
Loans...................................................................... 10
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 ............................................................... 12
Effect on Contract Fund; Effect on Insurance Amount
Dividends ................................................................. 12
Participation; Dividend Options
Death Proceeds ............................................................ 13
Insurance Amount; Proceeds Arising From Insured's Death
Face Amount Changes ....................................................... 13
Face Amount; Increase in Face Amount; Decrease in Face Amount
Beneficiary ............................................................... 14
Settlement Options ........................................................ 15
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............................................... 17
Applicability; Interest on Proceeds; Settlement at Payee's Death;
Spendthrift and Creditor
Income Tables ............................................................. 18
General Provisions ........................................................ 19
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 ..................................................... 20
Mortality Table Described; Interest Rate; Exclusions; Minimum Legal
Values
Endorsements.............................................................. 21
(VUL-A-102)
Page 2
II-10
<PAGE>
CONTRACT DATA
Insured's Sex and Age M-35
xx xxx xxx Policy Number
Insured JOHN DOE Jan. 10, 1991 Contract Date
Initial Face Amount $100,000
Premium Period LIFE
Agency 0-MIL7
Beneficiary
CLASS 1 MARY DOE, WIFE
CLASS 2 ROBERT DOE, SON
LOAN INTEREST RATE: VARIABLE
INSURANCE AMOUNT: VARIABLE
SCHEDULE OF FACE AMOUNTS
EFFECTIVE RATING
AMOUNT DATE CLASS
------- ---- -----
INITIAL $100,000 JAN. 10, 1991 PREFERRED
$300.000 JAN. 10, 1992
$100,000 JAN. 10, 1998
*****END OF SCHEDULE*****
CONTINUED ON NEXT PAGE
VUL-A-102
Page 3
II-11
<PAGE>
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
LIST OF CONTRACT LIMITATIONS
o The minimum premium we will accept is $25.
o The minimum increase in face amount is $25,000.
o The minimum decrease in face amount is $10,000.
o The minimum face amount is $100,000.
o The minimum amount you may withdraw is $500.
o We may limit the number of face amount increases to one in any contract year.
o We may limit the amount of premiums in any contract year to $10,000.
o You may not borrow less than $500 at any one time except to pay premiums.
*****END OF LIST*****
LIST OF SUPPLEMENTARY BENEFITS
(Each benefit is described in the form that
bears the number shown for it)
NONE
*****END OF LIST*****
MINIMUM INITIAL PREMIUM
The minimum initial premium due on the contract date is $361.76
*****END OF LIST*****
CONTINUED ON NEXT PAGE
VUL-A-102
Page 3A
II-12
<PAGE>
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
ADJUSTMENTS TO PREMIUM PAYMENTS
From each premium paid, we will:
o Deduct a charge for any taxes attributable to premiums. For purposes of this
charge, the term "taxes attributable to premiums" shall include any federal,
state or local income, premium, excise, business or any other type of tax (or
component thereof) measured by or based upon the amount of premium received
by us.
o Deduct a charge for payment processing of up to $2.00.
o Deduct a charge at a rate of up to 8% of the payment to pay for sales
charges.
The remainder of the premium is the invested premium amount.
ADJUSTNENTS TO THE CONTRACT FUND
On the contract date the contract fund is equal to the investment premium amount
credited on that date, minus any of the charges described below which may be due
on that date. On any day after that date, we will adjust the contract fund by:
o adding any invested premium amounts.
o adding any increase due to investment results in the value of the variable
investment options.
o adding guaranteed interest at an effective annual rate of 4.0% a year on that
portion of the contract fund that is not in a variable investment option.
o adding any excess interest on that portion of the contract fund that is not
in a variable investment option.
o adding any dividends to the fund.
o adding any unused sales charges (see General Provisions).
o subtracting any charge for extra ratinq class.
o subtracting any charge for extra benefits.
CONTRACT DATA CONTINUED ON NEXT PAGE
VUL-A-102
Page 3B
II-13
<PAGE>
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
o subtracting a monthly charge for the expected cost of mortality of up to the
maximum monthly rate (see Table of Maximum Monthly Rates) multiplied by the
coverage amount (described under Contract Fund).
o subtracting a monthly charge for administrative expenses of up to $8.00.
o subtracting any withdrawals
o subtracting an administrative charge of up to $15 for withdrawals.
o subtracting an administrative charge for up to $15 for a decrease in face
amount.
o subtracting any decrease due to investment results in the value of the
variable investment options.
o subtracting a charge against the variable investment options at a rate of not
more than .00245475% a day (0.90% a year) for mortality and expense risks
that we assume.
o subtracting any amount charged against the contract for federal, state or
local taxes attributable to the contract (other than taxes previously
deducted from the premium).
VUL-A-102
Page 3C
II-14
<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.
We may charge less than these rates. At least once every five years, 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.
VUL-A-102
Page 4
II-15
<PAGE>
POLICY NO. 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 Prudential Series Fund, Inc. We show
the available investment options of the account below. They invest in Series
Fund portfolios with the same name.
These are Class One investments as described under Transfers.
VARIABLE 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
The FIXED INVESTMENT OPTIONS are funded by the general account the company.
These are Class Three investments as described under Transfers.
FIXED INVESTMENT OPTIONS
Fixed Interest Rate
*****END OF LIST*****
SCHEDULE OF INITIAL ALLOCATION OF INVESTED PREMIUM AMOUNTS
Money Market 40%
Bond 60%
VUL-A-102
Page 5
II-16
<PAGE>
POLICY NO. XX XXX XXX
ATTAINED AGE FACTORS
These factors are used to determine your insurance amount as described under
Death Proceeds. These factors apply on the contract anniversary when the
Insured's attained age is as shown. To calculate the insurance amount at
other times we consider the time elapsed since the last contract anniversary.
Attained Attained
Age Factors Age Factors
--------- ------- -------- -------
35 4.21942 67 1.60268
36 4.07931 68 1.56603
37 3.94401 69 1.53110
38 3.81346 70 1.49782
39 3.68773 71 1.46620
40 3.56660 72 1.43628
41 3.44995 73 1.40810
42 3.33768 74 1.38170
43 3.22957 75 1.35703
44 3.12550 76 1.33391
45 3.02527 77 1.31221
46 2.92887 78 1.29175
47 2.83608 79 1.27237
48 2.74681 80 1.25398
49 2.66086 81 1.23656
50 2.57819 82 1.22016
51 2.49876 83 1.20486
52 2.42243 84 1.19068
53 2.34925 85 1.17762
54 2.27911 86 1.16552
55 2.21196 87 1.15430
56 2.14768 88 1.14376
57 2.08617 89 1.13366
58 2.02726 90 1.12379
59 1.97080 91 1.11397
60 1.91682 92 1.10388
61 1.86519 93 1.09325
62 1.81588 94 1.08180
63 1.76886 95 1.06940
64 1.72412 96 1.05619
65 1.68159 97 1.04267
66 1.64113 98 1.02984
99 1.01976
VUL-A-102
Page 6
II-17
<PAGE>
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PREMIUM PAYMENT AND REINSTATEMENT
PAYMENT OF PREMIUMS
Premiums may be paid at our Home Office or to any of our authorized agents.
If we are asked to do so, we will give a signed receipt. If we receive the first
premium payment on or before the contract date, we will credit it as of the
contract date. If we receive the first premium after the contract date, we will
credit an amount equal to the minimum initial premium as of the contract date.
We will credit the remainder, if any, as of the date of receipt at our Home
Office.
MINIMUM INITIAL PREMIUM
We show the minimum initial premium in the contract data pages. There is no
insurance under this contract until an amount at least equal to the minimum
initial premium is paid.
PREMIUMS
Except as we state in the next paragraph, 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 and maximum
premiums we will accept. We have the right to limit premiums as described in the
contract data pages. We also have the right to refuse any payment that increases
the insurance amount by more than it increases the contract fund.
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 adjustments described under
Adjustments To 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.
We show the initial allocation of invested premium amounts 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. You may not, however, increase your
allocation to any fixed investment option available to you without our consent
(see Fixed Investment Options). To change your allocation, 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 Home 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.
(VUL-A-102)
Page 7
II-18
<PAGE>
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.
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 reinvestment.
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.
COVERAGE AMOUNT
The coverage amount is used to determine the expected cost of mortality as
described under Adjustments To The Contract Fund. It is equal to the insurance
amount (see Insurance Amount) minus the contract fund.
- -------------------------------------------------------------------------------
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 variable investment options. We
list them in the contract data pages. We may establish additional variable
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
variable investment option are credited to, or charged against, that variable
investment option. This is without regard to income, gains, or losses in other
investment options.
(VUL-A-102)
Page 8
II-19
<PAGE>
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 variable 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.
- -------------------------------------------------------------------------------
FIXED INVESTMENT OPTIONS
We list any fixed option available to you in the contract data pages. You
may allocate all or part of your invested premium amount to an available fixed
investment option. We credit fixed investment options with interest as we
describe below.
GUARANTEED INTEREST
On any portion of the contract fund in a fixed investment option, we will
credit interest each day at the daily equivalent of the guaranteed rate we show
under Adjustments To The Contract Fund in the contract data pages.
EXCESS INTEREST
We may credit excess interest in addition to the guaranteed interest on any
portion of the contract fund in a fixed investment option. The rate of any
excess interest will be determined from time to time and will continue
thereafter until we determine a new rate. We may use different rates of excess
interest for different portions of the contract fund. We may from time to time
guarantee rates of excess interest on some portions of the contract fund.
We may establish additional fixed investment options. We will notify you
within one year if we do so.
- -------------------------------------------------------------------------------
TRANSFERS
You have the right to transfer amounts into or out of investment options if
the contract is not in default, subject to certain restrictions depending on an
investment's class. The investment class for each investment is shown under the
List of Investment Options in the contract data pages. To make a transfer, you
must ask us in a form that meets our needs. Unless otherwise restricted, the
transfer will take effect on the date we receive your notice at our Home Office.
CLASS ONE INVESTMENTS
You may transfer amounts into or out of these investments up to four times
in each contract year.
CLASS TWO INVESTMENTS
You may transfer amounts into these investments up to four times in each
contract year. Transfers out of these investments may be made only with our
consent.
CLASS THREE INVESTMENTS
Transfers into or out of these investments may be made only with our
consent.
(VUL-A-102)
Page 9
II-20
<PAGE>
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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 contract fund less any contract debt.
If the contract is in default, the net cash value is zero.
We will usually pay any net cash value within seven days after we receive
your request and the contract at our Home Office. But we have the right to
postpone paying you the part of the net cash value that is to come from any
variable investment option (provided by a separate account registered under the
Investment Company Act of 1940) if: (1) the New York Stock Exchange is closed;
or (2) the SEC requires that trading be restricted or declares an emergency. We
have the right to postpone paying you the remainder for up to six months. If we
do so for more than thirty days, we will pay interest at the rate of 3% a year.
RETURN OF SALES CHARGES
If the contract is not in default, we will, upon surrender within the first
three contract years, return any sales charge we deducted from premiums paid
within the 365 days prior to the date we receive your surrender request at our
Home Office. If we have already credited a portion of the sales charges as we
describe under Unused Sales Charges, we will not return that portion again.
- -------------------------------------------------------------------------------
LOANS
You may borrow any amount up to the current 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
the sum of (a) 90% of the portion of the cash value that is attributable to the
variable investment options, and (b) the balance 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.
We charge interest daily on any loan. Interest is due on each contract
anniversary, or when the loan is paid back, whichever comes first. If interest
is not paid when due, it becomes part of the loan. Then we start to charge
interest on it, too.
(VUL-A-102)
Page 10
II-21
<PAGE>
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 stated under
Adjustments To The Contract Fund. 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.
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 paying that part of the
loan that comes from any investment option provided by an account registered
under the Investment Company Act of 1940 if: (1) the New York Stock Exchange is
closed; or (2) the SEC requires that trading be restricted or declares an
emergency. We have the right to postpone paying you the remainder of the
proceeds of a loan for up to six months, unless it will be used to pay premiums
on this or other contracts with us.
(VUL-A-102)
Page 11
II-22
<PAGE>
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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 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 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. Unless you request otherwise, we will take any withdrawal
proportionately from all investment options that apply to the contract.
We may charge an administrative fee as stated in the contract data pages.
EFFECT ON INSURANCE AMOUNT
When you make a withdrawal, we will reduce your scheduled face amount(s),
subject to the minimum face amount, so that the coverage amount will not
increase. We describe coverage amount under Contract Fund. We will recompute the
contract's monthly deductions and expense charges. We will also send you new
contract data pages.
- -------------------------------------------------------------------------------
DIVIDENDS
PARTICIPATION
This contract will be eligible for a dividend on the anniversary if the
Insured is living. We will decide each year what part, if any, of our surplus to
credit to this contract as a dividend. We do not expect to credit any dividends
to this contract.
DIVIDEND OPTIONS
While the contract is in force, you may choose any of the uses we show
below for any dividend. You must ask us in writing and in a form that meets our
needs.
While the contract is not in default past its days of grace, you may choose
any of these uses for any such dividend:
1. Cash. -- We will pay it to you in cash.
2. Increase Contract Fund. -- We will use it to increase your contract
fund.
If you have not made another choice by 31 days after the anniversary, we
will use any dividend as we state under dividend option 2.
(VUL-A-102)
Page 12
II-23
<PAGE>
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DEATH PROCEEDS
INSURANCE AMOUNT
This contract either has a variable or a fixed insurance amount. We show
the type of insurance amount that applies to this contract in the contract data
pages.
If this contract has a fixed 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, times the attained age factor that applies. We show the attained age
factors in the contract data pages.
If this contract has a variable 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, (2) the current face amount plus the contract fund before
deduction of any monthly charges due on that date, and (3) the contract fund
before deduction of any monthly charges due on that date, plus any return of
sales charges (as described under Surrender), times the attained age factor that
applies.
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.
- -------------------------------------------------------------------------------
FACE AMOUNT CHANGES
FACE AMOUNT
The Schedule of Face Amounts in the contract data pages shows one or more
face amounts. Subject to the requirements below, you may increase or decrease
the face amount(s).
INCREASE IN FACE AMOUNT
After the first contract year, you may increase the face amount(s) once
each contract year. You may do so subject to all these conditions and the
paragraph that follows:
1. You must ask for the increase in writing in a form that meets our
needs: if you are not the Insured and the Insured is age 8 or over, he or
she must sign the form too.
2. The amount of the increase must be at least equal to the minimum
increase in face amount, which we show on page 3.
3. You must give us any facts we need to satisfy us that the Insured
is insurable for the amount of the increase.
4. If we ask you to do so, you must send us the contract to be
endorsed.
5. The contract must not be in default.
6. We must not, since the issue date, have changed the basis on which
benefits and charges are calculated under newly issued contracts.
7. You must make any required payment.
8. The Insured must be eligible for the same rating class and benefits
as shown on page 3.
9. If more than one face amount is shown in the contract data pages,
each must be increased by the same amount. Our permission is needed to do
otherwise.
(VUL-A-102)
Page 13
II-24
<PAGE>
An increase will take effect only if we approve your request for it at our
Home Office. If we approve the increase, we will recompute the contract's
charges. We will send you new contract data pages showing the amount and
effective date of the increase and the recomputed values. If the Insured is not
living on the effective date, the increase will not take effect.
DECREASE IN FACE AMOUNT
After the first contract year, you may decrease the face amount. You may do
so subject to all these conditions and the paragraphs that follow:
1. You must ask for the decrease in writing in a form that meets
our needs.
2. The amount of the decrease must be at least equal to the minimum
decrease in face amount, which we show on page 3.
3. The face amount(s) after the decrease must be at least equal to the
minimum face amount, which we show on page 3.
4. If we ask you to do so, you must send us the contract to be
endorsed.
5. If more than one face amount is shown, each must be decreased by
the same amount. Our permission is needed to do otherwise.
A decrease will take effect only if we approve your request for it at our
Home Office. If we approve the decrease, we will recompute the contract's
charges. A decrease in face amount may also affect the amount of any extra
benefits this contract might have. We will send you new contract data pages
showing the amount and effective date of the decrease and the recomputed values.
If the Insured is not living on the effective date, the decrease will not take
effect. We may deduct the administrative charge (shown under Adjustments To The
Contract Fund) for the decrease.
- -------------------------------------------------------------------------------
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 Home 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 so on.
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.
(VUL-A-102)
Page 14
II-25
<PAGE>
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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
1 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.
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 persons 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 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.
(VUL-A-102)
Page 15
II-26
<PAGE>
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 the right may choose, or change the choice of, an option
for all or part of the residue. In come 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.
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.
(VUL-A-102)
Page 16
II-27
<PAGE>
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 of 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.
(VUL-A-102)
Page 17
II-28
<PAGE>
OPTION 1 TABLE
------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR
EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
------------------------------------------
Number of Years Monthly 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>
OPTION 2 TABLE
- -------------------------------------------------------------------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST
PAYABLE IMMEDIATELY
- -------------------------------------------------------------------------------------------------------
<CAPTION>
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 3.40 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
- -------------------------------------------------------------------------------------------------------
</TABLE>
(VUL-A-102)
Page 18
II-29
<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 Company.--The company issuing this contract.
You and Your.--The owner of the contract.
Insured.--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 Date.--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 attached copy of the initial application, together with
copies of any subsequent applications to change the policy, and any additional
contract data pages added to the policy, 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 an
application, to try to void the contract or to deny a claim.
CONTRACT MODIFICATIONS
Only a Company 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.
Also, for any increase in the face amount requested after the first
contract year, if the Insured, whether sane or insane, dies by suicide within
two years from the effective date of the increase, we will pay, as to the
increase in amount, no more than the sum of the charges paid for the increase.
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.
(VUL-A-102)
Page 19
II-30
<PAGE>
INCONTESTABILITY
Except as we state in the next sentence, we will not contest this contract
after it has been in force during the Insured's lifetime for two years from the
issue date. There are two exceptions: (1) non-payment of enough premium to
provide the required charges; and (2) any change in the contract that requires
our approval and that would increase our liability. For any such change, we will
not contest the change after it has been in effect during the Insured's lifetime
for two years from the date it takes effect.
ASSIGNMENT
We are under no obligation to comply with or honor an assignment unless we
receive it, or a copy of it, at our Home 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 the person paying premiums on this contract and on other
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 Home Office proof of
death and any other information we need to pay the claim. But we have the right
to postpone paying the part of the proceeds that is to come from a variable
investment option if: (1) the New York Stock Exchange is closed; or (2) the SEC
requires that trading be restricted or declares an emergency. We have the right
to postpone paying the remainder for up to six months.
CHANGE IN PLAN
You may be able to have this contract changed to another plan of life
insurance. Any change may be made only if we consent, and will be subject to
conditions and charges that are then determined. We have the right to postpone
paying the remainder for up to six months.
- --------------------------------------------------------------------------------
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 date 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 as
those 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.
(VUL-A-102)
Page 20
II-31
<PAGE>
- --------------------------------------------------------------------------------
ENDORSEMENTS
(Only we can endorse this contract.)
(VUL-A-102)
Page 21
II-32
<PAGE>
- --------------------------------------------------------------------------------
Flexible Premium Variable Life Insurance Policy. Insurance payable only upon
death. Cash values reflect premium payments, investment results and charges.
Eligible for annual dividends as stated under Dividends.
- --------------------------------------------------------------------------------
VUL-A-102
Page 22
II-33
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(5)(b)
PRUCO LIFE INSURANCE COMPENY
Phoenix, Arizona 85012
A STOCK COMPANY SUBSIDIARY OF
The Prudential Insurance Company of America
INSURED JOHN DOE XX XXX XXX Policy Number
JAN. 10, 1991 Contract Date
INITIAL FACE AMOUNT $100,000
PREMIUM PERIOD LIFE
AGENCY 0-MIL7
- --------------------------------------------------------------------------------
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, the investment experience of the investment options, and the charges
made. There is no guaranteed minimum.
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.
/s/ SPECIMEN /s/ SPECIMEN
Secretary President
Flexible Premium Variable Life Insurance Policy. Insurance payable only upon
death. Cash values reflect premium payments, investment results and charges.
Eligible for annual dividends as stated under Dividends.
- --------------------------------------------------------------------------------
VUL-B-104
II-34
<PAGE>
- --------------------------------------------------------------------------------
GUIDE TO CONTENTS
Page
----
Contract Data .............................................................. 3
Schedule of Face Amounts; List of Contract
Limitations; List of Supplementary Benefits.
Minimum Initial Premium; Adjustment to
Premium Payments; Adjustments to the
Contract Fund
Table of Maximum Monthly Mortality Rates per $1000 ......................... 4
List of Investment Options ................................................. 5
Schedule of Initial Allocation of Invested
Premium Amounts
Attained Age Factors ....................................................... 6
Premium Payment and Reinvestment ........................................... 7
Payment of Premiums; Minimal Initial
Premium; Premiums; Invested Premium
Amount; Allocations; Grace Period;
Reinstatement
Contract Fund .............................................................. 8
Coverage Amount
Separate Account ........................................................... 8
Separate Account; Investment Options;
Separate Account Investments
Transfers .................................................................. 9
Class One Investments; Class Two Investments;
Class Three Investments
Surrender .................................................................. 9
Net Cash Value; Return of Sales Charges
Loans ...................................................................... 10
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
Dividends .................................................................. 12
Participation; Dividend Options
Death Proceeds ............................................................. 12
Insurance Amount; Proceeds Arising From
Insured's Death
Face Amount Changes ........................................................ 13
Face Amount; Increase in Face Amount;
Decrease in Face Amount
Beneficiary ................................................................ 14
Settlement Options ......................................................... 14
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 ............................................... 16
Applicability; Interest on Proceeds; Settlements
at Payee's Death; Spendthrift and Creditor
Income Tables .............................................................. 17
General Provisions ......................................................... 18
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 ....................................................... 19
Mortality Table Described; Interest Rate;
Exclusions; Minimum Legal Values
VUL-B-104
Page 2
II-35
<PAGE>
CONTRACT DATA
Insured's Sex and Age M-35
xx xxx xxx Policy Number
Insured JOHN DOE Jan. 10, 1991 Contract Date
Initial Face Amount $100,000
Premium Period LIFE
Agency 0-MIL7
Beneficiary
CLASS 1 MARY DOE, WIFE
CLASS 2 ROBERT DOE, SON
LOAN INTEREST RATE: VARIABLE
INSURANCE AMOUNT: VARIABLE
SCHEDULE OF FACE AMOUNTS
EFFECTIVE RATING
AMOUNT DATE CLASS
------- ---- -----
INITIAL $100,000 JAN. 10, 1991 PREFERRED
$300,000 JAN. 10, 1992
$100,000 JAN. 10, 1998
*****END OF SCHEDULE*****
CONTINUED ON NEXT PAGE
VUL-B-104
Page 3
II-36
<PAGE>
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
LIST OF CONTRACT LIMITATIONS
o The minimum premium we will accept is $25.
o The minimum increase in face amount is $25,000.
o The minimum decrease in face amount is $10,000.
o The minimum face amount is $100,000.
o The minimum amount you may withdraw is $500.
o We may limit the number of face amount increases to one in any contract year.
o We may limit the amount of premiums in any contract year to $10,000.
o You may not borrow less than $500 at any one time except to pay premiums.
*****END OF LIST*****
LIST OF SUPPLEMENTARY BENEFITS
(Each benefit is described in the form that
bears the number shown for it)
NONE
*****END OF LIST*****
MINIMUM INITIAL PREMIUM
The minimum initial premium due on the contract date is $361.76
*****END OF SCHEDULE*****
CONTINUED ON NEXT PAGE
VUL-A-104
Page 3A
II-37
<PAGE>
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
ADJUSTMENTS TO PREMIUM PAYMENTS
From each premium paid, we will:
o Deduct a charge for any taxes attributable to premiums. For purposes of this
charge, the term "taxes attributable to premiums" shall include any federal,
state or local income, premium, excise, business or any other type of tax (or
component thereof) measured by or based upon the amount of premium received
by us.
o Deduct a charge for payment processing of up to $2.00.
o Deduct a charge at a rate of up to 8% of the payment to pay for
sales charges.
The remainder of the premium is the invested premium amount.
ADJUSTMENTS TO THE CONTRACT FUND
On the contract date the contract fund is equal to the investment premium amount
credited on that date, minus any of the charges described below which may be due
on that date. On any day after that date, we will adjust the contract fund by:
o adding any invested premium amounts.
o adding any increase due to investment results in the value of the investment
options.
o adding guaranteed interest at an effective annual rate of 4.0% a year on that
portion of the contract fund that is not in a investment option.
o adding any excess interest on that portion of the contract fund that is not
in a investment option.
o adding any dividends to the fund.
o adding any unused sales charges (see General Provisions).
o subtracting any charge for extra ratinq class.
o subtracting any charge for extra benefits.
CONTINUED ON NEXT PAGE
VUL-B-104
Page 3B
II-38
<PAGE>
POLICY NO. XX XXX XXX
CONTRACT DATA CONTINUED
o subtracting a monthly charge for the expected cost of mortality of up to the
maximum monthly rate (see Table of Maximum Monthly Rates) multiplied by the
coverage amount (described under Contract Fund).
o subtracting a monthly charge for administrative expenses of up to $8.00.
o subtracting any withdrawals.
o subtracting an administrative charge of up to $15 for withdrawals.
o subtracting an administrative charge for up to $15 for a decrease in face
amount.
o subtracting any decrease due to investment results in the value of the
investment options.
o subtracting a charge against the investment options at a rate of not
more than .00245475% a day (0.90% a year) for mortality and expense risks
that we assume.
o subtracting any amount charged against the contract for federal, state or
local taxes attributable to the contract (other than taxes previously
deducted from the premium).
VUL-B-104
Page 3C
II-39
<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.
We may charge less than these rates. At least once every five years, 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.
VUL-B-104
Page 4
II-40
<PAGE>
POLICY NO. 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 name.
These are Class One investments as described under Transfers.
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 40%
Bond 60%
VUL-B-104
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POLICY NO. XX XXX XXX
ATTAINED AGE FACTORS
These factors are used to determine your insurance amount as described under
Death Proceeds. These factors apply on the contract anniversary when the
Insured's attained age is as shown. To calculate the insurance amount at
other times we consider the time elapsed since the last contract anniversary.
Attained Attained
Age Factors Age Factors
--------- ------- -------- -------
35 4.21942 67 1.60268
36 4.07931 68 1.56603
37 3.94401 69 1.53110
38 3.81346 70 1.49782
39 3.68773 71 1.46620
40 3.56660 72 1.43628
41 3.44995 73 1.40810
42 3.33768 74 1.38170
43 3.22957 75 1.35703
44 3.12550 76 1.33391
45 3.02527 77 1.31221
46 2.92887 78 1.29175
47 2.83608 79 1.27237
48 2.74681 80 1.25398
49 2.66086 81 1.23656
50 2.57819 82 1.22016
51 2.49876 83 1.20486
52 2.42243 84 1.19068
53 2.34925 85 1.17762
54 2.27911 86 1.16552
55 2.21196 87 1.15430
56 2.14768 88 1.14376
57 2.08617 89 1.13366
58 2.02726 90 1.12379
59 1.97080 91 1.11397
60 1.91682 92 1.10388
61 1.86519 93 1.09325
62 1.81588 94 1.08180
63 1.76886 95 1.06940
64 1.72412 96 1.05619
65 1.68159 97 1.04267
66 1.64113 98 1.02984
99 1.01976
VUL-B-104
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PREMIUM PAYMENT AND REINSTATEMENT
PAYMENT OF PREMIUMS
Premiums may be paid at our Home Office or to any of our authorized agents.
If we are asked to do so, we will give a signed receipt. If we receive the first
premium after the contract date, we will credit an amount equal to the minimum
initial premium as of the contract date. We will credit the remainder, if any,
as of the date of receipt at our Home Office.
MINIMUM INITIAL PREMIUM
We show the minimum initial premium in the contract data pages. There is no
insurance under this contract until an amount at least equal to the minimum
initial premium is paid.
PREMIUMS
Except as we state in the next paragraph, 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 and maximum
premiums we will accept. We have the right to limit premiums as described in the
contract data pages. We also have the right to refuse any payment that increases
the insurance amount by more than it increases the contract fund.
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 adjustments described under
Adjustments To 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.
We show the initial allocation of invested premium amounts 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 change your allocation, 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 Home 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.
(VUL-B-104)
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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.
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.
COVERAGE AMOUNT
The coverage amount is used to determine the expected cost of mortality as
described under Adjustments To The Contract Fund. It is equal to the insurance
amount (see Insurance Amount) minus the contract fund.
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.
(VUL-B-104)
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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 into or out of investment options
if the contract is not in default, subject to certain restrictions depending on
an investment's class. The investment class for each investment is shown under
the List of Investment Options in the contract data pages. To make a transfer,
you must ask us in a form that meets our needs. Unless otherwise restricted, the
transfer will take effect on the date we receive your notice at our Home Office.
CLASS ONE INVESTMENTS
You may transfer amounts into or out of these investments up to four times
in each contract year.
CLASS TWO INVESTMENTS
You may transfer amounts into these investments up to four times in each
contract year. Transfers out of these investments may be made only with our
consent.
CLASS THREE INVESTMENTS
Transfers into or out of these investments may be made only with our
consent.
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 contract fund less any contract debt.
If the contract is in default, the net cash value is zero.
We will usually pay any net cash value within seven days after we receive
your request and the contract at our Home 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.
RETURN OF SALES CHARGES
If the contract is not in default, we will, upon surrender within the first
three contract years, return any sales charge we deducted from premiums paid
within the 365 days prior to the date we receive your surrender request at our
Home Office. If we have already credited a portion of the sales charges as we
describe under Unused Sales Charges, we will not return that portion again.
(VUL-B-104)
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LOANS
You may borrow any amount up to the current 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.
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.
(VUL-B-104)
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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 stated under
Adjustments To The Contract Fund. 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.
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 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. Unless you request otherwise, we will take any withdrawal
proportionately from all investment options that apply to the contract.
We may charge an administrative fee as stated in the contract data pages.
EFFECT ON INSURANCE AMOUNT
When you make a withdrawal, we will reduce your scheduled face amount(s),
subject to the minimum face amount, so that the coverage amount will not
increase. We describe coverage amount under Contract Fund. We will recompute
the contract's monthly deductions and expense charges. We will also send you
new contract data pages.
(VUL-B-104)
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DIVIDENDS
PARTICIPATION
This contract will be eligible for a dividend on the anniversary if the
Insured is living. We will decide each year what part, if any, of our surplus
to credit to this contract as a dividend. We do not expect to credit any
dividends to this contract.
DIVIDEND OPTIONS
While the contract is in force, you may choose any of the uses we show
below for any dividend. You must ask us in writing and in a form that meets
our needs.
While the contract is not in default past its days of grace, you may
choose any of these uses for any such dividend:
1. Cash.--We will pay it to you in cash.
2. Increase Contract Fund.--We will use it to increase your contract fund.
If you have not made another choice by 31 days after the anniversary, we
will use any dividend as we state under dividend option 2.
DEATH PROCEEDS
INSURANCE AMOUNT
This contract either has a variable or a fixed insurance amount. We show
the type of insurance amount that applies to this contract in the contract data
pages.
If this contract has a fixed 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, times the attained age factor that applies. We show the attained age
factors in the contract data pages.
If this contract has a variable 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, (2) the current face amount, plus the contract fund before
deduction of any monthly charges due on that date, and (3) the contract fund
before deduction of any monthly charges due on that date, plus any return of
sales charges (as described under Surrender), times the attained age factor
that applies.
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.
(VUL-B-104)
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FACE AMOUNT CHANGES
FACE AMOUNT
The Schedule of Face Amounts in the contract data pages shows one or more
face amounts. Subject to the requirements below, you may increase or decrease
the face amount(s).
INCREASE IN FACE AMOUNT
After the first contract year, you may increase the face amount(s) once
each contract year. You may do so subject to all these conditions and the
paragraph that follows:
1. You must ask for the increase in writing in a form that meets our needs;
if you are not the Insured and the Insured is age 8 or over, he or she
must sign the form too.
2. The amount of the increase must be at least equal to the minimum
increase in face amount, which we show on page 3.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the amount of the increase.
4. If we ask you to do so, you must send us the contract to be endorsed.
5. The contract must not be in default.
6. We must not, since the issue date, have changed the basis on which
benefits and charges are calculated under newly issued contracts.
7. You must make any required payment.
8. The Insured must be eligible for the same rating class and benefits as
shown on page 3.
9. If more than one face amount is shown in the contract data pages, each
must be increased by the same amount. Our permission is needed to do
otherwise.
An increase will take effect only if we approve your request for it at our
Home Office. If we approve the increase, we will recompute the contract's
charges. We will send you new contract data pages showing the amount and
effective date of the increase and the recomputed values. If the insured is not
living on the effective date, the increase will not take effect.
DECREASE IN FACE AMOUNT
After the first contract year, you may decrease the face amount. You may
do so subject to all these conditions and the paragraphs that follow:
1. You must ask for the decrease in writing in a form that meets our needs.
2. The amount of the decrease must be at least equal to the minimum
decrease in face amount, which we show on page 3.
3. The face amount(s) after the decrease must be at least equal to the
minimum face amount, which we show on page 3.
4. If we ask you to do so, you must send us the contract to be endorsed.
5. If more than one face amount is shown, each must be decreased by the
same amount. Our permission is needed to do otherwise.
A decrease will take effect only if we approve your request for it at our
Home Office. If we approve the decrease, we will recompute the contract's
charges. A decrease in face amount may also affect the amount of any extra
benefits this contract might have. We will send you new contract data pages
showing the amount and effective date of the decrease and the recomputed values.
If the Insured is not living on the effective date, the decrease will not take
effect. We may deduct the administrative charge (shown under Adjustments To The
Contract Fund) for the decrease.
(VUL-B-104)
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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 Home 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 so on.
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 1 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.
(VUL-B-104)
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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.
OPTION 4 (INSTALMENT 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 coupon. 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 persons 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.
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.
(VUL-B-104)
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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 of them is living, 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.
(VUL-B-104)
Page 16
II-52
<PAGE>
OPTION 1 TABLE
------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR
EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
------------------------------------------
Number of Years Monthly 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>
OPTION 2 TABLE
- -------------------------------------------------------------------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST
PAYABLE IMMEDIATELY
- -------------------------------------------------------------------------------------------------------
<CAPTION>
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 3.40 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
- -------------------------------------------------------------------------------------------------------
</TABLE>
(VUL-B-104)
Page 17
II-53
<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 Company.--The company issuing this contract.
You and Your.--The owner of the contract.
Insured.--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 Date.--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 attached copy of the initial application, together with
copies of any subsequent applications to change the policy, and any additional
contract data pages added to the policy, 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 an
application, to try to void the contract or to deny a claim.
CONTRACT MODIFICATIONS
Only a Company 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.
Also, for any increase in the face amount requested after the first
contract year, if the Insured, whether sane or insane, dies by suicide within
two years from the effective date of the increase, we will pay, as to the
increase in amount, no more than the sum of the charges paid for the increase.
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.
(VUL-B-104)
Page 18
II-54
<PAGE>
INCONTESTABILITY
Except as we state in the next sentence, we will not contest this contract
after it has been in force during the Insured's lifetime for two years from the
issue date. There are two exceptions: (1) non-payment of enough premium to
provide the required charges; and (2) any change in the contract that requires
our approval and that would increase our liability. For any such change, we will
not contest the change after it has been in effect during the Insured's lifetime
for two years from the date it takes effect.
ASSIGNMENT
We are under no obligation to comply with or honor an assignment unless we
receive it, or a copy of it, at our Home 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 the person paying premiums on this contract and on other
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 Home 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. Any change may be made only if we consent, and will be subject to
conditions and charges that are then determined.
- --------------------------------------------------------------------------------
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 as
those 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.
(VUL-B-104)
Page 19
II-55
<PAGE>
Flexible Premium Variable Life Insurance Policy. Insurance payable only upon
death. Cash values reflect premium payments, investment results and charges.
Eligible for annual dividends as stated under Dividends.
- --------------------------------------------------------------------------------
(VUL-B-104)
Page 20
II-56
EXHIBIT 1.A.(12)
- --------------------------------------------------------------------------------
RIDER FOR INTERIM TERM INSURANCE BENEFIT
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay the beneficiary an amount under this benefit if we receive due
proof that the Insured died on or after the date of the benefit but before the
contract date. But our payment is subject to the provisions of the benefit and
of the rest of this contract. The amount of the benefit is equal to the amount
of insurance provided by the contract on the contract date. We show the contract
date and the date of the benefit on the contract data pages.
CHANGES IN CONTRACT PROVISIONS
This contract has a Suicide Exclusion and an Incontestability provision. In
each of them, we refer to a period of time that extends from the issue date. But
for each of them we will count the time from the date of this benefit, not from
the issue date.
This contract might have a benefit for the payment of premiums by us in the
event of disability; it might have one that provides accidental death coverage.
If so, we might refer in either or both of those benefits to the contract date.
But we will use the date of this benefit, not the contract date.
The first contract premium is due on the contract date. We will grant 31
days of grace for paying it. This will be so even though we state otherwise
under Grace Period.
Except for the changes we describe above, all the provisions of this
contract will be in effect on and after the contract date if the Insured is then
living, as if the contract did not have this beneift. The benefit will not make
any dividend or any contract value that may be provided by the contract
available any sooner.
BENEFIT PREMIUM
We show the premium for this benefit on the contract data pages. This
premium is to be paid on or before the date of the benefit. It is not the
premium for the contract. Neither the benefit nor the premium for it provides
any insurance, or changes premiums payable, on or after the contract date.
PREMIUM ADJUSTMENT
The Insured might die before the contract date. If so, we will return that
part of the premium for this benefit that is more than was needed to pay for the
benefit through the date of death. We will add the amount we return to the
amount we would otherwise pay under the benefit.
THIS SUPPLEMENTARY BENEFIT RIDER ATTACHED TO THIS CONTRACT ON THE CONTRACT DATE
Pruco Life Insurance Companny,
By /s/ DOROTHY K. LIGHT
-------------------------
Secretary
VL 160A
II-57
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-58
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. 33-38271 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 explanation 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.
(3) The deduction in an amount equal to 1.25% of each premium is a
reasonable charge in relation to the additional income tax burden
imposed upon Pruco Life and its parent company, The Prudential
Insurance Company of America, as the result of the enactment of
Section 848 of the Internal Revenue Code. In reaching that
conclusion a number of factors were taken into account that, in my
opinion, were appropriate and which resulted in a projected
after-tax rate of return that is a reasonable rate to use in
discounting the tax benefit of the deductions allowed in Section 848
in taxable years subsequent to the year in which the premiums are
received.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
/s/
- -------------------------
Nancy D. Davis, FSA, MAAA
Vice President and Assistant Actuary
The Prudential Insurance Company of America
II-59
<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>
