AS FILED WITH THE SEC ON SEPTEMBER 12, 1996 REGISTRATION NO. 333-06701
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. [ ]
(Check appropriate box or boxes)
---------------------
PRUCO LIFE FLEXIBLE PREMIUM
VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
PRUCO LIFE INSURANCE COMPANY
(Name of Depositor)
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 445-4571
(Address and telephone number of principal executive offices)
---------------------
THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(Name and address of agent for service)
---------------------
Individual Variable Annuity Contracts -- The Registrant has registered an
indefinite amount of securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940.
---------------------
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement
---------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495(A) UNDER THE 1933 ACT)
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N-4 ITEM NUMBER AND CAPTION LOCATION
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PART A
1. Cover Page Cover Page
2. Definitions Definitions of Special Terms Used in This Prospectus
3. Synopsis Brief Description of the Contract
4. Condensed Financial Information N/A
5. General Description of Registrant, Depositor, and General Information About Pruco Life, The Pruco Life Flexible
Portfolio Companies Premium Variable Annuity Account, and The Investment Options
Available Under the Contract; The Interest-Rate Investment
Options and Investments by Pruco Life
6. Deductions and Expenses Brief Description of the Contract; Charges, Fees, and Deductions
7. General Description of Variable Annuity Contracts Part A: Brief Description of the Contract; Allocation of Purchase
Payments; Transfers; Death Benefit; The Interest-Rate Investment
Options and Investments by Pruco Life; Voting Rights; Ownership
of the Contract; State Regulation
8. Annuity Period Brief Description of the Contract; Effecting an Annuity
9. Death Benefit Death Benefit; Effecting an Annuity
10. Purchases and Contract Value Brief Description of the Contract; Pruco Life Insurance Company;
Requirements for Issuance of a Contract; Valuation of a Contract
Owner's Contract Fund
11. Redemptions Brief Description of the Contract; Short-Term Cancellation Right or
"Free Look"; Withdrawals; Charges, Fees and Deductions; Effecting
an Annuity
12. Taxes Premium Taxes and Taxes Attributable to Purchase Payments;
Federal Tax Status
13. Legal Proceedings Litigation
14. Table of Contents of the Statement of Additional Information
Additional Information
PART B
15. Cover Page Cover Page
16. Table of Contents Contents
17. General Information and History Not Applicable
18. Services Part A: Experts
19. Purchase of Securities Being Offered Part A: Brief Description of the Contract; Charges, Fees and
Deductions; Sale of the Contract and Sales Commissions
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N-4 ITEM NUMBER AND CAPTION LOCATION
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20. Underwriters Part A: Sale of the Contract and Sales Commissions
Part B: Principal Underwriters
21. Calculation of Performance Data Performance Information
22. Annuity Payments. Part A: Valuation of a Contract Owner's Contract
Fund; Effecting an Annuity
23. Financial Statements Part A: Consolidated Financial Statements of Pruco
Life Insurance Company and Subsidiaries
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered in Part C to this Registration Statement.
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PART A
INFORMATION REQUIRED IN A PROSPECTUS
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PROSPECTUS
September 12, 1996
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
VARIABLE ANNUITY CONTRACTS
PRUCO LIFE MARKET-VALUE ADJUSTMENT ANNUITY CONTRACTS
DISCOVERY SELECT
This prospectus describes the DISCOVERY SELECT(SM) Annuity Contract*, an
individual variable annuity contract offered by Pruco Life Insurance Company
("Pruco Life", "we" or "us"), a stock life insurance company that is a
wholly-owned subsidiary of The Prudential Insurance Company of America ("The
Prudential").
The Contract is purchased by making an initial payment of $10,000 or more.
Additional payments of $1,000 or more may also be made. Following the deduction
for any applicable taxes, the purchase payments may be allocated as you direct
in one or more of the following ways.
o They may be allocated to one or more of nineteen subaccounts, each of which
invests in one of the following portfolios of The Prudential Series Fund,
Inc. (the "Prudential Series Fund") or other listed portfolios
(collectively, the "Funds"):
THE PRUDENTIAL SERIES FUND, INC.
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Money Market Portfolio Stock Index Portfolio Prudential Jennison Portfolio
Diversified Bond Portfolio Equity Income Portfolio Global Portfolio
High Yield Bond Portfolio Equity Portfolio
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AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund AIM V.I. Value Fund
JANUS ASPEN SERIES
Growth Portfolio International Growth Portfolio
MFS VARIABLE INSURANCE TRUST
Emerging Growth Series Research Series
OCC ACCUMULATION TRUST
Managed Portfolio Small Cap Portfolio
T. ROWE PRICE EQUITY SERIES, INC.
Equity Income Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
International Stock Portfolio
WARBURG PINCUS TRUST
Post-Venture Capital Portfolio
o They may be allocated to a fixed-rate option which guarantees a stipulated
rate of interest for a one year period.
o They may be allocated to a market-value adjustment option which guarantees
a stipulated rate of interest if held for a seven year period.
The value allocated to the subaccounts will vary daily with the investment
performance of those accounts. If amounts allocated to a market-value adjustment
option are withdrawn or transferred prior to the expiration of the interest rate
period, the contract value will be subject to a Market-Value Adjustment, which
could result in receipt of more or less than the original amount allocated to
that option. On the annuity date, the cash value will be applied to effect a
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fixed-dollar annuity. Upon annuitization, your participation in the investment
options ceases. Prior to that annuity date, you may withdraw in whole or in part
the cash value of the Contract.
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This prospectus provides information a prospective investor should know before
investing. Additional information about the Contract has been filed with the
Securities and Exchange Commission in a Statement of Additional Information,
dated September 12, 1996, which information is incorporated herein by reference,
and is available without charge upon written request to Prudential Annuity
Service Center, 300 Columbus Circle, Edison, New Jersey 08837, or by
telephoning 1-888-PRU-2888 (toll free).
The accompanying prospectuses for the Funds and the related statements of
additional information describe the investment objectives and risks of investing
in the portfolios. Additional portfolios and subaccounts may be offered in the
future.
The Contents of the Statement of Additional Information with respect to the
Contract appear on page 29 of this prospectus.
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PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ACCOMPANIED
BY A CURRENT PROSPECTUS FOR EACH OF THE FUNDS. EACH OF THESE PROSPECTUSES SHOULD
BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRUCO LIFE INSURANCE COMPANY PRUDENTIAL ANNUITY SERVICE CENTER
213 Washington Street 300 Columbus Circle
Newark, New Jersey 07102-2992 Edison, New Jersey 08837
Telephone: 1-888-PRU-2888 (toll free)
*DISCOVERY SELECT is a service mark of The Prudential.
DISSEL-1 Ed 9-96 Cat. No. 64M8836
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PROSPECTUS CONTENTS
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PAGE
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DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS...........................................................................1
BRIEF DESCRIPTION OF THE CONTRACT..............................................................................................2
FEE TABLE......................................................................................................................4
GENERAL INFORMATION ABOUT PRUCO LIFE, THE PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY
ACCOUNT, AND THE INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT.........................................................10
PRUCO LIFE INSURANCE COMPANY.............................................................................................10
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT.....................................................................10
THE FUNDS................................................................................................................10
THE INTEREST-RATE INVESTMENT OPTIONS AND INVESTMENTS BY PRUCO LIFE.......................................................13
DETAILED INFORMATION ABOUT THE CONTRACT.......................................................................................13
REQUIREMENTS FOR ISSUANCE OF A CONTRACT..................................................................................13
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK".............................................................................13
ALLOCATION OF PURCHASE PAYMENTS..........................................................................................13
ASSET ALLOCATION PROGRAM.................................................................................................14
CASH VALUE...............................................................................................................14
GUARANTEED INTEREST RATE PERIODS.........................................................................................14
WHAT HAPPENS WHEN AN INTEREST CELL REACHES ITS MATURITY DATE?............................................................14
TRANSFERS................................................................................................................14
DOLLAR COST AVERAGING....................................................................................................15
AUTO-REBALANCING.........................................................................................................15
WITHDRAWALS..............................................................................................................15
AUTOMATED WITHDRAWALS....................................................................................................16
MARKET-VALUE ADJUSTMENT..................................................................................................16
DEATH BENEFIT............................................................................................................16
VALUATION OF A CONTRACT OWNER'S CONTRACT FUND............................................................................17
CHARGES, FEES AND DEDUCTIONS..................................................................................................17
PREMIUM TAXES AND TAXES ATTRIBUTABLE TO PURCHASE PAYMENTS................................................................17
ADMINISTRATIVE CHARGE....................................................................................................17
CHARGE FOR ASSUMING MORTALITY AND EXPENSE RISKS..........................................................................18
EXPENSES INCURRED BY THE FUNDS...........................................................................................18
WITHDRAWAL CHARGE........................................................................................................18
TRANSACTION CHARGE.......................................................................................................19
CRITICAL CARE ACCESS.....................................................................................................19
FEDERAL TAX STATUS............................................................................................................19
DIVERSIFICATION AND INVESTOR CONTROL.....................................................................................19
TAXES PAYABLE BY CONTRACT OWNERS.........................................................................................19
WITHHOLDING..............................................................................................................20
IMPACT OF FEDERAL INCOME TAXES...........................................................................................21
IRS REQUIRED DISTRIBUTIONS ON DEATH OF OWNER.............................................................................21
TAXES ON PRUCO LIFE......................................................................................................22
CONTRACTS USED IN CONNECTION WITH TAX FAVORED PLANS......................................................................22
IRAS.....................................................................................................................22
SEPS.....................................................................................................................23
TDAS.....................................................................................................................23
ELIGIBLE DEFERRED COMPENSATION PLANS OF STATE OR LOCAL GOVERNMENTS AND TAX EXEMPT ORGANIZATIONS..........................24
QUALIFIED PENSION AND PROFIT SHARING PLANS...............................................................................24
MINIMUM DISTRIBUTION OPTION..............................................................................................24
WITHHOLDING ON TAX FAVORED PLANS.........................................................................................24
ERISA DISCLOSURE.........................................................................................................25
ADDITIONAL ERISA REQUIREMENTS............................................................................................25
EFFECTING AN ANNUITY..........................................................................................................25
ANNUITY PAYMENTS FOR A FIXED PERIOD......................................................................................26
LIFE ANNUITY WITH 120 PAYMENTS CERTAIN...................................................................................26
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INTEREST PAYMENT OPTION..................................................................................................26
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT ANNUITY PURCHASE RATES.....................................................26
OTHER INFORMATION.............................................................................................................26
MISSTATEMENT OF AGE OR SEX...............................................................................................26
SALE OF THE CONTRACT AND SALES COMMISSIONS...............................................................................27
VOTING RIGHTS............................................................................................................27
SUBSTITUTION OF FUND SHARES..............................................................................................28
OWNERSHIP OF THE CONTRACT................................................................................................28
PERFORMANCE INFORMATION..................................................................................................28
REPORTS TO CONTRACT OWNERS...............................................................................................28
STATE REGULATION.........................................................................................................28
EXPERTS ................................................................................................................29
LITIGATION...............................................................................................................29
STATEMENT OF ADDITIONAL INFORMATION......................................................................................29
ADDITIONAL INFORMATION...................................................................................................29
FINANCIAL STATEMENTS.....................................................................................................29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS..................................................................................................................32
DIRECTORS AND OFFICERS........................................................................................................36
EXECUTIVE COMPENSATION........................................................................................................37
FINANCIAL STATEMENTS OF THE PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT..............................................A1
CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES...........................................B-1
MARKET-VALUE ADJUSTMENT FORMULA..............................................................................................C-1
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DEFINITIONS OF SPECIAL TERMS USED IN THIS PROSPECTUS
ACCOUNT--SEE THE PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT (THE
"ACCOUNT"), BELOW.
ANNUITANT--THE PERSON OR PERSONS, DESIGNATED BY THE CONTRACT OWNER, UPON WHOSE
LIFE OR LIVES MONTHLY ANNUITY PAYMENTS ARE BASED AFTER AN ANNUITY IS EFFECTED.
ANNUITY CONTRACT--A CONTRACT DESIGNED TO PROVIDE AN ANNUITANT WITH AN INCOME,
WHICH MAY BE A LIFETIME INCOME, BEGINNING ON THE ANNUITY DATE.
ANNUITY DATE--THE DATE, SPECIFIED IN THE CONTRACT, WHEN ANNUITY PAYMENTS BEGIN.
BOARD--EITHER THE BOARD OF DIRECTORS OR BOARD OF TRUSTEES OF A FUND.
CASH VALUE--THE SURRENDER VALUE OF THE CONTRACT, WHICH EQUALS THE CONTRACT FUND
PLUS OR MINUS ANY MARKET-VALUE ADJUSTMENTS LESS ANY WITHDRAWAL CHARGE AND ANY
ADMINISTRATIVE CHARGE DUE UPON SURRENDER.
CHARGE-FREE AMOUNT--THE AMOUNT OF PURCHASE PAYMENTS IN YOUR CONTRACT FUND THAT
IS NOT SUBJECT TO A WITHDRAWAL CHARGE.
CONTRACT ANNIVERSARY--THE SAME DAY AND MONTH AS THE CONTRACT DATE IN EACH LATER
YEAR.
CONTRACT DATE--THE DATE PRUCO LIFE RECEIVED THE INITIAL PURCHASE PAYMENT AND
NECESSARY DOCUMENTATION FOR THE CONTRACT.
CONTRACT FUND--THE TOTAL VALUE ATTRIBUTABLE TO A SPECIFIC CONTRACT REPRESENTING
AMOUNTS INVESTED IN ALL THE SUBACCOUNTS AND IN THE INTEREST-RATE INVESTMENT
OPTIONS.
CONTRACT OWNER--YOU. THE PERSON WHO PURCHASES A DISCOVERY SELECT CONTRACT AND
MAKES THE PURCHASE PAYMENTS. THE OWNER WILL USUALLY ALSO BE AN ANNUITANT, BUT
NEED NOT BE. THE OWNER HAS ALL RIGHTS IN THE CONTRACT BEFORE THE ANNUITY DATE.
SUBJECT TO CERTAIN LIMITATIONS AND REQUIREMENTS DESCRIBED IN THIS PROSPECTUS,
THESE RIGHTS INCLUDE THE RIGHT TO MAKE WITHDRAWALS OR SURRENDER THE CONTRACT, TO
DESIGNATE AND CHANGE THE BENEFICIARIES WHO WILL RECEIVE THE PROCEEDS AT THE
DEATH OF THE ANNUITANT BEFORE THE ANNUITY DATE, TO TRANSFER FUNDS AMONG THE
INVESTMENT OPTIONS, AND TO DESIGNATE A MODE OF SETTLEMENT FOR THE ANNUITANT ON
THE ANNUITY DATE.
CONTRACT YEAR--A YEAR THAT STARTS ON THE CONTRACT DATE OR ON A CONTRACT
ANNIVERSARY.
FIXED-RATE OPTION--AN INVESTMENT OPTION UNDER WHICH PRUCO LIFE CREDITS INTEREST
TO THE AMOUNT ALLOCATED AT A GUARANTEED INTEREST RATE PERIODICALLY DECLARED IN
ADVANCE BY PRUCO LIFE BUT NOT LESS THAN 3%.
GUARANTEED INTEREST RATE--THE EFFECTIVE ANNUAL INTEREST RATE CREDITED DURING THE
INTEREST RATE PERIOD.
INTEREST CELL--A DIVISION OF THE INTEREST-RATE INVESTMENT OPTIONS WHICH IS
ESTABLISHED WHENEVER YOU ALLOCATE OR TRANSFER MONEY INTO AN INTEREST-RATE
INVESTMENT OPTION. THE AMOUNT IN THE INTEREST CELL IS CREDITED WITH A GUARANTEED
INTEREST RATE, DECLARED IN ADVANCE BY PRUCO LIFE AND NEVER LESS THAN 3%, IF HELD
FOR THE DURATION OF THE CELL'S INTEREST RATE PERIOD.
INTEREST-RATE INVESTMENT OPTIONS--THE FIXED-RATE OPTION AND THE MARKET-VALUE
ADJUSTMENT OPTION.
INTEREST RATE PERIOD--THE PERIOD FOR WHICH THE GUARANTEED INTEREST RATE IS
CREDITED.
MARKET-VALUE ADJUSTMENT--IF AMOUNTS ARE WITHDRAWN OR TRANSFERRED FROM A
MARKET-VALUE ADJUSTMENT OPTION BEFORE THE END OF THE INTEREST RATE PERIOD, A
MARKET-VALUE ADJUSTMENT WILL OCCUR. A MARKET-VALUE ADJUSTMENT MAY RESULT IN AN
INCREASE, DECREASE OR NO CHANGE IN THE VALUE OF THE MONEY THAT WAS IN THE
INTEREST CELL. FOR THE FORMULA USED TO CALCULATE THE ADJUSTMENT, SEE
MARKET-VALUE ADJUSTMENT FORMULA, ON PAGE C-1. WITH RESPECT TO RESIDENTS OF
PENNSYLVANIA ONLY, SEE PAGE C-4.
MARKET-VALUE ADJUSTMENT OPTION ("MVA OPTION")--AN INTEREST-RATE INVESTMENT
OPTION SUBJECT TO A MARKET-VALUE ADJUSTMENT.
THE PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT (THE "ACCOUNT")--A
SEPARATE ACCOUNT OF PRUCO LIFE REGISTERED AS A UNIT INVESTMENT TRUST UNDER THE
INVESTMENT COMPANY ACT OF 1940.
SUBACCOUNT--A DIVISION OF THE ACCOUNT, THE ASSETS OF WHICH ARE INVESTED IN
SHARES OF THE CORRESPONDING PORTFOLIO OF THE FUNDS.
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 ARE CALCULATED, WHICH IS GENERALLY AT
4:15 P.M. NEW YORK CITY TIME ON EACH DAY DURING WHICH THE NEW YORK STOCK
EXCHANGE IS OPEN.
VARIABLE INVESTMENT OPTIONS--THE SUBACCOUNTS.
1
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BRIEF DESCRIPTION OF THE CONTRACT
The DISCOVERY SELECT(SM) Annuity Contract offers you a way to invest on a
tax-deferred basis in a variety of investment options and provide income
protection for later life by financing annuity payments commencing on the
annuity date. The Contract is a variable annuity contract. The value of the
Contract depends upon investment results of the investment option[s]. Currently,
you may place the invested portion of your purchase payments into one or a
combination of variable and interest-rate investment options. Amounts held under
the Contract may be withdrawn, in whole or in part, prior to the annuity date.
The Contract also provides for a death benefit.
The Contract is purchased by making an initial payment of at least $10,000.
Additional payments of $1,000 or more may also be made. After the deduction of
any charge for taxes attributable to purchase payments is made, purchase
payments are allocated to the subaccounts and/or the fixed-rate investment or
Market-Value Adjustment Options in accordance with your instructions.
Currently, there are nineteen variable investment options, each of which is
called a subaccount. The assets of each subaccount are invested in a
corresponding portfolio of one of the Funds.
The FIXED-RATE OPTION guarantees a stipulated rate of interest for a one-year
period. The MARKET-VALUE ADJUSTMENT OPTION (the "MVA option") guarantees a
stipulated rate of interest if held for a seven-year period.
The quoted interest rates will be expressed as an effective annual yield.
Interest will be credited daily throughout the interest rate period at a rate
that will provide the guaranteed annual effective yield over the period of one
year. The MVA and fixed-rate options are made up of individual "interest cells"
each of which is established whenever you allocate or transfer money into those
options. Your Pruco Life representative will tell you the rates of interest
currently in effect. This rate will never be below 3%.
The value of each Market-Value Adjustment interest cell, prior to its maturity
date, varies with changes in interest rates in the same way that the value of a
bond changes. If interest rates have risen since the interest cell was
established, its value will have decreased. If you make a withdrawal or transfer
prior to the maturity date, the value of the interest cell will be adjusted up
or down or not at all, depending upon the difference in interest rates between
the date when the cell was established and the date of withdrawal or transfer.
The maximum value of the factor used in determining the amount of adjustment,
either positive or negative, is 0.40. See MARKET-VALUE ADJUSTMENT, page C-1.
With respect to residents of Pennsylvania only, see page C-4.
Pruco Life makes charges under the Contract for the costs of selling and
distributing the Contract, for administering the Contract, and for assuming
mortality and expense risks under the Contract. Moreover, a charge may be
deducted for taxes attributable to purchase payments, including premium tax. In
the case of premium tax, Pruco Life will deduct the tax, as provided by
applicable law, either from the purchase payment when received, or from the
Contract Fund at the time the annuity is effected. The deduction may be lower,
or not made at all, for larger purchase payments. See PREMIUM TAXES AND TAXES
ATTRIBUTABLE TO PURCHASE PAYMENTS, page 17. A charge against each of the Fund's
assets is made by the investment adviser for providing investment advisory and
management services.
A mortality and expense risk charge equal to an annual rate of 1.25% is deducted
from the assets held in the variable investment options. An administrative
charge is deducted from the assets held in the variable investment options at an
annual rate of 0.15%. There will be an additional administrative charge of $30
on each Contract anniversary and at the time of a full withdrawal for Contracts
with Contract Funds less than $50,000. A withdrawal charge may be imposed upon
withdrawals made in the first seven Contract years. The maximum withdrawal
charge is 7% of the amount withdrawn. Further detail about charges may be found
under CHARGES, FEES AND DEDUCTIONS, page 17.
In the event that the sole or last surviving annuitant dies prior to the annuity
date or the surrender of the Contract for its cash value, Pruco Life will pay a
death benefit to the stated beneficiary. If the annuitant was the sole owner of
the Contract and the sole beneficiary is the annuitant's spouse, the spouse may
be able to continue the Contract. See DEATH BENEFIT, page 16. In the event that
the annuitant dies after an annuity has been effected but before the entire
value of the Contract is distributed, special distribution rules apply. See
EFFECTING AN ANNUITY, page 25.
Amounts may be transferred out of an investment option into any combination of
other investment options available under the Contract. There are no minimum
transfer dollar amount requirements. Market-Value Adjustments may apply.
Restrictions apply on transfers made from the fixed-rate option. See TRANSFERS,
page 14.
For a limited time, a Contract may be returned for a refund in accordance with
the terms of its "free look" provision. See SHORT-TERM CANCELLATION RIGHT OR
"FREE LOOK", page 13.
You may withdraw all or part of the Contract Fund prior to the annuity date,
subject to the possible withdrawal charge mentioned above. See WITHDRAWALS, page
15. If a full or partial withdrawal is requested, it may be wholly or partially
2
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taxable. Certain withdrawals may be subject to a federal penalty tax as well as
a federal income tax. See TAXES PAYABLE BY CONTRACT OWNERS, page 19. If a lump
sum is requested, it will generally be paid within 7 days and deducted from the
Contract Fund. See WITHDRAWALS, page 15. If an annuity option is selected,
annuity payments will be in installments of guaranteed amounts. See EFFECTING AN
ANNUITY, page 25.
This Brief Description of the Contract is intended to provide a broad overview
of the more significant features of the Contract. More detailed information will
be found in subsequent sections of this prospectus and in the Contract document.
3
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FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchase Payments..................................None
Maximum Withdrawal Charge:
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THE WITHDRAWAL CHARGE WILL BE EQUAL TO THE FOLLOWING PERCENTAGE OF
FOR WITHDRAWALS DURING THE CONTRACT YEAR INDICATED THE AMOUNT WITHDRAWN*
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FIRST CONTRACT YEAR 7%
SECOND CONTRACT YEAR 6%
THIRD CONTRACT YEAR 5%
FOURTH CONTRACT YEAR 4%
FIFTH CONTRACT YEAR 3%
SIXTH CONTRACT YEAR 2%
SEVENTH CONTRACT YEAR 1%
EIGHTH AND SUBSEQUENT CONTRACT YEARS NO CHARGE
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* THE WITHDRAWAL CHARGE IS NOT IMPOSED ON ANY CHARGE-FREE WITHDRAWAL AMOUNTS,
WITHDRAWALS MADE UNDER CRITICAL CARE ACCESS, SEE PAGE 19, OR ANY AMOUNT USED TO
PROVIDE INCOME UNDER THE LIFE ANNUITY WITH 120 PAYMENTS CERTAIN OPTION.
THERE WILL BE A REDUCTION IN SUCH WITHDRAWAL CHARGE IN THE CASE OF CONTRACTS
ISSUED TO CONTRACT OWNERS ISSUE AGE 84 AND OLDER.
ANNUAL CONTRACT FEE AND FEE UPON FULL WITHDRAWAL.........................$30**
** THIS CHARGE WILL BE APPORTIONED OVER ALL THE ACCOUNTS MAKING UP THE CONTRACT
FUND AS OF THE EFFECTIVE DATE OF THAT DEDUCTION. AMOUNTS APPORTIONED TO THE TWO
INTEREST-RATE INVESTMENT OPTIONS WILL REDUCE THE INTEREST CELLS ON A FIFO (FIRST
IN/FIRST OUT) BASIS DETERMINED BY THE AGE OF THE CELL. THE CHARGE WILL NOT BE
MADE UPON WITHDRAWALS UNDER CRITICAL CARE ACCESS OR IF THE CONTRACT FUND IS
$50,000 OR MORE.
TRANSFER CHARGE
IMPOSED ONLY FOR TRANSFERS IN EXCESS OF TWELVE TRANSFERS IN A CONTRACT YEAR
(EXCLUDING TRANSFERS IN CONNECTION WITH DOLLAR COST AVERAGING AND
AUTO-REBALANCING)........................................................$25
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a Percentage of average Contract Fund)
ALL SUBACCOUNTS
MORTALITY AND EXPENSE RISK FEE........................... 1.25%
ADMINISTRATIVE FEE....................................... 0.15%
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TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES................... 1.40%
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ANNUAL EXPENSES OF THE FUNDS
(as a percentage of portfolio average net assets)
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INVESTMENT OTHER TOTAL FUND ANNUAL
MANAGEMENT FEE EXPENSES EXPENSES (AFTER EXPENSE
REIMBURSEMENTS)
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THE PRUDENTIAL SERIES FUND(1)
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Money Market Portfolio 0.40% 0.04% 0.44%
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Diversified Bond Portfolio 0.40% 0.04% 0.44%
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High Yield Bond Portfolio 0.55% 0.06% 0.61%
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Stock Index Portfolio 0.35% 0.03% 0.38%
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Equity Income Portfolio 0.40% 0.03% 0.43%
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4
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INVESTMENT OTHER TOTAL FUND ANNUAL
MANAGEMENT FEE EXPENSES EXPENSES (AFTER EXPENSE
REIMBURSEMENTS)
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Equity Portfolio 0.45% 0.03% 0.48%
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Prudential Jennison Portfolio 0.60% 0.19% 0.79%
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Global Portfolio 0.75% 0.31% 1.06%
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AIM VARIABLE INSURANCE FUNDS, INC.(2)
- ------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth and Income Fund 0.65% 0.52% 1.17%
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AIM V.I. Value Fund 0.65% 0.10% 0.75%
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JANUS ASPEN SERIES(3)
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Growth Portfolio 0.65% 0.13% 0.78%
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International Growth Portfolio 0.00% 1.27% 1.27%
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MFS VARIABLE INSURANCE TRUST(4)
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Emerging Growth Series 0.75% 0.25% 1.00%
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Research Series 0.75% 0.25% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST(5)
- ------------------------------------------------------------------------------------------------------------------------------------
Managed Portfolio 0.80% 0.14% 0.94%
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Portfolio 0.80% 0.20% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE (6)
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc., Equity Income Portfolio 0.85% 0.00% 0.85%
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Series, Inc.,
International Stock Portfolio 1.05% 0.00% 1.05%
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
INVESTMENT OTHER TOTAL FUND ANNUAL
MANAGEMENT FEE EXPENSES EXPENSES (AFTER EXPENSE
REIMBURSEMENTS)
====================================================================================================================================
<S> <C> <C> <C>
WARBURG PINCUS TRUST(7)
- ------------------------------------------------------------------------------------------------------------------------------------
Post-Venture Capital Portfolio 0.64% 0.76% 1.40%
====================================================================================================================================
</TABLE>
The purpose of the foregoing tables is to assist Contract owners in
understanding the expenses that they bear, directly or indirectly of the Pruco
Life Flexible Premium Variable Annuity Account and the Funds. The expenses
relating to the Funds (other than those in the Prudential Series Fund) have been
provided to Pruco Life by the Funds and have not been independently verified by
Pruco Life. See the sections on charges in this prospectus and the accompanying
prospectuses for the Funds. The above tables do not include any taxes
attributable to purchase payments nor any premium taxes. Currently, there is no
deduction for such taxes at the time purchase payments are made, but in some
states, a deduction is made when an annuity is effected.
(1.) The Prudential Series Fund. With respect to The Prudential Series Fund
portfolios, except for the Global Portfolio, The Prudential reimburses a
portfolio when its ordinary operating expenses, excluding taxes, interest, and
brokerage commissions exceed 0.75% of the portfolio's average daily net assets.
The amounts listed for the portfolios under "Other Expenses" are based on
amounts incurred in the last fiscal year. The Prudential Jennison Portfolio
commenced operations in 1995. Consequently, for the fee table above and the
examples that follow, the figures shown as "Other Expenses" and total expenses
are based on actual amounts from May 1, 1995 through May 1, 1996. It is
anticipated that as average net assets of the portfolio grow, the magnitude of
"Other Expenses" will decrease and become comparable to that of other
portfolios.
(2.) AIM Variable Insurance Funds, Inc. AIM may from time to time voluntarily
waive or reduce their respective fees. Fee waivers or reductions, other than
those contained in the agreement with the adviser, may be modified or terminated
at any time. Management fees and other expenses have been restated to reflect
current agreements which do not include waivers or reductions for the AIM V.I.
Growth and Income Fund.
(3.) Janus Aspen Series. The fees and expenses for the Janus Aspen Series Growth
Portfolio and International Growth Portfolio in the table above are based on
gross expenses before expense offset arrangements for the fiscal year ended
December 31, 1995, net of fee waivers or reductions from Janus Capital. Janus
Capital has agreed to reduce each Portfolio's advisory fee to the extent such
fee exceeds the effective rate of the Janus retail fund corresponding to such
Portfolio. Janus Capital may terminate this fee reduction or any of the expense
limitations set forth herein at any time upon 90 days' notice to the Trustees of
the Janus Aspen Series. The fees and expenses for the International Growth
Portfolio have been restated to reflect the 1.25% expense limitation in effect
from June 3, 1996 through April 30, 1997. Without fee waivers or reductions, the
Management Fee, Other Expenses and Total Fund Annual Expenses would have been
0.85%, 0.13% and 0.98% for the Growth Portfolio and 1.00%, 2.57% and 3.57% for
the International Growth Portfolio.
(4.) MFS Variable Insurance Trust. With respect to the MFS Trust Emerging Growth
Series and Research Series the adviser has agreed to bear, subject to
reimbursement, expenses for each of the MFS Funds such that each aggregate
Funds' operating expenses shall not exceed, on an annualized basis, 1.00% of the
average daily net assets of the MFS Funds from November 2, 1994 through December
31, 1996, 1.25% of the average daily net assets of the Series from January 1,
1997 through December 31, 1998, and 1.50% of the average daily net assets of the
Series from January 1, 1999 through December 31, 2004; provided however, that
this obligation may be terminated or revised at any time. Absent this expense
arrangement, "Other Expenses" and "Total Fund Annual Expenses" would be 2.16%
and 2.91%, respectively for the Emerging Growth Series and 3.15% and 3.90%
respectively for the Research Series.
(5.) OCC Accumulation Trust. The annual expenses of the OCC Accumulation Trust
Portfolios as of December 31, 1995 have been restated to reflect new management
fee and expense limitation arrangements in effect as of May 1, 1996. Effective
May 1, 1996, the expenses of the Managed and Small Cap Portfolios of the OCC
Accumulation Trust are contractually limited by OpCap Advisors so that their
respective annualized operating expenses do not exceed 1.25%
6
<PAGE>
of their respective average daily net assets. Furthermore, through April 30,
1997, the annualized operating expenses of the Managed and Small Cap Portfolios
will be voluntarily limited by OpCap Advisors so that annualized operating
expenses of these Portfolios do not exceed 1.00% of their respective average
daily net assets. Without such voluntary expense limitations, and taking into
account the revised contractual provisions effective May 1, 1996 concerning
management fees and expense limitations, the Management Fees, Other Expenses and
Total Portfolio Annual Expenses incurred for the fiscal year ended December 31,
1995 would have remained unchanged for the Managed Portfolio and would have been
.80%, .39% and 1.19%, respectively, for the Small Cap Portfolio.
(6.) T. Rowe Price Equity Series, Inc. and T. Rowe Price International
Series, Inc. With respect to the T. Rowe Price Funds, the Investment Management
Fees include the ordinary expenses of operating the Funds.
(7.) Warburg Pincus Trust. With respect to the Warburg Trust Post-Venture
Capital Portfolio, absent the anticipated waiver of fees by the Fund's
investment adviser and co-administrator, the Investment Management Fee would
equal 1.25%; Other Expenses would equal 0.81%, and Total Fund Annual Expenses
would equal 2.06%. Other Expenses for the Fund are based on annualized estimates
of expenses for the fiscal year ending December 31, 1996, net of any fee waivers
or expense reimbursements. The investment adviser has undertaken to limit the
Fund's Total Fund Annual Expenses through December 31, 1996.
EXAMPLES OF FEES AND EXPENSES
The following examples illustrate the cumulative dollar amount of all the above
expenses that would be incurred on each $1,000 of your investment.
o The examples assume a consistent 5% annual return on invested assets;
o The examples do not take into consideration any taxes attributable to
purchase payments nor any premium taxes which may be payable at the time of
annuitization or at the time of purchase payments;
For a term less than 10 years, the expenses shown in Table I describe applicable
charges for the withdrawal of your entire Contract Fund or if you use your
Contract Fund to effect an annuity assuming, in each case, that your Contract
Fund is invested entirely in the designated portfolio. THE EXAMPLES SHOULD NOT
BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES
INCURRED IN ANY GIVEN YEAR MAY BE MORE OR LESS THAN THOSE SHOWN IN THE EXAMPLES.
7
<PAGE>
TABLE I
IF YOU WITHDRAW YOUR ENTIRE CONTRACT FUND JUST PRIOR TO THE END OF THE
APPLICABLE TIME PERIOD OR IF YOU USE YOUR CONTRACT FUND TO EFFECT AN ANNUITY AT
THE END OF THE APPLICABLE TIME PERIOD, YOU WOULD PAY THE FOLLOWING CUMULATIVE
EXPENSES ON EACH $1,000 INVESTED. (NOTE: THE 1, 3 AND 5 YEAR COLUMNS REFLECT THE
IMPOSITION OF THE WITHDRAWAL CHARGE; HOWEVER, IF YOU CHOOSE CERTAIN ANNUITY
OPTIONS AFTER THE FIRST YEAR THIS CHARGE WILL NOT BE MADE. WHERE THIS IS THE
CASE, THE EXPENSES SHOWN IN TABLE II BELOW WOULD BE APPLICABLE. SEE WITHDRAWAL
CHARGE, ON PAGE 13.)
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
MONEY MARKET PORTFOLIO....................................... $ 82 $ 94 $117 $220
DIVERSIFIED BOND PORTFOLIO................................... $ 82 $ 94 $117 $220
HIGH YIELD BOND PORTFOLIO.................................... $ 84 $ 99 $126 $238
STOCK INDEX PORTFOLIO........................................ $ 82 $ 92 $114 $214
EQUITY INCOME PORTFOLIO...................................... $ 82 $ 94 $116 $219
EQUITY PORTFOLIO............................................ $ 83 $ 95 $119 $225
PRUDENTIAL JENNISON PORTFOLIO................................ $ 86 $ 105 $135 $257
GLOBAL PORTFOLIO............................................ $ 88 $ 113 $148 $284
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. GROWTH AND INCOME FUND............................... $ 89 $ 116 $154 $294
AIM V.I. VALUE FUND.......................................... $ 85 $ 104 $133 $252
JANUS ASPEN SERIES
GROWTH PORTFOLIO.............................................. $ 86 $ 105 $134 $255
INTERNATIONAL GROWTH PORTFOLIO................................ $ 90 $ 119 $159 $304
MFS VARIABLE INSURANCE TRUST
EMERGING GROWTH SERIES........................................ $ 88 $ 111 $145 $278
RESEARCH SERIES............................................... $ 88 $ 111 $145 $278
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO............................................. $ 87 $ 109 $142 $272
SMALL CAP PORTFOLIO........................................... $ 88 $ 111 $145 $278
T. ROWE PRICE
T. ROWE PRICE EQUITY SERIES, INC., EQUITY INCOME PORTFOLIO.... $ 86 $ 107 $138 $263
T. ROWE PRICE INTERNATIONAL SERIES, INC., INTERNATIONAL
STOCK PORTFOLIO............................................. $ 88 $ 113 $148 $283
WARBURG PINCUS TRUST
POST-VENTURE CAPITAL PORTFOLIO................................ $ 92 $ 123 $165 $317
</TABLE>
8
<PAGE>
TABLE II
IF YOU DO NOT WITHDRAW ANY PORTION OF YOUR CONTRACT FUND AS OF THE END OF THE
APPLICABLE TIME PERIOD, YOU WOULD PAY THE FOLLOWING CUMULATIVE EXPENSES ON EACH
$1,000 INVESTED.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
MONEY MARKET PORTFOLIO....................................... $ 19 $ 59 $102 $220
DIVERSIFIED BOND PORTFOLIO................................... $ 19 $ 59 $102 $220
HIGH YIELD BOND PORTFOLIO.................................... $ 21 $ 64 $111 $238
STOCK INDEX PORTFOLIO........................................ $ 19 $ 57 $ 99 $214
EQUITY INCOME PORTFOLIO...................................... $ 19 $ 59 $101 $219
EQUITY PORTFOLIO............................................. $ 20 $ 60 $104 $225
PRUDENTIAL JENNISON PORTFOLIO................................ $ 23 $ 70 $120 $257
GLOBAL PORTFOLIO............................................. $ 25 $ 78 $133 $284
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. GROWTH AND INCOME FUND............................... $ 26 $ 81 $139 $294
AIM V.I. VALUE FUND.......................................... $ 22 $ 69 $118 $252
JANUS ASPEN SERIES
GROWTH PORTFOLIO.............................................. $ 23 $ 70 $119 $255
INTERNATIONAL GROWTH PORTFOLIO................................ $ 27 $ 84 $144 $304
MFS VARIABLE INSURANCE TRUST
EMERGING GROWTH SERIES........................................ $ 25 $ 76 $130 $278
RESEARCH SERIES............................................... $ 25 $ 76 $130 $278
OCC ACCUMULATION TRUST
MANAGED PORTFOLIO............................................. $ 24 $ 74 $127 $272
SMALL CAP PORTFOLIO........................................... $ 25 $ 76 $130 $278
T. ROWE PRICE
T. ROWE PRICE EQUITY SERIES, INC., EQUITY INCOME PORTFOLIO.... $ 23 $ 72 $123 $263
T. ROWE PRICE INTERNATIONAL SERIES, INC., INTERNATIONAL
STOCK PORTFOLIO............................................. $ 25 $ 78 $133 $283
WARBURG PINCUS TRUST
POST-VENTURE CAPITAL PORTFOLIO................................ $ 29 $ 88 $150 $317
</TABLE>
NOTICE THAT IN BOTH OF THE ABOVE TABLES, THE LEVEL OF CUMULATIVE CHARGES IS
IDENTICAL FOR THE 10 YEAR COLUMN. THIS IS BECAUSE AT THAT POINT THERE ARE NO
WITHDRAWAL CHARGES TAKEN BY PRUCO LIFE UPON SURRENDER OR ANNUITIZATION.
9
<PAGE>
GENERAL INFORMATION ABOUT PRUCO LIFE, THE PRUCO LIFE FLEXIBLE PREMIUM
VARIABLE ANNUITY ACCOUNT, AND THE INVESTMENT OPTIONS AVAILABLE UNDER THE
CONTRACT
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company ("Pruco Life") is a stock life insurance company,
organized in 1971 under the laws of the State of Arizona. Pruco Life is licensed
to sell life insurance and annuities in the District of Columbia, Guam, and in
all states except New York. These Contracts are not offered in any state in
which the necessary approvals have not yet been obtained. Pruco Life is a
wholly-owned subsidiary of The Prudential, a mutual insurance company founded in
1875 under the laws of the State of New Jersey. As of December 31, 1995, The
Prudential has invested over $442 million in Pruco Life in connection with Pruco
Life's organization and operation. The Prudential intends from time to time to
make additional capital contributions to Pruco Life as needed to enable it to
meet its reserve requirements and expenses in connection with its business. The
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 appear on page 37 and should be considered only as bearing
upon Pruco Life's ability to meet its obligations under the Contracts.
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
The Pruco Life Flexible Premium Variable Annuity Account (the "Account") was
established on June 16, 1995 under Arizona law as a separate investment account.
The Account meets the definition of a "separate account" under federal
securities laws. Pruco Life is the legal owner of the assets in the Account and
is obligated to provide all benefits under the Contracts. Pruco Life will at all
times 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 are segregated from all of Pruco Life's other
assets and may not be charged with liabilities which arise from any other
business Pruco Life conducts. In addition to these assets, the Account's assets
may include funds contributed by Pruco Life to commence operation of the Account
and may include accumulations of the charges Pruco Life makes against the
Account. From time to time these additional assets will be transferred to Pruco
Life's general account. Before making any such transfer, Pruco Life will
consider any possible adverse impact the transfer might have on the Account.
The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any
supervision by the SEC of the management or investment policies or practices of
the Account. For state law purposes, the Account is treated as a part or
division of Pruco Life. There are currently nineteen subaccounts within the
Account which invest in corresponding portfolios of the Funds available under
the Contracts. There are additional subaccounts which invest in other portfolios
of the Prudential Series Fund which are not available under the Contracts.
Additional subaccounts may be added in the future. Pursuant to the terms of the
Contract, Pruco Life has the right to modify unilaterally the Contract to limit
the number and/or type of funds. The Account's financial statements begin on
page 36.
THE FUNDS
The following is a list of each Fund, its investment objectives and its
investment adviser:
THE PRUDENTIAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO. The maximum current income that is consistent with
stability of capital and maintenance of liquidity through investment in
high-quality short-term debt obligations. There are no assurances that this
portfolio will maintain a stable net asset value.
DIVERSIFIED BOND PORTFOLIO. A high level of income over the longer term while
providing reasonable safety of capital through investment primarily in readily
marketable intermediate and long-term fixed income securities that provide
attractive yields but do not involve substantial risk of loss of capital through
default.
HIGH YIELD BOND PORTFOLIO. Achievement of a high total return through investment
in high yield/high risk fixed income securities in the medium to lower quality
ranges.
STOCK INDEX PORTFOLIO. Achievement of investment results that correspond to the
price and yield performance of publicly traded common stocks in the aggregate by
following a policy of attempting to duplicate the price and yield performance of
the Standard & Poor's 500 Composite Stock Price Index.
10
<PAGE>
EQUITY INCOME PORTFOLIO. Both current income and capital appreciation through
investment primarily in common stocks and convertible securities that provide
favorable prospects for investment income returns above those of the Standard &
Poor's 500 Composite Stock Price Index or the New York Stock Exchange Composite
Index.
EQUITY PORTFOLIO. Capital appreciation through investment primarily in common
stocks of companies, including major established corporations as well as smaller
capitalization companies, that appear to offer attractive prospects of price
appreciation that is superior to broadly-based stock indices. Current income, if
any, is incidental.
PRUDENTIAL JENNISON PORTFOLIO. Long-term growth of capital through investment
primarily in equity securities of established companies with above-average
growth prospects. Current income, if any, is incidental.
GLOBAL PORTFOLIO. Long-term growth of capital through investment primarily in
common stock and common stock equivalents of foreign and domestic issues.
Current income, if any, is incidental.
The Prudential is the investment advisor for the assets of each of the
portfolios of the Prudential Series Fund. The Prudential has a Service Agreement
with its wholly-owned subsidiary The Prudential Investment Corporation ("PIC"),
which provides that, subject to The Prudential's supervision, PIC will furnish
investment advisory services in connection with the management of the Prudential
Series Fund. In addition, The Prudential has entered into a Subadvisory
Agreement with its wholly-owned subsidiary Jennison Associates Capital Corp.
("Jennison"), under which Jennison furnishes investment advisory services in
connection with the management of the Prudential Jennison Portfolio.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. GROWTH AND INCOME FUND. The Fund's investment objective is to seek
growth of capital, with current income as a secondary objective.
AIM V.I. VALUE FUND. The Fund's investment objective is to achieve long-term
growth of capital by investing primarily in equity securities judged by A I M
Advisors, Inc. to be undervalued relative to the current or projected earnings
of the companies issuing the securities, or relative market values of assets
owned by the companies issuing the securities or relative to the equity market
generally. Income is a secondary objective and would be satisfied principally
from the income (interest and dividends) generated by the common stocks,
covertible bonds and convertible preferred stocks that make up the Fund's
portfolio.
A I M Advisors, Inc., serves as the investment adviser to the AIM V.I. Value
Fund and the AIM V.I. Growth and Income Fund.
JANUS ASPEN SERIES
GROWTH PORTFOLIO. A diversified portfolio that seeks long-term growth of capital
by investing primarily in common stocks, with an emphasis on companies with
larger market capitalizations.
INTERNATIONAL GROWTH PORTFOLIO. A diversified portfolio that seeks long-term
growth of capital by investing primarily in common stocks of foreign issuers.
Janus Capital Corporation is the investment adviser to the Growth Portfolio and
the International Growth Portfolio and is responsible for the day-to-day
management of the portfolios and other business affairs of the portfolios.
MFS VARIABLE INSURANCE TRUST
EMERGING GROWTH SERIES. This 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.
RESEARCH SERIES. The Research Series' investment objective is to provide
long-term growth of capital and future income.
Massachusetts Financial Services Company, a Delaware corporation, is the
investment adviser to each MFS Series.
11
<PAGE>
OCC ACCUMULATION TRUST (formerly known as Quest for Value Accumulation Trust)
MANAGED PORTFOLIO. Growth of capital over time through investment in a portfolio
consisting of common stocks, bonds and cash equivalents, the percentages of
which will vary based on management's assessments of relative investment.
SMALL CAP PORTFOLIO. Capital appreciation through investment in a diversified
portfolio of equity securities of companies with market capitalizations of under
$1 billion.
OpCap Advisors (formerly known as Quest for Value Advisors, the "OCC Manager")
is responsible for management of the OCC Accumulation Trust's business. Pursuant
to the investment advisory agreement with the OCC Accumulation Trust, and
subject to the authority of the Board of Trustees, the OCC Manager supervises
the investment operation of the Managed Portfolio and the Small Cap Portfolio,
furnishes advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities and provides certain
administrative services for the OCC Accumulation Trust.
T. ROWE PRICE
T. ROWE PRICE EQUITY SERIES, INC., EQUITY INCOME PORTFOLIO. The fund's objective
is to provide substantial dividend income as well as long-term capital
appreciation through investment in common stocks of established companies.
T. ROWE PRICE INTERNATIONAL SERIES, INC., INTERNATIONAL STOCK PORTFOLIO. The
fund's objective is long-term growth of capital through investment primarily in
common stocks of established, non-U.S. companies.
T. Rowe Price Associates, Inc. is the Investment Manager for the Equity Income
Portfolio and Rowe Price-Fleming International, Inc. is the Investment Manager
for the International Stock Portfolio.
WARBURG PINCUS TRUST
POST-VENTURE CAPITAL PORTFOLIO. Seeks long-term growth of capital by investing
primarily in equity securities of issuers in their post-venture capital stage of
development and pursues an aggressive investment strategy.
The Warburg Pincus Trust employs Warburg, Pincus Counsellors, Inc. as investment
adviser and Abbott Capital Management, L.P. as its sub-investment adviser with
respect to a portion of the Post-Venure Capital Portfolio allocated to private
limited partnerships or other investment funds.
Further information about the Fund portfolios can be found in the accompanying
prospectuses for each Fund.
The investment advisors with respect to the various funds charge a daily
investment management fee as compensation for their services, as set forth in
the table beginning on page 4 and as more fully described in the prospectus for
each Fund.
It is conceivable that in the future it may become disadvantageous for both
variable life insurance and variable annuity contract separate accounts to
invest in the same underlying mutual fund. Although neither the companies which
invest in the Funds, nor the Funds currently foresees any such disadvantage, the
Funds' Boards intend to monitor events in order to identify any material
conflict between variable life insurance and variable annuity contract owners
and to determine what action, if any, should be taken in response thereto. This
might force a Fund to sell securities at disadvantageous prices. 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 will be compensated by an affiliate of each of the Funds (other than
those in 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, AND RESTRICTIONS, THEIR EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN, AND ALL OTHER ASPECTS OF THEIR OPERATION IS CONTAINED IN THE
12
<PAGE>
ACCOMPANYING 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 WILL BE MET.
THE INTEREST-RATE INVESTMENT OPTIONS AND INVESTMENTS BY PRUCO LIFE
Purchase payments invested in the interest-rate investment options do not result
in participation in the investment gains or losses of any designated portfolio
of investments as is the case for payments invested in the variable investment
options. The amounts invested in the interest-rate investment options are
credited with interest at rates guaranteed by Pruco Life. All of Pruco Life's
assets stand behind those guarantees.
Assets of Pruco Life must be invested in accordance with requirements
established by applicable state laws regarding the nature and quality of
investments that may be made by life insurance companies and the percentage of
their assets that may be committed to any particular type of investment. In
general, these laws permit investments, within specified limits and subject to
certain qualifications, in federal, state, and municipal obligations, corporate
bonds, preferred and common stocks, real estate mortgages, real estate and
certain other investments.
DETAILED INFORMATION ABOUT THE CONTRACT
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
The minimum initial purchase payment is $10,000. Purchase payments in excess of
$2 million require prior approval of Pruco Life. The Contract may generally be
issued on proposed annuitants below the age of 86. Contracts purchased in
connection with Individual Retirement Annuity plans (IRAs) will generally be
issued to annuitants below the age of 70. However, IRA Contracts may be issued
up to age 80 provided that the Minimum Distribution Option or other appropriate
IRS election is made. Before issuing any Contract, we require submission of
certain information. Following our review of the information and approval of
issuance, a Contract will be issued that sets forth precisely your rights and
Pruco Life's obligations. You may thereafter make additional payments of $1,000
or more, but there is no obligation to do so.
The Contract date will be the date the initial purchase payment and required
information in good order are received at the Prudential Annuity Service Center.
If the current underwriting requirements are not met and the issuance of the
Contract is not approved, the purchase payment will promptly be returned. Pruco
Life reserves the right to change these requirements on a non-discriminatory
basis.
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"
Generally, you may return a Contract for refund within 10 days after you receive
it. Some states allow a longer period of time during which a Contract may be
returned for a refund. If you purchase the Contract as an IRA, federal law
requires that you return the Contract for refund within 7 days. A refund may be
requested by mailing or delivering the Contract to the representative who sold
it or to the Prudential Annuity Service Center. As required by applicable law,
you will then receive a refund of either (1) all purchase payments made, plus
any interest credited, plus or minus any change in cash value due to investment
experience or market value adjustment, which will include charges that have been
made against the account or the underlying variable investment funds or (2) all
purchase payments made.
ALLOCATION OF PURCHASE PAYMENTS
You determine how the initial purchase payment will be allocated among the
subaccounts and interest-rate investment options by specifying the desired
allocation on the application form for the Contract. You may choose to allocate
nothing to a particular subaccount or interest-rate option. Unless you tell us
otherwise, subsequent purchase payments will be allocated in the same
proportions as the most recent purchase payment made (unless that was a purchase
payment you directed us to allocate on a one time-only basis). You may change
the way in which subsequent purchase payments are allocated by providing Pruco
Life with proper written instruction or by telephoning the Prudential Annuity
Service Center, once you have provided the appropriate identification to effect
a telephone transfer. See TRANSFERS, page 14.
13
<PAGE>
ASSET ALLOCATION PROGRAM
An Asset Allocation Program is available to assist you in determining how to
allocate your purchase payments. If you choose to participate in the program,
your registered representative will provide you with an investor profile
questionnaire. Based on your answers to the questionnaire, a software program,
designed by The Prudential with the assistance of Ibbotson Associates, will
identify an asset allocation model that is appropriate for investors that have
investment objectives, risk tolerance and time horizons comparable to yours. The
Asset Allocation Program is available at no charge to you. You are under no
obligation to participate in the program or to invest according to the program
recommendations. You may ignore, in whole or in part, the investment allocations
provided by the program.
The Asset Allocation Program is intended as an aid in making your purchase
payment allocations. It is not a guarantee of investment return and there can be
no assurance that any portfolio will attain its investment objectives. You
should consider reviewing your investor profile questionnaire annually, and each
time your investor profile changes.
CASH VALUE
The cash value of the Contract is the amount you will receive if you withdraw
all of your Contract Fund. It is equal to the value of the Contract Fund plus or
minus any applicable Market-Value Adjustment of all amounts in MVA option
interest cells and minus any applicable withdrawal and administrative charges. A
withdrawal will generally have federal income tax consequences, which could
include tax penalties. You should consult with a tax adviser before making a
withdrawal. See WITHDRAWALS, on page 15 and FEDERAL TAX STATUS, on page 19.
GUARANTEED INTEREST RATE PERIODS
Pruco Life determines the effective guaranteed annual interest rate ("guaranteed
interest rate") that is available at any given time for the one year fixed-rate
option and for the MVA option. This is the rate that the portion of the Contract
Fund allocated to that option will earn throughout each interest rate period.
The rates change frequently and you may learn what rate[s] are available from
your Pruco Life representative. When you select an interest-rate investment
option, your payment will be allocated to an interest rate cell and the interest
rate will then not change until the cell's maturity date. Interest will be added
to the amount in the cell daily at a rate that will provide the guaranteed
effective yield over the period of one year.
Although the guaranteed interest rates offered may change, the minimum
guaranteed interest rate will never be less than an effective annual rate of 3%.
WHAT HAPPENS WHEN AN INTEREST CELL REACHES ITS MATURITY DATE?
On each maturity date, we will offer an election to transfer the amount maturing
into either of the available interest-rate investment options or the
subaccounts. A Market-Value Adjustment will not be made if this is done within
the first 30 days after an interest cell within the MVA option matures. Any
amount that you transfer into the same interest-rate investment option during
the 30-day period will receive the appropriate rate for that option, effective
as of the maturity date. Amounts that you withdraw or transfer into a variable
investment option or into a different interest-rate investment option during the
30-day period will receive interest for the period between the maturity date and
the date of withdrawal or transfer at the declared renewal rate for the matured
cell (i.e. as if you had taken no action within the 30-day period) and will be
effective on the date Pruco Life receives your request. If you do not make an
election to transfer within the 30-day period following the maturity date, the
amount maturing will ordinarily be transferred into a new interest cell of the
same duration as the maturing cell at the prevailing interest rate. The transfer
date will be the maturity date.
TRANSFERS
You may transfer out of an investment option into any combination of other
investment options available under the Contract. The transfer request may be in
dollars, such as a request to transfer $1,000 from one subaccount to another, or
may be in terms of a percentage reallocation among subaccounts. In the latter
case, the percentages must be whole numbers. You may make transfers by proper
written notice to the Prudential Annuity Service Center, or by telephone, once
you have provided appropriate identification to effect a telephone transfer.
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You will automatically be enrolled to use the Telephone Transfer System. Pruco
Life has adopted procedures designed to ensure that requests by telephone are
genuine. We will not be held liable for following telephone instructions that we
reasonably believe to be genuine. We cannot guarantee that you will be able to
get through to complete a telephone transfer during peak periods such as periods
of drastic economic or market change.
Transfers among subaccounts will take effect as of the end of the valuation
period in which a proper transfer request is received at the Prudential Annuity
Service Center. Transfers from interest-rate investment options will take effect
on the day we receive your proper notice at the Prudential Annuity Service
Center. Transfers out of an interest cell in the fixed-rate option are permitted
only during the 30-day period following its maturity date. Amounts transferred
from a Market-Value Adjustment Option interest cell may be subject to a
Market-Value Adjustment if the transfer is not made in the 30-day period
following the maturity date of the interest cell.
You may make up to 12 transfers a year without charge. Thereafter, Pruco Life
will assess a charge of $25 for each subsequent transfer during that Contract
year. See TRANSACTION CHARGE, page 19. Dollar Cost Averaging and Auto-
Rebalancing transfers do not count towards the 12 transfers per year that can be
made without charge.
DOLLAR COST AVERAGING
Additionally, an administrative feature called Dollar Cost Averaging ("DCA") is
available to Contract owners. This feature allows you to transfer amounts out of
the fixed-rate option or one of the variable investment options (designated as
the "DCA account") and into one or more other variable investment options.
Transfers may be in specific dollar amounts or percentages of the amount in the
DCA account at the time of the transfer. If the DCA account balance drops below
$250, the entire remaining balance of the account will be transferred on the
next transfer date. You may ask that transfers be made monthly, quarterly,
semi-annually or annually. You can add to the DCA account at any time. Initial
transfers must be at least 3% of the DCA account. These amounts are subject to
change at Pruco Life's discretion. Any transfers made pursuant to DCA are not
counted in determining the number of transfers subject to the transfer charge.
Each automatic transfer will take effect as of the end of the valuation period
in monthly, quarterly, semi-annual or annual intervals as designated by you
based on the date the DCA account was established provided the New York Stock
Exchange is open on that date. If the New York Stock Exchange is not open on a
transfer date, the transfer will take effect as of the end of the valuation
period which immediately follows that date. Automatic transfers will continue
until the amount in the DCA account has been transferred, or until you notify us
and we process a change in allocation or cancellation of the feature.
AUTO-REBALANCING
This Contract offers another investment technique that you may find attractive.
The Auto-Rebalancing feature allows you to automatically rebalance subaccount
assets at specified intervals based on percentage allocations that you choose.
For example, suppose your initial investment allocation of variable investment
options A and B is split 40% and 60%, respectively. Then, due to investment
results, that split changes. You may instruct that those assets be rebalanced to
your original or different allocation percentages. Auto-Rebalancing can be
performed on a one-time basis or periodically, as you choose. You may select
that rebalancing occur in monthly, quarterly, semi-annual or annual intervals
based on your Contract year. Rebalancing will take effect as of the end of the
valuation period in the intervals you specify and will continue at those
intervals until you notify us otherwise. If the New York Stock Exchange is
not open on the rebalancing date, the transfer will take effect as of the end
of the valuation period which immediately follows that date. Any transfers made
pursuant to Auto-Rebalancing are not counted in determining the number of
transfers subject to the transfer charge. The interest-rate investment options
cannot participate in this administrative feature. In addition, you should not
include the DCA account as one of the subaccounts to be rebalanced.
WITHDRAWALS
You may at any time before the annuity date make a withdrawal from the Contract
Fund of all or part of the cash value of the Contract. However, Pruco Life's
consent will be required for a partial withdrawal if the amount requested is
less than $500. For federal income tax purposes, withdrawals from Contracts
other than IRAs are considered to have been made first from investment income.
See TAXES PAYABLE BY CONTRACT OWNERS, page 19.
You may specify from which investment options you would like the withdrawal
processed. The withdrawal amount may be specified as a dollar amount or as a
percentage of the Contract Fund. If you do not specify from where you would like
the withdrawal processed, a partial withdrawal will be withdrawn proportionally
from all investment options. Within
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the interest-rate investment options, we will take the withdrawal first from the
oldest eligible interest cell or cells. A Market-Value Adjustment may apply. See
MARKET-VALUE ADJUSTMENT, page C-1. With respect to residents of Pennsylvania
only, see page C-4.
Only amounts withdrawn from purchase payments (including full withdrawals) are
subject to a withdrawal charge. For purposes of determining withdrawal charges,
withdrawals are considered as having been made first from purchase payments. See
WITHDRAWAL CHARGE, page 18. The withdrawal will be effected as of the end of the
valuation period in which a proper withdrawal request is received at the
Prudential Annuity Service Center.
Pruco Life will generally pay the amount of any withdrawal, less any required
tax withholding, within 7 days after we receive a properly completed withdrawal
request. We will adjust the Contract Fund to reflect any applicable sales and/or
administrative charge and Market-Value Adjustment. We may delay payment of any
withdrawal allocable to the subaccount[s] for a longer period if the disposal or
valuation of the Account's assets is not reasonably practicable because the New
York Stock Exchange is closed for other than a regular holiday or weekend,
trading is restricted by the SEC or the SEC declares that an emergency exists.
With respect to the amount of any withdrawal allocable to the interest-rate
investment options, we expect to pay the withdrawal promptly upon request.
AUTOMATED WITHDRAWALS
Pruco Life also offers an Automated Withdrawal feature which enables you to
receive periodic withdrawals in monthly, quarterly, semi-annual or annual
intervals. Withdrawals will be processed as of the end of the valuation period
in the intervals you specify and will continue at those intervals until you
notify us otherwise. If the New York Stock Exchange is not open on the
processing date, the withdrawal will be processed as of the end of the valuation
period which immediately follows that date. Withdrawals may be made from a
designated investment option or proportionally from all investment options.
Withdrawals may be expressed as a specified dollar amount or as a percentage of
the Contract Fund. Market-value adjustments may apply, and withdrawal charges
may apply if the withdrawals in any Contract year exceed the charge-free amount.
Additionally, Pruco Life's consent will be required for any partial withdrawal
of less than $500.
MARKET-VALUE ADJUSTMENT
An amount transferred or withdrawn from an MVA option before its maturity date
will be subject to a Market-Value Adjustment.
The amount of the Market-Value Adjustment depends upon the difference between
the guaranteed interest rate for the interest cell from which the withdrawal or
transfer is being made and the interest rate being declared on the date of the
withdrawal or transfer by Pruco Life for interest rate periods approximately
equal to one year longer than the time remaining until the maturity date of the
interest cell. Pruco Life may not always offer MVA options at all durations.
Rates for intermediate durations not currently offered will be declared as often
as rates for durations which are offered. Such declared rates will be determined
in a manner consistent with the offered rates, but reflecting the different
investment horizon of the intermediate duration. If you specify your withdrawal
or transfer as a dollar amount, the Market-Value Adjustment may increase or
decrease the amount remaining in the MVA option. If you request the withdrawal
or transfer as a percentage of the Contract Fund, the Market-Value Adjustment
may increase or decrease the amount being withdrawn or transferred. If the
current declared rate is higher than the guaranteed rate, there will be a
decrease. If the current declared rate is lower than the guaranteed rate, there
will be an increase. The adjustment--whether up or down--will never be greater
than 40% of each amount subject to the adjustment. For a more precise
description of how the Market-Value Adjustment is determined, and an example of
how it affects the amount remaining after a partial withdrawal, see MARKET-VALUE
ADJUSTMENT FORMULA on page C-1. With respect to residents of Pennsylvania
only, see page C-4.
DEATH BENEFIT
If the last surviving or sole annuitant dies prior to the annuity date, Pruco
Life will, upon receipt of all of the information necessary to make the payment
(including due proof of death and election of a payment option), pay a death
benefit to the beneficiary designated by the Contract owner. The death benefit
will equal the greatest of: (1) the Contract Fund as of the date of due proof of
death; (2) the sum of all invested purchase payments made less total withdrawals
made (including withdrawal charges); and (3) the greatest of the Contract Fund
values calculated on every third Contract anniversary reduced by all subsequent
withdrawals and withdrawal charges.
The beneficiary may receive this amount in one sum or under a payout option.
Unless the beneficiary has been irrevocably designated, you may change the
beneficiary at any time. If the annuitant dies after he or she has begun to
receive annuity payments, the death benefit, if any, will be determined by the
type[s] of payout provisions then in effect.
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If the annuitant was the sole owner of the Contract, the annuitant's spouse was
the sole beneficiary, and the spouse had an unrestricted right to receive the
death benefit in one sum, then the spouse has the right to continue the Contract
as annuitant and owner.
VALUATION OF A CONTRACT OWNER'S CONTRACT FUND
The value of your Contract Fund is the sum of your interests in the variable
investment options and in the interest-rate investment options. The portion of
the Contract Fund allocated to the Account is the sum of the interests in each
subaccount. The values are measured in Units, for example, Money Market Units,
Diversified Bond Units or High Yield Bond Units. Every purchase payment made by
an owner is converted into Units of the subaccount or subaccounts selected by
dividing the amount of the purchase payment by the Unit Value for the subaccount
to which that amount has been allocated. The value of these Units changes each
valuation period to reflect the investment results, expenses, and charges of the
subaccount and the corresponding Fund. Further detail about Units is contained
in the Statement of Additional Information.
There is, of course, no guarantee that your Contract Fund will increase or that
it will not fall below the amount of your total purchase payments. However,
Pruco Life guarantees a minimum interest rate of 3% a year on that portion of
the Contract Fund allocated to the interest-rate investment options. Excess
interest on payments allocated to the interest-rate investment options may be
credited in addition to the guaranteed interest rate. A Market-Value Adjustment
may apply to amounts held in the MVA option, which could reduce effective annual
yields below the guaranteed interest rate levels.
CHARGES, FEES AND DEDUCTIONS
PREMIUM TAXES AND TAXES ATTRIBUTABLE TO PURCHASE PAYMENTS
A charge may be deducted for premium taxes and any taxes attributable to
purchase payments. For these purposes, "premium taxes and taxes attributable to
purchase payments" shall include any state or local premium taxes and any
federal premium taxes and any federal, state or local income, excise, business
or any other type of tax (or component thereof) measured by or based upon the
amount of premium received by Pruco Life. If Pruco Life pays a state or local
tax at the time purchase payments are made, the deduction will be made at the
time based on the applicable rate. In many states, Pruco Life pays a premium tax
when an annuity is effected. In those states, the tax will be deducted at that
time. The tax rates currently in effect in those states that impose a tax range
from 1% to 5%. The Prudential also reserves the right to deduct from each
purchase payment a charge up to a maximum of 0.3% for federal income taxes
measured by premiums in those states where approval has been obtained.
Currently, no such charge is being made in any state.
A deduction for any such taxes imposed on purchase payments will not be made,
however, except to the extent that the total tax attributable to premiums is in
excess of 4% when: (1) your total purchase payments, less any purchase payments
withdrawn, equal or exceed $50,000; or (2) you purchase separate Contracts for
each of your children or grandchildren as annuitants, each Contract has purchase
payments totaling at least $25,000, and total purchase payments, less any
purchase payments withdrawn, equal or exceed $50,000. Special tax rules apply to
multiple annuity contracts issued by the same company (and affiliates) to the
same Contract owner during any calendar year. See FEDERAL TAX STATUS, page 19.
ADMINISTRATIVE CHARGE
There is an administrative charge to reimburse Pruco Life for the expenses
incurred in administering the Contracts. This includes such things as issuing
the Contract, establishing and maintaining records, and providing reports to
Contract owners. This charge is deducted daily from the assets in each of the
variable subaccounts and is equivalent to an effective annual rate of 0.15%
(.00041065% daily). There will be an additional charge of $30 annually and upon
surrender on Contracts with less than $50,000 in the Contract Fund. This $30
charge will be apportioned over all investment options making up the Contract
Fund as of the effective date of that deduction. The administrative charge
contains no element of anticipated profit.
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CHARGE FOR ASSUMING MORTALITY AND EXPENSE RISKS
A deduction is made daily from the assets of each of the variable investment
options to reimburse Pruco Life for assuming the risk that our estimates of
longevity and of the expenses we expect to incur over the lengthy periods that
the Contract may be in effect will turn out to be incorrect. The charge is made
daily at an annual rate of 1.25% (.00340349% daily) of the assets held in the
subaccounts. This charge is not assessed against amounts allocated to the
interest-rate investment options.
To the extent that the charge for these risks exceeds the actual cost of
expenses and benefits, Pruco Life will realize a gain. These proceeds will
become part of Pruco Life's general account and will be available to cover any
deficiency to the extent to which withdrawal charges are less than sales
expenses under the Contracts.
EXPENSES INCURRED BY THE FUNDS
The charges and expenses of the Funds are indirectly borne by the Contract
owners. Detail about investment management fees and other underlying fund
expenses are provided in the fee table and in the accompanying prospectuses for
the Funds and the related statements of additional information.
WITHDRAWAL CHARGE
A withdrawal charge may be made upon full or partial withdrawals. The charge
compensates Pruco Life for paying all of the expenses of selling and
distributing the Contracts, including sales commissions, printing of
prospectuses, sales administration, preparation of sales literature, and other
promotional activities. No withdrawal charge is imposed whenever earnings are
withdrawn.
Withdrawals are deemed to be made first from purchase payments and then from
earnings. A portion of the purchase payments to be withdrawn in any Contract
year may be withdrawn without the imposition of any charge. That amount is
referred to as the "charge-free amount". It is equal to 10% of the total of all
purchase payments less all withdrawals of purchase payments previously made plus
any charge-free amount still available from the immediately preceding Contract
year. An example of how the charge-free amount and the withdrawal charge are
determined is given on page C1 as part of the example of how the Market-Value
Adjustment works.
If your withdrawal exceeds the charge-free amount and it is made within the
first seven Contract years, a percentage charge will be applied. The following
table sets forth the rates that apply:
- --------------------------------------------------------------------------------
THE WITHDRAWAL CHARGE WILL
BE EQUAL TO THE
FOR WITHDRAWALS DURING FOLLOWING PERCENTAGE OF
THE CONTRACT YEAR INDICATED THE AMOUNT WITHDRAWN*
- --------------------------------------------------------------------------------
FIRST CONTRACT YEAR 7%
SECOND CONTRACT YEAR 6%
THIRD CONTRACT YEAR 5%
FOURTH CONTRACT YEAR 4%
FIFTH CONTRACT YEAR 3%
SIXTH CONTRACT YEAR 2%
SEVENTH CONTRACT YEAR 1%
EIGHTH AND SUBSEQUENT CONTRACT YEARS NO CHARGE
- --------------------------------------------------------------------------------
* SUBJECT TO CHARGE-FREE AMOUNT DESCRIBED ABOVE.
- --------------------------------------------------------------------------------
No withdrawal charge is made upon a withdrawal used to effect an annuity under
the Life Annuity with 120 Payments Certain option. See EFFECTING AN ANNUITY,
page 25. Also, at our discretion, we may reduce or waive withdrawal charges for
certain classes of contracts (e.g., contracts purchased by Prudential employees
or exchanged from existing contracts).
Contracts issued to annuitants aged 84 or older are subject to a reduced
withdrawal charge. The withdrawal charge will never be greater than permitted by
applicable law or regulation.
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To the extent that the contingent deferred sales charge is insufficient to
recover all distribution expenses associated with the Contracts, the deficiency
will be met from Pruco Life's surplus which is, in part, derived from the
charges for the assumption of mortality and expense risks and from mortality
gains from Contracts under which annuity payments are being made.
TRANSACTION CHARGE
There is a charge of $25 for each transfer you make after the first 12
(excluding DCA and Auto-Rebalancing transfers) in a Contract year. The charge is
taken pro-rata from the investment options from which the transfer is made. Any
affected MVA option cells will not undergo a Market-Value Adjustment as a result
of this processing.
CRITICAL CARE ACCESS
All or part of any withdrawal and annual administrative charges associated with
a full or partial withdrawal, or any withdrawal charge due on the annuity date,
will be waived following the receipt of due proof that the annuitant or (if
applicable) last surviving co-annuitant has been confined to an eligible nursing
home or hospital for a period of at least 3 months or a physician has certified
that the annuitant or co-annuitant has 6 months or less to live.
FEDERAL TAX STATUS
The following discussion is based on current law and interpretations which may
change. The discussion is general in nature. It is not intended as tax advice.
Nor does it consider any applicable state or other tax laws. A qualified tax
adviser should be consulted for complete information and advice. The following
rules do not generally apply to annuity contracts held by or for non-natural
persons (e.g., corporations) or to contracts held under tax-favored retirement
plans. Where a Contract is held by a non-natural person, unless the Contract
owner is a nominee or agent for a natural person (or in other limited
circumstances), the Contract will generally not be treated as an annuity for tax
purposes.
DIVERSIFICATION AND INVESTOR CONTROL
Section 817(h) of the Internal Revenue Code (the "Code") provides that the
underlying investments for a variable annuity must satisfy certain
diversification requirements. For further detail on diversification
requirements, see DIVIDENDS, DISTRIBUTIONS, AND TAXES in the accompanying
prospectus for the Prudential Series Fund.
IRS regulations issued to date do not provide guidance concerning the extent to
which Contract owners may direct their investments to particular subaccounts of
a separate account without causing the Contract owners instead of Pruco Life to
be considered the owners of the underlying assets. Such guidance will be
included in regulations or revenue rulings under Section 817(d) relating to the
definition of a variable contract. The ownership rights under the Contract are
similar to, but different in certain respects from, those addressed by the
Internal Revenue Service in Rulings in which it was determined that Contract
owners were not owners of separate account assets. For example, a Contract owner
has the choice of more Funds, including Funds with similar broad investment
strategies and different investment managers, and may be able to reallocate
amounts between subaccounts more frequently than in such rulings. While Pruco
Life believes it will be considered the owner of the Account assets, these
differences could result in a Contract owner being considered the owner of the
Account assets. Because of this uncertainty, Pruco Life reserves the right to
make such changes as it deems necessary to assure that the Contract qualifies as
an annuity for tax purposes. Any such changes will apply uniformly to affected
Contract owners and will be made with such notice to affected Contract owners as
is feasible under the circumstances.
TAXES PAYABLE BY CONTRACT OWNERS
Under current law, Pruco Life believes that the Contract will be treated as an
annuity for federal income tax purposes and that the issuing insurance company,
Pruco Life, and not the Contract owner, will be treated as the owner of the
underlying investments for the Contract. Accordingly, generally no tax should be
payable by any Contract owner as a result of any increase in the value of the
Contract until money is received by him or her. It is important, however, to
consider how amounts that are received will be taxed.
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The Code provides generally that amounts withdrawn by a Contract owner from his
or her Contract, before annuity payments begin, will be treated for tax purposes
as being first withdrawals of investment income, rather than withdrawals of
purchase payments, until all investment income has been withdrawn.
To the extent assignment is authorized by the Contract, the assignment or pledge
of (or agreement to assign or pledge) any portion of the value of the Contract
for a loan will be treated as a withdrawal subject to these rules. Amounts
withdrawn before annuity payments begin which represent a distribution of
investment income will be taxable as ordinary income and may be subject to a
penalty tax. Amounts which represent a withdrawal of purchase payments will not
be taxable as ordinary income or subject to a penalty tax. Moreover, all annuity
contracts issued by the same company (and affiliates) to the same Contract owner
during any calendar year shall be treated as one annuity contract for purposes
of determining whether an amount is subject to tax under these rules.
Different tax rules apply to your receipt of annuity payments. For Contracts
other than individual retirement annuities, a portion of each annuity payment
you receive under a Contract will be treated as a partial return of your
purchase payments and will not be taxable. The remaining portion of the annuity
payment will be taxed as ordinary income. Exactly how an annuity payment is
divided into taxable and non-taxable portions depends upon the period over which
annuity payments are expected to be received, which in turn is governed by the
form of annuity selected and, where a lifetime annuity is chosen, by the life
expectancy of the annuitant. Annuity payments which are received after the
annuitant recovers the full amount of the purchase payments will be fully
includible in income. Should annuity payments cease on account of the death of
the annuitant before purchase payments have been fully recovered, the annuitant,
on his or her last tax return (or in certain cases the beneficiary) is allowed
a deduction for the unrecovered amount.
The Code provides that any amount received under an annuity contract which is
included in income may be subject to a penalty tax. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include amounts: (1) made on or after the
Contract owner reaches age 59 1/2, (2) made on or after the death of the
Contract owner, (3) attributable to the Contract owner becoming disabled within
the meaning of Code section 72(m)(7), (4) in the form of level annuity payments
made not less frequently than annually under a lifetime annuity, (5) under a
qualified funding asset (defined by Code section 130(d)), or (6) under an
immediate annuity contract (within the meaning of section 72(u)(4)).
Election of the interest pay option is not considered as an annuity payment for
tax purposes. Accordingly, unless the Contract is held by an individual
retirement annuity, such election will cause investment income under the
Contract to be taxable.
Generally, the same tax rules apply to amounts received by the beneficiary as
those set forth above with respect to the Contract owner, except that the early
withdrawal penalty tax does not apply. The election of an annuity payment option
may defer taxes otherwise payable upon the receipt of a lump sum death benefit.
Certain minimum distribution requirements apply in the case where the owner
dies. See IRS REQUIRED DISTRIBUTIONS ON DEATH OF OWNER, page 21.
In addition, a transfer of the Contract to or the designation of a beneficiary
who is either 37 1/2 years younger than the Contract owner or a grandchild of
the Contract owner may have Generation Skipping Transfer tax consequences under
section 2601 of the Code.
Certain transfers of a Contract for less than full consideration, such as a
gift, will trigger tax on the investment income in the Contract. This rule does
not apply to certain transfers between spouses or incident to divorce. See
OWNERSHIP OF THE CONTRACT, page 28.
WITHHOLDING
Generally, unless you elect to the contrary, the portion of any amounts you
receive under your Contract that are attributable to investment income will be
subject to withholding to meet federal income tax obligations. The rate of
withholding on annuity payments made to you will be determined on the basis of
the withholding certificate you may file with Pruco Life. If you do not file
such a certificate, you will be treated, for purposes of determining your
withholding rate, as a married person with three exemptions. The rate of
withholding on all other payments made to you under your Contract, such as
amounts you receive upon withdrawals, will be 10%. Thus, if you fail to elect
that Pruco Life not do so, it will withhold from withdrawal by, or annuity
payment to, you the appropriate percentage of the amount of the payment that
constitutes investment income and hence is taxable. Pruco Life will provide you
with forms and instructions concerning your right to elect that no amount be
withheld from payments to you. If you elect not to have withholding made, you
are liable for payment of federal income taxes on the taxable portion of the
distribution. You may be subject to penalties under the estimated tax payment
rules if your withholding and estimated tax payments are not sufficient. If you
do not provide a social security number or other taxpayer identification number,
you will not be
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permitted to elect out of withholding. Special withholding rules apply for
nonresident aliens. Generally, there will be no withholding for taxes until you
actually receive payments under your Contract.
IMPACT OF FEDERAL INCOME TAXES
In general, if you expect to accumulate savings over a relatively long period of
time without making significant withdrawals, there should be tax advantages,
regardless of your tax bracket, in purchasing a Contract rather than, for
example, a mutual fund with a similar investment policy and approximately the
same level of expected investment results. This is because little or no income
taxes are incurred by you or by Pruco Life while you hold the Contract and it is
generally advantageous to defer the payment of income taxes, so that the
investment return is compounded without any deduction for income taxes. The
advantage may be considerably greater if you decide to liquidate your investment
in the form of monthly annuity payments after your retirement, and even more so
if your income, and your tax rate, are lower at that time than they were during
your working years.
IRS REQUIRED DISTRIBUTIONS ON DEATH OF OWNER
If the Contract owner dies before the entire interest in the Contract is
distributed, the value of the Contract must be distributed to the designated
beneficiary as described in this section so that the Contract qualifies as an
annuity under the Internal Revenue Code.
If the death occurs on or after the annuity date, the remaining portion of the
interest in the Contract must be distributed at least as rapidly as under the
method of distribution being used as of the date of death. If the death occurs
before the annuity date, the entire interest in the Contract must be distributed
within 5 years after the date of death. However, if an annuity payment option
is selected by the designated beneficiary and if annuity payments begin within 1
year of the owner's death, the value of the Contract may be distributed over the
beneficiary's life or a period not exceeding the beneficiary's life expectancy.
The owner's designated beneficiary is the person to whom ownership of the
Contract passes by reason of death, and must be a natural person. Special
additional rules apply to Contracts issued in conjunction with plans subject to
Section 457 of the Code. For Contracts purchased in connection with a tax
favored plan where the owner's spouse is the beneficiary, annuity payments need
only begin on or before April 1 of the calendar year following the calendar year
in which the owner would have attained age 70-1/2 or in some instances the
remaining interest in the Contract may be rolled over to an IRA owned by the
spouse.
If any portion of the Contract owner's interest is payable to (or for the
benefit of) the surviving spouse of the owner, the Contract may be continued
with the surviving spouse as the owner. This rule does not apply to Contracts
issued in connection with tax favored plans other than IRAs.
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TAXES ON PRUCO LIFE
The earnings of the Account are taxed as part of the operations of Pruco Life.
No charge is being made currently against the Account for company federal income
taxes. Pruco Life will review the question of a charge to the Account for
company federal income taxes periodically. Such a charge may be made in future
years for any federal income taxes that would be attributable to the Contract.
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 Contract or the Account. If there is a
material change in 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.
CONTRACTS USED IN CONNECTION WITH TAX FAVORED PLANS
The Contract may be purchased for use in connection with various retirement
arrangements entitled to favorable federal income tax treatment ("tax favored
plans"). These are individual retirement accounts and annuities ("IRAs") subject
to Section 408(a) and 408(b) of the Code, simplified employee pension plans
("SEPs") under Section 408(k) of the Code, tax deferred annuities ("TDAs") under
Section 403(b) of the Code, deferred compensation plans of state and local
governments and tax exempt organizations under Section 457 of the Code, and
pension, profit sharing and annuity plans qualified under Sections 401(a) and
403(a) of the Code. Such plans, accounts, and annuities must satisfy certain
requirements of the Code in order to be entitled to the federal income tax
benefits accorded to these plans. A discussion of these requirements is beyond
the scope of this prospectus, and it is assumed that such requirements are met
with respect to a Contract purchased for use in connection with a tax favored
plan.
In general, assuming the requirements and limitations of the Code provisions
applicable to the particular type of tax favored plan involved are satisfied,
purchase payments (other than after-tax employee payments) under the Contract
will be deductible (or not includible in income) up to certain amounts each year
and federal income tax will not be imposed on the investment income and realized
gains of the subaccounts in which the purchase payments have been invested until
a distribution is received. Persons contemplating the purchase of a Contract in
connection with a tax favored plan should consult their tax advisor before
purchasing a Contract for such purposes.
The comments which follow concerning specific tax favored plans are intended
merely to call attention to certain of their features. No attempt has been made
to discuss in full the tax ramifications involved or to offer tax advice. As
suggested above, a qualified tax advisor should be consulted for advice and
answers to any questions.
IRAs
Because the Contract's minimum initial payment of $10,000 is greater than the
maximum annual contribution permitted to be made to an IRA (generally, $2,000),
a Contract may be purchased as a Section 408(b) IRA only in connection with a
"rollover" of the proceeds of a qualified plan, TDA or IRA. The Code permits
persons who are entitled to receive certain qualifying distributions from a
qualified pension or profit-sharing plan described in section 401(a) or 403(a),
a tax-deferred section 403(b) annuity ("TDA"), or an IRA, to directly rollover
or make, within 60 days, a tax-free "rollover" of all or any part of the amount
of such distribution to an IRA which they establish. Additionally, the spouse of
a deceased employee may roll over to an IRA certain distributions received by
the spouse from a qualified pension or profit-sharing plan, TDA or IRA on
account of the employee's death. Once the Contract has been purchased, regular
IRA contributions will be accepted to the extent permitted by law. However, if
regular IRA contributions are made, the Funds in the Contract cannot be used as
a conduit IRA and may not later be placed in another plan that is qualified
under Sections 401(a), 403(a) or 403(b) of the Code.
In order to qualify as an IRA under Section 408(b) of the Code, a Contract (or
an endorsement made a part of the Contract) must contain certain additional
provisions: (1) the owner of the Contract must be the annuitant, except when a
transfer is made to a former spouse in accordance with a divorce decree as
provided in Section 408(d)(6) of the Code; (2) the rights of the owner cannot be
forfeitable; (3) the Contract may not be sold, assigned, discounted or pledged
for any purpose to any person except Pruco Life; and (4) annuity and death
benefit payments must satisfy certain minimum distribution requirements.
Contracts issued as Section 408(b) rollover IRAs will conform to such
requirements.
In general, the full amount distributed from an IRA (and not properly rolled
over to another IRA) is subject to federal income tax and to the withholding
rules described above. A 10% early distribution penalty applies to distributions
made before the Contract owner reaches age 59-1/2, subject to exceptions (1) -
(4) above (see TAXES PAYABLE BY CONTRACT OWNERS on page 19). If the owner
borrows against the IRA or engages in certain prohibited transactions, the
Contract ceases to qualify as an IRA and the full amount is deemed to be
distributed. In addition, any amount pledged as security for a loan is deemed to
be distributed. Payments generally must begin by April 1 of the year following
attainment of age 70-1/2 and are subject to certain minimum distribution
requirements.
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SEPs
Under a SEP, annual employer contributions to an IRA established by an employee
are not includible in income up to the lesser of $30,000 or 15% of the
employee's earned income (excluding the employer's contribution to the SEP). In
addition, a SEP must satisfy certain minimum participation requirements and
contributions may not discriminate in favor of highly compensated employees.
Contracts issued as Section 408(b) IRAs established under a SEP must satisfy the
requirements described above for a Section 408(b) IRA.
Certain SEP arrangements are permitted to allow employees to elect to reduce
their salaries by as much as $9,500 (in 1996) and have their employer make
contributions on their behalf to the SEP. These arrangements, called salary
reduction SEPs, are available only if the employer maintaining the SEP has 25 or
fewer employees and at least 50% of the eligible employees elect to make salary
reduction contributions. Other limitations may reduce the permissible
contribution level for highly compensated employees. New salary reduction SEPs
may not be established after 1996.
In accordance with IRS regulations, persons who purchase a Contract used as an
IRA, including one established under a SEP arrangement, are given disclosure
material prepared by Pruco Life. The material includes this prospectus, a copy
of the Contract, and a brochure containing information about eligibility,
contribution limits, tax consequences, and other particulars concerning IRAs.
The regulations require that such persons be given 7 days after making an
initial contribution in which to affirm or reverse their decision to
participate. Therefore, within 7 days after establishing the Contract, a person
may cancel his or her Contract by notifying Pruco Life in writing, and Pruco
Life will refund all of the purchase payments under the Contract or, if greater,
the amount credited under the Contract (less any bonus) computed as of the
valuation period that Pruco Life receives the notice for cancellation. This
7-day period may or may not coincide with any part of the 10-day free look
period described under SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK", page 13.
TDAs
Section 403(b) of the Code permits employers and employees of Section 501(c)(3)
tax-exempt organizations and public educational organizations to make, subject
to certain limitations, contributions to an annuity in which the employee's
rights are nonforfeitable (commonly referred to as a "tax deferred annuity").
The amounts contributed under a TDA and increments thereon are not taxable as
income until distributed as annuity income or otherwise. Generally,
contributions to a TDA may be made through a salary reduction arrangement up to
a maximum of $9,500. However, under certain special rules, the limit could be
increased as much as $3,000. In addition, the Code permits certain total
distributions from a TDA to be "rolled over" to another TDA or IRA. Certain
partial distributions from a TDA may be "rolled over" to an IRA.
An annuity contract will not qualify as a TDA, unless under such contract
distributions from salary reduction contributions and earnings thereon (other
than distributions attributable to assets held as of December 31, 1988) may be
paid only on account of attainment of age 59-1/2, severance of employment,
death, total and permanent disability and, in limited circumstances, hardship.
(Such hardship withdrawals are permitted, however, only to the extent of salary
reduction contributions and not earnings thereon.)
The Section 403(b)(11) withdrawal restrictions referred to above do not apply to
the transfer of all or part of a Contract owner's interest in his or her
Contract among the available investment options offered by Pruco Life or to the
direct
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transfer of all or part of the Contract owner's interest in the Contract to a
Section 403(b) tax-deferred annuity contract of another insurance company or to
a mutual fund custodial account under Section 403(b)(7) of the Code.
In imposing the restrictions on withdrawals as described above, Pruco Life is
relying upon a no-action letter dated November 28, 1988 from the Chief of the
Office of Insurance Products and Legal Compliance of the Securities and Exchange
Commission to the American Council of Life Insurance.
Employer contributions are subject generally to the same coverage, minimum
participation and nondiscrimination rules applicable to qualified pension and
profit-sharing plans. Distributions must satisfy minimum distribution
requirements similar to those that apply to qualified plans generally.
ELIGIBLE DEFERRED COMPENSATION PLANS OF STATE OR LOCAL GOVERNMENTS AND TAX
EXEMPT ORGANIZATIONS
A Contract may be used to fund an eligible deferred compensation plan of a state
or local government or a tax-exempt organization. The amounts contributed under
such plans and increments thereon are not taxable as income until distributed or
otherwise made available to the employee or other beneficiary. If the
requirements of Section 457 of the Code are not met, however, employees may be
required to include in gross income all or part of the contributions and
earnings thereon. The assets of deferred compensation plans are part of the
employer's general assets. Contributions generally may not exceed the lesser of
$7,500 or 33-1/3% of the employee's compensation. Distributions must begin by
April 1 of the year following attainment of age 70-1/2. However, for
governmental and church plans, distributions may be delayed until April 1 of the
calendar year following the calendar year the participant retires if that is
later. Distributions are subject to special minimum distribution rules in
addition to the minimum distribution requirements for qualified plans. Rollovers
are not permitted.
QUALIFIED PENSION AND PROFIT SHARING PLANS
A Contract may be used to fund a qualified pension or profit-sharing plan. The
plan itself must satisfy the coverage, minimum participation, nondiscrimination
and minimum distribution and all other requirements applicable generally to
qualified pension and profit-sharing plans. The Code also imposes dollar
limitations on contributions that may be made to or benefits that may be
received from a qualified pension or profit-sharing plan (including a limitation
of $9,500 (in 1996) on the amount that an employee may contribute through a
salary reduction arrangement in the case of a plan with a qualified "cash or
deferred" arrangement). For self-employed individuals who establish qualified
plans, contributions are deductible within the limits prescribed by the Code.
Annual deductible contributions cannot exceed the lesser of $30,000 or 25% of
"earned income". For this purpose "earned income" is computed after the
deduction for contributions to the plan is considered. Distributions are subject
to certain minimum distribution requirements.
MINIMUM DISTRIBUTION OPTION
A Minimum Distribution Option is available under IRAs and certain other tax
favored plans. This option enables the owner to satisfy IRS minimum distribution
requirements without having to annuitize or cash surrender the Contract.
Distributions from tax favored plans generally must begin by April 1 of the year
following attainment of age 70 1/2. The owner can select either a "calculation"
or "recalculation" method to determine the minimum distribution payout. Pruco
Life will send the owner a check for the minimum distribution amount less any
partial withdrawals made during the year and less any applicable withdrawal
charges and plus or minus any applicable market value adjustment. Pruco Life's
calculations are based on the cash value of this Contract, the calculation
method chosen and the owner's age as specified on the application. Other
calculation methods may be available for an owner/spouse combination. If the
owner has other tax favored accounts, he or she will be responsible for taking
the minimum distribution from each.
WITHHOLDING ON TAX FAVORED PLANS
Certain distributions from qualified retirement plans and 403(b) annuities will
be subject to mandatory 20% federal income tax withholding unless the
distribution is an eligible rollover distribution that is "directly" rolled over
into another qualified plan, 403(b) annuity or IRA. Unless the Contract owner
may elect to the contrary, the portion of any taxable amounts received under the
Contract will be subject to withholding to meet federal income tax obligations.
The rate of withholding on annuity payments where mandatory withholding is not
required will be determined on the basis of the withholding certificate filed by
the Contract owner with Pruco Life. For annuity payments not subject to
mandatory withholding, if no such certificate is filed, the Contract owner will
be treated, for purposes of determining the withholding rate, as a married
person with three exemptions; the rate of withholding on all other payments made
under the Contract, such as amounts received upon withdrawals, will be 10%.
Thus, if the Contract owner fails to elect that there be no withholding, Pruco
Life will withhold from every withdrawal or annuity payment the appropriate
percentage of the amount of the payment that is taxable. Pruco Life will provide
the Contract owner with forms and instructions concerning the right to elect
that no amount be withheld from payments. Recipients who elect not to have
withholding made are liable for payment of federal income taxes on the taxable
portion of the distribution. All recipients may be subject to penalties under
the estimated tax payment rules if withholding and estimated tax payments are
not sufficient. Contract owners who do not provide a social security
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number or other taxpayer identification number will not be permitted to elect
out of withholding. Generally, there will be no withholding for taxes until
payments are actually received under the Contract. Distributions to Contract
owners under an eligible deferred compensation plan subject to Section 457 of
the Code are treated as the payment of wages for federal income tax purposes and
thus are subject to the general withholding requirements. Your employer, and not
Pruco Life, is required to withhold on wage payments.
ERISA DISCLOSURE
The Employee Retirement Income Security Act of 1974 ("ERISA") prevents a
fiduciary and other "parties in interest" with respect to a pension or
profit-sharing plan from receiving any benefit from any party dealing with the
plan as a result of the sale of the Contract (other than benefits that would
otherwise be provided in the plan).
Administrative exemptions issued by the Department of Labor under ERISA permit
transactions between insurance agents and qualified pension and profit sharing
plans under Section 401(a) and 403(a) of the Code and with SEPs or IRAs. To be
able to rely on the exemptions certain information must be disclosed to the plan
fiduciary purchasing the insurance contract. The information that must be
disclosed includes the relationship between the agent and the insurer, a
description of any charges, fees, discounts, penalties or adjustments that may
be imposed in connection with the purchase, holding, exchange or termination of
the Contract, as well as the commissions received by the agent. Information
about any applicable charges, fees, discounts, penalties or adjustments may be
found under CHARGES, FEES AND DEDUCTIONS, page 17. Information about sales
representatives and commissions may be found under SALE OF THE CONTRACT AND
SALES COMMISSIONS, page 27. Additional information relevant for qualified plan
or IRA investment may be found in the Contract and accompanying documentation.
In addition to disclosure, other conditions apply to the use of the exemption.
For example, a plan fiduciary may not be a partner or employee of The Prudential
representative making the sale. The fiduciary must not be a relative of the
representative (including spouse, direct descendant, spouse of a direct
descendant, ancestor, brother, sister, spouse of a brother or sister). The
representative may not be an employee, officer, director or partner of either
the independent fiduciary or the employer establishing the plan. No relative of
the representative may: (1) control, directly or indirectly, the corporation
establishing or maintaining the plan; (2) be either a partner with a 10% or more
interest in the partnership or the sole proprietor establishing or maintaining
the plan; or (3) be an owner of a 5% or more interest in a Subchapter S
Corporation establishing or maintaining the plan. In addition, no affiliate
(including relatives) of the representative may be a trustee, administrator or a
fiduciary with written authority to acquire, manage or dispose of the assets of
the plan.
ADDITIONAL ERISA REQUIREMENTS
If your retirement arrangement is part of a plan governed by ERISA, additional
requirements such as spousal consent to distributions may be necessary. Consult
the terms of your retirement arrangement.
EFFECTING AN ANNUITY
Upon the annuity date, the cash value of the Contract will be converted into a
fixed-dollar annuity payable to the annuitant[s] named in the Contract. In
certain cases, any applicable withdrawal charge will be waived. If two
annuitants are named in the Contract, you may decide how much of the amount is
to be applied for each annuitant and under which form[s] of annuity. If the
Contract is not large enough to produce an initial monthly payment of $50, you
will be paid the cash value in a single sum. There is no minimum required
monthly payment in New Jersey.
When you choose to annuitize, all amounts held in the investment options will be
withdrawn. An amount equal to the premium tax, if any, imposed by the state in
which the Contract Owner resides is then deducted (unless deducted earlier).
Many states do not impose a premium tax. In other states the tax ranges from 1%
to 5% of the amount applied to effect an annuity. See PREMIUM TAXES, page 17.
Some local jurisdictions also impose a tax. The amount remaining is applied to
effect an annuity. This amount becomes part of Pruco Life's general account.
The amount of the monthly payments will depend upon the amount applied and the
table of rates set forth in the Contract which we guarantee will be used even if
longevity has significantly improved since the Contract date. If Pruco Life is
offering more favorable rates at that time, then those rates will be used.
The annuity will be in one of three forms listed below and other forms may be
available with our consent. All the annuity options under this Contract are
fixed annuity options. Your participation in the variable investment options
ceases when the annuity is effected. Unless we consent to a later date, an
annuity must begin no later than the
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Contract anniversary coinciding with or next following the annuitant's 90th
birthday (or the younger annuitant's if there are two annuitants named in the
Contract). We will then make payments to the annuitant on the first day of each
period determined by the form of annuity selected. Unless applicable law states
otherwise, if you have not selected an annuity option to take effect by the
annuity date, the Interest Payment Option (see below) will become effective
then. Special rules apply in the case of a Contract issued in connection with an
IRA.
ANNUITY PAYMENTS FOR A FIXED PERIOD
Payments will be to the annuitant during his or her lifetime for up to 25 years.
Payments may be in monthly, quarterly, semi-annual, or annual installments. If
the annuitant dies during the annuity certain period, unless you designate
otherwise, the beneficiary will receive a lump sum payment. The amount of the
lump sum payment is determined by discounting each remaining unpaid payment at
the interest rate used to compute the actual payments. If the payments were
based on the table of rates set forth in the Contract, the interest rate used is
3 1/2% a year.
LIFE ANNUITY WITH 120 PAYMENTS CERTAIN
Payments will be made to the annuitant monthly during his or her lifetime. If
the annuitant dies before the 120th monthly payment is due, monthly annuity
payments do not continue to the beneficiary designated by the annuitant unless
he or she so selects. Instead, the present value of the remaining unpaid
installments, up to and including the 120th monthly payment, is payable to the
beneficiary in one sum. In calculating the present value of the unpaid future
payments, we will discount each such payment at the interest rate used to
compute the amount of the actual 120 payments. If the payments were based on the
table of rates set forth in the Contract, an interest rate of 3 1/2% a year is
used. Once annuity payments have begun, an annuitant may withdraw the present
value of any of the 120 payments certain that have not been paid.
INTEREST PAYMENT OPTION
The annuitant may choose to have Pruco Life hold a designated amount to
accumulate at interest. Unless applicable law states otherwise, if no option has
been selected by the annuity date, this option will automatically become
effective. Pruco Life will pay interest at an effective rate of at least 3% a
year, and we may pay a higher rate of interest.
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT ANNUITY PURCHASE RATES
Although the Contract generally provides for sex-distinct annuity purchase rates
for life annuities, those rates are not applicable to Contracts offered in
states that have adopted regulations prohibiting sex-distinct annuity purchase
rates. Rather, blended unisex annuity purchase rates for life annuities will be
provided under all Contracts issued in those states, whether the annuitant is
male or female. Other things being equal, such unisex annuity purchase rates
will result in the same monthly annuity payments for male and female annuitants.
Special provisions may apply if the Contract is issued in connection with an
IRA. The necessary information will be provided by the plan sponsor or
administrator.
OTHER INFORMATION
MISSTATEMENT OF AGE OR SEX
If an annuitant's stated age or sex (except where unisex rates apply) or both
are incorrect in the Contract, we will change each benefit and the amount of
each annuity payment to that which the total purchase payment amounts would
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have bought for the correct age and sex. Also, we will adjust for the amount of
any overpayments we have already made.
SALE OF THE CONTRACT AND SALES COMMISSIONS
Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
The 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
1111 Durham Avenue, South Plainfield, New Jersey 07080. The Contract is sold by
registered representatives of Prusec who are also authorized by state insurance
departments to do so. The Contract may also be sold through other broker-dealers
authorized by Prusec and applicable law to do so. Registered representatives of
such other broker-dealers may be paid on a different basis than described below.
The maximum commission that will be paid to the representative is 3.5% of the
purchase payment received, and the amount paid to the broker-dealer to cover
both the individual representative's commission and other distribution expenses
will not exceed 6% of the purchase payment. In addition, trail commissions based
on the size of the Contract Fund may be paid. Such commissions will be subject
to reduction if Pruco Life issues a Contract on and after the annuitant's 84th
birthday. The representative may be required to return all of the first year
commission if the Contract is not continued through the first year.
Representatives who meet certain productivity, profitability, and persistency
standards with regard to the sale of the Contract will be eligible for
additional compensation.
Sales expenses in any year are not equal to the deduction for sales loads 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.
VOTING RIGHTS
As stated above, all of the assets held in the subaccounts of the Account are
invested in shares of the corresponding portfolios of the Funds. Pruco Life is
the legal owner of those shares and as such has the right to vote on any matter
voted on at any shareholders meetings of the Funds. However, as required by law,
Pruco Life votes the shares of the Funds at any regular and special shareholders
meetings the Funds are required to hold in accordance with voting instructions
received from Contract owners. The Funds may not hold annual shareholders
meetings when not required to do so under the laws of the state of their
incorporation or the Investment Company Act of 1940. Fund shares for which no
timely instructions from Contract owners are received, and any shares owned
directly or indirectly by Pruco Life are voted in the same proportion as shares
in the respective portfolios for which instructions are received. Should the
applicable federal securities laws or regulations, or their current
interpretation, change so as to permit Pruco Life to vote shares of the Funds in
its own right, it may elect to do so.
Generally, you may give voting instructions on matters that would be changes in
fundamental policies and any matter requiring a vote of the shareholders of the
Funds. With respect to approval of the investment advisory agreement or any
change in a portfolio's fundamental investment policy, Contract owners
participating in such portfolios will vote separately on the matter, pursuant to
the requirements of Rule 18f-2 under the Investment Company Act of 1940.
The number of Funds shares for which you 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
applicable Fund. The number of votes for which you may give Pruco Life
instructions is determined as of the record date chosen by the Board of the
applicable Fund. We furnish you with proper forms and proxies to enable you to
give these instructions. We reserve the right to modify the manner in which the
weight to be given voting instructions is calculated where such a change is
necessary to comply with current federal regulations or interpretations of those
regulations.
Pruco Life may, if required by state insurance regulations, disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the sub-classification or investment objectives of one or more
of the Funds' 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 Funds' portfolios, provided that we reasonably
disapprove such changes in accordance with applicable federal regulations. If we
do disregard voting instructions, we will advise you of that action and our
reasons for such action in the next annual or semi-annual report to Contract
owners.
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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. This may occur because of
investment policy changes, tax law changes, the unavailability of shares for
investment or at the discretion of Pruco Life. In that event, we may seek to
substitute the shares of another portfolio or of an entirely different mutual
fund. Before this can be done, the approval of the SEC, and possibly one or more
state insurance departments, will be required. You will be notified of such
substitution.
OWNERSHIP OF THE CONTRACT
The Contract owner is entitled to exercise all the rights under the Contract.
The Contract owner is usually, but not always, an annuitant. Ownership of the
Contract may, however, be transferred to another person who need not be the
person who is to receive annuity payments. Transfer of the ownership of a
Contract may involve federal income tax consequences, or may be prohibited under
certain Contracts, and you should consult with a qualified tax adviser before
attempting any such transfer. Generally, ownership of the Contract is not
assignable to a tax-qualified retirement plan or program without Pruco Life's
consent.
PERFORMANCE INFORMATION
Performance information for the subaccounts may appear in advertising and
reports to current and prospective Contract owners. Performance information is
based on historical investment experience of the Funds, adjusted to take charges
under the Contract into account, and does not indicate or represent future
performance.
Total returns are based on the overall dollar or percentage change in value of a
hypothetical investment over a stipulated period, and assume a surrender of the
Contract at the end of the period. Total return quotations reflect changes in
unit values and the deduction of applicable charges including any applicable
withdrawal charges.
A cumulative total return reflects performance over a stated period of time. An
average annual total return reflects the hypothetical annually compounded return
that would have produced the same cumulative total return if the performance had
been constant over the entire period.
The Money Market Subaccount may advertise its current and effective yield.
Current yield reflects the income generated by an investment in the subaccount
over a specified seven-day period. Effective yield is calculated in a similar
manner except that income earned is assumed to be reinvested.
Reports or advertising may include comparative performance information,
including, but not limited to: comparisons to market indices; comparisons to
other investments; performance rankings; personalized illustrations of
historical performance; and data presented by analysts or included in
publications.
See PERFORMANCE INFORMATION in the Statement of Additional Information for
recent performance information.
REPORTS TO CONTRACT OWNERS
You will be sent quarterly statements that provide certain information pertinent
to your Contract. These statements provide Contract data that apply only to each
particular Contract, including Contract values and transactions during the
period. You may request current Contract information at any time, however, we
may limit the number of such requests or impose a reasonable charge if such
requests are made too frequently.
You will also be sent an annual report for the Account and annual and
semi-annual reports for the Funds.
STATE REGULATION
Pruco Life is subject to regulation and supervision by the Department of
Insurance of the State of Arizona, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business.
Pruco Life is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business to determine solvency and compliance with local
insurance laws and regulations.
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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 audited financial statements and the financial statements from which the
Condensed Financial Information included in this prospectus have been derived,
have been examined by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein. Such financial statements have been included
herein in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing. Deloitte & Touche LLP's principal business
address is Two Hilton Court, Parsipanny, New Jersey 07054-0319.
On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Pruco Life. There have been no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of the accountant, would have caused them to make a reference
to the matter in their reports.
LITIGATION
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 The Prudential, the Company and agents appointed by The Prudential
and the Company. The Prudential has agreed to indemnify the Company for any and
all losses resulting from such litigation.
STATEMENT OF ADDITIONAL INFORMATION
The contents of the Statement of Additional Information include:
OTHER INFORMATION CONCERNING THE ACCOUNT
PRINCIPAL UNDERWRITER
DETERMINATION OF SUBACCOUNT UNIT VALUES
PERFORMANCE INFORMATION
COMPARATIVE PERFORMANCE INFORMATION
ADDITIONAL INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, relating to the offering described in this prospectus. This prospectus
does not include all of the information set forth in the registration statement.
Certain portions have been omitted pursuant to the rules and regulations of the
SEC. The omitted information may, however, be obtained from the SEC's principal
office in Washington, D.C., upon payment of a prescribed fee.
Further information, including statutory statements filed with the state
insurance departments, may also be obtained from Pruco Life's office. The
address and telephone number of Pruco Life are set forth on the cover of this
prospectus.
FINANCIAL STATEMENTS
The consolidated financial statements of Pruco Life and subsidiaries should be
distinguished from the financial statements of the Account, and should be
considered only as bearing upon the ability of Pruco Life to meet its
obligations under the Contracts.
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<TABLE>
SELECTED FINANCIAL DATA
The following selected financial data, prepared on a statutory basis except as
noted otherwise, for Pruco Life should be read in conjunction with the
CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY AND
SUBSIDIARIES and notes there to be included in this prospectus beginning on page
B-1.
<CAPTION>
** PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
GAAP ** (Statutory Basis)
BASIS ** ---------------------------------------------------------------------------
For The Six ** For The Six For the Years Ended December 31,
Months Ended ** Months Ended ------------------------------------------------------------
June 30, 1996(1) ** June 30, 1996 1995 1994 1993 1992 1991
---------------- ** ------------- -------- ---------- ---------- ---------- -----------
** ($000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues **
Premiums, annuity fund **
deposits and other **
revenue ................. $ 193,648 ** $ 432,751 $ 615,379 $ 603,864 $ 591,660 $ 541,248 $ 521,590
Net investment income..... 122,204 ** 124,937 250,386 245,977 260,939 274,037 285,565
---------- ** ---------- ---------- ---------- ---------- ---------- ----------
Total revenues.............. 315,852 ** 557,688 865,765 849,841 852,599 815,285 807,155
---------- ** ---------- ---------- ---------- ---------- ---------- ----------
Benefits and expenses **
Current and future **
benefits and claims .... 138,134 ** 402,124 512,988 559,658 534,354 478,148 501,454
Other expenses............ 74,974 ** 69,662 144,563 149,478 157,557 129,701 126,201
---------- ** ---------- ---------- ---------- ---------- ---------- ----------
Total benefits and expenses. 213,108 ** 471,786 657,551 709,136 691,911 607,849 627,655
---------- ** ---------- ---------- ---------- ---------- ---------- ----------
Income before provision in **
lieu of federal income tax **
and cumulative effect of a **
change in accounting **
principle................. 102,744 ** 85,902 208,214 140,705 160,688 207,436 179,500
Provision in lieu of **
federal income tax ....... 35,961 ** 36,513 (50,013) (87,750) (83,640) (96,578) (75,242)
---------- ** ---------- ---------- ---------- ---------- ---------- ----------
Net income before cumulative **
effect of a change in **
accounting principle ..... 66,783 ** 49,389 $ 158,201 $ 52,955 $ 77,048 $ 110,858 $ 104,258
---------- ** ---------- ---------- ---------- ---------- ---------- ----------
Cumulative effect on prior **
years (to December 31, 1990) **
of change in reserve **
basis.... -- ** -- -- -- -- -- 140,242
---------- ** ---------- ---------- ---------- ---------- ---------- ----------
Net income.................. $ 66,783 ** $ 49,389 $ 158,201 $ 52,955 $ 77,048 $ 110,858 $ 244,682
========== ** ========== ========== ========== ========== ========== ==========
Assets...................... $9,043,862 ** $8,425,341 $7,817,436 $7,090,802 $7,172,104 $6,709,958 $6,369,288
========== ** ========== ========== ========== ========== ========== ==========
</TABLE>
Prior years' financial statements have been revised to reflect a change in
presentation of Separate Account policyholder net investment income and net
realized and unrealized gains (losses). Please see Note 1J of the Notes to
Consolidated Financial Statements on page B-25.
(1) The unaudited supplemental financial information for the period ending June
30, 1996 has been prepared in accordance with Generally Accepted Accounting
Principles ("GAAP") as set forth in the Financial Accounting Standards
Board's Interpretation No. 40, "Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises."
Interpretation No. 40 changes the current practice of the Company with
respect to utilizing statutory basis financial statements for general
purposes in that it would not allow such financial statements to be
referred to as having been prepared in accordance with GAAP pronouncements,
unless specifically exempted.
30
<PAGE>
STATUTORY BASIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR PERIOD ENDING JUNE 30, 1996
Pruco Life Insurance Company consists of Pruco Life Insurance Company (Pruco
Life), Pruco Life Insurance Company of New Jersey and The Prudential Life
Insurance Company of Arizona (collectively, the Company). Pruco Life is a wholly
owned subsidiary of Prudential Insurance Company of America (Prudential), a
mutual life insurance company. The Company markets individual life insurance and
single pay deferred annuities primarily through Prudential's sales force. The
Company held over $8.4 billion in assets at June 30, 1996, $4.6 billion of which
were held in Separate Accounts under variable life insurance policies and
variable annuity contracts. The remaining assets were held in the general
account for investment primarily in bonds, short term investments and mortgage
loans.
1. RESULTS OF OPERATIONS (FOR THE SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH
THE SIX MONTHS ENDED JUNE 30, 1995.)
Net income for the six month period ended June 30, 1996 was $49.4 million. This
represents a $19.6 million decrease over the same period in 1995.
Premiums and annuity considerations increased from $274 million at June 30, 1995
to $423 million for the same period in 1996. This increase is primarily
attributable to the introduction of the Discovery Preferred Product in November
1995.
Net investment income slightly declined from $125.7 million for the six month
period ended June 30, 1995 to $124.9 million for the same period ending June 30,
1996. Realized capital gains increased to $1.6 million for the six months ended
June 30, 1996 from a realized loss of $1.2 million for the same period in 1995.
This is the result of a significant sale of mortgage backed securities during
the second quarter of 1996.
Current and future policy benefits increased $149.9 million from $252.2 million
for the six month period ended June 30, 1995 to $402.1 million for the same
period in 1996. The change is a result of an increase of $129.0 million in net
transfers to Separate Accounts, $125.0 million increase in aggregate reserves,
offset by a decrease of $112.1 million in benefits and other withdrawals. The
increase in net transfers to Separate Accounts is predominantly due to the new
sales of Discovery Preferred. The increase in aggregate reserves is attributable
to the decline in General Accounts withdrawals in 1996. There are several items
contributing to the decrease in benefits and other withdrawals. In 1995,
approximately 40% of the General Account funds of Discovery Annuity and
Discovery Annuity Plus were surrendered. In addition, the interest rate
environment influenced contractholders to surrender their contracts in favor of
new fixed rate investment products. Finally, in 1995 certain General Accounts
funds outside of the surrender charge period were targeted for "rollover" into a
variable annuity. Such funds were not targeted in this year's campaign.
Total expenses for the six month period ended June 30, 1996 decreased $2.0
million over the same period in 1995. The decrease was attributable to a $5.1
million decrease in general and administrative expenses offset by a $3.0 million
increase in commission expenses. The increase in commission expenses is due to
commissions being paid for the sales of Discovery Preferred.
2. LIQUIDITY
For an insurance company, cash needs, for the purpose of paying current
benefits, making policy loans, and paying expenses are met primarily from
premiums and investment income. Benefit expenses incurred were $275.4 million
and $442.5 million for the six months ended June 30, 1996 and June 30, 1995
respectively. Cash flows are anticipated to be ample to meet the Company's
liquidity needs for the foreseeable future.
3. INVESTMENTS
The Company maintains a well diversified portfolio consisting of fixed as well
as equity investments. Of the Company's total assets of approximately $8.4
billion as of June 30, 1996, 55.1% was invested in Separate Account assets,
31.0% in fixed maturities, 4.0% in short term investments, .7% in mortgage loans
and the remaining 9.2% in other assets.
Fixed Maturities. As of June 30, 1996 and December 31, 1995, the Company's
investments in fixed maturities, which are primarily carried at statement value,
were $2.6 billion and $2.5 billion, respectively. Included in fixed maturities
are securities that are classified by the National Association of Insurance
Commissioners (NAIC) as being in the lowest three rating categories. The lowest
three NAIC categories represent, for the most part, high-yield securities. These
approximated 1.0% and 1.0% of the Company's assets at June 30, 1996 and December
31, 1995, respectively.
Mortgage Loans. As of June 30, 1996 and December 31, 1995, the Company's
investments in mortgage loans were $62.2 million and $64.4 million,
respectively. Mortgage loans are carried at the lower of unpaid principal
balance or fair value. The decrease in mortgage loans is primarily a result of a
$1.8 million loan payment. Currently, the Company has two loans in the amount of
$8.4 million in the process of foreclosure and two loans with restructured terms
in the amount of $6.9 million.
31
<PAGE>
GAAP BASIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR PERIOD ENDING JUNE 30, 1996(1)
Pruco Life Insurance Company consists of Pruco Life Insurance Company (Pruco
Life), Pruco Life Insurance Company of New Jersey and The Prudential Life
Insurance Company of Arizona (collectively, the Company). Pruco Life is a wholly
owned subsidiary of Prudential Insurance Company of America (Prudential), a
mutual life insurance company. The Company markets individual life insurance and
single pay deferred annuities primarily through Prudential's sales force. The
Company held over $9.0 billion in assets at June 30, 1996, $4.6 billion of which
were held in Separate Accounts under variable life insurance policies and
variable annuity contracts. The remaining assets were held in the general
account for investment primarily in bonds, short term investments and mortgage
loans.
1. Results of Operations (for the six months ended June 30, 1996
compared with the six months ended June 30, 1995.)
Net income for the six month period ended June 30, 1996 was $66.8 million. This
represents an $8.4 million decrease over the same period in 1995.
Policy Fee Income primarily consists of amounts assessed during the period
against contractholders' account balances for mortality, policy administration
and surrender charges. Policy Fee Income increased $2.3 million from $154.3
million for the six months ended June 30, 1995 to $156.6 million for the same
period in 1996. This is primarily attributable to the introduction of the
Discovery Preferred Product in November 1995.
Net investment income slightly declined from $124.4 million for the six month
period ended June 30, 1995 to $122.2 million for the same period ending June 30,
1996. Realized capital gains increased to $4.9 million for the six months ended
June 30, 1996 from a realized gain of $0.4 million for the same period in 1995.
This is the result of a significant sale of mortgage backed securities during
the second quarter of 1996.
Policyholders' benefits decreased $3.5 million for the six months ended June 30,
1996, from the same period in 1995. This is primarily due to a decline in the
level of reserves held for Minimum Death Benefit guarantees.
Total expenses for the six month period ended June 30, 1996 increased $6.3
million over the same period in 1995. The increase was attributable to general
and administrative expenses.
2. Liquidity
For an insurance company, cash needs, for the purpose of paying current
benefits, making policy loans, and paying expenses are met primarily from
premiums and investment income. Benefit expenses incurred were $46.8 million and
$41.4 million for the six months ended June 30, 1996 and June 30, 1995
respectively. Cash flows are anticipated to be ample to meet the Company's
liquidity needs for the foreseeable future.
3. Investments
The Company maintains a well diversified portfolio consisting of fixed as well
as equity investments. Of the Company's total assets of approximately $9.0
billion as of June 30, 1996, 51.2% was invested in Separate Account assets,
29.0% in fixed maturities, 3.8% in short term investments, .7% in mortgage loans
and the remaining 15.3% in other assets.
Fixed Maturities. As of June 30, 1996 and December 31, 1995, the Company's
investments in fixed maturities, which are primarily carried at market value,
were $2.6 billion and $2.5 billion, respectively. Included in fixed maturities
are securities that are classified by the National Association of Insurance
Commissioners (NAIC) as being in the lowest three rating categories. The lowest
three NAIC categories represent, for the most part, high-yield securities. These
approximated 1.0% and 1.0% of the Company's assets at June 30, 1996 and December
31, 1995, respectively.
Mortgage Loans. As of June 30, 1996 and December 31, 1995, the Company's
investments in mortgage loans were $62.2 million and $64.4 million,
respectively. Mortgage loans are carried at the lower of unpaid principal
balance or fair value. The decrease in mortgage loans is primarily a result of a
$1.8 million loan payment. Currently, the Company has two loans in the amount of
$8.4 million in the process of foreclosure and two loans with restructured terms
in the amount of $6.9 million.
(1) The unaudited supplemental financial information for the periods ending
June 30, 1996 and 1995 and December 31, 1995 have been prepared in
accordance with Generally Accepted Accounting Principles ("GAAP") as set
forth in the Financial Accounting Standards Board's Interpretation No. 40,
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises." Interpretation No. 40 changes the current
practice of the Company with respect to utilizing statutory basis financial
statements for general purposes in that it would not allow such financial
statements to be referred to as having been prepared in accordance with
GAAP pronouncements, unless specifically exempted.
32
<PAGE>
STATUTORY BASIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Pruco Life Insurance Company consists of Pruco Life Insurance Company, Pruco
Life Insurance Company of New Jersey and The Prudential Life Insurance Company
of Arizona (collectively, the Company). The Company markets individual life
insurance and single pay deferred annuities primarily through the Prudential's
sales force. The Company held $7.8 billion in assets at December 31, 1995, $4.3
billion of which were held in Separate Accounts under variable life insurance
policies and variable annuity contracts. The remaining assets were held in the
general account for investment primarily in bonds, short-term investments and
mortgage loans.
Because of the large number of stock and mutual life insurance companies and
other entities engaged in marketing insurance products, the Company is engaged
in a business that is highly competitive. During the past several years, the
insurance industry has suffered setbacks both financially and in public
relations. The Company, however, remains sound.
1. RESULTS OF OPERATIONS
(a) 1995 versus 1994
Net income for 1995 was $158 million, representing a $105 million increase from
the same period in 1994.
Premiums and annuity considerations decreased $42 million in 1995, from $612
million for the year ended December 31, 1994, to $570 million for the same
period in 1995. This decrease is primarily due to the decline in first year
premiums for certain life insurance products.
Net investment income increased $4 million for the twelve months ended December
31, 1995, from the same period in 1994. This is primarily due to an increase in
income generated by policy loans.
The Company had net realized investment gains of $4 million during 1995 compared
to investment losses of $21 million during 1994. This increase is due to our
newly structured portfolio aligned more closely with the company's liability
duration and reduced the portfolio's interest rate risk. Following statutory
Interest Maintenance Reserve (IMR) guidelines, net realized investment gains of
$9 million were deferred for the period ended December 31, 1995. In comparison,
$20 million of net realized investment losses were deferred for the period
ending December 31, 1994. Amortized into net investment income were $4 million
and $5 million of IMR for the twelve month period ended December 31, 1995 and
1994, respectively.
Other income increased $28 million for the year ended December 31, 1995 from the
year ended December 31,1994. This increase was partially due to a special
provision for non-guaranteed policyholder credits. In addition, the company
share of separate account improved from a loss of $4 million for the year ended
December 31, 1994 to a gain of $7 million for the same period in 1995.
Current and future benefits and claims decreased $47 million for the twelve
months ended December 31, 1995, from the same period in 1994. This was driven by
the decline in premiums during 1995, which reduces the level of reserves needed
to be held.
Total expenses for the year ended December 31, 1995 decreased by $5 million from
the same period in 1994. This is primarily due to a decrease in commission
expenses of $4 million, which correlates with the decrease in sales.
Provision in lieu of federal income taxes decreased $38 million for the year
ended December 31, 1995, as compared to December 31, 1994. Although operating
income for 1995 was higher than the previous year, provision in lieu of federal
income taxes includes a benefit to federal income taxes applicable to prior
years.
(b) 1994 versus 1993
Net income for 1994 was $53 million, representing a $24 million decrease from
the same period in 1993.
Premiums and annuity considerations increased $48 million in 1994, from $564
million for the year ended December 31, 1993, to $612 million for the same
period in 1994. An increase in unscheduled premium
33
<PAGE>
payments on two individual life insurance products together with an increase in
renewal premiums, driven by these two products, account for this increase.
Net investment income decreased $15 million for the twelve months ended December
31, 1994, from the same period in 1993. Reduced yields on the Company's fixed
rate investment portfolio lead to reduced net investment income. In addition,
net cash outflows to meet policyholder obligations resulted in a decrease in
invested assets which, in turn, contributed to the lower investment income.
The Company had net realized investment losses of $21 million during 1994
compared to investment gains of $9 million during 1993. Sales of Corporate and
Mortgage-Backed Securities during the twelve months of 1994 generated realized
losses attributable to the increase in interest rates during this period.
However, the expectation is that the newly structured portfolio will align more
closely with the company's liability duration and reduce the portfolio's
interest rate risk. Following statutory Interest Maintenance Reserve (IMR)
guidelines, net realized investment losses of $20 million were deferred for the
period ended December 31, 1994. In comparison, $19 million of net realized
investment gains were deferred for the period ended December 31, 1993. Amortized
into net investment income were $5 million and $7 million of IMR for the twelve
month period ended December 31, 1994, and 1993, respectively.
Current and future benefits and claims increased $25 million for the twelve
months ended December 31, 1994, from the same period in 1993. An increase in
benefits paid during 1994 as compared to 1993 combined with high surrender
benefits, which can be attributed to contract maturities of annuity products as
the Company's inforce ages, was more than offset by an increase in reserves
resulting from the 1994 increase in premiums and annuity considerations.
Total expenses for the year ended December 31, 1994 decreased by $8 million from
the same period in 1993. General, administrative, and other expenses for the
year ended December 31, 1994, decreased $9.8 million due to the decrease in
allocation of costs from The Prudential. Allocations are primarily based on
average compensation over a period of recent years and inforce. The average
compensation and inforce amounts used in 1994 decreased from 1993 by 48% and 5%,
respectively. This can be attributable to a decline in the sales of certain life
insurance products between periods of allocation. Offsetting this decrease is an
increase in commission expense of $1.8 million from the same period in 1993,
which is consistent with the increase in first year premiums.
Provision in lieu of federal income taxes increased $4 million for the year
ended December 31, 1994, as compared to December 31, 1993. Although operating
income for 1994 was lower than the previous year, provision in lieu of federal
income taxes increased due to federal income taxes applicable to prior years.
2. LIQUIDITY
For an insurance company, cash needs, for the purpose of paying current
benefits, making policy loans, and paying expenses, are met primarily from
premiums and investment income. Benefit expenses incurred in 1995, 1994 and 1993
were respectively, $684 million, $547 million and $584 million. Cash flows are
anticipated to be ample to meet the Company's liquidity needs for the
foreseeable future.
3. INVESTMENTS
The Company maintains a well diversified portfolio consisting of fixed as well
as equity investments. Of the Company's total assets of $7.8 billion as of
December 31, 1995, 32.12% was invested in fixed maturities, 0.05% in equity
securities, 2.92% in short-term investments, 0.82% in mortgage loans, 0.05% in
real estate, 54.82% in separate account assets and the remaining 9.22% in other
assets.
Fixed Maturities. As of December 31, 1995 and 1994, the Company's investments in
fixed maturities, which are primarily carried at amortized cost, were $2.5
billion and $2.6 billion, respectively. Included in fixed maturities are
securities classified by the National Association of Insurance Commissioners
(NAIC) as being in the lowest three rating categories. The lowest three NAIC
categories represent, for the most part, high-yield securities. These
approximate 1.0% of the Company's assets at December 31, 1995 and 1.5% at
December 31, 1994.
34
<PAGE>
Mortgage Loans. As of December 31, 1995 and 1994, the Company's investments in
mortgage loans were $64 million and $72 million, respectively. Mortgage loans
are carried at the lower of unpaid principal balance or fair value of the
underlying property. The decrease in mortgage loans is due to the payment of one
loan totaling $6.0 million. As of December 31, 1995, the Company has two loans
in the amount of $8.4 million in the process of foreclosure and two loans with
restructured terms in the amount of $6.9 million.
Real Estate. As of December 31, 1995 and 1994, the Company's investment in real
estate was $4 million and $7 million, respectively. Real estate is carried at
the lower of cost or fair value less disposition costs. The Company sold one
property during the first quarter of 1995.
35
<PAGE>
DIRECTORS AND OFFICERS
The directors and major officers of Pruco Life, listed with their principal
occupations during the past 5 years, are shown below.
DIRECTORS OF PRUCO LIFE
WILLIAM M. BETHKE, Director -- Chairman and Director, Prudential Investment
Advisory Company, Ltd. since 1988; President, Prudential Life Insurance
Company, Ltd. since 1987. Age 49.
IRA J. KLEINMAN, Director. -- Chief Marketing and Product Development Officer,
Prudential Individual Insurance Group since 1995; 1993 to 1995: President,
Prudential Select; Prior to 1993: Senior Vice President of The Prudential.
Age 49.
MENDEL MELZER, Director. -- Chief Financial Officer of the Money Management
Group of The Prudential since 1995; 1993 to 1995: Senior Vice President and
Chief Financial Officer of Prudential Preferred Financial Services; Prior to
1993: Managing Director, The Prudential Investment Corporation. Age 35.
ESTHER H. MILNES, President and Director. -- Vice President and Actuary,
Prudential Individual Insurance Group since 1996; 1993 to 1996: Senior Vice
President and Chief Actuary, Prudential Insurance and Financial Services; Prior
to 1993: Vice President and Associate Actuary of The Prudential. Age 45.
I. EDWARD PRICE, Vice Chairman and Director. -- Senior Vice President and
Actuary, Prudential Individual Insurance Group since 1995; 1994 to 1995: Chief
Executive Officer, Prudential International Insurance; 1993 to 1994: President,
Prudential International Insurance; Prior to 1993: Senior Vice President and
Company Actuary of The Prudential. Age 53.
KIYOFUMI SAKAGUCHI, Director. -- President, Prudential International Insurance
since 1995; Chairman and Chief Executive Officer, The Prudential Life Insurance
Co., Ltd,; 1992-1994: President and Chief Executive Officer, Asia Pacific
Region-Prudential International Insurance; 1987-1994: President, The Prudential
Life Insurance Co., Ltd. Age 53.
WILLIAM F. YELVERTON, Chariman of the Board and Director. -- Chief Executive
Officer, Prudential Individual Insurance Group since 1995; Prior to 1995: Chief
Executive Officer, New York Life Worldwide. Age 54.
OFFICERS WHO ARE NOT DIRECTORS
BEVERLY R. BARNEY, Senior Vice President. -- Vice President and Re-Engineering
Officer, Prudential Individual Insurance Group since 1995; 1993 to 1995: Senior
Vice President and Associate Actuary, Prudential Direct; Prior to 1993: Senior
Vice President and Actuary of Pruco Life. Age 48.
SUSAN L. BLOUNT, Secretary. -- Vice President and Secretary of The Prudential
since 1995; Prior to 1995: Assistant General Counsel for Prudential Residential
Services Company. Age 38.
C. EDWARD CHAPLIN, Treasurer. -- Vice President and Treasurer of The Prudential
since 1995; 1993 to 1995: Managing Director and Assistant Treasurer of The
Prudential; 1992 to 1993: Vice President and Assistant Treasurer, Banking and
Cash Management for The Prudential; Prior to 1992: Regional Vice President of
Prudential Mortgage Capital Company. Age 39.
CLIFFORD E. KIRSCH, Chief Legal Officer. -- Chief Counsel, Variable Products,
Law Department of The Prudential since 1995; 1994 to 1995: Associate General
Counsel with Paine Webber; Prior to 1994: Assistant Director in the Division of
Investment Management with the Securities and Exchange Commission. Age 36.
SHIRLEY SHAO, Senior Vice President and Chief Actuary. -- Vice President and
Assistant Actuary, The Prudential and Executive Vice President and Chief
Financial Officer, Prudential of Taiwan since 1989. Age 41.
FRANK MARINO, Senior Vice President. -- Vice President, Policyholder Relations
Department, Prudential Individual Insurance Group since 1996; Prior to 1996:
Senior Vice President, Prudential Mutual Fund Services. Age 51.
MICHAEL R. SHAPIRO, Senior Vice President. -- Vice President, Marketing and
Product Development, Prudential Individual Insurance Group since 1996; Prior to
1996: Senior Vice President, Prudential Select Brokerage. Age 48.
LINDA DOUGHERTY, Vice President, Comptroller and Chief Accounting Officer. --
Vice President Accounting, The Prudential since 1988. Age 47.
The business address of all directors and officers of Pruco Life is 213
Washington Street, Newark, New Jersey 07102-2992.
36
<PAGE>
EXECUTIVE COMPENSATION
Executive Officers of Pruco Life may also serve one or more affiliated companies
of Pruco Life. Allocations have been made as to each individual's time devoted
to his duties as an executive officer of Pruco Life and its subsidiaries. The
following table shows the cash compensation paid, based on these allocations, to
the executive officers of Pruco Life as a group for services rendered in all
capacities in Pruco Life and its subsidiaries during 1995. Directors of Pruco
Life who are also employees of The Prudential do not receive compensation in
addition to their compensation as employees of The Prudential.
- --------------------------------------------------------------------------------
NAME & PRINCIPAL POSITION Year Allocated Cash
Compensation ($)
- --------------------------------------------------------------------------------
ESTHER H. MILNES 1995 $17,879
PRESIDENT 1994 $14,250
1993 $9,846
BEVERLY R. BARNEY 1995 $9,771
SENIOR VICE PRESIDENT 1994 $ 0
1993 $126,142
HELEN M. GALT **1995 $-------
PRESIDENT **1994 $-------
**1993 $13,382
- --------------------------------------------------------------------------------
** RESIGNED POSITION AS OF JULY, 1993.
- --------------------------------------------------------------------------------
37
<PAGE>
FINANCIAL STATEMENTS OF THE DISCOVERY SELECT
VARIABLE ANNUITY SUBACCOUNTS OF THE
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED HIGH YIELD EQUITY
MARKET BOND BOND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 90,123 $ 19,352 $ 20,274 $ 87,295
Receivable from Related Separate Account........ 54,286 0 0 0
-------------- -------------- -------------- --------------
Total Assets.................................. $ 144,409 $ 19,352 $ 20,274 $ 87,295
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET ASSETS, REPRESENTING:
Equity of Contract owners....................... $ 144,409 $ 9,105 $ 9,191 $ 65,762
Equity of Pruco Life Insurance Company.......... 0 10,247 11,083 21,533
-------------- -------------- -------------- --------------
$ 144,409 $ 19,352 $ 20,274 $ 87,295
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the period ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED HIGH YIELD EQUITY
MARKET BOND BOND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
11/22/95* 11/22/95* 11/22/95* 11/22/95*
TO TO TO TO
12/31/95 12/31/95 12/31/95 12/31/95
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 123 $ 434 $ 1,032 $ 259
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME............................. 123 434 1,032 259
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 0 23 0 431
Net unrealized gain (loss) on investments....... 0 (104) (758) (395)
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 0 (81) (758) 36
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 123 $ 353 $ 274 $ 295
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
*Commencement of Business
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A5 AND A6.
A1
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL
EQUITY JENNISON GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2] $ 222,527 $ 64,759 $ 23,072
Receivable from Related Separate Account 31,616 6,365 0
-------------- -------------- --------------
Total Assets $ 254,143 $ 71,124 $ 23,072
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS, REPRESENTING:
Equity of Contract owners $ 254,143 $ 71,124 $ 19,564
Equity of Pruco Life Insurance Company 0 0 3,508
-------------- -------------- --------------
$ 254,143 $ 71,124 $ 23,072
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL
EQUITY JENNISON GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO
11/22/95* 11/22/95* 11/22/95*
TO TO TO
12/31/95 12/31/95 12/31/95
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received $ 142 $ 0 $ 138
-------------- -------------- --------------
NET INVESTMENT INCOME 142 0 138
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received 337 0 193
Net unrealized gain (loss) on investments 3,048 759 (259)
-------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS 3,385 759 (66)
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 3,527 $ 759 $ 72
-------------- -------------- --------------
-------------- -------------- --------------
*Commencement of Business
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A5 AND A6.
A2
<PAGE>
FINANCIAL STATEMENTS OF THE DISCOVERY SELECT
VARIABLE ANNUITY SUBACCOUNTS OF THE
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the period ended December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED HIGH YIELD EQUITY PRUDENTIAL
MARKET BOND BOND INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- -------------- --------------
11/22/95* 11/22/95* 11/22/95* 11/22/95* 11/22/95*
TO TO TO TO TO
12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............. $ 123 $ 434 $ 1,032 $ 259 $ 142
Capital gains distributions
received........................ 0 23 0 431 337
Net unrealized gain (loss) on
investments..................... 0 (104) (758) (395) 3,048
-------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS......... 123 353 274 295 3,527
-------------- -------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS..... 144,295 8,998 9,090 65,753 253,239
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS......................... (9) 10,001 10,910 21,247 (2,623)
-------------- -------------- -------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS........ 144,409 19,352 20,274 87,295 254,143
NET ASSETS:
Beginning of Period............... 0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
End of Period..................... $ 144,409 $ 19,352 $ 20,274 $ 87,295 $ 254,143
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
*Commencement of Business
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A5 AND A6.
A3
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------
PRUDENTIAL PRUDENTIAL
JENNISON GLOBAL
PORTFOLIO PORTFOLIO
-------------- --------------
11/22/95* 11/22/95*
TO TO
12/31/95 12/31/95
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 0 $ 138
Capital gains distributions
received 0 193
Net unrealized gain (loss) on
investments 759 (259)
-------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 759 72
-------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 70,817 19,677
-------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS TRANSFERS (452) 3,323
-------------- --------------
TOTAL INCREASE IN NET ASSETS 71,124 23,072
NET ASSETS:
Beginning of Period 0 0
-------------- --------------
End of Period $ 71,124 $ 23,072
-------------- --------------
-------------- --------------
*Commencement of Business
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A5 AND A6.
A4
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
OF THE DISCOVERY SELECT VARIABLE ANNUITY SUBACCOUNTS OF
THE PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
FOR THE PERIOD ENDED DECEMBER 31, 1995
NOTE 1: GENERAL
Pruco Life Flexible Premium Variable Annuity Account (the "Account") was
established on June 16, 1995 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. Currently
only Pruco Life's Discovery Preferred Contracts invest in the Account. Pruco
Life's Discovery Select Contracts will also invest in the Account once the
product becomes available to the Contract owner.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. At December 31, 1995, there were eleven subaccounts
within the Account, each of which invested only in a corresponding portfolio of
The Prudential Series Fund, Inc. (the "Prudential Series Fund"). The Prudential
Series Fund is a diversified open-ended management investment company, and is
managed by Prudential. On May 1, 1995, "The Prudential Stock Index Portfolio", a
twelfth subaccount, was added to the Account. Discovery Select will invest in
the seven Prudential Series Fund subaccounts shown in Note 2, The Prudential
Stock Index Portfolio, as well as eleven other non-Prudential administered
variable subaccounts.
NOTE 2: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share for each portfolio of the Prudential Series Fund
that is available under Discovery Select Contracts, the number of shares of each
portfolio held by the subaccounts of the Account that are available under
Discovery Select Contracts, and the aggregate cost of investments in such shares
at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED HIGH YIELD EQUITY
PORTFOLIO MARKET BOND BOND INCOME
INFORMATION PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Number of shares: 9,012 1,711 2,599 5,365
Net asset value per share: $ 10.0000 $ 11.3131 $ 7.8004 $ 16.2709
Cost: $ 90,123 $ 19,456 $ 21,032 $ 87,690
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIOS (CONTINUED)
-------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL
PORTFOLIO EQUITY JENNISON GLOBAL
INFORMATION PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Number of shares: 8,679 5,161 1,485
Net asset value per share: $ 25.6399 $ 12.5468 $ 15.5332
Cost: $ 219,479 $ 64,000 $ 23,331
</TABLE>
NOTE 3: CHARGES AND EXPENSES
A. Mortality Risk and Expense Charges
The mortality risk and expense risk charges at an effective annual rate of
1.25% are applied daily against the net assets representing equity of
Contract owners held in each subaccount.
B. Administrative Charge
The administrative charge at an effective annual rate of .15% is applied
against the net assets representing equity of Contract owners held in each
subaccount.
A5
<PAGE>
Pruco Life had determined not to assess the Mortality and Expense Risk
Charge and Administrative Charge until after December 31, 1995. Pruco Life
began assessing these charges as of January 22, 1996. The Mortality and
Expense Risk Charge and Administrative Charge are not assessed against
amounts allocated to the interest-rate investment options.
C. Withdrawal Charge
A withdrawal charge is imposed upon the withdrawal of funds from certain
variable annuity contracts to compensate Pruco Life for sales and other
marketing expenses. The amount of any withdrawal charge will depend on the
amount withdrawn and the number of years that have elapsed since the
Contract date. No withdrawal charge will be imposed after the eighth
Contract Year or upon a withdrawal used to effect an annuity under the Life
Annuity with 120 Payments Certain option.
NOTE 4: TAXES
The operations of the subaccounts form a part of, and are taxed with, the
operations of Pruco Life. Under the Internal Revenue Code, all ordinary income
and capital gains allocated to the Contract owners are not taxed to Pruco Life.
As a result, the net asset values of the subaccounts are not affected by federal
income taxes on distributions received by the subaccounts.
NOTE 5: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The increase (decrease) in net assets resulting from surplus transfers
represents the net contributions (withdrawals) of Pruco Life to the Account.
A6
<PAGE>
FINANCIAL STATEMENTS OF THE DISCOVERY SELECT
VARIABLE ANNUITY SUBACCOUNTS OF THE
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
STATEMENTS OF NET ASSETS (UNAUDITED)
June 30, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED HIGH YIELD STOCK
MARKET BOND BOND INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO*
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2]........ $ 13,011,730 $ 9,000,065 $ 6,134,094 $ 1,254,608
-------------- -------------- -------------- --------------
Total Assets.................................. $ 13,011,730 $ 9,000,065 $ 6,134,094 $ 1,254,608
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET ASSETS, REPRESENTING:
Equity of Contract owners....................... $ 12,287,479 $ 8,499,781 $ 5,775,999 $ 981,623
Equity of Pruco Life Insurance Company.......... 724,251 500,284 358,095 272,985
-------------- -------------- -------------- --------------
$ 13,011,730 $ 9,000,065 $ 6,134,094 $ 1,254,608
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS (UNAUDITED)
For the period ended June 30, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
--------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED HIGH YIELD STOCK
MARKET BOND BOND INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO*
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 160,607 $ 228,828 $ 268,265 $ 6,712
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk and for
administration [Notes 3A and 3B].............. 40,663 25,996 18,817 845
-------------- -------------- -------------- --------------
NET EXPENSES...................................... 40,663 25,996 18,817 845
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 119,944 202,832 249,448 5,867
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized loss on shares redeemed [average cost
basis]........................................ 0 (25,544) 0 0
Net unrealized gain (loss) on investments....... 0 (239,572) (209,445) (1,104)
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 0 (265,116) (209,445) (1,104)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 119,944 $ (62,284) $ 40,003 $ 4,763
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
*Commenced Business on 5/1/96
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A12 AND A13.
A7
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
PRUDENTIAL
EQUITY PRUDENTIAL PRUDENTIAL PRUDENTIAL
INCOME EQUITY JENNISON GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc.
Portfolios at net asset value [Note 2] $ 11,581,716 $ 30,188,546 $ 11,448,615 $ 5,893,563
-------------- -------------- -------------- --------------
Total Assets $ 11,581,716 $ 30,188,546 $ 11,448,615 $ 5,893,563
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET ASSETS, REPRESENTING:
Equity of Contract owners $ 10,765,646 $ 28,410,792 $ 10,763,335 $ 5,467,732
Equity of Pruco Life Insurance Company 816,070 1,777,754 685,280 425,831
-------------- -------------- -------------- --------------
$ 11,581,716 $ 30,188,546 $ 11,448,615 $ 5,893,563
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
PRUDENTIAL
EQUITY PRUDENTIAL PRUDENTIAL PRUDENTIAL
INCOME EQUITY JENNISON GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received $ 142,076 $ 251,973 $ 11,243 $ 139,160
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk and for
administration [Notes 3A and 3B] 31,599 80,096 29,176 14,469
-------------- -------------- -------------- --------------
NET EXPENSES 31,599 80,096 29,176 14,469
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) 110,477 171,877 (17,933) 124,691
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized loss on shares redeemed [average cost
basis] 0 0 (4,370) 0
Net unrealized gain (loss) on investments (95,655) 14,046 143,983 4,332
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS (95,655) 14,046 139,613 4,332
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 14,822 $ 185,923 $ 121,680 $ 129,023
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A12 AND A13.
A8
<PAGE>
FINANCIAL STATEMENTS OF THE DISCOVERY SELECT
VARIABLE ANNUITY SUBACCOUNTS OF THE
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the period ended June 30, 1996 (Unaudited) and December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED HIGH YIELD
MARKET BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------ ------------------------------ ------------------------------
01/01/96 01/01/96 01/01/96
TO 11/22/95* TO 11/22/95* TO 11/22/95*
06/30/96 TO 06/30/96 TO 06/30/96 TO
(UNAUDITED) 12/31/95 (UNAUDITED) 12/31/95 (UNAUDITED) 12/31/95
-------------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)...... $ 119,944 $ 123 $ 202,832 $ 434 $ 249,448 $ 1,032
Capital gains distributions
received........................ 0 0 0 23 0 0
Realized (loss) on shares redeemed
[average cost basis]............ 0 0 (25,544) 0 0 0
Net unrealized gain (loss) on
investments..................... 0 0 (239,572) (104) (209,445) (758)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS......... 119,944 123 (62,284) 353 40,003 274
-------------- -------------- -------------- -------------- -------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS..... 12,037,088 144,295 8,494,877 8,998 5,727,148 9,090
-------------- -------------- -------------- -------------- -------------- -------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS......................... 710,289 (9) 548,120 10,001 346,669 10,910
-------------- -------------- -------------- -------------- -------------- -------------
TOTAL INCREASE IN NET ASSETS........ 12,867,321 144,409 8,980,713 19,352 6,113,820 20,274
NET ASSETS:
Beginning of Period............... 144,409 0 19,352 0 20,274 0
-------------- -------------- -------------- -------------- -------------- -------------
End of Period..................... $ 13,011,730 $ 144,409 $ 9,000,065 $ 19,352 $ 6,134,094 $ 20,274
-------------- -------------- -------------- -------------- -------------- -------------
-------------- -------------- -------------- -------------- -------------- -------------
*Commencement of Business
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A12 AND A13.
A9
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
PRUDENTIAL PRUDENTIAL
STOCK EQUITY PRUDENTIAL
INDEX INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------------------------ --------------
05/01/96* 01/01/96 01/01/96*
TO TO 11/22/95* TO
06/30/96 06/30/96 TO 06/30/96
(UNAUDITED) (UNAUDITED) 12/31/95 (UNAUDITED)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 5,867 110,477 $ 259 $ 171,877
Capital gains distributions
received 0 0 431 0
Realized (loss) on shares redeemed
[average cost basis] 0 0 0 0
Net unrealized gain (loss) on
investments (1,104) (95,655) (395) 14,046
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 4,763 14,822 295 185,923
-------------- -------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 980,142 10,671,080 65,753 27,950,570
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS TRANSFERS 269,703 808,519 21,247 1,797,910
-------------- -------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS 1,254,608 11,494,421 87,295 29,934,403
NET ASSETS:
Beginning of Period 0 87,295 0 254,143
-------------- -------------- -------------- --------------
End of Period $ 1,254,608 $ 11,581,716 $ 87,295 $ 30,188,546
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
*Commencement of Business
<CAPTION>
PRUDENTIAL
JENNISON
PORTFOLIO
------------------------------
01/01/96
11/22/95* TO 11/22/95*
TO 06/30/96 TO
12/31/95 (UNAUDITED) 12/31/95
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 142 $ (17,933) $ 0
Capital gains distributions
received 337 0 0
Realized (loss) on shares redeemed
[average cost basis] 0 (4,370) 0
Net unrealized gain (loss) on
investments 3,048 143,983 759
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 3,527 121,680 759
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 253,239 10,576,787 70,817
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS TRANSFERS (2,623) 679,024 (452)
-------------- -------------- --------------
TOTAL INCREASE IN NET ASSETS 254,143 11,377,491 71,124
NET ASSETS:
Beginning of Period 0 71,124 0
-------------- -------------- --------------
End of Period $ 254,143 $ 11,448,615 $ 71,124
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A12 AND A13.
A10
<PAGE>
FINANCIAL STATEMENTS OF THE DISCOVERY SELECT
VARIABLE ANNUITY SUBACCOUNTS OF THE
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the period ended June 30, 1996 (Unaudited) and December 31, 1995
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------
PRUDENTIAL
GLOBAL
PORTFOLIO
------------------------------
01/01/96
TO 11/22/95*
06/30/96 TO
(UNAUDITED) 12/31/95
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)...... $ 124,691 $ 138
Capital gains distributions
received........................ 0 193
Realized (loss) on shares redeemed
[average cost basis]............ 0 0
Net unrealized gain (loss) on
investments..................... 4,332 (259)
-------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS......... 129,023 72
-------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS..... 5,323,864 19,677
-------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM SURPLUS
TRANSFERS......................... 417,604 3,323
-------------- --------------
TOTAL INCREASE IN NET ASSETS........ 5,870,491 23,072
NET ASSETS:
Beginning of Period............... 23,072 0
-------------- --------------
End of Period..................... $ 5,893,563 $ 23,072
-------------- --------------
-------------- --------------
*Commencement of Business
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A12 AND A13.
A11
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
OF THE DISCOVERY SELECT VARIABLE ANNUITY SUBACCOUNTS OF
THE PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
FOR THE PERIOD ENDED JUNE 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995
NOTE 1: GENERAL
Pruco Life Flexible Premium Variable Annuity Account (the "Account") was
established on June 16, 1995 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. Currently
only Pruco Life's Discovery Preferred Contracts invest in the Account. Pruco
Life's Discovery Select Contracts will also invest in the Account once the
product becomes available to the Contract owner.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. At June 30, 1996, there were twelve subaccounts
within the Account, each of which invested only in a corresponding portfolio of
The Prudential Series Fund, Inc. (the "Prudential Series Fund"). The Prudential
Series Fund is a diversified open-ended management investment company, and is
managed by Prudential. Discovery Select will invest in the eight Prudential
Series Fund subaccounts shown in Note 2, as well as eleven other non-Prudential
administered variable subaccounts.
NOTE 2: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share for each portfolio of the Prudential Series Fund
that is available under Discovery Select Contracts, the number of shares of each
portfolio held by the subaccounts of the Account that are available under
Discovery Select Contracts, and the aggregate cost of investments in such shares
at June 30, 1996 were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL
MONEY DIVERSIFIED HIGH YIELD STOCK
PORTFOLIO MARKET BOND BOND INDEX
INFORMATION PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Number of shares: 1,301,173 831,454 787,421 57,627
Net asset value per share: $ 10.0000 $ 10.8245 $ 7.7901 $ 21.7713
Cost: $ 13,011,730 $ 9,239,740 $ 6,344,297 $ 1,255,712
<CAPTION>
PORTFOLIOS (CONTINUED)
---------------------------------------------------------
PRUDENTIAL
EQUITY PRUDENTIAL PRUDENTIAL PRUDENTIAL
PORTFOLIO INCOME EQUITY JENNISON GLOBAL
INFORMATION PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Number of shares: 674,100 1,107,448 849,766 353,625
Net asset value per share: $ 17.1810 $ 27.2596 $ 13.4727 $ 16.6662
Cost: $ 11,677,766 $ 30,171,452 $ 11,303,873 $ 5,889,491
</TABLE>
NOTE 3: CHARGES AND EXPENSES
A. Mortality Risk and Expense Charges
The mortality risk and expense risk charges at an effective annual rate of
1.25% are applied daily against the net assets representing equity of
Contract owners held in each subaccount.
B. Administrative Charge
The administrative charge at an effective annual rate of .15% is applied
against the net assets representing equity of Contract owners held in each
subaccount.
A12
<PAGE>
Pruco Life had determined not to assess the Mortality and Expense Risk
Charge and Administrative Charge until after December 31, 1995. Pruco Life
began assessing these charges as of January 22, 1996. The Mortality and
Expense Risk Charge and Administrative Charge are not assessed against
amounts allocated to the interest-rate investment options.
C. Withdrawal Charge
A withdrawal charge is imposed upon the withdrawal of funds from certain
variable annuity contracts to compensate Pruco Life for sales and other
marketing expenses. The amount of any withdrawal charge will depend on the
amount withdrawn and the number of years that have elapsed since the
Contract date. No withdrawal charge will be imposed after the eighth
Contract Year or upon a withdrawal used to effect an annuity under the Life
Annuity with 120 Payments Certain option.
NOTE 4: TAXES
The operations of the subaccounts form a part of, and are taxed with, the
operations of Pruco Life. Under the Internal Revenue Code, all ordinary income
and capital gains allocated to the Contract owners are not taxed to Pruco Life.
As a result, the net asset values of the subaccounts are not affected by federal
income taxes on distributions received by the subaccounts.
NOTE 5: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SURPLUS TRANSFERS
The increase (decrease) in net assets resulting from surplus transfers
represents the net contributions (withdrawals) of Pruco Life to the Account.
A13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners of
Pruco Life Flexible Premium Variable Annuity
Account and the Board of Directors
of Pruco Life Insurance Company
Newark, New Jersey
We have audited the accompanying statements of net assets of Pruco Life Flexible
Premium Variable Annuity Account of Pruco Life Insurance Company (comprising,
respectively, the Prudential Money Market Portfolio, Prudential Diversified Bond
Portfolio, Prudential High Yield Bond Portfolio, Prudential Equity Income
Portfolio, Prudential Equity Portfolio, Prudential Jennison Portfolio and
Prudential Global Portfolio subaccounts) as of December 31, 1995, the related
statements of operations for the periods presented in the year then ended, and
the statements of changes in net assets for each of the periods presented in the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the respective subaccounts
constituting the Pruco Life Flexible Premium Variable Annuity Account as of
December 31, 1995, the results of their operations, and the changes in their net
assets for the respective stated periods in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 15, 1996
A14
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Statutory Basis)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1996 1995
---------- ----------
(000's)
<S> <C> <C>
ASSETS
Fixed maturities (market $2,636,817 and $2,598,439) ......... $2,615,825 $2,510,783
Equity securities (cost $2,651 and $5,317) .................. 4,048 4,009
Mortgage loans .............................................. 62,247 64,464
Investment real estate ...................................... 4,070 4,059
Policy loans ................................................ 602,009 569,273
Other long term investments ................................. 4,854 4,159
Short term investments ...................................... 339,964 228,016
---------- ----------
Total Investments ......................................... 3,633,017 3,384,763
Cash ........................................................ 54,663 41,435
Accrued investment income ................................... 60,900 59,862
Premiums due and deferred ................................... 19,902 19,521
Receivable from affiliates .................................. 6,849 8,275
Federal income taxes - from affiliates ...................... 0 8,875
Other assets ................................................ 11,430 9,436
Assets held in Separate Accounts ............................ 4,638,580 4,285,269
---------- ----------
TOTAL ASSETS .................................................. $8,425,341 $7,817,436
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Policy liabilities and insurance reserves:
Future policy benefits and claims ......................... $2,617,680 $2,606,856
Other policy claims and benefits payable .................. 14,377 13,822
Interest maintenance reserve (IMR) ........................ 27,893 27,282
Payable to affiliates ....................................... 39,302 41,584
Federal income taxes - to affiliates ........................ 35,330 0
Other liabilities ........................................... 213,011 52,865
Asset valuation reserve (AVR) ............................... 38,425 37,268
Liabilities related to Separate Accounts .................... 4,559,751 4,208,737
---------- ----------
Total Liabilities ............................................. 7,545,769 6,988,414
---------- ----------
Stockholders' Equity
Common stock, $10 par value; authorized,
1,000,000 shares; issued and outstanding 250,000 shares ... 2,500 2,500
Paid in capital ............................................. 439,582 439,582
Unassigned surplus .......................................... 437,490 386,940
---------- ----------
Total Stockholders' Equity .................................... 879,572 829,022
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $8,425,341 $7,817,436
========== ==========
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-1
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Statutory Basis)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
--------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(000's) (000's)
<S> <C> <C> <C> <C>
REVENUE
Premiums and annuity considerations ........... $ 423,364 $ 274,092 $ 227,282 $ 134,118
Net investment income ......................... 124,937 125,669 62,645 62,065
Net realized investment gains/(losses) ........ 1,580 (1,191) (651) 19
Other income .................................. 7,807 27,303 5,068 23,643
--------- --------- --------- ---------
Total Revenue ................................... 557,688 425,873 294,344 219,845
--------- --------- --------- ---------
BENEFITS AND EXPENSES
Current and future benefits and claims ........ 402,124 252,226 217,444 135,902
Commission expenses ........................... 15,551 12,509 8,774 6,303
General, administrative and other expenses .... 54,111 59,199 31,239 31,652
--------- --------- --------- ---------
Total Benefits and Expenses ..................... 471,786 323,934 257,457 173,857
--------- --------- --------- ---------
Income before income tax provision ............ 85,902 101,939 36,887 45,988
Income tax provision .......................... 36,513 32,916 13,314 12,446
--------- --------- --------- ---------
NET INCOME ...................................... $ 49,389 $ 69,023 $ 23,573 $ 33,542
========= ========= ========= =========
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-2
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Statutory Basis)
Six Months Ended
June 30,
-------------------------
1996 1995
----------- -----------
(000's)
Cash Flows From Operating Activities:
Net Income ..................................... $ 49,389 $ 69,023
Adjustments to reconcile net income
to net cash from operations .................. 173,520 (142,617)
----------- -----------
Cash Flows From Operating Activities ............. 222,909 (73,594)
----------- -----------
Cash Flows From Investing Activities:
Proceeds from the sale/maturity of:
Fixed maturities ............................. 2,300,020 995,311
Equity securities ............................ 2,015 611
Mortgage loans ............................... 2,217 6,807
Other long term investments .................. 4 120
Investment real estate ....................... 0 2,925
Payments for the purchase of:
Fixed maturities ............................. (2,398,678) (917,788)
Equity securities ............................ (2,611) (2,047)
Other long term investments .................. (699) (626)
Net payments of short term investments ....... (111,949) (4,980)
----------- -----------
Cash Flows From Investing Activities ............. (209,681) 80,333
----------- -----------
Net increase in cash ............................. 13,228 6,739
Cash, beginning of period ........................ 41,435 27,780
----------- -----------
Cash, End of Period .............................. $ 54,663 $ 34,519
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash paid in lieu of income taxes .............. $ 0 $ 0
=========== ===========
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-3
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(Statutory Basis)
1. General
Pruco Life Insurance Company consists of Pruco Life Insurance Company (Pruco
Life), Pruco Life Insurance Company of New Jersey and The Prudential Life
Insurance Company of Arizona (collectively, the Company). Pruco Life is a wholly
owned subsidiary of The Prudential Insurance Company of America (The
Prudential), a mutual life insurance company. The accompanying unaudited
financial statements have been prepared in accordance with statutory accounting
practices prescribed or permitted by the National Association of Insurance
Commissioners and the respective domiciliary state insurance departments.
Certain financial information which is normally included in financial
statements, prepared in accordance with statutory accounting practices, but
which is not required for interim reporting purposes, has been omitted. The
financial statements for the six months ended June 30, 1996 and 1995 include all
adjustments (consisting of only normal recurring accruals) which, in the opinion
of management, are necessary for fair presentation of results for that interim
period. The results for the six months ended June 30, 1996 and 1995, are not
necessarily indicative of the results for a full year. These statements should
be read in conjunction with the consolidated financial statements and notes
thereto included on Form 10-K for the fiscal year ended December 31, 1995.
2. Related Party
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.
B-4
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENTS OF FINANCIAL POSITION(1)
(Unaudited)
(GAAP Basis)
June 30, 1996 December 31, 1995
------------- -----------------
(000's)
ASSETS
Fixed maturities
Held to maturity ............................. $ 437,268 $ 437,727
Available for sale ........................... 2,190,946 2,144,854
Mortgage loans ................................. 62,247 64,464
Policy loans ................................... 602,009 569,273
Equity securities .............................. 4,048 4,036
Investment real estate ......................... 4,070 4,059
Other long term investments .................... 4,854 4,159
Short term investments ......................... 339,964 228,016
---------- ----------
Total Invested Assets ........................ 3,645,406 3,456,588
Cash ........................................... 54,663 41,435
Deferred policy acquisition costs .............. 587,249 566,976
Premiums due ................................... 7,708 6,367
Accrued investment income ...................... 60,900 59,862
Receivable from affiliates ..................... 6,849 8,275
Other assets ................................... 14,593 12,578
Assets held in Separate Accounts ............... 4,638,580 4,285,268
Federal income tax receivable .................. -- 8,875
Reinsurance recoverable on paid losses ......... 27,914 27,914
---------- ----------
TOTAL ASSETS ................................... $9,043,862 $8,474,138
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Future policy benefits and claims .............. $2,709,023 $2,705,708
Other policy claims and benefits ............... 14,377 13,822
Other liabilities .............................. 192,697 35,269
Federal income tax payable ..................... 35,330 --
Deferred federal income tax payable ............ 142,839 151,588
Payable to affiliate ........................... 39,310 41,584
Separate Account liabilities ................... 4,605,927 4,263,896
---------- ----------
Total Liabilities .............................. 7,739,503 7,211,867
---------- ----------
Contingencies - Note 11
Stockholders' Equity
Common Stock, $10 par value;
authorized, 1,000,000 shares;
issued & outstanding 250,000 shares ........ 2,500 2,500
Paid in capital ................................ 439,582 439,582
Unrealized gains (net of tax of $3,594
& $19,585) ................................... 6,140 30,835
Unassigned equity .............................. 856,137 789,354
---------- ----------
Total Stockholders' Equity ..................... 1,304,359 1,262,271
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ........................... $9,043,862 $8,474,138
========== ==========
(1) The unaudited supplemental financial information for the periods ending
June 30, 1996 and December 31, 1995 have been prepared in accordance with
Generally Accepted Accounting Principles ("GAAP") as set forth in the
Financial Accounting Standards Board's Interpretation No. 40,
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises." Interpretation No. 40 changes the current
practice of the Company with respect to utilizing statutory basis financial
statements for general purposes in that it would not allow such financial
statements to be referred to as having been prepared in accordance with
GAAP pronouncements, unless specifically exempted.
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-5
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENTS OF FINANCIAL POSITION(1)
(Unaudited)
(GAAP Basis)
Six Months Ended Three Months Ended
June 30, June 30,
---------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
(000's)
REVENUE
Premiums ......................... $ 24,297 $ 27,154 $ 13,742 $ 17,296
Net investment income ............ 122,204 124,352 61,352 61,560
Realized capital gains/(losses) .. 4,923 391 (2,252) 2,770
Policy fee income ................ 156,621 154,289 77,817 68,722
Other income ..................... 7,807 27,303 5,068 23,643
-------- -------- -------- --------
Total Revenue .................... 315,852 333,489 155,727 173,991
-------- -------- -------- --------
BENEFITS AND EXPENSES
Interest credited to
policyholders' account
balances ...................... 60,908 65,446 31,882 35,493
Policyholders' benefits .......... 77,226 80,688 37,621 37,639
Other operating costs and
expenses ...................... 74,974 68,732 42,923 39,838
-------- -------- -------- --------
Total Benefits and Expenses ...... 213,108 214,866 112,426 112,970
-------- -------- -------- --------
Income before income tax
provision ..................... 102,744 118,623 43,301 61,021
Income tax provision
Current ....................... 27,481 34,533 4,727 13,651
Deferred ...................... 8,480 8,861 8,362 10,327
-------- -------- -------- --------
NET INCOME ....................... $ 66,783 $ 75,229 $ 30,212 $ 37,043
======== ======== ======== ========
(1) The unaudited supplemental financial information for the periods ending
June 30, 1996 and 1995 have been prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") as set forth in the Financial
Accounting Standards Board's Interpretation No. 40, "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises." Interpretation No. 40 changes the current practice of the
Company with respect to utilizing statutory basis financial statements for
general purposes in that it would not allow such financial statements to be
referred to as having been prepared in accordance with GAAP pronouncements,
unless specifically exempted.
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-6
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY(1)
(Unaudited)
(GAAP Basis)
Six Months Ended Twelve Months Ended
June 30, 1996 December 31, 1995
---------------- -------------------
(000's)
COMMON STOCK
Balance, beginning of period $ 2,500 $ 2,500
Issued during period -- --
---------- ----------
Balance, end of period 2,500 2,500
---------- ----------
PAID IN CAPITAL
Balance, beginning of period 439,582 439,582
Paid in during period -- --
---------- ----------
Balance, end of period 439,582 439,582
---------- ----------
UNASSIGNED EQUITY
Balance, beginning of period 789,354 626,995
Net income 66,783 162,359
---------- ----------
Balance, end of period 856,137 789,354
---------- ----------
UNREALIZED CAPITAL GAINS
Balance, beginning of period 30,835 --
Net change in unrealized (losses)/gains (34,548) 43,915
Other adjustments(a) 9,853 (13,080)
---------- ----------
Balance, end of period 6,140 30,835
---------- ----------
TOTAL STOCKHOLDERS' EQUITY $1,304,359 $1,262,271
========== ==========
(1) The unaudited supplemental financial information for the periods ending
June 30, 1996 and December 31, 1995 have been prepared in accordance with
Generally Accepted Accounting Principles ("GAAP") as set forth in the
Financial Accounting Standards Board's Interpretation No. 40,
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises." Interpretation No. 40 changes the current
practice of the Company with respect to utilizing statutory basis financial
statements for general purposes in that it would not allow such financial
statements to be referred to as having been prepared in accordance with
GAAP pronouncements, unless specifically exempted.
(a) Other adjustments consist of deferred policy acquisition costs and related
deferred income taxes.
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-7
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS(1)
(Unaudited)
(GAAP Basis)
Six Months Ended
------------------------------
June 30, 1996 June 30, 1995
------------- -------------
(000's)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................. $ 66,783 $ 75,229
Adjustments to reconcile net income to
cash flows from operating activities ... 97,443 (97,045)
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES ....... 164,226 (21,816)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale/maturity of:
Fixed maturities ...................... 2,300,020 1,028,626
Equity securities ..................... 2,015 611
Mortgage loans ........................ 2,217 6,807
Investment real estate ................ -- 2,925
Other long term investments ........... 4 120
Other ................................. 59,050 (48,577)
Payments for the purchase of:
Fixed maturities ...................... (2,398,679) (951,104)
Equity securities ..................... (2,611) (5,248)
Other long term investments ........... (699) (626)
Net payments of short term
investments ....................... (112,315) (4,980)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES ....... (150,998) 28,554
----------- -----------
Net increase in cash ....................... 13,228 6,738
Cash, beginning of period .................. 41,435 27,780
----------- -----------
CASH, END OF PERIOD ........................ $ 54,663 $ 34,518
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid in lieu of income taxes ..... $ -- $ --
=========== ===========
(1) The unaudited supplemental financial information for the periods ending
June 30, 1996 and 1995 have been prepared in accordance with generally
Accepted Accounting Principles ("GAAP") as set forth in the Financial
Accounting Standards Board's Interpretation No. 40, "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises." Interpretation No. 40 changes the current practice of the
Company with respect to utilizing statutory basis financial statements for
general purposes in that it would not allow such financial statements to be
referred to as having been prepared in accordance with GAAP pronouncements,
unless specifically exempted.
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-8
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES
A. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of Pruco
Life Insurance Company (Pruco Life), a stock life insurance company, and its
subsidiaries (collectively, the Company). Pruco Life is a wholly-owned
subsidiary of The Prudential Insurance Company of America (Prudential), a mutual
life insurance company. The Company markets individual life insurance and single
pay deferred annuities primarily through Prudential's sales force. All
significant intercompany balances and transactions have been eliminated in
consolidation.
B. BASIS OF PRESENTATION
The Financial Accounting Standards Board (FASB) issued Interpretation No. 40
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises, as amended by Statement of Financial Accounting
Standards (SFAS) No. 120 "Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain Long-Duration Participating
Contracts", effective for fiscal years beginning after December 15, 1995.
Interpretation No. 40 changed the practice of mutual life insurance companies
with respect to utilizing statutory basis financial statements for general
purposes in that such financial statements are no longer allowed to be referred
to as having been prepared in accordance with Generally Accepted Accounting
Principles (GAAP). As a result of Interpretation No. 40, the Company has
prepared the 1996 consolidated financial statements in accordance with all
applicable GAAP pronouncements. The Company has restated the 1995 consolidated
financial statements in accordance with GAAP. These financial statements were
previously prepared based on statutory accounting practices prescribed or
permitted by regulatory authorities in the domiciliary states. See Note 9 for
the Company's statutory net income and surplus determined in accordance with
accounting practices prescribed or permitted by regulatory authorities in
domiciliary states.
C. INVESTMENTS
Fixed Maturities -- Securities held to maturity are those that the Company has
the positive intent and ability to hold to maturity and are principally reported
at amortized cost. Amortized cost is adjusted to estimated fair value for
impairments which are deemed to be other than temporary.
Where the Company may not have the positive intent to hold fixed maturities
until maturity, the securities are classified as "Available for Sale." These
securities are reported at market value based principally on their quoted market
prices. The associated unrealized gains and losses, net of income taxes and
deferred policy acquisition costs, are included as a component of equity or if
deemed to be other than temporary, are included as a realized loss.
Equity Securities consist primarily of common and preferred stocks. Marketable
equity securities are classified as "Available for Sale" and are reported at
market value based principally on their quoted market prices. Non-marketable
equity securities are reported at historical cost adjusted for other than
temporary impairments. The associated unrealized gains and losses are included
as a component of equity. $4.2 million and $3.6 million of joint venture equity
securities are included in "Other Long Term Investments" as of June 30, 1996 and
December 31, 1995, respectively.
Mortgage Loans and Policy Loans are stated primarily at unpaid principal
balances, net of unamortized discounts and valuation allowances for impaired
loans. Impaired loans are those for which management believes that they will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. A valuation allowance is recorded for the difference between the
present value of expected future cash flows discounted at the loan's effective
interest rate or the fair value of the underlying collateral, and the carrying
value of the loan. Interest income on non-impaired loans is recognized as net
investment income earned.
B-9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
Investment Real Estate was acquired through foreclosure during 1994. This
property was valued at its fair value at the time of foreclosure. Fair value is
considered to be the amount that could reasonably be expected in a current
transaction between willing parties, other than in forced or liquidation sale.
Depreciation on these properties for the period ended June 30, 1996 and the year
ended December 31, 1995 was $149 thousand and $106 thousand, respectively.
Other Long Term Investments, which consist of limited partnerships, are valued
at the aggregate net equity in the partnerships. Certain investments in this
category were non-income producing at June 30, 1996 and December 31, 1995. These
investments were $718 thousand at June 30, 1996 and $316 thousand at December
31, 1995.
Partnership and joint venture interests in which the Company does not have
control and a majority economic interest is reported on the equity basis of
accounting. $4.8 million and $4.1 million of non real estate related interests
are included in other long term investments, as of June 30,1996 and December 31,
1995, respectively. The Company's share of net income from such entities was
$850 thousand and $476 thousand for the periods ended June 30, 1996 and 1995
respectively and is reported in investment income.
D. OTHER ASSETS
Property and equipment is carried at cost less accumulated depreciation. When
applicable cost includes interest and real estate taxes incurred during
construction as well as other construction related costs. Depreciation is
calculated primarily on the straight line method based on the estimated useful
lives of the assets. Accumulated depreciation was $2.2 million and $2.0 million
as of June 30, 1996 and December 31, 1995, respectively.
E. REVENUE RECOGNITION AND RELATED EXPENSES
Universal Life and Investment-Type Contracts. Universal life contracts are long
duration life insurance contracts that involve significant mortality and
morbidity risk with both fixed and guaranteed terms. Investment contracts are
long duration contracts that do not subject the insurance enterprise to risks
arising from contractholder mortality or morbidity. Amounts received as payments
for these contracts are reported as deposits to contractholders' account
balances. Revenues from these contracts consist primarily of amounts assessed
during the period against contractholders' account balances for mortality
charges, policy administration and surrender charges. Policy benefits and claims
that are charged to expenses include benefit claims incurred in the period in
excess of related contractholders' account balances.
F. DEFERRED POLICY ACQUISITION COSTS
Acquisition costs consist of commissions and other costs which vary with and are
primarily related to the production or acquisition of new business. Acquisition
costs related to universal life products and investment-type contracts are
deferred and amortized in proportion to total estimated gross profits arising
principally from investment results, mortality, expense margins and surrender
charges based on historical and anticipated future experience. Deferred
acquisition costs are reviewed to determine if they are recoverable from future
income, including investment income. If such costs are determined to be
unrecoverable, they are expensed at the time of determination. The effect on the
deferred policy acquisition asset that would result from realization of
unrealized gains/(losses) is recognized with an offset to unrealized
gains/(losses) in consolidated stockholders' equity as of the balance sheet
date.
B-10
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
G. FUTURE POLICY BENEFITS AND CONTRACTHOLDERS' FUNDS
Policyholders' account balances for universal life and investment-type contracts
are equal to the policy account values. The policy account values represent an
accumulation of gross premium payments plus credited interest less expense and
mortality charges and withdrawals.
Benefit liabilities for annuities during the accumulation period are equal to
the accumulated contractholders' fund balances and after annuitization are equal
to the present value of expected future payments.
Interest crediting rates on these life insurance products range from 3.35%
to 7%.
When liabilities for future policy benefits plus the present value of expected
future gross premiums are insufficient to provide expected future policy
benefits and expenses, unrecoverable deferred policy acquisition costs are
written off and thereafter, if required, a premium deficiency reserve is
established as a charge to earnings.
H. SEPARATE ACCOUNTS
Separate Accounts represent funds for which investment income and investment
gains and losses accrue directly to, and investment risk is borne by, the
policyholders, with the exception of the Pruco Life Modified Guaranteed Annuity
Account. The Pruco Life Modified Guaranteed Annuity Account is a non-unitized
separate account, which funds the Modified Guaranteed Annuity Contract and the
Market Value Adjustment Annuity Contract. Owners of the Pruco Life Modified
Guaranteed Annuity and the Market Value Adjustment Annuity Contracts do not
participate in the investment gain or loss from assets relating to such
accounts. Such gain or loss is borne, in total, by the Company. Assets are
carried at market value. Deposits to all Separate Accounts are reported as
increases in Separate Account liabilities. Charges assessed against
contractholders' account balances for mortality, policy administration and
surrender charges are included in revenues. Mortality and expense risk charges
applied against net assets represent contractholder funds and are also a
component of revenue. The assets are legally segregated and are not subject to
claims that arise out of any other business of the Company.
I. 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 reporting period. Actual results could differ from those
estimates.
B-11
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
2. FIXED MATURITIES AND EQUITY SECURITIES
Gross unrealized gains and losses for securities classified as Held to Maturity
and Available for Sale, by major security type, are as follows:
For the period ended June 30, 1996
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
(000's)
HELD TO MATURITY
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies .............. $ 437,268 $ 9,898 $ 1,296 $ 445,870
Foreign government bonds .... -- -- -- --
Corporate securities ........ -- -- -- --
Mortgage-backed securities .. -- -- -- --
Other fixed maturities ...... -- -- -- --
---------- ------- ------- ----------
Total ................... $ 437,268 $ 9,898 $ 1,296 $ 445,870
========== ======= ======= ==========
For the period ended June 30, 1996
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
(000's)
AVAILABLE FOR SALE
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies .............. $ 229,580 $ 1,116 $ 120 $ 230,576
Foreign government bonds .... 86,719 705 828 86,596
Corporate securities ........ 1,860,386 25,987 13,178 1,873,195
Mortgage-backed securities .. 565 14 -- 579
Other fixed maturities ...... -- -- -- --
---------- ------- ------- ----------
Total ................... $2,177,250 $27,822 $14,126 $2,190,946
========== ======= ======= ==========
B-12
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
For the period ended December 31, 1995
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
(000's)
HELD TO MATURITY
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies .............. $ -- $ -- $ -- $ --
Foreign government bonds .... 437,727 18,629 1,805 454,551
Corporate securities ........ -- -- -- --
Mortgage-backed securities .. -- -- -- --
Other fixed maturities ...... -- -- -- --
---------- ------- ------- ----------
Total ................... $ 437,727 $18,629 $ 1,805 $ 454,551
========== ======= ======= ==========
For the period ended December 31, 1995
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
(000's)
AVAILABLE FOR SALE
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies .............. $ 324,854 $ 6,830 $ 61 $ 331,623
Foreign government bonds .... 73,042 3,055 -- 76,097
Corporate securities ........ 1,506,934 54,859 2,168 1,559,625
Mortgage-backed securities .. 169,190 8,717 398 177,509
Other fixed maturities ...... -- -- -- --
---------- ------- ------- ----------
Total ................... $2,074,020 $73,461 $ 2,627 $2,144,854
========== ======= ======= ==========
B-13
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
The amortized cost and estimated fair value of fixed maturities at June 30, 1996
and December 31, 1995, categorized by contractual maturity, are shown below.
Actual maturities will differ from contractual maturities because borrowers may
prepay obligations with or without call or prepayment penalties. Fixed
maturities not due at a single maturity date have been included in the table.
As of June 30, 1996
--------------------------
Estimated
Amortized Fair
Cost Value
---------- ----------
(000's)
HELD TO MATURITY
Due in one year or less ........................ $ 22,763 $ 22,926
Due after one year through five years .......... 187,868 189,775
Due after five years through ten years ......... 187,560 194,275
Due after ten years ............................ 39,077 38,894
Mortgage-backed securities ..................... -- --
---------- ----------
Total ...................................... $ 437,268 $ 445,870
========== ==========
As of June 30, 1996
--------------------------
Estimated
Amortized Fair
Cost Value
---------- ----------
(000's)
AVAILABLE FOR SALE
Due in one year or less ........................ $ 91,207 $ 92,526
Due after one year through five years .......... 1,577,900 1,588,618
Due after five years through ten years ......... 392,482 393,497
Due after ten years ............................ 115,096 115,726
Mortgage-backed securities ..................... 565 579
---------- ----------
Total ...................................... $2,177,250 $2,190,946
========== ==========
B-14
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
As of December 31, 1995
--------------------------
Estimated
Amortized Fair
Cost Value
---------- ----------
(000's)
HELD TO MATURITY
Due in one year or less ........................ $ 25,982 $ 26,325
Due after one year through five years .......... 184,288 189,354
Due after five years through ten years ......... 194,543 206,331
Due after ten years ............................ 32,914 32,541
Mortgage-backed securities ..................... -- --
---------- ----------
Total ...................................... $ 437,727 $ 454,551
========== ==========
As of December 31, 1995
--------------------------
Estimated
Amortized Fair
Cost Value
---------- ----------
(000's)
AVAILABLE FOR SALE
Due in one year or less ........................ $ 135,710 $ 137,304
Due after one year through five years .......... 1,316,881 1,360,878
Due after five years through ten years ......... 335,302 349,961
Due after ten years ............................ 116,937 119,202
Mortgage-backed securities ..................... 169,190 177,509
---------- ----------
Total ...................................... $2,074,020 $2,144,854
========== ==========
Proceeds from the sale/maturity of fixed maturities during the period ended June
30, 1996 and the year ended December 31, 1995 were $2.3 billion and $2.0
billion, respectively. Gross gains of $18.8 million and $3.3 million and gross
losses of $13.7 million and $5.6 million were realized on those sales during the
period ended June 30, 1996 and the year ended December 31, 1995 respectively.
B-15
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
<TABLE>
3. NET INVESTMENT INCOME
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
(000's) (000's)
<S> <C> <C> <C> <C>
Net investment income consisted of:
Gross investment income
Fixed maturities ........................... $ 91,959 $ 98,832 $ 46,058 $ 49,315
Equity securities .......................... -- (32) -- (55)
Mortgage loans ............................. 2,313 4,559 938 1,603
Investment real estate ..................... 488 313 313 167
Policy loans ............................... 15,960 14,181 8,166 7,302
Short term investments ..................... 8,594 5,753 4,404 2,977
Other ...................................... 4,748 3,265 2,572 1,687
-------- -------- -------- --------
124,062 126,871 62,451 62,996
Investment expenses ............................ 1,858 2,519 1,099 1,436
-------- -------- -------- --------
Net investment income .......................... $122,204 $124,352 $ 61,352 $ 61,560
======== ======== ======== ========
4. INVESTMENT GAINS/(LOSSES)
Six Months Ended Three Months Ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
(000's) (000's)
<S> <C> <C> <C> <C>
Realized gains/(losses):
Fixed maturities ........................... $ 4,943 $ 372 $ (2,199) $ 2,743
Equity securities .......................... (40) 70 (52) 85
Mortgage loans ............................. -- -- -- --
Investment real estate ..................... -- (69) -- (69)
Other ...................................... 20 18 (1) 11
-------- -------- -------- --------
Realized investment gains/(losses) ............. $ 4,923 $ 391 $ (2,252) $ 2,770
======== ======== ======== ========
Six Months Ended Three Months Ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
(000's) (000's)
<S> <C> <C> <C> <C>
Unrealized gains/(losses):
Fixed maturities -- Available for sale ..... $(57,053) $ 52,684 $(14,940) $ 51,879
Equity securities .......................... (27) 53 (1,046) 48
-------- -------- -------- --------
(57,080) 52,737 (15,986) 51,927
Other adjustments (a) .......................... 16,394 (14,560) 4,803 (14,658)
Federal income tax provision/(benefit) ......... 15,991 (11,906) 3,388 (11,906)
-------- -------- -------- --------
Net change in unrealized gains/(losses) ........ (24,695) 26,271 (7,795) 25,363
Net unrealized gains/(losses), beg of period.... 30,835 -- 13,935 908
-------- -------- -------- --------
Net unrealized gains/(losses) .................. $ 6,140 $ 26,271 $ 6,140 $ 26,271
======== ======== ======== ========
</TABLE>
- ------------
(a) Other adjustments consist of deferred policy acquisition costs and deferred
income taxes.
B-16
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
5. MORTGAGE LOANS
Mortgage loans at June 30, 1996 and December 31, 1995 are as follows:
June 30, December 31,
1996 1995
-------- ------------
(000's)
Commercial loans .................................. $59,205 $59,659
Agricultural loans ................................ 3,042 4,805
------- -------
Total mortgage loans .............................. $62,247 $64,464
======= =======
6. FAIR VALUE INFORMATION
The fair value amounts have been determined by the Company using available
information and reasonable valuation methodologies for only those accounts for
which fair value disclosures are required. Considerable judgement is applied, as
necessary, in interpreting data to develop the estimates of fair value.
Accordingly, the estimates presented may not be realized in a current market
exchange. The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair values.
The following methods and assumptions were used in calculating the fair values.
Fixed Maturities -- Fair values for fixed maturities, other than private
placement securities, are based on quoted market prices or estimates from
independent pricing services. Fair values for private placement securities are
estimated using a discounted cash flow model which considers the current market
spreads between the U.S. Treasury yield curve and corporate bond yield curve
adjusted for the type of issue, its current quality and its remaining average
life. The fair value of certain non-performing private placement securities is
based on amounts provided by state regulatory authorities.
Equity Securities -- Fair value is based on quoted market prices, where
available, or prices provided by state regulatory authorities.
Mortgage Loans -- The fair value of the commercial mortgage and agricultural
loan portfolio is primarily based upon the present value of the scheduled cash
flows discounted at the appropriate U.S. Treasury rate, adjusted for the current
market spread for a similar quality mortgage. For certain non-performing and
other loans, fair value is based upon the value of the underlying collateral.
Policy Loans -- The estimated fair value is calculated using a discounted cash
flow model based upon current U.S. Treasury rates and historical loan
repayments.
Investment-type insurance contract liabilities -- Fair values for the Company's
investment-type insurance contract liabilities are estimated using a discounted
cash flow model, based on interest rates currently being offered for similar
contracts.
7. INSURANCE
The benefit reserve liabilities for single premium universal life contracts and
investment-type contracts such as deferred annuities are the contractholders'
funds.
The benefit reserve liabilities for payout annuities such as matured deferred
annuities and supplementary contracts are the present values of estimated future
benefits payments and related expenses. Present values for these contracts are
computed using interest rates ranging from 6.5% to 11%. The mortality assumption
for these contracts is the 83 IAM tables.
Reserves for supplementary benefits are stated at interest rates that vary from
4% to 6.5% using mortality and morbidity assumptions either from company
experience or various actuarial tables.
B-17
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
8. INCOME TAXES
The Company is a member of a group of affiliated companies which join in filing
a consolidated federal tax return. Pursuant to a tax allocation agreement,
current tax liabilities are determined for individual companies based upon their
separate return basis taxable income. Members with a loss for tax purposes
recognize a current benefit in proportion to the amount of their losses utilized
in computing consolidated taxable income.
The Company has not established a valuation allowance for its deferred tax
assets. 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 asset.
Net unrealized gains and losses are presented in equity net of deferred taxes.
The tax provision attributable to these items amounted to $3.6 million and $19.6
million at June 30, 1996 and December 31, 1995, respectively.
The Internal Revenue Service (the "Service") has conducted examinations of the
federal income tax returns of the Company 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 challenges.
The components of the income tax provisions are as follows:
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
---------------- ----------------
(000's)
Current U.S. income tax ............... $27,481 $34,533
Deferred U.S. income tax .............. 8,480 8,861
------- -------
Total income taxes .................... $35,961 $43,394
======= =======
The tax effects of temporary differences that give rise to deferred tax assets
and liabilities are presented below.
June 30, 1996 December 31, 1995
------------- -----------------
DEFERRED TAX ASSETS (000's)
Insurance reserves .................... $ 24,646 $ 29,738
Other ................................. -- --
-------- --------
Total deferred tax assets ............. $ 24,646 $ 29,738
======== ========
DEFERRED TAX LIABILITIES
Deferred acquisition costs ............ $152,717 $149,223
Net capital gains ..................... 7,411 27,715
Other ................................. 7,357 4,388
-------- --------
Total deferred tax liabilities ........ $167,485 $181,326
-------- --------
Net deferred liability ................ $142,839 $151,588
======== ========
The differences between the U.S. statutory federal income tax and the effective
income tax as reflected in the accompanying statement of income are:
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
---------------- ----------------
Tax at statutory rate ................. $35,961 $41,518
True-up of 1994 provision ............. -- --
Other items, net ...................... -- 1,876
------- -------
Total tax provision ................... $35,961 $43,394
======= =======
B-18
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
For The Periods Ended June 30, 1996 and 1995 (Unaudited)
(GAAP Basis)
9. STOCKHOLDERS' EQUITY
The amounts of statutory net income for the periods ended, and surplus as of
June 30, 1996 and 1995 were as follows:
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
---------------- ----------------
(000's)
Net income ............................ $ 39,552 $ 42,579
-------- --------
Surplus ............................... $872,141 $742,463
======== ========
10. RELATED PARTY TRANSACTIONS
A. SERVICE AGREEMENTS
The Company, Prudential, Pruco Life of New Jersey and Pruco Securities
Corporation, an indirect wholly-owned subsidiary of Prudential, operate under
service and lease agreements whereby services of officers and employees,
supplies, use of equipment and office space are provided. The net cost of these
services allocated to the Company were $47 million as of June 30, 1996 and $98
million for the year ended December 31, 1995.
B. PENSION PLANS
The Company is a wholly-owned subsidiary of Prudential which sponsors several
defined benefit pension plans that cover substantially all of its employees.
Benefits are generally based on career average earnings and credited length of
service. Prudential's funding policy is to contribute annually the amount
necessary to satisfy the Internal Revenue Service contribution guidelines.
No pension expense for contributions to the plan was allocated to the Company in
1996 or 1995 because the plan was subject to the full funding limitation under
the Internal Revenue Code.
C. POSTRETIREMENT LIFE AND HEALTH BENEFITS
Prudential also sponsors certain life insurance and health care benefits for its
retired employees. Substantially all employees may become eligible to receive a
benefit if they retire after age 55 with at least 10 years of service.
Prudential elected to amortize its obligation over twenty years. A provision for
contributions to the postretirement fund is included in the net cost of services
allocated to the Company discussed above for the periods ended June 30, 1996 and
December 31, 1995.
D. REINSURANCE
The Company currently has three reinsurance agreements in place with Prudential
(the reinsurer). Specifically: reinsurance Group Annuity Contract, whereby the
reinsurer, in consideration for a single premium payment by the Company,
provides reinsurance equal to 100% of all payments due under the contract; and
two yearly renewable term agreements in which the Company may offer and the
reinsurer may accept reinsurance on any life in excess of the Company's maximum
limit of retention. These agreements had no material effect on net income for
the period ended June 30, 1996 and for the year ended December 31,1995.
11. 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.
12. DIVIDENDS
The Company is subject to Arizona law which limits the amount of dividends that
insurance companies can pay to stockholders. The maximum dividend which may be
paid in any twelve month period without notification or approval is limited to
the lesser of 10% of surplus as of December 31 of the preceding year or the net
gain from operations of the preceding calendar year. Cash dividends may only be
paid out of surplus derived from realized net profits. Based on these
limitations and the Company's surplus position at December 31, 1995, the Company
would be permitted a maximum of $83 million in dividend distribution in 1996,
all of which could be paid in cash, without approval from The State of Arizona
Department of Insurance.
B-19
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Statutory Basis)
DECEMBER 31,
-----------------------------
1995 1994
-------- -------
($000'S)
ASSETS
Fixed maturities (market value $2,598,439
and $2,596,172)....................... $2,510,783 $2,647,315
Equity securities (cost $5,317 and $5,434) 4,009 3,326
Mortgage loans........................... 64,464 71,919
Investment in real estate................ 4,059 7,189
Policy loans............................. 569,273 493,862
Other long-term investments.............. 4,159 4,044
Short-term investments................... 228,016 191,455
---------- ----------
Total Investments..................... 3,384,763 3,419,110
Cash..................................... 41,435 27,780
Accrued investment income................ 59,862 59,382
Premiums due and deferred................ 19,521 16,821
Receivable from affiliates............... 8,275 7,517
Federal income taxes--from affiliate..... 8,875 23,306
Other assets............................. 9,436 25,102
Assets held in Separate Accounts......... 4,285,269 3,511,784
---------- ----------
TOTAL ASSETS............................. $7,817,436 $7,090,802
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy liabilities and insurance reserves:
Future policy benefits and claims...... $2,606,856 $2,767,552
Other policy claims and benefits payable 13,822 15,184
Interest Maintenance Reserve (IMR)..... 27,282 21,802
Payable to affiliates.................... 41,584 30,257
Other liabilities........................ 52,865 131,695
Asset Valuation Reserve (AVR)............ 37,268 23,690
Liabilities related to Separate Accounts 4,208,737 3,424,535
---------- ----------
TOTAL LIABILITIES ........................ 6,988,414 6,414,715
---------- ----------
STOCKHOLDER'S EQUITY:
Common Stock, $10 par value; authorized,
1,000,000 shares; issued and outstanding,
250,000 shares......................... 2,500 2,500
Paid-in capital.......................... 439,582 439,582
Unassigned surplus....................... 386,940 234,005
---------- ----------
TOTAL STOCKHOLDER'S EQUITY................ 829,022 676,087
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY. $7,817,436 $7,090,802
========== ==========
CONSOLIDATED STATEMENTS OF OPERATIONS
(Statutory Basis)
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
($000'S)
REVENUE
Premiums and annuity considerations....... $570,440 $611,820 $563,900
Net investment income..................... 250,386 245,977 260,939
Net realized investment gains/(losses).... 3,952 (21,215) 8,878
Other income.............................. 40,987 13,259 18,882
-------- -------- --------
TOTAL REVENUE.............................. 865,765 849,841 852,599
-------- -------- --------
BENEFITS AND EXPENSES
Current and future benefits and claims.... 512,988 559,658 534,354
Commission expenses....................... 25,755 30,169 28,386
General, administrative and other expenses 118,808 119,309 129,171
-------- -------- --------
TOTAL BENEFITS AND EXPENSES................ 657,551 709,136 691,911
-------- -------- --------
Income before provision in lieu of federal
income tax............................... 208,214 140,705 160,688
Provision in lieu of federal
income tax............................... (50,013) (87,750) (83,640)
-------- -------- --------
NET INCOME................................. $158,201 $ 52,955 $ 77,048
======== ======== ========
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-20
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(Statutory Basis)
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- -------- -------
($000'S)
COMMON STOCK
Balance, beginning of year................. $ 2,500 $ 2,500 $ 2,500
Issued during year......................... - - -
-------- -------- --------
Balance, end of year....................... 2,500 2,500 2,500
-------- -------- --------
PAID-IN CAPITAL
Balance, beginning of year................. 439,582 439,582 439,582
Paid-in during year........................ - - -
-------- -------- --------
Balance, end of year ...................... 439,582 439,582 439,582
-------- -------- --------
UNASSIGNED SURPLUS
Balance, beginning of year................. 234,005 176,711 162,530
Net income................................. 158,201 52,955 77,048
Net unrealized investment gains/(losses)... 8,761 5,814 (9,351)
(Increase) decrease in non-admitted assets. (449) (477) 575
(Increase) decrease in AVR................. (13,578) (998) 5,909
Dividends to stockholder................... - - (60,000)
-------- -------- --------
Balance, end of year....................... 386,940 234,005 176,711
-------- -------- --------
TOTAL STOCKHOLDER'S EQUITY.................. $829,022 $676,087 $618,793
======== ======== ========
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Statutory Basis)
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
-------- -------- ------
($000'S)
CASH FLOW FROM OPERATING ACTIVITIES
Net income............................... $ 158,201 $ 52,955 $ 77,048
Adjustments to reconcile net income
to net cash from operations:
Increase/(decrease) in policy
liabilities and insurance reserves..... (162,058) (143,153) (124,602)
Net decrease in Separate Accounts....... 10,717 5,674 12,173
Net realized investment (gains)/losses.. (3,952) 21,215 (8,878)
Depreciation, amortization and
other non-cash items................... (2,854) 314 1,907
(Increase)/decrease in operating assets:
Policy loans........................... (75,411) (73,591) (71,472)
Notes receivable from affiliates....... - 50,000 9,000
Interest receivable from affiliates.... - 23 420
Accrued investment income.............. (480) (2,597) 880
Premiums due and deferred.............. (2,700) (252) (880)
Receivable from affiliates............. (758) (637) 1,970
Federal income taxes--from affiliate... 14,467 (19,155) 6,879
Other assets........................... 15,666 (9,273) (9,481)
Increase/(decrease) in operating
liabilities:
Payable to affiliates.................. 11,327 (24,029) 13,260
Federal income taxes--to affiliate..... (36) - -
Other liabilities...................... (78,830) 27,710 34,632
--------- --------- ---------
CASH FLOW FROM (USED FOR) OPERATING
ACTIVITIES ............................ (116,701) (114,796) (57,144)
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity of:
Fixed maturities....................... 2,031,587 2,710,424 1,687,992
Equity securities...................... 5,557 1,909 4,032
Mortgage loans......................... 7,395 10,821 21,691
Other long-term investments............ 1,559 607 520
Investment in real estate.............. 2,925 8,676 -
Payments for the purchase of:
Fixed maturities....................... (1,876,232) (2,561,081) (1,483,234)
Equity securities...................... (4,279) (2,436) (3,068)
Mortgage loans......................... - (35,276) (918)
Other long-term investments............ (1,674) (1,584) (84)
Investment in real estate.............. - - (20)
Net proceeds/(payments) of short-term
investments............................ (36,482) 9,845 (116,735)
--------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES...... 130,356 141,905 110,176
--------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid......................... - - (60,000)
--------- ---------- -----------
Net increase/(decrease) in Cash........ 13,655 27,109 (6,968)
Cash, beginning of year................ 27,780 671 7,639
--------- ---------- ----------
CASH, END OF YEAR....................... $ 41,435 $ 27,780 $ 671
========= ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Non-cash financing:
Investment in real estate from
foreclosed mortgage loans.......... $ - $ 4,139 $ 7,300
========= ========== ==========
Cash paid in lieu of income taxes.... $ 53,107 $ 73,903 $ 76,760
========= ========== ==========
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
B-21
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES
A. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Pruco Life Insurance Company (Pruco Life), a stock life insurance company,
and its subsidiaries (collectively, the Company). Pruco Life is a
wholly-owned subsidiary of The Prudential Insurance Company of America
(The Prudential), a mutual life insurance company. The Company markets
individual life insurance and single pay deferred annuities primarily
through The Prudential's sales force. All significant intercompany
balances and transactions have been eliminated in consolidation.
B. BASIS OF PRESENTATION
The consolidated financial statements are presented in conformity with
statutory accounting practices prescribed or permitted by the National
Association of Insurance Commissioners ("NAIC") and their respective
domiciliary home state insurance departments. Prescribed statutory
accounting practices include publications of the NAIC, state laws,
regulations and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices not so prescribed.
The Company, with permission from the Arizona Department of Insurance
("the Department"), prepares an Annual Report that differs from the Annual
Statement filed with the Department in that subsidiaries are consolidated
and certain financial statement captions are presented differently.
Certain reclassifications have been made to the 1994 and 1993 financial
statements and footnotes to conform to the 1995 presentation. Included in
the Statement of Operations are certain items which, under statutory
accounting practices, are charged or credited directly to surplus.
Management has used estimates and assumptions in the preparation of the
financial statements that affect the reported amounts of assets,
liabilities, revenue and expenses. Actual results could differ from those
estimates.
The following is a reconciliation of Pruco Life's Statutory Net Income
with net income per the consolidated financial statements.
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
-------- -------- -------
($000'S)
Pruco Life Statutory Net Income including net
gains and losses on sales of investments....... $113,565 $ 49,374 $ 79,405
Adjustments to reconcile to net income
as follows:
Dividends from subsidiary...................... - - (26,000)
Change in General Account Reserve due to
changes in valuation basis................... 8,990 10,853 (2,331)
Provision for future assessments............... 367 377 588
Net gain from operations in Separate Accounts.. (9,775) 8,880 5,114
Gain/(Loss) due to income tax applicable to
other than current year...................... 19,752 (33,001) -
Other.......................................... (510) (13) 67
Subsidiaries' Statutory Net Income............. 25,812 16,485 20,205
-------- -------- --------
Consolidated Net Income.......................... $158,201 $ 52,955 $ 77,048
======== ======== ========
C. FUTURE APPLICATION OF ACCOUNTING STANDARDS
The Financial Accounting Standards Board (the "FASB") issued
Interpretation No. 40, "Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises," which, as
amended, is effective for fiscal years beginning after December 15, 1995.
Interpretation No. 40 changes the current practice of
B-22
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
mutual life insurance companies, with respect to utilizing statutory basis
financial statements for general purposes, in not allowing such financial
statements to be referred to as having been prepared in accordance with
GAAP. Interpretation No. 40 requires GAAP financial statements of mutual
life insurance companies to apply all GAAP pronouncements, unless
specifically exempted. See Note 9 of the Notes to Consolidated Financial
Statements on page B-31 for the impact of Interpretation No. 40 on the
Company's Total Stockholders' Equity.
D. SELECTED FINANCIAL DATA OF PRUCO LIFE
Pruco Life markets the Future Value Annuity Contract, and individual
deferred annuity contract. Only assets of Pruco Life, shown below, are
available to meet the guarantees under this annuity contract. The
following is the selected financial data of Pruco Life:
DECEMBER 31,
------------------------------
1995 1994
---------- ----------
($000'S)
Assets:
Investments other than subsidiaries........ $2,736,259 $2,758,088
Investment in subsidiaries................. 198,601 169,816
Other assets............................... 132,185 135,778
Assets held in Separate Accounts........... 3,495,841 2,869,734
---------- ----------
Total Assets............................... $6,562,886 $5,933,416
========== ==========
Liabilities:
Policy liabilities and insurance reserves.. $2,187,632 $2,296,987
Other liabilities.......................... 115,115 163,322
Liabilities related to Separate Accounts... 3,431,117 2,797,020
---------- ----------
Liabilities:
Total Liabilities.......................... $5,733,864 $5,257,329
========== ==========
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
--------- --------- ---------
($000'S)
Revenues........................... $717,990 $698,685 $716,402
Benefits, expenses and taxes....... 588,812 659,237 633,277
-------- -------- --------
Net Income......................... $129,178 $ 39,448 $ 83,125
======== ======== ========
E. INVESTMENTS
Fixed maturities, which include long-term bonds and redeemable preferred
stock, are stated primarily at amortized cost. Certain investments in this
category were non-income producing at December 31, 1995 and 1994. These
investments amounted to $29 million and $13 million, respectively.
Equity securities, which consist primarily of common stock, are carried at
market value which is based on quoted market prices, where available, or
prices provided by the National Association of Insurance Commissioners'
(NAIC) Securities Valuation Office (SVO).
Mortgage loans are carried at the lower of the fair value of the
underlying property or unpaid principal balance. At December 31, 1995, two
loans were in foreclosure in the amount of $8 million. At December 31,
1994, one loan was in foreclosure in the amount of $6 million.
Policy loans are stated primarily at unpaid principal balances.
B-23
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
All the Company's real estate investments were acquired through
foreclosure during 1995 and 1994. These properties are carried at the
lower of cost of fair value less disposition costs. Fair value is
considered to be the amount that could reasonably be expected in a current
transaction between willing parties, other than in forced or liquidation
sale. Depreciation on these properties for the years ended December 31,
1995 and 1994 was $106 thousand and $456 thousand, respectively.
Other long-term investments, which consist solely of limited partnerships,
are valued at the aggregate net equity in the partnerships. Certain
investments in this category were non-income producing at December 31,
1995. These investments amounted to $300 thousand. There were no
non-income producing investments at December 31, 1994.
Short-term investments are stated at amortized cost, which approximates
fair value.
Realized investment gains and losses are reported based on specific
identification of the investments sold.
F. FUTURE POLICY BENEFITS, LOSSES AND CLAIMS
Reserves for individual life insurance are calculated using various
methods, interest rates and mortality tables which produce reserves that
meet the aggregate requirements of state laws and regulations.
Approximately 7% of individual life insurance reserves are determined
using the net level premium method, or by using the greater of a net level
premium reserve or the policy cash value. About 93% of individual life
insurance reserves are calculated according to the Commissioner's Reserve
Valuation Method ("CRVM"), or methods which compare CRVM reserves to
policy cash values.
Reserves for deferred individual annuity contracts are determined using
the Commissioner's Annuity Reserve Valuation Method.
For life insurance and annuities, unpaid claims include estimates of both
the death benefits on reported claims and those which are incurred but not
reported.
Reserves for other deposit funds or other liabilities with life
contingencies reflect the contract deposit account or experience
accumulation for the contract and any purchased annuity reserves.
G. REVENUE RECOGNITION AND RELATED EXPENSES
Premium revenues are recognized as income over the premium paying period
of the related policies. Annuity considerations are recognized as revenue
when received. Expenses, including new business acquisition costs such as
commissions, are charged to operations as incurred.
H. ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
The Asset Valuation Reserve (AVR) and the Interest Maintenance Reserve
(IMR) are required for life insurance companies under NAIC regulations.
The AVR is calculated based on a statutory formula and designed to
mitigate the effect of valuation and credit-related losses on unassigned
surplus.
The components of AVR at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
($000'S)
FIXED EQUITY REAL ESTATE
MATURITIES MORTGAGES SECURITIES & OTHER INV. TOTAL
---------- --------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
Beginning of Year 1994 -- AVR ................ $ 18,294 $ 3,699 $ 699 $ 0 $ 22,692
Additions .................................... 12,062 2,166 348 2,047 16,623
Deductions ................................... (10,454) (4,355) (314) (502) (15,625)
-------- ------- ------- ------ --------
End of Year 1994 -- AVR ...................... $ 19,902 $ 1,510 $ 733 $1,545 $ 23,690
======== ======= ======= ====== ========
Beginning of Year 1995 -- AVR ................ $ 19,902 $ 1,510 $ 733 $1,545 $ 23,690
Additions .................................... 14,540 1,007 2,764 272 18,583
Deductions ................................... (1,832) (39) (2,627) (507) (5,005)
-------- ------- ------- ------ --------
End of Year 1995-- AVR ....................... $ 32,610 $ 2,478 $ 870 $1,310 $ 37,268
========= ======= ======= ====== ========
</TABLE>
B-24
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
The IMR captures net realized capital gains and losses resulting from
changes in the general level of interest rates. These gains and losses are
amortized into investment income over the expected remaining life of the
investment sold. The IMR balance was $27.3 million and $21.8 million at
December 31, 1995 and 1994, respectively. "Net realized investment
gains/(losses)" of $9.2 million and $(19.9) million were deferred in 1995
and 1994, respectively. Amortized into "Net investment income" were $3.8
million and $4.8 million of IMR for the year ended December 31, 1995 and
1994, respectively.
I. FEDERAL INCOME TAXES
The Company is a member of a group of affiliated companies which join in
filing a consolidated federal tax return. Pursuant to a tax allocation
agreement, current tax liabilities are determined for individual companies
based upon their separate return basis taxable income. Members with
taxable income incur an amount in lieu of the separate return basis
federal tax. Members with a loss for tax purposes recognize a current
benefit in proportion to the amount of their losses utilized in computing
consolidated taxable income. Differences between estimated liabilities and
actual payments are included in the current year's operations as an
adjustment to the provision in lieu of income taxes. For the year 1993,
the Company was allocated a portion of the consolidated income tax
liability attributable to Section 809 of the Internal Revenue Code
(commonly referred to as "Equity Tax"). Since 1994, the Company has no
longer been allocated this Equity Tax.
Taxes on the Company are calculated under the Internal Revenue Code of
1986 which provides that life insurance companies be taxed on their gain
from operations after dividends to policyholders. In calculating this tax,
the Code requires the capitalization and amortization of policy
acquisition expenses.
J. SEPARATE ACCOUNTS
Separate accounts represent funds for which investment income and
investment gains and losses accrue directly to, and investment risk is
borne by, the policyholders, with the exception of the Pruco Life Modified
Guaranteed Annuity Account. The Pruco Life Modified Guaranteed Annuity
Account is a non-unitized separate account, which funds the Modified
Guaranteed Annuity Contract and the Market Value Adjustment Annuity
Contract. Owners of the Pruco Life Modified 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 Pruco Life. Assets are carried at market value. Deposits to
such accounts are included in revenues with a corresponding liability
increase included in benefits and expenses. The assets of each account are
legally segregated and are not subject to claims that arise out of any
other business of the Company. Consequently, management believes that it
is appropriate to combine Separate Account policyholder net investment
income and net realized and unrealized capital gains/(losses) along with
benefit payments and change in reserves in "Current and future benefits
and claims". Policyholder net investment income and net realized and
unrealized gains/(losses) for the years ended December 31, 1995, 1994 and
1993 were $805 million, ($28) million and $443 million, respectively.
B-25
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
2. FEDERAL INCOME TAXES
The following is a reconciliation of the Company's federal tax provision
as computed at the federal tax rate with that computed at the Company's
effective tax rate. The below amounts include federal income tax
applicable to prior years, where appropriate.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
-------- -------- -------
($000'S)
<S> <C> <C> <C>
Income before provision in lieu of
federal income taxes.................... $208,214 $140,705 $160,688
Statutory tax rate........................ 35% 35% 35%
--------- -------- --------
Expected federal income taxes............. $ 72,875 $ 49,247 $ 56,241
Tax effect of:
Statutory/tax policy reserve
difference............................ (14,524) 19,949 14,577
Timing differences in tax/book income
recognition on investments............ (6,980) 11,608 4,055
Timing differences in tax/book income
Recognition--other.................... (7,173) (6,816) (415)
Decrease/(Increase) in life insurance
premiums deferred and uncollected..... (953) (88) (308)
Capitalization of policy acquisition
expenses.............................. 6,768 13,850 7,374
Allocated equity tax.................... - - 2,116
-------- -------- --------
Federal income taxes...................... $ 50,013 $ 87,750 $ 83,640
======== ======== ========
Effective tax rate........................ 24% 62% 52%
======== ======== ========
</TABLE>
3. NET INVESTMENT INCOME
Net investment income consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
---------- ---------- --------
($000'S)
<S> <C> <C> <C>
Gross investment income
Fixed maturities......................... $194,198 $196,909 $216,660
Equity securities......................... 104 14 22
Mortgage loans............................ 7,757 4,041 6,359
Investment in real estate................. 647 2,146 2,066
Policy loans.............................. 29,775 25,692 21,741
Short-term investments.................... 15,092 12,676 9,031
Other..................................... 3,949 5,075 3,945
-------- -------- --------
251,522 246,553 259,824
Investment expenses......................... (4,904) (5,421) (5,570)
-------- -------- --------
Net investment income before IMR............ 246,618 241,132 254,254
Amortization of Interest Maintenance Reserve 3,768 4,845 6,685
-------- -------- --------
Net investment income....................... $250,386 $245,977 $260,939
======== ======== ========
</TABLE>
B-26
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
4. INVESTMENT AND INVESTMENT GAINS (LOSSES)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
---------- ---------- --------
($000'S)
<S> <C> <C> <C>
Realized Gains (Losses)
Fixed maturities.......................... $ 11,359 $(38,180) $ 32,471
Equity securities......................... 2,020 503 607
Mortgage loans............................ (90) (4,581) (2,592)
Investment in real estate................. (99) 1,184 (2,004)
Other..................................... 10 (1) (411)
Tax effected amounts transferred to Interest
Maintenance Reserve....................... (9,248) 19,860 (19,193)
-------- -------- --------
Net realized investment gains............... $ 3,952 $(21,215) $ 8,878
======== ======== ========
Unrealized Gains (Losses)
Fixed maturities.......................... 9,192 5,430 (9,380)
Equity securities......................... 799 (490) 260
Other..................................... (1,229) 874 (231)
-------- -------- --------
Net unrealized investment gains (losses) 8,762 5,814 (9,351)
Balance beginning of year................... (12,352) (18,166) (8,815)
-------- -------- --------
Balance end of year......................... $ (3,590) $(12,352) $(18,166)
======== ======== ========
</TABLE>
EQUITY SECURITIES AT DECEMBER 31,
($000'S)
GROSS UNREALIZED
-----------------------------------------------------
FAIR
MARKET
COST GAINS LOSSES VALUE
------- ------- -------- -------
1995 ........... $5,317 $581 $1,889 $4,009
1994 ........... 5,434 386 2,493 3,327
1993 ........... 4,405 742 2,359 2,788
FIXED MATURIES
--------------------------------
($000'S)
INCREASE (DECREASE)
AT DECEMBER 31, IN DIFFERENCE BETWEEN
-------------------------------- MARKET VALUE AND
AMORTIZED MARKET AND AMORTIZED COST
COST VALUE DURING THE YEAR
---------- ---------- ------------------
1995 .... $2,510,782 $2,598,439 $ 138,800
1994 .... 2,647,315 2,596,172 (167,494)
1993 .... 2,835,251 2,951,602 10,453
B-27
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
The amortized cost and estimated market value of fixed maturities at December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995
--------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
($000's) ($000's) ($000's) ($000's)
----------- -------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of
U.S. government corporations
and agencies ........................ $ 324,854 $ 6,829 $ 61 $ 331,622
Obligations of U.S. and
political subdivisions .............. - - - -
Debt securities issued by foreign
governments and
their agencies ...................... 73,042 3,055 - 76,097
Corporate securities .................. 1,943,696 73,489 3,974 2,013,211
Mortgage backed securities ............ 169,190 8,717 398 177,509
---------- -------- ------- ----------
Total ................................. $2,510,782 $ 92,090 $ 4,433 $2,598,439
========== ======== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
($000'S) ($000'S) ($000'S) ($000'S)
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of
U.S. government corporations
and agencies $ 409,678 $ 224 $ 20,259 $ 389,643
Obligations of U.S. and
political subdivisions ............. - - - -
Debt securities issued by
foreign governments and
their agencies ..................... 86,026 2,075 2,310 85,791
Corporate securities ................. 1,960,296 17,005 43,521 1,933,780
Mortgage-backed securities ........... 191,315 1,429 5,786 186,958
---------- -------- -------- ----------
Total ................................ $2,647,315 $ 20,733 $ 71,876 $2,596,172
========== ======== ======== ==========
</TABLE>
The amortized cost and estimated market value of fixed maturities at December
31, 1995 by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
ESTIMATED
AMORTIZED MARKET
COST VALUE
($000's) ($000's)
---------- ----------
Due in one year or less ................... $ 161,693 $ 163,629
Due after one year through five years ..... 1,500,204 1,549,264
Due after five years through ten years .... 529,845 556,294
Due after ten years ....................... 149,850 151,743
---------- ----------
2,341,592 2,420,930
Mortgage-backed securities ................ 169,190 177,509
---------- ----------
Total ..................................... $2,510,782 $2,598,439
========== ==========
Proceeds from the sale/maturity of fixed maturities during 1995, 1994, and
1993 were $2.0 billion, $2.7 billion and $1.7 billion, respectively. Gross
gains of $28.8 million, $16.8 million and $44.5 million and gross losses
of $17.5 million, $49.8 million and $12.0 million were realized on those
sales during 1995, 1994, and 1993, respectively.
The Company invests in both investment grade and non-investment grade
securities. The SVO of the NAIC rates fixed maturities held by insurers
(SVO rated securities accounted for approximately 87.2% and 93.6% of the
Company's total fixed maturities balances at both December 31, 1995 and
1994) for regulatory purposes and
B-28
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
groups investments into six categories ranging from highest quality bonds
to those in or near default. The lowest three NAIC categories represent,
for the most part, high-yield securities and are defined by the NAIC as
including any security with a public agency rating of B+ or B1 or less.
Included in "fixed maturities" are securities that are classified by the
NAIC as being in the lowest three rating categories. These approximated
1.0% and 1.5% of the Company's assets at December 31, 1995 and 1994,
respectively. The amount by which the market value of these securities
exceeded the carrying value was approximately $1.8 million and $(0.9)
million at December 31, 1995 and 1994, respectively.
5. RELATED PARTY TRANSACTIONS
A. SERVICE AGREEMENTS
The Company, The Prudential, Pruco Life of New Jersey and Pruco Securities
Corporation, an indirect wholly-owned subsidiary of The Prudential,
operate under service and lease agreements whereby services of officers
and employees, supplies, use of equipment and office space are provided.
The net cost of these services allocated to the Company were $98 million,
$78 million, and $98 million for the years ended December 31, 1995, 1994,
and 1993, respectively.
In a reorganization of the parent's Individual Insurance Department,
effective January 1, 1993, the corporate staff of the Company was absorbed
by the parent. The costs associated with these employees, which were
previously borne by the Company, are now charged to the Company under the
service and lease agreements with the parent.
B. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company is a wholly-owned subsidiary of The Prudential which sponsors
several defined benefit pension plans that cover substanially all of its
employees. Benefits are generally based on career average earnings and
credited length of service. The Prudential's funding policy is to
contribute annually the amount necessary to satisfy the Internal Revenue
Service contribution guidelines.
No pension expense for contributions to the plan was allocated to the
Company in 1995, 1994 or 1993 because the plan was subject to the full
funding limitation under the Internal Revenue Code.
POSTRETIREMENT LIFE AND HEALTH BENEFITS
The Prudential also sponsors certain life insurance and health care
benefits for its retired employees. Substantially all employees may become
eligible to receive a benefit if they retire after age 55 with at least 10
years of service. Postretirement benefits, with respect to The Prudential,
are recognized in accordance with the prescribed NAIC policy. The
Prudential elected to amortize its obligation over twenty years. A
provision for contributions to the postretirement fund is included in the
net cost of services allocated to the Company discussed above for the
years ended December 31, 1995, 1994, and 1993.
C. REINSURANCE
The Company currently has three reinsurance agreements in place with The
Prudential (the reinsurer). Specifically: reinsurance of a 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 contact; and, two Yearly Renewable Term agreement 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 ($2.5 million).
These agreements had no material effect on net income for the years ended
December 1995, 1994, and 1993.
D. OTHER TRANSACTIONS
The Company has issued approximately 375 variable universal life contracts
to The Prudential for the purpose of funding non-qualified pension
benefits for certain employees. Included in insurance premiums and annuity
considerations for the years ended December 31, 1995, 1994 and 1993 are
respectively, $12 million, $12 million and $12 million, which are
attributable to these contracts.
B-29
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
6. 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 12 month period without notification or approval
is limited to the lesser of 10% of surplus as of December 31 of the
preceding year or the net gain from operations of the preceding calendar
year. Cash dividends may only be paid out of surplus derived from realized
net profits. Based on these limitations and the Company's surplus position
at December 31, 1995, the Company would be permitted a maximum of $83
million in dividend distributions in 1996, all of which could be paid in
cash, without approval from The State of Arizona Department of Insurance.
7. FAIR VALUE INFORMATION
The fair value amounts have been determined by the Company using available
information and reasonable valuation methodologies for only those accounts
for which fair value disclosures are required. Considerable judgement is
necessarily applied in interpreting data to develop the estimates of fair
value. Accordingly, the estimates presented may not be realized in a
current market exchange. The use of different market assumptions and/or
estimation methodologies could have a material effect on the estimated
fair values.
The following methods and assumptions were used in calculating the fair
values. For all other financial instruments presented in the table, the
carrying value is a reasonable estimate of fair value.
FIXED MATURITIES. Fair values for fixed maturities, other than private
placement securities, are based on quoted market prices or estimates from
independent pricing services. Fair values for private placement securities
are estimated using a discounted cash flow model which considers the
current market spreads between the U.S. Treasury yield curve and corporate
bond yield curve adjusted for the type of issue, its current quality and
its remaining average life. The fair value of certain non-performing
private placement securities is based on amounts provided by state
regulatory authorities.
EQUITY SECURITIES. Fair value is based on quoted market prices, where
available, or prices provided by state regulatory authorities.
MORTGAGE LOANS. The fair value of the commercial mortgage and agricultural
loan portfolio is primarily based upon the present value of the scheduled
cash flows discounted at the appropriate U.S. Treasury rate, adjusted for
the current market spread for a similar quality mortgage. For certain
non-performing and other loans, fair value is based upon the value of the
underlying collateral.
POLICY LOANS. The estimated fair value is calculated using a discounted
cash flow model based upon current U.S. Treasury rates and historical loan
repayments.
INVESTMENT-TYPE INSURANCE CONTRACT LIABILITIES. Fair values for the
Company's investment-type insurance contract liabilities are estimated
using a discounted cash flow model, based on interest rates currently
being offered for similar contracts.
B-30
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Statutory Basis)
The following table discloses the carrying amounts and estimated fair
values of the Company's financial instruments at December 31, 1995 and
1994.
<TABLE>
<CAPTION>
(000's) (000's)
1995 1994
----------------------- --------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities ............. $2,510,782 $2,598,438 $ 2,647,315 $ 2,596,172
Equity securities ............ 4,009 4,036 3,326 3,326
Mortgage Loans ............... 64,464 63,635 71,919 71,805
Policy Loans ................. 569,273 577,975 493,862 448,617
Other Long term investments .. 4,159 4,159 4,044 4,044
Short term investments ....... 228,016 228,016 191,455 191,455
Financial Liabilities:
Investment type
insurance contracts ........ $ 536,963 $ 537,241 $ 794,691 $ 761,324
</TABLE>
8. 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 The Prudential, the Company and agents
appointed by The Prudential and the Company. The Prudential has agreed to
indemnify the Company for any and all losses resulting from such
litigation.
9. SUBSEQUENT EVENT
As required by Interpretaion No. 40, in the first quarter of 1996, the
Company changed its basis of accounting from statutory accounting
practices to Generally Accepted Accounting Principles ("GAAP") (see Note
1). The effect of this change to Total Stockholders' Equity at December
31, 1995 was an increase of $433 million (unaudited).
B-31
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Pruco Life Insurance Company
Newark, New Jersey
We have audited the accompanying statements of financial position--statutory
basis of Pruco Life Insurance Company and Subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows--statutory basis for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Notes 1 and 9, as of the first quarter of 1996, the Company has
changed its accounting policies to conform to all generally accepted accounting
principles pronouncements. Therefore, these financial statements, which were
prepared in conformity with the accounting practices prescribed or permitted by
the Insurance Department of the State of Arizona (statutory basis), which is a
comprehensive basis of accounting, are no longer in accordance with generally
accepted accounting principles. The effects on such financial statements of the
differences between the statutory basis of accounting and generally accepted
accounting principles are also described in Note 9.
In our opinion, because of the effects of the differences between the two bases
of accounting referred to in the preceding paragraph, such financial statements
do not present fairly, in all material respects, the financial position of Pruco
Life Insurance Company and Subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
However, in our opinion, the accompanying statutory basis financial statements
present fairly, in all material respects, the financial position of Pruco Life
Insurance Company and Subsidiaries as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, on the basis of accounting described in Note 1.
Deloitte & Touche LLP
Parsippany, New Jersey
March 15, 1996, except for Note 9
as to which the date is September 11, 1996
B-32
<PAGE>
WITH RESPECT TO RESIDENTS OF STATES, OTHER THAN PENNSYLVANIA, IN WHICH DISCOVERY
SELECT(SM) IS BEING OFFERED. WITH RESPECT TO RESIDENTS OF PENNSYLVANIA, SEE
PAGE C-4.
MARKET-VALUE ADJUSTMENT FORMULA
The Market-Value Adjustment, which is applied to withdrawals and transfers made
at any time other than the 30-day period following the end of an interest rate
period, involves three amounts:
1. The number of whole months remaining in the existing interest rate
period.
2. The guaranteed interest rate.
3. The interest rate that Pruco Life declares for a duration of one year
longer than the number of whole years remaining on the existing cell
being withdrawn from.
Stated as a formula, the Market Value Factor is equal to:
(M/12) x (R-C), not to exceed +0.40 or be less than -0.40;
Where,
M = the number of whole months (not to be less than one) remaining in the
interest rate period.
R = the Contract's guaranteed interest rate expressed as a decimal. Thus 6.2% is
converted to 0.062.
C = the interest rate, expressed as a decimal, that Pruco Life declares for
a duration equal to the number of whole years remaining in the present
interest rate period, plus 1 year as of the date the request for a
withdrawal or transfer is received.
The Market-Value Adjustment is then equal to the Market Value Factor multiplied
by the amount subject to a Market-Value Adjustment.
The steps below explain how a Market-Value Adjustment is calculated.
STEP 1: Divide the number of whole months left in the existing interest rate
period (not to be less than one) by 12.
STEP 2: Determine the interest rate Pruco Life declares on the date the
request for withdrawal or transfer is received for a duration of years equal
to the whole number of years determined in Step 1, plus 1 additional year.
Subtract this interest rate from the guaranteed interest rate. The result
could be negative.
STEP 3: Multiply the results of Step 1 and Step 2. Again, the result could
be negative. If the result is less than -0.4, use the value -0.4. If the
result is in between -0.4 and 0.4, use the actual value. If the result is
more than 0.4, use the value 0.4.
STEP 4: Multiply the result of Step 3 (which is the Market Value Factor) by
the value of the amount subject to a Market-Value Adjustment. The result is
the Market-Value Adjustment.
STEP 5: The result of Step 4 is added to the interest cell. If the
Market-Value Adjustment is positive, the interest cell will go up in value.
If the Market-Value Adjustment is negative, the interest cell will go down
in value.
Depending upon when the withdrawal request is made, a withdrawal charge may
apply.
The following example will illustrate the application of a Market-Value
Adjustment and the determination of the withdrawal charge. Suppose a Contract
owner made two invested purchase payments, the first in the amount of $10,000 on
December 1, 1995, all of which was allocated to the Equity Subaccount, and the
second in the amount of $5,000 on October 1, 1997, all of which was allocated to
the MVA Option with a guaranteed interest rate of 8% (0.08) for 7 years. A
request for withdrawal of $8,500 is made on February 1, 2000 (the Contract owner
does not provide any withdrawal instructions) . On that date the amount in the
Equity Subaccount is equal to $12,000 and the amount in the interest cell with a
maturity date of September 30, 2004 is $5,985.23, so that the Contract Fund on
that date is equal to $17,985.23.
C-1
<PAGE>
On February 1, 2000, the interest rate declared by Pruco Life for the duration
of 5 years (4 whole years remaining until September 30, 2004, plus one year) is
11%.
The following computations would be made:
1. Calculate the Contract Fund value as of the effective date of the
transaction. This would be $17,985.23.
2. Calculate the charge-free amount (the amount of the withdrawal that is not
subject to a withdrawal charge).
DATE PAYMENT FREE
---- ------- ----
12/1/95 $ 10,000 $1,000
12/1/96 $2,000
10/1/97 $ 5,000 $2,500
12/1/97 $4,000
12/1/98 $5,500
12/1/99 $7,000
The charge-free amount in the fifth Contract year is 10% of $15,000 (total
purchase payments) plus $5,500 (the charge-free amount available in the fourth
Contract year) for a total of $7,000.
3. Since the withdrawal request is in the fifth Contract year, a 3% withdrawal
charge rate applies to any portion of the withdrawal which is not
charge-free.
$8,500.00 requested withdrawal amount
- $7,000.00 charge-free
-----------
$1,500.00 additional amount needed to complete withdrawal
The Contract provides that the Contract Fund will be reduced by an amount
which, when reduced by the withdrawal charge, will equal the amount requested.
Therefore, in order to produce the amount needed to complete the withdrawal
request ($1,500), we must "gross-up" that amount, before applying the withdrawal
charge rate. This is done by dividing by 1 minus the withdrawal charge rate.
$1,500.00 / (1-.03) =
$1,500.00 / 0.97 = $1,546.39 grossed-up amount
Please note that a 3% withdrawal charge on this grossed-up amount reduces
it to $1,500, the balance needed to complete the request.
$1,546.39 grossed-up amount
X .03 withdrawal charge rate
---------
$ 6.39 withdrawal charge
4. The Market Value Factor is determined as described in steps 1 through 5,
above. In this case, it is equal to 0.08 (8% is the guaranteed rate in the
existing cell) minus 0.11 (11% is the interest rate that would be offered for an
interest cell with a duration of the remaining whole years plus 1), which is
- -0.03, multiplied by 4.58333 (55 months remaining until September 30, 2004,
divided by 12) or -0.13750. Thus, there will be a negative Market-Value
Adjustment of 14% of the amount in the interest cell that is subject to the
adjustment.
-0.13750 X $5,985.23 = - 822.97 negative MVA
$ 5,985.23 unadjusted value
----------
$ 5,162.26 ajusted value
$12,000.00 Equity value
----------
$17,162.26 adjusted Contract Fund
C-2
<PAGE>
5. The total amount to be withdrawn, $8,546.39, (sum of the surrender charge,
$46.39, and the requested withdrawal amount of $8,500) is apportioned over all
accounts making up the Contract Fund following the Market-Value Adjustments, if
any, associated with the MVA option.
Equity ($12,000 / $17,162.26) X $8,546.39 = $5,975.71
7-Yr MVA ($5,162.26 / $17,162.26) X $8,546.39 = $2,570.68
---------
$8,546.39
6. The adjusted value of the interest cell, $5,162.26, reduced by the withdrawal
of $2,570.68 leaves $2,591.58. This amount must be "unadjusted" by dividing it
by 0.86250 (1 plus the Market-Value Adjustment of -0.13750) to determine the
amount remaining in the interest cell to which the guaranteed interest rate of
8% will continue to be credited until September 30, 2004 or a subsequent
withdrawal. That amount is $3,004.73.
C-3
<PAGE>
WITH RESPECT TO RESIDENTS OF PENNSYLVANIA ONLY.
MARKET-VALUE ADJUSTMENT FORMULA
The Market-Value Adjustment, which is applied to withdrawals and transfers made
at any time other than the 30-day period following the end of an interest rate
period, involves three amounts:
1. The number of whole months remaining in the existing interest rate
period.
2. The guaranteed interest rate.
3. The interpolated value of the interest rates that Pruco Life declares
for the number of whole years remaining and the duration 1 year longer
than the number of whole years remaining in the existing interest rate
period.
Stated as a formula, the Market Value Factor is equal to:
(M/12) x (R-C), not to exceed +0.40 or be less than -0.40;
Where,
M = the number of whole months (not to be less than one) remaining in the
interest rate period.
R = the Contract's guaranteed interest rate expressed as a decimal. Thus 6.2% is
converted to 0.062.
C = the interpolated value of the interest rates, expressed as a decimal, that
Pruco Life declares for the number of whole years remaining and the duration
1 year longer than the number of whole years remaining as of the date the
request for a withdrawal or transfer is received or m/365 x (n+1)year rate
+ (365-m)/365 x n year rate, where 'n' equals years and 'm' equals days
remaining in year 'n' of the existing interest rate period.
The Market-Value Adjustment is then equal to the Market Value Factor multiplied
by the amount subject to a Market-Value Adjustment.
The steps below explain how a Market-Value Adjustment is calculated.
Step 1: Divide the number of whole months left in the existing interest rate
period (not to be less than one) by 12.
Step 2: Interpolate the interest rates Pruco Life declares on the date the
request for withdrawal or transfer is received for the duration of years
equal to the whole number of years determined in Step 1, plus the whole
number of years plus 1 additional year.
Step 3: Subtract this interpolated interest rate from the guaranteed
interest rate. The result could be negative.
Step 4: Multiply the results of Step 1 and Step 2. Again, the result could
be negative. If the result is less than -0.4, use the value -0.4. If the
result is in between -0.4 and 0.4, use the actual value. If the result is
more than 0.4, use the value 0.4.
Step 5: Multiply the result of Step 3 (which is the Market Value Factor)
by the value of the amount
C-4
<PAGE>
subject to a Market-Value Adjustment. The result is the Market-Value
Adjustment.
Step 6: The result of Step 4 is added to the interest cell. If the
Market-Value Adjustment is positive, the interest cell will go up in value.
If the Market-Value Adjustment is negative, the interest cell will go down
in value.
Depending upon when the withdrawal request is made, a withdrawal charge may
apply.
The following example will illustrate the application of a Market-Value
Adjustment and the determination of the withdrawal charge. Suppose a Contract
owner made two invested purchase payments, the first in the amount of $10,000 on
December 1, 1995, all of which was allocated to the Equity Subaccount, and the
second in the amount of $5,000 on October 1, 1997, all of which was allocated to
the MVA Option with a guaranteed interest rate of 8% (0.08) for 7 years. A
request for withdrawal of $8,500 is made on February 1, 2000 (the Contract owner
does not provide any withdrawal instructions). On that date the amount in the
Equity Subaccount is equal to $12,000 and the amount in the interest cell with a
maturity date of September 30, 2004 is $5,985.23, so that the Contract Fund on
that date is equal to $17,985.23.
On February 1, 2000, the interest rates declared by Pruco Life for the durations
4 and 5 years (4 whole years remaining until September 30, 2004, plus 1 year)
are 10.8% and 11.4%, respectively.
The following computations would be made:
1. Calculate the Contract Fund value as of the effective date of the
transaction. This would be $17,985.23.
2. Calculate the charge-free amount (the amount of the withdrawal that is not
subject to a withdrawal charge).
DATE PAYMENT FREE
------- ------- ------
12/1/95 $10,000 $1,000
12/1/96 $2,000
10/1/97 $ 5,000 $2,500
12/1/97 $4,000
12/1/98 $5,500
12/1/99 $7,000
The charge-free amount in the fifth Contract year is 10% of $15,000 (total
purchase payments) plus $5,500 (the charge-free amount available in the fourth
Contract year) for a total of $7,000.
C-5
<PAGE>
3. Since the withdrawal request is in the fifth Contract year, a 3% withdrawal
charge rate applies to any portion of the withdrawal which is not charge-free.
$8,500.00 requested withdrawal amount
-$7,000.00 charge-free
----------
$1,500.00 additional amount needed to complete withdrawal
The Contract provides that the Contract Fund will be reduced by an amount
which, when reduced by the withdrawal charge, will equal the amount requested.
Therefore, in order to produce the amount needed to complete the withdrawal
request ($1,500), we must "gross-up" that amount, before applying the withdrawal
charge rate. This is done by dividing by 1 minus the withdrawal charge rate.
$1,500.00 / (1-.03) =
$1,500.00 / 0.97 = $1,546.39 grossed-up amount
Please note that a 3% withdrawal charge on this grossed-up amount reduces
it to $1,500, the balance needed to complete the request.
$1,546.39 grossed-up amount
X .03 withdrawal charge rate
---------
$ 46.39 withdrawal charge
4. The Market Value Factor is determined as described in steps 1 through 5,
above. In this case, it is equal to 0.08 (8% is the guaranteed rate in the
existing cell) minus 0.11 (11% is the interpolated value for the interest rates
that would be offered for interest cells with durations of whole years remaining
and whole year plus 1 remaining in the existing interest rate period), which is
- -0.03, multiplied by 4.58333 (55 months remaining until September 30, 2004,
divided by 12) or -0.13750. Thus, there will be a negative Market-Value
Adjustment of 14% of the amount in the interest cell that is subject to the
adjustment.
-0.13750 X $5,985.23 = - 822.97 negative MVA
$ 5,985.23 unadjusted value
----------
$ 5,162.26 adjusted value
$12,000.00 Equity value
----------
$17,162.26 adjusted Contract Fund
5. The total amount to be withdrawn, $8,546.39, (sum of the surrender charge,
$46.39, and the requested withdrawal amount of $8,500) is apportioned over all
accounts making up the Contract Fund following the Market-Value Adjustments, if
any, associated with the MVA option.
Equity ($12,000 / $17,162.26) X $8,546.39 = $5,975.71
7-Yr MVA ($5,162.26 / $17,162.26) X $8,546.39 = $2,570.68
---------
$8,546.39
6. The adjusted value of the interest cell, $5,162.26, reduced by the withdrawal
of $2,570.68 leaves $2,591.58. This amount must be "unadjusted" by dividing it
by 0.86250 (1 plus the Market-Value Adjustment of -0.13750) to determine the
amount remaining in the interest cell to which the guaranteed interest rate of
8% will continue to be credited until September 30, 2004 or a subsequent
withdrawal. That amount is $3,004.73.
C-6
<PAGE>
O FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
O THE PRUDENTIAL SERIES FUND, INC.
=============================================
- ----------------------------------=============================================
----------------------
BULK RATE
U.S. Postage
PAID
Jersey City, N.J.
Permit No. 60
----------------------
The Pruco Life Insurance Company of America
213 Washington Street
Newark, New Jersey 07102-3777
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION REQUEST CARD
DISCOVERY SELECT
(PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
VARIABLE ANNUITY CONTRACT)
Please send me a copy of the current Statement of Additional Information for the
Pruco Life Flexible Premium Variable Annuity Account and Discovery Select(SM)
Annuity Contract (Please print)
Name:__________________________________________________________________________
Address:_______________________________________________________________________
City:_________________________________State:_________________Zip:______________
- --------------------------------------------------------------------------------
(Back of Card)
Please
place
correct
postage
here
PRUDENTIAL ANNUITY SERVICE CENTER
300 Columbus Circle
Edison, New Jersey 08837
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
September 12, 1996
PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
VARIABLE ANNUITY CONTRACTS
The DISCOVERY SELECT(SM) Annuity Contract* (the "Contract") is an individual
variable annuity contract issued by the Pruco Life Insurance Company ("Pruco
Life"), a stock life insurance company that is a wholly-owned subsidiary of The
Prudential Insurance Company of America ("The Prudential") and is funded through
the Pruco Life Flexible Premium Variable Annuity Account (the "Account"). The
Contract is purchased by making an initial purchase payment of $10,000 or more;
subsequent payments must be $1,000 or more.
This statement of additional information is not a prospectus and should be read
in conjunction with the Contract's prospectus, dated September 12, 1996, which
is available without charge upon written request to the Prudential Annuity
Service Center, 300 Columbus Circle, Edison, New Jersey 08837, or by telephoning
1-888-PRU-2888 (toll free).
PRUCO LIFE INSURANCE COMPANY PRUDENTIAL ANNUITY SERVICE CENTER
213 Washington Street 300 Columbus Circle
Newark, New Jersey 07102-2992 Edison, New Jersey 08837
Telephone: 1-888-PRU-2888 (toll free)
*DISCOVERY SELECT is a service mark of The Prudential.
Catalog No.
<PAGE>
CONTENTS
PAGE
OTHER INFORMATION CONCERNING THE ACCOUNT.......................................1
PRINCIPAL UNDERWRITER.................................................1
DETERMINATION OF SUBACCOUNT UNIT VALUES...............................1
PERFORMANCE INFORMATION...............................................1
COMPARATIVE PERFORMANCE INFORMATION...................................8
<PAGE>
OTHER INFORMATION CONCERNING THE ACCOUNT
PRINCIPAL UNDERWRITER
Pruco Securities Corporation ("Prusec"), an indirectly wholly-owned subsidiary
of The Prudential, performs all sales and distribution functions regarding the
Contracts and may be deemed to be the "principal underwriter" of the Account
under the Investment Company Act of 1940.
DETERMINATION OF SUBACCOUNT UNIT VALUES
The value for each Subaccount Unit is computed as of the end of each "valuation
period" as defined in the prospectus (also referred to in this section as
"business day"). On any given business day the value of a Unit in each
subaccount will be determined by multiplying the value of a Unit of that
subaccount for the preceding business day by the net investment factor for that
subaccount for the current business day. The net investment factor for any
business day is determined by dividing the value of the assets of the subaccount
for that day by the value of the assets of the subaccount for the preceding
business day (ignoring, for this purpose, changes resulting from new purchase
payments and withdrawals), and subtracting from the result the daily equivalent
of the 1.4% annual charge for administrative expenses and mortality and expense
risks. (See CHARGES, FEES, AND DEDUCTIONS in the prospectus.) The value of the
assets of a subaccount is determined by multiplying the number of shares of The
Prudential Series Fund, Inc. (the "Series Fund") held by that subaccount by the
net asset value of each share and adding the value of dividends declared by the
Series Fund but not yet paid.
PERFORMANCE INFORMATION
The tables that follow provide performance information for each subaccount
through June 30, 1996. The performance information is based on historical
experience and does not indicate or represent future performance.
AVERAGE ANNUAL TOTAL RETURN
The DISCOVERY SELECT Annuity is a new contract. The returns shown below were
calculated using historical investment returns of the portfolios of the Funds.
All fees, expenses and charges associated with the DISCOVERY SELECT Annuity and
the Funds have been reflected in these returns, as if the Contract had existed
from the inception date of each Funds' portfolios.
Table 1 below shows the average annual rates of total return on hypothetical
investments of $1,000 for periods ended June 30, 1996 in each subaccount other
than the Money Market Subaccount. These figures assume withdrawal of the
investments at the end of the period other than to effect an annuity under the
Contract. This table assumes deferred sales charges
1
<PAGE>
<TABLE>
TABLE 1
AVERAGE ANNUAL TOTAL RETURN
<CAPTION>
FROM DATE
FIVE TEN PORTFOLIO
ONE YEAR YEARS YEARS ESTABLISHED
FUND DATE ENDED ENDED ENDED THROUGH
PORTFOLIO ESTABLISHED 06/30/96 06/30/96 06/30/96 06/30/96
================================== ================ =============== =============== ============= ===============
<S> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
DIVERSIFIED BOND PORTFOLIO 6/83 -1.77% 6.84% 6.87% 8.08%
HIGH YIELD BOND PORTFOLIO 2/87 4.54% 11.44% N/A 7.09%
STOCK INDEX PORTFOLIO 10/87 17.51% 13.44% N/A 14.32%
EQUITY INCOME PORTFOLIO 2/88 6.22% 12.99% N/A 12.34%
EQUITY PORTFOLIO 6/83 12.80% 14.22% 12.05% 13.12%
PRUDENTIAL JENNISON 5/95 11.65% N/A N/A 22.50%
PORTFOLIO
GLOBAL PORTFOLIO 9/88 8.74% 10.59% N/A 8.44%
AIM VARIABLE INSURANCE
FUNDS, INC.
AIM V.I. GROWTH AND
INCOME FUND 5/94 13.86% N/A N/A 16.24%
AIM V.I. VALUE FUND 6/93 8.18% N/A N/A 15.98%
JANUS ASPEN SERIES
GROWTH PORTFOLIO 9/93 18.49% N/A N/A 13.88%
INTERNATIONAL GROWTH
PORTFOLIO 5/94 32.69% N/A N/A 15.81%
MFS VARIABLE INSURANCE TRUST
EMERGING GROWTH SERIES 7/95 N/A N/A N/A 29.18%
RESEARCH SERIES 7/95 N/A N/A N/A 17.33%
OCC ACCUMULATION TRUST1
MANAGED PORTFOLIO 8/88 14.16% 17.93% N/A 18.07%
SMALL CAP PORTFOLIO 8/88 10.11% 14.05% N/A 12.80%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
FROM DATE
FIVE TEN PORTFOLIOS
ONE YEAR YEARS YEARS ESTABLISHED
SERIES FUND DATE ENDED ENDED ENDED THROUGH
PORTFOLIO ESTABLISHED 06/30/96 06/30/96 06/30/96 06/30/96
================================== ================ =============== =============== ============= ===============
<S> <C> <C> <C> <C> <C>
T. ROWE PRICE EQUITY SERIES,
INC.
EQUITY INCOME PORTFOLIO 3/94 17.08% N/A N/A 18.62%
T. ROWE PRICE INTERNATIONAL
SERIES, INC.
INTERNATIONAL STOCK
PORTFOLIO 3/94 8.72% N/A N/A 6.79%
WARBURG PINCUS TRUST
POST-VENTURE CAPITAL
PORTFOLIO 9/96 N/A N/A N/A N/A
</TABLE>
1 Based on the results of OCC Accumulation Trust and its predecessor. On
September 16, 1994, an investment company which had commenced operations on
August 1, 1988 called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds, the Old Trust
and the present OCC Accumulation Trust (the "Trust"), at which time the
Trust commenced operations. The total net assets for the Managed and Small
Cap Portfolios immediately after the transaction were $682,601,380 and
$139,812,573, respectively, with respect to the Old Trust and for the Managed
and Small Cap Portfolios, $51,345,103 and $8,129,274, respectively, with
respect to the Trust. For the period prior to September 16, 1994, the
performance figures above for the Managed and Small Cap Portfolios reflect the
performance of the corresponding portfolios of the Old Trust.
The average annual rates of total return shown above are computed by finding the
average annual compounded rates of return over the periods shown that would
equate the initial amount invested to the withdrawal value, in accordance with
the following formula: P(1+T)"- ERA. In the formula, P is a hypothetical
investment of $1,000; T is the average annual total return; " is the number of
years; and ERA is the withdrawal value at the end of the periods shown. These
figures assume deduction of the maximum withdrawal charge that may be applicable
to a particular period.
3
<PAGE>
NON-STANDARD TOTAL RETURN
Table 2 below shows the average annual rates of return as in Table 1, but
assumes that the investments are not withdrawn at the end of the period or that
the Contract owner annuitizes at the end of the period. This table assumes no
deferred sales charges.
<TABLE>
<CAPTION>
TABLE 2
AVERAGE ANNUAL TOTAL RETURN ASSUMING NO WITHDRAWAL
FROM DATE
FIVE TEN PORTFOLIO
ONE YEAR YEARS YEARS ESTABLISHED
FUND DATE ENDED ENDED ENDED THROUGH
PORTFOLIO ESTABLISHED 06/30/96 06/30/96 06/30/96 06/30/96
=================================== ================== =============== =============== ============= ==============
<S> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
DIVERSIFIED BOND PORTFOLIO 6/83 4.53% 7.07% 6.87% 8.08%
HIGH YIELD BOND PORTFOLIO 2/87 10.84% 11.64% N/A 7.09%
STOCK INDEX PORTFOLIO 10/87 23.81% 13.62% N/A 14.32%
EQUITY INCOME PORTFOLIO 2/88 12.52% 13.17% N/A 12.34%
EQUITY PORTFOLIO 6/83 19.10% 14.39% 12.05% 13.12%
PRUDENTIAL JENNISON 5/95 17.95% N/A N/A 26.47%
PORTFOLIO
GLOBAL PORTFOLIO 9/88 15.04% 10.79% N/A 8.44%
AIM VARIABLE INSURANCE
FUNDS, INC.
AIM V.I. GROWTH AND 5/94 20.16% N/A N/A 17.59%
INCOME FUND
AIM V.I. VALUE FUND 6/93 14.48% N/A N/A 16.55%
JANUS ASPEN SERIES
GROWTH PORTFOLIO 9/93 24.79% N/A N/A 14.86%
INTERNATIONAL GROWTH 5/94 38.99% N/A N/A 17.16%
PORTFOLIO
MFS VARIABLE INSURANCE TRUST
EMERGING GROWTH SERIES 7/95 N/A N/A N/A 36.03%
RESEARCH SERIES 7/95 N/A N/A N/A 24.14%
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
FROM DATE
FIVE TEN PORTFOLIOS
ONE YEAR YEARS YEARS ESTABLISHED
SERIES FUND DATE ENDED ENDED ENDED THROUGH
PORTFOLIO ESTABLISHED 06/30/96 06/30/96 06/30/96 06/30/96
=================================== ================ =============== ================ ============= ==============
<S> <C> <C> <C> <C> <C>
OCC ACCUMULATION TRUST1
MANAGED PORTFOLIO 8/88 20.46% 18.09% N/A 18.07%
SMALL CAP PORTFOLIO 8/88 16.41% 14.23% N/A 12.80%
T. ROWE PRICE EQUITY SERIES,
INC.
EQUITY INCOME PORTFOLIO 3/94 23.38% N/A N/A 19.87%
T. ROWE PRICE INTERNATIONAL
SERIES, INC.
INTERNATIONAL STOCK 3/94 15.02% N/A N/A 8.21%
PORTFOLIO
WARBURG PINCUS TRUST
POST-VENTURE CAPITAL
PORTFOLIO 9/96 N/A N/A N/A N/A
</TABLE>
1 Based on the results of OCC Accumulation Trust and its predecessor. On
September 16, 1994, an investment company which had commenced operations on
August 1, 1988 called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds, the Old Trust
and the present OCC Accumulation Trust (the "Trust"), at which time the
Trust commenced operations. The total net assets for the Managed and Small
Cap Portfolios immediately after the transaction were $682,601,380 and
$139,812,573, respectively, with respect to the Old Trust and for the Managed
and Small Cap Portfolios, $51,345,103 and $8,129,274, respectively, with
respect to the Trust. For the period prior to September 16, 1994, the
performance figures above for the Managed and Small Cap Portfolios reflect the
performance of the corresponding portfolios of the Old Trust.
5
<PAGE>
Table 3 shows the cumulative total return for the portfolios, assuming no
withdrawal. This table assumes no deferred sales charges.
<TABLE>
<CAPTION>
TABLE 3
CUMULATIVE TOTAL RETURN ASSUMING NO WITHDRAWAL
FROM DATE
FIVE TEN PORTFOLIO
ONE YEAR YEARS YEARS ESTABLISHED
FUND DATE ENDED ENDED ENDED THROUGH
PORTFOLIO ESTABLISHED 06/30/96 06/30/96 06/30/96 06/30/96
=================================== ================ =============== ================ ============= ==============
<S> <C> <C> <C> <C>
THE PRUDENTIAL SERIES FUND
DIVERSIFIED BOND 6/83 4.53% 40.71% 94.28% 175.88%
PORTFOLIO
HIGH YIELD BOND 2/87 10.84% 73.41% N/A 89.68%
PORTFOLIO
STOCK INDEX PORTFOLIO 10/87 23.81% 89.38% N/A 220.32%
EQUITY INCOME PORTFOLIO 2/88 12.52% 85.64% N/A 164.51%
EQUITY PORTFOLIO 6/83 19.10% 95.87% 211.85% 400.70%
PRUDENTIAL JENNISON 5/95 17.95% N/A N/A 31.50%
PORTFOLIO
GLOBAL PORTFOLIO 9/88 15.04% 66.89% N/A 87.82%
AIM VARIABLE INSURANCE
FUNDS, INC.
AIM V.I. GROWTH AND 5/94 20.16% N/A N/A 41.98%
INCOME FUND
AIM V.I. VALUE FUND 6/93 14.48% N/A N/A 60.28%
JANUS ASPEN SERIES
GROWTH PORTFOLIO 9/93 24.79% N/A N/A 47.29%
INTERNATIONAL GROWTH 5/94 38.99% N/A N/A 40.86%
PORTFOLIO
MFS VARIABLE INSURANCE
TRUST
EMERGING GROWTH SERIES 7/95 N/A N/A N/A 33.40%
RESEARCH SERIES 7/95 N/A N/A N/A 22.44%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FROM DATE
FIVE TEN PORTFOLIOS
ONE YEAR YEARS YEARS ESTABLISHED
SERIES FUND DATE ENDED ENDED ENDED THROUGH
PORTFOLIO ESTABLISHED 06/30/96 06/30/96 06/30/96 06/30/96
================================ ================ ============== ============== ============= ===================
<S> <C> <C> <C> <C> <C>
OCC ACCUMULATION TRUST1
MANAGED PORTFOLIO 8/88 20.46% 129.62% N/A 272.31%
SMALL CAP PORTFOLIO 8/88 16.41% 94.51% N/A 159.38%
T. ROWE PRICE EQUITY
SERIES, INC.
EQUITY INCOME PORTFOLIO 3/94 23.38% N/A N/A 50.35%
T. ROWE PRICE INTERNATIONAL
SERIES, INC.
INTERNATIONAL STOCK 3/94 15.02% N/A N/A 19.43%
PORTFOLIO
WARBURG PINCUS TRUST
POST-VENTURE CAPITAL 9/96 N/A N/A N/A N/A
PORTFOLIO
</TABLE>
1 Based on the results of OCC Accumulation Trust and its predecessor. On
September 16, 1994, an investment company which had commenced operations on
August 1, 1988 called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds, the Old Trust
and the present OCC Accumulation Trust (the "Trust"), at which time the
Trust commenced operations. The total net assets for the Managed and Small
Cap Portfolios immediately after the transaction were $682,601,380 and
$139,812,573, respectively, with respect to the Old Trust and for the Managed
and Small Cap Portfolios, $51,345,103 and $8,129,274, respectively, with
respect to the Trust. For the period prior to September 16, 1994, the
performance figures above for the Managed and Small Cap Portfolios reflect the
performance of the corresponding portfolios of the Old Trust.
MONEY MARKET SUBACCOUNT YIELD
The "yield" and "effective yield" figures for the Money Market Subaccount shown
below were calculated using historical investment returns of the Money Market
Portfolio of the Series Fund. All fees, expenses and charges associated with the
DISCOVERY SELECT Annuity and the Series Fund have been reflected.
The "yield" and "effective yield" of the Money Market Subaccount for the seven
days ended June 30, 1996 were 3.03% and 3.07% respectively.
The yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one accumulation unit of the Money Market Subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from contract
owner accounts, and dividing the difference by the value of the subaccount at
the beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7), with the resulting figure carried
to the nearest ten-thousandth of 1%.
The deduction referred to above consists of the 1.25% charge for mortality and
expense risks and the 0.15% charge for administration. It does not reflect the
withdrawal charge.
The effective yield is obtained by taking the base period return, adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result, according to the following formula: Effective Yield - ((base period
return + 1) 365/7) - 1.
The yields on amounts held in the Money Market Subaccount will fluctuate on a
daily basis. Therefore, the stated yields for any given period are not an
indication of future yields.
7
<PAGE>
COMPARATIVE PERFORMANCE INFORMATION
Reports or advertising may include comparative performance information,
including, but not limited to: (1) comparisons to market indices such as the Dow
Jones Industrial Average, the Standard & Poor's 500 Index, the Value Line
Composite Index, the Russell 2000 Index, the Morgan Stanley World Index, the
Lehman Brothers bond indices; (2) comparisons to other investments, such as
certificates of deposit; (3) performance rankings assigned by services such as
Morningstar, Inc. and Variable Annuity Research and Data Services (VARDS), and
Lipper Analytical Services, Inc.; (4) data presented by analysts such as Dow
Jones, A.M. Best, The Bank Rate Monitor National Index; and (5) data in
publications such as The Wall Street Journal, Times, Forbes, Barrons, Fortune,
Money Magazine, and Financial World.
8
<PAGE>
FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
VARIABLE ANNUITY CONTRACTS
PRUCO LIFE INSURANCE COMPANY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 445-4571
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
To be added by pre-effective amendment.
(b)Exhibits
(1) Resolution of the Board of Directors of Pruco Life Insurance Company
establishing the Pruco Life Flexible Premium Variable Annuity Account.
(Note 2)
(2) Agreements for custody of securities and similar investments--Not
Applicable.
(3) (a) Distribution Agreement between Pruco Securities Corporation
(Underwriter) and Pruco Life Insurance Company (Depositor).
(Note 4)
(b) Form of Selected Broker Agreement between Prudential Securities
Incorporated and Pruco Securities Corporation with respect to
sale of the Contracts. (Note 4)
(4) (a) The Prudential DISCOVERY SELECT Contract. (Note 4)
(5) (a) Application form for the Contract. (Note 1)
(6) (a) Articles of Incorporation of Pruco Life Insurance Company, as
amended October 19, 1993. (Note 4)
(b) By-laws of Pruco Life Insurance Company, as amended June 14, 1983.
(Note 2)
(7) Contract of reinsurance in connection with variable annuity
contract--Not Applicable.
(8) Other material contracts performed in whole or in part after the date
the registration statement is filed:
(a) Form of Fund Participation Agreement. (Note 4)
(9) Opinion of Counsel and consent to its use as to legality of the
securities being registered. (Note 1)
(10) Written consent of Deloitte & Touche LLP, independent auditors. (Note
1)
(11) All financial statements omitted from Item 23, Financial
Statements--Not Applicable.
(12) Agreements in consideration for providing initial capital between or
among Registrant, Depositor, Underwriter, or initial Contract
owners--Not Applicable.
(13) Schedule of Performance Computations. (Note 1)
(14) Powers of Attorney.
(a) Linda S. Dougherty, Mendel A. Melzer (Note 4)
(b) Garnett L. Keith, Jr., Ira J. Kleinman,
Esther H. Milnes, I. Edward Price (Note 2)
(c) William F. Yelverton (Note 3)
(d) William M. Bethke, Kiyofumi Sakaguchi (Note 1)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Registrant's Form N-4, Registration
No. 33-61125 filed July 19, 1995.
(Note 3) Incorporated by reference to Pre-Effective Amendment No. 1,
Registration No. 33-61125 filed November 17, 1995.
(Note 4) Incorporated by reference to Registrant's Form N-4,
filed June 24, 1996.
C-1
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Incorporated by reference to the Pruco Life Flexible Premium Variable Annuity
Account prospectus under "Directors and Officers" contained in Part A of this
registration statement.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
DEPOSITOR OR REGISTRANT
Pruco Life Insurance Company ("Pruco Life"), a corporation organized under the
laws of Arizona, is a direct, wholly-owned subsidiary of The Prudential
Insurance Company of America, ("The Prudential"), a mutual life insurance
company organized under the laws of New Jersey. The subsidiaries of The
Prudential and short descriptions of each are set forth on the following pages.
Pruco Life may be deemed to control its two wholly-owned subsidiaries, Pruco
Life Insurance Company of New Jersey ("Pruco Life of New Jersey") and The
Prudential Insurance Company of Arizona ("PLICA"). Pruco Life may also be deemed
to control the following separate accounts which are registered as unit
investment trusts under the Investment Company Act of 1940: the Pruco Life
Variable Appreciable Account, the Pruco Life Variable Insurance Account, the
Pruco Life Single Premium Variable Life Account, the Pruco Life Variable
Universal Account, the Pruco Life PRUvider Variable Appreciable Account, the
Pruco Life Single Premium Variable Annuity Account, the Pruco Life Flexible
Premium Variable Annuity Account (Registrant) (separate accounts of Pruco Life),
the Pruco Life of New Jersey Variable Appreciable Account, the Pruco Life of New
Jersey Variable Insurance Account, the Pruco Life of New Jersey Single Premium
Variable Life Account, and the Pruco Life of New Jersey Single Premium Variable
Annuity Account (separate accounts of Pruco Life of New Jersey).
The above-referenced separate accounts, along with The Prudential and certain of
The Prudential's separate accounts, hold all the shares of The Prudential Series
Fund, Inc., a Maryland corporation. In addition, The Prudential holds all the
shares of Prudential's Gibraltar Fund, a Delaware Corporation, in three of its
separate accounts. The Prudential Series Fund, Inc. and Prudential's Gibraltar
Fund are registered as open-end diversified, management investment companies
under the Investment Company Act of 1940. Additionally, the aforementioned
separate accounts of The Prudential are registered as unit investment trusts
under the Investment Company Act of 1940.
In addition, Pruco Life may also be deemed to be under common control with The
Prudential Variable Contract Account-2, The Prudential Variable Contract
Account-10, and The Prudential Variable Contract Account-11, separate accounts
of The Prudential, all of which are registered as open-end, diversified,
management investment companies under the Investment Company Act of 1940.
ITEM 27. NUMBER OF CONTRACT OWNERS
No contracts offered by Registrant will be sold prior to the effective date of
this Registration Statement.
ITEM 28. INDEMNIFICATION
The Prudential Directors' and Officers' Liability and Corporation Reimbursement
Insurance Program, purchased by The Prudential from Aetna Casualty & Surety
Company, CNA Insurance Companies, Lloyds of London, Great American Insurance
Company, Reliance Insurance Company, Corporate Officers & Directors Assurance
Ltd., A.C.E. Insurance Company, Ltd., XL Insurance Company, Ltd., and
Zurich-American Insurance Company, provides reimbursement for "Loss" (as defined
in the policies) which the Company pays as indemnification to its directors or
officers resulting from any claim for any actual or alleged act, error,
misstatement, misleading statement, omission, or breach of duty by persons in
the discharge of their duties in their capacities as directors or officers of
The Prudential, any of its subsidiaries, or certain investment companies
affiliated with The Prudential. Coverage is also provided to the individual
directors or officers for such Loss, for which they shall not be indemnified.
Loss essentially is the legal liability on claims against a director or officer,
including adjudicated damages, settlements and reasonable and necessary legal
fees and expenses incurred in defense of adjudicatory proceedings and appeals
therefrom. Loss does not include punitive or exemplary damages or the multiplied
portion of any multiplied damage award, criminal or civil fines or penalties
imposed by law, taxes or wages, or matters which are uninsurable under the law
pursuant to which the policies are construed.
There are a number of exclusions from coverage. Among the matters excluded are
Losses arising as the result of (1) claims brought about or contributed to by
the criminal or fraudulent acts or omissions or the willful violation of any law
by a director or officer, (2) claims based on or attributable to directors or
officers gaining personal profit or advantage to which they were not legally
entitled, and (3) claims arising from actual or alleged performance of, or
C-2
<PAGE>
failure to perform, services as, or in any capacity similar to, an investment
adviser, investment banker, underwriter, broker or dealer, as those terms are
defined in the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Advisers Act of 1940, the Investment Company Act of 1940, any rules
or regulations thereunder, or any similar federal, state or local statute, rule
or regulation.
The limit of coverage under the Program for both individual and corporate
reimbursement coverage is $150,000,000. The retention for corporate
reimbursement coverage is $10,000,000 per loss.
The relevant provisions of New Jersey law permitting or requiring
indemnification, New Jersey being the state of organization of The Prudential,
can be found in Section 14A:3-5 of the New Jersey Statutes Annotated. The
relevant provisions of Arizona law, Arizona being the state of organization of
Pruco Life, can be found in Section 10-005 of the Arizona Statutes Annotated.
The text of The Prudential's by-law 26, which relates to indemnification of
officers and directors, is incorporated by reference to Exhibit 1.A.(6)(b) of
Post-Effective Amendment No. 1 to Form S-6, Registration No. 33-61079, filed
April 25, 1996, on behalf of The Prudential Variable Appreciable Account. The
text of Pruco Life's by-laws, Article VIII, which relates to indemnification of
officers and directors, is incorporated by reference to Exhibit (6)(b) to this
Registration Statement.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Pruco Securities Corporation also acts as principal underwriter for the
Pruco Life PRUvider Variable Appreciable Account, the Pruco Life Variable
Insurance Account, the Pruco Life Variable Appreciable Account, the Pruco
Life Variable Universal Account, the Pruco Life Single Premium Variable
Life Account, the Pruco Life Single Premium Variable Annuity Account, the
Pruco Life of New Jersey Variable Insurance Account, the Pruco Life of New
Jersey Variable Appreciable Account, the Pruco Life of New Jersey Single
Premium Variable Life Account, the Pruco Life of New Jersey Single Premium
Variable Annuity Account, The Prudential Variable Appreciable Account, The
Prudential Individual Variable Contract Account, The Prudential Qualified
Individual Variable Contract Account, Prudential's Annuity Plan Account,
Prudential's Investment Plan Account, Prudential's Annuity Plan Account-2,
Prudential's Gibraltar Fund, and The Prudential Series Fund, Inc.
(b) NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
---------------- ----------------
William Frisby Yelverton* Chairman and Director
Richard Topp* President and Director
E. Michael Caulfield*** Director
Joseph Mahoney* Director
James Avery Jr.* Director
Douglas Wade Henderson* Director
Richard Painter** Director
Lisa Ramaswamy** Chief Financial Officer and Comptroller
Clifford E. Kirsch* Chief Legal Officer and Secretary
* Principal Business Address: Prudential Plaza, Newark, NJ 07102
** Principal Business Address: 1111 Durham Avenue, South Plainfield, NJ 07080
*** Principal Business Address: 477 Martinsville Road, Liberty Corner, NJ 07938
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books or other documents required to be maintained by Section 31
(a) of the 1940 Act and the rules promulgated thereunder are maintained by the
Registrant through The Prudential Insurance Company of America, Prudential
Plaza, Newark, New Jersey 07102-3777.
C-3
<PAGE>
ITEM 31. MANAGEMENT SERVICES
Summary of any contract not discussed in Part A or Part B of the registration
statement under which management-related services are provided to the
Registrant--Not Applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes to file a post-effective amendment to this Registrant
Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16
months old for so long as payments under the variable annuity contracts may
be accepted.
(b) Registrant undertakes to include either (1) as part of any application to
purchase a contract offered by the prospectus, a space that an applicant
can check to request a statement of additional information, or (2) a
postcard or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a statement of
additional information.
(c) Registrant undertakes to deliver any statement of additional information
and any financial statements required to be made available under this Form
promptly upon written or oral request.
(d) Restrictions on withdrawal under Section 403(b) Contracts are imposed in
reliance upon, and in compliance with, a no-action letter issued by the
Chief of the Office of Insurance Products and Legal Compliance of the
Securities and Exchange Commission to the American Council of Life
Insurance on November 28, 1988.
C-4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Pre-Effective Amendment No. 1 to the
Registration Statement to be signed on its behalf, in the City of Newark, and
the State of New Jersey, on this 12th day of September, 1996.
(Seal) THE PRUCO LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY ACCOUNT
(Registrant)
By: PRUCO LIFE INSURANCE COMPANY
(Depositor)
Attest: /s/ Clifford E. Kirsch By: /s/ Esther H. Milnes
------------------------ -------------------------
Clifford E. Kirsch Esther H. Milnes
Chief Legal Officer President
As required by the Securities Act of 1933, this Pre-Effective Amendment No. 1 to
the Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE AND TITLE
-------------------
September 12, 1996
/s/ *
- ----------------------------------
Esther Milnes
President and Director
/s/ *
- ----------------------------------
Linda S. Dougherty
Chief Accounting Officer, Vice
President and Comptroller
/s/ *
- ----------------------------------
William M. Bethke
Director
*By: /s/ Clifford E. Kirsch
/s/ * ----------------------------
- ---------------------------------- Clifford E. Kirsch
Ira J. Kleinman (Attorney-in-Fact)
Director
/s/ *
- ----------------------------------
Mendel A. Melzer
Director
/s/ *
- ----------------------------------
I. Edward Price
Director
/s/ *
- ----------------------------------
Kiyofumi Sakaguchi
Director
/s/ *
- ----------------------------------
William F. Yelverton
Chairman of the Board and Director
C-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
(5)(a) Application form for the Contract Page C-7
(9) Opinion of Counsel and consent to its use as to legality of the Page C-11
securities being registered.
(10) Written Consent of Deloitte & Touche LLP, independent auditors. Page C-12
(13) Schedule of Performance Computations. Page C-13
(14) Powers of Attorney. Page C-26
</TABLE>
C-6
<TABLE>
DISCOVERY SELECT(sm)
ANNUITY APPLICATION
[LOGO] PRUDENTIAL
Aplication for a Flexible Payment Variable Deferred Annuity to the Pruco Life Insurance Company
Phoenix, AZ 85014, a stock company subsidiary of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
===========================================================================================================
Prudential Annuity Service Center
PO Box 14200
New Brunswick, NJ 08906-4200
<CAPTION>
PLEASE PRINT USING BLUE OR BLACK INK
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
OWNER First Name MI. Last Name ([ ]Individual [ ]Corporation [ ]Trust [ ]Other___)
(Owner
is the |__|__|__|__|__|__|__|__|__|__|__|__|__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Annuitant
unless
otherwise Street
indicated.)
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State Zip Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| |__|__|__|__|
SS#/TIN (Tax Identification Number) Date of Birth(mm-dd-year) Area Code Phone Number
|__|__|__|__|__|__|__|__|__| |__|__|__|__|__|__|__|__| |__|__|__| |__|__|__|__|__|__|__|
Male Female U.S. Citizen Non-Resident Alien Country
Section 1 |__| |__| |__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|
---------------------------------------------------------------------------------------------------------------
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CONTINGENT First Name MI. Last Name ([ ]Individual [ ]Corporation [ ]Trust [ ]Other___)
OWNER
(If any) |__|__|__|__|__|__|__|__|__|__|__|__|__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
(Do not
complete if
opening Street
an IRA.)
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State Zip Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| |__|__|__|__|
SS#/TIN (Tax Identification Number) Date of Birth(mm-dd-year)
|__|__|__|__|__|__|__|__|__| |__|__|__|__|__|__|__|__|
Male Female U.S. Citizen Non-Resident Alien Country
Section 2 |__| |__| |__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|
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-----------------------------------------------------------------------------------------------------
ANNUITANT First Name MI. Last Name
(If Owner
is the |__|__|__|__|__|__|__|__|__|__|__|__|__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Annuitant,
skip this
section.) Street
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State Zip Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| |__|__|__|__|
SS#/TIN (Tax Identification#) Date of Birth(mm-dd-year) Area Code Phone Number
|__|__|__|__|__|__|__|__|__| |__|__|__|__|__|__|__|__| |__|__|__| |__|__|__|__|__|__|__|
Male Female U.S. Citizen Non-Resident Alien Country
Section 3 |__| |__| |__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|
-----------------------------------------------------------------------------------------------------
Any person who knowingly gives false or deceptive information when completing this form
for the purpose of defrauding the company may be guilty of insurance fraud.
[X]
- ---------------
ORD 96190--96 Ed. 7/96 {Bar Code...........}
- ---------------
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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CO- First Name MI. Last Name
ANNUITANT
(If any) |__|__|__|__|__|__|__|__|__|__|__|__|__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
(Do not
complete if
opening Street
an IRA.)
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State Zip Code
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__| |__|__|__|__|__| |__|__|__|__|
SS#/TIN (Tax Identification Number) Date of Birth(mm-dd-year)
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Male Female U.S. Citizen Non-Resident Alien Country
Section 4 |__| |__| |__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|
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BENEFICIARY First Name MI. Last Name
|__|__|__|__|__|__|__|__|__|__|__|__|__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Relationship to Annuitant Primary (Class 1)
|__|__|__|__|__|__|__|__|__|__|__|__|__| |X|
First Name MI. Last Name
|__|__|__|__|__|__|__|__|__|__|__|__|__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Relationship to Annuitant Primary (Class 1) Secondary Class (2)
|__|__|__|__|__|__|__|__|__|__|__|__|__| |__| |__|
First Name MI. Last Name
|__|__|__|__|__|__|__|__|__|__|__|__|__| |__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Relationship to Annuitant Primary (Class 1) Secondary Class (2)
Section 5 |__|__|__|__|__|__|__|__|__|__|__|__|__| |__| |__|
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
_ _ _
TYPE OF |_| NON-QUALIFIED |_| QUALIFIED |_| CUSTODIAL IRA
PLAN _
|_| IRA
Section 6A
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
SOURCES OF NON-QUALIFIED QUALIFIED
FUNDS _ _ _ _ _
|_| 1035 Exchange |_| Rollover |_| Direct Rollover |_| Transfer |_| Regular Contribution*
* Please apply my Regular Contribution to the following tax years:
Section 6B $|__|__|__|__|.|__|__| Yr.|__|__|__|__| $|__|__|__|__|.|__|__| Yr.|__|__|__|__|
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
PAYMENT
(Minimum I am investing $|__|__|__|__|__|__|__|.|__|__| in Discovery Select
$10,000)
Section 7 Please make check(s) payable to PRUDENTIAL.
-----------------------------------------------------------------------------------------------------
[X]
- ---------------
ORD 96190--96 Ed. 7/96 {Bar Code...........}
- ---------------
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
PURCHASE INTEREST RATE OPTIONS GROWTH PORTFOLIOS
PAYMENT _ _ _ _ _ _
ALLOCATION 1 Year Fixed Rate Option (1YRFXD) |_| |_| |_|% Prudential Equity Portfolio (STOCK) |_| |_| |_|%
(Please write _ _ _ _ _ _
in what % of 7 Year Market Value Adjustment Option |_| |_| |_|% Prudential Jennison Portfolio (GROWTH) |_| |_| |_|%
your payment (7YRMVA) _ _ _
you want to AIM V.I. Value Fund (AIMVAL) |_| |_| |_|%
allocate to MONEY MARKET PORTFOLIOS _ _ _
the following _ _ _ Janus Aspen Series Growth Portfolio |_| |_| |_|%
options. This Prudential Money Market Portfolio (MMKT) |_| |_| |_|% (JANGRW)
total must _ _ _
equal 100%.) BOND PORTFOLIOS MFS Research Series (MFSRSR) |_| |_| |_|%
_ _ _
Prudential Diversified Bond Portfolio |_| |_| |_|% AGGRESSIVE GROWTH PORTFOLIOS
(BOND) _ _ _
_ _ _ MFS Emerging Growth Series (MFSEMG) |_| |_| |_|%
Prudential High Yield Bond Portfolio |_| |_| |_|% _ _ _
(HYLD) OpCap Advisors OCC Accumulation Trust |_| |_| |_|%
Small Cap Portfolio (OPPSMC)
BALANCED PORTFOLIO _ _ _
_ _ _ Warburg Pincus Post-Venture |_| |_| |_|%
OpCap Advisors OCC Accumulation Trust |_| |_| |_|% Capital Portfolio (WARVCP)
Managed Portfolio (OPPMAN)
INTERNATIONAL STOCK PORTFOLIOS
GROWTH & INCOME PORTFOLIOS _ _ _
_ _ _ Prudential Global Portfolio (GLEQ) |_| |_| |_|%
Prudential Stock Index Portfolio (STIX) |_| |_| |_|% _ _ _
_ _ _ Janus Aspen Series International |_| |_| |_|%
Prudential Equity Income Portfolio (HIDV) |_| |_| |_|% Growth Portfolio (JANINT)
_ _ _ _ _ _
AIM V.I. Growth & Income Fund (AIMGRI) |_| |_| |_|% T. Rowe Price International Stock |_| |_| |_|%
_ _ _ Portfolio (TRINST)
T. Rowe Price Equity Income Portfolio |_| |_| |_|%
Section 8 (TREQST) TOTAL 1 0 0 %
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
_ _
REPLACEMENT Will the proposed contract replace any existing insurance or annuity contract? |_| No |_| Yes If yes, list:
AND
AGGREGATION Company Name Contract Number
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__|__|__|__|__|__|__|__|
Year of Issue Plan
|__|__|__|__| |__|__|__|__|__|__|__|__|__|__|
Section 9 Did you purchase a non-qualified annuity from Prudential or an affiliated company this _ _
calendar year? If yes, list contract number and plan in "Additional Remarks" section 12. |_| No |_| Yes
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
SPECIAL Please check any services you would like to elect.
SERVICES _
|_| DOLLAR COST AVERAGING I authorize Prudential to automatically transfer funds from the portfolio I select
_ _ _ _
to the other portfolio(s) listed below: |_| Annually |_| Semi-Annually |_| Quarterly |_| Monthly
Please use investment codes from Section 8 to indicate selections
TRANSFER FROM:* ALLOCATE TO:** (must total 100%)
Portfolio |__|__|__|__|__|__| $|__|__|__|__|__|__|__| Portfolio |__|__|__|__|__|__| |__|__|__|%
or |__|__|__|% Portfolio |__|__|__|__|__|__| |__|__|__|%
*7 year Market Value Adjustment Option not available. Portfolio |__|__|__|__|__|__| |__|__|__|%
Portfolio |__|__|__|__|__|__| |__|__|__|%
**Two Interest Rate Options not available.
Section 10 I understand that the transfer will continue until I terminate the program in writing or until the funds in the
account from which money is being transferred are exhausted. I also understand that Prudential's Dollar Cost
Averaging program is subject to the rules and restrictions outlined in the prospectus.
-------------------------------------------------------------------------------------------------------------------
[X]
- ---------------
ORD 96190--96 Ed. 7/96 {Bar Code...........}
- ---------------
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------
SPECIAL _
SERVICES |_| AUTO-REBALANCING I want to maintain my allocation percentages by having my portfolio mix automatically
(continued) adjusted as allocated in my variable investment options in Section 8.
_ _ _ _
Adjust my portfolio mix: |_| Annually |_| Semi-Annually |_| Quarterly |_| Monthly
If the desired start date is different than the contract date, please specify:
Start Date: |__|__| |__|__| |__|__|__|__|
MM DD Year
To auto-rebalance to a percentage that is different than listed in Section 8, please complete and
attach a separate Auto-Rebalancing Form.
_
|_| TELEPHONE TRANSFERS Telephone transfers/reallocations will be accepted from the Contract Owner.
For your protection, appropriate identification must be provided. Please indicate if you wish to
extend authority as follows:
_
Section 10 |_| I authorize the Company to accept telephone transfers/reallocation instructions from my Registered
Investment Advisor for my non-qualified plan only. (This is applicable to Registered Investment
Advisors only).
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
_
SIGNATURES |_| CHECK HERE IF A STATEMENT OF ADDITIONAL INFORMATION IS DESIRED.
If applying for an IRA, the Owner acknowledges receiving a Questions and Answers on Individual Retirement
Annuities (IRAs) explanatory booklet and understands that he or she will be given a financial disclosure
statement with the contract.
No representative can make or change a contract or waive any of the Company's rights or needs. The Owner
believes this contract meets his/her needs and financial objectives. The Owner further (1) understands that
any amount of purchase payments allocated to a variable investment option will reflect the investment
experience of that option and, therefore, annuity payments and surrender values may vary and are not
guaranteed as to a fixed dollar amount and, (2) acknowledges receipt of the current prospectus for the
contract applied for and the variable investment options.
Signed at __________________________________________ ______________________
City, State Date
__________________________________________ __________________________________________
Signature of Owner (Individual, Signature of Annuitant
Corporation, Trust)
Section 11 __________________________________________
Signature of Co-Annuitant (if applicable)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
REPRESENTATIVE _ _ _ _
SIGNATURE |_| 1 |_| 2 |_| 3 |_| 4
_ _
Do you have, from any source, facts that any person named as Owner or Contingent Owner above |_| |_|
may replace or change any current insurance or annuity in any company? If yes, give details No Yes
in "Additional Remarks" below.
This application is submitted in the belief that the purchase of this contract is appropriate for the Owner
based upon the information furnished. Reasonable inquiry has been made of the Owner concerning the Owner's
overall financial situation and needs and investment objectives.
The representative hereby certifies that all information contained in this application is true to the best
of his/her knowledge and belief.
_ _ _ _ _ _
_____________________________________________________ |_||_||_||_||_||_|
Name Registered Representative Contract Number
_____________________________________________________ _____________________________________________________
Signature Account #
_____________________________________________________ _____________________________________________________
Branch/Field Office Name Branch/Field Office Code
ADDITIONAL REMARKS
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
PRUDENTIAL ANNUITY SERVICE CENTER Overnight: PRUDENTIAL ANNUITY SERVICE CENTER
PO Box 14200 300 Columbus Circle
New Brunswick, NJ 08906-4200 Edison, NJ 08837
Section 12
Questions? Call 1-888-PRU-2888 (toll free)
-----------------------------------------------------------------------------------------------------------------
- ---------------
ORD 96190--96 Ed. 7/96 {Bar Code...........}
- ---------------
</TABLE>
C-10
Exhibit 9
September 12, 1996
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992
Gentlemen:
In my capacity as Chief Legal Officer of Pruco Life Insurance Company ("Pruco
Life"), I have reviewed the establishment of the Pruco Life Flexible Premium
Variable Annuity Account (the "Account") on June 16, 1995, by the Board of
Directors of Pruco Life as a separate account for assets applicable to certain
individual variable annuity contracts, pursuant to the provisions of Section
20-651 of the Arizona Insurance Code. I was responsible for oversight of the
preparation and review of the Registration Statement on Form N-4, as amended,
filed by The Prudential with the Securities and Exchange Commission
(Registration No. 333-06701) under the Securities Act of 1933 for the
registration of certain individual variable annuity 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 individual variable
annuity contracts is not chargeable with liabilities arising out of
any other business Pruco Life may conduct.
(4) The individual variable annuity 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,
Clifford E. Kirsch
C-11
Exhibit 10
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 33-06701 on Form N-4 of Pruco Life Flexible Premium Variable
Annuity Account of Pruco Life Insurance Company of our report dated February 15,
1996, relating to the financial statements of Pruco Life Flexible Premium
Variable Annuity Account, and of our report dated March 15, 1996, except for
Note 9 as to which the date is September 11, 1996, relating to the financial
statements of Pruco Life Insurance Company and subsidiaries appearing in the
Prospectus, which is part of such Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
Parsippany, New Jersey
September 11, 1996
C-12
DISCOVERY
SELECT 30-Jun-96
WITH CHARGES
TABLE 1 AVERAGE ANNUAL TOTAL RETURN
Inception 1 year 5 years 10 years Since
Date Ending Ending Ending Inception
30-Jun-96 30-Jun-96 30-Jun-96
DIBOND 6/83 -1.77% 6.84% 6.87% 8.08%
EQUITY 6/83 12.80% 14.22% 12.05% 13.12%
EQINC 2/88 6.22% 12.99% N/A 12.34%
HIYLD 2/87 4.54% 11.44% N/A 7.09%
GLOBAL 9/88 8.74% 10.59% N/A 8.44%
PRUJEN 5/95 11.65% N/A N/A 22.50%
STIX 10/87 17.51% 13.44% N/A 14.32%
TRINST 3/94 8.72% N/A N/A 6.79%
TREQST 3/94 17.08% N/A N/A 18.62%
JANINT 5/94 32.69% N/A N/A 15.81%
JANGRW 9/93 18.49% N/A N/A 13.88%
MFSEMG 7/95 N/A N/A N/A 29.18%
MFSRSR 7/95 N/A N/A N/A 17.33%
AIMGRI 5/94 13.86% N/A N/A 16.24%
AIMVAL 6/93 8.18% N/A N/A 15.98%
OPPMAN 8/88 14.16% 17.93% N/A 18.07% See Note 2
OPPSMC 8/88 10.11% 14.05% N/A 12.80% See Note 2
Note: This table assumes deferred sales charges
Note 2: Based on the results of OCC Accumulation Trust and its predecessor. On
September 16, 1994, an investment company which had commenced operations on
August 1, 1988 called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds, the Old Trust
and the present OCC Accumulation Trust (the "Trust"), at which time the
Trust commenced operations. The total net assets for the Managed and Small
Cap Portfolios immediately after the transaction were $682,601,380 and
$139,812,573, respectively, with respect to the Old Trust and for the Managed
and Small Cap Portfolios, $51,345,103 and $8,129,274, respectively, with
respect to the Trust. For the period prior to September 16, 1994, the
performance figures above for the Managed and Small Cap Portfolios reflect the
performance of the corresponding portfolios of the Old Trust.
DISCOVERY
SELECT 30-Jun-96
NO LOAD
Table 2 AVERAGE ANNUAL TOTAL RETURN ASSUMING NO WITHDRAWL
Inception 1 year 5 years 10 years Since
Date Ending Ending Ending Inception
30-Jun-96 30-Jun-96 30-Jun-96
DIBOND 6/83 4.53% 7.07% 6.87% 8.08%
EQUITY 6/83 19.10% 14.39% 12.05% 13.12%
EQINC 2/88 12.52% 13.17% N/A 12.34%
HIYLD 2/87 10.84% 11.64% N/A 7.09%
GLOBAL 9/88 15.04% 10.79% N/A 8.44%
PRUJEN 5/95 17.95% N/A N/A 26.47%
STIX 10/87 23.81% 13.62% N/A 14.32%
TRINST 3/94 15.02% N/A N/A 8.21%
TREQST 3/94 23.38% N/A N/A 19.87%
JANINT 5/94 38.99% N/A N/A 17.16%
JANGRW 9/93 24.79% N/A N/A 14.86%
MFSEMG 7/95 N/A N/A N/A 36.03%
MFSRSR 7/95 N/A N/A N/A 24.14%
AIMGRI 5/94 20.16% N/A N/A 17.59%
AIMVAL 6/93 14.48% N/A N/A 16.55%
OPPMAN 8/88 20.46% 18.09% N/A 18.07% See Note 2
OPPSMC 8/88 16.41% 14.23% N/A 12.80% See Note 2
Note: This table assumes no deferred sales charges
Note 2: Based on the results of OCC Accumulation Trust and its predecessor. On
September 16, 1994, an investment company which had commenced operations on
August 1, 1988 called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds, the Old Trust
and the present OCC Accumulation Trust (the "Trust"), at which time the
Trust commenced operations. The total net assets for the Managed and Small
Cap Portfolios immediately after the transaction were $682,601,380 and
$139,812,573, respectively, with respect to the Old Trust and for the Managed
and Small Cap Portfolios, $51,345,103 and $8,129,274, respectively, with
respect to the Trust. For the period prior to September 16, 1994, the
performance figures above for the Managed and Small Cap Portfolios reflect the
performance of the corresponding portfolios of the Old Trust.
DISCOVERY SELECT 30-Jun-96
Table 3 CUMULATIVE TOTAL RETURN ASSUMING NO WITHDRAWL
Inception 1 year 5 years 10 years Since
Date Ending Ending Ending Inception
30-Jun-96 30-Jun-96 30-Jun-96
DIBOND 6/83 4.53% 40.71% 94.28% 175.88%
EQUITY 6/83 19.10% 95.87% 211.85% 400.70%
EQINC 2/88 12.52% 85.64% N/A 164.51%
HIYLD 2/87 10.84% 73.41% N/A 89.68%
GLOBAL 9/88 15.04% 66.89% N/A 87.82%
PRUJEN 5/95 17.95% N/A N/A 31.50%
STIX 10/87 23.81% 89.38% N/A 220.32%
TRINST 3/94 15.02% N/A N/A 19.43%
TREQST 3/94 23.38% N/A N/A 50.35%
JANINT 5/94 38.99% N/A N/A 40.86%
JANGRW 9/93 24.79% N/A N/A 47.29%
MFSEMG 7/95 N/A N/A N/A 33.40%
MFSRSR 7/95 N/A N/A N/A 22.44%
AIMGRI 5/94 20.16% N/A N/A 41.98%
AIMVAL 6/93 14.48% N/A N/A 60.28%
OPPMAN 8/88 20.46% 129.62% N/A 272.31% See Note 2
OPPSMC 8/88 16.41% 94.51% N/A 159.38% See Note 2
Note: This table assumes no deferred sales charges
Note 2: Based on the results of OCC Accumulation Trust and its predecessor. On
September 16, 1994, an investment company which had commenced operations on
August 1, 1988 called Quest for Value Accumulation Trust (the "Old
Trust") was effectively divided into two investment funds, the Old Trust
and the present OCC Accumulation Trust (the "Trust"), at which time the
Trust commenced operations. The total net assets for the Managed and Small
Cap Portfolios immediately after the transaction were $682,601,380 and
$139,812,573, respectively, with respect to the Old Trust and for the Managed
and Small Cap Portfolios, $51,345,103 and $8,129,274, respectively, with
respect to the Trust. For the period prior to September 16, 1994, the
performance figures above for the Managed and Small Cap Portfolios reflect the
performance of the corresponding portfolios of the Old Trust.
C-13
<PAGE>
<TABLE>
<CAPTION>
A B C D E=(A/D)-1 F=(B/D)-1 G=(C/D)-1
5 YR 10 YR SINCE INCEPT 5 YR ROR 10 YR ROR SINCE INCEPT
<S> <C> <C> <C> <C> <C> <C> <C>
DIBOND 1,407.14 1,942.78 2,758.83 1,000.00 40.71% 94.28% 175.88%
EQUITY 1,958.67 3,118.46 5,007.01 1,000.00 95.87% 211.85% 400.70%
EQINC 1,856.39 N/A 2,645.09 1,000.00 85.64% N/A 164.51%
HIYLD 1,734.09 N/A 1,896.80 1,000.00 73.41% N/A 89.68%
GLOBAL 1,668.93 N/A 1,878.25 1,000.00 66.89% N/A 87.82%
PRUJEN N/A N/A 1,315.05 1,000.00 N/A N/A 31.50%
STIX 1,893.81 N/A 3,203.16 1,000.00 89.38% N/A 220.32%
TRINST N/A N/A 1,194.27 1,000.00 N/A N/A 19.43%
TREQST N/A N/A 1,503.53 1,000.00 N/A N/A 50.35%
JANINT N/A N/A 1,408.59 1,000.00 N/A N/A 40.86%
JANGRW N/A N/A 1,472.94 1,000.00 N/A N/A 47.29%
MFSEMG N/A N/A 1,333.95 1,000.00 N/A N/A 33.40%
MFSRSR N/A N/A 1,224.39 1,000.00 N/A N/A 22.44%
AIMGRI N/A N/A 1,419.77 1,000.00 N/A N/A 41.98%
AIMVAL N/A N/A 1,602.80 1,000.00 N/A N/A 60.28%
OPPMAN 2,296.21 N/A 3,723.07 1,000.00 129.62% N/A 272.31%
OPPSMC 1,945.06 N/A 2,593.77 1,000.00 94.51% N/A 159.38%
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN
AVG POLICY SIZE 40000 30/40000*1000 = $0.75 ANNUAL CHG
DISCOVERY SELECT DIBOND EQUITY EQINC HIYLD GLOBAL PRUJEN STIX TRINST TREQST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR % OF RETURN 4.60% 19.18% 12.60% 10.92% 15.11% 18.02% 23.88% 15.10% 23.45%
ERV (ENDING REDEEMABLE VALUE) 1046.00 1191.79 1125.96 1109.17 1151.14 1180.25 1238.85 1150.98 1234.51
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75
ERV LESS ADMIN CHARGE 1045.25 1191.04 1125.21 1108.42 1150.39 1179.50 1238.10 1150.23 1233.76
ROR BEFORE LOAD 4.53% 19.10% 12.52% 10.84% 15.04% 17.95% 23.81% 15.02% 23.38%
CHARGE FREE AMOUNT 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
AMT SUBJ TO LOAD 900.00 900.00 900.00 900.00 900.00 900.00 900.00 900.00 900.00
1ST YEAR SALE CHARGE 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
AMT OF LOAD 63.00 63.00 63.00 63.00 63.00 63.00 63.00 63.00 63.00
ERV LESS ADMIN CHG & LOAD 982.25 1128.04 1062.21 1045.42 1087.39 1116.50 1175.10 1087.23 1170.76
RETURN W/SALES LOAD AND ADM CHG -1.77% 12.80% 6.22% 4.54% 8.74% 11.65% 17.51% 8.72% 17.08%
<CAPTION>
DISCOVERY SELECT DIBOND EQUITY EQINC HIYLD GLOBAL PRUJEN STIX TRINST TREQST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 YR RATE OF RETURN
YEARS IN EXISTENCE 5.00 5.00 5.00 5.00 5.00 N/A 5.00 N/A N/A
'91 (OR INCEPT) TO '92 ROR 12.86% 9.86% 12.02% 21.17% 5.24% N/A 11.27% N/A N/A
'91 TO '92 ERV 1128.63 1098.64 1120.24 1211.67 1052.39 N/A 1112.71 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 N/A N/A
'91 TO '92 ERV LESS ADMIN CHG 1127.88 1097.89 1119.49 1210.92 1051.64 N/A 1111.96 N/A N/A
'92 (OR INCEPT) TO '93 ROR 10.36% 19.00% 23.91% 16.56% 8.37% N/A 11.55% N/A N/A
'92 TO '93 ERV 1244.76 1306.54 1387.11 1411.49 1139.71 N/A 1240.39 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 N/A N/A
'92 TO '93 ERV LESS ADMIN CHG 1244.01 1305.79 1386.36 1410.74 1138.96 N/A 1239.64 N/A N/A
'93 (OR INCEPT) TO '94 ROR -2.58% 4.61% 3.26% 4.46% 19.36% N/A -0.30% N/A N/A
'93 TO '94 ERV 1211.94 1365.97 1431.51 1473.68 1359.43 N/A 1235.89 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 N/A N/A
'93 TO '94 ERV LESS ADMIN CHG 1211.19 1365.22 1430.76 1472.93 1358.68 N/A 1235.14 N/A N/A
'94 (OR INCEPT) TO '95 ROR 11.19% 20.48% 15.33% 6.24% 6.81% N/A 23.88% N/A N/A
'94 TO '95 ERV 1346.72 1644.85 1650.14 1564.85 1451.20 N/A 1530.04 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 N/A N/A
'94 TO '95 ERV LESS ADMIN CHG 1345.97 1644.10 1649.39 1564.10 1450.45 N/A 1529.29 N/A N/A
'95 (OR INCEPT) TO '96 ROR 4.60% 19.18% 12.60% 10.92% 15.11% N/A 23.88% N/A N/A
'95 TO '96 ERV 1407.89 1959.42 1857.14 1734.84 1669.68 N/A 1894.56 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 N/A N/A
'95 TO '96 ERV LESS ADMIN CHG 1407.14 1958.67 1856.39 1734.09 1668.93 N/A 1893.81 N/A N/A
ANNUALIZED ROR BEFORE LOAD 7.07% 14.39% 13.17% 11.64% 10.79% N/A 13.62% N/A N/A
CHARGE FREE AMOUNT 500.00 500.00 500.00 500.00 500.00 N/A 500.00 N/A N/A
AMT SUBJ TO LOAD 500.00 500.00 500.00 500.00 500.00 N/A 500.00 N/A N/A
5TH (OR INCEPTION) SALE CHARGE 3.00% 3.00% 3.00% 3.00% 3.00% N/A 3.00% N/A N/A
AMT OF LOAD 15.00 15.00 15.00 15.00 15.00 N/A 15.00 N/A N/A
ERV LESS LOAD 1392.14 1943.67 1841.39 1719.09 1653.93 N/A 1878.81 N/A N/A
ANN. 5YR RET W/LOAD AND ADM CHG 6.84% 14.22% 12.99% 11.44% 10.59% N/A 13.44% N/A N/A
C-15
<PAGE>
<CAPTION>
DISCOVERY SELECT JANINT JANGRW MFSEMG MFSRSR AIMGRI AIMVAL OPPMAN OPPSMC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR % OF RETURN 39.06% 24.87% N/A N/A 20.24% 14.56% 20.53% 16.49%
ERV (ENDING REDEEMABLE VALUE) 1390.63 1248.68 N/A N/A 1202.35 1145.56 1205.33 1164.88
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A 0.75 0.75 0.75 0.75
ERV LESS ADMIN CHARGE 1389.88 1247.93 N/A N/A 1201.60 1144.81 1204.58 1164.13
ROR BEFORE LOAD 38.99% 24.79% N/A N/A 20.16% 14.48% 20.46% 16.41%
CHARGE FREE AMOUNT 100.00 100.00 N/A N/A 100.00 100.00 100.00 100.00
AMT SUBJ TO LOAD 900.00 900.00 N/A N/A 900.00 900.00 900.00 900.00
1ST YEAR SALE CHARGE 7.00% 7.00% N/A N/A 7.00% 7.00% 7.00% 7.00%
AMT OF LOAD 63.00 63.00 N/A N/A 63.00 63.00 63.00 63.00
ERV LESS ADMIN CHG & LOAD 1326.88 1184.93 N/A N/A 1138.60 1081.81 1141.58 1101.13
RETURN W/SALES LOAD AND ADM CHG 32.69% 18.49% N/A N/A 13.86% 8.18% 14.16% 10.11%
<CAPTION>
DISCOVERY SELECT JANINT JANGRW MFSEMG MFSRSR AIMGRI AIMVAL OPPMAN OPPSMC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 YR RATE OF RETURN
YEARS IN EXISTENCE N/A N/A N/A N/A N/A N/A 5.00 5.00
'91 (OR INCEPT) TO '92 ROR N/A N/A N/A N/A N/A N/A 20.31% 23.48%
'91 TO '92 ERV N/A N/A N/A N/A N/A N/A 1203.08 1234.79
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A 0.75 0.75
'91 TO '92 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A 1202.33 1234.04
'92 (OR INCEPT) TO '93 ROR N/A N/A N/A N/A N/A N/A 18.22% 23.39%
'92 TO '93 ERV N/A N/A N/A N/A N/A N/A 1421.44 1522.73
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A 0.75 0.75
'92 TO '93 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A 1420.69 1521.98
'93 (OR INCEPT) TO '94 ROR N/A N/A N/A N/A N/A N/A 4.15% -1.41%
'93 TO '94 ERV N/A N/A N/A N/A N/A N/A 1479.71 1500.58
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A 0.75 0.75
'93 TO '94 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A 1478.96 1499.83
'94 (OR INCEPT) TO '95 ROR N/A N/A N/A N/A N/A N/A 28.90% 11.42%
'94 TO '95 ERV N/A N/A N/A N/A N/A N/A 1906.43 1671.15
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A 0.75 0.75
'94 TO '95 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A 1905.68 1670.40
'95 (OR INCEPT) TO '96 ROR N/A N/A N/A N/A N/A N/A 20.53% 16.49%
'95 TO '96 ERV N/A N/A N/A N/A N/A N/A 2296.96 1945.81
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A 0.75 0.75
'95 TO '96 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A 2296.21 1945.06
ANNUALIZED ROR BEFORE LOAD N/A N/A N/A N/A N/A N/A 18.09% 14.23%
CHARGE FREE AMOUNT N/A N/A N/A N/A N/A N/A 500.00 500.00
AMT SUBJ TO LOAD N/A N/A N/A N/A N/A N/A 500.00 500.00
5TH (OR INCEPTION) SALE CHARGE N/A N/A N/A N/A N/A N/A 3.00% 3.00%
AMT OF LOAD N/A N/A N/A N/A N/A N/A 15.00 15.00
ERV LESS LOAD N/A N/A N/A N/A N/A N/A 2281.21 1930.06
ANN. 5YR RET W/LOAD AND ADM CHG N/A N/A N/A N/A N/A N/A 17.93% 14.05%
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED RATES OF RETURN
DISCOVERY SELECT
10 YR RATE OF RETURN DIBOND EQUITY EQINC HIYLD GLOBAL PRUJEN STIX TRINST TREQST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 10.00 10.00 8.36 9.35 7.78 1.17 8.70 2.25 2.25
'85 TO '86 ERV LESS ADMIN CHG 1,000.00 1,000.00 N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ROR 3.99% 20.35% N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ERV 1,039.89 1,203.46 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ERV LESS ADMIN CHG 1,039.14 1,202.71 N/A N/A N/A N/A N/A N/A N/A
'87 TO '88 ROR 4.92% -6.57% N/A N/A N/A N/A N/A N/A N/A
'87 TO '88 ERV 1,090.27 1,123.64 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'87 TO '88 ERV LESS ADMIN CHG 1,089.52 1,122.89 N/A N/A N/A N/A N/A N/A N/A
'88 (OR INCEPT) TO '89 ROR 10.63% 13.56% N/A N/A N/A N/A N/A N/A N/A
'88 TO '89 ERV 1,205.36 1,275.20 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'88 TO '89 ERV LESS ADMIN CHG 1,204.61 1,274.45 N/A N/A N/A N/A N/A N/A N/A
'89 (OR INCEPT) TO '90 ROR 4.97% 11.31% N/A N/A N/A N/A N/A N/A N/A
'89 TO '90 ERV 1,264.44 1,418.53 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'89 TO '90 ERV LESS ADMIN CHG 1,263.69 1,417.78 N/A N/A N/A N/A N/A N/A N/A
'90 (OR INCEPT) TO '91 ROR 9.23% 12.24% N/A N/A N/A N/A N/A N/A N/A
'90 TO '91 ERV 1,380.28 1,591.32 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'90 TO '91 ERV LESS ADMIN CHG 1,379.53 1,590.57 N/A N/A N/A N/A N/A N/A N/A
'91 (OR INCEPT) TO '92 ROR 12.86% 9.86% N/A N/A N/A N/A N/A N/A N/A
'91 TO '92 ERV 1,556.98 1,747.45 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'91 TO '92 ERV LESS ADMIN CHG 1,556.23 1,746.70 N/A N/A N/A N/A N/A N/A N/A
'92 (OR INCEPT) TO '93 ROR 10.36% 19.00% N/A N/A N/A N/A N/A N/A N/A
'92 TO '93 ERV 1,717.49 2,078.66 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'92 TO '93 ERV LESS ADMIN CHG 1,716.74 2,077.91 N/A N/A N/A N/A N/A N/A N/A
'93 (OR INCEPT) TO '94 ROR -2.58% 4.61% N/A N/A N/A N/A N/A N/A N/A
'93 TO '94 ERV 1,672.49 2,173.68 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'93 TO '94 ERV LESS ADMIN CHG 1,671.74 2,172.93 N/A N/A N/A N/A N/A N/A N/A
'94 (OR INCEPT) TO '95 ROR 11.19% 20.48% N/A N/A N/A N/A N/A N/A N/A
'94 TO '95 ERV 1,858.81 2,617.99 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'94 TO '95 ERV LESS ADMIN CHG 1,858.06 2,617.24 N/A N/A N/A N/A N/A N/A N/A
'95 (OR INCEPT) TO '96 ROR 4.60% 19.18% N/A N/A N/A N/A N/A N/A N/A
'95 TO '96 ERV 1,943.53 3,119.21 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'95 TO '96 ERV LESS ADMIN CHG 1,942.78 3,118.46 N/A N/A N/A N/A N/A N/A N/A
ANNUALIZED ROR BEFORE LOAD 6.87% 12.05% N/A N/A N/A N/A N/A N/A N/A
CHARGE FREE AMOUNT 1,000.00 1,000.00 N/A N/A N/A N/A N/A N/A N/A
AMT SUBJ TO LOAD 0.00 0.00 N/A N/A N/A N/A N/A N/A N/A
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% N/A N/A N/A N/A N/A N/A N/A
AMT OF LOAD 0.00 0.00 N/A N/A N/A N/A N/A N/A N/A
ERV LESS LOAD 1,942.78 3,118.46 N/A N/A N/A N/A N/A N/A N/A
ANN. 10YR RET W/LOAD AND ADM CHG 6.87% 12.05% N/A N/A N/A N/A N/A N/A N/A
C-17
<PAGE>
<CAPTION>
DISCOVERY SELECT
10 YR RATE OF RETURN JANINT JANGRW MFSEMG MFSRSR AIMGRI AIMVAL OPPMAN OPPSMC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 2.16 2.80 0.94 0.94 2.16 3.08 7.91 7.91
'85 TO '86 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'87 TO '88 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'87 TO '88 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'87 TO '88 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'88 (OR INCEPT) TO '89 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'88 TO '89 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'88 TO '89 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'89 (OR INCEPT) TO '90 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'89 TO '90 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'89 TO '90 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'90 (OR INCEPT) TO '91 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'90 TO '91 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'90 TO '91 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'91 (OR INCEPT) TO '92 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'91 TO '92 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'91 TO '92 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'92 (OR INCEPT) TO '93 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'92 TO '93 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'92 TO '93 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'93 (OR INCEPT) TO '94 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'93 TO '94 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'93 TO '94 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'94 (OR INCEPT) TO '95 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'94 TO '95 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'94 TO '95 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'95 (OR INCEPT) TO '96 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'95 TO '96 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'95 TO '96 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
ANNUALIZED ROR BEFORE LOAD N/A N/A N/A N/A N/A N/A N/A N/A
CHARGE FREE AMOUNT N/A N/A N/A N/A N/A N/A N/A N/A
AMT SUBJ TO LOAD N/A N/A N/A N/A N/A N/A N/A N/A
10TH (OR INCEPTION) SALE CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
AMT OF LOAD N/A N/A N/A N/A N/A N/A N/A N/A
ERV LESS LOAD N/A N/A N/A N/A N/A N/A N/A N/A
ANN. 10YR RET W/LOAD AND ADM CHG N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
C-18
<PAGE>
<TABLE>
ANNUALIZED RATES OF RETURN
<CAPTION>
DISCOVERY SELECT
SINCE INCEPTION RATE OF RETURN DIBOND EQUITY EQINC HIYLD GLOBAL PRUJEN STIX TRINST TREQST
- ------------------------------ ------ ------ ----- ----- ------ ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 13.06 13.07 8.36 9.35 7.78 1.17 8.70 2.25 2.25
INCEPT. TO '83 ROR 0.57% 2.44% N/A N/A N/A N/A N/A N/A N/A
INCEPT. TO 'ERV 1005.74 1024.35 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.05 0.05 N/A N/A N/A N/A N/A N/A N/A
INCEPT TO '83 ERV LESS ADMIN CHG 1005.69 1024.30 N/A N/A N/A N/A N/A N/A N/A
83 TO '84 ROR 1.21% -8.57% N/A N/A N/A N/A N/A N/A N/A
INCEPT. TO '84 ERV 1017.91 936.52 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
INCEPT. TO 84 ERV LESS ADMIN CHG 1017.16 935.77 N/A N/A N/A N/A N/A N/A N/A
'84 TO '85 ROR 20.76% 28.60% N/A N/A N/A N/A N/A N/A N/A
'84 TO '85 ERV 1228.29 1203.40 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'84 TO '85 ERV LESS ADMIN CHG 1227.54 1202.65 N/A N/A N/A N/A N/A N/A N/A
'85 TO '86 ROR 15.56% 33.34% N/A N/A N/A N/A N/A N/A N/A
'85 TO '86 ERV 1418.56 1603.61 N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A N/A N/A N/A N/A N/A
'85 TO '86 ERV LESS ADMIN CHG 1417.81 1602.86 N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ROR 3.99% 20.35% N/A 0.17% N/A N/A N/A N/A N/A
'86 TO '87 ERV 1474.37 1928.97 N/A 1001.72 N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 N/A 0.26 N/A N/A N/A N/A N/A
'86 TO '87 ERV LESS ADMIN CHG 1473.62 1928.22 N/A 1001.46 N/A N/A N/A N/A N/A
'87 (OR INCEPT) TO '88 ROR 4.92% -6.57% 6.34% 1.03% N/A N/A 18.65% N/A N/A
'87 TO '88 ERV 1546.13 1801.46 1063.37 1011.78 N/A N/A 1186.51 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.27 0.75 N/A N/A 0.52 N/A N/A
'87 TO '88 ERV LESS ADMIN CHG 1545.38 1800.71 1063.10 1011.03 N/A N/A 1185.99 N/A N/A
'88 (OR INCEPT) TO '89 ROR 10.63% 13.56% 17.59% 7.54% 12.53% N/A 18.51% N/A N/A
'88 TO '89 ERV 1709.69 2044.96 1250.12 1087.29 1125.34 N/A 1405.48 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.58 N/A 0.75 N/A N/A
'88 TO '89 ERV LESS ADMIN CHG 1708.94 2044.21 1249.37 1086.54 1124.76 N/A 1404.73 N/A N/A
'89 (OR INCEPT) TO 90 ROR 4.97% 11.31% 4.98% -6.51% 7.71% N/A 14.13% N/A N/A
'89 TO '90 ERV 1793.81 2275.32 1311.59 1015.76 1211.51 N/A 1603.25 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 N/A N/A
'89 TO '90 ERV LESS ADMIN CHG 1,793.06 2,274.57 1,310.84 1,015.01 1,210.76 N/A 1,602.50 N/A N/A
'90 (OR INCEPT) TO '91 ROR 9.23% 12.24% 8.67% 7.82% -7.02% N/A 5.47% N/A N/A
'90 TO '91 ERV 1,958.49 2,552.96 1,424.51 1,094.34 1,125.81 N/A 1,690.22 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 N/A N/A
'90 TO '91 ERV LESS ADMIN CHG 1,957.74 2,552.21 1,423.76 1,093.59 1,125.06 N/A 1,689.47 N/A N/A
'91 (OR INCEPT) TO '92 ROR 12.86% 9.86% 12.02% 21.17% 5.24% N/A 11.27% N/A N/A
'91 TO '92 ERV 2,209.56 2,803.95 1,594.96 1,325.07 1,184.00 N/A 1,879.89 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 N/A N/A
'91 TO '92 ERV LESS ADMIN CHG 2,208.81 2,803.20 1,594.21 1,324.32 1,183.25 N/A 1,879.14 N/A N/A
'92 (OR INCEPT) TO '93 ROR 10.36% 19.00% 23.91% 16.56% 8.37% N/A 11.55% N/A N/A
'92 TO '93 ERV 2,437.70 3,335.95 1,975.30 1,543.67 1,282.34 N/A 2,096.19 N/A N/A
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 N/A N/A
'92 TO '93 ERV LESS ADMIN CHG 2,436.95 3,335.20 1,974.55 1,542.92 1,281.59 N/A 2,095.44 N/A N/A
'93 (OR INCEPT) TO '94 ROR -2.58% 4.61% 3.26% 4.46% 19.36% N/A -0.30% 0.66% 1.36%
'93 TO '94 ERV 2,374.14 3,488.91 2,038.86 1,611.76 1,529.68 N/A 2,089.10 1,006.63 1,013.57
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 N/A 0.75 0.19 0.19
'93 TO '94 ERV LESS ADMIN CHG 2,373.39 3,488.16 2,038.11 1,611.01 1,528.93 N/A 2,088.35 1,006.44 1,013.39
'94 (OR INCEPT) TO '95 ROR 11.19% 20.48% 15.33% 6.24% 6.81% 11.50% 23.88% 3.24% 20.32%
'94 TO '95 ERV 2,638.97 4,202.61 2,350.61 1,711.54 1,633.04 1,114.97 2,586.95 1,039.01 1,219.28
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 0.12 0.75 0.75 0.75
'94 TO '95 ERV LESS ADMIN CHG 2,638.22 4,201.86 2,349.86 1,710.79 1,632.29 1,114.85 2,586.20 1,038.26 1,218.53
'95 (OR INCEPT) TO '96 ROR 4.60% 19.18% 12.60% 10.92% 15.11% 18.02% 23.88% 15.10% 23.45%
'95 TO '96 ERV 2,759.58 5,007.76 2,645.84 1,897.55 1,879.00 1,315.80 3,203.91 1,195.02 1,504.28
ANNUAL ADMIN CHARGE 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75
'95 TO '96 ERV LESS ADMIN CHG 2,758.83 5,007.01 2,645.09 1,896.80 1,878.25 1,315.05 3,203.16 1,194.27 1,503.53
ANNUALIZED ROR BEFORE LOAD 8.08% 13.12% 12.34% 7.09% 8.44% 26.47% 14.32% 8.21% 19.87%
CHARGE FREE AMOUNT 1,000.00 1,000.00 900.00 1,000.00 800.00 200.00 900.00 300.00 300.00
AMT SUBJ TO LOAD 0.00 0.00 100.00 0.00 200.00 800.00 100.00 700.00 700.00
10TH (OR INCEPTION) SALE CHARGE 0.00% 0.00% 0.00% 0.00% 0.00% 6.00% 0.00% 5.00% 5.00%
AMT OF LOAD 0.00 0.00 0.00 0.00 0.00 48.00 0.00 35.00 35.00
ERV LESS LOAD 2,758.83 5,007.01 2,645.09 1,896.80 1,878.25 1,267.05 3,203.16 1,159.27 1,468.53
ANN. RET W/LOAD AND ADM CHG 8.08% 13.12% 12.34% 7.09% 8.44% 22.50% 14.32% 6.79% 18.62%
<CAPTION>
DISCOVERY SELECT
SINCE INCEPTION RATE OF RETURN JANINT JANGRW MFSEMG MFSRSR AIMGRI AIMVAL OPPMAN OPPSMC
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS IN EXISTENCE 2.16 2.80 0.94 0.94 2.16 3.08 7.91 7.91
INCEPT. TO '83 ROR N/A N/A N/A N/A N/A N/A N/A N/A
INCEPT. TO 'ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
INCEPT TO '83 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
83 TO '84 ROR N/A N/A N/A N/A N/A N/A N/A N/A
INCEPT. TO '84 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
INCEPT. TO 84 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'84 TO '85 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'84 TO '85 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'84 TO '85 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'85 TO '86 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'85 TO '86 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'85 TO '86 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ERV N/A N/A N/A N/A N/A N/A N/A N/A
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'86 TO '87 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'87 (OR INCEPT) TO '88 ROR N/A N/A N/A N/A N/A N/A N/A N/A
'87 TO '88 ERV N/A N/A N/A N/A N/A N/A N/A N/A
C-19
<PAGE>
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A N/A N/A
'87 TO '88 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A N/A N/A
'88 (OR INCEPT) TO '89 ROR N/A N/A N/A N/A N/A N/A 20.20% 11.07%
'88 TO '89 ERV N/A N/A N/A N/A N/A N/A 1202.02 1110.71
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A 0.68 0.68
'88 TO '89 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A 1201.34 1110.03
'89 (OR INCEPT) TO 90 ROR N/A N/A N/A N/A N/A N/A 15.67% 6.62%
'89 TO '90 ERV N/A N/A N/A N/A N/A N/A 1389.59 1183.47
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A 0.75 0.75
'89 TO '90 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A 1,388.84 1,182.72
'90 (OR INCEPT) TO '91 ROR N/A N/A N/A N/A N/A N/A 16.69% 12.75%
'90 TO '91 ERV N/A N/A N/A N/A N/A N/A 1,620.67 1,333.46
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A 0.75 0.75
'90 TO '91 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A 1,619.92 1,332.71
'91 (OR INCEPT) TO '92 ROR N/A N/A N/A N/A N/A N/A 20.31% 23.48%
'91 TO '92 ERV N/A N/A N/A N/A N/A N/A 1,948.90 1,645.62
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A N/A 0.75 0.75
'91 TO '92 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A N/A 1,948.15 1,644.87
'92 (OR INCEPT) TO '93 ROR N/A N/A N/A N/A N/A 4.08% 18.22% 23.39%
'92 TO '93 ERV N/A N/A N/A N/A N/A 1,040.75 2,303.16 2,029.66
ANNUAL ADMIN CHARGE N/A N/A N/A N/A N/A 0.06 0.75 0.75
'92 TO '93 ERV LESS ADMIN CHG N/A N/A N/A N/A N/A 1,040.69 2,302.41 2,028.91
'93 (OR INCEPT) TO '94 ROR -3.82% 2.02% N/A N/A -2.52% 4.36% 4.15% -1.41%
'93 TO '94 ERV 961.82 1,020.23 N/A N/A 974.80 1,086.04 2,398.07 2,000.39
ANNUAL ADMIN CHARGE 0.12 0.60 N/A N/A 0.12 0.75 0.75 0.75
'93 TO '94 ERV LESS ADMIN CHG 961.70 1,019.63 N/A N/A 974.68 1,085.29 2,397.32 1,999.64
'94 (OR INCEPT) TO '95 ROR 5.46% 15.82% N/A N/A 21.29% 29.05% 28.90% 11.42%
'94 TO '95 ERV 1,014.20 1,180.95 N/A N/A 1,182.20 1,400.55 3,090.22 2,228.04
ANNUAL ADMIN CHARGE 0.75 0.75 N/A N/A 0.75 0.75 0.75 0.75
'94 TO '95 ERV LESS ADMIN CHG 1,013.45 1,180.20 N/A N/A 1,181.45 1,399.80 3,089.47 2,227.29
'95 (OR INCEPT) TO '96 ROR 39.06% 24.87% 33.47% 22.51% 20.24% 14.56% 20.53% 16.49%
'95 TO '96 ERV 1,409.34 1,473.69 1,334.65 1,225.09 1,420.52 1,603.55 3,723.82 2,594.52
ANNUAL ADMIN CHARGE 0.75 0.75 0.70 0.70 0.75 0.75 0.75 0.75
'95 TO '96 ERV LESS ADMIN CHG 1,408.59 1,472.94 1,333.95 1,224.39 1,419.77 1,602.80 3,723.07 2,593.77
ANNUALIZED ROR BEFORE LOAD 17.16% 14.86% 36.03% 24.14% 17.59% 16.55% 18.07% 12.80%
CHARGE FREE AMOUNT 300.00 300.00 100.00 100.00 300.00 400.00 800.00 800.00
AMT SUBJ TO LOAD 700.00 700.00 900.00 900.00 700.00 600.00 200.00 200.00
10TH (OR INCEPTION) SALE CHARGE 5.00% 5.00% 7.00% 7.00% 5.00% 4.00% 0.00% 0.00%
AMT OF LOAD 35.00 35.00 63.00 63.00 35.00 24.00 0.00 0.00
ERV LESS LOAD 1,373.59 1,437.94 1,270.95 1,161.39 1,384.77 1,578.80 3,723.07 2,593.77
ANN. RET W/LOAD AND ADM CHG 15.81% 13.88% 29.18% 17.33% 16.24% 15.98% 18.07% 12.80%
</TABLE>
C-20
<PAGE>
<TABLE>
UNIT VALUES FOR THE LAST DAY OF EVERY QUARTER SINCE INCEPTION FOR THE PRU DISCOVERY SELECT PRODUCTS
<CAPTION>
DISCOVERY SELECT DIBOND EQUITY EQINC HIYLD GLOBAL PRUJEN STIX TRINST TREQST
- -----------
INCEPTION DATE 08-Jun-83 06-Jun-83 19-Feb-88 23-Feb-87 19-Sep-88 01-May-95 19-Oct-87 31-Mar-94 31-Mar-94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WHOLE YEARS SINCE
INCEPTION 13.00 13.00 8.00 9.00 7.00 1.00 8.00 2.00 2.00
INCEPTION UNIT VALUE 0.99691 1.00241 0.99730 0.99968 0.99848 1.00866 0.80241 0.99985 0.99985
30-Jun-83 1.00263 1.02682 N/A N/A N/A N/A N/A N/A N/A
30-Jun-84 1.01481 0.93882 N/A N/A N/A N/A N/A N/A N/A
30-Jun-85 1.22545 1.20733 N/A N/A N/A N/A N/A N/A N/A
30-Jun-86 1.41615 1.60984 N/A N/A N/A N/A N/A N/A N/A
30-Jun-87 1.47264 1.93737 N/A 1.00140 N/A N/A N/A N/A N/A
30-Jun-88 1.54510 1.81001 1.06050 1.01172 N/A N/A 0.95207 N/A N/A
30-Jun-89 1.70938 2.05552 1.24706 1.08803 1.12363 N/A 1.12827 N/A N/A
30-Jun-90 1.79428 2.28791 1.30917 1.01715 1.21030 N/A 1.28772 N/A N/A
30-Jun-91 1.95982 2.56794 1.42269 1.09665 1.12538 N/A 1.35821 N/A N/A
30-Jun-92 2.21191 2.82123 1.59376 1.32878 1.18434 N/A 1.51129 N/A N/A
30-Jun-93 2.44112 3.35740 1.97475 1.54887 1.28352 N/A 1.68585 N/A N/A
30-Jun-94 2.37820 3.51214 2.03906 1.61797 1.53198 N/A 1.68075 1.00648 1.01342
30-Jun-95 2.64432 4.23150 2.35171 1.71894 1.63630 1.12463 2.08204 1.03905 1.21932
30-Jun-96 2.76596 5.04308 2.64792 1.90659 1.88361 1.32734 2.57933 1.19593 1.50526
<CAPTION>
DISCOVERY SELECT JANINT JANGRW MFSEMG MFSRSR AIMGRI AIMVAL OPPMAN OPPSMC
- ------------
INCEPTION DATE 02-May-94 13-Sep-93 24-Jul-95 24-Jul-95 02-May-94 01-Jun-93 01-Aug-88 01-Aug-88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WHOLE YEARS SINCE
INCEPTION 2.00 2.00 0.00 0.00 2.00 3.00 7.00 7.00
INCEPTION UNIT VALUE 0.99996 0.99996 0.99996 0.99996 0.99996 1.00881 0.99989 0.99989
30-Jun-83 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-84 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-85 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-86 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-87 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-88 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-89 N/A N/A N/A N/A N/A N/A 1.20189 1.11059
30-Jun-90 N/A N/A N/A N/A N/A N/A 1.39023 1.18407
30-Jun-91 N/A N/A N/A N/A N/A N/A 1.62229 1.33498
30-Jun-92 N/A N/A N/A N/A N/A N/A 1.95175 1.64842
30-Jun-93 N/A N/A N/A N/A N/A 1.04992 2.30742 2.03405
30-Jun-94 0.96178 1.02019 N/A N/A 0.97476 1.09567 2.40329 2.00545
30-Jun-95 1.01429 1.18159 N/A N/A 1.18230 1.41395 3.09791 2.23452
30-Jun-96 1.41050 1.47543 1.33460 1.22504 1.42154 1.61976 3.73399 2.60294
</TABLE>
C-21
<PAGE>
<TABLE>
UNIT VALUES FOR THE LAST DAY OF EVERY QUARTER SINCE INCEPTION FOR THE PRU DISCO SELECT PRODUCTS
<CAPTION>
DISCOVERY SELECT MMKT DIBOND EQUITY EQINC HIYLD GLOBAL PRUJEN STIX TRINST TREQST
- -----------
INCEPTION DATE 02-Jun-83 08-Jun-83 06-Jun-83 19-Feb-88 23-Feb-87 19-Sep-88 01-May-95 19-Oct-87 31-Mar-94 31-Mar-94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WHOLE YEARS SINCE
INCEPTION 0.00 13.00 13.00 8.00 9.00 7.00 1.00 8.00 2.00 2.00
INCEPTION UNIT VALUE 1.00018 0.99691 1.00241 0.99730 0.99968 0.99848 1.00866 0.80241 0.99985 0.99985
30-Jun-83 1.00515 1.00263 1.02682 N/A N/A N/A N/A N/A N/A N/A
30-Sep-83 1.02314 1.00221 0.99435 N/A N/A N/A N/A N/A N/A N/A
31-Dec-83 1.04146 1.01524 0.98054 N/A N/A N/A N/A N/A N/A N/A
1984 31-Mar-84 1.06058 1.02483 0.93938 N/A N/A N/A N/A N/A N/A N/A
30-Jun-84 1.08271 1.01481 0.93882 N/A N/A N/A N/A N/A N/A N/A
30-Sep-84 1.10815 1.07700 1.01823 N/A N/A N/A N/A N/A N/A N/A
31-Dec-84 1.13159 1.13344 1.04168 N/A N/A N/A N/A N/A N/A N/A
1985 31-Mar-85 1.14983 1.14693 1.13401 N/A N/A N/A N/A N/A N/A N/A
30-Jun-85 1.16867 1.22545 1.20733 N/A N/A N/A N/A N/A N/A N/A
30-Sep-85 1.18624 1.24580 1.14590 N/A N/A N/A N/A N/A N/A N/A
31-Dec-85 1.20424 1.32595 1.36494 N/A N/A N/A N/A N/A N/A N/A
1986 31-Mar-86 1.22158 1.39617 1.56588 N/A N/A N/A N/A N/A N/A N/A
30-Jun-86 1.23756 1.41615 1.60984 N/A N/A N/A N/A N/A N/A N/A
30-Sep-86 1.25228 1.44380 1.49021 N/A N/A N/A N/A N/A N/A N/A
31-Dec-86 1.26532 1.49670 1.54936 N/A N/A N/A N/A N/A N/A N/A
1987 31-Mar-87 1.27915 1.50981 1.87814 N/A 1.01369 N/A N/A N/A N/A N/A
30-Jun-87 1.29454 1.47264 1.93737 N/A 1.00140 N/A N/A N/A N/A N/A
30-Sep-87 1.31112 1.41678 2.03515 N/A 0.97037 N/A N/A N/A N/A N/A
31-Dec-87 1.32931 1.48043 1.55338 N/A 0.93936 N/A N/A 0.85903 N/A N/A
1988 31-Mar-88 1.34683 1.53083 1.70198 1.00261 1.00061 N/A N/A 0.89961 N/A N/A
30-Jun-88 1.36427 1.54510 1.81001 1.06050 1.01172 N/A N/A 0.95207 N/A N/A
30-Sep-88 1.38485 1.57378 1.74932 1.07351 1.02977 1.00586 N/A 0.95209 N/A N/A
31-Dec-88 1.40768 1.57964 1.79322 1.09680 1.04843 1.07983 N/A 0.97813 N/A N/A
1989 31-Mar-89 1.43381 1.58916 1.89404 1.15356 1.06436 1.12695 N/A 1.04210 N/A N/A
<CAPTION>
DISCOVERY SELECT JANINT JANGRW MFSEMG MFSRSR AIMGRI AIMVAL OPPMAN OPPSMC
- -----------
INCEPTION DATE 02-May-94 13-Sep-93 24-Jul-95 24-Jul-95 02-May-94 01-Jun-93 01-Aug-88 01-Aug-88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WHOLE YEARS SINCE
INCEPTION 2.00 2.00 0.00 0.00 2.00 3.00 7.00 7.00
INCEPTION UNIT VALUE 0.99996 0.99996 0.99996 0.99996 0.99996 1.00881 0.99989 0.99989
30-Jun-83 N/A N/A N/A N/A N/A N/A N/A N/A
30-Sep-83 N/A N/A N/A N/A N/A N/A N/A N/A
31-Dec-83 N/A N/A N/A N/A N/A N/A N/A N/A
1984 31-Mar-84 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-84 N/A N/A N/A N/A N/A N/A N/A N/A
30-Sep-84 N/A N/A N/A N/A N/A N/A N/A N/A
31-Dec-84 N/A N/A N/A N/A N/A N/A N/A N/A
1985 31-Mar-85 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-85 N/A N/A N/A N/A N/A N/A N/A N/A
30-Sep-85 N/A N/A N/A N/A N/A N/A N/A N/A
31-Dec-85 N/A N/A N/A N/A N/A N/A N/A N/A
1986 31-Mar-86 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-86 N/A N/A N/A N/A N/A N/A N/A N/A
30-Sep-86 N/A N/A N/A N/A N/A N/A N/A N/A
31-Dec-86 N/A N/A N/A N/A N/A N/A N/A N/A
C-22
<PAGE>
1987 31-Mar-87 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-87 N/A N/A N/A N/A N/A N/A N/A N/A
30-Sep-87 N/A N/A N/A N/A N/A N/A N/A N/A
31-Dec-87 N/A N/A N/A N/A N/A N/A N/A N/A
1988 31-Mar-88 N/A N/A N/A N/A N/A N/A N/A N/A
30-Jun-88 N/A N/A N/A N/A N/A N/A N/A N/A
30-Sep-88 N/A N/A N/A N/A N/A N/A 1.00056 0.99757
31-Dec-88 N/A N/A N/A N/A N/A N/A 1.03786 1.01297
1989 31-Mar-89 N/A N/A N/A N/A N/A N/A 1.14942 1.09464
</TABLE>
C-23
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Jun-89 1.46273 1.70938 2.05552 1.24706 1.08803 1.12363 N/A 1.12827 N/A N/A
30-Sep-89 1.48969 1.71664 2.24492 1.32515 1.06159 1.23424 N/A 1.24262 N/A N/A
31-Dec-89 1.51667 1.76801 2.29422 1.32679 1.01279 1.26541 N/A 1.26306 N/A N/A
1990 31-Mar-90 1.54121 1.74036 2.23465 1.27222 0.96666 1.15976 N/A 1.21953 N/A N/A
30-Jun-90 1.56660 1.79428 2.28791 1.30917 1.01715 1.21030 N/A 1.28772 N/A N/A
30-Sep-90 1.59159 1.80617 1.92449 1.16547 0.91553 1.05289 N/A 1.10713 N/A N/A
31-Dec-90 1.61757 1.88843 2.14426 1.25965 0.88031 1.08669 N/A 1.20018 N/A N/A
1991 31-Mar-91 1.64007 1.93178 2.54576 1.39732 1.01671 1.13425 N/A 1.36794 N/A N/A
30-Jun-91 1.65943 1.95982 2.56794 1.42269 1.09665 1.12538 N/A 1.35821 N/A N/A
30-Sep-91 1.67708 2.06514 2.56190 1.49197 1.15554 1.18030 N/A 1.42369 N/A N/A
31-Dec-91 1.69352 2.16852 2.66469 1.58384 1.20818 1.19366 N/A 1.53544 N/A N/A
1992 31-Mar-92 1.70647 2.13280 2.80723 1.56248 1.28975 1.13553 N/A 1.49022 N/A N/A
30-Jun-92 1.71673 2.21191 2.82123 1.59376 1.32878 1.18434 N/A 1.51129 N/A N/A
30-Sep-92 1.72539 2.29772 2.84544 1.65912 1.37870 1.12607 N/A 1.55168 N/A N/A
31-Dec-92 1.73311 2.29194 3.00000 1.72009 1.40033 1.13674 N/A 1.62200 N/A N/A
1993 31-Mar-93 1.74004 2.38331 3.26582 1.90917 1.48145 1.23501 N/A 1.68565 N/A N/A
30-Jun-93 1.74636 2.44112 3.35740 1.97475 1.54887 1.28352 N/A 1.68585 N/A N/A
30-Sep-93 1.75291 2.50972 3.47422 2.03732 1.56716 1.44096 N/A 1.72162 N/A N/A
31-Dec-93 1.75973 2.48943 3.60570 2.07432 1.64713 1.60476 N/A 1.75431 N/A N/A
1994 31-Mar-94 1.76667 2.41065 3.50101 2.03262 1.63845 1.53641 N/A 1.68051 0.99985 0.99985
30-Jun-94 1.77613 2.37820 3.51214 2.03906 1.61797 1.53198 N/A 1.68075 1.00648 1.01342
30-Sep-94 1.78921 2.38221 3.69964 2.15338 1.61477 1.59646 N/A 1.75506 1.04459 1.06188
30-Dec-94 1.80554 2.37561 3.65464 2.07507 1.58019 1.50533 N/A 1.74751 1.00728 1.06022
1995 31-Mar-95 1.82495 2.47253 3.96491 2.19764 1.65780 1.49401 N/A 1.90917 1.00104 1.14384
30-Jun-95 1.84509 2.64432 4.23150 2.35171 1.71894 1.63630 1.12463 2.08204 1.03905 1.21932
30-Sep-95 1.86443 2.69911 4.59104 2.47267 1.76307 1.75970 1.22724 2.23815 1.07973 1.30867
31-Dec-95 1.88376 2.82857 4.73205 2.49069 1.83209 1.72032 1.24327 2.36221 1.10437 1.40860
1996 31-Mar-96 1.90143 2.76354 4.96716 2.63240 1.88681 1.82365 1.28380 2.47973 1.15567 1.46762
30-Jun-96 1.91871 2.76596 5.04308 2.64792 1.90659 1.88361 1.32734 2.57933 1.19593 1.50526
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Jun-89 N/A N/A N/A N/A N/A N/A 1.20189 1.11059
30-Sep-89 N/A N/A N/A N/A N/A N/A 1.29635 1.19138
31-Dec-89 N/A N/A N/A N/A N/A N/A 1.35673 1.18235
1990 31-Mar-90 N/A N/A N/A N/A N/A N/A 1.30368 1.13117
30-Jun-90 N/A N/A N/A N/A N/A N/A 1.39023 1.18407
30-Sep-90 N/A N/A N/A N/A N/A N/A 1.20701 1.01227
31-Dec-90 N/A N/A N/A N/A N/A N/A 1.29213 1.05300
1991 31-Mar-91 N/A N/A N/A N/A N/A N/A 1.55612 1.25113
30-Jun-91 N/A N/A N/A N/A N/A N/A 1.62229 1.33498
30-Sep-91 N/A N/A N/A N/A N/A N/A 1.71975 1.45902
31-Dec-91 N/A N/A N/A N/A N/A N/A 1.86092 1.53837
1992 31-Mar-92 N/A N/A N/A N/A N/A N/A 1.95413 1.70897
30-Jun-92 N/A N/A N/A N/A N/A N/A 1.95175 1.64842
30-Sep-92 N/A N/A N/A N/A N/A N/A 2.05793 1.64933
31-Dec-92 N/A N/A N/A N/A N/A N/A 2.17831 1.85035
1993 31-Mar-93 N/A N/A N/A N/A N/A N/A 2.25024 1.99725
30-Jun-93 N/A N/A N/A N/A N/A 1.04992 2.30742 2.03405
30-Sep-93 N/A 1.01928 N/A N/A N/A 1.09909 2.37853 2.11644
31-Dec-93 N/A 1.03060 N/A N/A N/A 1.11975 2.37335 2.18516
1994 31-Mar-94 N/A 1.03899 N/A N/A N/A 1.14703 2.34605 2.09741
30-Jun-94 0.96178 1.02019 N/A N/A 0.97476 1.09567 2.40329 2.00545
30-Sep-94 0.98120 1.04618 N/A N/A 1.01372 1.16241 2.45725 2.13931
30-Dec-94 0.96290 1.04447 N/A N/A 0.99101 1.14893 2.40478 2.12447
C-24
<PAGE>
1995 31-Mar-95 0.92301 1.11969 N/A N/A 1.07328 1.25820 2.70937 2.06215
30-Jun-95 1.01429 1.18159 N/A N/A 1.18230 1.41395 3.09791 2.23452
30-Sep-95 1.11179 1.28258 1.08409 1.03722 1.30451 1.57246 3.31366 2.38130
31-Dec-95 1.16948 1.34097 1.16778 1.10015 1.30858 1.54376 3.45213 2.41418
1996 31-Mar-96 1.27761 1.44865 1.24335 1.15983 1.36888 1.54899 3.68746 2.50577
30-Jun-96 1.41050 1.47543 1.33460 1.22504 1.42154 1.61976 3.73399 2.60294 37.59753
</TABLE>
C-25
POWER OF ATTORNEY
Know all men by these presents:
That I, WILLIAM M. BETHKE, of NEWARK, NEW JERSEY, a member of the Board of
Directors of Pruco Life Insurance Company, do hereby make, constitute and
appoint as my true and lawful attorneys in fact CLIFFORD E. KIRSCH, THOMAS C.
CASTANO, RICHARD E. MEADE, and THOMAS J. LOFTUS, or any of them severally for me
and in my name, place and stead to sign registration statements on the
appropriate forms prescribed by the Securities and Exchange Commission for the
registration under the Investment Company Act of 1940, where applicable, and the
Securities Act of 1933, respectively, and any and all amendments thereto
executed on behalf of Pruco Life Insurance Company and filed with the Securities
and Exchange Commission for the following:
The Pruco Life PRUvider Variable Appreciable Account and variable life
insurance contracts, to the extent they represent participating interests
in said Account;
The Pruco Life Variable Appreciable Account and flexible premium variable
life insurance contracts, to the extent they represent participating
interests in said Account;
The Pruco Life Variable Insurance Account and scheduled premium variable
life insurance contracts, to the extent they represent participating
interests in said Account;
The Pruco Life Single Premium Variable Life Account and flexible premium
variable life insurance contracts, to the extent they represent
participating interests in said Account;
The Pruco Life Variable Universal Account and flexible premium variable
universal life insurance contracts, to the extent they represent
participating interests in said Account;
The Pruco Life Single Premium Variable Annuity Account and single payment
variable annuity contracts, to the extent they represent participating
interests in said Account;
C-26
<PAGE>
The Pruco Life Flexible Premium Variable Annuity Account and flexible
premium variable annuity contracts, to the extent they represent
participating interests in said Account;
Market value adjustment annuity contracts; and
The Pruco Life Variable Contract Real Property Account and individual
variable life insurance contracts and variable annuity contracts, to the
extent they represent participating interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of July,
1996.
William M. Bethke
---------------------
Signature
State of New Jersey )
) SS
County of Essex )
On this 31st day of July , 1996, before me personally appeared William M.
Bethke known to me to be the person mentioned and described in and who executed
the foregoing instrument and he duly acknowledged to me that he executed the
same.
My commission expires:
December 8, 1997
Sandra Walker
---------------------
C-27
<PAGE>
POWER OF ATTORNEY
Know all men by these presents:
That I, KIYOFUMI SAKAGUCHI, of TOKYO, JAPAN, a member of the Board of
Directors of Pruco Life Insurance Company, do hereby make, constitute and
appoint as my true and lawful attorneys in fact CLIFFORD E. KIRSCH, THOMAS C.
CASTANO, RICHARD E. MEADE, and THOMAS J. LOFTUS, or any of them severally for me
and in my name, place and stead to sign registration statements on the
appropriate forms prescribed by the Securities and Exchange Commission for the
registration under the Investment Company Act of 1940, where applicable, and the
Securities Act of 1933, respectively, and any and all amendments thereto
executed on behalf of Pruco Life Insurance Company and filed with the Securities
and Exchange Commission for the following:
The Pruco Life PRUvider Variable Appreciable Account and variable life
insurance contracts, to the extent they represent participating interests
in said Account;
The Pruco Life Variable Appreciable Account and flexible premium variable
life insurance contracts, to the extent they represent participating
interests in said Account;
The Pruco Life Variable Insurance Account and scheduled premium variable
life insurance contracts, to the extent they represent participating
interests in said Account;
The Pruco Life Single Premium Variable Life Account and flexible premium
variable life insurance contracts, to the extent they represent
participating interests in said Account;
The Pruco Life Variable Universal Account and flexible premium variable
universal life insurance contracts, to the extent they represent
participating interests in said Account;
The Pruco Life Single Premium Variable Annuity Account and single payment
variable annuity contracts, to the extent they represent participating
interests in said Account;
C-28
<PAGE>
The Pruco Life Flexible Premium Variable Annuity Account and flexible
premium variable annuity contracts, to the extent they represent
participating interests in said Account;
Market value adjustment annuity contracts; and
The Pruco Life Variable Contract Real Property Account and individual
variable life insurance contracts and variable annuity contracts, to the
extent they represent participating interests in said Account.
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of August,
1996.
Kiyofumi Sakaguchi
----------------------
Signature
City of Newark )
) SS
Country of USA )
On this 14th day of August , 1996, before me personally appeared Kiyofumi
Sakaguchi known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires:
August 31, 1999
David L. Butler
----------------------
C-29
