AS FILED WITH THE SEC ON _______________. REGISTRATION NO. 33-29181
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
POST-EFFECTIVE AMENDMENT NO. 13
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
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PRUCO LIFE
VARIABLE UNIVERSAL ACCOUNT
(Exact Name of Trust)
PRUCO LIFE INSURANCE COMPANY
(Name of Depositor)
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 286-7754
(Address and telephone number of principal executive offices)
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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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It is proposed that this filing will become effective (check appropriate space):
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on June 3, 1999 pursuant to paragraph (b) of Rule 485
------------
(date)
[_] 60 days after filing pursuant to paragraph (a) of Rule 485
[_] on _________________ pursuant to paragraph (a) of Rule 485
(date)
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY FORM N-8B-2)
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Sale of the Contract and Sales Commissions
5. Pruco Life Variable Universal Account
6. Pruco Life Variable Universal Account
7. Not Applicable
8. Not Applicable
9. Litigation
10. Brief Description of the Contract; Short-Term
Cancellation Right or "Free Look"; Transfers;
Refund of Sales Charges; Reduction of Charges;
Cash Surrender Value; Death Benefit; Partial
Withdrawal of Cash Surrender Value; When Proceeds
are Paid; Contract Loans; Exchange Right Available
in Some States; Reduced Paid-Up Insurance Option
Available in Some States; Voting Rights;
Substitution of Series Fund Shares; Changes in
Face Amount
11. Brief Description of the Contract; Pruco Life
Variable Universal Account
12. Cover Page; Brief Description of the Contract; The
Prudential Series Fund, Inc.; Sale of the Contract
and Sales Commissions
13. Brief Description of the Contract; The Prudential
Series Fund, Inc.; Premiums; Allocation of
Premiums; Charges and Expenses; Refund of Sales
Charges; Reduction of Charges; Sale of the
Contract and Sales Commissions
14. Brief Description of the Contract; Detailed
Information for Prospective Contract Owners
15. Brief Description of the Contract; Premiums;
Allocation of Premiums; Transfers
16. Brief Description of the Contract; Detailed
Information for Prospective Contract Owners
17. Partial Withdrawal of Cash Surrender Value; When
Proceeds are Paid
18. Pruco Life Variable Universal Account; Cash
Surrender Value
19. Reports to Contract Owners
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
20. Not Applicable
21. Contract Loans
22. Not Applicable
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.
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
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
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
JUNE 7, 1999
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
PRUSELECT(SM) I
This prospectus describes certain individual flexible premium variable universal
life insurance contracts, PRUSELECT(SM) I Variable Life Insurance Contract* (the
"Contract"), issued by Pruco Life Insurance Company ("Pruco Life", "us", or
"we"), a stock life insurance company. Pruco Life is a wholly-owned subsidiary
of The Prudential Insurance Company of America ("Prudential"). These Contracts
provide individual universal life insurance coverage with flexible premium
payments and variable investment options. The Contracts are owned by employers,
trusts, associations or similar entities for the purpose of providing insurance
on the lives of selected employees. As of January 1, 1992, Pruco Life no longer
offers these Contracts for sale. In general, the owner, not the insured
employee, makes all the premium payments and receives the benefits under the
Contracts. The Contracts may be used for funding the owner's liabilities for
retiree medical benefits or other non-qualified employee benefits.
The Contracts provide a death benefit and a cash surrender value. The cash
surrender value generally increases with the payment of each premium, decreases
to reflect charges made by Pruco Life, and varies daily with investment
performance of the chosen subaccounts. There is no guaranteed minimum cash
surrender value. The death benefit generally remains fixed in the amount or
amounts scheduled at the outset of the Contract (the "face amount"). However,
Pruco Life may increase the death benefit to maintain the Contract's status as
life insurance under the Internal Revenue Code.
You may choose to invest your Contract's premiums in one or more of 20 available
subaccounts of the Pruco Life Variable Universal Account (the "Account"), each
of which invests in a corresponding portfolio of the Funds indicated below:
THE PRUDENTIAL SERIES FUND, INC. (THE "SERIES FUND")
Money Market Conservative Balanced Equity
Diversified Bond Flexible Managed Prudential Jennison
Government Income High Yield Bond Small Capitalization Stock
Zero Coupon Bond 2000 Stock Index Global
Zero Coupon Bond 2005 Equity Income Natural Resources
AIM VARIABLE INSURANCE FUNDS, INC. AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
AIM V.I. Value Fund American Century VP Value Fund
JANUS ASPEN SERIES MFS(R) VARIABLE INSURANCE TRUST (SM)
Growth Portfolio Emerging Growth Series
T. ROWE PRICE INTERNATIONAL SERIES, INC.
International Stock Portfolio
This prospectus describes the Contract generally and the Pruco Life Variable
Universal Account. The attached prospectuses for the Funds and their related
statements of additional information describe the investment objectives and the
risks of investing in the portfolios. Pruco Life may add additional investment
options in the future. Please read this prospectus and keep it for future
reference.
The Securities and Exchange Commission ("SEC") maintains a Web site
(http://www.sec.gov) that contains material incorporated by reference and other
information regarding registrants that file electronically with the SEC.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 286-7754
*PRUSELECT is a service mark of Prudential.
CVUL-1 Ed 6-99
<PAGE>
<TABLE>
PROSPECTUS CONTENTS
<CAPTION>
PAGE
<S> <C>
DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS.................................1
INTRODUCTION AND SUMMARY.............................................................2
BRIEF DESCRIPTION OF THE CONTRACT.................................................2
PREMIUMS..........................................................................2
CHARGES...........................................................................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 FUNDS.........................................................................5
DETAILED INFORMATION FOR CONTRACT OWNERS.............................................7
REQUIREMENTS FOR ISSUANCE OF A CONTRACT...........................................7
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"......................................7
PREMIUMS..........................................................................7
ALLOCATION OF PREMIUMS............................................................8
TRANSFERS.........................................................................8
CHARGES AND EXPENSES..............................................................9
REFUNDS OF SALES CHARGES.........................................................11
REDUCTION OF CHARGES.............................................................11
CASH SURRENDER VALUE.............................................................12
DEATH BENEFIT....................................................................12
PARTIAL WITHDRAWAL OF CASH SURRENDER VALUE.......................................13
CHANGES IN FACE AMOUNT...........................................................13
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS.14
CONTRACT LOANS...................................................................15
WHEN PROCEEDS ARE PAID...........................................................15
TAX TREATMENT OF CONTRACT BENEFITS...............................................16
LAPSE AND REINSTATEMENT..........................................................17
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS..............17
REDUCED PAID-UP INSURANCE OPTION AVAILABLE IN SOME STATES........................18
OTHER GENERAL CONTRACT PROVISIONS................................................18
VOTING RIGHTS....................................................................18
SUBSTITUTION OF FUND SHARES......................................................19
REPORTS TO CONTRACT OWNERS.......................................................19
SALE OF THE CONTRACT AND SALES COMMISSIONS.......................................19
STATE REGULATION.................................................................19
EXPERTS..........................................................................20
LITIGATION.......................................................................20
YEAR 2000 COMPLIANCE.............................................................20
ADDITIONAL INFORMATION...........................................................21
FINANCIAL STATEMENTS.............................................................22
DIRECTORS AND OFFICERS..............................................................23
FINANCIAL STATEMENTS OF PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT.......................A1
CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY
AND SUBSIDIARIES....................................................................B1
</TABLE>
<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
the Contract. It is equal to the Contract Fund plus any refund of sales charges
due, minus any Contract debt and applicable charges.
CONTRACT--Pruco Life Pruselect(SM) Variable Life Insurance Policy, an individual
flexible premium variable universal life insurance contract.
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
we have charged that is not yet due and that we have not yet added to the loan.
CONTRACT FUND--The total amount at any time credited to the Contract.
CONTRACT OWNER--The entity, typically an employer, trust or association, that
purchases the Contract.
CONTRACT YEAR--A year that starts on the Contract date or on a Contract
anniversary.
DEATH BENEFIT--The amount payable upon the death of the insured before the
deduction of any outstanding Contract debt.
FACE AMOUNT--The amount[s] of life insurance as shown in the Contract's schedule
of face amounts.
FUNDS--Mutual funds with separate portfolios. One or more of the available Fund
portfolios may be chosen as an underlying investment for the Contract.
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.
PRUCO LIFE INSURANCE COMPANY -- Us, we, Pruco Life. The company offering 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 Funds.
US, WE--Pruco Life Insurance Company ("Pruco Life").
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 Fund are calculated, which is
generally at 4:15 p.m. Eastern time on each day during which the New York Stock
Exchange is open.
YOU--The owner of the Contract.
1
<PAGE>
INTRODUCTION AND SUMMARY
THIS SUMMARY PROVIDES A BRIEF OVERVIEW OF THE MORE SIGNIFICANT ASPECTS OF THE
CONTRACT. WE PROVIDE FURTHER DETAIL IN THE SUBSEQUENT SECTIONS OF THIS
PROSPECTUS AND IN THE CONTRACT. THE CONTRACT, INCLUDING THE APPLICATION ATTACHED
TO IT, CONSTITUTES THE ENTIRE AGREEMENT BETWEEN YOU AND PRUCO LIFE AND YOU
SHOULD RETAIN THESE DOCUMENTS.
BRIEF DESCRIPTION OF THE CONTRACT
The Contract is an individual flexible premium variable universal life insurance
contract offered by Pruco Life Insurance Company ("Pruco Life", "us", or "we")
to employers, trusts, associations or similar entities and that provide
insurance on the lives of covered employees or other insured individuals. As of
January 1, 1992, Pruco Life no longer offers these Contracts for sale. In
general, the Contract owner, and not the insured, makes the premium payments and
receives benefits under the Contracts; the original owner may, however, be able
to assign certain Contract rights.
The Contract is a form of variable universal life insurance. It is based on a
Contract Fund, the value of which changes every business day. You may invest
premiums in one or more of the 20 available subaccounts. Your Contract Fund
value changes every day depending upon Contract charges, described in the chart
below, and upon the change in the value of the particular subaccounts that you
have selected.
Although the value of your Contract Fund will increase if there is favorable
investment performance in the subaccounts you select, there is a risk that
investment performance will be unfavorable and that the value of your Contract
Fund will decrease. The risk will be different, depending upon the subaccounts
you choose.
PREMIUMS
You have flexibility with respect to the payment of premiums. You generally
select the amount and timing of premium payments. The Contract typically sets
forth a schedule of annual target premiums that you may pay, but you need not
adhere to that schedule and instead may vary the timing and amount of premiums.
See PREMIUMS, page 7.
You are not required to pay any specific premium level to ensure that the
Contract remains inforce. Rather, the Contract will not lapse as long as the
Contract Fund is sufficient to pay the monthly charges. The payment of any
specified premium level does not guarantee that the Contract will remain
inforce. See LAPSE AND REINSTATEMENT, page 17.
You 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 20 subaccounts. Each subaccount is invested in a
corresponding portfolio of a mutual fund (a "Fund"). Information about the Fund
portfolios can be found under The Funds, on page 5 and in the attached
prospectuses for the Funds. Because you may invest premiums in these various
subaccounts, the Contract offers an opportunity for the cash surrender value to
appreciate more rapidly than it would under comparable fixed-benefit insurance.
You must accept the risk that, if investment performance is unfavorable, the
cash surrender value may not appreciate as rapidly or may decrease in value.
CHARGES
We deduct certain charges from each premium payment and from the amounts held in
the designated subaccount[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 on page 9. In brief, Pruco Life
may make the following charges:
2
<PAGE>
- --------------------------------------------------------------------------------
PREMIUM PAYMENT
- --------------------------------------------------------------------------------
|
|
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o less charge for taxes
attributable to premiums
o less $2 processing fee
- --------------------------------------------------------------------------------
|
|
- --------------------------------------------------------------------------------
o less a front-end sales load of not more than 7%
- --------------------------------------------------------------------------------
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INVESTED PREMIUM AMOUNT
o To be invested in one or a combination of the 20 available portfolios of
the Funds.
- --------------------------------------------------------------------------------
|
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- --------------------------------------------------------------------------------
DAILY CHARGES
o We deduct a daily mortality and expense risk charge, equivalent to an
annual rate of up to 0.9%, from the subaccount assets.
o We deduct management fees and expenses from the Fund assets.
- --------------------------------------------------------------------------------
|
|
- --------------------------------------------------------------------------------
MONTHLY CHARGES
o We deduct an administrative charge of up to $3 plus up to $0.04 per $1,000
of face amount of insurance from the Contract Fund.
o We deduct a charge for anticipated mortality (the "cost of insurance
charge") 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.
- --------------------------------------------------------------------------------
|
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POSSIBLE ADDITIONAL CHARGES
o We deduct an administrative processing charge of up to $15 in connection
with each partial withdrawal of excess cash surrender value.
o We deduct an administrative processing charge of up to $15 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 11.
For DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS, see page 1.
Additional information may also be obtained from Pruco Life. The address and
telephone number are set forth on the cover of this prospectus.
-----------------------------
THE REPLACEMENT OF LIFE INSURANCE IS GENERALLY NOT IN YOUR BEST INTEREST. IN
MOST CASES, IF YOU REQUIRE ADDITIONAL COVERAGE, THE BENEFITS OF YOUR EXISTING
CONTRACT CAN BE PROTECTED BY PURCHASING ADDITIONAL INSURANCE OR A SUPPLEMENTAL
CONTRACT. IF YOU ARE CONSIDERING REPLACING A CONTRACT, YOU SHOULD COMPARE THE
BENEFITS AND COSTS OF SUPPLEMENTING YOUR EXISTING CONTRACT WITH THE BENEFITS AND
COSTS OF PURCHASING ANOTHER CONTRACT AND YOU SHOULD CONSULT A QUALIFIED TAX
ADVISER.
THIS PROSPECTUS WAS ONLY OFFERED IN JURISDICTIONS IN WHICH THE OFFERING WAS
LAWFUL. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION FOR THE FUNDS.
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 is a stock life insurance company, organized in 1971 under the laws
of the State of Arizona. It is licensed to sell life insurance and annuities in
the District of Columbia, Guam, and in all states except New York. Pruco Life is
a wholly-owned subsidiary of Prudential, a mutual insurance company founded in
1875 under the laws of the State of New Jersey. Prudential (the "Company") is
currently considering reorganizing itself into a publicly traded stock company
through a process known as "demutualization." On February 10, 1998, the
Company's Board of Directors authorized management to take the preliminary steps
necessary to allow the Company to demutualize. On July 1, 1998, legislation was
enacted in New Jersey that would permit this conversion to occur and that
specified the process for conversion. Demutualization is a complex process
involving development of a plan of reorganization, adoption of a plan by the
Company's Board of Directors, a public hearing, voting by qualified
policyholders and regulatory approval, all of which could take two or more years
to complete. Prudential's management and Board of Directors have not yet
determined to demutualize and it is possible that, after careful review,
Prudential could decide not to go public.
The plan of reorganization, which hasn't been developed and approved, would
provide the criteria for determining eligibility and the methodology for
allocating shares or other consideration to those who would be eligible.
Generally, the amount of shares or other consideration eligible customers would
receive would be based on a number of factors, including the types, amounts and
issue years of their policies. As a general rule, owners of Prudential-issued
insurance policies and annuity contracts would be eligible, while mutual fund
customers and customers of the Company's subsidiaries, such as the Pruco Life
insurance companies, would not be. It has not yet been determined whether any
exceptions to that general rule will be made with respect to policyholders and
contract owners of Prudential's subsidiaries.
As of December 31, 1998, Prudential has invested over $442 million in Pruco Life
in connection with Pruco Life's organization and operation. Prudential may 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
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 a unit investment trust, which is a type of investment company.
It is registered with the Securities and Exchange Commission ("SEC") under the
Investment Company Act of 1940 ("1940 Act"). 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. Currently, you may invest in one or a combination of 20
available subaccounts within the Account, each of which invests in a single
corresponding portfolio of the Funds. Pruco Life may add additional subaccounts
in the future. The Account's financial statements begin on page A1.
4
<PAGE>
THE FUNDS
The following is a list of the Funds, the portfolios' investment objectives and
investment advisers:
THE PRUDENTIAL SERIES FUND, INC. (THE "SERIES FUND"):
o MONEY MARKET PORTFOLIO: The investment objective is maximum current income
consistent with the stability of capital and the maintenance of liquidity.
The Portfolio invests in high quality short-term debt obligations that
mature in 13 months or less.
o DIVERSIFIED BOND PORTFOLIO: The investment objective is a high level of
income over a longer term while providing reasonable safety of capital. The
Portfolio invests primarily in higher grade debt obligations and high
quality money market investments.
o GOVERNMENT INCOME PORTFOLIO: The investment objective is maximum current
income consistent with the stability of capital and the maintenance of
liquidity. The Portfolio invests in high-quality short-term money market
instruments issued by the U.S. government or its agencies, as well as by
corporations and banks, both domestic and foreign.
o ZERO COUPON BOND PORTFOLIOS - 2000 AND 2005: The investment objectives are
the highest predictable compound investment for a specific period of time,
consistent with the safety of invested capital. The Portfolios invest in
debt obligations of the United States Treasury and corporations that have
been issued without interest coupons, or have been stripped of their
interest coupons, or have interest coupons that have been stripped from the
debt obligation.
o CONSERVATIVE BALANCED PORTFOLIO: The investment objective is a total
investment return consistent with a conservatively managed diversified
portfolio. The Portfolio invests in a mix of equity securities, debt
obligations and money market instruments.
o FLEXIBLE MANAGED PORTFOLIO: The investment objective is a total investment
return consistent with an aggressively managed diversified portfolio. The
Portfolio invests in a mix of equity securities, debt obligations and money
market instruments.
o HIGH YIELD BOND PORTFOLIO: The investment objective is a high total return.
The Portfolio invests primarily in high yield/high risk debt securities.
o STOCK INDEX PORTFOLIO: The investment objective is investment results that
generally correspond to the performance of publicly-traded common stocks.
The Portfolio attempts to duplicate the price and yield performance of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index").
o EQUITY INCOME PORTFOLIO: The investment objective is both current income
and capital appreciation. The Portfolio invests primarily in common stocks
and convertible securities that provide good prospects for returns above
those of the S&P 500 Index or the NYSE Composite Index.
o EQUITY PORTFOLIO: The investment objective is capital appreciation. The
Portfolio invests primarily in common stocks of major established
corporations as well as smaller companies that offer attractive prospects
of appreciation.
o PRUDENTIAL JENNISON PORTFOLIO: The investment objective is to achieve
long-term growth of capital. The Portfolio invests primarily in equity
securities of major established corporations that offer above-average
growth prospects.
o SMALL CAPITALIZATION STOCK PORTFOLIO: The investment objective is to
achieve long-term growth of capital. The Portfolio attempts to duplicate
the price and yield performance of the Standard & Poor's Small
Capitalization Index (the S&P SmallCap Index).
o GLOBAL PORTFOLIO: The investment objective is long-term growth of capital.
The Portfolio invests primarily in common stocks (and their equivalents) of
foreign and U.S. companies.
o NATURAL RESOURCES PORTFOLIO: The investment objective is to achieve
long-term growth of capital. The Portfolio invests primarily in common
stocks and convertible securities of natural resource companies and
securities that are related to the market value of some natural resource.
5
<PAGE>
Prudential is the investment adviser for the assets of each of the portfolios of
the Series Fund. Prudential's principal business address is 751 Broad Street,
Newark, New Jersey 07102-3777. Prudential has a Service Agreement with its
wholly-owned subsidiary The Prudential Investment Corporation ("PIC"). The
Service Agreement provides that, subject to Prudential's supervision, PIC will
furnish investment advisory services in connection with the management of the
Series Fund. In addition, Prudential has entered into a Subadvisory Agreement
with its wholly-owned subsidiary Jennison Associates LLC ("Jennison"), under
which Jennison furnishes investment advisory services in connection with the
management of the Prudential Jennison Portfolio.
AIM VARIABLE INSURANCE FUNDS, INC.:
o AIM V.I. VALUE FUND. Seeks to achieve long-term growth of capital by
investing primarily in equity securities judged by the fund's investment
adviser to be undervalued relative to the investment adviser's appraisal of
the current or projected earnings of the companies issuing the securities,
or relative to current market values of assets owned by the companies
issuing the securities or relative to the equity market generally. Income
is a secondary objective.
A I M Advisors, Inc. ("AIM") is the investment adviser for this Fund. The
principal business address for AIM is 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.:
o AMERICAN CENTURY VP VALUE FUND. Seeks long-term capital growth with income
as a secondary objective. The fund seeks to achieve its objective by
investing primarily in equity securities of well-established companies with
intermediate-to-large market capitalizations that are believed by
management to be undervalued at the time of purchase.
American Century Investment Management, Inc. ("ACIM") is the investment adviser
for this Fund. ACIM's principal business address is American Century Tower, 4500
Main Street, Kansas City, Missouri 64111. The Principal Underwriter of the fund
is American Century Services, Inc., located at 4500 Main Street, Kansas City,
Missouri 64111.
JANUS ASPEN SERIES:
o GROWTH PORTFOLIO. Seeks long-term growth of capital in a manner consistent
with the preservation of capital.
Janus Capital Corporation is the investment adviser and is responsible for the
day-to-day management of the portfolio and other business affairs of the
portfolio. Janus Capital Corporation's principal business address is 100
Fillmore Street, Denver, Colorado 80206-4928.
MFS(R) VARIABLE INSURANCE TRUST(SM):
o EMERGING GROWTH SERIES. Seeks to provide long-term growth of capital.
Dividend and interest income from portfolio securities, if any, is
incidental to the Series' investment objective of long-term growth of
capital.
Massachusetts Financial Services Company, a Delaware corporation, is the
investment adviser to this MFS Series. The principal business address for the
Massachusetts Financial Services Company is 500 Boylston Street, Boston,
Massachusetts 02116.
T. ROWE PRICE INTERNATIONAL SERIES, INC.:
o INTERNATIONAL STOCK PORTFOLIO. Long-term growth of capital through
investments primarily in common stocks of established, non-U.S. companies.
Rowe Price-Fleming International, Inc. is the investment manager for this Fund.
The principal business address for Rowe Price-Fleming International, Inc. is 100
East Pratt Street, Baltimore, Maryland 21202.
Further information about Fund portfolios can be found in the attached
prospectuses and their statements of additional information for each Fund.
6
<PAGE>
The investment advisers for the Funds charge a daily investment management fee
as compensation for their services. These fees are described in the table under
DEDUCTIONS FROM PORTFOLIOS in the CHARGES AND EXPENSES section, see page 9, and
are more fully described in the prospectus for each Fund.
In the future it may become disadvantageous for both variable life insurance and
variable annuity contract separate accounts to invest in the same underlying
mutual funds. Although neither the companies that invest in the Funds nor the
Funds currently foresee any such disadvantage, the Board of Directors for each
Fund intends to monitor events in order to identify any material conflict
between variable life insurance and variable annuity contract owners and to
determine what action, if any, should be taken. Material conflicts could result
from such things as: (1) changes in state insurance law; (2) changes in federal
income tax law; (3) changes in the investment management of any portfolio of the
Funds; or (4) differences between voting instructions given by variable life
insurance and variable annuity contract owners.
Pruco Life may be compensated by an affiliate of each of the Funds (other than
the Prudential Series Fund) based upon an annual percentage of the average
assets held in the Fund by Pruco Life under the Contracts. These percentages
vary by Fund, and reflect administrative and other services provided by Pruco
Life.
A full description of the Funds, their investment objectives, management,
policies, restrictions, expenses, investment risks, and all other aspects of
their operation is contained in the attached prospectuses for each Fund and in
the related statements of additional information, which should be read in
conjunction with this prospectus. There is no assurance that the investment
objectives of the Funds will be met.
DETAILED INFORMATION FOR CONTRACT OWNERS
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
As of January 1, 1992, these Contracts were no longer available for sale. Pruco
Life offered the Contracts on both an individually underwritten basis and a
guaranteed issue basis. Underwritten Contracts required individualized evidence
of the insured's insurability and rating class. Guaranteed issue Contracts were
issued in certain circumstances on associated individuals, such as those
employees of a company who met criteria established by Pruco Life. The minimum
face amount offered depended on whether the Contract was issued on an
underwritten or guaranteed issue basis (the face amount is the minimum death
benefit, absent Contract debt or default). The minimum face amounts offered were
$100,000 for an underwritten Contract and $50,000 for a Contract issued on a
guaranteed issue basis. A Contract owner could have established a schedule of
face amounts under which the face amount changes on designated dates.
Generally, the Contract was issued on insureds between the ages of 20 and 75 for
underwritten Contracts, and between the ages of 20 and 64 for guaranteed issue
Contracts. In its discretion, Pruco Life may have issued the Contract on
insureds of other ages.
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"
Generally, you may return the Contract for a refund within 10 days after you
receive it, within 45 days after Part I of the application for insurance is
signed or within 10 days after Pruco Life mails or delivers a Notice of
Withdrawal Right, whichever is latest. 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 sets a minimum initial premium for issuance of a Contract. A Contract
typically contains a schedule of annual target premiums that the owner may pay.
The Contract owner need not follow that schedule, however, and has considerable
flexibility with respect to the timing and amount of payments. The minimum
premium Pruco Life will accept is $25, and Pruco Life reserves the right to
limit premiums over the target amount in any year to $10,000. Pruco Life may
also refuse to accept a premium that will immediately result in an increase in
the death benefit. See DEATH BENEFIT, page 12. The amount of premium payments
made by the Contract owner will affect the Contract's cash surrender value and
the likelihood of lapse, and may affect the size of the death benefit. Payment
of premiums in
7
<PAGE>
excess of certain amounts will cause the Contract to become a Modified Endowment
Contract, which affects the tax treatment of pre-death distributions under the
Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 16.
ALLOCATION OF PREMIUMS
On the Contract date, Pruco Life deducted any applicable charge for taxes
attributable to premiums, the $2 processing charge, and the front-end sales
charge from the initial premium, and the first monthly charges were made. See
CHARGES AND EXPENSES, page 9. Except as provided below, the remainder of the
initial premium was allocated among the subaccounts according to your specified
allocation. In certain states, any Contract owner who exercised his or her
short-term cancellation ("free-look") right received a return of premium with no
adjustment for investment experience. For those Contract owners, the initial
premium remaining after the deduction of the charges described above was
allocated to the Money Market Subaccount until the end of the free-look period.
If receipt of the first premium preceded the Contract date, there was a period
during which the Contract owner's initial premium was not invested.
The charge for taxes attributable to premiums, the $2 processing charge, and the
front-end sales charge also apply to all subsequent premium payments. The
remainder is invested as of the end of the valuation period in which it is
received at a Home Office in accordance with the allocation you previously
designated. Provided the Contract is not in default, you may change the way in
which subsequent premiums are allocated by giving written notice to a Home
Office, or by telephoning a Home Office, provided you are enrolled to use the
Telephone Transfer System. There is no charge for reallocating future premiums.
The percentage of the invested premium that you may allocate to a particular
subaccount must be at least 10% on the date the allocation takes effect. All
percentage allocations must be in whole numbers. For example, 33% can be
selected but 33@@@@% cannot. Of course, the total allocation to all selected
subaccount[s] must equal 100%.
TRANSFERS
If the Contract is not in default, you 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 and without 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 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. You may transfer amounts by proper written notice to a
Home Office, or by telephone, provided you are enrolled to use the Telephone
Transfer System. You will automatically be enrolled to use the Telephone
Transfer System unless the Contract is jointly owned or the Contract owner
elects not to have this privilege. Telephone transfers may not be available on
Contracts that are assigned, (see ASSIGNMENT, page 18), 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 Contract 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 its shares held in
the corresponding portfolio of the Series Fund will be redeemed. 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 takes effect on the date that proper
notice is received at a Home Office.
The Contract was not designed for professional market timing organizations,
other organizations, or individuals using programmed, large, or frequent
transfers. A pattern of exchanges that coincides with a "market timing" strategy
may be disruptive to the subaccounts and will be discouraged. If such a pattern
were to be found, we may be required to modify the transfer procedures,
including but not limited to refusing transfer requests of an agent under a
power of attorney on behalf of more than one Contract owner.
8
<PAGE>
CHARGES AND EXPENSES
This section provides a more detailed description of each charge that is
described briefly in the chart on page 3.
In several instances we will use the terms "maximum charge" and "current
charge." The "maximum charge," in each instance, is the highest charge that
Pruco Life is entitled to make under the Contract. The "current charge" is the
lower amount that Pruco Life is now charging. We reserve the right to increase
each current charge, up to the maximum charge, without giving any advance
notice.
All charges made by Pruco Life, whether deducted from premiums or from the
Contract Fund, are set forth below.
1. We deduct a charge from each premium payment for taxes attributable to
premiums. These taxes vary by state, and in some states by locality. The
tax rates generally range from 0.75% to 5% (but in some instances it may
exceed 5%), with the most common level being 2% of premiums. During 1998,
1997, and 1996, Pruco Life received a total of approximately $1,577,
$61,232, and $93,083, respectively, in charges for payment of taxes
attributable to premiums.
2. We deduct an administrative charge of $2 from each premium payment to cover
the cost of collecting and processing premiums. During 1998, 1997, and
1996, Pruco Life received a total of approximately $15, $790, and $1,004,
respectively, in processing charges.
3. We deduct a charge from each premium payment for sales expenses. This
charge, often called a "sales load", is deducted to compensate us for the
costs of selling the Contracts, including commissions, advertising, and the
printing and distribution of prospectuses and sales literature. This charge
consists of a deduction of up to 7% of the premium remaining after the
charge for taxes attributable to premiums and the $2 administrative charge
have been deducted. On a non-guaranteed basis, Pruco Life intends to charge
only a 5% sales load on payments made after the first year. A portion of
the sales load may be refunded to you if aggregate premiums under all
Contracts of this type purchased by you exceed an amount determined by
Pruco Life (currently $5 million). See REFUNDS OF SALES CHARGES, page 11.
During 1998, 1997, and 1996, Pruco Life received a total of approximately
$5,313, $205,059, and $151,540, respectively, in sales load charges.
4. On each Monthly date, (i.e., the Contract date and the same day of each
succeeding month), we reduce the Contract Fund by an administrative charge
of up to $3 plus up to $0.04 per $1,000 of face amount of insurance.
Currently, this charge is not more than $6 per month on a non-guaranteed
basis. This charge compensates Pruco Life for administrative expenses
incurred, among other things, in issuing the Contracts, processing claims,
paying cash surrender values and death benefits, keeping records, and
communicating with Contract owners. During 1998, 1997, and 1996, Pruco
Life received a total of approximately $25,788, $35,000, and $35,000,
respectively, in monthly administrative charges.
5. We deduct a mortality charge (also referred to as a "cost of insurance
charge") from the Contract Fund on each Monthly date to cover anticipated
mortality costs. When an insured dies, the amount of the death benefit paid
to the beneficiary is larger than the Contract Fund. The mortality charges
are designed to enable Pruco Life to pay this larger death benefit. The
charge is determined by multiplying the applicable "net amount at risk"
(the amount by which the death benefit, computed as if there were no
Contract debt, exceeds the Contract Fund) by a mortality rate based upon
the insured's sex, issue age and current attained age, and the anticipated
mortality for that class of persons. The maximum rate that Pruco Life may
charge for underwritten Contracts which are not in a substandard risk class
is 100% of the applicable rates of the non-smoker/smoker 1980 CSO Tables.
The maximum rate that Pruco Life may charge under Contracts issued on a
guaranteed issue basis which are not in a substandard risk class is 100% of
the applicable rates of the composite 1980 CSO Tables. Higher rates apply
if the insured is determined to be in a substandard risk class. Current
cost of insurance rates are typically lower than the maximum rates.
6. We deduct a charge for assuming mortality and expense risks. This is done
by deducting daily, from the assets of each of the subaccounts, a
percentage of those assets up to an effective annual rate of 0.9%. Pruco
Life currently intends to charge only 0.6% on these Contracts, but reserves
the right to make the full 0.9% charge. The mortality risk assumed is that
insureds may live for a shorter period of time than Pruco Life estimated
when it determined what mortality charges to make. The expense risk assumed
is that expenses will be greater than Pruco Life estimated in fixing its
administrative charges. During 1998, 1997, and 1996, Pruco Life received a
total of approximately $400,378, $341,984, and $273,293, respectively, in
mortality and expense risk charges.
9
<PAGE>
7. In connection with each partial withdrawal of cash surrender value, we
deduct an administrative processing charge, which is the lesser of: (a) $15
or; (b) 2% of each withdrawal. See PARTIAL WITHDRAWAL OF CASH SURRENDER
VALUE, page 13.
8. We deduct an administrative processing charge of up to $15 in connection
with each decrease in face amount. See CHANGES IN FACE AMOUNT, page 13.
9. The Account purchases shares of the Funds at net asset value. The net asset
value of those shares reflects investment management fees and expenses
already deducted from the assets of the Funds. More detailed information is
contained in the attached prospectus for the Funds.
The total expenses of each portfolio for the year 1998, expressed as a
percentage of the average assets during the year, are shown below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OTHER EXPENSES TOTAL EXPENSES (AFTER
PORTFOLIO ADVISORY (AFTER EXPENSE EXPENSE REIMBURSEMENT)
FEE REIMBURSEMENT)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SERIES FUND
MONEY MARKET 0.40% 0.01% 0.41%
DIVERSIFIED BOND 0.40% 0.02% 0.42%
GOVERNMENT INCOME 0.40% 0.03% 0.43%
ZERO COUPON BOND 2000 (1) 0.40% 0.00% 0.40%
ZERO COUPON BOND 2005 (1) 0.40% 0.00% 0.40%
CONSERVATIVE BALANCED 0.55% 0.02% 0.57%
FLEXIBLE MANAGED 0.60% 0.01% 0.61%
HIGH YIELD BOND (1) 0.55% 0.03% 0.58%
STOCK INDEX (1) 0.35% 0.02% 0.37%
EQUITY INCOME (1) 0.40% 0.02% 0.42%
EQUITY 0.45% 0.02% 0.47%
PRUDENTIAL JENNISON 0.60% 0.03% 0.63%
SMALL CAPITALIZATION STOCK 0.40% 0.07% 0.47%
GLOBAL 0.75% 0.11% 0.86%
NATURAL RESOURCES (1) 0.45% 0.04% 0.49%
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. VALUE FUND (2) 0.61% 0.05% 0.66%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP VALUE PORTFOLIO (3) 1.00% 0.00% 1.00%
JANUS ASPEN SERIES
GROWTH PORTFOLIO (4) 0.65% 0.03% 0.68%
MFS(R) VARIABLE INSURANCE TRUST SM
EMERGING GROWTH SERIES 0.75% 0.10% 0.85%
T. ROWE PRICE INTERNATIONAL SERIES, INC.
INTERNATIONAL STOCK PORTFOLIO (5) 1.05% 0.00% 1.05%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 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 offset the effect of some of the
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:
o the Zero Coupon Bond Portfolios will not exceed the investment
management fee;
o the Stock Index Portfolio will not exceed the investment management
fee plus 0.05% of the average daily net assets of the portfolio; and
o 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 0.62% for the Zero Coupon Bond Portfolio 2000
and 0.61% for the Zero Coupon Bond Portfolio 2005 during 1998. No such
adjustments were
10
<PAGE>
necessary for the High Yield Bond, Stock Index, Equity Income, and Natural
Resources Portfolios in 1998. Pruco Life intends to continue these
adjustments in the future, although we retain the right to discontinue
them.
(2) AIM may from time to time voluntarily waive or reduce its respective fees.
Effective May 1, 1999, the Fund will reimburse AIM in an amount up to 0.25%
of the average net asset value of the Fund for expenses incurred in
providing, or assuring that participating insurance companies provide,
certain administrative services. Currently, the fee only applies to the
average net asset value of each Fund in excess of the net asset value of
each Fund as calculated on April 30, 1999.
(3) Fees are all-inclusive.
(4) The fees and expenses in the table above are based on gross expenses of the
Portfolio before expense offset arrangements for the fiscal year ended
December 31, 1998. The information for the Portfolio is net of fee waivers
or reductions from Janus Capital. Fee reductions for the Portfolio reduce
the management fee to the level of the corresponding Janus retail fund.
Other waivers, if applicable, are first applied against the management fee
and then against other expenses. Without such waivers or reductions, the
management fee, other expenses and total operating expenses for the
Portfolio would have been 0.72%, 0.03% and 0.75%, respectively. Janus
Capital may modify or terminate the waivers or reductions at any time upon
at least 90 days' notice to the Trustees.
(5) The investment management fee includes the ordinary expenses of operating
the Portfolio.
THE EXPENSES RELATING TO THE FUNDS (OTHER THAN THOSE OF THE SERIES FUND)
HAVE BEEN PROVIDED TO PRUCO LIFE BY THE FUNDS. PRUCO LIFE HAS NOT
INDEPENDENTLY VERIFIED THEM.
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 any 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 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.
11. An extra risk charge may be deducted monthly for aviation, occupational or
temporary extra risks.
You may specify the subaccount[s] from which the monthly deductions are made. If
the amount held in a designated subaccount is insufficient or if no selection is
made by the Contract owner, the monthly charges will be deducted based on the
portions of the Contract Fund invested in each of the selected subaccount[s].
REFUNDS OF SALES CHARGES
Non-guaranteed refunds of sales load may be made based on such factors as total
aggregate premiums of a certain amount over a given period of time and the
persistency of the Contracts.
REDUCTION OF CHARGES
In addition to the refund of sales charges noted above, Pruco Life reserves the
right to reduce the sales charges and/or other charges on certain multiple life
sales, where it is expected that the amount or nature of such multiple sales
will result in savings of sales, administrative or other costs. Pruco Life
determines both the eligibility for such reduced charges, as well as the amount
of such reductions, by considering the following factors:
(1) the number of individuals;
(2) the total amount of premium payments expected to be received from these
Contracts;
(3) the nature of the association between these individuals, and the expected
persistency of the individual Contracts;
(4) the purpose for which the individual Contracts are purchased and whether
that purpose makes it likely that costs will be reduced; and
(5) any other circumstances which Pruco Life believes to be relevant in
determining whether reduced costs may be expected.
11
<PAGE>
Some of the reductions in charges for these sales may be contractually
guaranteed. Pruco Life may withdraw or modify other reductions on a uniform
basis. Pruco Life's reductions in charges for these Contracts will not be
unfairly discriminatory to the interests of any Contract owners.
CASH SURRENDER VALUE
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 16. Unlike
traditional fixed-benefit insurance, however, a Contract's cash surrender value
is not known in advance because it varies daily with the investment performance
of the selected subaccount[s]. It also varies with the amount of invested
premiums and charges deducted from the Account. The cash surrender value equals
the Contract Fund plus any refund of sales charges due minus any Contract debt
from any outstanding loan. The Contract owner may withdraw part of the cash
surrender value under certain conditions. See PARTIAL WITHDRAWAL OF CASH
SURRENDER VALUE, page 13 and TAX TREATMENT OF CONTRACT BENEFITS, page 16.
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 inforce is received. See LAPSE AND
REINSTATEMENT, page 17.
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 Fund portfolio[s].
DEATH BENEFIT
At issue, the Contract specified a face amount or a series of face amounts
applicable at different times. Assuming that there is no Contract debt and that
the Contract is not in default, the death benefit on any date is equal to the
greater of: (1) the current face amount; and (2) the Contract Fund before
deduction of any monthly charges due on that date, divided by the net single
premium per $1 at the insured's attained age. This second alternative ensures
that the death benefit will not be less than the amount of life insurance that
could be provided for an invested single premium amount equal to the Contract
Fund. The death benefit proceeds will be reduced to reflect any Contract debt.
If the Contract is in default and the insured dies in the 61-day grace period,
the death benefit less any overdue charges is payable. If the insured dies after
the grace period, no death benefit is payable. See LAPSE AND REINSTATEMENT, page
17.
The death benefit may be increased based on the size of the Contract Fund and
the insured's attained age, as described under (2) above. Such an increase
ensures that the Contract will satisfy the Internal Revenue Code's definition of
life insurance. The death benefit may thereafter vary based on the size of the
Contract Fund and the insured's attained age, but will not decrease below the
face amount. The net single premium is used only in the calculation of the death
benefit, not for premium payment purposes. The following is a table of
illustrative net single premiums for $1 of death benefit.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
REGULAR ISSUE PREFERRED
-------------------------------------------------------------------------------------------------------------------
INCREASE IN INCREASE IN INSURANCE
MALE NET SINGLE INSURANCE AMOUNT FEMALE NET SINGLE AMOUNT PER $1
ATTAINED AGE PREMIUM PER $1INCREASE IN ATTAINED AGE PREMIUM INCREASE IN CONTRACT
CONTRACT FUND FUND
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
25 .17000 $ 5.88 25 .15112 $ 6.62
35 .23700 $ 4.22 35 .21127 $ 4.73
55 .45209 $ 2.21 55 .40090 $ 2.49
65 .59468 $ 1.68 65 .53639 $ 1.86
-------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
GUARANTEED ISSUE
-------------------------------------------------------------------------------------------------------------------
INCREASE IN INCREASE IN
MALE NET SINGLE INSURANCE AMOUNT PER FEMALE NET SINGLE INSURANCE AMOUNT PER
ATTAINED AGE PREMIUM $1 INCREASE IN ATTAINED AGE PREMIUM $1 INCREASE IN
CONTRACT FUND CONTRACT FUND
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
25 .18455 $ 5.42 25 .15687 $ 6.37
35 .25596 $ 3.91 35 .21874 $ 4.57
55 .47352 $ 2.11 55 .40746 $ 2.45
65 .60986 $ 1.64 65 .54017 $ 1.85
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Whenever the death benefit is determined in this way, Pruco Life reserves the
right to refuse to accept further premium payments.
A Contract owner may be able to decrease the face amount of the Contract with
Pruco Life's consent. The Contract may become a Modified Endowment Contract and
may have tax consequences if such a decrease in the face amount occurs. See
CHANGES IN FACE AMOUNT, page 13, and TAX TREATMENT OF CONTRACT BENEFITS, page
16.
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 16. You
may make up to four withdrawals per year, subject to certain requirements. The
amount withdrawn must be at least $2,000 (in some states the minimum withdrawal
amount may be lower). Also, there is an administrative processing fee equal to
the lesser of $15 or 2% of the amount withdrawn. A Contract owner may not
designate the subaccount[s] from which a withdrawal is to be taken. The amount
withdrawn plus the administrative processing fee will be taken proportionately
from the Contract Fund based on the portion of the total Contract Fund in a
particular subaccount. An amount withdrawn may not be repaid except as a premium
subject to the applicable charges. You must make all requests for withdrawals in
writing. Upon request, we will tell you 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 is permitted if it will 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 that if the face
amount is decreased, there is a danger that the Contract might be classified as
a Modified Endowment Contract. A withdrawal may affect target premiums and
monthly deductions. You should consult your tax adviser and Pruco Life
representative before making any withdrawal which causes a decrease in face
amount. See TAX TREATMENT OF CONTRACT BENEFITS, page 16. Contract owners who
make a partial withdrawal will be sent replacement Contract pages showing the
new face amount.
CHANGES IN FACE AMOUNT
Pruco Life may, on a non-contractual basis, permit a Contract owner to decrease
the Contract's face amount without withdrawing a portion of the Contract Fund.
This can be done to reduce monthly charges. There is an administrative
processing fee of up to $15 for such a decrease. You should carefully consider
the tax consequences before requesting a decrease in face amount; the Contract
may become a Modified Endowment Contract if its face amount is decreased. See
TAX TREATMENT OF CONTRACT Benefits, page 16. We will not allow a decrease if it
will cause the face amount to fall below the minimum face amounts. Decreases in
face amount may also be combined with cash withdrawals. In its discretion, Pruco
Life may also allow a Contract owner to increase a Contract's face amount based
on such factors as changes in the insured's salary.
Increases in a Contract's face amount may also affect whether the Contract is a
Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 16.
13
<PAGE>
ILLUSTRATIONS OF CASH SURRENDER VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS
The following eight tables show how a Contract's death benefit and cash
surrender values change with the investment performance of the Account. They are
"hypothetical" because they are based, in part, upon several assumptions which
are described below. All eight tables assume the following:
o a Contract with a face amount of $100,000 bought by a male, non-smoker of a
given age, with no extra risks or substandard ratings, and no extra benefit
riders added to the Contract.
o the given premium is paid on each Contract anniversary, the deduction for
taxes attributable to premiums is 2% and no loans are taken.
o the Contract Fund has been invested in equal amounts in each of the 20
available portfolios of the Funds.
The first four tables (pages T1 through T4) assume target premiums are paid
annually for all years, and the remaining four tables (pages T5 through T8)
assume payment of the 7-pay premiums for seven years. These are the maximum
annual premiums that may be paid in the first seven years without the Contract's
becoming a Modified Endowment Contract under federal tax law. See TAX TREATMENT
OF CONTRACT BENEFITS, page 16. Furthermore, as their headings indicate, the
following eight tables alternate between tables assuming the current charges
will continue for the indefinite future and tables assuming the maximum
contractual charges have been made from the beginning.
Finally, there are three assumptions, shown separately, about the average
investment performance of the portfolios. The first is that there will be a
uniform 0% gross rate of return with the average value of the Contract Fund
uniformly adversely affected by very unfavorable investment performance. The
other two assumptions are that investment performance will be at a uniform gross
annual rate of 6% and 12%. Actual returns will fluctuate from year to year. In
addition, death benefits and cash surrender values would be different from those
shown if investment returns averaged 0%, 6% and 12% but fluctuated from those
averages throughout the years. Nevertheless, these assumptions help show how the
Contract values change with investment experience.
The first column in the following eight tables (pages T1 through T8) shows the
Contract year. The second column, to provide context, shows what the aggregate
amount would be if the premiums had been invested to earn interest, after taxes,
at 4% compounded annually. The next three columns show the death benefit payable
in each of the years shown for the three different assumed investment returns.
The last three columns show the cash surrender value payable in each of the
years shown for the three different assumed investment returns. The cash
surrender values in the first three years reflect the refund of the prior year's
sales charges applicable to surrenders.
A gross return (as well as the net return) is shown at the top of each column.
The gross return represents the combined effect of investment income and capital
gains and losses, realized or unrealized, of the portfolios before any reduction
is made for investment advisory fees or other Fund expenses. The net return
reflects average total annual expenses of the 20 portfolios of 0.59%, and the
daily deduction from the Contract Fund of 0.6% per year for the tables based on
current charges and 0.9% per year for the tables based on maximum charges. Thus,
assuming current charges, gross investment returns of 0%, 6% and 12% are the
equivalent of net investment returns of -1.19%, 4.81% and 10.81%, respectively.
Assuming maximum charges, gross investment returns of 0%, 6% and 12% are the
equivalent of net investment returns of -1.49%, 4.51% and 10.51%, respectively.
The actual fees and expenses of the portfolios associated with a particular
Contract may be more or less than 0.59% and will depend on which subaccounts are
selected. The death benefits and cash surrender values shown reflect the
deduction of all expenses and charges both from the Funds and under the
Contract.
Your Pruco Life representative can provide you with a hypothetical illustration
for your own age, sex, and rating class.
14
<PAGE>
<TABLE>
ILLUSTRATIONS
-------------
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $1,402.04 ANNUAL PREMIUMS FOR ALL YEARS
USING CURRENT CHARGES
<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 (-1.19% Net) (4.81% Net) (10.81% Net) (-1.19% Net) (4.81% Net) (10.81% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,458 $100,000 $100,000 $ 100,000 $ 1,150 $ 1,220 $ 1,290
2 $ 2,975 $100,000 $100,000 $ 100,000 $ 2,186 $ 2,394 $ 2,610
3 $ 4,552 $100,000 $100,000 $ 100,000 $ 3,229 $ 3,646 $ 4,097
4 $ 6,192 $100,000 $100,000 $ 100,000 $ 4,185 $ 4,883 $ 5,669
5 $ 7,898 $100,000 $100,000 $ 100,000 $ 5,188 $ 6,243 $ 7,480
6 $ 9,672 $100,000 $100,000 $ 100,000 $ 6,167 $ 7,656 $ 9,475
7 $ 11,517 $100,000 $100,000 $ 100,000 $ 7,124 $ 9,129 $ 11,678
8 $ 13,435 $100,000 $100,000 $ 100,000 $ 8,061 $ 10,664 $ 14,113
9 $ 15,431 $100,000 $100,000 $ 100,000 $ 8,976 $ 12,264 $ 16,805
10 $ 17,506 $100,000 $100,000 $ 100,000 $ 9,869 $ 13,931 $ 19,782
15 $ 29,197 $100,000 $100,000 $ 103,703 $14,020 $ 23,434 $ 40,223
20 $ 43,420 $100,000 $100,000 $ 162,901 $17,473 $ 35,130 $ 73,646
25 $ 60,725 $100,000 $100,000 $ 248,527 $20,405 $ 50,461 $129,657
30 (Age 65) $ 81,779 $100,000 $116,899 $ 370,803 $21,864 $ 69,517 $220,509
35 $107,394 $100,000 $138,609 $ 549,389 $20,857 $ 92,541 $366,794
40 $138,559 $100,000 $163,329 $ 816,885 $15,970 $120,359 $601,971
45 $176,476 $100,000(2) $192,701 $1,225,916 $ 3,366(2) $153,673 $977,631
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0%, the Contract would go into default in policy
year 46, unless an additional premium payment was made.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rates of
inflation. The death benefit and cash surrender value for a contract would be
different from those shown if the actual rates of return averaged 0%, 6%, and
12% over a period of years, but also fluctuated above or below those averages
for individual contract years. No representations can be made by Pruco Life or
the Series Fund that these hypothetical rates of return can be achieved for any
one year or sustained over any period of time.
T1
<PAGE>
<TABLE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $1,402.04 ANNUAL PREMIUMS FOR ALL YEARS
USING MAXIMUM CONTRACTUAL CHARGES
<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 (-1.49% Net) (4.51% Net) (10.51% Net) (-1.49% Net) (4.51% Net) (10.51% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,458 $100,000 $100,000 $100,000 $ 1,100 $ 1,169 $ 1,237
2 $ 2,975 $100,000 $100,000 $100,000 $ 2,083 $ 2,283 $ 2,491
3 $ 4,552 $100,000 $100,000 $100,000 $ 3,041 $ 3,437 $ 3,867
4 $ 6,192 $100,000 $100,000 $100,000 $ 3,878 $ 4,537 $ 5,282
5 $ 7,898 $100,000 $100,000 $100,000 $ 4,786 $ 5,777 $ 6,941
6 $ 9,672 $100,000 $100,000 $100,000 $ 5,666 $ 7,058 $ 8,762
7 $ 11,517 $100,000 $100,000 $100,000 $ 6,519 $ 8,384 $ 10,763
8 $ 13,435 $100,000 $100,000 $100,000 $ 7,344 $ 9,756 $ 12,961
9 $ 15,431 $100,000 $100,000 $100,000 $ 8,139 $11,174 $ 15,379
10 $ 17,506 $100,000 $100,000 $100,000 $ 8,905 $12,640 $ 18,038
15 $ 29,197 $100,000 $100,000 $100,000 $12,225 $20,721 $ 35,975
20 $ 43,420 $100,000 $100,000 $143,159 $14,467 $30,111 $ 64,721
25 $ 60,725 $100,000 $100,000 $209,064 $15,032 $40,811 $109,069
30 (Age 65) $ 81,779 $100,000 $100,000 $296,480 $12,881 $52,925 $176,311
35 $107,394 $100,000 $100,080 $413,623 $ 5,803 $66,817 $276,151
40 $138,559 $ 0(2) $111,487 $571,878 $ 0(2) $82,156 $421,422
45 $176,476 $ 0 $122,699 $787,471 $ 0 $97,849 $627,984
</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>
<TABLE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $3,573.47 ANNUAL PREMIUMS FOR ALL YEARS
USING CURRENT CHARGES
<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 (-1.19% Net) (4.81% Net) (10.81% Net) (-1.19% Net) (4.81% Net) (10.81% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,716 $100,000 $100,000 $100,000 $ 2,887 $ 3,064 $ 3,242
2 $ 7,581 $100,000 $100,000 $100,000 $ 5,469 $ 5,995 $ 6,543
3 $ 11,601 $100,000 $100,000 $100,000 $ 8,062 $ 9,115 $ 10,257
4 $ 15,782 $100,000 $100,000 $100,000 $10,420 $ 12,185 $ 14,175
5 $ 20,129 $100,000 $100,000 $100,000 $12,892 $ 15,560 $ 18,693
6 $ 24,651 $100,000 $100,000 $100,000 $15,301 $ 19,072 $ 23,686
7 $ 29,353 $100,000 $100,000 $100,000 $17,647 $ 22,730 $ 29,212
8 $ 34,244 $100,000 $100,000 $100,000 $19,928 $ 26,543 $ 35,339
9 $ 39,330 $100,000 $100,000 $100,000 $22,143 $ 30,521 $ 42,144
10 (Age 65) $ 44,620 $100,000 $100,000 $100,000 $24,289 $ 34,676 $ 49,717
15 $ 74,416 $100,000 $100,000 $152,236 $33,926 $ 58,687 $101,639
20 $110,668 $100,000 $122,790 $253,912 $41,551 $ 90,485 $187,111
25 $154,773 $100,000(2) $162,097 $407,228 $45,428(2) $129,267 $324,752
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0%, the Contract would go into default in policy
year 40, unless an additional premium payment was made.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rates of
inflation. The death benefit and cash surrender value for a contract would be
different from those shown if the actual rates of return averaged 0%, 6%, and
12% over a period of years, but also fluctuated above or below those averages
for individual contract years. No representations can be made by Pruco Life or
the Series Fund that these hypothetical rates of return can be achieved for any
one year or sustained over any period of time.
T3
<PAGE>
<TABLE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $3,573.47 ANNUAL PREMIUMS FOR ALL YEARS
USING MAXIMUM CONTRACTUAL CHARGES
<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 (-1.49% Net) (4.51% Net) (10.51% Net) (-1.49% Net) (4.51% Net) (10.51% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,716 $100,000 $100,000 $100,000 $ 2,577 $ 2,745 $ 2,913
2 $ 7,581 $100,000 $100,000 $100,000 $ 4,814 $ 5,297 $ 5,801
3 $ 11,601 $100,000 $100,000 $100,000 $ 6,956 $ 7,905 $ 8,936
4 $ 15,782 $100,000 $100,000 $100,000 $ 8,753 $10,321 $ 12,098
5 $ 20,129 $100,000 $100,000 $100,000 $10,688 $13,035 $ 15,805
6 $ 24,651 $100,000 $100,000 $100,000 $12,511 $15,798 $ 19,846
7 $ 29,353 $100,000 $100,000 $100,000 $14,214 $18,609 $ 24,258
8 $ 34,244 $100,000 $100,000 $100,000 $15,784 $21,461 $ 29,085
9 $ 39,330 $100,000 $100,000 $100,000 $17,209 $24,352 $ 34,380
10 (Age 65) $ 44,620 $100,000 $100,000 $100,000 $18,477 $27,278 $ 40,206
15 $ 74,416 $100,000 $100,000 $120,099 $22,078 $42,549 $ 80,183
20 $110,668 $100,000 $100,000 $190,621 $18,692 $59,282 $140,471
25 $154,773 $100,000(2) $100,235 $284,539 $ 760(2) $79,934 $226,912
</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>
<TABLE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $3,897 ANNUAL PREMIUMS FOR SEVEN YEARS
USING CURRENT CHARGES
<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 (-1.19% Net) (4.81% Net) (10.81% Net) (-1.19% Net) (4.81% Net) (10.81% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,053 $100,000 $100,000 $ 100,000 $ 3,571 $ 3,778 $ 3,984
2 $ 8,268 $100,000 $100,000 $ 100,000 $ 6,833 $ 7,459 $ 8,110
3 $ 12,651 $100,000 $100,000 $ 100,000 $10,128 $ 11,395 $ 12,765
4 $ 17,210 $100,000 $100,000 $ 100,000 $13,191 $ 15,328 $ 17,733
5 $ 21,952 $100,000 $100,000 $ 100,000 $16,401 $ 19,648 $ 23,449
6 $ 26,883 $100,000 $100,000 $ 102,746 $19,567 $ 24,173 $ 29,782
7 $ 32,011 $100,000 $100,000 $ 122,709 $22,692 $ 28,914 $ 36,765
8 $ 33,291 $100,000 $100,000 $ 130,683 $22,185 $ 30,076 $ 40,465
9 $ 34,623 $100,000 $100,000 $ 139,212 $21,673 $ 31,287 $ 44,541
10 $ 36,008 $100,000 $100,000 $ 148,332 $21,154 $ 32,548 $ 49,031
15 $ 43,809 $100,000 $102,403 $ 204,655 $18,459 $ 39,719 $ 79,379
20 $ 53,300 $100,000 $107,115 $ 284,083 $15,371 $ 48,425 $ 128,431
25 $ 64,848 $100,000 $114,920 $ 404,409 $11,863 $ 59,954 $ 210,980
30 (Age 65) $ 78,898 $100,000 $124,199 $ 579,691 $ 6,722 $ 73,859 $ 344,730
35 $ 95,991 $ 0(2) $135,541 $ 838,663 $ 0(2) $ 90,493 $ 559,925
40 $116,788 $ 0 $149,921 $1,229,155 $ 0 $110,478 $ 905,777
45 $142,090 $ 0 $168,382 $1,828,401 $ 0 $134,279 $1,458,095
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0%, the Contract would go into default in policy
year 35, unless an additional premium payment was made.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rates of
inflation. The death benefit and cash surrender value for a contract would be
different from those shown if the actual rates of return averaged 0%, 6%, and
12% over a period of years, but also fluctuated above or below those averages
for individual contract years. No representations can be made by Pruco Life or
the Series Fund that these hypothetical rates of return can be achieved for any
one year or sustained over any period of time.
T5
<PAGE>
<TABLE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
ASSUME PAYMENT OF $3,897 ANNUAL PREMIUMS FOR SEVEN YEARS
USING MAXIMUM CONTRACTUAL CHARGES
<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 (-1.49% Net) (4.51% Net) (10.51% Net) (-1.49% Net) (4.51% Net) (10.51% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,053 $100,000 $100,000 $ 100,000 $ 3,515 $ 3,720 $ 3,926
2 $ 8,268 $100,000 $100,000 $ 100,000 $ 6,712 $ 7,327 $ 7,967
3 $ 12,651 $100,000 $100,000 $ 100,000 $ 9,857 $11,092 $ 12,430
4 $ 17,210 $100,000 $100,000 $ 100,000 $12,682 $14,756 $ 17,092
5 $ 21,952 $100,000 $100,000 $ 100,000 $15,723 $18,862 $ 22,540
6 $ 26,883 $100,000 $100,000 $ 100,000 $18,711 $23,148 $ 28,560
7 $ 32,011 $100,000 $100,000 $ 117,418 $21,648 $27,625 $ 35,180
8 $ 33,291 $100,000 $100,000 $ 124,484 $21,028 $28,583 $ 38,545
9 $ 34,623 $100,000 $100,000 $ 132,002 $20,399 $29,571 $ 42,234
10 $ 36,008 $100,000 $100,000 $ 139,998 $19,760 $30,591 $ 46,276
15 $ 43,809 $100,000 $100,000 $ 188,279 $16,323 $36,166 $ 73,028
20 $ 53,300 $100,000 $100,000 $ 253,909 $12,167 $42,528 $114,790
25 $ 64,848 $100,000 $100,000 $ 343,023 $ 6,492 $49,546 $178,955
30 (Age 65) $ 78,898 $ 0(2) $100,000 $ 464,020 $ 0(2) $57,044 $275,943
35 $ 95,991 $ 0 $100,000 $ 628,443 $ 0 $64,719 $419,574
40 $116,788 $ 0 $100,000 $ 852,405 $ 0 $72,309 $628,146
45 $142,090 $ 0 $100,000 $1,158,958 $ 0 $79,664 $924,234
</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.
T6
<PAGE>
<TABLE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $7,633 ANNUAL PREMIUMS FOR SEVEN YEARS
USING CURRENT CHARGES
<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 (-1.19% Net) (4.81% Net) (10.81% Net) (-1.19% Net) (4.81% Net) (10.81% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,938 $100,000 $100,000 $100,000 $ 6,841 $ 7,241 $ 7,642
2 $ 16,194 $100,000 $100,000 $100,000 $13,076 $ 14,287 $ 15,547
3 $ 24,780 $100,000 $100,000 $100,000 $19,383 $ 21,833 $ 24,485
4 $ 33,710 $100,000 $100,000 $100,000 $25,242 $ 29,381 $ 34,041
5 $ 42,997 $100,000 $100,000 $100,000 $31,404 $ 37,703 $ 45,083
6 $ 52,655 $100,000 $100,000 $106,972 $37,499 $ 46,453 $ 57,352
7 $ 62,699 $100,000 $101,076 $128,641 $43,533 $ 55,663 $ 70,842
8 $ 65,207 $100,000 $102,325 $137,727 $42,428 $ 57,848 $ 77,862
9 $ 67,815 $100,000 $103,649 $147,545 $41,283 $ 60,118 $ 85,578
10 (Age 65) $ 70,528 $100,000 $105,053 $158,163 $40,092 $ 62,473 $ 94,056
15 $ 85,808 $100,000 $113,313 $225,843 $33,139 $ 75,652 $150,782
20 $104,399 $100,000 $125,702 $331,742 $23,116 $ 92,631 $244,464
25 $127,017 $100,000(2) $141,815 $495,548 $ 4,938(2) $113,093 $395,185
</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.
T7
<PAGE>
<TABLE>
PRUSELECT I VARIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 55
ASSUME PAYMENT OF $7,633 ANNUAL PREMIUMS FOR SEVEN YEARS
USING MAXIMUM CONTRACTUAL CHARGES
<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 (-1.49% Net) (4.51% Net) (10.51% Net) (-1.49% Net) (4.51% Net) (10.51% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,938 $100,000 $100,000 $100,000 $ 6,530 $ 6,922 $ 7,314
2 $ 16,194 $100,000 $100,000 $100,000 $12,423 $13,589 $ 14,803
3 $ 24,780 $100,000 $100,000 $100,000 $18,209 $20,547 $ 23,080
4 $ 33,710 $100,000 $100,000 $100,000 $23,367 $27,293 $ 31,723
5 $ 42,997 $100,000 $100,000 $100,000 $28,948 $34,900 $ 41,893
6 $ 52,655 $100,000 $100,000 $100,000 $34,432 $42,873 $ 53,203
7 $ 62,699 $100,000 $100,000 $119,079 $39,825 $51,246 $ 65,577
8 $ 65,207 $100,000 $100,000 $126,388 $38,167 $52,671 $ 71,452
9 $ 67,815 $100,000 $100,000 $134,161 $36,395 $54,098 $ 77,815
10 (Age 65) $ 70,528 $100,000 $100,000 $142,429 $34,488 $55,523 $ 84,700
15 $ 85,808 $100,000 $100,000 $192,354 $22,125 $62,546 $128,423
20 $104,399 $100,000 $100,000 $260,415 $ 734 $68,909 $191,903
25 $127,017 $ 0(2) $100,000(2) $353,621 $ 0(2) $73,499(2) $282,002
</TABLE>
(1) Assumes no Contract loan has been made.
(2) Based on a gross return of 0%, the Contract would go into default in policy
year 21, unless an additional premium payment was made. Based on a gross
return of 6%, the Contract would go into default in policy year 40 unless
an additional premium payment was made.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations made by an owner, prevailing interest rates, and rates of
inflation. The death benefit and cash surrender value for a contract would be
different from those shown if the actual rates of return averaged 0%, 6%, and
12% over a period of years, but also fluctuated above or below those averages
for individual contract years. No representations can be made by Pruco Life or
the Series Fund that these hypothetical rates of return can be achieved for any
one year or sustained over any period of time.
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CONTRACT LOANS
You may borrow from Pruco Life an amount up to the "loan value" of the Contract,
using the Contract as the only security for the loan. The loan value of a
Contract is 90% of its Contract Fund, if the Contract is not in default. The
minimum amount that may be borrowed at any one time is $500 unless the loan is
used to pay premiums on a life insurance policy issued by Pruco Life or its
affiliates.
The Contract provides a choice of fixed or variable loan interest rates. Under
the fixed loan interest rate provision, interest charged on a loan accrues daily
at a fixed effective annual rate of 5.5%. Under the variable loan interest rate
provision, interest charged on any loan will accrue daily at an annual rate
Pruco Life determines at the start of each Contract year (instead of at the
fixed 5.5% rate). The interest rate will not exceed any rate required by state
law and will not exceed the greater of 5% and the "Published Monthly Average"
for the calendar month ending two 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. If that average is no longer
published, a substantially similar average established by the insurance
regulator where the Contract is issued, will be used.
For example, the Published Monthly Average in 1998 ranged from 6.72% to 7.00%.
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 "Contract debt" is the amount of all outstanding loans plus any interest
accrued but not yet due. If at any time your Contract debt exceeds your Contract
Fund, Pruco Life will notify you of its intent to terminate the Contract in 61
days, within which time you may repay all or enough of the loan to keep the
Contract inforce. If you fail to keep the Contract inforce, the amount of unpaid
Contract debt will be treated as a distribution which may be taxable. See TAX
TREATMENT OF CONTRACT BENEFITS -- PRE-DEATH DISTRIBUTIONs, page 16, and LAPSE
AND REINSTATEMENt, page 17.
When a loan is made, an amount equal to the loan proceeds is transferred out of
the applicable subaccount[s]. The reduction is generally made in the same
proportions as the value that each subaccount bears to the total value of the
Contract. While a fixed-rate loan is outstanding, the amount that was
transferred continues to be treated as part of the Contract Fund, but it is
credited with the assumed effective annual rate of return of 4% rather than with
the actual rate of return of the applicable subaccount[s]. While a loan made
pursuant to the variable loan interest rate provision is outstanding, the amount
that was 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 applies.
If the death benefit becomes payable while a loan is outstanding, or if the
Contract is surrendered, any Contract debt will be deducted from the proceeds
otherwise payable.
A loan will have a permanent effect on a Contract's cash surrender value and may
have a permanent effect on the death benefit because the investment results of
the selected subaccount[s] will apply only to the amount remaining in those
subaccount[s]. The longer the loan is outstanding, the greater the effect is
likely to be. The effect could be favorable or unfavorable. If investment
results are greater than the rate being credited upon the amount of the loan
while the loan is outstanding, Contract values will not increase as rapidly as
they would have if no loan had been made. If investment results are below that
rate, Contract values will be higher than they would have been had no loan been
made. Loan repayments are allocated to the subaccounts 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. See TAX TREATMENT OF CONTRACT
BENEFITS, page 16.
WHEN PROCEEDS ARE PAID
We will generally pay any death benefit, cash surrender value, withdrawal, or
loan proceeds within seven days after all the documents required for such a
payment are received at a Home Office. The amount is determined as of the end of
the valuation period in which the necessary documents are received at a Home
Office, except the death benefit is determined as of the date of death.
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: (1) the New York
Stock Exchange is closed for other than a regular holiday or weekend; or (2) the
SEC restricts trading; or (3) the SEC declares that an emergency exists.
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TAX TREATMENT OF CONTRACT BENEFITS
This summary provides general information on the federal income tax treatment of
the Contract. It is not a complete statement of what the federal income taxes
will be in all circumstances. It is based on current law and interpretations,
which may change. It does not cover state taxes or other taxes. It is not
intended as tax advice. You should consult your own qualified tax adviser for
complete information and advice.
TREATMENT AS LIFE INSURANCE. The Contract must meet certain requirements to
qualify as life insurance for tax purposes. These requirements include certain
definitional tests and rules for diversification of the Contract's investments.
For further information on the diversification requirements, see TAXATION OF THE
FUND in the statement of additional information for the Series Fund. We believe
we have taken adequate steps to ensure that the Contract qualifies as life
insurance for tax purposes. Generally speaking, this means that:
o you will not be taxed on the growth of the funds in the Contract,
unless you receive a distribution from the Contract,
o the Contract's death benefit will be tax free to your beneficiary.
Although we believe that the Contract should qualify as life insurance for tax
purposes, there are some uncertainties, particularly because the Secretary of
Treasury has not yet issued permanent regulations that bear on this question.
Accordingly, we reserve the right to make changes -- which will be applied
uniformly to all Contract owners after advance written notice -- that we deem
necessary to ensure that the Contract will qualify as life insurance.
PRE-DEATH DISTRIBUTIONS. The tax treatment of any distribution you receive
before the insured's death depends on whether the Contract is classified as a
Modified Endowment Contract.
CONTRACTS NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
o If you surrender the Contract or allow it to lapse, you will be taxed
on the amount you receive in excess of the premiums you paid less the
untaxed portion of any prior withdrawals. For this purpose, you will
be treated as receiving any portion of the cash surrender value used
to repay Contract debt. The tax consequences of a surrender may differ
if you take the proceeds under an income payment settlement option.
o Generally, you will be taxed on a withdrawal to the extent the amount
you receive exceeds the premiums you paid for the Contract less the
untaxed portion of any prior withdrawals. However, under some limited
circumstances, in the first 15 Contract years, all or a portion of a
withdrawal may be taxed if the Contract Fund exceeds the total
premiums paid less the untaxed portions of any prior withdrawals, even
if total withdrawals do not exceed total premiums paid.
o Extra premiums for optional benefits and riders generally do not count
in computing the premiums paid for the Contract for the purposes of
determining whether a withdrawal is taxable.
o Loans you take against the Contract are ordinarily treated as debt and
are not considered distributions subject to tax.
MODIFIED ENDOWMENT CONTRACTS.
o The rules change if the Contract is classified as a Modified Endowment
Contract. The Contract could be classified as a Modified Endowment
Contract if premiums substantially in excess of scheduled premiums are
paid or a decrease in the face amount of insurance is made (or a rider
removed). The addition of a rider or an increase in the face amount of
insurance may also cause the Contract to be classified as a Modified
Endowment Contract. You should first consult a qualified tax adviser
and your Pruco Life representative if you are contemplating any of
these steps.
o If the Contract is classified as a Modified Endowment Contract, then
amounts you receive under the Contract before the insured's death,
including loans and withdrawals, are included in income to the extent
that the Contract Fund exceeds the premiums paid for the Contract
increased by the amount of any loans previously included in income and
reduced by any untaxed amounts previously received other than the
amount of any loans excludible from income. An assignment of a
Modified Endowment Contract is taxable in the same way.
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<PAGE>
These rules also apply to pre-death distributions, including loans,
made during the two-year period before the time that the Contract
became a Modified Endowment Contract.
o Any taxable income on pre-death distributions (including full
surrenders) is subject to a penalty of 10 percent unless the amount is
received on or after age 59?, on account of your becoming disabled or
as a life annuity. It is presently unclear how the penalty tax
provisions apply to Contracts owned by businesses.
o All Modified Endowment Contracts issued by us to you during the same
calendar year are treated as a single Contract for purposes of
applying these rules.
WITHHOLDING. You must affirmatively elect that no taxes be withheld from a
pre-death distribution. Otherwise, the taxable portion of any amounts you
receive will be subject to withholding. You are not permitted to elect out of
withholding if you do not provide a social security number or other taxpayer
identification number. You may be subject to penalties under the estimated tax
payment rules if your withholding and estimated tax payments are insufficient to
cover the tax due.
OTHER TAX CONSIDERATIONS. If you transfer or assign the Contract to someone
else, there may be gift, estate and/or income tax consequences. If you transfer
the Contract to a person two or more generations younger than you (or designate
such a younger person as a beneficiary), there may be Generation Skipping
Transfer tax consequences. Deductions for interest paid or accrued on Contract
debt or on other loans that are incurred or continued to purchase or carry the
Contract may be denied. Your individual situation or that of your beneficiary
will determine the federal estate taxes and the state and local estate,
inheritance and other taxes due if you or the insured dies.
BUSINESS-OWNED LIFE INSURANCE. If a business, rather than an individual, is the
owner of the Contract, there are some additional rules. Business Contract owners
generally cannot deduct premium payments. Business Contract owners generally
cannot take tax deductions for interest on Contract debt paid or accrued after
October 13, 1995. An exception permits the deduction of interest on policy loans
on Contracts for up to 20 key persons. The interest deduction for Contract debt
on these loans is limited to a prescribed interest rate and a maximum aggregate
loan amount of $50,000 per key insured person. The corporate alternative minimum
tax also applies to business-owned life insurance. This is an indirect tax on
additions to the Contract Fund or death benefits received under business-owned
life insurance policies.
LAPSE AND REINSTATEMENT
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 will go into
default.
Should this happen, Pruco Life will send you a notice of default setting forth
the payment necessary to keep the Contract inforce. This payment must be
received at a Home Office within the 61 day grace period after the notice of
default is mailed or the Contract will lapse. A Contract that lapses with an
outstanding Contract loan may have tax consequences. See TAX TREATMENT OF
CONTRACT BENEFITS, page 16.
A Contract that has lapsed may be reinstated within five 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. It is possible
for a lapsed Contract to be classified as a Modified Endowment Contract if
reinstated after lapsing. See TAX TREATMENT OF CONTRACT BENEFITS, page 16.
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS
The Contracts employ mortality tables that distinguish between males and
females. Thus, premiums and benefits differ under Contracts issued on males and
females of the same age. The Contract was not sold in those states that had
adopted regulations prohibiting sex-distinct insurance rates. The Contract may
not be assigned if to do so would violate regulations or laws relating to
sex-distinct insurance rates.
17
<PAGE>
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 purchase fixed reduced paid-up insurance. Fixed reduced
paid-up insurance provides 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. A Contract may be classified as a Modified
Endowment Contract if this option is exercised. See TAX TREATMENT OF CONTRACT
BENEFITS, page 16.
OTHER GENERAL CONTRACT PROVISIONS
ASSIGNMENT. This Contract may not be assigned if the 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. We will not be obligated to comply with any
assignment unless we receive a copy at a Home Office.
BENEFICIARY. You designated and named your beneficiary in the application. You
may change the beneficiary, provided it is in accordance with the terms of the
Contract.
INCONTESTABILITY. We will not contest the Contract after it has been inforce
during the insured's lifetime for two years from the issue date except when any
change is made in the Contract that requires Pruco Life's approval and would
increase our liability. We will not contest such change after it has been in
effect for two years during the lifetime of the insured.
MISSTATEMENT OF AGE OR SEX. If the insured's stated age or sex (except where
unisex rates apply) or both were 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.
SETTLEMENT OPTIONS. The Contract grants to most Contract owners, or to the
beneficiary, a wide variety of optional ways of receiving Contract proceeds,
other than in a lump sum. A Pruco Life representative can explain these options
upon request.
VOTING RIGHTS
As described earlier, all of the assets held in the subaccounts will be invested
in shares of the corresponding portfolios of the Funds. Pruco Life is the legal
owner of those shares and has the right to vote on any matter voted on at
shareholders meetings of the Funds. However, Pruco Life will, as required by
law, vote the shares of the Funds in accordance with voting instructions
received from Contract owners at any regular and special shareholders meetings.
A Fund will not hold annual shareholders meetings when not required to do so
under the laws of the state of its incorporation or the Investment Company Act
of 1940. 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. If the applicable federal securities laws
or regulations, or their current interpretation change so as to permit Pruco
Life to vote shares of the Funds in its own right, it may elect to do so.
Matters on which Contract owners may give voting instructions include the
following:
(1) election of the Board of Directors of the Funds;
(2) ratification of the independent accountant of the Funds;
(3) approval of the investment advisory agreement for a portfolio of the Funds
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 Funds.
Contract owners participating in such portfolios will vote separately on the
investment advisory agreement or any change in a portfolio's fundamental
investment policy, pursuant to the requirements of Rule 18f-2 under the
Investment Company Act of 1940.
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<PAGE>
The number of Fund shares for which a Contract owner may give instructions 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 Funds. 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 applicable 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 they 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 Fund's
portfolios, or to approve or disapprove an investment advisory contract for a
Fund. In addition, Pruco Life itself may disregard voting instructions that
would require changes in the investment policy or investment adviser of one or
more of the 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 FUND SHARES
Although Pruco Life believes it to be unlikely, it is possible that in the
judgment of its management, one or more of the portfolios of the Funds may
become unsuitable for investment by Contract owners because of investment policy
changes, tax law changes, or the unavailability of shares for investment. In
that event, Pruco Life may seek to substitute the shares of another portfolio or
of an entirely different mutual fund. The approval of the SEC, and possibly one
or more state insurance departments, will be required before this can be done.
Contract owners will be notified of any such substitution.
REPORTS TO CONTRACT OWNERS
Once each Contract year (except where the Contract is inforce as fixed reduced
paid-up insurance), Pruco Life will send you statements providing certain
information pertinent to your 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.
You will also be sent annual and semi-annual reports of the Funds showing the
financial condition of the portfolios and the investments held in each
portfolio.
SALE OF THE CONTRACT AND SALES COMMISSIONS
Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
Prudential, acts as the principal underwriter of the Contract. Prusec, organized
in 1971 under New Jersey law, is registered as a broker and dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. Prusec's principal business address is 751 Broad
Street, Newark, New Jersey 07102-3777. The Contract was sold by registered
representatives of Prusec who were also authorized by state insurance
departments to do so. The Contract may also have been 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. Premiums after the first year may generate up to a 4%
commission. Moreover, trail commissions of up to 0.2% of the Contract Fund as of
the Contract's anniversary may be paid. 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. This may include the amounts derived from the
mortality and expense risk charge described in item 7 under CHARGES AND
EXPENSES, page 9.
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.
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<PAGE>
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 consolidated financial statements of Pruco Life and its subsidiaries as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998 and the financial statements of the Account as of December 31,
1998 and for each of the three years in the period then ended included in this
prospectus have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting. PricewaterhouseCoopers LLP's
principal business address is 1177 Avenue of the Americas, New York, New York
10036.
Actuarial matters included in this prospectus have been examined by Nancy D.
Davis, FSA, MAAA, Vice President and Actuary of Prudential whose opinion is
filed as an exhibit to the registration statement.
LITIGATION
Several actions have been brought against Pruco Life alleging that Pruco Life
and its agents engaged in improper life insurance sales practices. Prudential
has agreed to indemnify Pruco Life for losses, if any, resulting from such
litigation. No other significant litigation is being brought against Pruco Life
that would have a material effect on its financial position.
YEAR 2000 COMPLIANCE
The services provided to you as a purchaser of a Variable Universal Life
Insurance Contract depend on the smooth functioning of numerous computer
systems. Many computer systems in use today are programmed to recognize only the
last two digits of a date as the year. As a result, any systems using this kind
of programming can not distinguish a date using "00" and may treat it as "1900"
instead of "2000." This problem may impact computer systems that store business
information, but it could also affect other equipment used in our business like
telephone, fax machines and elevators. If this problem is not corrected, the
"Year 2000" issue could affect the accuracy and integrity of business records.
Prudential's regular business operations could be interrupted as well as those
of other companies that deal with us.
In addition, the operations of the mutual funds associated with the Variable
Universal Life Insurance Contract could experience problems resulting from the
Year 2000 issue. Please refer to the respective mutual fund's prospectus for
information regarding their approach to Year 2000 concerns. The following
describes Prudential's effort to address Year 2000 concerns.
To address this potential problem Prudential, as the parent company of Pruco
Life, organized its Year 2000 efforts around the following three areas:
o BUSINESS SYSTEMS - Computer programs directly used to support our business;
o INFRASTRUCTURE - Computers and other business equipment like telephones and
fax machines; and
o BUSINESS PARTNERS - Year 2000 readiness of essential business partners.
BUSINESS SYSTEMS. The business systems component includes a wide range of
computer programs that directly support Prudential's business operations
including systems for: insurance product processing, securities trading,
personnel record keeping and general accounting systems. All business systems
were analyzed to determine whether each computer program with a Year 2000
problem should be retired, replaced or renovated. The majority of this work has
been completed. A few remaining programs are currently being tested and
completion of this process is expected by June 1999.
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<PAGE>
INFRASTRUCTURE. As with business applications, we established a specific
methodology and process for addressing infrastructure issues. The infrastructure
effort includes mainframe computer system hardware and operating system
software, mid-range systems and servers, telecommunications equipment and
systems, buildings and facilities systems, personal computers, and vendor
hardware and software. Other than desktop systems, substantially all other
infrastructure systems have been tested. Presently a small number of midrange
computers, and building and facility systems are still in the testing phase. We
expect to have the infrastructure implementation process completed by June 1999.
BUSINESS PARTNERS. Prudential recognizes the importance of determining the Year
2000 readiness of external business relationships especially those that involve
electronic data transfer products and services, and products that impact our
essential business processes. Prudential first classified each business partner
as "highly critical" or "less critical" to our business and then began to
develop risk assessment and contingency plans to address the potential that a
business partner could experience a Year 2000 failure. All highly critical
business partner relationships have been assessed and contingency planning is
completed. Risk assessment and contingency planning continues for less critical
business partners, and the target completion date for these relationships is
June 1999.
Prudential believes that the Business Systems, Infrastructure and Business
Partners components of the Year 2000 project are substantially on schedule. A
small number of the projects may not meet their targeted completion date.
However, Prudential expects that these projects will be completed by September,
1999. If there are any delays, they should not have a significant impact on the
timing of the project as a whole.
THE COST OF YEAR 2000 READINESS
Prudential is funding the Year 2000 program from internal operating budgets, and
estimates that its total costs to address the Year 2000 issue will total
approximately $220 million. Because these expenses were part of the operating
budget, they did not impact the management of Variable Universal Life Insurance
Contracts. During the course of the Year 2000 program, some optional computer
projects have been delayed, but these delays have not had any material effect on
Variable Universal Life Insurance Contracts.
YEAR 2000 RISKS AND CONTINGENCY PLANNING
Prudential believes that it is well positioned to lessen the impact of the Year
2000 problem. However, given the nature of this issue, we can not be 100%
certain that we are completely prepared, particularly because we can not be
certain of Year 2000 readiness of third parties. As a result, we are unable to
determine at this time whether the consequences of Year 2000 failures may have a
material adverse effect on the results of Prudential's operations, liquidity or
financial condition. In the worst case, it is possible that a Year 2000
technology failure, whether internal or external, could have a material impact
on Prudential's results of operations, liquidity, or financial position. If
Prudential is unable to address the Year 2000 problem, we may have difficulty in
responding to your incoming phone calls, calculating your unit values or
processing withdrawals and purchase payments. It is also possible that the
mutual funds associated with the Variable Universal Life Insurance Contract will
be unable to value their securities, in turn creating difficulties in purchasing
or selling shares of the respective mutual fund and calculating corresponding
unit asset values. The objective of Prudential's Year 2000 program has been to
reduce these risks as much as possible.
Most of the operations of the Variable Universal Life Insurance Contract involve
such a large number of individual transactions that they can only be handled
with the help of computers. As a result, our current contingency plans include
responses to the failure of specific business programs or infrastructure
components. However, our contingency responses are now being reviewed and we
expect to finalize them by June, 1999 to ensure that they are workable under the
special conditions of a Year 2000 failure. Prudential believes that with the
completion of its Year 2000 program as scheduled, the possibility of significant
interruptions of normal operations will be reduced.
ADDITIONAL INFORMATION
Pruco Life has filed a registration statement with the SEC under the Securities
Act of 1933, relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. Certain portions have been omitted pursuant to the rules and
regulations of the SEC. The omitted information may, however, be obtained from
the SEC's principal office in Washington, D.C., upon payment of a prescribed
fee.
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FINANCIAL STATEMENTS
The financial statements of the Account should be distinguished from the
consolidated financial statements of Pruco Life and its subsidiaries, which
should be considered only as bearing upon the ability of Pruco Life to meet its
obligations under the Contracts.
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DIRECTORS AND OFFICERS
The directors and major officers of Pruco Life, listed with their principal
occupations during the past five years, are shown below.
DIRECTORS OF PRUCO LIFE
JAMES J. AVERY, JR., CHAIRMAN AND DIRECTOR. -- Senior Vice President and Chief
Actuary, Prudential Individual Insurance Group since 1997; 1995 to 1997:
President of Prudential Select; Prior to 1995: Chief Operating Officer of
Prudential Select.
WILLIAM M. BETHKE, DIRECTOR. -- Chief Investment Officer since 1997; Prior to
1997: President, Prudential Capital Markets Group.
IRA J. KLEINMAN, DIRECTOR. -- Executive Vice President, Prudential International
Insurance Group since 1997; 1995 to 1997: Chief Marketing and Product
Development Officer, Prudential Individual Insurance Group; Prior to 1995:
President, Prudential Select.
ESTHER H. MILNES, PRESIDENT AND DIRECTOR. -- Vice President and Actuary,
Prudential Individual Insurance Group since 1996; Prior to 1996: Senior Vice
President and Chief Actuary, Prudential Insurance and Financial Services.
I. EDWARD PRICE, VICE CHAIRMAN AND DIRECTOR. -- Senior Vice President and
Actuary, Prudential Individual Insurance Group since 1995; Prior to 1995: Chief
Executive Officer, Prudential International Insurance.
KIYOFUMI SAKAGUCHI, DIRECTOR. -- President, Prudential International Insurance
Group since 1995; Prior to 1995: Chairman and Chief Executive Officer, The
Prudential Life Insurance Co., Ltd.
OFFICERS WHO ARE NOT DIRECTORS
C. EDWARD CHAPLIN, TREASURER. -- Vice President and Treasurer of Prudential
since 1995; Prior to 1995: Managing Director and Assistant Treasurer of
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; Prior to 1995:
Vice President, North America Customer Services, Chase Manhattan Bank.
CLIFFORD E. KIRSCH, CHIEF LEGAL OFFICER AND SECRETARY. -- Chief Counsel,
Variable Products, Law Department of Prudential since 1995; Prior to 1995:
Associate General Counsel with Paine Webber.
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.
EDWARD A. MINOGUE, SENIOR VICE PRESIDENT. -- Vice President, Annuity Services,
Prudential Investments since 1997; Prior to 1997: Director, Merrill Lynch.
HIROSHI NAKAJIMA, SENIOR VICE PRESIDENT. -- President & Chief Executive Officer,
Pruco Life Insurance Company, Taiwan Branch since 1997; Prior to 1997: Senior
Managing Director, Prudential Life Insurance Co., Ltd.
IMANTS SAKSONS, SENIOR VICE PRESIDENT. -- Vice President, Compliance, Prudential
Individual Financial Services since 1998; Prior to 1998: Vice President, Market
Conduct, U.S. Operations, Manulife Financial.
SHIRLEY H. SHAO, SENIOR VICE PRESIDENT AND CHIEF ACTUARY. -- Vice President and
Associate Actuary, Prudential.
DENNIS G. SULLIVAN, VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER. -- Vice
President and Deputy Controller, Prudential since 1998; 1997 to 1998, Vice
President and Controller, ContiFinancial Corporation; Prior to 1997, Director,
Saloman Brothers.
The business address of all directors and officers of Pruco Life is 213
Washington Street, Newark, New Jersey 07102-2992.
Pruco Life directors and officers are elected annually.
23
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF NET ASSETS (UNAUDITED)
MARCH 31, 1999
SUBACCOUNTS
---------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Investment in The Prudential Series Fund, Inc.
Portfolios at net asset value [Note 3] .... $19,609,651 $42,031,090 $45,297,365 $33,403,623 $47,379,878
----------- ----------- ----------- ----------- -----------
Net Assets ................................... $19,609,651 $42,031,090 $45,297,365 $33,403,623 $47,379,878
=========== =========== =========== =========== ===========
NET ASSETS, representing:
Equity of contract owners .................... $19,609,651 $42,031,090 $45,297,365 $33,403,623 $47,379,878
----------- ----------- ----------- ----------- -----------
$19,609,651 $42,031,090 $45,297,365 $33,403,623 $47,379,878
=========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A1
<PAGE>
<TABLE>
SUBACCOUNTS (CONTINUED)
- -------------------------------------------------------------------------------------------------------
ZERO COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL GOVERNMENT
2000 BOND INDEX INCOME RESOURCES GLOBAL INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 17,431,308 $ 2,988,677 $173,693,440 $ 14,500,611 $ 940,287 $ 14,086,716 $ 8,657,238
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 17,431,308 $ 2,988,677 $173,693,440 $ 14,500,611 $ 940,287 $ 14,086,716 $ 8,657,238
============ ============ ============ ============ ============ ============ ============
$ 17,431,308 $ 2,988,677 $173,693,440 $ 14,500,611 $ 940,287 $ 14,086,716 $ 8,657,238
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 17,431,308 $ 2,988,677 $173,693,440 $ 14,500,611 $ 940,287 $ 14,086,716 $ 8,657,238
============ ============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A2
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF NET ASSETS (UNAUDITED)
MARCH 31, 1999
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------
ZERO COUPON SMALL
BOND PRUDENTIAL CAPITALIZATION
2005 JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investment in The Prudential Series Fund, Inc.
Portfolios at net asset value [Note 3] .... $16,321,258 $ 4,386,074 $10,412,507
----------- ----------- -----------
Net Assets ................................... $16,321,258 $ 4,386,074 $10,412,507
=========== =========== ===========
NET ASSETS, representing:
Equity of contract owners .................... $16,321,258 $ 4,386,074 $10,412,507
----------- ----------- -----------
$16,321,258 $ 4,386,074 $10,412,507
=========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A3
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1999 and the years ended December 31, 1998 and 1997
SUBACCOUNTS
---------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
INVESTMENT INCOME
<S> <C> <C> <C> <C> <C> <C>
Dividend income ............................ $ 162,811 $ 461,945 $ 461,061 $ 0 $ 2,359,120 $ 2,574,631
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A] 20,701 53,117 50,651 59,784 229,634 205,292
Reimbursement for excess expenses [Note 5C] 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
NET EXPENSES .................................. 20,701 53,117 50,651 59,784 229,634 205,292
----------- ----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) .................. 142,110 408,828 410,410 (59,784) 2,129,486 2,369,339
----------- ----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received ..... 0 0 0 0 128,093 408,037
Realized gain (loss) on shares redeemed .. 0 0 0 1,731 173,161 94,146
Net change in unrealized gain (loss)
on investments .......................... 0 0 0 (168,005) (29,348) (288,588)
----------- ----------- ----------- ----------- ----------- -----------
NET GAIN (LOSS) ON INVESTMENTS ................ 0 0 0 (166,274) 271,906 213,595
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................. $ 142,110 $ 408,828 $ 410,410 $ (226,058) $ 2,401,392 $ 2,582,934
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A4
<PAGE>
<TABLE>
SUBACCOUNTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------- ----------------------------------------- -------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED) (UNAUDITED)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 860,120 $ 1,108,812 $ 0 $ 1,147,432 $ 1,050,936 $ 0 $ 1,965,960 $ 2,025,296
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
66,647 284,011 286,301 47,182 209,364 206,248 67,656 271,618 256,921
0 0 0 0 0 0 0 0 0
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
66,647 284,011 286,301 47,182 209,364 206,248 67,656 271,618 256,921
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(66,647) 576,109 822,511 (47,182) 938,068 844,688 (67,656) 1,694,342 1,768,375
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
0 5,026,484 2,827,131 0 3,419,770 5,545,715 0 2,703,038 5,037,552
263,128 4,779,486 1,774,816 (54,205) 353,509 605,368 (9,343) 935,553 200,066
17,025 (5,230,122) 4,476,157 542,462 (1,305,317) (1,682,924) 690,367 (276,688) (1,945,306)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
280,153 4,575,848 9,078,104 488,257 2,467,962 4,468,159 681,024 3,361,903 3,292,312
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 213,506 $ 5,151,957 $ 9,900,615 $ 441,075 $ 3,406,030 $ 5,312,847 $ 613,368 $ 5,056,245 $ 5,060,687
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A5
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1999 and the years ended December 31, 1998 and 1997
SUBACCOUNTS
---------------------------------------------------------------------------------
ZERO COUPON HIGH
BOND YIELD
2000 BOND
PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
INVESTMENT INCOME
<S> <C> <C> <C> <C> <C> <C>
Dividend income ............................ $ 0 $ 821,929 $ 745,017 $ 0 $ 261,439 $ 197,684
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A] 24,820 101,177 101,616 4,555 15,665 12,354
Reimbursement for excess expenses [Note 5C] (8,832) (37,196) (42,117) 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
NET EXPENSES .................................. 15,988 63,981 59,499 4,555 15,665 12,354
----------- ----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) .................. (15,988) 757,948 685,518 (4,555) 245,774 185,330
----------- ----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received ..... 0 227,825 690,332 0 0 0
Realized gain (loss) on shares redeemed .. (348) (52,050) (94,913) (36,419) (4,633) 16,526
Net change in unrealized gain (loss)
on investments .......................... 32,187 217,606 (355,649) 106,301 (334,049) 59,640
----------- ----------- ----------- ----------- ----------- -----------
NET GAIN (LOSS) ON INVESTMENTS ................ 31,839 393,381 239,770 69,882 (338,682) 76,166
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................. $ 15,851 $ 1,151,329 $ 925,288 $ 65,327 $ (92,908) $ 261,496
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A6
<PAGE>
<TABLE>
SUBACCOUNTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------
STOCK EQUITY NATURAL
INDEX INCOME RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- ------------------------------------------ -----------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED) (UNAUDITED)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 1,729,752 $ 1,326,042 $ 0 $ 365,234 $ 370,792 $ 0 $ 8,084 $ 8,087
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
244,136 820,541 502,161 20,719 90,144 85,229 1,278 5,828 9,335
0 0 0 0 0 0 (3) 0 0
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
244,136 820,541 502,161 20,719 90,144 85,229 1,275 5,828 9,335
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(244,136) 909,211 823,881 (20,719) 275,090 285,563 (1,275) 2,256 (1,248)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
0 2,499,196 2,997,271 0 797,222 1,414,553 0 50,250 136,346
1,427,705 5,771,729 2,754,626 1,653 2,673,910 481,377 (13,809) (28,695) 24,931
6,581,142 24,590,569 15,534,339 500,743 (4,107,342) 2,177,083 73,458 (210,866) (299,786)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
8,008,847 32,861,494 21,286,236 502,396 (636,210) 4,073,013 59,649 (189,311) (138,509)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 7,764,711 $33,770,705 $22,110,117 $ 481,677 $ (361,120) $ 4,358,576 $ 58,374 $ (187,055) $ (139,757)
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A7
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1999 and the years ended December 31, 1998 and 1997
SUBACCOUNTS
--------------------------------------------------------------------------------
GOVERNMENT
GLOBAL INCOME
PORTFOLIO PORTFOLIO
-------------------------------------- --------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED)
-------------------------------------- ---------------------------------------
INVESTMENT INCOME
<S> <C> <C> <C> <C> <C> <C>
Dividend income ............................ $ 0 $ 160,959 $ 149,254 $ 0 $ 402,330 $ 257,272
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A] 19,239 70,813 80,250 12,199 38,968 23,144
Reimbursement for excess expenses [Note 5C] 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
NET EXPENSES .................................. 19,239 70,813 80,250 12,199 38,968 23,144
----------- ----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) .................. (19,239) 90,146 69,004 (12,199) 363,362 234,128
----------- ----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received ..... 0 536,310 504,462 0 0 0
Realized gain (loss) on shares redeemed .. 40,178 235,100 1,501,595 3,471 8,247 17,410
Net change in unrealized gain (loss)
on investments .......................... 234,592 1,531,076 (871,934) (126,900) 205,452 86,634
----------- ----------- ----------- ----------- ----------- -----------
NET GAIN (LOSS) ON INVESTMENTS ................ 274,770 2,302,486 1,134,123 (123,429) 213,699 104,044
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................. $ 255,531 $ 2,392,632 $ 1,203,127 $ (135,628) $ 577,061 $ 338,172
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A8
<PAGE>
<TABLE>
SUBACCOUNTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
ZERO COUPON SMALL
BOND PRUDENTIAL CAPITALIZATION
2005 JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------- ----------------------------------------- ------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED) (UNAUDITED)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 650,198 $ 485,431 $ 0 $ 3,905 $ 1,751 $ 0 $ 49,149 $ 39,052
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
23,550 67,532 42,708 4,574 11,315 4,217 15,016 43,679 34,205
(7,501) (22,824) (23,762) 0 0 0 0 0 0
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
16,049 44,708 18,946 4,574 11,315 4,217 15,016 43,679 34,205
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(16,049) 605,490 466,485 (4,574) (7,410) (2,466) (15,016) 5,470 4,847
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
0 7,803 124,816 0 37,636 50,105 0 604,937 381,206
1,207 12,587 225,279 26,682 22,375 43,121 (8,676) (29,549) 703,647
(503,083) 773,486 215,644 320,784 478,204 73,161 (976,199) (95,776) 238,634
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(501,876) 793,876 565,739 347,466 538,215 166,387 (984,875) 479,612 1,323,487
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ (517,925) $ 1,399,366 $ 1,032,224 $ 342,892 $ 530,805 $ 163,921 $ (999,891) $ 485,082 $ 1,328,334
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A9
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the three months ended March 31, 1999 and the years ended December 31, 1998 and 1997
SUBACCOUNTS
----------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
---------------------------------------- ----------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------ ------------ ------------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) .................. $ 142,110 $ 408,828 $ 410,410 $ (59,784) $ 2,129,486 $ 2,369,339
Capital gains distributions received .......... 0 0 0 0 128,093 408,037
Realized gain (loss) on shares redeemed ....... 0 0 0 1,731 173,161 94,146
Net change in unrealized gain (loss)
on investments ............................... 0 0 0 (168,005) (29,348) (288,588)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ..................... 142,110 408,828 410,410 (226,058) 2,401,392 2,582,934
------------ ------------ ------------ ------------ ------------ ------------
PREMIUM PAYMENTS AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ................. 4,820,171 8,459,179 16,018,494 1,173,544 4,026,378 5,573,222
Policy Loans ................................ 0 0 (45,968) (153) (10,790) 0
Policy Loan Repayment and Interest .......... 0 0 44,362 103 85 449,595
Surrenders, Withdrawals and Death Benefits .. (40,508) 48,094 (447,841) (108,348) (5,421,341) (3,109,854)
Net Transfers From (To) Other Subaccounts
or Fixed Rate Options ..................... 1,824,070 (5,068,699) (17,376,103) 170,804 4,043,371 146,922
Administrative and Other Charges ............ (90,378) (258,516) (264,540) (114,121) (491,540) (665,026)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL PREMIUM PAYMENTS AND OTHER
OPERATING TRANSFERS ........................... 6,513,355 3,180,058 (2,071,596) 1,121,829 2,146,163 2,394,859
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RETAINED IN THE ACCOUNT [Note 7] .............. (131) (1,722) (115,766) 3,789 (35,755) (86,028)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ........................................ 6,655,334 3,587,164 (1,776,952) 899,560 4,511,800 4,891,765
NET ASSETS
Beginning of year ............................. 12,954,317 9,367,153 11,144,105 41,131,530 36,619,730 31,727,965
------------ ------------ ------------ ------------ ------------ ------------
End of year ................................... $ 19,609,651 $ 12,954,317 $ 9,367,153 $ 42,031,090 $ 41,131,530 $ 36,619,730
============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A10
<PAGE>
<TABLE>
SUBACCOUNTS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------- ------------------------------------------ ------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED) (UNAUDITED)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (66,647) $ 576,109 $ 822,511 $ (47,182) $ 938,068 $ 844,688 $ (67,656) $ 1,694,342 $ 1,768,375
0 5,026,484 2,827,131 0 3,419,770 5,545,715 0 2,703,038 5,037,552
263,128 4,779,486 1,774,816 (54,205) 353,509 605,368 (9,343) 935,553 200,066
17,025 (5,230,122) 4,476,157 542,462 (1,305,317) (1,682,924) 690,367 (276,688) (1,945,306)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
213,506 5,151,957 9,900,615 441,075 3,406,030 5,312,847 613,368 5,056,245 5,060,687
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,712,690 5,974,743 8,187,661 452,245 2,727,720 4,391,711 286,232 6,161,137 2,723,156
(235) (16,155) (2,354) (200) (13,509) (101,032) 0 (15) (114,831)
258 2,348 6,595 225 2,543 109,493 0 976 1,296,181
(479,829) (11,366,743) (3,056,522) (225,852) (1,109,742) (3,330,740) (1,362,582) (41,543) (871,239)
(2,147,207) (6,233,542) (2,416,623) (44,917) (9,445,233) 2,115,451 970,963 (11,038,745) 2,899,464
(157,634) (750,093) (962,520) (64,785) (300,968) (387,697) (154,838) (628,277) (699,975)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(1,071,957) (12,389,442) 1,756,237 116,716 (8,139,189) 2,797,186 (260,225) (5,546,467) 5,232,756
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(2,538) (378,339) 2,060 591 99,015 (1,047) 1,759 (6,712) 1,650,849
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(860,989) (7,615,824) 11,658,912 558,382 (4,634,144) 8,108,986 354,902 (496,934) 11,944,292
46,158,354 53,774,178 42,115,266 32,845,241 37,479,385 29,370,399 47,024,976 47,521,910 35,577,618
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 45,297,365 $ 46,158,354 $ 53,774,178 $ 33,403,623 $ 32,845,241 $ 37,479,385 $ 47,379,878 $ 47,024,976 $ 47,521,910
============ ============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A11
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the three months ended March 31, 1999 and the years ended December 31, 1998 and 1997
SUBACCOUNTS
----------------------------------------------------------------------------------
ZERO COUPON HIGH YIELD
BOND 2000 BOND
PORTFOLIO PORTFOLIO
----------------------------------------- --------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------ ------------ ----------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) .................. $ (15,988) $ 757,948 $ 685,518 $ (4,555) $ 245,774 $ 185,330
Capital gains distributions received .......... 0 227,825 690,332 0 0 0
Realized gain (loss) on shares redeemed ....... (348) (52,050) (94,913) (36,419) (4,633) 16,526
Net change in unrealized gain (loss)
on investments .............................. 32,187 217,606 (355,649) 106,301 (334,049) 59,640
------------ ------------ ------------ ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS .............. 15,851 1,151,329 925,288 65,327 (92,908) 261,496
------------ ------------ ------------ ----------- ------------ -----------
PREMIUM PAYMENTS AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ................. 0 2,718,006 2,096,958 231,299 637,224 330,357
Policy Loans ................................ 0 0 0 0 0 0
Policy Loan Repayment and Interest .......... 0 0 0 0 0 0
Surrenders, Withdrawals and Death Benefits .. 0 (5) (99,448) (197,615) (1,826) (298,998)
Net Transfers From (To) Other Subaccounts
or Fixed Rate Options ..................... 0 (4,790,386) (5,246,708) (212,602) 556,432 297,454
Administrative and Other Charges ............ (17,747) (84,639) (125,845) (17,998) (67,806) (67,627)
------------ ------------ ------------ ----------- ------------ -----------
TOTAL PREMIUM PAYMENTS AND OTHER
OPERATING TRANSFERS ........................... (17,747) (2,157,024) (3,375,043) (196,916) 1,124,024 261,186
------------ ------------ ------------ ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
RETAINED IN THE ACCOUNT [Note 7] .............. 244 (33,379) (325,458) 27 (1,836) (7,832)
------------ ------------ ------------ ----------- ------------ -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ........................................ (1,652) (1,039,074) (2,775,213) (131,562) 1,029,280 514,850
NET ASSETS
Beginning of year ............................. 17,432,960 18,472,034 21,247,247 3,120,239 2,090,959 1,576,109
------------ ------------ ------------ ----------- ------------ -----------
End of year ................................... $ 17,431,308 $ 17,432,960 $ 18,472,034 $ 2,988,677 $ 3,120,239 $ 2,090,959
============ ============ ============ =========== ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A12
<PAGE>
<TABLE>
SUBACCOUNTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY NATURAL
STOCK INDEX INCOME RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------- ------------------------------------------ -----------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED) (UNAUDITED)
- ------------- ------------- ------------- ------------ ------------ ------------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (244,136) $ 909,211 $ 823,881 $ (20,719) $ 275,090 $ 285,563 $ (1,275) $ 2,256 $ (1,248)
0 2,499,196 2,997,271 0 797,222 1,414,553 0 50,250 136,346
1,427,705 5,771,729 2,754,626 1,653 2,673,910 481,377 (13,809) (28,695) 24,931
6,581,142 24,590,569 15,534,339 500,743 (4,107,342) 2,177,083 73,458 (210,866) (299,786)
- ------------- ------------- ------------- ------------ ------------ ------------ --------- ----------- -----------
7,764,711 33,770,705 22,110,117 481,677 (361,120) 4,358,576 58,374 (187,055) (139,757)
- ------------- ------------- ------------- ------------ ------------ ------------ --------- ----------- -----------
1,873,570 13,077,570 14,400,181 169,428 260,870 857,548 304 48,993 343,362
(295) (19,574) (15,209) 0 0 0 0 0 0
202 144 25,713 0 0 0 0 0 0
(377,100) (432,906) (3,907,071) (102,136) (8,141,933) (802,616) 0 0 (674,237)
(2,217,613) 11,664,940 17,853,467 (428,213) 7,241,853 (358,547) 16,083 22,258 47,378
(404,384) (1,454,112) (1,103,134) (48,664) (248,861) (366,230) (5,524) (23,922) (38,500)
- ------------- ------------- ------------- ------------ ------------ ------------ --------- ----------- -----------
(1,125,620) 22,836,062 27,253,947 (409,585) (888,071) (669,845) 10,863 47,329 (321,997)
- ------------- ------------- ------------- ------------ ------------ ------------ --------- ----------- -----------
2,013 42,339 (7,138) (371) (15,048) (64,926) (36) (5,635) (11,668)
- ------------- ------------- ------------- ------------ ------------ ------------ --------- ----------- -----------
6,641,104 56,649,106 49,356,926 71,721 (1,264,239) 3,623,805 69,201 (145,361) (473,422)
167,052,336 110,403,230 61,046,304 14,428,890 15,693,129 12,069,324 871,086 1,016,447 1,489,869
- ------------- ------------- ------------- ------------ ------------ ------------ --------- ----------- -----------
$ 173,693,440 $ 167,052,336 $ 110,403,230 $ 14,500,611 $ 14,428,890 $ 15,693,129 $ 940,287 $ 871,086 $ 1,016,447
============= ============= ============= ============ ============ ============ ========= =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A13
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the three months ended March 31, 1999 and the years ended December 31, 1998 and 1997
SUBACCOUNTS
--------------------------------------------------------------------------------
GOVERNMENT
GLOBAL INCOME
PORTFOLIO PORTFOLIO
--------------------------------------- --------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ----------- ----------- -----------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) .................. $ (19,239) $ 90,146 $ 69,004 $ (12,199) $ 363,362 $ 234,128
Capital gains distributions received .......... 0 536,310 504,462 0 0 0
Realized gain (loss) on shares redeemed ....... 40,178 235,100 1,501,595 3,471 8,247 17,410
Net change in unrealized gain
(loss) on investments ........................ 234,592 1,531,076 (871,934) (126,900) 205,452 86,634
------------ ------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS .............. 255,531 2,392,632 1,203,127 (135,628) 577,061 338,172
------------ ------------ ------------ ----------- ----------- -----------
PREMIUM PAYMENTS AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ................. 442,552 1,832,043 2,622,189 8,004 139,842 425,284
Policy Loans ................................ 0 0 (67,171) 0 0 0
Policy Loan Repayment and Interest .......... 0 0 67,209 0 0 0
Surrenders, Withdrawals and Death Benefits .. 0 (16,418) (4,072,024) (120) 120 (1,472,671)
Net Transfers From (To) Other Subaccounts
or Fixed Rate Options ..................... 380,623 (1,739,609) (4,363,304) 343,717 4,402,000 763,266
Administrative and Other Charges ............ (33,917) (128,121) (199,522) (24,582) (84,070) (87,039)
------------ ------------ ------------ ----------- ----------- -----------
TOTAL PREMIUM PAYMENTS AND OTHER
OPERATING TRANSFERS ............................ 789,258 (52,105) (6,012,623) 327,019 4,457,892 (371,160)
------------ ------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RETAINED IN THE ACCOUNT [Note 7] .............. 1,356 (27,164) (140,126) (120) (2,141) (104,696)
------------ ------------ ------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS ........................................ 1,046,145 2,313,363 (4,949,622) 191,271 5,032,812 (137,684)
NET ASSETS
Beginning of year ............................. 13,040,571 10,727,208 15,676,830 8,465,967 3,433,155 3,570,839
------------ ------------ ------------ ----------- ----------- -----------
End of year ................................... $ 14,086,716 $ 13,040,571 $ 10,727,208 $ 8,657,238 $ 8,465,967 $ 3,433,155
============ ============ ============ =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A14
<PAGE>
<TABLE>
SUBACCOUNTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
ZERO COUPON SMALL
BOND PRUDENTIAL CAPITALIZATION
2005 JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------- --------------------------------------- -------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97 1/1/99 1/1/98 1/1/97
TO TO TO TO TO TO TO TO TO
3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97 3/31/99 12/31/98 12/31/97
(UNAUDITED) (UNAUDITED) (UNAUDITED)
- ------------ ------------ ----------- ----------- ----------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (16,049) $ 605,490 $ 466,485 $ (4,574) $ (7,410) $ (2,466) $ (15,016) $ 5,470 $ 4,847
0 7,803 124,816 0 37,636 50,105 0 604,937 381,206
1,207 12,587 225,279 26,682 22,375 43,121 (8,676) (29,549) 703,647
(503,083) 773,486 215,644 320,784 478,204 73,161 (976,199) (95,776) 238,634
- ------------ ------------ ----------- ----------- ----------- --------- ------------ ------------ -----------
(517,925) 1,399,366 1,032,224 342,892 530,805 163,921 (999,891) 485,082 1,328,334
- ------------ ------------ ----------- ----------- ----------- --------- ------------ ------------ -----------
7,870 2,768,957 962,033 112,734 75,139 238,539 832,782 1,531,442 2,981,948
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
(1) 25,615 (26,502) 0 0 (293,084) (75) (19,451) (4,293,128)
65,691 6,405,234 3,302,946 1,196,322 1,234,490 508,875 82,279 2,745,637 1,826,062
(16,586) (52,935) (50,149) (9,559) (22,311) (8,919) (36,989) (129,979) (180,256)
- ------------ ------------ ----------- ----------- ----------- --------- ------------ ------------ -----------
56,974 9,146,871 4,188,328 1,299,497 1,287,318 445,411 877,997 4,127,649 334,626
- ------------ ------------ ----------- ----------- ----------- --------- ------------ ------------ -----------
120 (91,783) 119,618 8,106 32,534 806 (8,967) (24,899) 18,918
- ------------ ------------ ----------- ----------- ----------- --------- ------------ ------------ -----------
(460,831) 10,454,454 5,340,170 1,650,495 1,850,657 610,138 (130,861) 4,587,832 1,681,878
16,782,089 6,327,635 987,465 2,735,579 884,922 274,784 10,543,368 5,955,536 4,273,658
- ------------ ------------ ----------- ----------- ----------- --------- ------------ ------------ -----------
$ 16,321,258 $ 16,782,089 $ 6,327,635 $ 4,386,074 $ 2,735,579 $ 884,922 $ 10,412,507 $ 10,543,368 $ 5,955,536
============ ============ =========== =========== =========== ========= ============ ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A16 THROUGH A21
A15
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
MARCH 31, 1999 (UNAUDITED)
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. Proceeds from sales of the Pruselect I and
Pruselect II Variable Universal Life products are invested in the
Account as directed by the contract owners.
The Account is registered under the Investment Company Act of 1940, as
amended, as a unit investment trust. There are 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. Beginning June 7, 1999, the following five
additional non-Prudential administered subaccounts will be available to
contract owners: AIM V.I. Value Fund; American Century VP Value Fund;
Janus Growth Portfolio; MFS Emerging Growth Series; and the T. Rowe
International Stock Portfolio.
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.
A16
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share (rounded) 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
March 31, 1999 were as follows: (unaudited)
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Number of shares: 1,960,965 3,814,074 1,520,046 1,987,128 3,096,724
Net asset value per share (rounded): $ 10.00 $ 11.02 $ 29.80 $ 16.81 $ 15.30
Cost $19,609,651 $42,183,696 $41,477,010 $35,165,236 $47,298,386
<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: 1,366,090 404,970 4,391,743 699,162 73,575
Net asset value per share (rounded): $ 12.76 $ 7.38 $ 39.55 $ 20.74 $ 12.78
Cost: $17,563,045 $3,157,605 $112,632,164 $14,375,101 $1,229,164
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Number of shares: 651,861 739,935 1,251,630 166,139 777,053
Net asset value per share (rounded): $ 21.61 $ 11.70 $ 13.04 $ 26.40 $ 13.40
Cost: $11,602,655 $8,490,639 $15,831,977 $3,498,471 $11,023,219
</TABLE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding contract owner units, unit values and total value of
contract owner equity at March 31, 1999 were as follows: (unaudited)
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding (Pruselect I) 297,188 4,899,575 718,944 821,549 5,407,410
Unit Value (Pruselect I) ..................... $ 1.54975 $ 2.05300 $ 3.48794 $ 2.77050 $ 2.46091
----------- -------------- ------------- -------------- ------------
Contract Owner Equity (Pruselect I) .......... $ 460,567 $ 10,058,828 $ 2,507,633 $ 2,276,101 $ 13,307,151
----------- -------------- ------------- -------------- ------------
Contract Owner Units Outstanding
(Pruselect II) ............................ 12,356,241 15,573,435 12,267,910 11,235,345 13,845,580
Unit Value (Pruselect II) .................... $ 1.54975 $ 2.05300 $ 3.48794 $ 2.77050 $ 2.46091
----------- -------------- ------------- -------------- ------------
Contract Owner Equity (Pruselect II) ......... $19,149,084 $ 31,972,262 $ 42,789,732 $ 31,127,522 $ 34,072,727
----------- -------------- ------------- -------------- ------------
TOTAL CONTRACT OWNER EQUITY .................. $19,609,651 $ 42,031,090 $ 45,297,365 $ 33,403,623 $ 47,379,878
=========== ============== ============== ============== ============
</TABLE>
A17
<PAGE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------
ZERO
COUPON HIGH YIELD STOCK EQUITY NATURAL
BOND 2000 BOND INDEX INCOME RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding (Pruselect I) -- 29,598 8,347,889 1,226,037 249,323
Unit Value (Pruselect I) ...................... $ -- $ 2.22115 $ 4.25426 $ 3.20691 $ 1.73302
----------- ---------- ------------- ------------ ---------
Contract Owner Equity (Pruselect I) ........... $ -- $ 65,742 $ 35,514,090 $ 3,931,792 $ 432,082
----------- ---------- ------------- ------------ ---------
Contract Owner Units Outstanding (Pruselect II) 8,144,063 1,315,956 32,480,232 3,295,639 293,248
Unit Value (Pruselect II) ..................... $ 2.14037 $ 2.22115 $ 4.25426 $ 3.20691 $ 1.73302
----------- ---------- ------------- ------------ ---------
Contract Owner Equity (Pruselect II) .......... $17,431,308 $2,922,935 $ 138,179,350 $ 10,568,819 $ 508,205
----------- ---------- ------------- ------------ ---------
TOTAL CONTRACT OWNER EQUITY ................... $17,431,308 $2,988,677 $ 173,693,440 $ 14,500,611 $ 940,287
=========== ========== ============= ============ =========
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------
ZERO SMALL
GOVERNMENT COUPON PRUDENTIAL CAPITALIZATION
GLOBAL INCOME BOND 2005 JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding (Pruselect I) -- 1,556,080 25,852 269,286 --
Unit Value (Pruselect I) ...................... $ -- $ 1.96815 $ 2.44489 $ 2.80457 $ --
----------- ------------- -------------- ------------ ------------
Contract Owner Equity (Pruselect I) ........... $ -- $ 3,062,599 $ 63,206 $ 755,230 $ --
----------- ------------- -------------- ------------ ------------
Contract Owner Units Outstanding (Pruselect II) 7,863,699 2,842,588 6,649,809 1,294,617 6,557,407
Unit Value (Pruselect II) ..................... $ 1.79136 $ 1.96815 $ 2.44489 $ 2.80457 $ 1.58790
----------- ------------- -------------- ------------ ------------
Contract Owner Equity (Pruselect II) .......... $14,086,716 $ 5,594,639 $ 16,258,052 $ 3,630,844 $ 10,412,507
----------- ------------- -------------- ------------ ------------
TOTAL CONTRACT OWNER EQUITY ................... $14,086,716 $ 8,657,238 $ 16,321,258 $ 4,386,074 $ 10,412,507
=========== ============= ============== ============ ============
</TABLE>
NOTE 5: CHARGES AND EXPENSES (UNAUDITED)
A. Mortality Risk and Expense Risk Charges
The mortality risk and expense risk charges, at an effective annual
rate of 0.90%, are 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 related charges by Pruco Life. Pruco Life currently intends to
charge only 0.60% on these contracts, but reserves the right to make
the full 0.90% charge.
B. Partial Withdrawal Charge
A charge is imposed by Pruco Life on partial withdrawals of the cash
surrender value. A charge equal to the lesser of $15 or 2% will be
made in connection with each partial withdrawal of the cash surrender
value of a contract.
C. 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.
A18
<PAGE>
NOTE 5: CHARGES AND EXPENSES (CONTINUED)
D. Cost of Insurance Charges
Contract owner contributions are subject to certain deductions prior
to being invested in the Account. The deductions are for (1)
transaction costs which are deducted from each premium payment to
cover premium collection and processing costs; (2) state premium
taxes; (3) sales charges which are deducted in order to compensate
Pruco Life for the cost of selling the contract. Contracts are also
subject to monthly charges for the costs of administering the
contract.
NOTE 6: TAXES
Pruco Life is taxed as a "life insurance company" as defined by the
Internal Revenue Code and the results of operations of the Account form
a part of Prudential's consolidated federal tax return. Under current
federal law, no federal income taxes are payable by the Account. As
such, no provision for tax liability has been recorded, in these
financial statements.
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN THE ACCOUNT
The increase (decrease) in net assets retained in the Account represents
the net contributions (withdrawals) of Pruco Life to (from) the Account.
Effective October 13, 1998, Pruco Life no longer maintains a position in
the Account. Previously, Pruco Life maintained a position in the Account
for liquidity purposes including unit purchases and redemptions, fund
share transactions and expense processing.
NOTE 8: UNIT ACTIVITY
Transactions in units (including transfers among subaccounts) for the
three months ended March 31, 1999, and the years ended December 31, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------
MONEY MARKET DIVERSIFIED BOND
PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------
1/1/99 1/1/99
TO 1/1/98 1/1/97 TO 1/1/98 1/1/97
3/31/99 TO TO 3/31/99 TO TO
(UNAUDITED) 12/13/98 12/31/97 (UNAUDITED) 12/13/98 12/31/97
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 5,180,929 11,769,929 15,281,942 2,072,745 5,686,444 4,556,760
Contract Owner Redemptions: (968,829) (9,721,732) 16,788,123) (1,531,858) (4,658,242) (3,288,085)
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------------------
EQUITY FLEXIBLE MANAGED
PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------
1/1/99 1/1/99
TO 1/1/98 1/1/97 TO 1/1/98 1/1/97
3/31/99 TO TO 3/31/99 TO TO
(UNAUDITED) 12/13/98 12/31/97 (UNAUDITED) 12/13/98 12/31/97
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 1,031,422 2,885,417 4,465,527 1,730,484 8,590,002 4,476,620
Contract Owner Redemptions: (1,332,251) (6,422,617) (3,935,074) (1,690,156) (11,597,522) (3,255,025)
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------------------
CONSERVATIVE BALANCED ZERO COUPON BOND 2000
PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------
1/1/99 1/1/99
TO 1/1/98 1/1/97 TO 1/1/98 1/1/97
3/31/99 TO TO 3/31/99 TO TO
(UNAUDITED) 12/13/98 12/31/97 (UNAUDITED) 12/13/98 12/31/97
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 802,397 12,272,439 5,516,349 -- 3,053,595 11,968,207
Contract Owner Redemptions: (908,658) (14,641,165) 2,950,237) (8,313) (4,144,022) (13,929,611)
</TABLE>
A19
<PAGE>
NOTE 8: UNIT ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------------------
HIGH YIELD BOND STOCK INDEX
PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------
1/1/99 1/1/99
TO 1/1/98 1/1/97 TO 1/1/98 1/1/97
3/31/99 TO TO 3/31/99 TO TO
(UNAUDITED) 12/13/98 12/31/97 (UNAUDITED) 12/13/98 12/31/97
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 196,151 621,628 1,021,708 3,186,939 12,075,930 20,876,571
Contract Owner Redemptions: (286,821) (117,717) (879,849) (3,457,339) (5,649,830) (11,486,568)
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------------------
EQUITY INCOME NATURAL RESOURCES
PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------
1/1/99 1/1/99
TO 1/1/98 1/1/97 TO 1/1/98 1/1/97
3/31/99 TO TO 3/31/99 TO TO
(UNAUDITED) 12/13/98 12/31/97 (UNAUDITED) 12/13/98 12/31/97
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 1,858,410 3,556,140 679,346 25,952 89,639 237,684
Contract Owner Redemptions: (1,988,244) (3,811,832) (873,682) (18,660) (66,113) (378,671)
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------------------
GLOBAL GOVERNMENT INCOME
PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------
1/1/99 1/1/99
TO 1/1/98 1/1/97 TO 1/1/98 1/1/97
3/31/99 TO TO 3/31/99 TO TO
(UNAUDITED) 12/13/98 12/31/97 (UNAUDITED) 12/13/98 12/31/97
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 794,299 2,263,591 0,705,193 2,612,877 3,917,010 3,049,723
Contract Owner Redemptions: (355,625) 2,393,156) 4,887,428) (2,447,765) 1,539,750) (3,251,977)
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------------------------------------
ZERO COUPON BOND 2005 PRUDENTIAL JENNISON
PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------
1/1/99 1/1/99
TO 1/1/98 1/1/97 TO 1/1/98 1/1/97
3/31/99 TO TO 3/31/99 TO TO
(UNAUDITED) 12/13/98 12/31/97 (UNAUDITED) 12/13/98 12/31/97
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 29,214 3,960,131 9,228,779 957,400 1,126,502 589,921
Contract Owner Redemptions: (6,697) (75,113) (6,935,187) (469,077) (524,101) (302,690)
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------
SMALL CAPITALIZATION STOCK
PORTFOLIO
----------------------------------------------
1/1/99
TO 1/1/98 1/1/97
3/31/99 TO TO
(UNAUDITED) 12/13/98 12/31/97
----------------------------------------------
<S> <C> <C> <C>
Contract Owner Contributions: 760,303 3,950,209 3,529,907
Contract Owner Redemptions: (242,621) (1,275,859) (3,181,968)
</TABLE>
A20
<PAGE>
NOTE 9: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
in the Series Fund for the three months ended March 31, 1999 were as
follows: (unaudited)
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------
DIVERSIFIED FLEXIBLE CONSERVATIVE
MONEY MARKET BOND EQUITY MANAGED BALANCED
---------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Purchases.. $7,238,814 $1,543,002 $ 1,786,840 $ 834,368 $ 1,265,409
Sales...... $ (746,290) $ (477,170) $(2,927,982) $(764,241) $(1,591,531)
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------------------
ZERO COUPON HIGH YIELD STOCK EQUITY NATURAL
BOND 2000 BOND INDEX INCOME RESOURCES
---------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Purchases.. $ -- $ 296,419 $ 2,875,728 $ 165,301 $ 43,905
Sales...... $(33,491) $(497,863) $(4,243,472) $(595,975) $(34,353)
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------------------
SMALL
GOVERNMENT ZERO COUPON PRUDENTIAL CAPITALIZATION
GLOBAL INCOME BOND 2005 JENNISON STOCK
---------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Purchases.. $1,022,457 $ 440,751 $ 67,545 $1,402,976 $1,001,213
Sales...... $ (251,083) $(126,052) $(26,500) $ (99,946) $ (147,199)
</TABLE>
A21
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
SUBACCOUNTS
----------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in The Prudential Series Fund, Inc.
Portfolios at net asset value [Note 3]...... $ 12,954,317 $ 41,131,530 $ 46,158,354 $ 32,845,241 $ 47,024,976
------------ ------------ ------------- ------------ ------------
Net Assets.................................... $ 12,954,317 $ 41,131,530 $ 46,158,354 $ 32,845,241 $ 47,024,976
============ ============ ============ ============ ============
NET ASSETS, representing:
Equity of contract owners................... $ 12,954,317 $ 41,131,530 $ 46,158,354 $ 32,845,241 $ 47,024,976
------------ ------------ ------------- ------------ ------------
$ 12,954,317 $ 41,131,530 $ 46,158,354 $ 32,845,241 $ 47,024,976
============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A22
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------
ZERO COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL GOVERNMENT
2000 BOND INDEX INCOME RESOURCES GLOBAL INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 17,432,960 $ 3,120,239 $167,052,336 $ 14,428,890 $ 871,086 $ 13,040,571 $ 8,465,967
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 17,432,960 $ 3,120,239 $167,052,336 $ 14,428,890 $ 871,086 $ 13,040,571 $ 8,465,967
============ ============ ============ ============ ============ ============ ============
$ 17,432,960 $ 3,120,239 $167,052,336 $ 14,428,890 $ 871,086 $ 13,040,571 $ 8,465,967
- ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 17,432,960 $ 3,120,239 $167,052,336 $ 14,428,890 $871,086 $ 13,040,571 $ 8,465,967
============ ============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A23
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
SUBACCOUNTS
---------------------------------------------
ZERO COUPON SMALL
BOND PRUDENTIAL CAPITALIZATION
2005 JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS
Investment in The Prudential Series Fund, Inc.
Portfolios at net asset value [Note 3]...... $ 16,782,089 $ 2,735,579 $ 10,543,368
------------ ------------ ------------
Net Assets.................................... $ 16,782,089 $ 2,735,579 $ 10,543,368
============ ============ ============
NET ASSETS, representing:
Equity of contract owners................... $ 16,782,089 $ 2,735,579 $ 10,543,368
------------ ------------ ------------
$ 16,782,089 $ 2,735,579 $ 10,543,368
============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A24
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
<CAPTION>
STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income.................................. $ 461,945 $ 461,061 $ 370,956 $ 2,359,120 $ 2,574,631 $ 2,171,278
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A]...... 53,117 50,651 40,789 229,634 205,292 210,590
Reimbursement for excess expenses [Note 5C]...... 0 0 0 0 0 0
----------- ----------- ----------- ----------- ------------------------
NET EXPENSES 53,117 50,651 40,789 229,634 205,292 210,590
----------- ----------- ----------- ----------- ------------------------
NET INVESTMENT INCOME (LOSS) 408,828 410,410 330,167 2,129,486 2,369,339 1,960,688
----------- ----------- ----------- ----------- ------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received........... 0 0 0 128,093 408,037 0
Realized gain (loss) on shares redeemed........ 0 0 0 173,161 94,146 296,104
Net change in unrealized gain (loss)
on investments............................... 0 0 0 (29,348) (288,588) (852,759)
----------- ------------ ----------- ----------- ------------------------
NET GAIN (LOSS) ON INVESTMENTS 0 0 0 271,906 213,595 (556,655)
----------- ------------ ----------- ----------- ------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........................ $ 408,828 $ 410,410 $ 330,167 $ 2,401,392 $ 2,582,934 $ 1,404,033
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A25
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------- ------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 860,120 $ 1,108,812 $ 897,405 $ 1,147,432 $ 1,050,936 $ 810,334 $ 1,965,960 $ 2,025,296 $ 1,460,883
- ----------- ----------- ----------- ----------- ----------- -----------
284,011 286,301 203,014 209,364 206,248 145,789 271,618 256,921 213,652
0 0 0 0 0 0 0 0 0
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
284,011 286,301 203,014 209,364 206,248 145,789 271,618 256,921 213,652
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
576,109 822,511 694,391 938,068 844,688 664,545 1,694,342 1,768,375 1,247,231
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
5,026,484 2,827,131 3,585,387 3,419,770 5,545,715 2,731,323 2,703,038 5,037,552 2,164,504
4,779,486 1,774,816 633,352 353,509 605,368 75,275 935,553 200,066 464,539
(5,230,122) 4,476,157 759,941 (1,305,317) (1,682,924) (331,513) (276,688) (1,945,306) 108,733
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
4,575,848 9,078,104 4,978,680 2,467,962 4,468,159 2,475,085 3,361,903 3,292,312 2,737,776
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 5,151,957 $ 9,900,615 $ 5,673,071 $ 3,406,030 $ 5,312,847 $ 3,139,630 $ 5,056,245 $ 5,060,687 $ 3,985,007
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A26
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
<CAPTION>
STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------
ZERO COUPON HIGH
BOND YIELD
2000 BOND
PORTFOLIO PORTFOLIO
------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income.................................. $ 821,929 $ 745,017 $ 472,600 $ 261,439 $197,684 $ 132,351
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A]...... 101,177 101,616 34,875 15,665 12,354 7,323
Reimbursement for excess expenses [Note 5C]...... (37,196) (42,117) (8,393) 0 0 0
----------- ----------- ----------- ----------- ------------------------
NET EXPENSES 63,981 59,499 26,482 15,665 12,354 7,323
----------- ----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) 757,948 685,518 446,118 245,774 185,330 125,028
----------- ----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received........... 227,825 690,332 0 0 0 0
Realized gain (loss) on shares redeemed........ (52,050) (94,913) 81,019 (4,633) 16,526 3,467
Net change in unrealized gain (loss)
on investments............................... 217,606 (355,649) (17,112) (334,049) 59,640 (3,313)
----------- ----------- ----------- ----------- ------------------------
NET GAIN (LOSS) ON INVESTMENTS 393,381 239,770 63,907 (338,682) 76,166 154
----------- ----------- ----------- ----------- ------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 1,151,329 $ 925,288 $ 510,025 $ (92,908) $ 261,496 $ 125,182
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A27
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
STOCK EQUITY NATURAL
INDEX INCOME RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------- ------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,729,752 $ 1,326,042 $ 900,654 $ 365,234 $ 370,792 $ 475,277 $ 8,084 $ 8,087 $ 8,770
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
820,541 502,161 260,862 90,144 85,229 94,957 5,828 9,335 7,362
0 0 0 0 0 0 0 0 (160)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
820,541 502,161 260,862 90,144 85,229 94,957 5,828 9,335 7,202
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
909,211 823,881 639,792 275,090 285,563 380,320 2,256 (1,248) 1,568
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
2,499,196 2,997,271 673,354 797,222 1,414,553 485,860 50,250 136,346 172,185
5,771,729 2,754,626 413,888 2,673,910 481,377 908,956 (28,695) 24,931 33,275
24,590,569 15,534,339 7,149,445 (4,107,342) 2,177,083 1,098,444 (210,866) (299,786) 88,415
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
32,861,494 21,286,236 8,236,687 (636,210) 4,073,013 2,493,260 (189,311) (138,509) 293,875
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$33,770,705 $22,110,117 $ 8,876,479 $ (361,120) $ 4,358,576 $ 2,873,580 $ (187,055) $ (139,757) $ 295,443
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A28
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
<CAPTION>
STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------
GOVERNMENT
GLOBAL INCOME
PORTFOLIO PORTFOLIO
------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income.................................. $ 160,959 $ 149,254 $ 312,052 $ 402,330 $ 257,272 $ 215,507
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A]...... 70,813 80,250 67,425 38,968 23,144 17,932
Reimbursement for excess expenses [Note 5C]...... 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
NET EXPENSES 70,813 80,250 67,425 38,968 23,144 17,932
----------- ----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) 90,146 69,004 244,627 363,362 234,128 197,575
----------- ----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received........... 536,310 504,462 240,786 0 0 0
Realized gain (loss) on shares redeemed........ 235,100 1,501,595 155,802 8,247 17,410 553
Net change in unrealized gain (loss)
on investments............................... 1,531,076 (871,934) 1,328,007 205,452 86,634 (117,230)
----------- ----------- ----------- ----------- ----------- -----------
NET GAIN (LOSS) ON INVESTMENTS 2,302,486 1,134,123 1,724,595 213,699 104,044 (116,677)
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........................ $ 2,392,632 $ 1,203,127 $ 1,969,222 $ 577,061 $ 338,172 $ 80,898
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A29
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
ZERO COUPON SMALL
BOND PRUDENTIAL CAPITALIZATION
2005 JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------- ------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 650,198 $ 485,431 $ 48,741 $ 3,905 $ 1,751 $ 547 $ 49,149 $ 39,052 $ 24,838
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
67,532 42,708 5,414 11,315 4,217 1,034 43,679 34,205 11,568
(22,824) (23,762) (1,163) 0 0 0 0 0 0
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
44,708 18,946 4,251 11,315 4,217 1,034 43,679 34,205 11,568
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
605,490 466,485 44,490 (7,410) (2,466) (487) 5,470 4,847 13,270
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
7,803 124,816 10,654 37,636 50,105 0 604,937 381,206 76,737
12,587 225,279 93 22,375 43,121 (693) (29,549) 703,647 2,225
773,486 215,644 (61,956) 478,204 73,161 14,438 (95,776) 238,634 219,537
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
793,876 565,739 (51,209) 538,215 166,387 13,745 479,612 1,323,487 298,499
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 1,399,366 $ 1,032,224 $ (6,719) $ 530,805 $ 163,921 $ 13,258 $ 485,082 $ 1,328,334 $ 311,769
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A30
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)...................... $ 408,828 $ 410,410 $ 330,167 $ 2,129,486 $ 2,369,339 $ 1,960,688
Capital gains distributions received.............. 0 0 0 128,093 408,037 0
Realized gain (loss) on shares redeemed........... 0 0 0 173,161 94,146 296,104
Net change in unrealized gain (loss) on
investments..................................... 0 0 0 (29,348) (288,588) (852,759)
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................ 408,828 410,410 330,167 2,401,392 2,582,934 1,404,033
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
PREMIUM PAYMENTS AND OTHER OPERATING
TRANSFERS [Note 7]................................ 3,180,058 (2,071,596) 4,126,018 2,146,163 2,394,859 (5,205,030)
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN
THE ACCOUNT [Note 8].............................. (1,722) (115,766) (2,181,943) (35,755) (86,028) (35,291)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............. 3,587,164 (1,776,952) 2,274,242 4,511,800 4,891,765 (3,836,288)
NET ASSETS
Beginning of year................................. 9,367,153 11,144,105 8,869,863 36,619,730 31,727,965 35,564,253
----------- ----------- ----------- ----------- ----------- -----------
End of year....................................... $12,954,317 $ 9,367,153 $11,144,105 $41,131,530 $36,619,730 $31,727,965
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A31
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------- ------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 576,109 $ 822,511 $ 694,391 $ 938,068 $ 844,688 $ 664,545 $ 1,694,342 $ 1,768,375 $ 1,247,231
5,026,484 2,827,131 3,585,387 3,419,770 5,545,715 2,731,323 2,703,038 5,037,552 2,164,504
4,779,486 1,774,816 633,352 353,509 605,368 75,275 935,553 200,066 464,539
(5,230,122) 4,476,157 759,941 (1,305,317) (1,682,924) (331,513) (276,688) (1,945,306) 108,733
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
5,151,957 9,900,615 5,673,071 3,406,030 5,312,847 3,139,630 5,056,245 5,060,687 3,985,007
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(12,389,442) 1,756,237 5,017,735 (8,139,189) 2,797,186 4,354,486 (5,546,467) 5,232,756 (1,853,576)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(378,339) 2,060 (6,721) 99,015 (1,047) 16,614 (6,712) 1,650,849 (1,583,656)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(7,615,824) 11,658,912 10,684,085 (4,634,144) 8,108,986 7,510,730 (496,934) 11,944,292 547,775
53,774,178 42,115,266 31,431,181 37,479,385 29,370,399 21,859,669 47,521,910 35,577,618 35,029,843
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$46,158,354 $53,774,178 $42,115,266 $32,845,241 $37,479,385 $29,370,399 $47,024,976 $47,521,910 $35,577,618
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A32
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------
ZERO COUPON HIGH
BOND YIELD
2000 BOND
PORTFOLIO PORTFOLIO
------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)...................... $ 757,948 $ 685,518 $ 446,118 $ 245,774 $ 185,330 $ 125,028
Capital gains distributions received.............. 227,825 690,332 0 0 0 0
Realized gain (loss) on shares redeemed........... (52,050) (94,913) 81,019 (4,633) 16,526 3,467
Net change in unrealized gain (loss) on
investments..................................... 217,606 (355,649) (17,112) (334,049) 59,640 (3,313)
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................ 1,151,329 925,288 510,025 (92,908) 261,496 125,182
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FRO
PREMIUM PAYMENTS AND OTHER OPERATING
TRANSFERS [Note 7]................................ (2,157,024) (3,375,043) 20,209,923 1,124,024 261,186 594,373
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN
THE ACCOUNT [Note 8].............................. (33,379) (325,458) (9,441) (1,836) (7,832) (9,051)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............. (1,039,074) (2,775,213) 20,710,507 1,029,280 514,850 710,504
NET ASSETS
Beginning of year................................. 18,472,034 21,247,247 536,740 2,090,959 1,576,109 865,605
----------- ----------- ----------- ----------- ----------- -----------
End of year....................................... $17,432,960 $18,472,034 $21,247,247 $ 3,120,239 $ 2,090,959 $ 1,576,109
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A33
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------------
EQUITY NATURAL
STOCK INDEX INCOME RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------- ------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------ ------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 909,211 $ 823,881 $ 639,792 $ 275,090 $ 285,563 $ 380,320 $ 2,256 $ (1,248) $ 1,568
2,499,196 2,997,271 673,354 797,222 1,414,553 485,860 50,250 136,346 172,185
5,771,729 2,754,626 413,888 2,673,910 481,377 908,956 (28,695) 24,931 33,275
24,590,569 15,534,339 7,149,445 (4,107,342) 2,177,083 1,098,444 (210,866) (299,786) 88,415
- ------------ ------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
33,770,705 22,110,117 8,876,479 (361,120) 4,358,576 2,873,580 (187,055) (139,757) 295,443
- ------------ ------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
22,836,062 27,253,947 17,931,933 (888,071) (669,845) (7,025,151) 47,329 (321,997) 425,963
- ------------ ------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
42,339 (7,138) 62,929 (15,048) (64,926) (214,892) (5,635) (11,668) 3,239
- ------------ ------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
56,649,106 49,356,926 26,871,341 (1,264,239) 3,623,805 (4,366,463) (145,361) (473,422) 724,645
110,403,230 61,046,304 34,174,963 15,693,129 12,069,324 16,435,787 1,016,447 1,489,869 765,224
- ------------ ------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
$167,052,336 $110,403,230 $61,046,304 $14,428,890 $15,693,129 $12,069,324 $ 871,086 $ 1,016,447 $ 1,489,869
============ ============ =========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A34
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------
GOVERNMENT
GLOBAL INCOME
PORTFOLIO PORTFOLIO
--------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)...................... $ 90,146 $ 69,004 $ 244,627 $ 363,362 $ 234,128 $ 197,575
Capital gains distributions received.............. 536,310 504,462 240,786 0 0 0
Realized gain (loss) on shares redeemed 235,100 1,501,595 155,802 8,247 17,410 553
Net change in unrealized gain (loss) on
investments..................................... 1,531,076 (871,934) 1,328,007 205,452 86,634 (117,230)
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................ 2,392,632 1,203,127 1,969,222 577,061 338,172 80,898
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
PREMIUM PAYMENTS AND OTHER OPERATING
TRANSFERS [Note 7]................................ (52,105) (6,012,623) 5,591,186 4,457,892 (371,160) 1,069,544
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN
THE ACCOUNT [Note 8].............................. (27,164) (140,126) 72,239 (2,141) (104,696) 75,388
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS............. 2,313,363 (4,949,622) 7,632,647 5,032,812 (137,684) 1,225,830
NET ASSETS
Beginning of year................................. 10,727,208 15,676,830 8,044,183 3,433,155 3,570,839 2,345,009
----------- ----------- ----------- ----------- ----------- -----------
End of year....................................... $13,040,571 $10,727,208 $15,676,830 $ 8,465,967 $ 3,433,155 $ 3,570,839
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A35
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
ZERO COUPON SMALL
BOND PRUDENTIAL CAPITALIZATION
2005 JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------- ------------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 605,490 $ 466,485 $ 44,490 $ (7,410) $ (2,466) $ (487) $ 5,470 $ 4,847 $ 13,270
7,803 124,816 10,654 37,636 50,105 0 604,937 381,206 76,737
12,587 225,279 93 22,375 43,121 (693) (29,549) 703,647 2,225
773,486 215,644 (61,956) 478,204 73,161 14,438 (95,776) 238,634 219,537
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
1,399,366 1,032,224 (6,719) 530,805 163,921 13,258 485,082 1,328,334 311,769
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
9,146,871 4,188,328 95,281 1,287,318 445,411 229,628 4,127,649 334,626 3,553,224
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(91,783) 119,618 6,971 32,534 806 770 (24,899) 18,918 (50,657)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
10,454,454 5,340,170 95,533 1,850,657 610,138 243,656 4,587,832 1,681,878 3,814,336
6,327,635 987,465 891,932 884,922 274,784 31,128 5,955,536 4,273,658 459,322
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$16,782,089 $ 6,327,635 $ 987,465 $ 2,735,579 $ 884,922 $ 274,784 $10,543,368 $ 5,955,536 $ 4,273,658
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A37 THROUGH A44
A36
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT
DECEMBER 31, 1998
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. Proceeds from sales of the Pruselect I and
Pruselect II Variable Universal Life products are invested in the
Account as directed by the contract owners.
The Account is registered under the Investment Company Act of 1940, as
amended, as a unit investment trust. There are 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.
A37
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share (rounded) 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, 1998 were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
----------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of shares: 1,295,432 3,718,551 1,557,468 1,983,317 3,118,251
Net asset value per share (rounded): $ 10.00 $ 11.06 $ 29.64 $ 16.56 $ 15.08
Cost $ 12,954,317 $ 41,116,131 $ 42,355,024 $ 35,149,316 $ 47,633,851
PORTFOLIOS (CONTINUED)
----------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of shares: 1,368,722 432,892 4,426,400 720,273 72,691
Net asset value per share (rounded): $ 12.74 $ 7.21 $ 37.74 $ 20.03 $ 11.98
Cost: $ 17,596,884 $ 3,395,468 $112,572,202 $ 14,804,123 $ 1,233,421
PORTFOLIOS (CONTINUED)
----------------------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of shares: 616,375 713,187 1,248,613 114,427 716,718
Net asset value per share (rounded): $ 21.16 $ 11.87 $ 13.44 $ 23.91 $ 14.71
Cost: $ 10,791,102 $ 8,172,468 $ 15,789,725 $ 2,168,760 $ 10,177,881
</TABLE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding contract owner units, unit values and total value of
contract owner equity at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding
(Pruselect I)................. 284,050 4,967,427 751,308 925,294 5,454,469
Unit Value (Pruselect I)........ $ 1.53463 $ 2.06358 $ 3.47377 $ 2.73333 $ 2.42907
------------ ------------ ------------ ------------ ------------
Contract Owner Equity (Pruselect
I)............................ $ 435,911 $ 10,250,682 $ 2,609,870 $ 2,529,134 $ 13,249,288
------------ ------------ ------------ ------------ ------------
Contract Owner Units Outstanding
(Pruselect II)................ 8,157,279 14,964,696 12,536,375 11,091,272 13,904,782
Unit Value (Pruselect II)....... $ 1.53463 $ 2.06358 $ 3.47377 $ 2.73333 $ 2.42907
------------ ------------ ------------ ------------ ------------
Contract Owner Equity (Pruselect
II)........................... $ 12,518,406 $ 30,880,848 $ 43,548,484 $ 30,316,107 $ 33,775,688
------------ ------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER EQUITY..... $ 12,954,317 $ 41,131,530 $ 46,158,354 $ 32,845,241 $ 47,024,976
============ ============ ============ ============ ============
</TABLE>
A38
<PAGE>
<TABLE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION (CONTINUED)
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------
ZERO
COUPON HIGH YIELD STOCK EQUITY NATURAL
BOND 2000 BOND INDEX INCOME RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding
(Pruselect I)................. -- 25,757 8,398,687 1,262,488 241,112
Unit Value (Pruselect I)........ $ -- $ 2.17253 $ 4.06468 $ 3.10198 $ 1.62735
------------ ------------ ------------ ------------ ------------
Contract Owner Equity (Pruselect
I) ........................... $ -- $ 55,957 $ 34,137,973 $ 3,916,212 $ 392,374
------------ ------------ ------------ ------------ ------------
Contract Owner Units Outstanding
(Pruselect II)................ 8,152,376 1,410,467 32,699,834 3,389,022 294,167
Unit Value (Pruselect II)....... $ 2.13839 $ 2.17253 $ 4.06468 $ 3.10198 $ 1.62735
------------ ------------ ------------ ------------ ------------
Contract Owner Equity (Pruselect
II) .......................... $ 17,432,960 $ 3,064,282 $ 32,914,363 $ 10,512,678 $ 478,712
------------ ------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER EQUITY..... $ 17,432,960 $ 3,120,239 $ 7,052,336 $ 14,428,890 $ 871,086
============ ============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------------------------
ZERO SMALL
GOVERNMENT COUPON PRUDENTIAL CAPITALIZATION
GLOBAL INCOME BOND 2005 JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding
(Pruselect I)................. -- 1,504,348 -- 209,554 --
Unit Value (Pruselect I)........ $ -- $ 1.99973 $ -- $ 2.54336 $ --
------------ ------------ ------------ ------------ ------------
Contract Owner Equity (Pruselect
I) $ -- $ 3,008,289 $ -- $ 532,971 $ --
------------ ------------ ------------ ------------ ------------
Contract Owner Units Outstanding
(Pruselect II)................ 7,425,025 2,729,208 6,653,144 866,023 6,039,725
Unit Value (Pruselect II)....... $ 1.75630 $ 1.99973 $ 2.52243 $ 2.54336 $ 1.74567
------------ ------------ ------------ ------------ ------------
Contract Owner Equity (Pruselect
II) .......................... $ 13,040,571 $ 5,457,678 $ 16,782,089 $ 2,202,608 $ 0,543,368
------------ ------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER EQUITY..... $ 13,040,571 $ 8,465,967 $ 6,782,089 $ 2,735,579 $ 10,543,368
============ ============ ============ ============ ============
</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%, are 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 related charges by Pruco
Life. Pruco Life currently intends to charge only 0.60% on these
contracts, but reserves the right to make the full 0.90% charge.
B. Partial Withdrawal Charge
A charge is imposed by Pruco Life on partial withdrawals of the
cash surrender value. A charge equal to the lesser of $15 or 2%
will be made in connection with each partial withdrawal of the cash
surrender value of a contract.
C. 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.
A39
<PAGE>
NOTE 5: CHARGES AND EXPENSES (CONTINUED)
D. Cost of Insurance Charges
Contract owner contributions are subject to certain deductions
prior to being invested in the Account. The deductions are for (1)
transaction costs which are deducted from each premium payment to
cover premium collection and processing costs; (2) state premium
taxes; (3) sales charges which are deducted in order to compensate
Pruco Life for the cost of selling the contract. Contracts are also
subject to monthly charges for the costs of administering the
contract.
NOTE 6: TAXES
Pruco Life is taxed as a "life insurance company" as defined by the
Internal Revenue Code and the results of operations of the Account form
a part of Prudential's consolidated federal tax return. Under current
federal law, no federal income taxes are payable by the Account. As
such, no provision for tax liability has been recorded, in these
financial statements.
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
The following amounts represent components of contract owner activity
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------
MONEY MARKET DIVERSIFIED BOND
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Net Payments................................. $ 8,459,179 $ 16,018,494 $ 4,026,378 $ 5,573,222
Policy Loans................................................ 0 (45,968) (10,790) 0
Policy Loan Repayment and Interest.......................... 0 44,362 85 449,595
Surrenders, Withdrawals and Death Benefits.................. 48,094 (447,841) (5,421,341) (3,109,854)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.............................................. (5,068,699) (17,376,103) 4,043,371 146,922
Administrative and Other Charges............................ (258,516) (264,540) (491,540) (665,026)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Premium
Payments and Other Operating Transfers.................... $ 3,180,058 $ (2,071,596) $ 2,146,163 $ 2,394,859
============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------
EQUITY FLEXIBLE MANAGED
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Net Payments................................. $ 5,974,743 $ 8,187,661 $ 2,727,720 $ 4,391,711
Policy Loans................................................ (16,155) (2,354) (13,509) (101,032)
Policy Loan Repayment and Interest.......................... 2,348 6,595 2,543 109,493
Surrenders, Withdrawals and Death Benefits.................. (11,366,743) (3,056,522) (1,109,742) (3,330,740)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.............................................. (6,233,542) (2,416,623) (9,445,233) 2,115,451
Administrative and Other Charges............................ (750,093) (962,520) (300,968) (387,697)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Premium
Payments and Other Operating Transfers.................... $(12,389,442) $ 1,756,237 $ (8,139,189) $ 2,797,186
============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------
CONSERVATIVE BALANCED ZERO COUPON BOND 2000
PORTFOLIO PORTFOLIO
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Net Payments................................. $ 6,161,137 $ 2,723,156 $ 2,718,006 $ 2,096,958
Policy Loans................................................ (15) (114,831) 0 0
Policy Loan Repayment and Interest.......................... 976 1,296,181 0 0
Surrenders, Withdrawals and Death Benefits.................. (41,543) (871,239) (5) (99,448)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.............................................. (11,038,745) 2,899,464 (4,790,386) (5,246,708)
Administrative and Other Charges............................ (628,277) (699,975) (84,639) (125,845)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Premium
Payments and Other Operating Transfers.................... $ (5,546,467) $ 5,232,756 $ (2,157,024) $ (3,375,043)
============ ============ ============ ============
</TABLE>
A40
<PAGE>
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS (CONTINUED)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------
HIGH YIELD BOND STOCK INDEX
PORTFOLIO PORTFOLIO
------------------------------- ----------------------------
1998 1997 1998 1997
--------------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
Contract Owner Net Payments ................................ $ 637,224 $ 330,357 $ 13,077,570 $ 14,400,181
Policy Loans ............................................... 0 0 (19,574) (15,209)
Policy Loan Repayment and Interest ......................... 0 0 144 25,713
Surrenders, Withdrawals and Death Benefits ................. (1,826) (298,998) (432,906) (3,907,071)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options ............................................. 556,432 297,454 11,664,940 17,853,467
Administrative and Other Charges ........................... (67,806) (67,627) (1,454,112) (1,103,134)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Premium
Payments and Other Operating Transfers .................. $ 1,124,024 $ 261,186 $ 22,836,062 $ 27,253,947
============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------
EQUITY INCOME NATURAL RESOURCES
PORTFOLIO PORTFOLIO
------------------------------- ----------------------------
1998 1997 1998 1997
--------------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
Contract Owner Net Payments ................................ $ 260,870 $ 857,548 $ 48,993 $ 343,362
Policy Loans ............................................... 0 0 0 0
Policy Loan Repayment and Interest ......................... 0 0 0 0
Surrenders, Withdrawals and Death Benefits ................. (8,141,933) (802,616) 0 (674,237)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options ............................................. 7,241,853 (358,547) 22,258 47,378
Administrative and Other Charges ........................... (248,861) (366,230) (23,922) (38,500)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Premium
Payments and Other Operating Transfers .................... $ (888,071) $ (669,845) $ 47,329 $ (321,997)
=========== =========== =========== ===========
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------
GLOBAL GOVERNMENT INCOME
PORTFOLIO PORTFOLIO
-------------------------------- ----------------------------
1998 1997 1998 1997
--------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Contract Owner Net Payments ................................ $ 1,832,043 $ 2,622,189 $ 139,842 $ 425,284
Policy Loans ............................................... 0 (67,171) 0 0
Policy Loan Repayment and Interest ......................... 0 67,209 0 0
Surrenders, Withdrawals and Death Benefits ................. (16,418) (4,072,024) 120 (1,472,671)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options ............................................. (1,739,609) (4,363,304) 4,402,000 763,266
Administrative and Other Charges ........................... (128,121) (199,522) (84,070) (87,039)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Premium
Payments and Other Operating Transfers
Payments and Other Operating Transfers .................... $ (52,105) $(6,012,623) $ 4,457,892 $ (371,160)
=========== =========== =========== ===========
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------
ZERO COUPON BOND 2005 PRUDENTIAL JENNISON
PORTFOLIO PORTFOLIO
-------------------------------- ----------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
Contract Owner Net Payments ................................ $ 2,768,957 $ 962,033 $ 75,139 $ 238,539
Policy Loans ................................................ 0 0 0 0
Policy Loan Repayment and Interest ......................... 0 0 0 0
Surrenders, Withdrawals and Death Benefits ................. 25,615 (26,502) 0 (293,084)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options ............................................. 6,405,234 3,302,946 1,234,490 508,875
Administrative and Other Charges ........................... (52,935) (50,149) (22,311) (8,919)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Premium
Payments and Other Operating Transfers .................... $ 9,146,871 $ 4,188,328 $ 1,287,318 $ 445,411
=========== =========== =========== ===========
</TABLE>
A41
<PAGE>
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS (CONTINUED)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------
SMALL CAPITALIZATION STOCK
PORTFOLIO
-----------------------------
1998 1997
--------------- ------------
<S> <C> <C>
Contract Owner Net Payments........................................... $ 1,531,442 $ 2,981,948
Policy Loans ......................................................... 0 0
Policy Loan Repayment and Interest ................................... 0 0
Surrenders, Withdrawals and Death Benefits ........................... (19,451) (4,293,128)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options ...................................................... 2,745,637 1,826,062
Administrative and Other Charges ..................................... (129,979) (180,256)
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Premium
Payments and Other Operating Transfers ............................. $ 4,127,649 $ 334,626
=========== ===========
</TABLE>
NOTE 8: NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN THE ACCOUNT
The increase (decrease) in net assets retained in the Account
represents the net contributions (withdrawals) of Pruco Life to
(from) the Account. Effective October 13, 1998, Pruco Life no longer
maintains a position in the Account. Previously, Pruco Life
maintained a position in the Account for liquidity purposes including
unit purchases and redemptions, fund share transactions and expense
processing.
NOTE 9: UNIT ACTIVITY
Transactions in units (including transfers among subaccounts) for the
years ended December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
-----------------------------------------------------------------------------------------------
MONEY MARKET DIVERSIFIED BOND
PORTFOLIO PORTFOLIO
--------------------------------------------- -----------------------------------------------
1998 1997 1996 1998 1997 1996
--------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 11,769,929 15,281,942 20,647,286 5,686,444 4,556,760 7,359,670
Contract Owner
Redemptions: (9,721,732) (16,788,123) (17,694,761) (4,658,242) (3,288,085) (10,274,181)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------------------------
EQUITY FLEXIBLE MANAGED
PORTFOLIO PORTFOLIO
--------------------------------------------- -----------------------------------------------
1998 1997 1996 1998 1997 1996
--------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 2,885,417 4,465,527 7,684,191 8,590,002 4,476,620 7,183,433
Contract Owner
Redemptions: (6,422,617) (3,935,074) (5,707,765) (11,597,522) (3,255,025) (4,966,689)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------------------------
CONSERVATIVE BALANCED ZERO COUPON BOND 2000
PORTFOLIO PORTFOLIO
--------------------------------------------- -----------------------------------------------
1998 1997 1996 1998 1997 1996
--------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 12,272,439 5,516,349 8,974,255 3,053,595 11,968,207 14,921,286
Contract Owner
Redemptions: (14,641,165) (2,950,237) (10,034,515) (4,144,022) (13,929,611) (3,798,030)
</TABLE>
A42
<PAGE>
NOTE 9: UNIT ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------------------------
HIGH YIELD BOND STOCK INDEX
PORTFOLIO PORTFOLIO
----------------------------------------------- ---------------------------------------------
1998 1997 1996 1998 1997 1996
----------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 621,628 1,021,708 1,571,264 12,075,930 20,876,571 16,298,797
Contract Owner
Redemptions: (117,717) (879,849) (1,254,509) (5,649,830) (11,486,568) (8,266,289)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------------------------
EQUITY INCOME NATURAL RESOURCES
PORTFOLIO PORTFOLIO
----------------------------------------------- ---------------------------------------------
1998 1997 1996 1998 1997 1996
----------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 3,556,140 679,346 2,219,957 89,639 237,684 601,007
Contract Owner
Redemptions: (3,811,832) (873,682) (5,553,498) (66,113) (378,671) (380,047)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------------------------
GLOBAL GOVERNMENT INCOME
PORTFOLIO PORTFOLIO
----------------------------------------------- ---------------------------------------------
1998 1997 1996 1998 1997 1996
----------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 2,263,591 10,705,193 10,357,718 3,917,010 3,049,723 4,777,804
Contract Owner
Redemptions: (2,393,156) (14,887,428) (5,813,881) (1,539,750) (3,251,977) (4,123,118)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------------------------------------------------------
ZERO COUPON BOND 2005 PRUDENTIAL JENNISON
PORTFOLIO PORTFOLIO
----------------------------------------------- ---------------------------------------------
1998 1997 1996 1998 1997 1996
----------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 3,960,131 9,228,779 78,742 1,126,502 589,921 202,258
Contract Owner
Redemptions: (75,113) (6,935,187) (28,993) (524,101) (302,690) (28,028)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-----------------------------------------------
SMALL CAPITALIZATION STOCK
PORTFOLIO
-----------------------------------------------
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Contract Owner
Contributions: 3,950,209 3,529,907 2,812,163
Contract Owner
Redemptions: (1,275,859) (3,181,968) (182,921)
</TABLE>
A43
<PAGE>
NOTE 10: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of
investments in the Series Fund for the year ended December 31, 1998
were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------------------------
DIVERSIFIED FLEXIBLE CONSERVATIVE
MONEY MARKET BOND EQUITY MANAGED BALANCED
----------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Purchases.............. $ 14,092,629 $ 10,641,312 $ 7,679,747 $ 10,851,762 $ 18,157,080
Sales.................. $ (10,657,424) $ (8,676,999) $ (20,559,544) $ (19,077,409) $ (23,821,192)
<CAPTION>
PORTFOLIOS (CONTINUED)
----------------------------------------------------------------------------------------
ZERO COUPON HIGH YIELD STOCK EQUITY NATURAL
BOND 2000 BOND INDEX INCOME RESOURCES
----------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Purchases.............. $ 6,245,813 $ 1,277,486 $ 39,790,603 $ 11,692,035 $ 119,383
Sales.................. $ (8,500,198) $ (170,962 $ (17,613,097) $ (12,685,299) $ (83,518)
<CAPTION>
PORTFOLIOS (CONTINUED)
----------------------------------------------------------------------------------------
SMALL
GOVERNMENT ZERO COUPON PRUDENTIAL CAPITALIZATION
GLOBAL INCOME BOND 2005 JENNISON STOCK
----------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Purchases.............. $ 2,396,129 $ 4,625,540 $ 9,253,074 $ 2,172,323 $ 4,637,315
Sales.................. $ (2,546,211) $ (208,757) $ (242,694) $ (863,785) $ (474,906)
</TABLE>
A44
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of the
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 the subaccounts (Money Market
Portfolio, Diversified Bond Portfolio, Equity Portfolio, Flexible Managed
Portfolio, Conservative Balanced Portfolio, Zero Coupon Bond 2000 Portfolio,
High Yield Bond Portfolio, Stock Index Portfolio, Equity Income Portfolio,
Natural Resources Portfolio, Global Portfolio, Government Income Portfolio, Zero
Coupon Bond 2005 Portfolio, Prudential Jennison Portfolio and Small
Capitalization Stock Portfolio) of the Pruco Life Variable Universal Account at
December 31, 1998, the results of each of their operations and the changes in
each of their net assets for each of the three years in the period then ended,
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 fund shares owned at
December 31, 1998, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 19, 1999
A45
<PAGE>
<TABLE>
<CAPTION>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
MARCH 31, 1999 AND DECEMBER 31, 1998 (IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value (amortized cost, 1999: $2,635,172; 1998: $2,738,654) $ 2,638,138 $ 2,763,926
Held to maturity, at amortized cost (fair value, 1999: $421,172; 1998: $421,845) 416,380 410,558
Equity securities - available for sale, at fair value (cost, 1999: $3,714; 1998: $2,951) 3,316 2,847
Mortgage loans on real estate 17,117 17,354
Policy loans 782,714 766,917
Short-term investments 295,639 240,727
Other long-term investments 1,046 1,047
------------ ------------
Total investments 4,154,350 4,203,376
Cash 108,198 89,679
Deferred policy acquisition costs 897,183 861,713
Accrued investment income 65,388 61,114
Other assets 68,275 65,145
Separate Account assets 12,239,534 11,531,754
------------ ------------
TOTAL ASSETS $ 17,532,928 $ 16,812,781
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances $ 2,723,256 $ 2,701,984
Future policy benefits and other policyholder liabilities 512,758 528,806
Cash collateral for loaned securities 128,635 73,336
Securities sold under agreement to repurchase 23,449 49,708
Income taxes payable 11,376 44,524
Net deferred income tax liability 155,058 148,834
Payable to affiliate 51,651 66,568
Other liabilities 67,983 55,038
Separate Account liabilities 12,195,943 11,490,751
------------ ------------
TOTAL LIABILITIES 15,870,109 15,159,549
------------ ------------
CONTINGENCIES (SEE NOTE 2)
STOCKHOLDER'S EQUITY
Common stock, $10 par value;
1,000,000 shares, authorized;
250,000 shares, issued and outstanding at
March 31, 1999 and December 31, 1998 2,500 2,500
Paid-in-capital 439,582 439,582
Retained earnings 1,222,401 1,202,833
Accumulated other comprehensive income
Net unrealized investment gains 32 9,902
Foreign currency translation adjustments (1,696) (1,585)
------------ ------------
Accumulated other comprehensive income (1,664) 8,317
------------
------------
TOTAL STOCKHOLDER'S EQUITY 1,662,819 1,653,232
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 17,532,928 $ 16,812,781
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B1
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (IN THOUSANDS)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
------------ -----------
REVENUES
Premiums $ 13,708 $ 11,707
Policy charges and fee income 93,013 77,905
Net investment income 69,813 64,115
Realized investment (losses) gains, net (5,023) 5,439
Asset management fee income 11,209 9,410
Other income 1,279 813
--------- ---------
TOTAL REVENUES 183,999 169,389
--------- ---------
BENEFITS AND EXPENSES
Policyholders' benefits 52,910 40,911
Interest credited to policyholders' account balances 31,262 25,359
General, administrative and other expenses 68,980 50,921
--------- ---------
TOTAL BENEFITS AND EXPENSES 153,152 117,191
--------- ---------
Income before income taxes 30,847 52,198
--------- ---------
Income taxes 11,279 19,058
--------- ---------
NET INCOME $ 19,568 $33,140
--------- ---------
Other comprehensive income, net of tax:
Unrealized (losses) gains on securities, net of
reclassification adjustment (9,870) (4,784)
Foreign currency translation adjustments (111) (119)
--------- ---------
Other comprehensive income (9,981) (4,903)
--------- ---------
TOTAL COMPREHENSIVE INCOME $ 9,587 $ 28,237
========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B2
<PAGE>
<TABLE>
<CAPTION>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
ACCUMULATED
OTHER TOTAL
COMMON PAID-IN- RETAINED COMPREHENSIVE STOCKHOLDER'S
STOCK CAPITAL EARNINGS INCOME EQUITY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 $ 2,500 $ 439,582 $ 1,050,871 $ 12,564 $ 1,505,517
Net income -- -- 151,962 -- 151,962
Change in foreign currency
translation adjustments -- -- -- 2,980 2,980
Change in net unrealized
investment losses, net of -- -- -- (7,227) (7,227)
reclassification adjustment
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 $ 2,500 $ 439,582 $ 1,202,833 $ 8,317 $ 1,653,232
Net income -- -- 19,568 -- 19,568
Change in foreign currency
translation adjustments -- -- -- (111) (111)
Change in net unrealized
investment losses, net of -- -- -- (9,870) (9,870)
reclassification adjustment
=========== =========== =========== =========== ===========
BALANCE, MARCH 31, 1999 $ 2,500 $ 439,582 $ 1,222,401 $ (1,664) $ 1,662,819
=========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B3
<PAGE>
<TABLE>
<CAPTION>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,568 $ 33,140
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Policy charges and fee income (15,543) (13,365)
Interest credited to policyholders' account balances 31,262 25,359
Realized investment gains, net 5,023 (5,439)
Amortization and other non-cash items 12,611 2,029
Change in:
Future policy benefits and other policyholder liabilities (16,048) 6,881
Accrued investment income (4,274) 1,457
Separate Accounts (2,588) 3,093
Payable to affiliate (14,917) 8,822
Policy loans (15,797) (17,686)
Deferred policy acquisition costs (35,470) (32,252)
Income taxes payable (33,148) 16,295
Deferred income tax liability 6,224 (814)
Other, net 9,815 (2,252)
----------- -----------
CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES (53,282) 25,268
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Available for sale 1,299,549 1,398,316
Held to maturity 11,843 20,878
Equity securities 1 27
Mortgage loans on real estate 237 206
Other long-term investments 34 --
Payments for the purchase of:
Fixed maturities:
Available for sale (1,200,898) (1,266,223)
Held to maturity (17,670) (3,855)
Equity securities (764) (146)
Other long-term investments (33) (376)
Cash collateral for loaned securities, net 55,299 (65,959)
Securities sold under agreement to repurchase, net (26,259) --
Short-term investments, net (54,927) (101,614)
----------- -----------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES 66,412 (18,746)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 665,120 700,997
Withdrawals (659,731) (691,009)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES 5,389 9,988
----------- -----------
Net increase in Cash 18,519 16,510
Cash, beginning of year 89,679 71,358
----------- ===========
CASH, END OF PERIOD $ 108,198 $ 87,868
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B4
<PAGE>
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Pruco Life
Insurance Company (the Company) have been prepared in accordance with the
requirements of Form 10-Q and generally accepted accounting principles (GAAP)
for interim financial information. These statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended December 31, 1998 included in the Company's Annual Report on Form
10-K for that year.
The accompanying consolidated financial statements have not been audited by
independent accountants in accordance with generally accepted auditing
standards, but in the opinion of management such financial statements include
all adjustments, consisting only of normal recurring accruals and elimination of
intercompany balances and transactions, necessary to summarize fairly the
Company's financial position and results of operations. The results of
operations for the three months ended March 31, 1999 may not be indicative of
the results that may be expected for the year ending December 31, 1999.
Certain amounts in the prior years have been reclassified to conform to current
year presentation.
2. 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.
In the normal course of business, the Company is subject to various claims and
assessments. Management believes the settlement of these matters would not have
a material effect on the financial position or results of operations of the
Company.
3. RELATED PARTY TRANSACTIONS
Prudential and the Company have an agreement with respect to administrative
services for the Prudential Series Fund. The Company invests in the various
portfolios of the Series Fund through the Separate Accounts. Under this
agreement, Prudential pays compensation to the Company in the amount equal to a
portion of the gross investment advisory fees paid by the Prudential Series
Fund. This is recorded as "Asset management fee income" on the Statements of
Operations and Comprehensive Income.
B5
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 1997 AND 1996 (IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value (amortized cost, 1997: $2,526,554;
1996: $2,210,150) $ 2,563,852 $ 2,236,817
Held to maturity, at amortized cost (fair value, 1997: $350,056; 1996:
$416,102) 338,848 405,731
Equity securities - available for sale, at fair value (cost, 1997: $1,289;
1996: $3,626) 1,982 3,748
Mortgage loans on real estate 22,787 46,915
Policy loans 703,955 639,782
Short-term investments 316,355 169,830
Other long-term investments 1,317 4,528
----------------- -----------------
Total investments 3,949,096 3,507,351
Cash 71,358 73,766
Deferred policy acquisition costs 655,242 633,159
Accrued investment income 67,000 62,110
Income taxes receivable - 7,191
Reinsurance recoverable on unpaid losses 25,882 27,014
Other assets 60,810 62,924
Separate Account assets 8,022,079 5,336,851
----------------- -----------------
TOTAL ASSETS $12,851,467 $9,710,366
================= =================
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances $ 2,282,191 $ 2,188,862
Future policy benefits and other policyholder liabilities 570,729 557,351
Cash collateral for loaned securities 143,421 -
Income taxes payable 71,703 -
Deferred income tax liability 138,483 148,960
Payable to affiliate 70,375 49,828
Other liabilities 120,260 88,930
Separate Account liabilities 7,948,788 5,277,454
----------------- -----------------
TOTAL LIABILITIES 11,345,950 8,311,385
----------------- -----------------
CONTINGENCIES - (SEE NOTE 10)
STOCKHOLDER'S EQUITY
Common stock, $10 par value;
1,000,000 shares, authorized;
250,000 shares, issued and outstanding at
December 31, 1997 and 1996 2,500 2,500
Paid-in-capital 439,582 439,582
Retained earnings 1,050,871 944,497
Net unrealized investment gains 17,129 14,104
Foreign currency translation adjustments (4,565) (1,702)
----------------- -----------------
TOTAL STOCKHOLDER'S EQUITY 1,505,517 1,398,981
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $12,851,467 $9,710,366
================= =================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B-1
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 (IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
REVENUES
Premiums $ 49,496 $ 51,525 $ 42,089
Policy charges and fee income 330,292 324,976 319,012
Net investment income 259,634 247,328 246,618
Realized investment gains, net 10,974 10,835 13,200
Other income 33,801 20,818 26,986
----------------- ----------------- -----------------
TOTAL REVENUES 684,197 655,482 647,905
----------------- ----------------- -----------------
BENEFITS AND EXPENSES
Policyholders' benefits 179,419 186,873 153,987
Interest credited to policyholders' account balances 110,815 118,246 126,926
General, administrative and other expenses 225,721 122,006 134,790
----------------- ----------------- -----------------
TOTAL BENEFITS AND EXPENSES 515,955 427,125 415,703
----------------- ----------------- -----------------
Income from operations before income taxes 168,242 228,357 232,202
----------------- ----------------- -----------------
Income taxes
Current 73,326 60,196 67,014
Deferred (11,458) 18,939 12,544
----------------- ----------------- -----------------
Total income taxes 61,868 79,135 79,558
----------------- ----------------- -----------------
NET INCOME $ 106,374 $ 149,222 $ 152,644
================= ================= =================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B-2
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 (IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------
NET FOREIGN
UNREALIZED CURRENCY TOTAL
COMMON PAID-IN- RETAINED INVESTMENT TRANSLATION STOCKHOLDER'S
STOCK CAPITAL EARNINGS GAINS ADJUSTMENTS EQUITY
------------- ------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ 2,500 $ 439,582 $ 642,631 $(41,761) $ 650 $1,043,602
Net income -- -- 152,644 -- -- 152,644
Change in foreign
currency translation
adjustments -- -- -- -- (1,870) (1,870)
Change in net
unrealized
investment gains -- -- -- 73,817 -- 73,817
------------- ------------- ------------- ------------- ----------- -------------
BALANCE, DECEMBER 31, 1995 2,500 439,582 795,275 32,056 (1,220) 1,268,193
Net income -- -- 149,222 -- -- 149,222
Change in foreign
currency translation
adjustments -- -- -- -- (482) (482)
Change in net
unrealized
investment gains -- -- -- (17,952) -- (17,952)
------------- ------------- ------------- ------------- ----------- -------------
BALANCE, DECEMBER 31, 1996 2,500 439,582 944,497 14,104 (1,702) 1,398,981
Net income -- -- 106,374 -- -- 106,374
Change in foreign
currency translation
adjustments -- -- -- -- (2,863) (2,863)
Change in net
unrealized
investment gains -- -- -- 3,025 -- 3,025
------------- ------------- ------------- ------------- ----------- -------------
BALANCE, DECEMBER 31, 1997 $ 2,500 $ 439,582 $1,050,871 $ 17,129 $ (4,565) $1,505,517
============= ============= ============= ============= =========== =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B-3
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 (IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
--------------- -------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 106,374 $ 149,222 $ 152,644
Adjustments to reconcile net income to net cash provided by
operating activities:
Policy charges and fee income (40,783) (50,286) (56,637)
Interest credited to policyholders' account balances 110,815 118,246 126,926
Net increase in Separate Accounts (13,894) (38,025) (3,520)
Realized investment gains, net (10,974) (10,835) (13,200)
Amortization and other non-cash items (5,525) 26,709 (8,106)
Change in:
Future policy benefits and other policyholders' liabilities 13,378 56,151 22,877
Accrued investment income (4,890) (2,248) (480)
Payable to affiliate 20,547 16,519 10,569
Policy loans (64,173) (70,509) (75,411)
Deferred policy acquisition costs (22,083) (66,183) 31,318
Income taxes payable/receivable 78,894 (816) 12,031
Reinsurance recoverable on unpaid losses 1,132 900 750
Deferred income tax liability (10,477) 7,912 30,779
Other, net 34,094 7,564 (76,702)
--------------- -------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES 192,435 144,321 153,838
--------------- -------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Available for sale 2,828,665 3,886,254 1,886,687
Held to maturity 138,626 138,127 144,898
Equity securities 6,939 7,527 5,557
Mortgage loans on real estate 24,925 19,226 7,395
Other long-term investments 3,276 288 1,559
Investment real estate -- 4,488 2,926
Payments for the purchase of:
Fixed maturities:
Available for sale (3,141,785) (4,008,810) (1,741,139)
Held to maturity (70,532) (114,494) (135,092)
Equity securities (4,594) (4,697) (4,279)
Other long-term investments (51) (657) (1,674)
Cash collateral for loaned securities, net 143,421 -- --
Short-term investments, net (147,030) 58,186 (36,482)
--------------- -------------- ------------
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES (218,140) (14,562) 130,356
--------------- -------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 2,099,600 536,370 95,039
Withdrawals (2,076,303) (633,798) (365,578)
--------------- -------------- ------------
CASH FLOWS FROM (USED IN)FINANCING ACTIVITIES 23,297 (97,428) (270,539)
--------------- -------------- ------------
Net (decrease) increase in Cash (2,408) 32,331 13,655
Cash, beginning of year 73,766 41,435 27,780
--------------- -------------- ------------
CASH, END OF YEAR $ 71,358 $ 73,766 $ 41,435
=============== ============== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes (received) paid $ (7,904) $ 61,760 $ 53,107
=============== ============== ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B-4
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BUSINESS
Pruco Life Insurance Company (the Company) is a stock life insurance company,
organized in 1971 under the laws of the state of Arizona. The Company markets
individual life insurance, variable life insurance, variable life insurance,
variable annuities, and deferred annuities (the Contracts) in all states except
New York, the District of Columbia and Guam. In addition, the Company markets
individual life insurance through its branch office in Taiwan. The Company has
two subsidiaries, Pruco Life Insurance Company of New Jersey (PLNJ) and The
Prudential Life Insurance company of Arizona (PLICA). PLNJ is a stock life
insurance company organized in 1982 under the laws of the state of New Jersey.
It is licenced to sell individual life insurance and deferred annuities only in
the states of New Jersey and New York. PLICA is a stock life insurance company
organized in 1988 under the laws of the state of Arizona. PLICA had no new
business sales in 1977 and at this time will not be issuing new business.
The only reportable industry segment of the Company is "Life Insurance."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company, a
stock life insurance company, and its subsidiaries. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles ("GAAP"). All significant intercompany balances and transactions have
been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
INVESTMENTS
FIXED MATURITIES classified as "available for sale" are carried at estimated
fair value. Fixed maturities that the Company has both the positive intent and
ability to hold to maturity are stated at amortized cost and classified as "held
to maturity". The amortized cost of fixed maturities are written down to
estimated fair value when considered impaired and the decline in value is
considered to be other than temporary. Unrealized gains and losses on fixed
maturities "available for sale", net of income tax, the effect on deferred
policy acquisition costs and participating annuity contracts that would result
from the realization of unrealized gains and losses are included in a separate
component of equity, "Net unrealized investment gains."
EQUITY SECURITIES, available for sale, comprised of common and non-redeemable
preferred stock, are carried at estimated fair value. The associated unrealized
gains and losses, net of income tax, the effect on deferred policy acquisition
costs and participating annuity contracts that would result from the realization
of unrealized gains and losses, are included in separate component of equity,
"Net unrealized investment gains."
MORTGAGE LOANS ON REAL ESTATE are stated primarily at unpaid principal balances,
net of unamortized discounts
POLICY LOANS are carried at unpaid principal balances.
SHORT-TERM INVESTMENTS, including highly liquid debt instruments purchased with
an original maturity of twelve months or less, are carried at amortized cost,
which approximates fair value.
OTHER LONG-TERM INVESTMENTS primarily represent the Company's investments in
joint ventures and partnerships in which the Company does not have control.
These investments are recorded using the equity method of accounting, reduced
for other than temporary declines in value.
REALIZED INVESTMENT GAINS, NET are computed using the specific identification
method. Costs of fixed maturity and equity securities are adjusted for
impairments considered to be other than temporary.
CASH
Cash includes cash on hand, amounts due from banks, and money market
instruments.
DEFERRED POLICY ACQUISITION COSTS
The costs which vary with and that are related primarily to the production of
new insurance business are deferred to the extent such costs are deemed
recoverable from future profits. Such costs include certain commissions, costs
of policy issuance and underwriting, and certain variable field office expenses.
Deferred policy acquisition costs are subject to recoverability testing at the
time of policy issue and loss recognition testing at the end of each accounting
period. Deferred policy acquisition costs are
B-5
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
adjusted for the impact of unrealized gains or losses on investments as if these
gains or losses had been realized, with corresponding credits or charges
included in equity.
Acquisition costs related to interest-sensitive life products and
investment-type contracts are deferred and amortized in proportion to total
estimated gross profits arising principally from investment results, mortality
and expense margins and surrender charges based on historical and anticipated
future experience. Amortization periods range from 15 to 30 years. Amortization
of deferred policy acquisition costs was $149,851 thousand, $9,309 thousand, and
$54,371 thousand for the years ended December 31, 1997, 1996, and 1995,
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 of revisions to estimated gross profits on unamortized
deferred acquisition costs is reflected in earnings in the period such estimated
gross profits are revised.
FUTURE POLICY BENEFITS AND POLICYHOLDERS' ACCOUNT BALANCES
Future policy benefits includes reserves for annuities in payout status as well
as reserves for riders and supplemental benefits. Reserves for annuities in
payout status are generally calculated as the present value of estimated future
benefit payments and related expenses, using interest rates ranging from 6.5% to
11.0%. The mortality assumption is generally the 1983 Individual Annuity
Mortality Table. Reserves for riders and supplemental benefits are calculated
using interest rates ranging from 2.5% to 7.25% and various mortality and
morbidity tables derived from company or industry experience. Reserves for
business in the Company's Taiwan branch are generally calculated using interest
rates ranging from 6.25% to 7.5% and the 1989 Taiwan Standard Ordinary
Experience Mortality table with modifications.
For the above categories, premium deficiency reserves are established, if
necessary, when the liabilities for future policy benefits plus the present
value of expected future gross premiums are insufficient to provide for expected
future policy benefits and expenses.
Policyholders' account balances for interest-sensitive life and investment-type
contracts are equal to the policy account values. The policy account values
represent an accumulation of gross premium payments plus credited interest, less
expense and mortality charges and withdrawals. Interest crediting rates on life
insurance products range from 4.2% to 6.5% and on investment-type products range
from 3.15% to 7.9%.
SECURITIES LOANED are recorded at the amount of cash received as collateral. The
Company obtains collateral in an amount equal to 102% of the fair value of the
domestic securities. The Company monitors the market value of securities loaned
on a daily basis with additional collateral obtained as necessary. Non-cash
collateral received is not reflected in the consolidated statements of financial
position. Substantially, all of the Company's securities loaned are with large
brokerage firms.
These transactions are used to generate net investment income and facilitate
trading activity. These instruments are short-term in nature (usually 30 days or
less) and are collateralized principally by U.S. Government and mortgage-backed
securities. The carrying amounts of these instruments approximate fair value
because of the relatively short period of time between the origination of the
instruments and their expected realization.
SEPARATE ACCOUNT ASSETS AND LIABILITIES
Separate Account assets and liabilities are reported at estimated fair value and
represent segregated funds which are invested for certain policyholders, pension
funds and other customers. The assets consist of common stocks, fixed
maturities, real estate related securities, and short-term investments. The
assets of each account are legally segregated and are not subject to claims that
arise out of any other business of the Company. Investment risks associated with
market value changes are generally borne by the customers, except to the extent
of minimum guarantees made by the Company with respect to certain accounts. The
investment income and gains or losses for Separate Accounts generally accrue to
the policyholders and are not included in the Consolidated Statement of
Operations. Mortality, policy administration and surrender charges on the
accounts are included in "Policy charges and fee income."
Separate Accounts represent funds for which investment income and investment
gains and losses accrue directly to, and investment risk is borne by, the
policyholders, with the exception of the Pruco Life Modified Guaranteed Annuity
Account. The Pruco Life Modified Guaranteed Annuity Account is a non-unitized
separate account, which funds the Modified Guaranteed Annuity Contract and the
Market Value Adjustment Annuity Contract. Owners of the Pruco Life Modified
Guaranteed Annuity and the Market Value Adjustment Annuity Contracts do not
participate in the investment gain or loss from assets relating to such
accounts. Such gain or loss is borne, in total, by the Company.
B-6
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INSURANCE REVENUE AND EXPENSE RECOGNITION
Amounts received as payment for interest-sensitive life, investment contracts
and deferred annuities are reported as deposits to "Policyholders' account
balances." Revenues from these contracts are reflected as "Policy charges and
fee income" and consist primarily of fees assessed during the period against the
policyholders' account balances for mortality charges, policy administration
charges, surrender charges, and interest earned from the investment of these
account balances. Benefits and expenses for these products include claims in
excess of related account balances, expenses of contract administration,
interest credited and amortization of deferred policy acquisition costs.
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Assets and liabilities of the Taiwan branch reported in other than U.S. dollars
are translated at the exchange rate in effect at the end of the period.
Revenues, benefits and other expenses are translated at the average rate
prevailing during the period. Translation adjustments arising from the use of
differing exchange rates from period to period are charged or credited directly
to equity. The cumulative effect of changes in foreign exchange rates are
included in "Foreign currency translation adjustments."
DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives include futures subject to market risk, all of which are used by the
Company in other than trading activities. Income and expenses related to
derivatives used to hedge are recorded on the accrual basis on the Statements of
Financial Position. Gains and losses relating to derivatives used to hedge the
risks associated with anticipated transactions are realized in "Realized
investment gains, net." If it is determined that the transaction will not close,
such gains and losses are included in "Realized investment gains, net."
Derivatives held for purposes other than trading are primarily used to hedge or
reduce exposure to interest rate and foreign currency risks associated with
assets held or expected to be purchased or sold, and liabilities incurred or
expected to be incurred. Additionally, other than trading derivatives are used
to change the characteristics of the Company's asset/liability mix consistent
with the Company's risk management activities.
INCOME TAXES
The Company and its subsidiaries are members 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. 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. Deferred income taxes
are generally recognized, based on enacted rates, when assets and liabilities
have different values for financial statement and tax reporting purposes. A
valuation allowance is recorded to reduce a deferred tax asset to that portion
which management believes is more likely than not to be realized.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("FASB") issued the
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 125"). The statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
and provides consistent standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. SFAS 125
became effective January 1, 1997 and is to be applied prospectively. Subsequent
to June 1996, FASB issued SFAS No. 127 "Deferral of the Effective Date of
Certain Provisions of SFAS 125" ("SFAS 127"). SFAS 127 delays the implementation
of SFAS 125 for one year for certain provisions, including repurchase
agreements, dollar rolls, securities lending and similar transactions. The
Company will delay implementation with respect to those affected provisions.
Adoption of SFAS 125 has not, and will not have a material impact on the
Company's results of operations, financial condition and liquidity.
In June of 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for years beginning after December 15, 1997. This statement
defines comprehensive income as "the change in equity of a business enterprise
during a
B-7
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
period from transactions and other events and circumstances from non-owner
sources, excluding investments by owners and distributions to owners" and
establishes standards for reporting and displaying comprehensive income and its
components in financial statements. The statement requires that the Company
classify items of other comprehensive income by their nature and display the
accumulated balance of other comprehensive income separately from retained
earnings in the equity section of the Statement of Financial Position. In
addition, reclassification of financial statements for earlier periods must be
provided for comparative purposes.
RECLASSIFICATIONS
Certain amounts in the prior years have been reclassified to conform to current
year presentation.
B-8
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES:
The following tables provide additional information relating to fixed maturities
and equity securities as of December 31,:
<TABLE>
<CAPTION>
1997
----------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
------------------ ---------------- ------------- ----------------
(In Thousands)
<S> <C> <C> <C> <C>
FIXED MATURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 177,691 $ 1,231 $ 20 $ 178,902
Foreign government bonds 83,889 1,118 19 84,988
Corporate securities 2,263,898 36,857 2,017 2,298,738
Mortgage-backed securities 1,076 180 32 1,224
------------------ ---------------- ------------- ----------------
Total fixed maturities available for sale $2,526,554 $ 39,386 $ 2,088 $2,563,852
================== ================= ============== ===============
------------------ ---------------- ------------- ----------------
EQUITY SECURITIES AVAILABLE FOR SALE $ 1,289 $ 802 $ 109 $ 1,982
================== ================= ============== ===============
------------------ ---------------- ------------- ----------------
FIXED MATURITIES HELD TO MATURITY
Corporate securities $ 338,848 $ 11,427 $ 219 $ 350,056
------------------ ---------------- ------------- ----------------
Total fixed maturities held to maturity $ 338,848 $ 11,427 $ 219 $ 350,056
================== ================= ============== ===============
1996
----------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated Fair
Cost Gains Losses Value
------------------ ---------------- ------------- ----------------
(In Thousands)
FIXED MATURITIES 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
------------------ ---------------- ------------- ----------------
Total fixed maturities available for sale $2,210,150 $ 31,252 $ 4,585 $2,236,817
================== ================= ============== ===============
------------------ ---------------- ------------- ----------------
EQUITY SECURITIES AVAILABLE FOR SALE $ 3,626 $ 819 $ 697 $ 3,748
================== ================= ============== ===============
------------------ ---------------- ------------- ----------------
FIXED MATURITIES HELD TO MATURITY
Corporate securities $ 405,731 $ 10,947 $ 576 $ 416,102
------------------ ---------------- ------------- ----------------
Total fixed maturities held to maturity $ 405,731 $ 10,947 $ 576 $ 416,102
================== ================= ============== ===============
</TABLE>
B-9
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. INVESTMENTS (CONTINUED)
The amortized cost and estimated fair value of fixed maturities, categorized by
contractual maturities at December 31, 1997, are shown below:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------------- -----------------------------------
ESTIMATED ESTIMATED
FAIR FAIR
AMORTIZED COST VALUE AMORTIZED COST VALUE
----------------- ---------------- ----------------- -----------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 29,759 $ 29,731 $ 13,736 $ 13,838
Due after one year through five years 1,738,532 1,758,946 204,298 212,050
Due after five years through ten years 555,194 567,928 98,192 101,143
Due after ten years 201,993 206,023 22,622 23,025
Mortgage-backed securities 1,076 1,224 -- --
----------------- ---------------- ----------------- -----------------
Total $2,526,554 $2,563,852 $ 338,848 $ 350,056
================= ================ ================= =================
</TABLE>
Actual maturities will differ from contractual maturities because issuers have
the right to call or prepay obligations.
Proceeds from the sale of fixed maturities available for sale during 1997, 1996,
and 1995 were $2,796,306 thousand, $3,667,062 thousand, and $1,807,584 thousand,
respectively. Gross gains of $18,635 thousand, $22,078 thousand, and $25,909
thousand and gross losses of $7,990 thousand, $17,718 thousand, and $13,907
thousand were realized on those sales during 1997, 1996, and 1995, respectively.
Proceeds from the maturity of fixed maturities available for sale during 1997,
1996, and 1995 were $32,359 thousand, $219,192 thousand, and $79,103 thousand,
respectively. During the years ended December 31, 1997, 1996 and 1995, there
were no securities classified as held to maturity that were sold.
The following table describes the amortized cost and estimated fair value of
fixed maturity securities by rating agency equivalent as of December 31, 1997:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
-------------------------------- -------------------------------
AMORTIZED ESTIMATED FAIR AMORTIZED ESTIMATED FAIR
COST VALUE COST VALUE
--------------- ---------------- --------------- ---------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
AAA/AA/A $ 1,319,527 $ 1,334,823 $ 187,692 $ 194,797
BBB 1,047,203 1,062,641 128,481 131,820
BB 80,136 83,293 20,540 21,264
B 73,717 76,781 2,132 2,172
CCC or lower 5,943 6,288 -- --
In or near default 28 26 3 3
--------------- ---------------- --------------- ---------------
Total $ 2,526,554 $ 2,563,852 $ 338,848 $ 350,056
=============== ================ =============== ===============
</TABLE>
The NAIC rates certain public and private placement securities as "in or near
default" if they are currently non-performing or believed subject to default in
the near term. The Company's holdings of these securities, in the aggregate,
comprised less than 1% of total invested assets at December 31, 1997 and 1996.
B-10
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. INVESTMENTS (CONTINUED)
MORTGAGE LOANS ON REAL ESTATE
The Company's mortgage loans were collateralized by the following property types
at December 31,
1997 1996
---------------------- -----------------------
(In Thousands)
Office buildings $ 4,607 20% $ 18,497 39%
Retail stores 8,090 35% 8,731 19%
Apartment complexes 6,080 27% 11,771 25%
Industrial buildings 4,010 18% 7,916 17%
---------------------- -----------------------
Net carrying value $ 22,787 100% $ 46,915 100%
====================== =======================
The mortgage loans are geographically dispersed throughout the United States
with the largest concentrations in Washington (29%) and Pennsylvania (27%).
SPECIAL DEPOSITS
Fixed maturities of $8,302 thousand and $8,744 thousand at December 31, 1997 and
1996, respectively, were on deposit with governmental authorities or trustees as
required by certain insurance laws.
OTHER LONG-TERM INVESTMENTS
The Company's "Other long-term investments" of $1,317 thousand and $4,528
thousand as of December 31, 1997 and 1996, respectively, are comprised of
non-real estate related interests. The Company's share of net income from these
entities is $2,158 thousand, $1,434 thousand and $345 thousand for the years
ended December 31, 1997, 1996 and 1995, respectively, and is reported in "Net
investment income."
B-11
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. INVESTMENTS (CONTINUED)
INVESTMENT INCOME AND INVESTMENT GAINS AND LOSSES
NET INVESTMENT INCOME arose from the following sources for the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities - available for sale $ 161,140 $ 152,445 $ 160,740
Fixed maturities - held to maturity 26,936 33,419 33,458
Equity securities 76 44 104
Mortgage loans on real estate 2,585 5,669 7,757
Investment real estate - 613 647
Policy loans 37,398 33,449 29,775
Short-term investments 22,011 16,780 15,092
Other 14,920 9,438 3,949
----------------- ----------------- -----------------
Gross investment income 265,066 251,857 251,522
Less: investment expenses (5,432) (4,529) (4,904)
----------------- ----------------- -----------------
Net investment income $ 259,634 $ 247,328 $ 246,618
================= ================= =================
</TABLE>
REALIZED INVESTMENT GAINS ,NET including charges for other than temporary
reductions in value, for the years ended December 31, were from the following
sources:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities - available for sale $ 9,039 $ 9,036 $ 11,359
Fixed maturities - held to maturity 821 - -
Equity securities 8 781 2,020
Mortgage loans on real estate 797 1,677 (90)
Investment real estate - 487 (99)
Other 309 (1,146) 10
----------------- ----------------- -----------------
Realized investment gains, net $ 10,974 $ 10,835 $ 13,200
================= ================= =================
</TABLE>
NET UNREALIZED INVESTMENT GAINS on securities available for sale are included in
the consolidated statement of financial position as a component of equity, net
of tax. Changes in these amounts for the years ended December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Balance, beginning of year $ 14,104 $ 32,056 $ (41,761)
Changes in unrealized investment gains
(losses) attributable to:
Fixed maturities 10,631 (43,853) 110,932
Equity securities 571 1,403 68
Participating group annuity contracts 1,292 (3,855) 5,092
Deferred policy acquisition costs (8,412) 17,321 (25,214)
Deferred federal income taxes (1,057) 11,032 (17,061)
----------------- ----------------- -----------------
Balance, end of year $ 17,129 $ 14,104 $ 32,056
================= ================= =================
</TABLE>
B-12
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INCOME TAXES
The components of income taxes for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ---------------------
(In Thousands)
<S> <C> <C> <C>
Current tax expense:
U.S. $71,989 $59,489 $65,131
State and local 1,337 703 1,876
Foreign -- 4 7
--------------------- --------------------- ---------------------
Total 73,326 60,196 67,014
--------------------- --------------------- ---------------------
Deferred tax (benefit) expense:
U.S. (11,458) 18,413 12,196
State and local -- 526 348
--------------------- --------------------- ---------------------
Total (11,458) 18,939 12,544
--------------------- --------------------- ---------------------
Total income tax expense $61,868 $79,135 $79,558
===================== ===================== =====================
</TABLE>
The Company's income tax expense for the years ended December 31, differs from
the amount computed by applying the expected federal income tax rate of 35% to
income from operations before income taxes for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- --------------------
(In Thousands)
<S> <C> <C> <C>
Expected federal income tax expense $58,885 $79,925 $81,271
State income taxes 869 1,229 2,224
Other 2,114 (2,019) (3,937)
--------------------- --------------------- ---------------------
Total income tax expense $61,868 $79,135 $79,558
===================== ===================== ====================
</TABLE>
B-13
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INCOME TAXES (CONTINUED)
Deferred tax assets and liabilities at December 31, resulted from the items
listed in the following table:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
(In Thousands)
<S> <C> <C>
Deferred income tax assets
Insurance reserves $ 40,896 $ 38,532
-------------------- --------------------
Total deferred income tax assets 40,896 38,532
-------------------- --------------------
Deferred income tax liabilities
Deferred acquisition costs 168,702 173,785
Net investment gains 8,161 12,502
Other 2,516 1,205
-------------------- --------------------
Total deferred income tax liabilities 179,379 187,492
-------------------- --------------------
Deferred federal income tax liabilities $ 138,483 $ 148,960
==================== ====================
</TABLE>
Management believes that based on its historical pattern of taxable income, the
Company will produce sufficient income in the future to realize its deferred tax
assets after valuation allowance. Adjustments to the valuation allowance will be
made if there is a change in management's assessment of the amount of the
deferred tax assets that are realizable.
The Internal Revenue Service (the "Service") has completed examinations of the
consolidated federal income tax returns through 1989. The Service has examined
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. The
Service has begun their examination of the years 1993 through 1995.
5. REINSURANCE
The Company assumes and cedes reinsurance with Prudential and other companies.
The effect of reinsurance for the years ended December 31, is summarized as
follows:
1997 1996 1995
----------- ----------- -----------
Life insurance premiums
Gross Amount $ 51,851 $ 53,776 $ 44,357
Ceded to other companies (3,724) (3,379) (2,268)
Assumed from other companies 1,369 1,128 --
----------- ----------- -----------
Net amount $ 49,496 $ 51,525 $ 42,089
=========== =========== ===========
1997 1996 1995
----------- ----------- -----------
Life insurance in force
Gross Amount $47,328,495 $47,430,580 $47,822,892
Ceded to other companies (1,292,395) (1,172,449) (822,619)
----------- ----------- -----------
Net amount $46,036,100 $46,258,131 $47,000,273
=========== =========== ===========
B-14
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. EQUITY
RECONCILIATION OF STATUTORY SURPLUS AND NET INCOME
Accounting practices used to prepare statutory financial statements for
regulatory purposes differ in certain instances from GAAP. The following table
reconciles the Company's statutory net income and surplus as of and for the
years ended December 31, determined in accordance with accounting practices
prescribed or permitted by the Arizona Department of Banking and Insurance with
net income and equity determined using GAAP.
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------------
(In Thousands)
<S> <C> <C> <C>
STATUTORY NET INCOME $ 12,778 $ 48,846 $ 113,565
Adjustments to reconcile to net income on a GAAP basis:
Statutory income of subsidiaries 18,553 25,001 44,186
Deferred acquisition costs 38,003 48,862 (6,103)
Deferred premium 1,144 1,295 (743)
Insurance liabilities 26,517 28,662 32,665
Deferred taxes 11,458 (7,780) (27,669)
Valuation of investments 506 365 5,480
Other, net (2,585) 3,971 (8,737)
------------------ ------------------ ------------------
GAAP NET INCOME $ 106,374 $ 149,222 $ 152,644
================== ================== ==================
<CAPTION>
1997 1996
-------------------- --------------------
(In Thousands)
<S> <C> <C>
STATUTORY SURPLUS $ 853,130 $ 901,645
Adjustments to reconcile to equity on a GAAP basis:
Valuation of investments 97,787 95,411
Deferred acquisition costs 655,242 633,159
Deferred premium (14,817) (11,859)
Insurance liabilities (107,525) (124,781)
Deferred taxes (113,461) (124,823)
Other, net 135,161 30,229
-------------------- --------------------
GAAP STOCKHOLDER'S EQUITY $ 1,505,517 $ 1,398,981
==================== ====================
</TABLE>
The New York State Insurance Department ("Department") recognizes only statutory
accounting for determining and reporting the financial condition 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 GAAP in making such determinations.
B-15
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values presented below have been determined using available information
and valuation methodologies. Considerable judgment is applied in interpreting
data to develop the estimates of fair value. Accordingly, such estimates
presented may not be realized in a current market exchange. The use of different
market assumptions and/or estimation methodologies could have a material effect
on the estimated fair values. The following methods and assumptions were used in
calculating the fair values (for all other financial instruments presented in
the table, the carrying value approximates fair value.)
FIXED MATURITIES AND EQUITY SECURITIES
Fair values for fixed maturities and equity securities, other than private
placement securities, are based on quoted market prices or estimates from
independent pricing services. Fair values for private placement securities are
estimated using a discounted cash flow model which considers the current market
spreads between the U.S. Treasury yield curve and corporate bond yield curve,
adjusted for the type of issue, its current credit quality and its remaining
average life. The estimated fair value of certain non-performing private
placement securities is based on amounts estimated by management.
MORTGAGE LOANS ON REAL ESTATE
The fair value of the mortgage loan portfolio is primarily based upon the
present value of the scheduled future cash flows discounted at the appropriate
U.S. Treasury rate, adjusted for the current market spread for a similar quality
mortgage.
POLICY LOANS
The estimated fair value of policy loans is calculated using a discounted cash
flow model based upon current U.S. Treasury rates and historical loan
repayments.
DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of futures is estimated based on market quotes for a transactions
with similar terms.
The following table discloses the carrying amounts and estimated fair values of
the Company's financial instruments at December 31,:
<TABLE>
<CAPTION>
1997 1996
------------------------------------- --------------------------------------
ESTIMATED ESTIMATED
CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
------------------ ------------------ ------------------ -------------------
(In Thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities:
Available for sale $ 2,563,852 $ 2,563,852 $ 2,236,817 $ 2,236,817
Held to maturity 338,848 350,056 405,731 416,102
Equity securities 1,982 1,982 3,748 3,748
Mortgage loans 22,787 24,994 46,915 46,692
Policy loans 703,955 703,605 639,782 623,218
Short-term investments 316,355 316,355 169,830 169,830
Cash 71,358 71,358 73,766 73,766
Separate Account assets 8,022,079 8,022,079 5,336,851 5,336,851
Financial Liabilities:
Policyholders'
account balances $ 2,282,191 $ 2,282,191 $ 2,188,862 $ 2,188,862
Cash collateral for loaned
securities 143,421 143,421 -- --
Separate Account liabilities 7,948,788 7,948,788 5,277,454 5,277,454
Derivatives 653 653 -- --
</TABLE>
B-16
<PAGE>
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. DERIVATIVE INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of liability positions in future instruments, which represents
the Company's current exposure to credit loss from other parties'
non-performance, was $653 thousand at December 31, 1997. This includes the
estimated fair values of outstanding derivative positions only and does not
include the fair values of associated financial and non-financial assets and
liabilities, which generally offset derivative notional amounts. The fair value
amounts presented also do not reflect the netting of amounts pursuant to right
of setoff, qualifying master netting agreements with counterparties or
collateral arrangements.
9. RELATED PARTY TRANSACTIONS
SERVICE AGREEMENTS
Prudential, and Pruco Securities Corporation, an indirect wholly-owned
subsidiary of Prudential, operate under service and lease agreements whereby
services of officers and employees (except for those agents employed by the
Company in Taiwan), supplies, use of equipment and office space are provided.
The net cost of these services allocated to the Company were $139,489 thousand,
$101,662 thousand and $98,119 thousand for the years ended December 31, 1997,
1996, and 1995, respectively.
REINSURANCE
The Company currently has three reinsurance agreements in place with Prudential
(the reinsurer). Specifically a reinsurance Group Annuity Contract, whereby the
reinsurer, in consideration for a single premium payment by the Company,
provides reinsurance equal to 100% of all payments due under the contract, and
two yearly renewable term agreements in which the Company may offer and the
reinsurer may accept reinsurance on any life in excess of the Company's maximum
limit of retention. The Company is not relieved of its primary obligation to the
policyholder as a result of these reinsurance transactions. These agreements had
no material effect on net income for the years ended December 31, 1997, 1996,
and 1995.
10. 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.
In the normal course of business, the Company is subject to various claims and
assessments. Management believes the settlement of these matters would not have
a material effect on the financial position or results of operations of the
Company.
11. DIVIDENDS
The Company is subject to Arizona law which limits the amount of dividends that
insurance companies can pay to stockholders. The maximum dividend which may be
paid in any twelve month period without notification or approval is limited to
the lesser of 10% of statutory surplus as of December 31 of the preceding year
or the net gain from operations of the preceding calendar year. Cash dividends
may only be paid out of surplus derived from realized net profits. Based on
these limitations and the Company's surplus position at December 31, 1997, the
Company would be permitted a maximum of $15,260 thousand in dividend
distribution in 1998, all of which could be paid in cash, without approval from
The State of Arizona Department of Insurance.
B-17
<PAGE>
Report of Independent Accountants
---------------------------------
To the Board of Directors of
Pruco Life Insurance Company
In our opinion, the accompanying consolidated statements of financial position
and the related consolidated statements of operations, of changes in
stockholder's equity and of cash flows present fairly, in all material respects,
the financial position of Pruco Life Insurance Company and its subsidiaries at
December 31, 1997 and 1996, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
managememt; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with 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 provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
New York, New York
March 23, 1998
B-18
<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 operations, changes
in stockholder's equity, and cash flows of Pruco Life Insurance Company and
subsidiaries for the year ended December 31, 1995. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such consolidated statements of operations, changes in
stockholder's equity, and cash flows present fairly, in all material respects,
the results of operations and cash flows of Pruco Life Insurance Company and
subsidiaries for the year ended December 31, 1995 in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Parsippany, NJ
December 19, 1996
B-19
<PAGE>
PRUSELECT(SM) I
Variable Life
Insurance
[LOGO]
Pruco Life Insurance Company
213 Washington Street, Newark, NJ 07102-2992
Telephone: 800 286-7754
CVUL-1 Ed. 6/99
<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
The Registrant, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.
Arizona, being the state of organization of Pruco Life Insurance Company
("Pruco"), permits entities organized under its jurisdiction to indemnify
directors and officers with certain limitations. The relevant provisions of
Arizona law permitting indemnification can be found in Section 10-850 ET SEQ. of
the Arizona Statutes Annotated. The text of Pruco's By-law, Article VIII, which
relates to indemnification of officers and directors, is incorporated by
reference to Exhibit 3(ii) to its Form 10-Q, SEC File No. 33-37587, filed August
15, 1997.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 108 pages.
The undertaking to file reports.
The representation with respect to charges.
The signatures.
Written consents of the following persons:
1. PricewaterhouseCoopers LLP, independent accountants.
2. Clifford E. Kirsch, Esq.
3. 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) (a) Resolution of Board of Directors of Pruco
Life Insurance Company establishing the Pruco
Life Variable Universal Account. (Note 8)
(b) Amendment of Separate Account Resolution.
(Note 1)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco
Securities Corporation and Pruco Life
Insurance Company. (Note 8)
(b) Proposed form of Agreement between Pruco
Securities Corporation and independent
brokers with respect to the Sale of the
Contracts. (Note 8)
(c) Schedule of Sales Commissions. (Note 8)
(d) Participation Agreements and Amendments:
(i)(a) AIM Variable Insurance Funds, Inc.,
AIM V.I. Value Fund. (Note 3)
(b) Amendment to the AIM Variable
Insurance Funds, Inc. Participation
Agreement. (Note 1)
(ii)(a) American Century Variable
Portfolios, Inc., VP Value
Portfolio. (Note 1)
(iii)(a) Janus Aspen Series, Growth
Portfolio. (Note 3)
(b) Amendment to the Janus Aspen Series
Participation Agreement. (Note 1)
(iv)(a) MFS Variable Insurance Trust,
Emerging Growth Series. (Note 3)
(b) Amendment to the MFS Variable
Insurance Trust Participation
Agreement. (Note 1)
(v)(a) T. Rowe Price International Series,
Inc., International Stock
Portfolio. (Note 3)
(b) Amendment to the T. Rowe Price
International Series, Inc.
Participation Agreement. (Note 1)
(4) Not Applicable.
(5) Variable Universal Life Insurance Contract. (Note 8)
(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 May
6, 1997. (Note 9)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form for Variable Universal Life Insurance
Contract. (Note 8)
(b) Supplement to the Application for Variable Universal
Life Insurance Contract. (Note 10)
(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 1)
II-2
<PAGE>
(12) Endorsement to modify List of Investment Options. (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.
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, Esther H. Milnes, I. Edward
Price (Note 2)
(b) Kiyofumi Sakaguchi (Note 5)
(c) James J. Avery, Jr. (Note 3)
(d) Dennis G. Sullivan (Note 4)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Form 10-K, Registration No. 33-08698,
filed March 31, 1997 on behalf of the Pruco Life Variable Contract
Real Property Account.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 2 to Form
S-6, Registration No. 333-07451, filed June 25, 1997 on behalf of the
Pruco Life Variable Appreciable Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 6 for Form
S-1, Registration No. 33-86780, filed April 16, 1999 on behalf of the
Pruco Life Variable Contract Real Property Account.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 8 to Form
S-6, Registration No. 33-49994, filed April 28, 1997 on behalf of the
Pruco Life PRUvider Variable Appreciable Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 9 to this
Registration Statement, filed April 25, 1996.
(Note 7) Incorporated by reference to Form S-6, Registration No. 333-07451,
filed July 2, 1996 on behalf of the Pruco Life Variable Appreciable
Account.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 10 to this
Registration Statement, filed April 28, 1997.
(Note 9) Incorporated by reference to Form 10-Q, Registration No. 33-37587,
filed August 15, 1997 on behalf of the Pruco Life Insurance Company.
(Note 10) Incorporated by reference to Post-Effective Amendment No. 11 to
this Registration Statement, filed April 28, 1998.
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 3rd day of June, 1999.
(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. 13 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 3rd day of June, 1999.
SIGNATURE AND TITLE
-------------------
/s/ *
- -------------------------
Esther H. Milnes
President and Director
/s/ *
- -------------------------
Dennis G. Sullivan
Vice President and Chief Accounting Officer
/s/ * *By: /s/ Thomas C. Castano
- ------------------------- ---------------------
James J. Avery, Jr. Thomas C. Castano
Director (Attorney-in-Fact)
/s/ *
- -------------------------
William M. Bethke
Director
/s/ *
- -------------------------
Ira J. Kleinman
Director
/s/ *
- -------------------------
I. Edward Price
Director
/s/ *
- -------------------------
Kiyofumi Sakaguchi
Director
II-4
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 13 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated March 19, 1999, relating to the
financial statements of the 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 February 26, 1999, relating to the
consolidated financial statements of Pruco Life Insurance Company and its
subsidiaries, which appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
PricewaterhouseCoopers LLP
New York, New York
May 28, 1999
II-5
<PAGE>
EXHIBIT INDEX
Consent of PricewaterhouseCoopers LLP, independent Page II-5
accountants.
1.A.(1)(b) Amendment of Separate Account Resolution. Page II-7
1.A.(3)(d) Participation Agreements and Amendments: Page II-8
(i)(b) Amendment to the AIM Variable Insurance Funds,
Inc. Participation Agreement.
(ii)(a) American Century Variable Portfolios, Inc.
Participation Agreement.
(iii)(b) Amendment to the Janus Aspen Series
Participation Agreement.
(iv)(b) Amendment to the MFS Variable Insurance Trust
Participation Agreement.
(v)(b) Amendment to the T. Rowe Price International
Series, Inc. Participation Agreement.
1.A.(11) Memorandum describing Pruco Life Insurance Company's Page II-31
issuance, transfer, and redemption procedures for the
Contracts pursuant to Rule 6e-3(T)(b)(12)(iii).
1.A.(12) Endorsement to modify List of Investment Options. Page II-37
3. Opinion and Consent of Clifford E. Kirsch, Esq., as Page II-38
to the legality of the securities being registered.
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as to Page II-39
actuarial matters pertaining to the securities being
registered.
II-6
PRUCO LIFE INSURANCE COMPANY
Action by the Executive Committee of
Board of Directors by Unanimous Consent
Pursuant to Section 4.12 of Article IV of the By-Laws of Pruco Life
Insurance Company, an Arizona corporation, and pursuant to Section 10-0444 of
the Arizona General Corporation Law, the undersigned, being, or acting for all
the regular members of the Executive Committee of the Board of Directors of such
Company, hereby consent to and adopt the following resolution:
R-876 Establishment of VUL Subaccounts
RESOLVED, that the Resolution (R-447) establishing the Pruco Life
Variable Universal Account (the "Account"), adopted April 17, 1989, is hereby
amended by the addition of the following provision:
RESOLVED, that the proper officers of the Company are hereby authorized
to establish such subaccounts of the Account as they mey find necessary or
desirable to allow for purchase payments received in connection with the
Company's Pruselect I and Pruselect II contracts, and with such other individual
variable life insurance contracts as they may determine from time to time, and
the dividends, interest and gains produced thereby, to be invested and
reinvested in shares of the various portfolios of The Prudential Series Fund,
Inc. and in the following investment company portfolios at the net asset value
of such shares at the time of acquisition:
FUND/SERIES PORTFOLIO
AIM Variable Insurance Funds, Inc. AIM V.I. Value Fund
American Century VP Value Portfolios,Inc. American Century VP Value Fund
Janus Aspen Series Growth Portfolio
MFS Variable Insurance Trust Emerging Growth Series
T. Rowe Price International Series, Inc. International Stock Portfolio
September 3, 1998
/s/ James J. Avery, Jr.
---------------------------
James J. Avery, Jr.
/s/ Esther H. Milnes
---------------------------
Esther H. Milnes
/s/ I. Edward Price
---------------------------
I. Edward Price
II-7
AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated September 21, 1996,
by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware corporation, Pruco Life Insurance Company, an
Arizona life insurance company and Pruco Securities Corporation, a New Jersey
corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
<TABLE>
"SCHEDULE A
<CAPTION>
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES FUNDED BY THE
THE POLICIES UTILIZING THE FUNDS SEPARATE ACCOUNTS
- ------------ ------------------- -----------------
<S> <C> <C>
AIM V.I. Growth and Income Pruco Life Flexible Premium Discovery Select Annuity
Fund Variable Annuity Account, Contract
AIM V.I. Value Fund established June 16, 1995
AIM V.I. Value Fund Pruco Life Variable Variable Universal Life
Appreciable Account, Insurance Policy
established January 13, 1984
AIM V.I. Value Fund Pruco Life Variable PruSelect I Variable Universal
Universal Account, Life Policy
established April 17, 1989
AIM V.I. Value Fund Pruco Life Variable PruSelect II Variable Universal
Universal Account, Life Policy"
established April 17, 1989
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: August 1, 1998
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
--------------------- -----------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
II-8
<PAGE>
A I M DISTRIBUTORS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo
--------------------- -----------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
PRUCO LIFE INSURANCE COMPANY
Attest: /s/ Thomas C. Castano By: /s/ Esther H. Milnes
--------------------- ---------------------
Name: Thomas C. Castano Name: Esther H. Milnes
--------------------- ---------------------
Title: Assistant Secretary Title: President
--------------------- ---------------------
(SEAL)
PRUCO SECURITIES CORPORATION
Attest: /s/ Thomas C. Castano By: /s/ Richard A. Topp
--------------------- ---------------------
Name: Thomas C. Castano Name: Richard A. Topp
--------------------- ---------------------
Title: Assistant Secretary Title: President
--------------------- ---------------------
(SEAL)
II-9
<PAGE>
AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT
THIS AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT is made and
entered into as of June 30, 1998 by and among PRUCO LIFE INSURANCE COMPANY (the
"Company") and AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. ("Manager").
WHEREAS, the Company offers to the public certain individual variable
universal life contracts, variable annuity contracts and individual variable
life insurance contracts (collectively, the "Contracts"); and
WHEREAS, the Company wishes to offer as investment options under the
Contracts, the funds listed on EXHIBIT A hereto (the "Funds"), each of which is
a series of mutual fund shares registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and
WHEREAS, on the terms and conditions hereinafter set forth, the Manager
desires to make shares of the Funds available as an investment option under the
Contracts and to retain the Company to perform certain administrative services
on behalf of the Funds;
NOW, THEREFORE, the Company and the Manager agree as follows:
1. TRANSACTIONS IN THE FUNDS. Subject to the terms and conditions of
this Agreement, the Manager will cause shares of the Funds to be made available
to be purchased, exchanged, or redeemed, by the Company on behalf of Contract
owners through the Accounts (defined in SECTION 6(a) below) through a single
account per Fund at the net asset value applicable to each order. The Funds'
shares shall be purchased and redeemed on a net basis in such quantity and at
such time as determined by the Company to satisfy the requirements of the
Contracts for which the Funds serve as underlying investment media. Dividends
and capital gains distributions will be automatically reinvested in full and
fractional shares of the Funds.
2. ADMINISTRATIVE SERVICES. The Company shall be solely responsible for
providing all administrative services for the Contract owners. The Company
agrees that it will maintain and preserve all records as required by law to be
maintained and preserved, and will otherwise comply with all laws, rules and
regulations applicable to the marketing of the Contracts and the provision of
administrative services to the Contract owners.
3. PROCESSING AND TIMING OF TRANSACTIONS.
(a) The funds hereby appoint the Company as their agent for the limited
purpose of accepting purchase and redemption orders for Fund shares from the
Contract owners. On each day the New York Stock Exchange (the "Exchange") is
open for business (each, a "Business Day"), the Company may receive instructions
from the Contract owners for the purchase or redemption of shares of the Funds
("Orders"). Orders received and accepted by the Company prior to the close of
regular trading on the Exchange (the "Close of Trading") on any given Business
Day (currently, 3:00 p.m. Central time) and transmitted to the Funds' transfer
agent by 8:30 a.m. Central time on the next following Business Day will be
executed at the net asset value determined as of the Close of Trading, on the
previous Business Day ("Day 1"). Any Orders received by the Company after the
Close of Trading, and all Orders that are transmitted by the Company after 8:30
a.m. Central time on the next following Business Day, will be executed at the
net asset value next determined following receipt of such Order. The day as of
which an Order is executed pursuant to the provisions set forth above is
referred to herein as the "Effective Trade Date".
II-10
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(b) By 5:30 p.m. Central time on each Business Day, the Manager or its
agent will provide to the Company, via facsimile or other electronic
transmission acceptable to the Company, the Funds' net asset value, dividend and
capital gain information and, in the case of income funds, the daily accrual for
interest rate factor (mil rate), determined at the Close of Trading. If the
Manager provides the Company with materially incorrect share net asset value
information through no fault of the Company, the Company on behalf of the
separate accounts shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share, dividend or capital gain
information shall be reported to the Company promptly upon discovery.
(c) By 8:30 a.m. Central time on each Business Day, the Company will
provide to the Manager via facsimile or other electronic transmission acceptable
to the Manager a report stating whether the Orders received by the Company from
Contract owners by the Close of Trading on the preceding Business Day resulted
in the Accounts being a net purchaser or net seller of shares of the Funds. As
used in this Agreement, the phrase "other electronic transmission acceptable to
the Manager" includes the use of remote computer terminals located at the
premises of the Company, its agents or affiliates, which terminals may be linked
electronically to the computer system of The Manager, its agents or affiliates
(hereinafter, "Remote Computer Terminals").
(d) Upon the timely receipt from the Company of the report described in
(c) above, the Funds will execute the purchase or redemption transactions (as
the case may be) at the net asset value computed as of the Close of Trading on
Day 1. Payment for net purchase transactions shall be made by wire transfer to
the custodial account designated by the Funds on the Business Day next following
the Effective Trade Date. Such wire tramfers shall be initiated by the Company's
bank prior to 3:00 p.m. Central time and received by the Funds prior to 5:00
p.m. Central time on the Business Day next following the Effective Trade Date.
If payments for a purchase Order is not timely received, such Order will be
executed at the net asset value next computed following receipt of payment.
Payments for net redemption transactions shall be made by wire transfer by the
Funds to the account designated by the appropriate receiving party within the
time period set forth in the applicable Fund's then-current prospectus;
provided, however, the Funds will use all reasonable efforts to settle all
redemptions on the Business Day following the Effective Trade Date. Within one
week of the transaction, the Manager will send or cause to be sent a written
confirmation of all trades to the Company's Separate Accounts Department in the
form of a statement detailing the Company's total shares owned, Effective Trade
Date, shares purchased and sold and the net asset value of the shares. On any
Business Day when the Federal Reserve Wire Transfer System is closed, all
communication and processing rules will be suspended for the settlement of
Orders. Orders will be settled on the next Business Day on which the Federal
Reserve Wire Transfer System is open and the Effective Trade Date will apply.
4. PROSPECTUS AND PROXY MATERIALS.
(a) The Manager shall provide to the shareholder of record copies of the
Funds proxy materials, periodic fund reports to shareholders and other materials
that are required by law to be sent to the Funds' shareholders. In addition, the
Manager shall provide the Company with a sufficient quantity of prospectuses of
the Funds to be used in conjunction with the transactions contemplated by this
Agreement, together with such additional copies of the Funds' prospectuses as
may be reasonably requested by Company. If the Company provides for pass-through
voting by the Contract owners, the Manager will provide the Company with a
sufficient quantity of proxy materials for each Contract owner. If requested by
the Company in lieu of printed prospectuses, the Manager or its designee shall
provide such documentation (including a "camera ready" copy of the new
prospectus as set in type or, at the request of the Company, as a diskette in
the form sent to the Funds' printer) and other assistance as is reasonably
necessary in order for the parties hereto once
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each year (or more frequently if the prospectus for the Shares is supplemented
or amended) to have the prospectus for the Contracts, prospectuses for other
mutual funds in which the Contracts may be invested, and the Funds' new
prospectus printed together in one document. Such documentation shall be
provided in electronic format no later than April 15 of each year. If the
Manager fails to provide such documentation in a timely manner through no fault
of its own and such delay causes the Company to incur additional costs, the
Manager shall reimburse the Company for any reasonable and actual out-of-pocket
expenses directly attributable to such delay upon submission of any expense
accounting the Manager reasonably may require. Such out-of-pocket expenses shall
not include over-time for employees of the Company.
(b) The cost of preparing, printing and shipping of the prospectuses,
proxy materials, periodic fund reports and other materials of the Funds to the
Company shall be paid by the Manager or its agents or affiliates; provided,
however, that if at any time the Manager or its agent reasonably deems the usage
by the Company of such items to be excessive, it may, prior to the delivery of
any quantity of materials in excess of what is deemed reasonable, request that
the Company demonstrate the reasonableness of such usage. If the Manager
believes the reasonableness of such usage has not been adequately demonstrated,
it may request that the Company pay the cost of printing (including press time)
and delivery of any excess copies of such materials. Unless the Company agrees
to make such payments, the Manager may refuse to supply such additional
materials and this section shall not be interpreted as requiring delivery by the
Manager of any copies in excess of the number of copies to be provided to
existing Contract owners.
(c) The cost of distribution, if any, of any prospectuses, proxy
materials, periodic fund reports and other materials of the Funds to the
Contract owners shall be paid by the Company and shall not be the responsibility
of the Manager or the Funds.
5. COMPENSATION AND EXPENSES.
(a) The Accounts shall be the sole shareholder of Fund shares purchased
for the Contract owners pursuant to this Agreement (the "Record Owners"). The
Company and the Record Owners shall properly complete any applications or other
forms required by the Manager or the Funds' transfer agent from time to time.
(b) The Manager acknowledges that it will derive a substantial savings in
administrative expenses, such as a reduction in expenses related to postage,
shareholder communications and recordkeeping, by virtue of having a single
shareholder account per Fund for the Accounts rather than having each Contract
owner as a shareholder. In consideration of performance by the Company of the
administrative services and performance of all other obligations under this
Agreement by the Company, the Manager will pay the Company a fee (the
"Administrative Services Fee") equal to 25 basis points (0.25%) per armum of the
average aggregate amount invested by the Company in the Funds, based on the
average aggregate market value of investments (on behalf of the Contact owners)
in the Funds by the Company, its subsidiaries and affiliates that offer
insurance products, up to an average aggregate investment in the Funds of $100
million. For all assets invested in the Funds by the Company, its subsidiaries
and affiliates that offer insurance products, over $100 million, the Manager
will pay the Company an Administrative Services Fee of 30 basis points (0.30%)
per annum of the average aggregate market value of the investments over SI 00
million.
(c) The parties understand that the Manager customarily pays, out of its
management fee, another corporation for the type of administrative services to
be provided by the Company to the Contract owners. The parties agree that the
payments by the Manager to the Company, like its payments to such other
corporation, are for administrative services only and do not constitute payment
in any manner for investment advisory services or for costs of distribution.
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<PAGE>
(d) For the purposes of computing the payment to the Company contemplated
by this SECTION 5, the average aggregate amount invested by the Accounts in the
Funds over a one month period shall be computed by totaling the Company's
aggregate investment (share net asset value multiplied by total number of shares
of the Funds held by the Company) on each Business Day during the month and
dividing by the total number of Business Days during such month.
(e) The Manager will calculate the amount of the payment to be made
pursuant to this SECTION 5 at the end of each calendar quarter and will make
such payment to the Company within 30 days thereafter. The check for such
payment will be accompanied by a statement showing the calculation of the
amounts being paid by the Manager for the relevant months and such other
supporting data as may be reasonably requested by the Company and shall be
mailed to:
For the Pruco Life Variable Appreciable Account and Variable Universal Account:
Pruco Life Insurance Company
c/o The Prudential Insurance Company of America
Gateway Center Three, 10th Floor
Newark, New Jersey 07102
Attention: Dennis Kane, Director of Accounting
For the Pruco Life Flexible Premium Variable Annuity Account:
Pruco Life Insurance Company
3 Gateway Center, 8th Floor
Newark, New Jersey 07102-4077
Attn: Joel Kesner
6. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and wan-ants that: (i) this Agreement has been
duly authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms; (ii) it has established the
accounts set forth on EXHIBIT B hereto (the "Accounts"), which are separate
accounts under Arizona insurance law, and has to the extent required by law
registered the Accounts as unit investment trusts under the Investment Company
Act to serve as investment vehicles for the Contracts; (iii) each Contract
provides for the allocation of net amounts received by the Company to an
Account for investment in the shares of one of more specified investment
companies selected among those companies available through the Accounts to act
as underlying investment media; (iv) selection of a particular investment
company is made by the Contract owner under a particular Contract, who may
change such selection from time to time in accordance with the terms of the
applicable Contract; and (v) the activities of the Company contemplated by
this Agreement comply with all provisions of federal and state insurance,
securities, and tax laws applicable to such activities.
(b) The Manager represents that: (i) this Agreement has been duly
authorized by all necessary corporate action and, when executed and delivered,
shall constitute the legal, valid and binding obligation of the Manager,
enforceable in accordance with its terms; and (ii) the investments of the
Funds will at all times be adequately diversified within the meaning of
Section 817(h) of the Internal Revenue Service Code of 1986, as amended (the
"Code"), and the regulations thereunder, and that at all times while this
Agreement is in effect, all beneficial interests in each of the Funds will be
owned by one or more insurance companies or by any other party permitted under
Section 1.817-5(f)(3) of the Regulations promulgated under the Code. In the
event of a breach of this Section 6(b)(ii) by the Funds or the Manager will
take all reasonable steps (A) to notify the
II-13
<PAGE>
Company of such breach and (B) to adequately diversify the Funds so as to
achieve compliance within the grace period afforded by Treasury Regulation
1.817-5.
(c) The Manager represents that the Funds are currently qualified as
Regulated Investment Companies under Subchapter M of the Internal Revenue Code,
and that they will maintain such qualification (under Subchapter M or any
successor or similar provision) and that the Manager will notify the Company
immediately upon having a reasonable basis for believing that the Funds have
ceased to so qualify or that they might not qualify in the future.
7. ADDITIONAL COVENANTS AND AGREEMENTS.
(a) Each party shall comply with all provisions of federal and state
laws applicable to its respective activities under this Agreement.
(b) Each party shall promptly notify the other parties in the event that
it is, for any reason, unable to perform any of its obligations under this
Agreement.
(c) The Company covenants and agrees that all Orders accepted and
transmitted by it hereunder with respect to the Accounts on any Business Day
will be based upon instructions that it received from the Contract owners in
proper form prior to the Close of Trading of the Exchange on that Business Day.
(d) The Company covenants and agrees that all Orders transmitted to the
Funds' transfer agent, whether by telephone, telecopy, or other electronic
transmission acceptable to the Manager, shall be sent by or under the authority
and direction of a person designated by the Company as being duly authorized to
act on behalf of the owner of the Account. Absent actual knowledge to the
contrary, the Manager shall be entitled to rely on the existence of such
authority and to assume that any person transmitting Orders for the purchase,
redemption or transfer of Fund shares on behalf of the Company is "an
appropriate person" as used in Sections 8-107 and 8-401 of the Uniform
Commercial Code with respect to the transmission of instructions regarding Fund
shares on behalf of the owner of such Fund shares. The Company shall maintain
the confidentiality of all passwords and security procedures issued, installed
or otherwise put in place with respect to the use of Remote Computer Terminals
and assumes full responsibility for the security therefor. The Company further
agrees to be solely responsible for the accuracy, propriety and consequences of
all data transmitted to the Manager by the Company by telephone, telecopy or
other electronic transmission acceptable to the Manager.
(e) The Company shall furnish, or shall cause to be furnished, to the
Manager, each piece of sales literature or other promotional material in which a
Fund or the Manager is named, at least eight business days prior to its use. No
such material shall be used if the Funds or the Manager reasonably objects in
writing to such use within eight business days after receipt of such material.
(f) The Company shall not give any information or make any representations
or statements on behalf of any Fund or concerning any Fund other than the
information or representations contained in the registration statement or
prospectus for the Fund shares, as such registration statement and prospectus
may be amended or supplemented from time to time, or in reports or proxy
statements for that Fund, or in sales literature or other promotional material
approved by the Manager, except with the permission of the Manager. The Manager
agrees to respond to any request for approval on a prompt and timely basis.
(g) The Manager shall furnish, or shall cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company or the
II-14
<PAGE>
Accounts is named, at least ten business days prior to its use. No such material
shall be used if the Company reasonably objects in writing to such use within
ten business days after receipt of such material.
(h) The Manager shall not give any information or make any representations
on behalf of the Company or concerning the Company, the Accounts, or the
Contracts other than the information or representations contained in a
registration statement or prospectus for the Contracts, as such registration
statement and prospectus may be amended or supplemented from time to time, or in
published reports for the Accounts which are in the public domain or approved by
the Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company, except with the permission of the
Company. The Company agrees to respond to any request for approval on a prompt
and timely basis.
(i) The Manager will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials, and
all amendments to any of the above, that relate to that Fund or its shares, upon
the Company's request.
(j) The Company will provide to the Manager at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, and all amendments to any of the above, that relate to
the Contracts or the Accounts, upon the Manager's request.
(k) For purposes of this Section 7, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, reprints or excerpts of any other advertisement sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, prospectuses, statements of additional information, shareholder
reports, and proxy materials and any other material constituting sales
literature or advertising under NASD rules, the Investment Company Act or the
Securities Act of 1993 (the "1933 Act").
(1) For so long as the Manager maintains a web site on the Internet, the
Company may provide a hyperlink to such site. If the Manager discontinues such
web site or no longer maintains copies of Fund prospectuses therein for any
reason, the Manager shall provide an electronic version of the Funds'
prospectuses to the Company for use on the Company's web site, as reasonably
requested by the Company.
8. USE OF NAMES. Except as otherwise expressly provided for in this
Agreement, neither the Manager nor the Funds shall use any trademark, trade
name, service mark or logo of the Company, or any variation of any such
trademark, trade name, service mark or logo, without the Company's prior written
consent, the granting of which shall be at the Company's sole option. Except as
otherwise expressly provided for in this Agreement, the Company shall not use
any trademark, trade name, service mark or logo of the Manager or the Funds, or
any variation of any such trademarks, trade names, service marks, or logos,
without the prior written consent of either the Manager or the Funds, as
appropriate, the granting of which shall be at the sole option of the Manager
and/or the Funds.
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<PAGE>
9. PROXY VOTING.
(a) The Company shall provide pass-through voting privileges to all
Contract owners so long as the SEC continues to interpret the Investment Company
Act as requiring such privileges. It shall be the responsibility of the Company
to assure that it calculates voting privileges in a consistent manner.
(b) The Company will distribute to Contract owners all proxy material
furnished by the Manager and will vote shares in accordance with instructions
received from such Contract owners. The Company shall vote Fund shares for which
no instructions have been received in the same proportion as shares for which
such instructions have been received. The Company and its agents shall not
oppose or interfere with the solicitation of proxies for Fund shares held for
such Contract owners.
10. INDEMNITY.
(a) The Manager agrees to indemnify and hold harmless the Company and
its officers, directors, employees, agents, affiliates and each person, if any,
who controls the Company within the meaning of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this SECTION 10(A)) against any losses,
claims, expenses, damages or liabilities (including amounts paid in settlement
thereof) or litigation expenses (including legal and other expenses)
(collectively, "Losses"), to which the Indemnified Parties may become subject,
insofar as such Losses (i) result from a breach by the Manager of a material
provision of this Agreement, or (ii) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement or prospectus of the Funds or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Manager will reimburse any legal or other expenses reasonably incurred by
the Indemnified Parties in connection with investigating or defending any such
Losses. The Manager shall not be liable for indemnification hereunder if such
Losses are attributable to the negligence or misconduct of the Company in
performing its obligations under this Agreement.
(b) The Company agrees to indemnify and hold harmless the Manager and the
Funds and their respective officers, directors, employees, agents, affiliates
and each person, if any, who controls the Funds or the Manager within the
meaning of the 1933 Act (collectively, the "Indemnified Parties" for purposes of
this SECTION 10(B)) against any Losses to which the Indemnified Parties may
become subject, insofar as such Losses (i) result from a breach by the Company
of a material provision of this Agreement, or (ii) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement or prospectus of the Company regarding
the Contracts, if any, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) result from
the use by any person of a Remote Computer Terminal. The Company will reimburse
any legal or other expenses reasonably incurred by the Indemnified Parties in
connection with investigating or defending any such Losses. The Company shall
not be liable for indemnification hereunder if such Losses are attributable to
the negligence or misconduct of the Manager or the Funds in performing their
obligations under this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party otherwise than under this SECTION 10. In case any such
II-16
<PAGE>
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish to, assume
the defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this SECTION 10 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(d) If the indemnifying party assumes the defense of any such action, the
indemnifying party shall not, without the prior written consent of the
indemnified parties in such action, settle or compromise the liability of the
indemnified parties in such action, or permit a default or consent to the entry
of any judgment in respect thereof, unless in connection with such settlement,
compromise or consent, each indemnified party receives from such claimant an
unconditional release from all liability in respect of such claim.
11. POTENTIAL CONFLICTS.
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by the Manager on December 21, 1987, with the SEC and
the order issued by the SEC in response thereto (the "Shared Funding Exemptive
Order"). The Company has reviewed the conditions to the requested relief set
forth in such application for exemptive relief. As set forth in such
application, the Board of Directors of the Funds (the "Board") will monitor the
Funds for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the
Funds. An irreconcilable material conflict may arise for a variety of reasons,
including: (i) an action by any state insurance regulatory authority; (ii) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar actions by insurance, tax or securities
regulatory authorities; (iii) an administrative or judicial decision in any
relevant proceeding; (iv) the manner in which the investments of any portfolio
are being managed; (v) a difference in voting instructions given by variable
annuity contract owners and variable life insurance contract owners; or (vi) a
decision by an insurer to disregard the voting instructions of contract owners.
The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
(b) The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order by providing the Board
with all information reasonably necessary for the Board to consider any issues
raised. This includes, but is not limited to, an obligation by the Company to
infonn the Board whenever contract owner voting instructions are disregarded.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists with regard
to contract owner investments in the Funds, the Board shall give prompt notice
to all Participating Companies. If the Board determines that the Company is
responsible for causing or creating said conflict, the Company shall at its sole
cost and expense, and to the extent reasonably practicable (as determined by a
majority of the disinterested Board members), take such action as is necessary
to remedy or eliminate the irreconcilable material conflict. Such necessary
action may include but shall not be limited to:
(i) withdrawing the assets allocable to the Accounts from the
Funds and reinvesting such assets in a different
investment medium or submitting the question of whether
such segregation should be implemented to a vote of all
affected contract owners and as appropriate, segregating
the assets of any
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<PAGE>
appropriate group (i.e., annuity contract owners, life
insurance contract owners, or variable contract owners of
one or more Participating Companies) that votes in favor
of such segregation, or offering to the affected contract
owners the option of making such a change; and/or
(ii) establishing a new registered management investment
company or managed separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contract owner voting instructions and said
decision represents a minority position or would preclude a majority vote by all
of its contract owners having an interest in the Funds, the Company at its sole
cost, may be required, at the Board's election, to withdraw the Accounts'
investment in the Funds and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
(e) For the purpose of this SECTION 11, a majority of the disinterested
Board members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict but in no event will the Funds be
required to establish a new funding medium for any Contract. The Company shall
not be required by this SECTION 11 to establish a new funding medium for any
Contract if an offer to do so has been declined by vote of a majority of the
Contract owners materially adversely affected by the irreconcilable material
conflict.
12. TERMINATION. This agreement shall terminate as to the sale and
issuance of new Contracts:
(a) at the option of either the Company or the Manager upon six months'
advance written notice to the other,
(b) at the option of the Company if the Funds' shares are not available
for any reason to meet the requirement of Contracts as determined by the
Company. Reasonable advance notice of election to terminate shall be furnished
by Company;
(c) at the option of either the Company or the Manager, upon institution
of formal proceedings against the broker-dealer or broker-dealers marketing the
Contracts, any Account, the Company, the Manager, or the Funds by the National
Association of Securities Dealers, Inc. (the "NASD"), the SEC or any other
regulatory body;
(d) upon termination of the Management Agreement between the Funds and
Manager. Notice of such termination shall be promptly furnished to the Company.
This SUBSECTION (D) shall not be deemed to apply if contemporaneously with such
termination a new contract of substantially similar terms is entered into
between the Funds and Manager,
(e) upon the requisite vote of Contract owners having an interest in any
of the Funds to substitute for the Funds' shares the shares of another
investment company in accordance with the terms of Contracts for which the
Funds' shares had been selected to serve as the underlying investment medium.
The Company will give 60 days' written notice to the Funds and the Manager of
any proposed vote to replace the Funds' shares;
(f) upon assignment of this Agreement unless made with the written consent
of all other parties hereto;
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<PAGE>
(g) if the Funds' shares are not registered, issued or sold in conformance
with Federal law or such law precludes the use of Fund shares as an underlying
investment medium of Contracts issued or to be issued by the Company. Prompt
notice shall be given by either party should such situation occur,
(h) at the option of the Manager, if the Manager reasonably determines in
good faith that the Company is not offering shares of the Funds in conformity
with the terms of this Agreement or applicable law;
(i) at the option of any party hereto upon a determination that continuing
to perform under this Agreement would, in the reasonable opinion of the
terminating party's counsel, violate any applicable federal or state law, rule,
regulation or judicial order;
(j) at the option of the Company if a Fund fails to meet the
diversification requirements specified in Section 6(b)(ii) hereof,
(k) at the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement; or
(1) at the option of the Company upon three months' advance written notice
if a Fund substantially changes its investment objective or investment style.
13. CONTINUATION OF AGREEMENT. Termination as the result of any cause
listed in SECTION 12 shall not affect the Manager's obligation to continue to
cause the Funds to furnish their shares under the terms of this Agreement to
Contracts then in force for which its shares serve or may serve as the
underlying medium (unless such further sale of Fund shares is proscribed by law
or the SEC or other regulatory body). Following termination, the Manager shall
not have any Administrative Services payment obligation to the Company (except
for payment obligations accrued but not yet paid as of the termination date).
14. NON-EXCLUSIVITY. Each of the parties acknowledges and agrees that this
Agreement and the arrangement described herein are intended to be non-exclusive
and that each of the parties is free to enter into similar agreements and
arrangements with other entities.
15. SURVIVAL. The provisions of SECTION 8 (use of names) and SECTION 10
(indemnity) of this Agreement shall survive termination of this Agreement.
16. AMENDMENT. Neither this Agreement, nor any provision hereof, may be
amended, waived, discharged or terminated orally, but only by an instrument in
writing signed by all of the parties hereto.
17. NOTICES. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by telex,
telecopier, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are directed at
the following addresses, or at such other addresses as may be designated by
notice from such party to all other parties.
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<PAGE>
To the Company:
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102
Attention: Thomas C. Castano, Esq.
(201) 802-4708 (office number)
(201) 802-9560 (telecopy number)
With a copy to:
Pruco Life Insurance Company
751 Broad Street, 21st Floor
Newark, New Jersey 07102
Attention: Kirk Montgomery
(973) 367-772S (office number)
(973) 643-5520 (telecopy number)
To the Manager:
American Century Investments
4500 Main Street
Kansas City, Missouri 64111
Attention: Charles A. Etherington, Esq.
(816) 340-4051 (office number)
(816) 340-4964 (telecopy number)
Any notice, demand or other communication given in a manner prescribed in this
SECTION 17 shall be deemed to have been delivered on receipt.
18. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned without the
written consent of all parties to the Agreement at the time of such assignment.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
20. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the matters dealt with herein, and
supersedes all previous agreements, written or oral, with respect to such
matters, specifically including that certain Fund Participation Agreement dated
May 16, 1997, by and among the Company, the Manager and American Century
Investment Services, Inc.
22. CONFIDENTIALITY. Subject to applicable law and regulatory authority,
each party hereto shall treat as confidential all information reasonably
identified as such in writing by any other party hereto (including without
limitation the names and addresses of the owners of the
II-20
<PAGE>
Contracts) and, except as contemplated by this Agreement shall not disclose,
disseminate or utilize such confidential information until such time as it may
come into the public domain without the expressed prior written consent of the
affected party.
23. COOPERATION. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit each other and
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
AMERICAN CENTURY INVESTMENT, PRUCO LIFE INSURANCE COMPANY
MANAGEMENT, INC.
By: /s/ William M. Lyons By: /s/ Edward A. Minogue
---------------------------- ---------------------------
William M. Lyons Name: Edward A. Minogue
Executive Vice President Title: Senior Vice President
II-21
<PAGE>
EXHIBIT A
FUNDS AVAILABLE
- -------------------------------------------------- -----------------------------
ISSUER NAME OF FUND
- -------------------------------------------------- -----------------------------
American Century Variable Portfolios, Inc. VP Value
- -------------------------------------------------- -----------------------------
II-22
<PAGE>
EXHIBIT B
ACCOUNTS
Pruco Life Variable Appreciable Account
Pruco Life Variable Universal Account
Pruco Life Flexible Premium Variable Annuity Account
II-23
AMENDMENT TO FUND PARTICIPATION AGREEMENT
This Amendment to the Fund Participation Agreement ("Agreement") dated
August 12, 1996, between Janus Aspen Series, an open-end management investment
company organized as a Delaware business trust (the "Trust"), and Pruco Life
Insurance Company, an Arizona life insurance company (the "Company") is
effective as of ________________, 1998.
AMENDMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend the Agreement as follows:
1. Schedule A of this Agreement shall be deleted and replaced with the attached
Schedule A.
All other terms of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Amendment as of the date and year first above written.
PRUCO LIFE INDURANCE COMPANY
By: /s/ Esther H. Milnes
-------------------------
Name: Esther H, Milnes
Title: President
JANUS ASPEN SERIES
By: /s/ Bonnie Howe
--------------------------
Name: Bonnie M. Howe
Title: Assistant Vice President
II-24
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
<TABLE>
<CAPTION>
Name of Separate Account and the Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Pruco Life Flexible Premium Variable Discovery Select Annuity Contract
Annuity Account
est. June 16, 1995
Pruco Life Variable Appreciable Account Variable Universal Life Insurance Contract
est. January 13, 1984
Pruco Life Variable Universal Account Pruselect I Variable Universal Life
est. April 17, 1989 Insurance Contract
Pruselect II Variable Universal Life
Insurance Contract
</TABLE>
II-25
AMENDMENT NUMBER 2 TO PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
PRUCO LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
Amendment Number 2, dated as of June 5, 1998, by and among PRUCO LIFE
INSURANCE COMPANY (the "Company"), MFS VARIABLE INSURANCE TRUST (the "Trust")
and MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS") to the Participation
Agreement, dated as of July 2, 1996, as amended by the Amendment to the
Participation Agreement, dated May 1, 1998, by and among the Company, the Trust,
and MFS (the "Agreement"),
WHEREAS, the parties to the Agreement wish to amend the Agreement to
revise Schedule A to reflect new products offered by the Company:
NOW, THEREFORE, the parties do hereby agree to amend the Agreement as
follows:
Schedule A of the Agreement is amended as attached hereto.
II-26
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have executed this
Amendment as of the date first above written.
PRUCO LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ Esther H. Milnes
---------------------
Title: President
MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not individually,
By: /s/ James R. Bordewick, Jr.
-------------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Arnold D. Scott
-------------------------------
Arnold D. Scott
Senior Executive Vice President
II-27
<PAGE>
As of June 5, 1998
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
- --------------------------- ------------------------- --------------------------
NAME OF SEPARATE ACCOUNT
AND DATE ESTABLISHED BY POLICIES FUNDED PORTFOLIOS
BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
- --------------------------- ------------------------- --------------------------
The Pruco Life Flexible Discovery Select MFS Emerging Growth Series
Premium Annuity Contract MFS Research Series
Variable Annuity Account
(Est. 6/16/95)
- --------------------------- ------------------------- --------------------------
Pruco Life Variable Variable Universal MFS Emerging Growth Series
Appreciable Account Life Insurance Policy
(Est. 1/13/84)
- --------------------------- ------------------------- --------------------------
Pruco Life Variable Pruselect I Variable MFS Emerging Growth Series
Universal Account Universal Life Policy
(Est. 4/17/89) Pruselect II Variable
Universal Life Policy
- --------------------------- ------------------------- --------------------------
II-28
SCHEDULE A
Effective as of June 22, 1998, this Schedule A is hereby amended as follows:
<TABLE>
<CAPTION>
NAME OF SEPARATE ACCOUNT
AND DATE ESTABLISHED BY CONTRACTS FUNDED BY
BOARD OF DIRECTORS SEPARATE ACCOUNT DESIGNATED PORTFOLIOS
- ------------------ ---------------- ---------------------
<S> <C> <C>
Pruco Life Flexible Premium Discovery Select Annuity T. Rowe Price International Series, Inc.
Variable Annuity Account Contract -----------------------------------------
o T. Rowe Price International Stock
Portfolio
T. Rowe Price Equity Series, Inc.
-----------------------------------------
o T. Rowe Price Equity Income
Portfolio
Pruco Life Variable Variable Universal Life
Appreciable Account Insurance Policy T. Rowe Price International Series, Inc.
est. January 13, 1984 -----------------------------------------
o T. Rowe Price International Stock
Portfolio
Pruco Life Variable Pruselect I Variable T. Rowe Price International Series, Inc.
Universal Account Universal Life Policy -----------------------------------------
est. April 17, 1989 o T. Rowe Price International Stock
Portfolio
Pruselect II Variable
Universal Life Policy
</TABLE>
IN WITNESS WHEREOF, Pruco Insurance Company, T. Rowe Price
Investment Services, Inc. and the undersigned funds hereby amend this Schedule A
in accordance with the Participation Agreement made and entered into as of the
8th day of July, 1996.
COMPANY: PRUCO LIFE INSURANCE COMPANY
By its authorized officer
By: /s/ Esther H. Milnes
-------------------------
Title: President
Date: July 6, 1998
II-29
<PAGE>
FUND: T. ROWE PRICE EQUIRT SERIES, INC.
By its authorized officer
By: /s/
-------------------------
Title: Vice President
Date: June 22, 1998
FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer
By: /s/
-------------------------
Title: Vice President
Date: June 22, 1998
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By: /s/
-------------------------
Title: Vice President
Date: June 22, 1998
II-30
Exhibit 1.A(11)
Description of Pruco Life's Issuance, Transfer
and Redemption Procedures for
Pruselect I Life Insurance Contracts
Pursuant to Rule 6e-3(T)(b)(12)(iii)
This document sets forth the administrative procedures that will be followed
by Pruco Life Insurance Company ("Pruco Life") in connection with the issuance
of its Pruselect I Life Insurance Contracts ("Contract",) the transfer of assets
held thereunder, and the redemption by contract owners of their interests in
said Contracts.
I. Procedures Relating to Issuance and Purchase of the Contracts
A. Premium Schedules and Underwriting Standards
Premiums for the Contract will not be the same for all owners.
Insurance is based on the principle of pooling and distribution of
mortality risks, which assumes that each owner pays a premium
commensurate with the Insured's mortality risk as actuarially
determined utilizing factors such as age, sex, smoking status, health
and occupation, and degree of underwriting. A uniform premium for all
Insureds would discriminate unfairly in favor of those Insureds
representing greater risks. However, for a given face amount of
insurance, Contracts issued on insureds in a given risk classification
will have the same scheduled or target premium.
The underwriting standards and premium processing practices followed by
Pruco Life are similar to those followed in connection with the offer
and sale of fixed-benefit life insurance, modified where necessary to
meet the requirements of the federal securities laws.
B. Application and Initial Premium Processing
Upon receipt of a completed application form from a prospective owner,
Pruco Life will follow certain insurance underwriting (i.e., evaluation
of risk) procedures designed to determine whether the proposed Insured
is insurable. This will involve evaluation of the answers to the
questions on the application and may include a medical examination. The
process may require that further information be provided by the
proposed Insured before a determination can be made. Pruco Life may in
certain circumstances offer these contracts on a guaranteed issue basis
on certain associated individuals, such as employees of a company, who
meet certain criteria established by Pruco Life. In these cases the
underwriting will be simplified, i.e., no medical examination, and a
short question application form may be used. A Contract cannot be
issued, i.e., physically issued through Pruco Life's computerized issue
system, until this underwriting procedure has been completed.
These processing procedures are designed to provide immediate benefits
to every prospective owner who pays the minimum initial premium at the
time the application is submitted, without diluting any
II-31
<PAGE>
benefit payable to any existing owner. Although a Contract cannot be
issued until after the underwriting process has been completed, such a
proposed Insured will receive immediate insurance coverage for the face
amount of the Contract, if he or she proves to be insurable and the
owner has paid the minimum initial premium. Under certain circumstances
Pruco Life may decline to accept a payment at the time the application
is submitted.
The Contract Date marks the date on which benefits begin to vary in
accordance with the investment performance of the selected investment
option(s). It is also the date as of which the insurance age of the
proposed Insured is determined. It represents the first day of the
Contract year and therefore determines the Contract anniversary and
also the Monthly Dates. It also represents the commencement of the
suicide and contestable periods for purposes of the Contract.
If the minimum initial premium is paid with the application and the
underwriting is on a guaranteed issue basis the Contract Date will
ordinarily be the date of the application. If an unusual delay is
encountered (for example, if a request for further information is not
met promptly), the Contract Date will be 21 days prior to the date on
which the Contract is physically issued. If a medical examination is
required, the Contract Date will ordinarily be the date on which Part 2
of the application (the medical report) is completed, subject to the
same qualification as that noted above.
If the minimum initial premium is not paid with the application, the
Contract Date will be the Contract Date stated in the Contract, which
will generally be about 3 days after the date of physical issue (to
permit time for delivery). Benefits will begin on that date provided
the Owner pays the minimum initial premium by that date.
If permitted by the insurance laws of the state in which the Contract
is issued, the Contract may be back dated up to six months, provided
that the minimum initial premium is paid with the application and that
the backdating results in a lower insurance age for the Insured. The
values under the Contract and the amount(s) deposited into the selected
investment option(s) will be calculated upon the assumptions that the
Contract had been issued on the Contract Date and the minimum initial
premium had been received on that date. If the initial premium paid is
in excess of the minimum initial premium, the excess (after the
front-end deductions) will be credited to the Contract and placed in
the selected investment option(s) on the date of receipt.
In certain situations with Pruco Life's consent, the owner may select a
common contract date for all contracts in advance of actual
underwriting, approval and issue of the contracts. Payment of the
minimum initial premium by the selected contract date is required.
Pruco Life will transfer the appropriate amounts to the selected
investment option(s) on the date the Contract is approved. The variable
benefits under all Contracts will be calculated on the assumption that
the invested portion of the initial premium was transferred to the
selected investment option(s) on the Contract Date. Any portion of the
initial premium payment in excess of the minimum initial premium will
be credited (after the front-end deductions) as of the date of receipt.
If the initial premium is received before the Contract Date, the entire
invested portion will be credited as of the Contract Date.
II-32
<PAGE>
C. Premium Processing
Whenever a premium after the first is received, unless the Contract is
in default past its days of grace, Pruco Life will subtract the
front-end deductions. What is left will be invested in the selected
investment option(s) on the date received (or, if that is not a
business day, on the next business day). There is an exception if the
Contract is in default within its days of grace. Then, to the extent
necessary to end the default, premiums will be credited as of the date
of the default or the Monthly Date after default, and premiums greater
than this amount will be credited when received.
The Contract provides a grace period of 61 days from the date Pruco
Life mails the Contract owner a notice of default. As an administrative
practice, Pruco Life extends the grace period by seven days to minimize
manual processing required when premium payments are processed shortly
after the 61st day.
D. Reinstatement
The Contract may be reinstated within five years after default (this
period will be longer if required by state law) unless the Contract has
been surrendered for its cash surrender value. A Contract will be
reinstated upon receipt by Pruco Life of a written application for
reinstatement, production of evidence of insurability satisfactory to
Pruco Life and payment of at least the amount specified in the
Contract. That amount is 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, and 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.
If reinstatement is requested within three months after the contract
went into default, evidence of insurability will not be required.
E. Repayment of Loan
A loan made under the Contract may be repaid with an amount equal to
the monies borrowed plus interest which accrues daily, either at a
fixed annual rate of 5-1/2% or, if a contract owner has elected to have
a variable loan interest rate applicable to loans made under the
Contract, at the variable loan interest rate then applicable to the
loan.
When a loan is made, Pruco Life will transfer an amount equal to the
contract loan from the investment option(s). Under the fixed-rate
Contract Loan provision, the amount of Contract Fund attributable to
the outstanding contract loan will be credited with interest at an
annual rate of 4%, and Pruco Life thus will realize the difference
between that rate and the fixed loan interest rate, which will be used
to cover the loan investment expenses, income taxes, if any, and
processing costs. If an owner so desires, the owner may elect to have a
variable loan interest rate apply to the contract loans, if any, that
he or she may make. If this election is made:
1. Interest on the loan will accrue daily at an annual rate Pruco Life
determines at the start of each contract year (instead of at a fixed
rate), as described in the prospectus.
II-33
<PAGE>
2. While a loan is outstanding, the amount of the Contract Fund
attributable to the outstanding contract loan will be credited with
interest at a rate which is less than the loan interest rate for the
contract year by 1% (instead of 4%).
Upon repayment of Contract debt, the loan portion of the payment (i.e.,
not the interest) will be added to the investment option(s) in
proportion to the amounts in each variable investment option
attributable to the Contract as of the date of repayment.
II. Transfers
Pruco Life Variable Universal Account ("Account") currently has twenty
subaccounts, of these, fifteen are invested in shares of a
corresponding portfolio of The Prudential Series Fund, Inc., and the
remainder in other funds ("Fund"). All are registered under the 1940
Act as open-end diversified management investment companies. Provided
the Contract is not in default the owner may, up to four times in each
contract year, transfer amounts from one subaccount to another
subaccount, without charge. All or a portion of the amount credited to
a subaccount may be transferred.
Transfers among subaccounts will take effect at the end of the
valuation period during which a proper written request or authorized
telephone request is received at a Pruco Life 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.
III. "Redemption" Procedures: Surrender and Related Transactions
A. Surrender for Cash Surrender Value
If the insured party under a Contract is alive, Pruco Life will pay,
within seven days, the Contract's cash surrender value as of the date
of receipt at its Service Office of the Contract and a signed request
for surrender. The Contract's cash surrender value is computed as
follows:
1. If the Contract is not in default: The cash surrender value is the
Contract Fund, minus any Contract debt. If the Contract is
surrendered within the first three contract years, we will also
return sales charges deducted from premiums paid within the 365 days
prior to the date we receive the surrender request at our Service
Office.
2. If the Contract is in default, the cash surrender value is zero. We
will not return any sales charges as described above.
In lieu of the payment of the cash surrender value in a single sum upon
surrender of a Contract, an election may be made by certain owners to
apply all or a portion of the proceeds under one of the fixed
benefit-settlement options described in the Contract or, with the
approval of Pruco Life, a combination of options. An option is
available only if the proceeds to be applied are $1,000 or more
II-34
<PAGE>
or would result in periodic payments of at least $20.00. The
fixed-benefit settlement options are subject to the restrictions and
limitations set forth in the Contract.
B. Withdrawal of Cash Surrender Value
An owner may make a withdrawal of part of the cash surrender value. The
amount withdrawn must be at least $2,000. An owner may make no more
than four withdrawals in a Contract year, and there is a fee of $15 for
each such withdrawal. Any amount withdrawn may not be repaid except as
a premium subject to the Contract charges.
Whenever a withdrawal is made, the death benefit payable will
immediately be reduced by at least the amount of the withdrawal. The
resulting reduction in death benefit may require a reduction in the
face amount. No withdrawal will be permitted if it would result in a
new face amount less than the minimum face amount. The face amounts
scheduled in other years will be reduced by the same amount, but in no
event below the minimum face amount. The Contract Fund is reduced by
the sum of the cash withdrawn and the fee for the withdrawal. An amount
equal to the reduction in the Contract Fund will be withdrawn from the
investment options. In addition, the amount of the scheduled or target
premiums due thereafter will be reduced to reflect the lower face
amount of insurance.
C. Death Claims
Pruco Life will pay a death benefit to the beneficiary within seven
days after receipt at its Service Office of due proof of death of the
Insured and all other requirements necessary to make payment. State
insurance laws impose various requirements, such as receipt of a tax
waiver, before payment of the death benefit may be made. In addition,
payment of the death benefit is subject to the provisions of the
Contract regarding suicide and incontestability. In the event Pruco
Life should contest the validity of a death claim, an amount up to the
portion of the Contract Fund in the variable investment options with be
withdrawn, if appropriate, and held in Pruco Life's general account.
The following describes the death benefit if the Contract is not in
default past its days of grace. The death benefit is the face amount
less any Contract debt, unless it is increased due to growth in the
Contract Fund as described below.
If the Contract Fund plus any returnable sales charge grows to exceed
the net single premium of the insured's attained age for the death
benefit described above, the death benefit will be the Contract Fund
plus such returnable sales charge, divided by such net single premium.
The death benefit will be adjusted for any Contact debt.
The proceeds payable on death also will include interest (at a rate
determined by Pruco Life from time to time) from the date that the
death benefit is computed (the date of death) until the date of
payment.
Pruco Life will make payment of the death benefit out of its general
account, and will transfer assets, if appropriate, from the Account to
the general account in an amount up to the Contract Fund.
II-35
<PAGE>
In lieu of payment of the death benefit in a single sum, an election
may be made to apply all or a portion of the proceeds under one of the
fixed-benefit settlement options described in the Contract, or with the
approval of Pruco Life, a combination of options. The election may be
made by the owner during the Insured's lifetime, or, at death, by the
beneficiary. An option in effect at death may not be changed to another
form of benefit after death. An option is available only if the
proceeds to be applied are $1,000 or more or would result in periodic
payments of at least $20.00. The fixed benefit settlement options are
subject to the restrictions and limitations set forth in the Contract
and are not available to non-natural payees unless Pruco Life agrees
otherwise.
D. Default
The Contract is in default on any Monthly Date on which the Contract
Fund is less than zero. Monthly Dates occur on the Contract Date and in
each later month on the same day of the month as The Contract Date. The
Contract provides for a grace period commencing on the Monthly Date on
which the Contract goes into default and extending at least 61 days
after the mailing date of the notice of default. The insurance coverage
continues in force during the grace period, but if the Insured dies
during the grace period, any charges due during the grace period are
deducted from the amount payable to the beneficiary.
E. Loans
The Contract provides that if the Contract is not in default, the owner
may take out a loan at any time a loan value is available. The owner
may borrow money on completion of a form satisfactory to Pruco Life.
The Contract is the only security for the loan. Disbursement of the
amount of the loan will be made within seven days of receipt of the
form at Pruco Life's Service Office. The investment options will be
debited in the amount of the loan on the date the form is received. The
percentage of the loan withdrawn from each investment option will
normally be equal to the percentage of the value of such assets held in
the investment option. An owner may borrow up to the Contract's full
loan value. The loan provision is described in the prospectus.
When a loan is made, the Contract Fund is not reduced, but the value of
the assets relating to the Contract held in the investment option(s) is
reduced. Accordingly, the daily changes in the cash surrender value
will be different from what they would have been had no loan been
taken. Cash surrender values are thus permanently affected by any
Contract debt, whether or not repaid.
On settlement the amount of any Contract debt is subtracted from the
insurance proceeds. If Contract debt ever becomes equal to or more than
what the cash surrender value would be if there was no Contract debt,
all the Contract's benefit will end 61 days after notice is mailed to
the owner and any known assignee, unless payment of an amount
sufficient to end the default is made within that period.
II-36
- ---------------=================================================================
ENDORSEMENTS
(Only we can endorse this contract.)
ALTERATION OF TEXT
This endorsement modifies certain provisions of the policy to
which it is attached, as follows:
The first paragraph under List Of Investment Options is replaced
with the following:
THE PRUCO LIFE VARIABLE UNIVERSAL ACCOUNT.
Each investment option of this account invests in a specific
portfolio of The Prudential Series Fund, Inc., and such other
funds as we may specify from time to time. We show the available
investment options of the account below. Unless we say otherwise,
the investment options invest in funds or fund portfolios with
the same names. This account is registered with the SEC under the
Investment Company Act of 1940.
Pruco Life Insurance Company,
BY SPECIMEN
SECRETARY
II-37
Exhibit 3
June 3, 1999
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-38
Exhibit 6
June 3, 1999
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. 13 to Registration Statement No. 33-29181 on Form S-6 describes
the Contracts. I have reviewed the Contract form and I have participated in the
preparation and review of the Registration Statement and Exhibits thereto. In my
opinion:
(1) The illustrations of cash surrender values and death benefits
included in the prospectus section entitled "Illustrations" based
on the assumptions stated in the illustrations, are consistent
with the provisions of the Contract. The rate structure of the
Contract has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations,
appear more favorable to a prospective purchaser of a Contract
for male age 35 or male age 55, than to prospective purchasers of
Contracts on males of other ages or on females.
(2) The illustrations of the effect of an increase in the Contract
fund on the increase in insurance amount shown in the section
entitled "Death Benefit" is consistent with the provisions of the
Contract.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
/s/
- ----------------------------------------
Nancy D. Davis, FSA, MAAA
Vice President and Actuary
The Prudential Insurance Company of America
II-39
